Mortgage :
In India, the Transfer of Property Act (TPA) of 1882 governs the mortgage
of immovable property.
• The most essential element of a mortgage is a transfer of formal interest
in the property with a mechanism for redemption.
• Section 58(a) of the TPA provides the essential ingredients of a mortgage
loan.
Section 58(a) of the Act defines the term 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.”
The person who mortgages the property is the ‘mortgagor’ and the person to whom the
property is mortgaged is the ‘mortgagee’. The instrument used by the parties involved in such
transfer is known as the ‘mortgage deed’.
Simply we can say mortgage is one kind of security given by Mortgager to Mortgagee, on for
paying back the loan amount. This concept of Mortgage is only applicable in Immovable of
property. By giving Mortgage, the Mortgager does not transfer the ownership right but only
Transfers some right over that specific immovable property to the Mortgagee like In case the
borrower fails to pay back the loans the mortgagee has the right to the authority over that
property or to sale it for receiving its debt back.
ESSENTIALS:
1. There must be a transfer of interest This does not imply a transfer of ownership. The
right of the mortgagee is only an ancillary right meant to assure debt repayment.
2. The transfer must be in terms of immovable property: It must be an immovable
property that is specifically mentioned in the deed. It must be described fairly so that it may
be determined which property it is.
3. With the intention of acquiring monetary payment:
Extended or to be advanced by a loan: A mortgage is not a transfer undertaken purely to
secure debt or other obligations but not to discharge obligations.
Existing or potential debt: Existing debt means obligations that are not time-barred. Future
debt is debt that arises after the mortgage. It is not essential to secure debt before the
transaction; it might be conducted to secure money payment advanced in the future.
Performance of an activity that may result in monetary liability: Consideration can be an
agreement that results in monetary responsibility for the mortgagor. The act of mortgagor
ensuing from such involvement is referred to as performance.
Types of mortgages:
Simple Mortgage (Section 58b)
Key Features:
o Mortgagor personally binds himself to repay the loan.
o No possession transfer to the mortgagee.
o Mortgagee has the right to sell the property (via court).
o Must be registered under law.
o No foreclosure allowed.
Remedies for Mortgagee:
o Obtain a money decree against the mortgagor.
o Sue for sale of the property.
Mortgage by Conditional Sale (Section 58c)
Key Features:
o The property is ostensibly sold to the mortgagee.
o If loan is repaid, the sale is void, and property reverts to mortgagor.
o If loan is not repaid, the sale becomes absolute.
o One single document must contain both the sale and condition.
Remedy for Mortgagee:
o Foreclosure suit (not sale).
Case Law: Sunil K. Sarkar v. Aghor K. Basu (1989) – Separate sale and
reconveyance deeds do not constitute a mortgage by conditional sale.
Usufructuary Mortgage (Section 58d)
Key Features:
o Possession is transferred to the mortgagee.
o Mortgagee collects rents & profits from the property instead of interest.
o No fixed repayment date; the mortgagee repays himself.
o No right to sell or sue for repayment.
Restriction:
o Only one usufructuary mortgage can exist on a property at a time.
English Mortgage (Section 58e)
Key Features:
o Absolute transfer of property to the mortgagee.
o Mortgagor must repay the loan on a fixed date.
o Re-transfer of property to mortgagor after full repayment.
Remedy for Mortgagee:
o Sale (not foreclosure).
o Mortgagor is personally liable for repayment.
Equitable Mortgage (Section 58f)
Key Features:
o Also known as Mortgage by Deposit of Title-Deeds.
o Mortgagor delivers property documents to the mortgagee as security.
o No need for a written mortgage deed.
Applicability:
o Allowed in notified towns (e.g., Calcutta, Bombay, Madras).
Remedy for Mortgagee:
o Suit for sale or recovery of mortgage money.
Anomalous Mortgage (Section 58g)
Key Features:
o A mortgage not covered under any other category.
o Rights & liabilities depend on:
Terms of the mortgage deed.
Local customs & usage.
o Possession may or may not be delivered.
Remedy for Mortgagee:
o Sale or foreclosure, based on contract terms.
Rights of a Mortgager:
Right of mortgagor to redeem (Section 60)
Mortgagor can redeem the mortgage by repaying the full amount.
