Mortgage

Introduction:
Where the loan is secured against any movable property, it is called a pledge.
Where the loan is secured against some immovable property of the debtor, it is
called mortgage. In both the cases, whether the property is movable or
immovable, the loan is secured because in default of repayment, the creditors can
recover his money from the property which has been specified as security.
Relevant provision:
Section 58 to 104 of the Transfer of Property Act, 1882 deals with mortgages
and charges.

Definition of mortgage:-
Section 58 (a) of T.P Act Defines, “Mortgage is the transfer of an interest in
specific immovable property for the purpose of securing payment of money
advanced or to be advance debt way of loan, an existing or future debt or the
performance of an engagement which give rise to a pecuniary liability”.
 Mortgagor and Mortgagee
The person who transfers the interest in an immovable property is called the
mortgagor.
The person to whom it is transferred is called the mortgagee.
 Mortgage Money
The principal money and interest of which payment is secured for time being is
called mortgage money.
 Mortgage Deed
The instrument by which the transfer is effected is called a mortgage deed.
Essential elements of mortgage: - Following essentials elements are necessary
In mortgage:
1. There must be transfer of an interest.
2. The interest transferred must be of some specific immovable property.
3. 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: - in a mortgage there is transfer of only an ‘interest’ of the
immovable property. There is no transfer of absolute interest or ownership. The
‘interest’ is transferred in favor of the mortgagee who advances the money as
loan. It is the ‘interest of property’ which gives him (mortgagee) the right to
recover his money from mortgagor’s property. A peculiar feature of the interest
transferred is that such ‘interest’ itself is an ‘immovable property’ this interest in
favor of mortgage, there still remains a vested remainder with the mortgagor.
(2) Specific immovable property: - the property which is being mortgaged must
be specific immovable property. The immovable property must be specifically
mentioned in the deed. That is to say, it must be mentioned in a reasonably
certain manner so that it can be identified as to which property has been
mortgaged. The property must not be described in general terms such as, “my all
property” or, “my house and landed property”. On the other hand, where the
property has been described in a manner that it can be ascribed without any
doubt, the property is specified even though no ascertained without any doubt,
the property is specific even though no particular details are given in the deed.
For example, where the mortgagor has only one house in the city called
Ghaziabad, “my house in Ghaziabad” is specific mention of the property although
no house number etc, is given in the deed. similarly.” our Zamindari property” or,
“all properties of the entire Bhag have been held specific mention of the
mortgage property.
(3)The purpose of mortgage: Consideration of mortgage:- the last essential
element of mortgage is its purpose. The purpose of mortgage must be to secure a
debt. Mortgage is a transfer of property supported with some consideration; the
consideration of mortgage is to secure a debt. Mortgagor transfers the interest in
his property to mortgage in consideration of security for payment of some kind of
loan taken by him. The loan may be in the form of:
1. Money advanced or to be advanced: mortgage may be executed for a sum of
money advanced or to be advanced on a future date. Where the mortgagee has
already given some money, the mortgagor may execute a deed of mortgage as
security for its payment. This is a mortgage for the money advanced. 2. An
existing or future debt: existing debt means a debt the claim of which exists at
present e.g. a debt which is not barred by limitation. Such debt may be secured by
way of mortgage. Mortgage may be affected to secure also a ‘future debt’. Future
debt is a sum of money which the mortgagee is entitled to get from mortgagor on
a future date.
3. The performance of any engagement giving rise to a pecuniary liability: lastly,
consideration in the mortgage may also be an ‘engagement’ as used in this
section means a contract within the meaning of section 2 of the Indian Contract
Act 1882. Just as a breach of contract results in pecuniary liability the
‘engagement’ contemplates here should also arise in some pecuniary liability.
Pecuniary liability means liability to pay some of money.
Right of foreclosure
Introduction:
Section 67 of the Transfer of Property Act gives to the mortgagee right of
foreclosure or sale just as section 60 provides a statutory right to mortgagor to
redeem the mortgage. This section confers statutory right on mortgagee to
foreclose the mortgage. Foreclosure means closing or withdrawing the
mortgagor’s right of redemption. ‘Foreclosure’ is a legal term which means that
equitable relief given to mortgagor against forfeiture of the security is withdrawn.
In the transaction of mortgage, mortgagor’s interest is to get back his property
after payment of the money whereas; mortgagee’s interest is to get back his
money if it is not paid by mortgagor. Mortgagor exercises his right of redemption.
Mortgagee is entitled to get back his money under the right of foreclosure or sale.
