PROJECT REPORT

SUBMITTED FOR THE DEGREE OF LLB 2ND YEAR

SUBJECT

LAW OF PROPERTY

SUBJECT CODE

LAW124

TOPIC

RIGHT & LIABILITIES OF MORTGAGOR AND MORTGAGEE

SUBMITTED BY

TUHIN BARAI, ENROLLMENT NO - A90856123027

RANJAN BISWAS, ENROLLMENT NO - A90856123022

HARSHPREET KAUR, ENROLLMENT NO - A90856123001

SUBMITTED TO

MS. MADHULEKHA BHOWMIK

MONTH AND YEAR OF SUBMISSION

MARCH, 2025
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Introduction
The Transfer of Property Act, 1882 deals with a) various specific transfers relating to immovable
property. b) general principles relating to the transfer of movables and immovable property.
Chapter II of The Transfer of Property Act, 1882 deals with both movable and immovable
property. Section 58 to 104 of the Transfer of Property Act, 1882 deals with mortgages and
charges.

Mortgage under Transfer of Property Act, 1882

Section 58 to 104 of the Transfer of Property Act, 1882 deals with mortgages and charges.

Below mentioned sections are important sections.

As per Section 58 of Transfer of Property Act, 1882 the following words are defined

● Mortgage

A mortgage is the transfer of an interest in immovable property for the purpose of securing the
payment of money advanced, an existing or future debt or the performance of an engagement
which may give rise to a pecuniary liability.

● Mortgagor and Mortgagee

The person who transfers the interest in an immovable property is called the mortgagor.

The person to whom it is transferred is called the mortgagee.

● Mortgage Money

The principal money and interest of which payment is secured for time being is called mortgage
money.

● Mortgage Deed

The instrument by which the transfer is effected is called a mortgage deed.

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Mortgage

A mortgage is a transfer of an interest in immovable property and it is given as a security for a

loan. 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.

Kinds of Mortgage

As per Section 58 of Transfer of Property, there are six kinds of mortgages

Simple Mortgage

● Simple Mortgage is defined under Section 58(b) of Transfer of Property Act, 1882.
● In a simple mortgage, the mortgagor does not transfer immovable property to the
mortgagee but agrees to pay the mortgage money.
● The mortgagee agrees on a condition that in the event of not paying the mortgage money
the mortgagee has every right to sell the property and can use the proceeds of the sale and
such a transaction is called a simple mortgage.

Conditional Mortgage

● Mortgage by conditional sale is defined under Section 58(c) of Transfer of Property Act,
1882.
● In this mortgagee places three conditions to the mortgagor, and the mortgagee shall have
the right to sell the property if:
1. mortgagor defaults in payment of mortgage money on a certain date.
2. as soon as the payment is made by the mortgagor the sale shall become void.
3. on the payment of money by the mortgagor, the property is transferred and such a
transaction is called a mortgage by conditional sale.
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Usufructuary Mortgage

● Usufructuary Mortgage is defined under Section 58(d) of Transfer of Property Act, 1882.
● In this mortgage, the mortgagor delivers the possession of the property to the mortgagee
and authorises the mortgagee to retain such property until the payment is made by the
mortgagor and further authorise him to receive the rent or profit arising from such
mortgaged property and to appropriate the same instead of payment of interest. Such a
transaction is called a Usufructuary transaction.

English Mortgage

● English Mortgage is defined under Section 58(e) of Transfer of Property Act, 1882.
● In this mortgage, the mortgagor transfers the property absolutely to the mortgagee and
binds himself that he will repay the mortgage money on the specified date and lays down
a condition that on repayment of money mortgagee shall re-transfer the property. Such a
transaction is called an English mortgage transaction.

Deposit of title-deeds

● Deposit of title -deeds are defined under Section 58(f) of Transfer of Property Act, 1882.
● In this mortgage where a person is in Calcutta, Madras, Bombay and in any other towns
as specified by the state government and the mortgagor delivers to a creditor or his agent
the documents of title of immovable property with an intent to create security and then
such a transaction is called Deposits of title-deeds.

Anomalous Mortgage

● An Anomalous Mortgage is defined under Section 58(f) of Transfer of Property Act,

1882.
● A mortgage which is not any one of the mortgages mentioned above is called an
anomalous mortgage.
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Rights and Liabilities of Mortgagor and Mortgagee

Rights of Mortgagor:

Right of Redemption

As per Section 60 of the Transfer of the Property Act, 1882 one of the important rights of the
mortgagor is the right to redeem the mortgage.

● Once the money has become due on the specified date the mortgagor has the right to get
back the mortgaged property on paying the money to the mortgagee.
● Right to redemption is a statutory and legal right which cannot be extinguished on the
entering into any agreement.

