Section 69 of Transfer Of Property Act

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISHAKHAPATNAM, ANDHRA PRADESH

SUBJECT

TRANSFER OF PROPERTY ACT

NAME OF FACULTY

PROF. P.J. NAIDU

SUBMITTED BY

AMAN DWIVEDI

IV SEMESTER

18LLBOO8

SECTION- A

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TABLE OF CONTENTS

ABSTRACT 03

1. INTRODUCTION 05

2. MORTGAGEE’S POWER TO SELL 09

3. Mortgagee’s Duty 12

4. Who may Exercise the Power of Sale 17

5. Power of Sale without Intervention of Court 18

6. Conditions of Exercise of Power 21

7. Mortgagee’s Power of Sale and Mortgagor’s Fundamental 24

Right
8. Relevant Case Law 26
9. BIBLIOGRAPHY

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 ABSTRACT

Section 69(1)(a)

The first case in which the mortgagee can have the power to sell is mentioned in clause (a) of
sub-section (1) of Section 69 of the Transfer of Property Act, 1882. It lays down the following
conditions for the acquisition of the power, namely: (1) that the mortgage must be an English
mortgage, as defined in Section 58(e) of the Transfer of Property Act, 1882, and (2) neither the
mortgagor nor the mortgagee must be-

(i) a Hindu, Mohammedan or Buddhist, or

(ii) a member of any other race, sect, tribe, or class from time to time specified in this behalf by
the State Government in the Official Gazette.

The power of sale is inherent in the mortgagee, if Conditions (i) and (ii) mentioned above are
satisfied. Thus it can be exercised where an English mortgage is executed by a company, which
can be said to have no religion In L.V. Apte v. R.G.N. Price 1the A.P. High Court applied Section
69 to an English mortgage between a company and trustees for debenture-holders, some of the
trustees being Hindus.

Section 69(1)(a) is confined only to a select sect of mortgagors and mortgagees who do not
belong to the majority communities in India. This section is taken advantage of by corporate
bodies who are not natural persons since such bodies are not deemed to belong to any religion.
As far as individuals are concerned, this section can be adopted if both the mortgagor and
mortgagee do not belong to the religion, race, sect, tribe or class which are excluded from the
purview of Section 69(1)(a).

If the conditions in Section 69(1)(a) and Section 69(2) are complied with, mortgagee's power of
sale arises suo motu.

It is opined that Section 69(1)(a) is outdated in the present circumstances since the stipulations
cannot be applied to the commercial transactions like mortgages, in letter and spirit. No
1
AIR 1962 AP 274

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community can be compelled to exclude themselves from a particular commercial venture as it
would affect their constitutional rights.

Sections 69(1)(b) and 69(1)(c)

The words "expressly conferred" in clauses (b) and (c) indicate that the inherent power available
under clause (a) is not available under clauses (b) and (c).

To bring a case under Section 69(1)(b), it is necessary to establish that

(i) a power of sale without the intervention of the court is expressly conferred on the mortgagee
by the mortgage deed, and

(ii) the mortgagee is Government. This clause is applicable only where the mortgagee is the
Government and does not extend to any other person. It applies both to the State Governments
and the Central Government.

Section 69(1)(c) requires that

(i) power of sale without the intervention of the court must have expressly been conferred on the
mortgagee by the mortgage deed, and

(ii) the mortgaged property, or any part thereof, must, on the date of the execution of the
mortgage deed, have been situate within the towns of Calcutta, Madras, Bombay or in any other
town, or area, which the State Government may, by notification in the Official Gazette, specify
in this behalf.

It is observed that the three cases mentioned in clauses (a), (b) and (c) of sub-section (1) of
Section 69 of the Transfer of Property Act are independent and mutually exclusive. Clause (a)
applies only where the mortgage is an English mortgage and the parties do not belong to certain
religions, or sects, etc. Clause (b) applies to cases where the mortgagee is the Government.
Under clauses (a) and (b), it is not necessary that the property mortgaged should be situated in

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any particular place. It may be situated in any part of India. But an essential condition of clause
(c) is that the mortgaged property must be situated within any of the towns or area, specified in
the clause.

INTRODUCTION
The power of the mortgagee to sell without intervention of the court, before the incorporation of
such right under Section 69 of the Transfer of Property Act, 1882, was a subject-matter of
controversy and divergent views.

This power of sale, a feature of the English mortgage was originally confined to Englishmen or
to Indian residents in the Presidency Towns who were conversant with the forms of English
mortgage and English law and procedure as administered in the Presidency Towns. In the
mofussil, prior to the Transfer of Property Act, there were certain regulations governing the law
of mortgages between the parties who were not Europeans. Those regulations did not empower
the mortgagee to effect sale of the mortgaged property without the intervention of the court.

