A mortgage is the transfer of an interest in specific immovable property to secure the repayment of a loan. The Transfer of Property Act, 1882 recognises six distinct types of mortgage under the Transfer of Property Act, listed in section 58: the simple mortgage, the mortgage by conditional sale, the usufructuary mortgage, the English mortgage, the mortgage by deposit of title deeds, and the anomalous mortgage. Which one you sign decides who holds the title deeds, whether the lender can take possession, whether the lender must go to court to recover, and whether the remedy is a sale of the property or foreclosure of your right to get it back.
Part of the property and real estate practice at S Jain & Attorneys, Bangalore.
This guide explains each type in plain English, sets them side by side, and then deals with the parts that actually decide disputes: registration, limitation, enforcement under the SARFAESI Act, and the doctrine that stops a lender from writing your right of redemption out of existence.
What a mortgage is under the Transfer of Property Act
Section 58(a) defines a mortgage as the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
The person who borrows and transfers the interest is the mortgagor. The lender who receives that interest is the mortgagee. The principal and interest secured are the mortgage money, and the instrument by which the transfer is effected is the mortgage deed.
A mortgage is not a sale. The mortgagor keeps ownership and keeps the right to get the property back on repayment. That is the doctrine usually stated as once a mortgage, always a mortgage. Section 60 gives the mortgagor the right to redeem, and the courts treat any bargain that defeats or unreasonably postpones that right as a clog on the equity of redemption. The Supreme Court in Seth Ganga Dhar v. Shankar Lal (15 April 1958) treated the rule against clogs as embodied in section 60 itself, and in Pomal Kanji Govindji v. Vrajlal Karsandas Purohit (4 November 1988) said courts do not look with favour on a stipulation that clogs the equity of redemption.
Key takeaway. The label on the document does not decide anything. Whether an instrument is a mortgage, and which of the six kinds it is, depends on the rights the document actually creates. Read for three things every time: does the lender get possession, is there a personal covenant to repay, and is the lender's remedy sale or foreclosure.
Four ideas sit underneath all six kinds, whichever one the document turns out to be.
Section 58(a)
A mortgage is the transfer of an interest in specific immovable property to secure money advanced or to be advanced, an existing or future debt, or a pecuniary engagement.
Mortgagor and mortgagee
The borrower who transfers the interest is the mortgagor, the lender who receives it is the mortgagee, and the principal and interest secured are the mortgage money.
Section 60, redemption
A mortgage is not a sale. The mortgagor keeps ownership and the right to get the property back on repayment, which is the right of redemption.
The clog doctrine
Once a mortgage, always a mortgage. Any bargain that defeats or unreasonably postpones redemption is treated as a clog on the equity of redemption.
The six types of mortgage under section 58
Section 58 lists six kinds. They differ mainly on three questions: are the title deeds handed over, does the lender take possession, and how does the lender recover, by having the property sold or by foreclosing the borrower's right to redeem.
1. Simple mortgage, section 58(b)
The mortgagor does not deliver possession, binds himself personally to pay the mortgage money, and agrees, expressly or impliedly, that on default the mortgagee may cause the property to be sold and the proceeds applied towards the debt. Two consequences follow. The lender cannot simply keep the property, and the lender cannot take possession. It must obtain a decree for sale from the court. This is the workhorse form for private and non institutional lending.
2. Mortgage by conditional sale, section 58(c)
The mortgagor ostensibly sells the property on a condition that the sale becomes absolute on default, or becomes void on payment, or that on payment the buyer will transfer the property back to the seller. The proviso to section 58(c) is critical: no such transaction is deemed to be a mortgage unless the condition is embodied in the document which effects or purports to effect the sale. If the condition sits in a separate agreement, the transaction is not a mortgage by conditional sale. The mortgagee's remedy here is foreclosure, not sale.
3. Usufructuary mortgage, section 58(d)
The mortgagor delivers possession, or binds himself to deliver possession, and authorises the mortgagee to retain it until payment and to receive the rents and profits, the usufruct, in lieu of interest, or in payment of the mortgage money, or partly each. There is no personal covenant to repay, and under section 67 a usufructuary mortgagee as such cannot sue for sale or for foreclosure. Recovery happens by enjoyment of the property until the debt is worked off.
