Deed of Mortgage explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
In a mortgage by conditional sale, the borrower appears to sell the property to the lender, but the sale carries a condition: if the money is repaid by a fixed date the sale becomes void (or the property comes back to the borrower), and if it is not repaid the sale becomes absolute. This article gives a specimen deed for a company or an individual borrower, explains the statutory proviso that governs it, and shows how it differs from other mortgages.
The deed must state a sale, the sum advanced, the date for repayment and the condition, all in one document. Under the proviso to section 58(c) of the Transfer of Property Act, 1882, the transaction is not treated as a mortgage unless the condition is embodied in the document that effects or purports to effect the sale. The lender's remedy on default is foreclosure through the court, and the deed is a registrable mortgage instrument signed by the mortgagor and attested by at least two witnesses.
When you need this deed
You use a mortgage by conditional sale when the parties want the lender to hold the property with a title that becomes complete only if the borrower fails to repay by a fixed date. It is used for loans between businesses and individuals, especially where the lender wants a transfer of the title rather than a mere charge. The characteristics are:
- an ostensible sale of specific immovable property;
- a condition either that on default the sale becomes absolute, or that on repayment the sale becomes void or the buyer re-transfers the property to the seller;
- the condition embodied in the same document;
- no personal liability to repay the debt unless the deed separately provides for it.
If your priority is a lender's right to sell rather than foreclose, compare the simple mortgage and the English mortgage deed. Our loan documentation support team can help choose and draft the right form for your facts.
Specimen deed
DEED OF MORTGAGE BY CONDITIONAL SALE This Deed of Mortgage by Conditional Sale is executed on at BETWEEN , (the Mortgagor, which expression includes its successors and permitted assigns, or its heirs, executors, administrators and assigns) AND , (the Mortgagee, which expression includes its successors and permitted assigns, or its heirs, executors, administrators and assigns). RECITALS A. The Mortgagor is the owner of and has good title to the land and building described in the Schedule (the Mortgaged Property). B. The Mortgagor requires a loan of for . The Mortgagee has agreed to advance it on the Mortgagor executing this deed of ostensible sale of the Mortgaged Property on the conditions stated below. NOW THIS DEED WITNESSETH AS FOLLOWS: 1. Advance. The Mortgagor acknowledges receipt of (the Mortgage Money) from the Mortgagee on the execution of this deed. 2. Sale. In consideration of the Mortgage Money, the Mortgagor sells and transfers to the Mortgagee the Mortgaged Property, with all buildings, fixtures, easements and appurtenances, to hold to the Mortgagee on the conditions below, subject to all taxes, rates and dues payable to the Government or local authority. 3. Condition for repayment. If the Mortgagor repays the Mortgage Money on or before , the sale shall be void and the Mortgagee shall re-transfer the Mortgaged Property to the Mortgagor, at the Mortgagor's cost, by a registered deed of reconveyance. 4. Condition on default. If the Mortgagor fails to repay on or before , the sale shall become absolute, subject to the Mortgagor's right of redemption until it is barred by a decree of the competent court as provided by law. 5. Title and encumbrances. The Mortgagor states that it has full right to transfer the Mortgaged Property, which is clear of all encumbrances, charges, claims and litigation. 6. Quiet possession. The Mortgagee may possess and enjoy the Mortgaged Property without interruption by the Mortgagor or any person claiming through the Mortgagor. 7. Outgoings. The Mortgagee may pay taxes, revenue and public charges that the Mortgagor fails to pay and recover the amount from the Mortgagor, with interest at . 8. Further assurance. The Mortgagor shall, at its cost, execute all further documents the Mortgagee reasonably requires to perfect its title. 9. Costs. The costs of stamping and registering this deed and related expenses shall be borne by . IN WITNESS WHEREOF the parties have signed this deed on the date first written above. Signed by the Mortgagor: Signed by the Mortgagee: Witnesses: 1. 2. SCHEDULE: DESCRIPTION OF THE MORTGAGED PROPERTY
Clause-by-clause explanation
| Clause | What it does | Drafting tip |
|---|---|---|
