MORTGAGE

In India, Mortgage is governed under Section 58 to 104 of the Transfer of Property Act, 1882. A
Mortgage can be defined as the transfer of interests in a specific property to secure the pan
advanced or to be advanced in the future. In other words, we can say that when any person takes
a loan from anyone, some security is required to be kept with the lender to have the assurance
that in case of default in the repayment of the loan, the lender can recover his money from that
security.
When someone takes out a loan, they are granting the lender some interest in their real estate as
security for paying back the loan; this is referred to as a mortgage of real estate. The court
clarified in Chetti Goundan v. Sundaram Pillai that the right created in the property by the
transfer is accessory to the right to recoup the debt in a mortgage. So, a mortgage does not grant
the lender ownership rights; rather, it only grants the lender an accessory right to ensure that the
amount owed is paid.
The person who mortgages his property against the loan is called "Mortgagor." Whereas the
person to whom the property is mortgaged is called Mortgagee" and the terms and conditions
related to mortgages are contained in the "Mortgage Deed".
ESSENTIALS OF A VALID MORTGAGE
The following are prerequisites for a legitimate mortgage:
1. Offer and Acceptance: The borrower must make a clear offer to accept the loan, and the
lender must accept it. This is typically stated in a formal mortgage contract.
2. Competent Parties: In order to enter into a contract, both parties to the mortgage
agreement must be of legal age. Usually, this means that they have to be of legal age and
in good mental health.
3. Legal Purpose: The mortgage must have a legitimate goal. For instance, the borrowed
money must be utilized for legitimate purposes, like buying property.
4. Property Description: The property being used as collateral needs to be described in detail
in the mortgage document. This includes specifics like the property's address, boundaries,
and any other pertinent details that help identify it.
5. Consideration: Valued consideration must be given and received by both the lender and
the borrower. This is typically the loan amount that the lender provides in exchange for
the borrower's pledge to pay back the loan.
6. Intention to Establish Legal Relations: In order to establish legal relations, both parties
must be aware of the implications of signing the mortgage agreement.

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 7. Free Consent: Both parties' consent must be given voluntarily, which means it cannot be
acquired by deception, fraud, coercion, or other unfair means.
8. Registration (where necessary): For a mortgage to be legally binding in some
jurisdictions, it must be registered with the relevant government agency. In the event that
there are several claims made on the property, registration aids in determining the
mortgage's priority.
9. Certainty of Terms: The mortgage's terms and conditions, including the interest rate,
repayment schedule, and other pertinent information, must be unambiguous and certain.
10. Legal Formalities: The mortgage must abide by any formalities mandated by the
applicable laws. This could involve having witnesses present or getting the paperwork
notarized.
11. Delivery of Possession: In certain instances, the delivery of possession of the property
might be required in order for the mortgage to be enforceable. This is more typical in
some legal frameworks.

KINDS OF MORTGAGE

Mortgage is defined by Section 58 (a) of the Transfer of Property Act, 1882 (TPA) as a 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 (monetary) liability.
 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 affected is called a mortgage-deed.
Types of Mortgages
 Simple Mortgage:
o Section 58(b) of TPA defines simple mortgage.
o It states that 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.
o The essential elements of simple mortgage are:

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  There is a personal undertaking by the mortgagor to repay the loan.
 Possession and enjoyment remain with the mortgagor.
 There is a power of sale but to be exercised only through Court.
 It must be affected by a registered instrument.
 There is no delivery of ownership or possession.
 There is no foreclosure.
o In the case of a simple mortgage, the mortgagee has two remedies:
 A personal undertaking to obtain a money decree against the mortgagor.
 To sue on the mortgage and obtain a decree for the sale of the property.

 Mortgage by Conditional Sale:

o Section 58(c) of TPA defines mortgage by conditional sale.
o It states that 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.
o 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.
o The essential elements of mortgage by conditional sale:
 There is an ostensible sale by the mortgagor to the mortgagee of the
mortgaged property.
 There is a condition that the sale shall be void if the loan is repaid on a
particular date. The property is then retransferred to the mortgagor.
 The remedy of the mortgagee is by a suit for foreclosure.
 Registration is compulsory only if the consideration exceeds Rs. 500.
 There should be only one document.
o A transaction can be deemed to be a mortgage by conditional sale only when the
condition is embodied in the same document which purports to affect the sale.
o In this form of mortgage, there is no personal liability on the part of the mortgagor
to pay the debt.

