Chapter 5

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CHARGES
Poonam Pradhan Saxena: Property Law, 3rd ed
Dr Poonam Pradhan Saxena
Poonam Pradhan Saxena: Property Law, 3rd ed > Poonam Pradhan Saxena: Property Law, 3rd
ed > Chapter 5 Charges
Chapter 5 Charges
CHARGES
[s 100] Charges.—Where immovable property of one person is by act of parties or operation of law made security
for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said
to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage
shall, so far as may be, apply to such charge.
Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the
execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge
shall be enforced against any property in the hands of a person to whom such property has been transferred for
consideration and without notice of the charge.
End of Document
CHARGE, REQUISITES OF THIS SECTION
Chapter 5 Charges

The requisites of this section are:
(i) Immovable property of one person is made security for the payment of money to another;
(ii) By act of parties or by operation of law;
(iii) This transaction does not amount to a mortgage;
(iv) All the provisions which apply to a simple mortgage shall, so far as may be, apply to such charge; and
(v) Charges cannot be enforced against any property in hands of a bona fide transferee for consideration
without its notice.
The purpose of a charge is to secure the payment of money, but there is no transfer of a right in this property in
favour of the other to make it a mortgage.1 It is akin to the creation of a personal obligation, such as a right to obtain
the payment of money out of a specific property.
For example, A is the owner of certain property. He has a son and a daughter. He gives his entire property to the
son and puts a condition that the son would be under an obligation to pay Rs 5000 out of the property, every month,
to the daughter for her maintenance. This amount of money would constitute a charge in favour of the daughter. If
the son sells the property to a third person, the daughter can enforce her right against the third person provided he
has notice of this charge.
Take another example, a Hindu joint family comprised of three coparceners, A, B and C. The three decide to
partition the property and each of them gets one third share in the property. The family had to pay some debts from
the property and now each of them will be separately liable to pay the proportionate amount of the debt. If A and B
together pay the total debt, they would have a charge over the property in the hands of C, for the proportionate
amount of debt that C was under an obligation to pay, from his share of the property.
A charge is different from the word “detained”.2 An encumbrance or a burden caused by an act or omission of man
and not that created by nature is the requirement for a charge. It means charge or burden upon property or a claim
or lien on the land is a legal liability and constitutes a burden on title which diminishes value of the land. Hence,
encumbrance must be a charge on property and must run with the property.3 Mere undertaking that the party will
not dispose of the properties mentioned in an undertaking during the currency of the loan will not create any charge
over those properties, unless charge is created by deposit of title deeds or through a registered document. Even if
the purpose of the decree obtained in between the respondents was fraudulent and collusive, that would not confer
any charge over the properties, unless the undertaking is registered.4
Creation of ChaNo table of authorities entries found.rge
A charge need not be in writing,5 but if it is reduced to writing, registration is necessary in the case of a non-
testamentary instrument of the value of Rs 100 or upwards.6 No particular words or form is prescribed to create a
charge, but the intention of the parties that money is to be paid out of a specific property must be very clear. For
example, the husband earmarks a specific property for the wife so that she can realise her maintenance from that
property. It does not amount to the transfer of an interest in the property in favour of the wife, but it is a charge, as
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the payment is to be made out of that property. An assignment of such a charge would also need to be registered.7
Electricity dues of an erstwhile consumer are not a charge on the property and cannot be recovered from the
purchaser of the property.8
A charge cannot ordinarily be split up by apportioning liability amongst various persons.9
Specific Property
The security for the charge must be specific immovable property otherwise the charge would be void for
uncertainty.10 Property must be sufficiently described. If the property belongs to the joint family and is partitioned, in
the schedules to the partition deed,11 a clear and accurate specification of the property is mandatory for creation of
a charge. Descriptions like, a charge over ‘all the property of the judgment debtor both movable and immovable’12
or an undertaking in a deed to segregate certain property so that it would be answerable to another person, should
the executant of the deed fail to give a charge bond, has the effect of making the property a security for the
payment and creating a charge.13 A charge created by a person on the unknown and uncertain share, which one of
his heirs may succeed to, is invalid as a charge.14
Charge by Act of Parties
Charge can be created either by the act of parties or by operation of law. Creation of enforceable security is the
essence of charge either in respect of immovable property or in respect of movables.15 Where the document shows
an intention to make the land security for the payment of the money mentioned therein16 or an intention to create a
charge in praesenti an agreement may amount to a charge.17 But, a mere undertaking to discharge an obligation or
liability is not enough if the intention to make a specified property or fund liable is absent.18
The following are the illustrations of creation of a charge:
(i) A document that gives only a right of payment out of a particular fund or property;19
(ii) An agreement which gives immovable property as security for the satisfaction of a debt;20
(iii) A compromise under which the right is given to the other party for the payment of a maintenance allowance
in property without transferring an interest in the property;
(iv) An agreement by which an owner of a share in a village receives in lieu of his share a lump sum out of the
income;21
(v) An agreement executed by a person forbidden to execute a mortgage taking an advance on the same
terms as a mortgage;22
(vi) An undertaking not to sell a particular share in the factory till the loan on promissory note is paid off;23
(vii) A covenant in a lease empowering the lessee to retain part of the rent in satisfaction of a previous loan to
the lessor;24
(viii) A provision in a partition deed that a common family debt should be proportionately discharged by the
respective sharers and that if any sharer defaults, the share of defaulting sharer constitutes a charge in
favour of the sharer who has paid in excess.25
A charge created in favour of a creditor continues to subsist until it is extinguished or abandoned by an express
view to that effect.26 Vendor and vendee in collusion, cannot create a charge on property of a third party, without his
consent and a decree creating a charge over his property would not only be not binding on him but he will also be
entitled to a decree declaring his right over the said property.27 A charge on future property is valid and operates on
such property when it comes into existence.28 In case of distribution of property, the consideration of priority of debt
secured by a charge has to be taken in account. Therefore, where a mortgage is created on the property of an
insolvent, the amount recoverable by the mortgagee will be above the priority contemplated in section 61 of the
Insolvency Act.29
Passing of an arbitral award on consent would not result in the annulment of hypothecation and the party would
retain its character as a secured creditor in a case where there is hypothecation of movable property as the
principles applicable to movable and immovable property are distinct.30 Where goods were hypothecated to bank by
borrower without delivery of possession and were subsequently transferred by him, the legal rights of Bank continue
