Anomalous mortgage

What is Anomalous mortgage?

According to Section 58(g) of the Transfer of Property Act, ‘a mortgage which is not a simple mortgage, a mortgage
by conditional sale and usufructuary mortgage and English mortgage or a mortgage by deposit of title deeds
within the meaning of this Section, is called an “Anomalous Mortgage.”

Essential features Anomalous mortgage

(i) It must be a mortgage as defined by Section 58 of the Transfer of Property Act.
(ii) It is negatively defined and should not be anyone of the mortgages listed above.
(iii) Anomalous mortgages are usually a combination of two mortgages. Examples of such mortgages are:
(a) a simple and usufructuary mortgage, and
(b) an usufructuary mortgage accompanied by conditional sale. There may be other forms, molded by custom and local usage.
(c) Merits and Demerits of an Equitable Mortgage

Merits

(i) The borrower saves the stamp duty on the mortgage deed and the registration charges. It involves minimum formalities.
(ii) It involves less time and can be conveniently created.
It can be done without much publicity and therefore, the customer’s position is not exposed to public gaze.

 

Demerits

(i) In case of default, the remedy is to obtain a decree for sale of the property. Since, this involves going to the Court, it is expensive and time consuming. This shortcoming can be overcome by inserting a covenant by which the mortgagee is given the power of sale. In that case, the mortgage deed must be properly stamped and registered and the mortgage loses the advantage of being simple in procedure and less expensive.

 
(ii) Where the borrower is holding the title deeds in his capacity as a trustee and equitable mortgage of the same is effected, the claim of the beneficiary, under trust will prevail over any equitable mortgage. Therefore, the banker has to make a proper scrutiny of the title deeds before accepting them as a security.

 
(iii) The borrower may create a subsequent legal mortgage in favour of another party. However, this possibility is not there, if the equitable mortgagee holds the original title deeds. In India, there is no difference between the two types of mortgages. According to Section 48 of the Registration Act, 1908, a mortgage by deposit of title deeds prevails against any subsequent mortgage relating to the same property. Similarly, the title of the equitable mortgagee, is not defeated by any subsequent sale without notice. However, to avoid any risk of this type, the equitable mortgage should be accepted only after obtaining the original title deeds.

 
The law in England is slightly different. As between equitable mortgage and legal (simple) mortgage, the latter
prevails even though it is effected subsequently. The law, regarding this is, as between law and equity, law
prevails. As between the equities, the prior in time prevails.

 
Pledge requires only a limited interest in the property and ownership remains with the right of pledger.The Pawnee
has ‘special property’ in the goods pledged and can sell the same in the event of default by the pledger of course,
after giving reasonable notice.Pawnee has no right of foreclosure. He can only sell the property to realize his
dues. Here the legal ownership passes to mortgagee, of course, subject to the mortgagor to redeem the property.The
mortgagee as a rule takes decree of a Court of Law before having recourse against the property mortgaged.In
certain cases, the mortgagee can foreclose the property.