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The Transfer of Property Act, 1882

The Transfer of Property Act, 1882 Mortgage and kind of Mortgages (Section 58)

SUBMITTED TO:

SUBMITTED BY:

Dr. Rajinder Kaur

Somnath Tayal

Professor, UILS

BAL.L.B (Hons.)

Panjab University

Section – Section – B B

Chandigarh

95/13

Mortgage and Kinds of Mortgage (Section 58)

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The Transfer of Property Act, 1882 INDEX Serial No.

Particulars

1.

Introduction

2.

Mortgage

5 6-12 6



Definition of Mortgage



History of Mortgage

6,7



Meaning of Mortgage

7,8



Elements of Mortgage

8-11



3.

Page No.



Transfer of Interest

8,9



Specific immovable property

9,10



Purpose of Mortgage

10,11

Important Terms

Kinds of Mortgage

11,12 13-23

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Simple Mortgage

13-15

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Mortgage by Conditional Sale

15,16

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Usufructuary Mortgage

17,18



English Mortgage

18,19

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Mortgage by Deposit of Title Deeds

20,21

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Anomalous Mortgage

21-23


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The Transfer of Property Act, 1882 ACKNOWLEDGEMENT This project has helped me a lot to learn about the law regarding the Transfer of Property Act, 1882. Basically my project was based on Mortgage and its types. While researching for my project I came across many new writers in field of law and I was amazed by the amount of information there was which I was missing out earlier for sure. This work has enabled me to know about the Transfer of Property Act, 1882, in a better way; my fundamentals of this subject were cleared up to a great extent. I would take this opportunity to thanks my teacher ‘Dr. Rajinder Kaur’ who chooses me for this project work. She has been a great influence both in class as a teacher and outside the class as a mentor. I would also thank my friends who in some way or other contributed to my project. Lastly I would extend my gratitude to the almighty one for granting me strength and wisdom to make this project.

Declaration:

It is being mentioned that the work contained herein is an original work. Though some books have been referred for guidance which are accordingly mentioned.

Somnath Tayal 95/13


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The Transfer of Property Act, 1882

LIST OF CASES Serial No. 1.

Name of the Case B. Jayashankarappa and others V. D. S. Gulwadi

Citation AIR

2000

Karnataka

359 2.

C. Raghunandan V. K Nageshwar Rao

AIR 2009 AP 205

3.

Hanooman Prasad V. Babooee Munraj Koer

(1856) 6 M.I.A. 393

4.

Ishawar Das V. Dhanang Singh

Air 1985 Delhi 83

5.

Janardhana Mallan V. Gangadharan

AIR 1983 Kerala 178

6.

Monappa Naika V. Land Tribunal Puttur

AIR 2012 Kar 161

7.

Munna Lal V. Phuddi Singh

AIR 1987 All. 155

8.

Nidha Shah V. Murli Dhar

(1903) 25 All. 115

9.

Raghunath V. Amir Bakesh

AIR 1922 Pat. 299

10.

Ram Chand V. Ishwar Chandra

AIR 1921 Cal. 172

11.

Ramkinkar V. Satyacharan

AIR 1939 PC 14

12.

Sri Raja Pappammarao V. Ram Chandra Raju

19 Mad. 249

13.

Sunil V. Aghor

AIR 1989 Gau. 39

14.

Thakur Das V. Putli

AIR 1942 Lahore 611

15.

Vaddiparthi V. Appalanarasimhulu

AIR 1921 Mad. 517


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The Transfer of Property Act, 1882 INTRODUCTION

Before the Transfer of Property Act came into existence in 1882, the transfer of immovable property in India were governed by the principles of English Law and Equity. In the absence of any statutory provisions the courts had to fall back upon English Law on real properties, sometimes forcing the courts to decide according to their own notions of justice and fair play, resulting in confused and conflicting case laws. To remedy these confusions and conflicts a Law Commission was appointed in England to prepare a code of Substantive Law of Transfer of Properties in India. 1 The preamble of the Transfer of Property Act, 1882, lays down that the Act has been enacted because it was ‘expedient to define and amend certain parts of law relating to the transfer of property by act of parties’ . This Act, was, therefore, enacted because it was necessary to give a definite meaning and make changes in some of the rules which at that time regulated the transfer of pro perties by act of the parties. Transfer ‘by act of the parties’ is transfer taking place between two living persons. Such a transfer is also known as ‘transfer inter vivos’.2 The object of the Transfer of Property Act may be summarised as under:3 1) The Transfer of Property Act, 1882 provides a definite, clear and uniform law for transfer of immovable property by act of parties i.e., transfer between li ving persons. 2) The Act has modified and made change in some of the rules which existed before its enactment. The changes were made so that the laws may be made suitable to the socioeconomic conditions of India. 3) The Transfer of Property Act completed the Code of Law of Contract. Before this Act, although there was Code for Contracts, but there was no enacted law for transfers which used to take place in furtherance of a contract. 4) By making provisions for inter vivos transfers, the Transfer of Property Act has enacted a law parallel to the already existing laws of testamentary and interstate transfers i.e., transfer of property under wills and under the law of inheritance.

