a) A mortgage is the transfer of an interest in specific immoveable 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 liablility.

The transferor is called a mortgagor, 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 (if any)
by which the transfer is effected is called a mortgage-deed

b) Where, 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.
c) Where the mortgagor ostensibly sells the mortgaged property on condition that on default of
payment of the mortgage-money 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 sale:
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.
d) Where the mortgagor delivers possession or expressly or by implication binds himself to deliver
possession of the mortgaged property to the mortgagee, and authorizes 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 an usufructuary mortgage and the mortgagee
an usufructuary mortgagee.
e) Where the mortgagor binds himself to repay the mortgage-money 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 mortgagemoney as agreed, the
transaction is called an English mortgage.
f) Where 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 immoveable property, with intent to create a security thereon, the
transaction is called a mortgage by deposit of title-deeds.
g) A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary
mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of
this .section is called an anomalous mortgage.
 Mortgage.—A mortgage is a transfer of an interest in specific immoveable property as security
for the repayment of a debt. But such interest itself is immoveable property (u). The nature of
the right transferred depends upon the form of the mortgage. In a simple mortgage what is
transferred is a power of sale which is one of the component rights that make up the aggregate
of ownership. In a usufructuary mortgage what is transferred is a right of possession and
enjoyment of the usufruct (x). In a conditional mortgage and in an English mortgage the right
transferred is, in form, a transfer of a right of ownership subject to a condition. In each case,
whatever be the form of the mortgage, there is a transfer of some interest only and not a
transfer of the whole interest of the mortgagor Cv). The characteristic feature of mortgages is
that the right in the property created by the transfer is accessory to the right to recover the debt
(z). The debt subsists in a mortgage, while a transaction by which a debt is extinguished is not a
mortgage but a sale. This is well illustrated by the case of Nidha Sah v. Murli Dhar (a), where the
deed purported to be a deed of mortgage with possession of certain villages for a period of 14
years. The deed provided that at the expiry of the term the mortgagors were to come into
possession of the mortgaged villages without settlement of accounts and that the mortgagee
should then have no power whatever in respect of the said estate but should return the
mortgage deed to the mortgagors without their repaying the mortgage money. The mortgagee
refused to return such villages as he had, on the ground that he had not received the full
number of villages, and had not been able to recoup himself. The Privy Council said that the
deed was not a security for the payment of any money and that the transaction was not a
mortgage but a grant of land for a fixed term free of rent and that, as the suit was not on
contract but on title, the so-called mortgagors were entitled to recover possession. A sale deed
passed by a mortgagor in favour of the mortgagee containing a recital that in case the
mortgagee is dispossessed on account of some defect in title of the mortgagor, the mortgagee
would be entitled to renew his debt, does not amount to a mortgage as ,no specific immoveable
property was charged (b)

Kinds of mortgage

Simple Mortgage [Section 58(b)]

Clause (b) of Section 58 reads:

Simple mortgage.—Where, 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 failure 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 basic elements of a simple mortgage are:

1. The mortgagor must have bound himself personally to repay the loan; 
2. The possession of the property is not given to the mortgagee; and
3. To secure the loan he has transferred to the mortgage the right to
have the specific immovable property sold in the event of his failure to
repay.

Mortgagor’s Personal Obligation

The fundamental element of a simple mortgage is the personal obligation to pay
on the part of the mortgagor. Such personal liability or obligation to pay may be
expressed or implied from the terms of a transaction since a promise to pay
arises from the acceptance of the loan. 

The promise to pay is implicit in the borrowing transaction itself but it may be
displaced by the terms of the mortgage transaction for instance in the case of a
usufructuary mortgage. 

No Delivery of Possession
Possession remains with the mortgagor in the case of a simple mortgage. The
security which is obtained by the mortgagee is of the mortgaged property, not
of the rents and profits accruing from it. As per Section 68, if a simple
mortgagee sues for enforcement of his security, a decree for possession would
be illegal. It would also not operate as foreclosure rather it would convert a
simple mortgagee into a mortgagee having possession. 

Right to cause the Property Sold 

The mortgagee is empowered to sell the property in the case of non-payment of
the mortgaged money. However, the power of sale is not to be exercised
without the intervention of the court. This implies that the mortgagee needs to
get a decree from the court to execute the sale. Upon the sale of property by
the intervention of the court, the mortgagee shall get the money advanced by
him with interest and the remaining portion of proceeds of sale shall be given to
the mortgagor whose property was sold.

