Notes on Acts and Laws
Contents
Chapter 7 : The Transfer of Property Act
Chapter 8 : The Law of
Evidence
1. Suppose two properties are mortgaged
and they belong to different persons. Suppose for the realisation
of the mortgage money only one property is sold and the proceeds are found to be
sufficient to pay the amount. The result is that one mortgagor has lost his property while
the other gets it back without having to pay any thing.
This is a gross injustice. To remedy this injustice
Equity invented the doctrine of Contribution which is embodied in Section 82.
2.
According to this Section, the different owners are liable to contribute rateably
to the debt secured by the mortgage.
3.
For determining the rate at which each should contribute the value therefore
shall be taken as the value at the date of the mortgage deducting the amount of mortgage,
if any, to which it was subject on that date.
1. The claim for contribution can arise only when the
whole of the mortgage debt has been satisfied—26
All. 407 (426, 27) T.B.
2. The right to contribution is subject to the rule
of marshalling. That is where marshalling comes into conflict with contribution, the rule of marshalling shall prevail—This is
the meaning of the last para
of Section 82.
WHO
CAN CLAIM THE RIGHTS OF THE MORTGAGOR Section 91.
*****[f1]
WHO
CAN CLAIM THE RIGHTS OF THE MORTAGAGEE Section
92.
Any
person other than the mortgagor who pays the
mortgagee becomes entitled to the rights of the mortgagee.
*
The page of MS has been left blank.
Such
persons are—
1.
Subsequent mortgagee.
2.
Surety.
3.
Any person having an interest in the property.
4.
A co-mortgagor.
5.
Any other person with whose money the mortgage has been redeemed if the mortgagor has by a
registered deed agreed to this.
This
is called the rule of subrogation.
II.
DOES THE LAW OF SALE PRESCRIBE ANY PARTICULAR
MODE OF TRANSFER ?
1. The Law of Sale of Immovable Property does
prescribe a mode of transfer. The mode of transfer is either Registration or Delivery of Possession.
2.
Whether the appropriate mode of transfer in any particular case is Registration or
Delivery of Possession depends upon two considerations—
(i) Whether the immovable property is tangible or intangible. (ii)
Whether the Immovable Property is worth more than Rs. 100 or is less than Rs. 100.
3.
If the property is Intangible then the transfer
can take place only by registration, no matter what the value of the property is.
4.
If the property is Tangible property then
(i)
If it is worth more than Rs. 100 then the transfer must be by registration.
(ii)
If it is worth less than Rs. 100 then the transfer may be either by Registration or by
delivery of possession.
5. It is clear that in all cases except one.
Registration is the only method of effecting a sale. The case where option is given either
to register or deliver possession is the case where the property is tangible and is less
than Rs. 100 in value.
6.
Registration and Delivery as alternative
complimentary modes.—In this connection the following points may be noted:—
(i)
Where Registration is prescribed as the only
mode of transfer, delivery of Possession is neither necessary nor enough to complete the
transaction of sale.
(ii) Where delivery of possession is prescribed.
Registration is not necessary to complete the sale. However, Registration without delivery
will be enough to complete the sale.
7.
No other mode of Transfer.—The provisions
as to modes of transfer are exhaustive and a sale cannot be effected in any other way.
Title cannot pass by admission
or by recitals in a deed or petitions to officers or entry in the record of rights.
Admission that land has been sold, will not operate as an estoppel so as to do, away with
the sale for a registered conveyance or delivery. 43 Cal.
790.
8.
It is necessary to observe the prescribed modes of transfer—
(i) Ownership does not pass except by a transfer in the
prescribed form.
(ii) An unregistered deed is not enough (a) In cases where Registration is
compulsory. (b) Also in cases where the value is less than Rs. 100 and the transfer is not made by delivery.
9. Meaning of tangible and intangible (i) Immovable
Property is either tangible or intangible.
(ii)
The distinction between tangible and intangible is analogous to the distinction made in
English Law between a corporeal hereditament and incorporeal hreditament
(iii) A corporeal hereditament is an interest in land in
possession i.e. a present right to enjoy the possession of land. An incorporeal
hereditament is a right over land in the possession of another, which may be a future
right to possession, or a right to use for a special purpose the land in the possession of
another e.
g.
a right of way.
(iv) The contract between tangible and intangible is a
contract between the estate of one who is possessed of the land, the tangible thing and
that of a man who has the mere right, the intangible thing, without possession of anything
tangible.
(v) A thing to be tangible must be capable of actual
delivery. Sulaiman C. J. 50 All. 986.
10.
Meaning of Delivery of Possession
(i)
Delivery takes place when the seller places the buyer, or such other person as he directs,
in possession of the property.
(ii)
Delivery is an act which has the effect of putting the buyer in the possession
of property.
(iii)
What amounts to Possession ?
The question remains unanswered. Is it actual possession ? or Is it symbolical possession ?
(iv) One view is that since delivery is prescribed for
tangible property only what the Legislature intends is actual possession.
(v) The other view is that it is used in a wider and
ordinary sense because in the great majority of cases, land is in the occupation of a
tenant or the buyer and physical delivery is therefore impossible.
(vi) The latter view is the generally accepted view, so
that there is physical delivery, when the owner of property places the buyer in such
relation to the land and its actual occupants as he himself occupies.
11. Ownership when transferred (i)
Ownership passes upon delivery or registration. (ii) With regard to registration, the following points should
be noted:—
(a)
Once registration is effected, the title relates back to the date of the execution.
(b) A Registered sale-deed will not be defeated by
another deed executed later but registered earlier.
(c) The transfer will not be subject to the pendens
if the deed was executed before the suit but registered after the suit.
(d) Although it is true that property does not pass i. e.
ownership is not transferred until Registration is effected, it is not true to say that
property passes as soon as the instrument is registered, for the true test is the
intention of the parties.
3. Section 55 (3)— To deliver title-deeds :—
1.
Title-deeds are accessory to the estate. They pass with the conveyance without being
named.
2.
This includes all deeds relating to the property
conveyed in possession as well as in power.
3.
The liability to deliver title-deeds also includes the liability to bear the cost of
obtaining them.
4. Counterparts leases and Kabulayets
are deeds of title accessory to the estate.
5. The duty to deliver title-deeds is not dependent
upon the completion of the conveyance. This duty does not arise until the price has been
paid.
EXCEPTIONS
:
(i)
When the seller retains parts of the property comprised in the deeds, he may retain the
deeds but is under an obligation for their safe custody and to produce them or give true
copies when required.
(ii) When property is sold in different lots—the
purchaser of the lot of the greatest lot is
entitled to the documents—subject to the same obligations as above.
By
an express covenant, it may be given to the purchaser of the largest lot i.e. in area.
6.
The sub-section does not say what is to happen if the sales are at different times.
BUYER'S LIABILITIES
1. BEFORE
CONVEYANCE
1.
Section 55 (5) (a)—To disclose facts relating
to the interest of the seller in the
property materially increasing value.
1. Every purchaser is bound to observe good faith in
all that he says or does in relation to the contract and must abstain from all deceipt,
whether by suppression of truth or by suggestion of falsehood.
2.
The buyer, however, is under no duty to disclose latent advantages as the seller is to
disclose latent defects.
3. To this rule, matters of title are an exception.
Although the seller's title is ordinarily a matter exclusively within
his knowledge, yet there may be cases where the buyer has information which the seller
lacks. In such eases he must not make an unfair use of it.
Illustration 1.—Summers vs. Griffiths.
An old women sold property at an undervalue believing that
she could not make out a good title to it while the buyer knew that she could. The sale
was set aside.
Illustration 2.—Ellard vs. Llandaff (Lord)
The lessee obtained a renewal of a
lease, in consideration of a surrender of the old lease, suppressing the fact (that)*[f2]
the person on whose life the old lease depended was on his death-bed.
2.
Section 55 (5) (6)—To pay the Price.
1.
The buyer is not bound to pay the price except on a complete conveyance to himself of the
whole interest that he has purchased.
