NATIONAL LAW INSTITUTE UNIVERSITY

BHOPAL (M.P.)

A
PROJECT
ON
“USUFRUCTUARY MORTGAGE”

SEVENTH TRIMESTER

SUBMITTED BY:
SHIVANI KHODA
2014BALLB48

SUBMITTED TO:
Prof. VIJAY KUMAR SINGH
 Acknowledgment

I would like to express my sincere thanks to my Property Law teacher Vijay Kumar Singh for
her valuable suggestions & guidance. I would also like to thank my seniors as well as my
friends who have given their timely help, encouragement as well as criticism during the various
stages of the project, without which it would not have been easy to complete my task smoothly.

I am also thankful to my parents for their constant inspiration & moral support.

SHIVANI KHODA

2014BALLB48
 Research Questions

 What is mortgage and its types?

 What is Usufructuary mortgage and its elements?
 How is Usufructuary mortgage different from other forms of mortgage?

Hypothesis

It is assumed in the beginning of the project that Usufructuary mortgage is an altogether

different kind of mortgage and is different from all other forms including Zuripeshgi lease.

Research Methodology

The research methodology used in this project is doctrinal method.

Citation Style

The project would follow Bluebook 19th Edition citation format throughout.
 TABLE OF CONTENT

1. Introduction…………………………………………………….………..…5
2. Kinds Of Mortgage……………...…………………………………………5
3. Usufructuary Mortgage……….………………..……………………...…..8
4. Essentials of usufructuary mortgage.……………………..…………......10
5. Mortgage with possession but without personal covenant to pay….......14
6. Usufructuary mortgage with personal covenant to pay.………………..14
7. Possession retained by mortgagor-It is not usufructuary mortgage...…15
8. Usufructuary mortgage-Mortgage money paid-Mortgage ends…...…...15
9. Usufructuary mortgage-Redemption………………………………….....16
10. Usury Regulations…………………………………………………...…….18
11. Remedies of a Usufructuary Mortgagee…………………………....……19

12. Rights of Usufructuary Mortgagor…………………………………...….19

13. Distinction from other mortgages and from zuri-peshgi lease……..…..19

14. Conclusion ……………………………………………………………...….22

15. Bibliography and References………………………………………………..….….23
 INTRODUCTION
Mortgage is a security for a debt. However, mortgage in itself is not a debt. Contrary to this it
is lender’s security for a debt. It is a transfer of an interest in immoveable property from owner
to lender, and such transfer is made on this condition that this interest will be returned to owner
after satisfaction or performance of terms of mortgagor. Thus, mortgage is a security for that
loan, which lender makes to borrower.

According to Section 58 of Transfer Of Property Act: A mortgage is the transfer of an

interest in specific immoveable 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.

KINDS OF MORTGAGE:

1. Simple Mortgage - Section 58(b):

Simple mortgage is a transaction in which without delivering possession of the mortgaged
property, the mortgage or ties himself actually to pay the mortgage money and agree expressly
or impliedly that in the event if this failing to pay according to the contract the mortgages shall
have right to cause the mortgage property to be sold the proceeds of sale to be applied in
payment of mortgage money. That transaction is called simple mortgage.

Essentials:
 Property is mortgaged.
 Possession is not delivered.
 A personal obligation to pay the debt.
 Obligation may be express or implied.
 The transfer of a right to cause the mortgage property to be sold in default of the
payment.
2. Mortgage by conditional sale - Section 58(c):
Where the mortgagor ostensibly sells the mortgaged property:-
 On condition that on default of payment of the mortgage money on a certain date, the
sale might get to be outright
 On condition that on such payment being made, the sale shall become void,
 Payment being made, the buyer shall transfer the property to the seller. The aforesaid
condition as to payment must be embodied in the very same document which ostensibly
purports to affect the sale.
Essentials:
 This mortgage is a form of sale.
 The sale becomes absolute on the non-payment of mortgage money.
 The sale may become void on the payment of mortgage money.
 No delivery of possession is given.
 There is no personal liability on the part of the mortgagor to pay the debt.
 The remedy of the mortgage is by foreclosure only.

