Wednesday, 30 March 2016

MORTGAGE


What is a Mortgage?
Transfer of property act 1882, deals with mortgage. The relevant section is 58(a). The necessary ingredients are: -
1. Transfer of interest in specific immovable property.
2. Transfer is for the purpose of securing the payment of money advanced or to be advanced by way of loan.
3. It may be existing and future debt.
4. It may be also for performance of an engagement, which may lead to financial liability.

Can a mortgage be done in favour of company?
Yes. The transfer of specific interest in an immovable property should be in favour of living person. Living person includes company, association, and body of individuals.

What is the difference between mortgage and pledge?
Mortgages are dealt as per transfer of property act while Indian Contract Act of 1872 deals with pledge.
Pledge is the bailment of goods, as security for payment of debt, performance or promise.
The pledgee holds the possession of goods as security, but has no right of foreclosure, as there is no transfer of ownership.
Right of enjoyment of property not given to the pledgee.
Transfer of possession is very important in case of pledge; not necessarily so in case of mortgage, depending upon type of mortgage. In mortgage there is transfer of interest, whereas in case of pledge, the pledgee has only special right of detaining the goods till repayment of loan.
Mortgagor has right of redemption and mortgagee has right of foreclosure, where as the pledgee does not have right of foreclosure.

What are the different kinds of mortgages?
Broadly there are six types of mortgages: -
1. Simple Mortgage
2. Mortgage by conditional sale
3. Usufructuary Mortgages
4. English Mortgages
5.Mortgage by deposit of title deeds
6. Anomalous Mortgage.

What is meant by mortgage by possession and mortgage without possession?
In case of mortgage by possession, the physical possession of the immovable property is delivered, possession is important in case of Usufructuary mortgage. In case of mortgage without possession, the physical possession of the property is not delivered like in simple mortgage.

What is meant by Redemption?
Redemption is right available to mortgagor that is one who has transferred the interest in immovable property. He may at any time after the principal money has become due may repay the amounts due, get the interest in specific immovable property transferred in his favour, and also get back the possession, if delivered to the mortgagee.

What is foreclosure?
This is right available to mortgagee, who may exercise this after the mortgage money has become due and before decree has been made for redemption or mortgage money has been paid or deposited in the court.
The mortgagee has a right to obtain from competent court a decree that the mortgagor, shall be absolutely debarred of his right of redemption or that the property be sold.

What are the remedies available to the mortgagee?
The mortgagee has three remedies. A suit may be filed on personal covenant, where the mortgagor has undertaken to repay the debt, binding him personally. A suit can also be filed for sale and thirdly may exercise his right of foreclosure.

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