PROJECT ON

PROPERTY LAW

PROJECT TOPIC :

KINDS OF MORTGAGE

PROJECT SUBMITTED TO :

MS MEENU SHARMA

PROJECT SUBMITTED BY :

CHIRAG ANEJA

ENROLLMENT NUMBER :

A11921512022

INDEX

1.
2.
3.
4.
5.
6.
7.
8.
9.

WHAT IS MORTGAGE
ESSENTIAL ELEMENTS OF MORTGAGE
TYPES OF MORTGAGE
SIMPLE MORTGAGE
MORTGAGE BY CONDITIONAL SALE
USUFRUCTUARY MORTGAGE
ENGLISH MORTGAGE
MORTGAGE BY DEPOSIT OF TITLE DEEDS
ANOMALOUS MORTGAGE

WHAT IS A MORTGAGE :

In an old case of 1883 , Justice Mahmood observed , a

mortgage , as understood in this country , cannot be defined better
than by the definition adopted by the Legislature in section 58 of the
Transfer of Property Act . That definition has not , in any way ,
altered the law , but , on the contrary , has only formulated in clear
language , the notions of a mortgage , as understood by all the
writers of the text-books on Indian mortgages . Every word of the
definition is borne out by the decisions of Indian Courts of Justice ..

Section 58 of the Transfer of Property Act defines mortgage .

According to this section a mortgage is the transfer of an interest in
specific immovable property for the purpose of securing ---i) the payment of money advanced or to be advanced by way of
loan ,
ii) an existing or future debt , or
iii) the performance of an engagement which may give rise to a
pecuniary liability .

The transferor is called a mortgagor , and 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 by which the transfer is effected is called a
mortgage deed . The words mortgagors and mortgagees also
include persons deriving title from them respectively .

ESSENTIAL ELEMENTS OF MORTGAGE

There are three essential elements of a mortgage .

They are as follows
1) There must be transfer of an interest with respect to immovable
property .
2) The interest transferred must be of some specific immovable
property .
3) The purpose of transfer of interest must be ---a) to secure
i) payment of money advanced or
ii) to be advanced by way of loan ,
iii) an existing or future debt or ,
b) the performance of an engagement which may give rise to a
pecuniary liability .

TYPES OF MORTGAGE

Section 58 of the Transfer of property Act has introduced six kinds

of mortgages . they are as follows ---1) Simple mortgage.
2) Mortgage by conditional sale .
3) Usufructuary mortgage .
4) English mortgage .

5) Mortgage by deposit of title-deeds .

6) Anomalous mortgage .

SIMPLE MORTGAGEWhere, 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.
The characteristics of a simple mortgage are:1. That the mortgagor must have bound himself personally to
repay the loan;
2. That to secure the loan he has transferred to the mortgagee
the right to have
specific immovable property sold in the
event of his having failed to repay and;
3. That possession of the property is not given to the mortgagee;
The essential characteristics of a simple mortgage therefore
are that possession is not given to the mortgagee of the
mortgaged property. That is expressly provided in the
definition itself. All the rights which the mortgagee has are
these: First to recover the money which he has loaned. His
second right is that in the event of non-payment, 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. Therefore,

the mortgagee under a simple mortgage has no right

whatsoever to actual possession of the mortgaged property or
any other possession at all.

MORTGAGE BY CONDITIONAL SALEWhere, the mortgagor ostensibly sells the mortgaged property:-

On condition that on default of payment of the mortgagemoney on a certain date the sale shall become absolute, or on
condition that on such payment being made the sale shall
become void, or on 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.

PROVIDED 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.

Mortgage by conditional sale is an apparent sale with a

condition that upon repayment of the consideration amount,
the purchaser shall re transfer the property to the seller.
Although, the whole transaction looks into like a conditional

sale yet, in essence the intention of the parties is to secure

the money which the seller takes as 'loan from the purchaser.
Mortgage by conditional sale was very well known in India.
Among the Muslims it was a common mode of securing a
debt. It was common also among the Hindus as a mortgage
which became a sale on non -payment of debt. The Transfer of
Property Act has now recognised this form of mortgage with
modifications.

Essential elements of mortgage by Conditional Sale

According to Section 58(c) the mortgage by conditional sale
has following essential elements:

i.

There is an ostensible sale of an immovable property.

ii.

The sale is subject to any of the following conditions:

o On non-payment of mortgage-money (price) the sale would
become absolute or,
o On non-payment of mortgage-money, the sale shall
become void or the buyer shall re transfer the said
property to the seller.

i.

The condition must be embodied in the same document.

Ostensible sale means a sale which apparently looks look a

sale but in reality there is no sale. In this mortgage,
apparently there is a sale of an immovable property but in
reality it is intended to secure a debt. Although in appearance
the transaction may be like a sale but, since the intention of
the parties is to treat it as security for debt, therefore there
must exist a relation of debtor and creditor between seller and
buyer, the sale is not mortgage.

