TRANSFER OF PROPERTY LAW

TOPIC: ENGLISH MORTGAGE

 INTRODUCTION

An English mortgage is a type of loan in which the mortgagor (borrower) transfers property
rights to the mortgagee (lender) in the event of payment default or repayment failure. The
mortgagee has the right to sell the property to recoup the loan amount given to the mortgagor
in an English mortgage system.

OBJECTIVE

The objective of this project is to research about English Mortgage, its history and it use in
India.

RESEARCH QUESTIONS

 what is the definition of English Mortgage?

 How is English Mortgage different from other kinds of Mortgages?

SCOPE AND LIMITATION

This project is about English Mortgage. My Project research is limited to just English
Mortgage and its use in India.
 MAIN BODY

According to the Sec 58(e) of the Transfer of Property Act, 1882, English Mortgage is
defined as “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.”

The basic characteristics of an English Mortgage are

 The borrower/the mortgagor binds himself to repay the loan on a specific date
 The mortgaged property is absolutely transferred to the lender/the mortgagee
 The absolute transfer is made subject to the condition that the lender will re-transfer
the mortgaged property to the borrower upon payment of the loan amount.
 While the possession rights remain with the mortgagee, the mortgagor is allowed to
either occupy the property himself or rent it out.

In the case, Narayan v. Venkataramana1, the Court had noted the above essential elements
English Mortgage which included that the mortgagor needs to bind himself to repay the
money, it should be an absolute transfer of property and the mortgagee shall reconvey the
property back to mortgagor once the amount is paid.

The English mortgage is an absolute form of transfer of property to the mortgagee on the
terms that when the loan is paid off on a specific date, the mortgagee must re-transfer the
property to the mortgagor.   the mortgagor here, binds himself to repay the debt amount on
the specified date and transfers the property completely to the mortgagee on the condition
that when the debt amount is paid off, the mortgagee will return the property to the mortgagor
upon payment of principal and interest.

Though the term used is ‘English Mortgage’, there is considerable difference between the
Mortgages practiced in England and that practiced in India. The usual form of mortgage deed
in England was that if the mortgagor repays, the mortgagee shall convey the estate to the
mortgagor. However, a personal covenant is not found in mortgages in England but it
has been made a part of English Mortgage in India.

Absloute Transfer
1
Narayan v. Venkataramana, ILR (1902) 25 Madras 220 (235) FB
In English Mortgage, the Mortgagor absolutely transfers the property to the mortgagee.
Though, an absolute transfer cant be considered as a mortgage because in Mortgage, there is
transfer of only a limited interest for securing the debt. The use of “absolutely” is only a
matter of form and not of substance. Only an interest in the property is transferred and not the
whole property.2

In Ramkinkar v. Satyacharan3, the Privy Council held that the definition of an English
mortgage as given in the Transfer of Property Act must be read subject to the definition of a
mortgage. Their Lordships observed:

"that section 58(e) speaks of the mortgagor transferring the mortgaged property absolutely to
the mortgagee." In using those words, does it mean that no interest or no legal interest in the
property remains in the mortgagor? Their Lordships did not think so. If the Sub-section
stopped at the word "mortgage", it might be necessary to put the construction upon it, but it
does not stop there : it adds the proviso that the mortgagee "'will transfer" the property upon
payment of the mortgage money as agreed."

Their Lordships think that with this addition, the sub-section upon its true construction does
not declare "an English mortgage to be an absolute transfer of the property. It declares only
that such a mortgage would be absolute were it not for the proviso for retransfer."

In Raj Kishore V. Prem Singh4, the mortgage did not bind himself to repay the mortgage
money on a certain date. The sale deed did not even remotely suggest that the transaction was
in the nature of a mortgage or that there was any undertaking or agreement between the
parties under which the property sold had to be re- transferred to the seller. The seller was not
a signatory to the agreement of reconveyance. It was held that the transaction could not be
said to be an English mortgage. The suit filed was for a declaration to the effect that the sale
deed executed by the plaintiff was void and that he continued to be the owner and in
occupation. Hence, the plea that the suit was in substance one for redemption of mortgage
was not tenable.

