3/20/2019 PROPERTY LAW

MORTGAGE OF IMMOVABLE PROPERTY

Aayush Singh
BBA LLB(H), SECTION A, A3221515007
INTRODUCTION
Transfer of Property
“Transfer of property” means an act by which a living person conveys property, in present or in
future, to one or more other living persons, or to himself, or to himself and one or more other living
persons; and “to transfer property” is to perform such act.
In this “living person” includes a company or association or body of individuals, whether
incorporated or not, but nothing herein contained shall affect any law for the time being in force
relating to transfer of property to or by companies, associations or bodies of individuals.

IMMOVABLE PROPERTY
Definition in Section 3 is not exhaustive. It says only that ‘immovable property’ does not include
standing timber growing crops or grass. Definition of immovable property in Section 3(26) of
General Clauses Act, 1897, is also not exhaustive. It defines immovable property as it shall include
land, benefits to arise out of land, and things attached to earth. Thus we find that while Transfer of
property excludes certain things. General Clauses Act, includes certain things under the head
‘immovable property’. By combing both definitions, we may say that, the term includes land,
benefits to arise out of lands, and things attached to the earth, except standing timber, growing
crops and grass.

1. Land: It means a determinate portion of the earth’s surface, which may be covered by
water, the column of surface above the surface, the ground beneath the surface. All the
objects which are on or under the surface in its natural State are included in the term land.
Also all objects placed by human agency on or under the surface with the intention of
permanent annexation are immovable property, e.g., Building, wall, fences.
2. Benefits to arise out of land: Apart from physical point of view, every benefits arise out
of land is also regarded as immovable property. Registration Act also includes as
immovable property benefits to arise out of land, hereditary allowances, right of way,
lights, ferries and fisheries. In Anand Behera v. State of Orissa, AIR 1956 SC 17, the right
to catch away fish from chilka lake, over a number of years, was held to be an equivalent
of profits a pendre in England and a benfits to arise out of land in India. Similarly, a right
to collect a rent and profits of immovable property, right to collect dues from a fair or heat
or market on a land are immovable property.
3. Things attached to earth: Section 3 of transfer of property defines the expression
‘attached to earth’ as including (1) things rooted in the earth, (2) things embedded in the
earth, (3) things attached to what is so embedded, and (4) chattel attached to earth or
building.
 Things rooted in earth include trees and shrubs, except standing timber, growing
crops and grasses (Section 3, TPA). Whether tress regarded as movable or
immovable depends upon the circumstances of the case. If the intention is that trees
should continue to have the benefit of further sustenance or nutriment by the soil
(land), e.g., enjoining their fruits, then such tree is immovable property. But if the
intention is to oust them down sooner or later for the purpose utilizing the wood for
building or other industrial purpose, they would be timber and of accordingly be
regarded as movable property determining whether the tree is movable or
immovable, the intention if party is important if the parties intend that the tree
should continue to have the benefit of further nutriment to be afforded by soil, the
tree is immovable property. But if intention is to withdraw the tree from land, and
the land is providing it only as a warehouse, it is to be treated as movable property.
 Things embedded in earth: It includes such things as house, buildings, etc., however
certain things like an anchor imbedded in the land to hold a ship is not an
immovable property’ to determine whether such things are movable or immovable
property, depends upon circumstances of each case and there are two main
conditions to indicate intention:
 the degree or mode of annexation, e.g. tie-up seats fastened to the floor of
cinema halls are immovable property on brick-work and timber and
tapestries;
 the object of annexation, for, e.g., Blocks of stone placed one on the top of
other without any mater or cement for the purpose of forming a dry wall,
will become part of land, so immovable property, but not the stones
deposited in the builder’s yard.
 Things attached to what is so embedded must be for the permanent beneficial
enjoyment of the to which it is attached, as section says for, e.g., door and windows
of a house are immovable property to be permanent, like electric fans or window
blinds, they are movable property.
 Chattel attached to earth or building if a chattel, i.e., movable property is attached
to earth or building, if is immovable property. The degree, manner, extent and
strength of attachment are the main features to be regarded in determining the
question. Standing timber, growing crops and grasses are regarded as severable
from land and they are regarded as movable property. However if they and the land
 on which they stand is sold, such standing timber, growing crops or grasses will
pass to purchases.

