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SIMPLE MORTGAGE DEED

(Project Report)

Submitted To:
Mrs. Neha Sinha Saxsena
(Faculty: Drafting, Pleading and Conveyancing)

Submitted By:
HARSHMANDER RASTOGI
B.A.LL.B. (Hons.), Semester-VIII
Section C, Roll No. - 069

Hidayatullah National Law University


Raipur (C.G)

Simple Mortgage Deed 1


DECLARATION

I, HARSHMANDER RASTOGI hereby declare that, the thesis of the project work entitled,

Simple Mortgage Deed is of my own & this project work is submitted to H.N.L.U. Raipur. It is

record of an original work done by me under the able guidance of Mrs. Neha Sinha, Faculty

Member, H.N.L.U., Raipur.

Harshmander Rastogi
Roll No. 069
Batch XIII
Semester VIII
Section C
Date -15/02/2017

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Acknowledgements

I feel highly elated to work on the topic Simple Mortgage Deed. The practical realization of
this project has obligated the assistance of many persons. I express my deepest regard and
gratitude to my teacher, Mrs. Neha Sinha for her unstinted support. Her consistent supervision,
constant inspiration and invaluable guidance have been of immense help in understanding and
carrying out the nuances of the project report.

I take this opportunity to also thank the University and the Vice Chancellor for providing
extensive database resources in the Library and through Internet.

My gratitude also goes out to the staff and administration of HNLU for the infrastructure in the
form of our library and IT Lab that was a source of great help for the completion of this project
Some printing errors might have crept in, which are deeply regretted. I would be grateful to
receive comments and suggestions to further improve this project report.

Harshmander Rastogi
Roll No. 069
Batch XIII
Semester VIII
Section C

15/02/2017

Simple Mortgage Deed 3


TABLE OF CONTENTS

CONTENT PAGE NO

Introduction 5

Objectives 6

Particulars of Mortgage Deed 7

Simple Mortgage Deed 8-10

Facts 11

Simple Mortgage Deed Format 12-14

Bibliography 15

Simple Mortgage Deed 4


INTRODUCTION

Mortgage is a common but ambiguous term in todays loan oriented society. The popular term
mortgage carries with it various vague ideas .We the common people know that we need to
mortgage our property in order to get loans such as house building loans, car loans and
educational loans and so on.

Section 58 of the Transfer of Property Act defines various types of mortgages. Section 58(A)
defines Mortgage as the transfer of an interest in specific immovable property for the purpose
of securing the payment of the money advanced or to be advanced by way of loan, an existing or
future debt or the performance of an agreement which may give rise to a pecuniary liability. The
transferor is called a Mortgagor, the transferee a mortgagee; the principal money and interest of
which payment is secured for the time being are called Mortgage-Money and the instrument by
which the transfer is affected is called a Mortgage-Deed.

Section 58(b) defines a Simple Mortgage, where without delivering possession of the
mortgaged property, the mortgagor binds himself personally to pay the mortgage money and
agrees, expressly or impliedly, that in the event of his failing to pay according to his contract, the
mortgagee shall have the right to cause the mortgaged property to be sold for satisfaction of the
mortgage money. Such a mortgage is called Simple mortgage.

Generally speaking when a person wishes to buy some movable or immovable property for
which he is in need of money, then he can take loan mortgaging his movable or immovable
property. In case of mortgage the banks or financial institutions give loan by securing the
repayment of the loan with the interest in a specific movable and/or immovable property
transferred by the person who has taken the loan. Mortgage works as a security of the loan
amount. It is way to secure profit for the bank and/ financial institutions and it is the way of
getting loans for the common people, builder and/or company, firm etc. Mortgage is French
term which means death contract. The term death contract means that the pledge (promise,
bailment, guarantee) ends only when the loan is repaid, the obligation is fulfilled or when the
borrower takes over and/or sells the collateral, the mortgaged property by way of foreclosure.

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OBJECTIVES
To understand the manner in which a simple mortgage deed is drafted.
To provide for a model format of a simple mortgage deed under section 58 of Transfer of
Property Act, 1882

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PARTICULARS OF MORTGAGE DEED
According to the Section 58(a) of the Transfer of Property Act 1882 A mortgage is the transfer
of 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 performance of an
engagement which may give rise to a pecuniary liability.

