Kalpeshkumar L Gupta

Assistant Professor of Law

kalpesh.gupta@aurouniversity.edu.in

March 11, 2015

1
Outline
1. Mortgage etc. definition
2. Types of mortgage
3. Rights and liabilities of mortgagor
4. Rights and liabilities of mortgagee

2
Outline
1. Mortgage etc. definition
2. Types of mortgage
3. Rights and liabilities of mortgagor
4. Rights and liabilities of mortgagee

3
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 which may give rise to
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
by which the transfer is effected is called a mortgage-deed.

4
Elements of Mortgage

1. There must be transfer of an interest.

2. There must be specific immovable property intended to be
mortgaged.
3. The transfer must be secure the payment of a loan or to
secure the performance of contract.

5
Outline
1. Mortgage etc. definition
2. Types of mortgage
3. Rights and liabilities of mortgagor
4. Rights and liabilities of mortgagee

6
Forms of Mortgage

1. Simple Mortgage;
2. Mortgage by conditional sale;
3. Usufructuary mortgage;
4. English Mortgage
5. Mortgage by deposit of title deeds;
6. Anomalous mortgage.

7
Forms of Mortgage

1. Simple Mortgage

i. That the mortgagor must have bound himself personally to

repay the loan
ii. That to secure the loan he has transferred to the mortgagee
the right to have specific immovable property sold in the
event of his having failed to repay and
iii. That performance of the property is not given to the
mortgagee

8
Forms of Mortgage

2. Mortgage by conditional sale;

Ostensible sale on condition that upon repayment, the buyer shall

transfer the property to the seller.
Essentials
- the mortgagor must ostensible sell the immovable property;
- there must be a condition that either
- on the repayment of the money due under the
mortgage on a certain date, the sale shall become void
or the buyer shall retransfer the property to the seller or
In default of payment on that date the sale shall become
absolute
- the condition must be embodied in the document which
effects or purports to effect the sale.

Cont
9
Forms of Mortgage

2. Mortgage by conditional sale;

Chunchun Jha v/s. Ebadat Ali & Othrs (AIR 1954 S.C. 345)

The judgment says that the intention must be gathered from the
document itself and if the words are express and clear, effect
must be given to them and any extraneous enquiry into what was
thought or intended is ruled out.

Cont
10
Forms of Mortgage

3. Usufructuary mortgage;

The characteristics of a usufructuary mortgage are

i. Possession of the property is delivered to the mortgagee;

ii. The mortgagee is to get rents and profits in lieu of interest or
principal or both;
iii. No personal liability in incurred by the mortgagor; and
iv. The mortgagee cannot foreclose or sue for sale.

11
Forms of Mortgage

3. Usufructuary mortgage;

Pratap Bahadur v/s. Gajadhar (1902 24 All. 521)

The mortgagor covenanted to put the mortgagee in possession of

a certain village on a subsequent date and to pay interest at 24%,
until possession was delivered. It was held that the mortgage was
a usufructuary mortgage.

in case of Yashwani v/s. Vithal ( (1897, Bom 267)..where there

was a covenant that the mortgagor would pay interest every year
but that if failed to pay the interest, the mortgagee could take
possession and would appropriate the rents and profits, the
mortgagee could take possession and would appropriate the rents
and profits towards interest, it was held that transaction was a
simple mortgage.
12
Forms of Mortgage

4. English Mortgage :-

Main feature of of this mortgage are

i. that the mortgagor should bind himself to repay the mortgage

money on a certain day;
ii. That the mortgaged property should be transferred absolutely
to the mortgagee and
iii. That such absolute transfer be made subject to a proviso that
the mortgagee will reconvey the property to the mortgagor,
upon payment by him of the mortgage money on the
appointment day.

13
Forms of Mortgage
5. Mortgage by deposit of title deeds;

Also known as Equitable Mortgage. There is simply a deposit a

deposit of document of title without anything more without
writing or without any other formalities.

The object of the legislature in providing for this kind of mortgage

is to give facility to the mercantile community in cases where it
may be necessary to raise money all of sudden before an
opportunity can be afforded of preparing mortgage deed.

Essential requisites of such a mortgage are

i. A debt;
ii. Deposit of the title deeds and
iii. an intention that the deeds shall be security for the debt.

14
Forms of Mortgage

5. Mortgage by deposit of title deeds;

Compulsory Registration of transaction ?