1

The Transfer of Property Act, 1882, Bare Act. Dr. R. K. Sinha, the Transfer of property act, P 1 (Central Law Agency, Allahabad, 17 th Edition, 2016). 3 Id P-3. 2


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The Transfer of Property Act, 1882 MORTGAGE DEFINITION OF MORTGAGE

In Section 2(17) of the Indian Stamp Act, 1899, a mortgage is defined as follows: “Mortgagedeed includes every instrument whereby, for the purpose of securing money advances or to be advanced, by way of loan or an existing or future debt, or the performance of an engagement, one person transfers or creates, to or in favour of another, a right over or in respect of specified property.” This definition is much wid er and more general than that given in the transfer of Property Act, because it applies to any specified property both movable and immovable, whereas mortgage of a movable property is excluded from the Transfer of Property Act, and refers to the performance of an engagement and is not restricted to an engagement giving rise to a pecuniary liability only. But definitions are materia lly different.4 In Transfer of Property Act, 1882, mortgage is defined under Section 58(a) as: “A mortgage is the transfer of interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing debt, or the performance of an engagement which may give rise to pecuniary liability.”

HISTORY OF MORTGAGE

A mortgage by conditional sale was a very early form of mortgage among Hindus. Among Mohammedans, the mortgage by conditional sale was a device to evade the Islamic prohibition of interest. This was literally a sale with a promise, so that the mortgagee enjoyed the rents and profits in lieu of interest and became absolute owner of the property if the debt was not paid. However, the earliest form of Mohammedan security was the ‘rahn’ or pledge with possession. This developed by slow degrees into the recognition of a pledge without possession with a power to sale. The development was slower than in Hindu law because interest not being added, the security was always sufficient. In England it seems certain that the original mortgage at common law was rather a pledge than mortgage. The transfer was not of title, but of possession. This form was similar to usufructuary mortgage under the

4

Professor G.P. Tripathi, The Transfer of Property Act, 1882, P 281 (Central Law Publications, Allahabad, 15 th Edition, 2006).


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The Transfer of Property Act, 1882 transfer of property act. At a later time which cannot be exactly ascertained, the English mortgage took the modern form of a conditional conveyance. The condition was originally one of defeasance, that on repayment, the grant determined and the land reverted to the mortgagor who was entitled to re-enter. Subsequently, the condition became one of reconveyance on repayment as defined in clause (e) of Section 58. After the common law mortgage became a mortgage by conditional conveyance, it was modified by three principles of equity. These are:5 (1) That equity looks to the essence of the transaction and that a mortgage in essence is a borrowing transaction; (2) That the borrower is in need of protection and the condition that penalizes him is void; (3) That the condition of forfeiture in default of payment on due date is a penalty. These equitable principles have been applied to the law of mortgage India.

MEANING OF MORTGAGE

Loan may be secured or unsecured. Where money is given simply on the basis of debtor’s promise to pay i.e. on promissory note, the creditor can file suit for recovery of his money. But, if such debtor has no money to repay the loan or becomes insolvent, the creditor’s money is lost because he cannot recover it from debtor’s property. Such loans are therefore, called, unsecured loans. On the other hand, before giving the loan, the creditor may take security from the debtor for the repayment of his money. Where the loan is secured against any movable property, it is called a pledge. Where the loan is secured against some immovable property of the debtor, it is called mortgage. In both the cases, whether the property is movable or immovable, the loan is secured because in default of repayment, the creditor can recover his money from the property which has been specified as security. 6 In the case of B. Jayashankarappa and others V. D. S. Gulwadi 7, it was held that a reading of Section 58 per se shows that a mortgage, no doubt is a transfer, but not the transfer of

5

Dinshah Fardunji Mulla, The Transfer of Pro perty Act 1882, P 551 (Lexis Nexis, New Delhi, 10 th Edition, 2006). 6 Supra Note 2, P 273. 7 B. Jayashankarappa and others V. D. S. Gulwadi, AIR 2000 Karnataka 359.


