Rule
A mortgage is the transfer of an interest in specific immovable property to secure the payment of money advanced or to be advanced, an existing or future debt, or the performance of an engagement that may give rise to a money liability (S.58(a)).
- The transferor is the mortgagor. The transferee is the mortgagee.
- The principal and interest secured are the mortgage-money. The instrument is the mortgage-deed.
- Only an interest passes. The mortgagor keeps the right to get the property back on payment (S.60).
A mortgage is security, not a sale. The law lets the parties choose how much interest passes and which remedy the lender gets, so S.58 recognises six kinds.
| Provision | What it says |
|---|---|
| S.58(a) | Definition of mortgage and the four terms |
| S.58(b) to S.58(g) | The six kinds |
| S.59 | Form: registered instrument, signed and attested by two witnesses, where the money secured is Rs.100 or more |
| S.60 | Mortgagor's right of redemption |
| S.67, S.68 | Mortgagee's right to foreclosure or sale, and to sue for the money |
Requirements
The elements of every mortgage under S.58(a):
| # | Requirement | What to check |
|---|---|---|
| 1 | Transfer of an interest | Not ownership. A bare licence to stay is not a mortgage |
| 2 | In specific immovable property | Identified property, not "all my assets" |
| 3 | To secure a debt or money engagement | No debt, no mortgage |
| 4 | In the form the law requires | Registered deed under S.59, except deposit of title deeds |
The six kinds
| Kind | Clause | Possession | Personal liability | Main remedy |
|---|---|---|---|---|
| Simple | S.58(b) | Stays with mortgagor | Yes | Sale through court |
| By conditional sale | S.58(c) | Usually stays with mortgagor | No | Foreclosure |
| Usufructuary | S.58(d) | Passes to mortgagee | No | Rents and profits. No foreclosure or sale |
| English | S.58(e) | As agreed | Yes | Sale |
| By deposit of title deeds | S.58(f) | Stays with mortgagor | Yes | Sale through court |
| Anomalous | S.58(g) | As agreed | As agreed | As the deed provides |
Simple mortgage (S.58(b))
- Possession is not delivered.
- The mortgagor binds himself personally to pay.
- On default, the mortgagee may cause the property to be sold.
Mortgage by conditional sale (S.58(c))
- The mortgagor ostensibly sells the property, on condition that on default the sale becomes absolute, or on payment the sale becomes void, or the buyer will retransfer.
- Proviso: it is a mortgage only if the condition is in the same document that effects the sale.
- No personal liability. Remedy is foreclosure.
Usufructuary mortgage (S.58(d))
- Possession is delivered or the mortgagor binds himself to deliver it.
- The mortgagee takes the rents and profits in place of interest, or towards the mortgage-money, or both.
- No personal liability. The mortgagee cannot foreclose or sue for sale (S.67, proviso).
English mortgage (S.58(e))
- The mortgagor binds himself to repay on a certain date.
- He transfers the property absolutely to the mortgagee, subject to a proviso to retransfer on payment.
- Personal liability exists. Remedy is sale.
Mortgage by deposit of title deeds (S.58(f))
- A person delivers documents of title to immovable property to a creditor with intent to create security.
- Allowed only in Kolkata, Chennai, Mumbai and other towns the State Government notifies.
- No writing or registration needed (S.59 does not apply).
Anomalous mortgage (S.58(g))
- Any mortgage that is not one of the five above, for example a mix of simple and usufructuary.
Many books number the kinds wrongly. S.58(a) is the definition. The kinds run from S.58(b) (simple) to S.58(g) (anomalous).
Illustrations
1. Simple mortgage
- Facts: Ravi borrows Rs.10 lakhs from a bank and executes a registered mortgage deed over his house. He keeps living in it.
- Result: A simple mortgage (S.58(b)). On default the bank can sue for sale (S.67) and sue Ravi on his personal promise (S.68).
- Why: No possession passed, and Ravi bound himself personally to repay.
2. Sale deed with reconveyance clause
- Facts: Suresh needs Rs.5 lakhs. He signs a "sale deed" of his house to Mahesh for Rs.5 lakhs. The same deed says Mahesh will reconvey if Suresh repays with interest within 3 years.
- Result: Likely a mortgage by conditional sale (S.58(c)). Suresh can redeem.