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 o The remedy of the mortgagee is by foreclosure only.
o In the case of Sunil K. Sarkar v. Aghor K. Basu (1989), it was held that where
separate documents of sale deed and reconveyance deed are executed between the
same parties in the same transaction and in respect of the same property, the
transaction could not be called a mortgage by conditional sale.
 Usufructuary Mortgage:
o Section 58(d) of TPA defines usufructuary mortgage.
o It states that 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.
o There cannot be two different usufructuary mortgages on the same property at the
same time, as the possession can only be given to one only.
o In this type of mortgage, the mortgagee has the advantage to repay himself.
 English Mortgage:
o Section 58(e) of TPA defines English mortgage.
o It states that 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.
o The word ‘absolutely’ emphasizes that the characteristics of a sale are more
pronounced in the case of an English mortgage, but it does not suggest that there is
absolute transfer in the nature of sale.
o The remedy for this type of mortgage is by sale and not by foreclosure.
o In this, the mortgagor ordinarily undertakes to pay the debt personally.
 Equitable Mortgage:
o Section 58(f) of TPA defines mortgage by deposit of title-deeds which is popularly
known as equitable mortgage.
o It states that 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

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 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.
o The object of the Legislature in providing for this kind of mortgage is to
give facility to the mercantile communities in cases where it may be necessary to
raise money all of a sudden before an opportunity can be afforded of preparing the
mortgage deed.
o The provisions which apply to a simple mortgage are also applicable to a mortgage
by deposit of title deeds.
o In both mortgages, no delivery of possession of property takes place.
o The mortgagee’s remedy is by a suit for sale, he can also sue for the mortgage
money.
 Anomalous Mortgage:
o Section 58(g) of TPA defines anomalous mortgage.
o It states that 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 Section 58 of TPA is called an
anomalous mortgage.
o The rights and liabilities of the parties to such a mortgage are to be determined by
their contract, as evidenced in the mortgage deed and failing that, by local usage.
o In such a mortgage, the possession may or may not be delivered.
o The mortgagee’s remedy is by sale and also foreclosure, if the terms of the
mortgage permit it.

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 RIGHTS AND LIABILITIES OF MORTGAGE
The Transfer of Property Act, of 1882 (hereinafter referred to as "the Act") consists of legal
provisions related to 'modes of transfer' and states how a property can be transferred in India.
A mortgage is one form of the transfer of property. The Act provides the rights and liabilities of
the mortgagor or in simple terms the borrower and the mortgagee of the mortgage.
As per Section 58(a) of the Act, a mortgage is the transfer of an interest in a specific immovable
property to secure payment for money loaned, a debt, or an engagement that may lead to future
financial liability. In simple words, in mortgage a property is used as a security for a loan. A
mortgage, basically, provides security to the effect that if the mortgagor fails to pay back the
loan or satisfies his financial liability, the money of the mortgagee can be recovered.
Who Is A Mortgagor?
Section 58 of the Act provides that the transferor is called a mortgagor. A mortgagor is a person
who alienates an interest in his/her immovable property in favour of another called the
mortgagee for the purpose of securing a financial loan. The mortgagor still had the ownership of
his property and gave the mortgagee an interest in the same. The mortgagor uses the value of his
property to raise a financial benefit and promises to refund or pay a loan or be able to fulfil a
duty. The asset acts as a collateral claim for the mortgagee to enforce a right to claim and sell the
asset on the failure of the mortgagor to meet his obligations.
Who Is A Mortgagee?
As per Section 58 of the Act, the transferee is called the mortgagee. A mortgagee is the party
who receives an interest in the immovable property from the mortgagor as security for a
financial obligation. The mortgagee does not become the outright owner of the property. He only
acquires an interest in it which gives him certain rights. This interest becomes his security for
the loan or debt given to the mortgagor.
RIGHT OF A MORTGAGOR
The Act provides the following rights of the Mortgagor:
Right of redemption (Section 60)
This is the basic right of the mortgagor. It vests him with full ownership of the mortgaged
property, and he can exercise this right anytime after the principal amount of the loan becomes
due. A decree for redemption by a court is neither necessary nor relevant for exercising this
right.
Redemption of a portion of the Mortgaged property (Section 60)
Usually, a person with a stake in only a part of a mortgaged property cannot redeem just their
share by paying a proportional amount of the debt. The exception to this rule is if the mortgagee
has, in some way, gained ownership of a share belonging to one of the mortgagors. In such a
scenario, the other mortgagors would have a right to redeem only their portion.

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Right to transfer to a third party (Section 60A)
Where a mortgagor has a redemption right, they may exercise their right to have the property
transferred directly to a third party instead of first getting the property returned to them. The
mortgagor orders the mortgagee to assign the debt and transfer the property to that third party.
The mortgagee must comply with this requirement. This option is not available where the
mortgagee is, or has at any time been, in actual possession of the property.
Right of Inspection and Documents to be produced (Section 60B)
As long as the mortgagor is exercising his right of redemption, he is entitled, without cost, to
inspect and be given copies of any documents relating to the property which are in the control of
the mortgagee.
Right to Redeem separately or simultaneously (Section 61)
This right accrues to a situation whereby there are consecutive mortgages created by the same
mortgagor in reference to different properties but with the same mortgagee. The mortgagor may
redeem each of those mortgages separately and/or all the mortgages together when the principal
amounts of two or more of such mortgages fall due. This can be done unless otherwise provided
for under the mortgage agreement.
Rights Specific to Usufructuary Mortgages (Section 62)
A Usufructuary mortgage is a type of mortgage by which the mortgagee takes into possession
of the mortgaged property and is also entitled to enjoy the income of the property for the
purposes of extinguishing the mortgage. In such a mortgage, the mortgagor is entitled to redeem
the usufructuary mortgage with all documents pertaining thereto.
 Full repayment through income: If the mortgage deed allows the mortgagee to recover
fully the amount due with the assistance of earnings on the property, then the mortgagor
may reclaim possession once the mortgagee has recovered the full amount.
 Maturity or payment :If the mortgagee was only allowed to recover part of the debt
from the earnings on the property, the mortgagor may recover possession once the period
of the mortgage has expired and one of the following is attained:
 Pay or tender to pay the balance to the mortgagee
 The balance can be deposited with the court
Rights relating to accessions (Section 63)
An accession is something added to a property. If the mortgagee has possession of the property
and something is added, the mortgagor usually gets to keep it when they pay off the mortgage,
unless otherwise agreed. If the lender pays for the addition with his own money, it might become
part of the mortgage, but the borrower may have to reimburse the lender for this.

