Rights and Liabilities of a Mortgagee

Table of Contents

THE RIGHTS OF THE MORTGAGEE ARE:

Right of foreclosure

This right is present under Section 67 of the Transfer of Property Act. Foreclosure means closing or withdrawing the mortgagor’s right of redemption. The right of foreclosure is a right available to a mortgagee to recover his outstanding money. After the principal amount has become due, and before payment of mortgage money by mortgagor or before decree of redemption has been passed by Court, mortgagee has a right to obtain a decree of foreclosure from the Court. The right to foreclosure can be exercised by the mortgagee only when:

The debt amount has become due for payment.
There are no contrary conditions in the mortgage deed as to the time fixed for repayment
Mortgage money has become due but mortgagor has not got a decree of redemption of the mortgaged property.
Mortgage money has become due but mortgagor has not paid or deposited the amount.
Mortgagee should not be mortgagee of public works like canal, railway etc.
A trustee or legal representative of mortgagee cannot file a suit for foreclosure but for sale only

Right to sue for mortgage money

This right is present under Section 68 of the Transfer of Property Act. The grounds on basis of which mortgagee has right to sue for mortgagee-money are:

Default in Payment – when mortgagor binds himself to repay mortgage money but defaults.
Destruction of Mortgaged-property – when mortgaged property is wholly or partially destroyed. However, such destruction should not be caused due to wrongful act or default of the mortgagor
Insufficient security – when rendered security is insufficient, and the mortgagee has given the mortgagor a reasonable opportunity to provide further sufficient security, but mortgagor has failed to do so.
Deprivation of Security – when mortgagee is deprived of whole or part of his security by or in consequence of wrongful act or default of mortgagor.
Non-delivery of Possession – when mortgagee is entitled to possession of mortgaged-property, but mortgagor fails to deliver the same to mortgagee.
Securing of Possession – when mortgagee is entitled to secure possession of mortgaged-property without disturbance by mortgagor or any person, who claims under a title, which is superior to that of mortgagor.

Right to sale of mortgaged property in case of non-payment of mortgage money

Section 69 provides rules relating to sale of the property privately i.e. without help of the Court. Under this section, the mortgagee himself is entitled to effect the sale (a) in certain cases and (b) under the conditions laid down in this section.

The mortgagee may exercise the power of sale of mortgaged-property privately that is without Court’s intervention in any of the following cases –

Where the mortgage is an English mortgage and neither of the parties is a Hindu, Muslim or Buddhist or a member of any other race, sect, tribe or class to be specified from, time to time by the State Government. It is to be noted that power of sale in this case is always deemed to be implied. It is not necessary that such power be expressly given in the deed.
Where the mortgagee is Government and power of sale without Court has expressly been conferred on the mortgagee.

Where the mortgaged-property or any part thereof is situated within the towns of Calcutta, Madras, Bombay or any other area which the State Government may by notification specify and the power of sale is expressly given in the deed

Right to appointment of receiver

This right is present under Section 69A of the Transfer of Property Act. The mortgaged property primarily belongs to the mortgagor; he has every right to see that his property is dealt with by mortgagee in an impartial way. Therefore, when the mortgaged property is in possession of mortgagee or when the mortgagee sells the property under Section 69 the mortgagor may appoint a receiver to look after the conduct of the mortgagee.

Under this section a receiver may be appointed in any of the following manner:

The receiver may be appointed by the mortgagor himself by nominating a person to act as receiver. However, it is necessary that such person is named in the mortgage-deed and he gives his consent to act as receiver.
Receiver may be appointed also by mortgagee if –
all persons nominated by mortgagor are dead or
all persons nominated by mortgagor have refused to act as receiver.
The receiver may be appointed by the Court if they could not be appointed by mortgagor or mortgagee. If mortgagor does not agree on the name given by mortgagee, he may apply to the Court for nominating a suitable receiver. The person appointed by Court shall be deemed to have been appointed by mortgagee.

Accession to mortgaged property

This right is present under Section 70 of the Transfer of Property Act. It states that if, after the date of a mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession.

Right to Renewed Lease

This right is present under Section 71 of the Transfer of Property Act. If mortgaged property is a leasehold property and during the duration of mortgage, the lease gets renewed then the mortgagee is entitled to have the benefit of the new lease. The mortgagee should however not have entered into any contract to the contrary with mortgagor.

Rights of mortgagee, in possession

This right is present under Section 72 of the Transfer of Property Act. It is the liability of mortgagor, in the case of an acquisition which is necessary to preserve the property from destruction, forfeiture or sale, or made with his assent, to pay the proper cost thereof, as an addition to the principal money, with interest at the same rate as is payable on the principal amount, or, where no such rate is fixed, at the rate of nine percent per annum.

THE DUTIES OF THE MORTGAGEE ARE:

To manage the property as a person of ordinary prudence would manage if it were his own.
To use his best endeavour to collect the rents and profits thereof.
In the absence of a contract to the contrary, to pay Government revenue and the other charges of a public nature and all rents out of the income of the property.
In the absence of a contract to the contrary, to make such necessary repairs as the income of the property permits.
Not to commit an act which is destructive or permanently injurious to the property.
When the whole or any part of the property is insured against loss or damage by fire, in case of such loss or damage to reinstate the insured property with the money obtained from the insurance policy or to discharge the mortgage debt with it ,if the mortgagor so directs.
To keep clear, full and accurate accounts of all sums received and spent by him as mortgaged and give them to the mortgagor when asked.
To debit receipts from the mortgaged property or where such property is personally occupied by him; a fair occupation rent thereof after deducting the expenses of management, the collection charges, revenue and costs of repairs, first against the interest on the mortgage money and then against the principal.
To account for the receipts from the mortgaged property. Such accounting of receipt from the property shall be taken instead of interest on the principal money given to the mortgagor.

REFERENCES

R.K.Sinha, The Transfer of Property Act (Central Law Agency, Allahabad, 20^th edn., 2019).
S. Rama Rao, Transfer of Property Act (MSR Law Books)
C. Venkatasubharao, The Transfer of Property Act, 1882 (C.Subbiah Chetty & Co., Chennai, 16^th edn., 2019).

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