Mortgage is the one kind of transfer and it is the one kind of title transfer of specific immovable property. The purpose of it to lend money and it may be immediately or later on. Mortgage creates pecuniary liability.
۩Meaning of mortgage:-
According to section 58(a) of the Transfer of Property Act 1882,
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.
ü The transferor is called a mortgagor;
ü The transferee a mortgagee;
ü The principal money and interest of which payment is secured for the time being are called the mortgage-money; and
ü The instrument (if any) by which the transfer is effected is called a mortgage-deed.
According to section 53-D TP Act, 1882,
An immovable property under registered mortgage must not be re-mortgaged or sold without the written consent of the mortgagee, and any re-mortgage or sale made otherwise must be void. [Amended by the Act 26 of 2004]
۩Elements of Mortgage:-
ü There must be a transfer of an interest;
ü There must be specific immovable property intended to be mortgaged;
ü The transfer must be made to secure the payment of a loan or to secure the performance of a contract.
۩Types/ Forms of Mortgage:-
According to Section 58 of T P Act, 1882, the types of mortgage are discussed below:
ü Simple mortgage
ü Mortgage by conditional sale
ü Usufructuary mortgage
ü English mortgage
ü Mortgage by deposit of title-deeds
ü Anomalous mortgage
# Simple mortgage [Section: 58(b) of TP ACT 1882]:-
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.
# Mortgage by conditional sale [Section: 58© of TP ACT 1882]:-
Where, the mortgagor ostensibly sells the mortgaged property –
ü on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or
ü on condition that on such payment being made the sale shall become void, or
ü on condition that on such payment being made the buyer shall transfer the property to the seller,
The transaction is called a mortgage by conditional sale. However, no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to affect the sale.
In order to determine that a document is a mortgage by conditional sale, the following tests, though not exhaustive, should be applied:
ü The existence of debt.
ü The period of repayment, a short period being indicative of a sale and a long period of a mortgage.
ü The continuance of the grantor in possession indicates a mortgage.
ü A stipulation for interest on payment indicates a mortgage.
ü A price below the true value indicates a mortgage.
ü A contemporaneous deed stipulated for convenience indicates a mortgage, but one executed after a lapse of time points to a sale.
# Usufructuary mortgage [Section: 58(d) of TP Act 1882]:-
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 such rents and profits and to appropriate the same in lieu of interest or in payment of the mortgage-money, or partly in lieu of interest or partly in payment of the mortgage-money, the transaction is called a usufructuary mortgage.
# English mortgage [Section: 58(e) of TP Act 1882]:-
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.
# Mortgage by deposit of title-deeds [Section: 58(f) of TP Act 1882]:-
Where a person in the town of Dhaka, Narayangonj and Chittagong and inother town which the government, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.
# Anomalous mortgage [Section: 58(g) of TP Act 1882]:-
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 within the meaning of s 58 of the TP Act is called an anomalous mortgage.
۩ Rights and Liabilities of Mortgagor [Sections 60-62,83 of TP Act 1882]:-
ü Right of mortgagor to redeem [Section:60 of TP Act 1882];
ü Redemption of portion of mortgaged property [Section:60 of TP Act 1882];
ü Right to redeem separately or simultaneously [Section:61 of TP Act 1882];
ü Right of usufructuary mortgagor to recover possession [Section: 62 of TP Act 1882];
ü Power to deposit in court money due on mortgage [Section:83 of TP Act 1882];
ü Right to money deposited by mortgagor:
# Right of mortgagor to redeem:-
According to s 60 of TP Act, at any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee-
ü to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee,
ü where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and
ü at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished.
# Redemption of portion of mortgaged property:-
Section 60 of TP Act also provides that a person interested in a share only of the mortgaged property is not entitled to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor.
# Right to redeem separately or simultaneously:-
According to s 61 of TP Act, a mortgagor who has executed two or more mortgages in favour of the same mortgagee shall, in the absence of a contract to the contrary, when the principal money of any two or more of the mortgages has become due, be entitled to redeem any one such mortgage separately, or any two or more of such mortgages together.
# Right of usufructuary mortgagor to recover possession:-
Section 62 of TP Act provides that in the case of a usufructuary mortgage, the mortgagor has a right to recover possession of the property together with the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee,-
ü where the mortgagee is authorised to pay himself the mortgage-money from the rents and profits of the property,-when such money is paid;
ü where the mortgagee is authorised to pay himself from such rents and profits or any part thereof a part only of the mortgage-money,-when the term (if any) prescribed for the payment of the mortgage-money has expired and the mortgagor pays or tenders to the mortgagee the mortgage-money or the balance thereof or deposits it in court.