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Rights relating to improvements (Sections 63A)
Where the mortgagee enhances the mortgaged property during the holding period, usually the
borrower is allowed to retain such improvements at the time of discharging the mortgage
without paying for the improvements
In other instances, such improvements will require payment on discharge by the mortgagor if
they were:
 Absolutely necessary to prevent destruction: To prevent deterioration of the property
or value loss in it.
 Absolutely necessary to protect security: To retain sufficient value of the property.
 Made in compliance with the lawful order of any public servant or public authority
 Contractual obligation: Stipulated in the mortgage deed
Right to enjoy renewal of mortgage lease (Section 64)
Where the property mortgaged is a lease and the mortgagee renews this lease, generally, the
mortgagor enjoys the renewed lease on redemption, unless a contract states otherwise.
Right to Lease the Property (Section 65A)
 Leasing rights: Provided that the mortgage does not prohibit them, a mortgagor may
lease a mortgaged property, so long as they are lawfully in possession.
 Binding leases: The leases entered by the mortgagor are binding on the mortgagee, that
is, the mortgagee has to perform as per the terms of the lease.
Protection against Unnecessary Liability for Wear and Tear (Section 66)
A mortgagor in possession is not liable to the mortgagee for any loss that his property may
suffer by way of decay or otherwise. But no mortgagor would do anything which shall radically
and permanently injure the value of the property, especially anything which would render the
security inadequate.
Rights regarding Revenue Sale or Compulsory Acquisition (Section 73)
If the government sells the mortgaged property (e.g., due to unpaid taxes) or acquires it
compulsorily (e.g., for a public project), and this was not caused by the actions of the
mortgagee, the mortgagee has a right to claim the mortgage money from the proceeds. This
claim takes precedence over most other claims, except those from earlier encumbrances.
Rights of the Co-mortgagors (Section 95)
If one of multiple mortgagors redeems the entire property, they can use their right of subrogation
(stepping into the shoes of the original mortgagee) to recover proportionate expenses from other
co-mortgagors.

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LIABILITIES OF A MORTGAGOR
As per the Act, the mortgagor has the following liabilities:
 Liability to repay the Debt: The primary and the first liability of the mortgagor is that he
has to repay the loan or debt for which property was mortgaged as security. The absence
of repayment of debt permits the mortgagee to take legal steps, such as foreclosure, to
recover the money.
 Liability not to impair Security (Section 65(a)): The mortgagor shall not create any
hindrance to the security interest of the mortgagee. He shall not commit an act that lowers
the value of the mortgaged property.
 Liability to defend the title of the mortgagor (Section 65(b)): It is the liability of the
mortgagor to defend his title over the property.
 Liabilities to pay public charges (Section 65(c)): Any tax and other public charge
imposed or levied upon or charged against mortgaged property shall be liable to be paid
by the mortgagor. The mortgagee will pay public charges if the latter is not paid by the
mortgagor but he must collect them as well and add it to the debt.
 Liability to prevent Forfeiture (Section 65(d)): Where the mortgaged property is let out
on a lease, the mortgagor shall take proper care to prevent forfeiture or determination of a
tenancy and to comply with the terms thereof so as not to lose security.
 Liability to waste by mortgagor in possession (Section 66): Section 66 provides that a
mortgagor in possession of the mortgaged property is not liable to the mortgagee for any
deterioration of the property. The mortgagor cannot commit destruction or permanent
injury to the property if such destruction or permanent injury would make the security
insufficient. According to the explanation for this Section, a security is considered
insufficient “unless the value of the mortgaged property exceeds by one-third, or, if
consisting of buildings, exceeds by one-half, the amount for the time being due on the
mortgage.”
 Liability to compensate for breach of Contract (Section 68): In case the mortgagor
commits breach of the mortgage deed, he may be liable to make up for loss caused. This
means failure in paying the debt, inability in passing a clear title, or any other form of
breach of the mortgage agreement.
RIGHT OF A MORTGAGEE
Below is a summary of the rights of a mortgagee as provided under the Act:
Right of Foreclosure or Sale (Section 67)
In case of foreclosure, if the person takes a mortgage and fails to repay, the mortgagee can ask
for selling the property in simple or English mortgages or can get full ownership in the mortgage
with conditional sale.