State of Haryana & Ors. v/s. Navir Singh & Ors. (Delhi HC, 7/10/2013)

As in the instant case, the original deeds were deposited with the
bank, the charge of mortgage can be entered into revenue record in
respect of mortgage by deposit of title deeds and for that, instrument
of mortgage is not necessary Since mortgage by deposit of
title-deeds does not require registration, no payment towards
registration fee and stamp duty is necessary.

15
Forms of Mortgage

6. Anamalous Mortgage

Which does not fall under any of the five classes mentioned
above.

Includes. i. a simple mortgage usufructuary, ii a mortgage

usufructuary by conditional sale.

16
Forms of Mortgage

6. Anamalous Mortgage

Vadalparty v/s. Appalanarsimhulu (41 Mad. L. J. 563)

.the mortgage was with possession, the rents and profits were
to be set off against interest and the principle was to be repaid in
fie years and if not paid, the mortgage was to be worked out into
sale at the expiry of twenty years. This was held to be mortgage
usufructuary by conditional sale.

17
Section 59 : Mortgage when to be by assurance

Where the principal money secured is one hundred rupees

or upwards, a mortgage other than a mortgage by deposit
of title deeds can be effected only by a registered
instrument signed by the mortgagor and attested by at least
two witnesses.

..where the principal money secured is less than one

hundred rupees a mortgage may be affected wither by a
registered instrument signed and attested as aforesaid or
delivery of properties

18
Section 59 : Mortgage when to be by assurance

Mode of transfer in Mortgage

1. Registered instrument;
2. Delivery of possession;
3. Deposit of title deeds

19
Section 59 : Mortgage when to be by assurance

Mode of transfer in Mortgage

1. Registered instrument;

If principal money secured is Rs. 100 or upwards, a

registered instrument is compulsory.

Cont.. 20
Cont..
Section 59 : Mortgage when to be by assurance

Mode of transfer in Mortgage

Registration of mortgage by deposit of title deeds..

Essence of a mortgage by deposit of title deeds is the actual

handling over by a borrower to the lender of document of
title to immovable property with the intention that those
documents shall constitute a security which will enable the
creditor ultimately to recover the money which he has lent.

if a document of this character is not registered, it cannot

be used in the evidence at all and the transaction itself
cannot be proved by oral evidence either.

Cont.. 21
Cont..
Section 59 : Mortgage when to be by assurance

Sundararachariar v/s. Narayan Ayyar (AIR 1931, PC, 36, 58 I.S.

68)
Verbal agreement for advance upon deposit of certain
documents of title. MOU As agreed upon in person, I have
delivered to you the under mentioned documents as security
and also a promissory note for Rs. 60,000
It was held by Privy Council that :-
a. The memorandum is not a document which requires
registration even if the agreed advance is conditional upon
it being given
b. There being no written agreement, the memo as well as
oral evidence is admissible in evidence to prove the intent
to create a security by deposit of the documents named.
Cont.. 22
Section 59 : Mortgage when to be by assurance

Mode of transfer in Mortgage

2. Delivery of possession

When the principal money secured is less than Rs. 100, a

mortgage may be effected either by a registered instrument
or by delivery of possession.

23
Section 59 : Mortgage when to be by assurance

Mode of transfer in Mortgage

3. Deposit of title deeds

This is a mortgage by deposit of title deeds and it is not

necessary that it should be in writing.

Mortgage deed need not be signed by mortgagor and

mortgagee both A mortgage could be effected by a
registered instrument signed by the mortgagor and attested
by to least two witnesses. It was immaterial for the purpose
of admissibility of the document or otherwise, whether the
mortgagee was a signatory to the deed of mortgage or not
(Tara Chand v/s. Sagarbai, AIR 2007 S.C 2059)

24
Outline
1. Mortgage etc. definition
2. Types of mortgage
3. Rights and liabilities of mortgagor
4. Rights and liabilities of mortgagee

25
Rights & Liabilities of Mortgagor
Section 60 : Right of mortgagor to redeem
At any time after the principal money has become due, the mortgagor
has a right, on payment or tender at a proper time and place of the
mortgage money, to require the mortgagee

(a) to deliver to the mortgagor the mortgage-deed and all documents

relating to the mortgaged property which are in the possession or
power of the mortgagee,

