DR.

RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY, LUCKNOW

PROPERTY LAW

“RIGHTS AND LIABILITIES OF MORTGAGOR”

UNDER THE GUIDANCE OF SUBMITTED BY

DR.MANISH SINGH JYOTI RANJAN
RMLNLU 200101076
6th SEMESTER
 ACKNOWLEDGEMENT
Apart from the efforts of mine, the success of this project depends largely on the encouragement
and guidelines of many others. I take this opportunity to express my deep gratitude and sincere
thanks to Prof. Manish Singh who guided me and taught everything so well. I take this
opportunity to express my deep sense of gratitude for his invaluable guidance, constant
encouragement, immense motivation, which has sustained my efforts at all the stages of this
project work.

I can’t forget to thanks my parents for providing me best of the facilities, support and
encouragement. I will remain indebted to them.

Besides, I would like to thank the authorities of Dr. Ram Manohar Lohiya National Law
University for providing us with a good environment and facilities to complete this project.

I would also like to acknowledge my classmates who helped me and provided valuable advice
which helped me to carry out this project successfully.

Jyoti Ranjan
 Table of Contents
INTRODUCTION 4
IMPORTANT DEFINITIONS AND RELEVANT PROVISIONS 4
1. Mortgage 4
2. Mortgagor 6
3. Mortgagee 7
4. Mortgage Money 7
TYPES OF RIGHTS AND LIABILITIES 8
RELEVANT PROVISIONS 8
RIGHTS AND LIABILITIES OF A MORTGAGOR 8
1. Right of Mortgagor to Redeem 8
Position in the Transfer of Property Act 9
Exercise of the right of redemption 10
Extinguishment of right of redemption 10
2. Redemption of Portion of Mortgaged Property 11
3. Right to Redeem Separately or Simultaneously 11
4. Obligation to Transfer to Third Party Instead of Re-transfer to Mortgagor 11
5. Right to Inspection and Production of Documents 12
6. Right of Usufructuary Mortgagor to Recover Possession 12
7. Accession to Mortgaged Property 13
8. Improvements to Mortgaged Property 13
General rule 14
Exceptions 14
CONCLUSION 15
BIBLIOGRAPHY 15
 INTRODUCTION

In the ancient system, mortgage was a pledge, forfeited in default of payment. Expression
"Mortgage" is combination of two French words "Mort” and "Gage" which meant pledge. Early
form of mortgage amongst Hindus and Muslims took the form of conditional conveyance.
Muslims devised it to evade Quranic injunction against usury and it was known as bye-bil-
wafa (sale with promise). Usufruct was enjoyed in lieu of interest and the property was forfeited
in default of payment of debt. Among Hindus, in Bengal, it was known as Khatkabala and in
Bombay, as Gahan Lahan. In the earliest form of Mohammedan law it was also known as rahn
or pledge with possession, which corresponded to Roman pignus. Later, English mortgage took
the modern form of conditional conveyance, according to which the mortgagor was entitled to
re-enter the land on repayment of the debt. It then became akin to English mortgage, as
incorporated in sub-sec. (e) of Section 58 of the Transfer of Property Act, 1882. The equitable
principles governing mortgages, after the common law mortgage became mortgage by
conditional conveyance, have been incorporated in the Indian Law of mortgages, whereby on
principles of equity, it has come to be recognised that mortgage is in essence a borrowing
transaction and that the borrower needed protection and not penalisation and that forfeiture of
property on non-repayment on due date amounted to penalising him.

A mortgage is an interest in land created by a written instrument providing security for the
performance of a duty or the payment of a debt. The rights and liabilities of mortgagor and
mortgagee are mentioned in the TPA.
 IMPORTANT DEFINITIONS AND RELEVANT PROVISIONS
1. Mortgage

Mortgage is transfer of an interest in specific immoveable property for the purpose of securing
the payment of money advanced by way of loan, an existing or future debt, or the performance
of an engagement which may give rise to pecuniary liability. Mortgage is one of the modes of
transfer of the interest in respect of a specific immovable property and the word "transfer" is
defined with reference to the word "convey" under Section 5 of the Transfer of Property Act.
Transferor must have an interest in the property since he cannot sever himself from it and yet
convey it1. There is a transfer of interest in each case, whatever is the form of mortgage, and
the nature of interest transferred depends upon the form of the mortgage.