The transferor is called the mortgagor , the transferee is called the mortgagee, the principal
money and interest of which payment is secured for the time being are called the mortgage -
money, and the instrument (if any) by which the transfer is effected is called a mortgage deed.

The Blacks Law Dictionary (7th) Edition defines the term mortgage:

A conveyance of title to property that is given as security for the payment of a debt or the
performance of a duty and that will become void upon performance according to the stipulated
terms.

A lien against property that is granted to secure an obligation (such as debt) and that is
extinguished upon payment or performance according to stipulated terms.

1. An instrument (such as a deed or contract) specifying the terms of such a transaction.


2. Loosely the loan on which such a transaction is based.
3. The mortgagees right conferred by such a transaction.
4. Loosely any real- property security transaction, including a deed of trust.
5. Therefore by way of mortgage deed the mortgagor transfers his interest in a specific
immovable property, the mortgaged property for securing the payment of mortgaged
money to the mortgagee.

Legal significance and/or essential elements of the term mortgage:

1. There must be a transfer of interest


2. The interest transferred must be some specific immovable property.
3. The purpose of the transfer must be to secure the payment of any debt or performance of
an engagement which may give rise to a pecuniary liability.

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SIMPLE MORTGAGE DEED
Definition
Simple mortgage is executed where without any property being delivered to the mortgagee; the
mortgagor makes himself liable to repay the debt. In simple words Simple Mortgage is used to
notify all mortgage deeds where the debtors binds himself through a personal covenant and gives
his property as security to the creditor.1

It is implied by him in an express or implied manner that in the event of non-repayment of loan,
the mortgaged property can be used to make good of the loan by the mortgagee. In a deed of
simple mortgage, the transfer of right signifies the right to liquidate the property. There is no rule
stating that such right be expressly mentioned in the mortgage deed. 2

The fundamental characteristic of simple mortgage is that the mortgagee has no right to liquidate
the property without the permission of the court. The mortgagee can apply to the court for
consent to offer the sold property, or file a suit for recuperation of the entire sum without
offering the property.3

Personal Liability
A simple mortgage entails two types of liabilities, personal liability and the mortgaged property. 4
In a standard mortgage deal, the mortgagor does not have any personal liability and on non-
repayment of loans, the mortgagee can move on to liquidate the mortgaged property in order to
make good of the loan. But in a simple mortgage, there is a personal liability on part of the
mortgagor to repay the loan along with the mortgaged property, hence the mortgagee has to
option to move against either the mortgagor personally thus obtaining a decree against him or he
can move against the mortgaged property to liquidate it for the payment of loan. The presence of
a personal covenant is very important in a simple mortgage and that is what distinguishes it from
other forms of mortgage.

1
Jangi Singh v chander (1908) ILR 30 All 390.
2
Dalip Singh v Bahadur ram (1912) 34 All 446.
3
Fundamental Characteristics of Simple Mortgage available at
sjecnotes.weebly.com uploads 2 1 2 1788 mortgage.doc (Last Visited on 16/3/2014)
4
Wahidunnia v Gobardhan (1900) ILR 22 All 453

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No Delivery of Possession
There is no delivery of mortgaged property in simple mortgage. The money can be recovered by
a money decree. A clause to transfer the complete interest of a mortgaged property to the
mortgagee on non-payment of loans changes the simple mortgage into mortgage with possession.

Sale of Property
In mortgage, the mortgagor may give the power to sale the property either expressly or
impliedly. This basically means that on the event of non-payment of debt, the mortgagee can sell
the mortgaged property. But even if the contract of mortgage specifically talks about selling the
property on non-payment the mortgagee cannot go ahead with the sale of the mortgaged property
and has to wait for the intervention of the court to sell the mortgaged property.

Adverse Possession
A trespasser who removes the mortgagor and takes possession of the land that land can still be
legally mortgaged. The trespasser can become the owner of the limited right the mortgagor has
over the land mortgaged by him but it does not in any way take away the legal rights of the
mortgagee over the mortgaged land in a simple mortgage .Adverse possession is valid only when
the mortgagee who has a right over the mortgaged land does not take possession over the land in
time and he runs against time which is from the day he gets his right to interest over the
mortgaged land. If there is no accrual of rights to possess the land by the mortgagee, his right
cannot be taken away by the mere possession of that particular mortgaged land by the adverse
claimant.

