Define a simple mortgage. How is it to be executed? What are the remedies available to a simple mortgagee for the recovery of mortgage money?

Question: Define a simple mortgage. How is it to be executed? What are the remedies available to a simple mortgagee for the recovery of mortgage money? [BJS 2018]

Find the answer to the mains question of Property Law only on Legal Bites. [Define a simple mortgage. How is it to be executed? What are the remedies available to a simple mortgagee for the recovery of mortgage money?]

Answer

According to Section 58 of the Transfer of Property Act, 1882, a mortgage is the transfer of an interest in specific immoveable property to secure the payment of money advanced or to be advanced by way of loan, existing or future debt or the performance of an agreement which may give rise to pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest the payment of which is secured for the time being are called the mortgage money and the instrument by which the transfer is affected is called the mortgage deed.

Simple Mortgage is defined under Section 58(b) of the Transfer of Property Act, 1882. In a simple mortgage, the mortgagor does not transfer immovable property to the mortgagee but agrees to pay the mortgage money. The mortgagee agrees on a condition that in the event of not paying the mortgage money the mortgagee has every right to sell the property and can use the proceeds of the sale and such a transaction is called a simple mortgage.

Key characteristics of a Simple Mortgage are:-

Definition: A simple mortgage is executed without delivering the property to the mortgagee. The mortgagor is personally liable for loan repayment.

Personal Liability: This involves personal liability along with the mortgaged property.

No Delivery of Possession: The mortgaged property is not delivered, and recovery is through a money decree.

Sale of Property: The mortgagee can sell the property only with court intervention.

Adverse Possession: Adverse possession does not affect the mortgagee's legal rights over the property in a simple mortgage.

Legal Requirements for Simple Mortgage: To create a valid simple mortgage, the following legal requirements must be met:

Execution of a Mortgage Deed: A simple mortgage must be created by executing a mortgage deed, which sets out the terms and conditions of the mortgage, including the amount of loan, interest rate, repayment period, and the consequences of default.

Stamping and Registration: The mortgage deed must be stamped as per the rules under the Indian Stamp Act and registered as per the rules under the Registration Act. The stamp duty and registration fees payable vary from state to state.

Deposit of Title Deeds: The title deeds of the property must be deposited with the lender as security for the loan. The title deeds must be genuine and free from encumbrances.

Consent of Co-Owners: In the case of jointly owned property, the consent of all co-owners must be obtained for creating a simple mortgage.

In case of a simple mortgage, the right of foreclosure is not available. The remedy is either to proceed against the mortgagor personally or for the sale of the mortgaged property.