CHANAKYA NATIONAL LAW UNIVERSITY

PATNA

SUBJECT:
PROPERTY LAW
PROJECT ON

ONCE A MORTGAGE IS ALWAYS A MORTGAGE AND NOTHING MORE

SUBMITTED TO:- SUBMITTED BY:-

Dr. SITA RAMA RAO ANURADHA

FACULTY OF ROLL NO- 1516

PROPERTY LAW B.A.LLB (Hons)

3rd SEMESTER
 TABLE OF CONTENTS

ACKNOWLEDGEMENT……………………………………3

RESEARCH METHODOLOGY………………………………..4

1. INTRODUCTION………………………………………………..5

2. RIGHT OF REDEMPTION…………………………………..9
3. ONCE A MORTGAGE ALWAYS A MORTGAGE. ………………13
4. CONCLUSION…………………………………………………..16

BIBLIOGRAPHY……………………………………………………17

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ACKNOWLEDGEMENT

Writing a project is one of the most significant academic challenges, I have ever faced. Though
this project has been presented by me but there are many people who remained in veil, who gave
their all support and helped me to complete this project.

First of all I am very grateful to my subject teacher Dr. SITA RAMA RAO without his kind
support and help the completion of the project was a herculean task for me. He donated his
valuable time from his busy schedule to help me to complete this project and suggested me from
where and how to collect data.

I am very thankful to the librarian who provided me several books on this topic which proved
beneficial in completing this project.

I acknowledge my friends who gave their valuable and meticulous advice which was very useful
and could not be ignored in writing the project.

Lastly I am very much thankful to my parents and family, who always stand aside me and helped
me a lot in accessing all sorts of resources.

I thank all of them !

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AIMS & OBJECTIVES:-

By doing this project , the aim of the researcher is to study the concept of mortgage , right of
redemption and finds the defects of the regulating act.

RESEARCH METHODOLOGY:-

For the completion of this project Doctrinal method has been used. The research is based on
comprehensive study of various books, journals, judgements and articles available and also on
web resource.

Method of Writing:
The method of writing followed in the course of this research paper is primarily analytical.

Mode of Citation
The researcher has followed a uniform mode of citation.

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INTRODUCTION
Mortgage is the one kind of transfer and it is the one kind of title transfer of specific immovable
property. Section 5 of the Transfer of Property Act, 18821 defines “transfer of property”.
Transfer of property means an act by which a living person conveys property to one or more
other living persons. Property means: (1) the thing itself, or (2) some or all the rights in a things.
The provision of Section 3 of the Transfer of Property Act, 1882 does not provide for a
comprehensive definition of ‘immovable Property’, however, it only mentions that ‘immovable
property’ does not include standing timber, growing crops, or grass. According to Sec.3 (26) of
the General Clauses Act, 1897 the “Immovable property shall include land, benefits to arise out
of land, and things attached to the earth or permanently fastened to anything attached to the
earth”. “Attached to the earth” means Rooted in the earth(like tree and shrubs) , Imbedded in the
earth(like walls etc) ,Attached in such a way which gives permanent beneficial enjoyment. So,
Immovable Property It includes land, benefits to arise out of land, and things attached to the
earth. If the thing is fixed to the land even slightly or it is caused to go deeper in the earth by
external agency, then it is deemed to be immovable property. If the purpose of annexation of a
thing is to confer a permanent benefit to the land to which it is attached, then it is immovable
property. So, as against sale or gift, the mortgage is simply the transfer of an interest in the
property mortgaged. The purpose of it to lend money and it may be immediately or later on.
Mortgage creates pecuniary liability.

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 terms 2.

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”. The transferor is called a mortgagor,
the transferee a mortgagee, the principal money and interest of which payment is secured for the

1
ACT NO. IV OF 1882
2
Black’s Law dictionary, 9th edition, page no. 1101

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time being are called the mortgage money and the instrument (if any) by which the transfer is
effected is called a mortgage-deed.

Elements of Mortgage

There must be a transfer of an interest- There must be specific immovable property intended to
be mortgaged. The transfer must be made to secure the payment of a loan or to secure the
performance of a contract. 1) Transfer of interest- a transaction of mortgage involves the transfer
of an interest from the mortgagor to the mortgagee. On this point this differs from sale because in
sale, on the contrary, there is complete transfer of all the interests in the property. The mortgage
is transfer of interest less than ownership.

