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MORTGAGE
Definition
• Section 58(a) of Transfer of Property Act
1982 ,” 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 the
performance of an engagement which may
give rise to a pecuniary liability”
• Important terms: Mortgagor, Mortgagee,
Mortgage money, mortgage deed.
Essentials
• Parties to a mortgage;
• Transfer of an interest;
• In a specific immovable property;
• The purpose is to secure the
repayment of money
• Advanced/or to be advanced
• Debt-existing/future
• Performance of an engagement that
may give rise to a Pecuniary liability.
Types of
Mortgage,
Section 58
• Simple mortgage, sec 58 (b)/ registered mortgage
if registry takes place
• Mortgage by conditional Sale, sec 58 (c)
• Usufructuary mortgage , sec 58 (d)
• English mortgage, sec 58 (e)
• Mortgage by deposit of title deeds, sec 58 (f)/
equitable mortgage
• Anomalous mortgage, sec 58 (g)
MODE OF EXECUTION OF A MORTGAGE,
Section 59
Mortgage when to be by assurance- Section 59
Where the principal money secured is one hundred rupees or upwards, a mortgage other than a
mortgage by deposit of title deeds can be effected only by a registered instrument signed by the
mortgagor and attested by at least two witnesses.
Where the principal money secured is less than one hundred rupees, a mortgage may be effected
either by a registered instrument signed and attested as aforesaid, or (except in the case of a
simple mortgage) by delivery of the property.
• Loan amount is less than 100 Rs- registration optional (except in case of simple mortgage)
• Loan amount- above 100- registration compulsory
Rights of Mortgagor
• Right of redemption (Sec.60)
• Right to inspection and production of document [s 60 B]- M BY DEPOSIT OF
TITLE DEEDS
• Obligation to transfer to third party instead of re-transference to mortgagor [s
60A]
• Right to redeem separately or simultaneously. [s 61]
• Accession and Improvement to Mortgaged property[s 63A]-IP IS IN
POSSESSION OF MORTGAGEE
• Right to confer a lease when mortgagor is in possession (S.65A)
• Right incase of waste- mortgagor in possession is not liable to mortgagee for
allowing the property to deteriorate but he must not do any act which is
destructive or permanently injurious to the property. Eg. Removal of valuable
fixtures from the property (S.66)
Duties of mortgagor
• Implied warranty of title by the mortgagor. If the title of the
mortgagor turns out to be defective, the mortgagor must indemnify
the mortgagee for the defective title to the property. (S. 65) and (S.
65(b))
• The mortgagor must compensate the mortgagee for payment of all
taxes and public charges. (S. 65(c))
• When the mortgaged property is leased, the mortgagor must direct
the rent payable under the lease, etc to the mortgagee. (S. 65(d))
• Covenant for the discharge of prior mortgage (S. 65(e))
Rights of Mortgagee
a. Right to foreclosure or sale (S. 67)
b. Right to sue for mortgage-money (S. 68)- Can be done under following
circumstances-
• Where the mortgagor binds himself to repay the same,
• Where the mortgaged property is destroyed, wholly or partially without the
fault of any party.
• Where the mortgagee is deprived of the whole or part of his security by
wrongful act or default of the mortgagor.
• Where the mortgagee being entitled to possession, the mortgagor fails to
deliver the same.
Rights of Mortgagee
c. Right to sell without the intervention of the court (S. 69)-
available in following cases:
- Where the power of sale without the intervention of the court is
expressly conferred on the mortgagee by the mortgage deed
- Mortgagee is the government.
In above cases as well there can be no direct sale, a notice in writing
has to be served to the mortgagor and if payment is not made within 3
months, then property can be sold off.
d. Right to appoint Receiver Sec 69 A- A mortgagee having the right to
exercise a power of sale under section 69 is entitled to appoint, in
writing, a receiver of the income of the mortgaged property.
Rights of Mortgagee
• Right to accession (S. 70)
• Right of renewal of mortgaged lease (S. 71)
• Right to proceeds of revenue sale or compensation on acquisition (S. 73)-
According to this section, where the mortgaged property or any interest in it is sold, Owing to
failure to pay –
- Arrears of revenue, or
- Other charges of a public nature, or
- Rent due in respect of such property.
