Charge

Charge is defined under the Transfer of Property Act, 1882 (Section 100):
- An immovable property is made security for the payment of money to another party, and the transaction does not equate to a mortgage.
- The person who has the claim on the property is said to have a charge, and provisions applicable to a simple mortgage shall apply where suitable.

Based on Nature of Charge:
- Fixed Charge:
  - Linked to a specific asset or defined group of assets.
  - Clearly identified in the charge document.
  - Associated with assets such as land, building, plant, and machinery.
  - Higher priority in liquidation over floating charge holders.
- Floating Charge:
  - Applies to the company’s changing pool of assets.
  - Assets are not specified; typically includes stock, debtors, etc.
  - Priority is lower than fixed charges during liquidation.
Based on Conditions of Charge:
- Pari-Passu Charge: Shared by multiple lenders according to their contributions; requires consent from existing holders.
- Exclusive Charge: Granted to a specific lender only.
- Further Charge:
  - Additional borrowing against already charged assets with consent from the first charge holder.
  - In liquidation, the first charge holder’s dues are settled first; the second charge holder follows.

Definition: The process by which a floating charge converts into a fixed charge.
Triggers for Crystallization:
1. Cessation of business or winding up.
2. Intervention by debenture holders, including appointments of external managers.
3. Specific events outlined in the charge deed.

When a floating charge crystallizes:
- Converts into a fixed charge on company property.
- Holds priority over later equitable charges and unsecured creditors.
- Nonetheless, preferential creditors (certain secured creditors) hold higher priority during liquidation.

Mortgage:
- A legal document allowing lenders to possess property if the borrower defaults.
- Typically involves real estate.
- Lender can foreclose and sell the property to recoup the loan.
- Borrower retains ownership until foreclosure occurs.
Charge:
- A legal document granting possession of specific assets for secured loans, e.g., equipment, inventory.
- Specific assets are used as collateral; foreclosure process applies as well.

Charge:
- No physical transfer of property; rights granted as part of a security arrangement.
- Secured against immovable property of a borrower.
Pledge:
- Involves delivering personal property to a lender as security for a debt.
- Title remains with the pledger until the obligation is satisfied.

Types include:
- Charges for secured debentures or deposits.
- Charges on uncalled share capital, book debts, movable and immovable property, and intangible assets like patents.

Registration Rules:
- Requires filing creation/modification details within 30 days using Form CHG-1 or CHG-9.
- Must register regardless of asset location (within/outside India).
Fees Payment:
- Additional fees increase depending on registration delays.

Unregistered charges become void against:
- Liquidators during company winding-up (treated as unsecured).
- Subsequent creditors who may enjoy priority if their charges are registered.

Requires registration upon acquisition of charged property under applicable laws.
Modifications include any changes to terms of the charge or obligations corresponding to security provisions.

Formal steps involve:
- Board meetings and authorization.
- Filing necessary forms like CHG-1, CHG-3 for modifications.
- Maintaining charge register (Form CHG-7).

Used to analyze the history of a company's charged properties, assisting lenders in assessing creditworthiness.
Contains details such as property ownership history, mortgages against properties, and secured loans.

Allows corrections for misstatements or late payments affecting charge registrations, ensuring proper creditor protections are maintained.