What is Charge?
A Charge is a right created on an asset to secure payment of a debt, without transfer of ownership or possession. Charges may be fixed or floating, and on company assets must be registered with the Registrar of Companies under the Companies Act, 2013.
| Meaning | A Charge is a right created on an asset to secure payment of a debt, without transfer of ownership or possession. Charges may be fixed or floating, and on company assets must be registered with the Registrar of Companies under the Companies Act, 2013. |
|---|---|
| Category | Banking |
| Related Laws | Transfer of Property Act 1882, Companies Act 2013 |
| Who Uses It | Banks, companies, RoC |
| Why It Matters | Registered charge gives lenders priority in insolvency. |
Charge explained in plain English
A practitioner's view written for borrowers and advisors — not a textbook definition.
A Charge is a right created on an asset to secure payment of a debt, without transfer of ownership or possession. Charges may be fixed or floating, and on company assets must be registered with the Registrar of Companies under the Companies Act, 2013.
In practice, Charge is used most often by banks, companies, roc. Each of them sees the term from a slightly different angle: borrowers care about protection and outcomes, lenders care about classification and recovery, regulators care about consistency and disclosure.
The legal anchor for Charge is Transfer of Property Act 1882, Companies Act 2013. RBI master directions, the SARFAESI Act 2002, the RDB Act 1993 and the IBC 2016 commonly interplay, depending on the loan size, security and stage of stress.
Why does it matter? Registered charge gives lenders priority in insolvency. For a stressed borrower, getting this concept right early often saves several months of penal interest, legal cost and credit-score damage.
A real example: A company creates a charge on its plant and machinery for a ₹10 crore term loan. The mechanics may look complex, but the underlying logic — the bank wants closure, the borrower wants a fair outcome — is straightforward once the right framework is in place.
If you are facing a situation involving Charge, the safest first step is a structured case review with a senior ex-banker who has handled comparable matters across banks and ARCs in India.
Where you'll encounter Charge
Whenever a loan moves from "Standard" to "stressed", Charge is one of the words that starts appearing in notices, bank emails and lawyers' opinions.
Sanctioning committees, recovery teams and risk officers use Charge to classify accounts, decide provisioning and approve resolution paths.
Charge appears in pleadings, securitisation applications, OAs, Section 7/9 petitions and SARFAESI writs as part of the dispute record.
When stressed loans are sold to ARCs or special-situations investors, Charge is used in term sheets, assignment agreements and due-diligence reports.