The party who makes the offer is known as the offeror, and the party who accepts the offer is known as the offeree. Termination of offer is where the offer is terminated before the other side(offeree) has the opportunity to accept or reject it.  There are a number of ways for an offer to be terminated. An offer is terminated in the following circumstances:

• Revocation
• Rejection
• Lapse of time
• Conditional Offer
• Operation of law
• Death
• Acceptance
• Illegality

Termination of Offer by Revocation:

The word ‘revocation’ means “taking back”. The Indian Contract Act lays out the rules of revocation of an offer in Section 5. It says the offer may be revoked anytime before the communication of the acceptance is complete against the proposer/offeror. Once the acceptance is communicated to the proposer, revocation of the offer is not possible. An offer can be revoked at any time before acceptance takes place. However, the revocation must be communicated effectively directly or indirectly to the offeree before acceptance.

In Payne v Cave, (1789) 3 TR 148 case, the claimant put his goods up for sale at a public auction. The defendant made the highest bid, but then changed his mind. He purported to withdraw the bid before the auctioneer’s hammer fell. The claimant argued that there was a completed contract and the defendant had to pay for the goods. The Court held in favour of the defendant. The defendant’s bid was an offer, which had been withdrawn before it was accepted. As such, there was no contract.

In Byrne v Van Tien hoven, [1880] 5 CPD 344 case, Van Tien hoven offered to sell goods to Byrne by letter dated 1st October. Byrne received the letter on 11th October and telegraphed an acceptance on the same day. On 8th October Van Tien hoven posted a letter revoking the offer. This letter was received by Byrne on 20th October. Van Tien hoven refused to go through with the sale. The Court held that to be effective revocation must be communicated. Where post is used for acceptance, acceptance occurs when and where sent (provided it is contemplated as a means of acceptance) (the ‘postal rule’). However, this rule does not apply in relation to revocation of offers – if post is used for revocation, communication is only effective if and when it is received by the offeree. In this case receipt of the revocation occurred after acceptance with the result that there was a contract formed in this case.

Termination of Offer by Rejection:

The refusal of an offer by the offeree is called rejection. An offer is terminated when the offeree communicates his rejection to the offeror. Once an offer has been rejected, it cannot subsequently be accepted by the offeree. A counter-offer ranks as a rejection, but a mere inquiry as to the possibility of varying some term does not.

In Hyde v. Wrench, (1840) 49 ER 132 case, the defendant(offeror) offered to sell his farm for £1000 but the Plaintiff(offeree) offered him £950 and subsequently rejected the offer. So, the offeree filed the case as the offeror was bind by the contract but it was held that as soon as offeree put the condition the first offer becomes void which means that the offeror is not bounded by the contract as the original offer was rejected by the offeree.

In Stevenson, Jacques v McLean, (1880) 5 QBD 346 case, the defendant possessed several warrants for iron. He wrote the claimant in London asking them if they could find him a buyer. After negotiations, the defendant stated that 40s per ton was the lowest price he was willing to sell for. He told the claimant that this offer was open until the following Monday. The claimants sent a telegram on Monday morning asking if the defendant agreed to delivery over two months, and if not, how long he could give. The defendant did not respond, and sold the warrants to a third-party later that day. Before he informed the claimant of this, they sent another telegram in the afternoon accepting the defendant’s offer. The claimant sued the defendant for damages for non-delivery of the iron. The defendant argued that the claimant’s first telegram was a counter-offer, and therefore that his original offer had been revoked. The Court held in favour of the claimant. The first telegram was merely an inquiry for information, not a counter-offer. While the defendant could have revoked his offer at any time on Monday, he failed to do so before the offer was accepted. There was therefore a completed contract between the parties. A mere inquiry would not be considered as rejection.

Termination of Offer by Lapse of Time:

Where in a contract, a fixed time has been prescribed to the offeree to communicate the acceptance, the offeree is bound to accept the offer within the fixed time so prescribed because after the expiry of the fixed time the offer lapses. The validity of the offer by the offeree would not be affected if the letter of acceptance so posted within the stipulated time reaches the offeror after the completion of the specified time (Postal Rule). Where there is no express time limit, an offer is normally open only for a reasonable time. The length for a reasonable time will depend on the circumstances of the case with respect to offers involving other types of subject matter, definition of a reasonable time depends upon the demand for the subject matters and upon the volatility of its price.

