MORTGAGE

Question 1

MORTGAGE DEFINED

Answer 1

A mortgage is the transfer of an interest in specific immovable 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 the mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage money and the instrument (if any) by which the transfer is effected, is called a mortgage deed.

Question 2

The essential elements of a transaction of a mortgage are

Answer 2

(i) Parties to a mortgage;
(ii) Transfer of an interest;
(iii) In a specific immovable property;
(iv) the purpose is to secure the repayment of money advanced or to be advanced/or is for performance of an engagement that may give rise to a pecuniary liability.

Question 3

Mortgagor

Answer 3

A person effecting the mortgage of his property is called a mortgagor and the one in whose favour it is executed is called a mortgagee. A mortgagor must be a person competent to contract and capable to transfer the property.

A minor cannot affect a mortgage, but a guardian of minor can affect a valid mortgage with the sanction of the court.

If several persons execute a mortgage and some of them are minors, the mortgage is only partly invalid. It remains valid and operative for those competent to execute it.

The mortgage by a judgment debtor of property under the management of collector is void, but the personal liability of the mortgagor remains unaffected.

Where the guardian of a minor executes mortgage of the property of the minor without the sanction of the court, the mortgage is not void but voidable at the option of the minor which he can exercise on attaining majority.

If the karta of a joint Hindu family executes a mortgage of the joint family property without the consent of the other coparceners, again the mortgage is voidable at the option of the other coparceners.

If the mortgage is for a legal necessity, it is not necessary for the mortgagee to see the application of his money and all that he needs to show to the court is that he made reasonable inquiries and acted honestly.

Question 4

Mortgagee

Answer 4

Any person who is competent to hold property can be a mortgagee irrespective of his competency to contract. It is the competency to hold the property and not the competency to contract which is material here, and therefore in earlier cases it was
held that even a minor is competent to be a mortgagee.

The Supreme Court in a case clarified that since the conditions of validity of a mortgage must entail both parties, and a mortgagor and mortgagee must be competent to enter into a contract, a
minor, being incompetent to contract cannot be a mortgagee.

Question 5

Transfer of an Interest

Answer 5

In a mortgage there is, necessarily, a transfer of an interest in the property for a specific purpose. For instance, A borrows money from B and undertakes to repay it within a period of one year. The agreement also provides that if A is not able to arrange money, he would sell his property and repay the loan out of the sale proceeds. This is not a transaction of mortgage, as no interest has been transferred in favour of the mortgagee. What that interest is, would depend upon the nature and type of mortgage which is effected.

For example, in a simple mortgage, the transferor transfers a right to cause the property to be sold. In usufructuary or possessory mortgage, the right to possess and enjoy the property is transferred. Likewise, in an English mortgage, what is transferred is the ownership while the mortgagor retains a right of redemption; or a right to get his property back.

Transfer of an interest as distinguished from a personal liability creates a relationship of the transferee with the property and even if the property changes hands, i.e., the ownership changes, the relationship of the transferee with the property continues.

After effecting a mortgage by transferring an interest in the property, if the mortgagor sells
the property to a third party, the mortgage would continue to be effective and valid. Rather, the third party takes the property subject to the mortgage.

Question 6

Specific Immovable Property

Answer 6

The security must be in the shape of a specific immovable property, i.e., transfer of a specific right in a specific immovable property is the fundamental requirement in a mortgage.

Specific immovable property means that the property should be sufficiently identified, and the description should not be general or ambiguous in character.

For instance, A borrows money from B and undertakes to repay it within a period of two
years. The contract also provides that if A failed to repay the loan within a period of two years, B can sell any of his properties. A owns three properties, X, Y and Z. This is not a transaction of mortgage, as the security for repayment of money has not been
identified as a specific immovable property.

The description of the property as aforesaid should be as specific as possible. If, from the description of the property, it cannot be easily identified, the transaction would not amount to a mortgage transaction. The proper way of describing it is by its name, if any, with the full postal address. If the property is a land, it should be described clearly and if need be, with
reference even to the neighbouring properties.

Question 7

Money Advanced or to be Advanced

Answer 7

The primary purpose of the mortgage is to ensure the repayment of money advanced or to be advanced. The clause ‘money advanced or to be advanced’ shows that the loan amount might be paid to the mortgagor at the time of the execution of the mortgage deed or even subsequent thereto. The date of execution of the mortgage is effective
even if the mortgage money is undertaken to be advanced in future. But if there is no
consideration, the mortgage is void.

