Author is Senior lecturer at KCEF Law College Pulwama
Lessons From The Law
A mortgage is a transfer of an interest in immovable property. One person gives his/her property to another in exchange for money as a loan for a specific period. The loan can be taken on immovable property specifically, which is tangible form. However, in case of default in repayment, person holding the mortgaged property can sell or use the property to compensate for his loss.
The transaction conditions depend on the parties; for example, when a person lends money to another, he may do so without asking for any security or demand some security for the payment of money. Then, in case of default, when there was no security taken, person who lent the money may sue for repayment. And if there is some security taken, that security may be used to recoup the lost money.
Analysis of nature, and scope:
The concept of mortgage and pledge often found similar; however, there is a fundamental difference between the two. Pledge is when the loan is secured against movable property, whereas loan security is against immovable property in mortgage. Mortgage transactions can be traced back to the early times when there was no law on mortgage, and still, people were performing this kind of transaction. This practice is universally excepted with or without any specific laws on it. As shown in the below illustration. There was no law in specific related to mortgage property transactions before 1882. After establishment of Transfer of Property Act, the rights and liabilities, laws governing with mortgage, mortgagee, and mortgagor took a systematic and much-needed change, and detailed regulations were made. Before the 1882 Act, though act did not apply to previous transactions, however, mortgagor’s right to redemption existed to recoup the repayment of the mortgage money. [1]
The suit of mortgage is subject to the rule of lispendens. It means that during pendency of suit, the mortgagor cannot enter into lease contract. The essential feature of mortgage that there is a proviso for redemption;[2] it is a conveyance of the legal interest in property. It means that after the repayment of loan, the conveyance becomes void.
Under TPA, provisions of mortgage transactions have been provided from Section 58 to 104.[3] Section 58 of TPA[4] defines mortgage. In case,[5] SC observed that mortgage law in India is wholly embodied in Section 58 of TPA, read with CPC. Order XXXIV [6], Rule 1-15[7] deals with suits related to mortgage transactions. The court dealing with the suit is barred from going beyond these provisions. Section 2(a) of the Stamp Act [8] also defines “mortgage.”
As per section 58,[9] Essential Ingredients of Mortgage:
- There should be transfer of interest:
it means interest is not transfer of ownership. Right of mortgagee is only an accessory right that is intended merely to secure due payment of debt. Nature and quantity of interest or rights transferred will depend on the kind/form of mortgage.
Of immovable property:
It must be immovable property with specific mention in deed. For example, it shall not be denoted as “my land or my house.” It must be mentioned in a certain reasonable manner, so it can be distinguished as to which property it is.
- With the intention for securing the payment of money:
Advanced or to be advanced by way of loan:
Transfer made solely with the intention of securing debt or other obligation but by way of discharging liability is not a mortgage.
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- Existing or future debt:
Existing debt implies which are not barred by time. Future debt is which occurs aftermortgage. It is not necessary that securing debt shall be made before the transaction; it could be executed for securing money payment advanced in future.
- Performance of an engagement which may give rise to pecuniary liability:
consideration can be an engagement that arises pecuniary liability against mortgagor. Performance infers to act of mortgagor resulting from such engagement.These ingredients are essential to follow; if not followed, then mortgage transaction is not complete.
The section further provides for who is mortgagor, mortgagee, and mortgage- money, mortgage-deed. Mortgage-money is the principal money and interest of which payment is secured for specific time. Mortgage-deed is the instrument through which mortgage has been done. There are certain right and duties are incorporated to both mortgagor [10] and mortgagee. [11]