Registration
A simple mortgage can be created only through a registered document.
According to Section 59, even when the sum of money secured is less than
rupees 100, a simple mortgage needs to be effected by a registered
instrument. 

Mortgagee’s Remedy
In case the mortgagor fails to repay the loan within the stipulated date, the
following two remedies are available to the mortgagee:

1. Since in a simple mortgage the mortgagor holds a personal obligation

to repay the loan, the mortgagee may sue the mortgagor personally
for the recovery of the money. In such a case, he shall get a simple
money decree.
2. The mortgagee may also move to the court for the sale of mortgaged
property in order to recover his money. In such a case, he obtains a
decree for the sale of the property.
However, the mortgagee may put both the cause of actions in one suit. He may
sue the mortgagor personally and may also request the court for a decree in his
favour for the sale of the property but in both cases, the suit must be filed
within 12 years from the date on which the loan i.e. the mortgage money
becomes due.

Mortgage by Conditional Sale [Section 58(c)]

Clause (c) of Section 58 reads:

Mortgage by conditional sale.—Where, the mortgagor ostensibly sells the

mortgaged property— on condition that on default of payment of the mortgage
money 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 mortgage by conditional sale and the mortgagee a
mortgagee by conditional sale: Provided that no such transaction shall be
deemed to be a mortgage unless the condition is embodied in the document
which affects or purports to affect the sale.

The concept of a mortgage by conditional sale (known as ‘bye-bil-wafa in Islam)

was introduced by the Muslims due to the prohibition in their religion to not take
interest on the money which is lent by way of loan. This type of mortgage
enabled them to realize their principal amount as well as interest, at the same
time keeping their conscience clear. 

Basic elements of a mortgage by conditional sale are: 

1. The mortgagor must ostensibly sell the property to the mortgagee.

2. There must be a condition on such sale that either,

 on the repayment of the debt on a certain date,  

 the sale shall become void or the buyer shall transfer the property to
the seller, or in default of payment on the agreed date, the sale shall
become absolute. 
 The condition must be contained in the same document. 
In other words, when the mortgagor ostensibly sells the mortgaged property to
the mortgagee with a certain condition such as:

1. If the mortgagee makes any default on repayment of the debt (if the
loan is not repaid), the sale would become absolute and binding, or
2. If the mortgagee does not make any default in the payment
(repayment of the debt has been made), the sale would become void,
or
3. If the mortgagee makes the payment, the buyer shall transfer the
mortgaged property to the seller (the mortgagor shall transfer the
property back to the mortgagee), such a transaction is called a
mortgage by conditional sale. 
However, it is to be noted that no such transaction will be considered to be a
mortgage where no condition is mentioned in the same document which shall
affect the sale.

Condition in the Same Deed

The Proviso provided under clause (c) of Section 58 brought about a significant
change. Section 19 of the Transfer of Property (Amendment) Act, 1929 led to
the inclusion of the proviso:

Provided that no such transaction shall be deemed to be a mortgage unless the

condition is embodied in the document which affects or purports to affect the
sale.
It states that any deed which intends to effect sale would be termed a mortgage
by conditional sale only when it fulfills the above-mentioned elements. This
amendment is not retrospective in nature. After this proviso, for a transaction to
be treated as mortgage by conditional sale and not a sale itself the condition of
repurchase must be included in the same document that provides for ostensible
sale.

With the amendment in the clause, great emphasis is placed on inculcating the
provision of repurchase in the original sale deed itself rather than the
transaction being carried out through two documents (one being the sale deed,
other being the document containing conditions of reconveyance). Where they
are in separate documents the mortgagor then the nature of transaction would
not be a mortgage by conditional sale even if they are executed simultaneously.

The intention of the Parties

It must be kept in mind that documents containing reconveyance conditions
would not in any way claim to be mortgaged. The intention of the parties is one
of the crucial factors to determine the nature of the transaction and evidence
needs to be produced before the court if one’s claim is in contrast to the written
words of the deed in question. (Pandit Chunchun Jha v. Sheikh Ebadat)

Personal Liability
In a mortgage by conditional sale, there is no personal liability on the part of
the mortgagor to pay the debt and consequently, the mortgagee is not
permitted to make other of his properties a part of this transaction. It is an
exception to the rule of No Debt No Mortgage.

Absolute Ownership
The Privy Council in the case of Thumbuswamy v. Hossain Rowthen observed
that the essential characteristic of a mortgage is that on breach of condition,
the sale deed would be executed itself and the transaction would become an
absolute sale without any kind of accountability between the parties.