Such a failure did not arise from any default of the mortgagee, the mortgagee shall be entitled to
claim payment of the mortgage money, out of any surplus od sale-proceeds remaining after the
payment of –
- The arrears, and
- All charges and deductions directed by law.
Liabilities of mortgagee (Sec 76)
• To manage the property as he would manage if it were his own.
• To collect the rents and profits of same.
• In the absence of a contract to the contrary, to pay Government
revenue and the other charges of a public nature.
• In the absence of a contract to the contrary, to make such necessary
repairs as the income of the property permits.
• Not to commit any act which is destructive or permanently injurious
to the property.
• To maintain accounts of all sums received and spent by him and
render them to the mortgagor when asked.
Right of Redemption
At any time after the principal money has become due, the mortgagor has a right
on payment of the mortgage money at a proper place and time, to require the
mortgagee –
• To deliver to the mortgagor the mortgage-deed and all documents relating to
mortgaged property in possession or power of the mortgagee,
• To deliver possession of the property to the mortgagor where the mortgagee is
in possession of it,
• To re-transfer the property to the mortgagor or any third person directed by
him (at the cost of the mortgagor) it to register an acknowledgement in writing
on the extinction of the mortgagee’s right.
These rights cannot be exercised if they have been extinguished by the act of the
parties or by a decree of a court.
The right conferred by this section is called a right to redeem and a suit to enforce
it is called a suit for redemption.
Right of redemption
• Right of redemption is an absolute right.
• The right to redeem arises only after the principal money has become
due and continues till the time the mortgagee sues for enforcement
of the mortgage.
• In theory, the right of redemption of the mortgagor comes to an end
when the mortgagee files a suit for foreclosure, but practically, the
right continues even where the matter goes to the court and the
mortgagor is entitled to deposit the entire amount in the court and
redeem his property.
Modes of Exercise of Right of Redemption (S. 60,
83 and 84)
The right of redemption can be exercised in three ways –
• Paying the mortgage-money to the mortgagee outside court
• Depositing the mortgage-money in court.
• Filling a suit for redemption. The suit can be filed only after the
principal money has become due.
Clog on Right of Redemption
• Meaning- Obstruct/Block
• Once a mortgage always a mortgage- A mortgage is always
redeemable/ mortgage would remain a mortgage and it cannot by
the act of mortgagee be converted into a sale.
• Clog on the right of redemption of the mortgagor means an attempt
of the mortgagee to obstruct this right of redemption.
• Such a clog/condition obstructing the right of mortgagor to his
property will be void.
Clog on Right of Redemption
• Whether a particular condition operates as a clog or not depends on facts
and circumstances of the case.
Instances of Conditions Amounting to Clog on the Right of Redemption
1. In a mortgage for 40 years, a covenant for an automatic renewal of the
mortgage for another period of 40 years in case of default in payment.
(Sarbdawan v Bijay Singh, (1914))
2. A covenant by the mortgagee for perpetual renewal of the mortgage
Neelakhandan v Ananthakrishna, (1907)
3. A condition making mortgage irredeemable for 95 years or 99 years;(Ajit
Singh v Kakhbir Singh, AIR 1992 P&H 193.)
4. A condition that mortgagee is entitled to retain possession till the trees
bear fruits (Genu v Narayan, AIR 1921 Bom 51.)
Partial Redemption
• General rule- Partial Redemption not permitted
• Suit by several of the co-mortgagers to redeem only his own portion
of mortgaged property is not allowed.
• Exception- when co-mortgagor sells his interest in the mortgaged
property in favour of the mortgagee himself, the other mortgagers
can redeem their shares in the property.
Right to foreclosure or sale, Section 67
• Sec. 67- “In the absence of a contract to the contrary, the mortgagee
has, at any time after the mortgage-money has become due to him….”
• Section 60- “At any time after the principal money has become due,
the mortgagor has a right on payment of the mortgage money ..”