In Ramsgate Victoria Hotel v Montefiore, case, the defendant, Montefiore wanted to buy shares in the complainant’s hotel (Ramsgate Victoria Hotel). He communicated his offer to the complainant that he wanted to buy shares in the hotel at a certain price. After six months, the complainant accepted the offer. However, by this time, the value of shares had gone down and Mr. Montefiore was no longer interested in buying shares. The defendant did not formally revoke the offer, but he did not proceed with the sale. The Complainant brought an action against the defendant for specific performance of contract. The Court passed an order in favour of the defendant. The Court held the company’s claim for specific performance was not successful because the Company had sufficient time to accept the defendant’s offer. Six months was sufficient time to accept an offer. The company accepted the offer after six months so, it was no longer valid due to expiry / lapses of a reasonable period of time. The Court was of the view that an offer must be accepted within the prescribed time and if a time is not prescribed, then it must be accepted within a reasonable period of time.

In Dickinson v Dodds, case, on 10th June Dodds offered to sell house to Dickinson, stating: this offer to remain open until 9.00am on 12th June. Dickinson decided to accept on 11th June but did not advise Dodds immediately. Later on the 11th, Dickinson was informed by a third party that Dodds had sold to someone else. Dickinson then purported to accept the offer. Dodds replied that it was too late – the property had already been sold. The Court held that no particular form of revocation is required. All that is required is that the offeror in some way conveys (directly or indirectly) to the offeree that s/he had changed his or her mind about the offer. There was no question that this had occurred here – Dickinson knew Dodds was no longer prepared to sell before purporting to accept. The promise to keep the offer open was not binding because it was not supported by consideration.

Termination of Offer by Condition:

An offer which expressly provides that it is to terminate on the occurrence of some condition cannot be accepted after that condition has occurred; and such a provision may also be implied. In other words, termination of an offer may also occur due to a condition not being met.

In Financings Ltd v Stimson, [1962] 3 All ER 386 case, the parties entered into a hire-purchase agreement for a car. The claimant, a finance company, gave the dealer authority to draw up the agreement on its behalf. That agreement stated that it would only be binding on the claimant once the claimant had signed and accepted it. Two days later, before the claimant signed the agreement, the defendant informed the dealer that he no longer wanted to go through with the agreement. The night before the claimant signed the agreement, the car was stolen from the dealer. By the time the car was found, it had been damaged. The claimant sued the defendant for the price of the car, minus a deduction for the value of the damage. The defendant then argued that he was not obliged to pay, because he had revoked his offer before the claimant signed the agreement. The Court of Appeal held in favour of the defendant. The dealer acted as the claimant’s agent. In that capacity, he had ostensible authority to accept the defendant’s revocation of the offer. Since the claimant had to sign the contract to accept the offer, and they had not done so before the offer was revoked. Therefore, there was no contract. Additionally, the Court held that the offer was conditional on the car being in the condition it was when the offer was made. As such, even if the offer had not already been revoked, it was no longer capable of being accepted once the car was damaged.

Termination of Offer by Operation of Law

If there is no option contract, death or incapacitation of either party prior to acceptance will terminate the offer. It does not need to be communicated to the other party either. Death and incapacity do not terminate irrevocable offers. If the laws change prior to acceptance of the offer, the law will terminate the offer because it would become a void contract. In the event that the subject matter of the offer is destroyed prior to acceptance, this constitutes termination of the offer as well.

Termination of Offer by Death or Mental Incapacity:

The right to accept an ordinary offer is not transferable. Thus, the death of either the offeror or the offeree will cause termination of the offer. The unaccepted offer of a deceased person cannot be converted into a contract binding upon his estate.

In Raja of Bobbili v. A. Suryanarayana Rao, (1919) 42 Mad 776 case, an auction sale was held by the Court, the bid was subject to its sanction or acceptance by the Court but before the Court could accept it, the bidder died and it was held that on the death of the bidder his bid stood revoked.