4. English mortgage, section 58(e)
The mortgagor binds himself to repay on a certain date and transfers the property absolutely to the mortgagee, subject to a proviso that it will be re-transferred on repayment. Despite the absolute form of the transfer, the mortgagor retains the equity of redemption. The usual remedy is sale, and in a narrow set of cases described in section 69 an English mortgagee may sell without the intervention of the court.
5. Mortgage by deposit of title deeds, section 58(f)
Where a person in Calcutta, Madras or Bombay, or in any other town which the State Government concerned notifies in the Official Gazette, delivers to a creditor or the creditor's agent documents of title to immovable property with intent to create a security, the transaction is a mortgage by deposit of title deeds. This is the form popularly called an equitable mortgage. Three elements have to be present: a debt, a deposit of title documents, and the intention that the deposit is security for the debt. Because section 59 excludes it from the requirement of a registered instrument, it is fast, which is why banks use it for most housing and business loans. Note the territorial condition: the property, or the deposit, has to connect to a notified town, so confirm the town is notified before relying on this form.
6. Anomalous mortgage, section 58(g)
Any mortgage that is not one of the five above, including a combination of them, is an anomalous mortgage. Its incidents are governed largely by the contract between the parties, with the Act filling gaps. Under section 67, an anomalous mortgagee can foreclose only where the terms of the mortgage entitle him to.
The six types compared
| Type (section) | Title deeds delivered | Possession to lender | Personal liability to repay | Lender's main remedy | Registration |
|---|---|---|---|---|---|
| Simple, 58(b) | No | No | Yes, express personal covenant | Sale through the court | Registered instrument required if Rs. 100 or more |
| Conditional sale, 58(c) | No | No | No, generally | Foreclosure | Registered instrument required if Rs. 100 or more |
| Usufructuary, 58(d) | No | Yes | No | Retain possession and appropriate rents and profits; cannot sue for sale or foreclosure as such | Registered instrument required if Rs. 100 or more |
| English, 58(e) | No | Not usually in practice | Yes | Sale, and in the limited cases in s. 69 without the court | Registered instrument required if Rs. 100 or more |
| Deposit of title deeds, 58(f) | Yes, that is the whole mechanism | No | Yes, usually under the loan agreement | Sale, in practice most often under the SARFAESI Act | Expressly excluded from s. 59, but see the note below |
| Anomalous, 58(g) | Depends on the contract | Depends on the contract | Depends on the contract | As per the contract; foreclosure only if the terms allow | Registered instrument required if Rs. 100 or more |
Note on the equitable mortgage. Section 59 excludes a mortgage by deposit of title deeds from the requirement of a registered instrument. What lenders often do is record the deposit in a memorandum. If that memorandum is treated as the instrument that creates the security rather than a mere record of a completed deposit, registration and stamp duty questions arise, and State stamp law differs. Get the memorandum reviewed locally before assuming it is outside registration.
Registration, attestation and stamping
Section 59 of the Transfer of Property Act says that where the principal money secured is one hundred rupees or more, a mortgage other than a mortgage by deposit of title deeds can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. Below one hundred rupees, a mortgage other than a simple mortgage may also be effected by delivery of the property.
The consequence of getting this wrong is severe. Section 17(1)(b) of the Registration Act, 1908 makes non testamentary instruments that create any right, title or interest of the value of one hundred rupees and upwards in immovable property compulsorily registrable, and section 49 says a document required to be registered by section 17 or by any provision of the Transfer of Property Act shall not affect the immovable property comprised in it, and shall not be received as evidence of any transaction affecting the property, unless it has been registered. The proviso allows an unregistered document to be received as evidence of a contract in a suit for specific performance, or as evidence of a collateral transaction not required to be effected by a registered instrument, but that is a narrow rescue and not a substitute.
Stamp duty is a separate State subject and is charged under the applicable State Stamp Act. An instrument that is insufficiently stamped runs into its own admissibility problem, distinct from registration. In practice, the money saved by skipping registration or stamping is trivial next to the cost of a security that cannot be enforced or a deed that cannot be proved.
Common mistake. Treating a signed but unregistered mortgage deed as good security because both sides trust each other. Trust is not the point. Section 49 of the Registration Act keeps the unregistered instrument out of evidence for the transaction it records, which means the lender may find there is no enforceable mortgage at all, and the borrower may find there is a dispute about what was actually agreed.