The mortgagee does not have possession of the property in this type of
mortgage i.e. it gets only qualified ownership which may lead to absolute
ownership in case of default by the mortgagee.

Remedy Available 
The remedy with the mortgagee is by way of foreclosure and not sale, which is
possible only through a decree of the court. The mortgagee can file a decree for
foreclosure according to Section 67 of TPA, Rules 2 & 3 of Order 34, CPC only
when the mortgagor does not pay the amount on time and the sale becomes
absolute.

Usufructuary Mortgage [Section 58(d)]

Clause (d) of Section 58 reads:

Usufructuary mortgage.—Where 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 payment of the mortgage-money, or partly in lieu of interest
partly in payment of the mortgage money, the transaction is called a
usufructuary mortgage and the mortgagee a usufructuary mortgagee.

The basic elements of usufructuary mortgage are: 

1. The mortgagor either delivers possession or expressly or impliedly

binds himself to deliver possession of the mortgaged property to the
mortgagee.
2. The mortgagor authorises the mortgagee till the payment of the
mortgage money is satisfied:

 to retain such possession;

 to receive the rents and profits or any part of such rents and profits
arising from the property; and 
 to appropriate such rents and profits in lieu of interest, or payment of
the mortgage money, or partly in payment of the mortgage money. 

Delivery of Possession 
The possession of the mortgaged property is delivered to the mortgagee by the
mortgagor as a security for the payment of mortgage money. The mortgagee is
entitled to retain the ownership of the property till the debt remains unsatisfied.
The physical delivery of possession is not necessary to be made at the time of
execution of the deed and express or implied undertaking may be given by the
mortgagor to deliver possession. 

Rent and Profits

The mortgagee is entitled to receive rent and profits accruing from the
mortgaged property till the money is repaid. The method by which the rents and
profits are to be appropriated depends on the terms of the mortgage deed.
Such rents and profits or part of the rents and profits may be appropriated: 

1. in lieu of interest,
2. in lieu of principal, or
3. in lieu of principal and interest. 
In the first case, the mortgagor recovers possession at the time of the payment
of the principal amount. In the second case, the mortgagor continues to pay
interest and becomes entitled to recover possession once the rents and profits
obtained by the mortgagee become equal to the principal amount. In the last
case, the mortgagor does not recover possession until the principal and interest
are paid from the rents and profits. 

No Personal Liability of the Mortgagor

The mortgagor does not take any personal responsibility for the payment of
mortgage money in the case of a usufructuary mortgage. The mortgagee is
required to utilise rents and profits from the property for the satisfaction of his
mortgage money. There is no time limit whatsoever for the mortgage to subsist
since it is difficult to predict the time within which the debt will be satisfied. 

Mortgagee’s Remedies 
The mortgagee can sue for possession or recovery of advanced money if the
mortgagor fails to deliver possession of the property but if he has been given
possession, his only remedy is to retain property till his debts are satisfied. The
right of foreclosure or sale is not available for the usufructuary mortgagee. The
mortgagee enjoys the advantage of repaying himself. 

Rights of Usufructuary Mortgagor

A usufructuary mortgagor has been given a right under Section 62 to recover
possession of the mortgaged property from the mortgagee in the cases where: 
 1. The mortgagee was authorised to pay himself the amount of mortgage
money from the rents and profits of the property and the mortgage
money is paid,
2. The mortgagee is authorized to pay himself from the rents and profits
and the terms stipulated for the payment of the mortgage money have
expired and the mortgagor pays the mortgage money or balance of the
same to the mortgagee or deposits it in the court.

English Mortgage [Section 58(e)]

Clause (e) of Section 58 reads:

English mortgage.—Where the mortgagor binds himself to repay the mortgage

money 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.

Basic elements of an English mortgage are:

1. There is a consensus to pay the amount on the due date. The

mortgagor has to repay the mortgage money on the due date. 
2. There is an absolute transfer of property to the mortgagee. 
3. Such absolute transfer needs to be subject to a proviso that the
mortgagee will transfer the property to the mortgagor upon payment
of mortgage money on the agreed date. 
In the case of English Mortgage, the mortgagor transfers the ownership of the
mortgaged property absolutely to the mortgagee as security. The mortgagee
shall return or re-transfer the property once the mortgagor repays the amount
as agreed on a particular date. 

Personal Liability
In an English mortgage, there is a personal liability of the mortgagor to repay
the amount of mortgage debt on a certain date as agreed. An agreement to pay
is an important part of such a mortgage. 