2. If the property is sold free from Encumbrances
and these are not discharged at the time of conveyance, the buyer is not bound to pay.
3.
His remedies for getting rid of Encumbrances are—
(i) Under Section 18 (c)
of the Specific Relief Act to compel the vendor tot discharge them.
(ii) He may discharge it himself and set off the amount
against purchase money.
(iii) Recover it by subsequent
suit against the vendor.
4. This sub-section imposes a personal liability on
the buyer apart from the liability imposed by Section 55 (4) (b) on the property—52 All. 901.
BUYER'S
LIABILITIES
II.
AFTER CONVEYANCE
1.
Section 55 (5) (c)— To bear loss, etc.
1.
Under sub-section 55 (1) (c) the seller is to bear the loss between Contract and
Conveyance.
2.
After conveyance the buyer is the owner and the property is at his risk. He must therefore
bear the loss.
3.
This is different from English Law under which the contract for sale transfers an
equitable estate and with it liability for loss or destruction.
4.
The seller is liable for waste and if the seller has insured the property, the buyer can compel
him to apply it for restoration.
2.
Section 55 (5) (d)—
To pay outgoings.
1. Before conveyance this liability falls upon the
seller—55 (1) (g)
after
conveyance it falls on the buyer— Public charges, Rent, Interest and Encumbrances.
2.
The liability is statutory and not merely contractual and therefore it is binding on a
minor vendor on. whose behalf the property is sold—46 Mad. L. J. 464.
3. If property is sold free from Encumbrances, the seller must discharge it. If sold, subject to
Encumbrances, then the interest on Encumbrances upto sale must also be paid by the buyer—26 Bom. S. R. 942.
RIGHTS
OF BUYER
AND SELLER RIGHTS OF THE SELLER
1. BEFORE
CONVEYANCE
1. Section 55 (4) (a)—To take rents and profits.
1.
Until conveyance, the seller continues to be the owner. Therefore, he has a right to take
rents and profits of the property.
II. AFTERCONVEYANCE
1.
Section 55 (4) (b)—To claim charge,
on property for price not paid.
1.
If the sale is completed by conveyance and the price or any part of it is unpaid, the
seller has under this sub-section a charge for the price or for the balance.
2. The charge is a non-possessory charge i. e.
it does not give a right to retain possession. As the ownership has passed, the charge
gives the seller no right to refuse possession—
30 Mad. 524 ; 43 Mad. 712 ; 23 Bom. 525 ; 34 Mad. 543.
3.
The charge being on the property, it does not matter if there are several purchasers who
had agreed among themselves to pay in a certain proportion.
4.
The claim for a charge
for unpaid price, not only subsists against the original buyer, but is also available
against a transferee without consideration or a
transferee with notice of non-payment.
5.
The charge is not only for the purchase money but also for interest on the purchase money.
6.
The right to a charge for interest commences only from the date on which possession has
been delivered. The right to include interest for the purposes of a charge on the property
before possession has been delivered depends
upon the equities and circumstances of the case.
Illustration.—If
the purchaser retains part of the purchase money as security for the seller discharging
an Encumbrance,
he is not liable to pay interest.
7.
English and Indian Law.
(i) Under the English Law the seller has a lien from
the date of the Contract.
(ii) Under the Indian Law the charge begins from the
date of the conveyance.
(iii) The reasons for this difference :—
(a)
Under the English Law, the seller parts with the estate as a result of the contract.
(b) Under the Indian Law, the seller parts with it as a
result of conveyance.
(c) The result is the same, for both give the right to
proceed against the property. The only difference is that the English lien being
equitable, can be moulded by equity to suit circumstances. While the Indian charge being
statutory, is rigid and must conform to the terms of the statute.
BUYER'S RIGHTS
1.
BEFORE
CONVEYANCE
1.
Section 55 (6) (b)—To claim a charge on the
property for purchase money paid before conveyance.
1.
The clause as worded makes no sense. It is in two parts. If the clause " unless he has improperly declined to take delivery " which is negatively put was put positively to read " if
he has properly declined " then there is no distinction between the two
clauses.
2. But there is a distinction between the two parts
which is a distinction arising from burden of proof. Under the first part, the purchaser
is entitled to certain rights which he can enforce " unless he has improperly declined to take delivery "
which means that he is to lose those rights if the seller proves that he, the purchaser,
has improperly declined to accept delivery. Under the second part of the clause, the
purchaser gets certain additional rights which he can claim, only if, he can show that " he
has properly declined to take delivery " and the burden of showing it will be upon him.
3.
Under this clause, a buyer has a right to a charge for three things:—
(i)
for
the amount of purchase money properly paid,
(ii) for
the earnest if any,
(iii)
for the costs awarded to him.
4.
Charge for Purchase money paid.
1.
This charge attaches from the moment the buyer pays any part of the purchase money.
2.
Charge for purchase money is lost only when the
seller proves that the buyer has improperly declined to take delivery. The burden of proof
is upon the seller.
5. Charge for
earnest and cost.
(1)
There is a possibility for a charge in respect of these two. But this possibility will be
realised only if the buyer proves that he has properly declined to take delivery. The
burden of proof is upon the buyer.
6. Earnest and
Part Payment of Purchase money.
(1)
What is stated above about charge in respect of earnest applies only if the money paid is
paid as earnest.
(2) Money paid by a buyer before conveyance serves
two purposes : (1) It goes in part payment of the purchase money
for which it is deposited. (2) It is security for the performance of the contract. In the
latter case it is earnest. In the former case it is instalment.
(3)
This difference is important because whether there would be a charge or personal liability
or there would not be, would depend upon whether the payment made is Instalment or Earnest.
(i)
If it is earnest—There
is no charge (except in the case of a buyer who proves that he has properly declined to
take delivery). Earnest is wholly lost and there is not only no charge but there is even
no personal liability.
(ii) If it is part payment—There is a charge unless
seller shows that the buyer has improperly refused to take delivery. Part payment is never
wholly lost. If it fails to create a charge, it remains as a personal liability of the
seller.
(4)
Whether it is part payment or earnest is matter of contract or intention.
7.
The purchaser's charge can be enforced against the seller and all persons claiming under
him.
8. (1)
The buyer loses his charge :—
(i)
By his own subsequent default
(ii)
By his improperly refusing to take delivery.
(2) Earnest money—There are two purposes underlining Earnest:—
(i)
It goes in part payment of the purchase money.
(ii)
It is a security for the performance of the contract. It becomes part of the purchase
money if the contract goes through. It is forfeited, if the contract falls through by
reason of the fault or failure of the purchaser.
II. after conveyance
1.
Section 55 (6) (a)—To claim increment. 1.
This must be so, because, after conveyance he is the owner.
(Page
left blank—ed.)
1.
As far as possible, a sale ought to be free from Encumbrances. To provide sales being made free from
Encumbrances T.
P. Act contains two sections which make it possible. They are Section 56 and Section 57.
***
SECTION
I
THE
NATURE OF A MORTGAGE
1. definition.
1. Section 58 defines what is a mortgage. According
to the section, there are three ingredients of a mortgage transaction :—
(i) The transfer of interest. (ii)
In specific immovable
property.
(iii) For the purpose of securing the payment of money
advanced by way of a loan.
II. EXPLANATION
OF THESE INGREDIENTS.
(i) Immovable property is not an essential ingredient
of mortgage:
(1)
Under the English Law, all kinds of property, personal or real, can be made the subject of
a mortgage. The Real estate may be corporeal or incorporeal and the personal estate may be
in possession or in action. The Estate may be absolute or determinable
i. e.
for life :
it may be legal or equitable. Not only any kind of property may be the subject-matter of a
mortgage but any interest in it may be mortgaged, whether such interest is vested,
expectant or contingent.
(2)
The Transfer of Property speaks only of immovable property in relation to mortgages. This
gives the impression that the law does not recognise the mortgage of a movable
property. This would be a mistake. The Transfer of Property Act merely defines and amends
the law relating to property. It does not consolidate the law. It is, therefore, not a
complete or exhaustive code of law relating to mortgage.