What the mortgagor gets
- Right of redemption, section 60. At any time after the principal money has become due, on payment or tender of the mortgage money at a proper time and place, the mortgagor can require the mortgagee to deliver the mortgage deed and all documents relating to the property, to deliver possession where the mortgagee is in possession, and at the mortgagor's cost either to re-transfer the property or to execute and register an acknowledgement that the mortgagee's interest is extinguished. The proviso preserves the position where the right has been extinguished by act of the parties or by a decree.
- Protection against a clog. A term that makes redemption illusory, or postpones it unreasonably, or gives the mortgagee an option to purchase on default, is vulnerable, on the reasoning in Seth Ganga Dhar and Pomal Kanji Govindji.
- Right to inspection and production of documents, section 60B.
- Rights against accession, improvements and a renewed lease made to the property during the mortgage.
- The mortgagee in possession is accountable. Section 76 imposes real liabilities on a mortgagee in possession, including management, collection of rents and profits, payment of government dues, necessary repairs and proper accounting.
- Others can redeem too. Section 91 lists the persons besides the mortgagor who may sue for redemption, and section 92 gives the doctrine of subrogation to a person who redeems.
What the mortgagee gets
- Foreclosure or sale, section 67. In the absence of a contract to the contrary, after the mortgage money has become due, the mortgagee may obtain a decree that the mortgagor is absolutely debarred from redeeming, or a decree that the property be sold. The section then restricts who may do which: only a mortgagee by conditional sale, or an anomalous mortgagee whose terms so provide, may sue for foreclosure, and a usufructuary mortgagee as such and a mortgagee by conditional sale as such may not sue for sale.
- Suit for the mortgage money, section 68. The mortgagee may sue for the money only in the four situations listed, and in no others. The first is where the mortgagor binds himself to repay, which is why the personal covenant matters so much. The court may stay such a suit until the mortgagee has exhausted the remedies against the property.
- Sale without the court, section 69. Only in the narrow cases listed, principally an English mortgage where neither party belongs to the specified communities, a mortgage where the mortgagee is the Government and the deed confers the power, or property situated in the specified towns where the deed expressly confers the power. Even then, the power cannot be exercised unless notice requiring payment has been served and default has continued for three months, or interest of at least five hundred rupees has been in arrear for three months.
- Reimbursement of proper expenses incurred to preserve the property or the security, in the circumstances the Act allows.
Limitation: how long each right lasts
These periods come from the Schedule to the Limitation Act, 1963, and they decide many mortgage disputes before the merits are ever reached.
| Claim | Article | Period | Runs from |
|---|---|---|---|
| By a mortgagor, to redeem or recover possession of the mortgaged property | 61(a) | Thirty years | When the right to redeem or to recover possession accrues |
| By a mortgagor, to recover possession of property transferred by the mortgagee for value | 61(b) | Twelve years | When the transfer becomes known to the plaintiff |
| By a mortgagor, to recover surplus collections after the mortgage is satisfied | 61(c) | Three years | When the mortgagor re-enters on the property |
| To enforce payment of money secured by a mortgage or otherwise charged on immovable property | 62 | Twelve years | When the money sued for becomes due |
| By a mortgagee, for foreclosure | 63(a) | Thirty years | When the money secured becomes due |
| By a mortgagee, for possession of the mortgaged property | 63(b) | Twelve years | When the mortgagee becomes entitled to possession |
Deadline warning. A lender has twelve years under Article 62 to enforce payment secured by a mortgage, but a borrower has thirty years under Article 61(a) to redeem. Families who assume an old family mortgage has lapsed are often wrong in both directions: the right to redeem may still be alive decades later, while the lender's money claim may have died long ago. Date the debt precisely before you take a position.
SARFAESI: how banks enforce without going to court
Where the lender is a bank or a notified financial institution, most enforcement today happens not under the Transfer of Property Act but under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Section 13(1) opens by saying that notwithstanding sections 69 and 69A of the Transfer of Property Act, a security interest in favour of a secured creditor may be enforced without the intervention of a court or tribunal.
- The account is classified as a non performing asset by the secured creditor.
- The creditor issues a written notice under section 13(2) requiring the borrower to discharge the liability in full within sixty days, giving details of the amount payable and the secured assets intended to be enforced.
