HSNC University, Mumbai

D.M. Harish School of Law

Assignment for
Internal Continuous Assessment- 2024 -25

Subject: Property Law

Topic: A Study on Mortgage and its Types

under Transfer of Property Act, 1882.

Submitted by: Het Ashok Doshi

Program: LL. B.
Roll No.: DMSYLLB002
Semester: IV
Submitted to: Ms. Shahiza Irani

Signature of the Faculty

 A Study on Mortgage and its Types under Transfer of Property Act, 1882.

TABLE OF CONTENTS

Sr. No. Topic Pg. No.

I. Introduction 3

II. Definitions 3

i) Mortgage

ii) Mortgagor

iii) Mortgagee
iv) Mortgage money

v) Mortgage deed

III. Essential Elements of Mortgage 4

IV. Types of Mortgages under Transfer of Property Act, 1882 4

i) Simple Mortgage 5
ii) Mortgage by Conditional Sale 5,6

iii) Usufructuary Mortgage 6

iv) English Mortgage 7

v) Mortgage by Deposit of Title-deeds 7

vi) Anomalous Mortgage 8

V. Registration of Mortgage Deed 8

VI. Case Laws 9

VII. Conclusion 9

VIII. References 9

2
 I. Introduction

In India, The Transfer of Property Act, 1882 (Act) deals with a range of transfers related to
immovable property. The provisions for valid transfer by sale, mortgage, lease, gift, and exchange
are laid down by the said Act. Each of these types of transfers differs from each other depending
upon the transfer of right, title and interest. By some we transfer complete ownership and by some
we transfer only a temporary possession.

Mortgage is one such transfer of immovable property which is a lawful contract between parties
whereby one party i.e. the borrower (transferor) keeps his immovable property as security to secure a
loan from the lender (transferee).

In a mortgage, interest in the property is transferred from borrower to lender. This transfer or interest
is not absolute. The immovable property kept as collateral is released back to the borrower when as
per the terms of the contract he repays the amount borrowed from the lender. If he fails to do so then
the Act also provides for the rights of the lender who can sell the property to recover his losses.

The Act also requires the registration of mortgages to guarantee that they are legally enforceable. A
registered mortgage provides the lender priority over other property claims in the case of the
borrower's default.

II. Definitions
S. 58 to S. 99 of Chapter IV- OF MORTGAGES OF IMMOVABLE PROPERTY AND CHARGES
in the Act prescribe the provisions related to mortgage.
Definitions of the terms “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mortgage-
deed” are given under § 58(a) of the Act.

1) “Mortgage”, it is the transfer of interest 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.

2) One who transfers interest in a specific immovable property by creating a mortgage is called
the “mortgagor”.

3) The transferee of mortgaged property is called the “mortgagee”.

4) The principal money and interest of which payment is secured for the time being are called
“mortgage-money”

5) The instrument by which the transfer of interest in an immovable property is effected is called
“mortgage-deed”. ]1

In simple words, mortgage is a conveyance of property to a creditor as security for a debt; mortgagor
is a debtor in a mortgage; mortgagee is a creditor in a mortgage; and mortgage rate is the rate of
interest charged by the mortgagee.2

Mortgage security is the property conveyed as mortgage in order to secure loan. 3

1
The Transfer of Property Act, 1882, § 58(a), No. 4 of 1882, India
https://lddashboard.legislative.gov.in/sites/default/files/A1882-04.pdf
2
The Pocket Oxford Dictionary Pg. 579, 1st Ed. Printed in India, 1993
3
[R. 4(3), CPC (5 of 1908), O. XXXIV].
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 III. Essential features of a Mortgage

The essential features of a mortgage deduced from the above definitions:

1) There must be 2 parties.

2) The mortgaged property is a specific immovable property

3) There should be a transfer of interest.

4) There must be consideration i.e. the mortgage must be made to secure the payment of loan or
to secure the performance of a contract.