Right to transfer to a third party

● As per Section 60A of the Transfer of Property Act, 1882 the mortgagor may direct the
mortgagee to assign the mortgage debt and authorise him to transfer the property to a
third party instead of transferring him the same.
● The object of this section is to enable the mortgagor to pay off the debt of the mortgagee
by taking a loan from another person on the security of the same property.

Right to inspection and production of documents

● As per Section 60B of the Transfer of Property Act, 1882 the mortgagor may inspect the
document of title relating to the mortgaged property which is in the custody of the
mortgagee.
● The costs and expenses incurred while inspecting the documents may be borne by the
mortgagee.

Right to accession

● As per Section 63 of the Transfer of Property Act, 1882 during the subsistence of the
mortgage if any accession is made to the mortgaged property where the property is in
possession of the mortgagor itself and then the mortgagor has a right to take in accession
after the redemption of the mortgage.
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● Accession can be of two types:

1. Natural accession.
2. Acquired accession.

Right to improvement

● As per Section 63A of the Transfer of Property Act, 1882 during the subsistence of the
mortgage if any improvement is made to the property where the property is in possession
of the mortgagee and then the mortgagor has a right to take the improvements made to the
property upon the redemption.
● But where the improvements were at cost of the mortgage by preserving the property
from destruction then the mortgagor is liable to pay the cost which is incurred by the
mortgagee in preserving the property.

Right to a renewed lease

● As per Section 64 of the Transfer of Property Act, 1882 where the property which the
mortgagor has given for mortgage is a leasehold property if the mortgagee renews the
leases during the subsistence of mortgage the mortgagor shall obtain the benefit of the
lease upon the redemption of the mortgage.

Right to grant a lease

● As per Section 65A of the Transfer of Property Act, 1882 a mortgagor shall have the right
to grant a lease of which is lawfully in possession with the mortgagee and such lease shall
be binding on the mortgagee subject to the following conditions:
1. lease shall be according to the local laws, custom or usages.
2. no rent or premium shall be paid in advance.
3. the lease shall not contain a covenant for renewal.
4. the lease shall come into effect within six months from the date on which it is made.
5. in case lease of buildings, the duration of the lease shall not exceed not more than three
years.

Liabilities of Mortgagor:

Section 65 and 66 of the Transfer of the Property Act, 1882 deals with the liabilities of the
mortgagor.
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Section 65 is the implied liabilities which are laid upon the mortgagor. Subject to the contrary,
every mortgagor is deemed to have made the following covenant.

a. Covenant for title

● As per Section 65(a) of the Transfer of the Property Act, 1882 there is an implied
covenant that the mortgagor transferring the interest in the property to the mortgagee
belongs to the mortgagor only.
● And it is necessary that the mortgagor possess the transferable interest in the property.
● In case a mortgagor makes a breach in the covenant the mortgagor is liable to
compensate.

b. Covenant for the defence of the title

● As per Section 65(b) of the Transfer of the Property Act, 1882 the mortgagor has a
duty impliedly to either defend the title if anyone tries to take away the title from the
mortgagee or help the mortgagee in defending the title.
● By doing so, the mortgagor bears all the expenses incurred while defending the title.

c. Covenant for payment of public charge

● As per Section 65(c) of the Transfer of the Property Act, 1882 there is an implied duty
to the mortgagor that upon the execution of the mortgage the mortgagor shall pay all
the necessary changes.
● If the mortgagor fails to meet the required charges the property would be sold by the
public authorities and realise the charges.

d. Covenant for payment of rent

● As per Section 65(d) of the Transfer of the Property Act, 1882 where the property
mortgaged by the mortgagor is a leasehold property there is an implied duty of the
mortgagor to pay the rent of the mortgaged property.

e. Covenant for the discharge of prior mortgage

● As per Section 65(e) of the Transfer of the Property Act, 1882 there is implied duty of
the mortgagor to discharge the prior mortgage if any.
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● There is always a presumption that the mortgagor has a covenant with the subsequent
mortgages to pay off the mortgage on becoming due.
● In such subsequent mortgages if the mortgagor makes a breach the subsequent
mortgagee would have the right to sue for his mortgaged money.

Mortgagors liability for waste

● Section 66 of the Transfer of the Property Act, 1882 states there is an implied duty on
mortgagor that he shall not do any act which is injurious or destructive to the
mortgaged property.
● Mortgagee should also see that he also does not commit any act which results in
reducing the value of the mortgaged property.
● Following activities are considered as waste by the mortgagor:
1. Removing valuable fixtures from the mortgaged property.
2. Pulling down the mortgaged house and taking the price of the materials.
3. Cutting down the timber from the mortgaged property.
4. Mining under the mortgaged building which as a result may lead to placing the
building in danger.
5. Working new mines on the mortgaged property.
● Whether any particular activity is considered as waste or not depends on the degree of
the loss of the mortgaged property.
● The mortgagor is liable only for the active waste and not the permissible waste.

