National Law Institute University, Bhopal

A Project on

Anomalous mortgage

Submitted to

Mrs.Sushma Sharma

Course teacher

Property law-2

Submitted by

Varshita Mangamoori

2008 BA LLB 45

8th Trimester

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Table of Contents
Introduction...........................................................................................................................................2

The types of Mortgages.........................................................................................................................3

Anomalous mortgage............................................................................................................................3

Instances of Anomalous mortgages.......................................................................................................5

Usufructuary and anomalous mortgage- Distinction.............................................................................7

Right of redemption of anomalous mortgage.......................................................................................9

Rights and liabilities of parties to an anomalous mortgage...................................................................9

Case law study.....................................................................................................................................10

Conclusion...........................................................................................................................................13

Bibliography.........................................................................................................................................14

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Introduction

1
Sec. 58 of the Transfer of Property Act, 1882 defines mortgage as -

the transfer of an interest in specific immoveable 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
the performance of an engagement 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 the mortgage-money, and
the instrument (if any) by which the transfer is effected is called a mortgage-deed.

Under section 58 [sub-clauses (b)-(g)], mortgage has been classified on the basis of the nature
of interest that is transferred for securing the loan. The mortgages, accordingly, differ in the
rights and liabilities in each kind of mortgage and the formalities necessary for effecting
them.

The types of Mortgages as enumerated by section 58 are:

1. Simple Mortgage;

1
http://indialawfirms.blogspot.com/2007/11/types-of-mortgages-in-india.html
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2. Mortgage by Conditional Sale;
3. Usufructuary Mortgage;
4. English Mortgage;
5. Mortgage by deposit of title of deeds;
6. Anomalous mortgage.

Anomalous mortgage

23
Anomalous mortgage is a combination of different types of mortgages. Section 58 has laid
down several kinds of mortgages. This classification is, however, not exhaustive. Besides the
forms of mortgage that find a place in section 58, there are other methods of taking loans on
the security of immovable property. Though not enumerated by section 58, they are in
practice in India. These modes fulfil the essentials of a mortgage but do not come under any
particular category of mortgage. They are either customary or combinations of two or more
forms of mortgage. Thereby, they cause an anomaly and therefore, are called anomalous
mortgages. Where a transaction is a mortgage in all respects i.e. there is existence of debt and
security of an immovable property for re-payment of that debt but the agreement between the
debtor and creditor is of such nature that is cannot be included in any specific category of
mortgage, the transaction is an anomalous mortgage. It may also be a combination of two or
more specific mortgages. A mortgage which is not a simple mortgage, a mortgage by
conditional sale, a usufructuary mortgage, an English mortgage or a mortgage by deposit of
title deeds within the meaning of section 58 is called an anomalous mortgage. 4 When a
mortgage created does not fall into any one of the aforesaid categories i.e., a Simple
Mortgage, Mortgage by Conditional Sale, Usufructuary Mortgage, English Mortgage and
Mortgage by Deposit of Title Deeds, it is termed as Anomalous Mortgage. It can contain the
usual terms relating to the mortgaged debt, interest payable thereon, date of repayment, legal

2
http://www.tax4india.com/indian-laws/property-and-real-estate/mortgage/mortgage-1.html
3
http://www.lawzonline.com/legalencyclopedia/a/Anomalous-mortgage.html
4
http://www.hindu.com/pp/2006/03/25/stories/2006032501320300.htm
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remedy to the mortgagee to recover the debt in the case of default by the mortgagor, with
interest on the specified date.

Example: When the mortgage assumes the character of a simple mortgage but possession is
delivered, it is an anomalous mortgage. For instance, in Munni Lal v. Phuddi Singh,5‘A’
executed a mortgage under a registered instrument in favour of ‘B’. The mortgage stipulated
that in the event of failure on part of ‘A’ to pay up the amount due under the specified period
of four years, it shall be open to ‘B’ to realise the same by sale of the property mortgaged.
This evidently construes a characteristic feature of a simple mortgage, as defined under
section 58 (b) of the Transfer of property Act. But the mortgage also stipulated that for the
payment of interest, ‘B’ would be entitled to realise the rent from certain shops referred to in
a schedule. Also, the deed stipulated that in case the mortgagee is put in possession over the
land referred to in another schedule, he would be deemed to be a tenant at a certain rate. In
effect, this stipulation meant that every month a certain sum would be set-off as interest.
Further, the deed provided that the mortgagee shall be entitled to be in possession of the land.
These terms give the mortgage usufructuary characteristics as elaborated under section 58 (d)
of the Transfer of property Act. Therefore, the mortgage in question is neither purely simple
nor usufructuary exclusively. It is a mixture of both which makes it an anomalous mortgage
within the meaning of section 58 (g) of the Transfer of Property Act.

