TPA — Frequently Asked Questions
What is an equitable mortgage and how is it created under the TPA?
An equitable mortgage — called "mortgage by deposit of title deeds" under Section 58(f) TPA — is created when a borrower deposits original property documents with a lender in a notified town, with the intention of creating a security. No formal deed is required; the deposit itself creates the mortgage. Since 2011, all such mortgages must be registered with CERSAI within 30 days of creation to be enforceable under SARFAESI. A memorandum of deposit of title deeds is typically prepared and must be properly stamped under the applicable State Stamp Act.
Can a bank enforce a mortgage without going to court?
Yes — through SARFAESI 2002. Under Section 13, banks and specified financial institutions can take possession of and sell the secured asset without court intervention after issuing a Section 13(2) demand notice and waiting 60 days. Under TPA Section 69, a private extra-judicial sale is available only for English mortgages under specific conditions — rare in Indian banking. For mortgages outside SARFAESI's scope, banks must file a suit for sale under Section 67 TPA read with Order 34 CPC, or proceed under the RDDBFI Act before the DRT.
What is the right to redeem and can a bank prevent a borrower from exercising it?
The right to redeem (Section 60 TPA) allows a mortgagor to repay the full outstanding amount and reclaim the property at any time after the mortgage money falls due. This right cannot be contractually extinguished or restricted — any such term is void under the "no clogs on equity of redemption" doctrine. SARFAESI Section 13(8) expressly preserves this right until actual sale. Once a sale under SARFAESI Rule 9 is confirmed and a sale certificate issued, the right to redeem is extinguished.
What are the six types of mortgage under TPA and which is most common in banking?
TPA Section 58 defines six types: (1) simple mortgage — personal liability plus power of sale, no possession transfer; (2) mortgage by conditional sale — ostensible sale that reverts on repayment; (3) usufructuary — lender takes possession and applies rents towards debt; (4) English mortgage — full title transfers to lender, most powerful form; (5) mortgage by deposit of title deeds (equitable) — most common in banking, created by depositing original documents; (6) anomalous — any combination not fitting the above. The equitable mortgage is dominant in Indian banking because of its simplicity and cost-effectiveness, though it now requires CERSAI registration.
How do banks challenge fraudulent property transfers made by borrowers?
Under Section 53 TPA, banks can file a civil suit seeking a declaration that a transfer made with intent to defraud creditors is void or voidable. Courts look at circumstantial indicators: gross undervaluation, transfer to a close relative or associate, timing after NPA declaration or demand notice, and continued possession by the transferor. Under IBC Sections 43–51, the Resolution Professional can apply to the NCLT to reverse preferential, undervalue, or fraudulent transactions — even those made years before insolvency proceedings commenced.
What is a Section 67 suit and when does a bank file it?
A Section 67 TPA suit (filed under Order 34 CPC) is a civil court action seeking a decree that mortgaged property be sold to recover the outstanding debt. Banks file it when SARFAESI enforcement is not available — for example, when the outstanding balance is below the threshold, when the mortgage has technical defects, when the property is agricultural land excluded from SARFAESI, or when the borrower is outside SARFAESI's jurisdiction. The limitation period is 12 years from the date the mortgage money fell due (Article 61, Limitation Act).
What is the difference between a mortgage and a charge under TPA?
A mortgage (Section 58) transfers an interest in the property to the lender — the mortgagee acquires a proprietary right. A charge (Section 100) does not transfer any interest — it only creates an encumbrance or lien as security. Charges arise by agreement or by operation of law (unpaid vendor's lien, court decree, company floating charge). Both are enforced similarly to simple mortgages. Company charges on immovable property must be registered with the ROC under Companies Act Section 77 and with CERSAI under SARFAESI to be valid against third parties.
When is registration of a mortgage compulsory under TPA?
A simple mortgage must be by a registered deed if the principal amount secured is Rs. 100 or more — an unregistered simple mortgage deed is inadmissible in evidence. A mortgage by deposit of title deeds historically did not require registration under the Registration Act, as it was created by the physical act of deposit. However, post SARFAESI Amendment 2016 and CERSAI Regulations 2011, all equitable mortgages must be registered with CERSAI within 30 days of creation. Failure to register with CERSAI bars SARFAESI enforcement entirely (Section 26B, SARFAESI).
What is an actionable claim and how is it assigned under TPA?
An actionable claim is a debt or a right to claim money that is not secured by a mortgage or pledge of specific property — for example, a bank loan receivable or an insurance claim. Under Section 130 TPA, an actionable claim is transferred by a signed, written assignment deed. On execution, all of the assignor's rights and remedies vest in the assignee. This is the legal basis for NPA assignments from banks to ARCs — the ARC steps into the bank's shoes and can enforce the debt including through SARFAESI, provided the assignment deed is properly executed.
How does the TPA interact with SARFAESI in mortgage enforcement?
TPA governs the creation, nature, and validity of the mortgage — it determines what type of security interest the bank holds. SARFAESI provides the enforcement mechanism that bypasses civil courts. Section 35 of SARFAESI has an overriding effect over TPA to the extent of inconsistency. If a mortgage is defectively created under TPA — for example, an unregistered simple mortgage or an equitable mortgage not registered with CERSAI — SARFAESI enforcement can be successfully challenged before the DRT. The two statutes therefore work in tandem: TPA for creation, SARFAESI for enforcement.
Mortgage Enforcement and Property Disputes
Advocate Subodh Bajpai advises on mortgage validity, SARFAESI enforcement strategy, fraudulent transfer challenges, and civil court recovery suits under TPA.