MORTGAGE:

(a) According to Section 58, a mortgage is the transfer of an interest in some specific
immovable property for the purpose of securing the—

(a) payment of money advanced or to be advanced by way of loan,

(b) an existing or future debt, or
(c) the performance of an engagement
which may give rise to a pecuniary liability.

A person who takes a loan and gives some security for repayment of the loan in the form of
transfer of some interest in any immovable property, it is called a mortgage of property. The
ownership of the property remains in the debtor, but some of his interests in the property are
transferred to the creditor who has given the loan. In case the advanced money could not be
recovered by the creditor (person advancing the money), he can recover his money on the
basis of his interest in that property. Therefore, it may be said that the mortgage is for the
security of the creditor.

The debt subsists in a mortgage, but the transaction by which the debt is extinguished is not a
mortgage but a sale.

Elements of Mortgage
In order to constitute a mortgage, the following elements must be present in the transaction:

(1) There must be transfer of an interest.

(2) The interest transferred must be in specific immovable property.
(3) The transfer must be made to secure a loan of money, debt, or performance of an
engagement which may give rise to a pecuniary liability.

Transfer of an Interest:
It is different from a sale because in a sale there is a complete transfer of all the interests in
the property, whereas in a mortgage it is a transfer of interest less than ownership. The person
transferring the loan is known as the "mortgagor," and the person advancing the money is
known as the "mortgagee." Therefore, the interest is given by the mortgagor to the
mortgagee. What type of interest is transferred to the mortgagee decides the kind of
mortgage. A mortgage is a transfer of an interest, and it creates a right in rem, but a mere
agreement to create a mortgage does not create any interest in the property mortgaged.

Specific Immovable Property:

The property must be immovable property. Things attached to what is embedded in the earth
are also included in immovable property. In the mortgage deed, the property must be defined
specifically and not in general terms.

Consideration:
The mortgage must be supported by consideration. The consideration may be either money
advanced or to be advanced by way of loan, an existing or future debt, or the performance of
an engagement giving rise to a pecuniary liability. Where the mortgage has already advanced
money, the mortgagor may execute a deed of mortgage as security for its payment. The
mortgagor may also execute the mortgage deed before he gets the full amount from the
mortgagee.
Mortgagor:
The person who transfers the interest in the property in a mortgage is known as a mortgagor.
Under Section 59A, a person deriving title under the original mortgagor is included in the
term "mortgagor" too, for example, heirs, executors, administrators, etc. A mortgage by a
minor, who is incompetent to contract, is void.

Mortgagee:
A mortgagee is a person in whose favour the mortgage is created. A person deriving title
under the original mortgagee is also included. Every deed of mortgage must have the name of
the mortgagee, otherwise the deed will not be a valid deed. A mortgage executed in favour of
a minor who has advanced the whole of the mortgage money is enforceable by him or anyone
on his behalf. But otherwise, minority of the mortgagee renders it void ab initio.

Mortgage-money:
According to Section 58, the principal money and interest of which the payment is secured
for the time being are called the mortgage-money. This means that the mortgagor can redeem
the mortgaged property on payment of both the principal money as well as interest on that
money. However, the parties may enter into any contract to the contrary.

Mortgage-deed:
The instrument (if any) by which transfer is effected in a mortgage is known as a mortgage-
deed. No particular form of words is necessary for the creation of a mortgage. The transfer
should be originally intended as security for debt. The court will ascertain the intention of the
parties by looking into the substance of the deed.

Kinds of Mortgage
Section 58 contemplates six kinds of mortgage:—

(1) Simple Mortgage

(2) Mortgage by conditional sale
(3) Usufructuary Mortgage
(4) English Mortgage
(5) Mortgage by deposit of title-deeds
(6) Anomalous Mortgage

SIMPLE MORTGAGE [SECTION 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, in payment of the
mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple
mortgagee.
In a simple mortgage, possession of the property remains with the mortgagor, and he
personally binds to pay the mortgage-money. He agrees that in case of his default by non-
payment, the property may be sold by the mortgagee under the order of the court.

REMEDY OF THE MORTGAGEE:

Personal Liability - Suit for obtaining the money decree against the mortgagor - The
mortgagee has an option here to proceed either against the mortgagor or against the
mortgaged property.
Suit for Foreclosure & Sale of Property - In a simple mortgage, the mortgagee agrees on a
condition that in the event of not paying the mortgage money the mortgagee has every right
to cause the mortgage property to be sold and can use the proceeds of the sale and such a
transaction is called a simple mortgage.

MORTGAGE BY CONDITIONAL SALE [SECTION 58(C)]

(i) In this type of mortgage, the mortgagor ostensibly sells the property.
(ii) The property is sold on the condition that—
(a) On default of payment of the mortgage-money on a certain date, the sale shall become
absolute, or
(b) On such payment being made, the sale shall become void, or
(c) On such payment being made, the buyer shall transfer the property to the seller.

Such a transaction is called a mortgage by conditional sale, and the mortgagee is called a
mortgagee by conditional sale. However, such a transaction shall be deemed to be a mortgage
only when the condition is embodied in the document which effects or purports to affect the
sale.

The inclusion of the proviso under clause (c) of Section 58 brought about a significant
change. This amendment emphasized that the provision of repurchase must be included in the
original sale deed itself rather than having separate documents for the sale and conditions of
reconveyance.

In a mortgage by conditional sale, the mortgagor has no personal liability to repay the debt.
The mortgagee's only security is the mortgaged property. A mortgage by conditional sale is
non-possessory mortgage because no delivery of possession is given under it. Upon breach of
the condition, the sale deed itself is executed, and the transaction becomes an absolute sale
without further accountability between the parties. The mortgagee does not possess the
property but has qualified ownership that may become absolute in case of default.
Ostensible Sale: The transaction looks like a sale but is actually a security for the debt.

A mortgage by conditional sale can be affected in the following ways:

(i) Where the principal money secured is Rs 100 or more-by a registered instrument signed
by the mortgagor and attested by at least two witnesses.
(ii) Where the principal money secured is less than Rs 100 by a registered instrument signed
by the mortgagor and attested by at least two witnesses or by delivery of the property.
(Section 59)

REMEDY:
The remedy open to the mortgagee by conditional sale is by foreclosure only and not by sale
which can only be obtained through a court decree. The mortgagee can file a decree for
foreclosure when the mortgagor fails to repay the amount on time, and the sale becomes
absolute.