Question 8

Mortgage and Charge

Answer 8

A mortgage and a charge are fundamentally different from each other. In a charge there is no transfer of an interest in the property, while transfer of an interest in a specific immovable property is the fundamental requirement of a mortgage.

A charge is a little more than a personal obligation without a right in rem, and gives a right of
payment out of a specific fund or property without its transfer, such as an agreement giving immovable property for the satisfaction of a debt, or payment of maintenance allowance.

It is good against a subsequent transferee for value with notice, or with or without notice against a transferee without consideration, but a mortgage, which is good against all subsequent transferees.

A mere agreement to create a mortgage is
neither a mortgage nor a charge. Every mortgage is a charge but every charge is not a mortgage, but whether it is a charge or a mortgage, has to be determined in accordance with the intention of the parties

Question 9

Mortgage and lease

Answer 9

Mortgage and lease are species of the same genus, viz, the transfer of property, but the principal object of mortgage is to provide security for the repayment of loan whereas in lease the owner permits another to use his property on payment of rent.

Except in case of usufructuary mortgage and mortgage through conditional sale, possession of the mortgaged property remains with the mortgagor. The right of the mortgagor to redeem
his property is also different from the lessee’s right to sue for recovery of property and if the transaction is one of lease, it is improper to ask for deficit stamp duty from the transferor treating it as a mortgage deed.

Question 10

Right of Redemption and Right of Foreclosure of the Mortgage

Answer 10

In the transaction of a mortgage, the mortgagor keeps his property as a security with the mortgagee, by transfer of an interest in it in his favour. So the interest or right of the mortgagee is to cause the property to be sold in the event of non-payment of the loan.

The duty of the mortgagor is to repay the loan by the specified time, and his right is to get back or reclaim whatever he had transferred in favour of the mortgagee. This right of the mortgagor to get back, what all he had transferred in favour of the mortgagee after the payment of the loan is called a right of redemption. This is presently a
statutory right, unlike the right in equity under English law.

Redemption literally means release or liberation, and by repaying the loan the property of the mortgagor is released or liberated from the mortgage.
On the other hand, it is the duty of the mortgagee to deliver all the papers and the property if it is in his possession, back to the mortgagor, when he receives the mortgage money.

If the mortgagor fails to repay the loan amount within the specified time, the right arising in favour of the mortgagee is called a right of foreclosure. It must be understood that the old rule enabling the mortgagee to forfeit the property in the
event of non-payment of loan is not a good law any more. He can cause the property to
be sold, which means that he can neither appropriate the property himself, nor can sell
it himself, but must approach the court for its sale.

The right of the mortgagee to approach the court with a prayer for sale of the mortgaged property in the event of non-payment of loan is in the shape of a suit for foreclosure of the mortgage. This right
arises in favour of the mortgagee only after the expiry of the time period mentioned in the mortgage deed for its repayment.

Where the right to repay the loan arises immediately after execution of mortgage, the right to foreclose it is also simultaneous and can be exercised within a period of twelve years from the date it arose, failing which it would be barred by the law of limitation.

Question 11

KINDS OF MORTGAGES

Answer 11

The Act gives an exhaustive definition of mortgage and recognises six variants of it,
namely:
(i) Simple mortgage;
(ii) Mortgage by conditional sale;
(iii) Usufructuary mortgage;
(iv) English mortgage;
(v) Mortgage by deposit of title deeds or equitable mortgage; and
(vi) Anomalous mortgage.

Question 12

SIMPLE MORTGAGE

Answer 12

Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money and agrees expressly or impliedly that in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the sale proceeds to be applied so far as may be necessary, in payment of the mortgage money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.

For instance, A borrows Rs 10 lakhs from B and keeps his house as a security for its repayment. The contract empowers the mortgagee to proceed against the property in the event of non-payment of loan. It also gives a right to B to proceed against A personally should he so want, and obtain a money decree against him in a court of law.

A retains the possession of the property. This is a simple mortgage, as not only the property is
mortgaged, but also, the mortgagor is personally bound to repay the money. The mortgagee has an option here to proceed either against the mortgagor or against the mortgaged property

Question 13

MORTGAGE BY CONDITIONAL SALE

Answer 13

Where the mortgagor ostensibly sells the mortgaged property on a condition that on
default of payment of the mortgage money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on the condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called mortgage by conditional sale.