3. Usufructuary Mortgage – Section 58(d):

Where the mortgagor delivers possession or expressly or by implication binds himself to

deliver possession of the mortgaged property to the mortgagee and authorizes him to retain
such possession until payment of the mortgage money and to receive the rents and profits
accruing from the property and to appropriate the same in lieu of interest and in payment of the
mortgage money.

Essentials:
 Possession of property is delivered to the mortgagee.
 Mortgagee is entitled for rents and profits of the mortgage property.
 No personal liability on the mortgagor.
 Mortgagee cannot sale out the property.
 No time period is fixed, to pay the mortgage money.

4. English Mortgage – Section 58(e):

English mortgage is a transaction which the mortgagor binds himself to repay the mortgage
money on a certain date and transfers the mortgaged property absolutely to the mortgagee but
subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage
money as agreed the transaction is called an English mortgage.

Essentials:
 Mortgagor binds himself to re-pay the mortgagee on a certain date.
 The property is absolutely transferred to the mortgagee.
  Transfer of property should be subject to the proviso that the mortgagee will recover
the property to the mortgagor on the payment.

5. Mortgage by deposit title deed – Section 58(f):

This is called English law an equitable mortgage. If a person deposits his title deeds to the
immoveable property with the creditor or his agent with intent to create a security thereon, the
transaction is called equitable mortgage or a mortgage by deposit of title deeds.

Essentials:
 Document of titled deed is deposit as security.
 There is a debt.
 On the payment of mortgage money, the title deed is returned to the mortgagor.

6. Anomalous mortgage – Section 58(g):

A mortgage which is not a simple mortgage, a mortgage by conditional sale, a Usufructuary

mortgage, English or a mortgage by deposit of title deeds, is called an anomalous mortgage.
 I. Usufructuary Mortgage:
In a usufructuary mortgage, the mortgagee is placed in possession and has a right to enjoy the
rents and profits until the debt is paid1. It is not necessary that the mortgagee should take
physical possession, for the mortgagor may continue in possession as lessee of the mortgagee;2
or he may direct the tenants to pay rent to the mortgagee;3 but unless there is a clause providing
for the mortgagee going in possession, there cannot of course, be a usufructuary mortgage. 4 As
possession by the mortgagee is the distinguishing feature of such a mortgage, it follows that
there cannot be two different usufructuary mortgages on the same property at the same time. 5
When a mortgage was executed and the property mortgaged was leased to the mortgagee, both
formed one transaction which was a usufructuary mortgage, and not a simple mortgage.

The fact that possession was not given cannot alter the character of the transaction, 6 and the
words now inserted make it clear that the mortgagee who is entitled to possession under the
mortgage, but who has not received possession, is a usufructuary mortgagee. There is nothing
illegal in a usufructuary mortgagee leasing the property to the mortgagor. The mere fact that at
the time of the execution of the mortgage it was agreed that the mortgagor would continue in
possession as a lessee, would not affect the latter’s legal position.7 Where a usufructuary
mortgagee leases the property back to the mortgagor, whether the relationship between them
is that of landlord and tenant would depend upon the construction of the deed.

In case of A Narayan Rao v Laxmi Amma,8 it was said that, the document introducing any
conditions other than those covered by S. 58(d) could not be regarded as usufructuary
mortgage. Thus, where the document fixed the time to enjoy property for a term of 25 yrs on
illidarwar rights; created a personal covenant to pay value of improvements as decided by four
respectable persons, and after the period of 25 yrs or when the mortgagee demanded mortgage
money, payment of not only the mortgage money, but also the value of improvements were

1
Hastimal v P Tej Ram Sharma AIR 2007 SC 3246, (2007) 11 SCC 87.
2
Feroz Shah v Sobhat Khan 60 IA 273
3
Venkataratnam v Varahaliah (1932) 63 Mad LJ 310
4
Bachan Singh v Waryam Singh AIR 1961 Punj 477
5
Ram Narain Lal v Murli Dhar (1920) 5 Pat LJ 644
6
Khunni Lal v Madan Mohan (1908) ILR 31 All 318
7
Mohomed Isaq Hussain v Cheddalal AIR 1948 All 348
8
AIR 1994 Ker 371
agreed as the terms of the document, it was held that the document cannot be regarded as
usufructuary mortgage.

