Mortgage

What is Mortgage?

◉ Section 58 (a) of the TRANSFER OF PROPERTY ACT, 1882, defines mortgage as, “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.
◉ Example: Businesses often take out loans to purchase buildings as well as
improvements. Retailers that rent store locations in a mall might take out a loan to improve
parts of the store. Since the retailer doesn’t own the building, it can’t use the property as
collateral. Instead receivables or other assets are usually used to satisfy the collateral
requirement of the loan.

2
 Once a mortgage always a mortgage

◉ A mortgage deed is always a mortgage deed and it cannot be changed. It will always remain a mortgage
deed and revision or change can be done but it should not affect the right of redemption. It was held in the
case of Knocks v. Roulds , that the right of redemption on a mortgage can't be filled by any action that
makes it non-redeemable. If any changes made at that point it will invalid and void. In the event that any
condition is forced by the party, at that point it will likewise be void. The court stated that the deed to
make a mortgage and such a contract would remain a mortgage contract. In any case, the constraint of the
right of redemption after mortgage by a contract won't be considered as resistance.
◉ It is to make reference here that the transactional state of converting mortgage into sale deed is likewise
white for the explanation of opposition on the right of redemption. A condition that in case of non-
payment of any installment of mortgage money the mortgagee will hold the mortgaged property as a lease,
in the mortgage deed the following is considered to be illicit and ineffective. At all the goal is that contract
and the right of redemption of mortgage are co-broad whether the redemption has been noticed or not.

3
◉ On account of Vishnu Kaya v. Vishnu Maya, it has been held by the Sikkim High Court that in the event
that any transaction is a transaction of mortgage, at that point based on the value the right of redemption
will consistently be vested on it. It is likewise the prerequisite of the guideline of common equity and the
principle of natural justice.
◉ The mortgage and the right of redemption exist together and whenever there is a mortgage,
right of redemption comes along with it. The same goes hand in hand:
• It cannot be transferred through any other transaction.
• The right of redemption can neither be ended nor limited, it will remain in a mortgage deed.

4
 Types of Mortgage
◉ Simple Mortgage: Here, the borrower simply mortgages the immovable
asset personally to avail to a loan.

◉ Usufractuary Mortgage: In this case, the property’s possession is

transferred to the lender who can receive claims or profits from it without
creating any personal liability on the borrower.

◉ English Mortgage: it establishes personal liability on the borrower and the

mortgage property is transferred to the lender on the condition that
successful loan repayment will lead to recovery.
5
◉ Mortgage by conditional sale: here, a mortgager sells his or her property with
terms that it becomes effective if he or she defaults in repayment but void on
successful repayment.

◉ Mortgage by Title Deed Deposit: the borrower deposits the title deed of the
property to be mortgaged with the lender against the loan to avail.

◉ Anomalous Mortgage: A mortgage which is not a simple mortgage, a mortgage by

conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by
deposit of title deeds within the meaning of section 58.

6
Section 60 - Right of Redemption
What Does Right of Redemption Mean?
It is the legal right of a borrower or mortgagor who owns the immovable property to reclaim his or her
property once certain conditions have been fulfilled. The right of redemption renders property owners,
who are paying back taxes or liens on their property, the ability to avoid auctioning off their property,
sometimes even after an auction or sale has taken place.
For example: When an individual obtains a mortgage to buy a home, the home itself serves as
the collateral for the loan. That means that the home owner forfeits ownership of the home if they
default on their payments. Many mortgage notes include the right of foreclosure, which describes a
lender's ability to take possession of a property through a legal process called foreclosure and outlines
the conditions under which the lender has the right to foreclose. (State and national laws also regulate
the right of foreclosure.)

7
When homeowners default on their mortgage payments, lenders may invoke their right to foreclosure.
Lenders must abide by specific procedures in order for a foreclosure to be legal. First, they must provide
a default notice to the borrower, alerting them to the fact that their loan is in default from missed
payments. The homeowner then generally has a specified amount of time to make good on any missed
payments and avoid foreclosure. They will likely also be required to pay late payment fees in addition to
any outstanding balance. They may also use this time to fight the foreclosure if they believe that the
lender does not actually have the right to foreclose on the property.
If a home eventually is foreclosed upon, the lender will generally sell the property in order to recoup
money lost on the loan. The right of redemption gives mortgagors the opportunity to reclaim their
property and stop a foreclosure sale from happening, or, in some cases, even repurchase their property
after a sale has occurred.

8
Therefore, if 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:
1. 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,
2. where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the
mortgagor, and
3. 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:
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.

9
The section deals with the mortgage when the principal amount remains due. The redemption varies
according to the form of mortgage.

