Simple mortgage

Preface
A mortgage as per 58 of the Transfer of Property Act, 1882 is the transfer
of an interest in a specific immoveable property for the purpose of securing
the payment of money. This paper examines all essentials of a simple
mortgage in detail, as well as its important features, such as the rights of
the mortgagor, mortgagee, with emphasis on the right to redemption. It
also highlights features of sub mortgage and tacking.
Introduction
According to Section 58 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 agreement which may
give rise to pecuniary liability.[1]
The transferor is called a mortgagor, the transferee a mortgagee; the
principal money and interest the payment of which is secured for the time
being are called the mortgage money and the instrument by which the
transfer is affected is called the mortgage deed.[2]
Essentials of mortgage[3]

Transfer of Interest- The transfer of interest in a specific immovable

property is called mortgage. The mortgagor who has the possession of
the overall interest of the property only cedes a part of the interest in
favor of the mortgagee while mortgaging his property in order to
secure a loan. After the completion of the mortgage, the interest of the
mortgagor reduces to that proportion that has been mortgaged to the
mortgagee. His ownership also reduces temporarily until he makes
good of the loan that he has taken from the mortgagee. When the
mortgagor transfers his property, then under the rights provided to the

mortgagee, the transferee can recover what he has loaned to the

mortgagor.

Specific Immovable Property- There must be specific mention of the

property to be mortgaged in the mortgage deed. The reason behind
stating specific property is in case, the mortgagor cannot repay his
loan, then the court can decree a sale of the specific property
mortgaged by him when the mortgagee files a suit for non payment of
loan.

Securing the Payment of a Loan- The transaction involved in a

mortgage is for performance of obligations or payment of a loan. The
mortgagor and the mortgagee share the relation of a debtor and a
creditor.

If however the debtor borrows money from the creditor and puts this clause
that the creditor cannot sell the mortgaged property before the repayment
of loan then it is not a mortgage as there is no transfer of interest from the
property mortgaged. The basic difference between sale and mortgage is that
in mortgage there is a part of interest that is transferred while in a sale
there is complete transfer of rights.
The three most important features of a mortgage are:

The mortgagor can claim his right to the property he mortgaged after
he repays his loan.

The mortgagee has a right to sell the mortgaged property on non

payment of debt.

On complete payment of the debt, the mortgagee gives up whatever

interest he had on the mortgaged property.

Rights of the mortgagor[4]

1. Rights of Redemption: The mortgagor has the right to get back the
mortgaged property if

He repays the loan on the correct date and time

His right to get back his mortgaged property has not been quashed by
the court or by one of the contracting parties.

The mortgager who has redeemed the mortgage is entitled to the following
rights:

He can get back all the valid legal documents accrued in the process of
executing the mortgage deed.

He also gets the right to receive possession of the mortgaged land

from the mortgagee as done in English mortgage.

He also has the right to get back the property he mortgaged as his
own expense or ti a third person as directed by him.

2. Accession to Mortgaged Property: During the period of mortgage when

the mortgaged property was under the control of the mortgagee, if he
made any alterations to the property, then on total repayment of
mortgage money, the mortgagor when he gets back his property, gets
it back with all the alteration if there is nothing explicitly mentioned in
the contract.
2. Right to Transfer to Third Party: The mortgagor on repayment of the
mortgage money may want the mortgaged property to be transferred
to a third person and the mortgagee is bound to oblige.
2. Right to Inspection and Production of Documents: The mortgagor
possesses the right to check and keep record of all the title documents
which are in possession of the mortgagee.
Rights of the mortgagee[5]

1. Right to Sue for Mortgage Money: The mortgagee can claim his
mortgage money by filing a suit in the following situations:

Where the mortgagor through personal covenant takes up the liability

to pay the mortgagee as in English and simple mortgage.

Where the mortgaged property is insufficient or damaged or partly

destroyed and the mortgagor has not furnished any further security.

Where the mortgagee is denied of the total or proportion of the

mortgaged property by the mistake of the mortgagor.

Where the mortgagor is unable to provide security to the mortgagee

where he has the right to have security.

