Essentials of deposit of title deeds?
Section
58(f) of the Transfer of Property Act deals with deposit of title deeds. This
is a type of recognised modes of mortgage, especially to meet the urgent
financial needs. A person delivers to the creditor or his agent, documents of
title of immovable property with an intention to create security for the
amounts borrowed, is called deposit of title deeds. Accordingly the essentials
of the deposit of title deeds are debt, deposit of title deeds and intention to
create a security.
Equitable mortgages?
In
English law, deposit of title deeds is called as equitable mortgages. It is so
called, because in the absence of any legally executed document, merely on
basis of possession of title deeds by mortgagee, the equity would ensure the
return of the money.
Where the title deeds are to be delivered?
The title deeds are to be delivered
to the creditor or his agent at specified towns. The State Government notifies
the places where the documents are to be deposited with the creditor, and
documents should be deposited only in such places. The place need not
necessarily be the place where property is located. Originally this facility
was available only in Kolkata, Mumbai and Chennai. At present it is extended to
all important commercial centres. The property might be situated in Mysore, but
title deeds may be deposited in Bangalore with the creditor.
Existence of debt?
The purpose of depositing the title
deeds is to secure the amount borrowed. The debt may be existing or future debt
or may be even borrowed earlier. One may deposit the title deeds to borrow in
future also. But the determining factor is debt.
What are the documents to be deposited?
The
title deeds of the property that is the
documents, which establishes the title of the property to the owner have to be
deposited with the creditor. The sale deed, gift deed, partition deed great
certificate are some of the documents, which establishes the title.
What is meant by intention to create the security?
The
borrower should have intention, that is willingness to create a security to the
amount borrowed against the property. That intention is very important, mere
holding of the documents is not sufficient but must be supported by bonafide
intention.
Is it necessary to obtain any letter about deposit
of title deeds?
As per the Transfer of Property Act, there is no need
to have any written document witnessing the deposit. But to be practical, to
establish the intention it is always advisable to reduce the deposit in
writing. The borrower may deliver the documents with a covering letter.
Whether this mode of mortgage attracts Stamp Duty
and Registration?
As
the deposit may be made orally it does not attract Stamp Duty and Registration.
Even the covering letter, which merely records the intention of the party and
deposit, does not attract any Stamp Duty and Registration. But if such letter
contain references to any terms of contract; amount of loan, rate of interest,
repayment period etc., it attracts Stamp Duty and Registration. It should
always be noted that the date of deposit should not coincide with date of loan.
However many States have made the Registration of Covering letter compulsory.
What
remedy is available in case of failure of the borrower to repay?
The
remedy available is by enforcing a decree for sale of the mortgaged property by
suit. Such suit should be filed within 12 years from the date on which money
becomes due.
Right of redemption:
This
is a very important right of the mortgagor, which the law protects. Generally
law stands in favor of the weaker party and mortgagor being debtor; law safeguards his right. Section 60 of Transfer of Property act deals with Right of
Redemption which is a right available to mortgagor to get back the (redeem) the
property mortgaged that is after any time, the principal amount has become due,
on payment of all the dues. The mortgager may demand from the mortgagee, the
mortgage deed, all the documents, and if the property had been delivered, to
deliver the possession of the property. The entire cost of this process to be
borne by the mortgagor. He may also direct the mortgagee to deliver the deed; documents,
possession of the property so any third person. If the mortgage has been
effected by registered document, the redemption or re-conveyance deed also need
to be registered.
This
right of redemption is available before the mortgagee files a suit for enforcement
of mortgage.
Whether partial redemption is allowed?
The
mortgage is indivisible Section 60 of the Transfer of property act does not
allow partial redemption, one of the
mortgagors cannot redeem part of the mortgaged property by paying the proportionate
amount. If redeemed, the entire property has to redeemed. The only exception is
that if the mortgagee is a creditor himself and is responsible for breaking the
integrity of the mortgage by allowing the co-mortgagor to redeem partially or
when he acquires the interest of one of the co-mortgagors.
What is clog on redemption?
Clog
means obstruction. A mortgagor has the right to enjoy hold of the property as
he was entitled before the mortgage. If that right is prevented/restricted,
such conditions are called clogs. A term/condition in a mortgage transaction is
treated as clog, if it is unreasonable.
Foreclosure:
This
is a right available to the mortgagee. The relevant section is 67 of Transfer
of property act. This right can be exercised if there are no contrary
conditions in the mortgage deed and after the mortgaged money has become due
and before the mortgagor gets decree of redemption, or mortgaged money has been
paid, deposited. In simple terms the right can be enforced on failure of the mortgagor
to repay the money borrowed on due date. The mortgagee may obtain a decree from
the court, that the mortgagor is prohibited from right to redeem the property
or property be sold. This is suit for foreclosure. However the remedy depends
upon the nature of the mortgage.
In
the simple mortgage the foreclosure is not available. Remedy is either proceed
against the mortgagor personally or per sale of the property mortgaged, so also
in care of Usufructuary mortgage, where the mortgagee is in possession of the
property and continues to be so until the debris repaid on full. In case of conditional sale, the mortgagee
matures into sale on the failure of the payment of the debt, so the mortgage
may foreclosure depriving the right of redemption. In English mortgage they may
bring a suit for sale of the property. In case of mortgage by deposit of titles
deeds. The remedy is sued for personal decrees or for sale of the property.In anomalous
mortgage, the remedy depends upon the terms of mortgage.
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