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INTERESTS IN RIGHTS OVER LAND

ENCUMBRANCES:
 These are rights in alieno solo rights enjoyed in the land of another person other than the one entitled to enjoy such rights.  The exercise of ones rights over his land,

Mortgages:
Charges; 

These are a creation of statutes and have the effect of subjecting the property so burdened to some limitations which have the potential to defeat the registered proprietor rights of ownership with regard to such property.  In our case, mortgages are a creation under the Indian Transfer of Property Act whereas Charges apply under the RLA exclusively.  The ITPA and related statutes that draw from it is what we associate with mortgages whereas charges apply in the case of RLA.  Both serve the same purpose and are in the nature of encumbrances that play a significant role in the capitalist mode of production.  They feature prominently in borrowing transactions and it has been suggested that they perform certain functions in a capitalist economy which include allowing people in the periphery of the production process to be integrated into such a process. 

It has also been suggested that it is one way through which those desirous of owning homes can find an appropriate institution to enable them realise such ambitions so as an institutions it facilitates that kind of desire.  It serves as a way of reallocating property rights in the society in the sense that probably in the case of a defaulting party where a loan has been advanced, the property becomes available to be sold in the common market as well as guaranteeing that the person advancing the loan does not lose out but it makes available the money to acquire rights over property subject of sale.

The circumstances under which mortgages and charges can be said to be encumbrances is what entails.  Anybody desirous of borrowing money has to offer security and land is one of the recognised means of offering security and you have the property mortgaged or charged by drawing a special instrument that conforms to the respective requirements of the law and you have it registered against the property you put up as security.  Provided that you benefit from the financial accommodation you must perform all the conditions you sign up to and there are duties placed on the financier but the fact remains that your interest in the property has not been done away with and you retain a bit of that.  When the debt is paid you are entitled to a clean title and you are discharged from liability.  As long as you have not paid, there are activities that one cannot engage in because of the burdens that the property suffers from under that arrangement.

In terms of genesis and revelation of mortgages and charges, we have to note that we get the concept from the English law regarding that aspect which is very similar to the position under Roman law where the mortgage institution is thought to have first evolved.  Under Roman law, it took the form of what was known as fiducia and this was a form of fiduciary arrangement or relationship between a lender and borrower, property in question was given to lender in return for financial accommodation that had been sought and if the borrower defaulted, the party’s obligation, there was forfeiture to the lender regardless of the value of the property in question.

The institution also manifested itself in pigmus and entailed transfer of possession of property in question but without the element of forfeiture that is part of fiducia.  When there was default, the property in question was merely sold and not forfeited and the idea was to recover any sums that were outstanding and the accrued interest.  There was no forfeiture.

The third form which exemplifies this institution under Roman law was the Hypotheca and this entailed making a pledge with reference to a specified property but without the effect of the borrower having to deliver possession thereof.  The creditor had vested in him power of sale which he could exercise in event of default by the borrower and the catch was that upon exercise of power of sale there was a requirement for the creditor to render accounts as to how the proceeds realised had been applied and the borrower had to know how much had been realised and any sum realised in excess of what was owing had to be turned over to the borrower.  This brings us to modern day practice in respect to mortgages and charges.

Development of this institution was linked to the doctrine of Estate and it was manifestly in form of usury as far back as in the 13th and 14th century and it entailed lending money to those who were in need but under very unreasonable conditions which for instance called for payment of high premium rates in form of interest and had the trappings of a certain default on the part of the borrower because the element of high interest returns ensured the outcome and consequently borrowers in almost all cases hardly ever met their repayment obligations and the lenders ended up taking over the property.  It became unpopular with the people and the English parliament had to outlaw the practice all together but English lawyers are never short of tricks and evolved yet another institution of a pledge shortly after usury was outlawed and the basic idea was to offer land as security for a loan.  Two forms of a pledge, the so called living pledge and a dead pledge.  Under the living pledge, lender took possession of property in question and received any benefits accruing such as rents and profits and the arrangements lasted till the repayment and interest was fully paid.  Under dead pledge lender only received rents to be applied towards    offsetting the interest accruing and continued until interest was offset. 

The notion of conveyance by 19th century had been introduced whereby the borrower’s interest would be conveyed to the lender on condition that upon full payment of debt there would be a re-conveyance of the interest back to the borrower.  Such re-conveyance would be defeated if there was a default on the part of the borrower for this would lead to forfeiture of his interest in the property.  Through or reinventing the old institution, replacing usury with pledge and refining it further, the practice outlawed by parliament was back with the blessing of the law as no one found contracting wrong.  The rest of it is what we added to under various statutes.

PROVISIONS FOUND IN ITPA, RLA AND OTHERS

The Mohammedan law frowns on the element of charging interest and finds it alien and oppressive and as a direct reaction, their own form that closely associates to the mortgage institution is one supposed to be free from the element of charging interest.  The Byebilwafa which closely appears to be the equivalent of the English law institutions and apart from their aversion to charging interest, what is required is that the borrower is to pledge the property to the lender, and undertake to make good the debt in return the lender is vested with the right to take benefits such rent from property with no requirements to account but to apply such benefits towards offsetting the principal amount owed.  Question of interest accruing does not arise, once that has been done the borrowers obligation ceases and he is entitled to have his property back.

 
 
 

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