Transfer of Property Act (TPA)
TPA Mortgage Definition and Essentials Section 58
Mortgage under Section 58: Definition, Essentials, the Transfer of an Interest, and the Memorandum Accompanying a Deposit of Title Deeds
A sale moves the ownership; a mortgage moves only so much of it as is needed to secure money. That single difference explains everything about the chapter that follows — why the mortgagor keeps an equity of redemption, why the mortgagee's rights are measured by his security and not by the property, and why a charge, which transfers no interest at all, is treated separately. Section 58(a) also supplies the vocabulary the rest of the chapter uses: mortgagor, mortgagee, mortgage-money and mortgage-deed.
Figure 1: How much of the ownership moves in a sale, a mortgage and a charge
1. The Definition
Section 58(a), TPA 'A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.' |
2. The Three Essentials
2.1 A transfer of an interest
What passes is an interest, not the ownership. The mortgagee takes so much of the mortgagor's rights as the form of mortgage requires — in some forms the right to possession, in others merely a right to have the property sold — and everything not so transferred remains in the mortgagor as his equity of redemption. This is the point of contrast with a sale, where the whole of the ownership passes, and with a charge under section 100, where no interest passes at all and the property is merely made security for payment.
2.2 Specific immoveable property
The property must be specified and identifiable from the instrument. A transaction purporting to secure a debt on a person's property generally, without identifying it, creates no mortgage; the description must be sufficient to tell the court what is subject to the security. The requirement also excludes moveable property, which is the subject of a pledge or a hypothecation rather than a mortgage.
2.3 For the purpose of securing
The transfer must be by way of security, and for one of the three purposes named: the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. Where the intention is not to secure but to sell, the transaction is a sale however it is described; and where it is to secure, it is a mortgage however it is described. Intention decides, and the recitals are evidence of intention rather than conclusive of it.
3. The Vocabulary
Term | Meaning |
|---|---|
Mortgagor | The transferor — the person who gives the security |
Mortgagee | The transferee — the person in whose favour the interest is transferred |
Mortgage-money | The principal money and interest of which payment is secured for the time being |
Mortgage-deed | The instrument, if any, by which the transfer is effected — the words 'if any' leave room for a mortgage by deposit of title deeds, which needs no instrument |
4. Mortgage, Sale and Charge Compared
Point | Sale | Mortgage | Charge — s. 100 |
|---|---|---|---|
What passes | The ownership | An interest, to the extent needed as security | No interest; the property is made security for payment |
Purpose | To transfer the property for a price | To secure money or the performance of an engagement | To secure payment out of specified property |
What the transferor keeps | Nothing | The equity of redemption | The property, subject to the charge |
Redemption | Not applicable | The mortgagor may redeem — section 60 | Not a redemption, but the charge is discharged on payment |
Enforcement | — | According to the form of mortgage: foreclosure, sale, or possession | By sale, in the manner provided for a simple mortgage |
5. The Memorandum Accompanying a Deposit of Title Deeds
A mortgage by deposit of title deeds under section 58(f) is created by the deposit itself, with intent to create a security, in the towns notified for the purpose. No instrument is necessary. The difficulty arises where the parties also write something down. The question is then whether the writing is evidence of the transaction or the transaction itself.
The character of the memorandum | Consequence |
|---|---|
Merely a record or acknowledgment of a deposit already made, or of the fact of deposit | It is evidential; it does not require registration, and the mortgage stands on the deposit |
The bargain between the parties — the document in which the security is created and its terms are set out | It is the instrument by which the transfer is effected; it requires registration, and if unregistered it is inadmissible and the security fails |
Silence, with the deposit proved by other evidence | The mortgage is good; the deposit and the intention may be proved by oral evidence |
The practical test Ask whether the parties intended the writing to be the contract. If the deposit was complete and the paper merely records it, registration is unnecessary. If the paper is where the parties set out what was to be secured and on what terms, it is the mortgage, and the law of registration applies to it. |
6. Rights Determined by the Contract and by Usage
- The chapter is largely a set of default rules. Provision after provision in it opens with the words 'in the absence of a contract to the contrary', so that the mortgage deed is always the first document to read.
- The form of the mortgage fixes the rights. Section 58 goes on to define six kinds, and the remedies available — foreclosure, sale, possession — depend on which of them the parties have chosen.
- Local usage has a recognised place. Several provisions of the Act give way to usage, and a mortgage by deposit of title deeds itself depends on the property being in a town notified for the purpose.
- But the equity of redemption cannot be contracted away. Whatever the parties agree, a term that fetters the right to redeem is void as a clog — the principle behind section 60, which is treated separately.
7. Landmark Cases
📖 Chunchun Jha v. Ebadat Ali, AIR 1954 SC 345 Held: On the distinction between a mortgage by conditional sale and a sale with a condition of repurchase, the Court held that the intention of the parties is decisive. 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 of the transaction as a whole. Ratio: Whether a transaction is a mortgage or a sale is a question of intention, and the proviso to section 58(c) supplies the working rule. |
📖 Rachpal Mahraj v. Bhagwandas Daruka, AIR 1950 SC 272 Held: Where title deeds are deposited as security and a memorandum is also executed, the question is whether the parties intended the memorandum to constitute the bargain between them. If it was so intended, it is the instrument by which the mortgage was created and requires registration; if it was merely evidence of the deposit already made, it does not. Ratio: A memorandum that records a deposit needs no registration; one that constitutes the bargain does. |
📖 United Bank of India Ltd. v. Lekharam Sonaram & Co., AIR 1965 SC 1591 Held: The Court reaffirmed that a mortgage by deposit of title deeds is created by the deposit itself, made with the intention that the deeds shall be security for the debt. A writing accompanying the deposit does not require registration unless it embodies the contract between the parties, in which case it is the source of the security and must be registered. Ratio: The deposit creates the mortgage; the writing requires registration only if it is the bargain itself. |
8. Related Topics and Provisions
- Sale, Section 54 — the transfer of ownership, contrasted with a transfer of an interest
- Section 58(b) to (g), TPA — the six kinds of mortgage
- Section 60, TPA — the right of redemption, and clogs upon it
- Section 100, TPA — charges, where no interest is transferred
- Section 17, Registration Act, 1908 — and the memorandum accompanying a deposit of title deeds
- Section 59, TPA — how a mortgage is to be effected