tp act project

8/13/2019 TP Act Project

1/16

Submitted By

Ruben George Rock

Law of Property

MORTGAGEAn assignment on definition of mortgage anddifferent types of mortgages


2/16

VI Semester BA. LLB (Hons)

NUALS


3/16

ACKNOWLEDGEMENT

First and foremost, we wish to place on record our deep gratitude to Mrs. Veena.,

faculty, Property Law, for having given me the opportunity to work on the project. I also

thank profusely the lirary staff for the useful cooperation, their enthusiasm and

attentive response in helping me find the right research material and links to important

sources. My gratitude also e!tends to all other sources of data and information.

I specially wish to thank my friends whose timely support and relevant criti"ue

gave this project its essential structure and completeness, for were it not for their

assistance, this project would not have taken the form it has presently.


4/16

WHAT IS MORTGAGE?

A mortgage is a transer o interest in immo!ab"e #ro#erty as a security or a "oan.

$%ene!er a #erson "ends money to anot%er %e may do so eit%er &it%out asking or any

security' or %e may demand some security or t%e #ayment o money. I t%e "ender %adnot demanded or any security and t%e borro&er ai"s to #ay t%e same' %e &i"" %a!e a

rig%t to sue or t%e money. But i t%e borro&er becomes inso"!ent' %e may "ose a"" o %is

money. $%ere' %o&e!er' some security o adeuate !a"ue %as been gi!en or t%e "oan'

t%e "ender &i"" be #rotected i t%e borro&er becomes inso"!ent because t%e security is

gi!en #recedence o!er t%e c"aims o ot%er creditors. ortgage can be said as an

agreement to gi!e u# an interest in somet%ing i you ai" to #erorm some duty. It is a

"ega" document by &%ic% t%e o&ner (i.e.' t%e buyer) transers to t%e "ender an interest in

immo!ab"e #ro#erty to secure t%e re#ayment o a debt' e!idenced by a mortgage note.

*%e #arty &%o borro&s t%e money and gi!es t%e mortgage (t%e debtor) is t%e

mortgagor+ t%e #arty &%o #ays t%e money and recei!es t%e mortgage (t%e "ender) is t%e

mortgagee. Under ear"y ,ng"is% and U.S. "a&' t%e mortgage &as treated as a com#"ete

transer o tit"e rom t%e borro&er to t%e "ender. *%e "ender &as entit"ed not on"y to

#ayments o interest on t%e debt but a"so to t%e rents and #roits o t%e rea" estate. *%e

&ord -mortgage is o o"d /renc% origin &%ic% meant -dead #"edge. It &as dead or t&o

reasons' t%e #ro#erty &as oreit or -dead to t%e borro&er i t%e "oan &ere not re#aid

and t%e #"edge itse" &as dead i t%e "oan &as re#aid.

*%e essentia" eature o a mortgage is t%at it is a con!eyance o "ega" (it is "ega" or

euitab"e in ,ng"and) interest in #ro#erty' &it% a #ro!ision or redem#tion' i.e.' u#on

re#ayment o "oan' t%e con!eyance s%a"" become !oid or t%e interest s%a"" be re0

con!eyed.

DEFINITION OF MORTGAGE AS PER TRANSFER OF PROPERTY ACT

*%e #ro!isions re"ating to mortgage and c%arges are contained in section 12 to 342 o

t%e *ranser o 5ro#erty Act.


5/16

Section 58o t%e Act states as o""o&s6

"Mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgaged" defined.

(a) A mortgage is the transfer of an interest in specific immoveable 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 a 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 (if any)

by which the transfer is effected is called a mortgage-deed.

(b) imple mortgage-!here, without delivering possession of the mortgaged property, the mortgagor

binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event

of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged

property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the

mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.