2) Specific immovable property- the interest transferred is that of a specific immovable property.
The property, which has to be mortgaged, must be defined specifically and not in general terms.
The property must also be immovable property . The property must be specifically mentioned in
the mortgage deed. Where, for instance, the mortgagor stated “all of my property” in the
mortgage deed, it was held by the Court that this was not a mortgage. The reason why the
immovable property must be distinctly and specifically mentioned in the mortgage deed is that,
in case the mortgagor fails to repay the loan the Court is in a position to grant a decree for the
sale of any particular property on a suit by the mortgagee. It was accordingly held that no valid
mortgage was created when the property mortgage was described as “ the whole of my
property”,3 or as “our house or landed property.”4

3) Securing the payment of debt- the transaction involves the transfer of an interest for the
purpose of securing the payment of a debt, which is in the nature 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. The debt in lieu of the mortgaged property constitutes the
consideration of the mortgage. The mortgagor may also execute the mortgage deed before he
gets the full amount from the mortgagor. Mere ground that the mortgagee did not advance the
money on the date of execution of the deed does not render the transaction of mortgage

3
Bheri Dorayya v. Moddipatu Ramayya, 3 Mad. 35
4
Darsona singh v. Honwanta, 1 All. 274

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ineffective5 . There is thus a debt and the relationship between the mortgagor and the mortgagee
is that of debtor and creditor. When A borrows 100 bags of paddy from B on a mortgage and
agrees to return an equal quantity of paddy and a further quantity by way of interest, it is a
mortgage transaction for the performance of an obligation. Where, however, a person borrows
money and agrees with the creditor that till the debt is repaid he will not alienate his property, the
transaction does not amount to a mortgage. Here the person merely says that he will not transfer
his property till he has repaid the debt; he does not transfer any interest in the property to the
creditor. In a sale, as distinguished from a mortgage, all the interests or rights or ownership are
transferred to the purchaser. In a mortgage, as stated earlier, only part of the interest is
transferred to the mortgagee, some of them remains vested in the mortgagor. In the case of
Ragunath V. Amir Baks (1922), it was held that in mortgage where deed is registered, property
vested but consideration is not given; mortgage may not fail.

To sum up, it may be stated that there are three outstanding characteristics of a mortgage: i. The
mortgagee’s interest in the property mortgaged terminates upon the performance of the
obligation secured by the mortgage. ii. The mortgagee has a right of foreclosure upon the
mortgagor’s failure to perform. iii. The mortgagor has a right to redeem or regain the property on
repayment of the debt or performance of the obligation.

According to Section 58 of Transfer Of Property Act, 1882, the are different types of mortgage
like Simple mortgage , Mortgage by conditional sale , Usufructuary mortgage , English mortgage
, Mortgage by deposit of title-deeds , Anomalous mortgage.

Modes of Transfer in a mortgage , there are three ways in which property may be transferred by
way of mortgage, (1) Registered instrument. (2) Delivery of Possession. (3) Deposit of title-
deeds.

As, section 59 0f the Transfer of Property Act, 1882 states that- “ Where the principal money
secured is one hundred taka or upwards, a mortgage other than a mortgage by deposit of
titledeeds can be effected only by a registered instrument signed by the mortgagor and attested
by at least two witnesses. Provided that a mortgage by deposit of title-deeds, where the
mortgagee is the Government or a Scheduled Bank as defined in the Bangladesh Bank Order,

5
State of Kerala v. Cochin Chemical Refineries, AIR 1968 SC 67.

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1972 or a financial institution as defined in the Financial Institutions Act, 1993, shall also be
effected only by a registered instrument in the aforesaid manner. Provided further that where in
pursuance of a tripartite agreement between a buyer, a seller and a Scheduled Bank or financial
institution, the buyer undertakes to buy a flat or floor space to be constructed or a plot of land to
be developed by the seller (a real estate owner, firm or company), and the seller undertakes to
transfer the flat or floor space or a plot of land, as the case may be, to the buyer by registered
instrument upon construction or development, as the case may be, and the Scheduled Bank or
financial institution undertakes to pay the price, or part of the price, of the flat or floor space or
plot of land to the seller on behalf of the buyer, on condition, among others, that the flat or floor
space to be constructed or the plot of land to be developed, and transferred to the buyer, shall be
mortgaged to the Scheduled Bank or financial institution by deposit of title-deed as security
against the money paid or to be paid to the seller on behalf of the buyer as loan, such mortgage
by deposit of title-deed shall not be required to be effected by a registered instrument as
aforesaid. Where the principal money secured is less than one hundred taka, a mortgage may be
effected either by a registered instrument signed and attested as aforesaid, or (except in the case
of a simple mortgage) by delivery of the property’.

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RIGHT OF REDEMPTION
Right of mortgagor to redeem , 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, 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, where
the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the
mortgagor, and 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 ,acknowledgement
that right has been extinguished, extinguishment of right by (1) the act of the parties, or (2) the
decree of the court. 6It 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, 1. 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. 2. 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. 3. 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

6
Section 60 of transfer of property act 1882

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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. 4. 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.

EQUITY OF REDEMPTION.