The transfer should be to a living person, as defined under Section 5 of the Transfer of Property
Act, 1882, and "living person" includes a company or association or body of individuals,
whether incorporated or not. The transfer is in respect of a specific immovable property,
meaning thereby that the description of the immovable property should not only be free from
ambiguity and uncertainty, but it should be specific, as distinguished from general, so as to
identify the property. Assurance in payment, or ready recoverability, constitutes security for
the debt. Mortgage could be for a loan already taken or for a future loan.

In mortgages, the characteristic feature is that the right created by transfer is accessory to the
right to recover the debt2. When debt subsists, it is a mortgage and the transaction on extinction
of debt would be a sale but not a mortgage. In Nidha Sah3, where the deed gave possession of
some villages for 14 years and the possession of which was to revert to mortgagor on expiry of
that period and the mortgage deed without repayment of any moneys was to be returned, the
Privy Council held that it was not a mortgage transaction but a grant of land for a fixed term,
free of rent. Where no specific immovable property was charged but a sale deed was passed
with the recital that in case of defect in title, the mortgagee would be entitled to recover debt,
it did not amount to a mortgage4. Additional debt and induction of a co-mortgagee without
defining the shares of the original mortgagee and co-mortgagee would not alter the situation;

1
Krishna Kumar Khemka v. Grindlays Bank, (1990) 3 SCC 669 (673-674).
2
Rajkumari Kaushalya Devi v. Bawa Pritam Singh, (1960) 3 SCR 570 (573).
3
Nidha Sah v. Murli Dhar, (1903) ILR 25 All 115 (PC).
4
Ram Khilawan v. Ramanandan Prasad, AIR 1949 Pat. 505.
it was held that the original mortgagee would continue to be the mortgagee of the suit land5.
On giving possession to mortgagee, mortgagor does not cease to be owner of the land; on equity
of redemption, he can redeem possession of the land6.Mortgage is a conveyance of title to
property that is given as security for the payment of a debt or the performance of a duty and
that will become void upon payment or performance according to the stipulated terms7.

According to Section 58(a) of the Transfer of Property Act 1882,

“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 liability”.

I. The transferor is called a mortgagor;

II. The transferee a mortgagee;
III. The principal money and interest of which payment is secured for the time being are
called the mortgage-money; and
IV. The instrument (if any) by which the transfer is effected is called a mortgage-deed.

According to section 53-D TP Act, 1882, an immovable property under registered mortgage
must not be re-mortgaged or sold without the written consent of the mortgagee, and any re-
mortgage or sale made otherwise must be void. [Amended by the Act No. XXVI of 2004]

Mortgagor and Mortgagee

The transferor of an interest in specific immovable property is called "mortgagor" while the
transferee is called a "mortgagee". The principal money and interest, payment of which is
secured, is the “mortgage money” and the instrument under which transfer is effected is the
“mortgage deed”.

2. Mortgagor

Section 59-A of the Transfer of Property Act, 1882, deemingly includes also persons deriving
title from mortgagors. It was used in that sense even earlier to the enactment of this section.
Every owner is capable of mortgaging his property unless he is under a disability, statutory or

5
Narayan Pillai Raghavan Pillai v. N.A. Ponamma, AIR 1992 SC 146.
6
State of Punjab v. Labh Singh, (1985) 4 SCC 52.
7
Black’s Law dictionary, 9th edition, page no. 1101.
personal. A co-owner can mortgage his share of the property8, but a mortgage severs the status
of joint tenancy9. When property is mortgaged by joint owners, they are liable jointly and
severally10.

