MORTGAGE

SECTION 58-104
INTRODUCTION
A mortgage is a method of creating charge on immovable properties like land and
building. Section 58 of the Transfer of Property Act 1882, define a mortgage as follows:
"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:
A mortgage can be affected only on immovable property. Immovable property includes
land, benefits that arise out of land and things attached to earth like trees, buildings and
machinery. But a machine which is not permanently fixed to the earth and is shift able
from one place to another is not considered to be immovable property.
A mortgage is the transfer of an interest in the specific immovable property. This means
the owner transfers some of his rights only to the mortgagee. For example, the right to
redeem the property mortgaged.
CONTD.
The object of transfer of interest in the property must be to secure a loan or performance
of a contract which results in monetary obligation. Transfer of property for purposes
other than the above will not amount to mortgage. For example, a property transferred to
Liquidate prior debt will not constitute a mortgage.
The property to be mortgaged must be a specific one, i.e., it can be identified by its size,
location, boundaries etc.
The actual possession of the mortgaged property is generally with the mortgager.
The interest in the mortgaged property is re-conveyed to the mortgager on repayment of
the loan with interest due on.
In case, the mortgager fails to repay the loan, the mortgagee gets the right to recover the
debt out of the sale proceeds of the mortgaged property.
DEFINITION AND NATURE OF MORTGAGE
According to Section 58 of the Transfer of Property Act, 1882, 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 agreement which may give rise to pecuniary liability. The transferor
is called a mortgagor, the transferee a mortgagee; the principal money and interest the
payment of which is secured for the time being are called the mortgage money and the
instrument by which the transfer is effected is called the mortgage deed.
Essentials of a Mortgage-
1)Transfer of Interest: The first thing to note is that a mortgage is a transfer of interest in the
specific immovable property. The mortgagor as an owner of the property possesses all the
interests in it, and when he mortgages the property to secure a loan, he only parts with a part of
the interest in that property in favour of the mortgagee. After mortgage, the interest of the
mortgagor is reduced by the interest which has been transferred to the mortgagee. His ownership
has become less for the time being by the interest which he has parted with in favour of the
mortgagee. If the mortgagor transfers this property, the transferee gets it subject to the right of the
mortgagee to recover from it what is due to him i.e., the principal plus interest.
CONTD.
2)Specific Immovable Property: The second point is that the property must be specifically
mentioned in the mortgage deed. Where, for instance, the mortgagor stated “all of my
property” in the mortgage deed, it was held by the Court that this was not a mortgage. The
reason why the immovable property must be distinctly and specifically mentioned in the
mortgage deed is that, in case the mortgagor fails to repay the loan the Court is in a position
to grant a decree for the sale of any particular property on a suit by the mortgagee.
3)To Secure the Payment of a Loan: Another characteristic of a mortgage is that the
transaction is for the purpose of securing the payment of a loan or the performance of an
obligation which may give rise to pecuniary liability. It may be for the purpose of obtaining a
loan, or if a loan has already been granted to secure the repayment of such loan. There is
thus a debt and the relationship between the mortgagor and the mortgagee is that of debtor
and creditor. When A borrows 100 bags of paddy from B. on a mortgage and agrees to return
an equal quantity of paddy and a further quantity by way of interest, it is a mortgage
transaction for the performance of an obligation.
CONTD.
4)Where, however, a person borrows money and agrees with the creditor that till the debt is
repaid he will not alienate his property, the transaction does not amount to a mortgage. Here the
person merely says that he will not transfer his property till he has repaid the debt; he does not
transfer any interest in the property to the creditor. In a sale, as distinguished from a mortgage, all
the interests or rights or ownership are transferred to the purchaser. In a mortgage, as stated
earlier, only part of the interest is transferred to the mortgagee, some of them remains vested in
the mortgagor.