(1) Mortgages
of movables
are recognised in India.
9 C. W. N. 14 : 8 Bom. S. R. 344.
(4)
Law by which mortgages
of movables are governed.
The Transfer of Property Act makes no provision: The
Indian Contract Act makes no provision. Consequently the principles of English Law will be
applicable to such mortgages.
34 Cal. 223
(228): 27 Bom. S. R. 1449.
(5)
Mortgage of movable property may be effected without writing.
(6)
Mortgage of an actionable claim—in writing—though movable by reason of Section
130 T.
P.—37 Bom. 198. (P. C.) Deposit of
insurance policy.
(ii)
Transfer of an Interest :
1. It means the transfer
of some right belonging to the mortgagor in
respect of the property.
2.
Ownership consists of a bundle of rights, such as, right to possess, right to enjoy, sell,
etc.
3.
It is enough if one of these rights is transferred. The right transferred may vary :—
(i) It may be the right to sell. (ii) It may be the
right to enjoy. (iii) It-may
be the right to own.
4.
The nature of the right transferred is matter of no consequence so long as some right is
transferred.
III. THE PURPOSE
MUST BE SECURING THE PAYMENT OF MONEY
ADVANCED.
1.
The transfer of interest is by way of Security.
The idea of a Security involves two things. There must be a debt
or pecuniary liability and secondly there must be some property pledged for the meeting of
that liability.
1. The
purpose of the transfer must be securing of the debt. A transfer made for the purpose of
securing a debt must be distinguished from a transfer, the purpose of which is to
discharge a debt.
II Bom. 462.
3.
The right transferred
must be to enable the man to recover the debt. The transfer must not extinguish the debt.
If the effect of the transfer is to extinguish the debt then there is no mortgage.
Illustration.—
II Bom. 462 Abdulbhai vs. Kashi
In
1862, A in consideration of Rs.
150 passed to B
a writing called Karz Rokha (or debt-note). It proved (inter alia)
that B should hold and enjoy a certain piece of
land belonging to A for twenty years, that at
the end the land should be restored to A free
from all claims in respect of principal or interest.
Held, not a mortgage.
25
All. 115.
MORTGAGE
COMPARED WITH OTHER FORMS OF ALIENATIONS
MORTGAGE
AND SALE
1.
Sale is defined in Section 54—It is a transfer of ownership for a price. The price is
not a loan and the transfer is not a transfer of an interest but is an absolute transfer
of ownership.
2.
In a mortgage, the money paid is a loan and the transfer is a transfer of an interest
only.
3.
In a breach of a contract of sale, the rights are the rights of a vendor and purchaser
while the contract is a contract of mortgage the rights are those of a mortgagor and
mortgagee.
4.
In sale, the property is transferred absolutely. In mortgage, the property serves only as
a security for the repayment of a debt.
MORTGAGE
AND OTHER KINDS OF SECURITIES
1.
There are four kinds of securities (1) mortgage, (2) pledge, (3) lien and (4)
hypothecation or charge.
It
is important to note the distinction between mortgage and other kinds of securities.
1.
mortgage and pledge
1.
The bailment of good as security for payment of debt or performance of a promise is called
a '
pledge '
—Section 172 Indian Contract Act.
2. In a mortgage, general ownership in the property
passes to the mortgagee and the mortgagor has only a right to redeem. In a pledge,' only ' a
qualified or special property ' passes to the pledgee, the general ownership
remains in the pledger.
3.
Delivery of possession of the property pledged to the pledgee is essential. But delivery
of possession is not essential to a mortgage.
4.
The property which is once pledged cannot be pledged a second time, because, no possession
can be granted to the second pledgee, while property which is mortgaged once to one person
can be mortgaged again to others subsequently.
5.
Pledge can only be of
personal
property. Mortgage can be of both personal as well as real property.
Mortgage
and Liens
1.
A lien is a kind of security which is created by the operation of
the law. Lien is a right created by law and not by contract to retain possession of the
property belonging
to another until certain demands are satisfied.
2.
The law on the subject of lien is scattered in many statutes of the Indian Legislature. E.
g. Contract Act Sections 170-General-171-Bankers Solicitors, etc., 221-Agent's lien. Sale of goods 47, unpaid Vendor's lien. T. P. 554 :
55 (6) seller's and buyer's lien.
3. Lien does not create general ownership as a
mortgage does, not even qualified property as in a pledge—only right to retain possession.
4. Both mortgagee and pledgee can sell: but lien
holder cannot.
Mortgage
and a charge
1.
A charge is defined in Section 100. There are two elements in a charge:
(1)
There is a pecuniary liability.
(2)
Immovable
property is made security for the discharge of that pecuniary liability.
2. In a mortgage there are three elements :—
(i)
There is pecuniary liability.
(ii) Immovable property is made security for the
discharge of that pecuniary liability.
(iii) There is a transfer of an interest in that property
in favour of the creditor.
3.
In a charge there is no transfer of interest. There is only burden.
35
Cal. 985.
4.
The difference between mortgage and charge is material.
1.
A mortgagee can follow the mortgaged property in the hands of any transferee from the
mortgagor. While a charge can be enforced only against transferee with notice—
33 Cal. 985.
§
DIFFERENT CLASSES OF MORTGAGE
1. The section enumerates six classes of mortgage :—
(ii) Mortgage
by conditional sale.
(vi) Anomalous
mortgage.
2.
Characteristics of the different classes of mortgage.
(i)
Simple Mortgage
1. A
Simple mortgage involves two things :
(i)
A personal obligation, express or implied, to pay.
(ii)
The transfer
of a right to cause the property to be sold.
Personal
obligation
1.
When a person accepts a loan, there is involved a personal liability to pay, unless there
is a covenant to pay out of a particular fund.
10
Cal. 740;22 Cal. 434;16 Cal. 540,13 Mad. 192; 15 Mad. 304 ; 27 Mad. 526 : 86.
1.
A loan may be a secured loan or unsecured loan.
2. Every
unsecured loan involves a personal obligation to pay.
441. A. 87.
3.
The only case of a loan in which a personal obligation to pay is negatived, is where there
is a covenant to pay out of a particular fund.
Cases. 10 Cal. 740 ; 22 Cal. 434 ; 16 Cal. 540 ; 13 Mad. 192 15 Mad, 304 ; 27 Mad. 526 : 86.
4.
Whether a loan, for which there is security, involves a personal obligation to pay is a
question of construction. Two propositions may be stated as those of law :—
(i) Personal liability is not displaced by the mere
fact that security is given for the repayment of the loan with interest.
(ii) The nature and terms of security may negative any
personal liability on the part of the borrower.
5.
In a simple mortgage, there is always security given for the loan. The loan is a secured
loan. But nature and terms of the security must not negative the personal liability of the
mortgagor. A personal covenant to pay is implied in and is an essential part of every
simple mortgage.
Cases. 22 All. 453 (461) ; 29 Mad. 491 ; 30 All. 388.
6.
In the absence of such a covenant, the security would be a mere charge.
Cases. 42 All. 158 (164)=46 1. A. 228; 52 All. 901.
II.
Right to cause the property to be sold.
1.
This is aright in rein although it can only be enforced by the intervention of the Court,
as the words, '
cause to be sold ' indicate.
2.
The transfer of this right may be express or it may be implied.
(ii)
Mortgage by Conditional Sale
1.
Characteristics.
(1)
The transfer is by way of sale. It is a transfer of ownership.
(2)
The difference between sale and mortgage by conditional sale is that, in sale the transfer
is absolute while in mortgage by conditional sale, it is not absolute but is subject to a
condition.
(3) The condition may take three forms :—
(i) That
on default of payment of mortgage money on a certain
day, the sale shall become absolute.
(ii) Then
on such payment being made, the sale shall become void.
(iii) (iii)
That on such payment being made, the buyer shall transfer such
property
to the seller.
2.
