Coverage of this article
- Mortgage Under The Transfer of Property Act, 1882
- Simple Mortgage
- Mortgage by conditional sale
- Usufructuary Mortgages
- English Mortgages
- Mortgage by deposit of title deeds
- Anomalous Mortgage
Before the British administration, property transfers were governed by the personal laws of each of India's numerous ethnic communities. Laws that are inconsistent create ambiguity and uncertainty. As a result, commissions were established to harmonize and assemble the laws, which resulted in the passage of the Transfer of Property Act, of 1882. The Law of Conveyancing and Property Act, of 1881, an English statute, served as the basis for some of the provisions.
Movable and immovable properties are the two types of property recognized by the Indian legal system. The Sale of Goods Act of 1930 governs the transfer of movable property, whereas the Transfer of Property Act of 1882 governs the transfer of immovable property. However, transfers made by operation of law, such as those resulting from inheritance, insolvency, court orders, sales, etc., are not covered by this Act. Additionally, properties acquired through wills and succession are not covered by the Act.
According to Section 5 of the Transfer of Property Act of 1882, the act by which a live person conveys property to one or more others, by himself, or by one or more other living individuals in the present or future is referred to as a transfer of property. Whether incorporated or not, a business, an association, or a group of people are considered living beings.
Transfers that occur through sales, mortgages, leases, actionable claims, gifts, or exchanges are included.
Mortgage Under The Transfer of Property Act, 1882
The Old English phrase "mortgage" means "dead pledge," and it is derived from two French terms "mort" and "gage." This means that, until the debt is fully repaid, the property that the debtor has pledged as security for the creditor is considered to have no value or to be "dead," depending on how you look at it.
A mortgage can be described as the transfer of an interest in a specific immovable property to guarantee the repayment of funds advanced or to be advanced by way of a loan, an existing or future debt, or the performance of an engagement that may result in a financial liability under Section 58(a) of the Transfer of Property Act.
Mortgages are debt instruments in which immovable property is used as security until the debt amount is paid off. This transfer of interest in real estate may be for money advanced through loans or with the settlement of existing or prospective debts.
Only immovable properties, such as land and other benefits resulting from objects attached to the earth like buildings, machinery, etc., are eligible for mortgage placement. Growing crops, standing wood, and grass are excluded from this classification because they are all cultivated for specific purposes and will be cut or removed to fulfill them, making them movable property.
According to the Transfer of Property Act of 1882, there are six different types of mortgages.
1. Simple Mortgage
A simple mortgage is one in which ownership of the property is not transferred, according to Section 58(b). Instead, the mortgagee has the power to get a court order to sell the specific immovable property in question if the mortgagor is unable to pay back the amount owed on the loan.
The main characteristic of this type of mortgage is thus:
- does not entail the giving or giving up of possession of the thing
- The mortgagee continues to own the property
- In the event of non-payment, the mortgagor expressly or impliedly grants the mortgagee the right to sell the immovable property pledged as security.
- Although the mortgagee has the authority to sell the immovable property, they cannot do so without the court's permission.
- Following Section 59 of the Transfer of Property Act of 1882, a simple mortgage may only be executed through a registered deed, regardless of the amount of money being secured.
One particular property was mortgaged as collateral security for stridhan in the case of Mathai Mathai v. Joseph Mary. The mortgagee was required to contribute interest towards debt repayment. However, because there was no clause in the deed addressing the delivery of possession, the court determined that it should be regarded as a simple mortgage.
In the case of Kishan Lai v. Ganga Ram, the court upheld the interpretation that section 58(b) of the Transfer of Property Act, 1882's phrase "right to cause the property to be sold" implies that the mortgagee's ability to sell the property cannot be used arbitrarily and necessitates court intervention.
2. Mortgage by conditional sale
Conditional sale mortgages are discussed in Section 58(c). This kind of mortgage requires both the borrower and the lender to agree on a deadline after which the mortgaged property will be sold entirely if payment is not made. The transaction will be void and the property will need to be returned to the mortgagor if the payment is completed successfully on the required date.
Ostensible refers to something that appears to be true yet is false. The term "ostensible sale" in this country refers to a transaction that appears to be a sale but is a security for a debt. The following are the essential components of such mortgages:
- There must be a debt between the parties involved, resulting in a debtor-creditor relationship.
- The sale of such immovable property shall become absolute upon the failure or default of the mortgage money on a specific defined date.
- The sale will be void and the property will be returned to the mortgagor if the mortgage money is paid on the specified date.
- The same paper must also include the conditions.
The conditions listed in the section must be included in the mortgage deed when it is executed. The court held in the case of Tamboli Ramanlal Moti Lal v. Gharchi Chimanlal Keshavlal that the presence of the debt should be presumed from the very nature of the conditions inherent in the mortgage deed or the mortgage to be constituted a mortgage by conditional sale. The terms of an absolute apparent sale in the event of nonpayment and the restoration of the property in the event of payment before or on the specified date should be made clear. Such a deed will not be regarded as a mortgage by conditional sale if it does not depict a debtor-creditor relationship.