USUFRUCTUARY MORTGAGEWhere 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.

Mortgage is usufructuary where the mortgagor gives

possession of the property to mortgagee. Since possession is
with mortgagee, he gets the usufruct i.e. Produce, benefits,
rents or profits of the mortgage-property. In a usufructuary
mortgage, the mortgagee is entitled to enjoy the benefits of
mortgage property in lieu of interest on the principal money
(debt) advanced by him. So, on payment of debt (principal
money) the mortgagee has no right of possession. Where the
property is capable of giving good produce or benefits, the
parties may also agree that mortgagee is entitled to get the
usufruct of property not only in lieu of interest but also in partpayment of the money advanced.

Essential elements of usufructary mortgage- The essential

elements of usufructuary mortgagor are as follows:-

1. Delivery of possession of the mortgage-property or, an

express or implied undertaking by mortgagor to deliver
such possession.

2. Enjoyment or use of the property by mortgagee until his

dues are paid off.

3.

No personal liability of the mortgagor.

4.
Mortgagee can not foreclose or sue for sale of
mortgage-property.

ENGLISH MORTGAGEWhere the mortgagor binds himself to repay the mortgagemoney on a certain date, and transfers the mortgaged
property absolutely to the mortgagee, but subject 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
English mortgage.

In English mortgage there is absolute transfer of property to

mortgage with a condition that when the debt is paid off on a
certain date, he (mortgagee) shall re-transfer the property to
mortgagor. In English mortgage, the mortgagor binds himself
personally to pay the debt. In this form of mortgage the
personal debt exists and despite conveyance the debtor is
personally liable for the debt.

It is also necessary that specific date be maintained upto

which the mortgagor must repay the debt. The English
mortgage must contain any particular date say 5 th May, 2010
upto which he will repay the mortgage money. If the
mortgagor repays the money the mortgagee is bound to re

transfer the property to mortgagor. If mortgagor fails to repay

the mortgage money on the stimulated date, the mortgagee
has right of sale under section 67of this Act. If the event of
non-payment of mortgage-money (debt) under an English
mortgage, a decree of foreclosure is not passed. In this form
of mortgage, the mortgagee has right to apply for passing
decree for sale of the mortgage property.

Essential elements of English mortgage are as under:-

i.

The mortgagor binds himself to repay the mortgage money on

a certain date.

ii.

The mortgage
mortgagee.

iii.

The absolute transfer is subject to a proviso that mortgagee

will re transfer the
property to mortgagor on payment of
mortgage money on the said date.

property

is

transferred

absolutely

to

An essential feature of English mortgage is that mortgagor

binds himself to repay the loan by transferring the property
absolutely. The use of word 'absolutely' creates doubt because
mortgage as such is a transfer of only some interest in the
property. In every kind of mortgage only some interest is
conveyed; not the absolute interest. This inconsistency occurs
because this form of mortgage has been borrowed from
English law where mortgagor has an equitable interest in the
property both, before as well as after the date of payment.

MORTGAGE BY DEPOSIT OF TITLE-DEEDSWhere a person in any of the following towns, namely, the
towns of Calcutta, Madras, and Bombay, and in any other
town which the State Government concerned may, by
notification in the Official Gazette, 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.

Mortgage by deposit of title deeds is a peculiar kind of

mortgage. It is peculiar in the sense that in this mortgage,
execution of mortgage deed by mortgagor is not necessary.
Mere deposit of title deeds of an immovable property by
mortgagor to mortgagee is sufficient. Title deeds are those
documents which operate as are legal proof that a person
owns a particular property. The object of this kind of mortgage
is to provide easy mode of taking loans in urgent need
specially by trading community of the commercial towns.
Mortgage by deposit of title deed is unique because it does
not require registration and other formalities.

There are three essential ingredients for the creation of

mortgage by deposit of title deeds as per section 58(f) of the
Transfer of Property Act, firstly, there must be a creditor;
Secondly, there must be delivery by the mortgagor to the
creditor or his agent of the documents of title of the
immovable property; and thirdly, it should be done with the
intent to create security thereon. There may be a constructive
deposit instead of an actual one. In United Bank of India Ltd.
v. M/S Lekharam Sonaram and co. and others, Supreme Court
held that the essence of a mortgage by deposit of title deeds
is the actual handing over by a borrower to the lender of
documents of title to immovable property with the intention
that those documents shall constitute a security which will
enable the creditors ultimately recover the money which he
has lent.

Mere possession of a title deed by a person claiming to the

mortgage under mortgage by deposit of title deeds is also
protected under Law of Evidence. Section 90 of the Indian
Evidence Act provides as the presumption as to 30 years old
document, originating from proper custody and it reads as
under-

Where any document, purporting to be 30 years old, is

produced from any custody which the court in the particular
case considers proper, the court may presume that the
signature and every other part of such document, which
purports to be in the handwriting and, in the case of a
document executed or attested, that it was duly executed and
attested.