Components of the Section
(i) In the absence of a contract to the contrary, the mortgagee has, at any
time after
(a) the mortgage-money has become due to him, and
(b) before a decree has been made for the redemption of the mortgaged
property,
(c) or the mortgage-money has been paid or deposited,
(ii) A right to obtain from the Court a decree;
(iii) That the mortgagor shall be absolutely barred of his right to redeem the
property;(foreclosure) or
(iv) A decree that the property be sold (Sale)
The mortgagor has the option to deposit all the dues in the court before the
passing of a final decree in a foreclosure suit.
Suit for Foreclosure/Sale
• Simple mortgage- sale not foreclosure coz mortgagee does not have
possession.
• Conditional sale- Sale is already there , therefore appropriate remedy
will be to file a suit for foreclosure.
• Usufructuary- neither sale, nor foreclosure
• English- suit for sale
• Deposit of title deeds- section 59 provides that DTD stands on the
same footing as simple mortgage and therefore remedy will also be
the same.
• Anomalous- remedy will depend upon the terms of the deed.
Marshalling securities, Section 81
Essential Ingredients of the Section-
1. Mortgagee maybe 2 or more person but mortgagor must be one
2. Right cannot be exercised to the prejudice of prior mortgagee
3. Right cannot be exercised to the prejudice of any other person
having claim over the property.
No prejudice to third party
C would ask B to satisfy MD out of property IP2, but since property IP2 has been
already mortgaged to D , the exercise of marshalling would be against the interest
of D, hence will not be allowed.
Contribution, Section 82
• Equitable concept
• The section provides rules for the contribution of money towards the
mortgage debt.
• 2 rules-
a. MP belongs to two or more persons who have distinct interests in it
b. Two or more properties of the same person are utilised for
discharging the mortgage.
MP belongs to two or more persons
• If two or more persons owning property mortgage it, each of them
should contribute towards payment of the mortgage debt in
proportion to their shares in the property. If the others do not
contribute, one of them can require the others to pay their respective
share of money.
• Illustration- A, B, C and D together own a property. The share of each
of them is one-sixth, one-sixth, one-third and one-third respectively.
They mortgaged the property in favour of X for a loan of Rs 80,000.
The interest on this amount is calculated as Rs 10,000. Out of the
total amount of Rs 90,000, A and B will pay 15,000 each, and C and D
will pay Rs 30,000 each.
One property is mortgaged first and then
again mortgaged along with another property
• 2nd para of section 82- deals with a situation where out of 2
properties one is mortgaged to secure a debt and later on both the
properties are mortgaged to secure another debt.
• In such cases, when the former debt is paid out of the former
property then first of all, the amount of this former debt must be
deducted from the value of that former property and thereafter, both
the properties will contribute ratably to the later debt.
Subrogation (S. 92)
• Meaning
• The doctrine of subrogation is based on the principles of equity, justice and
good conscience. The essence of the doctrine is that the party who pays off
a mortgage gets clothed with all rights of the mortgagee.
Types of Subrogation
a. Legal
b. Conventional
Legal Subrogation
• A legal subrogation takes place by the operation of law.
• It will be legal subrogation when a mortgage debt is paid off by-
a. List of persons mentioned in section 91 i.e person who has interest
or charge in the property or is a surety for the payment of the
mortgage-debt, creditor of mortgagor who has obtained a decree of
sale of IP.
b. Subsequent mortgagee redeems the prior mortgagee(Puisne
mortgagee
c. co-mortgagor redeems the mortgage
Conventional Subrogation
• A conventional subrogation takes place when the person paying off
the mortgaged debt is a stranger, such a person has no interest to
protect the mortgaged property.
• This person satisfies the debt under an agreement that he would be
subrogated with the rights of the mortgagee who is paid off.
• Agreement- may be express or implied, in writing and registered
Charge, Section 100
The requisites of this section are:
(i) Immovable property of one person is made security for the payment
of money to another;
(ii) By act of parties or by operation of law;
(iii) This transaction does not amount to a mortgage;
(iv) All the provisions which apply to a simple mortgage shall, so far as
may be, apply to such charge; and
(v) Charges cannot be enforced against any property in hands of a bona
fide transferee for consideration without its notice.
