Mortgage with deposit of title deeds
s.k.goyal
(Querist) 27 May 2014
This query is : Resolved
What is liability of mortgagee with deposit of title deeds of a property(immovable) for a loan taken by other person in case of default
Anirudh
(Expert) 27 May 2014
please note, mortgagee is the person who lends the money. The person who gives the property in mortgage is called the mortgagor.
Therefore, the question of liability of mortgagee does not arise.
You have to come out with correct facts and question.
s.k.goyal
(Querist) 27 May 2014
A takes loan from B(institution) giving the land of C as collateral . For this C executed a mortgage deed with B. Mortgage under "Equitable mortgage with the deposit of title deeds" along with Memorandum of Entry. Also handover the sale deed of land along with the valuer's report . Now A defaulted and B auctioned the land to part adjust the amount against outstanding of loan without informing C. Here what kind of liability exists with C? Is it joint and several ?
Raj Kumar Makkad
(Expert) 27 May 2014
C has already undertaken to re-pay the outstanding of the banker towards A when he mortgage his immovable property and B bank has to recover it on default. Banker has to recover it from the mortgaged property as per its procedure which it definitely might have completed and C has got no right to claim for joint liability of first liability of A and then of C.
s.k.goyal
(Querist) 28 May 2014
Thank you sir.But I want to know, whether the liability to pay outstanding amount, even after adjusting the amount of mortgaged land of C , exists further towards C, as joint and several, in this type of mortgage or not ?
Rajendra K Goyal
(Expert) 28 May 2014
The liability is not limited to mortgaged property, it is joint and several for whole outstanding.
Please refer the guarantee agreement.
s.k.goyal
(Querist) 28 May 2014
But there is no guarantee agreement by C. The only documents executed by C were , 1) mortgage deed toward land , referring as a schedule in the deed of the land with proper identification and size etc. 2) Memorandum of Entry .
malipeddi jaggarao
(Expert) 28 May 2014
Mr.Goyal, Unless C is a joint borrower, or extended party guarantee to the loan, his property can not be taken as collateral security. Hence, the bank might have certainly obtained the guarantee of C. Once he is the guarantor, even for the residual amount, the bank has the liberty to recover this either from the borrower, or from C or from both. What is the position of the borrower A. The underlying principle for obtaining personal guarantee of a third party is to assert external/emotional pressure on the borrower to repay the dues if he is capable of. Hence C should assert pressure on A and see that the amount is paid.
At the same time C, being the guarantor, lost his property for payment of dues of A, can initiate civil suit for recovery of the amount from A (it will be meaningful if A is having any resources to meet the demand). The moment the guarantor pays the liability of principal debtor (either by him or by auction of his property by the Bank), he steps into the shoes of creditor and acquire all the rights of the creditor (here Bank) to recover the paid amount from the borrower.
s.k.goyal
(Querist) 28 May 2014
Sir, I am sorry to say but here C is neither a joint borrower nor signed any guarantee deed or agreement .
malipeddi jaggarao
(Expert) 29 May 2014
when C is neither a joint borrower or a guarantor, there is no question of creation of equitable mortgage in favour of financing institution as such contract is without consideration which is not valid.
I still firmly believe that no financial institution commits such blunder.
However, this can never happen. The Memorandum of depositing title deeds clearly narrates the purpose of such deposit wherein it clearly mentions that as consideration for sanctioning a loan of Rs.xxxto Mr.XXXXX the owner of the property mortgages the title deeds with the financial institution. For making the deposit valid, the property owner should be a joint borrower or a guarantor.
In case, if no guarantee of C was taken, his liability is limited to the extent of the sale proceeds of the property only.
Guest
(Expert) 29 May 2014
I endorse the views of Mr. Jaggarao.
T. Kalaiselvan, Advocate
(Expert) 31 May 2014
I too agree with the views of expert Mr. Jagga Rao on the issue. Unless C executes guarantee for the loan to A, his property cannot be accepted as collateral security. Subsequent to the recovery, C can step into the shoes of B to recover the money from A.
