Modern mortgage law has its roots in both Roman law and in Anglo-Saxon
English law. Laws in the area of redemption, however, arose from the changes in
the English laws during the early seventeenth century. Before these changes
mortgage was effectively a fee simple (Full interest) subject to a condition
In early mortgage transactions, mortgagors, as security for loans from the
mortgagees, deliver the property to the mortgagees subject to the condition that
if the mortgagors repaid the debt by a certain day, mortgagors would have the
right to re-enter the land and revest themselves of their former estate.
A condition that the mortgage will return the title upon full performance by the
mortgagor gradually displaced the condition of title passing to the mortgagee.
But if the amount is not paid by the Law Day the mortgagee's estate in the
property became absolute.
The strict enforcement of this rule of law led to harsh consequences when the
mortgagor lost his entire estate if, for any reason, he failed to make payment
on final day. The English court came to the aid of the mortgagor and at first
gave relief to the defaulting mortgagor only on a special showing of some ground
for equity jurisdiction such as fraud, accident, or mistake.
Later they allowed mortgagors to redeem their land from mortgagees if the
mortgagors tendered the principal and interest within a reasonable time after
Law Day. Courts referred to this right to late redemption as the mortgagor's
equity of redemption.
This right of redemption in turn proved unfair to mortgagees who, despite a
mortgagor's default, could never be certain that the mortgagor would not sue in
equity to redeem. In fairness to the mortgagee, the court of equity developed
the right of foreclosure. The earliest form of foreclosure allowed the mortgagee
to bring a suit whereby the court would issue an order requiring the mortgagor
to pay the full debt with interest and costs within a certain period of time.
Courts would forever bar the mortgagor's interest in land if he failed to comply
with the order.
Conditions for ForeclosureThe right to foreclosure occurs only when the loan is due and there are certain
conditions which needs to be fulfilled for claiming the right of foreclosure
- The loan amount has become due for payment.
- There are no contrary conditions attached in the mortgage deed i.e., any
fixed time for repayment etc.
- The right cannot be claimed until the mortgagor has got a decree of
redemption of the mortgaged property from the court.
- The mortgagor has not repaid the loan amount.
The mortgagor can however pay off his debt when due in the following ways:
- By tendering payment of the mortgage money directly to mortgagee
- By filing a suit for redemption
- By depositing the amount in court
- The right cannot be exercised when there was a mortgage of public works
like canal, railway etc.
- A trustee or legal representative of mortgagee cannot file a suit for
foreclosure but for sale only.
However, in case where the mortgage fails to redeem the property, the mortgagee
doesn't become directly the owner of the property and in order to proceed for
the recovery of the amount the mortgagee has to file a suit within the
limitation period or 12 years .
Foreclosure in Different types of Mortgages
The Transfer of Property defines six different types of mortgages and right to
foreclosure is however not available in all types of mortgages.
There are only
certain provisions which contains the provision of right to mortgage:
- Simple mortgage:
In this type of mortgage the mortgagee doesn't get the
actual possession of the property therefore he cannot exercise the right of
- Mortgage by conditional sale:
In this type of mortgage the mortgagee can bar
the mortgagor from exercising his right of redemption by filing the suit for
- Usufructuary mortgage:
In this mortgage the mortgagee retains the
possession of the mortgaged property as long as the mortgagor repays the money,
Thus the right of foreclosure is not available in this case.
- English mortgage:
In this mortgage there is absolute transfer therefore
neither the suit for foreclosure nor sale can be instituted.
- Mortgage by deposit of title deed:
Here also as in simple mortgage the right
to sue for sale is available.
- Anomalous mortgage:
In this mortgage it depends upon the terms of the
mortgage and therefore foreclosure right can also be present if the conditions
of the mortgage are such.
Law Commission Recommendation
The right of foreclosure is only available in the mortgage by conditional sale
and sometimes according to the terms of the anomalous mortgage. So, the most
important question to be considered is whether the right of foreclosure should
be retained at the present day. This right is also the violation of the doctrine
which has evolved overed the time that once a mortgage always a mortgage. This
right can easily be replaced by the right to sale.
Also, if decree of
foreclosure is passed then, mortgagor loses his property without receiving
anything from the mortgaged property which he might have received out of the
proceeds of the sale of the property. On the other hand, if the right to
foreclosure is abolished and the mortgaged property is sold, then after
satisfying the mortgage money due to the mortgagee, a portion of the sale
proceeds may be available to the mortgagor.
After the analysis of mortgage, the rights of both the parties in the contract
of mortgage i.e. mortgagee and mortgagor, and the rights available to the
mortgagor, with special focus on right to foreclosure as a right of mortgagee in
case the mortgagor defaults in payment of the loan borrowed. It can simply be
concluded that a mortgage is simply a transfer of an interest by the owner in
his specific immovable property, as a security for advancement of a credit/loan.
The person who gives security and takes the loan is known as Mortgagor, and the
person who advances the loan on credit is known as mortgagee. The Right to
foreclosure under TOPA provides rights to the mortgagee as per the requirement
which makes it more transparent for the mortgagee to recover debts from the
principal debtor or Mortgagor .
Mortgagor's main right is the right of redemption whereas the mortgagee relies
heavily on right of foreclosure and sale. Both these rights are for protecting
their party from risk and exploitation. However, the right of redemption
provides a greater amount of protection than a right to sale or foreclosure.
The redemption right is an absolute right to the mortgagor, Even when a suit for
redemption has been rejected previously, it would not deprive the mortgagor of
his right to redeem by filing a second suit for redemption. On the other hand,
the right to foreclosure clearly states that the if there is an agreement or
contract stating that the mortgagee's right to foreclosure or sale shall be
waived off, then it would be correct in law to deprive the mortgagee of this
The foreclosure can be avoided by the mortgagor if he uses the option of
reinstatement, short refinance, and special forbearance. The mortgagee however
cannot directly claim the right of foreclosure; he has to obtain a decree from
the court after the default in payment from the side of mortgagor arises. In
addition, the mortgagor also has a right to redemption by availing which he can
avoid the foreclosure .
- Catherine A. Gnatek, The New Mortgage Foreclosure Law: Redemption and
Reinstatment, 1989 U. ILL. L. REV. 471 (1989)
- Mhadagonda Ramgonda Patil v. Shripal Balwant Rainade (1988) 3 SCC 298
- Achaldas Durgaji Oswal v. Ramvilas Gangabesan Heda AIR 2003 SC 1017
- Law Commission of India - Report No. 70 (August, 1977) The Transfer of
Property Act, 1882