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However, there are some exceptions:
 Types of mortgages: Full ownership is allowed only in certain types of mortgages, such
as conditional sale; the majority are usufructuary mortgages.
 Trustee mortgagees: When the mortgagor acts as a trustee, they can only apply for a
sale, not a transfer in full.
 Public properties: Mortgages on public interest properties (like railways) cannot be
foreclosed or sold.
 Partial interests: Those with a share in only part of the mortgage cannot act on just their
portion unless the interests are formally divided.
Right to Possession (Section 65A)
In some types of mortgages, such as a usufructuary mortgage, the mortgagee has the right to
possession and can hold onto the property until all debts and interest are repaid. The income
generated by the property can be applied towards debt repayment.
Right to Sue for Mortgage Money (Section 68)
If the mortgagor defaults, the mortgagee can sue for the mortgage money. This right exists when
the mortgagor has committed any act that harms the mortgagee’s interest, such as damaging the
property or neglecting its maintenance.
Power of Sale without Court Intervention (Section 69)
In certain cases, the mortgagee can sell the property without a court order if the loan is not
repaid. This power is limited to specific circumstances, such as when the government is the
mortgagee, the property is located in certain regions, or in the case of English mortgages. A
formal notice must be issued, and the sale occurs through a public auction after waiting three
months for repayment.
Right to Appoint a Receiver (Section 69A)
When the mortgagee has the right to sell the property without court involvement, they can also
appoint a receiver to manage the income from the property. The receiver collects income to meet
expenses, pay debts, and settle mortgage interest, with any excess funds returned to the entitled
person.
Right to Accessions (Section 70)
If no specific clause states otherwise, the mortgagee is entitled to any accessions or
improvements to the mortgaged property after it was signed. This includes interest accrued and
ensures that their security grows with the property's value.

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Right to Enjoy the Proceeds of Renewed Leases (Section 71)
When the mortgaged property is under lease and the lease is renewed, the benefits of the new
lease automatically extend to the mortgagee, protecting their security interest.
Rights of Mortgagee in Possession (Section 72)
A mortgagee who takes possession of a mortgaged property must manage it prudently. They can
recover expenses for necessary preservation, title defense, or lease renewal, with notice to the
mortgagor. The mortgagee may insure the property and charge the cost to the mortgage debt.
Right to Proceeds of Revenue Sale or Compensation on Acquisition (Section 73)
If the government sells or acquires the mortgaged property, the mortgagee can claim the
outstanding mortgage money from the sale proceeds or compensation, with priority over most
other claims.
No Merger if Subsequent Encumbrance is Created (Section 101)
If a mortgagee gains additional rights or ownership in the mortgaged property, it does not merge
with their original mortgage if later encumbrances exist. This ensures that their first claim
remains in priority.
LIABILITIES OF A MORTGAGEE
The mortgagee is also subject to certain liabilities under the Act:
 Liabilities of mortgagee in possession (Section 76): Section 76 of the Act provides for
following liabilities of a mortgagee:
 Managing the property responsibly: The mortgagee should manage the property
like a prudent person would manage his own property.
 Collecting rent and paying expenses: The mortgagee should collect the rent or
profits of the property. They should also pay expenses such as government
revenue, taxes, and any existing rent dues, from the collected income.
 Making necessary repairs: The income collected from the property must be used
for making necessary repairs after deducting expenses as well as interest payments.
 Protecting the property: No act shall be done by the mortgagee that shall
deteriorate or destroy the property.
 Management of insurance proceeds: If the property is insured and is damaged or
destroyed, the mortgagee shall use the insurance proceeds to restore it or rebuild it,
or to pay a loan if the mortgagor so agrees.
 Accounting: The mortgagee shall be under an obligation to keep accounts of all
the incomes and expenses related to the property. Upon a request by the mortgagor,

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 he shall provide copies of such records and their supporting documents with the
mortgagor bearing the costs.
 Deduction of expenses and repayment of loan: The expenditure incurred on
management and interest should be deducted from the collected rent and the
remaining amount should be used towards loan repayment. Surplus belongs to the
mortgagor. If he is living on the property, the mortgagee should determine what he
considers to be a reasonable amount of rent for his occupation and then deduct the
expenses from that amount.
 Accounting for receipts: After the promise of the mortgagor to pay off the loan,
which can be full repayment of the amount concerned, the mortgagee should
provide an account of income received from the property starting on the date when
the mortgagor promised to pay off the loan.
 Bearing the loss for negligence: If such performances were not delivered by the
mortgagee, this leads to the loss, then in court proceedings, they will be liable for
that loss.
 Liability to account for Receipts (Section 77): The Section requires the mortgagee to
account for all sums received from the mortgaged property and to present the accounts for
inspection to the mortgagor on demand.

