4. DEFINITION OF MORTGAGE
According to section 58, a mortgage is the transfer of an interest in some 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 a pecuniary liability.
5. MEANING CONTD.
A mortgage is the transfer of an interest in some immovable property. It is given by way of
security for a loan. A person who takes a loan and gives some security for repayment of the
loan in the form of transfer of some interest in any immovable property, it is called a mortgage
of property.
The ownership of the property remains in the debtor but some of his interests in the property
are transferred to the creditor who has given loan. In case the advanced money could not be
recovered by the creditor (person advancing the money) he can recover his money on the basis
of his interest in that property. Therefore, it may be said that mortgage is for the security of the
creditor.
6. KEY TERMS
Mortgagor (Debtor) – the person who transfers the interest in the property in a mortgage is
known as a mortgagor.
Mortgagee (Creditor) – A mortgagee is a person in whose favour the mortgage is created
Every deed of mortgage must have the name of the mortgagee otherwise the deed will not be a
valid one.
Mortgage money – According to section 58, the principal money and interest of which the
payment is secured for the time being are called mortgage-money.
Mortgage-deed – The instrument by which transfer is effected in a mortgage is known as
mortgage deed.
7. ELEMENTS OF MORTGAGE
Transfer of interest – it is only a transfer of an interest in an immovable property. The interest is given by the mortgagor to
the mortgagee.
a. A mortgage is a transfer of an interest and it creates a right in rem, but mere agreement to create a mortgage does not
create any interest in the property mortgaged.
b. Without transfer if an interest there is no question of there being a mortgage within the meaning of section 58(a).
Specific immovable property – The interest created by mortgage must be in some specific immovable property. In
mortgage-deed the property must be specifically defined and not in general terms.
Consideration – the consideration may be either money advanced or to be advanced by way of loan, an existing or future
debt or the performance of an engagement giving rise to a pecuniary liability.
Ramaswami v. Sundarao
A transaction of mortgage does not become ineffective merely because the mortgagee could not advance the money
on the date of execution of the deed (State of Kerala v. Cochin Chemical Refineries AIR 1968 SC 1361)
8. CONTD.
Competency of mortgagor —
Sinhaya v. Munisani
Mortgage should be competent to contract. Any minor cannot effect a mortgage but a guardian on behalf of minor can effect a valid
mortgage.
Sidishi v. Trimbak
But whenever a guardian wants to enter into a mortgage on behalf of a minor then sanction from court is required. Whereas if the
guardian doesn’t take sanction from court then it is voidable in nature.
There can be more than one mortgagor and mortgagee.
Competency of Mortgagee —
Competency to contract is not required. Competency to hold the property is required. Proprietary rights.
Thakur Das v. Buddhi
Even a minor can never be competent to a contract but can be a mortgagee.
12. KINDS OF
MORTGAGE
(MNEMONIC –
SCUEDA)
1. Simple Mortgage
2. Mortgage by Conditional Sale
3. Usufructuary Mortgage
4. English Mortgage
5. Mortgage by deposit of title of
deeds
6. Anomalous mortgage
13. SIMPLE MORTGAGE
Clause (b) of section 58 says that where –
1. Without delivering possession of the mortgaged property;
2. The mortgagor –
3. Binds himself personally to pay the mortgage-money, and
4. Agrees that in the event of his failing to pay according to his contract, the mortgagee shall have a right to
cause the mortgaged property to be sold and the proceeds of a sale to be applied, in payment of the
mortgagee-money.
14. EXAMPLE
Example — If Pragya has to return loan money on 1st May and she fails to pay then mortgagee has two options to avail against
pragya
1. Suit for money — the mortgage can go to the court and avail money decree against mortgagor
2. Suit for sale— proceed with the mortgage property and sell it. Whatever the amount mortgagee realise, he can take the amount
owed and give back the rest to the mortgagor. Cannot be exercised without intervention or court.
Kishanlal v. Gangaram
The mortgagee cannot take possession
This mortgage can only be executed by registration whatever the amount may be (Compulsory)
Any adverse possession over property will not extinguish the right of mortgagor and mortgagee.
(Nandan v. Jhuman )
15. MORTGAGE BY CONDITIONAL SAE
In this type of mortgage, the mortgagor ostensibly sells the property.
The property is sold on the condition that –
1. On default of payment of the mortgage-money on a certain date the sale shall become
absolute, or
2. On such payment being made the sale shall become void, or
3. On such payment being made the buyer shall transfer property to the seller,
Such a transaction is called mortgage by conditional sale and the mortgagee is called
a mortgagee by conditional sale.
If there is no relationship between debtor and creditor, the question of it being a
mortgage by conditional sale does not arise. (Tamboli Ramanlal Moti lal v. Gharchi
Chimanlal Keshavlal, AIR 1992 SC 1236)
16. CONTD.
• that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the
document which effects or purports to effect the sale.
• Delivery of possession is essential
• Registration is compulsory when the value of the property is more than Rs. 100 . So, A mortgage by
conditional sale can be effected in the following ways –
1. Where the principal money secured is Rs. 100 or more-by a registered instrument signed by the
mortgagor and attested by at least two witnesses.
