Mortgage of Immovable Property

Definition: According to section 58(a) of the Transfer of Property Act, 1882 A

mortgage is the transfer of an interest in a 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.

Mortgagor -The transferor is called a mortgagor.

Mortgagee -The transferee a mortgagee.
Mortgage-money - The principal money and interest of which payment is secured
for the time being are called the mortgage-money.
Mortgage-deed - The instrument (if any) by which the transfer is effected is called
a mortgage-deed.

Kinds of Mortgages: The Transfer of Property Act, deals with 6 kinds of

mortgages.
1. Simple mortgage [section 58(b)];
2. Mortgage by conditional sale [section 58(c), 59 & 67];
3. Usufructuary mortgage [section 55(d) & 62-68];
4. English mortgage [ section 58(e)]
5. Mortgage by deposit of title-deeds [section 58(f) & 96]
6. Anomalous mortgage [ section 58(g), 67(b) & 98]
1.Simple Mortgage [sec.58(b)]: Where, without delivering possession of the
mortgaged property, the mortgagor binds himself personally to pay the mortgage-
money, and agrees, expressly or impliedly, that, in the event of his failing to pay
according to his contract, 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, the transaction is called a simple
mortgage and the mortgagee a simple mortgagee.

Essentials of simple mortgage:

1) There must be a transfer of specific immovable property. 
2) The possession of the property is retained by the mortgagor.
3) as the possession of the property is not given to the mortgagee, mortgagor has
right to usufruct e.g.  enjoyment of the property.
4) The title is not given to the mortgagee.
5) Mortgagor binds himself to pay mortgage money by Personal security.
6) Mortgagor has a right to sale on execution of decree against the mortgagor,7)
Mortgagee has no right of foreclosure.

2. Mortgage by conditional sale section 58(c)

Where, the mortgagor ostensibly sells the mortgaged property- on condition that on
default of payment of the mortgage-money on a certain date the sale shall become
absolute, or on condition that on such payment being made the sale shall become
void, or on condition that on such payment being made the buyer shall transfer the
property to the seller, the transaction is called a mortgage by conditional sale;
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.

Essentials of mortgaged by conditional sale -

1) Mortgagor ostensibly sells the immovable property by a sale. It is only
ostensible and not real.
2) The Mortgagor has given title and possession to the mortgagee and hence
mortgagee gets a right to usufruct property.
3)on default of payment of mortgage-money the sales shall be absolute.
4) In case mortgagor repaid the loan, the sale shall become void.
5)  that mortgagor is entitled to get the property transferred on such payment.
6) No Personal security and right to sale is given to the mortgagee.
7) Mortgagee gets a right to foreclose the property

3. Usufructuary Mortgage Sec 58(d)

Where the mortgagor delivers possession, or expressly or by implication binds
himself to deliver possession, of the mortgaged property to the mortgagee, and
authorizes him to retain such possession until payment of the mortgage-money,
and 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, the transaction is called a usufructuary mortgage and the mortgagee a
usufructuary mortgagee.

Essentials of Usufructuary mortgage 

 1. There is a delivery of possession to the mortgage or an express or implied
undertaking of the mortgagor to deliver such possession.
2. Retention of the possession by the mortgagee till the payment of the
mortgage-money or he has to receive rents and profits of the property either
in lieu of interest on mortgage-money or in payment of mortgage-money or
party in payment of either interest to mortgage money.
3. There is no personal liability of the mortgagor.
4. The mortgagee cannot foreclose or sue for sale of mortgage-property.
5. The mortgagor is entitled to redeem the property when the amount due is
paid or
6. the debt is discharged by rents and profits received by the mortgagee.
7. No time limit is fixed for the repayment.
8. Where the mortgage is for Taka 100 or more, it must be registered but where
it is less than Taka 100 it may be by a registered deed or by delivery of
possession.