2. Right of Sale: The mortgagee is well within his right to sell off the
mortgaged property on non payment of loan by filing a suit and
getting a decree from the court. However Sec. 69 of the Transfer of
Property Act gives the right to the mortgagee to sell off the mortgaged
property without filing a suit in the court of law and getting a decree to
sell the mortgaged property.
2. Right of Foreclosure: The mortgagee has a right to move court and file
a suit against the mortgagor barring him from claiming the mortgaged
property back. The right of foreclosure can be claimed in mortgage by
conditional sale and anomalous mortgage.
2. Right of Accession to Property: If any alteration is made to the
mortgaged property, then the mortgagee is entitled to both the
property that has been mortgaged and the alteration as security for
the money loaned.
2. Right to Possession: the mortgagee is legally empowered to take
control of the mortgaged property as per the terms of the contract of
mortgage. This right is available in usufructuary mortgage.

Sub mortgage[6]
A mortgage becomes a sub mortgage when the mortgagee, who is the
current possessor of the mortgaged property, uses the mortgaged property
as an advance. The mortgaged property as is property of the mortgagee as
long as the mortgagor has not repaid his loans, he can use the mortgaged
property to get loans by re-mortgaging the already mortgaged property.
The sub mortgagee has all the rights of the mortgagee and has all the legal
rights of the mortgagee. He has the right to get repaid the money loaned,
file a suit against the mortgagee turned mortgagor and take mortgaged
property as security. The sub mortgage is also called mortgage of
mortgagee.
Tacking[7]
A debtor can lawfully execute more than one mortgage at the same time on
his own property. But the priority of the mortgages will be according to the
dates on which they were executed.
Simple mortgage[8]
Definition
Simple mortgage is executed where without any property being delivered to
the mortgagee; the mortgagor makes himself liable to repay the debt[9]. It
is implied by him in an express or implied manner that in the event of nonrepayment of loan, the mortgaged property can be used to make good of the
loan by the mortgagee[10].
The fundamental characteristic of simple mortgage is that the mortgagee
has no right to liquidate the property without the permission of the court.
The mortgagee can[11]:

Apply to the court for consent to offer the sold property, or

File a suit for recuperation of the entire sum without offering the
property.

Personal Liability
A simple mortgage entails two types of liabilities, personal liability and the
mortgaged property[12]. In a standard mortgage deal, the mortgagor does
not have any personal liability and on non-repayment of loans, the
mortgagee can move on to liquidate the mortgaged property in order to
make good of the loan. But in a simple mortgage, there is a personal liability
on part of the mortgagor to repay the loan along with the mortgaged
property, hence the mortgagee has to option to move against either the
mortgagor personally thus obtaining a decree against him or he can move
against the mortgaged property to liquidate it for the payment of loan. The
presence of a personal covenant is very important in a simple mortgage and
that is what distinguishes it from other forms of mortgage.
No Delivery of Possession
There is no delivery of mortgaged property in simple mortgage. The money
can be recovered by a money decree. A clause to transfer the complete
interest of a mortgaged property to the mortgagee on non-payment of loans
changes the simple mortgage into mortgage with possession.
Sale of Property
In mortgage, the mortgagor may give the power to sale the property either
expressly or impliedly. This basically means that on the event of nonpayment of debt, the mortgagee can sell the mortgaged property. But even
if the contract of mortgage specifically talks about selling the property on
non-payment the mortgagee cannot go ahead with the sale of the
mortgaged property and has to wait for the intervention of the court to sell
the mortgaged property.
Adverse Possession

A trespasser who removes the mortgagor and takes possession of the land
that land can still be legally mortgaged. The trespasser can become the
owner of the limited right the mortgagor has over the land mortgaged by
him but it does not in any way take away the legal rights of the mortgagee
over the mortgaged land in a simple mortgage .Adverse possession is valid
only when the mortgagee who has a right over the mortgaged land does not
take possession over the land in time and he runs against time which is from
the day he gets his right to interest over the mortgaged land. If there is no
accrual of rights to possess the land by the mortgagee, his right cannot be
taken away by the mere possession of that particular mortgaged land by the
adverse claimant.
If the mortgage has been declared illegal for being unregistered and the
mortgagee has been in possession of that land for more than 12 years then
after 12 years, the mortgage becomes valid.