to survive and charge of Bank remains binding on transferee.31 A secured creditor may choose to realise its
Page 3 of 7
securities outside of winding up of the concern in liquidation. In creating a charge, such immovable asset must be
identified to discharge liabilities.32
Charge by Operation of Law
A charge created by a decree of a competent court is created by the operation of law33 and is governed by this
rule.34 Arrears of government revenue35 such as municipal taxes,36 are a paramount charge on the land, but
electricity dues or37 a co-sharer paying assessment to avert a sale does not get a charge on the other shares.38
A compromise decree creates a charge on an immovable property.39 A charge created by a consent decree over
certain property of the husband for maintenance of the deserted wife, for her life, is in the nature of a charge
contemplated by law and will not lapse by death of the husband.40 The creation of charge by operation of a statute
does not create an interest in the property.41 A security bond to the court will not operate as a mortgage42 nor create
a charge43 as the court is not a juridical person, but the security bond creates an encumbrance and a purchaser of
the property subject to the encumbrance, must indemnify the judgment debtor if the liability is enforced against
him.44
Charge and a Mortgage
The primary distinctions between a mortgage and a charge are as follows:
(i) In every mortgage there is a charge, but every charge is not a mortgage.45
(ii) A mortgage is primarily a contract between two parties and is created by the act of parties, while charge
can be created either by act of parties or even by operation of law.
(iii) In a mortgage there is a transfer of an interest in property in favour of the mortgagee, but in case of a
charge, there is no transfer of an interest.
(iv) On the one hand, a charge does not amount to a mortgage and yet it is subject to the application of
provisions applicable to a simple mortgage as if it has been equated to a simple mortgage both in respect
of the nature and efficacy of the security. An intended oral mortgage46 or a mortgage47 or a sale deed48
which is invalid for want of attestation49 or intended to operate until the vendee executes an agreement of
reconveyance on the vendee’s default50 cannot take effect as a charge.
(v) A mortgage is a transaction for the security of repayment of a debt, or for performance of an engagement
which may give rise to a pecuniary liability, while in case of a charge, there may or may not be a debt.
(vi) A mortgage is for a fixed term and redeemable, while a charge may create a liability in perpetuity not
capable of redemption.51
(vii) A charge does not require to be attested and proved in the same way as a mortgage.52
(viii) A charge-holder has no priority if there is no notice on the part of a subsequent simple mortgagee.53
(ix) A mortgage gives to the mortgagee a right in rem, but the charge does not give such a right in favour of the
other party.
(x) A charge like a simple mortgage can be enforced within a period of 12 years only, but the rest of the
mortgages can be enforced within a period of 30 years.
Contingent Charge
A charge to secure a liability which is not in existence in prasenti but is contingent and is liable to arise in future is
valid.54 A charge cannot be created on a future contingency55 though it is not necessary that there should be any
pre-existing debt and a charge may be created for discharge of an indemnity56 or contingent liability.57 A charge
holder in whose favour a charge is created on the property that is to come into existence in future will be entitled to
priority over a person who attaches the property after that such charge comes into existence.58
Notice of Charge
A charge can be enforced against a transferee of the property who has notice of it, or who is a gratuitous
transferee. This is the general prohibition that no charge shall be enforced against any property in the hands of a
transferee for consideration without notice of the charge and the exception to this general rule must be expressly
Page 4 of 7
provided by law.59 Charges including an oral non- possessory charge60 are not enforceable against transferees for
consideration without notice or a volunteer with or without notice.61 A law which merely makes municipal taxes a
first charge on the property but does not expressly provide for the priority of such charges over transferees for
consideration without notice will not prevail over a transferee for consideration without notice.
Enforcement of a Charge
A charge is enforced by sale62 and if it carries with it a personal liability, the charge holder is entitled to a personal
decree.63 A person who purchases a portion of a property which is subject to charge with notice of the charge is
liable to pay the whole amount, but he may sue for contribution.64 A recurring charge is not extinguished by a
decree for sale.65 If two properties are burdened with a charge and one of them is relieved of the liability of paying
the charge as a result of its transfer by the owner to a person for consideration and without notice of the charge, the
charge holder can recover the entire amount from the remaining property.66
A charge declared in a decree must be enforced by a suit.67 The doctrine of subrogation applies to a charge and it
is immaterial whether the prior mortgagee had notice of the charge.68 Where a portion of the property charged has
been relieved thereof, without the consent of the holder of the charge, the charge-holder can proceed against the
whole property for the enforcement of the charge and the principle of ratable distribution is inapplicable.69
Where there is a charge on the property as contemplated under section 55(6) of the Transfer of Property Act, 1882
there is no limitation to file the suit.70
Charge of a Trustee Over Trust Properties
A trustee is entitled to a charge on the income as well as the corpus of the trust estate for all moneys properly
expended in performing the obligations of the trust71 and this charge has priority over the returns of the
beneficiaries,72 but once he ceases to be a trustee, or loses possession of the trust property, he can enforce his
charge by sale.73
1 The broad distinction between a mortgage and a charge is this, that whereas a charge only gives a right to payment out
of a particular fund or particular property without transferring that fund or property, a mortgage is in essence a transfer
of an interest in specific immovable property, Raja Sri Shiva Prasad v Beni Madhab, AIR 1922 Pat 529. In a charge
there is no transfer of an interest in the property but the creation of a right of payment out of property specified.
2 M/S Rana Girders Ltd v UOI, JT 2013 (11) SC 226 : (2013) 10 SCC 746 [LNIND 2013 SC 749]; State of Karnataka v
Shreyash Papers (P) Ltd, JT 2006 (1) SC 180 [LNIND 2006 SC 16]) : (2006) 144 STC 331.
3 Sulochana Chandrakant Galande v Pune Municipal Transport, (2010) 8 SCC 467 [LNIND 2010 SC 698] : 2010 AIR
2962.
4 Haryana Financial Corp v Gurcharan Singh, 2014 (1) CTC 98 : 2013 (15) Scale 296 [LNIND 2013 SC 1076].
5 Abduljabhar v Venkata Sastri, AIR 1969 SC 1147 [LNIND 1969 SC 37].
6 The Registration Act, 1908, section 17(1)(b); see Bengal Banking Corp v Mackertich, (1884) ILR 10 Cal 315; Maine v
Bachchi, (1906) ILR 28 All 655; Amratlal v Keshavlal, AIR 1926 Bom 495; Imperial Bank v Bengal National Bank, AIR
1931 Cal 223; Rangampudi v Venkateswarlu, AIR 1934 Mad 713; Vishwanadhan v Menon, AIR 1939 Mad 202 [LNIND
1938 MAD 401].
7 Shiva Rao v Official Liquidator, AIR 1940 Mad 140 [LNIND 1939 MAD 221]; Kishan Lal v Ganga Ram, (1891) ILR 13 All
28, p 44; Royyiddi v Kali Nath, (1906) 33 Cal 985; Gur Dayal v Karam Singh, (1916) ILR 38 All 254; Jawahir Mal v
Indomati, (1914) 36 All 201; Benaras Bank v Har Prasad, AIR 1936 Lah 482.
8 Subhendu Banerjee v CESC, AIR 2002 Cal 242 [LNIND 2002 CAL 107]; a charge is a ‘transfer’ within the meaning of
the Electricity Act, 9 of 1910 section 9(2); see Uttar Pradesh Government v Manmohan Das, (1941) ILR All 691 : AIR
1941 All 345.
9 Har Charan Lal v Agra Municipal Board Agra, AIR 1952 All 315 [LNIND 1950 ALL 211].
10 Mohini Debi v Purna Sashi, (1932) 36 Cal WN, 138 IC 24, AIR 1932 Cal 451.
11 Manickam Pillai v Audinarayana, 5 IC 917, (1910) 34 Mad 47.
12 Narsinhamurthi v Satyanandan, AIR 1941 Mad 794 [LNIND 1941 MAD 120]; see also Sris Chundra Nandey v
Rakhalananda, AIR 1941 PC 16.
Page 5 of 7
13 Dau Bhairoprasad v Jugalprasad, AIR 1941 Nag 162.

