Transfer of Property Act (TPA)
Rights and Liabilities of the Parties to an Anomalous Mortgage under Section 98
Five of the six forms in section 58 come with their incidents fixed by the Act: a simple mortgagee sells, a mortgagee by conditional sale forecloses, a usufructuary mortgagee holds. The sixth form has no incidents of its own, because it is defined by exclusion. Section 98 therefore sends the parties back to their own bargain: the rights and liabilities of the parties to an anomalous mortgage are determined by their contract as evidenced in the mortgage deed, and, so far as the contract does not extend, by local usage.
1. The Section
Section 98, TPA 'In the case of an anomalous mortgage the rights and liabilities of the parties shall be determined by their contract as evidenced in the mortgage-deed, and, so far as such contract does not extend, by local usage.' |
And the definition it depends on — section 58(g) '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.' |
2. What Makes a Mortgage Anomalous
- A combination of two recognised forms. The commonest instance is a usufructuary mortgage with a personal covenant to repay — possession and the profits to the mortgagee, and a personal liability besides. It is neither a pure usufructuary mortgage, which carries no personal covenant, nor a simple mortgage, which carries no possession.
- A recognised form with an added incident. A simple mortgage coupled with a right of possession on default, or a mortgage by conditional sale with a right of sale, falls outside the definitions in the Act.
- A customary local form. The Act was drafted against a background of local mortgage usages — the otti and kanam of Malabar among them — which do not answer to any of the five descriptions, and which section 98 leaves to be worked out by the contract and by usage.
- Anything else the parties invent. The category is residual, and its boundaries are the boundaries of the other five.
3. The Order of Enquiry under Section 98
Step | What governs |
|---|---|
First | The contract as evidenced in the mortgage deed. The deed is the primary source, and the court construes it as it would any other instrument, giving effect to the incidents the parties have chosen |
Second | Local usage, so far as the contract does not extend. Usage supplies what the parties left unsaid, and it is a question of fact to be proved |
Third | The general provisions of the Act, so far as they are consistent with the contract and are not confined to a particular form of mortgage — redemption, accession, contribution, subrogation, priority and the rest |
4. What the Contract Cannot Do
The limits on freedom of contract It cannot take away the right of redemption. A mortgage is redeemable because it is a security, and section 98 does not authorise the parties to make an anomalous mortgage irredeemable. A stipulation that fetters redemption is a clog, and is void whatever the form of the mortgage. It cannot create a remedy the law withholds. Section 67 permits foreclosure only to a mortgagee by conditional sale and to an anomalous mortgagee by the terms of whose mortgage he is entitled to foreclose — so the remedy must be found in the deed, and cannot be assumed. And it cannot escape the general law. Formalities under section 59, the rules of priority, the provisions on contribution, marshalling and subrogation, and the requirements of registration apply to an anomalous mortgage as to any other. |
5. Remedies of an Anomalous Mortgagee
The remedy | When it is available |
|---|---|
Sale | Where the terms of the mortgage confer it, expressly or by necessary implication — section 67 |
Foreclosure | Only where the terms of the mortgage entitle him to foreclose — section 67 says so in terms |
Possession | Where the deed gives it; a mortgagee who takes possession is then subject to the liabilities in section 76 |
The personal remedy | Where the deed contains a covenant to repay; otherwise section 68 applies only in the situations it names |
Sale without the court | Only in the cases section 69 allows, which turn on the kind of mortgage and the place of the property |
6. Why the Act Leaves It to the Parties
- Indian mortgage practice was older than the Act and more varied than five categories. The draftsmen preferred a residual class to a forced classification that would have invalidated common local transactions.
- The incidents of the five named forms are themselves default rules, expressed to apply 'in the absence of a contract to the contrary'; section 98 simply makes the point explicit where no named form fits.
- Usage supplies the gaps in a way a statute could not. A customary form carries settled incidents in the locality where it is used, and those incidents are the parties' unspoken terms.
- But the protective core remains statutory. Redemption, the rule against clogs and the formalities are not left to contract, and that is what keeps the residual class from swallowing the chapter.
7. Landmark Cases
📖 Chunchun Jha v. Ebadat Ali, AIR 1954 SC 345 Held: The character of a mortgage transaction is determined by the intention of the parties gathered from the document read as a whole and from the surrounding circumstances. Where a transaction does not answer to any of the defined forms, the incidents the parties have chosen govern, and the court does not force the transaction into a category the deed does not support. Ratio: The classification of a mortgage, and therefore the remedies it carries, follows the intention shown by the deed. |
📖 Pomal Kanji Govindji v. Vrajlal Karsandas Purohit, (1989) 1 SCC 458 Held: Even where the parties have fixed their own incidents, the right of redemption cannot be fettered. The doctrine of clogs applies to every mortgage, and a stipulation which in substance prevents the mortgagor from recovering his property is void however the transaction is classified. Ratio: Freedom to fix the incidents of an anomalous mortgage does not extend to fettering the equity of redemption. |
8. Related Topics and Provisions
- Kinds of Mortgages under Section 58 — the five defined forms, and clause (g)
- Rights and Liabilities of the Mortgagee — section 67 and the remedies it allots
- Clog on the Equity of Redemption — the limit on what the contract may provide
- Formalities of a Mortgage, Section 59 — which apply to an anomalous mortgage too
- Right of Redemption, Section 60 — which every form carries
- Section 76, TPA — the liabilities of an anomalous mortgagee who takes possession