Requirements Of Mortgage Deed:

1. A thorough investigation of title upto 60 years and preparation of an

abstract on title and a thorough search in all the places as required in the
case of sale.
2. Recitals: a short history of the property right upto its vesting in the
mortgagor and the object of the loanAmount and rate of interest.
3. Parties to the deed: Mortgagor first and thereafter the mortgagee.
4. Operative words: in the case of a simple mortgage, the property is
charged and assured as security for repayment of the mortgage debt. In
case of English mortgage, it is out and out sold to the mortgagee subject to
the convenant as to re-conveyance upon repayment of the debt with

interest. (Sec 58 (e) of Transfer of Property Act).

5. Possession: An English mortgagee has the right to take possession of the
property. Such a mortgage should contain a clause as to the appointment of
a Receiver who may be a nominee of the mortgagee. Sec 69A of Transfer of
Property Act.
6. Execution and Attestation: Attestation is compulsory to every mortgage.
In case where the mortgagor doest not know the language, the deed must
be explained to him by some cpmpetent person.
7. Registration: Compulsory in case of mortgage of value above Rs 100/-,
and in all cases under the West Bengal Land Reforms Act (Vide section.7).
8. Delivery of title deed: A mortgagee is entitiled to all the title deeds of the
mortgaged property. If for any reason they are left with the mortgagor
through inadvertence or negligence, he can manipulate a prior equitable
mortgage by depositing the same elsewhere.
9. Redemption: Period is fixed by agreement between the
parties. Under Article 61 of The Limitation Act,1963, a suit for redemption
may be brought within 30 years from when the right to redeem accrues
according to the agreement. In case where the property has been transfered
by the mortgagee for valuable consideration the period of limitation is 12
years for the date of knowledge.
Conclusion
Simple mortgage is distinguished from other forms of mortgage by the
presence of a personal covenant. In simple mortgage, the mortgagor binds
himself personally to the mortgagee to repay the loan and also pledges his
property as a security, which can be liquidated on default of payment. But a
decree has to be passed by the court to liquidate the security and without
the intervention of the court, the security cannot be liquidated. One more

characteristic that must be kept in mind that there is only a partial transfer
of interest from the mortgagor to the mortgagee on transfer of property.
Edited by Neerja Gurnani
[1] Section 58(b), Transfer of Property Act, 1882
[2] Section 58(b), Transfer of Property Act, 1882
[3] Essentials of mortgage available
at http://www.lawyersclubindia.com/forum/Types-of-Mortgage8944.asp#.Uyc18c6adFx (last visited on 15/3/2014)
[4]Rights of Mortgagor available at
sjecnotes.weebly.com/uploads/5/2/5/1/5251788/mortgage.doc (Last Visited
on 16/3/2014)
[5] Rights of Mortgagor available at
sjecnotes.weebly.com/uploads/5/2/5/1/5251788/mortgage.doc (Last Visited
on 16/3/2014)
[6] Sub Mortgage available at
sjecnotes.weebly.com/uploads/5/2/5/1/5251788/mortgage.doc(Last Visited
on 16/3/2014)
[7] Tacking available at
sjecnotes.weebly.com/uploads/5/2/5/1/5251788/mortgage.doc (Last Visited
on 16/3/2014)
[8] Dr. Poonam Saxena, Property Law, Pg.410 412,
[9] Simple Mortgage is used to notify all mortgage deeds where the debtors
binds himself through a personal covenant and gives his property as security
to the creditor. See Jangi Singh v chander (1908) ILR 30 All 390

[10] In a deed of simple mortgage, the transfer of right signifies the right to
liquidate the property. There is no rule stating that such right be expressly
mentioned in the mortgage deed. See dalip Singh v Bahadur ram (1912) 34
All 446.
[11] Fundamental Characteristics of Simple Mortgage available at
sjecnotes.weebly.com/uploads/5/2/5/1/5251788/mortgage.doc (Last Visited
on 16/3/2014)
[12] Wahidunnia v Gobardhan (1900) ILR 22 All 453