Unit 4:-  Mortgage

          4.1 Definition of Mortgage, Kinds of Mortgage (section 58 to 59-A) 

          4.2 Rights and Liabilities of Mortgagor and Mortgagee 

 

Unit 4: Mortgage

4.1 Definition and Kinds of Mortgage (Sections 58 to 59A)

Introduction & Definition

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.

• Key Distinction: Unlike a Sale (where ownership is transferred), in a Mortgage, only an interest (right to sell/enjoy) is transferred. Ownership remains with the borrower.

Statutory Provisions

• Section 58: Definitions of Mortgage, Mortgagor, Mortgagee, Mortgage Money, and Mortgage Deed.
• Section 59: Registration of Mortgage.

Essential Ingredients (Section 58(a))

1. Transfer of Interest: Not a transfer of ownership, but a specific interest.
2. Specific Immovable Property: The property must be clearly identified (e.g., “House No. 12,” not “my future house”).
3. Securing Payment: The main purpose must be security for a loan (existing or future debt) or performance of an engagement.

The 6 Kinds of Mortgages (Section 58)

Type	Section	Key Feature	Possession?	Personal Liability?	Remedy
Simple Mortgage	58(b)	Mortgagor binds himself personally to pay.	Remains with Mortgagor.	Yes	Sale of property (via Court).
Mortgage by Conditional Sale	58(c)	Apparent sale converts to absolute sale if debt not paid; void if paid.	Usually with Mortgagee.	No	Foreclosure (taking the property).
Usufructuary Mortgage	58(d)	Mortgagee keeps property and earns rent/profit to pay off debt.	Given to Mortgagee.	No	Recover debt from rents/profits (No sale/foreclosure).
English Mortgage	58(e)	Absolute transfer to Mortgagee with a promise to re-transfer upon payment.	Given to Mortgagee.	Yes	Sale (often without Court).
Deposit of Title Deeds	58(f)	Delivery of documents of title to a creditor in specific towns (e.g., Kolkata, Madras, Mumbai).	Remains with Mortgagor.	Yes	Same as Simple Mortgage.
Anomalous Mortgage	58(g)	A mortgage that doesn’t fit the above 5 types (e.g., Customary Mortgage).	Depends on contract.	Depends on contract.	Sale or Foreclosure (as per deed).

Comparison: Mortgage vs. Charge (Section 100)

Feature	Mortgage (Sec 58)	Charge (Sec 100)
Transfer	Transfer of an interest.	No transfer of interest; only a right to payment from property.
Creation	Created by act of parties (Contract).	Created by act of parties or operation of law.
Registration	Compulsory (if > ₹100).	Compulsory only if created by act of parties.
Personal Liability	Usually exists (unless excluded).	Generally no personal liability.
Enforcement	Generally 12 years limitation.	Generally 12 years limitation.

4.2 Rights and Liabilities of Mortgagor and Mortgagee

This section balances the interests of the borrower and the lender.

A. Rights of Mortgagor (Borrower)

1. Right of Redemption (Section 60) – Most Important

• Definition: The right of the Mortgagor to get back their property (and documents) upon payment of the debt.
• “Once a Mortgage, Always a Mortgage”: This right cannot be taken away by any contract. Any condition that prevents or makes redemption impossible is called a “Clog on Redemption” and is void.
• Example: A clause saying “If debt is not paid in 5 years, the property becomes the Mortgagee’s forever” is a clog and is void.

2. Right to Accession (Section 63): If the property increases in value or size (e.g., a new room built) during the mortgage, the Mortgagor gets the improved property upon redemption.
3. Right to Inspection (Section 60B): Right to inspect documents of title in the Mortgagee’s custody.

B. Liabilities of Mortgagor (Section 65)

• Covenant for Title: Must warrant that they have the right to transfer the interest.
• Defense of Title: Must defend the title if challenged by a third party.
• Payment of Public Charges: Must pay all taxes/revenues on the property as long as they are in possession.

C. Rights of Mortgagee (Lender)

1. Right to Foreclosure or Sale (Section 67)

• Foreclosure: A court order barring the Mortgagor from redeeming the property (Property becomes Mortgagee’s). Only available in Mortgage by Conditional Sale.
• Sale: Right to sell the property to recover dues. Available in Simple, English, and Deposit of Title Deeds mortgages.

2. Right to Sue for Mortgage Money (Section 68)

• Can sue the Mortgagor personally if:
  • The Mortgagor bound themselves to repay (Personal Covenant).
  • The security is destroyed/insufficient due to Mortgagor’s fault.

3. Power of Sale without Court Intervention (Section 69)

• Allowed only in specific cases (e.g., English Mortgage, or where the deed explicitly allows it and the Mortgagee is not a Hindu/Muslim/Buddhist).

D. Liabilities of Mortgagee (Section 76)

• Applicable mainly to Mortgagee in Possession (e.g., Usufructuary/English).

1. Manage Property: Must manage it as a person of ordinary prudence would manage their own.
2. Collection of Rents: Must use best endeavors to collect rents/profits.
3. Payment of Taxes: Must pay Government revenue from the income of the property.
4. No Waste: Must not commit any act which is destructive or permanently injurious to the property.

Landmark Case Laws

1. Ganga Dhar v. Shankar Lal (1958)

• Facts: A mortgage deed contained a clause that redemption would only be allowed after 85 years.
• Issue: Was the 85-year period a “Clog on Redemption”?
• Judgment: The Supreme Court held that a long period per se is not a clog. However, if the term is oppressive or unconscionable (designed to make redemption practically impossible), it can be struck down. Here, 85 years was held valid as no unfair advantage was proved.

2. Pomal Kanji Govindji v. Vrajlal Karsandas Purohit (1989)

• Judgment: The SC modified the earlier stance. In cases of poverty or economic duress, even a long period (like 99 years) can be considered a clog on redemption if it renders the right to redeem illusory. The Court reduced the period, applying the principle of “Equity acts in personam.”

3. Kreglinger v. New Patagonia Meat & Cold Storage Co Ltd (1914) – [English Case]

• Significance: Established the modern test for “Clog on Redemption.” A collateral advantage (extra benefit to lender) is allowed only if it is fair, reasonable, and does not prevent the borrower from getting their property back in its original state.

Exam-Style Conclusion

The law of mortgage is built on the equitable principle that a necessitous borrower is not a free agent. While Sections 58-59 define the structural types of mortgages to suit different commercial needs, Sections 60 and 67 ensure a balance: the Mortgagee gets their money back (with interest), but the Mortgagor never loses their right to redeem their property, upholding the maxim “Once a Mortgage, always a Mortgage.”