A minor, who is incompetent to contract, cannot transfer the property by mortgages. There are
conflicting views on the question whether a minor, fraudulently representing himself to be a
major, having transferred the property by mortgage, whether can be estopped from pleading
minority later. One view is that mortgage can be validated by applying the doctrine of
estoppel11. The opposite view is taken in Brahma v. Dharmo12. The question, however, has
been settled by the Privy Council in Sadiq Ali Khan v. Jai Kishori13, supporting the latter view
that the mortgage deed by minor, who is incompetent to contract, is a nullity and is incapable
of founding a plea of estoppel. Rule of estoppel would not be applicable as otherwise it would
have the effect of enlarging the minor‘s power to contract. In case Mortgage deed is executed
by several persons of whom some are minors and pardah nashin ladies, who had not executed
the deed in accordance with law, the deed is not invalid insofar as the persons whose execution
was legal, and is binding on them.

3. Mortgagee

Any person capable of holding property can be a mortgagee. A minor can also be a mortgagee14.
A Corporation acting ultra vires in accepting a mortgage may be entitled to recover the money
through the charter of the corporation may be liable to forfeiture15.

An instrument which does not name the mortgagee is not a mortgagee deed. A Court, not being
a juridical person, any security bond given to a court cannot be enforced as a mortgage 16.
Mortgage deed is defined u/s 58(a) as the instrument (if any) by which transfer is effected.

8
Debi Singh v. Bhim Singh, AIR 1971 Del 316.
9
Re Pollard Estate, (1863) 3 De G.J. & Sm. 541, CA.
10
Dhanki v. Chandubha
11
Saral Chand v. Mohun, (1898) 25 Cal. 37.
12
(1898) 26 Cal. 381.
13
(1928) 30 Bom LR 1346.
14
Raghava v. Srinivasa, (1917) 40 Mad 308.
15
Hardy v. Metropolitan Land Co., (1872) 7 Ch. App. 427.
16
Raghubar Singh v. Jai Indra Bahadur Singh, (1919) 42 All 158.
4. Mortgage Money

Mortgage money includes principle amount and interest, payment of which is secured, as
defined under Section 58 (a) of the T.P. Act, 1882. With regard to interest, some Courts have
held that it includes interest after due date, awarded by way of damages17. The Allahabad High
Court held that interest awarded by way of damages was to be treated as decree for damages
and not recoverable from mortgaged property18. However, in view of the amended Rule II of
Order 34, C.P.C., it is now clear that interest awarded is also included in ”mortgage money".
But the Court may justifiably refuse to award interest after the date fixed in the decree in such
cases where the appeal by mortgagee was pending for over two years19. In the absence of a
contract to the contrary, the general rule is that the mortgage can create a charge on the estate
for the interest due under the mortgage20.

TYPES OF RIGHTS AND LIABILITIES

There are following two types of rights and liabilities of mortgagor as well as mortgagee.

I. Statutory rights and liabilities: The statutory rights and liabilities are provided in
relevant sections of the Transfer of Property Act, 1882.
II. Contractual rights and liabilities: Contractual rights and liabilities are those which the
mortgagor and mortgagee stipulate in the contract.

RELEVANT PROVISIONS

The rights and liabilities of a Mortgagor are contained in Sections 60-62, 83 of TP Act 1882:

I. Right of mortgagor to redeem [Section 60 of TP Act, 1882];

II. Redemption of portion of mortgaged property [Section 60 of TP Act, 1882];
III. Right to redeem separately or simultaneously [Section 61 of TP Act, 1882];
IV. Right of usufructuary mortgagor to recover possession [Section 62 of TP Act, 1882];
V. Power to deposit in court money due on mortgage [Section 83 of TP Act, 1882].

