TPA Kinds of Mortgages Section 58 — Transfer of Property Act (TPA) Notes for Judiciary

Kinds of Mortgages under Section 58: Simple, Conditional Sale, Usufructuary, English, Deposit of Title Deeds and Anomalous

Section 58 defines six forms, and the form chosen decides almost everything that follows: whether possession passes, whether the mortgagor is personally liable, and what remedy the mortgagee has when the money is not paid. Three questions separate them — does possession pass, is there a personal covenant to repay, and what is the remedy? The sixth form, the anomalous mortgage, is defined by exclusion, and whatever the parties have made that fits none of the others is governed by their own contract.

Figure 1: The six kinds, and the three questions that tell them apart

1. Simple Mortgage — Section 58(b)

The definition

Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money, and agrees, expressly or impliedly, that in the event of his failing to pay according to his contract the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage money — the transaction is called a simple mortgage and the mortgagee a simple mortgagee.

No possession passes. The mortgagor remains in possession and takes the rents and profits.
A personal covenant to pay, express or implied, is of the essence; the mortgagee may sue on it as well as on the security.
The remedy is sale, and only by intervention of the court under section 67. A simple mortgagee cannot foreclose and cannot take possession.
It must be made by a registered instrument, whatever the amount, since the alternative of delivery is not open to it.

2. Mortgage by Conditional Sale — Section 58(c)

The definition and the proviso

Where the mortgagor ostensibly sells the property on condition that on default of payment on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property back to the seller — the transaction is called a mortgage by conditional sale.

Proviso — no such transaction shall be deemed to be a mortgage unless the condition is embodied in the document which effects or purports to effect the sale.

The remedy of a mortgagee by conditional sale is foreclosure under section 67 — a decree declaring the mortgagor's right of redemption extinguished — and not sale.

2.1 Mortgage by Conditional Sale and Sale with a Condition of Repurchase

Point	Mortgage by conditional sale	Sale with a condition of repurchase
Nature of the transaction	A security for a debt; an ostensible sale only	A real sale, with a contractual right to buy back
Is there a debt?	Yes — a debtor-creditor relationship subsists	No — the price is the value of the property, not a loan
The document	The condition must be in the same document that effects the sale — the proviso	The condition is ordinarily in a separate document
The right to get the property back	The equity of redemption, which the law protects and which cannot be clogged	A contractual right, to be exercised strictly on its terms and within any time fixed
On default	Foreclosure, by a decree of the court	The right of repurchase simply lapses
The test	Intention, gathered from the whole transaction — the relation of the price to the value, the continuance of a debt, the possession, and the conduct of the parties	The same test, with the opposite answer

3. Usufructuary Mortgage — Section 58(d)

The definition

Where the mortgagor delivers possession, or expressly or by implication binds himself to deliver possession, of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgage money, and to receive the rents and profits accruing from the property, or any part of them, and to appropriate them in lieu of interest, or in payment of the mortgage money, or partly in lieu of interest and partly in payment of the mortgage money — the transaction is called a usufructuary mortgage.

Possession passes to the mortgagee, who takes the rents and profits.
There is no personal covenant to repay, and therefore no personal remedy against the mortgagor.
The mortgagee can neither foreclose nor sue for sale. His security is the possession itself, and he holds it until he is paid.
The mortgagor recovers possession on payment, and section 62 gives him the right to do so.
No time limit need be fixed, which is why long usufructuary mortgages have so often been examined as clogs on the equity of redemption.

4. English Mortgage — Section 58(e)

The definition

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

Three features together: a personal covenant to repay on a date, an absolute transfer, and a proviso for re-transfer.
The transfer is absolute in form only. The mortgagor retains his equity of redemption, and the mortgagee's interest is a security.
The remedy is sale under section 67, and in the cases the Act allows a sale without the intervention of the court under section 69.
The mortgagee may take possession, the transfer being absolute in form — which is what chiefly distinguishes it from a simple mortgage.

5. Mortgage by Deposit of Title Deeds — Section 58(f)

The definition

Where a person in any of the towns notified for this purpose delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title deeds.

