Abhishek Dutta 15 March 2023

Registered mortgage instead of equitable mortgage!! why so ?

One of my friend is willing to start manufacturing of a garment business and owns a property measuring 30.23 decimals in west Bengal, however out of the same 2.26 decimals is Doba (Waterbody). The title of the property is clear however Bank is refusing to mortgage the said property by way of Equitable Mortgage and has been stating the since waterbody can not be converted SARFESAI Can not be implemented on the same and the only way is a Registered Mortgage, which costs 2 - 3 % of the market value of the property , which is a huge sum.

We are offering only the converted part of property for mortgage (Excluding the waterbody) for consideration and the bank is willing to accept the total property for the mortgage (Excluding the waterbody), however, we do not understand the need for a registered mortgage. Does Registered Mortgage safeguard Bank's interest for mortgage of waterbody as Bank's empanelled advocate has advised Bank to get the property mortgaged under Section 58(e) of the transfer of Property act 1882.

Request seniors and experts to please advice.

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RAKESH ISHI 21 March 2023

It is true that a waterbody cannot be mortgaged under SARFAESI Act, as it is considered a non-transferable asset. However, it is possible to mortgage the portion of the property that is not a waterbody, as long as the title of the property is clear and the owner has the right to mortgage it.

A registered mortgage is a more secure form of mortgage for the bank, as it is registered with the government and provides a clear and legal proof of the bank's interest in the property. It also ensures that the mortgage cannot be challenged easily by any third party.

Section 58(e) of the Transfer of Property Act, 1882, allows for a registered mortgage of immovable property, which is created by the transfer of the property by the owner to the mortgagee, as security for the repayment of the loan. The mortgage is registered with the Registrar of the Sub-District, where the property is located.

In this case, if the bank is insisting on a registered mortgage, it may be because they want to ensure that their interest in the property is protected and that the mortgage cannot be challenged easily. The cost of the registered mortgage may be high, but it may be worth it in the long run, as it provides greater legal protection to the bank's interest.

Advice of a qualified lawyer is recommended in this situation to fully understand the implications of the mortgage and the legal requirements.

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Abhishek Dutta 21 March 2023

Thanks a lot sir, for your patient time and guidance.