Introduction

A mortgage conforms to the ‘Hypotheca’ of Roman Law, upon the

debtor’s failure to pay the debt, the creditor could get the
property of the debtor for sale and recover himself. The concept
of mortgage has also been recognised under Hindu and Muslim
Laws where the property was pledged to the creditor, the debtor
was debarred from the possession till the repayment of debt was
made, and the profits in the lieu of interest were taken by the
creditor.

The essential element of a mortgage is that it is a transfer of a

legal interest in the property with a provision for redemption i.e.
upon repayment of the loan, the transfer shall become void or
the interest shall be re-conveyed. The provisions pertaining to a
mortgage are contained in Section 58 of the Transfer of Property
Act, 1882

Definitions
Loans may be of two types, secured debt or unsecured debt.
Where the loan is secured against any movable property it is
called a pledge while where the loan is secured against some
immovable property of the debtor it is called a mortgage. A
mortgage is a transfer of an interest in specific immovable
property as a security for the repayment of debt.

Section 58(a) of TPA defines the terms ‘mortgage’, ‘mortgagor’,

‘mortgagee’, ‘mortgage-money’, and ‘mortgage-deed’.

- A mortgage is the 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, an existing or future debt, or the performance of an
engagement that 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.

Kinds of mortgage
1. Simple Mortgage [Section 58(b)]
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 failure 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 be necessary, in
payment of the mortgage money, the transaction is called a
simple mortgage and the mortgagee a simple mortgagee.

The basic elements of a simple mortgage are:

1. The mortgagor must have bound himself personally to

repay the loan;
2. The possession of the property is not given to the
mortgagee; and
3. To secure the loan he has transferred to the mortgage the
right to have the specific immovable property sold in the
event of his failure to repay.

Mortgagor’s Personal Obligation

The fundamental element of a simple mortgage is the personal
obligation to pay on the part of the mortgagor. 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.

No Delivery of Possession
Possession remains with the mortgagor in the case of a simple
mortgage. The security which is obtained by the mortgagee is of
the mortgaged property, not of the rents and profits accruing
from it. As per Section 68, if a simple mortgagee sues for
enforcement of his security, a decree for possession would be
illegal. It would also not operate as foreclosure rather it would
convert a simple mortgagee into a mortgagee having possession.

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.

Mortgagee’s Remedy
In case the mortgagor fails to repay the loan within the
stipulated date, the following two remedies are available to the
mortgagee:

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.
 2 Mortgage by Conditional Sale [Section 58(c)]
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
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 affects or purports to affect the sale.

Basic elements of a mortgage by conditional sale are:

1. The mortgagor must ostensibly sell the property to the

mortgagee.
2. There must be a condition on such sale that either,

- on the repayment of the debt on a certain date,

- the sale shall become void or the buyer shall transfer the
property to the seller

- or in default of payment on the agreed date, the sale

shall become absolute.

3. The condition must be contained in the same document.

Personal Liability
In a mortgage by conditional sale, there is no personal liability
on the part of the mortgagor to pay the debt and consequently,
the mortgagee is not permitted to make other of his properties a
part of this transaction. It is an exception to the rule of No Debt
No Mortgage.

Absolute Ownership
The Privy Council in the case of Thumbuswamy v. Hossain
Rowthen observed that the essential characteristic of a mortgage
is that on breach of condition, the sale deed would be executed
itself and the transaction would become an absolute sale without
any kind of accountability between the parties.

Remedy Available
The remedy with the mortgagee is by way of foreclosure and not
sale, which is possible only through a decree of the court. The
mortgagee can file a decree for foreclosure according to Section
67 of TPA, Rules 2 & 3 of Order 34, CPC only when the
mortgagor does not pay the amount on time and the sale
becomes absolute.

3. Usufructuary Mortgage [Section 58(d)]

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 payment of the mortgage-money, or partly in lieu of
interest partly in payment of the mortgage money, the
transaction is called a usufructuary mortgage and the mortgagee
a usufructuary mortgagee.

The basic elements of usufructuary mortgage are:

1. The mortgagor either delivers possession or expressly or

impliedly binds himself to deliver possession of the
mortgaged property to the mortgagee.
2. The mortgagor authorises the mortgagee till the payment
of the mortgage money is satisfied:

-to retain such possession;

-to receive the rents and profits or any part of such rents
and profits arising from the property; and
 - to appropriate such rents and profits in lieu of interest, or
payment of the mortgage money, or partly in payment of the
mortgage money.