Difference Between Conditional Sale and Sale with Condition of Repurchase:

While a mortgage by conditional sale and a sale with a right to repurchase may seem similar,
they differ in key aspects:

1. Debtor-Creditor Relationship:
 o In a mortgage by conditional sale, there is a debtor-creditor relationship, and a
debt must exist.
o In a sale with a condition of repurchase, no such relationship or debt exists
between the seller and buyer.
2. Transfer of Interest:
o In a mortgage by conditional sale, only a limited interest is transferred, while
the right of redemption remains.
o In a sale with a condition of repurchase, the entire interest is transferred,
except for a personal right to repurchase, which lapses if not exercised within
the specified time.
3. Right of Redemption:
o In a mortgage by conditional sale, the right of redemption persists even after
the fixed period.
o In a sale with repurchase, once the time lapses, the right is lost.

Legal Interpretation:
The Supreme Court has ruled that if the sale and condition of repurchase are in separate
documents, the transaction is not a mortgage. However, if the sale and condition are in the
same document, the intention of the parties, determined by the surrounding circumstances,
will dictate whether it's a mortgage or a sale.
For example, in a case where multiple documents were executed (sale, reconveyance, rent
note), the Supreme Court held that it was a sale with a condition to repurchase, not a
mortgage

Position of Transferee or Purchaser from Mortgagee:

A transferee from a mortgagee only acquires the rights of the mortgagee and cannot claim
any superior title. The court held that the purchaser, claiming through the mortgage, was
bound by the terms of the mortgage deed and could not assert an independent title.

USUFRUCTUARY MORTGAGE [SECTION 58(D)].

1. Where the mortgagor delivers possession or binds himself (expressly or by

implication) to deliver possession of the mortgaged property to the mortgagee, and
2. Authorises him to—
(a) retain such possession until payment of the mortgage-money, and
(b) receive the rents and profits accruing from the property, and to appropriate the
same in lieu of interest or in payment or mortgage money or partly in both,
the transaction is called a usufructuary mortgage and the mortgagee a usufructuary
mortgagee.

In a usufructuary mortgage, the possession of the property is given to the mortgagee. The
mortgagee is given the right to the usufruct of the property, i.e., rent, produce, or profits of
the property. The mortgagor himself does not remain personally liable to pay the mortgage
money because either the mortgagee is let into possession or he is permitted to repay himself
out of the rents and profits of such property.

[s 58.7.3.2] Essential elements:—

(i) There is delivery of possession to the mortgagee or an express or implied undertaking of
the mortgagor to deliver such possession.
(ii) Retention of 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 partly in payment of either interest or mortgage-money.
(iii) There is no personal liability of the mortgagor.
(iv) Mortgagee cannot foreclose or sue for the sale of the mortgaged property.
(v) The mortgagor is entitled to redeem the property when the amount due is personally
paid or the debt is discharged by rents and profits received by the mortgagee (Section 62).
(vi) No time limit is fixed for the repayment.
(vii) Where the mortgage is for Rs 100 or more, it must be registered, but where it is less
than Rs 100 it may be by a registered deed or by delivery of property.

Delivery of Possession:
The possession of the mortgaged property is handed over to the mortgagee by the mortgagor
as a security for the payment of mortgage-money. It is not necessary that the delivery of
possession must be made at the time of execution of the deed. The mortgagor may either give
express or implied undertaking to deliver possession.

Rents and Profits:

The mortgagee is entitled to receive rents and profits from the mortgaged property until the
debt is repaid. This money can be applied to either the interest or the principal of the
mortgage.

 If the rents and profits are retained only for the principal, the mortgagor regains
possession upon payment of the principal.
 If the rents and profits are in lieu of interest, possession is returned as soon as the debt
is paid.
 If part of the rents and profits is applied to interest and the rest to the principal, the
mortgagor must pay both in full to regain possession.

No Personal Liability of Mortgagor:

The mortgagor is not personally liable for the mortgage money, so the mortgagee cannot sue
the mortgagor personally for his debt. The mortgagee can only retain the possession of the
property. He cannot compel the mortgagor to pay back the mortgage-debt. Only the
mortgagor himself can pay off the debt and take the property back.

Mortgagee Cannot Foreclose or Sell:

The right of foreclosure or sale is not available to the usufructuary mortgagee. In such a
mortgage, no time limit is fixed. Therefore, the mortgagee is entitled to possession till the
money due is paid to him.

Rights of Mortgagee's Transferee:

As per the mortgage deed, the mortgagee had to keep possession with himself, thus binding
the mortgagee not to alienate by way of lease or some other process. It was held that the
transferee of the mortgagee who cultivated the land was not to be deemed a lawful tenant.
Any such claim was not proper. Such a transferee was not entitled to occupancy rights.47.

Redemption of Property:
The mortgagor is entitled to take back the mortgaged property from the possession of the
mortgagee on payment of the debt. Where the due debt is discharged from the rents and
profits of the property, he can redeem back the property.

No Time Limit:
The main characteristic of a usufructuary mortgage is that no time limit is fixed for the
repayment. Limitation starts when mortgage money is paid out of rents and profits, or partly
out of rents and profits, and partly by payment or deposit by the mortgagor.48.

Registration:
Where money taken is Rs 100 or more, registration is necessary. In other cases, the mortgage
is complete only by delivery of possession.

Remedies of a Usufructuary Mortgagee:

A usufructuary mortgagee cannot sue the mortgagor for either sale or foreclosure. His remedy
is only to retain possession of the property till the mortgage money is paid-up and to
appropriate the rents and profits of the property till his principal money and interest due both
are paid in accordance with the mortgage deed.

English Mortgage [Section 58(e)]

(i) Where the mortgagor binds himself to repay the mortgage-money on a certain date, and
(ii) 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.

In an English mortgage, the property is absolutely transferred to the mortgagee with the
condition that when the debt is paid off on the given date, the mortgagee will re-transfer the
property to the mortgagor.

Essential Elements:
The essential elements of an English mortgage are given below:
(i) There is absolute transfer of property to the mortgagee, i.e., there is delivery of possession.
(ii) There is a personal covenant to pay the amount. The mortgagor binds himself to repay the
mortgage money on the due date.
(iii) 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.

Absolute Transfer:
This section states that in an English mortgage, the mortgagor absolutely transfers the
property to the mortgagee. However, an absolute transfer can never be a mortgage because, in
a mortgage, there is a transfer of a limited interest only for securing the debt. The use of the
word "absolutely" is only a matter of form and not of substance. Only an interest in the
property is transferred and not the whole property.

MORTGAGE BY DEPOSIT OF TITLE-DEEDS OR EQUITABLE MORTGAGE

[SECTION 58(F)]
Mortgage by deposit of title-deeds is also known as equitable mortgage. According to sub-
section (f), where a person—
(i) in the towns of Calcutta, Madras, Bombay and in any other town specified by the State
Government concerned in this behalf,
(ii) delivers to a creditor or his agent documents of title to immovable property,
(iii) with intent to create a security thereon,
such a transaction is called a mortgage by deposit of title-deeds.