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The Transfer of Property Act, 1882 absolute ownership rights and in this respect it differs from sale. A mortgage is said to be a transfer of a limited interest in a specific immovable property. The purpose of mortgage is said to secure the payment of money, which the transferor possesses in the property, pass on by transfer to the transferee. In a mortgage, some rights are transferred to the mortgagee, while some others remain with the mortgagor. In the case of Nidha Shah V. Murli Dhar 8, a deed purported to be a deed of mortgage with possession of certain villages for a period of 14 years, provided that at the expiry of the term the mortgagers were to come into the possession of the mortgaged villages without settlement of the accounts and the mortgagee should than have no power whatsoever in respect of the said estate but should return the mortgage deed to the mortgagors without their repaying the mortgage money. The mortgagee refused to return such village as he had on the ground that he had not received the full number of villages and had not been able to compensate himself. The Privy Council held that the deed was not a security for the payment of any money and the transfer was not a mortgage but a grant of land for fixed term free of cost. The so called mortgagors were entitled to recover possession.

ELEMENTS OF MORTGAGE

Following essential elements are necessary in Mortgage:9 1. There must be transfer of interest. 2. The interest transferred must be of some specific immovable property. 3. The purpose of transfer of interest must be to secure payment of any debt or, performance of an engagement which may give rise to a pecuniary liabilit y. 1.

Transfer of Interest: In a mortgage there is transfer of only an interest of the

immovable property. There is no transfer of absolute interest or ownership. The interest is transferred in favour of the mortgagee who advances the money as a loan. It is the interest of property which gives him the right to recover his money from mortgagor’s property. A peculiar feature of the interest transferred is that such interest itself is an immovable property. However mortgage is not a transfer of all the interests. After 8 9

Nidha Shah V. Murli Dhar , (1903) 25 All. 115. Supra Note 2, P 275.


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The Transfer of Property Act, 1882 transferring this interest in favour of mortgagee, there still remains a vested remainder with the mortgagor. 10 In the case of Janardhana Mallan V. Gangadharan 11, it was decided that, mortgage is simply a transfer of interest in the immovable property while the ownership still retains with the mortgagors. Thus, where a joint family property is subject to mortgage, there is no matter of ownership and the coparceners being its lawful owners are competent to allot the mortgaged property in oral partition to any of the coparceners. The coparcener to whom the mortgaged property is allotted becomes it absolute owner and is entitled to redeem the mortgage. The words ‘transfer of an interest’ also brings out the distinction between: 12 (1) A mortgage and an agreement to mortgage

A mortgage is a transfer of an interest and creates a right in rem, but mere agreement that one person shall lend the money and the other would borrow it by way of mortgage, does not create any interest in the property intended to be mortgaged. Such an agreement is not even capable of specific performance, that is, the court cannot compel the parties to borrow or lend money. Such an agreement only gives rise to an obligation to pay damages. Since a mortgage creates a right in rem, such right is available against all subsequent transferees of the mortgaged property irrespective of notice. (2)A mortgage and a charge

The broad distinction between a charge and a mortgage is

Whereas a charge only gives a right to the payment out of a particular immovable

property without transferring any interest in the property, a mortgage is in essence a transfer of an interest in specific immovable property. 

A mortgage is good against a subsequent transferee and may been forced against a

bona fide purchaser for value with or without notice, while a charge is good only against a subsequent transferee without notice. 2. Specific Immovable Property: The next requisite of a mortgage is that immovable

property must be distinctly specified. The description of the property in mortgage deed, is any, must at least be sufficient to identify the property. The word ‘Specific’ is to be 10

Supra Note 2, P 275. Janardhana Mallan V. Gangadharan, A.I.R. 1983 Kerala 178. 12 S.N. Shukla, Transfer of Property Act, P 233 (Allahabad Law Agency, Faridabad, 27 th Edition 2009). 11