The term ostensible means seeming or apparent, but not actually the same thing. It imports that it is really not a sale. The components of a mortgage by conditional sale are:
(i) The mortgagor ostensibly sells the mortgaged property,
(ii) This ostensible sale is subject to a condition, that
(iii) On default of payment by a certain date, the sale shall become absolute;
(iv) If payment is made, the sale shall become void; and
(v) If payment is made the buyer would return the property to the seller.

There is no personal liability of the mortgagor to pay and the liability is only of the property.
The basic principle is that the form of transaction is not the final test and the true test is the intention of the parties in entering into the transaction and creating a security by way of mortgage.

Question 14

USUFRUCTUARY MORTGAGE

Answer 14

The essential feature of usufructuary or possessory mortgage is delivery of possession of the mortgaged property to the mortgagee. According to section 58 of the Act, where the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgage money and to receive the rents and profits and to appropriate the same in lieu of interest, or in payment of the
mortgage money or partly in lieu of interest or partly in payment of the mortgage money, the transaction is called an usufructuary mortgage and the mortgagee a usufructuary mortgagee.

The principal characteristic of a usufructuary mortgage is that there is no personal liability and the mortgagee has no right to have the mortgaged property brought to sale.

Ordinarily there is no time limit for repayment of the loan, but it may be impliedly fixed.
If no time is fixed for redeeming a usufructuary mortgage, the mortgagor has a right to get his property redeemed at any time since there is no limitation for the mortgagor.

Question 15

APPLICATION OF USUFRUCT

Answer 15

1) In usufructuary mortgage, the mortgagee has the right to use the property until the debt is fully paid.
2) Normally, the rents and profits during possession are appropriated by the mortgagee in lieu of interest on the money given to mortgagor.
3) But the parties may also agree that “part of such rent and profits” are to be treated as interest and the remaining benefits are to be taken by mortgagee in discharge of the debt.
4) Accordingly, under the mortgage-deed the parties may agree that rents and profits are (i) in lieu of interest or, (ii) in lieu of principal money, or (iii) in lieu of principal and interest both.

Question 16

SUMMARY OF USUFRCUTUARY MORTGAGE

Answer 16

1) In a usufructuary mortgage, there is no personal liability of the mortgagor. Mortgagee cannot sue the mortgagor personally for payment of his debt. He is entitled only to retain the possession of mortgage-property till his debt is fully paid
2) The mortgagee is entitled to continue in possession and enjoy the usufruct until the debt is fully paid off.
3) He can neither sue the mortgagor personally nor can exercise his right of foreclosure under
Section 67 of this Act. This right is not available to usufructuary mortgagee. It is significant to note that in this form of mortgage no time-limit is fixed for payment.
4) In a usufructuary mortgage the time up to which money may be paid by usufructuary mortgage by mortgagor is uncertain.
5) Registration, is necessary when the money taken under usufructuary mortgage is Rs. 100 or
more.

Question 17

ENGLISH MORTGAGE

Answer 17

(i) A loan is taken on the strength of the property by the mortgagor from the mortgagee;
(ii) There is an absolute transfer of this property in favour of the mortgagee;
(iii) The transfer is subject to a provision or condition that the mortgagee would return the property to the mortgagor upon repayment of the loan by a certain date; and
(iv) The payment is to be made on a certain date fixed in advance.

Under an English mortgage the mortgagee acquires a right to take possession as soon as the mortgage is executed.

For all practical purposes, he is the owner and the
mortgagor has a right in equity to redeem his property if he is able to repay the amount
on a certain date. If he fails to repay the amount he would lose the right to redeem.

In an English mortgage, the mortgagee is empowered to take a security and convert it in a
sale. However, in India, even if the mortgage is an English mortgage, the mortgagee cannot automatically convert the security into a sale. Where the mortgagor does not bind himself to repay the mortgage money on a certain date and the deed does not even remotely suggest that the transaction was in the nature of a mortgage, the
transaction would not be of an English mortgage.