This is a special kind of mortgage because here the execution of a mortgage deed is not
necessary. Mere deposit of title deeds of an immovable property by the mortgagor to the
mortgagee is sufficient. The rule of equity is that mere deposit of a document of title without
writing or without word of mouth will create in equity a charge upon the property which is
referred to in the deed.

Essential Elements:
(i) There must be a debt.
(ii) There must be a deposit of title-deeds.
(iii) The debt must be secured by deposit of title deeds.

Deposit of Title-deeds:
In England, and similarly in India, it suffices for mortgage creation if the deposited deeds
relate to the property, and not all deeds need to be deposited. Constructive delivery of title
deeds is acceptable. The Supreme Court in KJ Nathan v SV Maruty Reddy stated that
insisting on formalities for delivering deeds is hyper-technical, but the deposit must intend to
create a mortgage. No mortgage exists if the documents lack any title. A copy cannot serve as
a document of title, and an equitable mortgage can be formed even if the original title deed is
lost. It’s enough if the deeds deposited relate to the property.

In Syndicate Bank v Estate Officer and Manager, APIIC Ltd, the Supreme Court ruled that
letters from government officers could not be considered documents of title for mortgage
purposes, as title must be conveyed through registered deeds. Additionally, if title deeds are
returned to the mortgagor, no mortgage exists. If title deeds are redeposited under a new loan
but lack clear connection, the deposit is invalid, and benefits from limitation do not apply.

Deposit of Xerox Copies:

The mortgagor deposited copies of title deeds and a receipt from the Sub-Registrar, proving
registration. This serves as evidence of intent to create an equitable mortgage.

Intention to Create Security:

The title deeds must be deposited with the intention of securing a debt. Mere possession does
not imply such intent, as shown in Jethibai v Putlibai, where possession alone does not
constitute a mortgage. Three elements are essential: a debt, a deposit of title deeds, and the
intention for those deeds to serve as security.

Registration:
An oral mortgage by deposit of title deeds does not require registration, even if there’s
written documentation. A memorandum of deposit, detailing the creation of the equitable
mortgage, is considered a self-contained document that may need registration.
REMEDIES:
The mortgagee can sue for sale and recovery of the mortgage money but cannot foreclose.
The mortgagor can only sue for redemption, not for the title deeds.

Limitation:
The limitation period for enforcing payment secured by a mortgage through deposit of title
deeds is twelve years from the due date.

ANOMALOUS MORTGAGE [Section 58(G)].

A mortgage which does not fall under any of the five above-stated categories is known as an
anomalous mortgage. Examples of such mortgages include Kanom, Otti, and Peruartham
mortgages of Madras and the San mortgage of Gujarat. Such mortgages take innumerable
forms molded either by the custom or the caprice of the creditor. In this, the possession may
or may not be given. If the mortgage money is Rs 100 or more, it must be registered, but if
less than Rs 100, it may be by a registered deed or by delivery of possession.

Combination of Simple Mortgage and Usufructuary:

An anomalous mortgage is a combination of simple and usufructuary mortgages. The
mortgagee is in possession of the property and pays himself out of the rents and profits of the
property; the mortgagor has a personal covenant to pay with an express or implied right of
sale.

Mortgage Usufructuary by Conditional Sale:

Another anomalous mortgage, in which the mortgagee is in possession as an usufructuary
mortgagee for a fixed period, and if the debt is not paid within the fixed period, he becomes
the mortgagee by conditional sale.

Customary Mortgages:
These are mortgages in which special incidents are attached by local usage. For example, Otti
and Kanom mortgages cannot be redeemed before the expiry of 12 years in the absence of an
agreement to the contrary. The Kanom partakes in the nature of a mortgage and a lease, and
the Otti-holder has a right of pre-emption.

Case:
A mortgagor borrowed a sum of Rs 1000 from the mortgagee, and possession of the property
was handed over to him. The mortgage-debt was to be repaid within a period of 6 months,
and in case of default, the mortgagee had the right to bring the property to sale and realize the
amount. The document was described as a usufructuary mortgage. However, it was held to be
an anomalous mortgage because it had the character of a simple mortgage too, along with the
right of sale of property to realize the amount of mortgage-debt.

Oral Mortgage:
The mortgage was not registered. The mortgagee was given possession of the property. He
tried to claim ownership through adverse possession but could not prove it. The court said
that upon completion of 12 years of the oral mortgage, the period of limitation did not start
running against the mortgagor. The suit for redemption filed within 30 years was not barred
by limitation.
REMEDIES OF MORTGAGEE:
The mortgagee's remedy is by sale and foreclosure, where the terms of the mortgage permit it
[Section 67(a)]. The remedy of a mortgagor, if he becomes a trustee or legal representative of
the mortgagee, is by a suit for sale only [Section 67(b)].

Sub-Mortgage:
A mortgage by the mortgagee of his interest under the original mortgage is known as sub-
mortgage. Where the original mortgagee mortgages his interest, it is known as sub-mortgage.
A sub-mortgagee is entitled to a decree for sale of the mortgage-rights of his mortgagor.

The Transfer of Property Act, 1882 deals only with mortgages of immovable property. The
movable property can be pledged under Indian Contract Act, 1872.

___________________________________________________________________________
_______________

MODE OF TRANSFER IN MORTGAGE (SECTION 59):

A property may be transferred by way of mortgage in the following three ways:

1. By a Registered Instrument
For mortgages where the principal money secured is Rs 100 or more, the mortgage
must be executed through:
o A registered instrument.
o Signed by the mortgagor.
o Attested by at least two witnesses.
2. By Delivery of Possession
If the principal amount is less than Rs 100, a mortgage can be established by either a
registered instrument or delivery of possession. However, in the case of a simple
mortgage, where the mortgagor retains possession, a registered instrument is
necessary even if the debt is less than Rs 100.
3. By Deposit of Title-Deeds
In mortgages by deposit of title deeds, no writing or registration is required,
regardless of the mortgage debt amount. This method is allowed only in certain cities
to facilitate business.

Effects of Non-Registration:
If a mortgage requiring registration is not registered, it does not convert into a charge under
Section 100. The mortgagor cannot sue for redemption as the mortgage is invalid but can sue
for possession upon repayment of the loan. Possession cannot be regained on the basis of an
unregistered oral mortgage; however, the mortgagor may recover possession based on their
title.