- Why: The condition is in the same deed, and the real object was to secure a loan, not to buy the house.
3. Usufructuary mortgage
- Facts: Gopi borrows Rs.3 lakhs from Hari and puts him in possession of his farm. Hari keeps the crop income towards the debt.
- Result: A usufructuary mortgage (S.58(d)). Hari cannot sue Gopi personally or ask for sale.
- Why: The mortgagee is paid from the income of the land.
4. English mortgage
- Facts: A company transfers its building absolutely to a bank, promising to repay by 31 Dec 2027. The bank must retransfer on payment.
- Result: An English mortgage (S.58(e)).
- Why: Absolute transfer, personal promise to repay on a date, and a proviso for retransfer.
5. Deposit of title deeds
- Facts: Kavitha in Mumbai hands the original title deeds of her flat to her bank as security for an overdraft. Nothing is written or registered.
- Result: A valid mortgage by deposit of title deeds (S.58(f)).
- Why: Mumbai is a named town, and the deposit was made with intent to create security.
6. No debt
- Facts: A signs a mortgage deed in favour of B, but B never advances any money.
- Result: Nothing is secured, so the mortgage has no effect. A can have the deed cancelled.
- Why: A mortgage exists only to secure a debt or money engagement.
Key Cases
Balkishen Das v Legge, (1899) 27 IA 58 (PC)
- Facts: A deed of sale with a condition for repurchase was said by one side to be a mortgage.
- Held: The character of the transaction must be found from the document itself. Oral evidence of intention is not admissible for this.
- Principle: Look to the words of the deed to decide sale or mortgage.
Pandit Chunchun Jha v Sheikh Ebadat Ali, AIR 1954 SC 345
- Facts: The court had to decide whether a deed was a mortgage by conditional sale or a sale with a condition of repurchase.
- Held: The intention of the parties is the decisive test, found mainly from the deed. The transaction was a mortgage.
- Principle: Substance, not the label "sale", decides the character.
Bhaskar Waman Joshi v Shrinarayan Rambilas Agarwal, AIR 1960 SC 301
- Facts: A deed of sale with a clause for reconveyance was disputed.
- Held: Relevant points include a debtor-creditor relation, a price far below value, and the mortgagor staying in possession. The deed was held a mortgage.
- Principle: The court weighs all terms and circumstances to find the intention.
Distinctions
| Basis | Simple (S.58(b)) | Conditional sale (S.58(c)) |
|---|---|---|
| Possession | With mortgagor | Usually with mortgagor |
| Personal liability | Yes | No |
| Remedy | Sale | Foreclosure |
| Form | Mortgage deed | Ostensible sale deed with the condition in it |
| Basis | Usufructuary (S.58(d)) | English (S.58(e)) |
|---|---|---|
| Possession | With mortgagee | As agreed |
| Transfer | Interest only | Absolute, with proviso for retransfer |
| Personal liability | No | Yes |
| Remedy | Rents and profits | Sale |
| Basis | Conditional sale (S.58(c)) | Sale with option to repurchase |
|---|---|---|
| Relation | Debtor and creditor | Buyer and seller |
| Seller's right | Equity of redemption | Personal contractual option only |
| Time limit | Redemption until foreclosure decree | Option lost if not used in time |
Exam Scenario
A signs a registered "Sale Deed" of his house to B for Rs.8 lakhs. On the same day B gives A a separate unregistered letter promising to reconvey if A repays Rs.8 lakhs with 15% interest within 2 years. A stays in possession. B refuses to reconvey when A tenders the money. Advise A.
Approach
- Issue: Is this a mortgage by conditional sale (S.58(c)) or an absolute sale?
- Not met: The condition for reconveyance is not in the sale deed itself. The S.58(c) proviso says it is then not a mortgage by conditional sale.
- Issue: Even so, A can argue the whole transaction was a loan. Points in his favour: he kept possession, and the price and interest look like a loan (Bhaskar Waman Joshi, 1960).
- Issue: B will rely on the proviso and on Balkishen Das v Legge to say only the deed counts.
Conclusion: On the S.58(c) proviso, the deed is most likely an absolute sale, and A has at most a contractual right to repurchase under the letter.
Remedy: A can sue B for specific performance of the reconveyance promise, if it is enforceable and in time. The letter, being unregistered, can be used as evidence of that contract.
