MORTGAGE - SECTION 58 - 59
58. “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and
“mortgage-deed” defined.—
● (a) A mortgage is the transfer of an interest in a specific immoveable
property for the purpose of securing the payment of money advanced or
to be advanced by way of loan, an existing or future debt, or the
performance of an engagement which may give rise to a pecuniary
liability.
● The transferor is called a mortgagor,
● the transferee a mortgagee;
● The principal money and interest of which payment is secured for the
time being are called the mortgage-money, and
● the instrument (if any) by which the transfer is effected is called a
mortgage -deed.
Essentials of Mortgage
1. There must be a transfer of interest.
Must be transfer of an interest in immovable property. It is not a transfer of
ownership like in sale but only interest with a hope that in future the property
will be taken if the loan is repaid.
2. Immovable Property to be specific.
The immovable property should be mentioned with certainty so that it can be
identified as to which property has been mortgaged.
3. The purpose must be to secure payment.
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.
A transfer which is made by way of discharging a debt is not a mortgage.
[NIDHA SHAH v. MURLIDHAR (1903) 25 ALL 115]
4. There must be an intention of the parties to create debtor and
creditor relationship within themselves.
Kinds Of Mortgage:
Section 58 of TPA there are six kinds of mortgage.
1. Simple Mortgage [sec. 58(b]
2. Mortgage by conditional sale[ sec. 58(c)]
3. Usufructuary Mortgage [sec. 58(d)]
4. English Mortgage [sec. 58(e)]
5. Equitable Mortgage [sec. 58(f)]
6. Anomalous Mortgage [sec.58(g)]
Simple Mortgage [sec. 58(b]
● Where the mortgagor promises to pay the mortgage-money (loan)
without delivering possession of the mortgagor-property and agrees
expressly or impliedly that in case of non-payment of loan, the mortgagee
shall have the right to cause the mortgage property to be sold under an
order of court, the mortgage is a simple mortgage.
ESSENTIALS
1. Mortgagor’s Personal Obligation
The mortgagor binds himself personally for the repayment of loan. Such
personal liability or obligation to pay may be expressed or implied from the
terms of a transaction since a promise to pay arises from the acceptance of the
loan.
2. No Delivery of Possession Possession remains with the mortgagor in the
case of a simple mortgage.
3. Right to cause the Property Sold
The mortgagee is empowered to sell the property in the case of non-payment of
the mortgaged money. However, the power of sale is not to be exercised without
the intervention of the court. This implies that the mortgagee needs to get a
decree from the court to execute the sale. Upon the sale of property by the
intervention of the court, the mortgagee shall get the money advanced by him
with interest and the remaining portion of proceeds of sale shall be given to the
mortgagor whose property was sold.
REGISTRATION - A simple mortgage can be created only through a
registered document. According to Section 59, even when the sum of money
secured is less than rupees 100, a simple mortgage needs to be effected by a
registered instrument.
4. Simple Mortgagee’s Remedy
1. Since in a simple mortgage the mortgagor holds a personal obligation
to repay the loan, the mortgagee may sue the mortgagor personally
for the recovery of the money. In such a case, he shall get a simple
money decree.
2. The mortgagee may also move to the court for the sale of mortgaged
property in order to recover his money. In such a case, he obtains a
decree for the sale of the property.
However, the mortgagee may put both the cause of actions in one suit. He
may sue the mortgagor personally and may also request the court for a decree in
his favour for the sale of the property but in both cases, the suit must be filed
within 12 years from the date on which the loan i.e. the mortgage money
becomes due.
Mortgage by conditional sale[ sec. 58(c)]
I. In it, the mortgagor ostensibly sells the mortgaged property, on
condition that
II. on default of payment of the mortgage-money on a certain date, the
sale is to become absolute,
III. on such payment being made, the sale is to become void, or the buyer
(mortgagee) is to transfer the property to the seller(mortgagor).
IV. The conditions, especially of re-transferring the mortgaged property
must be embedded in a document.
● The word "ostensible" means that it has an appearance of sale but is
really not a sale. The ostensible sale need not be accompanied with
possession.