Illustration
• X files a suit in the court against her husband Y for maintenance. The
court grants the decree and orders the husband to pay a monthly
maintenance of rupees 1000 to the wife. In case of default of the
husband to pay the maintenance, his property would be liable to
amount for the same. In such a case, a charge is created on the
husband’s property.

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  • 2. Definition • Section 58(a) of Transfer of Property Act 1982 ,” 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 the performance of an engagement which may give rise to a pecuniary liability” • Important terms: Mortgagor, Mortgagee, Mortgage money, mortgage deed.
  • 3. Essentials • Parties to a mortgage; • Transfer of an interest; • In a specific immovable property; • The purpose is to secure the repayment of money • Advanced/or to be advanced • Debt-existing/future • Performance of an engagement that may give rise to a Pecuniary liability.
  • 4. Types of Mortgage, Section 58 • Simple mortgage, sec 58 (b)/ registered mortgage if registry takes place • Mortgage by conditional Sale, sec 58 (c) • Usufructuary mortgage , sec 58 (d) • English mortgage, sec 58 (e) • Mortgage by deposit of title deeds, sec 58 (f)/ equitable mortgage • Anomalous mortgage, sec 58 (g)
  • 5. MODE OF EXECUTION OF A MORTGAGE, Section 59 Mortgage when to be by assurance- Section 59 Where the principal money secured is one hundred rupees or upwards, a mortgage other than a mortgage by deposit of title deeds can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. Where the principal money secured is less than one hundred rupees, a mortgage may be effected either by a registered instrument signed and attested as aforesaid, or (except in the case of a simple mortgage) by delivery of the property. • Loan amount is less than 100 Rs- registration optional (except in case of simple mortgage) • Loan amount- above 100- registration compulsory
  • 6. Rights of Mortgagor • Right of redemption (Sec.60) • Right to inspection and production of document [s 60 B]- M BY DEPOSIT OF TITLE DEEDS • Obligation to transfer to third party instead of re-transference to mortgagor [s 60A] • Right to redeem separately or simultaneously. [s 61] • Accession and Improvement to Mortgaged property[s 63A]-IP IS IN POSSESSION OF MORTGAGEE • Right to confer a lease when mortgagor is in possession (S.65A) • Right incase of waste- mortgagor in possession is not liable to mortgagee for allowing the property to deteriorate but he must not do any act which is destructive or permanently injurious to the property. Eg. Removal of valuable fixtures from the property (S.66)
  • 7. Duties of mortgagor • Implied warranty of title by the mortgagor. If the title of the mortgagor turns out to be defective, the mortgagor must indemnify the mortgagee for the defective title to the property. (S. 65) and (S. 65(b)) • The mortgagor must compensate the mortgagee for payment of all taxes and public charges. (S. 65(c)) • When the mortgaged property is leased, the mortgagor must direct the rent payable under the lease, etc to the mortgagee. (S. 65(d)) • Covenant for the discharge of prior mortgage (S. 65(e))
  • 8. Rights of Mortgagee a. Right to foreclosure or sale (S. 67) b. Right to sue for mortgage-money (S. 68)- Can be done under following circumstances- • Where the mortgagor binds himself to repay the same, • Where the mortgaged property is destroyed, wholly or partially without the fault of any party. • Where the mortgagee is deprived of the whole or part of his security by wrongful act or default of the mortgagor. • Where the mortgagee being entitled to possession, the mortgagor fails to deliver the same.
  • 9. Rights of Mortgagee c. Right to sell without the intervention of the court (S. 69)- available in following cases: - Where the power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage deed - Mortgagee is the government. In above cases as well there can be no direct sale, a notice in writing has to be served to the mortgagor and if payment is not made within 3 months, then property can be sold off. d. Right to appoint Receiver Sec 69 A- A mortgagee having the right to exercise a power of sale under section 69 is entitled to appoint, in writing, a receiver of the income of the mortgaged property.
  • 10. Rights of Mortgagee • Right to accession (S. 70) • Right of renewal of mortgaged lease (S. 71) • Right to proceeds of revenue sale or compensation on acquisition (S. 73)- According to this section, where the mortgaged property or any interest in it is sold, Owing to failure to pay – - Arrears of revenue, or - Other charges of a public nature, or - Rent due in respect of such property. Such a failure did not arise from any default of the mortgagee, the mortgagee shall be entitled to claim payment of the mortgage money, out of any surplus od sale-proceeds remaining after the payment of – - The arrears, and - All charges and deductions directed by law.