To sum up, it may be stated that there are three outstanding characteristics of a mortgage:
a) The mortgagee’s interest in the property mortgaged terminates upon the performance of the
obligation secured by the mortgage.
b) The mortgagee has a right of foreclosure upon the mortgagor’s failure to perform.
c) The mortgagor has a right to redeem or regain the property on repayment of the debt or
performance of the obligation
MORTGAGE AND IT’S KINDS
Sections 58-104 of the of Transfer of Property Act, 1882, deals with substantial essential
features of mortgage of immovable property. Mortgage is a common term which in
layman’s understanding refers to an instrument that is used when we are in need of loan
or money, we mortgage our property. The property thus mortgaged works as a security
against the loan.
Mortgage is a French word which literally means “death pledge”, referring to the
“pledge” that shall end only when the loan is repaid and the obligation is completely
fulfilled.
Section 58 gives the definition as well as the kinds of Mortgage. The person transferring
the security or his title of the property is called the ‘mortgagor’ and the transferee, to
whom the property is being kept as security is called the ‘mortgagee’ and the principal
money and interest against which the property is kept is called mortgage-money, and if
there is any contract or deed or instrument by which the transfer is initiated is called a
mortgage-deed.
CONTD.
Section 58(a) defines mortgage and related terms as such “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 person who is the Transferor is called a Mortgagor,
The person who is the Transferee a Mortgagee.
The principal money and interest of which payment is secured for the time being are
called the Mortgage-Money.
The instrument (if any) by which the transfer is effected is called a Mortgage-Deed.
The Black’s Law Dictionary defines ‘mortgage’ as “A conveyance of title to property
that is given as security for the payment of a debt or the performance of a duty and that
will become void upon performance according to the stipulated terms”
SIMPLE MORTGAGE
In a simple mortgage, the mortgagor personally binds himself to payback the mortgage money,
either impliedly or expressly, that in the case of failure of repayment, the mortgagee shall have the
right to dispose the said property and recover the mortgage money.
The primary feature of simple mortgage is that the mortgagee shall not sell the property without
the intervention of the court. He can-
● apply to the court seeking permission for the sale of the property, or
● file a suit for the recovery of the entire amount.
In case of Kishan Lai v. Ganga Ram (1891), the Court had held the words mentioned under
Section 58(b) “right to cause the property to be sold” clarified that the mortgagee shall have the
right to sell the property only through the intervention of the Court and not otherwise. Another
case of Ram Narayan Singh v. Adhindra Nath, AIR (1916) PC 119, stated that even though some
property was kept as security by the mortgagor, but that would not relieve him of his personal
liabilities to pay off the debt along with the interest amount.
MORTGAGE BY CONDITIONAL SALE
In this kind of mortgage, the property is ostensibly sold by the mortgagor to the
mortgagee, on the following conditions-
● On the payment of the mortgage money, the sale shall become void.
● On the payment of the mortgage money, the mortgagee shall retransfer the property.
● The sale shall become absolute if the mortgagor fails to repay the amount on the
specified date.
● Although, the mortgagee enjoys no right to sell the property, yet, he can sue for
foreclosure.
Foreclosure signifies that the mortgagor loses the right to redeem the mortgaged
property and shall be completely debarred from it. The situation of foreclosure arises
when the mortgagor fails to repay the mortgaged money within the stipulated period;
with the order in place, the mortgagee shall become the owner of the property.
CONTD.
The document of mortgage should explicitly mention about the condition of sale and only
then it can be considered

In the case of Natesa Pathar v. Pakkirisamy Pathar, AIR 1997 Mad 105, it was stated that
the condition of sale and resale of the property was stated in the same document. The
purchaser of the property was also prohibited from hampering the property for a period of 5
years till its repurchase. The deed even mentioned the actual value of the property and
consideration stipulated by the purchaser; thus, the transaction was considered to be
mortgage by conditional sale.

The case of Chunchun Jha v. Ibadat Ali, AIR 1954 SC 345 it was held by the Court that if
sale and repurchase of the same property are drafted in separate documents or deeds then the
transaction cannot be considered as “mortgage by conditional sale” irrespective of the fact
whether the deed are simultaneously executed or not.
CONTD.