(c) "ortgage by conditional sale-!here, the mortgagor ostensibly sells the mortgaged property- oncondition that on default of payment of the mortgage-money on a certain date the sale shall become

absolute, or

#n condition that on such payment being made the sale shall become void, or

#n condition that on such payment being made the buyer shall transfer the property to the seller,

The transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional

sale$

%'* that no such transaction shall be deemed to be a mortgage, unless the condition is embodied

in the document which effects or purports to effect the sale+

(d) sufructuary mortgage-!here the mortgagor delivers possession or expressly or by implication binds

himself to deliver possession of the mortgaged property to the mortgagee, and authorises him to retain

such possession until payment of the mortgage-money, and to receive the rents and profits accruing from

the property or any part of such rents and profits and to appropriate the same in lieu of interest or in

payment of the mortgage-money, or partly in lieu of interest or partly in payment of the mortgage-money,

the transaction is called a usufructuary mortgage and the mortgagee a usufructuary mortgagee.

(e) *nglish mortgage-!here the mortgagor binds himself to repay the mortgage-money on a certain date,

and transfers the mortgaged property absolutely to the mortgagee, but subect to a proviso that he will re-

transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an

*nglish mortgage.


6/16

(f) "ortgage by deposit of title-deeds-!here a person in any of the following towns, namely, the towns of

alcutta, "adras, and /ombay, and in any other town which the tate 0overnment concerned may, by

notification in the #fficial 0a1ette, specify in this behalf, delivers to a creditor or his agent documents of

title to immovable property, with intent to create a security thereon, the transaction is called a mortgage

by deposit of title-deeds.

(g) Anomalous mortgage-A mortgage which is not a simple mortgage, a mortgage by conditional sale, a

usufructuary mortgage, an *nglish mortgage or a mortgage by deposit of title-deeds within the meaning of

this section is called an anomalous mortgage.

ANALYSIS OF SECTION 58 OF THE ACT

7n ana"y8ing Section 12' t%e o""o&ing e"ements can be discerned6

3. ortgage is a transer o an interest in s#eciic immo!ab"e #ro#erty.

9. It is or t%e #ur#ose o securing t%e #ayment o money

(a) Ad!anced or to be ad!anced by &ay o "oan+

(b) An e:isting or uture debt+ or

(c) *%e #erormance o an engagement &%ic% may gi!e rise to a #ecuniary

"iabi"ity.

;. *%e #erson &%o transers t%e #ro#erty is ca""ed mortgagor.


7/16

conditions "aid do&n in t%e mortgage. *%e mortgagor %o&e!er does not abandon

o&ners%i# o!er t%e #ro#erty or t%e dominion o!er t%e #ro#erty' but %e may #art &it% t%e

#ossession. *%e rig%ts &%ic% t%e mortgagee obtains are ne!ert%e"ess "ega" rig%ts' but

are on"y accessory rig%ts intended to secure t%e #ayment o t%e "oan.3It is a rig%t in

rem' i.e. a!ai"ab"e against t%e &%o"e &or"d e:ce#t t%e o&ner. $%et%er a mortgagor %as

transerred any interest o!er t%e #ro#erty to t%e transeree is a uestion o construction

and intention. No #articu"ar orm o &ord is necessary to create a mortgage. In t%e case

o >a&a%ar La" !.Indumati9' it &as %e"d t%at no transer o an interest in t%e #ro#erty took

#"ace &%ere #ro#erty &as mere"y made "iab"e or t%e "oan. In t%e case o Anant% Iyer !.

.R. Iyer;' it &as %e"d t%at &%ere it is #ro!ided t%at t%e transeree s%a"" %a!e rig%t to

recei!e rent o t%e "and s#eciied in t%e document or s%a"" %a!e t%e rig%t to #ossess t%e

"and' in eit%er case+ t%ere is transer o interest in s#eciic immo!ab"e #ro#erty. *%ere

must %o&e!er be an actua" transer and not a mere agreement to transer. It is urt%er

necessary t%at t%e #ro#erty must be distinct"y s#eciied.

*%e ob?ect o transer o s#eciic immo!ab"e #ro#erty by mortgage must be or t%e

#$r#oe o! ec$rin% t&e #a'(ent o! (one' a)*ance) or to +e a)*ance) +' t&e

,a' o! -oan. an e/itin% or !$t$re )e+t. or t&e #er!or(ance o! o(e en%a%e(ent

,&ic& (a' %i*e rie to #ec$niar' -ia+i-it'.