# Power to deposit in court money due on mortgage:-
Section 83 provides that at any time after the principal money payable in respect of any mortgage has become due and before a suit for redemption of the mortgaged property is barred, the mortgagor, or any other person entitled to institute such suit, may deposit, in any court in which he might have instituted such suit, to the account of the mortgagee, the amount remaining due on the mortgage.
# Right to money deposited by mortgagor:-
The court shall thereupon cause written notice of the deposit to be served on the mortgagee, and the mortgagee may, on presenting a petition (verified in manner prescribed by law for the verification of plaints) stating the amount then due on the mortgage, and his willingness to accept the money so deposited in full discharge of such amount, and on depositing in the same court the mortgage-deed and all documents in his possession or power relating to the mortgaged property, apply for and receive the money, and the mortgage-deed, and all such other documents so deposited shall be delivered to the mortgagor or such other person as aforesaid.
Where the mortgagee is in possession of the mortgaged property, the court shall, before paying to him the amount so deposited direct him to deliver possession thereof to the mortgagor and at the cost of the mortgagor either to re-transfer the mortgaged property to the mortgagor or to such third person as the mortgagor may direct or to execute and (where the mortgage has been effected by a registered instrument) have registered an acknowledgement in writing that any right in derogation of the mortgagor's interest transferred to the mortgagee has been extinguished.
۩Rights of the Mortgagee: [ Sections:67-72 of TP Act 1882]:-
ü Right to Foreclosure or sale [Section:67];
ü Mortgagee when bound to bring one suit on several mortgages [Section:67A];
ü Right to sue for mortgage-money [Section:68(1)];
ü Power of sale when valid [Section:69];
ü Rights of mortgagee in possession [Section: 72]
# Right to Foreclosure or sale:-
Section 67 of TP Act provides that in the absence of a contract to the contrary, the mortgagee has, at any time after the mortgage- money has become due to him, and before a decree has been made for the redemption of the mortgaged property, or the mortgage-money has been paid or deposited, a right to obtain from the court a decree that the mortgagor shall be absolutely debarred of his right to redeem the property, or a decree that the property be sold.
A suit to obtain a decree that a mortgagor shall be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure.
However, nothing of the above provisions shall be deemed-
ü to authorise any mortgagee other than a mortgagee by conditional sale or a mortgagee under an anomalous mortgage by the terms of which he is entitled to foreclose, to institute a suit for foreclosure, or a usufructuary mortgagee as such or a mortgagee by conditional sale as such to institute a suit for sale; or
ü to authorise a mortgagor who holds the mortgagee's rights as his trustee or legal representative, and who may sue for a sale of the property, to institute a suit for foreclosure; or
ü to authorise the mortgagee of a railway, canal, or other work in the maintenance of which the public are interested, to institute a suit for foreclosure or sale; or
ü to authorise a person interested in part only of the mortgage-money to institute a suit relating only to a corresponding part of the mortgaged property, unless the mortgagees have, with the consent of the mortgagor, severed their interests under the mortgage.
# Mortgagee when bound to bring one suit on several mortgages:-
Section 67A provides that a mortgagee who holds two or more mortgages executed by the same mortgagor in respect of each of which he has a right to obtain the same kind of decree under s 67, and who sues to obtain such decree on any one of the mortgages, shall, in the absence of a contract to the contrary, be bound to sue on all the mortgages in respect of which the mortgage-money has become due.
# Right to sue for mortgage-money:-
Section 68(1) provides that the mortgagee has a right to sue for the mortgage-money in the following cases and no others, namely,-
ü where the mortgagor binds himself to repay the same;
ü where, by any cause other than the wrongful act or default of the mortgagor or mortgagee, the mortgaged property is wholly or partially destroyed or the security is rendered insufficient within the meaning of s 66, and the mortgagee has given the mortgagor a reasonable opportunity of providing further security enough to render the whole security sufficient, and the mortgagor has failed to do so;
ü where the mortgagee is deprived of the whole or part of his security by or in consequence of the wrongful act or default of the mortgagor;
ü where, the mortgagee being entitled to possession of the mortgaged property, the mortgagor fails to deliver the same to him, or to secure the possession thereof to him without disturbance by the mortgagor or any person claiming under a title superior to that of the mortgagor.
However, in the case referred to in clause (a), a transferee from the mortgagor or from his legal representative shall not be liable to be sued for the mortgage-money.