Question 18

DIFFERENCE BETWEEN ENGLISH MORTGAGE AND MORTGAGE BY CONDITIONAL
SALE:

Answer 18

1) In an English mortgage, the mortgagor generally binds himself personally for the payment of debt. In a mortgage by conditional sale, the mortgagor does not
necessarily bind himself personally and has his remedy only against the mortgage- property.
2) In English mortgage there is absolute transfer of interest whereas in case of conditional mortgage, there is no immediate vesting, it occurs on default by mortgagor

Question 19

Mortgage usufructuary by conditional sale

Answer 19

1) In this form of mortgage, the mortgagee is first entitled to take possession and enjoyment of property but there is also a condition that in default of repayment within a specified period, the mortgagee shall have the right to cause the sale of property to him.
2) Thus, where the mortgage is usufructuary mortgage for a fixed term and there is also a
condition that on expiry of the due date, it shall operate as mortgage by conditional sale, the whole transaction is mixture of usufructuary mortgage and mortgage by conditional sale. It is therefore anomalous mortgage.
3) The anomaly is that a usufructuary mortgage is not for any fixed duration. Fixed duration is essential feature of mortgage by conditional sale. Since both are mixed in one mortgage, it is anomalous mortgage.
4) In Vaddiparthi v. Appalanarasimhulu, the mortgage was usufructuary mortgage in which the rents and benefits were agreed to be adjusted against interest. It was also agreed that the principal money shall be repaid in five years and if it is not paid within this period, the mortgage was to work out into a sale at the expiry of twenty years. The Madras High Court
held that it was a mortgage usufructuary by conditional sale.

Question 20

Deposit of Title Deeds

Answer 20

The essential feature of a mortgage by deposit of title deeds is the delivery of title deeds to the mortgagee.

An actual or even constructive delivery of title deeds bona fide relating to the property and showing the title of the depository is sufficient
and it is not necessary that there must be a physical delivery.

The requirement is delivery of the title deeds and not that all the deeds relating to the property must be deposited.

If the bank fails to prove the deposit of title deeds, the transaction would not amount to an equitable mortgage, but where certified copies of the original title deeds are deposited it would create an equitable mortgage.

Question 21

MORTGAGE BY DEPOSIT OF TITLE DEEDS

Answer 21

(i) The transferor borrows a sum of money from the transferee;
(ii) He delivers the title deeds of a specific immovable property;
(iii) He does it with an intention to keep the property as a security for the repayment
of the loan.

Mortgage by deposit of title deeds can be effected in Calcutta, Madras, Bombay and Shimla.
Where the transaction takes place outside the notified area the provisions will not apply.

Territorial restrictions do not apply to the registration of the transaction which can be even outside the notified towns.

A plea that deposit of title deeds are not in relation to properties situated in towns specified in section 58(f) or in towns notified by the state government is an important plea and cannot be ignored as a non consideration of such a plea would go to the root of the matter and result in remitting of the matter for fresh consideration to the lower court

Question 22

Intention to Create a Security

Answer 22

The title deed must be deposited with an intention that the property should stand as a security for the repayment of the loan by the mortgagor. Mere possession of title deeds coupled with the debt is not enough to raise the presumption that the deeds are a security for the debt, but it is a significant fact and the mortgagee may be asked to explain how he came to be in possession of them.

Where the documents on record showed that there was intention to create a security for repayment of loan availed by the principal borrower and for this purpose title deeds were deposited with the bank by the third parties of their properties, they would be treated as guarantor and as creating a mortgage of their property for repayment of the loan advanced to the principal borrower by deposit of title deeds and would be jointly and severable liable to
repay the amount.

Question 23

Mode of Execution

Answer 23

A mortgage by deposit of title deeds is an oral transaction, and does not require writing or registration, but if written it needs registration and no oral evidence to contradict it is admissible.

A memorandum accompanying mortgage containing a list of documents deposited, or a letter endorsing or evidencing the fact of deposit of title deeds, or in absence of an evidence that it was executed prior to or simultaneously does not require registration. But if the deposit is made through a letter explaining the reason for the deposit, it must be registered.

The rule is, either effect it orally or in accordance with the provisions of law, i.e., the deed should be properly executed, or should be validly attested and registered. As this mortgage does not require
registration so payment of registration fees is not required.

Question 24

RIGHTS AND LIABILITIES OF THE MORTGAGOR—RIGHT OF MORTGAGOR TO REDEEM (60)

Answer 24

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 (a) 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, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) 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 acknowledgment in writing
that any right in derogation of his interest transferred to the mortgagee has been extinguished:

Provided that the right conferred by this section has not been extinguished by act of the
parties or by decree of a court.
The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption.

Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.

Question 25

RIGHT OF REDEMPTION

Answer 25

Right to Redeem is the right to recover something by making the payments.

Mortgagor’s right of redemption means mortgagor’s right to recover or get back
the property after making payment of the loan.
By making payment of the loan,with interest the mortgagor becomes entitled to redeem or callback the interest given to the mortgagee as security for payment.

It arises out of residuary ownership of property.
It is, therefore,a legal or statutory right in India.
The right of mortgagor to redeem even after he was in default, was known as equity of redemption .

A mortgage transaction is primarily a contract to ensure the repayment of the loan amount.

The mortgagor remains the owner of the property and is capable to obtain the property from the mortgagee, when he repays the loan.

This statutory right of mortgagor to take back the property on repayment of the loan amount in full plus the interest on it, if any is called a right to redeem and a suit to enforce it is called a suit for redemption.

The right to redeem arises only after the principal money has become due.

It continues till the time the mortgagee sues for enforcement of the mortgage.

It cannot be taken away or defeated by an agreement to the contrary made either at the time of the execution of the mortgage as part of the contract, even if the mortgagor had expressly agreed to abide by it or by efflux of time.

The right to redeem can be taken away only by means and manner statutorily enacted for this purpose and strictly complied with.

Right of redemption as a statutory right continues in mortgage even though the mortgagor fails to pay the debt on the due date. It is an incident of a subsisting mortgage and subsists so long as the mortgage itself subsists and stands extinguished on execution of conveyance and the registration of transfer of the mortgagor’s interest by registered instrument or by decree of a court.

The dismissal of an earlier suit for redemption does not debar the mortgagor from filing a second suit for redemption during subsistence of mortgage.

If the right of redemption is alleged to have been extinguished by a decree, the decree should run strictly in accordance with the form prescribed for the purpose.

A borrower has a right to redeem the property at any time before the date the property is transferred to auction purchaser by confirmation of sale by secured creditor. The right of the mortgagor to redeem can be enforced in case of discharge of contract by accord and satisfaction.

Question 26

Once a Mortgage Always a Mortgage

Answer 26

A mortgage is always redeemable. And a mortgagor’s right to redeem shall neither be taken away nor be limited by any contract between the parties. The phrase also means that a mortgage would remain a mortgage and it cannot by the unilateral act of mortgagee be converted into a sale.

For instance if no period was fixed for redemption of a usufructuary mortgage when it was created, mortgagee would not become owner simply by efflux of time due to non redemption and mortgagor’s suit for redemption
would be proper.

There are four basic principles to which the law of mortgage is subject to in India which are as follows:
(i) A mortgage in essence is a borrowing transaction, and has to be viewed as such unless contrary is proved;
(ii) A mortgagor is a person who is in need of money, while the mortgagee is a party who has the money and it is presumed that the conditions that prevent the mortgagor to redeem his property or penalise him are inserted in the contract at the behest of the mortgagee;
(iii) Any condition that penalises the mortgagor in the event of non payment of loan would be termed as a clog on his right of redemption and would be void. Such conditions can validly be ignored by the mortgagor and would not be enforced by any court; and
(iv) A condition that the property would be forfeited in the event of default in payment of money is a penalty.

Question 27

Section 63 (Accession)

Answer 27

Accession, here, means an addition or improvement leading to expansion of or benefit of the mortgaged property.

Since the mortgage is a transfer of an interest in the mortgaged property, the mortgagee acquires the beneficial of the accession as well.

But the general rule is when the mortgagor redeems the property, the right to get the benefit of such accession would be with the mortgagor and not the mortgagee.

Accession can be of two types—natural accession and acquired accession. Acquired can again be classified into two parts—separable accession and those which are
inseparable, which are integrated with the property. Where mortgaged property in possession of the mortgagee has, during the continuance of the mortgage, received any accession, the mortgagor, upon redemption shall, in the absence of a contract to the contrary, be entitled as against mortgagee to such accession. The increased area of the village mortgaged without boundaries, or excess land given to the
mortgagee by mistake, will pass to the mortgagor on redemption.