S$+0ect Matter o! Mort%a%e"

o!ab"e and !a"uab"e c%atte" can a"so orm t%e sub?ect matter o mortgage. Suc% a

mortgage' e!en i not accom#anied by de"i!ery o #ossession' is sti"" o#erati!e e:ce#t

against bonaide #urc%asers &it%out notice.


8/16


9/16

ierent orms o mortgages as "isted in t%e *ranser o #ro#erty Act are6

Sim#"e mortgage CSec 12 (b)D

ortgage by conditiona" sa"e CSec 12 (c)D

Usuractuary mortgage CSec 12 (d)D

,ng"is% mortgage CSec 12 (e)D

ortgage by de#osit o tit"e deeds CSec 12 ()D

Anoma"ous mortgage CSec 12 (g)D

SIMPLE MORTGAGE

A sim#"e mortgage %as t%e o""o&ing e"ements6

(a) 5ossession o t%e mortgaged #ro#erty is not de"i!ered by t%e mortgagor to t%e

mortgagee+

(b) *%e mortgagor undertakes a #ersona" "iabi"ity to #ay t%e mortgage money+ and

(c) *%e mortgagor agrees' e:#ress"y or im#"ied"y t%at in case o %is ai"ure to #ay t%e

mortgage money t%e mortgagee s%a"" %a!e a rig%t to cause t%e mortgaged #ro#erty so"d

and t%e money so obtained s%a"" be a##"ied' so ar as may be necessary' in #ayment o

t%e mortgage money.

In e!ent o ai"ure to re#ay t%e mortgagee t%e mortgaged #ro#erty can be so"d. *%e

#o&er o sa"e cannot be e:ercised by t%e mortgagee a"one. He can se"" t%e #ro#erty

on"y t%roug% t%e inter!ention o court.E *%e mortgagee on obtaining an order rom court

a""o&ing sa"e o #ro#erty' t%e #roceeds o t%e sa"e &i"" be a##"ied or #ayment o debt

a"ong &it% interest and i any amount is "et unused' it &i"" be returned to t%e mortgagor.*%e suit or reco!ery o money must be i"ed &it%in t%e "imitation #eriod o 39 yrs rom

t%e date &%en t%e money sued or becomes due.2

E9ishanlal v. $angaram &'3('+ '8 0ll

2


10/16

No #articu"ar orms o &ords are necessary to create a sim#"e mortgage. It is suicient'

i t%e intention o t%e #arties to create a mortgage can be made out. In Goku"das !.

ri#aramF' it &as %e"d t%at t%e o""o&ing &ords suiced to create a sim#"e mortgage6

I I ai" to #ay t%e money as sti#u"ated I and my %eirs s%a"" &it%out ob?ection cause t%e

sett"ement o t%e said !i""age to be made &it% you.

MORTGAGE 1Y CONDITIONAL SALE

Suc% a mortgage %as t%e o""o&ing e"ements6

3. *%e mortgagor ostensib"y se""s t%e mortgaged #ro#erty

9. He se""s t%e #ro#erty on t%e condition t%at '

(a) 7n #ayment o t%e mortgaged money t%e sa"e s%a"" become !oid' and t%e

buyer s%a"" transer t%e #ro#erty to t%e se""er on t%e date i:ed+

(b) 7n deau"t o #ayment o t%e mortgage money on t%e i:ed date' t%e sa"e

become abso"ute

;. *%e conditions &%ic% eect or #ur#ort to eect t%e sa"e must be embodied in t%e

document o transer.Un"ike a sim#"e mortgage' t%e mortgagor doesnot take a #ersona" "iabi"ity to #ay "oan.

7n"y a date is i:ed or t%e #ayment o money and i by t%e i:ed date money is not

returned t%e sa"e becomes abso"ute. *%e mortgagee doesnot acuire any #ersona" rig%t

against t%e mortgagor. *%e remedy o mortgagee by conditiona" sa"e is to sue or

orec"osure on"y.