Scenario 2
Prakash gives the original title deeds of his farm to Vijay as security for a loan of Rs.15 lakhs. The deposit is made in a village that is not a notified town. No deed is signed. Advise Prakash.
Approach
- Met: Delivery of title deeds with intent to create security.
- Not met: The deposit was not made in a named or notified town (S.58(f)).
- Not met: There is no registered instrument under S.59.
Conclusion: No valid mortgage was created. Vijay is an unsecured creditor.
Remedy: Prakash can repay the loan and demand the return of his deeds. Vijay can sue only for the debt.
Recall Check
- Which clause of S.58 defines a mortgage, and which clauses list the kinds?
- Which kind needs no writing, and where is it allowed?
- What does the proviso to S.58(c) require?
- In which kinds is there no personal liability?
Flashcards
How does S.58 define a mortgage?
Transfer of an interest in specific immovable property to secure money advanced or to be advanced, an existing or future debt, or an engagement that may give rise to a money liability (S.58(a)).
Name all six kinds of mortgages under S.58.
Simple (b), conditional sale (c), usufructuary (d), English (e), deposit of title deeds (f) and anomalous (g).
Which mortgage does NOT require a written instrument?
Mortgage by deposit of title deeds (S.58(f)), in Kolkata, Chennai, Mumbai or a notified town, with intent to create security.
What is the *Chunchun Jha* test?
To tell a mortgage by conditional sale from a sale with repurchase, find the intention of the parties, mainly from the deed. A debtor-creditor relation and reconveyance on repayment point to a mortgage, whatever the label.
In which mortgage does the mortgagee have NO personal remedy?
Usufructuary mortgage (S.58(d)), and also mortgage by conditional sale (S.58(c)). The usufructuary mortgagee takes rents and profits and cannot foreclose or sue for sale.
What is the strongest form of mortgage for the lender?
English mortgage (S.58(e)): absolute transfer to the mortgagee, personal liability and a right of sale.
What is required for an equitable mortgage?
(1) Delivery of documents of title, (2) in Kolkata, Chennai, Mumbai or a notified town, (3) with intent to create security. No writing or registration needed.
Define mortgage under S.58, TPA.
Transfer of an interest in specific immovable property for securing payment of money advanced or to be advanced, an existing or future debt, or performance of an engagement giving rise to pecuniary liability.
What is transferred in a mortgage: ownership or interest?
Only an interest in the property. Ownership remains with the mortgagor.
What are the four key terms defined in S.58?
Mortgagor (transferor), mortgagee (transferee), mortgage-money (principal and interest secured), mortgage-deed (instrument of transfer).
Can a mortgage exist without a debt?
No. A mortgage secures a debt or money engagement. With nothing to secure, it has no effect.
What does S.59 require for creating a mortgage?
Where the money secured is Rs.100 or more, a registered instrument signed by the mortgagor and attested by two witnesses. Mortgage by deposit of title deeds is outside S.59.
What is the mortgagor's most important right?
Right of redemption (S.60): the right to get back the property on payment of the mortgage-money.
Name the six kinds of mortgage under S.58.
Simple, mortgage by conditional sale, usufructuary, English, mortgage by deposit of title deeds, anomalous.
In which mortgage does the mortgagee get foreclosure as a remedy?
Mortgage by conditional sale (S.58(c)), and also an anomalous mortgage if its terms allow (S.67).
What is the unique feature of usufructuary mortgage?
The mortgagee takes possession and the rents and profits in place of interest or towards the debt, so the debt can be paid off from the income.
What formalities are needed for creating an equitable mortgage (S.58(f))?
Only delivery of title deeds with intent to create security, in a named or notified town. No writing or registration required.
What is the test to distinguish mortgage by conditional sale from genuine sale?
- (1) Is the condition in the same deed (S.58(c), proviso)? - (2) Is the dominant intent security for a debt? - (3) Is the price far below market value, and does possession stay with the ostensible seller?
In an English mortgage, what must the mortgagee do on repayment?
Retransfer the property to the mortgagor, because it was transferred to him absolutely.
Does a usufructuary mortgagor have personal liability?
No. The mortgagee is paid from the rents and profits. He can sue for the money only in limited cases, such as being kept out of possession (S.68(1)(c)).