A mortgage by conditional sale and a sale with a condition of repurchase have a very close
resemblance. In both cases, there is a right of reconveyance :—
(1)
But they are different
in the nature of the terms on which the right to reconvey can be exercised
vary.
(2)
If it is a sale with
a condition of repurchase then :—
(i)
The right is personal and cannot be transferred.
(ii) The right can be enforced on strict compliance with
the terms laid down by the condition of repurchase.
Cases. 10 Cal.
30 ;
6 All. 37 ;
21 Bom. 528.
(3)
If it is a mortgage by conditional sale, then—
(i)
The right to reconveyance is not personal but is a right in term and can be exercised by
the transferee.
(ii)
Time will not be treated as of the essence.
3.
What is it that distinguishes sale with a condition
of repurchase
and mortgage by conditional sale ?
(1)
In a mortgage by conditional sale, the transaction notwithstanding the form, remains a
lending and borrowing transaction. The transfer of land, although it is in the form of a
sale, in fact it is a transfer by way of security.
(2) In a sale with a condition of repurchase, the
transaction is not a lending and borrowing arrangement. It is not a transfer of an
interest. It is a transfer of all rights. It is not a transfer by way of security. It is an absolute transfer
reserving only a personal right of repurchase.
What is the test for determining whether a
transaction is a mortgage ?
(1)
No particular words or form of conveyance are necessary to constitute a mortgage. As a
general rule, subject to very few exceptions, where a transfer of an estate is originally intended as a security
for money, it is a mortgage and where it is not so originally intended, it is not a
mortgage.
(1) It
is not the name given to a contract by the
parties that determines the nature of the transaction. A document may be held to be a sale
although it is called a mortgage by the parties.
2
Bom. 113.
(2) It
is the jural
relation,
constituted by it, that will determine whether the transaction is a mortgage or not.
2
Bom. 462.
4.
How to find what the intention of the parties was ?
By finding out how they have treated the money
advanced ? If they have treated it as a debt, then it is
mortgage. The criteria adopted by the Courts are—
(i) The existence of a debt
(ii) The period of repayment, a short period being
indicative of a sale and a long period of a mortgage.
(iii) The continuance of the mortgagor in possession
indicates a mortgage.
(iv) The price below a true value indicates a mortgage.
In
applying these tests, the Courts put the onus on the party alleging that an ostensible
sale-deed was a mortgage, and in a case of ambiguity, lean to the construction of a
mortgage.
5. Is oral
evidence of intention admissible ?
1.
Before the Indian Evidence Act was passed, oral evidence and other instruments were freely
admitted to prove this intention. But this practice was condemned by the Privy Council.
2.
After the passing of the Indian Evidence Act, the question was governed by Section 92.
3. Section 92 excludes oral evidence to
contradict a written document. The Indian Courts, never
the less, on the authority of Lincoln vs. Wright (1859) 4 De G. & J. 16
admitted evidence of acts and conduct of parties to show, that a deed which purported to
be an absolute conveyance was intended to operate as a mortgage.
4. In 1899, the Privy Council definitely
ruled in Balkishen v/s. Legge= 22 All. 149 =27/. A. 58. that
the rule in Lincoln vs. Wright had no application in India.
5.
The result is that, the Courts are definitely limited to the document itself in order to
ascertain the intention of the parties.
The
question is not what the parties meant, but what is the meaning of the words they used.
Importance
of the Proviso.
1. The
condition must be embodied in the same document.
Points
to be noted.
1.
Only means that in determining
the question if the condition is contained in another document Court cannot take into consideration
in determining intention.
2.
But, even if, it was contained in the same document, it is necessarily a mortgage by
conditional sale and not a sale with the condition of repurchase.
3.
The question of construction still remains.
(iii) Unsufructuary Mortgage
1.
characteristics.
(i)
Delivery of possession or undertaking to deliver possession.
(ii) Authority to retain such possession until payment
of mortgage-money.
(iii)
Authority to receive
the rents and profits and to appropriate the same in liue
of interest or in payment of the mortgage-money.
note.—there
is no personal obligation to pay.
(iv) English Mortgage
I.
characteristics
(i)
There is a personal obligation to repay by the mortgagor on a certain day.
(ii)
The transfer of the mortgagee is absolute.
(iii)
The transfer is subject to the proviso that the mortgagee shall reconvey the property on
payment.
II.
This closely resembles the conditional mortgage. Difference.
(i)
In the English Mortgage the sale is absolute while in the mortgage by conditional sale the
sale is ostensible.
Query. How
can it be a mortgage if the sale is absolute ? This seems to conflict with the definition of
mortgage which is transfer of an interest.
Difference in practice merely means this: that in
English Mortgage, the mortgagee is entitled to immediate possession. While in the case of
a mortgage by conditional sale, the right to possession depends upon the terms of the
mortgage.
(2)
In English Mortgage, there is a personal obligation to pay. In a conditional mortgage,
there is no such right.
REQUISITES OF A MORTGAGE BY DEPOSIT OF
TITLE DEEDS.
1.
Debt.
1.
A debt has been defined as a sum of money due now even though payable in the future, and
recoverable by action—(7922) 2 K.B.599 (617).
note.—as
to
difference
between a debt due by statute and debt due by
contract—(1922) 2 K. B. 37. There is no necessity of a promise to pay in
order to render the
money recoverable when
the
debt is a statutory debt.
2.
The debt may be an existing debt or a future debt. The deposit may be to cover a present
as well as future advances—50
I. A. 283 ; 17 All. 252 ; 17 All. 252 ;25 Cal. 611.
3. The
debt may be a general balance that might be due on an account.
2
Mad. 239 P. C.
(i)
Title deeds
1.
It has been held in England that it is sufficient if the deeds deposited bona fide
relate to the property or are material evidence of
title, and that, it is not necessary that all the deeds should be deposited. (1872) 8 Ch. App. 155.
2.
These cases have been followed in India. 59 Cal. 7
81.
3. But Page c.f. in 11 Rang
239 F. B. held that the documents must not only relate to
the property but must also be such as to show a prima facie or apparent title in the depositor.
4. If the documents show no kind of title, no
mortgage is created—Tax receipt—Plan—not documents of
title.
5.
If the deeds
are lost, copies may be deposited.
(ii) If the deeds are already deposited by way of
mortgage, they can, by oral agreement, be made a security for further advance. It is not
necessary that they should be handed back and redeposited.
17
All. 252.
25 Cal. 611.
III.
intention.
1.
The intention that the title-deeds shall be the security for the debt is the essence of
the transaction.
2.
Mere possession is not enough without evidence as to the manner in which the possession
originated so that a contract may be inferred.
23
1. A. 106; 38 Bom. 372.
I
Rang. 545.
3.
If it is in contemplation of the parties to have a legal mortgage prepared and if the
title-deeds are deposited for that purpose only,
the deposit does not create an equitable mortgage.
4.
But although the deposit is for the purpose of the preparations of a legal mortgage, there
may also be an intention to give an immediate security, in which case the deposit creates
an equitable mortgage.
5. The question is whether mere possession coupled with debt does not raise an inference that it is
a mortgage ? There is a difference of opinion but the better opinion seems to be as between
creditor and debtor possession coupled with debt raises a presumption in favour of a
mortgage.
IV.
territorial restrictions.
1.
This kind of equitable mortgages can be created only in certain towns.
2. The question is, to what does the restriction
refer ?
Does it to the place where the deeds are delivered ? or does not refer to the place where the property
mortgaged is situated ?
It is held that the restriction refers to the place where the deeds are delivered and not
to the situation of the property mortgaged.
Cases.
14 All. 238. 231. A. 106.
It
is not necessary for the property to be situated in the towns mentioned.
(vi)
Anomalous Mortgages
1. Any mortgage, other than those specified, is
called an anomalous mortgage. It is a mortgage which does not fall within any of the other five classes enumerated.
2. Anomalous mortgages take innumerable forms moulded either
by custom or the caprice of the creditor—some are combinations of the simple
forms—others are customary mortgages prevalent in particular districts, and to these
special incidents are attached by local usage.
What
is it that distinguishes different kinds of mortgage.