Remedy Available
In case of default by the mortgagor, the remedy available with the mortgagee is
to sell off the mortgaged property and recover himself.

No Absolute Interest
The property is transferred absolutely but it is subject to the provision of re-
transfer of that property if the mortgagor repays the amount. Therefore,
interest is transferred which is subject to the right of redemption.

Where the mortgagor absolutely transfers the property to the mortgagee and
the mortgagor is committed to repaying the money to the mortgagee on a fixed
date. Two circumstances are prevalent in this scenario:

1. Mortgagor repays the amount: If the mortgagor repays the agreed

upon to the mortgagee on the date specified, the property which was
absolutely transferred by him shall be reconveyed to the mortgagor.
2. Mortgagor makes default in payment: If the mortgagor does not repay
the amount on the mentioned date, then the remedy with the
mortgagee is to sell off the property and recover its debt. However,
there is a personal liability on the mortgagor to pay the debt.

Right of the Mortgagee

The mortgagee in this form of mortgage gets the right of possession whether
the right of entry is expressed or not, and can retain the same till the said
amount is not paid to him. But when the mortgagor is in possession he is
entitled to profit but is not accountable to the mortgagee. However, where the
mortgagee is in possession and is enjoying the profits from such property, it
shall apply them in reduction to mortgagees dues.

For instance, B, a mortgagor absolutely sells the property to A through a sale

deed. Here if B makes any default, A has to do nothing except registration of
the sale deed, as an absolute right has been given to A.

Mortgage by deposit of title deeds (Equitable

Mortgage) [Section 58(f)]
Clause (f) of Section 58 reads :
Mortgage by deposit of title-deeds.—Where 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.

In English Law, this type of mortgage is called an ‘equitable mortgage’ as

opposed to a ‘legal mortgage’ because there is just a deposit of a document of
the title without writing or without any other additional formalities. The
intention of the legislature in providing such a mortgage is to give facilities to
the mercantile community in situations where it may be necessary to raise
money all of a sudden before any opportunity of preparing a mortgage deed can
be afforded. Thus, this type of mortgage does not require any writing, and
being an oral transaction is not affected by the Law of Registration.  

The basic elements of this type of mortgage are:

1. There must be a debt.

2. There must be a deposit/delivery of the title deeds.
3. There is an intention that the deeds shall be security for the debt; and
4. Territorial restrictions 
It is important to note that such a mortgage can be made only in certain areas
and not everywhere in India. The said restriction to certain areas means the
place where the deeds are to be delivered and not the situation of the property
mortgaged. Also, a deposit of deeds beyond that area will neither create a
mortgage nor an exchange.

Existence of Debt
A debt may be existing or future in nature. A transfer of an interest in any
property to secure the payment of money advanced or to be advanced, or an
existing or future debt, or the performance of any engagement which results in
a pecuniary obligation is said to be a mortgage and clause (f) containing
equitable mortgage gives just one of the modes of creating mortgage. 

Deposit of Title-Deeds
It is not necessary to make physical delivery of documents, a constructive
delivery of documents is sufficient. A valid equitable mortgage does not require
all the documents of title to be deposited or the documents deposited to show a
complete title. It is sufficient if the deposited deeds are bona fide, relate to the
property, and are material evidence of title. If any title of deed is not shown at
all in the deposited document and there are documents in existence showing his
title to the property but they are not deposited then an equitable mortgage is
not created. 

Intention to Create Security

The gist of the transaction lies in the intention that the title deeds shall be
security for the money borrowed (debt). Merely handing over the title deeds to
Mr. X by Mr. Z does not create a mortgage. The deeds need to be delivered in
the performance of that agreement that they are security for the debt. 

The intention for creating security is a question of fact, not of law, which needs
to be determined in all cases just like any other fact-based on presumptions and
oral, documentary, or circumstantial evidence. 

Anomalous Mortgage [Section 58(g)]

Clause (g) of Section 58 reads:

Anomalous mortgage.—A mortgage that 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.

In order to protect various customary mortgages prevailing in different parts of

the country, clause (g) was enacted by the legislation. An anomalous mortgage
is said to be a combination of two or more mortgages. 

This section shall be read with Section 98 of the TPA which reads :

Rights and liabilities of parties to anomalous mortgages.—In the case of an

anomalous mortgage the rights and liabilities of the parties shall be determined
by their contract as evidenced in the mortgage deed, and, so far as such
contract does not extend, by local usage.

