Mortgage 2022-23 2

Mortgage
Ms Charvi Kumar
Symbiosis Law School, NOIDA
What is a “Mortgage?” – S 58(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
• the instrument (if any) by which the transfer is effected is called a
mortgage-deed.
Key Elements of Mortgage
• There must be transfer of interest
• There must be a specific immovable property intended to be mortgaged
• Transfer must be with intention to –
➢ Secure payments of loan
➢ Secure performance of a contract
How to determine whether Mortgage or not?
• Similar to Sale
• Difference is in the “intention of parties”
• Sale: Intention to transfer complete ownership and all interest

• Mortgage: Intention to transfer some interest and not whole property or full interest.
• B Jayashankarappa and ors v. DS Gulwadi, held that a mortgage was undoubtedly a

transfer, but not the transfer of absolute ownership rights and in this respect it
differs from sale..
Types of Mortgage
1. Simple Mortgage – Section 58(b)
2. Mortgage by conditional sale – Section 58(c)
3. Usufructuary mortgage – Section 58(d)
4. English mortgage – Section 58(e)
5. Mortgage by deposit of title-deeds – Section 58(f)
6. Anomalous mortgage – Section 58(g)
Simple Mortgage
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.
KEY ELEMENTS:
• Mortgagor binds himself to pay the loan
• Transfer a right to have a specific property to the mortgagee
• Possession of the property doesn’t go to the mortgagee
cause the mortgaged property to be sold means sale can take place through court ie,
power to sell the property cannot be exercised without the interference of the court
Mortgage by conditional sale
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
➢ that on such payment being made the sale shall become void, or
➢ 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.
This was also held in the case of Rajkishore v Prem Singh (2011 SC).
Features of Mortgage by Conditional sale
• If the mortgagor fails to repay the mortgage money by a certain date, the sale becomes
absolute
• If the mortgagor repays the mortgage money by a certain date, the sale becomes void and
the mortgagor becomes the owner of the property
• The transaction resembles that of sale, though it is only a mortgage
• The ostensible sale becomes an absolute sale if the mortgagor fails to repay the debt by
the specified date. This can be enforced through proceedings for foreclosure of the
mortgage. The order of foreclosure by a court converts the mortgage by conditional sale
into an absolute sale
• Mortgage by conditional sale is a mortgage and not a sale.
• It is liable to be cancelled at the option of the mortgagor at a subsequent date.
• A mortgage once created remains a mortgage unless it is foreclosed or redeemed
Difference Between Mortgage by Conditional Sale
and Sale with Option of Repurchase
• Vithal Tukaram Kadam vs Vamanrao Sawalaram Bhosale - words like
“repay”, “return” and “subject to this condition” in an agreement are
not commensurate with a deed of absolute sale.
• In Mortgage by Condition sale , a debt persists and there is a right to
redeem that the borrower i.e. the mortgagor has.
• No such rights in sale on condition to repurchase
Example of Mortgage by Conditional Sale
Usufructuary mortgage
Where the mortgagor delivers possession or expressly or by implication binds himself to deliver
possession of the mortgaged property to the mortgagee, and authorises 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.
For Example:
Basheer delivers possession or binds himself expressly or impliedly to deliver possession of
mortgaged property to Ahmad, and authorizes Ahmad to retain such possession until payment of
mortgage money.
He also authorizes Ahmad to receive those rents and profits which accrue from mortgaged property
or he also authorizes Ahmad to receive any part of such leases and benefits.
Indeed he approves Ahmad to proper such rents and profits in lieu of interest or in payment of
mortgage money or partly in lieu of interest or partly in payment of mortgage money. It is case of
Usufructuary mortgage.
Features of Usufructuary Mortgage
• No personal liability on the mortgagor.
• Possession of property is delivered to the mortgagee.
• No time period is fixed, to pay the mortgage money (sometimes, sometimes it can be
fixed)
• LR Rattan Lal v Sukh Ram and Ors (2012 HP) – if no period is prescribed in the
terms of the usufructuary mortgage, the mortgagee is under obligation to put back
the mortgagor in possession of the mortgaged property, the minute the mortgage
money has been paid back or it has otherwise been settled.
• Mortgagee can not sell the property.
• Mortgagee is entitled for rents and profits of the mortgaged property.
Usufructuary Mortgage Deed - Extract
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, 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.
Example
• Basheer mortgages his house to Ahmad for a loan of one lakh rupees, and he binds
himself to repay mortgage money on a certain date, and transfers mortgaged property
absolutely to Ahmad.
• However such transfer is subject to this condition that Ahmad will re-transfer
mortgaged property on repayment of mortgage money before agreed date. It is case of
English mortgage.
Features
• Mortgagor binds himself to re-pay the mortgagee on a certain date.
• The property is absolutely transferred to the mortgagee.
• Transfer of property should be subject to the proviso that the mortgagee will recover
the property to the mortgagor on the payment.
Mortgage by deposit of title-deeds
-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, delivers to a creditor or his
agent documents of title to immovable property, with intent to create a security
thereon, the transaction is called a mortgage by deposit of title-deeds.
Example
• Basheer delivers to a creditor or his/her agent documents of title to his own house
with intent to create a security on these documents to title. It is case of mortgage by
deposit of title deeds.
Features
• Document of title deed is deposited as security.
• There is a debt.
• On the payment of mortgage money, the title deed is returned to the mortgagor.
Anomalous mortgage
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.
Example
• An example of anomalous mortgage is dharta. Such form of mortgage is present in
Multan District. Through this mortgage, possession of mortgaged land remains with
mortgagor. However, he/she pays 1/80th part of produce of mortgaged land to
mortgagee.
• Lal Narsingh Partap Bahadur Singh v Mohd Yakubkhan (PC): Mixture of simple
mortgage and usufructuary mortgage. Mortgagor (A) was supposed to transfer land to
mortgagee (B) and allow B to enjoy the profits of the land in lieu of interest. He did
not transfer possession of the property. B sued A and had the land sold to recover the
debt. The Privy Council said that originally, it might have been considered an
usufructuary mortgage, but since non-handing over of the possession resulted in the
mortgage debt becoming ‘repayable’ immediately, allowing the mortgagee (B) to have
the property sold to recover his loan money, it became a sort of instantaneous ‘simple
mortgage’. Since it had characteristics of both, it was considered to be an anamolous
mortgage.
When to assure/register a
mortgage
“Mortgage when to be by assurance”
• Discussed under section 59 of TPA

