This article is written by Asha Kumari Manjhi , from Bhadrak Law College 3rd year, during his internship with LeDroit India.
Abstract:
This research paper delves into the concept of mortgages as outlined in the Transfer of Property Act, 1882. It provides a detailed analysis of the various types of mortgages recognized by the Act, highlighting their unique characteristics, legal implications, and the rights and obligations of the parties involved. The study aims to elucidate the distinctions between these mortgage types and offer insights into their practical applications within the Indian legal framework.
Keywords:
Mortgage,
Transfer of Property Act,
Simple Mortgage,
Mortgage by Conditional Sale,
Usufructuary Mortgage,
English Mortgage,
Equitable Mortgage,
Anomalous Mortgage
Introduction:
Transfer of Property Act, 1882 is the statutory law in India that contains provisions for mortgage laws. In simple terms, mortgage is transferring interest of an immovable property for securing a loan or for a performance of an engagement. Section 58(a) of the Act defines the term mortgage as follows: “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.”
The person who mortgages the property is the ‘mortgagor’ and the person to whom the property is mortgaged is the ‘mortgagee’. The instrument used by the parties involved in such transfer is known as the ‘mortgage deed’. The different types of mortgages under Transfer of Property Act can be divided into 6 types as detailed below per Section 58.
Research Methodology:
This study employs a doctrinal research methodology, primarily focusing on the analysis of statutory provisions within the Transfer of Property Act, 1882. Secondary sources, including legal commentaries, judicial precedents, and scholarly articles, have been consulted to provide a comprehensive understanding of the subject matter. The research is descriptive and analytical, aiming to elucidate the complexities inherent in the different types of mortgages.
Review of Literature:
Several legal scholars have extensively analyzed the concept of mortgages under the Transfer of Property Act. The article “Kinds of Mortgage and their features under Transfer of Property Act” provides a detailed examination of each mortgage type, outlining their distinct characteristics and legal implications.
Similarly, the piece “Understanding different types of mortgage under the Transfer of Property Act, 1882” offers insights into the practical applications and judicial interpretations of various mortgage forms.
These works, among others, have significantly contributed to the understanding of mortgage law in India.
Types of Mortgages:
1.Simple Mortgage (Section 58(b)): In a simple mortgage, the mortgagor does not deliver possession of the mortgaged property but binds himself personally to repay the loan. In the event of default, the mortgagee has the right to cause the property to be sold and apply the proceeds towards the debt. This type of mortgage creates a personal liability on the mortgagor.
2.Mortgage by Conditional Sale (Section 58(c)): This mortgage involves a transaction that appears as a sale with a condition that upon repayment of the loan, the buyer (mortgagee) will retransfer the property to the seller (mortgagor). If the mortgagor defaults, the sale becomes absolute. The essential feature is that the condition must be embodied in the same document.
3.Usufructuary Mortgage (Section 58(d)): In this arrangement, the mortgagor delivers possession of the property to the mortgagee, who is entitled to enjoy the property’s rents and profits in lieu of interest or principal payment. The mortgagee retains possession until the debt is repaid but has no right to cause a sale of the property.
4.English Mortgage (Section 58(e)): Here, the mortgagor transfers the property absolutely to the mortgagee, with a covenant to repay the loan on a specified date. Upon repayment, the mortgagee is obligated to retransfer the property to the mortgagor. This type of mortgage combines elements of both sale and security.
5.Mortgage by Deposit of Title Deeds (Section 58(f)): Commonly known as an equitable mortgage, this occurs when the mortgagor delivers the title deeds of the property to the mortgagee with the intent to create security for the debt. This form of mortgage does not require registration and is prevalent in certain cities specified by law.
6.Anomalous Mortgage (Section 58(g)): Any mortgage that does not fit into the aforementioned categories is termed an anomalous mortgage. These are typically hybrid forms, combining elements of different mortgage types, and are defined by the specific terms agreed upon by the parties involved.
Suggestions:
To enhance clarity and reduce litigation arising from ambiguities in mortgage transactions, it is recommended that:
Parties meticulously document the terms of the mortgage, ensuring that the nature of the transaction and the rights and obligations of each party are clearly delineated.
Legal practitioners and financial institutions provide comprehensive guidance to clients, elucidating the implications of different mortgage types to facilitate informed decision-making.
Legislative bodies consider periodic reviews of the Transfer of Property Act to address contemporary challenges and incorporate judicial interpretations that have evolved over time.
Conclusion:
The Transfer of Property Act, 1882, provides a structured framework for various types of mortgages, each designed to cater to different transactional needs and circumstances. Understanding the distinct features and legal consequences of each mortgage type is crucial for parties engaging in such transactions, as it ensures the protection of their rights and the fulfillment of their obligations. This study underscores the importance of informed consent and diligent documentation in mortgage dealings to uphold the principles of fairness and legal certainty.