Has the right to:
Get back property documents.
Recover property possession.
Get the mortgagee to acknowledge the end of the mortgage.
Right to transfer to the third party (Section 60A)
Mortgagor can request the mortgagee to transfer the mortgage to a third party of
their choice.
The mortgagee must comply if the mortgage amount is fully paid.
Right to inspection and production of documents (Section 60B)
Mortgagor can inspect and obtain copies of property-related documents.
This right is exercised at the mortgagor’s expense.
Right to redeem separately or simultaneously (Section 61)
Mortgagor can redeem all mortgages together or separately if multiple mortgages
exist.
Right of usufructuary mortgagor to recover possession (Section 62)
Right to recover possession of mortgaged property when:
The mortgagee has recovered the mortgage money through rents and profits.
The term for recovery has ended, and the mortgagor pays the remaining balance.
Accession to mortgaged property (Section 63)
Any accession (increase in value) to the property belongs to the mortgagor after
redemption.
Improvements to mortgaged property (Section 63A)
If the mortgagee makes necessary improvements, the mortgagor must pay for them.
Renewal of Mortgaged Lease (Section 64)
If the mortgagee renews a lease during the mortgage, the benefits go to the mortgagor.
Implied Contracts by Mortgagor (Section 65)
Mortgagor guarantees a valid title.
Must defend the mortgagee’s rights.
Must pay property-related charges.
Mortgagor's power to lease (Section 65A)
Mortgagor can lease the property while in possession.
Lease must follow local laws and customs
Waste by mortgagor in possession (Section 66)]
Mortgagor cannot cause permanent damage.
Two types:
Permissive Waste – Neglect, minor damages (not liable).
Active Waste – Significant destruction (liable).
Liabilities:
Liable for defective title.
Must indemnify the mortgagee for losses.
Liabilities of a mortgager
Covenant for the Title
If the property title is defective, the mortgagee can:
o Take legal action against the mortgagor.
o Demand repayment of the principal.
o Claim damages for financial losses.
Liability to Indemnify for Defective Title
If the property title is flawed, the mortgagor must:
o Compensate the mortgagee for damages.
o Cover any legal or financial losses arising from the defect.
Liability to Avoid Waste (Section 66)
The mortgagor must prevent damage to the property.
Two types of waste:
o Permissive Waste – Minor neglect (not liable).
o Active Waste – Destruction reducing property value (liable).
Improvements to Mortgaged Property (Section 63A)
Mortgagor must pay for essential improvements made during the mortgage period.
If improvements prevent damage or deterioration, costs are added to the mortgage
principal.
If the mortgagee pays property taxes, the mortgagor must reimburse them.
If the property is in the mortgagor’s possession, they must pay all taxes and public
charges.
Rights of Mortgagee
Right to Foreclosure or Sale (Sec. 67) – Obtain a decree for foreclosure when the
mortgage money is due.
Right to Sue for Mortgage Money (Sec. 68) – Can sue if:
o Mortgagor agreed to repay.
o Property is destroyed (not due to the mortgagee’s fault).
o Security is impaired.
o Possession was denied.
Power to Sale (Sec. 69) – Sale is valid in certain cases like English mortgages or
government mortgagees.
Right of Accession – Benefit from value appreciation or improvements.
Right to Renewal of Lease – Can seek lease renewal to protect security.
Right to Reimbursement – Recover expenses for property maintenance.
Right to Mesne Mortgage – Rights over subsequent mortgagees.
Liabilities of Mortgagee (Sec. 76)
Duty to Sue on Behalf of Other Mortgagees – Must act collectively unless agreed
otherwise.
Duty to Manage the Property – Maintain with reasonable care.
Duty to Collect Rents & Pay Govt. Charges – Ensure proper collection and
payments.
Duty to Make Necessary Repairs – Maintain property within income limits.
Duty to Avoid Destructive Acts – Prevent damage or loss.
Handling Fire Insurance – Use insurance money to restore or settle debt.
Duty to Maintain Clear Accounts – Provide records to the mortgagor.
IMPORTANT DOCTRINES IN MORTGAGE:
Mortgages are governed by two essential doctrines under the TPA. These are the
Doctrine of Priority (section 78 & 79) and Doctrine of Marshalling (section 81).