Question 28

Section 68- Right to Sue for Mortgage Money

Answer 28

The mortgagee has a right to sue for the mortgage-money only
(1) Where the mortgagor binds himself to repay the same; or
(2) Where, by any cause other than the wrongful act or default of the mortgagor or mortgagee, the mortgaged property is wholly or partially destroyed; or
(3) The security is rendered insufficient, and The mortgagee has given the mortgagor a reasonable opportunity of providing
further security enough to render the whole security sufficient, and the
mortgagor has failed to do so; or
(4) Where the mortgagee is deprived of the whole or part of his security by or in consequence of the wrongful act or default of the mortgagor; or
(5) Where the mortgagee being entitled to possession of the mortgaged property, the mortgagor fails to deliver the same to him; or
(6) To secure the possession thereof to him without disturbance by the mortgagor or any person claiming under a title superior to that of the mortgagor.

Question 29

CLOG IN MORTGAGE

Answer 29

1.THE CONDITION OR STIPULATION HAS BEEN
IMPOSED ONLY BY THE MORTGAGEE NOT BY ANY
OTHER PERSON.

2. THE CONDITION OR STIPULATION MUST BE
   INCORPORATED IN THE MORTGAGE DEED ITSELF.
   PARTIES ARE FREE TO STIPULATED OTHERWISE BY AN INDEPENDENT AGREEMENT.
3. THE CONDITION MUST BE UNREASONABLE,AGAINST THE PUBLIC POLICY AND WITH MALA FIDE INTENTION.
4. CONDITION PUTS EITHER ABSOLUTE RESTRAINT ON MORTGAGOR’S RIGHT OF
   REDEMPTION OR PREVENTS HIM FROM REDEEMING FOR UNREASONABLY LONG PERIOD.

Question 30

CONDITION OF SALE IN DEFAULT:

Answer 30

1. A condition which makes mortgage a sale in default is clog on redemption.
2. Stipulation entered into at the time of mortgage and included in the deed that in default of repayment of loan within the fixed date, the mortgagee shall be deemed to be purchaser of the mortgage-property is a ‘clog’ on redemption. Such stipulation converts mortgage into a sale. It is therefore void.
3. Since right of redemption basically an equitable right and since equity disfavours, a mortgage being converted to sale in default of payment, any such condition or stipulation is void.

Question 31

POSTPONEMENT OF REDEMPTION FOR LONG TERM:

Answer 31

1. The postponement of right of redemption for a long period is not necessarily a clog, on redemption.
2. This is so because in certain cases postponement of the right of redemption for a long term may be convenient for both the parties.
3. If a long term is unreasonable, it is clog; if it is not so it is not a clog.
4. The postponement is unreasonable if the bargain is oppressive or unconscionable. But, this all depends on the facts and circumstances in each case.

Question 32

Restraint on Alienation (MORTGAGE)

Answer 32

1. A condition which restraints the mortgagor from transferring mortgage-property, is a clog.
2. In mortgage, the mortgagor transfers only ‘an interest’ of the mortgage-property.
3. After transferring this interest he still has the residuary ownership of that property. So, during mortgage, the mortgagor continues to be the owner of property and he has every right to transfer the property by sale, gift, etc. and can even, effect another mortgage of that property.
4. Any stipulation which curtails or takes away mortgagor’s right of subsequent disposition is a clog on equity of redemption. It is void and cannot be enforced by the Courts.

Question 33

PARTIAL REDEMPTION

Answer 33

As a general rule, partial redemption is not permitted. Partial redemption means redemption of only a part of the mortgage. (LAST PARAGRAPH OF SECTION 60)

Question 34

BY PAYING OR TENDERING THE MORTGAGE MONEY TO THE MORTGAGEE (REDEMPTION)

Answer 34

o The mortgage money may be paid directly to mortgagee or to his authorized agent.
o Mortgagor must make the payment or tender to make payment of the debt.
o Tender means making an unconditional offer for payment of debt in such a manner that the other party gets it.
o Where there are two or more joint mortgagees, the payment must be made to all of them jointly. In such cases payment of debt made to only one mortgagee doesn’t discharge the debt against the remaining mortgagees.
o If the mortgagee dies, the payment is to be made to his legal heir.
o The mortgagor has the right to redeem the mortgage at any time after the principal money has become due.
Therefore, the proper time for making payment or tender is any time after the debt has become due.
o In case usufructuary mortgage, where no time is stipulate the limitation period for redemption of the mortgage was 30 years.