IV. Types of Mortgages under The Transfer Of Property Act, 1882

In India, under the Transfer of Property Act, 1882, there are six types of mortgages. Sec. 58 (b) to
Sec. 58 (g) provides explanation for them. The mortgage types are as under:

1) Simple Mortgage S.58 (b)

2) Mortgage by Conditional Sale S. 58 (c)

3) Usufructuary Mortgage S. 58 (d)

4) English Mortgage S. 58 (e)

5) Mortgage by Deposit of Title Deeds S. 58 (f)

6) Anomalous Mortgage S. 58 (g)

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 1) Simple Mortgage

This type of mortgage is described in Section 58(b) of the Act. In this type of mortgage, the
mortgagor assumes personal obligation for repaying the debt while maintaining possession and
ownership of the mortgaged property.

It is agreed that if the mortgagor fails to repay the debt, the mortgagee may sell the property and use
the revenues to repay the loan..

Essential elements of Simple Mortgage:

a) The property is not given to the mortgagee, possession remains with the mortgagor.

b) Mortgagor is personally liable to repay the debt.

c) Mortgagee has the right to sell the property in the event of default by mortgagor, as agreed by
the latter.

d) Mortgagee has the right to sell the property with the consent of the Court.

e) If after selling the property, entire debt is not recovered then mortgagee may file a suit against
the mortgagor for recovery of remaining debt.

f) The mortgagee does not have the right of foreclosure.

2) Mortgage by Conditional Sale

The form of mortgage described under Section 58 (c) is known as a mortgage by conditional sale.
The mortgagor ostensibly sells the mortgaged property under specific terms. It appears to be a sale,
but it is not an absolute sale unless specific events occur or conditions are met.

The transaction will be called Mortgage by conditional transfer if the mortgagor ostensibly sells the
property on the following conditions:

a) Condition by which the sale becomes absolute: If the mortgagor fails to repay the money
within the stipulated time period, or

b) Condition by which the sale becomes void: if the mortgagor repays the loan amount by a
certain date decided beforehand, or

c) Condition that on the abovementioned payment being made the buyer shall transfer the
property to the seller.

A proviso was inserted in S. 58 (c) by S. 19 of an Amending Act4 to Transfer of Property Act, 1882,
which states that no such transaction shall be deemed to be a mortgage, unless the condition is
included in the document that affects or purports to affect the sale.

4
Act 20 of 1929, India
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Essential elements of Mortgage by Conditional Sale:

a) The mortgagee will retain ownership and possession.

b) If the loan is repaid, the sale is void.

c) If the loan is not repaid, the sale is final and valid.

d) Upon loan repayment, the mortgagee will transfer the property back to the mortgagor.

e) The mortgagee has the right to foreclosure if the loan is not paid.

3) Usufructuary Mortgage

Usufructuary mortgage is defined u/S 58 (d) of the Act. In this type of a mortgage, the mortgagor
delivers the possession of the property to the mortgagee and authorizes the mortgagee to retain such
property until the payment is made by the mortgagor. He also authorizes the mortgagee to receive
rent or profit arising from such mortgaged property and appropriate the same instead of payment of
interest.

Essential elements of Usufructuary Mortgage

a) The mortgagee takes possession of the property.

b) The mortgagor retains ownership of the property.

c) Mortgagee enjoys the property.

d) Profits or rent earned is to be appropriated against loan amount.

e) Mortgagee will get rents and profits in lieu of interest or principal or both.

f) No personal liability for the mortgagor.

g) Usufructuary mortgages do not have a fixed payment deadline.

h) The mortgagee cannot foreclose or sue for sale.

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 4) English Mortgage

English mortgage is described u/S 58 (e) of the Act. In case of an English mortgage, where with the
intention of creating a security, the mortgagor transfers property absolutely to the mortgagee or his
agent and binds himself that he will repay the money on a specific date and such a transaction is
called English Mortgage. There is a condition attached that when the loan is fully repaid the
mortgagee will re-transfer the property to the mortgagor.

Essential Elements of an English Mortgage:

a) The mortgagee takes ownership and possession of the property i.e. absolute transfer of
mortgaged property.

b) The mortgagor assumes personal responsibility to repay the loan amount by a certain date.

c) The transfer is subject to proviso, that if the debt is repaid, the property is returned to the
mortgagor.

d) If the mortgagor defaults, the mortgagee has the right to sell the property to recover the
outstanding balance. This must be done with the authorization of the court.

e) An English mortgage is a combination of a simple mortgage with a mortgage by conditional

sale.

