Professional Documents
Culture Documents
Elaborate upon the concept of 'Mortgage and remedies including Marshalling, Contribution,
and Subrogation.
Answer- A mortgage is a way of putting a lien on immovable property such as land or a structure.
A mortgage is defined as follows under Section 58 of the Transfer of Property Act 1882: A
mortgage is the transfer of an interest in specified immovable property to secure the payment of
money advanced or to be advanced by means of loan, a present or future debt, or the execution of
an engagement that may result in a pecuniary liability.
In terms of the definition, the following are the characteristics of a mortgage:
(1) Only immovable property can be financed with a mortgage. Land, benefits derived
from land, and anything fixed to the earth, such as trees, structures, and machinery,
are all examples of immovable property. A machine, on the other hand, that is not
permanently fastened to the earth and may be moved from one location to another is
not considered immovable property.
(2) A mortgage is the transfer of a stake in a specific piece of real estate. This indicates
that the owner only gives the mortgagee some of his rights. For instance, the right to
redeem the mortgaged property.
(3) The transfer of an interest in a property must be for the purpose of securing a loan or
performing a contract that results in a monetary obligation. A transfer of property for
reasons other than those listed above is not considered a mortgage. A property
transferred to Liquidate Prior Debt, for example, will not be considered a mortgage.
(4) The mortgaged property must be identifiable by its size, location, and borders,
among other things.The actual possession of the mortgaged property is generally with
the mortgager.
(5) The mortgagee's interest in the mortgaged property is re-conveyed to the mortgager
when the debt is repaid with interest.
(6) If the mortgager fails to repay the loan, the mortgagee has the right to collect the
debt from the mortgaged property's selling proceeds.
A mortgage is defined as 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 agreement that may give rise to pecuniary liability,
according to Section 58 of the Transfer of Property Act, 1882.
The transferor is known as a mortgagor, and the transferee is known as a mortgagee; the mortgage
money is the principle and interest that is secured for the time being, and the instrument by which
the transfer is performed is known as the mortgage deed.
ESSENTIALS
1) Transfer of Interest: A mortgage is, first and foremost, a transfer of interest in a
certain immovable property. The mortgagor, as the owner of the property, owns all of
the interests in it, and when he mortgages it to secure a loan, he merely gives up a
portion of those interests to the mortgagee. Following a mortgage, the mortgagor's
interest is lowered by the interest that has been transferred to the mortgagee. For the
time being, his ownership has been reduced by the interest he has given up in favor of
the mortgagee. If the mortgagor transfers the property, the transferee receives it
subject to the mortgagee's right to reclaim what is owed to him, which is the principal
plus interest.
2) Specific Immovable Property The property must be expressly listed in the mortgage
deed, according to the second point. When the mortgagor said in the mortgage deed,
for example, “all of my property,” the Court determined that this was not a mortgage.
The reason that the immovable property must be described clearly and explicitly in
the mortgage deed is that if the mortgagor fails to repay the debt, the Court has the
authority to order the sale of any particular property if the mortgagee files a suit.:
3) To Secure the Payment of a Loan: Another aspect of a mortgage is that it is used to
secure the repayment of a loan or the fulfilment of an obligation that may result in
financial liability. It could be for the aim of getting a loan, or it could be for the
purpose of securing the repayment of a loan that has already been given. As a result,
there is a debt, and the mortgagor and the mortgagee have a debtor-creditor
relationship. It is a mortgage transaction for the fulfilment of an obligation when A
borrows 100 bags of paddy from B on a mortgage and agrees to return an identical
amount of paddy plus a further amount as interest.
4) A transaction that does not amount to a mortgage occurs when a person borrows
money and agrees with the creditor that he will not alienate his property until the
obligation is repaid. The person simply states that he will not transfer his property
until the debt is paid in full; he does not give the creditor any stake in the property. In
contrast to a mortgage, all interests, rights, and ownership are transferred to the buyer
in a sale. As previously indicated, only a portion of the interest in a mortgage is
transferred to the mortgagee; the remainder remains vested in the mortgagor.
To summarize, a mortgage has three distinguishing characteristics:
a) The mortgagee's interest in the mortgaged property expires when the obligation
guaranteed by the mortgage is fulfilled.
b) If the mortgagor fails to fulfill, the mortgagee has the authority to foreclose.
c) On repayment of the debt or execution of the duty, the mortgagor has the right to
redeem or reclaim the property.
KINDS OF MORTGAGE: Section 58(b) to (g) mentions six different types of mortgages.
Simple Mortgage
Simple mortgages are dealt with in Section 58(b) of the T.P. Act.
• Where the mortgagor binds himself personally to pay the mortgage-money without
delivering possession of the mortgaged property, and agrees, expressly or impliedly, that if he
fails to pay according to his contract, the mortgagee shall have the right to sell the mortgaged
property and apply the proceeds of sale, to the extent necessary, in payment of the mortgage-
money.