In case of Kamal Shaivajirao Katkar v. Gajrabai Sopanrao Algud, AIR 2001
Bom. 369, the case was that A was the owner of the land and had given
possession of the land to B on receipt of money taken by him and under the
agreement that B shall reconvey the property back to A once the amount is paid
or else it would amount to sale of land to B. But the agreement didn’t mention
anything or postulate the interest amount of loan. Thus, the Court found that the
parties had no common intention to treat the transfer of property as “security for
the debt” and therefore this cannot be considered as “mortgage by conditional
sale” and was rather a sale transaction with the explicit condition to repurchase.
USUFRUCTUARY MORTGAGE
Under this arrangement, following things occur:
The possession of the property is delivered to the mortgagee.
The mortgagee shall retain the property until the debt is repaid.
The mortgagor reserves the right to recover the property on the repayment of the
mortgage money.
The mortgagee is entitled to get rents and profits relating to the mortgaged property till
the loan is repaid.
The mortgagor is not personally liable for the repayment of the mortgage money.
The mortgagee shall not sue the mortgager for the repayment or foreclosure or sale of
property.
The only remedy for the mortgagee is to pay himself out of the rents and profits of the
mortgaged property.
CONTD.
This mortgage basically allows the mortgagee to receive the rents and profits ensued from
the mortgaged property and cover the interest amount from the respective benefits of the
property. Under this mortgage, the mortgagor transfers the possession of the property to the
mortgagee and since the property in in the possession of the mortgage, he is entitled to enjoy
the rents and profits of the mortgaged property in lieu of the interest on the principal amount
advanced to him. Once the debt is paid off, then the mortgagee shall return the possession of
the property and is no more entitled to its rents and benefits.
The most essential feature of this mortgage is that there is no time-limit stated for the
repayment of the debt
In case of Hikmatulla v. Imam ali (1890) 12 All 203, it was held that under usufructuary
mortgage the mortgagee can hold onto the possession of the property till the dues and
interest is paid off and as there is no time limit specified in this mortgage, there cannot be a
definite period of possession of property and in case a time limit is specified, then it would
not be counted as usufructuary mortgage.
CONTD.
In case of Butto Kristo v. Govindram, AIR (1939) Pat 540, it was held by the
Court that if the mortgaged property is tenanted place, then the only viable way
to give the possession of the property is by giving the right to collect the rents of
the property and appropriate it towards the debt cumulatively.
ENGLISH MORTGAGE
The salient features of English mortgage is:
The property is absolutely transferred to the mortgagee by the mortgagor and the
mortgagee can take the possession of the property immediately.
The condition for the transfer is that the property shall be transferred on the repayment
of the mortgage money.
The mortgager also binds himself to pay the mortgage money on a certain date.
The mortgagee enjoys the right to sell the property without any permission from the
court, if the mortgagor fails to pay the mortgage money.
Under English mortgage, it should be noted that the ownership is transferred on the
promise that it shall be re-transferred to the person (mortgagor) once the loan amount is
returned on the decided date, and as long as the property is with mortgagee, he is
allowed the possession of property along with the enjoyments of profits and rents
accrued to it.
CONTD.
In the case, Narayan v. Venkataramana, ILR (1902) 25 Madras 220 (235) FB
the Court had noted the above three 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.
But in India, the statutory power of sale of property is limited to very few
communities like the Christians, people from English community and not to
Hindus, Muhammadans, or Buddhists or any member of race, sect tribe as
mentioned by the State government in its Official Gazette. Thus, in India people
do have the right to enter into English mortgage but don’t have the power of sale
of mortgaged property.
MORTGAGE BY DEPOSIT OF TITLE DEEDS
Also known as equitable mortgage, the requisite of this kind of mortgage is-
A debt shall be there, existing or future.
Most essentially, the deposit of the title deed shall be with the creditor.
The intention of the said deposit is that the title deed shall be work as a security for
debt.
No registration is required for this type of mortgage. This was established by the Court
in the case of Royal Printing Works v. Oriental Bank of Commerce, AIR 1990 AP
120 .
It can be effected only in specified towns as mentioned by the government, such as
Kolkata, Mumbai and Chennai. But as was stated by the Court in the case of Sulochana
and Others v. The Pandyan Bank Ltd., AIR 1975 Mad 70 the debtor need not do it in
person, in fact, if the documents were duly forwarded, then it shall be deemed to have
been deposited in the specified towns.