Delivery of Possession
The possession of the mortgaged property is delivered to the
mortgagee by the mortgagor as a security for the payment of
mortgage money. The mortgagee is entitled to retain the
ownership of the property till the debt remains unsatisfied.

Rent and Profits

The mortgagee is entitled to receive rent and profits accruing
from the mortgaged property 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:

1. in lieu of interest,
2. in lieu of principal, or
3. in lieu of principal and interest.

No Personal Liability of the Mortgagor

The mortgagor does not take any personal responsibility for the
payment of mortgage money in the case of a usufructuary
mortgage. The mortgagee is required to utilise rents and profits
from the property for the satisfaction of his mortgage money.

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.

4. English Mortgage [Section 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.
In the case of English Mortgage, the mortgagor transfers the
ownership of the mortgaged property absolutely to the
mortgagee as security. The mortgagee shall return or re-transfer
the property once the mortgagor repays the amount as agreed on
a particular date.

Personal Liability
In an English mortgage, there is a personal liability of the
mortgagor to repay the amount of mortgage debt on a certain
date as agreed. An agreement to pay is an important part of such
a mortgage.

Remedy Available
In case of default by the mortgagor, the remedy available with
the mortgagee is to sell off the mortgaged property and recover
himself.

No Absolute Interest
The property is transferred absolutely but it is subject to the
provision of re-transfer of that property if the mortgagor repays
the amount. Therefore, interest is transferred which is subject to
the right of redemption.
Right of the Mortgagee
The mortgagee in this form of mortgage gets the right of
possession whether the right of entry is expressed or not, and
can retain the same till the said amount is not paid to him.

5. Mortgage by deposit of title deeds (Equitable Mortgage)

[Section 58(f)]
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 immovable property, with intent
to create a security thereon, the transaction is called a mortgage
by deposit of title-deeds. In English Law, this type of mortgage is
called an ‘equitable mortgage’

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

Existence of Debt
A debt may be existing or future in nature. A transfer of an
interest in any property to secure the payment of money
advanced or to be advanced, or an existing or future debt, or the
performance of any engagement which results in a pecuniary
obligation is said to be a mortgage and clause (f) containing
equitable mortgage gives just one of the modes of creating
mortgage.

Deposit of Title-Deeds
It is not necessary to make physical delivery of documents, a
constructive delivery of documents is sufficient. A valid equitable
mortgage does not require all the documents of title to be
deposited or the documents deposited to show a complete title.

6 Anomalous Mortgage [Section 58(g)]

A mortgage that is not a simple mortgage, a mortgage by
conditional sale, a usufructuary mortgage, an English mortgage,
or a mortgage by deposit of title deeds within the meaning of this
section is called an anomalous mortgage.

This section shall be read with Section 98 of the TPA which reads
:
Rights and liabilities of parties to anomalous mortgages.—

In the case of an anomalous mortgage the rights and liabilities of

the parties shall be determined by their contract as evidenced in
the mortgage deed, and, so far as such contract does not extend,
by local usage.

Remedy Available
In this case, the mortgage has the right of ‘foreclosure’ as well as
‘sale’ if the agreement of mortgage permits the same; and if the
debt is not repaid, the mortgagee would become the owner of the
property.

Mortgagor’s Right of Redemption

The right of redemption can be exercised by the mortgagor
through mortgage deed and can be exhausted only if there is an
agreement between the parties, or by way of a decree of the
court, or through any statutory provision which prohibits the
mortgagor from redeeming the mortgage. There are two other
terms as well which are used in relation to mortgage, which the
reader must know. These are:

Sub mortgage
Where a mortgaged property is mortgaged again is termed as
sub mortgage, or where the mortgagee mortgages its interest in
the said property.

Puisne mortgage (also called pari pasu mortgage)

When the mortgagor mortgage a property to one person and
mortgages the same property to another person in order to
secure another loan, the second mortgage is termed as Puisne
Mortgage.

Conclusion
Hence, a mortgage is defined as an express transfer of an
interest in immovable property as collateral for a loan. The most
important feature of a mortgage is that it is a transfer of a legal
interest in the property with a provision for redemption, which
means that the transfer will become void or the interest will be
re-conveyed upon repayment of the debt.