4. English mortgage [sec. 58(b)]:

Where the mortgagor binds himself to repay the mortgage-money on a certain date,
and transfers and the mortgaged property absolutely to the mortgagee, 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.
 Where the mortgagor binds himself to repay the mortgage-money on a
certain date, and
  Transfers the mortgaged property absolutely to the mortgagee on the
condition that he will re-transfer it to the mortgagor upon payment of the
mortgage-money as agreed.
The transaction is called an English mortgage.

Essential elements
1. There is an absolute transfer of property to the mortgagee i.e., there is the
delivery of possession.
2. There is a personal covenant to pay the amount. The mortgagor binds
himself to repay the mortgage money on the due date.
3. The property is transferred on the condition that the transferee-mortgagee
will re-transfer it to the mortgagor on the payment of the mortgage-money.

5.Mortgage by deposit of title-deeds [sec. 58(f) & 96]:

Mortgage by deposit of title-deeds is also known as an equitable mortgage.

According to sub-section (f), where a person-

o In the towns of Calcutta, Madras, Bombay and in any other town

specified by the state government concerned in this behalf.
o Delivers to a creditor or his agent documents of title to immovable
property.
o With intent to create a security, thereon.
Such a transaction is called a mortgage by deposit of title-deed. [KJ Nathan v. SV
Maruty Reddy, AIR 1965 SC 430]

This is a special kind of mortgage because here the execution of mortgage deed is
not necessary. Mere deposit of title deeds of the immovable property by the
mortgagor to mortgagee is sufficient.

6.Anomalous mortgage - Sec. 58(f)

A mortgage which is not a simple mortgage, a mortgage by conditional sale, a

usufructuary mortgage, an English mortgage or a mortgage by deposit of title-
deeds within the meaning of this section is called an anomalous mortgage.

It does not fit in above five mortgages, which is a combination of two or more of
above-mentioned type mortgage

Rights of Mortgagor:

1. Right of redemption: at any time after the principal money has

become due, the mortgagor has a right on payment of the mortgage money at a
proper place and time, to require the mortgagee –

 To deliver to the mortgagor the mortgage-deed and all documents relating to

mortgaged property in possession or power of the mortgagee,
 To deliver possession of the property to the mortgagor where the mortgagee
is in possession of it,
  To re-transfer the property to the mortgagor or any third person directed by
him (at the cost of the mortgagor) it to register an acknowledgement in
writing on the extinction of the mortgagee’s right.

These rights cannot be exercised if they have been extinguished by the act of the
parties or by a decree of a court.

2. Right to Transfer to the third party. (S. 60A)

According to this section, the mortgagor may require the mortgagor to assign the
mortgage-debt and transfer the mortgaged property to a third person directed by
him, instead of re-transferring the property to him. This section was intended to
enable the mortgagor to pay off the debt of the mortgagee by taking loan from
another person on the security of the same property.

3. Right to inspection and production of documents (S.60B)

According to this section, the mortgagor, who has handed over the title-deeds or
other documents relating to the mortgaged property to the mortgagee, is entitled to
inspect those documents. He may require the mortgagee to produce those
documents in his possession at a reasonable time and at the cost of mortgagor
himself. The mortgagor may make copies or abstracts of or extracts from those
documents.

4. Right to redeem separately or simultaneously

This section says that a mortgagor who has executed two or more mortgages in
favor of the same mortgagee shall be entitled to redeem anyone such mortgage
separately or any two or more of such mortgages together. However, this is subject
to contrary contract, i.e., the mortgagor and mortgagee may exclude this provision
from their mortgage. It is possible only when the principal money of any two or
more of the mortgages has become due.

5. Right to accession (S. 63)

According to section 63 –

 Where mortgaged property in possession of the mortgagee has,

 During the continuance of the mortgage,
 Received any accession,
 The mortgagor shall upon redemption, be entitled to such accession as
against mortgagee,
 This is so in the absence of a contact to the contrary.