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The Transfer of Property Act, 1882 distinguished from the word ‘General’. For instance, the word “my house and landed property” or “my house and property” have been held to be general and vague. On the other hand, the words “a house situated in Ghaziabad owned and possessed by us” have been held to be sufficiently specific.13 Immovable property includes also things attached to what is embedded to the earth. For instance, machinery attached permanently in the house for beneficial enjoyment of that house is also an immovable property. Therefore, mortgage of the house shall also include the mortgage of that machinery or any other fixture which is part of that immovable property. But, if the machinery or other fixture is not permanently attached for beneficial enjoyment, it shall not form part of security if the house is mortgaged. 14

3. Purpose of Mortgage: the third essential ingredient of mortgage is some purpose behind

mortgage or mortgage must be supported by some consideration. The consideration of mortgage must be either: 

Money Advanced or to be advanced;



An existing or future debt; or



The performance of any engagement giving rise to a pecuniary liability.

A mortgage is created with the purpose of securing a debt or other obligation. A transfer which is made by way of discharging a debt is not a mortgage. 15 Mortgage may be executed for the sum of money advanced or sum of money to be advanced on any future date. When a mortgagee had already given money and mortgagor executes mortgage deed for security of that money it is called mortgage for money advanced. Whereas, when mortgage deed is executed for sum of money which will be given in some future date is known as mortgage for money to be advanced. In Raghunath V. Amir Baksh 16 , A executed a mortgage in favour of B on 3 rd May. B gives money to A on 10th May. But, in the mean time, on 7 th May, A sold the mortgage property to C. thus C purchased property subject to mortgage. But C argued that since the consideration was not paid before the sale, there was no mortgage at the time of sale, therefore, he is not bound by the mortgage. It was held by the Patna High Court that the mortgage was

13

Supra Note 12, P 233. Supra Note 2, P 276. 15 Supra Note 12, P 234. 16 Raghunath V. Amir Bakesh, AIR 1922 Pat. 299. 14


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The Transfer of Property Act, 1882 effective from that date of its execution which was 3 rd May i.e. before the sale. Therefore, C was bound by the mortgage. Existing Debt means a debt the claim of which exists at present e.g. a debt which is not barred by limitation. Such debt may be secured by way of mortgage. Mortgage may be affected to secure also a future debt. Future debt is a sum of money which the mortgagee is entitles to get from mortgagor on a future date. 17 The term performance refers to an act of mortgagor resulting from an engagement. The term engagement refers to a contract and due to this contract; there is a possibility that the mortgagor may incur a financial liability. Just as a breach of contract results into pecuniary liability the engagement contemplated here should also arise in some pecuniary liability. In the case of Ram Chand V. Ishwar Chandra, 18 the facts were A borrows paddy from B in the form of interest. Paddy had pecuniary value and it was held that the transaction was mortgage and the engagement to return paddy with interest was an engagement and leads to pecuniary liability of A.

IMPORTANT TERMS

Some of the important under Section 58 are as follows: Mortgagor: A person affecting the mortgage of his property is called a mortgagor. A



mortgagor must be a person competent to contract and capable to transfer of property. A minor cannot affect a mortgage, but a guardian of minor can affect a valid mortgage with the sanction of the court. If several persons execute a mortgage and some of them are minors, the mortgage is only partly invalid. It remains valid and operative for those competent to execute it. Where the guardian of a minor executes mortgage of the property of the minor without the sanction of the court, the mortgage is not void but voidable at the option of the minor which he can exercise on attaining majority. If a karta of a joint Hindu family executes a mortgage of the joint family property without the consent of the other coparceners, the mortgage is voidable at the option of the other coparceners. If the mortgage is for a legal necessity, it is not necessary for the mortgagee to see the

17

Supra Note 2, P 277. Ram Chand V. Ishwar Chandra, AIR 1921 Cal. 172.

18


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The Transfer of Property Act, 1882 application of his money and all that he needs to show to the court is that he made reasonable inquiries and acted honestly. Mortgagee: One in whose favour property is mortgaged is known as mortgagee. Any



person who is competent to hold property can be a mortgagee irrespective of his competency to contract. It is competency to hold the property and not competency to contract which is material here. Therefore, as held in Thakur Das v. Putli 19, even a minor is competent to be a mortgagee. Mortgage Money: The expression mortgage money is the money against which security



is mortgaged. The mortgage money includes both principle amount and interest thereon. Only on the payment of principle amount the mortgagor cannot redeem the property as interest is also having a charge upon the security. However, the parties are free to make any contract contrary to it. It must be noted that the interest is provided for by the terms of the deed. If no provision is made for interest in the mortgage deed than the security will only be for the principal amount. Mortgage Deed: As per the Transfer of Property Act, 1882, Section 58 says that the



instrument by which the mortgage is affected is mortgage deed. There is no particular form of words in which the mortgage deed is to be formed. In the case of Hanooman Prasad V. Babooee Munraj Koer ,20 Privy Council has observed that, the form of expression, the literal sense, is not to be so much regarded as the real meaning of the parties which the transaction discloses. It is sufficient that the transfer should be originally intended as security for the debt.