The right of redemption of the mortgagor under sec. 60 of the Transfer of Property Act is based
on the equity of redemption under English law. In England, the mortgagor’s right of redemption
was introduced by the Chancery Courts, also known as the Courts of Equity. The mortgagor’s
right to redeem the mortgage by making payment, even after the due date is known as equity of
redemption.7 The Chancery Court introduced this right in order to do justice with cases on
mortgage decided under the common law.

Prior position at Common Law. At common law, the mortgage was the transfer of legal estate
(absolute interest), subject to a condition. The condition was ‘nonpayment of loan upto fixed
date’, which if fulfilled, the mortgaged property belonged absolutely to the mortgagee. Common
law treated the non-payment of debt upto a specified period as penalty for the mortgagor. The
common law gave no relief to the mortgagor, who failed to repay the debt upto the specified
period, even though he was ready to repay within few days after the specified period. Thus, in
default of the repayment the mortgagor lost all his rights in his immovable property. This
situation was exploited by the money-lenders, by not accepting the money on the due date. They
knew that if somehow the loan with interest remained unpaid upto the fixed date, they will
become owner of the property in lieu of the small sum of money, which the debtor took in his
urgent need. Role of Chancery Courts. Soon the Chancery Courts realized that the main purpose
of the mortgage is to keep the property as a security to the moneylender for the repayment of

7
Dr. R.K. Sinha, The Transfer of Property Act (18th ed., central law agency)

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money. Therefore, the money-lender should not be given any legal right to hold on the property
absolutely if the mortgagor was ready to repay the debt within reasonable time after the expiry of
the due date. Thus, the right which was denied by the Common Law was given to the mortgagor
by the Courts of Equity. This right of the mortgagor to redeem even if he was in default was
known as equity of redemption. Thus, this very principle evolved by the Chancery Courts went
against the common law. Equity started with the notion that stipulation as to time (fixed date for
repayment) should not be treated as penalty. The Courts even held it to be the essential character
of every mortgage. They provided further that it was an important right of the mortgagor and it
could not be denied in any manner, not even express agreement of the parties themselves. Equity
declared that ‘once a mortgage, always a 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 there.8

Extinguishment of right of redemption:- The mortgagor’s right of redemption is extinguished: a)

By foreclosure (section 67); b) When the mortgagee has exercised power of sale (section 68); c)
When it becomes barred under the Limitation Act, 1908.

“The right of mortgage-deed can come to an end only in manner known to law”.9 “Redemption
of mortgaged property- period of limitation- where mortgagee had transferred mortgage right to
new mortgagee before expiry of period of limitation, period of limitation would start from
transfer of mortgage and not from original mortgage”.10 - So, the mortgagor’s right on
redemption are,- 1. Delivery of the mortgage-deed and document of title relating to the
mortgaged property, 2. Possession, and 3. Reconveyance or acknowledgement.

CLOG ON REDEMPTION: The right of redemption continues although the mortgagor fails to
pay the debt at the due date. Any provision inserted in the mortgage-deed which has the effect of
preventing or impeding this right is void as a clog on redemption. This view was substantiated by

8
Section 38 of the Contract Act, 1872
9
Jaya Singh V. Krishna, AIR 1985 S.C. 1646
10
Faqir Gul V. Abdur Rahman, 1999 CLC 346

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LINDLEY M. R. in Stanley v. Wilde. The Supreme Court considered this rule in Murarilal v.
Devkaran, where the clause incorporated in the mortgage deed provided that the amount due
under the mortgage should be paid within 15 years whereupon the property would be redeemed.
Further it provided that in case payment was not made within that period, mortgagee would
become the owner of the property. The Supreme Court affirming the decision of the Rajasthan
High Court, held that any stipulation contained in the mortgage deed, which unreasonably
restrained the mortgagor’s equity of redemption can be ignored by the court subject to the
general law of limitation prescribed in that behalf.

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ONCE A MORTGAGE ALWAYS A MORTGAGE.
This maxim implies that the mortgagor’s right of redemption would not be defeated by any
agreement to the contrary, even if the mortgagor himself has agreed to it. The maxim simply
denied the validity of any stipulation in the mortgage deed, which defeats the mortgagor’s right
of redemption. In other word, a transaction, which at one time is mortgage, could not cease to be
so by having any stipulation in the mortgage deed intended to defeat the mortgagor’s right of
redemption. The underlying principle of this maxim was stated by LORD HENLEY in following
words: “This Court as a Conscience is very jealous of persons taking securities for a loan and
converting such securities into purchases. And therefore I take it to be an established rule, that a
mortgagee can never provide at the time of making the loan for any event or condition on which
the equity of redemption shall be discharged and the conveyance made absolute. And there is
great reason and justice in this rule for necessitous men are not, truly speaking, free men, but to
answer present exigency, will submit to any terms that the crafty may impose upon them”. In the
case of Nabin Chandra Moral V. Lalit Mohan Das Held: If the mortgage debt is paid, or a tender
thereof is made, by any person interested in the equity of redemption, a mortgage suit can be
instituted by any other person who has a right to equity of redemption. The right of redemption is
the inalienable right of the mortgagor. Besides the mortgagor any of the following persons may
also sue for redemption:- a) Any interested person in the mortgaged property, b) Any surety for
the payment of the mortgaged debt; or c) Any creditor of the mortgagor who has obtained a
decree for sale of the mortgaged property. - Section 91 of TP