2. Where the principal money secured is less than Rs. 100 by a registered instrument signed by the
mortgagor and attested by at least two witnesses or by delivery of property.
Remedy available is the suit for foreclosure
17. USUFRUCTUARY MORTGAGE
There is a delivery of possession to the mortgage or an express or implied undertaking of the mortgagor to deliver such possession.
Retention of the possession by the mortgagee till the payment of the mortgage-money or he has to receive rents and profits of the property
either in lieu of interest on mortgage-money or in payment of mortgage-money or party in payment of either interest to mortgage-money.
There is no personal liability of the mortgagor.
The mortgagee cannot foreclose or sue for sale of mortgage-property.
The mortgagor is entitled to redeem the property when the amount due is paid or the debt is discharged by rents and profits received by the
mortgagee.
No time limit is fixed for the repayment.
Where the mortgage is for Rs. 100 or more, it must be registered but where it is less than Rs. 100 it may be by a registered deed or by delivery
of property.
18. ENGLISH MORTGAGE
There is an absolute transfer of property to the mortgagee i.e there is the delivery of possession.
There is a personal covenant to pay the amount. The mortgagor binds himself to repay the mortgage
money on the due date.
The property is transferred on the condition that the transferee-mortgagee will re-transfer it to the
mortgagor on the payment of the mortgage-money.
19. M O RT G A G E B Y D E P O S I T O F T I T L E
D E E D S / E Q U I TA B L E M O RT G A G E
Mortgage by deposit of title-deeds is also known as an equitable mortgage. According to sub-section (f),
where a person –
In the towns of Calcutta, Madras, Bombay and in any other town specified by the state government
concerned in this behalf.
Delivers to a creditor or his agent documents of title to immovable property
With intent to create a security, thereon. (K.J. Nathan v. Maruthi Rao, 1965)
Such a transaction is called a mortgage by deposit of title-deeds.
This is a special kind of mortgage because here the execution of mortgage deed is not necessary. Mere
deposit of title deeds of the immovable property by the mortgagor to mortgagee is sufficient.
20. CONTD.
This mortgage is to be read with S.96 of TPA. All the provisions which may be applicable to simple mortgage will
also be applicable to mortgage by title deeds unless some clause is contrary.
Therefore, remedy is sale with court’s intervention and money decree
Recognised in India for the first time in case of Verdu Seth ram v. Kuckputty, 1892
Title deeds —
Shared Capital [Certificate that proves that this part of share is the persons - Proof ownership]
Probate or will [Document of will]
Gift deed
Remedy will be suit for money
22. ANOMALOUS
MORTGAGE
A mortgage which is not a simple mortgage, a
mortgage by conditional sale, a usufructuary
mortgage, an English mortgage or a mortgage
by deposit of title-deeds within the meaning of
this section is called an anomalous mortgage.
To be read with section 98
It is combination of two or more mortgages.
23. D I F F E R E N C E B E T W E E N U S U F R U C T U A RY
M O RT G A G E A N D L E A S E
Point of Difference Lease Usufructuary
Possession Actual Possession is
necessary
Actual or constructive
Right of redemption No Yes
Relationship Lessor and lessee Creditor and debtor
24. D I F F E R E N C E B E T W E E N M O RT G A G E B Y
C O N D I T I O N A L S A L E A N D E N G L I S H M O RT G A G E
Point of difference English mortgage Conditional mortgage
Remedy Sale Foreclosure
Ownership Absolute is transferred Qualified is transferred
Liability Proprietary Personal or proprietary
25. D I F F E R E N C E B E T W E E N M O RT G A G E A N D O T H E R
I M P O RTA N T C O N C E P T S
Point of difference Sale Mortgage by conditional
sale
Parties Buyer and seller Creditor and debtor
Presence of debt No Necessary
Right of redemption No Given
Repurchase of property by
separate document
Clause of object should be
there in the deed
Mortgage Lease
Debt is essential Debt may or may not be there
Time period may or may not be
mentioned
Mentioning time period is essential
26. Mortgage Pledge
It is when there is an immovable property
involved
It is when there is a movable property involved
It is governed under transfer of property
Act
It is governed under Indian Contract Act
Mortgage Sale
Some rights are transferred to the
mortgagee
Absolute rights are transferred
Debt is an essential Debt may or may not be present
Mortgage Lein
It is an active right Mere passive right of retaining
Mortgagee can get the right to sell of the
property
The transferee only has right to retain
Governed under TPA Governed under Contract Act.
27. Mortgage Hypothecation
Immovable property Movable property
Possession of property may or may not be
given
Possession of property is not given
Given u/S 58(a) of TPA Given u/S 2(n) of SARFAESI Act
28. HOW TO CREATE MORTGAGE/ MODE OF
EXECUTION OF MORTGAGE — S.59
Three methods —
1. Registration — Value of mortgaged property is more than Rs. 100 then it is
compulsory. Exception: Mortgage by deposit of Title deeds
2. Delivery of possession — When the value of the mortgaged property is less
than Rs. 100. Exception: Simple mortgage
3. Deposit of title deeds — Equitable mortgage