EXPLANATION- Documents are said to be in proper custody if

they are in the place in which, and under the care of the
person with whom, they would naturally be: but no custody is
improper if it is proved to have had a legitimate origin, or if
the circumstances of the particular case are such as to render
such an origin probable.

The mandate of the provision reflects that any person in

possession of property and the title deed as mortgagee shall
presumed to be a mortgage by deposit of title deed.

Under English law, a mortgage by deposit of title deeds is

known as equitable mortgage. It is called equitable mortgage
because in the absence of any legally executed document,
merely on the basis of possession of title deeds by
mortgagee, equity would assure return of his money. In the
words of Lord Cairns, it will establish rule of equity that a
deposit a document of title without more, without writing,
without word of mouth, will create equity a charge upon the
property referred to.

Essential elements of mortgage by deposit of title deedsAccording to section 58(f), where a person in any of the
specified towns, delivers to a creditor or his agent documents

of title to immovable property, with intent to create thereon,

the transaction is called a mortgage by deposit of title deeds,
under this definition, the essential elements of a mortgage by
deposit of title deeds are:-

i.

Existence of a debt;

ii.

Deposit of title deeds;

iii.

Intention to create security, and;

iv.

Territorial restrictions; application to this form of mortgage

only in specified
towns.

The title deeds must be delivered only for securing a

debt. Debt may wither be an existing debt or a future debt.
Title deeds may be deposited with banks to secure and
overdraft account. This is a common practice among the
trading community or persons involved in business. The title
deeds of an immovable property on which security is intended
to be created, must be deposited with the creditor or his
agent. The document deposited do not show any title at all
and there are documents in existence showing his title to the
property but they are not deposited then, an equitable
mortgage is not created.

Mere deposit of title deeds is not sufficient. The title deeds

must be deposited by the debtor with the intention of creating
security for a debt. Mortgage by deposit of title deeds is
applicable only in certain specified towns of this country. Like
other kinds of mortgage, and equitable mortgage is not
applicable through out the country. The mortgage by deposit
of title deeds may be made only in Calcutta, Bombay and

Madras and such other towns which state government may by

notification specify in official gazette.

ANOMALOUS MORTGAGE
A mortgage which is not a simple mortgage, a mortgage by
conditional sale, a usufructuary mortgage, an English
mortgage or a mortgage by deposit of title-deeds within the
meaning of this section is called an anomalous mortgage.

Section 58 has laid down several kinds of mortgage. But the

classification of mortgage given in this section is not
exhaustive. Besides this forms of mortgage, there are other
methods of taking loans on the security of immovable
property. These methods although not included in section 58,
but are in practice in India. Such modes of taking loans fulfill
the essential requirements of a mortgage but do not come
under any category of mortgage given in this section. These
transactions are in their very nature a mortgage without any
specific name. Since most of such mortgages are either
customary or combinations of two or more forms of mortgages
and thereby causing a normally (inconsistency) they are called
anomalous mortgage.

From the above study of the different kinds of mortgages defined

above, together with the provisions contained in Section 67 of the
Transfer of Property Act, 1882, it will be seen that the different kinds
of mortgages confer different rights on the mortgagees for the
realization of the amount advanced by him.

The mortgagees have got rights under sections 67 to 73 of the

Transfer of Property Act, 1882; Section 67 gives the right of
foreclosure to the mortgagee, stating that, a suit to debar the
mortgagor to claim redemption is called a suit for foreclosure. The
section says that after the mortgage money has become due, or
before decree for redemption been paid or deposited as provided in
law the mortgagee can ask the Court to pass a decree that the
mortgagor shall be debarred from claiming redemption or that the

property be sold. This foreclosure can be claimed in the cases of; (a)
conditional sale, (b) anomalous mortgage reserving a right to
foreclosure, or (c) usufructuary mortgage.

Section 67 provides the right against property and section 68

provides the right against mortgagor to the mortgagee. Under
section 68 mortgagee has a right to to sue mortgagor personally for
repayment of the mortgage-money. Right to sue for mortgagemoney is available to mortgagee in addition to the right of
foreclosure or sale, but only in certain specified circumstances. The
circumstances in which a mortgagee may sue has been specifically
mentioned in section 68. This remedy is available in the following
cases;

(a) where a mortgagor binds himself to repay the mortgage-money,

(b) where the mortgaged property is wholly or partially destroyed so

as to render the security insufficient without any fault of either party
and mortgagor failed to provide further security,

(c) where mortgagee is deprived of or lost the whole or part of his

security due to wrongful act or default of the mortgagor,
(d) where the mortgagee is entitled to have possession of property
but mortgagor fails to deliver possession thereof without
disturbance by himself or by any other person.