In this sense, the right of foreclosure is counterpart of the right of redemption.
According to section 67:
Right to foreclosure or sale. In me absence of a contract to contrary, the
mortgagee has at any time after the mortgage-money has become due to him,
and before a decree has been made for the redemption of the mortgaged
property, or the mortgage-money has been paid or deposited as hereinafter
provided, a right to obtain from the Court a decree that the mortgagor shall be
absolutely debarred of his right to redeem the property, or ‘‘[a decree] that the
property be sold. A suit to obtain '[a decree] that a mortgagor shall be absolutely
debarred of his right to redeem the mortgaged property is called a suit for
foreclosure.
Conditions:
The right to foreclosure can be exercised by mortgagee only when:
 The debt amount has become due for payment.
 There are no contrary conditions in the mortgage deed as to the time fixed
for repayment etc.
 Mortgage money has become due but mortgagor has not got a decree of
redemption of the mortgaged property.
 Mortgage money has become due but mortgagor has not paid or deposited
the amount. After the mortgage money has become due, the mortgagor
can pay off his debt in three ways:
 By tendering or making payment of the mortgage money directly to
mortgagee
 By filing a suit for redemption.
 By depositing the amount in court.
 Mortgagee should not be mortgagee of public works like canal, railway etc.
 A trustee or legal representative of mortgagee cannot file a suit for
foreclosure but for sale only.
However, when mortgagor fails to redeem the property, the mortgagee does not
become the owner of the property, he has to file a suit for recovery of the
amount due. The limitation period for instituting a suit is 12 years. The final
decree in a suit for foreclosure on the failure of defendant to pay all amounts due
extinguishes the right of redemption which has to be specifically declared. A
mortgagee may hold two or more mortgages executed by the same mortgagor. In
respect of each of such mortgages, he may have a right to obtain a decree of
foreclosure. In case he sues to obtain such a decree on any one of the mortgages,
he will be bound to sue on all the mortgages in respect of which the mortgage
money has become due.
When does the right arise?
The right of foreclosure or sale arises when the mortgage-money becomes due.
Section 67 provides that mortgagee has right of foreclosure of the mortgage “ at
any time after the mortgage-money has become due to him, and before a decree
has been made for redemption of the mortgaged property”. Section 67 does not
lay down to when the mortgage–money becomes due. Such date is normally fixed
in the mortgage-deed. When no time is fixed, the mortgage- money becomes
payable on the date of execution. Where the money is payable on demand and no
time for payment is fixed, the mortgage-money is deemed to be payable
forthwith from the date of execution of the mortgage; no previous demand is
necessary b mortgagee.
Modes of Foreclosure:- section 67 provides following two remedies to a
mortgagee:- (1)Foreclosure, and (2)Sale
These two remedies are available to the mortgagee in different forms of
mortgage. Which mode may be applied by mortgagee depends upon the form of
mortgage. Therefore, the specific remedy available to mortgagee is dealt with
separately.
Foreclosure and different kinds of mortgages:
The act contemplates six kinds of mortgage, namely simple mortgage, mortgage
by conditional sale, usufructuary mortgage, English mortgage, mortgage by
deposit of title deeds and anomalous mortgage.[14]
Simple mortgage: The mortgagee in such scenario does not get possession of the
mortgaged property and therefore cannot exercise right of foreclosure. The
remedy is either to proceed against the mortgagor personally or for sale of the
mortgaged property.
Mortgage by conditional sale: Mortgage by conditional sale provides in case of
default of payment, mortgage will become a sale. The remedy in such a situation
is not foreclosure but debarring mortgagor’s right of redemption.
Usufructuary mortgage: Under this mortgage, mortgagee retains possession until
repayment of money and receives rents and profits or part thereof in lieu of
interest, or in payment of mortgage money or partly in lieu of interest and partly
in payment of mortgage money. There is redemption when the amount due is
personally paid or is discharged by rents or profits received. He does not have a
right to foreclose or sale.[15]
English mortgage: A mortgagor binds himself personally to pay the debt, and
there is an absolute transfer of mortgaged property in favour of mortgagee.
Therefore he does not have a right of foreclosure but a right to file a suit for sale
of the mortgaged property.
Mortgage by deposit of title deeds: As per Section 96, the mortgagee of title
deeds is on the same footing as a simple mortgagee, therefore remedy available is
sale of the mortgaged property.
Anomalous mortgage: The remedy depends on the terms contained in the
mortgage deed as anomalous mortgage is combination of two or more types of
mortgages.[16]

Partial Foreclosure or Sale:- Section 67 (d) prohibits partial foreclosure or sale.

This clause is similar to the last clause of section 60 which prohibits partial
redemption. The basis of the rule against partial foreclosure is also the principle
of indivisibility of mortgagesecurity as it is in the case of partial redemption.