Comparative study between charge and mortgage

MORTGAGE

SECTION 58 of chapter 4 of transfer of property act deals with the topic of mortgage

In general sense when two parties (lender and the borrower ) enters into an agreement and in such agreement the lander is given assurance by the borrower that the right 82 transfer of immovable property for the purpose of security.
Immovable property includes plant and machinery, buildings , land etc

In mortgage the lender is given the possession of the property e and not the ownership . The ownership for that property lies to the borrower itself. And if the borrower is not able or he fails to repay the loan amount that he had taken from the lender as a loan , then the lender has a legal right to sell that property which he was given as a mortgage and by such he (borrower ) can recover the amount of loss.
Mortgage loans are becoming the most used forms of house finance now a days. It is transfer of interest of a property (immovable) for the security for the repayment of that specific loan given

“Section 58.of the TPA defines “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mortgage-deed” as”
“ A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed”

Nature of mortgage

When a person lends money to someone as a loan on the thing that the repayment of money will be made and if the borrower refuses to repay the money the lender can sue . But what will happen if the borrower becomes insolvent? The lender will loose his money .
But if a security is given under this agreement to protect the lender like when the borrower does not repay then the lender can realise his money buy the property which was given as security .
The purpose of mortgage is the repayment of loan given.

READ  Cyberbullying

Elements of mortgage –

Transfer of interest – there should be a transfer of interest. Search transfer uh should not be of ownership but off the interest only.
Specific immovable property- the property mortgaged must be sepcified and immovable.

“The word my house and landed property or my house and property have been held to be general and vague on the other hand the words a house situated in ghaziabad owned and possessed by us have been held to be sufficiently specific” )

Consideration of mortgage – 3rd essential is that the transfer must be supported by an appropriate consideration.
“Mortgage is created for the purpose of securing a debt aur other application a transfer which is made by way of discharging a dept is not a mortgage”

Illustration

A, gives loan to B and takes the interest in B’s house and the contract states that “A can realise it’s money from the house is B does default to repay the loan.

Forms of mortgage

The right transferred in a mortgage property depends on the nature which the property is having. The section 58 of Transfer of property act gives 6 classes of mortgage as.

– “Simple mortgage”
– “Mortgage by conditional sale”
– “Usufructuary mortgage”
– “English mortgage”
– “Mortgage by deposit of title deeds”
– ‘Anomalous mortgage”

 “Simple mortgage”- characteristics

1. Mortagago is personally bound to to repay the loan.
2. The right to sell the property if borrower fails to repay the loan should be transferred
3. The mortgagee is not given the possession of property.

Mortgage by conditional sale- characteristics:

– The property (immovable) is sold ostensibly by the mortgagor.
– Any of the two condition must be present
Either when the borrower repays the money the sale made by the seller would be transferred by buyer again to the seller
Or the sale shall become absolute in default of payment on the date
– Conditions must be present in a document

• Usufructuary mortgage – characteristics:

– Possession is given to mortgage- He gets rents and profits from int/principle
– Mortgagor is not personally liable

READ  Case study: Ashok Kumar Gupta,Vidya Sagar and others versus State Of Uttar Pradesh [1997 (5) SCC 201]

• “English mortgage” : characteristics:

– liability to repay on fixed date
– The property should be absolutely transferred
– The Transfer should be done by keeping in mind proviso that property should be returned upon the statement by mortgagor

• Mortgage by deposit of title deeds ( Equitable mortgage) – characteristics:

– The lender will be having the deposit of title deed
– Their should be a proper intention that the deed will surely be the security
– No registration is required

• Anomalous mortgage :

Any other mortgage than all the above is known as anomalous mortgage.

CHARGE

Section 100 of the TPA defines charge
“In each mortgage there is charge , but each charge is not a mortgage”
When one person made a security to another for the payment of loan and the property here is immovable and if the transfer does not amount to mortgage then it is said that the person to whom the security is given have charge of the property.

The charge which is created under TPA must be registered
Where a property (immovable) of a person is made as a security by the act of both the parties and the transaction does not amount to mortgage then the person to whom the property is given is said that he took charge of the property.

CHARGE

When one person made a security to another for the payment of loan and the property here is immovable and if the transfer does not amount to mortgage then it is said that the person to whom the security is given have charge of the property.

The charge which is created under TPA must be registered
Where a property (immovable) of a person is made as a security by the act of both the parties and therefore the transaction does not amount to mortgage then the person to whom the property is given is said that he took charge of the property.

CHARGE DEFINED: “by the term ‘charge’ we mean, a right created by the borrower on the property to secure the repayment of debt (principal and interest thereon), in favor of the lender”

Section 100 defines charge as

“ Charges .—Where immoveable property of 1 person is by act of parties or operation of law made security for the payment of cash to a different , and the transaction does not amount to a mortgage, the latter person is claimed to possess a charge on the property; and every one the provisions hereinbefore contained 1[which apply to an easy mortgage shall, so far as could also be , apply to such charge]”

READ  Understanding The Defence Of Mistake Of Fact

Exception : Charge of trustee

Section hundred of the TPA clearly states that expenses which are incurred by trustee becomes the first charge on the property owned but they are not enforced on sale of property like other charges

Trustee is only allowed to get the money out of the income gained by trust estate and is not allowed to rearrange any trust property without paying of the expenses which are to be paid by him previously.

• Kinds of charge

1. The charge created by act of parties
2. Charge which is arosed by law
– When vendor is not paid purchase money on a good.
– When vendee pays purchase money in advance

 DIFFERENCE BETWEEN CHARGE AND MORTGAGE

MEANING – It is the transfer of interest whereas charge is the security provided on a debt by the borrower to the lender.

CREATION – Mortgage is only created by the act of the parties on the other side charge can either be created by parties or law can also create it.

REGISTERATION – Mortgage is compulsory to be register under the TPA whereas charge may or may not be registered , it depends on the creation of it.

TERM – Mortgage is of specified period and charge can be infinite

PERSONAL LIABILITY – Generally mortgage carries personal liability and charge does not carry any personal liability unless its created in a contract.

DEBT – Creation of charge is not surely of debt but mortgage surely represents existence of a debt.

CONCLUSION
When a charge is made the lender is secured that the amount paid to borrower will be realised . On the other side in mortgage the borrower is under certain pressure to repay the amount or else the lender can realise the amount from the security given by borrower. Also mortgage is suitable for the borrowers with mala fide intentions as they can not take the money of lenders and run away.

Author: Shivam Sharma,
Bba llb 3rd year Delhi Metropolitan Education, GGSIPU

Leave a Comment