• If principal money secured is Rs 100 or above, a mortgage can be effected only by a
registered instrument signed by the mortgagor and attested by at least two
witnesses.
• Applies to all mortgages except mortgage by deposit of title deeds
• Where the principal money secured is less than one hundred rupees, a mortgage may
be effected either by a registered instrument signed and attested as aforesaid or
(except in the case of a simple mortgage) by delivery of the property.
Redemption, Foreclosure,
Subrogation, and Marshalling
Brief Overview
Right of Mortgagor to Redeem (Section 60)
• Basically the mortgagor has the right to ‘redeem’ the mortgage by repaying the
principal amount as well as interest (if any) to the mortgagee when the principal
amount becomes due.
• Suit for redemption must be filed within 12 years of the principal amount becoming
due.
Right of Mortgagee to Foreclose / Sale (Section 67)
• Counterpart to S60.
• Extinguishes the right of the mortgagor to redeem and makes the mortgagee an
absolute owner of the property from the date of the decree.
• This right arises at the same time as the right to redemption, as if the mortgagor does
not redeem, the mortgagee has the right to move the court to foreclose.
Marshalling Securities (Section 81)
• Similar to Marshalling in case of Sale
• A has properties X, Y, and Z.
• A mortgages properties X and Y to B.
• A then mortgages property Y to C.
• Per S 48, B has priority over C and can *technically* enforce the sale of either X or Y
to recover the amount due to him. This would leave C in a bad position, since if B
chose to enforce the sale of / foreclose property Y, then C would have no property left
to exercise his right of foreclosure upon.
• Therefore, per this rule, B must first satisfy his debts via property X before making a
move on property Y.
Subrogation (Section 92)
• Deals with a situation where, upon the payment of the debt and ‘redeeming’ the
mortgage, someone who was not the original mortgagor (or person claiming under
them) can now step into the shoes of the mortgagee. The persons who can ‘redeem’ the
mortgage are covered in S 91.
• Eg: A has property ‘X’, which A mortgaged to B by way of simple mortgage. A then
lets property ‘X’ to C, who is A’s lessee. C can ‘redeem’ the mortgage as she falls into
the category of ‘person who has any interest in the property mortgaged’ as per S
91(a). By redeeming the mortgage, C has 'been subrogated into the rights of’ (stepped
into the shoes of) B, the original mortgagee. Now C can file for sale/foreclosure!

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Mortgage

• Sale: Intention to transfer complete ownership and all interest

• B Jayashankarappa and ors v. DS Gulwadi, held that a mortgage was undoubtedly a

Where, the mortgagor ostensibly sells the mortgaged property-

• Discussed under section 59 of TPA

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