- If the borrower makes a representation or raises an objection, section 13(3A) requires the creditor to consider it and, if it is not accepted, to communicate the reasons within fifteen days. The section itself says this communication does not by itself give the borrower a right to move the Debts Recovery Tribunal.
- On failure to pay within the sixty days, the creditor may take the measures in section 13(4), including taking possession of the secured assets with the right to transfer them by lease, assignment or sale, and in defined cases taking over the management of the business.
- A borrower or any person aggrieved by a measure taken under section 13(4) may apply to the Debts Recovery Tribunal under section 17 within forty five days from the date the measure was taken.
- An appeal from the Tribunal lies to the Appellate Tribunal under section 18 within thirty days, and it will not be entertained unless the borrower deposits fifty per cent of the debt due as claimed or as determined by the Tribunal, whichever is less. The Appellate Tribunal may, for reasons recorded in writing, reduce that to not less than twenty five per cent.
Section 31 keeps some security interests outside the Act altogether. The two that matter most to ordinary borrowers are clause (i), which excludes any security interest created in agricultural land, and clause (j), which excludes any case in which the amount due is less than twenty per cent of the principal amount and interest. Clause (h) excludes a security interest securing repayment of a financial asset not exceeding one lakh rupees.
Substance over form, and the transaction that looks like a sale
The recurring dispute in this area is whether a document is a mortgage by conditional sale or an outright sale with an option to repurchase. The difference decides everything: a mortgagor can redeem for thirty years under Article 61(a), while a person who sold with a mere contractual option to repurchase has only that contract and its own time limit. The statutory starting point is the proviso to section 58(c), which requires the condition to be embodied in the very document that effects the sale. Beyond that, courts look at the whole transaction, including whether a debtor and creditor relationship existed before and continued after, whether the consideration was close to market value, who remained in possession, and who paid the taxes. Our separate guide on mortgage by conditional sale compared with a sale with repurchase deals with that question in detail.
A note on currency. India replaced its principal criminal statutes in 2023, so the Indian Penal Code is now the Bharatiya Nyaya Sanhita, 2023, the Code of Criminal Procedure is the Bharatiya Nagarik Suraksha Sanhita, 2023, and the Indian Evidence Act is the Bharatiya Sakshya Adhiniyam, 2023. That matters if a mortgage dispute spills into a criminal complaint for cheating or forgery. The Transfer of Property Act, 1882 itself has not been replaced, and the section numbers in this guide are current, but always check the text on the official source before acting.
What to check before you sign a mortgage deed
- Identify which of the six types the document actually creates, by reading for possession, the personal covenant and the remedy, not by reading the heading.
- Check whether possession is being handed over anywhere in the document, including in a side letter or an attornment clause.
- Find the redemption clause and test it. If redemption is postponed for an unusually long term, or is conditional on something outside your control, or the lender has an option to purchase on default, flag it as a possible clog.
- If the document is styled as a sale with a right to repurchase, insist that the condition be embodied in the same instrument, otherwise it will not be a mortgage by conditional sale.
- Confirm the instrument will be registered and properly stamped where section 59 requires it, and that two attesting witnesses sign.
- For an equitable mortgage, confirm the town is a notified town, list every title document being deposited in an acknowledgement, and take a receipt.
- Check the interest, default interest and penal charge clauses, and how the lender proposes to appropriate payments between principal and interest.
- Check whether the lender is a bank or notified financial institution, because that decides whether the SARFAESI route is available against you.
- Verify title independently. A mortgage of property you cannot show clear title to creates a dispute later, not security now.
- On repayment, do not stop at the closure letter. Collect the original title documents, obtain a registered deed of reconveyance or acknowledgement under section 60 where the mortgage was registered, and get the charge cancelled in the records.
