A BRIEF STUDY OF THE LAW RELATING TO ENGLISH MORTGAGES IN

INDIA

(Assignment submitted towards the fulfilment of assessment in the

subject of Transfer of Property)

Submitted by: Submitted To:

Abilash Viswanathan Mr. Anirudh Panickker
Roll No: 1493, Semester IV Assistant Professor
BBA.LL.B. (Hons) NLU Jodhpur

WHAT IS AN ENGLISH MORTGAGE?

The Transfer of Property Act defines an English mortgage as 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 retransfer it to the mortgagor
upon payment of the mortgage money.1 Therefore, in the case of an English mortgage, absolute
transfer of the property has already taken place, thus the question of court intervention does
not arise. The borrowers argued that, in contrast, absolute transfer of the property does not
occur in a legal mortgage; therefore, court intervention must be allowed.

The essentials of the English Mortgage can be thus summarized as follows:

1. The mortgagor binds himself to repay the borrowed money on a certain date.
2. The mortgagor transfers the property absolutely to the mortgagee.
3. But such transfer is subject to the condition that the mortgagee will retransfer the
property on repayment before the agreed date.

Though it is called ‘English Mortgage’, there is considerable difference between the Mortgages
practiced in England and English Mortgages as practiced in India. Grant of an estate in fee with
the condition that if the mortgagor shall repay the mortgagee shall convey the estate to the
mortgagor was the usual form of a mortgage deed in England. However, a personal covenant
is not found in mortgages in England but it has been made a part of English Mortgage in India.

1
Section 58(e), Transfer of Property Act, 1882
WHAT IS MEANT BY ‘CLOGGING OF REDEMPTION’?

The Transfer of Property Act, 1882 deals with the mortgage of immovable property in our
country. Mortgage is the transfer of an interest in an immovable property for the purpose of
securing a loan or the performance of an engagement. A mortgage to be valid must be in
relation to payment of any definite amount either already advanced or to be advanced, by way
of loan.2 Section 60 of the act lays down the provision of the redemption of mortgaged property
as the subject matter of the right of redemption can be described as that “right of the mortgagor
or of any third person directed by him which entitles him to get back the possession of the
mortgaged property after the payment of the mortgaged money”.

The Doctrine of Clogging of Redemption essentially protects the Right of Redemption of the
mortgagor of immovable property. The Doctrine says that if there is a covenant or condition in
the agreement that ‘clogs’ or invalidates the Right of Redemption of the mortgagor, such a
clause would be invalid and treated as void by the law. From this Doctrine, arises the famous
maxim “Once a Mortgage, always a Mortgage.” This maxim implies that the mortgagor’s right
of redemption would not be defeated by any agreement to the contrary, even if the mortgagor
himself agreed to it. The maxim simply denied the validity of any stipulation in the mortgage
deed which defeats the mortgagor’s right of redemption.

The underlying principle of this maxim was stated by Lord Henley in the case of Vernon v.
Bethel that:

“This court as a conscience is very jealous of persons taking securities for a loan and converting
such securities into purchases and therefore I take it to be an established rule, that a mortgagee
can never provide at the time of making the loan for any event or condition on which the equity
of redemption shall be discharged and the conveyance made absolute and there is great reason
and justice in this rule for necessitous men or not will submit to any terms that the crafty may
impose upon them.”3

2
ABC LIVE, KNOW THE SETTLED LAW ON MORTGAGE SUITS (2018), http://abclive.in/know-the-
settled-law-on-mortgage-suits/
3
Vernon v Bethell (1762) 28 ER 838
DIFFERENCE BETWEEN ENGLISH MORTGAGE AND MORTGAGE BY CONDITIONED SALE

Where the mortgagor ostensibly sells the mortgaged property– on condition that on default of
payment of the mortgage- money on a certain date the sale shall become absolute, or 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 a mortgage by conditional sale.4

Every conditional sale does not in itself imply a mortgage by conditional sale and the intention
of the parties as to their rights and liabilities during the ostensible sale plays an extremely
important part in the determination of the nature of the contract entered into by the parties.