Instances of Anomalous mortgages

a) Simple mortgage usufructuary- Where the terms of the mortgage are a combination
of a simple and usufructuary mortgage, the mortgage is termed as a simple mortgage
usufructuary. Where there is a personal covenant with an express or implied right of
sale and the mortgagee is given possession of the property as well so that he may
adjust his loan from the rents and profits of the property or the interest thereof, the
mortgage is neither a simple nor usufructuary mortgage. It is a combination of the two
and it may be termed as an anomalous mortgage. In a simple mortgage, the mortgagee
is entitled to recover the mortgage-money personally from the mortgagor. But if the

5
AIR 1987 All 155
5
 parties have also agreed that the mortgagee will have possession and the right of
enjoyment of the property, the situation will create an anomaly regarding the nature of
the mortgage. Munni Lal v. Phuddi Singh is an example of a simple mortgage
usufructuary.

Where the deed of mortgage gives a right of possession to the mortgagee and also
contains a covenant to pay, the mortgagee has both rights independently. He may sue
for sale although he may have to give up possession first. He may sue for sale of the
property or take possession of the property in the event of default.

b) Mortgage usufructuary by conditional sale- Here, the mortgagee is entitled to take

possession and enjoyment of property but there is also a condition that in default of
repayment within a specified period, he shall have the right to cause sale of the
property. Thus, where the mortgage is usufructuary for a fixed period and contains a
condition that the mortgage shall operate as mortgage by conditional sale on the
expiry of the due date, the whole transaction is a mixture of a usufructuary mortgage
and a mortgage by conditional sale. In Vaddiparthi v. Appalanarasimhulu,6 the
mortgage was usufructuary in which the rents and benefits were agreed to be adjusted
against interest. It was also agreed that the principal money shall be repaid in five
years and if not repaid within this period, the mortgage was to work out into a sale at
the expiry of twenty years. The Madras High Court held that it was a typical mortgage
usufructuary by conditional sale. In Sita Nath v. Thakurdas,7 the deed provided that
the mortgagee will have possession of property in lieu of interest and that the debt
was to be paid on a certain date. It was also provided that at the end of the said
specified period, the mortgagee would be entitled to foreclose according to law. It was
held that the mortgage was a combination of mortgage by conditional sale with
incidents of usufructuary mortgage.

6
AIR 1921 Mad. 517
7
(1914) 46 Cal. 448
6
 c) Customary forms of anomalous mortgage- These forms of mortgages are
mortgages to which special incidents are attached by local usage. 8 Certain peculiar
forms of mortgages are in practice in the form of local customs. They have the
essential features of a mortgage but their terms and conditions are governed by local
customary practices. For example, Kanom and Otti mortgages of Malabar are peculiar
forms of mortgage because they are not redeemable before the expiry of twelve years.
Kanom mortgages operate as lease as well as usufructuary mortgage. Paruartham
mortgage of Malabar is also an anomalous mortgage. In redeeming this mortgage, it is
the market value of the mortgage-property which is paid and not the amount for which
it is mortgaged. San mortgage, which is practiced in Gujarat, is peculiar because
without possession it gets priority over any subsequent bona fide purchaser with
possession.

Attestation of anomalous mortgage- In Kanna Karup v. Sankara,9 it was specifically held that
an anomalous mortgage is required to be in writing and must also be attested.

Usufructuary and anomalous mortgage- Distinction

The chief requirements of a purely usufructuary mortgage are:

 That the mortgagor must deliver or bind himself to deliver possession to the
mortgagee and;
 That the mortgage money (including interest) should be realised out of the usufruct of
the mortgaged property and;

 That the mortgagee should have no remedy except to enjoy the usufruct of the
mortgaged property.