It
is the nature of the right transferred which distinguishes the mortgage.
(1)
In a simple mortgage, what is transferred is a power of sale which is one of the component
rights that make up the aggregate of ownership.
(2)
In a unsufructuary mortgage, what is transferred is a right of possession and enjoyment of
the usufruct.
(3)
In a conditional mortgage and in an English mortgage, the right transferred is a right of
ownership subject to a condition.
(4)
In a simple mortgage and English mortgage, there is a personal obligation to pay.
(5) In an usufructuary mortgage and mortgage by
conditional sale, there is no personal obligation to pay.
What
is it that is common to all mortgages.
1. A mortgage is a transfer of an interest in
specific immovable property as security for the repayment of a debt.
2.
The existence of a debt is therefore a common characteristic.
3.
It is said that this cannot be so because in a conditional mortgage or in an usufructuary
mortgage there is no personal covenant to pay.
4.
The reply to this is, a debt does not cease to be a debt. The remedy of an action for debt
does not exist. The remedies for the recovery of debt may differ without the transaction
ceasing to be a transaction for debt.
An
ordinary mortgage of land may be viewed in two different aspects:
(1) Regarded as a promise by the debtor to repay the
loan, it
is a contract creating a personal obligation.
(2)
It is also a conveyance, because it passes to the creditor a real right in the property
pledged to him.
Out
of this double aspect, many questions arise.
Q. I.—By what law the validity of a mortgage of
land situated abroad should be governed ?
It is now settled that it is governed by the
law of situs, and no distinction is recognised
between an actual transfer and a mere executory contract.
Q. II.—What is the situs of the secured debt—Is the debt to be
regarded as situated in the country where the debtor resides, or where the land on which
it is secured is situated ?
The
Privy Council says "
It is idle to say that a debt covered by a security is in the same position with one
depending solely on the personal obligation of the debtor ".
III
REQUISITES
OF A VALID MORTGAGE
This requires the consideration of the following
topics :
I.
Formalities with which a mortgage must be executed.
II.
The proper subject-matters of a mortgage.
III.
The capacity to give and to accept a mortgage.
IV.
Contents of a mortgage-deed.
I
FORMALITIES WITH WHICH IT MUST BE EXECUTED
Section
59.—
1. Except in the case of mortgage by a deposit of
title-deeds, every mortgage created securing the repayment of Rs. 100 or more as principal money must, under the T. P. Act,
be effected by a registered
instrument, signed by the mortgagor and attested by at least two witnesses.
2.
Where the principal money is less than Rs. 100, a mortgage may be created either by such
an instrument or except in the case of simple mortgage by delivery of possession of the
mortgaged property.
3.
If the principal is above Rs. 100, the
transaction of mortgage must be in writing i.e. it must be by a deed and the deed must be:—
(1)
Signed by the mortgagor.
(2)
Attested by at least two witnesses.
(3)
Registered.
4. If it is less than Rs. 100 no writing is
necessary. Parol agreement is enough in the case of :—
(1)
Simple mortgage.
(2)
Conditional mortgage.
(3)
English mortgage.
(4)
Usufructuary mortgage.
Parol
agreement plus transfer of possession.
4. We
have only to consider mortgages where the principal is above Rs.
100.
(1) §
SIGNATURE
General
Clauses Act 1897. Section 3 (52).
1.
The signature may be made by means of types or by a facsimile. 25 Cal.
911. Such person having a name stamp used by servant.
2.
It may be the mark of an illiterate person. 41 Bom.
384 mark of a dagger.
3.
But a literate person cannot sign by making a mark. Confession not signed the accused was
literate. 32 Cal. 550.
Signature
includes a mark in the case of a person unable to write his name.
(2)
§ ATTESTATION
1.
Attestation.—To attest means to bear
witness to, affirm the truth or genuineness of, to testify, certify. Attestation
means the verification of the execution of a deed or will by the signature in the presence
of witnesses. Attesting witness is a witness who signs in verification.
2. That being so question is, must the attesting
witness be present at the execution of the instrument or a mere acknowledgement of
execution by the mortgagor to a witness who afterwards subscribes his name is enough to
satisfy the requirements of law in respect of attestation ?
3.
The Privy Council has laid down that the attesting witness ought to be present at the
execution of the instrument and a mere acknowledgement will not suffice.
39
I.A.
218 ;
35 Mad. 607 which overrule the Allahabad and Bombay decisions to the contrary—27 Bom. 91 and 26 All. 69.
§
ATTESTATION OF PARDANASHINS.
4. The same rule was applied. The signature of the Pardanashin
lady must be in the presence of the witness otherwise he cannot be said to be an attesting
witness.
Case
Law. 451.
A. 94.
A
mortgage-deed for over Rs. 100 purported to be signed by a Pardanashin lady on behalf of her son, a minor and to be
attested by two witnesses. It appeared from the evidence that the lady was behind the parda
when the deed was taken to her for signature. The witnesses did not see her sign it, but
her son came from behind the parda and told them that it had been signed by his mother;
they thereupon added their signatures as witnesses :—
Held that the deed was not "
attested " within the meaning of section 59 of the T. P. Act.
42
1. A. 163
A
mortgage-deed purported to be executed by two pardanashin ladies. It appeared from the
evidence of two of the attesting witnesses that they saw the hand of each executant
when she signed the deed, and that although they could not see the faces of the executants, they heard them speak and recognised their voices :—
Held that the deed was duly attested in accordance
with the T. P. Act.
5.
The Law is now changed and attestation on acknowledgement of his signature by the
executant is good—See Definition Attested
in section 3, T. P. Act as amended in 1926.
(3)
§ REGISTERED
(Page
left blank—ed.)
*
*
*
(Earlier
portion not found—ed.) to operate immediately, it is not necessary that there should
be a formal delivery or even that the document should go out of the possession of the
party who executes it.
illus—Exton
vs. Scott. (1833) 6 Simons 31.
A certain person having received moneys
belonging to another without any communication with him executed in his favour a mortgage
for the amount. The mortgagor retained the
deed in his custody for several years and then died an insolvent. After his death the
document was discovered in a chest containing his title-deed. It was contended that there
was no binding mortgage, because there had been no delivery of the deed. But the
contention is overruled, on the ground that there was no evidence to show that the
deed was not intended to operate from the moment of its execution.
6.
There seems to be an idea that if the deed is delivered to the other party, it must have
immediate operation and cannot in point of law
be delayed in its operation. But it is now established that evidence is admissible to show
the character in which the deed is delivered to a person though he is himself a party
taking under it and not a stranger. (1897) 2 Ch.
608.
7.
Where an instrument is to come into operation, not immediately, but only upon the
performance of some condition, it is known as an escrow
which simply means a scrawl, or writing, that is not to take effect till a condition
precedent is performed.
8. Mere execution is not enough. There must be
intention to give it immediate effect. Delivery means an intention to give immediate
effect. That intention is independent of the process of delivery or non-delivery.
9.
Where a
document
intended to be executed by one or some only and others refuse to complete it the question
whether it is binding on those who have executed it, is one of the intention of the
parties to be gathered from the facts of each.
§
MATERIAL ALTERATION IN A DEED—EFFECT OF
1.
A material alteration in a deed made without the
consent of the mortgagor and with the privity and knowledge of the person who relies upon
it, would altogether destroy the efficacy of the deed.
2.
If blanks are left to be filled up with merely formal matters the mortgagee may fill them
up without imperilling his rights.
(1905)
2 Ch. 455.
2. The
question what constitutes a material alteration within the meaning of the rule has
given rise to some difference of opinion.
10 C. W. N. 788 (of Mukerji J.)
Any
change in an instrument which causes it to speak a different language in legal effect from
that which it originally spoke, which changes the legal identity or character of the
instrument either in its terms or the relation of the parties to it, is a material change,
or technically, an alteration, and such a change
will invalidate the instrument against all parties not consenting to the change.
An
addition of a party to a contract constitutes a material alteration.