CLOGGING OF REDEMPTION

2
Ram Kinkar v. Satya Charan, (1939) 66 IA 50; AIR 1939 PC 14
3
Ibid
4
Raj Kishore V. Prem Singh, AIR 2011 SC 382
The Transfer of Property Act, 1882 deals with the mortgage of immovable property.
Mortgage is the transfer of an interest in an immovable property for the purpose of securing a
loan or the performance of an engagement. A mortgage to be valid must be in relation to
payment of any definite amount either already advanced or to be advanced, by way of loan.
Section 60 of the act lays down the provision of the redemption of mortgaged property as the
subject matter of the right of redemption can be described as that "right of the mortgagor or
of any third person directed by him which entitles him to get back the possession of the
mortgaged property after the payment of the mortgaged money”.

The Doctrine of Clogging of Redemption essentially protects the Right of Redemption of the
mortgagor of immovable property. The Doctrine says that if there is a covenant or condition
in the agreement that "clogs' or invalidates the Right of Redemption of the mortgagor, such a
clause would be invalid and treated as void by the law. From this Doctrine, arises the famous
maxim "Once a Mortgage, always a Mortgage." This maxim implies that the mortgagor's
right of redemption would not be defeated by any agreement to the contrary, even it the
mortgagor himself agreed to it. The maxim simply denied the validity of any stipulation in
the mortgage deed which defeats the mortgagor's right of redemption.

Difference B/w English Mortgage and Mortgage by conditional sale

Mortgage by conditional sale is a type of mortgage where there occurs an ostensible sale,
which is converted into absolute sale in the event that the ostensible seller is unable to repay
the loan.

The essential difference between and English Mortgage and a Mortgage by Conditioned Sale
Is with respect to when the actual transfer of ownership in the property takes place. In cases
of English Mortgage. the mortgagor transfers the property to the mortgagee in the first
instance itself and inserts a condition binding the mortgagee to transfer the property back to
mortgagor once the sun of mortgage money is paid. Here, the transfer of property occurs in
the initial stage of the transaction itself. This in contrast with the situation in cases of
Mortgage by Conditioned Sale, where the mortgagor inserts a clause by which a property will
be permanently transferred to the mortgagee upon failure to pay the mortgage money. Thus,
in Mortgage by Conditioned Sale, the Transfer of Property will occur in the future, whereas
in English Mortgage the Transfer of Property has already occurred.

The right under Section 69 of the Transfer of Property Act, 1882

The power of the mortgagee to sell without intervention of the court, before the incorporation
of such right under Section 69 of the Transfer of Property Act, 1882, was a subject-matter of
controversy and divergent views.

This power of sale, a feature of the English mortgage was originally confined to Englishmen
or to Indian residents in the Presidency Towns who were conversant with the forms of
English mortgage and English law and procedure as administered in the Presidency Towns.
In the mofussil, prior to the Transfer of Property Act, there were certain regulations
governing the law of mortgages between the parties who were not Europeans. Those
regulations did not empower the mortgagee to effect sale of the mortgaged property without
the intervention of the court.

The right under Section 69 is as much and as full a right as the right of redemption of the
mortgagor. The mortgagee is, in no sense, a trustee for the mortgagor in the matter of the
power of sale; as he holds it for protection of his interest and for his benefit. The mortgagee is
not debarred from exercising the power of sale, even though the mortgagor files a suit for
redemption.

The right under Section 69 of the Transfer of Property Act, I1882, which allows a person,
who is not the owner of the property, could convey the right. title and interest of a third party
mortgagor in the mortgaged property even without the intervention of the court, is as much
and as full a right as the right of redemption of the mortgagor. However, even this Right of
private sale can only be exercised in the following circumstances:

1. When the mortgage-deed expressly provides that the mortgagee is entitled to sell the
mortgaged property. or any part thercof, in default of payment of the mortgage-money.
without the intervention of the court.

2. And when the mortgagee is the Governmeni. (Clause (b) of sub-section (1).

3. If the mortgaged property or any part ther eof 1s, on the date of execution of the mortgage
deed, situate within the towns of Calcutta, Madras, Bombay or in any other town or area
which the State Government may, by notification in the Official Giazette, specify in this
behalt. (Clause (c) of sub-Section (1)).

Section 69 of the TPA however, is the exception, not the rule and as a general principle of
property law, the principle of "Once a Mortgage, always a Mortgage" reigns supreme and the
mortgagee does not gain ownership of the mortgaged property but merely an interest. It is not
the intention of the legislature in India that an English Mortgagee as defined in section 58(e)
of the Transfer of Property Act, 1882, should, by the very fact of execution of the mortgage.
have a right to possession. If the English mortgagee is to be taken as acquiring the right to
take possession as soon as the mortgage is executed whether a right of entry is expressly is
covenanted for or noL, then a jarring element is to be introduced in the section considered.

