Meaning and Concept
A Usufructuary Mortgage is a type of mortgage in which the mortgagor delivers possession of the mortgaged property to the mortgagee, and the mortgagee is entitled to retain possession and enjoy the rents and profits of the property in lieu of interest or in payment of the mortgage money. This form of mortgage is defined under Section 58(d) of the Transfer of Property Act, 1882. Unlike a simple mortgage, there is no personal liability on the mortgagor to repay the debt, and the mortgagee cannot sue for sale or foreclosure. The mortgagee recovers the loan amount from the income generated by the property.
Statutory Provision and Legal Framework
The legal framework for usufructuary mortgage is laid down under Section 58(d) of the Transfer of Property Act, 1882. According to this provision, possession must be delivered to the mortgagee either expressly or impliedly. The mortgagee’s rights are limited to enjoying rents and profits until the mortgage money is satisfied. Courts have held that since there is no personal covenant to repay, the mortgagee cannot enforce repayment through court proceedings. This form of mortgage is particularly common in agricultural transactions and rural lending practices.
Essential Characteristics and Importance
The essential characteristics of a usufructuary mortgage include delivery of possession, absence of personal liability, enjoyment of rents and profits by the mortgagee, and recovery of debt through usufruct rather than sale. Its importance lies in providing security to the lender without burdening the borrower with personal repayment obligations. In examinations, this mortgage is often compared with simple and English mortgages to test understanding of possession and repayment mechanisms. A clear grasp of these features is essential for answering problem-based questions.
Real-Time Example
A real-time example of a usufructuary mortgage is when a farmer mortgages his agricultural land to a moneylender and hands over possession of the land. The moneylender cultivates the land or leases it out and uses the income generated to adjust the loan amount. Once the loan is fully satisfied, possession is returned to the farmer. This practical arrangement reflects the operation of Section 58(d) of the Transfer of Property Act, 1882, where repayment is made through enjoyment of the property’s produce.
Mnemonic to Remember
A simple mnemonic to remember Usufructuary Mortgage is “P.R.O.F.I.T”.
P – Possession transferred
R – Rents and profits enjoyed
O – Ownership remains with mortgagor
F – No foreclosure or sale
I – Income repays debt
T – Till loan is satisfied
This mnemonic helps students recall key features quickly during exams.
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