Rights and Liabilities of Mortgagee:

The rights and liabilities of a mortgagee are given from Section 67 to 77 of Transfer of Property
Act, 1882.

Rights of Mortgagee in Possession

Right to foreclosure or sale

● As per Section 67 of the Transfer of Property Act, 1882 the mortgagee has a right to
foreclosure or sale.
● When the mortgagor does not pay the mortgage money after the specified date is over
and the mortgagor’s right to redeem the mortgaged money has become complete but
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he has failed to avail that right then mortgagee gets a right to institute suit for a decree
that the mortgagor is absolutely debarred of his right to redeem the property.
● The difference between the right to redemption and right to foreclosure is that the
former is an absolute right whereas the right to foreclose is not.
● The mortgagor cannot limit the right of redemption but the right to foreclose can be
made subject to a contract between the parties.

Right to sue

● As per Section 68 of the Transfer of Property Act, 1882 the mortgagee has every right to
sue for the mortgaged money.
● The mortgagee can sue for mortgaged money in the following circumstances:
1. where the mortgagor binds himself to repay the money to the mortgagee.
2. where the property mortgaged by the mortgagee has been destroyed either wholly or
partially without the fault of the mortgagee.
3. where the property is mortgaged, the mortgagee is deprived of the security due to some
wrongful act done by the mortgagor.
4. where the mortgagors fail to deliver the possession to the mortgagee.

Right to sell

● As per Section 69 of the Transfer of Property Act, 1882 the mortgagee has every right
to sell the mortgaged property if the mortgaged money has not been received
● This right can be exercised by the mortgagee when the mortgagor makes a default in
payment of the mortgaged money after the specified date is over.
● This right can be exercised without the intervention of the court but only in the
following cases:
1. if the mortgage is an English mortgage both the mortgagor and mortgage should not
be Hindu, Muslim, Buddhist, or a member of any other race as specified by the state
government;
2. when there is a contract between the mortgagor and mortgagee the sale would take
place without the intervention of the court in case of default in payment of mortgaged
money;
3. to exercise the above right the mortgaged property should be situated either in
Calcutta, Madras, Bombay, Ahmedabad, Kanpur, Allahabad, Lucknow, Coimbatore,
Cochin and Delhi.

Conditions to exercise of Power

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Before the sale proceeding can take place the mortgagee has to fulfil the following conditions:

● The notice has to be served on the mortgagor in writing and three months have to be
elapsed from sending the notice.
● When the money is unpaid for three money and mortgaged money is at least INR 500
in arrear.

Right to appoint a receiver

● A receiver is appointed only if there happens to be a sale under Section 69 of the

Transfer of Property Act, 1882.
● The appointment of the receiver is made according to the mortgaged deed.
● The person appointing as a receiver should be willing to act as a receiver if he is
unable to act as a receiver then the mortgagee can appoint the receiver if the
mortgagor agrees. In case the mortgagor does not agree to the appointment made by
the mortgagee then the mortgagee can apply to the court for the appointment.
● The money received by the receiver shall distribute for the following to below case
1. he may discharge all the rents, taxes, land revenues, and any other charge which is
affecting the property.
2. he can claim back the payment along with the interest.
3. he can keep a sum of money as commission and he may pay premiums on the various
insurances insured.

Right to accession to mortgaged property

● As per Section 70 of the Transfer of Property Act, 1882 if there is a contract between
the mortgagor and mortgagee that after the date of mortgage that the mortgagee shall
have the right to the accession made to the mortgaged property then the mortgagee
shall have right to all the accessions made.

Right of Mortgage to spend the money

● As per Section 72 of the Transfer of Property Act, 1882 the mortgagee has a right to
spend the money when it is necessary.

There are few circumstances in which the mortgagee has a right to spend the money:
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1. The mortgagee can spend the money on preserving the mortgaged property from
destruction, forfeiture and sale.
2. The mortgagee can spend the money if circumstances arise to protect the mortgagor’s
title to the property.
3. when the mortgaged property happens to be a renewable leasehold property.
4. The mortgagee can spend the money on insuring the mortgagor’s property.

Right to proceed of revenue sale or compensation on acquisition

● As per Section 73(1) of the Transfer of Property Act, 1882 if the mortgaged property is
sold due to the non-payment of government dues then the mortgagee shall have every
right to claim back his mortgaged money from such sale.
● As per Section 73(2) of the Transfer of Property Act, 1882 if the mortgaged property is
acquired under the land acquisition act or any other act and the compensation is paid the
mortgagee can claim his debt from such compensation.