___________________________________________________________________________
_______________

RIGHTS OF MORTGAGOR:

1. Right of Redemption (Section 60)

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:

(a) to deliver to the mortgagor the mortgage-deed and all documents relating to the
mortgaged property in possession or power of the mortgagee,
(b) to deliver possession of the property to the mortgagor where the mortgagee is in
possession of it,
(c) to re-transfer the property to the mortgagor or any third person directed by him (at the cost
of the mortgagor) or to register an acknowledgement in writing of 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.

The right to redeem allows the mortgagor, after the principal money becomes due, to pay
the mortgage-money and reclaim their property. This right, protected under the Transfer of
Property Act, 1882, is statutory and cannot be waived by any agreement made during the
mortgage transaction. Any attempt to make a mortgage irredeemable is void.

The right of redemption remains valid as long as the mortgage exists and can only be
extinguished by a court decree or a legal act of the parties. For example, payment of the
mortgage dues is an exercise of this right. In usufructuary mortgages, the mortgagor can
apply for a final decree, while the mortgagee can retain possession until that decree is passed.
In cases of conditional sales, redemption requires the retransfer of the property to the
mortgagor.

Clog on Redemption:

 Clog means restriction.

 Any restriction on the right to redemption is invalid and is void ab initio.
 This is practice against the mortgagor by inserting any restrictive terms against his
rights in the mortgage deed.
 The clog on redemption can only be applied after passing of the decree of the court
and not otherwise.
 The clog on redemption can only come into operation when the right of redemption of
the mortgagor completely extinguish.

Partial Redemption:

 This means redeeming the property in parts or in multiple transfers.

 This is void ab initio and the right of redemption cannot be exercised in multiple
transfers for the same mortgage.

2. Right of Transfer to Third Party (Section 60A)

According to this section, the mortgagor may require the mortgagee 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 a loan from another person on the security of the same
property. Therefore, the mortgage is not extinguished but remains alive.
The mortgagor may require the mortgagee to assign the mortgage-debt to a third person only
when the debt has become payable and the mortgagor has paid the mortgage-money.

3. Right to Inspection and Production of Documents (Section 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 the mortgagor himself. The mortgagor may make copies or
abstracts of or extracts from those documents.

4. Separate or Simultaneous Redemption (Section 61)

This section says that a mortgagor who has executed two or more mortgages in favour of the
same mortgagee shall be entitled to redeem any one such mortgage separately or any two or
more of such mortgages together. However, this is subject to a 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.

The doctrine of consolidation was an equitable doctrine under English law. The words "in the
absence of a contract to the contrary" indicate that the parties may allow consolidation by
mutual consent. However, it is necessary that such a provision must be clearly and explicitly
given.

5. Right of Usufructuary Mortgagor (Section 62)

Section 62 provides that in two conditions a usufructuary mortgagor can recover possession
of the property together with the mortgage deed and all documents relating to the mortgaged
property, which are in the possession or power of the mortgagee. The conditions are as
follows:

(i) Where the mortgagee is authorized to pay himself the mortgage-money from the rents and
profits of the property, when such money is paid.
(ii) Where the mortgagee is authorized to pay himself from such rents and profits when the
term prescribed for the payment of mortgage-money has expired, and the mortgagor pays or
tenders the mortgage money to the mortgagee or deposits it in the court.

Where a usufructuary mortgagor could not recover possession on the basis of an oral
mortgage, he can still recover possession on the strength of his title.

Process of Redemption
For the purpose of enforcing redemption of a usufructuary mortgage, the mortgagor may file
a suit for redemption or may take recourse to the summary process of deposit and notice
under section 83.

Limitation:
The cause of action for a mortgagor to file a suit for redemption arises when the mortgagor
offers to repay the mortgage money to the mortgagee, and the mortgagee either ignores or
refuses the offer. In such cases, the mortgagor has 30 years from the date of refusal to file the
suit. If a suit is filed after this period, it is barred by limitation, meaning the court will not
entertain it.

6. Right to Accession to Mortgaged Property (Section 63)

(i) Where mortgaged property in possession of the mortgagee has,

(ii) during the continuance of the mortgage,
(iii) received any accession,
(iv) the mortgagor shall upon redemption, be entitled to such accession as against mortgagee,
(v) This is so in the absence of a contract to the contrary.

This section deals with the following kinds of accessions:—

(1) Natural accessions
(2) Acquired accessions: These are of two types:—
(a) Separable acquired accessions, or
(b) Inseparable acquired accessions

Natural Accessions:
Natural accessions refer to physical additions to mortgaged property resulting from natural
processes. According to Section 70, if any accession occurs after the mortgage date, the
mortgagee is entitled to it for security purposes unless otherwise agreed. For example, if A
mortgages land bordering a river and the land increases due to alluvion, B (the mortgagee) is
entitled to this increase. Section 63 allows the mortgagor to redeem these natural accessions
along with the mortgaged property, meaning the mortgagee cannot retain them upon
redemption. Accessions which are not made by the parties to the mortgage but arise as
assertions by the course of nature are known as natural accessions.

Acquired Accessions:
Where such accession has been acquired at the expense of the mortgagee, and is capable of
separate possession or enjoyment without detriment to the principal property, the mortgagor
desiring to take the accession must pay to the mortgagee the expense of acquiring it.
(SEPARABLE ACCESSION)

If such separate possession or enjoyment is not possible, the accession must be delivered with
the property; the mortgagor being liable, in the case of an acquisition necessary to preserve
the property from destruction, forfeiture, or sale, or made with his assent, to pay the proper
cost thereof, as an addition to the principal money, [with interest at the same rate as is
payable on the principal, or, where no such rate is fixed, at the rate of nine per cent per
annum]. In the case last mentioned, the profits, if any, arising from the accession shall be
credited to the mortgagor. (INSEPARABLE ACCESSION)

Usufructuary Mortgage:
Where the mortgage is usufructuary, and the accession has been acquired at the expense of
the mortgagee then the profits arising from the accession shall be set off against interest
payable on the money so expended. However, this is in the absence of the contract to the
contrary.

7. Improvements to Mortgaged Property (Section 63A) [ Duty of Mortgagor]

This section, as a general rule, provides that in the absence of a contract to the contrary, if the
mortgaged property has improved during the continuance of the mortgage, the mortgagor
shall be entitled to such improvement without paying its cost. However, this general rule is
subject to an exception that the mortgagor is liable to pay the cost of improvements made by
the mortgagee in the following circumstances:—
(i) Where improvements were necessary to preserve the property from destruction or
deterioration, or
(ii) Where improvement was necessary to prevent the security from becoming insufficient in
comparison to debt, or
(iii) Where improvement was made in compliance with the lawful order of any public servant
or public authority.