The characteristics of simple mortgage are:
I. The mortgage takes a personal undertaking to pay the loan.
II. The possession of the mortgage-property is not given to the mortgagee.
III. In the case of non-payment of the loan the mortgagee has a right to have the mortgage-
property sold.
• So the Mortgagee has two remedies in case of default by the mortgagor.
i. Since in simple mortgage, the mortgagor takes personal obligation to repay the loan, the
mortgagee may sue the mortgagor personally to recover the money. In such a case, he will get
simple money decree.
ii. The mortgagee may move to the Court for the sale of the mortgaged property so that he
may recover his money.
• Simple mortgage can be done only through a registered document.
Mortgage by Conditional Sale.
• Section 58(c) deals with mortgages by conditional sale, in which the mortgagor ostensibly
sells the mortgaged property on the condition that the sale becomes absolute if the mortgage-
money is not paid by a specified date. or on the condition that the sale becomes void if such
payment is made, or on the condition that the buyer transfers the property to the seller if such
payment is made, the transaction is known as a mortgage by conditional transfer. By
conditional sale, the mortgagee becomes a mortgagee.
• Provided, however, that such a transaction shall not be construed as a mortgage, unless the
condition is enshrined in a document that effects or purports to complete the transaction.
•It is an apparent sale with a condition that upon repayment of the consideration amount, the
purchaser shall transfer the property to the seller.
Essential element of conditional mortage
• There is an ostensible sale of immovable property,The sale is subject to any of the following
conditions, on non-payment of the mortgage-money, the sale becomes absolute or on
payment, the sale shall become void. The condition must be embodied in the same document.
Usufructuary Mortgage
In this type of mortgage, the mortgager gives the mortgagee possession of the property or
agrees to provide the mortgagee possession of the property. The mortgagee has the right to
keep ownership of the property until the obligation is paid off. When the money is returned,
the mortgagee retains the right to retrieve the property.
The mortgagee is entitled to receive rents and profits related to the mortgaged property until
the loan is repaid, and to appropriate the same in lieu of interest or in repayment of the loan,
or both, until the debt is fully.
The mortgagee is not directly responsible for repaying the loan. As a result, the mortgagee is
unable to seek repayment from the mortgager. He cannot sue for foreclosure or sale of the
mortgaged property; the mortgagee's only option is to stay in possession of the property and
pay himself out of the rents or profits. He will have to wait a long time to recover his debts
because there is no time limit.
English Mortgage
The following are the features of an English mortgage:
(1) The mortgagee receives the property in its entirety from the mortgager. As a result, the
mortgagee has the right to take ownership of the property right away. The property will only
be transferred after the debt has been repaid.
(2) The mortgagee also commits to repaying the loan on a specific date.
(3) Under the event of non-payment, the mortgagee has the authority to sell the mortgaged
property without asking court permission in the circumstances set forth in section 69 of the
Transfer of Property Act.
Mortgage by Deposit of Title Deeds
The mortgage by deposit of title deeds transaction occurs when a debtor provides to a creditor
or his agent a document of title to immovable property with the aim of creating a security
interest thereon. This type of mortgage is only available in the cities of Kolkata, Mumbai, and
Chennai, as well as other cities authorized by the state government in the Official Gazette for
this reason. This sort of mortgage does not need to be registered. Equitable mortgage is
another name for this type of loan.
Anomalous Mortgage
Sec 58 (g) of T.P. Act deals with Anomalous mortgage.
•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.
RIGHTS OF MORTGAGOR:
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)
This right puts an end to mortgage by returning the property of mortgagor. The right
to redeem further grants three rights to the mortgagor:
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
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.
NATURAL CAUSES:
The natural accession of the mortgaged property ensures a benefit to the mortgagee and his
family but at the same time it is subject to theredemption by mortgagor. So it goes to the
mortgagor.
ACQUIRED BY THE MORTGAGEE’S OWN COST:
The acquired accession can be sub divided into
1. Separable Accessions:
When the accessions are acquired by the mortgagee’s own costwhich are separable from the
security shall go to the mortgagee. But if the mortgagor desires to retain them, the mortgagee
can surrender them by receiving the cost.
2. Inseparable Accession:
When the accession acquired by the mortgagee’s own cost cannot be passed or enjoyed by
the mortgagee separately from thesecurity, it must be delivered with the property. However,
the mortgagor is bound to pay the compensation only in two cases
In cases where the mortgagor is bound to pay the compensation, he is liable to pay the
interest on such cost. The rate of interest should be samewhat he pays to the mortgagee. If it
is not fixed, he should pay 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:
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:
2. Mortgaged-property delivery
When mortgagee is in possession of mortgaged property, mortgagor has the right to demand
that mortgagee deliver possession to mortgagor.