The essential difference between and English Mortgage and a Mortgage by Conditioned Sale
is with respect to when the actual transfer of ownership in the property takes place. In cases of
English Mortgage, the mortgagor transfers the property to the mortgagee in the first instance
itself and inserts a condition binding the mortgagee to transfer the property back to mortgagor
once the sum of mortgage money is paid. Here, the transfer of property occurs in the initial
stage of the transaction itself. This in contrast with the situation in cases of Mortgage by
Conditioned Sale, where the mortgagor inserts a clause by which a property will be
permanently transferred to the mortgagee upon failure to pay the mortgage money. Thus, in
Mortgage by Conditioned Sale, the Transfer of Property will occur in the future, whereas in
English Mortgage the Transfer of Property has already occurred.

RECONCILING SECTION 58(A) OF THE TPA WITH SECTION 58(E) OF THE TPA

Section 58(e) of the Transfer of Property Act speaks of an absolute transfer of ownership to the
mortgagee in the case of English mortgage whereas the definition states that the mortgage is a
transfer of interest in the specific immovable property. Thus, the relevance of this particular
mode of mortgage has to be looked into as its very nature has made it a redundant method of
mortgage.

A mortgagee has no right of sale if there is no default in payment of the mortgage money. There
can be default in payment of mortgage money only after it has become due, and not before. In
cases, where no time is fixed for payment of the mortgage money, there must be a demand for
payment before it can be said that the mortgagor has made a default in payment of the mortgage

4
Section 58(c), Transfer of Property Act, 1882
money. It has been held in Purasawalkam Hindu Janopakara Saswatha Nidhi Ltd. v. Kuddus
Sahib, that where the amount due for principal is not repayable at any particular date, nor is
anything stated as to when it is to be repaid, there can be no default in the payment of the
principal sum due until there is a demand made for the money.5

The right under Section 69 of the Transfer of Property Act, 1882, which allows a person, who
is not the owner of the property, could convey the right, title and interest of a third party-
mortgagor in the mortgaged property even without the intervention of the court, is as much and
as full a right as the right of redemption of the mortgagor. However, even this Right of private
sale can only be exercised in the following circumstances:

1. When the mortgage-deed expressly provides that the mortgagee is entitled to sell the
mortgaged property, or any part thereof, in default of payment of the mortgage-money,
without the intervention of the court.
2. And when the mortgagee is the Government. (Clause (b) of sub-section (1)).
3. If the mortgaged property or any part thereof is, on the date of execution of the mortgage
deed, situate within the towns of Calcutta, Madras, Bombay or in any other town or
area which the State Government may, by notification in the Official Gazette, specify
in this behalf. (Clause (c) of sub-section (1)).

The mortgagee is, in no sense, a trustee for the mortgagor in the matter of the power of sale; as
he holds it for protection of his interest and for his benefit. The mortgagee is not debarred from
exercising the power of sale, even though the mortgagor files a suit for redemption. So long as
the mortgage money is not paid or validly tendered, the mortgagee with full knowledge of a
pending suit for redemption and even to defeat the suit can enforce his power of sale under this
section.

Section 69 of the TPA however, is the exception, not the rule and as a general principle of
property law, the principle of “Once a Mortgage, always a Mortgage” reigns supreme and the
mortgagee does not gain ownership of the mortgaged property but merely an interest. It is not
the intention of the legislature in India that an English Mortgagee as defined in section 58(e)
of the Transfer of Property Act, 1882, should, by the very fact of execution of the mortgage,
have a right to possession. If the English mortgagee is to be taken as acquiring the right to take

5
Purasawalkam Hindu Janopakara Saswatha Nidhi Ltd. v. Kuddus Sahib, AIR 1926 Mad 841
possession as soon as the mortgage is executed whether a right of entry is expressly is
covenanted for or not, then a jarring element is to be introduced in the section considered.

The remedy available constitutes a basic element of the scheme, even though on the surface it
may appear that only the form of transfer is the criterion. The view taken in England is that if
the mortgagee allows the mortgagor to remain in possession, the mortgagor is, at law, merely
a tenant at sufferance, but in equity being the owner, the mortgagor can take the rents for his
own use and is not accountable to the mortgagee. The mortgagor in India transfers only an
interest. As a matter of legislative policy, the remedy of sale should suffice in case of English
mortgage. Therefore, it is recommended that it should be provided in section 58 (e) of the
Transfer of Property Act, 1882, that an English mortgage does not carry a right to possession
in the absence of an express agreement giving such right.