5) Mortgage of Deposit by Title Deeds

In India, such a mortgage comes u/S 58 (f) of the Transfer of Property Act, 1882. Such a mortgage is
known as equitable mortgage, in English law.

In this case the mortgagor delivers the original deeds of his property as a security against the loan. In
the event the mortgagor fails to repay the loan, the mortgagee sells the property.

There is no registration required for this mortgage. The mortgagor has to deliver the title papers of
the property to the mortgagee as security.

It can be effected only in the towns of Kolkata (Calcutta), Mumbai (Bombay) and Chennai (Madras)
and in certain places notified by the State Government.

Essentials Elements of Mortgage by Deposit of Title deeds:

a) The mortgage is created by depositing the original title deeds.

b) In this transaction, a person transfers title of their immovable property to a creditor as security
for a loan.

c) In English law, it is also known as an equitable mortgage.

d) Registration of a mortgage deed is not required.

e) An oral agreement with the creditor and delivery of title documents are sufficient.
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 6) Anomalous Mortgage
According to Sec. 58 (g) of the Transfer of Property Act, an anomalous mortgage is a mortgage that
is not a simple mortgage, mortgage by conditional sale, English mortgage, mortgage by deposit of
title deeds or usufructuary mortgage. Such a mortgage can be effected according to the terms and
conditions of the mortgager and the mortgagee.

It is a combination of 2 or more types of mortgages. It does not fall into a specific category of
mortgages.

V. Registration of Mortgage Deed

According to Section 59 of the Transfer of Property Act of 1882,

When the principal amount secured is one hundred rupees or more, a mortgage other than a mortgage
by deposit of title deeds can only be executed by a registered instrument signed by the mortgagor and
attested by at least two witnesses.

Where the principal amount secured is less than one hundred rupees, a mortgage may be executed
either by a registered instrument signed and attested as aforesaid, or (unless in the case of a simple
mortgage) by delivery of the property.

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 VI. Case Law

1) Prakash (Dead) By LR. v. G. Aradhya & Ors. 5 2023 LiveLaw (SC) 685
Transaction Cannot Be Regarded As Mortgage By Condition Sale If Condition For
Reconveyance Is Not Specified In Same Deed (Mortgage by Conditional Sale)

Facts:

1) Two documents regarding conveyance of property through sale deed and reconveyance of
same property through buy back deed were executed on the same day.
2) Both deeds were executed on the same day but as different documents.
3) The transferee to whom the property was conveyed agreed to re-transfer the property back
within five years of the Sale Deed in case the sale consideration of ₹5000/- (Rupees Five
Thousand) is paid.
4) The vendor (father of appellant) of the property sent notice to the transferee for reconveyance
of property.
5) The transferee responded that it was not a mortgage by conditional sale. It was an outright
sale of the property.
6) The Appellant then filed a suit for redemption of mortgage which was refused by the Trial
Court.
7) The order of Trial Court was upheld by the High Court.
8) Subsequently, this appeal was filed before the Supreme Court.

Held:

The Supreme Court recently held that under Section 58(c) of the Transfer of Property Act,1882 no
transaction shall be deemed to be a mortgage unless the condition for re-conveyance is contained in
the document which purports to effect the sale.

VII. Conclusion
The concept of Mortgage is very important to understand for both the borrower and the lender. A
mortgage is a method of creating charge on immovable properties like land and building. The
different kinds of mortgages create rights and liabilities for both the mortgagor and the mortgagee.
Mortgage is a transfer of interest in a specific immovable property in the favor of the mortgagee by
the mortgagor to secure a loan. One very important feature of a mortgage is that the mortgagor can
redeem his mortgaged property once the loan has been repaid. Mortgage like sale, gift, lease,
exchange is a very basic but fundamental transfer of immovable property under the Transfer of
Property Act, 1882.

VIII. Reference
1) Bare Act, The Transfer of Property Act, 1882, Professional Book Publishers, 2024.
2) https://lawnotes.co/kinds-of-mortgae-under-the-transfer-of-property-act-1882/

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Judgment: https://www.livelaw.in/pdf_upload/16420201114150146212judgement18-aug-2023-488066.pdf