A mortgagee who was the owner of the structure at the time of redemption was allowed, if he
so desired, to remove and take away the material of the structure.

Essential Elements:
(i) The mortgaged property should be in possession of the mortgagee.
(ii) The improvements to the property should have been affected during the continuance of
the mortgage.
(iii) The improvements must have been affected at the cost of the mortgagee.

8. Renewal of Mortgaged Lease (Section 64)

(1) Where the mortgaged property is a lease, and

(2) The mortgagor obtains a renewal of the lease,
(3) The mortgagor upon redemption shall have the benefit of the new lease, in the absence of
the contract to the contrary.

However, under section 71, 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
purposes of the security in the absence of the contract to the contrary.

9. Right to grant a lease: (Section 65A)

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.

DUTIES OF MORTGAGOR:

1. Section 65 of the Transfer of Property Act, 1882 outlines implied covenants for the
mortgagor:

1. Covenant for Title (65a): The mortgagor guarantees that they own the property and
have the right to transfer it. If this is breached, they must compensate the mortgagee.
 2. Covenant for Defence of Title (65b): The mortgagor must defend the mortgagee’s
title or assist in doing so, covering all related costs.
3. Covenant for Payment of Public Charges (65c): The mortgagor is responsible for
paying all the public charges on the property. Failure to do so may lead to the
property's sale.
4. Covenant for Payment of Rent (65d): If the property is leasehold, the mortgagor
must pay the rent.
5. Covenant for Discharge of Prior Mortgage (65e): The mortgagor must pay off any
prior mortgage. If breached, the subsequent mortgagee can sue.

2. Waste by mortgagor in possession. [SECTION 66]

According to this section, a mortgagor in possession of the mortgaged property must not do
any act which is destructive or permanently injurious to the property if the security is
insufficient or will be rendered insufficient by such act. The mortgagee who has given debt
on the security of any property will not allow destruction or injury to the mortgaged property.
That is why this section has imposed a liability on the mortgagor. Due to the injury, which is
permanent in nature, and destruction, the market value of the property is reduced, resulting in
loss to the mortgagee. The mortgagor's duty is not to waste the mortgaged property
deliberately.

Examples include:

 Removing valuable fixtures from the mortgaged property

 Pulling down the mortgaged house and taking the price of the materials
 Cutting down timber from the mortgaged property
 Mining under the mortgaged building, placing the building in danger
 Working new mines on the mortgaged property

A security is considered insufficient when the value of the mortgaged property is less than
the mortgage amount by one-third, or by one-half in the case of buildings. The mortgagor is
liable for any deliberate waste but not for natural deterioration or waste by omission.
Liability applies only to intentional actions that harm the property.

RIGHTS AND DUTIES OF MORTGAGEE:

RIGHTS OF MORTGAGEE:

1. Right to Foreclosure or Sale (Section 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 obtain from the court a decree that the
mortgagor shall be absolutely debarred of his right to redeem the property or a decree that the
property be sold.

An order permitting foreclosure can only be passed upon ascertaining the nature of the
mortgage and the parties' rights under it. A suit to obtain such decree is called a suit for
foreclosure. Where the mortgagor pays or deposits the mortgage-money, no occasion for the
exercise of the right of foreclosure or sale occurs. Similarly, where a decree for redemption is
made, a suit for foreclosure or sale would be barred because a redemption decree itself
provides for sale or foreclosure in default of payment.

When: 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.

Limitation: Where the mortgagor does not redeem the mortgage within the stipulated period,
the mortgagee does not automatically become the owner of the property. He has to file a suit
for recovery of the amount due within the limitation period of 12 years.

The difference between the right of redemption and the right to foreclosure is that the right of
redemption is an absolute right whereas the right to foreclose is not. The mortgagor cannot
limit his right of redemption but the right to foreclose can be made subject to the contract
between the parties to the mortgage.

Section 67 provides two remedies to a mortgagee—foreclosure and sale. These remedies are
available to the mortgagee in different forms of mortgages.

 Simple Mortgagee:

 Cannot foreclose.
 Can either sue for a money decree as personally binds himself or file for the sale of
the mortgaged property to recover the debt.

 Usufructuary Mortgagee:

 In possession of the property.

 Cannot sue for sale or foreclosure; recovers the debt from the property's income.

 Mortgage by Conditional Sale:

 Upon default, the property becomes the mortgagee's by sale.

 The remedy is to bar the mortgagor from redemption.

 English Mortgagee:
Can sue for the sale of the mortgaged property.

 Mortgage by Deposit of Title Deeds:

Treated like a simple mortgagee, with the right to sue for sale.

 Anomalous Mortgagee:
Rights depend on the terms of the deed, allowing either foreclosure, sale, or both.

Mortgagor as Trustee for Mortgagee:

Section 67(b) prohibits a mortgagor who is a trustee of the mortgagee from filing a suit for
foreclosure. This is because if the mortgagor were allowed to foreclose, he would acquire the
property for his own benefit, effectively becoming a trustee of his own property. Therefore,
the proper remedy in such a case is the sale of the mortgaged property.
Mortgagee of Public Works:
Mortgagees of public works, such as railways, canals, or public utility undertakings, are
prohibited from filing a suit for foreclosure or sale. The appropriate remedy here is to appoint
a receiver to realize the earnings of such undertakings and recover the debt.

Partial Foreclosure or Sale [Section 67(d)]:

Section 67 prohibits partial foreclosure or sale. A single mortgagee cannot foreclose or sell
their share unless all mortgagees have severed their interests with the mortgagor's consent.
This ensures the mortgagor is protected from multiple suits by different mortgagees. All co-
mortgagees must file one suit together concerning the entire mortgaged property.

2. Right to Sue for Mortgage-Money (Section 68):

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

(i) Where the mortgagor binds himself to repay the same.

(ii) Where the mortgaged property is destroyed, wholly or partially, without the fault of any
party.
(iii) Where the mortgagee is deprived of the whole or part of his security by the wrongful act
or default of the mortgagor.
(iv) Where the mortgagee, being entitled to possession, the mortgagor fails to deliver the
same.
Personal Covenant [Section 68(1)(a)]:
Where the mortgagor binds himself to repay the debt personally, it is said that there is a
personal covenant by the mortgagor. Clause (a) of Section 68 gives the mortgagee the right to
sue for the mortgage-money if there is a personal covenant by the mortgagor to repay the
same. In a simple mortgage and an English mortgage, there is personal liability on the
mortgagor, but in a mortgage by conditional sale or usufructuary mortgage, there is no
personal liability unless expressly or impliedly stated.