*%e mortgagee in #ossession o t%e mortgaged #ro#erty is bound to kee# #ro#er

accounts' not to commit &aste' to debit t%e #roits in disc%arge o %is debts under

section E= o t%e Act.

$%et%er a deed is a mortgage by conditiona" sa"e or is a sa"e &it% a condition o

re#urc%ase' it &i"" be determined by t%e intention o t%e #arties. escri#tion in t%e

document a"one is not suicient or t%is #ur#ose. *%e documents containing t%e terms

F&'(2*+ '8 5eg L P#


11/16

o transer must be read as a &%o"e. Its nature cannot be determined by reading t%e

document on"y #artia""y.

2S2FRACT2ARY MORTGAGE

*%e main c%aracteristics o t%is mortgage are as o""o&s6

3. 5ossession o t%e mortgaged #ro#erty is de"i!ered to t%e mortgagee.

9. *%e "atter is entit"ed to get and retain t%e rents and #roits arising out o t%e

mortgaged #ro#erty or t%e re#ayment o interest or #rinci#a" or bot%. No

#ersona" "iabi"ity is incurred by t%e mortgagor.

;. *%e mortgagee does not %a!e t%e rig%t to bring t%e mortgaged #ro#erty to sa"e to

reco!er t%e ba"ance o #rinci#a" or interest due.

So "ong t%e debt remains unsatisied+ t%e mortgagee is entit"ed to remain in #ossession

o t%e #ro#erty. Hence t%ere is no a i:ed time #eriod or &%ic% t%e mortgage subsists.

*%e a##ro#riation o rent or interest de#ends on t%e terms and conditions o t%e

mortgage deed. *%e mortgagee is su##osed to maintain account on it. I t%e mortgagor

ai"s to de"i!er #ossession o t%e #ro#erty to t%e mortgagee' t%e "atter can eit%er sue or

#ossession or or t%e reco!ery o "oan ad!anced. In case t%e #ossession is transerred'

t%e on"y remedy a!ai"ab"e to t%e mortgagor is to retain t%e #ro#erty unti" t%e debt issatisied.34

,!en t%oug% #ossession is gi!en o t%e mortgaged #ro#erty to t%e mortgagee' it is uite

dierent rom a "ease as t%ere is no mortgage debt &%ic% is re#ayab"e &it% interest in

t%e case o a "ease.

*o get t%e beneit o t%e rig%t to enorce a sa"e o t%e mortgaged #ro#erty or re#ayment

o t%e mortgaged debt &it% interest' t%e mortgagee can con!ert t%e mortgage into a

sim#"e mortgage.

34amnarayan %ingh v. 0indra 7ath &'3'2+ ** I0 (2


12/16

/or t%is #ur#ose' t%ere s%ou"d be a s#eciic &ritten #ro!ision in t%e mortgage deed to

enab"e t%e mortgagee to con!ert t%e usuructuary mortgage into a sim#"e mortgage.

3$ri#e&%i -eae6 t%is is a "ease or a "um# sum o money #aid in ad!ance. *%e

dierences bet&een 8uri#es%gi "ease and usuructuary "ease are as o""o&s6

3. *%e debtor0 creditor re"ation &%ic% e:ist in usuructuary mortgage is absent in

8uri#es%gi "ease.

9. In usuructuary mortgage' t%e mortgagee retains #ossession o t%e #ro#erty ti""

mortgage money is satisied' in 8uri#es%gi "ease' t%e #ossession is retained or a

i:e #eriod.

Kana( K$4&i-ana( tranaction.a #ractice common"y in !ogue in Sout% India is a

kind o "ease &%ic% resemb"es usuructuary mortgage.

