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JAI NARAIN

VYAS,UNIVERSITY

A PROJECT REPORT

ON

Mortgaged property

SUBMITTED TO:

SUBMITTED BY:


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Mortgage And Its Various Types

Dhanistha eena

!"a#$$"% &th seester'


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ACKNOWLEDGEMENT

I feel highly elated to work on this dynamic and highly important topic that is “Mortgage

and Its Various Types”. This topic instantly drew my attention and attracted me to research on

it.

So, I hope I have tried my level est to ring in new ideas and thoughts regarding the

asics of this topic. !ot to forget the deep sense of regard and gratitude to my faculty adviser,

who played the role of a protagonist. "ast ut not the least# I thank all the memers of the

$!V% and all others who have helped me in making this pro&ect a success.


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Contents

1. Acknowledgement

2. Introduction

3. Defination and nature of mortgage

4. Forms of mortgages

5. Rights of mortgager

. Rights of mortgagee

!. Case laws

". Conclusion


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INTRODUCTION

' mortgage is a method of creating charge on immovale properties like land and uilding. Section ()

of the Transfer of *roperty 'ct +)), define a mortgage as follows-

' mortgage is the transfer of an interest in specific immovale property for the purpose of securing

the payment of money advanced or to e advanced y way of loan, an e/isting or future det, or the

performance of an engagement which may give rise to a pecuniary liaility.

In terms of the definition, the following are the characteristics of a mortgage-

0+1 ' mortgage can e affected only on immovale property. Immovale property includes land,

enefits that arise out of land and things attached to earth like trees, uildings and machinery. 2ut

a machine which is not permanently fi/ed to the earth and is shift ale from one place to another

is not considered to e immovale property.

01 ' mortgage is the transfer of an interest in the specific immovale property. This means the owner

transfers some of his rights only to the mortgagee. 3or e/ample, the right to redeem the property

mortgaged.

041 The o&ect of transfer of interest in the property must e to secure a loan or performance of a

contract which results in monetary oligation. Transfer of property for purposes other than the

aove will not amount to mortgage. 3or e/ample, a property transferred to "i5uidate prior det

will not constitute a mortgage.

061 The property to e mortgaged must e a specific one, i.e., it can e identified y its si7e, location,

oundaries etc.

0(1 The actual possession of the mortgaged property is generally with the mortgager.

081 The interest in the mortgaged property is re9conveyed to the mortgager on repayment of the loan

with interest due on.

0:1 In case, the mortgager fails to repay the loan, the mortgagee gets the right to recover the det out

of the sale proceeds of the mortgaged property.

DEFINITION AND NATURE OF MORTGAGE

'ccording to Section () of the Transfer of *roperty 'ct, +)), a mortgage is the transfer of

an interest in specific immoveale property for the purpose of securing the payment of money

advanced or to e advanced y way of loan, an e/isting or future det or the performance of

an agreement which may give rise to pecuniary liaility.


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The transferor is called a mortgagor, the transferee a mortgagee# the principal money and

interest the payment of which is secured for the time eing are called the mortgage money

and the instrument y which the transfer is effected is called the mortgage deed.

Essentials of a Mortgage

+1 Transfer of Interest- The first thing to note is that a mortgage is a transfer of interest in

the specific immovale property. The mortgagor as an owner of the property

possesses all the interests in it, and when he mortgages the property to secure a loan,

he only parts with a part of the interest in that property in favour of the mortgagee.

'fter mortgage, the interest of the mortgagor is reduced y the interest which has

een transferred to the mortgagee. ;is ownership has ecome less for the time eing

y the interest which he has parted with in favour of the mortgagee. If the mortgagor

transfers this property, the transferee gets it su&ect to the right of the mortgagee to

recover from it what is due to him i.e., the principal plus interest.

1 Specific Immovale *roperty- The second point is that the property must e

specifically mentioned in the mortgage deed.


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repaid the det# he does not transfer any interest in the property to the creditor. In a

sale, as distinguished from a mortgage, all the interests or rights or ownership are

transferred to the purchaser. In a mortgage, as stated earlier, only part of the interest is

transferred to the mortgagee, some of them remains vested in the mortgagor.

To sum up, it may e stated that there are three outstanding characteristics of a mortgage-

a1 The mortgagee?s interest in the property mortgaged terminates upon the performance

of the oligation secured y the mortgage.

1 The mortgagee has a right of foreclosure upon the mortgagor?s failure to perform.

c1 The mortgagor has a right to redeem or regain the property on repayment of the det

or performance of the oligation.

FORMS OF MORTGAGES

Section () of the transfer of *roperty 'ct enumerates si/ kinds of mortgages-

0+1 Simple mortgage.

01 Mortgage y conditional sale.

041 %sufructuary mortgage.

061 @nglish mortgage.

0(1 Mortgage "y deposit of title deeds.

081 'nomalous mortgage.