§
IMPORTANCE OF THE THREE FORMALITIES
1.
The absence of any of three formalities is fatal to the validity of the transaction. The
word is only.
2. Not only the formalities must exist but they must
be valid, i. e.,
in accordance with law.
3.
Not only must there be signature but the signature must be valid.
4. Not only must there be attestation but the
attestation must be valid. If attestation is invalid, the deed cannot operate as a
mortgage—e. g. attestation without the presence or acknowledgement
by the executor.
5.
Not only must there be registration but the registration must be valid. Thus
(i)
If the property is so incorrectly described that it cannot be identified—18
Cal. 556/4.B.
(ii) When the deed is registered in a circle in which
the property is not situate.
29
Cal. 654.
(iii) Where the deed is not presented for registration by
the proper person the mortgage is invalid.
581.
A. 58
Two
other questions have to be considered in connection with the subject-matter of
Formalities.
I
IS EXECUTION OF THE DEED ENOUGH TO GIVE EFFECT TO THE MORTGAGE ?
1.
It is hardly necessary to state that the mere execution of a deed is not enough if it is
not intended to operate as a binding agreement.
2.
This is expressed in English Law by the formula that a deed must be delivered.
3.
This may not be clear unless one understands what meant by 'delivered'.
There is nothing mysterious about the delivery of a deed which does not represent any
technical process, but only indicates that the instrument is to come into immediate
operation.
4.
Shephard
in his Touchstone speaks of delivery as one of the requisites of a good deed
and adds that it is a question of fact for the jury.
CASE
LAW
I.
SUIT
AGAINST
SECRETARY OF STATE
(1906)
I K.B
.613; 5 Luc.
157; 37Mad. 55.
II.
POSITION OF THE CROWN
1920A.C.508 ;1932A.C.28 ;1929A.C.285 ;8App.cases 767 ; 8 M. I. A. 500 ; 1903 App. cases 501.
(1792)
2 Ves. 60 ; 13 M. P. C. C. 22 ;
(1906) I K. B. 613.
British
India
= Section 3(17) General Clauses Act, 1897. Whole of
British India = includes the Scheduled Districts. 52 Mad. 1.
Any newly acquired territory becomes an annexation
part of British India—Onsley vs. Plowden
(1856—59) I Bom. 145.
But
it retains its laws until altered by the Crown or Legislature. 19 Bom. 680 (686) following I M.I. A. 175/271.
Acts
such as Stamp Act passed by the Indian Legislature have been extended to many places which
though outside British India are under British Administration (e.
g.
Bangalore,
Hyderabad assigned districts:
Baroda
cantonment:
Mount Abu, etc.) by notifications under Sections 4 and 5 of the Foreign Jurisdiction and
Extradition Act, 1879, and the Indian (Foreign Jurisdiction) Order in Council, 1902.
§
CAPACITY TO GIVE OR TAKE A MORTGAGE
1.
A mortgage
is a transfer of property and also a
contract. It must therefore satisfy the requirements as to capacity laid down for a valid
transfer of property and for a valid contract.
§
REQUIREMENTS AS TO CAPACITY FOR A VALID TRANSFER OF PROPERTY
1.
Transfer of property means an act by which a living person conveys property to one or more
other living persons or to himself or to himself and one or more other living persons
—Section 5.
2.
A mortgage being an act of transfer of property, the parties to an act must be living
persons.
3. When it is said that both persons must be living it
is obvious that the intention is to make two distinctions :—
(i) Between a transfer inter vivos
and a will. (ii)
Between a transfer and the creation of an interest (Sections 13, 14, 16 and 20).
4.
A will operates from the death of the testator.
A mortgage therefore cannot be created by a will. It must be created inter vivos. A will does not operate as a
transaction between two living persons.
5.
A mortgage is a transfer of an interest. Sections 13, 14, 16—20 permit that an
interest may be created in favour of a person not in existence at the date of transfer.
But a mortgage is not the creation of an interest, but it is the transfer of an interest.
§
Living.
1.
What is the meaning of the word Living ? Does it mean one who has not suffered natural death
or does it mean that a person has not suffered civil death ? There may be no natural death although there may be civil
death.
Where a person enters into a religious order
renouncing all worldly affairs, his action is tantamount to civil death.
Sannyasi—Mulla.p.ll3.
Buddhist Monk—7. Rang. 677. 1. B.
2. A person who is civilly dead is not dead for the
purpose of the T. P. Act.
3. Living
as defined in explanation 3 to Section 299, I. P. C. would indicate that some part of its body must have
been brought forth. But under the Hindu Law a son conceived is equal to son born—Mulla
p. 319.
A person may be living for the purpose of the Hindu Law and may not be for the purpose of
T. P. Act.
16
Mad. 76
;
37 All. 162 ;
58 Mad. 886.
*[f3]
4. Another case of a person in a like position is
that of a convict. A convict under the English Law, since he cannot enter into a contract
or dispose of property, has no power to lend or borrow money on mortgage ; but the
administrator of a convict may mortgage any part of the convict's property.
A convict is defined in Section 6 of the Forfeiture Act 33 and 34 Vict. Ch. 23, 1870 : to mean any person against whom judgement of death,
or of penal servitude, shall have been pronounced or recorded by any Court of competent
jurisdiction in England, Wales or Ireland upon any charge of treason or felony.
3. What
about the position of a convict in India.
* (Page left blank in the Ms—ed.)
§
PERSON
1.
The word "
person "
according to the General Clauses Act includes any company or association or body of
individuals whether incorporated or not.
2. That the word person includes a "
juristic person " such as a corporation was a long established view.
But it is now made clear by a special proviso which was added to Section 5 of the T. P. Act
in 1929.
3.
A corporation, which has power to acquire and hold land has also impliedly
power to mortgage it for purposes of carrying out the object for which it was created. The
powers of statutory corporations are generally speaking regulated by the act of
incorporation, but where borrowing is necessary for the purposes of the corporation, it is
not forbidden by the T. P. Act because it is a "
person ".
4.
By Hindu Law an Idol is recognised as a juristic
person capable of holding property.
311. A. 203.
But the possession and management of the property of
the idol are vested in the Sebait. But
as the ownership belonged to the idol and as the idol is a juristic
person and therefore a living person, it can be a party to the mortgage.
§
REQUIREMENTS AS TO CAPACITY FOR CONTRACT
1.
This is dealt with in Section 7. Two things are necessary undersection?. (i) Person must be competent to contract
(ii) Person must be entitled to transferable property or
authorised to dispose of transferable property.
(i)
§ COMPETENT TO CONTRACT
1.
Section 4 says that the Chapters and Sections of the T. P. Act which relate to contracts
shall be taken as part of the Indian Contract Act.
2.
Competency to contract must therefore mean competency in accordance with the Contract Act.
Section
11.
Every person is competent to contract who is of the age of majority according to the law
to which he is subject, and who is of sound mind and is not disqualified from contracting
by any law to which he is subject.
3.
Disqualification of an Insolvent.
A word may be said as to the capacity of an
Insolvent to deal with any property subsequently acquired by him. Now it is settled Law
that an insolvent, who has not received his final discharge, cannot create a mortgage on immovable
property acquired by him. 17 Mad. 21 (But
See 8 Cal.
556).
§ ENTITLED
1.
The question is whether entitled means entitled
as a full owner or as a limited owner.
2. That a full owner has the capacity to mortgage is
obvious. The question is whether a limited owner has the capacity to mortgage ?
3.
Person holding property on trust for sale without express power to mortgage.
It
may be laid down generally that a trust for sale containing a direction for absolute
conversion does not authorise a mortgage.
4.
Partner—can mortgage partnership property
to secure partnership debt.
5.
An executor or administrator under the Indian Succession Act is competent to transfer.
6. Hindu widow, a Member of a joint family and the Karta of a
joint family, the Trustees of Hindu Religious Endowments.
7.
The last two having their power and necessity.
§
TRANSFERABLE PROPERTY
1.
The person whether he is a full owner or limited owner, the subject-matter must be
transferable property.