RIGHT OF REDEMPTION
What is the Right of Redemption?
About:
 It is the right of the mortgagor to redeem his mortgaged property back from the
mortgagee.
 This right can be exercised only after fulfilling the requisite conditions mentioned in the
mortgage deed or by paying back the mortgaged money.
 This right can be exercised within the time period agreed between the mortgagor and
mortgagee any by filing a suit for redemption.
 The right of redemption can be exercised only by filing the suit for redemption
Equity of Redemption:
 This gives the right to the mortgagor to redeem his mortgaged property after paying the
mortgage money.
 This also gives the right to the mortgagor to redeem even after not paying the mortgaged
money on time.

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  This principle protects the right of redemption of the mortgagor.
 This principle allows redemption even if the restrictions are levied on redemption in the
redemption deed.
Clog on Redemption:
 Clog means restriction.
 Any restriction on the right to redemption is invalid and is void ab initio.
 This is practice against the mortgagor by inserting any restrictive terms against his rights
in the mortgage deed.
 The clog on redemption can only be applied after passing of the decree of the court and
not otherwise.
 The clog on redemption can only come into operation when the right of redemption of the
mortgagor completely extinguish.
Partial Redemption:
 This means redeeming the property in parts or in multiple transfers.
 This is void ab initio and the right of redemption cannot be exercised in multiple transfers
for the same mortgage.
What is the Provision Related to the Right of Redemption?
 Section 60 of the TPA states that Right of Mortgagor to Redeem—
o 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
(a) 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.
(b) where the mortgagee is in possession of the mortgaged property, to deliver possession
thereof to the mortgagor.
(c) 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.
o Provided that the right conferred by this section has not been extinguished by act
of the parties or by decree of a Court.
o The right conferred by this section is called a right to redeem and a suit to
enforce it is called a suit for redemption.

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 o Nothing in this section shall be deemed to render invalid any provision to the effect
that, if the time fixed for payment of the principal money has been allowed to pass
or no such time has been fixed, the mortgagee shall be entitled to reasonable notice
before payment or tender of such money.
o Redemption of portion of mortgaged property: Nothing in this section shall entitle
a person interested in a share only of the mortgaged property 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
mortgager.
What are Landmark Judgements Related to “Right to Redemption”?
 Ganga Dhar v. Shankar Lal (1958): In this case a condition in the agreement between
parties regarding redemption of mortgaged property was in question, which was plainly
taking away altogether, the mortgagor’s right to redeem the mortgage after a specified
period.
o The Court held that the term that on the failure of the mortgagor to redeem within
the specified period of six months, he would lose his right to do so and the
mortgage deed was to be deemed to be a deed of sale in favor of the mortgagee,
was clearly a clog on the equity of redemption and as such invalid.
 Sampuran Singh v. Niranjan Kaur (Smt.) (1999): In this case the Supreme Court held
that when there is no restriction in the mortgage deed, mortgagors have a right to redeem
the mortgage from the very date when the mortgage was executed.
 Bandhrau Ram (died) through his LR’s Vs Sukh Ram (2000): The period of limitation
for filing a suit for recovery of immovable property or redemption of usufructuary
mortgages which have not fixed any time for repayment of mortgage money is 30 years
as prescribed under Article 61 to the Schedule to the Limitation Act, 1963.
FORECLOSURE
Foreclosure refers to the legal process wherein a banker/financier/lender attempts to recover the
amount of loan from a borrower who has discontinued making payments to the lender thereby
constraining the sale of assets being used as the collateral security for the loan.
Right to foreclosure
Whenever a loan is granted by the bank against the security of some immovable property, such
as in case of a home loan, then the borrower creates a mortgage on the immovable property, i.e.
on the property so mortgaged (here, the home). The concept of the right of foreclosure as well as
the right to redemption comes into question in case of the mortgage. The right to foreclosure
merely means a right available to the mortgagee for the purpose of recovering his outstanding

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loan amount. The relevant provisions to this subject of discussions are Section 67 and Section 68
of the Transfer of Property Act, 1882.
Under section 67, Transfer of Property Act, 1882, the right of foreclosure is the right of the
mortgagee (the bank). This right is available to the mortgagee (lender) when the mortgage
money is due and not paid by mortgager (borrower). Thus, the accessibility to the right of
foreclosure is readily obtainable to the mortgagee on the instance when the mortgager haven’t
paid the principle and interest amount of loan on due date. In comparison to the right of
foreclosure, the right of redemption is available to the mortgager when the amount of loan has
been paid back. i.e. the mortgager by paying back the mortgage money possess the right to take
back the mortgaged property.
In case of foreclosure of the property, the mortgagee can obtain a court decree which debars the
mortgager of his right of redemption. So, once this decree is obtained by the mortgagee through
the court, a bar will be placed on the mortgager for using his right of redemption.
Section 67 of the Transfer of Property Act, 1882, explains the conditions where the mortgagee
can either sell the property, do its foreclosure or neither sell it nor do its foreclosure. There are
six types of mortgage namely:
1) Simple Mortgage
2) Mortgage by conditional sale
3) Usufructuary Mortgage
4) English Mortgage
5) Mortgage by deposit of title deeds
6) Anomalous Mortgage
In case of a simple mortgage, either the sale of the mortgaged property is possible or one can
individually file suit against the mortgagor whereas the right of foreclosure is available only on
the mortgage by conditional sale. Under the usufructuary mortgage neither the right to sale nor
the right to foreclosure is available. English mortgage enumerates the right to the sale. Lastly,
the right to sell or foreclosure in case of anomalous mortgage depends upon the terms of the
mortgage. Basically, anomalous mortgage is defined as the type of mortgage which is not simple
mortgage, english mortgage, mortgage by conditional sale, mortgage by deposit of title deeds
and usufructuary mortgage. So, once the type of mortgage is decided, ultimately the right to sell
or foreclosure will also be determined.
Once the right of foreclosure is used by the mortgagee, this consequently extinguishes the right
of redemption of the mortgager. And once the right of redemptions is used, the right of
foreclosure will be extinguished. The limitation period is 30 years from the date the right
becomes available. Also, the right of redemption protects the rights of the mortgagor and he
(borrower) can recover loans by foreclosure or sale of the immovable property.