ENGLISH MORTGAGE

*%e e"ements o an ,ng"is% mortgage are6

3. *%e mortgagor takes a #ersona" "iabi"ity to re#ay t%e mortgage money+

9. He #romises to re#ay t%e money on a certain date+

;. He transers t%e mortgage #ro#erty abso"ute"y to t%e mortgagee+ and


13/16

*%ereore t%e mortgagor %as not #arted &it% t%e &%o"e o %is rig%ts and %ence t%e

situation doesnot it in t%e rame&ork o Sec 12(e) because it dea"s &it% abso"ute

transer o t%e mortgage #ro#erty to t%e mortgagee. In India' &%en t%e mortgagor

assigns %is "ease%o"d interest by &ay o ,ng"is% mortgage under Sec 12 o t%e Act' %e

doesnot transer an abso"ute interest &it%in t%e #rinci#"e estab"is%ed in ,ng"and and

conseuent"y t%e mortgagee is not "iab"e by t%e #ri!ity o estate to #ay rent to t%e "essor.

In o%d. Sanoo!ar A"i !. Asman A"i3;a #ro#erty &as mortgaged and t%e contract &as

embodied into t&o documents e:ecuted on t%e same day. By one document t%e

#ro#erty &as abso"ute"y transerred to t%e mortgagee and by t%e second an -ekrarnama>

&as e:ecuted by t%e mortgagee to retranser t%e suit #ro#erty. It &as %e"d t%at in an

,ng"is% mortgage t%e mortgagor binds %imse" to #ay t%e mortgage money on a certain

date. Since t%is e"ement is missing' it &as not %e"d as an ,ng"is% mortgage.

MORTGAGE 1Y DEPOSIT OF TITLE DEEDS

(3) *%is mortgage by de#osit o tit"e deeds is a!ai"ab"e on"y in t%e metro#o"itan cities o

o"kata' umbai' @%ennai and ot%er to&ns &%ic% t%e State Go!ernments concerned'

by notiication in t%eir oicia" ga8ette' s#eciy.

(9) *%e mortgagor de"i!ers t%e origina" documents o tit"e o %is #ro#erty to t%e creditor

or %is agent &it% t%e intention o creating a security on t%e same in a!our o t%e

creditor.

(;) *%is is a mortgage &%ic% is "arge"y resorted to' as t%e "ega" orma"ities are sim#"e

and easy to #erorm.

(


14/16

In ,ng"is% "a& t%is kind o mortgage is ca""ed -euitab"e mortgage. *%e most im#ortant

as#ect o t%is orm o mortgage is t%e intention o t%e mortgagor t%at t%e tit"e deed

de#osited &it% t%e mortgagee s%a"" o#erate as a security or #ayment o debt. I t%e

intention is ot%er&ise' t%en t%e transaction is not a mortgage. In Imperial 5ank of India

v. ai $yaw,3


15/16

e:#"ained beore. I t%e transaction amounts to mortgage t%e rig%ts and "iabi"ities o t%e

#arties &i"" be go!erned by t%e s#eciied terms o t%e deed. *%is does not e:c"ude t%e

o#eration o ot%er re"e!ant #ro!isions o t%e Act in so ar as t%ey are not embodied in

t%e deed.

Customary Mortgages:

*%ere are mortgages to &%ic% s#ecia" incidents are attac%ed by "oca" usage. /or

e:am#"e' Otti and Kano(#re!a"ent in a"abar area cannot be redeemed beore t%e

e:#iry o 39 years in t%e absence o a s#ecia" agreement to t%e country. *%e anom

acuires t%e c%aracter o a mortgage and a "ease. *%e 7tti %o"der %as a rig%t o #re0

em#tion. A Per$art&anmortgage is redeemab"e or t%e market !a"ue o t%e "and at t%e

time o redem#tion.3E A San (ort%a%e #re!a"ent in Gu?arat is a mortgage &it%out

#ossession and %as #riority o!er a subseuent mortgage &it% #ossession.

3ES%ekari !. anga"am (32E=) 3 mad 1E


16/16

1I1LIOGRAPHY

*ranser o 5ro#erty Act J H. N. *i&ari

Internet Sources

$iki#edia

Indiankanoon

La&yersc"ubindia.com

La&k%o?.org

tp act project

Documents