  • 11. Liabilities of mortgagee (Sec 76) • To manage the property as he would manage if it were his own. • To collect the rents and profits of same. • In the absence of a contract to the contrary, to pay Government revenue and the other charges of a public nature. • In the absence of a contract to the contrary, to make such necessary repairs as the income of the property permits. • Not to commit any act which is destructive or permanently injurious to the property. • To maintain accounts of all sums received and spent by him and render them to the mortgagor when asked.
  • 12. Right of Redemption At any time after the principal money has become due, the mortgagor has a right on payment of the mortgage money at a proper place and time, to require the mortgagee – • To deliver to the mortgagor the mortgage-deed and all documents relating to mortgaged property in possession or power of the mortgagee, • To deliver possession of the property to the mortgagor where the mortgagee is in possession of it, • To re-transfer the property to the mortgagor or any third person directed by him (at the cost of the mortgagor) it to register an acknowledgement in writing on the extinction of the mortgagee’s right. These rights cannot be exercised if they have been extinguished by the act of the parties or by a decree of a court. The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption.
  • 13. Right of redemption • Right of redemption is an absolute right. • The right to redeem arises only after the principal money has become due and continues till the time the mortgagee sues for enforcement of the mortgage. • In theory, the right of redemption of the mortgagor comes to an end when the mortgagee files a suit for foreclosure, but practically, the right continues even where the matter goes to the court and the mortgagor is entitled to deposit the entire amount in the court and redeem his property.
  • 14. Modes of Exercise of Right of Redemption (S. 60, 83 and 84) The right of redemption can be exercised in three ways – • Paying the mortgage-money to the mortgagee outside court • Depositing the mortgage-money in court. • Filling a suit for redemption. The suit can be filed only after the principal money has become due.
  • 15. Clog on Right of Redemption • Meaning- Obstruct/Block • Once a mortgage always a mortgage- A mortgage is always redeemable/ mortgage would remain a mortgage and it cannot by the act of mortgagee be converted into a sale. • Clog on the right of redemption of the mortgagor means an attempt of the mortgagee to obstruct this right of redemption. • Such a clog/condition obstructing the right of mortgagor to his property will be void.
  • 16. Clog on Right of Redemption • Whether a particular condition operates as a clog or not depends on facts and circumstances of the case. Instances of Conditions Amounting to Clog on the Right of Redemption 1. In a mortgage for 40 years, a covenant for an automatic renewal of the mortgage for another period of 40 years in case of default in payment. (Sarbdawan v Bijay Singh, (1914)) 2. A covenant by the mortgagee for perpetual renewal of the mortgage Neelakhandan v Ananthakrishna, (1907) 3. A condition making mortgage irredeemable for 95 years or 99 years;(Ajit Singh v Kakhbir Singh, AIR 1992 P&H 193.) 4. A condition that mortgagee is entitled to retain possession till the trees bear fruits (Genu v Narayan, AIR 1921 Bom 51.)
  • 17. Partial Redemption • General rule- Partial Redemption not permitted • Suit by several of the co-mortgagers to redeem only his own portion of mortgaged property is not allowed. • Exception- when co-mortgagor sells his interest in the mortgaged property in favour of the mortgagee himself, the other mortgagers can redeem their shares in the property.
  • 18. Right to foreclosure or sale, Section 67 • Sec. 67- “In the absence of a contract to the contrary, the mortgagee has, at any time after the mortgage-money has become due to him….” • Section 60- “At any time after the principal money has become due, the mortgagor has a right on payment of the mortgage money ..”
  • 19. Components of the Section (i) In the absence of a contract to the contrary, the mortgagee has, at any time after (a) the mortgage-money has become due to him, and (b) before a decree has been made for the redemption of the mortgaged property, (c) or the mortgage-money has been paid or deposited, (ii) A right to obtain from the Court a decree; (iii) That the mortgagor shall be absolutely barred of his right to redeem the property;(foreclosure) or (iv) A decree that the property be sold (Sale) The mortgagor has the option to deposit all the dues in the court before the passing of a final decree in a foreclosure suit.