14 Matlub Hasan v Kalawati, AIR 1933 All 934.
15 Hindustan Machine Tools Ltd v Nedungadi Bank Ltd, AIR 1995 Kant 185 [LNIND 1994 KANT 163].
16 Janardan v Anant, (1908) ILR 32 Bom 386; Narain Das v Murli Dhar, AIR 1929 Oudh 529; Bholanath v Sarba Mangal,
AIR 1940 Cal 93; Ali Mohammed v Ramnivas, AlR 1967 Raj 258.
17 JK (By) P Ltd v New K-I-Hind Spinning and Weaving Co, AIR 1970 SC 1041 [LNIND 1968 SC 412].
18 MC Chacko v State Bank of Travancore, AIR 1970 SC 504 [LNIND 1969 SC 221].
19 Gobinda Chandra v Dwarka Nath, (1908) ILR 35 Cal 837.
20 Ramaswami v Kuppuswami, AIR 1912 Mad 514; Sher Singh v Daya Ram, AIR 1932 Lah 465; Bank of India v Rustom,
AIR 1955 Bom 419 [LNIND 1954 BOM 121].
21 Rustamali v Afiab Khan, AIR 1943 Bom 414.
22 Remal Das v Jannat, AIR 1921 Lah 136; Sher Singh v Daya Ram, AIR 1932 Lah 465 (FB).
23 Narain Das v Murli Dhar, AIR 1929 Oudh 539.
24 Nathan Lal v Durga Das, AIR 1931 All 62.
25 Sesha Ayyar v Sreenivasa, AIR 1921 Mad 459 [LNIND 1921 MAD 64]; Abdul Razak Rowther v Abdul Rahiman Sahib,
AIR 1933 Mad 715 [LNIND 1933 MAD 128].
26 Balakrishnan v VPMohanan, AIR 1998 Ker 257 [LNIND 1998 KER 5].
27 Azheekkal Sree Varaha Devaswami v Ummer Sail, AIR 1951 Tr & Coch 17.
28 Fatechand v Parasram, AIR 1953 Bom 101 [LNIND 1951 BOM 25].
29 Patel Dahyabhai Ramjibhai v Manager Ranuj Nagrik Sahakari Bank, AIR 2010 Guj 54 [LNIND 2010 GUJ 1].
30 Infrastructure Leasing & Financial Services v BPL Ltd, (2015) 3 SCC 363 [LNIND 2015 SC 13] : 2015 (1) Scale 186
[LNIND 2015 SC 13].
31 Eureka Forbes Ltd v Allahabad Bank, (2010) 6 SCC 193 [LNINDORD 2010 SC 198] : (2010) 101 SCL 95(SC).
32 ONGC Ltd v Official Liquidator of Ambica Mills Co Ltd, AIR 2014 SC 3011 [LNIND 2014 SC 292]: (2015) 5 SCC 300
[LNIND 2014 SC 292].
33 There is a conflict of judicial opinion on this issue, see Bela Dibya v Ramkishore, AIR 1969 Ori 114 [LNIND 1968 ORI
93]; Rustamali v Aftab Khan, AIR 1943 Bom 414; Abdul Guffar v Miaz Ali, AIR 1943 Oudh 354; Venkatacha v
Rajagopala, AIR 1946 Mad 51 [LNIND 1945 MAD 118]; see also Debendmnath v Trinayani, AIR 1945 Pat 278; Safiul
Alam v Aminul Alam, AIR1969 Pat 162; Ghasiram v Kundanbai, AIR 1940 Nag 163; Batcha Sahib v
Periyanayagammal, AIR 1952 Mad 165 [LNIND 1951 MAD 53]; Radhe Lal v Ladli Parshad, AIR 1957 Punj 92; Prem
Kuer v Ram Lagan Rai, AIR 1948 Pat 199; Gangamani Devi v Kumar Chandra, AIR 1950 Pat 478; Shyam Narain v
Klublal Mehto, AIR 1968 Pat 238; Jata Bahadur v Krishna Bhamini, AIR 1957 Cal 204 [LNIND 1956 CAL 48]; Dhirendra
Nath v Santa Shila Devi, AIR 1968 Cal 336 [LNIND 1967 CAL 161]; HC Mukherji v Radha Mohan, AIR 1949 All 339;
Mahesh Prasad v Mundar, AIR 1951 All 141 [LNIND 1950 ALL 153], wherein it was held that a charge created by an
ordinary decree would not be a charge created by the acts of parties and the provisions of section 100 would not apply.
34 Laxmi Devi v Mukand Kunwar, AIR 1965 SC 834 [LNIND 1964 SC 366]; Manna Singh v Wasti Ram, AIR 1960 Punj
296.
35 Mangal Prasad v Chandra, (1905) 1 Nag LR 117; Singai Murlidhar v Laia, (1907) 3 Nag LR 40; Akhoy Kumar v Corpn.
of Calcutta, (1915) ILR 42 Cal 625; Corpn. of Calcutta v Arunchandra Singh, AIR 1934 Cal 862; Sri Rajah Bdlapragada
Venkata v Menda Seetayya, (1920) ILR 43 Mad 786; Ramkati Suryanarayana v Ramchandrudu, AIR 1932 Mad 716
[LNIND 1932 MAD 109]; and see Harish Chandra v Qasim Gam, AIR 1961 Pat 291.
36 Chatraput Singh v Gnndra Chunder, (1881) ILR 6 Cal 389.
37 Haryana State Electricity Board v Hanuman Rice Mills, Dhanauri, AIR 2010 SC 3835 [LNIND 2010 SC 785].
38 Seth ChitorMal v Shib Lal, (1892) ILR 14 All 273 (FB); Bhuneshwari Kuer v Manir Khan, AIR 1928 Pat 641; U Skate
Bwa v Maung Thank, AIR 1928 Rang 278; but see Seshagiri v Pichu,
(1887) 11 Mad 452; Srinivasa v Rama, (1893) 17 Mad 247; Rajah of Vizianagram v Raja Setrucherla, (1902) 26 Mad 686
(FB); Alayakammal v Subbarayya, (1905) ILR 28 Mad 493; Amman Pariyayi v Pakran, (1913) ILR 36 Mad 493; Kotayya
v Kotappa, AIR 1926 Mad 141 [LNIND 1925 MAD 36]; Swaminath lyer v Ramnath Iyer, AIR 1943 Mad 573.
39 Dattatraya Mote v Anand Datar, (1974) 2 SCC 799 [LNIND 1974 SC 295]; Naganna Naidu v Janardhana Krishna
Rangarao, AIR 1959 AP 622 [LNIND 1959 AP 54]; Bapurao v Narayan, (1949) Nag 802; Goswami Mahashpuri v