(b) where the mortgagee is in possession of the mortgaged property, to

deliver possession thereof to the mortgagor and

(c) at the cost of mortgagor either to re-transfer the mortgaged

property to him or to such third person as he may direct or to
execute and to have registered an acknowledgement in writing that
any right in derogation of his interest transferred to the mortgagee
has been extinguished.
Cont 26
Rights & Liabilities of Mortgagor
This remedy is available to the mortgagor only before the mortgagee
has filed a suit for enforcement of the mortgage. Subsequent to the
filing of the suit, this remedy is not available (Poulose & Othrs. v./s. State
Bank of Travancore, AIR 1989 Kerala 79)

Cont 27
Rights & Liabilities of Mortgagor
Clog on redemption

The right of redemption cannot be denied to the mortgagor even

though he may by express contract abandon his right to redeem the
property

Mortgage is intended merely to afford security to the lender, has held

an agreement which prevents redemption as void.

Romer, J in Biggs v/s. Hoddinott (1898, 2 Ch. 307), there is a principle

which I will accept without any qualification that on a mortgage you
cannot, by contract between the mortgagor and mortgage clog, as it is
termed, the equity of redemption so as to prevent the mortgagor from
redeeming on payment of principal, interest and costs.

Cont 28
Rights & Liabilities of Mortgagor
Clog on redemption

Romer, J in Biggs v/s. Hoddinott (1898, 2 Ch. 307), there is a principle

which I will accept without any qualification that on a mortgage you
cannot, by contract between the mortgagor and mortgage clog, as it is
termed, the equity of redemption so as to prevent the mortgagor from
redeeming on payment of principal, interest and costs.

Lord Lindley in Stanley v/s. Wilde (1899, 2 Ch. 474), Any provision
inserted to prevent redemption on payment or performance of the debt
or obligation for which the security was given, is what is meant by a clog
or fetter on the equity of redemption and is, therefore, void.

Cont 29
Rights & Liabilities of Mortgagor
Clog on redemption.Indian Law Cases
Condition on sale in default

If one of the terms of the mortgage is that on the failure of the

mortgagor to redeem within the specified period, the mortgagor will
have no claim over the mortgaged property and the mortgage deed will
be deemed to be a deed of sale in favour of the mortgagee, it cannot be
given effect to.

It plainly takes away altogether the mortgagors right to redeem the

mortgage after the specified period. This is not permissible for once a
mortgage always a mortgage and therefore always redeemable.
(Gangadhar v/s. Shakar Lal, AIR 1958 SC 773)

Cont 30
Rights & Liabilities of Mortgagor
Clog on redemption.Indian Law Cases
Long term for redemption

A long term is not necessarily a clog on redemption. (Dorika Matho v/s.

State, AIR 1980 Pat. 163)

Gangadhar v/s. Shankarlala, it was held by the SC that the term in the
mortgage that it will not be redeemable until the expiry of 85 years was
not a clog in the circumstance of the case.

Accordingly, the rule is that if the length of the term is found oppressive,
redemption would be allowed before the expiry of the term (Har Dayal
Singh v/s. Raja Ram Singh, 1933 9 Luck, 151).

In Fateh Mohammad v/s. Ram Dayal (1927 2 Luck. 588 IC 160), a period
of 200 years was held to be oppressive and unreasonable and is a clog
on redemption.

Cont 31
Rights & Liabilities of Mortgagor
Clog on redemption.Indian Law Cases
Stipulation barring mortgagors right of redemption after certain period

Murarilal v/s. Deo Karan (AIR 1965 SC 225)

..mortgaged property to be redeemed within a period of 15 years.

.after the expiry of the stipulated period of 15 years, the shop would
be deemed as an absolute transfer for this very amount.

Cont 32
Rights & Liabilities of Mortgagor
Clog on redemption.Indian Law Cases
Condition postponing redemption in case of default

Mohammad Sher Khan v/s. Seth Swami Dayal (1922 44 All. 185)

the mortgage was for a term of five years with a condition that if the
money was not paid, the mortgagee might enter into possession for a
period of 12 years during which the mortgagor could not redeem.

It was held that such a condition was a clog because it hindered an

existing right to redeem.

