Mortgage
. Mortgage is defined in Section 58 of the Transfer of Property Act.
2. Mortgage is the transfer of interest in a specific immovable property, for the purpose of securing an existing or future debt or
for the performance of an engagement which may give rise to a pecuniary liability. The person creating the mortgage is called as
the mortgagor and the person in whose favour mortgage is created (bank) is called as the mortgagee.
3. Immovable property, means land and things attached or permanently fastened to the earth.
4. Types of Mortgage: There are six types of mortgages namely (i) Simple Mortgage (ii) Mortgage by Conditional Sale (iii)
Usufructuary Mortgage (iv) English Mortgage (v) Mortgage by Deposit of title Deeds (Equitable Mortgage) and (vi). Anamalous
Mortgage. Of these, all • mortgages except Equitable Mortgage require registration with the Registrar of Assurances.
5. Registered Mortgage: In the case of registered mortgage (also called legal mortgage) first a mortgage deed is written which is
stamped as per Stamp Act of the concerned state. The deed is then executed in the presence of two witnesses. Thereafter, in
terms of the Indian Registration Act 1908, it is to be registered with the Registrar of Assurances (Sub Registrar) within 4 months of
the execution.
6. Simple Mortgage: In simple mortgage the mortgagor makes himself personally liable to pay the debt and agrees that in the
event of failing to pay according to his contract, mortgagee can get the property sold through the intervention of the court. If after
sale of property some debt is still outstanding, the borrower shall be- personally liable for the outstanding amount. Neither the
possession nor ownership of the property is transferred to the mortgagee. The mortgagee cannot exercise the right of foreclosure.
7. Mortgage by Conditional Sale: The mortgagor ostensibly sells the property to the mortgagee upon the condition that if the
debt is paid in time the property will be transferred back to him and in case of nonpayment within the specified time the
transaction would become a real sale. There is no personal liability of the mortgagor. In case of default, the mortgagee can exercise
his right of foreclosure through court.
8. Usufructuary Mortgage: In this mortgage, possession of the property is transferred to the mortgagee. The mortgage money is
recovered through income of the mortgaged property. There is no personal liability of mortgagor.
9. English Mortgage: As in the case of simple mortgage, the mortgagor undertakes personal liability to pay the debt. He transfers
the ownership of mortgaged property to the mortgagee upon a condition that property must be transferred back to him on
payment of debt. Mortgagee can sell the mortgaged property even without the intervention of court.
Equitable Mortgage
1. Equitable Mortgage is called as Mortgage by Deposit of Title Deeds.
2. It can be created by mere deposit of title deeds of property with intention to borrow.
3 a.Title deeds should be deposited at Mumbai, Kolkata, Chennai ( Presidency Towns) or any other town notified by the State
Government in this regard. It is not necessary that the title deeds should be deposited with the branch or at the place where the
loan is being raised.
3 b.These can be deposited anywhere in India at a notified place.
it is not necessary that it should be within bank branch premises. Mortgagor can deliver the title deeds to an authorized
representative of the bank at mortgagor's residence or other place provided it is in a Notified Centre.
4. The property to be mortgaged may be located anywhere in India (For example, for property located in Delhi, title deeds can be
deposited at Chennai.
5. Equitable Mortgage does not require registration with Registrar of Assurances. But in case of a limited company, charge in
yespect of equitable mortgage under Section 125 of the Companies Act, 1956 must be registered with Registrar of Companies.
6. A title deed can be a sale deed, lease deed, partition deed, gift deed, deed of assignment, deed of relinquishment, or such
other documents. Agreement to sale is not a title deed.
7. Normally a bank should insist for original title deeds but in exceptional cases equitable mortgage can be. created even by
certified copy of the title deeds.
8. Property located in cantonment areas should not be accepted for equitable mortgage, without clearance from cantonment
authorities.
10.The bank should not part with the title deeds even for a short duration at the request of the mortgagor because if some other
creditor is induced to finance on the basis of title deeds, the bank may Lose priority over the mortgaged property.
11. No registration with Registrar of Assurance is required. For a company, registration with ROC within 30 days is required u/s
87 of Companies Act 2013. Under SARFAESI Act, registration with CERSAI.
12.Deposit can take place within Municipal limits of Presidency Towns (Kolkata, Chennai or Mumbai) or State Govt. Notified Towns.
It is not necessary that the place for deposit of title.deeds, should be bank branch premises
Legal Opinion and Search Report: Before accepting mortgage of immovable property, legal opinion should be
obtained that the property is fit for mortgage and search should be conducted in the records of Registrar /Sub
Registrar for at least 12 years to ensure that the property is free from prior encumbrance.
Priority of Mortgage: The priority of the mortgage is considered from the date of execution of the mortgage deed (in the case of
registered mortgage) or from the date of creation of mortgage by deposit of title deeds and not with reference to the type of
mortgage or date of registration.
Right of Redemption: Right of the mortgagor to get back his mortgaged property on repayment of the loan, is called as the right of
redemption. This is available in all types of mortgages.
Right of foreclosure: The right of the mortgagee to deny the mortgagor of the property to exercise his right of redemption i.e.
debarring the mortgagor for ever to get back the mortgaged property is called as the right of foreclosure. This right is available to
the mortgagee in case of mortgage by conditional sale.
