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1. Mortgage

2. Introduction
• An individual has various types of interests in his
life. In order to satisfy his interests, he has
miscellaneous requirements, which in modern
world can be fulfilled only through the money.
Sometimes an individual borrows money from
others to satisfy his necessities. Even during the
ancient times, the tendency to borrow the money
from moneylenders was in vogue and the
moneylenders used to keep the property of
borrower as security for the repayment of the
loan. This tendency later known as
hypothecation or mortgage of property, movable
or immovable.

3. • At that time, property was kept as a
security delivered to the one who
advanced the loan, and it was forfeited in
the event of the non payment of loan
despite its worth. It was a universal
practice that value of the property kept as
mortgage was higher than the loan
amount even calculated with interest.

4. • Earlier under Roman law, the security of
land was known as fiducia, a conditional
conveyance under which the property,
whatever in value, was forfeited in case of
non payment. This was followed by pignus
which was a transfer not of ownership but
of possession without liability to forfeiture.
Then the last stage was hypotheca- a form
of pledge without delivery of possession
under which the creditor acquired a power
of sale.

5. • In Hindu and Mohammedan Laws-
mortgages went under similar process of
evolution. A mortgage by conditional sale
was a very early form of mortgage among
Hindus. The usufructuary mortgage with
neither power of sale nor of foreclosure
corresponded to the Roman Pignus and
the simple mortgage was a later
development corresponding to the Roman
Hypotheca.

6. • Among Mohammedans, the mortgage by
conditional sale was a device to evade the
Islamic prohibition of taking interest. The
development was slower than in the Hindu law
because interest not being added, the security
was always the same.
• In England, the original mortgage at common
law was rather a pledge than a mortgage. The
transfer was not of title but of possession.

7. Mortgage Structure of the Chapter
• Definition and kinds- S. 58, 96 and 98
• Charge- 100 and 101.
• Rights and liabilities of the Mortgagor- S.
59-66 and s. 95 respectively.
• Rights and liabilities of the Mortgagee- 67-
73, 94 and s. 67-A, 76-77.
• Redemption - S 60, 91
• Foreclosure or Sale- S 67
• Marshalling and Contribution- S 81 & 82.
• Subrogation- S 92.

8. Section 58 (a)
• Mortgage, Mortgagor, Mortgagee,
Mortgage money, Mortgage Deed:
• A Mortgage is the transfer of an interest in
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.

9. • The transferor is called a mortgagor, the
transferee a mortgagee; the principal
money and interest of which payment is
secured for the time being are called the
mortgage money, and the instrument by
which the transfer is effected is called a
mortgage deed.

10. Indian Stamp Act
• Section 2(17), ‘Mortgage deed includes
every instrument whereby, for the purpose
of securing money advanced or to be
advanced, by way of loan or an existing or
future debt, or the performance of an
engagement, one person transfers or
creates, to or in favour of another, a right
over or in respect of specified property’.

11. • The comparative analysis of these two
definitions clearly reflects that the
definition given under Indian Stamp Act is
wider than that of under T.P.Act. As it is
applicable to any specified property both
movable and immovable and refers to the
performance of an engagement and is not
restricted to an engagement giving rise to
a pecuniary liability only.

12. Judicial Approach towards meaning
of Mortgage
• The Karnatka High Court in B. Jayashankarappa
and others v. D.S.Gulwadi AIR 2000 Kar. 359
held as follows:
“A reading of section 58 shows that a mortgage, no
doubt is a transfer, but not the transfer of absolute
ownership rights and in this respect it differs from sale.
A mortgage is said to be transfer of a limited interest
in a specific immovable property. The purpose of
mortgage is said to secure the payment of money,
advanced as loan or an existing or future debt. In a
sale, all the rights of ownership that the transferor
possesses in the property, pass on by transfer to the
transferee. In a mortgage, some rights are transferred
to the mortgagee, while rest remain with the
mortgagor”.