Destruction of Security [Section 68(1)(b)]:

If the mortgaged property is wholly or partially destroyed, or if the security is rendered
insufficient for reasons other than the wrongful act or default of the mortgagor or mortgagee,
the mortgagee can sue if the mortgagor fails to provide further sufficient security after being
given reasonable opportunity.

Wrongful Act or Default of the Mortgagor [Section 68(1)(c)]:

The mortgagee can sue for the mortgage-money if deprived of security due to the mortgagor's
wrongful act or default. This applies when the mortgaged property is lost or destroyed due to
the mortgagor’s negligence or deliberate act. If the property was already mortgaged and this
fact was not disclosed to a subsequent mortgagee, the latter may sue for the mortgage-money.

Failure of Mortgagor to Deliver Possession [Section 68(1)(d)]:

The mortgagee may sue if the mortgagor fails to deliver possession of the mortgaged property
when entitled to it, particularly in usufructuary or anomalous mortgages. If possession is not
delivered, the mortgagee may sue for the mortgage-money.

3. Right to Sell (Section 69)

This section allows the mortgagee to sell the mortgaged property without court intervention if
the mortgage-money is not repaid. Unlike Sections 67 and 68, where recovery of debt
requires court involvement, here the mortgagee (or someone on their behalf) can sell the
property in default of payment without court intervention in specific cases.

a) Where the mortgage is an English mortgage and neither the mortgagor nor the mortgagee
is a— (i) Hindu,
(ii) Muhammadan,
(iii) Buddhist, or
(iv) 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.

b) Where a 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.

c) Where a power of sale without the intervention of the court is expressly conferred on the
mortgagee and the mortgaged property is situated within the specified towns. These towns
included Calcutta, Madras, and Bombay originally. But later on, Ahmedabad, Kanpur,
Allahabad, Lucknow, Coimbatore, Cochin, and Delhi, etc., were included by notification in
the Official Gazette.
Who may exercise Power:
This power can be exercised by mortgagees, transferers, assignees, and anyone acting on
behalf of the mortgagee (agents).

Conditions for exercise of Power:

The conditions for the applicability of this section are given in sub-section (2). These
conditions are statutory conditions and cannot be modified by the parties to the mortgage.
The conditions are stated below:—

(i) The first condition for exercising the power of sale is that a written notice must be served
to the mortgagor, requiring payment of the principal amount. Three months must pass after
the notice before the sale can occur. If there are multiple mortgagors, notice should be served
to at least one of them. The default can pertain to either the entire principal amount or any
part of it.

(ii) This power can be exercised when some interest under the mortgage amounting to at least
Rs 500 is in arrear and unpaid for three months after becoming due.

Protection to Purchaser (Section 69(3)):

Sub-section (3) safeguards purchasers of mortgaged property sold under the mortgagee's
power of sale. It states that the purchaser's title cannot be challenged based on:

 No Case for Sale: Claiming there was no valid reason for the sale.
 Lack of Notice: Asserting that proper notice was not given to the mortgagor.
 Irregular Exercise of Power: Arguing that the mortgagee did not follow proper
procedures.

However, this protection applies only if the purchaser is unaware of any irregularities before
the sale, and the mortgagor must have waived any notice requirement.

Order of Appropriation of Sale Proceeds (Section 69(4)):

Sub-section (4) outlines how the proceeds from the sale of mortgaged property are to be used:

1. Discharge Prior Encumbrances: Pay off any prior claims on the property.
2. Cover Sale Costs: Pay for costs and expenses incurred during the sale.
3. Discharge Mortgage Money: Settle the mortgage debt.
4. Surplus Distribution: Any remaining funds will be given to the rightful owner of the
mortgaged property.

The mortgagee acts as a trustee for any surplus funds and must pay interest on retained
amounts at the government-fixed rate until they are disbursed.

4. Right to Appoint Receiver (Section 69A)

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. This section was
inserted by the Amending Act 20 of 1929. This section deals with the right of the mortgagee
to appoint a receiver of the income of the mortgaged property. This section covers such cases
where it is alleged by the mortgagor that there is no debt outstanding or that the mortgage has
become time-barred and thus, there should be no receiver.
[s 69A.1] Appointment how made [Sub-section (2)]

Any person who has been named in the mortgage deed and is willing and 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. However, if the mortgagor does not give his consent to the
appointment, he is entitled to apply to the court for the appointment of a receiver. The person
appointed by the court shall be deemed to have been duly appointed by the mortgagee.

[s 69A.2] Removal of Receiver [Section 69(2)]

A receiver may be removed on due cause shown by the court on application made by either
mortgagor or mortgagee, or by a writing signed by the mortgagor and the mortgagee.

[s 69A.3] Position of Receiver [Section 69(3)]

A receiver appointed by the mortgagee shall be deemed to be the agent of the mortgagor and
he will be solely responsible for the receiver's acts or defaults. However, in two cases, the
mortgagor will not be responsible:

 (i) Where the mortgage deed provides otherwise i.e., someone else has been made
responsible instead of the mortgagor, or
 (ii) Acts or defaults of the receiver are due to the improper intervention of the
mortgagee.

[s 69A.4] Power of Receiver [Section 69(4)]

The receiver shall have the power to demand and recover all the income of which he is
appointed receiver and to give valid receipts for the same. He shall exercise any powers
which may have been delegated to him by the mortgagee in accordance with the provisions of
this section. A person paying money to the receiver shall not be concerned to inquire if the
appointment of the receiver was valid or not.

[s 69A.5] Remuneration of Receiver [Section 69(6)]

The receiver is entitled to retain out of any money received by him for his remuneration a
commission at a rate not exceeding 5% on the gross amount of money received. Where no
rate is specified, then the commission will be at the rate of 5% on that gross amount.
However, it is open to the court to allow commission at any other rate on the application
made to it by the receiver.

[s 69A.6] Receiver's Duty to Insure [Section 69(7)]

The receiver is bound to insure the mortgaged property (where it is of insurable nature)
against loss or damage by fire where the mortgagee directs him to do so in writing.

[s 69A.7] Application of Money by Receiver [Section 69(b)]

The receiver has to apply all the money received by him in the following manner:
  (i) in discharge of all rents, taxes, land revenue, rates, and outgoings whatever
affecting the mortgaged property.
 (ii) in keeping down all annual sums and other payments and interest on all principal
sums having priority to the mortgage.
 (iii) in payment of his commission, premiums on insurance policies, and the cost of
executing necessary or proper repairs.
 (iv) in payment of interest following due or under the mortgage.
 (v) in discharge of principal money when directed by the mortgagee in writing.

The residue, if any, shall be paid to the person who is otherwise entitled to the mortgaged
property.

