What Is a Mortgage? Types of Mortgage Under TPA Sections 58 to 98 Explained

Every mortgage rests on one idea: property is held as security for a debt. The borrower keeps the debt, the lender keeps the security, and the Transfer of Property Act, 1882 decides what each side can do. Chapter IV of the Act, which runs from Section 58 to Section 101, is among the longest and most tested parts of the Act.

In the Civil Judge Exam, PCS J Exam and APO Exam, questions on mortgage usually start with Section 58 and then branch into rights, liabilities and remedies. This blog covers the key sections from 58 to 98 in a clear order.

Section 58: the definition and the six kinds

Section 58(a) defines a mortgage as the transfer of an interest in specific immovable property to secure the payment of money lent or to be lent, an existing or future debt, or the performance of an engagement that may give rise to a pecuniary liability. The person who transfers is the mortgagor, and the person who receives is the mortgagee. The principal and interest secured is the mortgage-money, and the instrument is the mortgage-deed.

Section 58 then names the kinds of mortgage in clauses (b) to (g).

A tip for revision: learn the one feature that separates each kind. Simple means no possession. Conditional sale means a sale with a condition. Usufructuary means possession plus rents and profits. English means absolute transfer with a promise of re-transfer. Title-deeds means deposit of documents in notified towns. Anomalous means everything else.

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Section 59: how a mortgage is made

Where the principal money secured is one hundred rupees or more, a mortgage other than a mortgage by deposit of title deeds can be made only by a registered instrument signed by the mortgagor and attested by at least two witnesses.

Where the principal money is less than one hundred rupees, a mortgage may be made either by a registered instrument signed and attested in the same way, or, except for a simple mortgage, by delivery of the property.

Two things stand out. A mortgage by deposit of title deeds is outside the registered-instrument rule. And a simple mortgage always needs the registered instrument, whatever the amount.

Section 60: the right to redeem

Once the principal money has become due, the mortgagor can, by paying or tendering the mortgage-money at a proper time and place, require the mortgagee to do three things.

•        Deliver the mortgage-deed and all related documents in the mortgagee's possession or control.

•        Return possession of the property, if the mortgagee is in possession.

•        At the mortgagor's cost, either re-transfer the property to the mortgagor or to a third person named by the mortgagor, or give a written acknowledgement that the interest transferred to the mortgagee has ended. If the mortgage was made by a registered instrument, that acknowledgement must be registered.

This is called the right to redeem, and a suit to enforce it is a suit for redemption. The right is lost only if it has been extinguished by the act of the parties or by a court decree.

Two more points from the section are exam favourites. The mortgagee may be entitled by contract to reasonable notice before payment or tender if the date has passed or no date was fixed. And a person interested in only a part of the property cannot redeem just that part by paying a proportionate share of the debt, except where a mortgagee, or all mortgagees, have acquired all or part of a mortgagor's share.

Section 67: foreclosure and sale

In the absence of a contract to the contrary, the mortgagee has, at any time after the mortgage-money has become due and before a decree for redemption has been made or the money has been paid or deposited, a right to get a decree from the court that the mortgagor be absolutely debarred of his right to redeem, or a decree that the property be sold. A suit for the first kind of decree is a suit for foreclosure.

The section then says what it does not allow.

•        (a) Only a mortgagee by conditional sale, or a mortgagee under an anomalous mortgage whose terms allow foreclosure, may sue for foreclosure. And a usufructuary mortgagee, or a mortgagee by conditional sale, cannot sue for sale.

•        (b) A mortgagor who holds the mortgagee's rights as trustee or legal representative, and who may sue for sale, cannot sue for foreclosure.

•        (c) A mortgagee of a railway, canal or other work in whose maintenance the public are interested cannot sue for foreclosure or sale.

•        (d) A person interested in only part of the mortgage-money cannot sue for a corresponding part of the property, unless the mortgagees have severed their interests with the mortgagor's consent.

Section 68: the right to sue for the mortgage-money

A mortgagee can sue for the mortgage-money in four cases and no others.

•        (a) Where the mortgagor binds himself to repay it.

•        (b) Where, by a cause other than the wrongful act or default of the mortgagor or mortgagee, the property is wholly or partly destroyed or the security becomes insufficient within the meaning of Section 66, the mortgagee has given the mortgagor a reasonable chance to provide further security, and the mortgagor has failed to do so.

•        (c) Where the mortgagee is deprived of the whole or part of the security by or because of the wrongful act or default of the mortgagor.

•        (d) Where the mortgagee is entitled to possession and the mortgagor fails to deliver it, or to secure it without disturbance by the mortgagor or any person claiming under a title superior to the mortgagor's.

The proviso says that in the case of clause (a), a transferee from the mortgagor or from his legal representative cannot be sued for the mortgage-money. Under sub-section (2), where the suit is under clause (a) or (b), the court may, at its discretion, stay the suit until the mortgagee has exhausted all his remedies against the mortgaged property, unless the mortgagee abandons the security and, if necessary, re-transfers the property.

Section 69: sale without court intervention

Section 69(1) lets a mortgagee, or someone acting for him, sell the mortgaged property for default without the court's help, but only in three cases.

•        An English mortgage where neither party is a Hindu, Mohammedan or Buddhist, or a member of another group notified by the State Government.

•        Where the mortgage-deed expressly gives the power and the mortgagee is the government.

•        Where the deed expressly gives the power and the property was, when the deed was executed, within Calcutta, Madras, Bombay or another town or area notified by the State Government.

