Comment on the following: An encumbrance may be created by a charge, pledge or a mortgage.

An encumbrance means a restriction imposed on the owner's right over his property. All the three words used above impose a restriction on the right of the owner over his own property. As per Clause 16 of Section 2 of the Companies Act, 2013, charge means 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. A charge is called fixed or specific when it is created to cover assets which are ascertained and definite or are capable of being ascertained and defined, at the time of creating the charge whereas a floating charge is not attached to any definite property but covers property of a fluctuating type such as stock in trade. On the contrary, in case of a fixed or a floating charge the possession of the assets remains with the borrower. The ownership of the property also remains with the borrower. In case of fixed charge he has no right to sell or transfer the asset except with the consent of the charge holder. In case of a floating charge the borrower can treat his floating assets as if they have not been charged. He loses this right only when he commits a default and the charge holder decides to take action for recovery of the money due. In this case we say the floating charge crystallizes. 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 performance of an agreement which may give rise to pecuniary liability. In a pledge the borrower loses possession of the goods pledged as a security for repayment of a debt or performance of an obligation. The pawnor (pledgor) remains the owner of the property. He is entitled to get back the possession on repayment of the debt. However, in all these cases if the borrower commits a default in payment of the principal and interest thereof the lender gets a right to sell the property and recover the amount due to him. Thus, an encumbrance may be created by a charge, pledge or a mortgage.