If the mortgage has been declared illegal for being unregistered and the mortgagee has been in
possession of that land for more than 12 years then after 12 years, the mortgage becomes valid.

Agreement for Mortgage


As the sale of an immovable property by a conveyance is preceded by an agreement for sale, it is
advisable that in case of a Mortgage there should be an agreement to mortgage executed between
the mortgagor and the mortgagee. If the one is acting for the Mortgagee then precaution should
also be taken of having a particular sum deposited by the Mortgager towards the costs of the
Mortgagees Solicitor or Advocate. If this precaution is not taken one may find that the
mortgager may change his mind and if the transaction is not put through, the mortgagee may
become responsible to his solicitor or advocate for paying his costs.

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The period for which the amount is advanced must be mentioned and the date on which the
repayment must be made which is known as the due date must also be mentioned. Many time the
period of the mortgage may be one or two years with an option to the mortgagor to extend the
period provided he has complied with all the terms and conditions of the Mortgage and has been
regular in payment of interest and any other amount that may be due.

Conclusion
Simple mortgage is distinguished from other forms of mortgage by the presence of a personal
covenant. In simple mortgage, the mortgagor binds himself personally to the mortgagee to repay
the loan and also pledges his property as a security, which can be liquidated on default of
payment. But a decree has to be passed by the court to liquidate the security and without the
intervention of the court, the security cannot be liquidated. One more characteristic that must be
kept in mind that there is only a partial transfer of interest from the mortgagor to the mortgagee
on transfer of property.

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FACTS

The mortgage deed has been signed between the two parties namely Faizal Khan and
Ramadhir Singh, mortgagor and mortgagee respectively, both residents of Wasseypur.
The mortgage deed was signed for Rs. 7,86,000 on 14th February 2015 and the total sum
of Rs. 8,00,000 is to be paid by 14th February 2017 along with the interest rate of 8
percent per annum.
Mortgage deed was signed in order to fulfill the family purposes of the mortgagor and a
Farm house has been given as a security in mortgage deed.
Money is asked to be paid in installment in the month of April, June and September 2017
by the mortgagee.
Insurance and the premium amount of the property kept as the security has also been
agreed to be paid by the mortgagor.
In case of any default in payment, the mortgagor has agreed to pay the interest for the
amount.
The deed has been duly signed in the presence of the two witnesses by both the parties.

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SIMPLE MORTGAGE DEED FORMAT

This deed of SIMPLE MORTGAGE executed on November 14th of 2015 by Faizal Khan, Son
of Sardar Khan, aged about 23 years and residing at Kassai Mahaulla, Wasseypur (herein
after called the MORTGAGOR) To and Infavor of Ramadhir Singh, Son of Randhir Singh
aged about 45 years and residing at Birsa Nagar, Wasseypur (herein referred to as the
MORTGAGEE).

Whereas, the term Mortgagor and Mortgagee, unless repugnant to the context shall mean and
include their representatives heirs, successors, executors, administrators, trustees, legal
representatives and assigns.

Whereas, the Mortgagor herein, is the sole and absolute owner of immovable property more fully
described in the schedule hereunder written and herein after called the scheduled property.

Whereas, the Mortgagor is the absolute owner, having acquired the property, by and since then
Mortgagor has been in possession and enjoyment of the schedule property and paying taxes and
levies thereon, as sole and absolute owner thereof.

Whereas Mortgagor being in need of money for the purpose of his family expenses and the
Mortgagor requested the Mortgagee to lend him a sum of Rs. 7,86,000 (Seven Lakhs Eighty Six
Thousands only) which the Mortgagee has agreed to lend to the Mortgagor executing these
presents with a view to secure the repayment thereof with interest as herein after provided.

NOW THIS DEED WITNESSETH that pursuant to the said agreement and in consideration of
the sum of Rs. 7,86,000 (Seven Lakhs Eighty Six Thousands only) lent and advanced by the
Mortgagee to the Mortgagor on the execution of these presents (receipt whereof the Mortgagor
hereby admit).

He, the Mortgagor hereby covenants with the Mortgagee that he the Mortgagor will pay to the
Mortgagee the sum of Rs. 7,86,000 (Seven Lakhs Eighty Six Thousands only) on the day of
November 14th 2017 (herein after referred to as the 'due date') with interest thereon in the
meanwhile and until repayment of the said sum in full, at the rate of 08 percent per annum on
the 14th day of November 2017 and each subsequent installment on the 14th day of April, July

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and September of 2017 each succeeding month until the said principle sum of Rs. 7,86,000
(Seven Lakhs Eighty Six Thousands only) repaid in full.