19

Thakur Das V. Putli, AIR 1942 Lahore 611. Hanooman Prasad V. Babooee Munraj Koer , (1856) 6 M.I.A. 393.

20


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The Transfer of Property Act, 1882 KINDS OF MORTGAGE The Transfer of Property Act, 1882, under section 58, contemplates six types of mortgages as: 1) Simple Mortgage, 2) Mortgage by Conditional Sale, 3) Usufructuary Mortgage, 4) English Mortgage, 5) Mortgage by deposit of Title Deed, and 6) Anomalous Mortgage.

Simple Mortgage Mortgage by Conditional Sale Usufructuary Mortgage English Mortgage Mortgage by Deposit of Title Deeds

Anomalous Mortgage

SIMPLE MORTGAGE

As per section 58(b) of the Transfer of Property Act, 1882, simple mortgage is: “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


Page 13

The Transfer of Property Act, 1882 be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.” So, as per this definition, the main characteristics of simple mortgage are: 

The mortgagor takes a personal undertaking to pay the loan.



The possession of the mortgage property is not given to the mortgagee.



In the case of non-payment of loan the mortgagee has right to have the mortgage-property sold.

Personal Undertaking: A personal undertaking to pay is essential element of a simple

mortgage. The covenant to pay may be express or implied from the terms of a particular transaction. The promise to pay is implicit in the mortgage transaction, as, for example, in the case of usufructuary mortgage. 21 No Delivery of Possession: Another essential element of a simple mortgage is that

possession of the mortgage-property is not given to the mortgagee. This element of simple mortgage distinguishes it from usufructuary mortgage in which possession of the mortgage property is given to the mortgagee who gets right of enjoyment of that property. Under a simple mortgage, the mortgagee is not entitled to get possession of property. 22 Power of Sale: What is transferred to the mortgagee under a simple mortgage is a right to

cause the property to be sold through Court. Lord Hobhouse in Sri Raja Pappammarao V. Ram Chandra Raju 23, observed that, in default of payment a simple mortgage gives tot eh mortgagee a right not to possession but to sale which he must work out in execution proceedings. Mortgagee’s Remedy: When mortgagor fails to repay the loan in the specified time, than in

case of simple mortgage, mortgagee has two remedies as: 

He can sue the mortgagor personally for recovery of money, or



The mortgagee can also move to court for the sale of mortgage-property. Proceeds of the sale are settles against loan with interest and rest is returned back to the mortgagor.

21

Supra Note 12, P 237. Supra Note 2, P 280. 23 Sri Raja Pappammarao V. Ram Chandra Raju, 19 Mad. 249. 22


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The Transfer of Property Act, 1882 Registration: Simple mortgage can only be effected only by a registered document, even if

the amount is less than rupees hundred.

MORTGAGE BY CONDITIONAL SALE

As per Section 58(c) of the Transfer of Property Act, 1882, the mortgage by conditional sale is described as: “Where, the mortgagor ostensibly sells the mortgaged propertyOn 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 mortgage by conditional sale and the mortgagee a mortgagee 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.] ” Essential elements as are embodied under the section are as below:24 

There is an ostensible sale of an immovable property.



The sale is subject to any of the following conditions: a. On non payment of mortgage money the sale would become absolute or, b. On payment of mortgage money, the sale shall become void or the buyer shall retransfer the said property to seller. The condition must be embodied in the same document.



Ostensible Sale: A mortgage by conditional sale is an ostensible sale which ripens only on

the breach of condition as to payment into an absolute sale. The mortgagor here has no personal liability. The mortgagee remains content with the mortgaged property only. On the breach of conditions of payment, the contract executes itself and becomes one of absolute sale which can be enforced in a particular manner known as foreclosure. The mortgagee cannot look towards the personal properties of the mortgagor because he has no personal liability towards mortgagee. Ostensible sale means a sale which apparently looks like a sale 24

Supra Note 2, P 281.


