How a Mortgage Is Made

In one line

A mortgage of a hundred rupees or more must be a registered document signed by the borrower and witnessed by two people, unless it is made by handing over the title deeds.

In exam wording: section 59 provides that where the principal money secured is one hundred rupees or upwards, a mortgage other than a mortgage by deposit of title-deeds can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses; and where the principal money is less than one hundred rupees, by such an instrument or, except in the case of a simple mortgage, by delivery of the property.

Why the formalities are heavier than for a sale

Compare section 54. A sale of tangible immovable property worth a hundred rupees or more needs a registered instrument, and that is all. A mortgage of the same value needs a registered instrument plus the mortgagor's signature plus attestation by two witnesses.

The extra requirements are deliberate. A person selling land walks away with the price and knows what he has done. A person mortgaging land usually does it under financial pressure, often to a lender who has drafted the document, and he keeps living on the property as though nothing had changed. The formalities force a moment of deliberation and produce independent witnesses to it, which is a protection against the borrower being rushed or deceived.

Broken down

One hundred rupees and upwards:

• a registered instrument;
• signed by the mortgagor;
• attested by at least two witnesses;
• except a mortgage by deposit of title-deeds.

Less than one hundred rupees:

• such an instrument, signed and attested as above; or
• delivery of the property, except in the case of a simple mortgage.

The exception within the exception is logical. A simple mortgage is defined by the mortgagor not delivering possession, so delivery cannot be the mode of making one.

Attestation must satisfy section 3: two or more witnesses, each having seen the mortgagor sign or affix his mark, or seen another sign by his direction, or received a personal acknowledgement, and each having signed in the mortgagor's presence. The requirement carries the trap set out in that chapter: a person who signs for some other reason, such as a scribe or an identifying witness, is not an attesting witness, so a deed bearing several signatures may still be unattested and the mortgage bad.

Only the mortgagor need sign. The section requires the signature of the mortgagor, not of the mortgagee.

The exception for a mortgage by deposit of title-deeds

Section 58(f) creates the equitable mortgage, and section 59 excepts it from every formality here. It needs no writing, no registration and no attestation, however large the sum. Delivery of the documents of title to a creditor or his agent, in one of the named towns, with intent to create a security, is the whole of it.