The remedy available constitutes a basic element of the scheme, even though on the surface it
may appear that only the form of transfer is the eriterion. The view taken in England is that if
the mortgagce allows the mortgagor to remain in possession, the mortgagor is, at law, merely
a tenant at sulferance, but in equity being the owner, the mortgagor can take the rents for his
own use and is not accountable to the mortgagee. The mortgagor in India transfers only an
interest. As a matter of legislative policy. the remedy of sale should sufice in case of English
mortgage. Theretore, it is recommended that it should be provided in section S8 (e) of the
Transfer of Property Act, 1882, that an English mortgage does not carry a right to possession
in the absence of an express agreement giving such right.

Deed of English Mortgage

THIS MORTGAGE made the…………………………………..…..………….. day of..

…………….., 2007, BETWEEN 'AB' of, etc. (hereinafter called the "Mortgagor") of the One
Part, and 'CD' of, etc. (hereinafter called the "Mortgagee") of the Other Part. WITNESSES
WHEREAS the Mortgagor is absolutely seized and possessed or is otherwise well and
sufficiently entitled to an absolute estate of inheritance or an estate equivalent thereto free
from encumbrances to the lands, hereditaments……………………….. fully mentioned and
described in the Schedule hereto AND whereas the Mortgagor having occasion to borrow a
sum of Rs…………………….………….. approached the Mortgagee which the Mortgagee
has agreed to lend and advance on having repayment thereof with interest at………….. per
cent per annum and secured by a conveyance by way of mortgage of the said property. NOW
THIS INDENTURE WITNESSETH that in consideration of the sum of Rs…………………..
……….. this day paid to the said 'AB' by the said 'CD' (the receipt whereof the said 'AB'
hereby acknowledges), the Mortgagor hereby agrees with the covenant to pay to the
Mortgagee on the………………..………….. day of…………..………….. the sum of
Rs………….. with interest thereon in the meantime at the rate of Rs………….. per cent per
annum computed from the date of this deed such interest to be paid monthly and every month
on the 15th of every current month. NOW THIS INDENTURE also witnesses that for the
consideration aforesaid the said 'AB' as the beneficial owner, do hereby grant, transfer convey
unto and to the use of the said 'CD' all that etc. (describe the property): TO HAVE AND TO
HOLD the same absolutely and for ever PROVIDED ALWAYS that if the Mortgagor shall
pay or cause to be paid the sum of Rs………….. with interest thereon, on the………….. day
of………….., according to the foregoing agreement in that behalf, the Mortgagee, his heirs,
representatives or assigns shall, at the request and costs of the Mortgagor, his heirs,
representatives or assigns, reconvey to him or them as he or they shall direct, the said
property. AND THAT the Mortgagor do hereby covenant unto the Mortgagee that the
Mortgagor has absolute title to the land, hereditaments, messages and premises hereby
granted and conveyed and that the Mortgagor has good right, full power, absolute authority
and indefeasible title to grant, convey, transfer, assign and assure the same unto and to the
use of the Mortgagee in the manner hereinbefore indicated and further the Mortgagor and all
persons having lawfully or equitably any estate or interest in the same shall at all time
hereafter during the continuance of the security do execute or perform or cause to be done,
executed and performed all such further or other acts, deeds and things as may be reasonably
required for further and more perfectly assuring the same unto and in favour of the
Mortgagee. Provided, however, and it is further agreed by and between the parties that if the
Mortgagor commits any default in payment of the principal amount on the due date or any
three instalments of interest, whether they have been demanded or not it shall be lawful for
the Mortgagee to institute a suit for sale and to have a Receiver appointed over the mortgaged
property. IN WITNESS WHEREOF the parties herein under have set their hands on the date
and year hereinabove mentioned in the presence of: Witnesses: 1. 'AB' 2. 'CD' The Schedule
above referred to Signed, sealed and delivered Memo of consideration

BIBLOGRAPHY

1. https://www.99acres.com/articles/all-you-need-to-know-about-english-mortgage.html, last
accessed on 15th nov,2021.

2. https://www.makaan.com/iq/real-estate-faqs/mortage/what-is-english-mortgage, last
accessed on 15th nov, 2021.