Equitable Mortgage

Chartered Accountant

what is the meaning of Equitable mortgage?

What is the difference between English Mortgage and Equitable Mortgage?



Equitable mortgage means a mortgage which does not satisfy the all the requirements of legal mortgage as per the law in force but is nevertheless entered into as per agreement. It gives the necessary right to the mortgagee to file suit for non-payment.


Originally posted by :CA. Atindra A. Prabhu Bhatikar
" Equitable mortgage means a mortgage which does not satisfy the all the requirements of legal mortgage as per the law in force but is nevertheless entered into as per agreement. It gives the necessary right to the mortgagee to file suit for non-payment. "

Equitable mortgage means mortgage by deposit of title deeds. Such mortgage had been customary in India for hundreds of years. English jurisprudence does not recognise this mortgage but English judges sitting in Indian corts recognised it under the principle of equity. Hence the name equitable mortgage. It appears in Transfer of Properties Act as mortgage by deposit of title deeds. It is now actually legal mortgage but such is the force of habit / custom etc that it is still called equitable mortgage.

It is as legal as any other mortgage described in TPA.

In English mortgage the mortgagor sells the property to the mortgagee but  mortgagee has the obligation to sell the property back to the mortgagor if the debt secured by the morttgage is discharged as per its terms. In equitable mortgage ownership is not transferred but just a property interest is transferred to the mortgagor and hence the mortgagee cannot sell the property for realisation of unpaid dues without obtaining court's order.

As an interesting trivia, in UK what we call English mortgage is no longer legal.

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Very well put Mr. Singh.


As discussed above, in an English mortgage, the possession of the property is transferred to the mortgagor. Interestingly then, I wonder whether the mortgagor is free to sell the property to a third person, or in other words, does the title to the property become 'free from encumbrances'?


So far I have not come across any such transaction of re-conveyance of a mrotgaged property under an English mortgage. It is queer that this type of mortgage would be preferred by parties, when there are two instances of stamp duty implications that shall be attracted to restore the property to its original owner/mortgagee. Whereas under equitable mortgage, the parties may skip the stamp duty implication altogether !!!


Spare some thoughts guys?



What happens in the case of a loss of Deed Documents by the mortgagee & the Mortgage Account is delinquent ??


Equitable mortgage and English mortgage are the same which means handing over the original documents of title to the lender with an agreement that the property can be sold etc in case of failure of payment. Here the registration authorities are not kept posted of the information.

Legal mortgage means handing over the original documents of title to the lender with an agreement that the the property can be sold  etc in case of failure of payment and also registering with the Registrar that the charge is created on this property and without the permission from Registrar it cannot be sold.

Only the second option is now accepted by bankers for companies for colletaral security ,where as for individuals mostly the first option is acceped.


practicing chartered accountant

There is partnership firm with four partners namely A,B,C and D (Name of the firm ABCD Firm). The firm is having one land in the name of firm. Thereafter partners A and B resign from the firm and two new partner X and Y enters in the firm through new reconstitution deed.After some time C and D also resigns from the firm and also the name of the firm changed from ABCD firm to X & Y Firm. Now Firm X & Y wants to mortgage the land in the name of the firm to Bank for some loans.( Sale deed is still in the name of ABCD Firm)
Now question is whether the firm X & Y can mortgage the land in the name of firm


yes, but the new reconstituted deed will have to be produce before city survey office or city sub registrar. the new members or partners name should be introduce at city sub registrar or the old partners can be part of the loan as guarantors in the bank but if they mutually agreed to be part of the bank loan. The bank will make the deed of guarantee.

@ Joy: I have seen only one case of English mortgage. I am not aware whether the property was re-conveyed to the mortgagor or retained and sold by the mortgagee; when I saw the case the mortgagor was in default. The plus point of English mortgage is one does not have to file a mortgage suit if the mortgagor is in default. Of course rising stamp duty / court fees on conveyance has made it very expensive.


@ Abhijit CA: I have seen two such cases. In both cases the bank employees seem to have surreptitiously removed the title deeds, in collusion with the mortgagor borrower. In both cases the bank had gone for money suit, seeking attachment of the property. (In yet another case, the mortgagor borrower had repaid the loan as per schedule and the mortgagee banker had lost the title deed.)

@ Kolloru Krishna Murty:  S58 of TPA defines mortgage and also describes six types of mortgages. English mortgage is defined as (S58(e)):English mortgage.—Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage.

And s58(f) defines Mortgage by deposit of title-deeds.—Where a person in any of the following towns, namely, the towns of Calcutta, Madras, and Bombay, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.. (This section was added in 1929; i.e. since 1929 it is a mortgage in law though still referred to as equitable mortgage.)  

@ Sanjay Bansal & Ravi Dhadve: As noted above, in the definition the mortgagor has to deposit title deed for creation of a mortgage by deposit of title deeds. Courts have defined “title deed” as the document from which title is derived. The firm ABCD derived title from the sale deed that mentioned ABCD as the purchaser. XY got title as successor to ABCD and as such it has no title deeds to deposit. It is not much different from, say, I sole heir stepping into shoes of my deceased father will not be capable of creating mortgage by deposit of title deed if the deed named my father as the purchaser. Although I may have got the property mutated in my name in all revenue / city records, the fact is I have derived the title from succession (by being sole heir to the deceased) and not from any document; thus, so far I am concerned I have no title deeds to deposit. (Survey records are NOT title deeds. They record teh name in survey if teh holder has title i.e. title comes first and survey records come later)

This was the provision till about twenty-five years back. Since then I have not had to do anything with mortgages (thank God).


In an equitable mortgage the lender is secured by taking possession of all the original title documents of the property and by borrower's signing a Memorandum of Deposit of Title Deed (MODTD). This document is an undertaking by the borrower that he/she has deposited the title documents with the bank with his own wish and will, in order to secure the financing obtained from the bank..


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