13. Essentials
• Mortgagor,
• Mortgagee,
• Transfer of Interest- creating new limited interest
in favour of Mortgagee
• Specific immovable property,
• Purpose of Mortgage- As a Security of
repayment of debt i.e. securing a debt or
performance of pecuniary obligation
• Consideration - Money advanced or to be
advanced as a loan – Creation of debt may be
existing (past) or future debt

14. Mortgagor
• Mortgagor must be a person competent to
contract and capable to transfer the property.
A minor cannot affect a mortgage, but a
guardian or minor can affect a valid mortgage
with the sanction of the court. If several
persons execute a mortgage and some of
them are minor, the mortgage is only partly
invalid. It remains operative and valid for
those who were competent to execute it.

15. • Where the guardian of a minor executes
mortgage of the property without the
sanction of the court, the mortgage is not
void but voidable at the option of the minor
which he can exercise on attaining
majority.
• It is important to point out here that in a
mortgage executed by a minor, creditor
cannot seek the benefit of section 64 and
65 of Indian Contract Act, to get the things
restored.

16. • If the Karta of Joint Hindu Family executes a
mortgage of the joint family property without the
permission of the other coparceners, the
mortgage would be voidable at the option of
other coparceners. In case, such a mortgage is
for legal necessity, it is not necessary for the
mortgagee to see the application of his money
and all that he needs to show to the court is that
he made reasonable inquiries and acted
honestly.
• A partner of a commercial firm, a pardanashin
woman, one of the several co-owners can effect
a valid mortgage.

17. Mortgagee
• Any person who is capable to hold
property can be a mortgagee irrespective
of his competency to contract. It is
competency to hold the property land not
competency to contract which is material
here, and therefore even a minor, is
competent to be a mortgagee. Therefore a
mortgage deed executed in favour of a
minor who has advanced the whole of the
mortgage money, is enforceable by him or
by other person on his behalf.

18. Transfer of an Interest
• Mortgage carries a transfer of an interest with it,
for a specific purpose. However this transfer of
interest is different from sale because it is not a
transfer of full ownership of immovable property.
The class of interest transfer under the
transaction of mortgage is not identical with the
transfer of interests under sale.
• In a simple mortgage, the subject of transfer is a
power of sale which would be effective and
exercised in case of non payment.

19. • In a usufructuary mortgage, what is
transferred is a right of possession and
enjoyment of the usufruct.
• In a mortgage by conditional sale and in
an English mortgage the right transferred
is, in apparent form, a transfer of
ownership, however it is subject to a
condition.
• So, in each case, whatever be the form of
the mortgage, there is a transfer of some
interest only and not a transfer of the
whole interest of the mortgagor.

20. Specific Immovable Property
• The security must be in the shape of a specific
immovable property. Means property should be
sufficiently identified and the description should
not be general or ambiguous in character.
• For instance, a borrows money from B and
undertakes to repay it within a period of 2 years.
The contract also provides that if A fails to repay
the loan within the period of 2 years B can sell
any of his properties. While A has three
properties, so in this case property is not
specified. It is not a transaction of mortgage.
• The description of the property should be
specific otherwise in case the property is not
possible to be identified, it does not amount to
mortgage.

21. Purpose of Mortgage
• Securing a debt.
• Performance of an engagement which
gives rise to pecuniary obligation.
• Nidha Sha v. Murlidhar (1903) 25 All 115
- The purpose of mortgage is to ‘secure’
the debt. If a transfer of property is made
to ‘discharge’ the debt it is not mortgage.

22. Consideration
• A mortgage must be supported by
consideration, which may either be money
advanced or to be advanced as a loan i.e.
Creation of debt may be existing (past) or
future debt.
• Consideration may even be Performance
of an engagement which gives rise to
pecuniary obligation.

23. Covenant not to sell the property
• A covenant by the owner not to sell his
property till the loan is repaid does not
make- cannot make a transaction of
mortgage.

