Section 100 - Charges under the Transfer of Property Act, 1882
Section 100 explains when immovable property is made security for payment of money without creating a mortgage. It also governs the application of simple mortgage provisions to charges and protects certain purchasers who acquire property without notice.
Text of Section 100 - Charges
Where immoveable 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.
Official statutory source: Transfer of Property Act, 1882 (India Code, PDF).
Meaning of a charge on immovable property
A charge is a security interest in immovable property for the payment of money, created either by an agreement or by operation of law, where the transaction does not constitute a mortgage. The person entitled to payment is the charge-holder; the property provides security for the amount due.
Essential conditions under Section 100
- Identifiable immovable property: Property belonging to a person must be made security for a monetary obligation.
- Payment of money: The charge secures an amount payable to another person.
- Creation: The security arises through the act of parties or the operation of law.
- Not a mortgage: The transaction must not amount to a mortgage under the Act.
How a charge is created
1. By act of parties
The parties may expressly agree that specified immovable property will secure a debt or monetary obligation without creating a mortgage. The terms, intention and applicable requirements for documentation and registration must be examined.
2. By operation of law
A charge may arise under a statutory provision independently of a separate agreement. For example, Section 55(4)(b) addresses an unpaid seller's charge, subject to the conditions of that provision and any contract to the contrary.
Charge compared with mortgage
Under Section 58(a), a mortgage involves transfer of an interest in specific immovable property to secure payment of money or another obligation described in that section. A charge under Section 100 secures payment against immovable property but is distinguished from a transaction amounting to a mortgage. The Act applies provisions governing a simple mortgage, so far as applicable, to a charge. This does not convert every charge into a mortgage or make every mortgage remedy automatically available.
Enforcement of a charge
The charge-holder may seek appropriate relief to enforce the security, subject to the nature and terms of the charge, applicable mortgage provisions and procedural law. Order XXXIV of the Code of Civil Procedure, 1908 addresses mortgage suits and, under Rule 15, applies relevant provisions to charges within its scope. Enforcement is subject to applicable limitation, priority, notice and other legal requirements.
Protection of a transferee for consideration without notice
The concluding part of Section 100 ordinarily prevents enforcement of a charge against property transferred for consideration and without notice of the charge, unless another law expressly provides otherwise. Thus, whether the transferee gave consideration and had actual or legally attributable notice is material. The meaning of notice is addressed in Section 3 of the Act; registered documents, possession and circumstances requiring inquiry may be relevant.
A transferee who receives property gratuitously, or who takes it with notice of an existing charge, cannot claim this particular statutory protection merely by relying on the transfer.
Trustee's charge: express exception
Section 100 expressly excludes a trustee's charge on trust property for expenses properly incurred in executing the trust. Such claims must be considered under the law governing trusts and the relevant circumstances rather than being treated as ordinary Section 100 charges.
Illustrative example
Suppose A agrees that a particular plot will stand as security for payment of Rs. 5 lakh to B, but the transaction does not amount to a mortgage. Depending on its legally effective terms, B may have a charge under Section 100. If A subsequently transfers the plot to C for consideration and C takes without notice, Section 100 ordinarily protects C against enforcement of that charge, unless an applicable law expressly provides otherwise.
Related provisions
- Section 3: Interpretation clause, including the concept of notice.
- Section 55(4)(b): Seller's charge for unpaid purchase money in the specified circumstances.
- Section 58: Definition and types of mortgages.
- Section 59: Formal requirements for certain mortgages; document requirements for a charge depend on its creation and applicable law.
- Section 101: No merger in case of subsequent encumbrance.
- Order XXXIV Rule 15, CPC: Application of mortgage-suit rules to qualifying charges.
Frequently asked questions
Does every debt secured against land amount to a mortgage?
No. A transaction may create a charge rather than a mortgage if it meets Section 100 and does not amount to a mortgage under Section 58.
Can a charge arise without an agreement?
Yes. Section 100 recognises charges arising by operation of law as well as by act of parties.
Can a charge bind a later purchaser?
That depends on the facts, the purchaser's notice, consideration and any express statutory rule overriding the protection under Section 100.
For authoritative interpretation, consult the applicable statutory text, relevant state amendments, registration requirements and binding judicial decisions.