Classify different types of mortgages with examples.

Section 58 of the Transfer of Property Act, 1882, enumerates six distinct types of mortgages, each defined by the nature of the interest transferred and the manner in which the security is created. The type of mortgage is determined ultimately by the interest that passes from the mortgagor to the mortgagee — and it is this single criterion that differentiates each form from the others.

Simple Mortgage — Section 58(b)

The simplest and most commonly encountered form is the simple mortgage. Here, the mortgagor does not deliver possession of the property to the mortgagee. Instead, he personally binds himself to repay the mortgage money and agrees — expressly or impliedly — that upon default, the mortgagee shall have the right to cause the property to be sold through a court of law and recover the debt from the sale proceeds.

Example: A borrows Rs. 10 lakhs from B and keeps his house as security. A continues to live in the house. B has the right to proceed against A personally and also to have the property sold through a court decree if A defaults.

The mortgagee in a simple mortgage enjoys a twofold security — the personal covenant of the mortgagor and the right to have the property sold. Even if the property fetches a sum less than the mortgage money upon sale, B can proceed against A personally for the deficit. The mortgagee's remedy is by a suit for sale — he cannot foreclose a simple mortgage.

Mortgage by Conditional Sale — Section 58(c)

In a mortgage by conditional sale, the mortgagor ostensibly — that is, apparently but not actually — sells the property to the mortgagee. The word "ostensible" is the key: the sale looks like a real sale, but it is in fact a security. The transaction takes one of three forms: if the mortgage money is not paid by a certain date, the sale becomes absolute; or, if the money is paid, the sale becomes void; or, if the money is paid, the buyer shall re-transfer the property to the seller.

A critical proviso, added by the Amending Act of 1929, requires that the condition must be embodied in the same document which effects or purports to effect the sale. Two separate documents — a sale deed and an independent agreement to reconvey — do not constitute a mortgage by conditional sale, as the Supreme Court firmly settled in Chunchun Jha v. Sheikh Ebadat Ali (AIR 1954 SC 345). The mortgagor has no personal liability to repay the debt; the mortgagee's only remedy is by a suit for foreclosure, not sale.

Example: A, needing Rs. 5 lakhs, executes a single deed in favour of B which reads that A sells his property to B for Rs. 5 lakhs, with the condition that if A repays the amount within 5 years, the sale becomes void, and B shall reconvey the property. This is a mortgage by conditional sale.

Usufructuary Mortgage — Section 58(d)

The usufructuary mortgage is a possessory security where the mortgagor delivers — or undertakes to deliver — possession of the mortgaged property to the mortgagee. The mortgagee is authorised to retain that possession until the debt is repaid and to receive the rents and profits of the property, appropriating them either towards interest or towards repayment of the principal, or partly both.

Example: A mortgages his agricultural land to B for Rs. 2 lakhs. B is put in possession and collects the crops. The annual produce is worth Rs. 20,000 which goes towards repayment of the principal. Once the full amount is recovered, A gets back the land.

The mortgagor in a usufructuary mortgage has no personal liability to pay. B cannot sue A personally; he can only retain possession and realise himself out of the rents and profits. The mortgagee has no right to foreclose or to cause the property to be sold. Significantly, no fixed time limit is prescribed — the mortgage subsists until the entire debt is discharged through rents and profits. The Supreme Court, in Prabhakaran v. M. Azhagiri Pillai (AIR 2006 SC 1567), confirmed that where the mortgagee receives rents and profits and the mortgagor has no obligation to personally pay anything except at the time of redemption, it is a usufructuary mortgage.

English Mortgage — Section 58(e)

In an English mortgage, the mortgagor absolutely transfers the property to the mortgagee, coupled with two conditions: first, a personal covenant to repay the mortgage money on a fixed date; and second, a proviso that upon such repayment the mortgagee shall re-transfer the property to the mortgagor.

Example: A borrows Rs. 15 lakhs from B, transfers the property absolutely to B and undertakes to repay the loan with interest on 1st January 2027. B agrees that upon such repayment he will re-transfer the property to A. This is an English mortgage.

The use of the word "absolutely" in the definition is only a matter of form and not of substance, as the Privy Council clarified in Ram Kinkar v. Satya Charan (AIR 1939 PC 14) — the section does not declare an English mortgage to be an absolute transfer; it only means that such a mortgage would be absolute but for the proviso to re-transfer. The mortgagee here has a right to take immediate possession and, in certain cases, to sell without the intervention of the court.

Mortgage by Deposit of Title-Deeds — Section 58(f)

Also known as the equitable mortgage, this type requires no written document and no registration. Where a person, in any of the specified towns of Calcutta, Madras, Bombay or other towns notified by the State Government, delivers to a creditor the documents of title to his immovable property with the intention of creating a security thereon, the transaction is a mortgage by deposit of title-deeds.

Example: A visits his bank in Chennai, hands over the registered title deed of his flat along with a promissory note, intending to create a security for a loan. No mortgage deed is executed. This is an equitable mortgage.

Three essentials must be satisfied: a debt, a deposit of title deeds, and an intention that the deeds shall serve as security for the debt. In KJ Nathan v. SV Maruty Reddy (AIR 1965 SC 430), the Supreme Court observed that it would be hyper-technical to insist upon the formal ceremony of the creditor first delivering the deeds to the debtor and the debtor re-delivering them. The mortgagee's remedy is by a suit for sale, not foreclosure.

Anomalous Mortgage — Section 58(g)

Section 58(g) is a residual category — a catch-all provision that covers every mortgage which does not fall under any of the five preceding types. Any mortgage that combines the features of more than one recognised type, or is moulded by local custom or usage, falls under this head.

Examples: A mortgage where the mortgagee is put in possession (like a usufructuary mortgage) and also has a personal covenant from the mortgagor to repay with a right to sell upon default (like a simple mortgage) is a combination of the two, and is an anomalous mortgage. Similarly, the Kanom and Otti mortgages of Madras and the San mortgage of Gujarat are anomalous mortgages shaped by local custom — the Kanom, which partakes of the nature of both a lease and a mortgage, cannot be redeemed before the expiry of 12 years in the absence of contrary agreement.

A Comparative Glance