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Following mentioned are some conditions to exercise the right of foreclosure:
1) The money must be due for payment i.e. it must not be paid till the due date.
2) There should be no existing condition in the mortgage deed mentioning the waiving of the
right to foreclosure.
3) The mortgager should not in any circumstances possess a decree of redemption of the
mortgaged property.
In instances where the mortgagee possess two or more mortgages executed by the same
mortgagor, then the mortgagee certainly possess the right to acquire a decree of foreclosure. But,
if he sues to take decree on any one of the mortgages so available, then he would be bound to
sue on all the mortgages in respect of which the mortgage money has become due.

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 DOCTRINE OF PRIORITY
Introduction
The concept of the doctrine of priority is set by Section 48 of the Transfer of Property Act, 1882 (TPA).
 This Section is based on the maxim, qui prior est tempore potior est jure, which means that one who
is first in time is better in law. The transferor cannot prejudice the right of the transferee by any
subsequent dealing with the property.
The Doctrine of Priority
 This doctrine is drawn from the Principles of Natural Justice which states that if the rights are made
in favour of two different people at different times, then the one who has the advantage in time will
get the advantage in law as well. However, this principle applies only within the cases where the
conflicting equities of the parties involved are otherwise equal.
 This Section lays down a crucial principle that no man can convey a better title apart from what he
has.
 When a transferor transfers the same property in favour of more than one transferee, then each
transferee will enjoy the property together with its right as the former transferee.
 Under this doctrine, if an individual has already created a transfer of the property in motion, then he
cannot ignore his grant and treat the property free from the rights that were created in an earlier
transaction.
Example
 X is the owner of the immovable property. He mortgaged that property to Y in the month of June.
Later, in July X transferred the same property to Z. Here in this case, all the essentials are satisfied
and as per the rule of priority, Y will get all the rights of the property prior to Z. In case of default on
the payment of the loan, the mortgagee can sell the property as the latter transfer is in accordance
with the earlier transfer.
Essentials of the Doctrine
The doctrine is provided under Section 48 of TPA and its ingredients are:
 It is only applicable to immovable property.
 There should be one transferor and more than one transferee.
 The transfer should have been made at different times and should have created the rights in the
transferee.
Case Laws
 Duraiswami Reddi v. Angappa Reddi (1945): Madras High Court held that even if the documents of
a prior transferor are registered later on, he will still be given priority over subsequent transferee.
o This also holds true even when the latter transferee didn’t have any knowledge about the
previous transaction.
 SFL Industries Ltd v. Reliance Capital Ltd (2015): Section 529A in the Companies Act, 1956 does
not specifically provide for rights of priorities over mortgaged assets. In such circumstances Section
48 of TPA becomes applicable. The Punjab & Haryana High Court accordingly held that the claim of
the first charge holder would prevail over the claim of the second charge holder.
Exceptions of the Doctrine of Priority
Postponement of Prior Mortgagee