Cont 33
Rights & Liabilities of Mortgagor
Clog on redemption.Indian Law Cases
Penalty in case of default

Sunder Koer v/s. Sham Krishen (1906 34 Cal. 185)

Stipulation to charge at enhanced rate of interest from the date of

mortgage, in case of default in payment has been held to be a clog.

but if there is no undue influence, a high rate of interest is not

necessarily a clog (Sarfaraz v/s. Udwat Singh, 1929 4 Luck 147)

Cont 34
Case Laws
Collateral benefit to the mortgagee

An agreement which confers some collateral advantage upon the

mortgagee i.e. something in addition to the return of his money with
interest may be valid or invalid according to its terms and
circumstances.

It has been repeatedly laid down that the courts will set aside any
oppressive bargain, or any advantage exacted from man under grievous
necessity and want of money (Barret v/s. Hartley 1866 3 Eq 789)

.on the other hand, such contracts are valid if they are not oppressive
and not repugnant to equity of redemption.

Cont 35
Case Laws
Collateral benefit to the mortgagee

The Biggs Case (1898, 2 Ch. 307)

The owners of a hotel mortgaged it to a brewer.

Period of security 5 year, Mortgagors would buy from the mortgagee all
beers to be sold on the premises.

The mortgagors, after 2 years, ceased to buy beer from the mortgagee
and claimed to be entitled to redeem the hotel.

The Court of Appeal affirmed lower courts order, granting to the

mortgagee an injunction to restrain the mortgagors from buying beer
elsewhere in breach of the promise in the deed

36
 Exercise of the right of redemption

The mortgagors right of redemption is exercised

i. by paying or tendering mortgage-money to the mortgagee outside

the court i.e. privately;
ii. by depositing the amount in the court (Section 83) and
iii. by a suit for redemption, payment or tender

37
 Mortgagors rights on redemption

The mortgagors right of redemption are

i. delivery of the mortgage-deed and documents of title relating to

the mortgaged property
ii. Possession and
iii. reconveyance

38
 Extinguishment of right of redemption

The mortgagors right of redemption is extinguished

I. by foreclosure, Mortgagees right to fore-closure or sale. (Section

67)
II. Mortgagee's right to sue for mortgage money. (Section 68)
III. when it becomes barred under Limitation Act, 1963. Suit filed after
12 year timebarred. (Schedule Period of Limitation, Part IV , Sr.
No, 61 (b))

39
Section 60 A : Obligation to transfer to third party
instead of re-transference to mortgagor
This section defines the obligation of a mortgagee, when so required, to
transfer the mortgage-debt to a third person named by the mortgagor.
The right of the mortgagor and the obligation of the mortgagee arises
only when the mortgage debt has become payable and the mortgagee
has fulfilled the conditions laid down in Section 60.

When this condition are fulfilled, the mortgagor may require the
mortgagee to assign the mortgage-debt to a third the person.

The main purpose of this provision is to help the mortgagor to pay off
the mortgagee by raising a loan from another on the same property
without first reconveyed it to himself and then later creating a fresh
mortgage in favour of the new creator.

40
Section 60 B : Right to inspection and production of
documents
A mortgagor, as long as his right of redemption subsists , shall be
entitled at all reasonable times, at his request and at his own cost and
on payment of the mortgagees costs and expenses in this behalf, to
inspect and make copies or abstracts of, or extracts from, documents of
title relating to the mortgaged property which are in the custody or
power of the mortgagee.

41
Section 61 : Right to redeem separately or
simultaneously
A mortgagor who has executed two or more mortgages in favour of the
same mortgagee shall, in the absence of a contract to the contrary,
when the principal money of any two or more of the mortgages has
become due, be entitled to redeem any one such mortgage separately,
or any two or more of such mortgages together.

42
Section 62 : Right to usufructuary mortgagor to
recover possession
In this mortgage, the mortgagor has a right to recover possession of the
property when, in a case in which the mortgagee is authorized to pay
himself the mortgage money out of the rents and profit of the property,
the principal money is paid off.

This is not a case of redemption at all. At the moment when the rents
and profits of the mortgaged property sufficed to discharge the principal
secured by the mortgage, the mortgage came to an end, correlative
right arose in the mortgagor, to recover possession of the property.

43
 Section 63 A : Improvement to mortgaged property

Mortgagee will make improvement in property to preserve mortgage

property.

The mortgagor shall, in the absence of a contract to the contrary, be

liable to pay the proper cost thereof as an addition to the principal with
the interest at the same rate as is payable on the principal or where no
such rate is fixed at the rate of 9% per annum.