Liabilities of Mortgagee in Possession

As per Section 76 of the Transfer of Property Act, 1882 list down the duties of the mortgagee
who is in possession of the property which belongs to the mortgagor.The duties mentioned under
are the statutory duties except for the duties which are mentioned under clauses (c) and (d) the
duties under these clauses are mentioned in the contract by the parties.

Duty to manage the property

● The mortgagee has a duty to take reasonable care in the property of the mortgagor.
● Though he has a liability to take reasonable care in the property the mortgagee is not
bound by the directions given by the mortgagor and the mortgagee has acquired
absolute rights in managing the property.
● The only condition which is put forward by the mortgagor is that he cannot lease the
property beyond the termination of his interest in the mortgaged property.

Duty to collect rents and profits

● The mortgagee who is in possession of the mortgagor’s property can collect the rent
and profits arising from the property.
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● One outstanding feature of usufructuary mortgagee is the rent and profits collected
from the property are appropriated by the mortgagee instead of payment of interest.
● Mortgagee becomes liable for the collection of rent and profit only to the property
which he is liable to acquire the rent and profits and not liable for the whole rental
property.

Duty to pay rent, revenue and public charges

● If there is an agreement between the mortgagor and mortgagee that the mortgagee has
to pay the rents, revenue, taxes and outgoings then the mortgagee is liable to pay all of
them which have been agreed by him.
● The mortgagee is not allowed to take the benefits without paying the taxes etc.
● In case the money which has been obtained from the property is insufficient for
paying the charges, he may pay out of his own pocket and later add the amount which
has been paid by him to the debit account.

Duty to make necessary repairs

● If there is an agreement between the mortgagor and mortgagee that the mortgagee is
bound to carry out all the necessary repairs in the property then the mortgagee is liable
to take care of the necessary repairs.
● The necessary repairs in the property are to be made only when there is a surplus
amount from the rents and profits.

Duty not to commit any destructive act

● While the property is in the mortgagee’s possession he is prevented from committing

any act which is either in destructive nature or is injurious to the mortgaged property.
● He is prohibited from carrying out any acts which may result in reducing the value of
the property.
● If the property is destroyed because of acts of god then the mortgagee is not liable for
the property.

Duty towards the proper use of insurance money

● Where the mortgaged property has been insured against loss by fire it is the duty of
the mortgagee to apply for the insurance money in restoring the property.
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● The mortgagee is also bound to apply the money received under the insurance policy
in reinstating the property.
● The property which is to be insured only for the two-third of its value.

Duty to keep the accounts

● The mortgagee has a statutory duty under this provision in keeping the correct
accounts of all incomes and expenses incurred by the mortgagee.
● The only exception is when the mortgagee is entitled to adjust the income against the
interest he is not allowed to give full accounts because there may be no money left to
use for other expenses.

Duty to apply rents and profit

● This clause provides the manner in which the mortgagee who is in possession of the
property has to apply for rents and profits during the mortgage.

Essential doctrines under mortgage

Doctrine of Priority

● The doctrine of Priority is provided under Section 78 and 79 of the Transfer of

Property Act, 1882.
● This doctrine is based on the principle “quite prior est tempore potior est jure”.
● It means that first in time prevails over the other.
● Where the immovable property is transferred by the mortgagor to different
mortgagees the successive mortgagee is paid only after the prior mortgagee is
satisfied.
● Section 48 of the Transfer of Property Act, 1882 is an exception to this section.
● As per Section 78 of the Transfer of Property Act, 1882 in case a prior mortgage
suffers from fraud, misrepresentation or gross neglect then the subsequent mortgage
shall have priority over the prior mortgage.

Doctrine of Marshalling

● Marshalling is defined under Section 81 of the Transfer of the Property Act, 1882.
● In simple terms, marshalling means arranging things.
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● The doctrine of marshalling means when there are two or more properties which
belong to the mortgagor and the mortgages those properties to one mortgagee and
then subsequently mortgage those properties which have been mortgaged to another
mortgagee.

Conclusion

A mortgage-deed creates numerous rights and obligations for both the parties involved i.e.
mortgagor and mortgagee. Such rights and obligations were framed and incorporated under the
Transfer of Property Act in 1882 which is very old and hence outdated. Although amendments
were introduced in the Amendment Act of 1929, but no recent amendments have been done in
the section of rights and obligations of mortgagor. This has resulted in different fraudulent
transactions since both the mortgagee and mortgagor has discovered different new ways to cheat
each other. So, the need of the hour is to reformed the laws and make it tighter so that none of
the parties will try to enter into fraudulent transactions.

References

● Textbook on Transfer of Property Act, 1882 by Dr. Avtar Singh.

● Textbook on Transfer of Property Act, 1882 by Abinav Misra.
● https://indiankanoon.org/doc/515323/