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Report No. 70

54.91. Remedies.-

Finally, there is the question of remedies. In England, a mortgage by deposit of title deeds carries with it the remedies incident to an English mortgage, such as foreclosure.1 The equitable mortgagee has, prima facie, no right to the rents of the mortgaged property until he has obtained an order of the Court.2 Before the amendment of the Act in 1929, there was a difference of opinion as to the nature of the remedy available under this Act to an equitable mortgagee.3 Section 96 of the Act inserted by the amending Act of 1929, now makes it perfectly clear that an equitable mortgagee has remedies similar to those of a simple mortgagee.4 An equitable mortgagee has no right to possession. His only right is to obtain a decree for sale.5

A mortgagee by deposit of title deeds is not deprived of his right to recover the debt by his inability to produce either the deeds deposited or any memorandum of deposit, when the Court believes that there was a deposit and the deeds have been really lost.6

1. AIR 1939 Rang 321 (323);

AIR 1960 Mad 529 (532).

Backhouse v. Charlton, (1878) 26 WR (Eng) 504: 8 Ch D 444;

York Union Banking C. v. Artley, (1879) 27 WR (Eng) 704: 11 Ch D 205.

2. AIR 1962 Mad 59 (70);

AIR 1960 Mad 529 (532);

AIR 1936 Rang 290 (291);

Finck v. Tranter, (1905) 1 KB 427 (439).

3. Report of the Select Committee, clause 47 (now clause 49).

4. AIR 1960 Mad 529 (532); AIR 1936 Rang 400 (401).

5. AIR 1933 Mad 570 (575).

6. Baskett v. Skeel, (1863) 11 WR (Eng) 1019 (1020): 2 NR 547.

54.92. Where the mortgagor, besides making a deposit, also purports to confer a right of a different nature, e.g. possession-the mortgage would become an anomalous mortgage. It would then be governed by section 58(g) and the other provisions of the Act applicable to anomalous mortgages.

54.92A. Recommendation as to section 58(f).-

We have already indicated1 the amendment needed in section 58(f). We now proceed to the next clause.

1. Para. 54.70, supra.

54.93. Anomalous mortgag.- section 58(e).-

The last category of mortgages to be dealt with is that described by the rather curious name of "anomalous mortgage". As defined in the Act, it means a mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage an English mortgage or a mortgage by deposit of title deeds within the meaning of the section. This definition is verbally unexceptionable. But certain aspects which are of practical importance may be usefully pointed out.

In the first place, it is to be emphasised that a mortgage which is a combination of more than one type of the enumerated species ipso facto becomes an anomalous mortgage. For example, a usufructuary mortgage with a personal covenant for paying the money becomes, on a proper construction, a mortgage of the anomalous type.1 Similarly, a combination of usufructuary mortgage and mortgage by conditional sale becomes an anomalous mortgage.2

Secondly, even where the mortgage is not technically of two types, yet an aberration from the definition of a particular species would make it an anomalous mortgage.3

Thirdly, the rights and liabilities of a mortgagor and mortgagee under an anomalous mortgage are primarily governed by the contract or local usage. In this sense, this type of mortgage is the most elastic of all the types enumerated in the section.4 For example, if the right of foreclosure is given to the anomalous mortgagee by the contract, then he has, at any time after the mortgage money has become due to him and before a decree has been made for the redemption of the mortgaged property or before the mortgage money has been paid or deposited under the Act,5 a right to obtain from the court a decree of foreclosure.

There are, in fact, instances where the mortgagee in an anomalous mortgage is given both the right of foreclosure and right to sale.6 Of course, under the procedural law,7 the court has a discretion in such a case to pass a decree for sale instead of a decree for foreclosure.8

1. (1968) 1 Mad LJ 139.

2. (1941) 73 Cal LJ 246 (248), cited in the Yearly Digest.

3. AIR 1936 Pat 211 (220) (Dhavale, J.).

4. Section 98.

5. Section 67, first paragraph.

6. AIR 1940 Nag 156 (157).

7. Order 34, rule 4(3), C.P.C.

8. AIR 1935 All 778 (785).

54.94. No limit.-

Reverting to the type of transactions which could fall within the category of anomalous mortgages, one can state that theoretically there is no limit to their number and variety. Such mortgages may take as many forms as the parties may agree to enter into. A mortgage giving the right to possession may contain also a covenant to pay the principal and interest1 or a stipulation that the mortgagee should appropriate the rents and profits but only for a specified term of years and then the land be returned2 or a provision for adjustment of the rents and profits towards interest and the principal with a covenant to the effect that the deficiency shall be paid by the mortgagor.

Then, there may be cases the mortgage, though framed as a simple mortgage with the amount repayable in a specified time, gives the mortgagee a power to foreclose if any other creditor brought a suit against the mortgagor, or attempted to attach the property.

The most common instance of anomalous mortgages is furnished by a combination of a simple mortgage and usufructuary mortgage. This was (before the amendment of 1929) described as a "simple mortgage usufructuary", but it now clearly falls within the definition of anomalous mortgage. As we have pointed out in the introductory discussion,3 many of the local mortgages fall within this definition, since they cannot be accommodated within the strict language of section 58, clauses (b) to (f). Many of them are combinations of usufructuary mortgages and leases,4 or of a right to possession with a personal covenant.5

1. AIR 1947 Lah 46 (47).

2. 1902 ILR 26 Born 252 (258).