Page 6 of 7
Ramchandra Sitaramji, AIR 1944 Nag 1; Basumati Koer v Harbansi Koer, AIR 1941 Pat 95; Sheo Narain v Lakhan, AIR
1945 Pat 434.
40 Rundibala Roy v Putubala, AIR 1985 Cal 47 [LNIND 1984 CAL 138], 51.
41 RM Arunachalam v Commissioner IT, AIR 1997 SC 2905 [LNIND 1997 SC 911], wherein the Supreme Court held that
the creation of a charge under the Estate Duty Act, 1953 section 74(1), cannot be construed as creation of an interest
in property that is the subject matter of the charge.
42 Raghubar Singh v Jai Indra Bahadur Singh, AIR 1949 PC 55.
43 Syed Mehdi Ali v Chunni Lal, AIR 1929 All 834.
44 Rama Rayanimgar v Venkatalingam, AIR 1934 Mad 1 [LNIND 1933 MAD 30].
45 Dattatraya Mote v Anand Datar, (1974) 2 SCC 799 [LNIND 1974 SC 295].
46 PR Somasundram v YPN Nachiapa, AIR 1925 Rang 55.
47 Pran Nath v Jadu Nath, (1905) ILR 32 Cal 729; Tofaluddi v Jhahar Ali, (1899) ILR 26 Cal 78, 81; Govinda Chandra Pal
v Dwarka Nath Pal, (1908) 35 Cal 837; Samoa Patter v Abdul Sammad, (1908) ILR 31 Mad 337; Anantarama v
Yussuffi, (1916) 31 Mad LJ 133; Collector of Mirzapur v Bhagwan Prasad, (1913) 35 All 164; Narayan v Lakshmandas,
(1905) 7 Bom LR 934; Debendra v Behari, (1911) 16 Cal WN 1075; Sreemutty Rani v Rajah Sri Nath, (1896) 1 Cal WN
81; Khemchand v Malloo, (1915) 10 Nag LR 81.
48 Maung Tun Ya v Maung Aung, AIR 1925 Rang 1; PR Somasundram Chettiar v YPN Nachiappa Chettiar, AIR 1925
Rang 55.
49 See however, Gobinda Chandra v Dwarka Nath, (1908) ILR 35 Cal 837, wherein it was held that if an instrument is
expressly stated to be a mortgage, and gives the power of realisation of the mortgage money by sale of the mortgaged
premises, it should be held to be a mortgage and the fact that the necessary formalities of due execution were wanting
would not convert the mortgage into a charge. If, on the other hand, the instrument is not on the face of it a mortgage,
but simply creates a lien, or directs the realisation of money from a particular property, without reference to sale, it
creates a charge.
50 Phattechand v Uma, AIR 1934 Bom 24.
51 Matlub Hasan v Kalawati, AIR 1933 All 934.
52 Rama Sami lyengar v Kuppusami, AIR 1921 Mad 514; Sikandar Ara Amina Begum v Hasan Ara Begum, AIR 1936
Oudh 196.
53 Dattatraya Mote v Anand Datar, (1974) 2 SCC 799 [LNIND 1974 SC 295].
54 A Ali v Nath Bank, AIR 1951 Assam 56; RFH Crother v Pakkianathan, AIR 1953 Tr & Coch 344; Umrao Singh v
Tansukh Raj, AIR 1934 Lah 765.
55 Madho Misser v Sidh Binaik, (1887) ILR 14 Cal 687; Abdul Samad v Municipal Committee, 67 IC 939; Raja Ram v
Jagannath, AIR 1926 Oudh 209; Mohini Debi v Puma Sashi, AIR 1932 Cal 451.
56 Balasubramania v Sivaguru, (1911) 21 Mad LJ 562; Imbiohi v Achampat Ayukoya Haji, (1917) 33 Mad LJ 58; Murat
Singh v Pheku Singh, AIR 1928 Pat 587; Harnam Singh v Mahomed Akbar Khan, (1937) AP 76; Sriniwas v Jamnadas,
AIR 1952 MB 16.
57 Nand Lal v Dharamdeo, AIR 1925 Pat 288.
58 Alkash Ali Khalifa v Nath Bank, AIR 1951 Assam 56.
59 Ai Champday Industries Ltd v Official Liquidator, (2009) 4 SCC 486 [LNIND 2009 SC 402] : (2009) INSC 368.
60 Gur Dayal v Karam Singh, (1916) ILR 38 All 254; Kishan Lal v Ganga Ram, (1891) ILR 13 All 28, 44; Royzuddi v Kali
Nath, (1906) ILR 33 Cal 985, 993; Akkoy Kumar v Corp of Calcutta, (1915) 42 Cal 625; Hunter, Liquidator of Bank of
Upper India v Nisar Ahmad Chaudhari, AIR 1932 Oudh 336; Shariff Ahmed v H Hunter, AIR 1937 Oudh 420; Parshair
Lal v Brij Mohan, AIR 1936 Oudh 52; Jnanendra Nath v Sashi Mulch, AIR 1940 Cal 60; Matlub Hasan v Mi Kalawati,
AIR 1933 All 934; Raghubir Dayal v Hussain Mirza, AIR 1948 Oudh 147.
61 Chhaganlal v Chunital, AIR 1934 Bom 189.
62 Gajraj Jain v State of Bihar, (2004) 7 SCC 151 [LNIND 2004 SC 646]; Lalitha Kariappa v Sanjeevi, AIR 2006 Kant 25
[LNIND 2005 KANT 460].
63 Ahmedabad Municipality v Haji Abdul, AIR 1971 SC 1201 [LNIND 1971 SC 183].
64 Babu Ram v Imam Ullah, AIR 1935 All 411; Raghukul Tilak v Piiam Singh, AIR 1931 All 99.
65 Shariff Ahmed v H Hunter, AIR 1937 Oudh 420; Parshair Lal v Brij Mohan, AIR 1936 Oudh 52; Jnanendra Nath v Sashi
Mulch, AIR 1940 Cal 60.
Page 7 of 7
66 Raghubir Dayal v Hussain Mirza, AIR 1948 Oudh 147.