In Reynolds v Atherton, (1922) 127 LT 189 case, the claimant were a firm of cotton brokers. They acted under a brokerage contract with the defendant, a cotton spinning company. In order to renew their contract, the claimant purchased various shares in the defendant. In 1911, the claimant wrote the company a letter addressed to the directors. It stated that the claimants were willing to transfer their shares, while they remained the defendant’s broker. The defendant acknowledged the letter but did not respond until 1918. By that time, the shares had risen considerably in value and the composition of the defendant’s board of directors had changed. Three directors had also died. The defendant sent a letter purporting to accept the claimant’s offer on behalf of the directors who had run the company in 1911 (including the estates of those who had died). The claimant sought a declaration that there was no enforceable contract. The House of Lords held in favour of the claimant. The claimant had made their offer to the board of directors as an entity, whose composition might change. They had not made the offer to the particular directors who ran the company in 1911. The defendant’s letter had therefore not properly accepted the offer.

Termination of Offer by Acceptance:

Once the offer was accepted by the offeree, the contract is formed and brought the offer to an end. It can be made either orally, in writing, or by the implication of conduct when they are received by the offeror.

In Felthouse v Bindley, (1862) EWHC CP J35 case, the complainant, Paul Felthouse, had a conversation with his nephew, John Felthouse, about buying his horse. After their discussion, the uncle replied by letter stating that if he didn’t hear anymore from his nephew concerning the horse, he would consider acceptance of the order done and he would own the horse. His nephew did not reply to this letter and was busy at auctions. The defendant, Mr Bindley, ran the auctions and the nephew advised him not to sell the horse. However, by accident he ended up selling the horse to someone else. The Court held that there was no contract for the horse between the complainant and his nephew. There had not been an acceptance of the offer; silence did not amount to acceptance and an obligation cannot be imposed by another. Any acceptance of an offer must be communicated clearly. Although the nephew had intended to sell the horse to the complainant and showed this interest, there was no contract of sale. Thus, the nephew’s failure to respond to the complainant did not amount to an acceptance of his offer.

Illegality:

Finally, a change in the law which makes a potential contract illegal will terminate an offer, since courts will not enforce an illegal contract.

Conclusion:

Termination of an offer is not the same as contract termination. In the case of termination of an offer, the contract was not fully formed. Termination of an offer ends the power of the offeror to perform. A termination of offer can only be terminated prior to the offeree accepting it. It can happen by one of the party’s actions or operation of law.

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In this article, we shall understand the meaning of important term “Appropriate Government”. Various power are given to the appropriate Government under the Industrial disputes act, 1947.

The Industrial Disputes Act has made provision for the investigation and settlement of industrial disputes and for certain other purposes. It provides for special machinery of conciliation officers, work committees, the court of inquiry, Labour courts, Industrial Tribunals, and National Tribunals, defining their powers, functions, and duties and also the procedure to be followed by them. It also enumerates the contingencies when a strike or lock-out can be lawfully resorted to when they can be declared illegal or unlawful, conditions for laying off, retrenching discharging or dismissing a workman, circumstances under which an industrial can be closed down and several other matters related to industrial employees and employers. 

As per the provisions of the Industrial Disputes Act, 1947, when conciliation fails to bring an amicable settlement of the dispute, the conciliation officer has to submit a failure report to the appropriate Government with his own view for reference. The appropriate Government, after proper examination of the failure report, refers it either to the Labour Court or to the Industrial Tribunal for promoting a settlement of the dispute. Under Sec 10 of the Industrial Disputes Act 1947, the appropriate Government enjoys discretionary power to refer an industrial dispute to the court or tribunal. The law prescribes five major provisions for reference to a dispute.

• By the first proviso, the appropriate Government has been granted with the liberty to make the reference to a Labour Court if the matter comes under Schedule-II.
• Secondly, the Government has been granted with further power of referring the dispute to Labour Court even if it comes under Schedule-Ill of the Act, provided the dispute relates to less than 100 workers. Usually, the matters under Schedule-Ill falls under the jurisdiction of the Tribunal.
• Thirdly, where the dispute relates to public utility services and a strike notice under Sec 22 has been given; if the appropriate Government after examination, thinks fit, can make a reference of the dispute, to the court.
• Fourthly, where the parties to an industrial dispute apply in the prescribed manner either jointly or separately to the appropriate Government for a reference of a dispute to the Board, Court, then the Government can refer the same to the Board, Court or Tribunal.
• Fifthly, where the strike or lock-out is in existence at the time of reference of the dispute to Labour Court or Tribunal, the appropriate Government may by order prohibit the continuance of any strike or lock-out in that industry.
• Besides this, if any industrial dispute exists or is apprehended, the employer and the workmen can enter into an agreement and submit it to the appropriate Government for reference of the dispute to the arbitrator. In this case, the appropriate Government has to refer the same to the arbitrator (s) chosen by them (the worker and management).