3. See general discussion as to section 58.

4. AIR 1926 Mad 650 (651) (Nanos for 12 years).

5. AIR 1955 Tray 207, (Otti Mortgages in Tray-Co).

54.95. Mortgages of movables.-

Before we take leave of section 58, we would like to deal briefly with one matter which does not fall within the section, but which is analogous to it. A mortgage of movable property is outside the section, but it seems now to be fairly well-settled that such a mortgage can be made. Three propositions seem to be worth discussion:

(i) A mortgage of movables can be lawfully made.

(ii) Possession need not be delivered. This distinguishes it from a pledge, in which possession must be delivered.

(iii) Some title passes though possession is not delivered. On the first two propositions, the law seems to be fairly dear. On the third, the position may require some discussion.

54.96. Mortgage of movable-validity.-

Though neither the Transfer of Property Act nor the Indian Contract Act1 makes any provision for the mortgage of movables, as distinguished from pledge in which possession of subject of security is transferred as a part of the transaction, yet mortgages of movables have been recognised from very early times in India. Such transactions are still valid even though they may be unaccompanied by possession.2

A Punjab case3 on the subject is instructive. The plaintiff Bank sued to enforce a claim on an unregistered deed of mortgage of the machines, types, plants, printing presses, printing materials, apparatus, and also the goodwill, furniture, fixtures, fittings and appurtenances, and, belonging to a press. The Defendant-Appellant relied on a previous oral charge or hypothecation of these properties, made in her favour to secure advances made by her.

It was held that in the Punjab, a charge of this kind in respect of movable property could be made without any deed in writing and if made orally it was as effectual (except in cases provided for by section 48 of the Indian Registration Act) as if it were effected by an instrument in writing. It was held consequently, that the defendant's oral charge being prior in time must prevail over the rights of the plaintiff Bank under its written deed and that the question of notice did not arise.

1. Gour Law of Transfer, 8th Edn., p. 2344.

2. (a) Damodar v. Atma Ram, 8 Bom LR 344; (b)Shrish Chandra v. Nimari, 9 CWN 14; (c) Mohini Mohan Saha v Bengal Steam Laundry Co., 50 CWN 258.

3. Stewart v. Bank of Upper India Ltd., 1916 Punjab Record No. 32.

54.97. Possession not necessary.-

The delivery of possession is not necessary to constitute a mortgage of movable property. There is case law on the point that a hypothecation of movable property, though not accompanied with delivery of possession, is valid and recognised in one Madras case1, the owner of a coffee estate, in consideration of an advance of Rs. 1,000 on the crop of coffee then growing on the estate made upon trust to sell the same and apply the proceeds to the satisfaction of the sum advanced and interest created a mortgage. It was agreed that the crop should be allowed to remain in possession of the planter, who was to cultivate, gather and prepare the crop and deliver it to the Bank.

It was held by the court that the instrument created not a mere hypothecation or pledge of the property, but an assignment of the property by way of mortgage.

1. LR 8 Mad 104.

54.98. In another case1 in consideration of an advance of Rs. 1,450 on interest, repayable on demand, certain boat-owners assigned to Strong Steel & Co., their paddy boats, the boat owners retaining, working and being responsible for the safety of the boats, and agreeing, so long as the sum advanced with interest should remain unpaid, to use their boats for the sole purpose of supplying paddy to Strong Steel and Co., and to deliver such paddy (which was to be paid for at the market rate) at the end of each trip as directed by S & Co. On failure to make repayment on demand S & Co., were empowered to take possession of and to sell the boats. It was held by the High Court that the document was a mortgage, and not a pledge.

In another Madras case,2 the mortgage deed gave security to the mortgagee not only over the immovable property (lands comprised therein, but also over the produce realised therefrom every year. It stated:-

"The produce realised therefrom every year have been hypothecated to you. The High Court held that the mortgage deed will operate in respect of the produce on the land as a mortgage of movable property. It will be a valid mortgage of movable property. The moment the crops come into existence, the mortgagee gets title to the crop.

1. Kashway v. Strong Steel & Co., 1895 ILR 21 Cal 241.

2. Venkatacharan Chatti v. Venkata Rand Reddi, AIR 1940 Mad 929.

54.99. Defect in title.-

Though the delivery of possession is not necessary to constitute a mortgage of movable property, the transfer is not complete without delivery of possession in certain circumstances. In one Calcutta case,1 the mortgagors-Weston and Summers-executed the following deed:-

"As collateral security for the advance of Rs. 30,000 (Rupees Thirty thousand only), which you have made on our demand, promissory note and for any future advances which you may make to us, we hereby give you a lien over our stock-in-trade, outstandings, fittings, etc., in connection with our business, which is carried on in Calcutta, Simla and Rangoon, and we further undertake, whenever called by you to do so, to execute any assignment of our business to you with such conditions as you may require. Our business is free from all liens and encumbrances, save and except this, that we are now making and we undertake to keep it so."

This deed was executed in favour of Delhi and London Bank Ltd., Calcutta. The firm of Weston and Summers became insolvent. The Bank, at no time, got possession of the business or stock-in-trade of the insolvent. These were taken over by the official Assignee, when the insolvent filed his petition for relief in the Court, the High Court held that the agreement or undertaking with the Bank could not be enforced in equity, and for its breach there could be no remedy at law.

The Bank was entitled to preferential payment of so much of the fund as can be shown to represent the assets of the insolvent's business, which were in existence at the date of the letter of hypothecation. As regards the balance of the debt, the Bank must rank only as a general creditor of the estate.

1. Ambrose Summers, an insolvent (in re:), 1896 ILR 23 Cal 592.



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