This maxim implies that the mortgagor’s right of redemption would not be defeated by any
agreement to the contrary, even if the mortgagor himself agreed to it. The maxim simply denied
the validity of any stipulation in the mortgage deed which defeats the mortgagor’s right of
redemption. A maxim which stresses the principle that, in equity, a mortgage is intended solely
as security for a loan and not as a means to secure a collateral advantage for the mortgagee. In
other words, once the mortgagor has paid back his debt to the mortgagee, the purpose of the
mortgage has come to an end and the property should be released unencumbered 11The principle
is this – that a mortgage must not be converted into something else; and when once you have

11
https://www.realestatedefined.com/html/terms_defined/once_a_mortgage.html visited at 7/10/17

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come to the conclusion that a stipulation for the benefit of the mortgagee is part of the mortgage
transaction, it is but part of his security, and necessarily comes to an end on the payment off of
the loan
The underlying principle of this maxim was stated by Lord Henley in the case of (Vernon v.
Bethel) that_
“This court as a conscience is very jealous of persons taking securities for a loan and
converting such securities into purchases and therefore I take it to be an established rule, that a
mortgagee can never provide at the time of making the loan for any event or condition on which
the equity of redemption shall be discharged and the conveyance made absolute and there is
great reason and justice in this rule for necessitous men or not will submit to any terms that the
crafty may impose upon them.”

Vernon v Bethell (1762) is an English property law case, where it was affirmed that there could
be no clog on the equity of redemption.12

Major James Vernon wished to pay off his debts to Mr Bethell’s estate and recover title of a
sugar plantation in Antigua where he lived. Vernon had taken out a £278 mortgage on the land,
and on 5 March 1729 he assigned the mortgage to Mr Bethell, to whom he sold sugar, and got
from him further loans of £5000 to £6000. On 23 April 1738 Bethell requested repayment of
sums owed, by then £9541 9s 1d, or the enforcement of the security by taking possession of the
land, but still leave some for Major Vernon and his family13 On 25 August 1738 Vernon replied
that he would convey possession of the land to Bethell for five guineas, and its profits, for
release of the debt of £9976 1s 11d. Various other letters and statements by Bethell
acknowledged that Vernon should be able to recover title if his debts were paid off. When
Bethell died his will, from 19 March 1758 stated that if Vernon ceased with some ‘unjust
pretences’ to defeat his title to the land and would accept £6000, then he should be given full
title. The price of the land by then had risen significantly, and Vernon sought a declaration that
he retained the equity of redemption, that he could get full title to his land back with debts
repaid.Lord Henley LC held that there could be no clog on the equity of redemption, so that any

12
Vernon v Bethell (1762) 28 ER 838
13
My account is swelled to so enormous an amount, that I must have possession of the Antigua estate, in order
to save something for your family.

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restriction on the right to redeem one's property had the debt been discharged was ineffective. He
held the exchange of letters between Mr Bethell and Major Vernon showed that only a security
interest, and not an absolute conveyance was intended.

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CONCLUSION
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. A mortgage corresponds to the Hypotheca of Roman Law. The
creditors, on the failure of the debtor to pay the debt, could being the debtor’s property to sale
and recoup him. 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. The equity of redemption has been well recognized in
common law as well as in the Transfer of Property Act, 1882 which explicitly substantiate this
principle. There may be various conditions whereby the stipulations in the mortgage-deed have
turned to be the clog on the equity of redemption. The equity of redemption can be brought to an
end either by the act of parties or by a decree of the court.

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BIBLIOGRAPHY
BOOKS

 S.N. Shukla, The Transfer of Property Act 219 (23rd ed., 2001).
 Mulla, The Transfer of Property Act, 1882 656 (Solil Paul ed., 9th edition, 2000).
 Murarilal v. Dev Karan, AIR 1965 SC 225.
 Dr. R.K. Sinha, The Transfer of Property Act (18th ed., central law agency)

WEBSITES

 https://www.lawctopus.com/academike
 http://ishtionblogs.blogspot.in/2013/06/once-mortgage-always-mortgage.html
 https://moniruzzamanjuror.files.wordpress.com/2013/10/assinment-of-tp.pdf
 https://indiankanoon.org/search/?formInput=once%20mortgage%20always%20mortgage
&pagenum=1

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