Section 68(2) provides that where a suit is brought under clause (a) or clause (b) of sub-section (1), the court may, at its discretion, stay the suit and all proceedings therein, notwithstanding any contract to the contrary, until the mortgagee has exhausted all his available remedies against the mortgaged property or what remains of it, unless the mortgagee abandons his security and, if necessary, re-transfers the mortgaged property.
# Power of sale when valid:-
Section 69 provides that a mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section have power to sell or concur in selling the mortgaged property or any part thereof, in default of payment of the mortgage-money, without the intervention of the court, in the following cases and in no others, namely:
ü where the mortgage is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Muslim or Buddhist or a member of any other race, sect, tribe or class from time to time specified in this behalf by the Government, in the Official Gazette;
ü where a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage-deed and the mortgagee is the government; or schedule bank as defined in Art 37 of the Bangladesh Bank Order 1972; and
ü where a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage-deed and the mortgaged property or any part thereof was, on the date of the execution of the mortgage-deed, situate within the town of Dhaka or in any other town or area which the Government may, be notification in the Official Gazette, specify in this behalf.
However, as s 69(2) provides, the above power of sale must not be exercised unless and until –
ü notice in writing requiring payment of the principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service; or
ü some interest under the mortgage amounting at least to Tk 500/- is in arrear and unpaid for three months after becoming due.
Provided that the power of a schedule bank under clause (b) of s 69(1) as mentioned above should further be subject to such conditions as may be prescribed in this behalf by notification in the official Gazette by the Government in consultation with the Bangladesh Bank.
# Rights of mortgagee in possession:-
Section 72 of TP Act provides that a mortgagee may spend such money as is necessary –
ü for the preservation of the mortgaged property from destruction, forfeiture or sale;
ü for supporting the mortgagor's title to the property;
ü for making his own title thereto good against the mortgagor; and
ü when the mortgaged property is a renewable lease-hold, for the renewal of the lease;
and may, in the absence of a contract to the contrary, add such money to the principal money, at the rate of interest payable on the principal, and, where no such rate is fixed, at the rate of nine percent per annum:
Provided that the expenditure of money by the mortgagee under clause (2) or clause (3) shall not be deemed to be necessary unless the mortgagor has been called upon and has failed to take proper and timely steps to preserve the property or to support the title.
Where the property is by its nature insurable, the mortgagee may also, in the absence of a contract to the contrary, insure and keep insured against loss or damage by fire the whole or any part of such property, and the premiums paid for any such insurance shall be added to the principal money with interest at the same rate as is payable on the principal money or, where no such rate is fixed, at the rate of nine per cent per annum. But the amount of such insurance shall not exceed the amount specified in this behalf in the mortgage-deed or (if no such amount is therein specified) two-thirds of the amount that would be required in case of total destruction to reinstate the property insured.
۩Liabilities of mortgagee in possession:- [Section:76 of TP Act 1882]:-
According to s 76 of TP Act, when, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property, -
ü he must manage the property as a person of ordinary prudence would manage it if it were his own;
ü he must try his best endeavors to collect the rents and profits thereof;
ü he must, in the absence of a contract to the contrary, out of the income of the property, pay the government revenue, all other charges of a public nature and all rent accruing due in respect thereof during such possession, and any arrears of rent in default of payment of which the property may be summarily sold;
ü he must in the absence of a contract to the contrary, make such necessary repairs of the property as he can pay for out of the rents and profits thereof after deducting from such rents and profits the payments mentioned in clause (c) and the interest on the principal money;
ü he must not commit any act which is destructive or permanently injurious to the property;
ü where he has insured the whole or any part of the property against loss or damage by fire, he must, in case of such loss or damage, apply any money which he actually receives under the policy or so much thereof as may be necessary, in reinstating the property, or, if the mortgagor so directs, in reduction or discharge of the mortgage-money;
ü he must keep clear, full and accurate accounts of all sums received and spent by him as mortgagee, and, at any time during the continuance of the mortgage, give the mortgagor, at his request and cost, true copies of such accounts and of the vouchers by which they are supported;
ü his receipts from the mortgaged property, or, where such property is personally occupied by him, a fair occupation-rent in respect thereof, shall, after deducting the expenses properly incurred for the management of the property and the collection of rents and profits and the other expenses mentioned in clauses (c) and (d), and interest thereon, be debited against him in reduction of the amount (if any) from time to time due to him on account of interest and, so far as such receipts exceed any interest due, in reduction or discharge of the mortgage-money; the surplus, if any, shall be paid to the mortgagor;
ü when the mortgagor tenders, or deposits in the manner hereinafter provided, the amount for the time being due on the mortgage, the mortgagee must, notwithstanding the provisions in the other clauses of this section, account for his receipts from the mortgaged property from the date of the tender or from the earliest time when he couldtake such amount out of court, as the case may be, and shall not be entitled to deduct any amount therefrom on account of any expenses incurred after such date or time in connection with the mortgaged property.
