This article has been written by Khalid Ali Khan Afridi, a student of PSIT College of Law

Section 58 (e) of the Transfer of Property Act of 1882 defines the English Mortgage. “Where the mortgagor binds himself to repay the mortgage – money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but it is subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money in accordance with the agreement,” states Sub-Section (e) of Section 58, “the transaction is referred to as an English mortgage.”

It is clear from the definition that a mortgage can only be obtained for an immovable property in order to guarantee the repayment of both current and future debt. As the mortgagor is giving the mortgagee an absolute transfer of the immovable property, similar to a legal sale, the transaction will be liable to the appropriate stamp duty based on the property’s market value on the date the mortgage instruments were signed. According to the aforementioned Indian Registration Act of 1908 regulations, this document must also be registered as a sale deed.

TYPES OF MORTGAGE DEFINED UNDER TRANSFER OF PROPERTY ACT, 1882:

Section 58 of the Transfer of Property Act, 1882 enumerates six types of mortgages which are as follows:

1. Simple mortgage.
2. Mortgage by conditional sale.
3. Usufructuary mortgage.
4. English mortgage.
5. Mortgage by deposit of title deed.
6. Anomalous mortgage.

Only two of the six forms of mortgages mentioned, the simple mortgage and the mortgage by deposit of the title deed are common in India.

THE ESSENTIAL REQUISITES OF AN ENGLISH MORTGAGE:

An English mortgage mostly exhibits the following four features:

1. The borrower or mortgagor commits to paying back the debt by a certain date.

2. The lender or mortgagee receives a complete transfer of the mortgaged property.

3. The absolute transfer is contingent upon the lender re-transferring the mortgaged property to the borrower following the mortgagor’s repayment of the loan balance.

4. The mortgagor may use the property for his own use or as a rental while the mortgagee retains the right of possession.

For an English mortgage, you must also have a copy of the loan agreement and the mortgage deed. If there are many mortgagees or lenders, each one may claim their own portion of the property in accordance with their unique requirements. And in such circumstances, all mortgage deeds must be included in the loan application process. The terms and circumstances of the deeds may, however, be adjusted to meet the parties’ particular needs.

THE DRAWBACKS OF ENGLISH MORTGAGE:

The cost (amount) required in an English mortgage’s process is one of its main disadvantages. In comparison to all other types of mortgages, an English mortgage has greater costs. In addition, the stamp duty and registration fees must be paid twice because the property is first transferred in the name of the lender or mortgagee and then later in the name of the borrower or mortgagor. This eventually raises the mortgagor’s borrowing costs.

“Under an English mortgage, the Transfer of Property Act permits the lender to sell the mortgaged property without the intervention of the Honorable Courts,” according to an appraisal by Aradhana Bhansali, Partner, Rajani Associates. If the mortgage deed specifically states that the mortgagee has the right to sell, this is typically advantageous to the mortgagee in business or financial transactions. Because of this benefit, English mortgage is preferred by businesses and governmental organizations that need to provide loans or operating capital using real estate as collateral.

However, this right of the mortgagee to sell the property without the assistance of the Honorable Courts is subject to a number of strict requirements that must be met by the mortgagee before the sale of the property. An English mortgage’s limitation to a particular group of countrywide mortgagees and mortgagors is another issue.

WHAT MAKES ENGLISH MORTGAGE POPULAR?

The English mortgage permits enforcement in the event of a payment default without the assistance of the Honorable Court, in accordance with Section 69 of the Transfer of Property Act, 1882. Despite the fact that the transfer occurs twice, a mortgage is immune from re-transfer under the majority of state stamp laws. It implies that the transactions do not require two identical stamps.

An English mortgage has certain additional qualities in addition to being enforceable by sale like a simple mortgage. The legality of the power of extrajudicial sale in some situations is a significant result of the development of an English mortgage. According to section 69 of the Transfer of Property Act, 1882, a mortgagee has the authority to sell a mortgaged property when payment is late without the assistance of the Honorable Court.

RELEVANCE OF ENGLISH MORTGAGE IN INDIA

Clause (a) of Section 69 of the Transfer of Property Act, 1882’s subsection (1), which refers to the first situation in which the mortgagee is given the right to sell, explains when this is the case. It establishes the following requirements for acquiring the power:

1. That the mortgage must be an English mortgage, as per the definition given under Section 58(e) of the Transfer of Property Act, 1882.

2. Neither the mortgagor nor the mortgagee must be: 

(a) A Hindu, Mohammedan or Buddhist, or 

(b) A member of any other race, sect, tribe, or class from time to time specified in this behalf by the State Government(s) in the Official Gazette.

The English mortgage between a firm and trustees for debenture holders was subject to Section 69 of the Transfer of Property Act, 1882, by the Honorable the Honorable High Court of Andhra Pradesh in the case of L.V. Apte v. R.G.N. Price.

The Transfer of Property Act, 1882, Section 69 (1) (a), only applies to a specific group of mortgagees and mortgagors who do not come from the dominant communities in India. As they are not considered to belong to any religion, corporate entities that are not natural persons benefit from this provision. If the mortgagee and mortgagor are not members of the same race, religion, sect, tribe, or other group that is prohibited by Clause 69(1) (a) of the Transfer of Property Act, 1882, then this specific section may be adopted.

It is suggested or held that Section 69 (1) (a) of the Transfer of Property Act, 1882, is no longer applicable in the current environment since the provisions cannot be applied in text and spirit to commercial transactions like mortgages. No community can be forced to forego participating in a certain commercial endeavour because doing so would violate and restrict their constitutional rights.

CONCLUSION:

The English Mortgage is no longer applicable because it violates the residents’ most basic rights, as stated in section 69 of the Transfer of Property Act of 1882. As a result, it is no longer necessary and is no longer in use. 

SOURCES:

1. The Indian Registration Act, 1908
2. The Transfer of Property Act, 1882
3. L.V. Apte v. R.G.N. Price, AIR 1962 AP 274
4. https://housing.com
5. https://www.99acres.com
6. https://www.legalserviceindia.com

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