The Doctrine of Priority is founded on the tenet "quite prior est tempore potiorest
jure." It signifies that the first in time triumphs over the second. When the mortgagor
transfers immovable property to several mortgagees, the succeeding mortgagee is paid
only if the preceding mortgagee is satisfied. According to Section 78 of the Transfer
of Property Act of 1882, if a preceding mortgage is the result of fraud, deception, or
gross negligence, the subsequent mortgage takes precedence over the prior mortgage.
The Doctrine of Marshalling applies when the mortgagor owns two or more
properties, mortgages those properties to one mortgagee, and then mortgages those
properties to another mortgagee. When multiple properties are subject to a mortgage
and one of them is purchased free of encumbrances, the mortgagee is obligated to
repay the debt from the other party subject to the mortgage.
EXAMPLES THAT CAN BE USED FOR ANIMATION (BHARGAVI &
HRISHIKA)
Slide Layout:
1️⃣ Title: "Understanding Mortgage – A Simple Explanation"
2️⃣ Visual Elements: Icons of a house, money, and legal documents
3️⃣ Animation Sequence:
🔹 Step 1: Show a house with a person (mortgagor) standing next to it.
🔹 Step 2: A bank (mortgagee) appears on the other side.
🔹 Step 3: The mortgagor hands over a document (mortgage deed) to the
bank.
🔹 Step 4: The bank hands over money (loan) to the mortgagor.
🔹 Step 5: A countdown appears (loan repayment period).
🔹 Step 6 (Two Outcomes):
✅ If repaid → Document returns to the mortgagor, and the house
remains theirs.
❌ If not repaid → A red stamp “DEFAULT” appears, and the bank
takes possession/sells the house.
1️⃣ Doctrine of Priority (First in Time, First in Right) – Section 78 & 79
📌 Concept: The first mortgagee gets paid first before any later mortgagee.
🎬 Animation Idea:
1️⃣ Slide Title: “Doctrine of Priority – First in Time, First in Right”
2️⃣ Visual Elements:
A house (representing mortgaged property).
Two banks/lenders (Mortgagee 1 & Mortgagee 2).
Money flow (arrows showing payment sequence).
3️⃣ Animation Sequence:
Step 1: House appears → Mortgagor borrows ₹10 lakh from Bank 1
(First Mortgagee).
Step 2: A label appears: "Mortgage 1 (First in Time)."
Step 3: Mortgagor borrows again from Bank 2 (Second Mortgagee).
Step 4: A label appears: "Mortgage 2 (Second in Time)."
Step 5: Default Occurs! A “Red Cross” appears on the house.
Step 6: Bank 1 gets repaid first! The money (arrow) flows to Bank 1
first.
Step 7: If anything remains, Bank 2 gets paid. If not, Bank 2 suffers a
loss.
🟢 Key Animation Effects:
✅ Fade-in for the mortgage sequence.
✅ Motion paths for money transfer.
✅ Red warning effect if Bank 2 doesn’t get paid fully.
2️⃣ Doctrine of Marshalling (Section 81) – Protection for Subsequent
Mortgagee
📌 Concept: If the first mortgagee has multiple properties as security, the
second mortgagee can claim one that remains unpaid.
🎬 Animation Idea:
1️⃣ Slide Title: “Doctrine of Marshalling – Ensuring Fair Debt Recovery”
2️⃣ Visual Elements:
Two houses (Property A & Property B).
Two mortgagees (Bank 1 & Bank 2).
Money flow representation.
3️⃣ Animation Sequence:
Step 1: Mortgagor owns House A & House B.
Step 2: Mortgagor mortgages both houses to Bank 1 (First
Mortgagee).
Step 3: Mortgagor also mortgages House B to Bank 2 (Second
Mortgagee).
Step 4: Default Occurs! A red warning appears.
Step 5: Bank 1 sells House A first to recover debt.
Step 6: If House A sale is enough → Bank 2 keeps House B.
Step 7: If House A sale is not enough → Bank 1 can still claim from
House B, but must leave something for Bank 2.
🟢 Key Animation Effects:
✅ Motion path for houses being sold.
✅ Scaling effect for money being transferred.
✅ Conditional color changes (green for successful repayment, red if a loss
occurs).
