MORTGAGE a common but ambiguous term in today's loan oriented society. The popular term mortgage carries with it various vague ideas .We the common people know that we need to mortgage our property in order to get loans such as house building loans, car loans, educational loans and so on.
Generally speaking when a person wishes to buy some movable or immovable property for which he is in need of money , then he can take loan mortgaging his movable or immovable property. In case of mortgage the banks or financial institutions give loan by securing the repayment of the loan with the interest in a specific movable and/or immovable property transferred by the person who has taken the loan. Mortgage works as a security of the loan amount . It is way to secure profit for the bank and/ financial institutions and it is the way of getting loans for the common people, builder and/or company, firm etc.
Mortgage is French term which means 'death contract'.The term death contract means that the pledge
(promise, bailment, guarantee ) ends only when the loan is repaid , the obligation is fulfilled or when the borrower takes over and/or sells the collateral, the mortgaged property by way of foreclosure.
Kinds and Definitions of Property:
Property is of two kinds movable and immovable.
Immovable property is a kind of property tat can not be moved i.e the property attached to earth.
The following acts have given several definitions of the term 'immovable property' :
Section 3(26) of the General Clauses Act, 1897 states that “ immovable property " shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.
According to Section 2(6) in The Registration Act, 1908 " immovable property" includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.
Section 3 of the Transfer Of Property Act, 1882 states “ immovable property " does not include standing timber, growing crops or grass:"
All other kind of property which is not immovable property is movable property.
The following Acts give the definitions as under mentioned:
Section 3(36) of the General Clauses Act states that" movable property" shall mean property of every description, except immovable property.
According to Section 2(13) of the Civil Procedure Code ,1908 "movable property includes growing crops.”
Section 2(9) of the Registration Act , 1908 states that" movable property includes standing timber growing crops and grass, fruit upon and juice in trees, and property of every other description, except immovable property.”
According to Section 22 of the Indian Penal Code 1860 "movable property are intended to include corporeal property of every description, except land and things attached to the earth or permanently fastened to anything, which is attached to the earth.“
The way of providing loan :
In case of movable property loan is given through hypothecation i.e. Pledging of something as security without delivery of title or possession (Black's Law Dictionary 8th edition) by the banks and/or financial institutions.
In case of immovable property loan is provided by way of mortgage.
The Acts which deals with mortgage in India:
In India The Transfer of Property Act, 1882 deals with mortgage of immovable property. Chapter IV , Sections 58 – 104 of the said Act deals with mortgage .The Transfer of Property Act deals with the substantive part of mortgage of immovable property on the other hand The Civil Procedure Code ,1908 deals with the substantive part of it. Chapter XXXIV of The Civil Procedure Code, 1908 Suits relating to the mortgage of immovable property deals with the procedural part of it.
The general principles of mortgagecontract is guided by the Indian Contract Act ,1872.
Definition of the term Mortgage:
According to the Section 58(a) of the Transfer of Property Act 1882 “A mortgage is the transfer of interest in specific immovable 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 performance of an engagement which may give rise to a pecuniary liability.”
The transferor is called the mortgagor , the transferee is called the 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.”
The Black's Law Dictionary (7th) Edition defines the term “mortgage”:
- " A conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon performance according to the stipulated terms.
- A lien against property that is granted to secure an obligation (such as debt) and that is extinguished upon payment or performance according to stipulated terms.
- An instrument (such as a deed or contract) specifying the terms of such a transaction.
- Loosely the loan on which such a transaction is based.
- The mortgagee's right conferred by such a transaction.
- Loosely any real- property security transaction , including a deed of trust.”
Therefore by way of mortgage deed the mortgagor transfers his interest in a specific immovable property ,the mortgaged property for securing the payment of mortgaged mortgaged money to the mortgagee.
Legal significance and/or essential elements of the term mortgage:
- There must be a transfer of interest
- The interest transferred must be some specific immovable property.
- The purpose of the transfer must be to secure the payment of any debt or performance of an engagement which may give rise to a pecuniary liability.