Mentoassociates.com – Legal Articles

Mortgage is the transfer of an interest in an immovable property. The interest may be transferred for the purpose of:
a.Securing the payment of money advanced.
b.Securing the payment of money to be advanced by way of loan.
c.Securing the payment of an existing or future debt.
d.Securing the performance of an engagement which may give rise to a monetary liability.

The person who transfers the interest in the immovable property is the mortgagor, the person to whom the interest is transferred is the mortgagee .The instrument, if any, by which the transfer is effected is called mortgage deed. There are various types of mortgage like simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage, Anomalous mortgage, mortgage by deposit of title deeds etc.

In a simple mortgage, the possession of the mortgaged property is not delivered by the mortgagor. However, in the event of the mortgagor failing to pay the mortgage money, according to the contract, the mortgagee shall have a right to sell the mortgaged property and to realize the mortgage money from the sale proceeds. In a usufructuary mortgage, the mortgagor delivers the possession of the property to the mortgagee. The mortgagee can retain the possession till payment of the mortgage money by the mortgagor. The mortgagee can receive the rents and profits, accruing from the property, and appropriate the same in lieu of interest or in payment of mortgage money.

In a mortgage by deposit of title deeds, a person delivers to a creditor or his agent documents of title to an immovable property with intent to create a security thereon. A mortgage where the principle money secured is more than Rs 100/- can be effected only by a registered instrument. However this is not applicable in the case of mortgage by title deeds.
A mortgagor has a valid right called right to redeem. This means that, at any time principle money has become due, the mortgagor has a right on payment of the mortgage money, to require the mortgagee:

a) to deliver to the mortgagor,  the mortgage deeds and all documents relating to the mortgaged property in his possession.
b) to deliver possession of mortgage property to the mortgagor and to retransfer the  mortgaged property.

A mortgagor who has executed two or mortgages in favour of the same mortgagee, shall be entitled to redeem any one of such mortgage separately, or any two or more of such mortgages together.If any accession or improvement has happened to the mortgaged property during the possession with the mortgagee, then the mortgagor will be entitled to such accession and improvements upon redemption.

With the introduction of SARFAESI Act 2002, it has become easy for banks and other financial institutions to recover loans advanced from defaulting borrowers. If a borrower has taken a loan by giving some collateral security and if he defaults in the repayment of the said loan, then the bank or the financial institution can take the possession of the collateral security, in most cases an immovable property and then manage or even sell the same to recover the debt after issuing a 60 days notice. The borrower is forbidden form approaching the civil court or other authorities against any such actions. However, after the said action by the bank, the aggrieved party can approach the Debt Recovery Tribunal against such an action.
Some of the defenses against the action of banks under the SARFAESI Act include:
a) Non-issuance of 60 days notice
b) Non-classification of the account as Non Performing Asset.
c) If the collateral security is an agricultural land, then   proceedings under SARFAESI Act is not permitted.
d) Action of the bank  barred by Limitation Act, 1963
e) Non delivery of Possession notice to the borrower.
f) Non publication of Possession notice in the news paper.
g) Non service of notice of 30 days, for sale of the secured assets after taking possession of the same.
h) If the amount due is less than 20 percent of the principal amount and interest thereon.