6. Right to grant a lease (S.65A)

A mortgagor, who is in lawful possession of the mortgaged property, shall have the
power to make the lease the property which shall be binding on the mortgagee.
However, this right is subject to the provisions of sub-section (2). The conditions
given under sub-section (2) are-
 1. Every such lease shall be such as would be made in the ordinary course of
management of the property concerned, and in accordance with any local
law, custom or usage,
2. Every such lease shall reserve the best rent that can reasonably be obtained,
and no premium shall be paid or promised and no rent shall be payable in
advance,
3. No such lease shall contain a covenant for renewal,
4. Every such lease shall take effect from a date not later than six months from
the date on which it is made,
5. In the case of a lease of buildings, whether leased with or without the land
on which they stand, the duration of the lease shall in no case exceed three
years, and the lease shall contain a covenant for payment of the rent and a
condition of re-entry on the rent not being paid with a time therein specified.

Rights of Mortgagee:
1. Right to foreclosure of sale (S. 67)

According to this section, at any time after the mortgage money has become due
and before a decree has been made for the redemption of mortgaged-property or
the mortgage money has been paid or deposited, the mortgagee has a right to
redeem the property or a decree that the property to be sold

An order permitting foreclosure can only be passed upon ascertaining the nature of
the mortgage and the parties right under it. [K. Vilasini v. Edwin Periera, AIR
2009 SC 1041]
The right of foreclosure implies that when the time fixed for the repayment of
mortgage-money has expired and the mortgagor’s right to redeem the mortgaged-
money has become complete but he has failed to avail that right, the mortgagee
gets a right to institute a suit of decree that mortgagor should be absolutely
debarred of his right to redeem the property.

2. Right to sue for mortgage-money (S. 68)

In the following four cases the mortgagee has a right to sue for the mortgage-
money-

 Where the mortgagor binds himself to repay the same,

 Where the mortgaged property is destroyed, wholly or partially without the
fault of any party.
 Where the mortgagee is deprived of the whole or part of his security by
wrongful act or default of the mortgagor.
 Where the mortgagee being entitled to possession, the mortgagor fails to
deliver the same.

3. Right to sell (S. 69)

This section gives the mortgagee a right to sell without the intervention of the
court. When the mortgage-money is not repaid by the mortgagor, he becomes
entitled to sell the property to recover his debt in cases-

 Where the mortgage is an English mortgage and neither the mortgagor nor
the mortgagee is a – Hindu, Muhammadan, Buddhist, or A member of any
 other race, sect, tribe or class from time to time specified in this behalf by
the state government in the official gazette.
 Where the power of sale without the intervention of the court is expressly
conferred on the mortgagee by the mortgage deed and the mortgagee is the
government.
 Where the power of sale without the intervention of the court is expressly
conferred on the mortgagee and the mortgaged property is situated within
specified towns. These towns included Dhaka, Chittagong and Sylhet
originally.

4. Right to appoint Receiver:

A mortgagee having the right to exercise a power of sale under section 69 is

entitled to appoint, in writing, a receiver of the income of the mortgaged property.

Any person who has been named in the mortgage-deed and is willing and is able to
act as a receiver may be appointed by the mortgagee. In case no person has been so
named, or all the named persons are dead or unable or unwilling to act, the
mortgagee may appoint any person with the consent of the mortgagor.

5. Right to accession (S. 70)

Accession are addition to the property. Section 70 says that if after the date of the
mortgage any accession is made to the mortgaged property, the mortgagee shall be
entitled to such accession for the purposes of security of his mortgage-debt. This
section is a converse of section 63 which provides for the mortgagor’s rights of
accessions. The mortgagee is entitled to treat the acquired accession as part if his
security and to enforce his lien upon them.
6. Right of renewal of mortgaged lease (S. 71)

According to this section, when the mortgaged property is a lease and the
mortgagor obtains a renewal of the lease, the mortgagee shall be entitled to the new
lease for the purpose of security in the absence of the contract to the contrary.

7. Right of mortgagee to spend money

A mortgagee may spend such money as is necessary in the absence of the contract
to the contrary-

 For the preservation of the mortgaged property from destruction, forfeiture

or sale.
 For supporting the mortgagor’s title to the property.
 For making his own title thereto good against the mortgagor i.e., for
defending his own title against the mortgagor.
 When the mortgaged property is a renewable lease-hold, for the renewal of
the lease.
 Insuring the property where it is of insurable nature.