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The Transfer of Property Act, 1882 but in reality it is not a sale but a security for debt. The existence of debt can be i nferred from the very nature of the conditions contained in the mortgage-deed. 25 Condition: The characteristic feature of this form of mortgage is that it is a sale but becomes

mortgage because of any condition attached to it. The existence of debt is inferred from the very nature of condition which makes it a mortgage. The condition may be that if the mortgagor returns back the debt than the sale becomes void or buyer had to return back the property to the seller. Thus, whether the ostensible sale becomes sale in real or property comes back to seller depends upon the fulfilment or non-fulfilment of the conditions. However, it is necessary that any of the conditions mentioned must be incorporated in the same document. In the case of Sunil V. Aghor ,26 separate documents of sale deed, deed of reconveyance and lease deed were executed in the same transaction but the condition effecting the sale as a mortgage was not embodied in the sale deed itself. The Guhati High Court held that the transaction was not in the nature of mortgage by conditional sale. The Court further observed that the condition purporting to effect the sale as mortgage transaction must be incorporated in one and same document. Registration: In case of mortgage by conditional sale, it is necessary to register the deed

when the mortgage money is more than rupees hundred. Difference between Conditional Sale and Sale with Condition to Repurchase: Whether a

particular transaction is a mortgage by conditional sale or an out-and-out sale with a right to repurchase is to be determined by the intention of the parties which can be gathered by terms of the deed. These two transactions can be distinguished on the following two grounds as: 

In a mortgage by conditional sale, the relationship of debtor and credit or is necessary. The existence of a debt is must. But in sale with a condition to repurchase, there is no such relationship of debtor and creditor between seller and the buyer and no debt exists.



In a mortgage by conditional sale there is transfer of only some interest in the property mortgaged but in sale by condition to repurchase there is a transfer of whole of the interest in the property except a personal right to repurchase the property which is lot if it is not exercised within the given time. 27

25

C. Raghunandan V. K Nageshwar Rao, AIR 2009 AP 205. Sunil V. Aghor, AIR 1989 Gau. 39. 27 Supra Note 2, P 285 26


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The Transfer of Property Act, 1882 USUFRUCTUARY MORTGAGE

Usufructuray Mortgage has been described under Section 58(d), of the Transfer of Property Act as: “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 an usufructuary mortgage and the mortgagee an usufructuary mortgagee.” Essential elements as are given under the given section of usufructuary mortgage are: 

Delivery of possession of the mortgage property.



Enjoyment or use of property by mortgagee until debt is paid off. No personal liability of the mortgagor.



Mortgagee cannot foreclose or sue for sale of mort gaged 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 give express or implied undertaking to deliver possession. The mortgagee can take undertaking that he will deliver the possession in the future date. However, such undertaking can be implied or express. In the case of Monappa Naika V. Land Tribunal Puttur ,28 it was held that, where as per the mortgage deed, the mortgagee himself had to keep the possession, but he transferred possession to another person who was cultivating the land. It was held the possession of the mortgagee being on personal basis, the transferee had no legal right of being regarded as a tenant, etc. Rents and Profit: The method by which the rents and profit are to be appropriated depends

upon the terms of the mortgage deed. The rents and profits or par of the rents and profits may be appropriated as:

28

Monappa Naika V. Land Tribunal Puttur , AIR 2012 Kar 161.


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The Transfer of Property Act, 1882 

In lieu of interest,



In lieu of principal, or



In lieu of principal and interest

In a usufructuary mortgage, the mortgagee has right to use the property until the debt is fully paid. Generally, the mortgagee adjusts the interest from out of the rents and profits of mortgage property. As soon as the mortgage money is paid off by the mortgagor, the mortgagee vacates 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. He cannot compel the mortgagor to pay back the mortgage-debt. Only the mortgagor himself can pay off the debt and take back the property. The main characteristic of usufructuary mortgage is that no time limit is fixed for the repayment. 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 or the mortgagee can adjust money received by his as rents and profits partly in lieu of the principle amount for setting off the debt. Registration : Where money taken is Rupees hundred or more, registration is necessary. In

other case, mortgage is complete only by delivery of possession and no registration is necessary in those cases where mortgage money is less than rupees hundred.

ENGLISH MORTGAGE

As per Section 58(e) of the Transfer of Property Act, 1882, English mortgage is: “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.”


