The word “Mortgage” is something that we have come across as children or young adults, rather frequently. However, what really are these mortgages that people and financial institutions such as banks seem to be oh-so-fond of? What allows it’s recognition and where is it legally enshrined? To have a better understanding of this, let’s have a look at the Transfer of Property Act, 1882.
INTRODUCTION
The Transfer of Property Act, 1882 (hereinafter referred to as “The Act” or “The 1882 Act” or “ToPA”) came into effect on the first day of July in the year 1882 (Ref Sec 1 of The Act). Ancient, I know. While at one glance it might not seem like a subject matter encompassing a wide gamut because well, how much variation could one possibly bring to merely transferring of property, right? Upon delving further into it, we begin to unfurl the wider ambit of transfer of property, interest, ownership, etc. The differences between these and where do they overlap, are questions pertinent to be taken into consideration. The ToPA helps establish various condition requisites for transfer of property, leasing out property, gifting property to someone, mortgaging property and circumstances rendering each valid or void pursuant to the unique circumstances of a case. This Article aims to focus solely on bringing clarity as to Mortgages.
WHAT IS A MORTGAGE?
Sec 58 of the 1882 Act defines what a mortgage, mortgagor, mortgagee, mortgage deed and mortgage money is. In simple terms, Mortgage is a transfer of an interest by a mortgagor to a mortgagee through a mortgage deed out of which the money which comes is the mortgage money. Confusing? Let me explain the purpose of a mortgage to put things further into perspective. Let’s say you are X. You’re doing well in your life, mentally, emotionally and financially as well. A random person Y comes up to you and seeks to get a loan from you with a promise to pay you back. However, the very reason Y has approached you is because he is hard of liquid cash and is in need of the money to work on some of his ventures. You have your cynic and skepticism shoot up since you need some assurance/security to know that you will be paid back through some means or the other. In order to grant you such assurance Y, an honest man, “Mortgages” his property as security. This Property is your assurance to be paid back in a situation where Y is unable to pay you cash. The money owed to you shall and the proceeds thereof shall be taken from the Mortgage Property in an even of nonpayment by the Mortgagor or the Loan debtor, Y.
So in essence, a Mortgage Property is a property given as security whose interest lies with the Mortgagee who during a term of nonpayment beyond the stipulated timeframe by the Mortgagor, can acquire his Mortgage Money by way of his interest in this Mortgage property. Be it by moving the court to sell the property and acquire his due or by way of “Usufructuary Mortgage” which renders the money out of rent of that property, etc in your favour owing to the unique circumstances of the case.
CONCLUSION
Mortgages are a means of providing security by assuring an interest on the “Mortgage Property” by the Mortgagor/the debtor to the Mortgagee/the creditor. These Mortgages are binding by way of mortgage deeds which must be registered to give effect to legal validity of such a Mortgage barring a case wherein a mortgagor has transferred the Title deeds of the Mortgage Property to the mortgagee. In the latter, it is not mandatory to register a mortgage deed. Banks too, by way of the assets you hold may give you loans and hold those assets as security for an event wherein you default to pay the dues. Mortgages are restricted to Immovable Properties only. A movable property given as security for assurance of repayment or performance of duty is known as“Pledge” and falls under the Indian Contract Act, 1872.
REFERENCES
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