Question 35

BY DEPOSITING THE MORTGAGE MONEY IN THE COURT (REDEMPTION OF MORTGAGE)

Answer 35

1. The second mode of redemption is deposit of mortgage-money in the Court.
2. Unless the whole of mortgage-money is deposited in the Court, there is no valid discharge.
3. When the mortgage-money is deposited in the Court, the Court shall cause a notice to mortgagee that such a deposit has been made.
4. Where the notice has, duly been served on the mortgagee, it is deemed that mortgagor has done everything on his part for enabling the mortgagor to withdraw the money from the Court in full satisfaction of the debt.

Question 36

III.BY FILLING A SUIT FOR REDEMPTION (REDEMPTION OF MORTGAGE)

Answer 36

1. That is to say, a mortgagor is at liberty to redeem the mortgage directly by filing a suit for Redemption. The suit must be filed by mortgagor only after the right of redemption accrues to him i.e. after the payment of principal money has become due.
2. Further, the suit must be filed during the subsistence of mortgagor’s right of redemption.
3. Suit must not be filed when mortgagor has already lost his right of redemption. The mortgagor’s right of redemption is lost by foreclosure or sale by mortgagee (Sections 67 and 68) or, when it is barred by limitation under the Indian Limitation Act, 1963.

Question 37

RIGHT TO FORECLOSURE OR SALE (SECTION 67)

Answer 37

1. Foreclosure means closing or withdrawing the mortgagor’s right of redemption.
2. It means that equitable relief given to mortgagor against forfeiture of the security is withdrawn.
3. There is an important difference between right of redemption and the right of foreclosure.
4. Mortgagor’s right of redemption is an absolute right. Even the mortgagor himself is not allowed to limit his right of redemption by any contract.
5. But, mortgagee’s right of foreclosure or sale is not an absolute right. It is subject to a contrary contract between the parties.
6. Section 67 starts with the sentence, in the absence of a contract to the contrary’
7. Therefore, a mortgagee if he so likes, may limit his right of foreclosure by any such contract included in the deed of mortgage.
8. However, since Section 67 is in the absence of contract to the contrary, therefore, the parities are free to agree for the foreclosure on any other date.
9. It may be said, therefore, that right of foreclosure can be exercised any time after the mortgaged-money becomes due but before mortgagor’s right of redemption.
10. Section 67 does not lay down as to when the mortgage-money becomes due. Such date is normally fixed in the mortgage-deed. When no time is fixed, the mortgage-money becomes payable on the date of execution.

Question 38

Section 67 (d)

Answer 38

1. Section 67 (d) provides that if there are two or more mortgagees then, any one of these several mortgagees cannot foreclose or sell in respect of his own share.
2. He is entitled to foreclose or sell his own share only if several mortgagees have separated their shares with the consent of mortgagor.
3. Reason behind prohibition on partial foreclosure is to provide protection to the mortgagor from multiplicity of suits being filed by several mortgagees separately.
4. It is to be noted that mortgagor’s consent is necessary for partial foreclosure. If the consent of mortgagor is not obtained, any one of the mortgagees cannot separate his share and cannot enforce foreclosure.
5. In the absence of mortgagor’s consent, all the mortgagees must join together and file a single suit foreclosing the mortgage.

Question 39

“Opening the foreclosure”

Answer 39

Under the English law, every mortgage contains within itself a personal liability to repay the amount advanced. The mortgagor’s liability to repay the mortgage-debt and the liability of the mortgagee to reconvey the mortgaged-property to the mortgagor are reciprocal.

Therefore, after foreclosing, a mortgagee cannot sue on the personal covenant unless he retains the mortgaged property in his hands. If after foreclosing, the mortgagee sues on personal covenant, he himself has to become willing to surrender the security, only then he can ask the mortgagor to repay his loan or balance, if any.

The mortgagee by taking an action on the personal liability of the mortgagor gives him a renewed right to redeem the property. This is known as “opening the foreclosure”. However, no such action exists in India.

Question 40

Personal Covenant [Section 68(1)(a)]

Answer 40

However, the personal covenant does not run with the land. Therefore, no decree can be passed against a purchaser of the right of redemption. However, there is an implied covenant by such purchaser to indemnify the mortgagor.

In a simple mortgage and English mortgage, there is a personal liability of the mortgagor to pay but in a mortgage by conditional sale or usufructuary mortgage, there is no personal liability. In these two cases, however, this liability can be created only be an express or implied covenant.