What we tell clients
Most mortgage trouble we see is not caused by a hard legal question. It is caused by paperwork that was never completed. A lender takes the original documents and no acknowledgement is signed, so nobody can later say which deeds were deposited or when. A private loan is documented as a sale deed with an oral promise to reconvey, and years later the family is trying to prove a mortgage without the condition in the instrument, which is exactly the situation the proviso to section 58(c) is designed to defeat. Or the loan is repaid in full and everyone moves on, but no reconveyance is executed and the encumbrance certificate still shows the charge, which surfaces a decade later when the property is being sold and the original lender has died or the company has been struck off. Two habits prevent nearly all of it. First, put the security in the correct statutory form and register it, because the cost of registration is small and the cost of an unenforceable security is total. Second, treat closure as a transaction in its own right, with the same care as the loan: originals back, receipt taken, reconveyance registered, records updated. On the enforcement side, borrowers facing a bank notice should also know that the forty five day window under section 17 of the SARFAESI Act is short and starts from the measure, and that a Debts Recovery Tribunal will not be sympathetic to an application filed after the auction, so an objection under section 13(3A) should be made in writing and on time rather than in a phone call to the branch.
If a mortgage, registration or enforcement issue affects your property, our property and real estate law practice can help you assess the document and your options.
Frequently Asked Questions
What is the difference between a simple mortgage and an equitable mortgage?
In a simple mortgage the borrower keeps the title deeds, gives no possession, but binds himself personally to pay, and the lender must obtain a decree for sale on default. In an equitable mortgage, that is a mortgage by deposit of title deeds under section 58(f), the borrower hands the title documents to the lender with intent to create security. It is available only in the towns named in the section or notified by the State Government, and section 59 excludes it from the requirement of a registered instrument, which is why banks prefer it.
Which mortgage gives the lender possession of my property?
The usufructuary mortgage under section 58(d). The mortgagee retains possession until payment and appropriates the rents and profits in lieu of interest, or towards the principal, or both. A mortgagee in possession is not free to do as it likes: section 76 makes it accountable for management, rents, government dues, repairs and accounts.
Can a lender keep my property forever if I default?
No. Section 60 protects the right of redemption, and a term that defeats or unreasonably postpones it is treated as a clog on the equity of redemption, as the Supreme Court explained in Seth Ganga Dhar v. Shankar Lal and Pomal Kanji Govindji v. Vrajlal Karsandas Purohit. Depending on the type of mortgage the lender can seek sale or foreclosure through the proper process, but cannot write your right to redeem out of the bargain.
Does every mortgage need to be registered?
Under section 59, where the principal money secured is one hundred rupees or more, every mortgage except a mortgage by deposit of title deeds must be made by a registered instrument signed by the mortgagor and attested by at least two witnesses. Registration Act consequences follow if you skip it: under section 49 the document will not affect the property and will not be received as evidence of the transaction.
What is foreclosure and which mortgage allows it?
Foreclosure is a decree that the mortgagor is absolutely debarred from redeeming. Under section 67, it is available to a mortgagee by conditional sale, and to an anomalous mortgagee whose terms confer the right. Other mortgages generally lead to a decree for sale instead.
Is a mortgage the same as a sale of property?
No. A mortgage transfers only an interest as security. Ownership stays with the mortgagor, who can recover the property on repayment. Where a document is dressed up as a sale, the proviso to section 58(c) requires the repurchase condition to be in the same instrument before it can be a mortgage by conditional sale.
What law lets a bank take my property without going to court?
The SARFAESI Act, 2002. Section 13 lets a secured creditor enforce a security interest without the intervention of a court after classifying the account as a non performing asset and giving a sixty day notice under section 13(2). Your remedy is an application to the Debts Recovery Tribunal under section 17 within forty five days of the measure.
Are there loans SARFAESI cannot be used for?
Yes. Section 31 excludes, among others, a security interest created in agricultural land, a security interest securing a financial asset not exceeding one lakh rupees, and any case where the amount due is less than twenty per cent of the principal amount and interest.
How long do I have to redeem an old family mortgage?
Article 61(a) of the Limitation Act, 1963 gives thirty years to sue to redeem or to recover possession of mortgaged property, running from when the right to redeem or recover possession accrues. A mortgagee's suit to enforce payment of the money secured is governed by Article 62 and runs for twelve years from when the money became due.
The bank has closed my loan. What should I collect?
All original title documents deposited, a written acknowledgement listing them, a no dues or closure letter, and, where the mortgage was created by a registered instrument, a registered reconveyance or an acknowledgement under section 60 that the mortgagee's interest is extinguished. Then check that the encumbrance record no longer shows the charge.
This article is for general informational purposes only and does not constitute legal advice. Laws change and every situation is different; please consult a qualified advocate about your specific matter.