8. Right to proceeds of revenue sale or compensation on acquisition

(S. 73):
According to this section, where the mortgaged property or any interest in it is
sold, owing to failure to pay –

 Arrears of revenue, or
 Other charges of a public nature, or
 Rent due in respect of such property.

Liabilities of Mortgagee:
1. Mortgagee bound to bring one suit on several mortgages (S. 67A)
–

Section 67A provides that if a mortgage holds two or more mortgages of the same
property or of different properties from the same mortgagor, he must enforce all or
more, in the absence of a contract to the contrary. It provides that –

 A mortgagee who holds 2 or more mortgages executed by the same

mortgagor, and
 In respect of each mortgagee he has a right to obtain the same kind of decree
under section 67, and
 He sues to obtain such decree on anyone of the mortgages,
 He shall be bound to sue on all the mortgages in respect of which the
mortgage-money has become due.

2. Liabilities of mortgagee in possession (S. 76)

 The mortgagee is the person who gives a loan to the mortgagor on the security
of some property. This section says that when during the continuance of the
mortgage, the mortgagee takes possession of the mortgaged property he is
bound by the following duties –

i. Duty to manage the property as a person of ordinary prudence.

ii. Duty to collect rents and profits of the property to this best endeavor.
iii. Duty to pay government dues unless there is a contract to the contrary.
iv. Duty to make necessary repairs of the mortgaged property unless there
is a contract to the contrary.
v. Duty not to commit any act which may destroy or injure the property
permanently.
vi. Duty to apply insurance money in reinstating the property or in
reduction of the mortgage-money if he receives such money in respect
of the mortgaged-property.
vii. Duty to keep proper accounts of all sums received and spent by him as
a mortgagee.
viii. Duty to apply rents and profits in discharge of interest of making
certain deductions.
ix. Duty to account for gross receipts.

Marshalling and Contribution: The term marshalling means to

collect or gather and then arrange in proper order, in case of differences or
conflicts in interests or claims rearrange in such a way that there is justice and
maximum satisfaction to all. [Black’s Law Dictionary (2nd Edition)]
Marshalling Under section 81 of the Act “when the owner of two or more
properties mortgages the property to one person and subsequently mortgages two
or more properties to another person, the new mortgagee is, in the absence to the
contrary, entitled to have the mortgage debt satisfied out of the property or
properties not mortgaged to him. So far as the same will extend but not as to
prejudice the rights of the mortgagee or persons claiming under him or of any other
person who has for consideration acquired an interest in any of the properties”

This section applies to mortgages in which the mortgagees have the same debtor.
In such a case the first mortgagee might have one or more properties and the
second mortgagee might have some of those properties and advanced loan without
notice of the earlier encumbrance. In such a case the mortgagee is entitled to
Marshall securities and the first mortgagee shall proceed against the properties
which have not been encumbered in favor of the latter. [KosuriKoteswara Rao
v.KothuVenkataramana Rao AIR 1973 AP 46]

Illustration

X is the owner of property A, B and C. X mortgages all three properties (A, B, C)

to Y. Subsequently, X mortgages property B and C to Z. Hence under the rule of
marshalling Y can satisfy is debt out the property A, B and C. If the debt of Y can
be satisfied out of property A alone then property B and C should be left
untouched. However, if Y’s debt cannot be satisfied out of property A alone then
he can proceed to satisfy his debt from property B and C also.

Charge: Where immoveable property of one person is by act of parties or

operation of law made security for the payment of money to another, and the
transaction does not amount to a mortgage, the latter person is said to have a
charge on the property; and all the provisions hereinbefore contained. which apply
to a simple mortgage shall, so far as may be, apply to such charge. Nothing in this
section applies to the charge of a trustee on the trust-property for expenses properly
incurred in the execution of his trust, and, save as otherwise expressly provided by
any law for the time being in force, no charge shall be enforced against any
property in the hands of a person to whom such property has been transferred for
consideration and without notice of the charge.