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Mortgages

A Mortgage is the transfer of an interest in a specific immovable property for the purpose of securing the payment of money advanced by way of loan. The transferor is called the mortgagor the transferee a mortgagee.

In India mortgages are categorized as six types.

1. Simple Mortgage: in this type of mortgage, the mortgagor without delivering possession of the property binds himself to pay the mortgage money and agrees that in the event he fails to pay the money the mortgaged property can be sold and proceeds of the sale can be applied for repayment of the loan.

2. Mortgage by Conditional Sale: in this type of mortgage the mortgagor ostensibly sells the mortgaged property on a condition that on default of payment of the mortgage money on a particular date the sale shall become final or on the condition that on the payment being made the sale shall become void and the buyer shall transfer the property to the seller.

3. Usufructuary Mortgage: in this the mortgagor delivers possession or binds himself to deliver possession of the mortgaged property and authorizes him to receive the rents and profits that accrue from such property till repayment of the loan.

4. English Mortgage: in this case the mortgagor binds himself to repay the mortgage loan on a fixed date and transfers the mortgage property to the mortgagee subject to the term that mortgagee shall retransfer the property upon payment of the loan amount.

5. Mortgage by Deposit of Title Deeds: in this case the mortgagor delivers the original deeds of his property as a security against the loan. In the event the mortgagor fails to repay the loan, the mortgagee sells the property.

6. Anomalous Mortgage: A mortgage which is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage or a mortgage by deposit of the title deeds within the meaning of Section 58 of the Transfer of Property Act is called an anomalous mortgage.

Rights of a Mortgagee

• Right to foreclosure: the mortgagee has a right to obtain a decree for sale of property once the mortgagor fails to pay the mortgage amount.

• Right to sue for mortgage money: a mortgagor has the right to sue for mortgage money in certain cases.

• Right of power of sale of mortgaged property.

The Transfer of Property Act provides that the mortgagee, or any person acting on his behalf, subject to the provision of the Act, has the power to sell or concur in selling the mortgaged property or any part thereof in default of payment of the mortgage money, without intervention of the Court, in the following cases and in no others, namely;

1. Where the mortgage is an English mortgage, and neither the mortgagor nor mortgagee is a Hindu, Mohammedan or Buddhist, or a member of any other race, sect, tribe or class from time to time specified in this behalf, by the State Government in the official Gazette;

2. Where a power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage deed, and the mortgagor is the Government;

3. Where a power of sale without the intervention of the court is expressly conferred on the mortgagee by mortgage deed, and the mortgaged property or any part of thereof, was on the date of the execution of the mortgage deed, situated within the towns of Kolkata, Chennai, Bombay, or in any other town or area which the State Government may by notification in the Official Gazette, specify in this behalf.

No such power shall be exercised unless and until:

a) Notice in writing requiring payment of the principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in the payment of the principal money or of part thereof, for three months after such service; or

b) Some interest under the mortgage amounting to at least five hundred rupees, is in arrear and unpaid for three months after becoming due.

4. Right to appoint a Receiver: A mortgagee who has the right to exercise a sale shall be entitled to appoint for on his behalf a receiver. The mortgagee also has the right to move a court for appointment of a receiver. A receiver appointed under the Act shall be deemed to be the agent of mortgagor and the mortgagor shall be responsible for the receivers’ acts or defaults.

5. Right to accession to mortgaged property: if after the date of mortgage any accession is made to the mortgaged property the mortgagee shall be entitled for accession.

6. Right to benefit of new lease: where the mortgage property is on lease and the mortgagor has renewed the lease the mortgagee shall be entitled to such new lease.

7. Right to proceeds of sale: where the mortgage property or any part there of is sold the mortgagee shall be entitled to claim payment of such sale.

An agreement to mortgage requires the stamp duty as an ordinary agreement in terms of Article 5 of the stamp Act.

A mortgage deed for which property value exceeds rupees 100 is to be registered. If it is not registered the deed can only be used as evidence the mortgage debt.