Rights and Liabilities of a Mortgagor

RIGHTS OF A MORTGAGOR

Right to Redemption

Right to Redemption is an important right bestowed upon a mortgagor under Section 60 of the Transfer of Property Act, 1882. Mortgagor’s right of redemption means it is his right to recover or get back the property after making payment of the loan. If the loan has been paid, the interest so transferred must be reversed to the mortgagor by the mortgagee. The mortgagee cannot therefore hold any interest in the mortgage property. On payment of the mortgage money, the mortgagor should get back his property free from all traces of the mortgage.

Right of redemption cannot be excluded by a contract. Such a contract designed to impede redemption is a clog on redemption and is void.  It was held in Gangadhar v, Shankarlal[1] by the Supreme Court that the right of redemption of mortgage to mortgagor can neither be finished nor limited by any condition of the parties. If any such condition is imposed then it will be void.

Mortgagors may exercise his right of redemption in any of the following manners:

  1. Payment or tender of mortgage money – The mortgage money debt maybe paid directly to mortgagee or to his authorized agent. Unless the mortgagor makes payment or makes a proposal to pay the debt, he cannot redeem the mortgage. When the mortgagee is a minor, the payment should be made to his lawful guardian. When there are two or more joint mortgagees the payment must be made to all of them jointly. In such cases payment made to the one mortgagee does not discharge the debt against the remaining mortgagees.
  2. Deposit of mortgage money in court – Unless the whole mortgage money is deposited in the court there is no valid discharge. When the mortgage money is deposited in the court the court shall cause notice to mortgagee that such deposit has been made. If the mortgagee accepts the money deposited in the court, it is deemed that the debt is over and the mortgagor can redeem his property.
  3. Suit of redemption – A mortgagor is at liberty to redeem the mortgage directly by filing a suit for redemption. The suit must not be filed by the mortgagor when he has already lost his right of redemption. The mortgagor’s right of redemption is lost by foreclosure of sale or when it is barred by the limitation under the Limitation Act. Limitation for filing a suit for the redemption is thirty years from the date on which the loans are paid back by the mortgagor.
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 Obligation to transfer to the third party instead of transferring it to mortgagor

This right is present under Section 60A of the Transfer of Property Act and was added to the legislation by the Amendment Act of 1929. This right provides the mortgagor the authority to ask the mortgagee to assign the mortgage debt and transfer the property to a third person directed by him. This way, the mortgagor will be able to pay off the mortgagee by taking a loan from a third person on the same security.

Right to inspection and production of documents

This right is present under Section 60B of the Transfer of Property Act and was also added in the Act by Amendment Act of 1929. It is the right of the mortgagor to ask the mortgagee for the production of copies of documents of the mortgaged property in his possession for inspection. The expenses incurred on production or copies of documents or travel expenses of a mortgagee are to be paid by the mortgagor. This right is available to the mortgagor only as long as his right to redeem exists.

Right to accession

This right is present under Section 63 of the Transfer of Property Act. Accession means any addition to property. According to this right, the mortgagor is entitled to such accession to his property which is in the custody of mortgagee. In case an accession is made to the property due to the efforts of mortgagee or at his expense and such accession is inseparable, the mortgagor in order to be entitled to such addition needs to pay the mortgagee the expense of acquiring such accession. If such separate possession or enjoyment is not possible, the accession must be delivered with the property. If such an acquisition is required to the preserve the property from destruction, forfeiture or sale, or made with the mortgagor’s assent, then he has to pay for the same as an addition to the principal money, with interest at the same rate as is payable on the principal amount, or, where no such rate is fixed, at the rate of nine percent per annum. Where the mortgage is usufructuary and the accession has been acquired at the expense of the mortgagee, the profits arising from the accession shall be set off against interest payable on the money spent by the mortgagee.

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Right to improvements

This right is present under Section 63A of the Transfer of Property Act. According to this right if the mortgaged property has been improved while it was in possession of mortgagee, then on redemption and in the absence of any contract to the contrary mortgagor is entitled to such improvement. The mortgagor is not liable to pay mortgagee unless:

  • Improvements made by the mortgagee were to protect the property or with the prior permission of mortgagor.
  • Improvements were made by the mortgagee with the permission of the public authority.

Right to renewed Lease

This right is present under Section 64 of the Transfer of Property Act. If the mortgaged property is a leasehold property and during the duration of mortgage, the lease gets renewed then, on redemption the mortgagor is entitled to have the benefit of the new lease. The mortgagor should however not have entered into any contract to the contrary with mortgagee.

Right to grant a Lease

This right is present under Section 65A of the Transfer of Property Act and was added in the Act by Amendment Act of 1929. A mortgagor has the right to lease out the mortgaged property when he is in lawful possession of the said property, subject to the following conditions:

  • All conditions in the lease should be according to the local laws and customs to prevent any fraudulent transaction.
  • No rent or premium shall be paid in advance or promised by mortgagee.
  • The contract shall not contain any provision for the renewal of the lease.
  • Every such lease shall come into effect within a period of six months from the date of its execution.
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DUTY OF A MORTGAGOR

Duty to avoid waste

This duty is present under Section 66 of the Transfer of Property Act. This section imposes a duty on the mortgagor to not commit any deed which leads to the destruction of the property or any act which decreases the value of the mortgaged property.

REFERENCES

Dr. R.K.Sinha, The Transfer of Property Act (Central Law Agency, Allahabad, 20th edn., 2019).

  1. S. Rama Rao, Transfer of Property Act (MSR Law Books)

G.C. Venkatasubharao, The Transfer of Property Act, 1882 (C.Subbiah Chetty & Co., Chennai, 16th edn., 2019).

 

[1] A.I.R 1958 SC 770

Author: Aditi Shanmugam,
Chettinad School of Law, 2nd year/ Student

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