The requirement	What it means
A notified town	The deposit must be made in a town notified by the State Government for the purpose; the property itself may be situated elsewhere
Delivery of documents of title	Actual or constructive delivery to the creditor or his agent. The documents need not be all the documents of title, so long as what is delivered is material evidence of title
An intent to create a security	The intention is the heart of the transaction, and may be proved by the circumstances; the deposit must be made as security for a debt
No writing required	The mortgage is created by the deposit itself. Where a memorandum is executed, it needs registration only if it is the bargain and not merely a record of the deposit

6. Anomalous Mortgage — Section 58(g)

A mortgage which is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage or a mortgage by deposit of title deeds is called an anomalous mortgage. The category is residual, and it exists because the parties are free to combine incidents as they please. The rights and liabilities of the parties to an anomalous mortgage are determined, by section 98, by their contract as evidenced in the mortgage deed and, so far as such contract does not extend, by local usage. The commonest examples are combinations — a usufructuary mortgage with a personal covenant to pay, or a simple mortgage coupled with a conditional sale.

7. The Comparisons Most Often Asked

7.1 Simple and usufructuary

Point	Simple	Usufructuary
Possession	Stays with the mortgagor	Passes to the mortgagee
Personal liability	Yes — a personal covenant to pay	No
Rents and profits	Taken by the mortgagor	Taken by the mortgagee, in lieu of interest or in payment
Remedy	Sale, through the court	Retention of possession until paid; no foreclosure, no sale
Time	A date for payment is ordinarily fixed	Often no date at all; the mortgage runs until the money is recovered from the profits

7.2 Simple and English

Point	Simple	English
The transfer	No transfer of the property in form; only a right to have it sold	An absolute transfer, subject to a proviso for re-transfer
Possession	Remains with the mortgagor	May be taken by the mortgagee
Personal covenant	Yes	Yes — and to repay on a certain date
Remedy	Sale through the court	Sale, and in the cases allowed by section 69 without the court's intervention

7.3 Conditional sale and English

Point	Mortgage by conditional sale	English mortgage
The form of the transfer	An ostensible sale, which becomes absolute or void according to the condition	An absolute transfer with a proviso for re-transfer
Personal covenant	Ordinarily none	Essential — a covenant to repay on a certain date
Remedy	Foreclosure	Sale
The document	The condition must be embodied in the same document — the proviso to section 58(c)	The proviso for re-transfer is part of the same deed in the ordinary case

8. Landmark Cases

📖 Chunchun Jha v. Ebadat Ali, AIR 1954 SC 345

Held: The intention of the parties decides whether a transaction is a mortgage by conditional sale or a sale with a condition of repurchase. Where the condition of repurchase is embodied in the same document which effects the sale, the transaction is ordinarily a mortgage by conditional sale; where it is contained in a separate document, it is ordinarily a sale with an agreement to repurchase. The form is not conclusive, and the court looks at the substance.

Ratio: The proviso to section 58(c) provides the working rule, and intention supplies the answer.

📖 Rachpal Mahraj v. Bhagwandas Daruka, AIR 1950 SC 272

Held: Where title deeds are deposited as security and a memorandum is also executed, the Court held that where the parties intend the memorandum accompanying the deposit to constitute the bargain between them, it is the instrument by which the mortgage is created and requires registration; where it is merely evidence of a deposit already made, it does not.

Ratio: The deposit creates the mortgage; a writing requires registration only where it is the bargain itself.

📖 United Bank of India Ltd. v. Lekharam Sonaram & Co., AIR 1965 SC 1591

Held: A mortgage by deposit of title deeds is created by the deposit made with the intention that the deeds shall be security for the debt. The essential feature is the intention, and the deposit may be proved by oral evidence where no writing embodies the contract.

Ratio: Intention to create a security, and delivery of the documents, are what make the mortgage under section 58(f).

9. Related Topics and Provisions

Mortgage — Definition and Essentials, Section 58 — the common definition
Formalities of a Mortgage, Section 59 — which forms require a registered instrument
Section 67, TPA — the right to foreclosure or sale, and which mortgagee has which
Sections 68 and 69, TPA — the mortgagee's suit for the money, and sale without the intervention of the court
Section 98, TPA — the rights of the parties to an anomalous mortgage
Right of Redemption, Section 60 — which every one of the six forms carries