17
Bikramjit Tiwari v. Durga Dayal, (1894) 21 Cal. 274.
18
Narindra Bahadur v. Khadim Hussain, (1895) 17 All 581.
19
Registered Jessore Loan Co. v. Shailajanath, (1932) 59 Cal. 722.
20
Ganga Ram v. Natha Singh, AIR 1924 PC 183.
 RIGHTS AND LIABILITIES OF A MORTGAGOR
1. Right of Mortgagor to Redeem

According to s 60 of TP Act, at any time after the principal money has become due, the
mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money,
to require the mortgagee-

I. to deliver to the mortgagor the mortgage-deed and all documents relating to the
mortgaged property which are in the possession or power of the mortgagee,
II. where the mortgagee is in possession of the mortgaged property, to deliver possession
thereof to the mortgagor, and
III. at the cost of the mortgagor either to re-transfer the mortgaged property to him or to
such third person as he may direct, or to execute and (where the mortgage has been
effected by a registered instrument) to have registered an acknowledgement in writing
that any right in derogation of his interest transferred to the mortgagee has been
extinguished.
IV. Acknowledgement that right has been extinguished.
V. Extinguishment of right by (1) the act of the parties, or (2) the decree of the court.

It is the most important right of the mortgagor, through which, the mortgagor after paying-off
the money becomes entitle to get back the property. At any time after the mortgage- money has
become due, the mortgagor has a right on the payment of the mortgage-money to require the
mortgagee to reconvey the mortgaged property to him. This right of the mortgagor, through
which he is entitled to get the property returned to him, contemporaneously with the discharge
of his obligation, is called the right of redemption.

Position in the Transfer of Property Act

Unlike England, the Act does not distinguish between the right to redeem and equity of
redemption. In England, this right was evolved by the Chancery Courts and was known as
equity of redemption. On the following counts, the mortgagor’s right to redeem can be justified:

I. Transfer of an Interest: In a mortgage, the mortgagor transfers one of all his interests in
the immovable property. The mortgagor transfers only an interest in favour of
mortgagee and not the whole interest in the property.
 II. Residuary Ownership: After creating an interest in favour of mortgagee, the mortgagor
still has the remaining interest. The remaining interest is called the residuary ownership
of the mortgagor in the mortgage-property. It is the residuary ownership, by virtue of
which, the mortgagor has the right to redemption vested in him.
III. Purpose is only Securing the Payment of Debt: As per the provisions of the Transfer of
Property Act, in the transaction of mortgage, since there is a transfer of an interest of
the immovable property by the mortgagor for securing the loan, he is entitled to get
back that interest on the repayment of the loan. By making the payment of the loan with
its interest, the mortgagor becomes entitled to redeem, that is call back the ‘interest’
given to the mortgagee as security for repayment.
IV. Principles of Equity, Justice and Good Conscience: Mortgagor neither intends nor
desires that the property should go absolutely to mortgagee. Therefore if the mortgagee
is unable to repay the debt on a fixed date and there is some delay, the law must extend
his right to redemption upto a reasonable time. Principles of equity, justice and good
conscience do not allow that a transaction which is of borrowing nature should become
an absolute conveyance, only on the ground that the debt was not paid on the fixed date.
It is therefore, an inherent right of every mortgagor, laid down in Sec. 60, irrespective
of the kind of mortgage.

Exercise of the right of redemption

The mortgagor’s right of redemption is exercised,-

i. By paying or tendering mortgage-money to the mortgagee outside the court, i.e.

privately;
ii. By depositing the amount in the court; and
iii. By a suit for redemption, payment or tender.

Tender means an unconditional offer to pay the money under such circumstances that the
mortgagee may receive the money there21.

Extinguishment of right of redemption

The mortgagor’s right of redemption is extinguished:

I. By foreclosure (section 67);

21
Section 38 of the Contract Act, 1872.
 II. When the mortgagee has exercised power of sale (section 68);
III. When it becomes barred under the Limitation Act, 1908.

The right of mortgage-deed can come to an end only in manner known to law22.

So, the mortgagor’s right on redemption are,-

I. Delivery of the mortgage-deed and document of title relating to the mortgaged property,
II. Possession, and
III. Reconveyance or acknowledgement.