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  Section 78 of the TPA is an exception to the doctrine of priority.
o Postponement of prior mortgagee — Where, through the fraud, misrepresentation or gross
neglect of a prior mortgagee, another person has been induced to advance money on the
security of the mortgaged property, the prior mortgagee shall be postponed to the subsequent
mortgagee.
o Under this provision, if the prior mortgagee conducts some fraud, gross negligence, or
misrepresentation and induces any person to give security money for the same property, then
the prior mortgagee is postponed to the subsequent mortgagees.
o As a result, the subsequent mortgagee will have priority in the rights of the property over the
prior mortgagee.
Non-Compliance with the Procedure of Law in Prior Transfer
 Assuming that the prior transfer is created and is non-compliant to the procedure laid down by
the law, then subsequent transfer would be given all the rights prior to the previous transfer.
o For instance, A executed a lease deed of immovable property in favor of B for a period of 5
years but did not get it registered which was mandatory. Afterward, A sold the same property
to C. Here, the rights of C would be given priority over B.
Estoppel
 For this situation, if the primary transferee had some awareness of the subsequent transfer, then
subsequent transferee will get the priority.
By Registration
 Each instrument commences its pursuit from the date of its execution. In situations where subsequent
deeds are done on the same date and the order for execution is obscure, then all the deeds will be
carried out simultaneously.
 Additionally, in situations where two deeds comprise of different dates and are carried on various
days, then, for such a situation, priority will be on the dates on the deeds and not on their particular
registered dates.
By Notice
 The presence of notice implies being familiar with the facts. Therefore, when a Bonafide
contract, whether oral or written is composed for the sale of property, and further the third party
purchases the property concerning the notice of the previous exchange, the title of the party claiming
under the previous exchange would get priority over the subsequent purchaser. However, the
exchange that has been made in time should be bona fide.
 Section 50 of the Registration Act, 1908 also provides various classifications of the registered
document which is in relation to the immovable property to draw effect against the unregistered
document. Consequently, in situations where the holder of the registered deed had notice of the prior
unregistered deed, at the time of execution, gives the registered deed of the past holder a
priority because of his deed over the subsequent holder of an unregistered deed for not being ought
to be registered.
By court
 If or when the court orders or passes a decree to take the subsequent transfer or the second
transfer, then such transfer would prevail over the previous transfer and the rights of the subsequent
transfer would be given preference. Thus, the rule of priority will not be applicable in such cases.

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 LEASE MEANING AND ESSENTIALS
A lease is a legally binding contract that outlines the terms of renting property, ensuring the
tenant’s use of the property in exchange for regular payments to the landlord. These terms
typically include the property’s address, rent amount, security deposit, rent due date, lease
duration, pet policies, and consequences for breaching the contract.
Residential leases often have standard terms for all tenants, while commercial leases are more
negotiable and can span from one to 10 years, depending on the tenant’s specific needs.
Lease under Transfer of Property Act is defined under Section 105 as the temporary transfer of
real property for an agreed-upon consideration, with the recipient accepting the terms of the
arrangement.
Essentials of a Lease under Transfer of Property Act
 Competent Parties: Both parties must have the legal capacity to enter into a contract,
and the lessor must hold undisputed property rights.
 Right of Possession: A lease only transfers possession of the property, not ownership
rights.
 Rent Options: Consideration for the lease can come in the form of rent or a premium.
 Lessee Acceptance: The lessee must accept the lease terms, including the specified time
period and conditions.
 Defined Time Period: A lease always has a specified duration, which can be adjusted at
the lessor’s discretion.
Creating a Valid Lease
Section 107 of the Indian Transfer of Property Act outlines the requirements for creating a
valid lease of immovable property. It specifies the following conditions:
1. Leases Requiring Registration: A lease of immovable property that is from year to year,
or for a term exceeding one year, or that reserves a yearly rent, must be made through a
registered instrument. In other words, such leases need to be documented and registered
with the relevant authorities.
2. Other Lease Types: Leases of immovable property falling outside the categories
mentioned in the first condition may be made either by a registered instrument or by oral
agreement accompanied by the delivery of possession. This means that leases for shorter
terms or without yearly rent can be created through either a registered document or a
verbal agreement, provided that possession is delivered to the lessee.
3. Execution Requirements: When a lease of immovable property is made through a
registered instrument, that instrument, or in cases with multiple instruments, each of those
instruments, must be executed by both the lessor (property owner) and the lessee (tenant).

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 4. It’s important to note that the State Government has the authority to issue notifications in
the Official Gazette, allowing for certain exceptions. This means that the State
Government can specify circumstances or categories of leases that may be made through
unregistered instruments or oral agreements without requiring the delivery of possession.
In summary, the process of making a lease depends on the type and duration of the lease, with
some leases requiring registration and others permitting oral agreements, subject to the State
Government’s discretion. Proper documentation and compliance with these legal requirements
are crucial to creating a valid lease of immovable property in India.
Detailed Provisions for Lease of Immovable Property
Section 106 – Duration of Leases
 Specifies the default duration of leases for agricultural or manufacturing purposes and
other purposes when there is no written contract or local law to the contrary.
 Lease for agricultural or manufacturing purposes is deemed year-to-year, terminable with
a six-month notice, and for other purposes, it’s month-to-month, terminable with a 15-day
notice.
 The notice period commences from the date of receipt.
 Shorter notice periods may not invalidate the notice when a suit or proceeding is filed
after the notice period.
Section 110 – Commencement of Lease Time
 If a lease specifies a particular day as the starting point, that day is excluded when
calculating the lease duration.
 When no commencement day is mentioned, the lease begins from the date of making the
lease.
Section 111 – Determination of Lease
 Lists conditions under which a lease can end, including the passage of time, the
happening of specified events, surrender, implied surrender, forfeiture, and notice to
determine the lease.
Section 112 – Waiver of Forfeiture
 Explains that a forfeiture due to breach can be waived by certain actions of the lessor,
provided they are aware of the forfeiture.
Section 113 – Waiver of Notice to Quit
 Discusses how a notice to quit can be waived by the person giving it with the express or
implied consent of the recipient.
Section 114 – Relief Against Forfeiture for Non-Payment of Rent

