Rights and Liabilities of Mortgagee

Rights and Liabilities of Mortgagee

The Transfer of Property Act was enacted on 1st July 1882 with the objective to deal with the transfer of immovable property from one living person to another living person. The main purpose of the Act is to make rules, in order to regulate the transmission of immovable property between living persons. Before the Act was enacted the matters related to the immovable property were resolved by the Indian Courts on the basis of equity and a good conscience and there were no codified laws and it created uncertainty in resolving the matters and it became the need of time to codify the law with respect to the property. The Law Commission prepared the draft in 1870 and presented it to the Council in 1877 with necessary modifications but the draft did not the get the final shape, then again it was referred to Second Law Commission and after many recommendations and modifications, the draft was accepted and was republished again in 1878 and received the assent of the Governor-General on 17 November 1882. The article is a detailed analysis of the rights and liabilities of ‘Mortgagee.’

The Transfer of Property Act, 1882 was amended and the Transfer of Property (Amendment) Act, 1929 was enacted which came into force on 1st April 1930. This new amendment Act has brought many changes in the previous Act of 1882.

  1. The new amendment Act of 1929 made the doctrine of part performance statutorily recognised and embodied in section 53-A.
  2. The Act of 1929 makes provision according to which transfer in favour of a class is not to be wholly void.
  3. The Act introduces new changes in the doctrine of subrogation, the conventional subrogation is recognised only when it is supported by a registered instrument. It has been crystallised in Section 92.


A mortgage in general means transferring an interest of a property from one person to another against the advancement of loan, or any present or future debt, or for the performance of any act. The mortgage creates rights and liabilities.

The term mortgage means “a transfer of an interest in specific immovable property for the purpose of security –

  1. The payment of money advanced or to be advanced by way of the loan;
  2. An existing or future debt;
  3. The performance of an engagement which may give rise to a pecuniary liability.”[1]

In a mortgage, there are two parties, one who transfers the interest in property known as “MORTGAGOR” and one who in whose favour the interest is transferred is known as “MORTGAGEE”. 

The document or the instrument that gives the effect to the mortgage between the two parties is known as “ MORTGAGE DEED”.

Elements of a mortgage

Following are the elements that are important to constitute a valid mortgage.

  1. TRANSFER OF INTEREST: The first element of a valid mortgage is that there must be a transfer of an interest of the property, the transfer does not give the mortgage the ownership right on the property but only the accessory right[2] that is mere to secure the due payment of the debt.
  2. SPECIFIC IMMOVABLE PROPERTY: The subject matter of the mortgage must be a specific immovable property. The property that is mentioned in the mortgage deed should be properly identified.
  3. SECURITY: The other element that is important for a mortgage is a security that is known as mortgage money and it is for the payment or performance of work or clearance of a debt.
  4. COMPETENCE OF PARTIES: The parties of the mortgage must be competent to perform a contract.
  5. REGISTRATION: It is important to register the mortgage deed. The instrument is to be signed by the transferor and attested by two witnesses.

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A mortgagee is one of the parties to the mortgage in whose favour the mortgage is created.

For Example, A wants a loan from B, and B wants his amount to be secured which he is going to loan A. A will transfer the interest in a specific immovable property to B and will give him the authority of selling it in case A is not able to repay B’s amount. Here B is the mortgagee.

The Transfer of Property Act, 1882 defines a mortgagee as a transferee.[3]

The Transfer of Property Act,1882 enshrined the provisions that deal with the rights and liabilities of the mortgagee. Sections 67-77 of the Act lay down the rights of the mortgagee.