44
 Section 65 : Implied contracts by mortgagor

The implied covenants enumerated in the section

1. Covenant of title
2. Defence of title
3. Liability to pay public charges
4. Performance of conditions of the lease where the mortgaged
property is a lease
5. Liability to discharge prior mortgages.

45
Section 65 A : Mortgagors power to lease

Subject to the provisions of sub-section (2), a mortgagor while lawfully

in possession of the mortgaged property shall have power to make
leases thereof which shall be binding on the mortgagee.

46
Outline
1. Mortgage etc. definition
2. Types of mortgage
3. Rights and liabilities of mortgagor
4. Rights and liabilities of mortgagee

47
 Section 67 : Right to foreclosure or sale

This section is counterpart of Section 60 and gives the mortgage a right

to foreclosure or sale in default of redemption by the mortgagor.

Approach court for decree that the mortgagor shall be absolutely

debarred of his right to redeem the property or a decree that the
property be sold.

One fundamental point of difference between the mortgagors right of

redemption and the mortgagees right to foreclosure or sale.

The difference is that the right of redemption is not subject to

contract to the contrary, while the right to foreclosure or sale may be
curtailed by agreement of the parties.

48
Section 67 : Right to foreclosure or sale

A simple mortgage cannot foreclose.

A usufructury mortgage is a transferee of a right of possession only and

he retain possession unless the debt is paid off from usufruct. He cannot
therefore sue either for sale or for foreclosure.

A mortgage by deposit of title deeds stands on the same footing as

simple mortgage and the mortgagees right is thus limited to one for a
decree for sale.

49
Section 67 : Right to foreclosure or sale

Limitation for suit to enforce mortgage

Under Article 62 of the Limitation Act, 1963, a suit to enforce payment

of money charged upon immovable property, may be filled within 12
years from the date when the money sued for become due.

50
 Section 68 : Right to sue for mortgage-money

Alternate remedy to sue for the mortgage money in certain cases and
thus obtain a simple money decree.

a. Where the mortgagor binds himself to repay the same;

b. Where, without any fault of either party, the mortgaged property is
wholly or partially destroyed;
c. Where the mortgagee is deprived of the whole or part of his
security by reason of the wrongful act or default of the mortgagor;
or
d. Where the mortgagee being entitled to possession, the mortgagor
fails to deliver the same.

51
 Section 69 : Power of sale when valid

Power of mortgagee to sale without intervention of court

i. Where the mortgage is an English Mortgage and neither of the

parties is a Hindu, Mohammedan or Buddhist or a member of any
other race, sect, tribe or class from time to time specified by the
State Govt. in the official gazette;

ii. Where the mortgagee is the Govt. and the deed confers an express
power of sale.

iii. Where the mortgaged property or any part thereof was, on the
date of the execution of the mortgage, situate within the town of
Calcutta, Madras, Bombay or in any other town which the State
Govt. may specify in this behalf and the deed contained an express
power of sale.

3 months notice to be given.

Cont 52
 Cont
Section 69 : Power of sale when valid

Mortgagee exercising the power of sale cannot himself purchase the

property.

But fraud and collusion cannot be proved by mere suspicion and there
must be convincing, acceptable evidence that the mortgagee
manoeuvered to have the property purchased in the name of another
benami for the former and that the former furnished the entire
consideration. (Chakrapani v/s. T. Gopal Mudaliar, 1972, 2 MLJ 390)

Cont 53
 Cont
Section 69 : Power of sale when valid

Appropriation of sale proceeds (Sub-section 4)

Disposal of the purchase money after a Sale in following manner

i. For discharge of prior encumbrances;

ii. For payment of costs, charges and expenses properly incurred for
the sale;
iii. For the discharge of the mortgage money;
iv. The surplus remaining to be paid to the person entitled to the
mortgaged property.

54
 Cont
Section 69-A : Appointment of receiver

Mortgagee can appoint receiver in one of the three way.

i. Mortgage deed;
ii. Appointment by mortgagee with the consent of the mortgagor;
iii. Where the parties do not agree, the mortgagee may apply to the
court, and court may appoint the receiver.

55
 Cont
Section 70 : Accession to mortgaged property

If after the date of a mortgage any accession is made to the mortgaged

property, the mortgagee, in the absence of a contract to the contrary ,
shall for the purposes of the security be entitled to such accession.

Example

A mortgages a plot to B and afterwards erects a house on the plot. For

the purposes of his security, B is entitled to the house as well as the
plot.

56
57