Mortgage of lease is not an absolute assignment; no privity of estate arises with the lessor.

A mortgage of a lease under Indian law transfers only a security interest and does not operate as an absolute assignment of the leasehold. The mortgagor retains a continuing legal interest, including the statutory right of redemption, so the whole interest does not pass to the mortgagee. Section 58(e) describes one form of mortgage but does not convert it into a transfer in substance. Accordingly, a mortgagee of a lease does not become an assignee by privity of estate with the lessor and is not liable for the lease burdens on that basis.

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Issues: Whether a mortgage of a lease under the Transfer of Property Act constitutes an absolute assignment so as to create privity of estate between the lessor and the mortgagee, and thereby make the mortgagee liable for the burdens of the lease.

Analysis: Under Indian law, a mortgage transfers only an interest in specific immovable property. The Act recognizes the mortgagor's continuing legal right of redemption and also contemplates second mortgages and transfer of that right. Unlike English law before 1925, Indian law does not proceed on a distinction between legal and equitable estates in this context. Section 58(e) describes the form of an English mortgage, but it does not convert the transaction into an absolute transfer in substance. The mortgagor retains a legal interest subject to the statutory right of redemption, so the whole interest does not pass to the mortgagee. Accordingly, a mortgagee of a lease does not become an assignee of the leasehold interest by privity of estate merely because the mortgage takes the form of an English mortgage or any other form under section 58.

Conclusion: A mortgage of a lease under Indian law is not an absolute assignment and does not create privity of estate between the lessor and the mortgagee; the mortgagee is not liable for the lease burdens on that basis.

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