Section 58: “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mortgage-deed” defined.—
(a) A mortgage is the transfer of an interest in specific immoveable 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 a 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.
In Gopal v. Parsotam (1883) ILR 5 All 121, (157) case Justice Mahmood has defined mortgage as under: “Mortgage, as understood in this country, cannot be defined better than by the definition adopted by the Legislature in section 58 of the Transfer of Property Act (IV of l882). That definition has not in any way altered the law, but, on the contrary, has only formulated in clear language the notions of the mortgage as understood by all the writers of textbooks on Indian mortgages. Every word of the definition is borne out by the decisions of Indian Courts of Justice.”
In Kedar Lal v. Hari Lal, AIR 1952 SC 50 case, the Supreme Court has observed that the whole law of mortgage in India, including the law of contribution arising out of a transaction of mortgage, is now statutory and is embodied in the Transfer of Property Act read with the Code of Civil Procedure. The court cannot travel beyond these statutory provisions.
Mortgage, as defined in this section is the transfer of an interest in some immovable property. It is not a transfer of all the interests but only of some interest in the property. The purpose of this transfer of interest is to give security for repayment of the loan. Therefore, where a person mortgages his property, the legal effect is that there is a transfer of an interest‘ of that property in consideration of money advanced to him by the money-lender.
The person who takes a loan under a mortgage i.e: transfers the interest in his immovable property, is called mortgagor. The person in whose favour, the property is mortgaged i.e. who advances loan, is called mortgage. The sum of money and the instrument or deed of transfer are called mortgage money and mortgage-deed respectively.
A sale with a condition of retransfer is not mortgage, for the relationship of debtor and creditor does not subsist and there is no debt for which the transfer is as security.
In Natesa Pathar v Pakkirisamy Pathar AIR 1997 Mad 105 before the Madras High Court, the condition of sale and resale was engrafted in the same document, wherein the purchaser was specifically prohibited from encumbering the property within a period of five years stipulated for repurchase. There were also substantial differences between the actual value of the property and consideration as stipulated in the deed. It was held that it was a mortgage by conditional sale and not a sale with a condition for retransfer.
Characteristics of Mortgage:
Transfer of Interest:
In a mortgage, there is a transfer of only an ‘interest’ of the immovable property. There is no-transfer of absolute interest or ownership. The owner transfers some of the rights of ownership to the mortgagee and retains the remaining rights with himself. For example, a mortgagor retains the right to redeem the property mortgaged.
In Ali Hussain v. Nilla Kanden, (1864) 1 Mad. 356 case, the Court held that the ‘interest of property’ is transferred in favour of the mortgagee who advances the money as a loan. It is the ‘interest of property’ which gives him (mortgagee) the right to recover his money from mortgagor’s property. A peculiar feature of the interest transferred is that such ‘interest’ itself is an ‘immovable property’. However, the mortgage is not a transfer of all the interests. After transferring this interest in favour of mortgage, there still remains a vested remainder with the mortgagor.
In Papamma Rao v Pratapa Korkonda (1896) 19 Mad 249, 252, 23 LA 32 case, the Court held that the right transferred to the mortgagee is not ownership.
Specific Immovable Property:
The property which is being mortgaged must be specific immovable property i.e., it can be identified by its size, location, boundaries etc. It must be specifically mentioned in the deed. Thus it can be identified as to which property has been mortgaged. The property must not be described in general terms.
In Darshan Singh v. Hanwanta, (1876) 1 All 274 case, the Court held that it is necessary that there should be an accurate description of the property so as to render it capable of identification. No particular form of description is needed.
In Indian Insurance & Banking Corpn v Paramasiva Mudaliar, AIR 1957 Mad 610 case, the Court held that machinery in a mortgaged building does not form part of the security unless it is attached to the building for the permanent beneficial enjoyment thereof.
The Purpose of Mortgage:
The object of transfer of an interest in the property must be to secure a loan or performance of a contract which results in monetary obligation (pecuniary liability). A transfer made for the purpose of discharging debt is not a mortgage.
In Kottayya v Annapumamma, AIR 1945 Mad 189 case, a debtor who was not able to repay the amount of the debt granted to the creditor a right to occupy and enjoy certain land for a period of 20 years. It was held that the transaction was not a mortgage but a lease.
Possession of Property:
The actual possession of the mortgaged property need not always be transferred to the mortgagee. In certain cases (particularly home loans), the mortgagor and keep possession of the property and can enjoy it.
Reconveyance of Interest of Property:
The interest in the mortgaged property is re-conveyed to the mortgage on repayment of the loan with the interest due on.
Failure to Repay Loan by Mortgagor:
In case the mortgager fails to repay the loan, the mortgagee gets the right to recover the debt out of the sale proceeds of the mortgaged property adopting legal ways.
Difference Between Mortgage and Sale:
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Mortgage |
Sale |
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Mortgage defined under Section 58(a) of the Transfer of Property Act, 1882 |
Sale is defined under Section 54 of the Transfer of Property Act, 1882 |
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In mortgage there is a transfer of interest of immovable property |
In sales there is transfer of ownership of immovable property. |
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A mortgage is done to secure consideration |
In sales there is exchange for consideration |