From the above explanation we can conclude that the appropriate government has to play a very important role in solving industrial disputes. The appropriate Government under the Industrial Disputes Act, 1947 enjoys a wide power for reference of disputes to Boards, Courts or Tribunals.

Let us see the definition of the term “appropriate Government” and what includes.

Section 2 (a) Appropriate Government:

“Appropriate Government” means—

(i) in relation to any industrial dispute concerning  any industry carried on by or under the authority of the Central Government, or by a railway company or concerning any such controlled industry as may be specified in this behalf by the Central Government or in relation to an industrial dispute concerning a Dock Labour Board established under section 5A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), or the Industrial Finance Corporation of India Limited formed and registered under the Companies Act, 1956 (1 of 1956)], or the Employees’ State Insurance Corporation established under section 3 of the Employees’ State Insurance Act, 1948 (34 of 1948), or the Board of Trustees constituted under section 3A of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or the Central Board of Trustees and the State Boards of Trustees constituted under section 5A and section 5B, respectively, of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952), or the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956), or the Oil and Natural Gas Corporation Limited registered under the Companies Act, 1956 (1 of 1956)], or the Deposit Insurance and Credit Guarantee Corporation established under section 3 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961), or the Central Warehousing Corporation established under section 3 of the Warehousing Corporations Act, 1962 (58 of 1962), or the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963), or the Food Corporation of India established under section 3 or a Board of Management established for two or more contiguous States under section 16 of the Food Corporations Act, 1964 (37 of 1964), or the Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 (55 of 1994),or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976), or the Export Credit and Guarantee Corporation Limited or the Industrial Reconstruction Bank of India the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987)], or an air transport service, or a banking or an insurance company], a mine, an oilfield, a Cantonment Board,] or a 6 [major port, any company in which not less than fifty-one per cent. of the paid-up share capital is held by the Central Government, or any corporation, not being a corporation referred to in this clause, established by or under any law made by Parliament, or the Central public sector undertaking, subsidiary companies set up by the principal undertaking and autonomous bodies owned or controlled by the Central Government, the Central Government, and

(ii) in relation to any other industrial dispute, including the State public sector undertaking, subsidiary companies set up by the principal undertaking and autonomous bodies owned or controlled by the State Government, the State Government:

Provided that in case of a dispute between a contractor and the contract labour employed through the contractor in any industrial establishment where such dispute first arose, the appropriate Government shall be the Central Government or the State Government, as the case may be, which has control over such industrial establishment;

Section 25 L (b) in The Industrial Disputes Act, 1947 (Added by 1976 Amendment)

(b) notwithstanding anything contained in sub- clause (ii) of clause (a) of section 2,

(i) in relation to any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or

(ii) in relation to any corporation[ not being a corporation referred to in sub- clause (i) of clause (a) of section 2] established by or under any law made by Parliament, the Central Government shall be appropriate Government.

By amendment Act of 1982, several new establishments have been added to the list under this definition.

In Hindustan Aeronautics v. Their Workmen, AIR 1975 SC 1737 case, the Court held that the State Government is the appropriate government in respect of a separate unit of the company within its jurisdiction, even though it may be functioning under the directions of its Head Office situated elsewhere.

In workmen of Sri Ranga Vilas Motors v. S.R. V. Motors, AIR 1967 SC 1040 case, the Court held that the competence of the Mysore State Government to make a reference in respect of a dispute relating to a transfer of workman employed in Banglore, through the Head Office of the company was situated in Madras State. The Court held that there should be a connection between the dispute and the territory of the State and the industry, concerning which the dispute arose. The conclusion was based on the view that if the workman was working at a place in a state different from that in which the Head Office was situated, the employment would be in separate unit or establishment, and hence, the appropriate government of the State in which the workman was employed.

Indian Legal System > Civil Laws > Labour Laws > Industrial Disputes Act, 1947 > Appropriate Government

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The classification of mortgage has been made on the basis of the nature of the interest which is transferred for securing the loan. Accordingly, there is a difference in the rights and liabilities in each kind of mortgage. These six types of mortgages also differ regarding the formalities that are necessary for effecting them.