Under Section 69(2), the power cannot be used until written notice demanding the principal has been served and the money or part of it remains unpaid three months after service, or interest of at least five hundred rupees is in arrear and unpaid three months after it fell due.

Under Section 69(3), a purchaser's title cannot be questioned on the grounds that no case for sale had arisen, that notice was not given, or that the power was improperly or irregularly exercised. But a person harmed by an unauthorised, improper or irregular sale can claim damages from the one who exercised the power. Under Section 69(4), unless the contract says otherwise, the mortgagee holds the sale money in trust and applies it first to the costs of sale, then to the mortgage money and other dues, and any balance goes to the person entitled to the property.

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Section 76: duties of a mortgagee in possession

A mortgagee who takes possession carries a set of duties. He must manage the property as a person of ordinary prudence would manage it if it were his own, and make his best efforts to collect the rents and profits. Unless the contract says otherwise, he must pay government revenue, other public charges and rent due on the property from its income, and make necessary repairs he can afford from the rents and profits.

•        He must not do anything that destroys or permanently damages the property.

•        If he insures the property against fire and receives insurance money, he must use it to rebuild the property, or, if the mortgagor directs, to reduce or discharge the mortgage money.

•        He must keep clear, complete and accurate accounts, and at the mortgagor's request and cost give true copies with vouchers.

•        His receipts, or a fair occupation rent if he lives in the property, are credited first against the expenses and outgoings and interest, then against the principal, and any surplus goes to the mortgagor.

•        If the mortgagor tenders or deposits the amount due, the mortgagee must account for receipts from the date of the tender, or from when he could first withdraw the money from court.

If he fails in any of these duties, he can be charged with the resulting loss when accounts are taken under a decree. Section 77 adds that clauses (b), (d), (g) and (h) of Section 76 do not apply where there is a contract that the receipts from the property will be taken in place of interest on the principal, or in place of interest and defined portions of the principal.

Section 92: subrogation

A person who redeems property subject to a mortgage, such as those listed in Section 91 other than the mortgagor, and any co-mortgagor, gets the same rights as the mortgagee whose mortgage he redeems. This is called the right of subrogation.

A person who has advanced money to a mortgagor with which the mortgage has been redeemed is subrogated to the mortgagee's rights if the mortgagor has agreed so in a registered instrument. And there is no right of subrogation unless the mortgage in respect of which it is claimed has been redeemed in full.

Section 98: anomalous mortgages

In the case of an anomalous mortgage, the rights and liabilities of the parties are decided by their contract as shown in the mortgage-deed, and, so far as the contract does not extend, by local usage. This is the only rule needed for the residual kind of mortgage.

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Putting it together for the exam

Start every mortgage answer with Section 58 and name the kind. Then state how it is made under Section 59. Then bring in the mortgagor's right to redeem under Section 60 and the mortgagee's remedies under Sections 67 and 68. Add Sections 69, 76 and 92 where the facts call for them. Keep Section 98 for anomalous mortgages.

This sequence works for both theory and problem questions, and it matches the order of the Act.

Frequently Asked Questions

Q1. What is a mortgage under Section 58 of the Transfer of Property Act?

It is the transfer of an interest in specific immovable property to secure payment of money lent or to be lent, an existing or future debt, or the performance of an engagement that may give rise to a pecuniary liability.

Q2. What are the types of mortgage?

Simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage, mortgage by deposit of title-deeds, and anomalous mortgage.

Q3. What is the difference between a simple mortgage and a usufructuary mortgage?

In a simple mortgage possession is not delivered and the mortgagee may have the property sold on default. In a usufructuary mortgage the mortgagee keeps possession and takes the rents and profits in place of interest or in payment of the mortgage-money.

Q4. How is a mortgage made under Section 59?

If the principal money is one hundred rupees or more, by a registered instrument signed by the mortgagor and attested by two witnesses, except a mortgage by deposit of title deeds. For less than one hundred rupees, by such an instrument or, except in a simple mortgage, by delivery.

Q5. What is the right of redemption?

Under Section 60, once the principal money is due, the mortgagor can pay or tender the mortgage-money and require the mortgagee to return the deed, give back possession and re-transfer or acknowledge extinguishment of the interest.

Q6. What is foreclosure?

A suit by the mortgagee for a decree that the mortgagor be absolutely debarred of his right to redeem the property. Section 67 limits who may bring it.

Q7. When can a mortgagee sue for the mortgage-money?

Under Section 68, only where the mortgagor binds himself to repay, where the security is destroyed or becomes insufficient and further security is not given, where the mortgagee is deprived of security by the mortgagor's wrongful act, or where the mortgagor fails to give possession to a mortgagee entitled to it.

Q8. Can a mortgagee sell without going to court?

Only in the three cases in Section 69(1), and only after the notice or arrears conditions in Section 69(2) are met.

Q9. What is subrogation?

Under Section 92, a person who redeems a mortgage gets the same rights as the mortgagee whose mortgage he redeems, provided the mortgage is redeemed in full.

Q10. How are anomalous mortgages governed?

Under Section 98, by the contract as shown in the mortgage-deed and, so far as it does not extend, by local usage.

Aashayein Judiciary wraps up

The chapter on mortgages rewards order and care. Learn the six kinds from Section 58, then follow the story of a mortgage from creation to redemption or enforcement, section by section.

Nitesh Sir and the Aashayein Judiciary team teach the Transfer of Property Act with charts, problem questions and revision plans. Join our Online Judiciary Coaching to get Judiciary Notes, Judiciary Study Material, PYQ discussion and Mock Test practice for the Civil Judge Exam, PCS J Exam and APO Exam.