Mortgage: :

Transfer of an interest in specific immovable property.for the purpose of securing the

payment of money.advanced or to be advanced, by way of loan.Existing or future
debt.performance of any engagement which may give rise to pecuniary liability.

When a person lends money to another, he may be content to make a loan on the promise that
the borrower shall repay back in time.suppose such a person goes insolvent, the lender
may be in trouble having nothing to realize his amount from. And therefore if a security is
given for repayment, lender is protected even if the borrower becomes insolvent.mortgage
is one of the most important and probably the most ancient form of security, though the
development in various civilizations may have been different in different contexts.

As the definition suggests mortgage is a transfer of an interest, in a specified immovable
propertynot an absolute transfer of property or ownership.this is made to secure
payment of a loan.

Transfer of an interest distinguishes the mortgage from a charge.in a charge a right to
payment out of a particular immovable property without transferring any interest in the
property is given.whereas in a mortgage the transfer of an interest is distinguishing feature
and that too in a specified immovable property.a mortgage is good against a subsequent
transferee and may be enforced against a bonafide purchaser for value with or without
notice, while the charge is good only against a subsequent transferee with notice.

Specific immovable property makes it clear that the description of the property
mortgaged must be sufficient to identify the property.the word specific to be
distinguished from general, e.g. my house and property and my landed property have been
held to be general expressions.

Like any other contract the mortgage is to be supported by consideration.which may be
either the money advanced or to be advanced.an existing or future debt or the performance
of an engagement giving rise to a pecuniary liability.

Money advanced include existing debt and might well include a debt which has become
barred by limitation, whereas an existing debt means the debt which is not barred.
Mortgage may also be given for money to be advanced.This also means that mere non-
payment of mortgage money cannot have he effect of rendering the mortgage invalid.once
a document transferring immovable property has been registered the transaction is complete
and is governed by provisions of TP Act.However if the mortgagee without advancing the
amount agreed sues on the title created under the deed of mortgage, the court will not award
him a decree.

Future debt means a debt which may be incurred at any time after the mortgage.Money to
be advance and future debt are two separate things.money to be advanced is part of the
agreed terms.whereas the future debt may be a matter of further negotiations.

Any other engagement may be some other liability to pay some other thing, for example
mortgage of field for securing payment of paddy or wheat to the mortgagee.

Money advanced or to be advanced would imply that mortgage would not become void for
non-payment of money. Non-payment cannot have the effect of rendering the contract
invalid.

But if the mortgagee without advancing the money sues on the title deeds, his act would be a
nullity and courts would not award him a decree.in such a case the deed is ineffective but
not void.

58 (para-2) defines various parties involved in the transaction and nomenclature of the
documents.

Forms of Mortgage: : 1. Simple Mortgage.: (58 (b) : Without delivering the possession of
the mortgaged property.the mortgagor binds himself personally to repay.in case of
failure to pay, the mortgagee have a right to sell.(No delivery.personal undertaking.
right to sale).

On default the mortgagee have two fold course of action.sue the mortgagor personally.
Proceed against the property.May combine both in an action.

2 : Mortgage by Conditional Sale : : (58 (c): : To avoid taking interest (muslim law
prohibits taking of interest.byebil wafa) this kind of mortgage is devised during
Mohamdam rule in India.

The mortgagor purported to make over the property (ostensible sale) to the mortgagee by
way of an absolute sale and agrees to re-purchase the property on expiry of stipulated time.
(Legal recognition by Bengal Regulation Act 1878)Ostensible sale.on default of
payment sale becomes absolute.on payment sale becomes void.condition that on payment
mortgagee re-transfer.But such condition has to be embodied in the transaction itself.

Ostensible sale is conditional and intended simply as security of debt.ostensible sale need
not be accompanied with possession.mortgagee does not get a personal right.Breach of
condition of repayment within stipulated periodtransaction closedto be enforced by way
of an action of foreclosure.On expiry of stipulated period it does not become absolute
automatically but foreclosure by Court decree.

Sale with a condition of Repurchase: : is different.in Mortgage.debt subsists.right
to redeem.Transaction is only security.condition of forfeiture on default is penalty.

In sale : : Not a lending borrowing transaction.personal right of repurchase.distinction is
very fine but appreciable. (Chunchun Jha v. Ebadat Ali, 1955 1 SCR 174) (Tamboli
Ramanlal v. Kishanlal, AIR 1992 SC 1236)

3: : Usufructuary Mortgage: : Mortgagor delivers possession or binds himself to deliver
possession.authorises the mortgagee to retain possession, receive rents, profits etc.,
appropriate same in lieu of interest and mortgage money. (Possessionrents and profits
no personal liabilityno time limit)

Zuripeshagi Lease: Similar to usufructuary mortgagelumpsum payment.possession for
a definite period of time.Kanam Kuzhikanam: : too is similar to usufructuary mortgage.,
but is a lease like Zuripeshagi lease.