A usufructuary mortgage of an occupancy holding was not valid as a mortgage with all its
incidents and subject, to the provisions of law relating to usufructuary mortgage, but was valid
only in a qualified sense, i.e., in the sense of subletting with a covenant that the mortgagor will
not be entitled to recover possession without payment of the mortgage money, and further, that
under such a mortgage there is no transfer of the right of an occupancy tenant and consequently
no suit for redemption was maintainable, nor was there any extinguishment of the right of an
occupancy tenant upon expiry of the period of limitation fixed for redemption under art 148 of
the Limitation Act 1908.9 A mortgagor executed a usufructuary in respect of his agricultural
rent. Since no rent in respect of the land was paid to the landlord, he instituted a suit for arrears
of rent and obtained a decree and on an execution thereof, the property was put to sale. The
mortgagee paid the decretal amount. It was held that if on some default in payments of rent, a
rent decree is obtained and the mortgagee pays the sum even then the mortgage in question is
liable to be redeemed at the option of the mortgagor. The mortgagor cannot escape from his
obligations by bringing the equity of redemption of sale in execution of a decree on the personal
covenant.10

9
Ram Adhar Singh v Bansi AIR 1987 SC 987
10
Parichham Mistry v Acchiabar Mistry AIR 1997 SC 456
 II. Essentials of usufructuary mortgage in detail:

 Possession of property is delivered to the mortgagee:

The possession of the mortgaged property is handed over to the mortgagee by the mortgagor
as a security for the payment of mortgage-money. It is not necessary that the delivery of
possession must be made at the time of execution of the deed. The mortgagor may either give
express or implied undertaking to deliver possession.

Possession of property, recovery of:11

Possession of the mortgagee is permissive in character in the sense that it is with the consent
of the mortgagor.12 Therefore, on redemption of mortgage, the mortgagee is required to hand
over the possession of the property to the mortgagor. There are, however, certain exceptions to
it. In case of the mortgagee, a tenant of the mortgagor prior to the mortgage, it is a general
principle of law that there is no automatic merger of the tenancy rights with mortgage rights.
Both of them operate independent of each other, and on redemption of the mortgage, tenancy
would revive except in a case where an intention of the parties is reflected to the contrary. The
effect of the mortgage is to keep the lessee’s rights in abeyance which stood revived upon the
redemption of mortgage. For a merger to arise, it is necessary that a lesser estate and a higher
estate should merge in one person at one and the same time and in the same right, and no
interest in the property should remain outside. In the case of a lease, the estate that is in the
lessor, is a reversion. In the case of a mortgage, the estate that is outstanding, is the equity of
redemption of the mortgagor. Therefore, there cannot be a merger of lease and mortgage in
respect of the same property since neither of them is a higher, or a leaser estate than the other.13
Since there is no automatic merger, in absence of proof of surrender of lease by the
mortgagee/lessee, the mortgagor/lessor is not automatically entitled to recover possession of
leased premises on redemption of mortgage. However, if the mortgagee had no tenancy rights
prior to mortgage, he cannot claim the same after mortgage ends.14

As regards tenants inducted by the mortgagee, the cases Mahabid Gope v Harbans Narain
Singh and Om Prakash Garg v Gyan Nath, Supreme Court has held that he may grant lease not

11
See also Transfer Of Property Act 1882, s 83
12
Pratap Singh Babu Ram v Deputy Director of Consolidation, Mainpuri (2000) 4 SCC 614
13
Shah Mathuradas Manganlal Co v Nagappa Shankarappa Malage (1976) 3 SCC 660
14
Kharati Lal v Janak Raj AIR 2004 P & H 29
extending beyond the period of the mortgage; any leases granted by him must come to end and
at redemption since it is not an act of prudent management.15 They can be evicted on
redemption of mortgage.16 Such tenants are not entitled to the protection of rent control
legislation against the mortgagor after the redemption of the mortgage. An agricultural lease
may confer at best the status of tenants from year to year.17

 Appropriation of Rents and Profits:

The mortgagee becomes entitled to recover rents and profits of the property mortgaged till the
money is repaid. He may either appropriate the money towards:
i. Interest on the mortgage-money
ii. in payment of mortgage-money
iii. Partly for both principal and interest.
The mortgagor recovers possession when he pays the principal and there is no question of an
account between the mortgagor and mortgagee. In the first case, the mortgagee takes the chance
of the rents and profits being greater or less than the interest.18 In the second case, the mortgagor
continues to pay interest, and is entitled to recover possession when the rent and profits received
was equal to the amount of the principal. An account of the rents and profits is necessary for
this purpose. In the third case, the mortgagor is not entitled to recover possession until the
principal and interest are paid out of the rents and profits. This is a common form and an
account is necessary to ascertain whether the principal and interest have been paid off. There
are cases, however, in which the condition is that the rents and profits are taken in lieu of
interest and defined portions of the principal. Thus, if the condition is that the rents and profits
each year shall be taken in lieu of interest and one-tenth of the principal, the debt is discharged
in 10 yrs, and no account is necessary.

 No personal liability on the mortgagor:

The mortgagor is not personally liable for mortgage money so the mortgagee cannot sue the
mortgagor personally for his debt. The mortgagee can only retain the possession of the

15
Om Prakash Garg v Ganga Sahai AIR 1988 SC 108
16
Shambhu Dayal v Shivcharan Lal AIR 2004 Raj 118
17
Harihar Prasad Singh v Munshi Nath Prasad AIR 1956 SC 305
18
Raja Pertab Bahadur v Gajadher (1902) ILR 24 All 521
property. He cannot compel the mortgagor to pay back the mortgage-debt. Only the mortgagor
himself can pay off the debt and take the property back.

The mortgagee takes possession, and looks to the rent and profits to repay himself. The
mortgagor cannot be sued personally for the debt.19

In a Calcutta case, Luchmeshar v dookh,20 the words were ‘having paid the principal money in
the month of Chaitra 1297 we shall take back the documents and the land. In case we fail to
repay the principal money at due date, the sudbharna bond shall remain in force.’ But they
were held to import no personal covenant. As there is no personal liability, a debt secured by a
usufructuary mortgage cannot be attached under O 21, r 46 of the Code of Civil Procedure as
if it were a simple debt.21 The interest of such a mortgagee can only be attached under O 21 r
54.

This characteristic 1s lacking in many mortgages that are commonly called usufructuary. A
personal covenant is often included in order to provide a personal remedy against the
mortgagor. If the covenant does not import a right of sale, it has been said that the character of
the mortgage is not altered,22 but it is submitted that it is an anomalous mortgage. If it does
import a right of sale, it would still be an anomalous mortgage since the amending Act of 1929,
but a simple mortgage usufructuary under the TP Act as it stood before the amendment.

As s 58(d) stands, if under the mortgage deed, a mortgagor expressly or by implication binds
himself to convey possession of the mortgaged property to the mortgagee, the transaction is a
usufrucruary mortgage, notwithstanding the fact that the actual possession has not been
delivered. Such a transaction being a usufructuary mortgage, s 67 does not empower the
mortgagee to bring the property to sale. Section 68 may confer a right on the mortgagee to sue
for the mortgage money when the mortgagor fails to deliver the property to him without
disturbance by the mortgagor or any person claiming under him. This does not expressly or by
implication confer a right on him to recover the mortgage money by the sale of the property.23

19
Chathu v Kunjan (1889) ILR 12 Mad 109
20
(1897) ILR 24 Cal 677
21
Manilal Ranchod v Motibhai (1911) ILR 35 Bom 288
22
Kashi Ram v Sardar Singh (1906) ILR 28 All 157
23
Subarayya v Subramanyan (1952) 2 Mad LJ 55
  Mortgagee cannot foreclose or sell:

The right of foreclosure or sale is not available to the usufructuary mortgagee. In such a
mortgage no time limit is fixed. Therefore, the mortgagee is entitled to possession till the
money due is paid to him.

 No time limit:

The main characteristic of this mortgage is that no time limit is fixed for the repayment.

The mortgagee retains possession until the mortgage money is paid. It has been held that this
is an uncertain time dependent on the state of the account or the ability of the mortgagor to
repay, and that if a time limit if fixed the mortgage is not a mortgage ‘until payment of the
mortgage money’ and is, therefore, not a usufructuary mortgage.24 But this view does not seem
to be correct. A time limit may be impliedly fixed when the agreement is that referred to in s
77, when the rent and profits are in lieu of interest and defined portion of the principal.