2. Redemption of Portion of Mortgaged Property

Section 60 of TP Act also provides that a person interested in a share only of the mortgaged
property is not entitled to redeem his own share only, on payment of a proportionate part of the
amount remaining due on the mortgage, except only where a mortgagee, or, if there are more
mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share
of a mortgagor.

3. Right to Redeem Separately or Simultaneously

According to S. 61 of TP Act, a mortgagor who has executed two or more mortgages in favour
of the same mortgagee shall, in the absence of a contract to the contrary, when the principal
money of any two or more of the mortgages has become due, be entitled to redeem any one
such mortgage separately, or any two or more of such mortgages together.

In the case of Muhammad Hossain v. Inayat Ail23, it was held that “if the plaintiffs wish to
redeem the first two mortgages they must redeem them entirely and cannot ask for their own
share only. They must pay the entire mortgage money and if that is so, they must obtain the
entire property under the mortgage”.

4. Obligation to Transfer to Third Party Instead of Re-transfer to Mortgagor

Section 60-A states that

“1) Where a mortgagor is entitled to redemption, then, on the fulfilment of any conditions
on the fulfilment of which he would be entitled to require a re-transfer, he may require the

22
Jaya Singh V. Krishna, AIR 1985 S.C. 1646.
23
PLD 1952 Lah.372.
 mortgagee, instead of re-transferring the property, to assign the mortgage-debt and transfer
the mortgaged property to such third person as the mortgagor may direct; and the mortgagee
shall be bound to assign and transfer accordingly.

(2) The rights conferred by this section belong to and may be enforced by the mortgagor or
by any encumbrance notwithstanding an intermediate encumbrance; but the requisition of
any encumbrance shall prevail over a requisition of the mortgagor and, as between
encumbrances; the requisition of a prior encumbrance shall prevail over that of a subsequent
encumbrance.

(3) The provisions of this section do not apply in the case of a mortgagee who is or has been
in possession.”

5. Right to Inspection and Production of Documents

Section 60-B states that- “A mortgagor, as long as his right of redemption subsists, shall be
entitled at all reasonable times, at his request and at his own cost, and on payment of the
mortgagee's costs and expenses in this behalf, to inspect and make copies or abstracts or,
extracts from, documents of title relating to the mortgaged property which are in the custody
or power of the mortgagee”.

This section makes it clear that a mortgagor has a right to inspect and take copies of documents
of title relating to the mortgaged property which are in possession of the mortgagee. This right
subsists so long as his right of redemption subsists.

In the case of Jaya Singh v. Krishna24, it was held that: “The right of mortgage-deed can come
to an end only in manner known to law”.

6. Right of Usufructuary Mortgagor to Recover Possession

Section 62 of TP Act provides that in the case of a usufructuary mortgage, the mortgagor has
a right to recover possession of the property together with the mortgage-deed and all documents
relating to the mortgaged property which are in the possession or power of the mortgagee,

I. where the mortgagee is authorised to pay himself the mortgage-money from the rents
and profits of the property,-when such money is paid;

24
AIR 1985 S.C. 1646.
 II. where the mortgagee is authorised to pay himself from such rents and profits or any
part thereof a part only of the mortgage-money,-when the term (if any) prescribed for
the payment of the mortgage-money has expired and the mortgagor pays or tenders to
the mortgagee the mortgage-money or the balance thereof or deposits it in court.

7. Accession to Mortgaged Property

Section 63 says that “Where mortgaged property in possession of the mortgagee has, during
the continuance of the mortgage, received any accession, the mortgagor, upon redemption,
shall, in the absence of a contract to the contrary, be entitled as against the mortgagee to such
accession.

Accession acquired in virtue of transferred ownership: Where such accession has been acquired
at the expense of the mortgagee, and is capable of separate possession or enjoyment without
detriment to the principal property, the mortgagor desiring to take the accession must pay to
the mortgagee the expense of acquiring it. If such separate possession or enjoyment is not
possible, the accession must be delivered with the property; the mortgagor being liable, in the
case of an acquisition 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, or, where no such rate is fixed, at the
rate of nine percent per annum.