4: : English Mortgage: 58(e): : Mortgage binds himself to repay the mortgage money on
certain date.transfers property absolutely.subject to a proviso to transfer on payment.

It is different from mortgage by conditional sale: : personal obligation to pay.property
absolutely transferred to mortgagee.the word absolute transfer to be read subject to
definition of mortgage.(Ramkinkar v. SatyaCharan. 1939 I A 66)

5: : Mortgage by deposit of title deeds: : 58 (f): : Debt.deposit of title deedsintention
to create security.territorial limits (Bombay, Madras, Calcutta or any other town so
declared by the State government.In England, this is called equitable mortgage. (K J
Nathan v. Maruthi Rao, AIR 1965 SC 430)

6: : Anomalous mortgage: 58 (g)

Rights and Liabilities of Mortgagor: :

Before we start discussing the rights and liabilities of the parties to the mortgage, one thing
has got to be understood is that, the rights and liabilities of parties in case of mortgage unlike
sale are not that simple. The reason being the variety of transaction that can be entered into in
a mortgage process.

In case of such confusion, normally the party in position of strength is always the mortgagee
and walks away with a good bargain.Therefore mortgages have always been from the very
beginning taking advantage of the situation.

To avoid this unfortunate situation and to safeguard the rights of the mortgagor certain
principles have come to be established.

Equity of redemption is one such very important, probably the most important right of the
mortagagor.It was under English common law that this was called equity of redemption.
ay attempt by the mortgagee to foreclose the equity of redemption have always been
interpreted strictly by the courts of equity in England and for that purpose doctrine of clog
have come to be developed which has also been recognized by the Courts in India.

Lord Lindley, in Stanley v. Wilde, observed, mortgage is a conveyance of land or chattle for
payment of debt or discharge of some other obligation and that is redeemable on the
payment or discharge of such debt or obligation.

Any provision inserted to prevent or payment or performance of debt is a clog or fetter on the
equity of redemption and is void.

From principle of once a mortgage always a mortgage it follows that clog or fetter is
something which is inconsistent with the idea of security. Courts of equity have fought for
years to maintain that security is redeemable.

What is clog : Indian Cases ::

1. Court have normally ignored the condition that on default of payment mortgage shall
become absolute sale. (Gangadhar v. Shankarlal, 1958 SC 773)
2. Long term for redemption, say of 85 years have also been considered to be a clog.
Dorka Matho v. state, 1980 Pat 163) In Gangadhar the court considered this to be
oppressive condition and therefore void.
3. Stipulation barring mortgagors right of redemption after certain period too have
been considered to be a clog.in Murlilal v. Deokaran, AIR 1965 SC 225. A shop
was mortgaged and it was provided that after 15 years the shop would be deemed to
be an absolute transfer for this very amount.
4. Condition postponing redemption in case of default: In Mohd Sherkhan v. Seth
Swami Dayal; 1922 All (44) 122. the mortgage was for five years and it was provided
that on default the mortgagee shall enter for 12 years it was considered to be a clog.
5. A stipulation that mortgagror shall not alienate, the mortgaged property has been
considered to be a clog.
6. Stipulation that redemption shall be restricted to the mortgagor and not to his heirs
is considered to be a clog.
7. Stipulation as to the charge or interest at an enhanced rate from the date of the
mortgage in case of defaulta clog. (Sarfaraj v. Udwat Singh, 1929 Luck 147.

*Some collateral advantage conferred on the mortgagee would not be a clog.courts
look at oppressive bargain. It must not be unfair, unconscionable and inequitable.

It is a settled law in India and England that mortgage cannot be made irredeemable or
redemption made illusory. The law must respond and be responsive to the felt and discernible
compulsions of circumstances that would be equitable, fair and reasonable. (Pomal Kanji v.
Vrijlala Kishandas, AIR 1989 SC 436.

It must be noted clearly that section 60 of T.P.Act which provides for the mortgagors right
to redeem , nowhere uses the expression, subject to a contract to the contrary as such
right to redemption is an absolute right and any fetter or clog on it is not only interpreted
strictly but also looked at unfavourably by the courts.

Section 60 provides that, after the principal money has become due the mortgagor has a right
on payment or tender at proper time and place to require the mortgagee.to return the
mortgage deed and all documents.deliver the possession of property to mortgagor or third
person.at the cost of the mortgagor and .register an acknowledgement that the
mortgagees rights are extinguished.-----------provided rights conferred by this section have
not been extinguished by the act of the parties or by decree of the court.

However a share of mortgaged property cannot be redeemed, though one of the co-sharers
can redeem the whole.


Mortgage, continued.

So far we have covered sec 58, the definition and types of mortgages etc.

Apart from this there is a lot more, that requires to be covered for developing a proper
understanding of the concept of mortgage and that wont be covering in view of paucity of
time and simplicity of the subject. What all I shall be doing is to indicate the broad area that
requires to be covered by your own efforts, and that is the rights and liabilities of the
mortgagor and the mortgagee.