Such agreement which is made between the mortgagor and the mortgagee
according to their terms and conditions is called an anomalous mortgage. Where
it is not a simple, usufructuary, mortgage by conditional sale, etc. is termed as
an anomalous mortgage.
For instance, a usufructuary mortgage may also have the right of sale (as
stated above, a usufructuary mortgage only possession is given to the
mortgagee and it does not have the right of sale). Here, possession of the
property is given to the mortgagee for a certain period with a condition that on
non-repayment of debt the mortgage shall be deemed as mortgage by
conditional sale. Thus, making it a usufructuary mortgage as well as a mortgage
by conditional sale, making such mortgage an anomalous mortgage.

Remedy Available 
In this case, the mortgage has the right of ‘foreclosure’ as well as ‘sale’ if the
agreement of mortgage permits the same; and if the debt is not repaid, the
mortgagee would become the owner of the property.

Mortgagor’s Right of Redemption 

The right of redemption can be exercised by the mortgagor through mortgage
deed and can be exhausted only if there is an agreement between the parties,
or by way of a decree of the court, or through any statutory provision which
prohibits the mortgagor from redeeming the mortgage. The redemption right of
mortgagor comes into existence when payment is made to the mortgagee, it is
only when this right can not be exercised is due to the act of parties.

There are two other terms as well which are used in relation to mortgage, which
the reader must know. These are:

Sub mortgage
Where a mortgaged property is mortgaged again is termed as sub mortgage, or
where the mortgagee mortgages its interest in the said property.

For instance, where Mr. X mortgages his house to Mr. Z for ₹15,000 and Mr. Z
further mortgages its mortgagee rights( it can be the right to sue the mortgagor
in case of default or possession, rents, etc) on the property to Ms. B for ₹5,000.
Here Mr. Z created a Sub Mortgage.

Puisne mortgage (also called pari pasu mortgage)

When the mortgagor mortgage a property to one person and mortgages the
same property to another person in order to secure another loan, the second
mortgage is termed as Puisne Mortgage.
For instance, the property value of ‘Z’ is ₹1,00,00,000 (1 crore) has been given
as security to the ‘Bank of Baroda’ for the loan of ₹10,00,000 (10 lakh). If an
additional loan is required, the same can be taken from another bank due to the
difference in interest rate. So here the same property can be used as security
for securing another loan from ‘Syndicate Bank’ of ₹5,00,000 (5 lakh). This
transaction of taking a loan from ‘Bank of Baroda’ would be referred to as the
first mortgage while the loan from ‘Syndicate Bank’ would be referred to as the
second or puisne mortgage. Here syndicate bank becomes puisne mortgagee
and can recover its debt once the first mortgagee i.e. Bank of Baroda claims its
money.

A puisne mortgage is allowed only after the 1st mortgagee permits to use the
same property as security for another loan, by the valuation of the mortgaged
property.

Conclusion 
Hence, a mortgage is defined as an express transfer of an interest in immovable
property as collateral for a loan. The most important feature of a mortgage is
that it is a transfer of a legal interest in the property with a provision for
redemption, which means that the transfer will become void or the interest will
be re-conveyed upon repayment of the debt.

Rights and Liabilities of a Mortgagor

Rights of Mortgagor
Every mortgage-deed leaves a right to the mortgagor and a corresponding
liability for mortgagee and vice versa. Following are the rights given to a
mortgagor given by the Transfer of Property Act, 1882:

1. Right to redemption
2. Right to transfer mortgaged property to a third party instead of
retransferring
3. Right of inspection and production of documents
 4. Right to accession
5. Right to improvements
6. Right to a renewed lease
7. Right to grant a lease

Right to Redemption (section-60)

It is one of the most important rights of a mortgagor given under section of the
Act. This right puts an end to mortgage by returning the property of
mortgagor. The right to redeem further grants three rights to the
mortgagor:

1. Right to end mortgage deal

2. Right to transfer mortgaged property to his name
3. To take back possession of property in case of delivery of possession
In the case of Noakes & Co. vs. Rice (1902) AC 24, Rice was a dealer who
mortgaged his property, premise and goodwill to N subject to the provision that
if R paid back the whole amount, the property would be transferred back to his
name or any other person’s. A covenant was attached that stated whether or
not the amount is due, R would only sell Malt liquor by N in his premises.
Because of this covenant, R had difficulty in redemption and it didn’t give him
absolute right over his property. House of Lords held that anything which clogs
this right is bad and they came up with the concept that ‘once a mortgage
always a mortgage’  and said that mortgage could never be irreducible. 

