2nd Internal Property Law PDF

“Mortgage law in India”
INTERNAL ASSESSMENT-II
Question- Explain nature and scope of Mortgage law in India. Explain

different type of Mortgages and its application in the legal transaction.
Name- Deeksha Chaudhary
PRN NO. - 20010122094
Subject- Property Law
Course- Semester-2(LL.B three year 2020-23)
Faculty- Prof. Ashish Deshpande
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Nature and Scope of Mortgage law
Mortgage: -
Mortgage is a kind of security given by the borrower-debtor for repayment of loan to the lender-
creditor. Section 58 of the Transfer of Property Act, 1882 deals with the mortgage in India. It
says that it is the transfer of an interest for securing the payment of money such as: -
• The payment of money advanced or to be advanced through the loan

• An existing debt or future debt
• Or the performance of a promise which may arise to a legal obligation to pay damages.
A person who borrows the money called “mortgagor” and a person who gives the money called
“mortgagee”. The borrowed money and its interest of which payment is secured for the time
being are called the “mortgage money”. Mortgage is applied in immovable property and charges
only. The main objective of a mortgage is to secure the debt or other performance of a promise.
It protects a lender; if the borrower becomes insolvent the money can be settled from the
property given by way of security1.
In India, mortgage is not a new concept, it is evolving concept and it can be traced back to the
writings of Manu i.e. Smriti. It is a kind of deposit and once the property is given in mortgage for
the use then the transaction will always be regarded as mortgage. A property which is kept as
mortgage should be returned to the borrower on demand and deposit should be returned on
demand without any delay whatever is the lapsed time after mortgage or deposit2. It is commonly
said that once a mortgage, always a mortgage.3
Initially people took loans from their relatives, small traders, heads of the villages and big
zamindars and pay higher rate of interest on the principal money. Higher rate of interest, lack of
rules and regulations and lack of security are the problems faced by the mortgagor in India but
1 Nidha Sha v. Murlidhar (1903) 25 All 115.

2 Csanad Antal, Legal Transplantation in India, 2009 JURA: A Pecsi TUDOMANYEGYETEM ALLAM-es
JOGTUDOMANYI KARANAK tudomanyos IAPJA 185 (2009).
3 Pomal Kanji Govindji v. Vrajlal Karsandas Purohit (AIR) 1989 SC 436.
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later government intervention and formulation of law regarding mortgage and protection of
interest played a major role.4
Section 58 also explains the essentials of a mortgage such as transfer of an interest, specific
immovable property intended to be mortgaged and consideration of mortgage. In a mortgage,
rights are transferred between the mortgagor and mortgagee and it depends upon the kind of
mortgage. In mortgage, the right of ownership to the property remains with the mortgagor but the
accessory right is given to mortgagee to secure the payment or other obligation. During the
mortgage it is important to specifically mention the immovable property such as property name
and its location and name of possession. Otherwise it will create vagueness. There should be
transfer of money or performance of an engagement.
Effects of Mortgage:-
When mortgagee lends money on a promissory note, then the mortgagee can take a decree which
can be used against any property of the mortgagor. If the mortgagor alienates his property or not
able to repay the borrowed money then the mortgagee’s rights are prejudiced. In the first case,
mortgagee has no assets against which he can go ahead and proceed but in the latter case, the
mortgagee have to be satisfied with the dividend paid to him. To protect his position a mortgagee
persists upon security. The mortgaged property is considered as the sign of ownership for the
mortgagee. It is one of the main remedy of the mortgagee against the property which protects his
interests.
A mortgage is not a mere contract but it is the transfer of an interest in mortgaged property. If all
the obligation of valid mortgage is fulfilled but the mortgage money is not paid by the mortgagor
to mortgagee then it does not mean that the mortgage is invalid.5 If the mortgage-deed is not
registered then the mortgage will become invalid and then mortgagor cannot sue for the recovery
but mortgagor can bring an action against mortgagee for possession on his offering to pay the
loan.
Mode of Execution of Mortgages: -
4 Amee Nagar, Indian mortgage industry with reference to reverse mortgage scheme: review, research
gate publication, Sept.2020.
5 Rasik Lal v. Ram Narain (1921) ILR 34 All 273.
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These are the following ways in which property can be transferred by way of mortgage: -
• Registered instrument
• Deposit of title deeds
• Delivery of possession
In the case of mortgage, when the principal amount secured is more than hundred rupees, and
then the registered instrument is mandatory. When the mortgagor deposits money with the
mortgagee the title deeds of his property in order to create a security, the law indicate a contract
between mortgagor and mortgagee to create mortgage, then there is no need of registered
instrument. A registered instrument should be self attested by the mortgagor and two other
witnesses.
In the case when the principal amount secured is less than hundred rupees, then mortgage can be
influenced by registered instrument or delivery of possession. If the mortgage is “simple
mortgage” then it should be influenced by a registered instrument irrespective of amount.
Kinds of Mortgage: -
Section 58 of the Transfer of Property act, 1882 explain the six kinds of mortgage and the nature
of rights transferred in the mortgage based on the form or kind of mortgage.
A). Simple Mortgage: - In simple mortgage, there is no transfer of ownership and mortgagor
owns that he has to pay the mortgage money and he gives implied or express right to mortgagee
to bring the property to sale through decree of court to settle the debt6. It is considered as the
remedy of judicial sale.
B).Mortgage by Conditional Sale: - Section 58 clause c of Transfer of Property Act deals with
the mortgage by conditional sale. In this the property is apparently sold to the mortgagee if
mortgagor defaults in payment on stipulated date and time and the sale become absolute. If
mortgagor settles the payment then the sale become void or the property will be re-transferred. In
the case of Sunil K. Sarkar v. Aghor K. Basu, the court observed that the conditions (embodied
6 Kishanlal v. Gangaram (1891) 13 All 28.
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in the document) should be fulfilled otherwise, the sale will not be considered as mortgage by
conditional sale.7 In the case of Ismail Khatri v. Muljibhai Brahmabhatt8, the court held that the
document should be completely read and differentiated the mortgage by conditional sale and
right to repurchase.
C). Usufructuary Mortgage: - It is a possessory mortgage and the property is given as a security
to the mortgagee in which he is allowed to repay himself through the rents and profit from the
property. There is no fixed time limit. Mortgagee will possess the property till the repayment of
the money. In the case of Pratap Bahadur v. Gajadhar9, the mortgagor was agreed to put the
mortgagee in possession of a specific village and to pay the interest of twenty-four per cent until
the possession delivered. In Yashwani v. Vithal case10, there was a contract in which the
mortgagor had to pay the interest every year but if he makes default in the payment of interest
then the mortgagee will take possession and will settle his payment from the rents and profits.
Later, the court said that it was a simple mortgage. Section 58 clause (d) of Transfer of Property
Act explain this mortgage.
D). English Mortgage: - In this type of mortgage, mortgagor owns the responsibility of repay the
mortgage money on a stipulated date and time and gives the title of the property to the mortgagee
but it is subject to the provision embodied in the document. In the case of Ramkinkar v.
Satyacharan, the court defined the meaning of ‘absolutely’ and held that it does not imply the
absolute transfer of property and said that absolute transfer cannot be a mortgage11. Section 58
clause (e) of the Transfer of Property Act explains English Mortgage.
E). Equitable Mortgage: - It is also known as mortgage by deposit of title deeds. It means when
mortgagor transfers his title of deed document to mortgagee related to his immovable property as
a security then the mortgage by deposit of title deed take place. There is no need of further
writing and procedures. This kind of mortgage helps those communities who involve in
mercantile business where sudden need of money takes place. Verdu Seth Sam v. Luckputty case
7 AIR 1989 Gau 39.