As per Section 58, six types of mortgages are Simple mortgage, Mortgage by Conditional Sale, Usufructuary mortgage, English mortgage, Mortgage by deposit of title-deeds, and Anomalous mortgage.

Simple Mortgage:

Section 58(b): Simple mortgage.

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 proceeds of sale 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.

As per Section 58 (b). Where the mortgagor promises to pay the mortgage-money (loan) without delivering possession of the mortgagor-property and agrees expressly or impliedly that in case of non-payment of the loan, the mortgagee shall have the right to cause the mortgaged property to be sold through a decree or order from the Court, the mortgage is a simple mortgage. Thus in a simple mortgage, the mortgagee is not put into possession of the property pledged to him. The mortgagor merely parts with the right of sale and nothing more.

The mortgagee cannot foreclose i.e. keep the property in lieu of the mortgage-money but acquires right of sale the property by the intervention of the Court.

Characteristics of a simple Mortgage:

• In such a mortgage, the mortgagor takes a personal undertaking to pay the loan.
• In such a mortgage, the possession of the mortgagee-property is not given to the mortgage.
• In such mortgage in the case of non-payment of the loan, the mortgagee has the right to have the mortgage-property sold through the intervention of Court.
• A simple mortgage can be made only through a registered document irrespective of the sum of money secured. (Section 59 of the Act)
• A simple mortgagee is entitled to a decree for sale as a matter of course. He cannot acquire absolute ownership by foreclosure.
• In a simple mortgage, the security for the debt is two-fold: (i) the personal obligation; and (ii) The property.

Case Laws:

In Ram Narayan Singh v. Adhindra Nath, AIR (1916) PC 119 the Court held that the fact that some immovable property has been mentioned as security for its repayment does not displace the personal liability of mortgagor to repay the loan with interest.

In Kishan Lai v Ganga Ram (1891) 13 Allahabad 28 case, the Court held that the very words “right to cause the property to be sold” in section 58 (b) of the Transfer of Property Act, 1882 indicates that the power of sale is not to be exercised by the mortgagee without the intervention of the court.

Mortgage by Conditional Sale:

Section 58 (c): Mortgage by conditional sale:

Where, the mortgagor ostensibly sells the mortgaged property— on 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 condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale: Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.

As per section 58(c) of the Transfer of Property Act, the sale with a condition that upon repayment of the consideration amount, the purchaser shall retransfer the property to the seller is known as Mortgage by conditional sale. Although, the whole transaction looks like a conditional sale, yet, in the intention of the parties is to secure the money (an essential ingredient of the mortgage) which the seller takes as a loan from the purchaser.

Characteristics of Mortgage by Conditional Sale:

• There is an ostensible (appearing to be true but not necessarily so) sale of immovable property.
• It is a conditional sale. The sale is subject to any of the following conditions: (i) On non-payment of mortgage-money (price) the sale would become absolute or, (ii) On payment of mortgage money the sale shall become void or the buyer shall retransfer the said property to the seller.
• The condition must be embodied in the same document.

Case Laws:

In Rama v Samiyappa ILR (1881) 4 Mad 179 183 184 case, the Court held that the essential of this form of mortgage is that with the default of payment the transaction is closed and the mortgage security becomes the absolute property of the mortgagee. There is no personal liability on the part of the mortgagor to repay the debt. The mortgagor’s right of redemption will be lost only by a decree for foreclosure.

In Natesa Pathar v Pakkirisamy Pathar, AIR 1997 Mad 105 case, the condition of sale and resale was engrafted in the same document. The purchaser was specifically prohibited from encumbering the property within the period of five years stipulated for repurchase. There was a substantial difference between the actual value of the property and consideration as stipulated in the deed. The transaction was held to be a mortgage by conditional sale.

In Chunchun Jha v. Ibadat Ali, AIR 1954 SC 345 case, the Court held that if the sale and repurchase are embodied in separate documents then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not.

In Prakasam v. Rajambal, AIR 1975 Mad. 282 case, the document was described as a sale deed but the stamp paper was provided by the transferor and the consideration (price) was much less than the actual value of the property. There was a specific condition that on payment of ‘principal’ amount the property should be reconvened. It was held by the Madras High Court that the transaction was a mortgage by conditional sale and not an outright sale.