2. What is transferable property ?
(i) Section 6 says—Property of any kind may be
transferred, except as otherwise provided by this Act or by any other law. Every kind of
property is transferable unless its transfer is prohibited by Law.
(ii)
The exceptions fall under two heads: (a) Merely personal rights cannot be transferred.
(b) An interest
in property restricted in its enjoyment to the owner personally cannot be transferred.
3. This shows that there may be a mortgage of movable property.
The T.
P. Act does not deal with it because the contract deals with it as a pledge. It does not
prohibit.
§
THE CONTENTS OF A MORTGAGE-DEED
It
is desirable that the mortgage-deed should specify certain particulars.
1.
The debt or engagement, which is the subject-matter of the security, should be specified
in the deed, otherwise the mortgagor may substitute one debt for another.
2. The time for the payment or performance must be
specified in the deed. A stipulation that whole will be payable on payment of instalment
3.
The deed should also contain a covenant to pay because there are various kinds of
mortgages in which no debt is implied.
4.
The property which is given in mortgage should be sufficiently described. It is true,
extrinsic evidence is always admissible for the purpose of identifying any property, where
the description is either indefinite or even actually misleading.
Q.—Whether a mortgage can be created on a person'
s
property, if such property is not specifically described ?
Whether a general mortgage
is valid ?
Q.—Whether
a general pledge of all the property that the debtor then has, without any further
distinction, can create a mortgage under our Law.
1.
Distinction must be made between an instrument which contains sufficiently apt words to create a security and the one in which the debtor merely
agrees that, if the money is not repaid, the obligee would be
at liberty
to recover the debt
from the whole of the debtor's
property.
In
the latter case, if they stand alone,
merely give the obligee the ordinary right of a creditor to levy execution on the property
of his debtor and do not create any pledge.
Supposing
the case to fall under the first head, is such hypothecation good to create a mortgage.
In
India, the validity of such securities has been questioned on the ground that a general
hypothecation is too indefinite to be acted upon.
(1)
It is said that such hypothecations sin against the canon that a contract form must be
definite and reliance is placed upon Section 29 of the Contract Act and Section 93 of the
Evidence Act.
(2)
Vagueness is a misleading term. It may mean (1) either that the language is so indistinct
that it cannot be understood or (2) that the property to which it relates is not specified
in the contract.
(3)
Indefiniteness is, however, frequently confounded with what has been called wideness.
The
subject-matter of a contract may be wide and yet
definite. On the other hand it may be narrow and yet indefinite.
If
a man says " I mortgage all my landed property ", it
is wide but definite.
If a man, who has several houses, says ' I mortgage
one of my houses ', the description is not wide but is still
indefinite.
(4)
The word '
specific '
in the T.
P. Act is used to distinguish it from general and unless the property is specified in the
deed, there can be no mortgage in Law.
(5)
The property must be specified although the Law does not say that it must be specified in
any particular way.
***
THE
RIGHTS AND LIABILITIES OF THE MORTGAGE
INTRODUCTION
1.
The property which is the subject-matter of the mortgage is subject to the rights of the
mortgagor and the mortgagee.
2. There are two questions to be considered— (i) What
are the rights of the mortgagor and mortgagee ? (ii) What is the nature
of those rights ?
§ What is the nature of the rights
1.
The English Law divides :—the
interests of the mortgagor is spoken of as an equitable estate, while the interests of the
mortgagee is spoken of as a legal estate. The Indian Law does not recognise
this distinction between legal and equitable estate.
(1872) 1. A. Supp. 47 (71). 30 1. A. 238.
2.
Even under the Trust Act this distinction is not recognised. 581. A. 279.
3.
Both have legal rights—there is nothing equitable as opposed to legal.
II.
Under the English Law mortgagee is owner while the mortgagor has a bare right of
reconveyance.
1. Under the Indian Law it is just the reverse. The
mortgagor is the owner and the mortgagee has only a right in re abena.
Rights
of the Mortgagor
1.
The Rights of the mortgagor fall into three divisions—
I.
The Right to redeem.
II.
The Right to manage the property.
III.
The Right to obtain re-transfer.
§ Right to redeem Section 60
1.
The right to redeem
entitles the mortgagor to require the mortgagee to do three things— (i) To deliver to the mortgagor the mortgage-deed. (ii) To
deliver possession if the mortgagee is in possession. (iii) To have executed and registered an acknowledgement
in writing that the right (is redeemed)*[f4]
2. This right to redeem he can exercise on the
following conditions:—
(i) On payment or tender of the mortgage money. (ii)
At any time after the principal money has
become due. (iii) If the right to redeem is
not extinguished by act of parties or by decree of a Court. (iv) If the
mortgagor is prepared to redeem the whole.
1.
right to redeem
1.
The section is not prefaced by any such words as in the absence of a contract to the
contrary.
2.
The right of redemption is therefore a statutory right which cannot be fettered by any
condition which impedes or prevents redemption.
491.
A. 60. 3.
Any such condition is void as a clog on redemption.
II.
clog on redemption—any provision
inserted in the mortgage transaction to prevent redemption by a mortgagor is void:
(1)
The principle underlying
the rule against clog is that, mortgage is a conveyance as a security for the payment of a
debt. Nothing ought to prevent a man from getting back his security.
(2)
There is a difference between sale and security.
If sale, there is no right to get back property. If security, there is a right to get back
property.
(3) This right cannot be taken away by a contract. If it
does, it will be treated as a clog and will not be enforced.
III. INSTANCES
OF CLOG ON REDEMPTION
I. The following clauses are clogs on Redemption :—
(1)
Redeem during the life of the mortgagor.
(2)
Redeem with his own money—-not from any other person.
(3)
Redeem by payment on due debt or the mortgage will become sale.
(4) Redeem on condition that mortgagor shall grant
permanent lease to the mortgagee.
II. The following clauses are not deemed to be clogs
on Redemption:—
(1)
Not to redeem unless prior mortgages are redeemed.
(2)
Not to redeem an usufructuary mortgage until after the expiry of 15 years.
(3)
Postponement of the right to take possession after redemption for a reasonable and
necessary period.
III. No hard and fast rule as to what is a clog and
what is not :—
( 1 )
The mere fact that the terms of a mortgage are hard, does not make the clause a clog.
(2)
The test is whether it hampers the mortgagor in the exercise of his right to redeem in
such a way as to place the right to redeem beyond his reach.
(3)
If the clause is a clog, then it will not be enforced, even though it may be contained in
a consent decree. The right to redeem cannot be said to have been waived by consent
IV.
The doctrine of clog on redemption relates only to the dealings which take place between
the parties to the mortgage at the time when the
contract of mortgage has been entered into. It does not apply to a contract made
subsequently with each other.
1.
That means that parties are not free at the time when the contract of mortgage is made to
take away the right of the mortgagor to redeem.
2.
But they are at liberty subsequently to alter the terms of the contract of mortgage and
any clause which fetters the right to redeem will not be treated as a clog.
V.
Due.
1.
Must be distinguished from payable. Money may be payable but not due.
2.
Due =
demand able.
3.
If it is not paid on due date, the right to redemption is not lost. Mortgage remains a
mortgage—only
it can be exercised.
VI.
Payment.
(i) Payment must be to all if there are more than one mortgagee. (ii)
Mode of payment—legal tender or any other medium acceptable to the creditor. (iii) Place of payment—(Page left blank in Ms—ed.)
Redemption
and Improvements Section 63 A.
1.
The mortgagor on redemption is entitled to improvements in the absence of a contract to
the contrary.
2.
The mortgagor shall be liable to pay the cost of improvements if the improvement was—
(i) necessary to preserve the property from destination. (ii) necessary to prevent
security from being insufficient. (iii) made in compliance with lawful order of a public
authority.
3.
This also is subject to a contract to the contrary.
4.
Section 63 A lays down the general rule that ordinarily a mortgagee is not at liberty to
effect improvements and charge the mortgagor therewith. The object of the law is to
prevent a mortgagee from laying out large sums of money and thereby increasing his debt to
such an extent as to cripple the power of redemption. The mortgagee cannot be allowed to
make redemption impossible by making improvements—This is called improving a
mortgagor out of his estate.