● In this form of mortgage, there is no personal liability on the part of the
mortgagor to pay the debt.
● The remedy of the mortgagee is by foreclosure only. A mortgage is
foreclosed by obtaining a declaration from the Court to the effect that the
mortgagor will be debarred of his right of redemption. Such a
declaration/decree ripens the ostensible ownership of the mortgagee into
absolute ownership
(PANDIT CHUNCHUN JHA V. SHEIKH EBADAT) - The SC held that if the
provisions makes it clear that if the condition for repurchase is not mentioned in
the document the transaction cant be regarded as a mortgage.
A mortgage by conditional sale should be distinguished from a sale with
condition for repurchase. In the former, the sale is only ostensible, whereas in
the latter is a real sale. In a mortgage, the debt subsists and the right to redeem
remains with debtor. But, a sale with a condition of repurchase is not lending
and borrowing arrangements, there is no right to redeem but simply a personal
right of repurchase is reserved for the seller.
Usufructuary Mortgage [sec. 58(d)]
The essential elements of a usufructuary mortgage are given below:—
(i) 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.
● The mortgagor may either give express or implied undertaking to deliver
possession.
(ii) Rents and Profits
The mortgagee becomes entitled to receive rents and profits of the property
mortgaged till the money is repaid. The method by which the rents and
profits are to be appropriated depends on the terms of the mortgage deed. Such
rents and profits or part of the rents and profits may be appropriated:
● in lieu of interest,
● in lieu of principal, or
● in lieu of principal and interest.
(iii) There is no personal liability of the mortgagor.
The mortgagor is not personally liable for the mortgage money so the
mortgagee cannot sue the mortgagor personally for his debt.
(iv) Mortgagee’s Remedies
The mortgagee can sue for possession or recovery of advanced money if the
mortgagor fails to deliver possession of the property but if he has been given
possession, his only remedy is to retain property till his debts are satisfied.
The right of foreclosure or sale is not available for the usufructuary
mortgagee. The mortgagee enjoys the advantage of repaying himself.
(v) No time limit is fixed for the repayment.
(vi) Rights of Usufructuary Mortgagor
A usufructuary mortgagor has been given a right under Section 62 to recover
possession of the mortgaged property from the mortgagee in the cases where:
1. The mortgagee was authorised to pay himself the amount of
mortgage money from the rents and profits of the property and the
mortgage money is paid,
2. The mortgagee is authorised to pay himself from the rents and profits
and the terms stipulated for the payment of the mortgage money have
expired and the mortgagor pays the mortgage money or balance of
the same to the mortgagee or deposits it in the court.
Accession to Mortgaged Property (Section 63).— Section 63 provides that
where mortgaged property in possession of the mortgagee has during the
continuance of the mortgage received any accession, the mortgagor upon
redemptions will be entitled to such accession as against the mortgagee.
However, this is subject to the contrary contract i.e., if the mortgagor and
mortgagee both agree they can exclude the operation of this section.
English Mortgage [sec. 58(e)]
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.
Basic elements of an English mortgage are:
1. There is a consensus to pay the amount on the due date. The mortgagor
has to repay the mortgage money on the due date.
2. There is an absolute transfer of property to the mortgagee.
3. Such absolute transfer needs to be subject to a proviso that the mortgagee
will transfer the property to the mortgagor upon payment of mortgage
money on the agreed date.
Example: George borrows $200,000 from Helen and transfers his house to her
with the agreement that Helen will re-transfer the house upon repayment of the
loan.
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—
1. in the towns of Calcutta, Madras, Bombay and in any other town
specified by the State Government concerned in this behalf,
2. delivers to a creditor or his agent documents of title to immovable
property,
3. with intent to create a security, thereon such a transaction is called a
mortgage by deposit of title-deeds
The basic elements of this type of mortgage are:
1. There must be a debt.
2. There must be a deposit/delivery of the title deeds.
3. There is an intention that the deeds shall be security for the debt; and
4. Territorial restrictions
Anomalous Mortgage [Section 58(g)]
● 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.
● An anomalous mortgage is a combination of various other mortgages, for
example, a usufructuary mortgage may be created and the mortgagee
shall have the right of sale.