67 Aubhoyessury Dabee v Gouri Sunkur Panday, (1895) 22 Cal 859; Matangini Dassee v Chooneymoney Dassee, (1895)
22 Cal 903; Venkata Lakshmamma v Seetayya, (1920) 43 Mad 786; Rajkumar Lal vjai Karan Das, (1920) 5 Pat 1J 248.
68 Aravamudhu Ayyangar v Zamindarini Srinath Abiramvalli Ayah, AIR 1934 Mad 353 [LNIND 1933 MAD 260].
69 Hussein Mirza v Raghubir Dayal, AIR 1947 Oudh 122.
70 Perera AJ v Nalini Nethiyar, (2010) 3 KLJ 755 (Kerala).
71 Re Pumfrey, (1882) 22 ChD 261 .
72 Peary Mohun Mukerjee v Narendra Nath, (1910) ILR 37 Cal 229; Dodds v Tuke, (1884) 25 ChD 617.
73 Abkan Sahib v Soran Bibi, (1915) ILR 38 Mad 260; Peary Mohun Mukerjee v Narendra Nath, (1910) 37 Cal 229.
End of Document
MERGER
Chapter 5 Charges
MERGER
[s 101] No merger in case of subsequent encumbrance.—Any mortgagee of, or person having a charge upon,
immovable property, or any transferee from such mortgagee or charge-holder, may purchase or otherwise acquire
the rights in the property of the mortgagor or owner, as the case may be, without thereby causing the mortgage or
charge to be merged as between himself and any subsequent mortgagee of, or person having a subsequent charge
upon, the same property; and no such subsequent mortgagee or charge-holder shall be entitled to foreclose or sell
such property without redeeming the prior mortgage or charge, or otherwise than subject thereto.
If a person has one right over the property and he acquires another, the union of these two interests would result in
the merger. For instance, A mortgages his property in favour of B for securing the repayment of the loan. The
mortgagee has a right to have his money back, and the mortgagor has a right to have his security back in the event
of payment of the loan amount. This right is called a right of redemption. If the mortgagee acquires this right of
redemption, this would result in the merger of the two interests that the mortgagee had in the property and would
extinguish the mortgage. A security can be extinguished by merger of a lower into a higher security; and of a lesser
estate in a greater estate. There can be no merger if the remedies on two securities are not co-extensive74 or if the
later security is inoperative,75 or if there is no subsisting prior encumbrance at the relevant time76 or when merger is
expressly excluded by words indicating a contrary intention, eg, by a recital that the subsequent security is given by
way of further or additional security.77 A promissory note, enforceable by summary procedure, will not merge in a
mortgage for the same debt.78 The mere fact that the two capacities are united in the same physical person cannot
result in a merger.79 The doctrine of merger does not apply in the case of a lease followed by a mortgage to the
lessee.80
When after the mortgage, there is sale of right of redemption, or purchase of the property by the mortgagee himself,
the mortgage merges with the sale and is extinguished unless contrary intention is proved,81 or when a person
recovers judgment on a contract debt, the debt is extinguished as merged in the judgment82 but if it is secured by a
mortgage, the collateral security of the mortgage does not merge.83 An equitable mortgage by deposit of title deeds
is extinguished when a formal mortgage is executed for the debt.84 A mortgage security is not merged in the
judgment and subsists until satisfaction of the decree.85 Therefore, if the mortgage decree for sale is not executed
and the mortgagee is in possession, the mortgagor and the mortgagor’s purchasers cannot dispossess him except
by suit for redemption.86 If the mortgagee purchases the property mortgaged and the sale deed fails for want of
registration, or because the property was under attachment87 or if the sale is avoided as a fraud on creditors,88 he
can still fall back on the mortgage. A mortgagee in possession under an invalid sale may bring the property to
sale,89 or may be sued for redemption.90
Rule of Intention
A merger must be intended; otherwise the mortgage would be treated as alive and not extinguished. Whether the
charge is considered as extinguished or kept alive for the benefit of a person is a question of intention. When an
owner of estate pays charges on that estate which he is not personally liable to pay the question whether these
charges are to be extinguished, or are kept alive for his benefit, is a question of intention.91 A contract depriving the
prior mortgagee of his charge upon the property when he becomes its owner under a sale must be clear one.92 A
mere mention in a sale deed of the amount due upon a prior mortgage is not sufficient to imply intention of merger93
or the fact that the mortgagee purchases in the name of his son is not an evidence of an intention to keep the
Page 2 of 4
MERGER