In Ram Narayan Singh v Adhindra Nath25 a fixed date was appointed for restoration of
possession after calculation of the time when the mortgage money would be discharged out of
the usufruct, yet the Privy Council held that it was only a usufructuary mortgage. Again s 62(b)
expressly provides for a case where a term is prescribed for the payment of the mortgage
money. However, if the time limit imports a personal covenant to pay and a right of sale in
default, the mortgage would not be a usufructuary mortgage, but an anomalous mortgage of
the species ‘simple mortgage usufructuary.’26 If at the expiry of the time limit the mortgage is
to become a mortgage by conditional sale, it is an anomalous mortgage of the species ‘mortgage
usufructuary by conditional sale.’

 Registration:

Where money taken is Rs. 100 or more, registration is necessary. In other case mortgage is
complete only by delivery of possession.

24
Hikmatulla v Imam Ali (1890) ILR 12 All 203
25
44 IA 87, (1916) ILR 44 Cal 388
26
Pargan Pandey v Mahatam Mahto (1907) 6 Cal LJ 143
III. Mortgage with possession but without personal covenant to pay:

In case of Mst. Sanjya, w/o Mahadeo v. chauthmal27 there is no serious controversy that the
document is a mortgage deed which should have been registered. The controversy is on the
point whether the transaction embodied in document is an usufructuary mortgage or an
anomalous mortgage containing a personal undertaking by the defendant-appellant to pay the
amount of Rs. 901/- which it is said she borrowed from the plaintiff. There was delivery of
possession of the mortgaged property to the mortgagee and he was authorised to retain it till
payment of the mortgage amount and he was to receive rents and profits of mortgaged property
in lieu of interest. Thus, all the ingredients of a mortgage are satisfied in the present case.
Because even in a usufructuary mortgage as defined 58(d), there can be an agreement to pay
interest. The mortgage deed contains an undertaking to pay the amount of Rs. 901/- with
interest before the shop was redeemed and as such it must be taken that there is a personal
undertaking to pay Rs. 901/- with interest. If the claim for recovery of money can be deduced
from the document, as a separate matter from the condition of mortgage, or if there is a personal
undertaking to pay the amount of the loan, a claim on such agreement or in such circumstances
for the balance of the amount of the loan is entertainable by the courts.

IV. Usufructuary mortgage with personal covenant to pay-Mortgagee has

right to bring mortgaged property to sale:

There are clear terms in the mortgage-deed indicating that the mortgagors had bound
themselves personally to pay the mortgage money by specified dates and had, in the event of
failure on their part to pay the same according to the terms of the contract, agreed that the same
might be recovered according to law. They had also bound themselves to pay interest on the
mortgage money in the form of rent every month and in the event of their failure to do so had
agreed that the same might be recovered out of the mortgaged property. Besides this they had
also agreed that in case the mortgagees were required to pay house-tax, water-tax and electric
charges there would be charge in respect of them also upon the mortgaged property. Thus the
personal covenant to pay together with right of recovery, and agreement that the burden for
such payment would rest upon the mortgaged property, clearly imply right of sale in the
mortgagee. If the mortgagee; had the right to recover the amounts of unpaid instalment how
can that be done without bringing the mortgaged property to sale? The property is clearly

27
AIR 1963 Raj 129 at p. 131
subject to a burden for the payment of the amount according to contract. When such burden is
there not only for the principal amount but also for interest and taxes there is a clear right of
sale by necessary implication. The mortgage in question cannot be called a purely usufructuary
mortgage. In a purely usufructuary mortgage the mortgagee has a right of possession and a
further right to retain the same until the mortgage money is paid and to receive rents and profits
of the property while in his possession in lieu of interest or in payment of mortgage money or
both. The present mortgage is thus a simple mortgage usufructuary.28

V. Possession retained by mortgagor-It is not usufructuary mortgage:

An intention to deliver possession in present or in future is one of the essentials for an

usufructuary mortgage. In absence of such an intention a transaction of mortgage cannot be
treated as usufructuary mortgage. A usufructuary mortgage does not cease to be so merely by
reason of the fact that instead of actually taking possession on the date of the mortgage, the
mortgagee leases it back to the mortgagor for the period of the mortgage. In some cases it may
be so, but where the mortgage and the lease back are parts of the same transaction and intention
of the parties to the transaction is that the mortgagee should not get possession of the mortgaged
properties but would only get interest on the amounts advanced by him, at the stipulated rate,
every month, and the document and the deed of the lease back are nothing but merely devices
to ensure regular payment of the interest, the transaction cannot be held to be an usufructuary
mortgage. The mortgagee himself is in possession of the mortgaged property through the lease
who is his tenant but where it is found that the document of the lease back is a mere device to
ensure regular payment of the interest, even if the two documents are not executed on one and
the same date, there cannot be a relation of landlord and tenant between the mortgagee and the
mortgagor.29