In Ram Dayal v. Banwarlal,10 it was held that it the mortgagee is entitled to recover any part
of the mortgage money (generally, interest in addition to the principal), the mortgage cannot

8
Mulla; TRANSFER OF PROPERTY ACT, 7th edition, p.392.
9
AIR 1921 Mad. 243
10
AIR 1973 Raj 178
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be termed as a purely usufructuary mortgage and it will be an anomalous mortgage. In this
view, the court is supported by the principle laid down Bysani Madhava Chettiar Charity
Fund v. G.R.Krishnaswamy11. In this case, possession of the mortgaged property was given to
the mortgagee but he was not allowed to collect the usufruct (i.e. rents and profits) in lieu of
interest. There was, however, a separate provision fixing the rate of interest and method by
which it was to be recovered, namely, that the rents and profits were to be set off towards
payment of rent. The contingency of an excess rents and profits over interest or vice versa
was specifically contemplated, and for the case of deficit, where the whole of the interest was
not met from rents and profits, it was provided that the mortgagee may recover from the
mortgagor each month. The sum to be repaid for the purpose of redemption was merely the
original principal sum. The Court had held, “that the document meant that interest was not to
be charged on the mortgaged property but was left to be recovered under the personal
covenant of the mortgagors”. A similar view was adopted in Subramania Sastrigal v.
Sankara Rama Iyer,12 where the rents and profits accruing from the property were not
sufficient to cover the interest on the mortgage money. The deed stipulated that the balance of
the interest was to be paid by the mortgagor out of his own pocket. These facts were held
sufficient to take the document out of the definition of ‘usufructuary mortgage’.

In Satya Narain Prasad v. Adya Prasad Singh, 13 a transaction where the intention of the
parties was that the mortgagee was not to get possession of the mortgaged property but was
only to be entitled to interest on the amount advanced by him at a stipulated rate every year
and the mortgage lease was nothing but merely a device to ensure regular payment of interest
was held not to be a usufructuary mortgage. In Smt.Savitri Devi’s case,14 a similar transaction
was held to be an anomalous mortgage. This view was upheld by the Supreme Court in
Mathura Lal’s case.15 In Smt.Savitri Devi’s case, it was also held that unless there is a
covenant to the contrary, a decree for sale of mortgage property can be passed in accordance
with section 67 of the Transfer of Property Act.

11
AIR 1923 Mad 71
12
AIR 1952 Trav-Co. 391
13
AIR 1972 Pat 432
14
AIR 1968 Pat 222
15
AIR 1971 SC 310
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In Srinivas v. Stayanand,16the petitioners had contended that a mortgage that carried a
covenant to pay on a due date and to pay damages and interest in case of dispossession was
not a usufructuary mortgage. The covenant to pay is there in all mortgages and so is the
mortgagor’s right to redeem. The fact that a time-limit has been fixed during which the
mortgagor could redeem does not alter the essential characteristics of a transaction being
usufructuary. The mortgagor’s right to redeem and take possession under section 60 and 62
of the Transfer of Property Act being statutory, it is well-settled that there can be no clog on
this right of the mortgagor. Therefore, the limitation imposing a condition that the mortgage
could be redeemed within a specified period being a clog on the equity of redemption must be
treated as ‘an invalid condition of the document of mortgage’. The condition being invalid
has to be ignored and the document has to be read as a whole without this void condition.

Right of redemption of anomalous mortgage

In Hathika v. Puthiyapurayil Padmanabha17, though the document was styled as a

possessory mortgage-deed, the mortgagee was given the right to bring the property to sale in
the event that the mortgagor fails to pay the mortgage money after the prescribed period. The
mortgage is an anomalous mortgage. The rights and liabilities of parties to an anomalous
mortgage are provided under section 98 of the Transfer of Property Act. It cannot be disputed
that where there is an express undertaking in a mortgage-deed to pay money, the mortgage
will not be a possessory mortgage even if possession of the property was given. The
transaction assumes the character of a simple mortgage as well and is thus converted into an
anomalous mortgage. On reading the mortgage deed, it is evident that the deed is an
anomalous mortgage where the mortgagee is given the right to realise the mortgage money by
bringing the title, right and interest of mortgagor to sale.

Rights and liabilities of parties to an anomalous mortgage

16
AIR 1969 Pat 64
17
AIR 1994 Ker 141
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 Section 98 of the transfer of Property Act states that -“In the case of an anomalous mortgage,
the rights and liabilities of the parties shall be determined by their contract as evidenced in
the mortgage-deed, and, so far as such contract does not extend by local usage.”