mortgage alive, because of no puisne mortgage.94 But the purchasing mortgagee granting a sub-mortgage95 or the
retention of the mortgage deed by the mortgagee after the purchase of the right of redemption in presence of a
puisne mortgage is an indication of an intention to keep the mortgage alive.96 A mortgagee purchasing a right of
redemption at a sale in execution of a money decree does not lose priority over a puisne mortgage, even where by
mistake no mention was made of it in the sale proclamation.97
Where a subsequent usufructuary mortgagee pays off a foreclosure decree obtained by a prior mortgage to save
the property from foreclosure and later sues the mortgagor to recover the amount so paid and obtains a foreclosure
decree, he has no intention of keeping his own mortgage alive.1 In case of successive mortgages where the prior
mortgagee obtains a decree on his mortgage but doesn’t bring the property to sale and makes a further advance to
the mortgagor and takes a fresh mortgage for the decretal amount plus the further advance and the later mortgagee
claims priority over the prior, the first mortgage is not extinguished by merger as there is a subsequent mortgage,
and the prior mortgagee is entitled to a priority over the latter, in respect of the decretal amount.2 A mortgage will be
extinguished by merger, if there is no interest of any kind to enter into account or consideration so as to impede the
full and complete transfer of ownership of the estate as such.3 If the continuance is for the benefit of the purchaser,
no question of intention need be considered.4 When the charge for rent is in existence at the date of the
mortgagee’s sale, the mortgage is not extinguished by merger.5 But the application of this rule depends on the
circumstances present at the time of the mortgagee’s acquisition of full ownership.6 If the mortgagee after filing a
suit on his mortgage, purchases the right of redemption at a sale in execution of a simple money decree, the
mortgage is extinguished by merger and the suit will be dismissed.7 A partial failure of consideration does not avoid
the sale and the sale extinguishes the mortgage security,8 a mortgage extinguished by merger in a sale cannot be
enforced.9 In Sonaulla Karikar v Abu Syad,10 the mortgagor sold the mortgaged property to a purchaser and later
professed to sell the same to the mortgagee who after taking possession was evicted by the purchaser. The
purchaser is sued by the mortgagee on the mortgage and his contention that the mortgage was merged was held
as not valid as the mortgagor had already parted with his right of redemption and at the time of the purchase, the
purchaser’s interest was outstanding.
As Between Himself and Subsequent Mortgagee
The purchasing mortgagee’s rights merge in those of the mortgagor or remain in suspension until they are needed
for purposes of defence against the puisne mortgagee11 or by way of an attack.12 The mortgage is alive as far as
the puisne mortgagee is concerned13 and the purchasing mortgagee can claim the amount due under the mortgage
from him14 but he has no claim for interest after the date of his purchase15 and cannot enforce his mortgage by
suit16 but where purchasing mortgagee is also puisne mortgagee no estate intervenes and there is a merger of both
mortgages in the estate of ownership.17
When Securities are of Equal Degree
When the securities are of equal degree and one security is accepted for the other, the old security is
extinguished.18 But if the new security fails, there is no substitution and therefore, no extinction of the old security.19
Where a new security is taken with a fresh advance both for the old debt and the fresh advance, the first mortgage
remains alive for the protection of the first mortgagee against the second mortgagee20 and he does not lose priority
over a mesne mortgage even though the renewed mortgage includes other property and varies the rate of
interest,21 unless the first mortgage is time-barred.22 The renewal of a mortgage by a person with a limited interest,
cannot operate as a discharge of the first mortgage,23 and when a mortgagor gave a third mortgage consolidating
two prior mortgages, and the third mortgage is invalid for want of registration, he is allowed to redeem the prior
mortgages.24
The creditor can abandon his original security in favour of the new one such as a suit on a second mortgage
incorporating the first25 or where he gets a decree on the first mortgage and certifies satisfaction of the decree,26 or
admits in a recital in the subsequent mortgage that the first mortgage has been satisfied,27 he cannot fall back on it.
But the mere fact that the mortgagee has filed a suit on the first mortgage does not show that he has abandoned
it.28
74 Re Venkata v Ranga, (1887) 10 Mad 160, 163.

