Usufractuary mortgage is a special type of mortgage where the mortgagor delivers possession, either expressly or by implication, and binds himself to deliver possession of the mortgaged property to the mortgagee. He authorizes him to retain such possession until payment of the mortgage money. The mortgagee is also authorized to receive the rents and profits accruing from the property and to appropriate it towards interest or in payment of the mortgage money, or partly for interest or partly in payment of the mortgage money. Here the traits are (a) the possession of the mortgaged property is transferred to the mortgagee(b) he receives the income from the property e.g. rent, profit etc until the repayment of the loan(c) the title deeds remain with the owner. Where the mortgagor delivers possession or expressly or by implication binds himself to deliver possession of the mortgaged property to the mortgagee, and authorizes him to retain such possession until payment of the mortgage-money, and to receive the rents and profits accruing from the property or any part of such rent and profits and to appropriate the same in lieu of interest, or in payment of the mortgage-money, or partly in lieu of interest or partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee. ….. [Section 58(d) of the Transfer of Property Act, 1882]
According to section 58(d) of the Transfer of Property Act, where the mortgagor delivers posses-sion of the mortgaged property to the mortgagee and authorizes him to retain such possession until pay¬ment of the mortgage money and to receive the rents and profits accruing from the property in lieu of in¬terest or in payment of mortgage money, or partly in lieu of interest and partly in lieu of mortgage money, the transaction is called a usufructuary mort¬gage and the mortgagee a usufructuary mortgagee. The very definition of the expression "usufructuary mortgage" as given in section 58(d) of the Transfer of Property Act indicates that the mortgagor is personally liable for payment of the mortgage debt. If such an obligation exists in a transaction of mortgage, the mortgage would be either a simple mortgage, an English mortgage, a mortgage by deposit of title deeds or an anomalous mortgage. In all such cases, there must be an obligation by the mortgagor to pay the mortgage debt personally; but if no obligation is created, the mortgage, without any doubt, would be a usufructuary mortgage. ….. [Khushi Mohd. vs. Sultan Ali PLD 1962 (WP) Lahore 961]
"Complete usufructuary mortgage" means a transfer by a tenant of the right of possession in any land for the pur¬pose of securing the payment of money or the return of grain advanced or to be advanced by way of loan upon the condition that the loan, with all interest thereon, shall be deemed to be extinguished by the profits arising from the land dur¬ing the period of the mortgage. ….. [Section 2(6) of the State Acquisition and Tenancy Act, 1950 (E. B. Act XXII of 1951)]
The present law regarding usufructuary was enacted to protect the helpless raiyat.
The legislature in section 95 provided that the raiyat shall not enter into any form of usufructuary mortgage other than the complete usufructuary mortgage. The legislature also prohibited a contract of out and out sale with a clause of reconveyance and by a deeming clause had made such transaction as complete usufructuary mortgage. In other words, in Bangladesh a raiyat cannot enter into any other transaction of his raiyat holding except a complete usufructuary mortgage. ….. [Bangladesh vs. Him Abdul Gani Biswas (1980) 32 DLR (AD) 233]
See Sections 95, 95A of the State Acquisition and Tenancy Act, 1950 (E.B. Act XXII of 1951).