4. Standing timber: The word standing timber includes Babool Tree, Shisham, Nimb, Papal
Banyan, Teak, Bamboo, etc. The fruit berating tree like Mango, Mahua, Jackfruit, Jamun,
etc., are not standing timber, and they are immovable properties but if intention is to cut
them down sooner or later for the purpose utilizing them as timber, and not to use them for
the purpose of enjoying their fruits, they are regarded as movable property.
5. Growing crops: Growing crops includes creepers like pan, angoor, etc., millets (Wheat,
Sugarcane, etc.), Veg like Lauki, Kaddo, etc. These crops don’t have any own independent
existence beyond their final produce.

MORTGAGE
Section 58 (a) of the TRANSFER OF PROPERTY ACT, 1882, defines mortgage as,
“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.
In terms of the definition the following are the characteristics of a mortgage
1. A mortgage can be affected only on immovable property. Immovable property includes
land, benefits that arise out of land and things attached to the earth like trees, buildings and
machinery but a machine which is not permanently fixed to the earth and is shift about
from one place to another is not considered to be immovable property.
2. A mortgage is transfer of interest in the specific immovable property. This means the
owner transfers some of this rights only to the mortgagee. Example: the right to redeem
the property mortgaged.

3. The object of transfer of interest in the property must be secure a loan or performance of
contract which results in monetary obligation. Transfer of property for purposes other than
the above will not amount to mortgage. Example: a property transferred to liquidate prior
debt will not constitute a mortgage.

4. The property to be mortgaged must be specific one that is it can be identified by its
location, boundaries etc. further the specific property must be mentioned in the deed with
certainty so that it can be identified as to which property has been mortgaged .

5. The actual possession of the mortgaged property is generally with the mortgager
 6. The interest in the mortgaged property is re-conveyed to the mortgagor on repayment of
the loan with interest due on. In case if mortgagor fails to repay the loan the mortgagee
gets the right to recover debt out of the sale proceeds of the mortgaged property.
Essentials

1. Transfer of Interest - The transfer of interest in a specific immovable property is called

mortgage. The mortgagor who has the possession of the overall interest of the property
only cedes a part of the interest in favor of the mortgagee while mortgaging his property in
order to secure a loan. After the completion of the mortgage, the interest of the mortgagor
reduces to that proportion that has been mortgaged to the mortgagee. His ownership also
reduces temporarily until he makes good of the loan that he has taken from the mortgagee.
When the mortgagor transfers his property, then under the rights provided to the mortgagee,
the transferee can recover what he has loaned to the mortgagor.

2. Specific Immovable Property - There must be specific mention of the property to be

mortgaged in the mortgage deed. The reason behind stating specific property is in case, the
mortgagor cannot repay his loan, then the court can decree a sale of the specific property
mortgaged by him when the mortgagee files a suit for non-payment of loan.

3. Securing the Payment of a Loan - The transaction involved in a mortgage is for

performance of obligations or payment of a loan. The mortgagor and the mortgagee share
the relation of a debtor and a creditor.

Rights of Mortgagor

1. Right of redemption: This is a right to redeem the mortgage property, on payment or

tender to the mortgage of the mortgage money, after the same has become due. The right
includes:
 A right to return of all documents relating to the mortgaged property, including the
mortgage deed, in possession of the mortgagee;
 To obtain delivery of possession of the mortgage property from the mortgagee
where the latter is in possession thereof;
 To obtain re-transfer of the same to himself or his nominee (at his own cost) (d) to
as registered acknowledgement from the mortgagee (where mortgage is registered),
to the effect that the mortgagee rights re: the property are extinguished. These rights
can be enforced by suit also (sec.60)

A mortgagor having a share in the mortgage property, however, is not entitled to redeem
his share, only payment of a proportionate amount, unless the mortgage has acquired, in
whole or in part, the share of other co-mortgagor. Further, if the due date of payment
 expires, the mortgagee is entitled to reasonable notice before payment, if the mortgage deed
so provides. Notice that the right of redemption is available to the mortgagor only if

(i) it has not been extinguished by acts of parties

(ii) by as decree of the Court

2. Right of inspection: The mortgagor is entitled, at his own costs, to get inspection and
copies of documents relating to the mortgaged property in the possession of the mortgagee,
so long as the right of redemption subsists (sec.60B).