  • 20. Suit for Foreclosure/Sale • Simple mortgage- sale not foreclosure coz mortgagee does not have possession. • Conditional sale- Sale is already there , therefore appropriate remedy will be to file a suit for foreclosure. • Usufructuary- neither sale, nor foreclosure • English- suit for sale • Deposit of title deeds- section 59 provides that DTD stands on the same footing as simple mortgage and therefore remedy will also be the same. • Anomalous- remedy will depend upon the terms of the deed.
  • 21. Marshalling securities, Section 81 Essential Ingredients of the Section- 1. Mortgagee maybe 2 or more person but mortgagor must be one 2. Right cannot be exercised to the prejudice of prior mortgagee 3. Right cannot be exercised to the prejudice of any other person having claim over the property.
  • 22.
  • 23. No prejudice to third party C would ask B to satisfy MD out of property IP2, but since property IP2 has been already mortgaged to D , the exercise of marshalling would be against the interest of D, hence will not be allowed.
  • 24. Contribution, Section 82 • Equitable concept • The section provides rules for the contribution of money towards the mortgage debt. • 2 rules- a. MP belongs to two or more persons who have distinct interests in it b. Two or more properties of the same person are utilised for discharging the mortgage.
  • 25. MP belongs to two or more persons • If two or more persons owning property mortgage it, each of them should contribute towards payment of the mortgage debt in proportion to their shares in the property. If the others do not contribute, one of them can require the others to pay their respective share of money. • Illustration- A, B, C and D together own a property. The share of each of them is one-sixth, one-sixth, one-third and one-third respectively. They mortgaged the property in favour of X for a loan of Rs 80,000. The interest on this amount is calculated as Rs 10,000. Out of the total amount of Rs 90,000, A and B will pay 15,000 each, and C and D will pay Rs 30,000 each.
  • 26. One property is mortgaged first and then again mortgaged along with another property • 2nd para of section 82- deals with a situation where out of 2 properties one is mortgaged to secure a debt and later on both the properties are mortgaged to secure another debt. • In such cases, when the former debt is paid out of the former property then first of all, the amount of this former debt must be deducted from the value of that former property and thereafter, both the properties will contribute ratably to the later debt.
  • 27.
  • 28. Subrogation (S. 92) • Meaning • The doctrine of subrogation is based on the principles of equity, justice and good conscience. The essence of the doctrine is that the party who pays off a mortgage gets clothed with all rights of the mortgagee. Types of Subrogation a. Legal b. Conventional
  • 29. Legal Subrogation • A legal subrogation takes place by the operation of law. • It will be legal subrogation when a mortgage debt is paid off by- a. List of persons mentioned in section 91 i.e person who has interest or charge in the property or is a surety for the payment of the mortgage-debt, creditor of mortgagor who has obtained a decree of sale of IP. b. Subsequent mortgagee redeems the prior mortgagee(Puisne mortgagee c. co-mortgagor redeems the mortgage
  • 30. Conventional Subrogation • A conventional subrogation takes place when the person paying off the mortgaged debt is a stranger, such a person has no interest to protect the mortgaged property. • This person satisfies the debt under an agreement that he would be subrogated with the rights of the mortgagee who is paid off. • Agreement- may be express or implied, in writing and registered
  • 31. Charge, Section 100 The requisites of this section are: (i) Immovable property of one person is made security for the payment of money to another; (ii) By act of parties or by operation of law; (iii) This transaction does not amount to a mortgage; (iv) All the provisions which apply to a simple mortgage shall, so far as may be, apply to such charge; and (v) Charges cannot be enforced against any property in hands of a bona fide transferee for consideration without its notice.
  • 32. Illustration • X files a suit in the court against her husband Y for maintenance. The court grants the decree and orders the husband to pay a monthly maintenance of rupees 1000 to the wife. In case of default of the husband to pay the maintenance, his property would be liable to amount for the same. In such a case, a charge is created on the husband’s property.