Page 3 of 4
MERGER
75 Jivandas v Framji, (1870) 7 Bom HCR 45 OCJ.

76 Bashirunnisan v Habib Ahmed, AIR 1960 Pat 264.
77 Twopenny v Young, (1824) 3 B&C 208.
78 Ramgopal v Richard Blaquiere, (1868) 1 Beng LR 35 OCJ.
79 Mahomed Abdul Samad v Girdhari Lal, AIR 1942 All 175.
80 Malegowda v Gaibusab, AIR 1978 Kant 71 [LNIND 1978 KANT 3].
81 BT Kempanna v T Krishnappa, AIR 1973 Mys 58.
82 Owen v Homan, (1851) 8 Mac&G 378.
83 Economic Life Assurance Society v Osborne, (1902) AC 147; Ramshanker v Gulab Shanker, AIR 1933 Nag 241;
Purnamal v Venkata (1897) ILR 20 Mad 486; Latchmiput Singh v Land Mortgage Bank of India, (1887) 14 Cal 464.
84 Annesley, Vaughan v Vanderstegen, (1854) 2 Eq Rep 1257.
85 Surjiram v Barhamdeo, (1905) 2 Cal LJ 202.
86 Hirachand Babaji v Bhaskar, (1864) 2 Bom HC 198 ACJ.
87 Gopal Sahoo v Gunga, (1882) 8 Cal 530.
88 Appalaraju v Krishnamurthy, AIR 1932 Mad 182.
89 Rama Charan v Nimai Nandal, AIR 1922 Cal 114.
90 Ariyaputhira v Muthukomaraswami, (1914) ILR 37 Mad 423; Raj Kishore Lall v Sultanjehan, AIR 1953 Pat 58.
91 Malireddi v Gopala Krishnayya, AIR 1924 PC 36; The rule was laid down in Tharne v Cann, (1895) AC 11.
92 Madan Mohan v Nand Ram, AIR 1943 All 156.
93 Radha Kishan v Fakharuddin, AIR 1934 Lah 143.
94 Gobind Sarup v Kaldup Singh, AIR 1924 Lah 377; Lala Lakhmichand v Partab Singh, AIR 1930 Lah 620.
95 Madan Mohan v Nand Ram, AIR 1943 All 156.
96 Prayag Narain v Chedi Rai, (1909) 14 Cal WN 1093; Shantappa v Balapa, (1882) ILR 6 Bom 561; Gauri Shankar v
Bahadur Singh, AIR 1925 Pat 605.
97 Ram Sarup v Bharat Singh, AIR 1921 All 113; Gurdit Singh v Hakumat Rai, AIR 1932 Lah 56.
1 Gafoor Khan v Baldeo, AIR 1943 Oudh 284.
2 The Privy Council has laid down the rule in Gokuldas v Puranmal, (1884) ILR 10 Cal 1035; Mahalakshmammal v
Sriman Madhawa, (1912) ILR 35 Mad 642; Shankar v Sadashiv, (1914) 38 Bom 24, 31; NVN Natchiappa Chettyar v Ko
Tha Zan, AIR 1928 Rang 287.
3 Sabjan Mandal v Haripada Saha, AIR 1921 Cal 599; Bhawani Kumar v Mathura Prasad, (1913) ILR 40 Cal 89.
4 Ko Po Kun v CAMLAL Firm, AIR 1932 Rang 197.
5 Sita Chandra v Parbati Charan, AIR 1922 Cal 32; Bidumukhi Dasi v Babha Sundari, (1919) 24 Cal WN 961; For the
applicability of the rule of intention before the passing of Act see Bissen Das v Sheo Prasad, (1880) 5 Cal LR 29; Gaya
Prasad v Salik Prasad, (1881) ILR 3 All 682; Ramu v Subbaraya, (1875) 7 Mad HC 229; Lachmin Narain v Koteshar
Nath, (1880) ILR 2 All 826; Har Prasad v Bhagwan Das, (1882) 4 All 196; All LT Hasan v Dhirja, (1882) 4 All 518;
Shantappa v Balapa, (1882)ILR 6 Bom 561; Goluk Nath Misser v Lalla Prem Lal, (1878) ILR 3 Cal 307 (renewal of
mortgage).
6 Damodara Sami v Govindarajalu, AIR 1943 Mad 429 [LNIND 1943 MAD 86](FB).
7 Balamani Ammal v Rama Aiyar, AIR 1925 Mad 786 [LNIND 1924 MAD 515]; Lachman Prasad v Lachmeshwar, AIR
1922 All 76.
8 Kedar Nath v Bhagwat Prasad, AIR 1936 Pat 404.
9 Daso Pillai v Narayan Patro, AIR 1983 Mad 879.
10 AIR 1930 Cal 530.
11 Ram Sarup v Ram Lal, AIR 1922 All 394; Hari Ram v Minakshi Rani, AIR 1939 All 660; Nazani Din v Ram Sukh, AIR
1938 Lah 286; Sengamuthu v Thayarammal, AIR 1940 Mad 646 [LNIND 1939 MAD 80].
12 Bohra Bhup Singh v Sakha Ram, AIR 1945 All 158.
Page 4 of 4
MERGER
13 Ranma Aiyar v BagavathiMuthu, AIR 1936 Mad 473 [LNIND 1935 MAD 406].
14 Ghulam Khoja v Pandharinath, AIR 1948 Bom 579.
15 Syed Ibrahim v Arumugathayee, 16 IC 877 : (1915) ILR 38 Mad 18.
16 Arumugasundara v Narasimha, (1915) 29 Mad LJ 583.
17 Laxman Ganesh v Mathurabai, (1914) ILR 38 Bom 369.
18 Badri Prasad v Daulat, (1880) 3 All 706.
19 Har Chundi Lal v Sheoraj Singh, AIR 1916 PC 68.
20 Punjab and Sind Bank v Kishan Singh, AIR 1935 Lah 350; Gopal Chunder v Herembo, (1889) ILR 16 Cal 523; see also
Kanhaiya Lal v Gulab Singh, AIR 1933 Oudh 9; Seetharama v Venkatakrishna, (1893) ILR 16 Mad 94; Alangaran Chetti
v Lakshmanan Chetti, (1897) ILR 20 Mad 274.
21 Gopal Chunder v Herembo, (1889) 16 Cal 523; Inderdawan v Gobind, (1896) 23 Cal 790; Goluknath Misser v Lalla
Prem Lal, (1878) ILR 3 Cal 307; Baij Nath Goenka v Daleep, 58 IC 489.
22 Radhakishan v Hazarilal, AIR 1944 Nag 163 (FB); Kanhaiya Lal v Gulab Singh, AIR 1933 Oudh 9.
23 Skinner v Nauni Lal Singh, (1913) ILR 35 All 211.
24 Arunugam v Periasami, (1898) 19 Mad 160.
25 Nakta Ram v Mali Ram, (1906) All WN 191; see also Velayudu Reddi v Narasimha, (1917) 32 Mad LJ 263;
Mahalakshmammal v Sriman Madhawa, (1912) ILR 35 Mad 642 for a contrary conclusion Shankar v Mejo Mal, (1901)
ILR 23 All 313.
26 Ram Krishna v Chotmal, (1899) ILR 13 Bom 348.
27 Chhagan Lal v Muhammad Husain, (1919) ILR 41 All 456.
28 Purnamal v Venkata, (1897) ILR 20 Mad 486.
End of Document
NOTICE AND TENDER
Chapter 5 Charges
NOTICE AND TENDER

