This short article is written by Amandeep Kaur, a student of Symbiosis Law School, Pune. The author in this short article has discussed the fundamental ideas of mortgagor and mortgagee and likewise the rights and liabilities of a mortgagor.

Introduction

Nowadays mortgage is a very typically used word. Each and every single individual has the understanding that if he wants a loan to be sanctioned, he needs to pay some security and for that, he needs to mortgage his residential or commercial property with a bank. Mortgagor and mortgagee are the celebrations who have a crucial function to play during mortgage of a residential or commercial property. Various statutes readily available in India offers with a mortgage. Following legislation offer with mortgage:

The Transfer of Residential Or Commercial Property Act, 1882- Sections 58-104, which are discussed in Chapter IV offers with the considerable part of mortgage.
The Civil Procedure Code, 1908- The procedural part of mortgage of unmovable residential or commercial property is handled Chapter XXXIV of CPC.
Indian Contract Act, 1872- Any agreement related to mortgage and its basic principles are pointed out in the Indian Contract Act of 1872.
When do rights & liabilities of a mortgagor develop?

The rights and liabilities of a mortgagor develop throughout a mortgage. A loan might be secured or unsecured. Where a loan is offered simply on the basis of debtor's promise to pay (e.g. on promissory-note), such loans are called as unsecured loans. But, where the financial institution takes security from the debtor for the payment of his money, the loan is referred to as protected loans. One such way to protect loans is mortgage. Section-58( a) of the Transfer of Residential Or Commercial Property Act, 1882 has specified mortgage as the transfer of an interest in a particular unmovable residential or commercial property for protecting:

The payment of cash offered to him or to be given through loan, or
An existing or future financial obligation, or
The performance of an engagement which may offer increase to a pecuniary liability.

Who is a mortgagor?

The person who has actually moved the interest in a specific unmovable residential or commercial property is called mortgagor. For example, A desires a loan from B. Now B desires his amount to be protected which he is going to loan A. A will move the interest in a specific immovable residential or commercial property to B and will provide him the authority of offering it in case A is not able to repay B's amount. Here A is the mortgagor.

Who is a mortgagee?

The transferee or person in whose favour the interest is being moved is known as mortgagee. In the above-given example, the person who is providing money i.e. B is the mortgagee.

What is mortgage-money?

The principal amount which is given as loan and the interest amount which mortgagor will pay to mortgagee in addition to the primary amount. Sum of both the principal quantity and interest is called mortgage-money.

What is a mortgage deed?

It is an instrument by which the transfer of interest in a specific stationary residential or commercial property is affected. It is a type of arrangement which lawfully binds both the mortgagor and mortgagee.

Different kinds of mortgage

There are six type of mortgage which are recognized under the Transfer of Residential Or Commercial Property Act, 1882. They are discussed in the act from area 58( b) -58( g). Following are the various sort of mortgage:

Simple Mortgage [section-58( b)] Mortgage by conditional sale [section-58( c)] Usufructuary Mortgage [section-58( d)] English Mortgage [section-58( e)] Mortgage by deposit of title deeds [section-58( f)] Anomalous Mortgage [section-58( g)]

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Rights of Mortgagor

Every mortgage-deed leaves a right to the mortgagor and a corresponding liability for mortgagee and vice versa. Following are the rights provided to a mortgagor offered by the Transfer of Residential Or Commercial Property Act, 1882:

Right to redemption
Right to move mortgaged residential or commercial property to a 3rd celebration instead of retransferring
Right of inspection and production of files
Right to accession
Right to improvements
Right to a restored lease
Right to approve a lease
Right to Redemption (section-60)

It is among the most essential rights of a mortgagor offered under area of the Act. This right puts an end to mortgage by returning the residential or commercial property of mortgagor. The right to redeem additional grants 3 rights to the mortgagor:

Right to end mortgage deal
Right to transfer mortgaged residential or commercial property to his name
To take back possession of residential or commercial property in case of delivery of possession
In the case of Noakes & Co. vs. Rice (1902) AC 24, Rice was a dealership who mortgaged his residential or commercial property, premise and goodwill to N subject to the provision that if R paid back the entire amount, the residential or commercial property would be moved back to his name or any other person's. A covenant was attached that stated whether the amount is due, R would only offer Malt alcohol by N in his facilities. Because of this covenant, R had problem in redemption and it didn't give him outright right over his residential or commercial property. House of Lords held that anything which obstructs this right is bad and they created the principle that 'once a mortgage always a mortgage' and stated that mortgage might never ever be irreducible.

This principle was contributed to secure the interest of a mortgagor. Any condition or arrangement which avoids a mortgagor from redeeming his mortgaged residential or commercial property is a blockage on the right of redemption. The right to redemption continues even though the mortgagor stops working to pay back the loan amount to mortgagee. In the case of Stanley v. Wilde, (1899) 2 Ch 474, it was held that any provision pointed out in the mortgage-deed which has an impact of preventing or restraining the right to redemption is void as a blockage on redemption.

Exceptions to the right- The right to redeem has three exceptions. It can be extinguished under the following cases:

By the act of celebrations

By operation of law

By decree passed by the court

Obligation to transfer to the 3rd party instead of transferring it to mortgagor (section-60A)

This right was added in the Act by Amendment Act of 1929. This right offers the mortgagor with authority to ask the mortgagee to assign the mortgage debt and move the residential or commercial property to a 3rd individual directed by him. The function of this right is to help the mortgagor to pay off the mortgagee by taking a loan from a third person on the very same security.

