Established as per the Section 2(f) of the

UGC Act, 1956

Approved by AICTE, COA and BCI, New
Delhi

Mortgage

SOLS

Gargi Bose – Assistant Professor

30/10/2023
MORTGAGE

1. Section 58 to 98 of the Transfer of Property Act, 1882 deals with

mortgages.
2. A mortgage is a transfer of an interest in immovable property and it is
given as a security for a loan.
3. The ownership of an immovable property remains with the mortgagor
itself but some interest in the property is transferred to the mortgagee
who has given a loan.
• Essential conditions of a mortgage:
1. There is a transfer of interest to the mortgagee.
2. The interest created in specific immovable property.
3. The mortgage should be supported by consideration.
CHAPTER IV -
MORTGAGE
• OF MORTGAGES OF IMMOVEABLE PROPERTY
AND CHARGES
• Sec 58. “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-
money” and “mortgage-deed” defined.—
• (a) 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.
• 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 (if any) by which the transfer is
effected is called a mortgage -deed.
(b) SIMPLE MORTGAGE.
—

1. Where, without delivering possession of the mortgaged

property,
2. the mortgagor binds himself personally to pay the mortgage-
money, and
3. agrees, expressly or impliedly, that,
4. in the event of his failing to pay according to his contract,
5. 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 the mortgage-money,
6. the transaction is called a simple mortgage and the mortgagee a
simple mortgagee.
REQUISITES

1. The mortgagor agrees to personally repay the loan.

2. The property is not given to the mortgagee.
3. The mortgagor transfers the right to sell the property if they
fail to repay it as security for the loan.
4. To create a simple mortgage, a registered document is
necessary.
5. Even if the loan amount is less than 100 rupees, Section
59 states that a registered instrument is required except
for a simple mortgage.
1. In a simple mortgage, the mortgagor retains possession of
the property.
2. The mortgagee’s security is solely based on the property
itself, not on any income or profits it generates.
3. If a simple mortgagee seeks to enforce their security, they
cannot obtain a possession decree according to Section 68.
Instead, it would convert the simple mortgagee into a
mortgagee with possession.
1. The mortgagee has the right to sell the property if the mortgagor
fails to repay the loan.
2. However, this power of sale requires court intervention.
3. This means that the mortgagee must obtain a court decree to execute
the sale.
4. Once the property is sold through the court, the mortgagee receives
the advanced money with interest, and the remaining proceeds go to
the mortgagor.
5. Kishan Lai v Ganga Ram, the court reaffirmed the interpretation of
Section 58(b) of the Transfer of Property Act 1882. The court
clarified that the phrase “right to cause the property to be sold”
implies that the mortgagee cannot arbitrarily exercise the power of
sale. Instead, it requires the intervention of the court for the sale
process to take place.
(c) MORTGAGE BY CONDITIONAL SALE.
—
1. Where the mortgagor ostensibly sells the mortgaged property—
2. on condition that on default of payment of the mortgage-money
on a certain date the sale shall become absolute,
3. or on condition that on such payment being made the sale shall
become void, or
4. on condition that on such payment being made the buyer shall
transfer the property to the seller,
5. the transaction is called a mortgage by conditional sale and the
mortgagee a mortgagee by conditional sale:
6. [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.]
1. Muslims developed the mortgage by conditional sale as a way to
comply with their religious prohibition on charging interest on
loans.
2. This type of mortgage allowed them to receive the principal
amount and interest while keeping their conscience clear.
• Requisites
1. The mortgagor ostensibly sells the property to the mortgagee.
2. There is a condition attached to the sale, specifying the
consequences based on repayment or default.
3. The condition must be included in the same document.
1. In a mortgage by conditional sale, the mortgagor has no
personal liability to repay the debt, and the mortgagee cannot
include the mortgagor’s other properties in this transaction.
2. This type of mortgage is an exception to the general rule
of “No Debt, No Mortgage.”
3. Upon breach of the condition, the sale deed itself is executed,
and the transaction becomes an absolute sale without further
accountability between the parties.
4. The mortgagee does not possess the property but has qualified
ownership that may become absolute in case of default.
1. The remedy available to the mortgagee is foreclosure, which can only be
obtained through a court decree.
2. The mortgagee can file a decree for foreclosure when the mortgagor
fails to repay the amount on time, and the sale becomes absolute.
3. Rama v Samiyappa, the court reiterated that a crucial aspect of a
mortgage by conditional sale is that in the event of default in payment,
the mortgaged property becomes the absolute property of the mortgagee.
• Importantly, the mortgagor does not bear any personal liability for the
debt repayment. This distinction highlights the unique nature of a
mortgage by conditional sale, where the transfer of ownership is
contingent upon the occurrence of specific conditions, relieving the
mortgagor from personal liability.
d) USUFRUCTUARY MORTGAGE

1. Where the mortgagor delivers possession [or expressly or by

implication binds himself to deliver possession] of the mortgaged
property to the mortgagee, and
2. authorises him to retain such possession until payment of the
mortgage-money, and
3. 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, or in payment of the mortgage -money, or partly in
lieu of interest [or] partly in payment of the mortgage-money,
4. the transaction is called an usufructuary mortgage and the
mortgagee an usufructuary mortgagee.
REQUISITES