VI. Usufructuary mortgage-Mortgage money paid-Mortgage ends:

When the mortgage money is paid by the mortgagor to the mortgagee, there does not remain
any debt due from the mortgagor to the mortgagee, and, therefore, the mortgage can no longer
continue after the mortgage money has been paid. The transfer of interest represented by the

28
Jagannath Prasad Tulsiram v Kanti Prasad Battilal, AIR 1964 MP 305 at p. 306
29
Smt. Savitri Devi v Smt. Beni Devi, AIR 1968 Pat 222 at p. 225
 mortgage was for a certain purpose, and that was to secure payment of money advanced by
way of loan. A security cannot exist after the loan had been paid up. If any interest in the
property continues to vest in the mortgagee subsequent to the payment of the mortgage money
to him, it would be an interest different from that of a mortgagee’s interest. The mortgage ‘as
a transfer of an interest in immovable property for the purpose of securing payment of money
advanced by way of loan’ must come to an end on the payment of the mortgage money.30

Further, the definition of usufructuary mortgage itself leads to the conclusion that the authority
given to the mortgagee to remain in possession of the mortgaged property ceases when the
mortgage money has been paid up. The usufructuary mortgage, by the terms of its definition
authorises the mortgagee to retain possession only until payment of the mortgage money, and
to appropriate the rents and profits collected by him in lieu of interest or in payment of the
mortgage money, or partly in lieu of interest or partly in lieu of payment of the mortgage
money. When the mortgage money has been paid up, no question of appropriating the rents
and profits accruing from the property towards interest or mortgage money can arise. It is clear,
therefore, that on the payment of the mortgage money by thee mortgagor to the mortgagee the
mortgage comes to an end and the right of the mortgagee to remain in possession also comes
to an end. The right conferred by Section 60 is called a righto redeem and suit to enforce it is
called a suit for redemption.31

VII. Usufructuary mortgage-Redemption-Mortgagee when liable to

account for rents and profits from mortgaged property?

The definition of usufructuary mortgage in Section 58(d) clearly shows that in all usufructuary
mortgages when possession of the mortgaged property is delivered to the mortgagee it does not
necessarily follow that the mortgagor has to appropriate the income from the properties both
towards interest and principal. Whether the income from the mortgaged property has to be
taken by the mortgagee in lieu of interest only or in lieu of interest and partly towards principal
or in lieu of both interest and principal, is a question which has to be decided with reference to
the terms of the document.

30
Prithi Nath Singh v Suraj Ahir, AIR 1963 SC 1041 at p. 1042
31
Prithi Nath Singh v Suraj Ahir, AIR 1963 SC 1041 at p. 1042
In view of the provision of section 77 it is clear that when as per the terms of the mortgage the
mortgagee is to remain in possession and enjoy the income in lieu of interest there is no liability
for the mortgagee to account for the income or to adjust the income towards principal.

Where the recitals in the mortgage deed reveal that the mortgagor has undertaken to pay only
the principal amount and redeem the mortgage after a period of two years, and has given
possession of the property to the mortgagee and there is no stipulation regarding the rate of
interest and there is specific recital that mortgagor would pay principal without interest, it is
clear that possession of property was given in lieu of interest. Thus the mortgagee is not liable
to account for the rents and profits realised by him from the property.32

The document must be usufructuary mortgage as defined under Section 58(d) of the Transfer
of Property Act, 1882. The document introducing any conditions other than those covered by
Section 58(d) of the Act could not be regarded as an usufructuary mortgage, but an anomalous
mortgage. In case A. Narayana Rao v. Lami Amma33 it was said that if the document introduces
a personal covenant enabling the mortgagee to demand the mortgage money at a particular date
and the document fixes a time-limit, it would not be a usufructuary mortgage. If the document
also introduces other elements regarding the improvements, payments and creates rights in
regard thereto therein, the document would come out of the purview of the definition of
usufructuary mortgage and would have to be termed and classified as anomalous mortgage.