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  Provides an option for lessees to avoid ejectment in cases of forfeiture for non-payment
of rent by paying rent arrears, interest, and full costs of the suit or providing sufficient
security within a specified time.
Section 115 – Effect on Under-Leases
 Specifies that surrender, whether express or implied, of a lease does not affect under-
leases granted by the lessee with substantially similar terms, except for rent, unless the
surrender is made to obtain a new lease. Rent and contracts of under-lessees become
payable to and enforceable by the lessor.
Section 117 – Exemption of Leases for Agricultural Purposes
 States that the provisions of the Transfer of Property Act related to leases do not apply to
agricultural leases, except if the State Government, through a published notification,
makes specific provisions applicable, either in full or with modifications, after six months
from the notification’s publication.
Conclusion
Leases are a common part of daily life, involving agreements for renting property or assets such
as houses or cars. It’s vital for the public, law students, and the legal community to understand
the rights and provisions governing leases. Sections 105 to 117 of Transfer of Property Act
outline these aspects, and this article focuses on key sections to provide a clear and basic
understanding of lease agreements.
Rights and liabilities of lessor and lessee
Rights and Liabilities of a Lessor
Section 108A talks about the rights and liabilities of a lessor, so let's further analyse the rights
and liabilities of a lessor.
Rights of a lessor
1. Right to accretions- If during the tenancy period or during the duration of the tenancy any
further accretion, accumulation or addition is made in the property then the lessor is entitled to
such property. Such addition can be natural or by the expense of the lessee but after the
termination of the tenancy period, the lessee must deliver the title to the lessor.
2. Right to collect rent- The lessor has the right to collect rent or any form of consideration as
mentioned in the terms and conditions of the contract from the tenant without any form of
interruptions.
Liabilities of a lessor
1. Duty of disclosure- The lessor is bound to disclose any form of a material defect in the
property. There are two kinds of defects:
Latent defect- Latent defect cannot be discovered rationally or through inspection by the lessor.

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Apparent defect Apparent defect can be easily discovered through some inspection.
So basically a lessor shall disclose any apparent defect to the lessee and it is vital to disclose
such defects as they interfere with the enjoyment of the property by the lessee.
2. To give possession- The lessor must give possession of the property to the lessee on lessee's
request. However, this liability only arises when there is a request on behalf of the lessee.
3. Covenant for quiet enjoyment- The lessee has all the rights to enjoy the property. It is the duty
of the lessor to not cause any form of interruptions during the tenancy period. The Madhya
Pradesh HC stated that actions such as physical interference or direct interference in the
premises lead to a breach of enjoyment and interruptions.
Rights and liabilities of a lessee-
Rights of a lessee
1. To charge for repair If the lessor fails to make any repairs in the property which the lessor is
bound to do in that case the lessee can make such repairs by his personal expenses. If a lessee
makes such repairs by his personal expenses then, in that case, it is the right of the lessee to
deduct the cost of such repairs from the rent or the lessee may simply charge the lessor for such
repair.
2. Right to remove fixtures- The lessee has the right to remove any fixture in the property during
the time period of the lease, however, after the termination of the lease deed the lessee must
leave the property in the condition in which he received it. In case the lessee fails to do so, the
lessor can sue the lessee.
3. Right to assign his interest- The lessee can sub-lease the property or the lessee can absolutely
transfer his interests. However, if the lease deed restricts a lessee to assign his interest then the
lessee is prohibited to do so and even after the transfer of his rights, the lessee is still subject to
all the liabilities related to the lease deed.
4. Right to have benefits of crops When the lease is of uncertain duration then, in that case, the
lessee or his/her legal representative has been given the right to gain benefits from all the crops
grown by them.
Liabilities of a lessee
1. Duty to disclose material facts- The lessee is bound to inform the lessor of any material fact
which the lessee is aware of and the lessor is not. In case the lessee does not disclose such fact
and the lessor suffers any loss then the lessee is bound to compensate the lessor.
2. Duty to pay rent- The lessee is bound to pay the rent or the premium to the lessor or his agent
in the proper time and proper place as decided by the lease deed. In case lessee fails to pay
his/her rent then, in that case, the lessor can eject the lessee on the ground of non-payment of
rent or file a suit for arrears of rent.

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3. Duty to maintain the property- The lessee is bound to maintain the property in a good
condition as it was when he was given the possession of the property. The lessor or his agent are
allowed to inspect the property at the reasonable ground. Only the changes caused by irresistible
forces can act as an exception for this liability.
4. Duty to give notice- If the lessee becomes aware that any person has tried or is trying to
damage the rights of the lessor or the title of the lessor is endangered then, in that case, the
lessee must give notice to the lessor.
5. Duty to use the property in a reasonable manner- The lessee must use the property in a
manner as if it was his/her own property.
6. Duty not to erect any permanent structure- A lessee cannot erect any permanent structures
except in the case of agriculture without the consent of the lessor.
7. Duty to restore possession- After the determination of the lease, the lessee must restore the
possession of the property to the lessor. If the lessee does not vacate the premises even after the
expiry of the notice, the lessee is then bound to pay the damages.

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