This principle was added to protect the interest of a mortgagor. Any condition or
provision which prevents a mortgagor from redeeming his mortgaged property
is a clog on the right of redemption. The right to redemption continues even
though the mortgagor fails to repay the loan amount to mortgagee. In the case
of Stanley v. Wilde, (1899) 2 Ch 474, it was held that any provision
mentioned in the mortgage-deed which has an effect of preventing or impeding
the right to redemption is void as a clog on redemption.  

 Exceptions to the right- The right to redeem has three exceptions. It

can be extinguished under the following cases:

 By the act of parties

  By operation of law

 By decree passed by the court

Obligation to transfer to the third party instead of

transferring it to mortgagor (section-60A)
This right was added in the Act by Amendment Act of 1929. This right provides
the mortgagor with authority to ask the mortgagee to assign the mortgage debt
and transfer the property to a third person directed by him. The purpose of this
right is to help the mortgagor to pay off the mortgagee by taking a loan from a
third person on the same security.  

Right to inspection and production of documents

(section-60B)
This section is also inserted by the Amendment Act of 1929. It is the right of
mortgagor to ask mortgagee for the production of copies of documents of the
mortgaged property in his possession for inspection on notice of reasonable
time. The expenses incurred on production or copies of documents or travel
expenses of a mortgagee are to be paid by the mortgagor. This right is available
to the mortgagor only as long as his right to redeem exists. 

Right to Accession (section-63)

Basically, accession means any addition to property. According to this right
mortgagor is entitled to such accession to his property which is in the custody of
mortgagee. There are two types of accession:

 Artificial accession- It is when mortgagor made some efforts and it

increased the value of land. 
 Natural accession- The name itself defines i.e. without any man-made
efforts.
In case an accession is made to the property due to the efforts of mortgagee or
at his expense and such accession is inseparable, mortgagor, in order to be
entitled to such succession, needs to pay the mortgagee the expense of
acquiring such accession. 
If such separate possession or enjoyment is not possible, the accession must be
delivered with the property; it is the liability of mortgagor, in the case of an
acquisition which is necessary to preserve the property from destruction,
forfeiture or sale, or made with his assent, to pay the proper cost thereof, as an
addition to the principal money, with interest at the same rate as is payable on
the principal amount, or, where no such rate is fixed, at the rate of nine percent
per annum. 

Right to Improvements (section-63A)

According to this right if the mortgaged property has been improved while it
was in possession of mortgagee, then on redemption and in the absence of any
contract to the contrary mortgagor is entitled to such improvement. The
mortgagor is not liable to pay mortgagee unless:

 Improvements made by the mortgagee were to protect the property or

with the prior permission of mortgagor.
 Improvements were made by the mortgagee with the permission of the
public authority.   

Right to Renewed Lease (section-64)

If the mortgagor is entitled the mortgaged property is a leasehold property and
during the duration of mortgage the lease gets renewed then, on redemption
the mortgagor is entitled to have the benefit of the new lease. This right is
available to the mortgagor unless he enters into any contract to the contrary
with mortgagee.

Right to grant a Lease (section-65A)

This right was introduced by the Amendment Act of 1929. Prior to this right, the
Transfer of Property Act did not allow a mortgagor to lease out the mortgaged
property on his own but only with the permission of mortgagee. Now, a
mortgagor has the right to lease out the mortgaged property while he is in
lawful possession of that property, subject to the following conditions:

 All conditions in the lease should be according to the local laws and
customs to prevent any fraudulent transaction.
  No rent or premium shall be paid in advance or promised by
mortgagee.
 The contract shall not contain any provision for the renewal of the
lease.
 Every such lease shall come into effect within a period of six months
from the date of its execution. 
 Where the mortgaged property is a building, the term of the lease
should not exceed three years in total.

Duties/liabilities of a mortgagor
Along with the rights given to a mortgagor, the Transfer of Property Act has
also conferred some duties on him. Following are the duties of a mortgagor:

1. Duty to avoid waste

2. Duty to indemnify for defective title
3. Duty to compensate mortgagee
4. Duty to direct rent of a lease to mortgagee

Duty to avoid waste (section-66)

This section imposes a duty on the mortgagor to not to commit any act which
leads to the waste of property or any act which reduces the value of the
mortgaged property. Waste is divided into two categories:

 Permissive waste– A mortgagor who is in possession of the

mortgaged property is not liable to the mortgagee for any minor waste.
 Active waste– When an act is done which causes major waste of the
property or leads to the reduction in the value of mortgaged property,
then the mortgagor will be liable to the mortgagee.