In the case last mentioned the profits, if any, arising from the accession shall be credited to the
mortgagor. Where the mortgage is usufructuary and the accession has been acquired at the
expense of the mortgagee, the profits, if any, arising from the accession shall, in the absence
of a contract to the contrary, be set off against interest, if any, payable on the money so
expended”.

The term “accession” primarily denotes physical accretions or additions whether brought about
by natural or artificial means.

8. Improvements to Mortgaged Property

Section 63-A says that,

“(1) Where mortgaged property in possession of the mortgagee has, during the continuance
of the mortgage, been improved, the mortgagor, upon redemption, shall, in the absence of a
 contract to the contrary, be entitled to the improvement; and the mortgagor shall not, save
only in cases provided for in sub-section (2), be liable to pay the cost thereof.

(2) Where any such improvement was effected at the cost of the mortgagee and was
necessary to preserve the property from destruction or deterioration or was necessary to
prevent the security from becoming insufficient, or was made in compliance with the lawful
order of any public servant or public authority, the mortgagor shall, in the absence of a
contract to the contrary, be liable 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, or, where no such rate is
fixed, at the rate of nine percent per annum, and the profits if any, accruing by reason of the
improvement shall be credited to the mortgagor.”

General rule

Sub-section (1) lays down the general rule that ordinarily a mortgage is not at liberty to make
improvements and charge the mortgagor therewith. With this end in view, the sub-section laid
down that where mortgaged in possession of the mortgagee has been improved, the mortgagor
upon redemption is entitled to the improvement. The object is to prevent mortgagee from
spending large sums of money and then charging the mortgagor for it and in consequence make
it impossible for him to redeem.

Exceptions

Sub-section (2) lays down that the mortgagor shall be liable to pay the cost of improvements
in the following cases only,

I. If improvement was necessary to preserve the property from destruction or

deterioration, or
II. Was necessary to prevent the security from becoming insufficient, or
III. Was made in compliance with the lawful order of any public servant or public authority.

In the case of State Bank of Pakistan v. Khaledar Ma25, it was held that, “Mortgagor is liable
to pay cost for improvement when any when any of the tests under the section is fulfilled.”

25
14 DLR 735.
 CONCLUSION

Mortgage is the one kind of mode of transfer among the six modes i.e. Sale, Exchange,
Actionable claim, Mortgage, Gift, Lease. Regarding Mortgage in Transfer of Property Act
1882, there are sufficient laws but the application of these laws in the practical field is not well-
founded. So, it is expected that the statutory law will be implemented in the practical field.
Most of the provisions in the Act are not applicable to the contract for mortgage as most of the
sections contain the sentence “in the absence of contract to the contrary”. I think these
provisions should be followed in the contract for mortgage otherwise the contract will be
voidable. It is also expected that the rights of the mortgagor and mortgagee must be more
protected by adding some additional provisions.

Mortgage is a transfer of an interest in specific immovable property as a security for the

repayment of a monetary liability. This liability could be arising out of money already advanced
or to be advanced; it could be future debt or it could be pecuniary liability arising out of the
non-performance of any engagement. To conclude it can be said that the provisions of the
Transfer of Property Act, 1882 relating to mortgage successfully met the expectation and
demand of the mortgagor and mortgagee though it had many limitations.

BIBLIOGRAPHY
● Mulla, The Transfer of Property Act, 1882, 10th Edn, Lexis Nexis Butterworths India,
2006.
● Dr.Avtar Singh, The Transfer of Property Act, 3rd Edn, Universal Law Publishing Co.,
New Delhi, 2012.
● G.P. Tripathi, The Transfer of Property Act, 1882, 15th Edn, Central Law Publications,
Allahabad, 2006.
● Naveen Sharma, Right to Property in India, Deep and Deep Publications, New Delhi,
1990.
● Dr.PoonamPradhanSaxena, Property Law, 2nd Edn, Lexis Nexis, 2013.