5. Accessions to Property (Section 70)

Accessions are additions to the property. Section 70 states 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 the converse
of section 63, which provides for the mortgagor's rights of accessions. The mortgagee is
entitled to treat the acquired accession as part of his security and to enforce his lien upon
them. This section is not limited to physical accretions only; an increase of interest or
enlargement of the estate is also considered an accession.

A mortgagee is entitled to the benefit of accession for the purpose of security only. Any
accession made after the extinction of the mortgage does not come under the purview of this
section.

Illustrations
(a) A mortgages to B a certain field bordering on a river. The field is increased by alluvion.
For the purposes of his security, B is entitled to the increase.

(b) A mortgages a certain plot of building land to B and afterwards erects a house on the plot.
For the purposes of his security, B is entitled to the house as well as the plot.

6. Right of Renewal of Mortgaged Lease (Section 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 purposes of
security in the absence of a contract to the contrary. This is based on the principle that a
renewal of lease is a graft upon the old stock and is, therefore, subject to the same equities as
the old lease. In Rakestraw v. Brewer, the principle stated was that "the new lease is treated
as engrafted on the stock of the old lease and forming part of the mortgage security."

This section is a corollary of section 64; just as the mortgagor gets the benefit of the renewed
lease, the mortgagee also gets the benefit of the renewed lease under section 71.

7. Right of Mortgagee to Spend Money (Section 72)

Section 72 outlines when a mortgagee in possession may spend money, based on the
principle from Dryden v. Frost. The mortgagee is entitled to be indemnified for reasonable
expenses related to the mortgaged property and can add these expenses to the mortgage debt.
The mortgagee can spend money only when necessary to preserve the property, as they
recover their loan from the mortgaged property in case of the mortgagor's default. If the
property is destroyed or devalued, recovery becomes impossible. Thus, the mortgagee must
protect the property, but this right is not absolute; spending must be necessary and
reasonable, without exceeding what is required.

Circumstances in which Expenditure is Allowed:

A mortgagee may spend such money as is necessary in the absence of the contract to the
contrary:
(i) for the preservation of the mortgaged property from destruction, forfeiture, or sale.
(ii) for supporting the mortgagor's title to the property.
(iii) for making his own title thereto good against the mortgagor, i.e., for defending his own
title against the mortgagor.
(iv) when the mortgaged property is a renewable leasehold, for the renewal of the lease.
(v) insuring the property where it is of insurable nature.

 Preservation Responsibility: Clause (b) permits the mortgagee to spend money on

preserving mortgaged property, which serves as security for debt repayment. While it is the
mortgagor's duty to protect the property, if they neglect this responsibility, the mortgagee can
step in to protect and preserve it, with expenses incurred added to the mortgage money. The
mortgagee’s interest in preservation is crucial, as any destruction or devaluation of the
property affects their ability to recover the debt.

 Defense of Title: The mortgagor must defend their title. If they fail, and the mortgagee
incurs expenses defending the title, those costs can be added to the principal.

 Defending Mortgagee’s Title: Clause (d) permits the mortgagee to defend their title
against challenges from the mortgagor and recover costs related to that defense. However,
costs incurred in defending against third parties or in criminal proceedings are not
recoverable.

 Lease Renewals: The mortgagee can spend on renewing leases for renewable leasehold
properties and add those costs to the principal. If a new lease is created after eviction, the
mortgagee cannot claim costs related to that lease.

 Insurance Premiums: The mortgagee can insure the property against loss or damage and
add the insurance premiums to the principal. The insurance amount should not exceed what is
specified in the deed or, if unspecified, two-thirds of the reinstatement cost in case of total
destruction.

8. Right to Proceeds of Revenue Sale or Compensation on Acquisition (Section 73)

(i) According to this section, where the mortgaged property or any interest in it is sold,
(ii) owing to failure to pay—
(a) arrears of revenue, or
(b) other charges of a public nature, or
(c) rent due in respect of such property,
(iii) such a failure did not arise from any default of the mortgagee,
(iv) the mortgagee shall be entitled to claim payment of the mortgage money out of any
surplus of sale proceeds remaining after the payment of—
(a) the arrears, and
(b) all charges and deductions directed by law. [Sub-section (1)]

The section further provides in sub-section (2) that where the mortgaged property or any
interest in it is acquired under the Land Acquisition Act, 1894, or any other enactment for the
time being in force providing for compulsory acquisition of immovable property, the
mortgagee shall be entitled to claim payment of the mortgage money out of the amount due to
the mortgagor as compensation.

This section, therefore, enunciates the doctrine of substituted security. The rights and
interests of the mortgagee in the mortgaged property get attached to the property or to the
compensation which may replace the mortgaged property.291.

The mortgagee's claim of mortgage money in this section prevails against all other claims
except prior encumbrances. The mortgagee is also entitled to enforce his claim even though
the principal money has not become due. This right is given to the mortgagee because neither
the sale in default of arrears of revenue nor acquisition under any enactment takes into
consideration the date on which the mortgage debt becomes payable.

9. Marshalling Securities (Section 81)

(i) If the owner of two or more properties mortgaged them to one person and then mortgages
one or more of the properties to another person,
(ii) the subsequent mortgagee is, in the absence of a contract to the contrary, entitled to have
the prior mortgage-debt satisfied out of the property or properties not mortgaged to him, so
far as the same will extend,
(iii) but not so as to prejudice the rights of the prior mortgagee or of any other person who
has for consideration acquired an interest in any of the properties.

Marshalling means arranging things. Section 56 gives the right of marshalling to a subsequent
purchaser, and section 81 confers a similar right on puisne mortgagees. This right arises when
the owner of two or more properties mortgages them to one person and then mortgages one or
more of them (already mortgaged to the first mortgagee) to another person. The subsequent
mortgagee is entitled, unless there is a contract to the contrary, to have the prior mortgage-
debt satisfied out of properties not mortgaged to him.

For example, a mortgagor mortgages his three properties A, B, and C to mortgagee X for Rs
15,000. He further mortgages only property C to Y for Rs 5,000. Here X is the prior
mortgagee and Y is the subsequent mortgagee, with property C mortgaged to both
mortgagees. The mortgage-debt of X is Rs 15,000. This section gives Y the right to request
that the debt of X be satisfied out of the sale proceeds of properties A and B, and not C. If the
proceeds of A and B are less than Rs 15,000, only then may property C be sold. Thus,
although Y is a subsequent mortgagee, his claim is not prior to X’s, but he has a right to
marshalling, i.e., arranging the securities in his favor as far as possible.

Essential Elements
(1) The mortgagees may be two or more persons, but the mortgagor must be common, i.e.,
there must be a common debtor.
(2) The right cannot be exercised to the prejudice of the prior mortgagee.
(3) The right cannot be exercised to the prejudice of any other person having a claim over the
property.