(1 Si!"le Mortgage

In a simple mortgage, the mortgager does not deliver the possession of the mortgaged

property. ;e inds himself personally to pay the mortgage money and agrees either

e/pressly or impliedly, that in case of his failure to repay, the mortgagee shall have the

right to cause the mortgaged property to e sold and apply the sale proceeds in payment

of mortgage money.

The essential feature of the simple mortgage is that the mortgagee has no power to sell the

property without the intervention of the court. The mortgagee can-

0i1 apply to the court for permission to sell the mortgaged property, or

0ii1 file a suit for recovery of the whole amount without selling the property.


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(# Mortgage $% Con&itional Sale

In this form of mortgage, the mortgager ostensily sells the property to the mortgagee on

the following conditions-

0i1 The sale shall ecome void on payment of the mortgage money.

0ii1 The mortgagee will retransfer the property on payment of the mortgage money.

0iii1 The sale shall ecome asolute if the mortgager fails to repay the amount on a

certain date.

0iv1The mortgagee has no right of sale ut he can sue for foreclosure.

3oreclosure means the loss of right possessed y the mortgager to redeem the mortgaged

property. The mortgagee has the right to institute a suit for a decree so that the mortgager

will e asolutely dearred from his right to redeem the property. The right to foreclosure

arises when the time fi/ed for repayment e/pires and the mortgager fails to repay the

mortgage money.


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0+1 The mortgager transfers the property asolutely to the mortgagee. The mortgagee,

therefore, is entitled to take immediate possession of the property. The transfer is

su&ect to the condition that the property shall e transferred on repayment of the

loan.

01 The mortgager also inds himself to pay the mortgage money on a certain date.

041 In case of non9repayment, the mortgagee has the right to sell the mortgaged property

without seeking permission of the court in circumstances mentioned in section 8A of

the Transfer of *roperty 'ct.

(, Mortgage $% De"osit of Title Dee&s


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@ssential Ee5uirements of @5uitale Mortgage

0+1 'n e5uitale mortgage re5uires three essential features

i. There must e a det e/isting or future,

ii. There must e deposit of title deeds, are the title deeds should e deposited as security

for the det.

01 Eegistration of documents is not necessary.

Ro%al rinting Wor2s an& Ot+ers -s. Oriental 3an2 of Co!!er)e (4556. It was

estalished in the aove case, that where a security is furnished y deposit of title deeds,

no registration is necessary.

041 'n e5uitale mortgage can e affected only in the towns of Bolkata, Mumai and

=hennai and in certain places notified y the State Dovernment.

Slo)+ana an& Ot+ers 7s. T+e an&%an 3an2 Lt&. It was held in the aove case that

the detor need not produce the documents and deposit the same in person in any of the

towns mentioned in that Section. If the intention was to deposit the documents in the

towns mentioned and the documents were duly forwarded, such deposit shall e deemed

to have een made in the towns specified in the Section.

Sa$asi-a Rao 7s. 3an2 of 3aro&a 0+A)A1. It was held that even if certified copies of

documents of title to goods are deposited, if the intention of the deposit is for. security to

cover a loan, it would amount to e5uitale mortgage.

061 The documents are to e retransferred to the mortgagee on repayment of the det.

0(1 The mortgagee is empowered to apply to the court to convert the e5uitale mortgage into

a legal mortgage, if the mortgager fails to repay the loan on a specified date.

A&-antages

0+1 !o registration is re5uired in e5uitale mortgage and so stamp duty is saved.

01 It involves minimum formalities.

041 The information regarding such mortgage is kept confidential etween the lender and orrower. So the reputation of the orrower is not affected.


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Disa&-antages

0+1 If the mortgagor fails to repay, the mortgagee must get the decree for the sale of the

property. Detting a decree is e/pensive and time consuming.

01 The orrower may hold the title deeds not on his own account, ut in the capacity of a

trustee. If an e5uitale charge is created, the claim of the eneficiary under the trust will

prevail over e5uitale mortgage.

041 There is the risk of suse5uent legal mortgage in favour of another party. If the e5uitale

mortgagee parts with the security, even for a short period, the detor may create a second

legal mortgage over the same property. In that case, the second mortgage shall have the

first priority over the e5uitale mortgagee. The mortgagee should e very careful in this

regard.

(8 Ano!alos Mortgage

In terms of this definition an anomalous mortgage is one which does not fall under

anyone of the aove five terms of mortgages. Such a mortgage can e effected according

to the terms and conditions of the mortgager and the mortgagee. %sually it arises y a

comination of two or more of the aove said mortgages. It mayG take various forms

depending upon custom, usage or contract.

RIG9TS OF MORTGAGER

Rig+t of Mortgager:

Rig+ts of Re&e!"tion0 The mortgager has a right to redeem the mortgaged property

provided-

a. he9pays the mortgage money on due date at the proper place and time,

. The right of redemption has not een terminated y an act of the parties or y decree

of a court.

The mortgager who has redeemed the mortgage is entitled to the following rights-


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0a1 To get ack the mortgage deed and all other documents relating to the mortgaged

property,

01 To otain possession of the mortgaged property from the mortgagee, as in the case of

@nglish mortgage,

0c1 To have the mortgaged property retransferred at his cost to him or to such third person

as he may direct.