1. The mortgagor delivers possession of the property to the

mortgagee or binds themselves to do so.
2. The mortgagee is authorized to retain possession and
receive the rent and profits from the property.
3. The mortgagee can use the rent and profits as a substitute
for interest or payment of the mortgage money, either fully
or partially.
LIABILITY

1. In a usufructuary mortgage, the mortgagor is not personally

responsible for repaying the mortgage money.
2. The mortgagee must utilize the rents and profits from the property to
satisfy the mortgage money.
3. The duration of the mortgage is not limited since it is difficult to
predict when the debt will be fully repaid.
4. Hikmatulla v Imam Ali, the court established that the mortgagee is
entitled to retain possession of the mortgaged property until the full
repayment of the debt. Unlike other types of mortgages, the time
period for repayment is not fixed in a usufructuary mortgage. If a
specific time period is mentioned, the arrangement ceases to be a
usufructuary mortgage.
MORTGAGEE’S
REMEDIES

1. If the mortgagor fails to deliver possession of the property,

the mortgagee can sue for possession or to recover the
advanced money.
2. However, if the mortgagee has already been given
possession, their only remedy is to retain the property until
the debts are satisfied.
3. The usufructuary mortgagee does not have the right of
foreclosure or sale.
4. The mortgagee has the advantage of repaying themselves
using the rents and profits.
1. (e) English mortgage.—
2. Where the mortgagor binds himself to re-pay the mortgage-
money on a certain date, and
3. transfers the mortgaged property absolutely to the
mortgagee,
4. 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.
REQUISITES

1. The mortgagor commits to repaying the mortgage money on a

certain date.
2. There is an absolute transfer of the property to the mortgagee.
3. The transfer is subject to the condition that the mortgagee will
re-transfer the property to the mortgagor upon full payment of
the mortgage money on the agreed date.
4. In an English mortgage, the mortgagor transfers full ownership
of the property to the mortgagee as security. The mortgagee
will return or re-transfer the property to the mortgagor once the
agreed-upon mortgage money is fully repaid.
1. Personal Liability - In an English mortgage, the mortgagor is
personally liable to repay the mortgage debt by the agreed-
upon date. The agreement to repay is a crucial aspect of this
type of mortgage.
2. Remedy Available - If the mortgagor defaults on payment, the
mortgagee can sell the mortgaged property to recover the debt.
3. No Absolute Interest- While the property is transferred
absolutely to the mortgagee, it is subject to the provision of re-
transfer if the mortgagor repays the mortgage money.
Therefore, the mortgagee has an interest in the property but
with the right of redemption.
EQUITABLE MORTGAGE

1. (f) Mortgage by deposit of title-deeds.—

2. 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,
3. delivers to a creditor or his agent documents of title to
immoveable property, with intent to create a security
thereon, the transaction is called a mortgage by deposit of
title-deeds.
1. In English Law, this type of mortgage is referred to as an
“equitable mortgage” as it involves the deposit of title deeds
without additional formalities or a written document.
2. This type of mortgage provides flexibility to the business
community when there is an urgent need to raise funds
before the opportunity to prepare a mortgage deed arises.
3. This mortgage does not require a written document and is
not affected by registration laws since it is an oral
transaction.
REQUISITES

1. Existence of a debt.
2. Deposit or delivery of the title deeds.
3. The intention that the deeds will serve as security for the
debt.
1. Territorial Restrictions - It’s important to note that this
type of mortgage can only be made in specific areas
designated by the State Government and not everywhere in
India. Depositing the deeds beyond the specified area will
not create a mortgage or a valid security.
2. Existence of Debt- The debt can be an existing one or a
future obligation.
1. Deposit of Title-Deeds - Physical delivery of the documents is
not necessary; constructive delivery is sufficient. A valid
equitable mortgage does not require all the title documents to
be deposited, but the deposited deeds should be genuine,
relevant to the property, and serve as material evidence of title.
2. Intention to Create Security - The essence of the transaction
lies in the intention that the title deeds will serve as security for
the borrowed money (debt). Simply handing over the title
deeds from one person to another does not create a mortgage.
The delivery of the deeds must fulfil the agreement that they
will serve as security for the debt.
1. United Bank Of India v Messra Lekharam Sonam and
Co, the court established that the submission of the title
deed relating to the property is the essential requirement for
it to be considered as security.
2. No further requirements or formalities are necessary to
create a valid mortgage.
3. This ruling emphasizes the importance of the title deed as
the primary element in establishing the security for a
mortgage.
1. (g) Anomalous mortgage.—
2. 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.
PURPOSE

1. The purpose of including clause (g) was to recognize and

protect various customary mortgages that exist in different
regions of the country.
2. An anomalous mortgage is essentially a combination of two or
more types of mortgages.
3. The rights and liabilities of the parties involved in an
anomalous mortgage are determined by their contractual
agreement as stated in the mortgage deed.
4. Additionally, local usage and customs may also influence the
rights and liabilities to the extent that the contract does not
cover them.
1. An anomalous mortgage is created through an agreement
between the mortgagor and the mortgagee based on their
terms and conditions.
2. It is termed “anomalous” because it does not fit into the
established categories such as simple, usufructuary,
mortgage by conditional sale, and so on.
3. The remedy available in an anomalous mortgage depends
on the terms of the mortgage agreement.