The document discusses various types of mortgages under Indian law:
1. Simple mortgage where the mortgagor retains possession but is personally liable for repayment. If they default, the mortgagee can sell the property.
2. Mortgage by conditional sale where possession transfers to the mortgagee, but the mortgagor can redeem the property by a certain date. If they fail to pay, the mortgagee must foreclose through the courts.
3. Usufructuary mortgage where the mortgagor transfers possession and profits from the property to the mortgagee in lieu of interest until repayment.
The key right of the mortgagor is the equity of redemption,
The document discusses various types of mortgages under Indian law:
1. Simple mortgage where the mortgagor retains possession but is personally liable for repayment. If they default, the mortgagee can sell the property.
2. Mortgage by conditional sale where possession transfers to the mortgagee, but the mortgagor can redeem the property by a certain date. If they fail to pay, the mortgagee must foreclose through the courts.
3. Usufructuary mortgage where the mortgagor transfers possession and profits from the property to the mortgagee in lieu of interest until repayment.
The key right of the mortgagor is the equity of redemption,
The document discusses various types of mortgages under Indian law:
1. Simple mortgage where the mortgagor retains possession but is personally liable for repayment. If they default, the mortgagee can sell the property.
2. Mortgage by conditional sale where possession transfers to the mortgagee, but the mortgagor can redeem the property by a certain date. If they fail to pay, the mortgagee must foreclose through the courts.
3. Usufructuary mortgage where the mortgagor transfers possession and profits from the property to the mortgagee in lieu of interest until repayment.
The key right of the mortgagor is the equity of redemption,
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.