Introduction

• Mortgage is defined by Section 58 (a) of the Transfer of Property Act, 1882 (TPA) as a 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 (monetary) 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 affected is called a mortgage-deed.

Rights of a Mortgagor

The TPA offers privileges to a mortgagor in a mortgage-deed under Section 60 - 66, which are as follows:

• Right of mortgagor to redeem (Section 60)
• Right to transfer to the third party (Section 60A)
• Right to inspection and production of documents (Section 60B)
• Right to redeem separately or simultaneously (Section 61)
• Right of usufructuary mortgagor to recover possession (Section 62)
• Accession to mortgaged property (Section 63)
• Improvements to mortgaged property (Section 63A)
• Renewal of Mortgaged Lease (Section 64)
• Implied Contracts by Mortgagor (Section 65)
• Mortgagor's power to lease (Section 65A)
• Waste by mortgagor in possession (Section 66)]

These provisions are explained as follows:

• Right of Mortgagor to Redeem (Section 60)
• This provision provides that upon providing reasonable notice regarding the specified time and location, the mortgagor has the entitlement to redeem the mortgage by paying the outstanding mortgage amount and:
  • Require the mortgagee to deliver the mortgage-deed and the mortgaged property and documents in his possession or under his power.
  • Recover the possession of the mortgaged property from the mortgagee.
  • To get the property re-transferred to him or a third person at his own cost by the mortgagee at the mortgagor's desire or get an acknowledgement registered by the mortgagee extinguishing his right over the property.
• The right of redemption cannot be enforced if it has been extinguished by the right of parties or decree of court.
• The suit filed under this Section called the Suit for Redemption.

• Right to Transfer to the Third Party (Section 60A)
  • As per this section, the mortgagor possesses the right to request the transfer of both the mortgage deed and the mortgaged property to a third party as per the mortgagor's preference.
  • If the mortgagor has fulfilled his obligation by paying the mortgage amount, it is obligatory for the mortgagee to comply with this request.
• Right to Inspection and Production of Documents (Section 60B)
  • The mortgagor, exercising their right to redemption, can, at their own expense, request to inspect and obtain copies or extracts of the documents pertaining to the mortgaged property and the mortgage deed held by the mortgagee, upon successfully reimbursing the expenses incurred by the mortgagee on their behalf, at any reasonable time.
• Right to Redeem Separately or Simultaneously (Section 61)
  • In the absence of a contractual agreement, when multiple mortgages are executed in favor of the same mortgagee, the mortgagor has the right to redeem one or more of these mortgage deeds simultaneously or any one deed separately upon payment of the outstanding dues for the specific mortgage(s).
• Right of Usufructuary Mortgagor to Recover Possession (Section 62)
  • In a usufructuary mortgage, the mortgagor has a right to recover possession of the mortgage deed from the mortgagee
    • Where the mortgagee is authorised to pay himself the mortgage-money from the rents and profits of the property when such money is paid.
    • Where the mortgagee is authorised to pay himself from such rents and profits or arty 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 as hereinafter provided.
• Accession to Mortgaged Property (Section 63)
  • The mortgagor is entitled to the mortgaged property accession upon redemption, if any, during the mortgage's continuance when in possession of the mortgagee if a contract for the contrary does not exist.
  • The mortgagee has no right to claim the accession when redeemed by the mortgagor.
• Improvements to Mortgaged Property (Section 63A)
  • If a property is mortgaged, and the mortgagee makes improvements to the property while holding it as security, the mortgagor has a right to those improvements when they redeem the property. This entitlement exists unless there is a specific contract stating otherwise.
  • If the mortgagee makes necessary improvements to preserve the property from damage or deterioration, to maintain the property's value as security, or in compliance with a lawful order from a government authority, the mortgagor is generally responsible for paying the cost of those improvements.
    • This cost is added to the principal amount of the mortgage, and the mortgagor must pay interest on it at the same rate as the principal amount.
• Renewal of Mortgaged Lease (Section 64)
  • If a mortgaged property is in the possession of the mortgagee and has a lease in existence, and the mortgagee renews the lease during the mortgage period, the mortgagor has the right to receive the benefits of that lease renewal, unless there is a specific provision in the mortgage contract that states otherwise.
• Implied Contracts by Mortgagor (Section 65)
  • In the absence of a contract to the contrary, the mortgagor shall be deemed to contract with the mortgagee:
    • That the interest which the mortgagor professes to transfer to the mortgagee subsists, and that the mortgagor has power to transfer the same.
    • That the mortgagor will defend, or, if the mortgagee be in possession of the mortgaged property, enable him to defend, the mortgagor’s title thereto.
    • That the mortgagor will, so long as the mortgagee is not in possession of the mortgaged property, pay all public charges accruing due in respect of the property.
    • In the case where the mortgaged property is a lease, it is essential that the rent specified in the lease, the terms and conditions outlined in the lease agreement, and any commitments binding upon the lessee have all been fully met, performed, and adhered to up to the point when the mortgage was initiated.
      • Furthermore, the mortgagor is obligated, as long as the mortgage security remains valid and the mortgagee is not in possession of the mortgaged property, to continue paying the rent as stipulated in the lease.
        • If the lease is renewed, the mortgagor must also adhere to the terms of the renewed lease, fulfill the conditions specified therein, and honor any contracts that apply to the lessee.
      • Additionally, the mortgagor is responsible for indemnifying the mortgagee against any losses or claims that may arise due to the non-payment of the aforementioned rent or the failure to perform or adhere to the specified conditions and contracts.
  • Where the mortgage is a second or subsequent incumbrance on the property, that the mortgagor will pay the interest from time to time accruing due on each prior incumbrance as and when it becomes due and will at the proper time discharge the principal money due on such prior incumbrance.
• Mortgagor's Power to Lease (Section 65A)
  • While in lawful possession of the property, the mortgagor has the right to make the lease, which shall be binding on the mortgagee unless otherwise stated in the mortgage.
    • The lease made shall be dealt with in a regular manner of management of the property and as per the customs and local law.
    • The best rent shall be obtained, with no promise of premium or condition of advance payment.
    • It shall not contain an agreement for renewal.
    • The lease shall take effect from no longer than six months from the day of formation of the lease.
    • In the case of the lease of a building with or without land, the lease shall not exist for more than three years, and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid within a time therein specified
• Right in the Case of Waste (Section 66)
  • Based on this provision, the mortgagor is generally not held responsible for any natural deterioration of the property.
    • However, the mortgagor must refrain from taking any actions that could result in catastrophic or irreversible damage to the property, especially if such damage would render the property inadequate as collateral for the mortgage.