The right of redemption of mortgagor being a statutory right, the same can be taken away only
in terms of the provision appended to Section 60 of the Act which is extinguished either by a
decree or by act of parties. Admittedly, in the instant case, no decree has been passed
extinguishing the right of the mortgagor nor such right has come to an end by act of the parties.

A right for obtaining a final decree for sale or foreclosure can be exercised only on payment of
such money. Such a right can be exercised at any time even before the sale is confirmed
although the final decree might have been passed in the meanwhile. The mortgage is also not
entitled to receive any payment under the preliminary decree nor the mortgagor is a required
to make an application to recover before paying the same.

Even, indisputably, despite expiry of the time for deposit of mortgaged money in terms of the
preliminary decree, a second suit for redemption would be maintainable.

32
Nagaratnamma v Range Gowda, 1995 (3) Civil LJ 549 (Kant)
33
AIR 1994 Ker 371 at p. 376 (FB)
 Therefore, although by reason of preliminary decree in the suit for redemption of usufructuary
mortgage, the Court may fix the time for payment of the amount declared due but default in
depositing such payment would not debar him from a right to redeem the mortgaged property.

In the instant case of Achaldas Durgaji Oswal (dead) through LRs v. Ramvilas Gangabiasan
Heda (dead) through LRs,34 , a suit for redemption of usufructuary mortgage was filed by ‘R'
who purchased that property in sale because original mortgagor failed to pay mortgaged money
even after expiry of 5 years period of mortgage, ‘R' who purchased that property obtained
preliminary decree for redemption but could not deposit necessary amount within time
permitted by Court. He thereafter was permitted to deposit that amount by Court, which was
complied with. Thereafter, he sought preparation of final decree. It was held that, objection
regarding limitation was unsustainable because, there is no limitation for application for
preparation of final decree in respect of redemption of usufructuary mortgage.

VIII. Usury Regulations:

Usufructuary mortgages were a cloak for usurious transactions, the rent being taken in lieu of
exorbitant interest. The Usury Regulations were designed to check this practice by limiting the
mortgagee to interest at 12 per cent and by making him liable to account for rents and profits,
notwithstanding the terms of the contract, and allowing redemption before the expiry of the
period fixed in the deed.35 Usufructuary mortgages executed while these regulations were in
force are controlled by them, even though the suit be filed under the TP Act.36 Thus, in one
case redemption was allowed before the expiry of the period fixed. But in a case where the
contract was not usurious; the Privy Council held that a condition exonerating the mortgagee
from filing accounts was valid, although it was governed by the regulations.37

34
AIR 2003 SC 1017
35
Shah Mukhun Lal v Shree Kishen Singh (1869) 12 MIA 157
36
Samar Ali v Karim-ul-lah (1886) ILR 8 All 402
37
Badri Prashad v Babu Murlidhar (1882) ILR 2 All 593
IX. Remedies of a Usufructuary Mortgagee:

A usufructuary mortgagee cannot sue the mortgagor neither for the sale nor for the foreclosure.
His remedy is only to retain possession of the property till the mortgage money is paid-up and
to appropriate the rents and profits of property till his principal money and interest due both
are paid in accordance with the mortgage-deed. If the usufructuary mortgagee loses his
possession, he may sue to obtain the possession, mesne profits as well as for the mortgage
money under section 68.

X. Rights of Usufructuary Mortgagor:

Under section 62, a usufructuary mortgagor has been given a right to recover possession of the
mortgaged property from the mortgagee when –

i. Where the mortgagee was authorised to pay himself the amount of mortgage-money
from the rents and profits of the property and the money is paid,
ii. Where the mortgagee is authorised to pay himself from rents and profits and the terms
prescribed for the payment of the mortgage-money has expired and the mortgagor pays
the mortgage-money or balance of it to the mortgagee or deposit it in the court.38

XI. Distinction from other mortgages and from zur-i-peshgi lease:

(i) Usufrucruary mortgage and anomalous mortgage-

The chief requirement of a pure usufructuary mortgage is that the mortgagor must deliver or
bind himself to deliver possession to the mortgagee and that the mortgage money, including
interest, should be realised out of the usufruct of the mortgaged property and the mortgagee
should have no remedy except to enjoy the usufruct of the mortgaged property. If the mortgagee
is entitled to recover any part of the mortgage-money, which in general includes the interest on
the principal sum secured by the mortgage, it cannot be a pure usufructuary mortgage and will
amount to an anomalous mortgage.