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The Transfer of Property Act, 1882 Essential elements as are embodied under the definition are: 

The mortgagor binds himself personally to pay off the debt.



There is absolute transfer of mortgage property.



The absolute transfer is subject to a proviso that the mortgagee will retransfer the mortgaged property to mortgagor on payment of mortgage money on specific date.

In the case of Ramkinkar V. Satyacharan,29 the Privy Council observed that, section 58(e) deals with form not substance. The substantial rights are dealt with in Section 58(e) and 60. Whatever form is used, nothing more than an interest is transferred and that interest is subject to the right of redemption. It is therefore settled law that the word absolute in English mortgage is used merely as a matter of form. What really passes over the mortgage is interest as per Section 60. In English mortgage, the mortgagor binds himself personally to pay the debt and it is also necessary to specify the particular date before which debt had to be cleared. Difference from Mortgage by Conditional Sale: An English mortgage resembles a

mortgage by a conditional sale in so far as both of them belong to that class of securities in which the ownership of the property mortgaged is liable to be transferred from the mortgagor to the mortgagee on default of the payment. There are however the following points of difference between the two forms of mortgage- 30 (a) In an English mortgage, the mortgagor ordinarily undertakes to pay the debt personally. But in a mortgage by conditional sale, the mortgagor does not necessarily make himself personally liable for the payment of the mortgage money and accordingly the mortgagee has his remedy against the mortgaged property alone. (b) In an English mortgage, the ownership in the mortgaged property is absolutely transferred to the mortgagee, which is, however, liable to be divested by the repayment of the loan as agreed. In a mortgage by conditional sale, the mortgagor acquires only a qualified ownership, which, by terms of the agreement, generally ripens into absolute proprietorship on the default of the mortgagor.

29

Ramkinkar V. Satyacharan, AIR 1939 PC 14. Supra Note 2, P 291.

30


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The Transfer of Property Act, 1882 MORTGAGE BY DEPOSIT OF TITLE DEED

Section 58(f) of the Transfer of Property Act, 1882, defines mortgage by deposit of title deed as: “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 immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.” Under English law, a mortgage by deposit of title sees is known as equitable mortgage. It is called equitable mortgage because in the absence of any legally executed document, merely on the basis of possession of title deeds by mortgagee, equity would ensure return of his money. In the words of Lord Cairns, “It is well established rule of equity that a deposit of a document of title without more, without writing, without word or mouth, will create equity a charge upon the property referred to” 31 Essential elements of a mortgage by deposit of title deed are as below: 

Existence of Debt,



Deposit of title deed,



Intention to create security, and



Territorial restrictions.

Existence of Debt: As in other mortgages, the debt in a mortgage by deposit of title deeds

may be an existing or a future one. It may also be by way of present or future advances. The title deeds may be deposited also to cover a general balance that may be found on running account.32 Deposit of Title Deed: The essential feature of a mortgage by deposit of title deeds is the

delivery of title deeds to the mortgagee. An actual or even constructive delivery of title deeds relating to the property and showing the title of the depositor is sufficient and it is not necessary that there must be a physical delivery. For a valid equitable mortgage it is not necessary that all the documents of title should be deposited, or documents deposited should 31

Supra Note 2, P 292. Supra Note 12, P 251.

32


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The Transfer of Property Act, 1882 show a complete title, it is enough if the deeds, deposited bona fide relate to the property and are material evidence of title.33 In the case of Ishwar Das V. Dhanang Singh,34 an additional amount was advanced to the mortgagor on the agreement that mortgagee will be entitled to retain the documents as security also for the additional amount. The Delhi High Court held that the agreement was to be treated as constructive delivery of the title deeds to the creditor. It is unnecessary to require the deeds to be put back in the hands of debtor and redeposit when they are already in the possession of creditor for earlier mortgage. Intention to create security: The third and very essential element is that the deposit of the

title deed must be made with a distinction intention of creating a security for the debt. If in the contemplation of the parties to have a legal mortgage prepared and if the title deeds are deposited for the purpose only, the deposit does not create a mortgage. The mere fact that the title deeds have been deposited is not sufficient unless there is an agreement that the deeds should stand as security. 35 Territorial Restriction: The facility of the mortgage by deposit of the title deeds was

originally limited to presidency towns but now has been made available in many other cities also including Delhi, Kanpur, Allahabad, Lucknow, Coimbatore, Madurai, Kokinada, Bikaner, Cochin, Jaipur, Jodhpur, Manglore, Banglore and M ysore etc. 36 Existence of Property: This type of mortgage can only be availed in the cities named in the

territorial restriction. But, the property which is mortgages might be situated at any place. Its existence on any or either of these cities is not insisted upon. Registration: A mortgage by deposit of title deeds is created by deposit of title deeds and it

is not necessary that the transaction should be recorded. But it is usual for the deposit of title deeds to be accompanied by a memorandum in writing, if this writing must be the contract of mortgage so that it creates the mortgage, it must be registered. 37