Right to inspection and production of documents (section-60B)

This section is also placed by the Amendment Act of 1929. It is the right of mortgagor to ask mortgagee for the production of copies of files of the mortgaged residential or commercial property in his ownership for evaluation on notice of affordable time. The expenditures incurred on production or copies of documents or travel costs of a mortgagee are to be paid by the mortgagor. This right is offered to the mortgagor only as long as his right to redeem exists.

Right to Accession (section-63)

Basically, accession implies any addition to residential or commercial property. According to this ideal mortgagor is entitled to such accession to his residential or commercial property which is in the custody of mortgagee. There are 2 kinds of accession:

Artificial accession- It is when mortgagor made some efforts and it increased the worth of land.
Natural accession- The name itself specifies i.e. without any man-made efforts.

In case an accession is made to the residential or commercial property due to the efforts of mortgagee or at his cost and such accession is inseparable, mortgagor, in order to be entitled to such succession, needs to pay the mortgagee the cost of getting such accession.

If such separate belongings or enjoyment is not possible, the accession needs to be provided with the residential or commercial property; it is the liability of mortgagor, in the case of an acquisition which is essential to protect the residential or commercial property from damage, forfeit or sale, or made with his assent, to pay the proper cost thereof, as an addition to the principal money, with interest at the exact same rate as is payable on the primary amount, or, where no such rate is repaired, at the rate of nine percent per annum.

Right to Improvements (section-63A)

According to this right if the mortgaged residential or commercial property has actually been enhanced while it remained in belongings of mortgagee, then on redemption and in the lack of any agreement on the contrary mortgagor is entitled to such improvement. The mortgagor is not accountable to pay mortgagee unless:

Improvements made by the mortgagee were to protect the residential or commercial property or with the previous permission of mortgagor.
Improvements were made by the mortgagee with the approval of the general public authority.

Right to Renewed Lease (section-64)

If the mortgagor is entitled the mortgaged residential or commercial property is a leasehold residential or commercial property and throughout the period of mortgage the lease gets restored then, on redemption the mortgagor is entitled to have the advantage of the brand-new lease. This right is readily available to the mortgagor unless he enters into any contract to the contrary with mortgagee.

Right to grant a Lease (section-65A)

This right was presented by the Amendment Act of 1929. Prior to this right, the Transfer of Residential Or Commercial Property Act did not enable a mortgagor to rent out the mortgaged residential or commercial property on his own however only with the permission of mortgagee. Now, a mortgagor has the right to lease out the mortgaged residential or commercial property while he is in legal belongings of that residential or commercial property, based on the following conditions:

All conditions in the lease ought to be according to the regional laws and customs to avoid any deceptive transaction.
No lease or premium will be paid in advance or guaranteed by mortgagee.
The agreement shall not consist of any arrangement for the renewal of the lease.
Every such lease shall come into effect within a duration of 6 months from the date of its execution.
Where the mortgaged residential or commercial property is a building, the regard to the lease must not exceed 3 years in overall.

Duties/liabilities of a mortgagor

Along with the rights provided to a mortgagor, the Transfer of Residential or commercial property Act has likewise gave some duties on him. Following are the duties of a mortgagor:

Duty to avoid waste
Duty to indemnify for defective title
Duty to compensate mortgagee
Duty to direct lease of a lease to mortgagee
Duty to prevent waste (section-66)

This area imposes a duty on the mortgagor to not to devote any act which leads to the waste of residential or commercial property or any act which minimizes the worth of the mortgaged residential or commercial property. Waste is divided into two classifications:

Permissive waste- A mortgagor who is in possession of the mortgaged residential or commercial property is not accountable to the mortgagee for any minor waste.
Active waste- When an act is done which triggers major waste of the residential or commercial property or results in the decrease in the value of mortgaged residential or commercial property, then the mortgagor will be liable to the mortgagee.

Duty to indemnify for defective title

It is the responsibility of a mortgagor to compensate the mortgagee for a faulty title in the mortgaged residential or commercial property. A malfunctioning title refers to a circumstance when a 3rd party begins declaring or hinders mortgaged residential or commercial property. It is a liability for the mortgagor to compensate for the expenses sustained by mortgagee for securing the title of that residential or commercial property.

Duty to compensate mortgagee

If the mortgaged residential or commercial property is in belongings of mortgagee who is paying all the taxes and other public charges, then it is the responsibility of mortgagor to compensate mortgagee for sustaining such expenditures. Similarly, when there is no delivery of belongings i.e. the mortgaged residential or commercial property is still in ownership of mortgagor, then it is his task to pay all public charges and taxes imposed on it.

Duty to direct rent of a lease to mortgagee

Where the mortgaged residential or commercial property is rented by mortgagor then it is his responsibility to direct lessee to pay the lease, and so on to the mortgagee.

A mortgage-deed develops numerous rights and liabilities for both the parties involved i. e. mortgagor and mortgagee. These rights and liabilities were produced and consisted of in the Transfer of Residential Or Commercial Property Act in 1882 which is quite old and therefore is outdated. Though changes were made in the Amendment Act of 1929, but no recent amendments have actually been made in the chapter of rights and liabilities of mortgagor. This has actually caused different fraudulent transactions as both the mortgagor and mortgagee has discovered various new approaches of deceiving each other. Therefore, the requirement of the hour is to amend the laws and make it more rigid so that no celebration tries to enter in deceitful transactions.