SVKMS

NMIMS SCHOOL OF LAW

A SYNOPSIS SUBMITTED ON;

DISTINCTION BETWEEN MORTGAGE AND CHARGE UNDER THE
TRANSFER OF PROPERTY ACT, 1882
IN COMPLIANCE TO PARTIAL FULFILLMENT OF THE MARKING
SCHEME, FOR TRIMESTER VII OF 2016-2017, IN THE SUBJECT OF
PROPERTY LAW
SUBMITTED TO FACULTY:
Ms. ISHA KHURANA
FOR EVALUATION

SUBMITTED BY:
RIDDHI TULSHIAN (A056)
TY B.B.A L.L.B (HONS.)

SYNOPSIS
INTRODUCTION
What is a mortgage?
A mortgage involves the transfer of the title to an asset as security for a 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.
Mortgage as defined in Transfer of Property Act, 1882
According to Section 58 of the Transfer of Property Act, a mortgage is the transfer of an
interest in specific immovable 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 pecuniary liability.
TYPES OF MORTGAGE
1.
2.
3.
4.
5.
6.

Simple Mortgage
Mortgage by Conditional Sale
Usufructuary Mortgage
English Mortgage
Mortgage by deposit of title of deeds
Anomalous Mortgage

What is a Charge?
A charge is a right created by any person including a company referred to as the borrower
on its assets and properties, present and future, in favour of a financial institution or a bank,
referred to as the lender, which has agreed to extend financial assistance. Section 2(16) of
the Companies Act, 2014 defines charges so as to mean an interest or lien created on the
property or assets of a company or any of its undertakings or both as security and includes a
mortgage.

Charge as defined in Transfer of Property Act, 1882

According to Section 100 of the Transfer of Property Act, 1882, where an 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 which apply to a simple mortgage
shall, so far as may be, apply to such charge.
TYPES OF CHARGES
1. Charges created by act of parties.
2. Charges arising out of operation of law.
CHARGE AND MORTGAGE DISTINGUISHED
There is a clear distinction between a mortgage and a charge, the former being a transfer of
an interest in immoveable property as a security for the loan whereas the latter is not a
transfer, though it is nonetheless a security for the payment of an amount. A mortgage deed
includes every instrument whereby for the purpose of securing money advanced, or to be
advanced, by way of loan, or an existing or future debt, one person transfers, or creates in
favour of another, a right over a specified property.
Strictly speaking, a charge does not involve the transfer of ownership, in the same way as a
mortgage of unregistered title. The charge holder is deemed to have all the legal rights of a
mortgagee. However, some mortgagee rights depend on ownership, such as the inherent right
to take possession. A charge holder does not the have possession as a mortgagee. However, it
is often the case that conditions of a charge of registered land, right a grant mortgagee, by the
terms of the charge deed.

RESEARCH PROBLEM
Mortgage and Charge are common but ambiguous terms in todays world. These popular
words carry vague ideas with them. There is a need to address these terms and paint a clear
picture of them.
Now, it has been seen that the main distinction between a mortgage and a charge is that a
mortgagee obtains legal or beneficial title to the asset concerned, whereas a charge does not.
Is the distinction important?
There have been cases where the distinction between a mortgage and a charge has been
important but the distinction was not addressed properly. This failure to distinguish between
mortgages and charges is understandable. They both give the creditor a proprietary interest in
the asset concerned which is effective in the debtors insolvency. As far as rights against
subsequent encumbrances are concerned, the important distinction is not between mortgages
and charges but between legal mortgages, on the one hand, and equitable mortgages and
charges, on the other. It is generally easier to enforce legal rights against third parties than
equitable rights.
Although there is a conceptual distinction between a mortgage and a charge, the practical
differences between them are therefore insufficiently important to require them to be
considered separately. There are minor differences between mortgages and charges, these
differences will be dealt with in my research paper. We will also look at, the unclear
execution and implication of this distinction, and how it could be harassing for the party in
distress.

RESEARCH QUESTIONS
What is the meaning, scope and objective of mortgage and charge under the Transfer
of Property Act, 1882?
What other statutory provisions other than the Transfer of Property Act, 1882 deal

with mortgages and charges?

What are the important covenants/ documents required in a mortgage and charge? Are

the documents required similar in both cases?

How have the courts in India, interpreted the distinction between mortgage and

charge?
Does the distinction between mortgage and charge matter?

LIMITATION OF THE PROJECT

The project fails to conduct a primary research, thorough examination, interviews and
surveys due to lack of time. The research of the project limits to book and internet content.