AND IT IS HEREBY AGREED AND DECLARED that if the mortgagor fails to pay any
installment of interest, he will be liable to interest on the said installment in default at the same
rate as aforesaid from the date of default until payment such installment as and by way of
compound interest.

Without prejudice to the right of the Mortgagee to take any action on default as herein under
provided, and it is agreed and declared that in the event of Mortgagor committing default in
payment of any installment of interest or committing breach of any other term of this deed, the
whole amount of principal then due with interest thereon will at the option of the Mortgagee
become payable forthwith as if the said date had expired.

AND THIS DEED FURTHER AGREED AND DECLARED that in consideration aforesaid, the
Mortgagor hereby mortgage his said Farm House hereunder written as a security for
repayment of the said sum with interest and all other moneys due and payable hereunder with a
condition that on the Mortgagor repaying the said principal sum of Rs. 7,86,000 (Seven Lakhs
Eighty Six Thousands only) with all interest and other moneys due to the Mortgagee
(hereinafter referred to as the Mortgage amount) the Mortgagor will redeem the said scheduled
property from the mortgage security and shall if so required by the Mortgagor execute a deed of
release but at the costs of the Mortgagor.

AND IT IS FURTHER AGREED AND DECLARED by the Mortgagor that in the event of the
Mortgagor failing to pay the said principal sum with all interest and other moneys when the same
shall become due and payable under these presents, the Mortgagee will become entitled to have
the said scheduled property sold through any competent court and to realise and receive the said
mortgage amount out of the net sale proceeds of the said scheduled property.

AND IT IS FURTHER AGREED AND DECLARED BY THE MORTGAGOR that he shall


also be liable to pay and shall pay all the costs, charges and expenses that the Mortgagee will
incur for the protection of the mortgage security and or for the realisation of the mortgage
amount and the same shall be deemed to form part of the mortgage amount and the security there
for as aforesaid.

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AND IT IS FURTHER AGREED that during the pendency of the security hereby created and
until repayment of the mortgage amount, the Mortgagor will get insured and keep insured the
buildings and structures standing on the said land against loss and damages due to fire or any
other accident in the sum of at least Rs. 1,00,000 with some Insurance Company of repute and
pay all premium and the insurance policy as and when it becomes due and payable in respect
thereof to such company and shall hand over the policy to the Mortgagee duly endorsed in his
name as assignee and in the event of the Mortgagor failing to do so or to pay the premium.

The Mortgagee will be entitled to insure the said buildings and structures and/or to pay the
premium thereon and the amount paid by the Mortgagee in respect thereof will be deemed to
form part of the mortgage amount. And it is further agreed that in the event of the said scheduled
property being destroyed or damaged by fire or any accident as aforesaid. The Mortgagee will be
entitled to receive the insurance claim under such policy to the exclusion of the Mortgagor and to
appropriate the same first towards all arrears of interest and then the principal amount or as any
part thereof as may be sufficient to pay the mortgage amount due and if any surplus remains the
same only will become payable to Mortgagor.

The Schedule above referred to

IN WITNESS WHEREOF the parties herein have executed these presents on the 14th February
2015.

Signed, sealed and delivered by the


Within mentioned Mortgagor Faizal Khan
In presence of:

Signed, sealed and delivered by the


Within mentioned Mortgagee Ramadhir Singh
In presence of:

WITNESSES:

1.

2.

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BIBLIOGRAPHY
Text books.

1. Kothari and Arvind G. Kothari Ltd., Drafting, Conveyancing and Pleadings, 1982, 2 nd ed.,
N.M. Tripathi (P.), Bombay.
2. Ray Sukumar, Textbook on The Code of Civil Procedure, 2008, 5 th Ed, Universal Publishing
Co. G.M.

Articles and Reports


1. Law Commission of India, 100th Report on Litigation by and against the Government:
Some recommendations for reform, May 1984
2. Written Statements under Order VIII of CPC of India
http://himanshuaroras.blogspot.in/2013/02/written-statement-order-viii-of-cpc-of.html
3. Model Format of Written Statement: http://www.lawyersclubindia.com/forum/Plaint-
amp-Written-Statement-5487.asp

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