There are three kinds of primary kind of redemption:

1. Delivery of the possession back to the mortgagor
2. Delivery of the title documents and the mortgage deed.
3. Returning the property in favor of the mortgagor

10
When Can the Right of Redemption Be Used?
During a time frame which is known as the redemption period, a right of redemption may be availed,
which may be before or post a foreclosure auction has been concluded. Under the common practice,
lenders prefer to exercise a right to redemption only after a foreclosure if they have the resources to
seek at all, despite the possibility to take action before a foreclosure sale.
This is because it is impossible that lenders who already have adequate funds to cover the costs of
paying the entire outstanding debt and other charges will go into default.
In certain situations, it is possible for the creditor to make a profit when they exercise a right of
redemption following a sale of the foreclosure. In a foreclosure auction, a property could sell below
its market value.

11
Essential requirements of Right of Redemption
1. Redemption before time period-
Here the essential element is that the time duration mentioned in the mortgage deed is to
be followed. Only after getting a decree from the court or with the consent of the both the
parties the time duration of deed could be changed and the party can redeem the mortgage
before the time mentioned in the deed. The mortgagor cannot avoid it.
It was held in Bakhatawar Begum vs Hussaini Khanam, many questions were raised
regarding the redemption of the deed before time period mentioned in the deed. The court
here held that it can be done through court decree and same view was accepted in Pranil
Kumar vs Kishori Lal , the court further held that the property could be redeemed before
the time period mentioned if the contract does not state anything contrary towards the
point.

12
2. Validity of the deed-
It is quintessential and primary requirement of the mortgage deed to be legally valid and
can be held up in the court of law. It was held in Vishnu kaya vs Vishnu Maya that the deed
should be registered fulfilling all the criteria of the registration. It was further held that only
after the deed is registered the mortgage can redeem the property after paying the dues or
take the mortgagee to the court.

3. Payment of money due- It was first held in Vardara Julu vs Dhanlaxmi in India that
payment of the dues is essential for the redemption of the property given to the mortgagee.

4. Filing of the suit- Filing of suit is considered to be the primary duty of the mortgagor
before redemption of the property. The right of redemption of the property can only be
exercised after a suit is filed in the suit.
◉

13
Exception
:
of Right of Redemption
1.The right of redemption can't be done in a mortgage deed of the understanding yet after
it tends to be done by the accommodation of the right of redemption or by deal or by any
strategy by the free exchange.
2.The right can be exercised by the decree of the court.
3.The mortgagor just has the option to get such declaration regarding the right of
redemption can be anticipated until practicing after the decree for forfeiture of the right of
redemption can be passed by the court.
4. On the off chance that the right of redemption and interest of mortgage vested in one
individual then the right is done.
5. In the event that the property is vested in-state or if the property secured by the decree
of the court.

14
Doctrine of Clog Redemption
The phrase once a mortgagee is always a mortgagee, the following phrase means that the mortgagee would always
remain a mortgagee and never become an owner. He cannot transfer the property rights to a third party as he does not
have the authority to pass on the benefits of the property. The phrase is a part of equity of fairness. To ensure no
exploitation takes place the courts developed this phrase.

Accordingly, a mortgage deed establishes two things, one being the right of the creditor which is limited up to his
interest and other being deducting the residuary interest of the creditor from it. In a mortgage deed the right of
redemption is always there and cannot be written off unless the debtor fails to pay the amount or he wishes to do so. The
right is equitable to right to redeem.

The premise of this doctrine lies in the practice of value, equity, and a good conscience and is applicable to areas where
acts are not applicable. On reasonable scrutiny of the functions of a mortgage, it is seen in the majority of the cases that
the mortgagor goes into such an agreement as a result of some monetary difficulty. The law perceives the power of the
predominant party to embed provisos that will serve his own advantages by making obstacles on the right of
redemption13 and the same philosophy was also taken into consideration in U. Nilan v. Kannayyan (Dead) Through
Lrs.

15
Case Laws on Exceptions to Clog on Redemption
Narandas Karsondas vs S.A. Kamtam & Anr
1. It is only on execution of the conveyance and registration of transfer of the mortgagor's interest by registered
instrument that the mortgagor's right of redemption will be extinguished. The conferment of power to sell without
intervention of the Court in a Mortgage Deed by itself will not deprive the mortgagor of his right to redemption.
The extinction of the right of redemption has to be subsequent to the deed conferring such power. The right of
redemption is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere
contract for sale. The mortgagor's right to redeem will survive until there has been completion of sale by the
mortgagee by a registered deed.

L.K. Trust Vs EDC Ltd. and Others Respondent

1. The mortgagor under Indian law is the owner who had parted with some rights of ownership and the right of
redemption is the right which he exercises by virtue of his residuary ownership to resume what he has parted with.
In India this right of redemption, however, is statutory one. A right of redemption is an incident of a subsisting
mortgage and subsists so long as the mortgage itself subsists. The judicial trend indicates that dismissal of an
earlier suit for redemption whether as abated or as withdrawn or in default would not debar the mortgagor from
filing a second suit for redemption so long as the mortgage subsists. This right cannot be extinguished except by
the act of parties or by decree of a court.

