The term mortgage, put simply, means the Transfer of an interest as security (commonly known as collateral) given by the borrower(mortgagor) to the loan lender(mortgagee). Thus, if the borrower is unable to repay the loan or becomes insolvent, it protects the lender, as he acquires the right over the mortgaged property. This article talks about various concepts about the mortgage and the rights and liabilities to which it gives rise to.

Concepts revolving around mortgage are provided under:

1. Section 58-104 of The Transfer of Property Act, 1882
2. The Indian Contract Act, 1872

Who is a Mortgagee?

A mortgagee is an individual, group of individuals or an organisation that lends a loan to the borrower. He receives a mortgage as a security for the principal money and the interest on the payment, collectively known as mortgage money. The instrument(if any) through which the mortgage is transferred effectively to the mortgagee is called the mortgage deed.

Who is a Mortgagor?

The borrower who transfers such immovable property to the mortgagee is known as the Mortgagor. The mortgager is bound to repay the principal amount and the interest on it, given that no contradictory contract is present. Otherwise, the Mortgagee acquires the mortgaged property and has the right to recover the mortgage money through it.

Ex. A gives B a loan of rupees 50 lakh, to which B transfers his immovable property(his ancestral house) to A as security. Here, A is the mortgagee, and B is the mortgagor.

Different Kinds Of Mortgage

Keeping the meaning of mortgagor, mortgagee, mortgage-money, mortgage-deed same as explained above, a mortgage is of six kinds (Section 58 of TPA, 1882):

1. Simple Mortgage
2. Mortgage by Conditional Sale
3. Usufructuary Mortgage
4. English Mortgage
5. Mortgage by deposit of title-deeds
6. Anomalous mortgage
    

Simple Mortgage:

It is the mortgage where the mortgagor does not transfer the property's possession to the mortgagee and is himself bound to pay the mortgage money. And consent is expressed by the mortgagor to if he fails to do so, the mortgagee has the right to have the mortgaged property sold or for sale to recover the mortgage money. The mortgagee is such a case, is known as simple-mortgagee.

Mortgage by Conditional Sale:

As the name suggests, this kind of mortgage is based on different mortgage-money payment conditions. Here, the mortgaged property is apparently sold by the mortgagor on the following conditions:

1. if he is unable to repay the mortgage money, the sale is absolute, or
2. if he pays the mortgage money, the deal is void, or
3. The property is transferred back to the mortgagor on fulfilment of such payment, given the conditions are documented.

1. Usufructuary Mortgage:

   The mortgage, where the mortgagor delivers the property to the mortgagee or binds himself to do so. And the mortgagee (known as usufructuary mortgagee) is authorised to collect the profits and rents from the property as part of the mortgage money until the payment of the loan is complete; it is called a usufructuary mortgage.
    

2. English Mortgage:

   The mortgagor transfers the property absolutely to the mortgagee on the provision that the mortgagor is bound to repay the loan by a specific date. Upon Successful payment, the mortgagee is bound to re-transfer the property to him as agreed, and the transaction is an English mortgage.
    

3. Mortgage by deposit of title deeds:

   When the mortgagor, a resident of Calcutta, Bombay, Madras or any other town, where the State Government specifies this, delivers the documents of title of immovable property to the mortgagee as a security, is known as Mortgage by deposit of title-deeds.
    

4. Anomalous mortgage:

   This type of mortgage combines two or more mortgages mentioned above with the same meaning.

With every responsibility follows rights and liabilities. Further, in this article, we shall discuss the rights and liabilities of a mortgagor.

Rights Of A Mortgagor

The Transfer of Property Act of 1882 offers privileges to a mortgagor in a mortgage-deed, which are as follows:

1. Right of mortgagor to redeem (S.60)
2. Right to Transfer to the third party. (S.60A)
3. Right to inspection and production of documents (S.60B)
4. Right to redeem separately or simultaneously (S.61)
5. Right of usufructuary mortgagor to recover possession (S.62
6. Accession to mortgaged property (S.63)
7. Renewal of Mortgaged Lease (S.64)
8. Mortgagor's power to lease (S.65A)
9. Right in the case of waste (S.66)

Right of Mortgagor to Redeem (section 60)
The mortgagor on the payment of the due mortgage money with reasonable notification on the specific time and place has a right to:

1. require the mortgagee to deliver the mortgage-deed and the mortgaged property documents in his possession or under this power
2. recover the possession of the mortgaged property from the mortgagee
3. to get his property re-transferred at his own cost to him or a third party by the mortgagee at the mortgagor's desire or get an acknowledgement registered by the mortgagee extinguishing his right over the property

The right cannot be exercised if extinguished by the parties to the contract or by a court's decree. The suit to enforce such a right is called a suit for redemption.

Right to Transfer to the third party. (S. 60A)According to this section, the mortgagor has a right to ask the mortgagee to transfer the mortgage deed and the mortgaged property to a third party at the mortgagor's desire; if the mortgagor has paid the mortgage money, the mortgagee is bound to do so.

