PRESTIGE INSTITUTE OF MANAGEMENT AND RESEARCH

DEPARTMENT OF LAW

SUBJECT: TRANSFER OF PROPERTY

ASSIGNMENT TOPIC

TYPES OF MORTGAGE

SUBMITTED TO- SUBMITTED BY-

ASST. PROF. DIVYANI SINGH AKSHAT YADAV

BA.LL.B 7TH SEM

 INDEX OF AUTHORITIES

INTRODUCTION: ............................................................................................................................... 3
ESSENTIAL OF MORTGAGE: ......................................................................................................... 3
TYPES OF MORTGAGES: ................................................................................................................ 5
1) Simple Mortgage [Sec. 58 (b)] .................................................................................................. 5
2) Mortgage by Conditional Sale [Sec. 58 (c)] ............................................................................. 5
3) Usufructuary Mortgage [Sec. 58 (d)]....................................................................................... 6
4) English Mortgage [Sec. 58 (e)] ................................................................................................. 6
5) Mortgage by Deposit of Title Deeds [Sec. 58 (f)] .................................................................... 7
(6) anomalous mortgage [Sec. 58 (g)] .............................................................................................. 7
Legal Mortgage vs. Equitable Mortgage: ........................................................................................... 7
CONCLUSION: .................................................................................................................................... 8

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INTRODUCTION:

A mortgage is a method of creating charge on immovable properties like land and building.
Section 58 of the Transfer of Property Act 1882, define a 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 transfers his property i.e. Transferor is called a Mortgagor, And the person to
whom the property is being transferred i.e. Transferee is called Mortgagee. The principal
money and interest of which payment is secured for the time being are called the Mortgage-
Money. The instrument (if any) by which the transfer is affected is called a Mortgage-Deed.

In the case of B. Jayashanakrarappa and others v. D.S. Gulwadi AIR 2000 karnataka 359

It was held that a reading of section 58 per se shows that a mortgage, no doubt is a transfer, but
not the transfer of absolute ownership rights and in this respect, it differs from sale. A mortgage
is said to be a transfer of a limited interest in a specific immovable property.

ESSENTIAL OF MORTGAGE:

 There must be transfer of an interest.

 The interest transferred must be of some specific immovable property.
 The purpose of transfer of interest must be to secure payment of any debt or,
performance of an engagement which may give rise to a pecuniary liability.

1) Transfer of Interest: The first thing to note is that a mortgage is a transfer of interest
in the specific immovable 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. After
mortgage, the interest of the mortgagor is reduced by the interest which has been
transferred to the mortgagee. His ownership has become less for the time being by the

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 interest which he has parted with in favour of the mortgagee. If the mortgagor transfers
this property, the transferee gets it subject to the right of the mortgagee to recover from
it what is due to him i.e., the principal plus interest.

2) Specific Immovable Property: The second point is that the property must be
specifically mentioned in the mortgage deed. Where, for instance, the mortgagor stated
all of my property in the mortgage deed, it was held by the Court that this was not a
mortgage. The reason why the immovable property must be distinctly and specifically
mentioned in the mortgage deed is that, in case the mortgagor fails to repay the loan the
Court is in a position to grant a decree for the sale of any particular property on a suit
by the mortgagee.

3) To Secure the Payment of a Loan: Another characteristic of a mortgage is that the

transaction is for the purpose of securing the payment of a loan or the performance of
an obligation which may give rise to pecuniary liability. It may be for the purpose of
obtaining a loan, or if a loan has already been granted to secure the repayment of such
loan. There is thus a debt and the relationship between the mortgagor and the mortgagee
is that of debtor and creditor. When A borrows 100 bags of paddy from B on a mortgage
and agrees to return an equal quantity of paddy and a further quantity by way of interest,
it is a mortgage transaction for the performance of an obligation.

Where, however, a person borrows money and agrees with the creditor that till the debt
is repaid he will not alienate his property, the transaction does not amount to a
mortgage. Here the person merely says that he will not transfer his property till he has
repaid the debt; 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.

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TYPES OF MORTGAGES:

Section 58 of the transfer of Property Act enumerates six kinds of mortgages:

(1) Simple mortgage.

(2) Mortgage by conditional sale.

(3) Usufructuary mortgage.

(4) English mortgage.

(5) Mortgage Ly deposit of title deeds.

(6) Anomalous mortgage.

1) Simple Mortgage [Sec. 58 (b)]

In a simple mortgage, the mortgager does not deliver the possession of the mortgaged
property. He binds himself personally to pay the mortgage money and agrees either
expressly or impliedly, that in case of his failure to repay, the mortgagee shall have the
right to cause the mortgaged property to be 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:

(i) apply to the court for permission to sell the mortgaged property, or

(ii) file a suit for recovery of the whole amount without selling the property.