16
Jaya Singh D. Mhoprekar and Anr.v. Krishna Balaji Patil and Anr.
In both the case the right of redemption under a mortgage deed can come to an end only
in a manner known to law. Such extinguishment of the right can take place by contract
between the parties, by a merger or by statutory provision which debars the mortgager
from redeeming the mortgage. The mortgagor right of redemption is exercised by the
payment or tender to the mortgagee at the proper time and at the proper place of the
mortgage money. When it is extinguished by the act of parties, the act must take the
shape and observe the formalities which the law prescribes. A mortgage being a security
for the debt, the right of redemption continues although the mortgagor fails to pay the
debt at the due date. Any provision inserted to prevent, evade or hamper redemption is
void.

17
Exceptions:
The right of redemption cannot be finished in mortgage deed of the agreement but after it
can be finished by submission of the right of redemption or by sale or by any method by
the free transaction.
The right can be finished by the decree of court. the mortgagor only has the right to get
such decree the right of redemption can be awaited till exercising after the degree for
forfeiture of the right of redemption can be passed by the court.
If the right of redemption and interest of mortgage vested in one person then the right is
finished.
If the mortgaged property is vested in-state or if the mortgaged property acquisition by the
government the right.
If the mortgagee himself acquires a share in the mortgaged property, the indivisibility of
the mortgage is broken, and sharer in the remaining or integrity property is then entitled to
redeem his share.

18
Rights of Mesne Mortgagee
(1). This Section (Foreclose down) read with Section 91(a) (Redeem up) lays down the rights of mesne
mortgagee. Mesne mortgagee can redeem up under Sec. 91(a) and foreclose down under Section 94 of
Transfer of Property Act, 1882.
(2). This Section applies when same property is mortgaged for successive debts to successive
mortgagees—
◉ (a) Mesne mortgagee has same rights against mortgagees.
◉ (b) Posterior to himself (those to whom mortgage is subsequent)
◉ (c) As has against the mortgagor, a mortgagee has foreclosure and sale only, as such—
◉ (i) He can foreclose and has right of sale against subsequent mortgagee and,
◉ (ii) He can redeem any prior mortgagee.
(3) Mesne mortgagee can redeem all mortgagees before him and cannot in any way affect his rights.

19
1. Has the same rights against mortgagees posterior to himself as he has against the mortgagor.–
Sections 67 to 73 treat the rights of mortgagees against mortgagors. This section provides that a Mesne
mortgagee has the same rights against mortgagees, posterior to himself, as he has against the
mortgagor. Thus, a prior mortgagee can require the second mortgagee to redeem him, or, in default, to
submit to a foreclosure or sale of whatever interest he holds in the property. In other words, a prior
mortgagee is entitled to enforce the rights, conferred on him by his mortgage, not only against the
mortgagor but also against those who derive their title from or under him, e.g., a subsequent mortgagee,
who takes his mortgage subject to the prior mortgage
2. Effect of a decree obtained by the prior mortgagee on the rights of puisne mortgagee.-
Where the prior mortgagee institutes a suit for foreclosure or sale on his mortgage, making the puisne
mortgagee a party to the suit, the puisne mortgagee may, under the decree, be given the right to redeem
the prior mortgagee, and thereafter to take proceedings for foreclosure or sale against the mortgagor,
though the decree may not operate as res judicata between the mortgagor and the puisne mortgagee.
But where the decree does not give this liberty, the puisne mortgagee cannot pay off the mortgagee
decree-holder and adopt the decree as his own.

20
English and Indian Law Distinguished
The English and Indian law on the doctrine of redeem up and foreclose down have got certain difference.
Under English law, a puisne mortgagee can redeem a mortgagee who is immediately prior to him or
above him. The puisne mortgagee cannot redeem the anterior or prior mortgagee except first the immediate
one.
It means let us suppose there are three subsequent mortgagees of a property which is mortgaged by
mortgagor A to B, C and D.
So, if the third mortgagee D wants to redeem the first mortgagee B then he cannot do so unless first he
redeems his prior mortgagee C and foreclose against A the mortgagor who is just subsequent to him. D
cannot redeem C before he foreclose his own mortgage against A.
Under Indian law, the third mortgagee is entitled to redeem the first mortgagee without redeeming the
second mortgagee who is just above him. Similarly, the third mortgagee can redeem the second mortgagee
without foreclosing the subsequent mortgagor. The only requirement under Indian law is that all these
persons who are having interest in the mortgaged property must be made parties to any of such suits.

21
Rights of the Mortgagor
1. The mortgagor has the right to redeem the property after the payment of dues.
2. The mortgagor has the true ownership over the property and only he can pass the title.
3. Once an owner is always an owner.
4. The mortgagor has the right to receive the property in the state it was given or in the form 5. as
specified in the contract.
6. The mortgagor has the right to redeem the property prior to the time mentioned in the deed by
getting a decree of the court.
7. The mortgagor also has the right to extend or renew the lease.

22
Duties of the Motgagor

1. The mortgagor has duty to not waste the property.

2. He has the duty to indemnify for the defective title.
3. He also has the duty to compensate the mortgagee for any loss caused to him.
4. He also the duty to direct rent of a lease of mortgagee.
1.

23
THANK YOU.

24