5.
The mere consent of the mortgagor to
improvements is not enough to make him liable, unless it amounts to a promise to
reimburse.
Right
of Redemption and the benefit of the renewal of a lease
Section
64
The
renewal of a lease is a kind of an accession to the original interest of the mortgagor.
1.
If the mortgagee obtains a renewal of the lease, the mortgagor is entitled to the benefit
of the renewed lease on redemption.
2.
This is subject to a contract to the contrary.
Right of the Mortgagor to manage Section 66
1.
As long as the mortgagor remains in possession, he is at liberty to exercise the ordinary
rights of property and to receive the rents and profits without accounting for them.
2. Question is whether the mortgagor is liable for
waste ?
3. This is a Section which deals with the doctrine
of waste. Waste is either voluntary or permissive. Voluntary
waste implies the doing of some act which tends to the destruction of the premises, as
by pulling down houses, or removing fixtures ; or to the changing of their nature as the
conversion of pasture land into arable or pulling down buildings.
Permissive
Waste
implies an omission whereby damage result to the premises, where for instance houses are
suffered to fall into decay.
To
constitute voluntary waste by destruction of the premises, the destruction must be wilful
or negligent;
it is not waste if the premises are destroyed in the course of reasonable user and any
user is reasonable if it is for the purposes for which it is intended to be used, and if
the mode and extent of the user is apparently proper, having regard to the nature of the
property and what the tenant knows of it.
4. According to Section 66 the mortgagor is not
liable for permissive waste. He is liable for voluntary waste which renders the security
insufficient.
5.
A security is insufficient if the value is less than 1/3 of the money due and less than
1/2 if the security is buildings.
For
Section 65 A.—Please
see page No. 523
Liabilities
of the mortgagor
Section
65.
1.
The liabilities consists of certain statutory covenants.
2.
They are warranties for the breach of which the mortgagor is liable.
I.
generally— (a) Covenant for title.
(i) There is a title in the mortgagor in the interest
transferred. (ii)
That he had the right to transfer. Substituted
Security
Where the owner of an undivided share in a joint and
undivided estate mortgages his undivided share, the person who takes the security i.e. the
mortgagee takes it subject to the right of these co-sharers to enforce a partition and thereby convert what is
an undivided share of the whole into a defined portion held in severally—II. A. 106. After partition the security will be
the separate share allotted in place of the undivided share. Proceed against the share
allotted and not against share originally mortgaged.
* * *
(a)
Covenant to deferred title.
(b)
Covenant to pay public dues—if the mortgagee is not in possession.
(c)
Covenant to pay prior Encumbrance (debt) on its being due.
II.
when tHE mortgaged PROPERTY IS LEASEHOLD.
(i)
Covenant that all conditions have been performed down to the commencement of the mortgage.
(ii)
Covenant to pay rent reserved by the lease if the mortgagee is not in possession.
(iii) Covenant to perform all the conditions if the lease
is renewed.
These
covenants are not personal covenants. They run with the mortgaged property and can be
availed of by a transferee from the mortgagee.
Rights
of the Mortgagee
1.
They fall into two divisions—
(1) Right to realise the mortgage money.
(2)
Right to have the security maintained in tact during the continuance of the mortgage.
1.
RIGHT TO REALISE THE MORTGAGE MONEY.
1.
Under this fall the following rights—
(1)
Right to foreclose 67.
(2)
Right to sell 67/69.
(3)
Right to sue for mortgage money 68.
(4)
Right to claim money on sale and acquisition 73.
2.
A suit to obtain a decree that a mortgagor shall be absolutely debarred of his right to
redeem the mortgaged property is a suit for foreclosure.
note.—
1.
Mortgage money does not mean the whole of the mortgage money. If a mortgage is payable by
instalments, it is open to the mortgagee to bring a suit for foreclosure for an instalment of the principal and interest.13 M. L.1. 2.
2.
In the absence of an express stipulation, a mortgagee is not bound to receive payment by
instalments—24 All. 461.
3.
A suit for interest is maintainable even before the principal money became due unless
there is a covenant prohibiting him from doing so.
4.The three
rights are not available to every mortgagee.
1.
THE RIGHT TO SUE FOR MONEY.
Section
68.
This
is available only where the mortgagor binds himself to repay the same.
Question.—When
can it be said that a mortgagor personally binds
himself to pay ?
There
are two views on the matter.
(a) A personal covenant is presumed in all mortgages
of whatever form. According to this view, the only difference that can arise is that the
Court might in the absence of an express covenant, demand more clearly implied covenants
than it might require in other case—13 Lah. 259.
(b) The other view is that a covenant can
arise only where there is an express covenant the words are binds himself. This clause would be unnecessary if
personal covenant was implied in all cases.
By
definition
Section
58.
1.
The mortgagor in a simple mortgage binds
himself to repay the money.
2. In a mortgage by conditional sale, he says that " if
he pays he will recover his property ".
3.
In a usufructuary mortgage he does not even make this qualified covenant. It is therefore
clear that a mortgagor can sue for a money decree in
the case of a simple mortgage but not in the case of other kinds of mortgages unless there
is an express covenant to that effect.
Exceptions.
The
mortgagor can sue for a money decree from the mortgagor. But he cannot sue for a money
decree from a transferee from the mortgagor or from his legal representative.—
Other
cases in which he can sue for a money decree.
Generally
a mortgagee can sue for a money decree when there is a personal covenant by the mortgagor
to pay.
2.
There are cases where a mortgagee can sue although there is no personal covenant to
pay—
Section
68.
(i) Where by accidental causes, not due to the act of
either party such as fire, flood or vis major
the property is destroyed, wholly or partly, or is rendered insufficient and the mortgagor
on being given an opportunity fails to give further security.
(ii) Where the mortgagee is deprived of the whole or
part of his security by the wrongful conduct of the mortgagor.
(iii) Where the mortgagee being entitled to possession,
the mortgagor fails to deliver possession or fails to secure the mortgagee in his
possession.
Right
to sell 1.
This
right belongs only to—
(i)
Simple
mortgagee.
(iii)
(iii)
Equitable mortgagee.
2.
They cannot sue to obtain possession. They can only sue for sale. If the Court erroneously
gives him possession, that possession does not amount to foreclosure and the mortgagor can
subsequently redeem the mortgage.
19
Mad. 249 (252-53) P. C.
CONDITIONS
FOR THE EXERCISE OF THE RIGHT OF SALE AND FORECLOSURE.
1.
After the mortgage-money has become due and before decree for redemption is made.
2.
Suit must be for the whole of the mortgage-money. There cannot be a suit for the
realisation of a part of the mortgage-money by sale or foreclosure of a part of the
mortgage property.
Exception.—If there is a severence of the interests of the mortgagee with the
consent of the mortgagor, a suit for a part may be brought by the mortgagee.
Section
67 A.
3.
A mortgagee who holds many mortgages against the
same mortgagor must bring one suit on those
mortgages in respect of which—
(i) A right to sue has accrued to him and
(ii)
In respect
of which he has a right to obtain the same kind of decree. Section 65 A.
4.
If the mortgagor could not only manage the property but, if he is lawfully in possession of the mortgaged property,
he shall have the power to make leases thereof which would be binding upon the mortgagee.
5.
After the mortgage this power of the mortgagor to deal with the property is limited.
He has not anything like general authority.
6.The
power to lease is circumscribed by certain condition.
(i) He may lease it in accordance with local law,
custom or usage.
(ii)
Every lease shall reserve lest rent can reasonably be obtained— rent shall not be
paid in advance.
(iii) The lease must not contain a convenant
for renewal.
(iv) Lease shall take effect from a date not later than
6 months from the date on which it was made.
(v) In the case of a lease of a building, the duration
of the lease shall not exceed three years.
7.
The general power of the lease is subject to a contract to the contrary. The other
provisions are subject to variations.