In Kamal Shivajirao Katkar v. Gajrabai Sopanrao Algude, AIR 2001 Bom. 369 case, where A, the owner of the land, gave possession of his land of B on receipt of money from him, and under the agreement B was to execute reconveyance on payment of the amount by A otherwise the sale was to be confirmed. In this case, payment of interest was not stipulated in the agreement. Accordingly, the court found that there was no intention of parties to treat the transfer of land as ‘security for debt’ which is an essential feature of a mortgage. The Bombay High Court held that the transaction was sale with the condition to repurchase and not a mortgage by conditional sale.

Usufructuary Mortgage:

Section 58 (d): Usufructuary mortgage:

Where the mortgagor delivers possession 1[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 accruing from the property 2[or any part of such 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 3[or] partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee.

As per section 58(d) of the Transfer of Property Act, when the mortgagor gives possession of the property to the mortgagee, then the mortgage is called usufructuary mortgage. Since possession is with the mortgagee, he enjoys the fruits of the property i.e. produce, benefits, rents or profits of the mortgage-property in lieu of interest on the principal money (debt) advanced by him. Therefore, on payment of a debt (principal money). The mortgagee has no right of possession.

Characteristics of Usufructuary Mortgage:

• Delivery of possession of the mortgage-property or, an express or implied undertaking by the mortgagor to deliver such possession.
• Enjoyment or use of the property by mortgagee until his dues are paid off.
• There is a transfer to the mortgagee of one of the incidents of ownership, namely, the right of possession and enjoyment of the usufruct.
• No personal liability of the mortgagor.
• The mortgagee cannot foreclose or sue for sale of mortgage-property.
• In this form of mortgage, no time-limit is fixed for the payment.

Case Laws:

In Chathu v Kunjan (1889) 12 Madras 109 case, the Court held that since there is no personal liability on the part of the mortgagor to repay the mortgage – money the mortgagor cannot be sued personally for the debt.

In Butto Kkristo v. Govindram, AIR (1939) Pat 540 case, where the mortgage-property is a tenanted house the only way in which possession can be given to mortgagee is to give him the right to collect the rents and appropriate them towards the debt.

In Hikmatulla v. Imam Ali, (1890) 12 All 203 case, the Court held that mortgagee is entitled to retain possession until the money due is paid. In a usufructuary mortgage, the time up to which money may be paid by mortgagor is uncertain. If any time is fixed the mortgage would not be a
usufructuary mortgage.

English Mortgage:

Section 58 (e): English mortgage:

Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage.

As per section 58(e) of the Transfer of Property Act, in English mortgage, there is an absolute transfer of property to mortgagee with a condition that when the debt is paid off on a certain date, he (mortgagee) shall re-transfer the property to the mortgagor. According to section 58 (e) of this Act, where mortgagor binds himself to repay the money (debt) on a certain date and transfers the mortgage-property absolutely subject to the proviso that mortgagee will re-transfer it to mortgagor on payment of debt as agreed, the mortgage is English mortgage. In an English Mortgage, the ownership of the property is transferred with a promise to repay the debt on a certain date. And the mortgagee is entitled to the possession of the property and to the enjoyment of the profits arising therefrom.

Characteristics of English Mortgage:

• The mortgagor binds himself to repay the mortgage money (debt) on a certain date.
• The mortgage-property is transferred absolutely to the mortgagee.
• The absolute transfer is subject to a proviso that mortgagee will re-transfer the property to mortgagor on payment of mortgage-money on the said date.
• It is known to mortgagee with certainty when the mortgagor is to redeem or he to proceed to foreclose or sell.

Case Laws:

In Narayana v Venkataramana, ILR (1902) 25 Madras 220 (235) (FB) case the court opined that the English Mortgage has three essential ingredients. First, the mortgagor has to bind himself to repay the mortgage money on a certain day. Secondly, the property mortgaged is transferred “absolutely” to the mortgagee. Thirdly, this transfer is subject to a proviso that the mortgagee will reconvey the property to the mortgagor upon payment of the mortgage – money on the date fixed for repayment.

The statutory power of sale by an English mortgagee arises when the mortgagor and the mortgagee are not Hindus, Muhammadans or Buddhists or members of any other race, sect, tribe or class from time to time specified in this behalf by the State Government in the Official Gazette. This means that majority of people in India, though entitled to go in for English mortgage, cannot have the statutory power of sale due to confinement of this power only to certain communities such as Christians, people of English origin only.