Sec 59 to 66 deal with rights and liabilities of the mortgaro i.e. right to redeem (60), right to
receive accession or accretion, (63), right of inspection and production of documents and his
power to lease the mortgaged property.

Liabilities include (65) keeping the interest intact which he professes to transfer, to defend
the possession, pay all charges on the property (outgoings until he is in possession), keeping
the property in good shape, so as not to allow deterioration which turns the security
insufficient to meet the obligations of debt.

Section 67-85 deal with rights and liabilities of the mortgagee which include the right to
foreclosure, (67), right to sue for mortgage money(68), power of sale (69), appointment of
receiver (69A), right to accession or accretion to mortgaged property, right to renewal and
right to proceeds of revenue sale etc.

Liabilities include (76), management of the property with ordinary prudence, collection of
rents and profits, repairing of the property, avoiding anything that injures the property and
maintenance of accounts etc.

Sec 91 to 104 deal with procedural aspects and some concomitant concepts like notice,
charge, subrogation and tendering the performance etc.

Charge: : is a concept of hybrid character, which may arise in a variety of situations and
may be confusing as well for being similar with other kinds of transactions.

Section 100 provides, that where immovable property of one person is by act of parties or by
operation of law is made security for the payment of money to another, and the transaction
does not amount to mortgage the later person is said to have a charge on the property and all
provisions that apply to a simple mortgage apply to charge as well.

You must note that charge is a kind of fixture, which attach to the property charged and is not
extinguished either by sale or mortgageeven an auction purchaser does not get the property
free from charge.a recurring charge, it may be noted is not identical either with the
mortgage or lease.e.g. future maintenance.the charge holder in case of recurring charge
can bring the property to sale as and when the charge becomes due even in the hands of
purchaser.

There are two exceptions to the charge wherein the charge holder shall not have the right to
sale the property s in case of a simple mortgage.one is a charge of a trustee over trust
property.section 32 of Trusts Act provides that where the trustee incurres any expenses in
the execution of trust from out of his own pocket, he has the first charge over the trust
property and can re-imburse himself out of the income of the estate of the trust.

But he cannot do so by sale of the property for that would create kind of contradiction in
terms, i.e. trustee himself breaching the trust.what all he can do is to prohibit any kind of a
dispostion of the property without first providing for his charge.

The second exception is about the purchaser of a property for full consideration without
notice.this particular exception brings out the distinction between the mortgage and
charge.mortgage creates a right in rem and is enforceable even against the purchaser
without notice, but a charge is not so.

There are two kinds of charges spoken about under section 100, one by act of parties and the
other by operation of law.when the charge gets created by operation of law, the charge is
neither written nor registered.section 59 which talks about registration of a mortgage as an
essential element of mortgage, when the mortgage is of Rs 100 or more, is not applicable to
section 100, since section 100 does not distinguish between the charge by operation of law or
by act of parties.

However section 17 (1) b of registration Act provides for compulsory registration of a charge
of more than Rs. 100/=, in case of non-testamentary charge and therefore a charge created by
act of parties amounting to more than Rs.100 would require registration to be valid in law.

Two types of charges, 1- charge created by operation of law, which gets created irrespective
of the agreement of the parties.e.g. 54 (4) (b) provides where property has passed over to
buyer before payment of the whole money, the seller is entitled to a charge over the property-
similarly under section 55 (6) b, the purchaser is entitlted for a charge over the property,
where the property has not been passed over to him and he has paid an amount in anticipation
of purchase.

Other instances of charge by operation of law are mortgagees lien or right to maintenance.



Charge by act of parties may arise in a variety of situations e.g. A gets/inherits certain
property from some relative and agrees to pay a certain sum, to his sister or brother, such
sister or brother would have a charge over the property.

It must be noted that the charge does not require any particular form of words for creation of
charge.

Charge and Mortgage : : Mortgage is a transfer of an interest in the property.creating a
right in rem.in charge no interest is transferred and the right created is just ad rem, and not
jus in rem.but this is more than a mere obligation to pay.

Charge may be created by an act of parties or by operation of law.mortgage is created by
act of parties.further under a mortgage a debt subsists and there is debtor creditor
relationship.not so in case of charge.a charge created by operation of law does not
require registration, mortgage of more than Rs 100 requires registration.

A transaction which is intended to be a mortgage and gives the power to realize the debt from
out of mortgaged property does not become charge, merely because, certain formalities for
creation of valid mortgage has not been completed, e.g. registration, (Govind Chandra v.
Dwarakanath 1904 35 Cal 837)

Charge and simple mortgage: : in a simple mortgage there is a personal understanding to
pay the money-not so in charge.simple mortgage is a transfer of an interestnot so in
charge.

Charge and Lien: : Charge is created by act of parties or by operation of law, but lien is only
by operation of law.lien is a right to hold and retain property until payment of money
due.in case of charge realization can happen only by way of a court process.charge is
confined to immovable property lien can be in case of movable or immovable properties.