Section 100 of Transfer Of Property Act deals with charges.

A charge is a sort of obstruction or

encumbrance on the property. It is of two types mainly, fixed and floating. Charges are basically
incurred on an asset but under TPA, it deals with immovable property that is called as fixed
charges.

Under the transfer of property act, it deals with immovable property of one person wherein it
becomes the security for payment of money to the other person by an act of the party or by
operation of law. Such a transaction should not amount to a mortgage and the person whose
property it is should be the owner of the property. 

MEANING OF CHARGE

Section hundred defines charge as that encumbrance or obstruction on the property when one
person makes his or her immovable property security for the repayment of the loan on money to
the other and the transaction does not amount to mortgage. This specifically emphasizes that any
such transaction that is a mortgage won’t be a charge. A charge is either created by parties or it
can be created by operation of law. 

Section hundred distinguishes charge as the encumbrance or barrier on the property when one
party renders his or her immovable property protection for the repayment of the loan on money
to the other and the transaction does not amount to mortgage. This clearly stresses that every
other transaction that is a mortgage won’t be a tax. A charge is either created by the parties or
can be created by the application of the statute.
No sale of interest in immovable property is included in the charge. Property should be defined
and protection should be given for payment of money. For the development of a charge, a simple
and correct definition of the property is necessary. The type of words is immaterial in order to
constitute a charge; it is not appropriate to use any technical terminology.

A charge must be defined for the benefit of a single named person. A charge can be made orally,
but if it is made in writing by an instrument, it must be registered because the amount secured is
less than one hundred rupees.
Charges on immovable property are created to secure payment of money. Section 100 states that
where a person's immovable property is secured for payment of money to another person and the
transaction is not a mortgage, it is stated that a charge has been levied. In the case of a fee, there
is no redistribution of interest in respect of the receiver of the charge, but he is only entitled to
reclaim his money from the land. In the case of a fee, only a personal duty is established, i.e. the
right to pay out of the stated pro peril.

TYPES OF CHARGE

Basically, there are two types of charge depending upon the asset on which the charge is
incurred, whether it is movable or immovable, these are floating and fixed charges. 

1. Fixed Charges- 
Fix charges and all charges that are incurred on ascertainable property. Then this particular
charge is created, it is clearly specified that this is the property on which the Chargers been
created and the identity of that very property cannot and does not change during to period of
loan. Such property can be a land, machinery, building, copyright. In case of this agreement, the
borrower has only the possession of the asset whereas the real owner or the lender has total
control over it. Herein, the borrower cannot sell the property or transfer it or dispose it without
the permission of the owner since this is not a mortgage.
An example to this very type would be, a person who owns a house and that very person has to
pay a tax Luna‘s house dogs but that house. Such dogs being paid would be cold as charge. 

1. Floating Charge-
Floating charges are those charges that are generally created over on unascertainable assets. The
perfect example for these would be stock exchanges, assets, debtors etc. these kind of charges
fluctuate periodically and the value and quantity. In these charges, the person borrowing has a
right to sell the property; he can transfer the property and also dispose of the property without
permission of the other person.
However, there is a process by which floating charges can be converted into fixed charges. It is
basically when A person borrows awesome and is not able to repay the amount, the lender can
take an action to recover the debt by creating a charge on the property. It can also happen at the
time of winding up of the company. Or, also happen when a company ceases to exist or carry on
their business. 

ELEMENTS OF CHARGE

As per section hundred, there are four essentials of a charge to be a valid charge. They are-

1. Immovable property-

For a charge to be created, it must be against an in movable property only. However, this
property can be a current asset of the person or a future property that is being talked for creating
the charge. But when it comes to creating a charge on a movable property, it has to be kept in
mind that the owner of the property has a clear intention of using that property as a security for
the payment of the money.
A charge can never be created against a property that is not owned by a person.
The perfect example in this scenario can be sued for maintenance that is filed by the parent and
their son has to pay maintenance then in such a case he creates a charge on his property by
telling his tenant to pay the rent to his parents rather than paying it to him. 
However, in a scenario where wife filed a suit for maintenance and wanted to create a charge
against the house property but the property was neither owned not constructed by the husband so,
it cannot be said to create a charge against that property.