Duty to indemnify for defective title

It is the duty of a mortgagor to compensate the mortgagee for a defective title
in the mortgaged property. A defective title refers to a situation when a third
party starts claiming or interferes with mortgaged property. It is a liability for
the mortgagor to compensate for the expenses incurred by mortgagee for
protecting the title of that property.
Duty to compensate mortgagee
If the mortgaged property is in possession of mortgagee who is paying all the
taxes and other public charges, then it is the duty of mortgagor to compensate
mortgagee for incurring such expenses. Similarly, when there is no delivery of
possession i.e. the mortgaged property is still in possession of mortgagor, then
it is his duty to pay all public charges and taxes levied on it. 

Duty to direct rent of a lease to mortgagee

Where the mortgaged property is leased by mortgagor then it is his duty to
direct lessee to pay the rent, etc. to the mortgagee.  

Conclusion
A mortgage-deed comes up with many rights and liabilities for both the parties
involved i..e. mortgagor and mortgagee. These rights and liabilities were
created and included in the Transfer of Property Act in 1882 which is quite old
and therefore is outdated. Though amendments were made in the Amendment
Act of 1929, but no recent amendments have been made in the chapter of
rights and liabilities of mortgagor. This has lead to various fraudulent
transactions as both the mortgagor and mortgagee has found various new
methods of deceiving each other. Therefore, the need of the hour is to amend
the laws and make it more stringent so that no party attempts to enter in
fraudulent transactions.  

Clog On Redemption
When a mortgage takes place, the mortgagor has the right to get back his
property when he pays back the mortgage amount. This is known as the right of
redemption and arises out of equity. Anything which obstructs the right of the
mortgagor to redeem his property is void, and such obstruction constitutes a
clog on the right to redemption. This is also known as the doctrine of a clog on
redemption.

In the case of a mortgage, two categories of interest are generated. The first
interest which is created is the interest of the creditor on the property. This
interest is limited and temporary. The second category is the residuary interest
which can be determined by deducting the interest of the creditor or the
mortgagee, and this interest stays with the mortgagor. This division of the
interest gives the right of redemption to the mortgagor when the loan is repaid.
This right of the mortgagor is known as the equitable right to redeem. The right
of redemption to the mortgagor is provided under Section 60[1] of the Transfer
of Property Act, 1882. The contract of mortgage comes to an end when the
mortgagor repays the amount of the loan and exercises his right to redeem the
property. The right provided under the Act is a statutory right and to enforce it
statutory provisions has to be followed.

Right of Redemption – Notes

Right of redemption section 60 of Transfer of Property Act describes the right of
redemption the word redemption means to make free or get back the
mortgaged property by paying mortgage Debt. Redemption is a right of the
mortgage by which the mortgaged property is kept secure and the property is
returned to the mortgagor.
There are three important provisions made in section 60 of the Transfer of
Property Act 1882:
1. Right of redemption
2. Clog on Redemption
3. Once mortgage, always a mortgage.

Subrogation.
1
[92. Subrogation.-- Any of the persons referred to in section 91 (other than the mortgagor)
and any co-mortgagor shall, on redeeming property subject to the mortgage, have, so far as
regards redemption, foreclosure or sale of such property, the same rights as the mortgagee
whose mortgage he redeems may have against the mortgagor or any other mortgagee.

The right conferred by this section is called the right of subrogation, and a
person acquiring the same is said to be subrogated to the rights of the
mortgagee whose mortgage he redeems.

A person who has advanced to a mortgagor money with which the mortgage
has been redeemed shall be subrogated to the rights of the mortgagee whose
mortgage has been redeemed, if the mortgagor has by a registered
instrument agreed that such persons shall be so subrogated.

Nothing in this section shall be deemed to confer a right of subrogation on any

person unless the mortgage in respect of which the right is claimed has been
redeemed in full.]
“Charge” as defined in TPA, 1882
Section 100 of the TPA, 1882 defines charge as, “Where immovable property of
one person is by an act of parties or operation of law made security for the
payment of money to another, and the transaction does not amount to a
mortgage, the latter person is said to have a charge on the property; and all the
provisions hereinbefore contained which apply to a simple mortgage shall, so far
as may be, apply to such charge.