3. Right to redeem separately: A mortgagor who has executed two or more mortgages (on
the same or different properties), is entitled to redeem any one of them, without being
compelled or redeem them all unless the contract otherwise provides (sec.61). In other
words, consolidation of mortgages against the mortgager is not allowed by law, unless the
contract otherwise provides.

4. Right to possession: In case of usufructuary mortgage, the mortgager is entitled to recover

possession of the mortgaged property from the mortgagee only the mortgage debt being
repaid in part or in whole from the usufruct and on the payment of the balance(if
any)(sec.62)

5. Right to “accessions”: Where the mortgaged property receives any accession during the
continuance of the mortgage, the mortgager shall , only redemption, in absence of a
contract to the contrary, been entitled to the same, provided that
 If the accession can be separated, he shall pay the expenses of acquiring the same
to the mortgagee. If the accession can be separated, he shall pay the expenses of
acquiring the same to the mortgagee.

 If it cannot been separated, he shall pay the cost thereof to the mortgagee, only if
such accession was necessary to preserve the property from destruction, forfeiture
or sale or if it was made with the assent of the mortgager. Interest as the mortgage
rate or at 9 p.c. if notice rate is fixed shall been payable only such cost (sec.63).

 Accessions may be natural or acquired. Instances of the latter are new trees, a new
well, adding as new storey. Notice that as regards “accessions” which cannot be
separated, they must, on redemption, be handed over the mortgager, who is not
 bound to pay compensation for the same to the mortgagee, unless the case comes
within the words of the sec.

6. Renewal of lease: If the mortgagee of as leasehold obtains as renewal thereof during the
continuance of the mortgagor is entitled to the benefit of the new lease, on redemption,
unless the contract otherwise provides (sec.64).

7. Improvements: Where the mortgaged property is improved by the mortgagee during his
possession thereof, the mortgagor only redemption is, and absence of a contract to the
contrary, entitled to such improvements. The mortgagor is bound to pay the cost thereof to
the mortgagee, only if (a) they were necessary to preserve the property from destruction or
deterioration or to prevent the security being insufficient or (b) if they were made under
the lawful orders of any public servant or authority. Interest at the mortgagee rate or at 9
p.c., if notice rate is fixed, is also payable thereon. Profits resulting from such
improvements must be credited to the mortgagor (sec.63A). Generally the mortgagee
cannot be allowed “to improve the mortgagor out of the estate”. He is allowed reasonable
costs of improvements, only if his case falls within any of the above two class. Thus
rebuilding, the mortgaged property at as cost exceeding five times trade mortgage amount
will not be justified.

Rights of Mortgagee

1. Right to Sue for Mortgage Money: The mortgagee can claim his mortgage money by
filing a suit in the following situations:

 Where the mortgagor through personal covenant takes up the liability to pay the
mortgage as in English and simple mortgage.
 Where the mortgaged property is insufficient or damaged or partly destroyed and
the mortgagor has not furnished any further security.
 Where the mortgagee is denied of the total or proportion of the mortgaged property
by the mistake of the mortgagor.
 Where the mortgagor is unable to provide security to the mortgagee where he has
the right to have security.

2. Right of Sale: The mortgagee is well within his right to sell off the mortgaged property on
non-payment of loan by filing a suit and getting a decree from the court. However Sec. 69
of the Transfer of Property Act gives the right to the mortgagee to sell off the mortgaged
property without filing a suit in the court of law and getting a decree to sell the mortgaged
property.
 3. Right of Foreclosure: The mortgagee has a right to move court and file a suit against the
mortgagor barring him from claiming the mortgaged property back. The right of
foreclosure can be claimed in mortgage by conditional sale and anomalous mortgage.

4. Right of Accession to Property: If any alteration is made to the mortgaged property, then
the mortgagee is entitled to both the property that has been mortgaged and the alteration as
security for the money loaned.

5. Right to Possession: the mortgagee is legally empowered to take control of the mortgaged
property as per the terms of the contract of mortgage. This right is available in usufructuary
mortgage.