2. It does not result into mortgage-

A charge can never result in mortgage because if it does then it would be mortgage only. And
there has been a classify difference between the two. In a charge as there is no transfer of
property as well as new transfer of any right but merely an obligation upon the person who is the
owner of the property and right of repayment for the other person who has given the money. And
section 100 provides it explicitly that a charge should never result in a mortgage; however the
essentials that apply to more to gauge should also apply to charge. As per the rule, every
mortgage is a charge but every charge is not a mortgage which means that charge is a wider term
than mortgage.
As stated in the case of Matlub Hasan v. Mt Kalawti1, if the contract is not of a mortgage and it
simply creates a right to lien or it merely allows the realization of the amount borrowed from the
property without any reference to sale, it would be a charge.

3. It is created by an act of the parties-

A charge can be said to be created by the active parties if the parties themselves enter into an
agreement to create a charge on the property. When the parties have a clear intention of using the
property as a security for the repayment of the amount borrowed without any intention of
transferring the property or any right in that property, a charge is said to be created and there is
no requirement of any particular word or language to create such a charge. And in such a case
the person who has given the money can only hold a charge against the property, this is the only
remedy available.
And example in this context can be the same where a person gives a house on rent and allows
another person to take the rent instead of him but herein the person has no such obligation or he
doesn’t owe the other person any money and the other person doesn’t even have any right over
the property. But by entering into this agreement of paying the rent to the other person, the
parties have created a charge on the property by themselves which will be unforeseeable if the
payment of rent is not made on time.

4. It is created by operation of law- 

Apart from a charge being created by the parties, it is created by operation of law. It simply
means that the parties are to comply with the provisions of the law, it is a charge that is created
by legal enforcement without the intention or will rule of the parties. Hence, the parties have to
follow the obligations that are created by law.

1 AIR 1933 All 934

And example in this case would be, A making full payment of the amount to be paid by him to B
but B refusing to transfer the property or to allow him to register the property. In such a case, a
charge would be created on the set property in favour of A by operation of law.

Enforcement of a Charge
A charge is enforced by sale and if it carries with a personal liability the charge holder is entitled
to a personal decree. 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.

A charge can be extinguished by an act of parties by a release by the chargee of the debt or
security or by novation or by merger.

MORTGAGE V. CHARGE

The difference between mortgage and charge has been laid down in the case of Raja Sri Sri
Siva Prasad v. Beni Mahdab Chowdhury. As per the case, Charge gives right to payment on
the property or fund in particular without transferring that very fund or property. Whereas, in the
mortgage that is a transfer of interest involved in that particular property.

The division between mortgage and charge is very specific in England unlike in India where
there is a little different. It has been stated that in case of a simple mortgage the interest that is
transferred is a right by which the person canceled the property.

In the case of the Dalip Singh v. Bahadur Ram. The three essentials of mortgage were laid down
which are- 
a. Transfer of the interest in a particular immovable property 
b. A promise to repay the money taken for the mortgage. 
c. And an agreement which may be expressed or implied satisfying that if the motor schedule
feeds to repay the money according to the contract between them then the mortgagee has the
right to have to motivate property sold by filing a case in the court. 
Furthermore, a charge is created either by act of the parties or by operation of law whereas the
mortgage is created only by the act of the parties. A mortgage can be generated only by the act of
the parties. A payment can be established either by the act of the parties or by statute.

A mortgage may have a covenant to pay for. There can be no covenant to pay in a charge. A
mortgage gives rise to a right in rem. The charge does not give rise to the right in rem (against
the world). It is only applicable to those people who are impacted by the notification of the
charge. A mortgagee can keep track of his security in whatever hands it can take. A mortgagee
may also track the valuation of a bona fide buyer. The holder of the charge cannot follow his
safety.

Doctrine of Merger

A mortgage or a charge can be extinguished by a merger. A merger occurs by the union of a lower and
higher security or by the union of a lesser estate and a greater estate. A mortgage effects a division of
interest in the mortgaged property as between the mortgagor and the mortgagee. The bundle of interest
which remains with the mortgagor is one estate, and the bundle of interest which passes to the mortgagee
is another estate.

Section 101 abolishes the doctrine of merger in plain terms. In other words, the object of Section 101 is to
keep alive a charge. A contract depriving the prior mortgage of his charge upon the property when he
becomes its owner under a sale must be a clear one.

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.