The section, therefore, provides that the rights and liabilities of the parties to an anomalous
mortgage are to be determined by the terms and conditions laid down in the deed itself. Here,
it is pertinent to note that of all the mortgages laid down in section 58, anomalous mortgage is
peculiar in the sense that it is not any specific mode of mortgage. It is either a mixture of two
or more kinds of mortgages or is a localized customary form of securing debt. Since there is
no specific form of transaction, the rights and liabilities are fixed by the parties themselves.
The general provisions relating to rights and liabilities of the parties to a mortgage do not
apply to anomalous mortgages. However, the general principles of law inherent in the
transaction of mortgage cannot be avoided by a contrary contract in the deed. For example,
the right of redemption is a mortgagor’s basic right inherent in every mortgage. Therefore,
any agreement which puts a clog on redemption would be void, whatsoever be the kind of the
mortgage. In Muhammad Sher Khan v. Raja Seth Swamy Dayal,18 the Privy Council held that
an agreement creating a clog on redemption cannot be enforced even in an anomalous
mortgage.

Case law study

Sappani Mohammed Labbai Vs. Abdulla Syed through Power of attorney Agent
Ameena Bibi19-

A decree for sale of mortgage property was passed by the trial court when the mortgagee had
filed for recovery of mortgage money. In appeal, the counsel for the mortgagor contended
that the mortgage being usufructuary, no decree for sale of mortgage property could be filed.
Only a money decree could be passed. The counsel for the defendant stated that the mortgage
was anomalous in nature and therefore, a decree for sale of mortgage property was just and
proper. The mortgage deed was termed as a usufructuary mortgage and the mortgagee was to

18
AIR 1922 PC 17
19
(1988)2MLJ200
10
have possession of mortgage property in lieu of the interest. The deed also consisted of a
clause whereby the mortgagor had agreed to pay the mortgage money to the mortgagee
whenever demanded by the mortgagee after the period of mortgage had ended. The counsel
for the defendant stated that this was a personal covenant to pay and therefore, the mortgage
is anomalous in nature. If there is an option to pay in any year after the expiry of the period
and if there is an opportunity to redeem the mortgaged property after the stipulated period,
then it cannot be construed as a personal covenant. Therefore, the existence of the word by
itself could never be construed as resulting in a personal covenant unless the. necessary
incidence to bring about a personal covenant apart from the obligations under the Transfer of
Property Act are undertaken to be performed by the mortgagor. The Court held that it would
be highly improper to understand the clause in question as a personal covenant. The
defendant had simply stated that after the mortgage period is over, whenever the mortgagee
makes a demand, he would return the amount due and redeem the mortgage. Therefore, the
contention that the mortgage is anomalous was rejected by the Court.

N.K. Rajaraja Varman Thirumalpad and Ors. Vs. K.K. Krishnan Nair and Ors.20-

The Court had discussed the distinction between usufructuary mortgage and otti of
Malabar.In all usufructuary mortgages, according to Section 58(d)(i) possession is delivered
(ii) or agreed to be delivered expressly or by implication (iii) and to be retained till payment
of the mortgage money. The rents and profits or any part thereof are: (i) to be received; and
(ii) appropriated in lieu of : (a) interest or (b) mortgage money or (c) partly interest or (d)
partly mortgaged money. No time is fixed and there is no personal covenant. An otti is a
pledge, a pawn, a mortgage : in Malabar it especially designates a usufructuary mortgage, or
one in which for consideration of a sum advanced on loan, the borrower makes over the land
of which he is the hereditary proprietor to a temporary occupant, who receives the rent or
profits in lieu of interest on his loan, paying the difference, if his receipts exceed the interest,
to the proprietor : the borrower or lender may transfer the occupancy to a third party under
certain conditions, but the latter is not at liberty to sell it, and is responsible for any damage
done in the trees on the estate. The term is also sometimes used for the document of
assignment or mortgage deed. The Malabar otti is therefore not a usufructuary mortgage

20
(1956)2MLJ46
11
simpliciter contemplated under Section 58(d) of the Transfer of property Act and Section 9-A
of the Madras Act IV of 1938, but an anomalous mortgage covered by Section 58(g) of the
Transfer of Property Act.