Right to inspection and production of documents (S.60B)
Under his right to redemption, the mortgagor can request at all reasonable times on his own cost the and on successful payment of the expenses incurred by the mortgagee on his behalf to inspect and make a copy or extract the documents of the mortgaged property and mortgage-deed under the possession of the mortgagee.

Right to redeem separately or simultaneously (S.61)
On the execution of more than one mortgages favouring the same mortgagee, in the absence of a contract, the mortgagor can, on the payment of the due of one of the mortgage, redeem the deed on one individual or more mortgage-deed simultaneously.

Right of usufructuary mortgagor to recover possession (S.62)
In a usufructuary mortgage, the mortgagor has a right to recover possession of the mortgage deed from the mortgagee when the mortgagee has received the mortgage money from the property's profits and rents or has received the balance payment from the mortgagor.

Accession to mortgaged property (S.63)
The mortgagor is entitled to the mortgaged property accession upon redemption, if any, during the mortgage's continuance when in possession of the mortgagee if a contract for the contrary does not exist. The mortgagee has no right to claim the assession when redeemed by the mortgagor.

Renewal of Mortgaged Lease (S.64)
When the mortgaged property has a lease and in possession of the mortgagee, renewal of lease is obtained. Upon redemption, the mortgagor has a right to receive the lease's benefits unless mentioned otherwise in the contract.

Mortgagor's power to lease (S. 65A)
While in lawful possession of the property, the mortgagor has the right to make the lease, which shall be binding on the mortgagee unless otherwise stated in the mortgage.

1. The lease made shall be conducted in a regular manner of management of the property and as per the customs and local law
2. The reasonable and the highest rent shall be obtained, with no promise of premium or condition of advance payment
3. Shall not contain an agreement for renewal
4. The lease shall take effect from no longer than six months from the day of formation of the lease
5. In case of lease of a building with or without land, the lease shall not exist for more than three years and with an agreement of the rent and conditions applied if not followed.

Right in the case of waste (S.66)
According to this, the mortgagor is not liable to the mortgagee for the property's deterioration but shall not do an act, which is catastrophic or permanent injury is caused to the property if it is insufficient as the security.

Liabilities Of A Mortgagor:

Multiple liabilities are arising from the rights enjoyed by a mortgagor under the Transfer of Property Act, 1882, which are discussed below:

• Covenant for the title
  The mortgagor has a contract with the mortgagee to transfer the property to the mortgagee, with which there is a warranty for the title of the property. If the mortgaged property title is found defective, the mortgagee can bring an action against the mortgagee for the principal amount and the damages incurred.
   
• Liability to indemnify for defective title
  When the property title is found to be defective on the part of the mortgagor, the mortgagor is liable to pay damages to the mortgagee. The injuries are for the charges incurred by the mortgagee in claiming the right to the title.
   
• Liability to avoid waste (S. 66)
  The mortgagor is liable if he acts in a way that leads to waste of property or destroys or injures the property, reducing its value and making it insufficient for security. Waste is of two types:
  
  1. Permissive Waste:
     It is the small waste for which the mortgagor is not liable for
      
  2. Active Waste:
     When the destruction cases a greater waste and reducing the value of the property, the mortgagor is liable
      
• Improvements to mortgaged property (section 63A)
  When the mortgaged property undergoes improvements in the continuance of a mortgage need, the mortgagor is liable to pay the amount incurred.
  When such improvements are necessary to prevent the property from destruction and are incurred by the mortgagee, the mortgagor is liable to pay the amount in addition to the mortgage money and the principal, if not contract to the contrary is present. The interest has to pay at the required rate, and 9% if no rate is specified.
   
• Liable to compensate mortgagee
  When the property is in possession of the mortgagee and the mortgagee incurs the property's taxes, the mortgagor is liable to pay the mortgagee's expenses. If the property is in the mortgagor's possession, he is liable to pay all the property taxes and public charges.
   
• Accession acquired in virtue of transferred ownership
  The accession incurred at the mortgagee cost or which is capable of separate possession acquired at the mortgagor's desire, the expenses occurred are to be paid by the mortgagor. Also, if such accession is necessary to save the property from destruction or harm, the mortgagor is liable to pay the amount and is entitled to the profits.

Conclusion
Through the evolution of The Transfer of Property Act of 1882 has to widen the horizon concerning the rights and liabilities of a mortgagor and a mortgagee. This saves them from exploitation and securing the property mortgaged from ill-intentions.

The Indian Contract Act, 1872 specifies the formation of mortgage deals to ensure security and protection of the economically lower society. The articles describe, in brief, the concepts of the rights and liabilities of the mortgagor.

Award Winning Article Is Written By: Ms.Falgun Wairya

Authentication No: JL118670261032-05-0721