2) Mortgage by Conditional Sale [Sec. 58 (c)]

In this form of mortgage, the mortgager ostensibly sells the property to the mortgagee on
the following conditions:

(i) The sale shall become void on payment of the mortgage money.

(ii) The mortgagee will retransfer the property on payment of the mortgage money.

(iii)The sale shall become absolute if the mortgager fails to repay the amount on a certain
date.

(iv) The mortgagee has no right of sale but he can sue for foreclosure.

Foreclosure means the loss of right possessed by the mortgager to redeem the mortgaged
property. The mortgagee has the right to institute a suit for a decree so that the mortgager

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will be absolutely debarred from his right to redeem the property. The right to foreclosure
arises when the time fixed for repayment expires and the mortgager fails to repay the
mortgage money. Without the fore closure order the mortgagee will not become the owner
of the property.

3) Usufructuary Mortgage [Sec. 58 (d)]

Under this form of mortgage, the mortgager delivers possession of the property or binds
himself to deliver possession of the property to the mortgagee. The mortgagee is authorized
to retain the possession until the debt is repaid. The mortgager reserves the right to recover
the property when the money is repaid.

The essential feature of this form of mortgage is that the mortgagee is entitled to receive
rents and profits relating to the mortgaged property till the loan is repaid and appropriate
the same in lieu of interest or in repayment of the loan or both.

The mortgager is not personally liable to repay the mortgage money. So the mortgagee
cannot sue the mortgager for repayment. He can neither sue foreclosure nor sue for sale of
the mortgaged property; the only remedy for the mortgagee is to remain in possession of
the property and pay himself out of the rents or profits of the mortgaged property. Since
there is no time limit he has to wait for a very long time to recover his dues.

4) English Mortgage [Sec. 58 (e)]

The English mortgage has the following characteristics:

(1) The mortgager transfers the property absolutely to the mortgagee. The mortgagee,
therefore, is entitled to take immediate possession of the property. The transfer is
subject to the condition that the property shall be transferred on repayment of the loan.

(2) The mortgager also binds himself to pay the mortgage money on a certain date.

(3) In case of non-repayment, the mortgagee has the right to sell the mortgaged property
without seeking permission of the court in circumstances mentioned in section 69 of
the Transfer of Property Act.

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 5) Mortgage by Deposit of Title Deeds [Sec. 58 (f)]
When a debtor delivers to a creditor or his agent document of title to immovable property,
with an intention to create a security there on, the transaction is called mortgage by deposit
of title deeds. Such a mortgage is restricted to the towns of Kolkata, Mumbai and Chennai
and other towns notified by the State government for this purpose in the Official Gazette.
This type of mortgage requires no registration. This form of mortgage is also known as
equitable mortgage.

(7) anomalous mortgage [Sec. 58 (g)]

A mortgage which does not belong to any of the above 5 types is called an anomalous
mortgage. A mortgage which is not a simple mortgage, a mortgage by conditional sale, an
usufructuary, an English mortgage or a mortgage by deposit of title deeds within the
meaning of Section 58 of Transfer of Property Act is an Anomalous mortgage.

Legal Mortgage vs. Equitable Mortgage:

On the basis of transfer of title to the mortgaged property, mortgages are divided into two types,
namely:

(i) Legal Mortgage.

(ii) Equitable Mortgage.

Legal Mortgage:

In a legal mortgage, the legal title to the property is transferred in favour of mortgagee by a
deed. The deed is to be registered when the principal money is Rs. 100/- or more. On repayment
of the loan, the legal title is retransferred to the mortgagor. This method of creating charge is
expensive as it involves registration charges and stamp duty.

Equitable Mortgage:

An equitable mortgage is affected by mere delivery of documents of title to property to the

mortgagee. The mortgagor through Memorandum of deposit undertakes to grant a legal
mortgage if he fails to pay the mortgage money.

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CONCLUSION:

So, mortgage is a transfer of an interest in specific immovable property as security for the
repayment of a debt. But such interest itself is immovable property. The nature of the right
transferred depends on the form of mortgage. The transaction of mortgage has been a very
common method of taking loan and was known to the oldest systems of law if the money was
not repaid within the stipulated period the land belonged absolutely to the creditor and debtor
lost his rights in the property for ever. Thus, once a mortgage always a mortgage; it shouldn’t
become sale on non-payment of loan on the due date. Mortgage was regarded as essentially a
transaction for taking loan not a transaction for the transfer of title of property.