TYPES OF MORTGAGE

1. Simple Mortgage
2. Conditional Mortgage
3. Usufructuary Mortgage
4. English Mortgage
5. Mortgage by Deposit of Title Deeds
6. Anomalous Mortgage

SIMPLE MORTGAGE
Section 58 (b) defines “simple mortgage”
Where the mortgagor promises to pay the mortgage money without delivering possession of the
mortgagor property and agrees expressly or impliedly that in case of non-payment of loan the
mortgagee shall have the right to cause the mortgage property to be sold.
Personal Liability
A simple mortgage entails two types of liabilities, personal liability and the mortgaged property. In
a standard mortgage deal, the mortgagor does not have any personal liability and on non-repayment
of loans, the mortgagee can move on to liquidate the mortgaged property in order to make good of
the loan. But in a simple mortgage, there is a personal liability on part of the mortgagor to repay
the loan along with the mortgaged property, hence the mortgagee has to option to move against
either the mortgagor personally thus obtaining a decree against him or he can move against the
mortgaged property to liquidate it for the payment of loan. The presence of a personal covenant is
very important in a simple mortgage and that is what distinguishes it from other forms of mortgage.
No Delivery of Possession
There is no delivery of mortgaged property in simple mortgage. The money can be recovered by a
money decree. A clause to transfer the complete interest of a mortgaged property to the mortgagee
on non-payment of loans changes the simple mortgage into mortgage with possession.
Sale of Property
In mortgage, the mortgagor may give the power to sale the property either expressly or impliedly.
This basically means that on the event of non-payment of debt, the mortgagee can sell the
mortgaged property. But even if the contract of mortgage specifically talks about selling the
property on non-payment the mortgagee cannot go ahead with the sale of the mortgaged property
and has to wait for the intervention of the court to sell the mortgaged property.

MORTGAGE BY CONDITIONAL SALE

Section 55(c) defines “mortgage by conditional sale”

The sale with a condition that upon the repayment of the consideration amount the purchaser shall
retransfer the property to the seller is known as mortgage by conditional sale.

In other words, “Where the mortgagor ostensibly sells the mortgaged 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, or on condition that on
such payment being made the buyer shall transfer the property to the seller, the transaction is called
a mortgage by conditional sale”

Certain characteristics need to be present in a transaction for it to be classified as a mortgage by

conditional sale.

 As the name itself suggests, there needs to be a sale. An ostensible sale is necessary for
such type of a mortgage

 As also evidenced by the name itself, is the need for a condition accompanying the sale.

 In so far as this particular class of transactions is concerned the condition required is fairly
simple. The ostensible sale shall get converted to an absolute sale if the mortgagor is unable
to repay the debt by the specified date.

In Prakasam v. Rajambal, 116

The document was described as a sale deed but the stamp paper was provided by transferor and
the consideration (price) was much less than the actual value of the property. There was a specific
condition that on payment of 'principal' amount the property should be reconvened. It was held by
the Madras High Court that the transaction was a mortgage by conditional sale and not an outright
sale. Where A, the owner of a land, gave possession of his land of B on receipt of money from
him, and under the agreement B was to execute reconveyance on payment of amount by a
otherwise the sale was to be confirmed, the Bombay High Court held that the transaction was sale
with condition to repurchase and not a mortgage by conditional sale. It may be noted that in this
case, payment of interest was not stipulated in the agreement. Accordingly, the court found that
there was no intention of parties to treat the transfer of land as 'security for debt' which is an
essential feature of a mortgage.