Mortgage by Deposit of Title deeds:

Section 58 (f): Mortgage by deposit of title-deeds:

Where a person in any of the following towns, namely, the towns of Calcutta, Madras, and Bombay, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds

Section 58(f) provides for the mortgage by way of deposit of Title deeds. Mortgage by deposit of title-deeds is a peculiar kind of mortgage. It is peculiar in the sense that in this mortgage, execution of mortgage-deed by mortgagor is not necessary. Mere deposit of title-deeds of immovable property by a mortgagor to mortgagee is sufficient. Title-deeds
are those documents which are legal proof that a person owns a particular property. The object of this kind of mortgage is to provide easy
mode of taking loans in urgent need particularly by a trading community of the commercial towns. This is called in English law an equitable mortgage. The towns specified in the section are called notified towns. Many other places have been notified by the State Governments for depositing title – deeds for creation of mortgages. There are territorial Restrictions for application of this form of a mortgage. In accordance with the provisions of Section 96 of the Transfer of Property Act, 1882, mortgage by deposit of title deeds, though without writing or by any deed, is equivalent to a simple mortgage. Bankers, in most of the cases, adopt the mortgage by deposit of title deeds since it is simple, inexpensive and non-time-consuming. The remedy of this mortgagee lies in filing a suit for sale of the mortgaged property. Title-deeds may also be deposited with banks to secure an overdraft account. This is a common practice among the trading community or persons involved in the business.

Characteristics of Mortgage by Deposit of Title deeds:

• Existence of a debt. The debt may be an existing or future debt.
• Deposit of title-deeds in notified town,
• Intention to create security, and

Case laws:

In K.J. Nathan, S. Maruthi, AIR (1965) SC 430 case the physical delivery of the title-deeds had taken place outside the towns specified. But the intention to create equitable mortgage by these deeds was formed after delivery of the deeds and in a town which was within the notified area. The Supreme Court held that an equitable mortgage was created under section 58 (f) of the Transfer of Property Act. The Court opined that there must be a bona fide intention that possession of title-deeds with the creditor is by way of security for the money advanced by him. However, the intention to create security by the deposit of title-deeds is a question of fact and not of law.

In Jethibai v. Putlibai, (1961) 14 Bom. L.R. 1020 case, the Court held that there is no equitable mortgage unless there is a connecting link between the debt and the possession of title-deeds suggesting a definite intention on the part of the debtor that deeds are in possession of creditor as security for the debt.

Anomalous Mortgage:

Section 58(g): 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 this section is called an anomalous mortgage.

According to section 58 (g), a mortgage is an anomalous mortgage if it is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage or, a mortgage by deposit of title-deeds.

When a transaction is a mortgage in all respects i.e. there is the existence of debt and security of immovable property for re-payment of that debt but the agreement between the debtor and creditor is of such nature that it cannot be included in any specific category of mortgage, the transaction is an anomalous mortgage. It may also be combination of any two or more forms of specific categories of mortgage.

In Madho Rao v Gulam Mohiuddin AIR 1919 PC 121 case, the Court held that while considering an anomalous mortgage, the intention of the parties must be gathered from the terms of the instrument as controlled by the provisions of the Act.

Some of the forms of anomalous mortgages are given below :

• A mortgage with possession containing a covenant to pay the principal and interest (Ramanarayanimgar v Maharaja of Venkatagiri AIR 1927 PC 32 (36)).
• A mortgage with possession having a stipulation that the transferee should appropriate the rents and profits for a specified term of years and then give back the land (Tukaram v Ramchand ILR (1902) 26 Bom 252 (258)).
• A mortgage with the mortgagee to remain in possession and the mortgagor to repay in installments with interest or to redeem at any time.
• A mortgage without possession with the mortgagor not to redeem before five years and the mortgagee has given a right of foreclosure (Ujagar Lai v Lokendra Singh AIR 1941 Allahabad 169 (171)).
• A mortgage having a covenant to pay interest, but without any covenant to repay the principal and the mortgagor subsequently depositing certain title – deeds not mentioned in the mortgage as additional security.