Liabilities Of a Mortgagor

• Covenant for the Title
  • In a situation where the mortgagor has entered into an agreement with the mortgagee to transfer the property, and this agreement includes a warranty concerning the property's title, if it is subsequently discovered that the title of the mortgaged property is flawed or defective, the mortgagee has the legal right to initiate legal action against the mortgagor.
  • In this action, the mortgagee can seek not only the repayment of the principal amount but also claim damages for any losses incurred as a result of the defective title.
• Liability to Indemnify for Defective Title
  • If it is determined that the property title held by the mortgagor is flawed or defective, the mortgagor is responsible for compensating the mortgagee for any damages incurred.
  • These damages typically cover the expenses and costs that the mortgagee has had to bear in order to assert their rightful claim to the property title.
• Liability to avoid waste (Section 66)
  • The mortgagor is liable if he acts in a way that leads to waste of property or destroys or injures the property, reducing its value and making it insufficient for security.
  • Waste is of two types:
    • Permissive Waste: It is the small waste for which the mortgagor is not liable for; like failure to maintain ordinary repairs.
    • Active Waste: When destruction of property causes greater waste, reducing the value of the property, the mortgagor is liable.
• Improvements to Mortgaged Property (Section 63A)
  • If improvements are made to the mortgaged property during the term of the mortgage and they are necessary, the mortgagor is responsible for covering the expenses incurred for these improvements.
  • In cases where improvements are essential to prevent the property from being destroyed, and these improvements are carried out by the mortgagee, the mortgagor is obligated to cover the cost of these improvements. This cost is added to the original mortgage amount, along with the principal, unless there is a specific contract stating otherwise.
  • If the mortgagee is in possession of the property and covers the property taxes, the mortgagor is responsible for reimbursing the mortgagee for these expenses.
    • However, if the property is in the mortgagor's possession, they are obligated to pay all property taxes and any public charges associated with the property.