| Parties | Identify mortgagor and mortgagee | For a company, add CIN, registered office and authority to mortgage |
| Recitals | Record ownership, the loan and the purpose | State that the sale is on condition |
| 1 Advance | Acknowledges the money paid | Describe how it was paid |
| 2 Sale | The ostensible transfer | Describe the property exactly as in the Schedule |
| 3 Repayment condition | Makes the sale void on repayment, or requires a re-transfer | This is the proviso condition: it must be in this deed |
| 4 Default condition | Sale becomes absolute on default | The right of redemption continues until barred by a court decree |
| 5 Title | The mortgagor's covenant | Match it to the title search |
| 6 Possession | Whether the lender takes possession | Choose deliberately; possession changes the lender's duties |
| 7 Outgoings | Who pays taxes | Allow the mortgagee to pay and recover |
| 8 Further assurance | Perfects title | Keep it reasonable |
| 9 Costs | Allocates stamp and registration costs | State which party pays |
The law behind it
Section 58(c). A mortgage by conditional sale arises where the mortgagor ostensibly sells the mortgaged property on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or that on payment the sale shall become void, or that on payment the buyer shall transfer the property to the seller. The proviso adds that no such transaction is deemed a mortgage unless the condition is embodied in the document which effects or purports to effect the sale. Read the section with our article on the six kinds of mortgage under section 58.
Section 59. 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. See how a mortgage is made, registration and attestation.
Section 67. In the absence of a contract to the contrary, the mortgagee may, after the mortgage-money is due, obtain from the court a decree that the mortgagor shall be absolutely debarred of the right to redeem (foreclosure) or that the property be sold. A mortgagee by conditional sale may sue for foreclosure but, as such, may not institute a suit for sale. Read the right to foreclosure or sale under section 67.
Stamp duty, registration and execution
The deed is an instrument chargeable with stamp duty. The duty is fixed by the Stamp Act and Schedule of the State where the deed is executed; see stamp duty on a mortgage deed and the State-wise overview. Registration under the Registration Act, 1908 is needed as section 59 provides; our note on compulsory registration under section 17 gives the background.
Execution: the parties sign with two attesting witnesses, a company signs through an authorised person under a board resolution, the deed is stamped as required, presented for registration with identity proofs, and the title deeds are handed to the mortgagee if the deed says so. Where a company creates a charge, the further filings under company law should be checked separately.
Common mistakes
- Putting the repayment condition in a separate letter instead of in the sale deed, so that the transaction does not qualify as a mortgage.
- Describing the property loosely in the Schedule.
- Leaving the repayment date vague.
- Stating that the sale is absolute from the start.
- Forgetting that redemption continues until a decree of foreclosure.
- Using the form for a lender who needs the right to sell, which section 67 does not give to a mortgagee by conditional sale as such.
- Not registering the deed, or not having two attesting witnesses.
- Not matching the company's authority to mortgage with the board resolution.
Need help with mortgage documents?
A conditional-sale deed turns on one drafting point: the condition must be inside the sale document. Our loan documentation support service prepares and reviews mortgage deeds, title checks and the related registration steps.
Key takeaways
- A conditional sale mortgage is an ostensible sale with a condition for repayment or default.
- The condition must be embodied in the same document or it is not a mortgage.
- Foreclosure by court decree is the lender's remedy on default.
- Register the deed with two attesting witnesses; State law fixes stamp duty.
- Redemption continues until barred by decree.
Read next
- English mortgage deed: format
- Usufructuary mortgage deed: format
- Mortgage deed: essential clauses and registration
- Right of the mortgagor to redeem: section 60
Disclaimer: This specimen is a general model for information. Every document must be adapted to its facts and to the law, rules and forms in force when it is signed or filed; stamp duty, registration and court fees depend on the State and the forum. This article is general information, not legal advice; check the official text before acting.