Meaning and Legal Concept
A mortgage is a 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. The concept of mortgage is governed by the Transfer of Property Act, 1882, and is an important mode of creating security over immovable property. Section 58 of the Act defines mortgage and also classifies its various kinds. In a mortgage, the ownership is not completely transferred; instead, only an interest in the property is created in favour of the mortgagee. The object of a mortgage is to provide assurance to the lender while allowing the borrower to retain ownership, subject to the mortgage conditions. Mortgages play a vital role in banking, housing finance, and commercial transactions, making their classification legally significant.
Statutory Provisions and Classification
The different kinds of mortgages are enumerated under Section 58(a) to 58(g) of the Transfer of Property Act, 1882. The Act recognizes six main kinds of mortgages. These include Simple Mortgage (Section 58(b)), where the mortgagor personally binds himself to repay the loan and agrees that the property may be sold on default. Mortgage by Conditional Sale (Section 58(c)) involves a sale with a condition that the sale shall become void or absolute on the happening of a specified event. Usufructuary Mortgage (Section 58(d)) allows the mortgagee to enjoy the rents and profits of the property in lieu of interest or principal. English Mortgage (Section 58(e)) involves an absolute transfer with a condition of re-transfer upon repayment. Mortgage by Deposit of Title Deeds (Section 58(f)), also known as equitable mortgage, is created by depositing title deeds in notified towns. Anomalous Mortgage (Section 58(g)) is any mortgage not falling under the above categories.
Legal Characteristics and Importance
Each kind of mortgage has distinct legal characteristics concerning possession, liability, and remedies available to the mortgagee. For example, in a simple mortgage, the mortgagee has no right to possession, whereas in a usufructuary mortgage, possession is transferred. In an English mortgage, personal liability and absolute transfer coexist. The classification helps determine rights such as foreclosure, sale, and redemption. Mortgages are essential instruments for credit availability and economic development. A proper understanding of the kinds of mortgages enables borrowers and lenders to choose suitable security arrangements. For law students, this topic is highly important as it frequently appears in examinations and is closely connected with banking and property disputes.
Real-Time Example
A common real-time example is a home loan taken from a bank. When a person borrows money to purchase a house, the bank usually creates a mortgage by deposit of title deeds under Section 58(f) by keeping the original property documents as security. In rural areas, a usufructuary mortgage is often created where the lender takes possession of agricultural land and enjoys the produce until the loan is repaid. In some family arrangements, property may be transferred through a mortgage by conditional sale, where ownership depends on repayment. These examples show how different kinds of mortgages are applied in everyday financial and property transactions.
Mnemonic to Remember
A popular mnemonic to remember the kinds of mortgages is “SCUEEA”. S stands for Simple Mortgage, C for Conditional Sale, U for Usufructuary Mortgage, E for English Mortgage, the second E for Equitable Mortgage (deposit of title deeds), and A for Anomalous Mortgage. This mnemonic helps students easily recall all six kinds of mortgages under Section 58 of the Transfer of Property Act, 1882 during examinations.
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