Rights of Mortgagee

  • Right to foreclosure or sale: Right to Foreclosure is the right that entitled the mortgagee to claim his outstanding money, it is the method by which the mortgagee acquires the property freed from the mortgagor’s right of redemption and it gives right to the mortgagee to file suit for the foreclosure or sale of the mortgaged property.[4]
  • Mortgagee when bound to bring one suit on several mortgages: The mortgagee has the right to sue on all the mortgages in respect of which the mortgage money has become due when a mortgagee holds two or more mortgages executed by the same mortgagor in respect of each of which he has a right to obtain the same kind of decree.[5]
  • Right to sue for mortgage money: Whenever the mortgagor binds himself to repay or in case if the mortgaged property is partially or wholly destroyed by the wrongful act of the mortgagor or mortgagee or the security that is rendered is insufficient and the mortgagee has given the mortgagor a reasonable opportunity to pay the whole security but the mortgagor fails to do so, or if by the wrongful act or default of the mortgagor the mortgagee is derived wholly or partly from the security, in all these three cases the mortgagee has given the right to sue mortgagor for the mortgage money.[6]
  • Power of sale when valid: The mortgagee or any other person acting on his behalf has the right to sell the mortgaged property too without the intervention of court when there is no payment of mortgage money by the mortgagor, but the Act of 1882 has laid down certain conditions with respect to this right.
  1. When the mortgage is an English mortgage between non-Hindus, non-Muslims and members of the race or sect notified by the state government.
  2. When the government is the mortgagee and there are express provisions in the mortgage deed that allow sale without the intervention of the court.
  3. Where express provision is mentioned in the mortgage deed of sale of property without court intervention, in that case, the property of mortgage on the execution of the deed, situate in Calcutta, Madras, Bombay or any other town specified by the government.[7]
  • Accession to mortgaged property: In any case, if any accession is made to the mortgaged property after the date mortgage, the mortgagee is entitled to such accession for the purpose of security.[8]
  • Renewal of mortgage deed: In case the mortgaged property is a lease and the mortgagor obtains the renewal of a lease, the mortgagee for the security purpose is entitled to a new lease.[9]
  • Rights of a mortgagee in possession: A mortgagee may add money spent by him to the principal money due, at the same rate of interest as is payable on the principal and if not any rate is fixed then at the rate of nine per cent per annum.[10]
  • Right to proceeds of revenue sale or compensation on the acquisition: In case the mortgagor failed to pay arrears of revenue or other charges or rent due on the mortgaged property or on the part of the property, the mortgagee is entitled to claim payment of mortgage money, in whole or part.[11]

Liabilities of Mortgagee

Every right has the corresponding duty, the mortgagee to have certain liabilities towards the mortgagor that are enshrined in the TP Act, 1882.

When the property is mortgaged, the mortgagee gets the possession of such property as mentioned in the mortgage deed and during the continuance of the mortgage, he is liable to perform certain duties with respect to that property.

  1. He is duty-bound to maintain the property as the ordinarily prudent man maintains in case it were his own property.
  2. The mortgagee must try his best to collect the rent and profits due on the mortgaged property.
  3. It is the duty of the mortgagee to not do any act that will be destructive to the mortgaged property.
  4. It is the duty of the mortgagor to maintain all the records of the money received and spent by him as a mortgagee, and give the mortgagor true and accurate copies of records whenever asked by him.
  5. He is duty-bound to pay all the government revenues, all charges of public nature during the possession of mortgage property.
  6. The mortgagee has to make such necessary repairs of the property as he can pay for out of the rents and profits thereof after deducting from such rents and profits.[12]

If a mortgagee has failed to perform any duty mentioned above, he will be debited with loss caused due to his failure.


 The Transfer of Property Act, 1882 is the codified law that enables the transfer of immovable property between two living persons, that comes up with rights and liabilities of both the parties of the mortgage be it, mortgagor or mortgagee, these rights and liabilities are very important so that no party of the mortgage deed commit any fraud and work within the ambit of the Act.


[1] Transfer of Property Act,1882, s 58(a).

[2] Indian Contract Act,1872, sec 10.

[3] Transfer of Property Act, 1872, s 58(a).

[4] Transfer of Property Act,1872, s 67.

[5] Transfer of Property Act, 1872, s 67-A.

[6] Transfer of Property Act,1872, s 68.

[7] Transfer of Property Act, 1872, s 69.

[8] Transfer of Property Act, 1872, s 70.

[9] Transfer of property Act, 1872, s 71.

[10] Transfer of Property Act, 1872, s 72.

[11] Transfer of Property Act,1872, s 73.

[12] Transfer of Property Act,1872, s 76.


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