In the case of Rama v. Samiyappa, the court found that the fact that the mortgaged property becomes the mortgagee's absolute property upon default of payment and that the mortgagor is not personally liable for the debt's repayment is a crucial component of this type of mortgage.
3. Usufructuary mortgages
Usufructuary mortgages are a type of mortgage where the mortgagor transfers/delivers or agrees to transfer/deliver the possession of such mortgaged property to the mortgagee and grants him the following authority or powers, in accordance with Section 58 (d) of the Transfer of Property Act, 1882.
- To keep such possession of the mortgaged property up until the mortgage debt is fully repaid
- To have the right to receive all or any portion of the rents and profits that accrue from the mortgaged property
- To appropriate such rents or profits instead of (i) instead of interest, (ii) in payment of the mortgage debt, or (iii) partially in lieu of the mortgage debt and partially in lieu of both.
- As a result, the following are some significant characteristics or elements of such mortgages:
- Possession of the mortgaged property has been delivered.
- There is no personal liability for the mortgagor. The property is sufficient for the mortgagee
- When the loan balance is fully paid off or the obligation is satisfied with rentals and profits obtained by the mortgagee, the mortgagor has the right to redeem the mortgaged property.
- The mortgagee is not permitted to foreclose on or sell the mortgaged property.
- The amount of time it takes to repay the loan is not predetermined.
- If the mortgage is worth Rs. 100 or more, it must be recorded; if it is for less than Rs. 100, it may be accomplished through the surrender of property or a registered deed.
In the case of Prabhakaran v. M. Azhagiri Pillai, the mortgagor had given the mortgagee the interest in his property with the right to keep possession and profit from the property until the debt's full amount was recovered. The court determined that, in addition to this, the usufructuary mortgage will not subject the mortgagor to any personal liability.
The court ruled in Hikmatulla v. Imam Ali that the mortgagee has the right to keep the mortgaged property until the debt is fully paid. Usufructuary mortgages never specify a deadline for making payments, and if they do, they stop being considered usufructuary mortgages.
In Chathu v. Kunjan, the court determined that the mortgagor had no personal obligation to pay back the mortgage balance and could not be held personally liable.
4. English Mortgage
According to Section 58(e) of the Transfer of Property Act, 1881, in an English mortgage, the mortgagor commits himself to repaying the mortgage money on a specific date prescribed by the mortgagee, and transfers the said mortgaged property to the mortgagee, subject to a requirement that the mortgagee re-transfer it to the mortgagor when the mortgage money is fully paid. consequently, English mortgages must-have components:
- By the transmission of possession, there is an absolute transfer of property.
- There is personal liability for the mortgagor.
- The mortgagee receives a complete transfer of the mortgaged property.
- The transfer is conditional upon the mortgagee retransferring ownership of the property to the mortgagor following timely payment of the agreed-upon mortgage amount.
The court determined that the English mortgage contains three basic components in the case of Narayan v. Venkatarama.
- The mortgagee is obligated to pay back the debt individually.
- The property is absolutely transferred to the mortgagee.
- Once the debt is paid in full, the property will be returned.
5. Mortgage by deposit of title deeds
As per section 58 (f) of the Transfer Of Property Act, 1882 In a mortgage by deposit of title deeds, the mortgagee or creditor receives documents of title pertaining to the immovable property as a form of security. An arrangement like this is known as a mortgage by deposit of title deeds. There is no registration needed for this mortgage. Its core components include the following:
- This type of mortgage is acceptable in the cities of Calcutta, Madras, Bombay, as well as any other city that the relevant state government designates.
- There is no registration needed for this mortgage.
- It is sufficient to simply deliver the mortgagee with the immovable property's title deeds.
The court determined in United Bank Of India v. Messra Lekharam Sonam and Co. that the only requirement for a property to be regarded as a security is the falloff in the title deed about the property. There isn't any other prerequisite in place.
6. Anomalous Mortgage
A mortgage that does not fit the definition of a simple mortgage, such as one that is conditional, usufructuary, English, or one that requires the deposit of title papers, is referred to as an anomalous mortgage under Section 58(g). A mortgage created by combining two or more of the aforementioned types of mortgages falls under this category.
A mortgagor in the Hathika v. Puthiya Purayil Padmanathan case borrowed money from the mortgagee and received the property as well. The mortgagee had the right to sell the property and recoup the debt if the loan balance wasn't paid off within the allotted six months. Although the contract designated it as a usufructuary mortgage, the court found that it possessed characteristics of both a simple mortgage and a usufructuary mortgage, making it an anomalous mortgage.
These six types of mortgages are in accordance with the Transfer of Property
The basic concept of a mortgage is one of the fundamental concepts under the Transfer of Property Act, 1882 section 58 since it assists in securing the mortgagor's obligation and also in redeeming the property as soon as the mortgagor pays back the sum owing to the mortgagee.