8 AIR 1994 Guj 8.
9 Pratap Bahadur v. Gjadhar (1904) 24 All 521.
10 Yashwini v. Vithal (1897) Bom 267.
11 Ramkinkar v. Satyacharan, 1939 1 MLJ 554.
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gave the validity to these kinds of mortgages in India. Section 58 clause (f) explains this kind
of mortgage.
F). Anomalous Mortgage: - In this mortgage, the rights and liabilities of the mortgagee and
mortgagor are determined by the document of contract. It is considered as the combination of all
abovementioned mortgages. The possession can or cannot be delivered. Section 58 clause (g)
explains this kind of mortgage.
Mortgages can be redeem. Section 59 clause (a) states that mortgagor include a person who is
deriving the title deed from him and mortgagor’s legal heirs, lessees, subsequent mortgages,
charge holders, donees can redeem the mortgage property. Those persons who are entitled to
redeem then they can claim the right to subrogation. Subrogation enables a person to stand in the
shoes of mortgagee to whom he has paid off a right to be entitled to all the remedies.13
Law of Mortgage of immovable property in banking transaction: In banking sector, this kind of
law is created to regulate the affairs relating to the mortgage and to protect the rights of creditors
and debtors. The main objective was to ensure mutual trust and expand the trade and credit and
attract investment and promote the economic growth of the nation.
Law of Mortgage of immovable property in real estate sector: In housing sector, it is commonly
used. Mortgage can be used by a homeowner to buy his house or to buy the commercial entity
and it can also be used by a person to buy farmland.
Conclusion: - Mortgage is the legal agreement in which loan is taken by the borrower to
purchase or buy a home or other commercial land. Mortgages are the secured loans in which the
debtor makes promise to the creditor in the form of security. The ownership remains with the
real owner of the property but the ostensible ownership is with the creditor during the contract of
mortgage.
References: -
12 (1862) 8 M.I.A. 307.

13 G. C. Venkata Subbarao, Property Law, Revised by Jaya V. S.
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• Bare Act of the Transfer of Property Act, 1882

• D.F. Mulla, the transfer of Property Act 1882, 6th ed. By A.M. Setalvad 1973.
• DR. Poonam Pradhan Saxena, Property Law, 3rd ed. Lexis Nexis.
• https://www.indiankanoon.org
• https://www.manupatra.com
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“Mortgage law in India”

Question- Explain nature and scope of Mortgage law in India. Explain

Name- Deeksha Chaudhary

PRN NO. - 20010122094

Subject- Property Law

Course- Semester-2(LL.B three year 2020-23)

Faculty- Prof. Ashish Deshpande

Nature and Scope of Mortgage law

• The payment of money advanced or to be advanced through the loan

1 Nidha Sha v. Murlidhar (1903) 25 All 115.

Mode of Execution of Mortgages: -

6 Kishanlal v. Gangaram (1891) 13 All 28.

7 AIR 1989 Gau 39.

12 (1862) 8 M.I.A. 307.

• Bare Act of the Transfer of Property Act, 1882

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