Common Debtor
It is necessary that the mortgagor is the same person. Both the prior and subsequent
mortgagees must have given the loan to the same person on the security of his properties. No
marshalling can be exercised unless the mortgagees between whom it is to be enforced are
creditors of the same person and have claims against the property of a common debtor.

No Prejudice to Prior Mortgagee

Marshalling must not prejudice the interest of the prior mortgagee. The subsequent
mortgagee cannot compel the prior mortgagee to proceed against a security that is
insufficient.

Barness v Rector (310), for example:

(i) A mortgages two properties, X and Y, to B.
(ii) A then mortgages X to C.
(iii) A again mortgages Y to D.

If C insists that B should pay himself wholly out of Y, there might be nothing left for D.
Therefore, the court will apportion B's mortgages rateably between X and Y, with the surplus
of X going to C and the surplus of Y to D.

Contract to the Contrary

The right of marshalling under this section is subject to a contract to the contrary. This right
may be excluded by the parties to the mortgage by mutual agreement. Different fragments of
the same property are not considered different properties. Where one portion of the property
already mortgaged is subsequently mortgaged to another person, they will not be considered
as different properties

Right of Purchasers: A subsequent mortgagee who purchases the equity of redemption

retains the right to marshalling. They can require the prior mortgagee to realize their security
from properties not mortgaged to the subsequent mortgagee.

10. Contribution to Mortgage-debt (Section 82)

1. Where property subject to a mortgage belongs to two or more persons having distinct
and separate rights of ownership, the different shares or parts of the property owned
by such persons are, in the absence of a contract to the contrary, liable to contribute
rateably to the debt secured by the mortgage.
2. For determining the rate of contribution, the value of each share or part will be
deemed to be its value at the date of the mortgage, after deducting any other mortgage
or charge that it may have been subject to on that date.
3. Where two properties belong to the same owner:
o One is mortgaged to secure one debt, and
o Then both are mortgaged to secure another debt, and the former debt is paid
out of the former property, each property is, in the absence of a contract to the
contrary, liable to contribute rateably to the latter debt, after deducting the
 amount of the former debt from the value of the property out of which it has
been paid.

The doctrine of contribution under Section 82 ensures that when multiple properties are
mortgaged to secure a debt, each property contributes rateably to the debt based on its value
at the time of the mortgage, minus any prior charges. This principle applies when either
multiple properties or a single property owned by co-owners is mortgaged.

The doctrine is grounded in equity, ensuring no individual bears the entire burden of a
common debt. Each party contributes proportionally based on their share of the property,
preventing unfair financial pressure on one person.

Rules of Contribution

The rules of contribution are as follows:

1. When mortgaged property belongs to two or more persons.

2. When one property is mortgaged first and then again mortgaged with another
property.
3. Marshalling supersedes contribution.

When Mortgaged Property Belongs to Two or More Persons

When mortgaged property belongs to two or more persons, all co-mortgagors must contribute
proportionately to the mortgage debt. If the debt is recovered from one person’s property,
they can demand contribution from the others based on their share of the property.

When One Property is Mortgaged First, Then Again with Another Property
If a property is first mortgaged for one debt and later mortgaged along with another property
for a second debt, both properties contribute to the second debt, proportionate to their value,
after deducting the first debt.

Marshalling Supersedes Contribution

In cases of conflict, the right of marshalling prevails over contribution.

Where Mortgagee releases Part of Mortgaged Property:

When a mortgagee releases any part of the mortgaged property he diminishes his own
security only because the rest of the property remains subject to the mortgage for the

Distinction between Marshalling and Contribution

(1) Marshalling is the right of subsequent mortgagees, whereas contribution is related to
mortgagors.
(2) In marshalling, a subsequent mortgagee requires that the prior mortgagee recover his debt
from the property not mortgaged to him. Whereas in contribution, all co-mortgagors who
have taken debt by mortgaging their properties must contribute to the debt rateably according
to their respective shares.

SUBROGATION: [SECTION 92]:

Subrogation is a Roman word that means "substitution." It is the right of a person to stand in
the place of the creditor after paying off their liabilities. In the case of a mortgage,
subrogation takes place only by redemption. Therefore, to be entitled to subrogation, a person
must pay off the entire amount of a prior mortgage. A partial payment of the mortgage debt
cannot give rise to a claim for partial subrogation.

The doctrine of subrogation is based on the principles of equity, justice, and good conscience.
The essence of the doctrine is that the party who pays off a mortgage is clothed with all the
rights of the mortgagee. This doctrine was made applicable even in those parts of India where
the Act itself was not applicable.

Where Mortgagor Redeems, Subrogation is Not Applicable:

Where the mortgagor himself redeems the property, this doctrine cannot be invoked. The
mortgagor who discharges a prior debt is not entitled to be subrogated to the rights and
remedies of his creditor. This is because, by discharging a prior encumbrance created by
himself, he is discharging his own obligation to his creditor.

Kinds of Subrogation:
Subrogation is of two types—legal and conventional subrogation:

Legal Subrogation:
Legal subrogation takes place by operation of law and is based on the principle of
reimbursement. Where a person interested in making some payment, which another person is
legally bound to make, then such a person must be reimbursed when they make the payment.
Legal subrogation can be claimed by:

1. Puisne Mortgagee: A subsequent mortgagee who redeems a prior mortgage can step
into the position of the prior mortgagee.

2. Co-mortgagor: A co-mortgagor, who pays off their share and also the share of
another co-mortgagor, is entitled to subrogation. They are considered the principal
debtor for their own share and a surety for others. If one co-mortgagor redeems the
property and the other co-owner seeks partition, subrogation occurs by law, not by
agreement.

3. Surety: A surety, who repays the mortgage if the mortgagor defaults, can redeem the
property and subrogate to the creditor’s position.

4. Purchaser of Equity of Redemption: A purchaser of the mortgagor's equity of

redemption can also claim subrogation if their intent is to keep the mortgage alive.
Courts recognize that such purchasers may keep the prior encumbrances alive for their
benefit to come before later mortgagees.

Conventional Subrogation:
Conventional subrogation occurs when the person paying off the mortgage debt is a stranger
and has no interest to protect, but advances the money under an agreement (express or
implied) that they would be subrogated to the rights and remedies of the mortgagee who is
paid off. The right of subrogation can only be claimed if the mortgagor has agreed by
registered instrument that they shall be so subrogated.

Redemption in Full:
It is necessary that the mortgage must be redeemed in full. The right of redemption shall be
deemed to be conferred only when the mortgage in respect of which the right is claimed has
been redeemed in full.