The different forms of mortgages:
Simple Mortgage -A Simple Mortgage consists of two parts i.e. a covenant on the part of the mortgagor to pay the debt and an agreement empowering the mortgagee to realize his dues from and out of the property mortgaged to him. Therefore, generally speaking, a Simple Mortgagee has on default of the mortgagor two fold rights to proceed in Court; one arising out of breach of the covenant to repay and the other one arising out of the mortgage of the property. A personal liability created under Simple Mortgage is separate and independent from the obligation embodied in the form of right in and against the property, and the mortgagee may sue the debtor-mortgagor personally although he may not be able to enforce his security, as for instance in a case where owing to non-registration of mortgage no mortgage has been effectually created. In a Simple Mortgage the security is two fold; one is the property and the other is the personal obligation. The first relates to the transfer of power of sale of the mortgage. As the security is two fold, the remedy is two fold and as such cause of action is also two fold. The mortgagee can sue for both the recovery of the mortgage-debt and also fro the sale of the mortgaged property or he could file two separate actions for the enforcement of two independent rights.
It was held in Shivaji Prasad Sahu v. Darsan Das AIR 1963 Pat 87 (93) “..In a Simple Mortgage the interest transferred is the right to have the property sold, and this need not be provided for in the deed in so many words; it may be inferred from the language so used”
Mortgage by Conditional Sale – In this case, the mortgagor ostensibly sells the property to the mortgagee coupled with any of the three conditions, namely,
- The sale shall become absolute if there is default in payment of debt on a certain date or
- On the payment of mortgage-money on a due date the sale shall become void
- On such payment the mortgagee shall transfer the property to the mortgagor.
The expression “ostensible sale” means a transaction which takes the outward form of sale. The transaction resembles a sale though in reality it is only a mortgage. 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 mortgager to repay the mortgage debt. In this kind of mortgage, a creditor can look to only the property mortgaged for the satisfaction of his debt. If, therefore, the worth of the mortgaged property is less than the debt, the creditor has suffered loss, inasmuch a decree for foreclosure is the only remedy to which he is entitled. However, the mortgagor retains his right of redemption which is lost only by a decree of foreclosure. It has to be noted that any of the three conditions set out above are of the essence of this type of mortgage and that further a condition for repurchase can not be regarded as a mortgage unless a condition is contained in the same document.
Usufructuary Mortgage – In this case the mortgagor transfers to the mortgagee one of the most important incidents of ownership, namely, the possession/right of possession and enjoyment of the rents, profits and income of and from the property. Where the mortgagor is not in a position to give immediate possession, it is sufficient if he gives the right to possession. If a mortgagor expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, the transaction is a usufructuary mortgage although actual possession has not been delivered. Instead of giving actual possession, the mortgagor may direct the tenants of the mortgaged property to pay the rent to the mortgagee. No period of redemption is fixed in this type of mortgage. The mortgagee is entitled to remain in possession until payment of the mortgage money and therefore no time can be fixed during which the mortgage is to subsist. In this mortgage, there is no personal liability /covenant to repay the debt on the part of the mortgagor and therefore can not sue for his debt.
English mortgage– An “English mortgage” has three essential ingredients.As decided as early as 1902 in Narayana vs Venkataramana ILR (1902) 25 which is a full bench decision of Madras High court, the three essential ingredients are:-
- The mortgagor binds himself personally to repay the mortgage debt on a certain day;
- The property mortgaged is transferred “absolutely” to the mortgagee and
- This transfer is subject to the proviso that the mortgagee will reconvey the property to the mortgagor upon payment of the mortgage money on the date fixed for repayment. Sec. 58(e) of the Transfer of Property Act which defines the English mortgage, can not be construed as declaring an English mortgage to be an absolute transfer of the property, but as merely declaring that such a mortgage would be absolute, were it not for the proviso to re-transfer.
Mortgage by Deposit of Title Deeds – This mortgage requires four requisites:
- A debt
- Deposit of title deeds
- Intention to create security thereon
- Such a mortgage can be created only in specified towns. The mortgaged property need not be situate in any of the specified towns. What is necessary is that the deposit of title deeds must be in specified towns.
It is not necessary that all the title deeds delivered should show a complete title in the debtor. What is essential is that the instruments of title deeds deposited are a material part of the title. It is a misnomer to call this mortgage as “an equitable mortgage”. It is only in the United Kingdom that a mortgage by deposit of title deeds is also known as an equitable mortgage; this is because there it does not operate as an actual conveyance. However, in India, deposit of title deeds to secure a loan constitutes an actual mortgage. The proviso to Sec. 48 of the Indian Registration Act specifically provides that a mortgage by deposit of title deeds shall take effect as against any mortgage deed subsequently executed and registered.