01 A))ession to Mortgage& ro"ert%0 Huring the possession of the property, if the

mortgagee has voluntarily made any improvement in the property, the mortgager, on

redeeming the property, is entitled to all such additions or improvements, unless there is a

contract to the contrary.

041 Rig+t to Transfer to T+ir& art%0 The mortgager may re5uire the mortgagee to transfer

the mortgaged property to a third person instead of retransfer to him.

061 Rig+t to Ins"e)tion an& ro&)tion of Do)!ents0 The mortgager has the right to

inspect and make copies of all documents of title in the custody of mortgagee.

C+a"ter , ;RIG9TS OF MORTGAGEE

0+1 Rig+t to se for !ortgage !one%0 The mortgagee has the right to file a suit in a court of

law for the mortgage money in the following cases-

a.


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01 Rig+t of sale0 The mortgagee in case of a simple, @nglish and e5uitale mortgage has the

right to sell the property after filing a suit and getting a decree from a court.

' mortgagee has a right of sale without the intervention of the court under certain

circumstances mentioned in Section 8A of Transfer of *roperty 'ct.

041 Rig+t of fore)losre0 The mortgagee has a right to otain from the =ourt a decree for

foreclosure against the mortgager, that is, the mortgager is asolutely dearred of his right

to redeem the property. The right of fore closure is allowed in 0i1 a mortgage y a

conditional sale, and the anomalous mortgage.

061 Rig+t of a))ession to "ro"ert%0 If any addition is made to the mortgaged property, the

mortgagee is entitled to such addition for the purpose of security provided there is no

contract to the contrary. 3or e/ample, ' mortgages a certain plot of land to 2 and

afterwards constructs a uilding on it. 2 is entitled to the uilding and land as security for

the loan.

0(1 Rig+t of "ossession0 The mortgagee is entitled to the possession of the mortgaged

property as per the terms of mortgage deed. Such a right is availale in usufructuary

mortgage.

Case La<

1. Mortgage Cor"oration - S+aire >>+J =h :64 is an @nglish land law case relating to

the Trusts of "and and 'ppointment of Trustees 'ct +AA8.

Fa)ts- Mr Marvin 3o/ and Marsha Shaire lived at :6


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was &ust one factor, and there was no suggestion that it should e given more weight. It was

in the court?s discretion. In the circumstances, the court would not make an order until the

parties had had an opportunity to consider the conse5uences of the court?s conclusions on the

law. Cld cases should e treated with caution.J

> The very name “trust for sale” and the law as it has een developed y the courts

suggests that under the old +A(J law, in the asence of a strong reason to the contrary,

the court should order sale. !othing in the language of the new code as found in the

+AA8 'ct supports that approach. ?

Instead, the claimantGs interest should e converted to a loan for Mrs Shaire to pay off over

time. If she could not meet the re5uirements of the loan, then the court would order a sale, ut

only after consideration had een given to properties availale to Mrs Shaire with the money

that would e realised upon sale of the house. The court also held that Mrs Shaire would

never have intended for Mr 3o/ to have a (>K interest in the property, and therefore set his

share at (K.

#. Matt+e


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'. In 3ail% -. S!it+ 9 a case marked y great aility and fullness of research 99 the Supreme

=ourt of Chio came to a conclusion different from that at which we have arrived. The

&udgment was put chiefly upon the ground that notes, negotiale, are made so y statute,

while there is no such statutory provision as to mortgages, and that hence the assignee takes

the latter as he would any other chose in action, su&ect to all the e5uities which susisted

against it while in the hands of the original holder. To this view of the su&ect there are

several answers.

The transfer of the note carries with it the security, without any formal assignment or

delivery, or even mention of the latter. If not assignale at law, it is clearly so in e5uity.


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' mortgage is the transfer of an interest in specific immovale property for the purpose of

securing the payment of money advanced or to e advanced y way of loan, an e/isting

or future det, or the performance of an engagement which may give rise to a pecuniary

liaility.

Mortgages are mainly of 8 types, which are as follows-9

+1 Simple mortgage

1 Mortgage y =onditional sale

41 %sufuctuary mortgage

61 @nglish mortgage

(1 Mortgage of title deeds

81 'nomalous mortgage

In all the aove mentioned various types of mortgage the possession of mortgage property is

clearly mentioned making clear who will e having its possession and that too up to what

e/tent, e/cept in two types of mortgage, which are mortgage y conditional sale and the

another one anomalous mortgage. Sec () of Transfer of *roperty 'ct +)) which deals with

topic of mortgage remains silent on point of possession in mortgage y conditional sale. 'nd

in anomalous mortgage it is completely uncertain that who will have the possession of the

mortgaged property ecause anomalous mortgage is any mortgage which does not come

under the aove mentioned first five kinds of mortgage. So in anomalous mortgage

everything complete depends on the terms and condition set while making the contract of

mortgage.

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