In this view, Court is supported by the principle laid down in Bysani Madhava Chettiar Charity
Fund v G.R Krishnasammy.39 In that case under a mortgage, possession of the mortgaged

38
Sona Devi Jain v Dr. Ompraksh Sharma, AIR 2006 MP 181
39
property was given to the mortgagee but rents and profits were not given in lieu of interest.
There was a separate provision fixing the rate of interest and the method by which it was
recovered, namely, that the rents and profits were to be set off, as far as available, towards the
payment of interest. The contingency of an excess of rents and profits over interest or vice
versa was specifically contemplated, and for the case of deficit, where the whole of the interest
was not met from rents and profits, it was provided that the mortgagee may recover from the
mortgagors month after month. The sum to be repaid prior to redemption and for the purpose
of redemption was merely the original principal sum. It was held, “that the document meant
that interest was not to be charged on the mortgaged property but was left to be recovered under
the personal covenant of the mortgagors." A similar view was also taken in Subramonia
Sastrigal v. Sankara Rama Iyer. In that case the rents and profits accruing from the property
were not even sufficient to cover the interest on the mortgage amount. It was expressly stated
in the document that such income was sufficient only to cover the interest due on Rs. 680/-
representing only a portion of the mortgage amount. For the balance of the mortgage amount
of Rs. 300lthe mortgagor was to pay interest out of his own pocket. These facts were held
sufficient to take the document out of the definition of the “usufructuary mortgage."

(ii) Zuri-peshgi Lease-

Zuri-peshgi means a payment in advance or a lease for a premium. Where the right of
enjoyment of an immovable property is transferred for fixed period of time and the rent is paid
in advance in lump sum, the transaction is called an Zuri-peshgi lease. The lessee gets the right
to enjoy, use and use an appropriate the usufruct of property. The usufructuary mortgage and
Zuri-peshgj lease appear to be same but there are some differences between them-

 In a Zuri-peshgi lease, there is no existence of debt between the lessor and the lessee
but in usufructuary mortgage, existence of a debt is must.
 In Zuri-peshgi lease, specific time limit is given after which the lessee is to give back
the possession to the lessor. However, in a usufructuary mortgage, there is no fixed time
limit in which the possession is to be given back.

(iii) English Mortgage and Usufructuary Mortgage-

 In English mortgage, there is a personal liability to repay the loan.
In usufructuary mortgage, there is no personal liability to repay the loan.
 The property is absolutely transferred to the mortgagee, on condition that the property
will be re-transferred to the mortgagor on his repayment of loan.
Here the mortgagee does not get the ownership of the property only possession is
transferred to him which he can retain till his debt is paid off.
 The mortgagee can sue for sale and in certain circumstances even without the
intervention of the court.
The mortgagee cannot here sue for sale. He also does not have the power to sale without
the intervention of the court.
 CONCLUSION:

To conclude we can say that a mortgage is the transfer of an interest in specific immoveable
property for securing the payment of money advanced or to be advanced by way of money.
The different kinds are simple, conditional, and English by deposit of title deed and anomalous
mortgage. Usufructuary mortgage is distinguished from other forms of mortgage and from zuri-
peshgi lease.

In usufructuary mortgage there is no personal liability to repay the loan because either the
mortgagee is let into possession or he is permitted to repay himself out of rents and profits of
such property. In this the mortgagee does not get the ownership of the property, only possession
is transferred to him which he can retain till his debt is paid off and mortgagee cannot here sue
for sale. He also does not have the power to sale without the intervention of the court.
 Bibliography and References

 Transfer of Property, Mulla.

 Transfer of Property, Avatar Singh.
 Internet sources
 Other Books and Material.
 http://www.lawctopus.com/academike/mortgage/
 http://thelawstudy.blogspot.com/2014/12/mortage-its-kinds-and-ingredients.html