USUFRUCTUARY MORTGAGE
Section 58(d) defines “usufructuary mortgage”
A mortgage is usufructuary where the mortgagor gives possession of the property to the mortgagee,
he enjoys the fruits of the property.
Or
Usufructuary mortgage is a special type of mortgage where the mortgagor delivers possession,
either expressly or by implication, and binds himself to deliver possession of the mortgaged
property to the mortgagee. He authorizes him to retain such possession until payment of the
mortgage money. The mortgagee is also authorized to receive the rents and profits accruing from
the property and to appropriate it towards interest or in payment of the mortgage money, or partly
for interest or partly in payment of the mortgage money.
Essentials
1. Delivery of possession of the mortgaged property or an express or implied undertaking by
mortgagor to deliver such possession
2. Enjoyment or use if the property by mortgagee until his dues are paid off
3. No personal liability of the mortgagor
4. Mortgagor cannot foreclose or sue for the sale of mortgage-property
The mortgagee is entitles to continue possession and enjoy the usufruct until the debt has been
paid off. He can neither sue the mortgagor personally nor can exercise the rights of foreclosure. It
is to be noted that no time limit is fixed for the payment. The mortgagee is entitled to retain the
possession until the money due is paid. In such a mortgage the time upto which the money may be
paid by mortgagor is uncertain. If any time is fixed the mortgage would not be a usufructuary
mortgage.
For Example: If the mortgage agreement provides that the mortgagor should repay the money after
3 years and if the mortgagor does not pay the mortgaged money within 3 years, he should retain
the property until payment is made. It must be noted that no time limit is fixed for redemption of
usufructuary mortgage.

ENGLISH MORTGAGE
Where the mortgagor binds himself to repay the mortgage money on a 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.
Characteristics
1. That the mortgagor should bind himself to repay the mortgage money/loan on a
certain day;

2. That the mortgaged property should be transferred absolutely to the mortgagee ; and

3. That such absolute transfer should be made subject to a proviso that the mortgagee
will recover the property to the mortgagor, upon the payment by him of the mortgage
money on the appointed day

In the event of non-payment of the mortgage money under such mortgage a decree of
foreclosure is not passed. In this mortgage the mortgagee has the right to apply for passing
of the decree for sale of the mortgage property.

The difference between the mortgage by conditional sale and English mortgage is that in
English mortgage, the mortgagor binds him personally to repay the money.

MORTGAGE BY WAY OF DEPOSOT OF TITLE DEEDS

In England and popularly in India, this mortgage is called the equitable mortgage.

Mortgage by deposit of title-deeds is a peculiar kind of mortgage. It is peculiar in the sense that in
this mortgage, execution of mortgage-deed by mortgagor is not necessary. Mere deposit of title-
deeds of an immovable property by mortgagor to mortgagee is sufficient. Title-deeds are those
documents which are legal proof that a person owns a particular property. The object of this kind
of mortgage is to provide easy mode of taking loans in urgent need particularly by trading
community of the commercial towns. The borrowing transaction is a matter to faith or equity
justice and good conscience that money-lender advances loan only by having possession of certain
papers (titles-deeds) without any legal formality.

Under the definition under Section 58 (f) of Transfer of Property Act, 1882, the essential
requisites of such mortgage are:

1. Debt should be there

2. Deposit of the title deed with the lender (most essential)

3. Said deposit is with intention that the said title deed shall be security for the debt.

Title-deeds may also be deposited with banks to secure an overdraft account. This is a common
practice among the, trading community or persons involved in business. Title deeds may be
deposited also to cover a general balance which may be found due on a running account. In this
form of mortgage, title-deeds are deposited under an oral agreement to secure present or future
advance. When the money is advanced, there is creation of a charge upon the land comprised in
the title-deeds. The only fact that there is some debt and that the title needs of debtor are somehow
found in possession of the creditor would not be sufficient to create an equitable mortgage.
There must be a bona fide intention that possession of title-deeds with the creditor is by way of
security for the money advanced by him. However, intention to create security by deposit of title-
deeds is a question of fact and not of law. Therefore, the facts that title-deeds are in custody of the
creditor or that there exists a debt, both alone cannot give rise to a presumption that there is an
equitable mortgage. There is no equitable mortgage unless there is a connecting link between the
debt and the possession of title-deeds suggesting a definite intention on the part of the debtor that
deeds are in possession of creditor as security for the debt.

ANOMALOUS MORTGAGE

A mortgage which is not a simple mortgage, a mortgage by conditional sale, an

usufructuary, an English mortgage or a mortgage by deposit of title deeds within the
meaning of Section 58 of Transfer of Property Act is an Anomalous mortgage .

When a transaction is a mortgage in all respects i.e. there is existence of debt and security of an
immovable property for re-payment of that debt but the agreement between the debtor and creditor
is of such nature that it cannot be included in any specific category of mortgage, the transaction is
anomalous mortgage. It may also be combination of any two or more forms of specific categories
of mortgage.