3.Mortgaged-property - re-transfer
The mortgagor has the right to request the mortgagee to re-transfer mortgaged property to the
mortgagor or to a third party as directed by the mortgagor. However, such a re-transfer comes
at the expense of the mortgagor.
4. Extinguishment of Mortgagee’s Interest
Any right in derogation of mortgagor's interest, which has been transferred to mortgagee, has
been extinguished, and mortgagor has the right to demand mortgagee to perform and have
registered on acknowledgement in writing. In the case of a mortgage secured by a registered
instrument, however, such a judgment should be recorded.
Doctrine of Subrogation
Subrogation is the right of a person to act in the place of a creditor once he or she has paid off
his or her debts. Subrogation occurs solely through redemption in the event of a mortgage. As a
result, in order to be eligible for subrogation, a person must pay off a preceding mortgage in
full. A claim for partial subrogation cannot be based on a partial payment of the mortgage debt.
Section 92 of the Transfer of Property Act, 1882, recognizes and describes the right of
subrogation. Subrogation is a concept founded on the ideals of equity, justice, and morality.
The basic tenet of the doctrine is that the entity who pays off a mortgage inherits all of the
mortgagee's rights. It was decided in the case of Ganesh lal vs joti parshad that even in
portions of India where the Act itself did not apply, this notion was rendered applicable.
According to Section 91, any person who has an interest in the mortgaged property other than
the mortgagee, such as subsequent mortgagees, co-mortgagors, buyers of mortgaged property,
sureties of mortgaged debt, or creditors of mortgagor, steps into the shoes of the mortgagee. He
inherits all of the creditor's (mortgagee's) rights against the principal debtor (mortgagor),
including the power to foreclose, redeem, or sell the property. Subrogation is the legal term for
this.
The person should, nevertheless, pay off the entire mortgage.
A person pays a mortgage to safeguard his or her own interest in the property, or because he or
she is secondary liable for the debt or the lien's discharge. The borrower's use of the loan
proceeds to discharge a prior encumbrance, on the other hand, is not a sufficient cause for the
lender to be entitled to subrogation. There should be enough of evidence that the loan was
issued for that specific reason. As decided in the case of Parichan Mystry V. Acchiabar mysty.
There are two kinds of subrogation which is legal subrogation and conventional subrogation.
RULE OF MARSHALLING
The phrase "marshalling" refers to the process of arranging things. A future purchaser has the
right of marshalling under Section 56, and subsequent (puisne) mortgagees have a similar right
under Section 81. It's a question of fact and the Marshalling Principle is based on equity.
The following is an explanation of Section 81:
1.There must be two or more property owners. He must first mortgage two or more of these
properties to anyone,
2. and then he must mortgage one or more of these properties to someone else.
3. The following mortgagee has the right to have the prior mortgagee's debt settled from the
properties not sold to him. This can also be subject to a contract that states the opposite.
4. Similar to Section 56, the marshalling rule should not be applied in such a way as to
jeopardize the rights of the mortgagee or any other person who has acquired an interest in any
of the properties for consideration.
Illustration
An illustration can be used to describe marshalling in this context. If a mortgagor mortgages
three of his properties, Q, W, and E, to A and subsequently mortgages Q to B, B is entitled to
have the mortgagor satisfy his debt from the sale proceeds of the properties W and E, with
property X being sold only if the sale proceeds fall short.
In the case of Barness v. Rector W mortgaged two of his properties, A and B, to X. Property A
was then mortgaged to Y, and property B was mortgaged to Z. The court decided that X's
mortgages would be proportionately divided between properties A and B, with the surplus of A
going to Y and the surplus of B going to Z.
RULE OF CONTRIBUTION
The Rule of Contribution refers to mortgagors' aggregate contribution to a mortgage debt. It
allows one mortgagor to have the property of the other contribute to the repayment of the
mortgage debt. When a creditor has a single claim against numerous borrowers, he can collect
the debt from any of them, but he can also claim contribution from the other debtors under the
contribution rule, so that the burden is shared evenly.
The rule is encapsulated under Section 82 of TOPA and may be divided as per the following:
Mortgaged Property Belonging to two or more persons
This is based on the following essentials:
1. A mortgaged property must belong to two or more persons based on a common loan,
2. Each mortgagor, in absence to a contrary contract, is liable to contribute as per his
share of the mortgage,
For example, X, Y and Z mortgaged their properties to D mortgaging a common debt. Now if
D can recover the entire debt from the properties mortgaged by X, X is entitled to demand Y
and Z to contribute their portion of the debt out of their mortgaged properties. The Privy
Council has lucidly explained it in Kampta Singh v. Chaturbhuj. The Privy Council held that
if a person owns one property subject, with the property of other persons, to a common
mortgage, and has paid off the mortgage debt, he is entitled to call upon the owners of the other
property to bear their proper proportion of the burden.
