Introduction
In property law, transactions involving immovable property often require financial assistance. To secure repayment of loans advanced for such purposes, the law recognizes a mechanism called mortgage. Mortgage plays a crucial role in balancing the interests of lenders and borrowers by creating a legal security over property without transferring absolute ownership. Under Indian law, mortgages are governed primarily by the Transfer of Property Act, 1882 (TPA), which clearly defines the concept and classifies different types of mortgages. Understanding mortgages is essential for law students, legal practitioners, and property owners, as it frequently appears in examinations and real-life legal disputes.
Definition of Mortgage
According to Section 58(a) of the Transfer of Property Act, 1882, a mortgage is defined as:
“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 a pecuniary liability.”
Essential Elements of a Mortgage
From the statutory definition, the following essential elements can be identified:
- Transfer of an Interest – Not ownership, but a limited interest in the property.
- Immovable Property – Mortgage can only be created over immovable property.
- Security for Debt – The transfer is for securing repayment of a loan or obligation.
- Parties Involved
- Mortgagor – The person who transfers the interest
- Mortgagee – The person in whose favor the interest is transferred
- Mortgage Money – The loan amount
- Mortgage Deed – The instrument creating the mortgage
A mortgage does not extinguish the owner’s rights entirely; it merely creates a charge or interest until the debt is repaid.
Kinds of Mortgage under the Transfer of Property Act
Section 58 of the Transfer of Property Act classifies six kinds of mortgages, each with distinct characteristics.
1. Simple Mortgage (Section 58(b))
In a simple mortgage, the mortgagor:
- Does not deliver possession of the property
- Personally binds himself to repay the mortgage money
- Gives the mortgagee the right to cause the mortgaged property to be sold in case of default
Key Features
- No transfer of possession
- Personal liability of mortgagor
- Right of sale through court
This type is commonly used in bank loans where the borrower retains possession of the property.
2. Mortgage by Conditional Sale (Section 58(c))
In this mortgage, the mortgagor ostensibly sells the property with a condition that:
- On default, the sale becomes absolute, or
- On repayment, the sale becomes void, or
- On repayment, the buyer shall re-transfer the property
Key Features
- Appears as a sale but is actually a mortgage
- Condition must be in the same document
- Courts strictly interpret such transactions
This type often creates confusion between sale and mortgage and is therefore scrutinized carefully by courts.
3. Usufructuary Mortgage (Section 58(d))
In a usufructuary mortgage, the mortgagor:
- Delivers possession of the property
- Authorizes the mortgagee to enjoy rents and profits
- The income is adjusted towards interest or principal
Key Features
- No personal liability
- No fixed time for repayment
- Mortgagee remains in possession
This type is common in agricultural properties.
4. English Mortgage (Section 58(e))
In an English mortgage, the mortgagor:
- Transfers absolute ownership of the property
- Subject to a condition that ownership will be re-transferred upon repayment
- Binds himself personally to repay the debt on a certain date
Key Features
- Absolute transfer with reconveyance clause
- Personal liability
- Fixed repayment date
It provides strong security to the mortgagee.
5. Mortgage by Deposit of Title Deeds (Section 58(f))
Also known as an Equitable Mortgage, it is created when:
- The mortgagor delivers title deeds
- With an intention to create security
- In notified towns such as Mumbai, Chennai, Kolkata, Hyderabad, etc.
Key Features
- No registration required
- Intention is crucial
- Widely used in banking sector
This is one of the most convenient forms of mortgage in urban India.
6. Anomalous Mortgage (Section 58(g))
An anomalous mortgage is one which does not fall under any of the above categories.
Key Features
- Combination of different mortgages
- Governed by contract and local usage
- Flexible in nature
It depends largely on the agreement between parties.
Rights and Relevance of Mortgage
Mortgage protects the mortgagee while preserving ownership rights of the mortgagor. The most important right of the mortgagor is the Right of Redemption under Section 60 of the TPA, which allows him to reclaim the property upon repayment of the debt.
Mnemonic to Remember the Kinds of Mortgage
“Some Clever Users Enjoy Depositing Assets”
- A – Anomalous Mortgage
- S – Simple Mortgage
- C – Conditional Sale Mortgage
- U – Usufructuary Mortgage
- E – English Mortgage
- D – Deposit of Title Deeds
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