ANOMALOUS MORTGAGE

33

Supra Note 2, P 294. Ishawar Das V. Dhanang Singh, AIR 1985 Delhi 83. 35 Supra Note 12, P 252. 36 Supra Note 4, P 301. 37 Supra Note 12, P 253. 34


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The Transfer of Property Act, 1882 Section 58(g) of the Transfer of Property Act, 1882 describes Anomalous Mortgage as: “A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of this section is called an anomalous mortgage.” Section 58 has laid down various types of mortgage. But, the classification is not exhaustive. Beside these form of mortgage, there are other methods of taking loans on the security of immovable property. However these are not such included by specific name but are covered under the heading of anomalous mortgage. 38 Registration: Registration is compulsory in this tyoe od mortgage irrespective of value of

mortgage money. Examples: 

Combination of Simple and usufructuary mortgage : The mortgagee is in possession

of the property and pays himself out of rents and profits of the property, the mortgagor has a personal covenant to pay with express or implied right of sale. In the case of Munnia Lal V. Phuddi Singh 39, the mortgage deed provided that in the event of failure on the part of mortgagor to pay up the amount due within the specified period of time, it shall be open to the mortgagee to recover the same by sale of the mortgage property. The mortgage deed also provides that the mortgagee is entitled to realize rents from the shop situated in the mortgage property. Allahabad High Court held it as anomalous mortgage as like simple mortgage mortgagee can recover debt by selling the property at the end of time limit and like usufructuary mortgage, the mortgagee has right to receive rent from the shop. 

Mortgage usufructuary by conditional sale : The mortgagee is in possession as

usufructuary mortgagee for a fixed period and if the debt is not paid within the fixed period, he becomes mortgagee by conditional sale. As in the case of Vaddiparthi V. Appalanarasimuhulu, 40 the mortgage was usufructuary mortgage in which the rents and benefits were agreed to be adjusted against interest. It was also agreed that the principal money shall be repaid in five years and if it is not repaid in this period, the mortgage was

38

Supra Note 2, P 297. Munna Lal V. Phuddi Singh, AIR 1987 All. 155. 40 Vaddiparthi V. Appalanarasimhulu, AIR 1921 Mad. 517. 39


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The Transfer of Property Act, 1882 to work out into the sale at the expiry of twenty years. The Madras High Court held that it was a typical mortgage usufructuary by condtional sale. Customary mortgages: There are mortgages in which special conditions are attached by



local usage certain peculiar mortgages are in practice in the form of local customs. For instance, Otti and Kanom mortgages cannot be redeemed before the expiry of 12 years in the absence of an agreement to the contrary. The Kanom mortgage operates as a lease and usufructuary mortgage. San Mortgage is in practice in Gujarat. A peculiar feature of San Mortgage is that a San mortgage without possession gets priority over any subsequent bona fide purchaser with possession.41

41

Supra Note 2, P 299.


Page 23

The Transfer of Property Act, 1882 BIBLIOGRAPHY BOOKS



Avtar Singh, Textbook on the Transfer of Property Act, (Universal Law Publishing Co. Pvt. Lmt., Delhi, 2006).



Dr. R.K. Sinha, The Transfer of Property Act, (Central law Agency, Allahabad, 17 th Edition 2016).



G. P. Tripathi, TheTransfer of Property Act,1882, (Central Law Publications, Allahbad, 15th Edition, 2006).



Mulla, The Transfer of Property Act, (Lexis Nexis, New Delhi, 10 th Edition 2006)



Poonam Pradhan Saxena, Property Law, (Lexis Nexis, New Delhi, 2 nd Edition, 2011).



S. N. Shukla, The Transfer of Property Act, (Allahabad Law Agency, Faridabad, 27 th Edition 2008).


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Mortgage

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