CONTD.
This is a unusual kind of mortgage as the execution of the mortgage deed is not
necessary by the mortgagor and mere submission of the documents of the title-deed is
adequate to constitute a mortgage, documents of title-deeds is a legal evidence that the
he/she owns the property. Thus, this mortgage is often opted by people by submitting
their documents with the mortgagee to advance rapid loans especially common in the
trading community. This mortgage has been adopted from the English Law and is known
as the equitable mortgage.

As per, Section 96 of the transfer of property Act the mortgage by deposit of title deeds
can be done without any writing or executing of deed and is as equivalent to simple
mortgage. usually this kind of mortgage is adopted by bankers as it is less complex,
inexpensive and time saving and the remedy for non-payment of loan can be filed by the
mortgagee by filing a suit for sale of the mortgaged title.
CONTD.
In another case, Sabasiva Rao v. Bank of Baroda, 1991 70 Comp Cas 840 AP, the
Court clarified that even the certified copies of the documents of titles shall amount to
equitable mortgage.
The documents shall be returned to the mortgagee on the payment of the mortgage
money.
If the mortgagor fails to repay the loan on a specified date, then the mortgagee has the
right to apply to the court to convert the equitable mortgage into legal mortgage.
It carries a big advantage of involving minimal formalities along with keeping it
confidential, safeguarding the reputation of the borrower.
In case of Jethibai v. Putlibai (1961) 14 Bom. L.R. 1020, it was held by the Court that
there can be no equitable mortgage unless there is a common link between the debt owed
and the possession of title-deeds which suggests the intention of security on the part of
debtor and it can be attained only after repayment of the loan amount.
ANOMALOUS MORTGAGE
A mortgage which does not fall in the prescribed five categories, is known as anomalous
mortgage. This can be effected as per the conditions set down by the mortgagor and the
mortgagee, specific to their requirements. It usually is a combination of two or more of the
above-mentioned mortgages. It may take various shapes depending on the contract, usage
and custom.
Types of Anomalous Mortgage-
(i)Combination of simple mortgage and usufructuary – it is a combination of a simple
and a usufructuary mortgage. In such type of mortgage, the mortgagee is in possession and
pays himself the debts out of the rents or profits and there is also personal undertaking as
well as a right to cause the property to be sold on the expiry of the date fixed for payment.
(ii)Mortgage Usufructuary by conditional sale- in such type of anomalous mortgage, the
mortgagee is in possession as a usufructuary mortgagee for a fixed period and if debt is not
discharged at the expiry of the period, he gets all the rights of a mortgagee by conditional
sale. These are mortgage to which special incidents are attached by local usage.
CONTD.
(ii)Mortgage Usufructuary by conditional sale- in such type of anomalous
mortgage, the mortgagee is in possession as a usufructuary mortgagee for a fixed
period and if debt is not discharged at the expiry of the period, he gets all the
rights of a mortgagee by conditional sale.
In simple words,
A mortgage which does not belong to any of above categories is known as
anomalous mortgage.
It is a combination of two or more mortgages.
Possession may or may not be delivered.
The remedy may be by foreclosure or by sale depending on the term of
agreement.
CONTD.
The mortgage which doesn’t come in either of the categories mentioned above
can be considered as an anomalous mortgage. So basically, if there is existence of
loan or debt for which an immovable property is kept as a security till the loan
amount is paid back, but the terms and condition of that mortgage don’t match
with either of the mentioned mortgages, then it will come under the category of
anomalous mortgage.

In case of Madho Rao v. Gulam Mohiuddin AIR 1919 PC 121, it was decided
by the Court in case of an anomalous mortgage the intention of both the parties
should be considered first from the deed or agreement executed by them as per
the provision of the Act.
FORMALITIES FOR CREATING MORTGAGE
Where the principal money secured is one hundred rupees or more, 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. ‘Registered’ would mean registered in any part of the territories to
which this Act extends under the law for the time being in force regulating the
registration of documents.

Where the principal money secured is less than one hundred rupees, registration
is not necessary. It may be effected merely by the delivery of possession of the
property.