۩Some Doctrines Regarding Mortgage:-
ü Doctrine of Marshalling [Section:81 of TP Act 1882];
ü Doctrine of Contribution [Section :82 of TP Act 1882]
# Doctrine of Marshalling:-
Marshalling means to arrange. Section 81 of the TP Act provides that if the owner of two or more properties mortgages them to one person and then mortgages one or more of the properties to another person, the subsequent mortgage is, in the absence of a contract to the contrary, entitled to have the prior mortgage-debt satisfied out of the property or properties not mortgaged to him, so far as the same will extend, but not so as to prejudice the rights of the prior mortgagee or of any other person who has for consideration acquired an interest in any of the properties.
Raja mortgages his two properties X and Y to Rumi and then mortgages Y to Rana. If Rumi seeks to realize his mortgage out of Y, Rana can compel Rumi to proceed first against X and realize the debt from it. In case Rumi is unable to realize the whole amount due to him from X, he is entitled to recover the balance from Y.
# Doctrine of Contribution:-
Section 82 of the TP Act deals with the doctrine of contribution. It provides that where property subject to a mortgage belongs to two or more persons having distinct and separate rights of ownership therein, the different shares in or parts of such property owned by such persons are, in the absence of a contract to the contrary, liable to contribute rateably to the debt secured by the mortgage, and, for the purpose of determining the rate at which each such share or part shall contribute, the value thereof shall be deemed to be its value at the date of the mortgage after deduction of the amount of any other mortgage or charge to which it may have been subject on that date.
Where, of two properties belonging to the same owner, one is mortgaged to secure one debt and then both are mortgaged to secure another debt, and the former debt is paid out of the former property, each property is, in the absence of a contract to the contrary, liable to contribute rateably to the latter debt after deducting the amount of former debt from the value of the property out of which it has been paid.
However, the above provisions are not applicable to a property liable under s 81 to the claim of the subsequent mortgage. Thus it is in effect declared that, where marshalling and contribution might conflict with each other, marshaling is to prevail. For example, the owner of two properties, X and Y after mortgaging them separately to Rumi and Rana, mortgages them together to Rais, and then mortgages X to Rafi. Here Rafi is under s 81 entitled to compel Rais to resort to property Y and satisfy his claim out of that security as far as it will go.
۩ Suit for Redemption:- [Section:91 of TP Act 1882]:-
The Following Persons may sue for redemption:-
Section 91 of the TP Act provides that besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely:
ü any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;
ü any surety for the payment of the mortgage-debt or any part thereof; or
ü any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property.
۩Subrogation [Section: 92 of TP Act 1882]:-
Section 92 of the TP Act provides that any of the persons referred to in s 91 (other than the mortgagor) and any co-mortgagor shall, on redeeming property subject to the mortgage, have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee.
The right conferred by this section is called the right of subrogation, and a person acquiring the same is said to be subrogated to the rights of the mortgagee whose mortgage he redeems.
A person who has advanced to mortgagor money with which the mortgage has been redeemed shall be subrogated to the rights of the mortgagee whose mortgage has been redeemed, if the mortgagor has by a registered instrument agreed that such persons shall be so subrogated.
However, the above provisions of s 92 shall not be deemed to confer a right of subrogation on any person unless the mortgage in respect of which the right is claimed has been redeemed in full.
Mortgage is the one kind of mode of transfer among the six modes i.e. Sale, Exchange, Actionable claim, Mortgage, Gift, Lease. Regarding Mortgage in Transfer of Property Act 1882, there are sufficient laws but I specially think that the application of these laws in the practical field is not well-founded. So, it is expected that the statutory law will be implemented in the practical field.
A mortgage corresponds to the Hypotheca of Roman Law. The creditors, on the failure of the debtor to pay the debt, could being the debtor’s property to sale and recoup him. It differs from Nexum and Fiducia of that system of law.
Under the former, the debtor was merely forced to become the servant or slave of the creditor, and, under the latter, the debtor was kept out of the ownership and possession of his own property.
Hindu and Mahomedan laws also recognized the latter type of Mortgage. Property was pledged to the creditor and the debtor was kept out of possession till the debt was repaid, the creditor taking the profits in lieu of the interest.