Law > Civil Laws > Transfer of Property Act > Types of Mortgages

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Section 108 of the Act deals with the liabilities and rights of the lessor and lessee of immovable property. In this article, we shall discuss the liabilities of lessee. Section 108 clauses (k) to (q) deals with the liabilities of lessee

Section 108: Rights and liabilities of lessor and lessee:

In the absence of a contract or local usage to the contrary, the lessor and the lessee of immoveable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:

(A) ………………

(B) Rights and Liabilities of the Lessee

(a) ………… (j)

(k) the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is, and the lessor is not, aware, and which materially increases the value of such interest;

(l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;

(m) the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left;

(n) if the lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor’s rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;

(o) the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell 3[or sell] timber, pull down or damage buildings 3[belonging to the lessor, or] work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injurious thereto;

(p) he must not, without the lessor’s consent, erect on the property any permanent structure, except for agricultural purposes;

(q) on the determination of the lease, the lessee is bound to put the lessor into possession of the property.

• Section 108 (k) lays down that the lessee is under an obligation to disclose all related material facts which are likely to increase the value of the property for which the lessee has an interest in and the lessor is not aware of. There is no such duty when there is a contract or local usage to the contrary. This clause is not applicable to agricultural leases. In the event of non-disclosure by the lessee of an advantage taken by him, the lessor’s remedy would be not the avoidance of leases but compensation or damages.

• Section 108 (l) lays down that the lessee is under an obligation to pay the rent or premium which is settled upon in the agreement to the lessor or his agent within the prescribed time. This clause is not applicable when there is a contract or local usage to the contrary. This clause is not applicable to agricultural leases.

In Rameshwar Dayal v. Mani Lal. AIR 1977 All 534 (535) case, the Court held that once remittance of rent is proved, the presumption would arise under S. 114 of the Indian Evidence Act that ordinary course of events was followed and the amount must have been tendered to the addressee and received by him.

• Section 108 (m) lays down that the lessee is under an obligation to maintain the property in the condition that he initially got the property on commencement of the lease and he has to return it in the same condition. The changes caused by reasonable wear and tear or irresistible force are acceptable. This Section allows lessor and his agent during the term of the lease and at a reasonable time to enter upon the property and inspect its condition. The lessor is powered to give notice of any defect found and is entitled to make good, within three months after notice.

In Paritosh Ghosh v. Ashim Kumar Gupta, 2003 AIHC 291 (297,  298) (Cal) case, where the tenant made holes in walls for fixing air coolers, replaced brass water caps by plastic caps, in violation of leases agreement, the eviction of the tenant was held proper.

• Section 108 (n) lays down that if lessee gets to know about any proceedings relating to the property or any encroachment or any interference, then lessee is under an obligation to give notice to the lessor. This clause is for protection of the lessor’s interest in the property. This clause is not applicable when there is a contract or local usage to the contrary. This clause is not applicable to agricultural leases.

• Section 108 (o) lays down that the lessee has a right to use all the assets and goods which are on the property as an owner would use which is preserving it to the best of its nature. He is although under obligation to prevent any other person from using that asset or good for any other purpose from what was prescribed in the lease agreement.

• Section 108 (p) lays down that the lessee cannot attach any permanent structure without the consent of the lessor except for the purpose of agriculture.

In Rameshwar Roy v. Baidendra Kinkar Patra, AIR 1998 Cal 292 (298) case, the Court held that the clauses (m), (o) and (p) would apply only to premises demised, and none of this clause would apply in respect of other property, as property mentioned in these clauses would mean only the premises demised and not any other property or premises.

• Section 108 (q) lays down that the lessee is under an obligation to give the possession of the property back to the lessor after the expiry of the prescribed term of the lease.

In Sky Land International Pvt. Ltd. v. Kavita P. Lalwani, 2012 (191) DLT 594 (Del) case, the Court held that upon expiry of the term of the lease or termination of monthly leases by notice to quit, the lessee must vacate the property on his own and not wait for lessor to bring a suit where he can raise all kinds of contests in order to profit from Court delays.

In Santsaran v. Bankeylal Ramlal, AIR 1955 NUC 52 (MP) case, the Court held that even where the tenant has constructed a building on the land, the lessee’s obligation to restore possession to the lessor on the expiry of the leases is absolute.

In Hirabai v. Jivanlal, AIR 1955 Nag 134 (DB) case, the Court held that where the lessee wrongfully refuses to deliver possession, the lessee must pay damages to the lessor to the extent of the loss of rent suffered by latter during the period he remained out of possession.

Law > Civil Laws > Transfer of Property Act > Liabilities of Lessee

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