[s 102] Service or tender on or to agent. —Where the person on or to whom any notice or tender is to be served
or made under this Chapter does not reside in the district in which the mortgaged property or some part thereof is
situate, service or tender on or to an agent holding a general power-of-attorney from such person or otherwise duly
authorized to accept such service or tender shall be deemed sufficient.
Where no person or agent on whom such notice should be served can be found or is known to the person required
to serve the notice, the latter person may apply to any court in which a suit might be brought for redemption of the
mortgaged property, and such court shall direct in what manner such notice shall be served, and any notice served
in compliance with such direction shall be deemed sufficient:
Provided that, in the case of a notice required by s. 83, in the case of a deposit, the application shall be made to the
court in which the deposit has been made.
Where no person or agent to whom such tender should be made can be found or is known to the person desiring to
make the tender, the latter person may deposit in any court in which a suit might be brought for redemption of the
mortgaged property the amount sought to be tendered, and such deposit shall have the effect of a tender of such
amount.
End of Document
NOTICE, ETC., TO OR BY PERSON INCOMPETENT TO CONTRACT
Chapter 5 Charges
NOTICE, ETC., TO OR BY PERSON INCOMPETENT TO CONTRACT

[s 103] Notice, etc., to or by person incompetent to contract. —Where, under the provisions of this Chapter, a
notice is to be served on or by, or a tender or deposit made or accepted or taken out of court by, any person
incompetent to contract, such notice may be served on or by or tender or deposit made, accepted or taken, by the
legal curator of the property of such person; but where there is no such curator, and it is requisite or desirable in the
interest of such person that a notice should be served or a tender or deposit made under the provisions of this
Chapter, application may be made to any court in which a suit might be brought for the redemption of the mortgage
to appoint a guardian ad litem for the purpose of serving or receiving service of such notice, or making or accepting
such tender, or making or taking out of court such deposit, and for the performance of all consequential acts which
could or ought to be done by such person if he were competent to contract; and the provisions of [order XXXII in the
First Schedule to the Code of Civil Procedure, 1908 (5 of 1908)] shall, so far as may be, apply to such application
and to the parties thereto and to the guardian appointed thereunder.
This notice is notice consequent on the deposit having been made.29
29 Ganeshi Lal v Rohni Rukumdhuj, AIR 1928 All 311.
End of Document
POWER TO MAKE RULES
Chapter 5 Charges
POWER TO MAKE RULES

[s 104] Power to make rules.—The High Court may, from time to time, make rules consistent with this Act for
carrying out, in itself and in the Courts of Civil Judicature subject to its superintendence, the provisions contained in
this Chapter.
Rules have been framed under this section by the various high courts. Such rules prevail over the general terms of
the Code of Civil Procedure, 1908.30
30 Vrajlal v Venkataswami, AIR 1928 Bom 123.
End of Document

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Chapter 5

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Date and Time: 09 October 2020 12:40:00 IST

Job Number: 127259424

2. CHARGE, REQUISITES OF THIS SECTION

4. NOTICE AND TENDER

5. NOTICE, ETC., TO OR BY PERSON INCOMPETENT TO CONTRACT

6. POWER TO MAKE RULES

CHARGE, REQUISITES OF THIS SECTION

Creation of ChaNo table of authorities entries found.rge

A charge cannot ordinarily be split up by apportioning liability amongst various persons.9

Charge by Act of Parties

The following are the illustrations of creation of a charge:

Charge by Operation of Law

Charge and a Mortgage

The primary distinctions between a mortgage and a charge are as follows:

Charge of a Trustee Over Trust Properties

13 Dau Bhairoprasad v Jugalprasad, AIR 1941 Nag 162.

66 Raghubir Dayal v Hussain Mirza, AIR 1948 Oudh 147.

As Between Himself and Subsequent Mortgagee

When Securities are of Equal Degree

74 Re Venkata v Ranga, (1887) 10 Mad 160, 163.

75 Jivandas v Framji, (1870) 7 Bom HCR 45 OCJ.

NOTICE AND TENDER

NOTICE, ETC., TO OR BY PERSON INCOMPETENT TO CONTRACT

This notice is notice consequent on the deposit having been made.29

29 Ganeshi Lal v Rohni Rukumdhuj, AIR 1928 All 311.

POWER TO MAKE RULES

30 Vrajlal v Venkataswami, AIR 1928 Bom 123.

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