Q2-Define the term Lease, its duration, execution & determination of lease.
Answer- definition of lease- • Sec 105 of the T.P. Act defines Lease: A lease of immoveable
property is a transfer of a right to enjoy such property, made for a certain time, express or
implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of
crops, service or any other thing of value, to be rendered periodically or on specified occasions
to the transferor by the transferee, who accepts the transfer on such terms.
Essentials elements of a valid lease:
1. A contract must be signed between two parties (lessor and lessee).
2. There must be a restricted interest transfer, such as a right of enjoyment.
3. It must be an immovable property.
One of the many ways to transfer ownership rights in a property is through property exchange
(both movable and immovable). Sale, gift, and will are some of the other common and
regularly used methods for transferring immovable property. The term "exchange" is defined
in Section 118 of the aforementioned Act as "a transaction in which two persons mutually
transfer ownership of one object for the ownership of another, neither thing or both things
being money only."
In addition, section 119 of the aforementioned act allows redress to a party who is the victim
of a "transfer by exchange" due to a fault in the transferor's title. A person with a defective
title is responsible for returning the other person's original property and for any losses
suffered as a result of the exchange.
Each party to such an exchange enjoys the rights and is subject to the liabilities of a seller in
relation to the thing he gives, and each party to such an exchange enjoys the rights and is
subject to the liabilities of a buyer in relation to the thing he receives. Section 120 of the
aforesaid act (Transfer of Property Act, 1882) contains this provision for the protection of
both parties involved in the process of transferring ownership rights in immovable property
by exchange. The difference between "exchange of mobile property" and "exchange of
immovable property" is that the former is referred to as "barter" and is governed by the Indian
Contract Act of 1872, whilst the latter is referred to as "exchange" and is governed by the
"Transfer of Property Act of 1882."
Mode of exchange
According to Section 118, an exchange can only be undertaken in the way specified for the
sale of such property. Because only a registered conveyance can be used to sell immovable
property, every exchange of tangible, immovable property worth Rs. 100 or more must be
done through the registered document. Mutual conveyances are commonly used in the
exchange of immovable property. It is not required, however, that two separate deeds be
executed.
If a party receiving something in exchange is deprived of that object due to a flaw in the other
party's title to the exchange transaction, the deprived party can seek relief under section 119
of the Act. In such a circumstance, the deprived party is entitled to the thing that was
delivered to the other party during the transaction if it is still in the other party's possession.
If any contradictory expression exists, however, the party is not entitled to such relief.
Difference between exchange and sale
The difference between a sale and an exchange is that in a sale the price is paid in money
while in an exchange it is paid in another property by way of barter. The sale is always for a
price, which means money or the current coin of the realm while no price is paid in an
exchange, there is only a transfer of one specific property for another. And although payment
of price may be made in addition to the transfer of property, by way of equality of exchange,
such payment does not make the exchange lose its character as such.
Short note on Actionable claim
Section 136. “actionable claim” means a claim to any debt, other than a debt secured by
mortgage of immovable property or by hypothecation or pledge of movable property, or to
any beneficial interest in movable property not in the possession, either actual or
constructive, of the claimant, which the Civil Courts recognize as affording grounds for
relief, whether such debt or beneficial interest be existent, accruing, conditional or
contingent. These are claims which are in the nature of unsecured debts or any beneficial
interest in the movable property. A actionable claim as per section 136 cannot be purchased
by a judge, officer concerned with court or a legal practitioner. These are recognized by the
civil court for the same purpose. According to s 3, an actionable claim means a claim to:
(i) any debt,1 other than a debt secured by:
(a) mortgage of immovable property, or
(b) by hypothecation or pledge of movable property, or;
(ii) to any beneficial interest in movable property2 not in the possession either actual or
constructive of the claimant, which the civil court3 recognises as affording grounds for relief
whether such debt or beneficial interest be existent, accruing, conditional or contingent.
The transfer of an actionable cliam whether with or without consideration shall be effected
only when
1) By the execution of an instrument in writing
2) Signed by the transferor or his duly authorised agent
3) It shall be complete and effectual upon the execution of such instrument and thereupon;
4) All the rights and remedies of the transferor, whether by way damages or otherwise;
5) Shall vest in the transferee
6) Irrespective of whether such notice of the transfer be given or not.
Some illustration of actionable claims include-
I) Transfer of a right to sum of money.
II) A gift of actionable claim valuded at rupees three lakhs
III) An interest of a buyer of goods in a contract for forward delivery.
Illustration of not actionable claims
1) A decree is a not an actionable claim therefore there can be no transfer on the part of
the decree.
2) Transfer of collateral security does not transfer the loan.