24. Kinds of Mortgage
1. Simple Mortgage (Section 58 (b))
2. Mortgage by Conditional Sale (Section 58
(c))
3. Usufructuary Mortgage (Section 58 (d))
4. English Mortgage (Section 58 (e))
5. Mortgage by deposit of title deeds
(Section 58 (f) and Section 96)
6. Anomalous Mortgage (Section 58 (g) and
Section 98)

25. Simple mortgage
• Where, without delivering possession of the
mortgaged property, the mortgagor binds
himself personally to pay the mortgage money,
and agrees, expressly or impliedly, 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 sale to be applied, so far as may be
necessary, in payment of mortgage money, the
transaction is called a simple mortgage and the
mortgagee a simple mortgage

26. Mortgage by conditional sale
• Where the mortgagor ostensibly sells the mortgage
property-
– On condition that on default of payment of the mortgage
money on a certain date the sale shall become absolute, or
– On condition that on such payment being made the sale
shall become void, and that on such payment being made
the ‘ostensible’ buyer shall transfer the property to the
seller,
the transaction is called a mortgage by conditional sale and
the mortgagee a mortgagee by conditional sale. Provided
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.

27. Usufructuary Mortgage
• Where the mortgagor delivers possession or
expressly or by implication binds himself to deliver
possession of the mortgaged property to the
mortgagee, and authorises him to retain such
possession until payment of the mortgage money,
and to receive the rents and profits accruing from
the property or any part of such rents and profits
and to appropriate the same in lieu of interest of
partly in payment of the mortgage money, the
transaction is called an usufructuary mortgage.

28. English Mortgage
• Where the mortgagor binds himself to repay the
mortgage money on certain date, and transfers
the mortgaged property absolutely to the
mortgagee, but subject to a proviso that he will
re-transfer it to the mortgagor upon payment of
the mortgage money as agreed, the transaction
is called an English mortgage.
• Thus, the characteristics of Sale are more
pronounced in this case but it does not suggest
that there is absolute transfer in the nature of
sale

29. Difference between Mortgage by
Conditional Sale and English Mortgage
• In case of Mortgage by Conditional Sale, the mortgagor
does not bind himself personally to pay the debt, while in
case of English Mortgage there is ordinarily an
undertaking by the mortgagor to pay the debt personally.
• In case of Mortgage by Conditional Sale, the mortgagee
only gets qualified ownership which ripens into absolute
ownership on failure to pay debt. Thus, the remedy is
foreclosure i.e. obtaining a decree from Court to debar
mortgagor from his right of redemption.
• In case of English Mortgage, absolute interest is
transferred, which divests/cancels on repayment and in
case of failure to pay, the remedy is sale of property and
not foreclosure.

30. Mortgage by deposit of title deeds
• Where a person in any of the following
towns, namely, the towns of Calcutta,
Madras, and Bombay and in any other
town which the State Government
concerned may, by notification in the
Official Gazette, specify in this behalf,
delivers to a creditor or his agent
documents of title to immovable property,
with the intent to create a security thereon,
the transaction is called a mortgage by
deposit of title deeds.

31. Anomalous Mortgage
• A mortgage which is not a simple
mortgage, a mortgage by conditional sale,
an usufructuary mortgage, an English
mortgage or a mortgage by deposit of title
deeds within the meaning of this section is
called an anomalous mortgage.

32. Modes of Mortgage
• Mortgage can be affected by –
• Delivery of Title Deeds – Law implies contract to
create mortgage
• Registration of Mortgage Deed – Where the
principal money secured is equal to more than
Rs. 100/- there apart from the cases where
delivery of Title Deeds is effected, Registration is
compulsory even where delivery of possession
is made.

33. Modes of Mortgage
• Delivery of Property – Where the principal
money secured is less than Rs.100/- a mortgage
may be effected either by a registered document
or by delivery of possession.
• However, in case of Simple mortgage where
there is no delivery of possession, whatever may
be the amount of money secured or obligation
arises, it must be effected by registered
document.