Nothing in this section applies to the charge of a trustee on the trust-property

for expenses properly incurred in the execution of his trust, and, save as
otherwise expressly provided by any law for the time being in force, no charge
shall be enforced against any property in the hands of a person to whom such
property has been transferred for consideration and without notice of the
charge.” [3]

Charges arising by operation of law

 A charge can also be created by the operation of law. It means the
charge is created without the will or intention of the parties, but the
law enforces them to comply with certain obligations.
For example- B made full payment of purchase money to A in advance. But A is
neither transferring the property nor registering it in the name of B. A charge
will be created by the operation of law over the said property in favour of B.

Types of Charge

Fixed Charge
 The charge is created over ascertainable assets i.e. land, building,
machinery, goodwill, copyright etc.
 At the time of the creation of the charge, there is a clearly specified
and defined property, the identity of which doesn’t change during the
period of the loan.
  In such an arrangement, the borrower is only left with the possession
of the asset and the lender has full control over the asset.
 The borrower doesn’t have the right to sell, transfer or dispose of and
prior permission is required.
 There is an obligation to pay off the due amount first.

Floating Charge
 The charge is created over unascertainable assets i.e. assets, vehicles,
debtors, etc.
 It is dynamic in nature i.e. the value and quantity fluctuate
periodically.
 The borrower has the right to sell, transfer or dispose of and no prior
permission is required.
 No obligation to pay off the due amount first.
Crystallization is a process in which the floating charge is converted into a fixed
charge. It generally occurs when:

 The borrower defaults on payment and the lender takes action to

recover the debt.
 At the time of winding up of the company.
 The company ceases to exist or carry on the business.
 Appointment of a receiver by court.

Registration of Charges 
Under section 77 of the Companies Act, 2013 every company creating a charge
shall register the particulars of charge signed by the company and its charge-
holder together with the instruments created. [15]

Therefore all types of charges are required to be registered in accordance with

the Act, whether created within or outside India.

A company must file with the Registrar detailed information of the charge, along
with the Charge Instrument or its authenticated copy, in respect of certain
charges, within 30 days of the creation of a charge. If it is not filed, it shall be
void as against the liquidator and any other creditor of the company. This does
not, however, mean that the charge is altogether void and the debt is not
recoverable. So long as the company does not go into liquidation, the charge is
good and maybe enforced. [16]

Condonation of Delay
If the registrar is satisfied that the company had sufficient reason for not filing
the details and instrument of charge within 30 days of the formation of such
charge, then it can allow for such registration after 30 days but within 300 days
after the creation of the charge. The request for extension shall be submitted in
Form No. CHG-10 and shall be accompanied by a statement from the
corporation signed by the secretary or director claiming that owing to such late
filing, the rights of the intervening creditors of the company shall have no
adverse impact. If the corporation fails to file the charge even during this three-
hundred-day span, it may ask the Central Government to prolong the duration
in compliance with Section 87.

Difference between Mortgage and Charges

A mortgage is a legal process whereby a person borrows money from another
person and secures the repayment of the borrowed money and also the
payment of interest at the agreed rate, by creating a right or charge in favour of
the lender on his movable and/or immovable property. [17] 

According to Section 58 of the Transfer of Property Act, “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.” [18]

NO. CHARGE MORTGAGE

Defined under section 58 of the

1. Defined in section 100 of the Act.
Act.

Interest is created in the property for the It involves the transfer of

2. payment of the debt and there is no ownership interest in an immovable
transfer of any interest. property.

3. It is created either by an act of parties or It can be created by an act of

 operation of law. parties.

Registration must be under the

Registration is compulsory only when it is
4. Transfer of Property Act. It is
created by the act of the parties.
compulsory.

5. Time is infinite and can continue forever. Time is fixed in a Mortgage.

There is a creation of personal

Personal liability is created only when a
6. liability unless excluded by an
charge is created by an agreement.
express contract.

Right in personam i.e. enforceable against Right in rem i.e. enforceable

7.
a person. against the world.

8. It can be in oral and written form. It must be in writing.

While differentiating between charge and mortgage, the Supreme court

in JK(Bombay) Private Ltd v New Kaiser-I-Hind Spinning and Weaving Co
Ltd held that:

“While in the case of a charge, there is no transfer of an interest of property or

any interest therein, but only the creation of a right of payment out of the
specified property, a mortgage effectuates the transfer of property or an
interest therein. No particular form of words is necessary to create a charge and
all that is necessary is that there must be a clear intention to make a property
security for payment of money in praesenti.” [19]