Transfer of Property Act (TPA)
Mortgage Compared: With a Charge, a Pledge, a Lien, a Sale and a Lease
Five transactions stand near a mortgage and are constantly mistaken for it. A charge secures money without transferring any interest. A pledge secures it by handing over goods. A lien secures it by holding on to what one already has. A sale transfers the ownership outright, and a lease transfers the right to enjoy for a term. The question that separates all of them is the one section 58 answers: what passes, and for what purpose?
Figure 1: The six transactions, and the same questions asked of each
1. Mortgage and Charge
The provisions Section 58(a) — a mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money. Section 100 — where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property. |
Point | Mortgage | Charge |
|---|---|---|
What happens to the property | An interest in it is transferred to the mortgagee | No interest is transferred; the property is merely made security |
How it arises | By act of parties only | By act of parties or by operation of law — a decree, a statute, a maintenance charge |
Enforcement | According to the form: foreclosure, sale, or retention of possession | By sale, in the manner provided for a simple mortgage |
Against a transferee | Binds the property, subject to the rules of priority and notice | Not enforceable against a transferee for consideration without notice |
Formality | Section 59 — a registered and attested instrument where ₹100 or more is secured | A charge by act of parties in writing requires registration; one arising by operation of law does not |
Every mortgage is a charge | But not every charge is a mortgage — the security is the same idea, the transfer of an interest is not | — |
2. Mortgage and Pledge
Point | Mortgage | Pledge |
|---|---|---|
Property | Specific immoveable property | Moveable goods |
Governing law | Section 58 and the following sections of this Act | Sections 172 to 179 of the Indian Contract Act, 1872 |
What passes | An interest in the property | Possession of the goods; the general property remains in the pawnor |
Possession | Passes in some forms only — usufructuary and English | Essential; delivery of the goods, actual or constructive, makes the pledge |
Enforcement | Foreclosure, sale or retention, according to the form | The pawnee may sell after reasonable notice, or sue for the debt and retain the goods as collateral |
Use of the thing | The mortgagee in possession may take the rents and profits | The pawnee must not use the goods, save as the contract allows |
3. Mortgage and Lien
- A lien is a right to retain, not a right transferred. It entitles the holder to keep possession of what is already lawfully in his hands until what is due to him is paid.
- It ordinarily carries no power of sale. A pledgee may sell; a person with a common-law lien may only hold on, unless a statute gives him more.
- It is generally lost with possession. A mortgage is not affected by the mortgagee parting with possession, because it rests on a transfer of an interest rather than on holding the thing.
- It arises by law or by the course of dealing, and not, in the ordinary case, by a deed.
- And it attaches to what the holder has — goods, documents, or, in the case of a vendor's lien, the land in respect of the unpaid price, which the Act gives statutory form in section 55(4)(b).
4. Mortgage and Sale
Point | Mortgage | Sale |
|---|---|---|
What passes | An interest, to the extent the security requires | The ownership |
What is left in the transferor | The equity of redemption | Nothing |
Purpose | To secure money or the performance of an engagement | To transfer the property for a price |
Is it reversible? | Yes — the mortgagor may redeem under section 60 | No — there is nothing to redeem |
Consideration | The mortgage money, which is a debt | The price, which is the value of the property |
Where the two meet | A mortgage by conditional sale looks like a sale; the proviso to section 58(c) requires the condition to be embodied in the same document, and the intention decides | A sale with a condition of repurchase is a sale; the seller's right is contractual, and there is no equity of redemption |
5. Mortgage and Lease
Point | Mortgage | Lease |
|---|---|---|
What passes | An interest by way of security | A right to enjoy the property for a term |
Purpose | Security for money | Enjoyment in return for rent or premium |
Consideration | The mortgage money advanced | Rent, or a premium, or both |
What the transferor keeps | The equity of redemption | The reversion |
Duration | Until redemption or enforcement | The term fixed, subject to determination under section 111 |
On default | Foreclosure, sale or possession, according to the form | Forfeiture and re-entry, under section 111(g) |
Where they meet | A usufructuary mortgagee is in possession and takes the profits, which makes him look like a lessee — but he holds as security, and must give up possession on redemption | — |
6. The Question to Ask in Every Case
Three questions settle all five comparisons Does anything pass, and what? The ownership — a sale. An interest by way of security — a mortgage. A right to enjoy for a term — a lease. Possession of goods — a pledge. Nothing at all — a charge or a lien. For what purpose? Security, or enjoyment, or an outright transfer for a price. And what is the remedy on default? Foreclosure, sale, possession, retention, or forfeiture — each transaction has its own, and the remedy often reveals the nature of the transaction more reliably than its label. |
7. Landmark Cases
📖 Chunchun Jha v. Ebadat Ali, AIR 1954 SC 345 Held: On whether a transaction was a mortgage by conditional sale or a sale with a condition of repurchase, the Court held that the intention of the parties is decisive. The form of the document is not conclusive, and the court must look at the substance of the transaction; where the condition of repurchase is contained in the same document which effects the sale, the transaction is ordinarily a mortgage. Ratio: The line between a mortgage and a sale is drawn by intention, and the proviso to section 58(c) supplies the working rule. |
📖 Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247 Held: The equity of redemption is the subsisting right of the mortgagor to redeem, and it continues until it is extinguished in one of the ways the law recognises. A mortgage differs from a sale precisely in that the mortgagor retains this right, which is an incident of the transaction and not a mere contractual term. Ratio: What distinguishes a mortgage from a sale is the equity of redemption that survives it. |
8. Related Topics and Provisions
- Mortgage — Definition and Essentials, Section 58 — the transfer of an interest
- Transfer of Interest vs Transfer of Ownership — the underlying distinction
- Section 100, TPA — charges on immoveable property
- Sections 172 to 179, Indian Contract Act, 1872 — pledge
- Sale, Section 54 and Lease, Section 105, TPA
- Section 55(4)(b), TPA — the unpaid seller's statutory charge