Gopinatha Chowdhari and Anr.Vs. Kristno Chowdhari21

In this case, the mortgage deed contained a provision that the payment of the principal and
interest shall be obtained by way of payment of mortgage property. The mortgagor was also
entitled to certain portion of the paddy being produced on the field. Further, it contained a
covenant that in that event the mortgagee shall realize the money due to him, by sale of a
portion, or sufficient part of the mortgaged land and leave the remaining lands to the
mortgagor. The Court had held that the document was certainly neither a simple mortgage,
nor a usufructuary mortgage. It was not a simple mortgage, as possession of the property has
been given to the mortgagee; and it was not a usufructuary mortgage because there is no
provision that any portion of the usufruct should be taken towards the principal, or the
interest on the mortgage. It is therefore an anomalous mortgage and the rights and liabilities
of the parties have to be determined as per section 98 of the Transfer of Property Act.

Babu Kamal Nayan Prasad Sinha and Ors. Vs. Babu Ram Nayan Prasad Sinha,
Raghunandan Prasad and Binda Pathak and Ors.22-

The question in this case was whether, having regard to the fact that the plaintiff is in
possession of the mortgaged properties, he is entitled to bring a suit for realization of the
money due to him by the sale of the mortgaged properties. The Court held that the mortgage
in this case is an anomalous mortgage as there was a personal covenant to pay the mortgagee

21
AIR1925Mad881
22
AIR1930Pat152
12
and the mortgagee was in possession of the mortgage property, and that as there was a
covenant in it to pay the mortgage money on a certain date, the plaintiff is entitled to bring a
suit for the sale of the mortgaged properties.

S. Srinivasa Aiyangar and Ors. Vs. Radhakrishna Pillai23-

The plaintiff sued for redemption of a mortgage created in 1884. This mortgage document
begins by calling itself a usufructuary mortgage and in two or three places in the course of the
deed; it is expressly called a usufructuary mortgage deed. It, however, contains a clause that
if the mortgage amount was not paid on a date which is stipulated in the document at an
interval of exactly nine years from the date of the document the mortgage was to work itself
out as a sale for the principal amount due on the mortgage bond. Possession was given to the
mortgagee in accordance with the nature of the document and its spirit. At the end, there is a
covenant to this effect. " I, the mortgagor, shall pay to you the costs of the construction of
earth work . etc., on the date fixed for redemption as per your accounts along with the
mortgage money." It is contended by the appellant's learned counsel that this is a combination
of three kinds of mortgages, a simple mortgage, a usufructuary mortgage and a mortgage by a
conditional sale. The plaintiff's contention, on the other hand, is that it is a usufructuary
mortgage with a covenant at the end clogging the equity of redemption. The document was
held to be a combination of simple and usufructuary mortgage.

Dronamraju Lakshmi Narasimha Rao Pantulu Vs. Immani Seshayya and Ors.24

One Venkatrayudu Pantulu mortgaged the plaint properties to one Venkanna by two deeds,
Exs. A and B on the 2nd May, 1865. The equity of redemption was sold by the Court in
execution of a money decree against the mortgagor and was purchased by the plaintiff. He
has brought the suit for the redemption of the mortgage against the defendants who are the
representatives of Venkanna alleging that the mortgage debt has been discharged and that he
is entitled to have an account taken of the rents and profits of the mortgaged property. The
District Munsif held that the plaintiff was not entitled to redeem the mortgage as the term of
55 years fixed in the mortgage deed had not expired and he gave a decree for a certain
23
AIR1914Mad42
24
AIR1925Mad825
13
amount which under the mortgage the mortgagee undertook to pay to the mortgagor. The
plaintiff appealed and the Subordinate Judge of Ellore dismissed the appeal. The plaintiff has
preferred this Second Appeal. The Court held that even an anomalous mortgage is subject to
the provisions of section 60.

Conclusion

A mortgage which is not a simple mortgage, a mortgage by conditional sale, a usufructuary

mortgage, an English mortgage or a mortgage by deposit of title deeds within the meaning of
this section is called an “anomalous mortgage”. Anomalous mortgage is basically a residual
category. In India, several kinds of mortgages based on local practices and molded by custom
or the whim of the creditor are in existence. Mortgage which does not fall within any of the
five categories described above is anomalous. These forms are also rarely if at all use in
banking transactions. In the case of an anomalous mortgage the rights and liabilities of the
parties shall be determined by their contract as evidenced in the mortgage deed, and, so far as
such contract does not extend, by local usage.

Bibliography

1. The Transfer of Property Act, Dr.R.K.Sinha, 11th Edition: Central Law Agency.

2. Sohoni’s Transfer of Property Act, Vishwas Shridhar Sohoni, Sameer Vishwas

Sohoni, 2nd Edition: Premier Publishing Co.

3. www.manupatra.com

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