Section 69 of the Transfer of Property Act, 1882, was modelled on the English Conveyancing
Act, 1881 and the English Law of Property Act, 1925. Section 69 was later remodelled by
amending Act 20 of 1929 drawing the principles from the English law.

Section 69 of the Transfer of Property Act, 1882 contains five sub-sections. Sub-sections (1) and
(2) as detailed hereunder, deal with the circumstances under which the mortgagee's right to
exercise the power of sale without the intervention of the court arises. Sub-sections (3) and (4)
respectively dwell on the title of the purchaser from the mortgagee and the manner of
deployment of sale proceeds of the mortgaged property by the mortgagee, his duties and
responsibilities. Sub-section (5) states that nothing in this section applies to powers conferred
before the first day of July, 1882.

The right under Section 69 is as much and as full a right as the right of redemption of the
mortgagor. The mortgagee is, in no sense, a trustee for the mortgagor in the matter of the power
of sale; as he holds it for protection of his interest and for his benefit. The mortgagee is not
debarred from exercising the power of sale, even though the mortgagor files a suit for
redemption. So long as the mortgage money is not paid or validly tendered, the mortgagee with

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full knowledge of a pending suit for redemption and even to defeat the suit can enforce his
power of sale under this section.

While clauses (b) and (c) of sub-section (1) require that power of sale without intervention of the
court must be expressly conferred on the mortgagee by the mortgage deed, no such conditions
need be fulfilled, where the mortgage is an English mortgage and neither of the parties is Hindu,
Mohammedan or Buddhist or any sect, race etc., as stipulated under clause (a) of sub-section (1).

Power of sale without intervention of court

The words "power of sale" refer to a clause expressly included in the mortgage deed. They mean
conveyancing. The expression has not been defined in the Act. It includes all steps which are
necessary to be taken in connection with a sale. The law permits the greatest freedom of contract,
unless it is expressly taken away. If any party contends that a particular clause restricts, in any
way, the power of parties to enter into a contract, the burden rests on him to show that the words
prevent an agreement between the parties.

The power of sale, under Section 69, can be exercised only in the three cases mentioned in
clauses (a), (b) and (c) of sub-section (1). The situation of the property is immaterial in cases
falling within clauses (a) and (b).

A mortgagee has no right of sale if there is no default in payment of the mortgage money. There
can be default in payment of mortgage money only after it has become due, and not before. In
cases, where no time is fixed for payment of the mortgage money, there must be a demand for
payment before it can be said that the mortgagor has made a default in payment of the mortgage
money. It has been held in Purasawalkam Hindu Janopakara Saswatha Nidhi Ltd. v. Kuddus
Sahib2 that where the amount due for principal is not repayable at any particular date, nor is
anything stated as to when it is to be repaid, there can be no default in the payment of the
principal sum due until there is a demand made for the money.

Conditions for exercise of power

2
AIR 1926 Mad 841

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Section 69(2)(a) and Section 69(2)(b) specify the conditions for exercise of the power. These
conditions are imperative and cannot be varied by an agreement between the parties. The power
to exercise the right of sale arises when:

(a) notice in writing requiring payment of the principal money has been served on the mortgagor,
or on one of several mortgagors, and

(b) default has been made in payment of the principal money, or of part thereof, and

(c) such default has continued for three months after such service; or

(ii) some interest under the mortgage amounting at least to five hundred rupees is (a) in arrear,
and (b) remains unpaid for three months after becoming due.

Conditions (i) and (ii) are in the alternative. It is sufficient if any one of them is fulfilled.

The power of sale under Section 69(1) can be exercised by the mortgagee only when the
conditions under Section 69(2) are fulfilled.

No notice is necessary when default is made for the payment of interest. It is sufficient that
interest under the mortgage amounting at least to five hundred rupees is in arrear and unpaid for
three months after becoming due.

Notice cannot be waived

The notice required by Section 69(2)(a) is not only necessary but is imperative and even the
period of three months cannot be curtailed by agreement of the parties.

The Supreme Court in Narandas Karsondas v. S.A. Kamtam  3held that the conferment of power
on mortgagee to sell without intervention of the court in a mortgage deed by itself will not
deprive the mortgagor of his right of redemption. The equity of redemption is not extinguished
by mere contract for sale. Therefore, until sale is complete by registration the mortgagor does not
lose his right of redemption. In view of the fact that only on execution of conveyance ownership
passes from one party to another, it cannot be said that the mortgagor lost the right of redemption
just because the property was put to auction. The mortgagor has a right to redeem unless the sale

3
(1977) 3 SCC 247

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of property was complete by registration in accordance with the provisions of the Registration
Act.

Section 69(1)(a) of the Transfer of Property Act, 1882 unduly excludes the majority
communities in India from exercising the power of sale available for an English mortgagee. This
section appears to have been enacted only for the transactions between mortgagors and
mortgagees who are English people or people of English origin.

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 MORTGAGEE’S POWER TO SELL

The power of the mortgagee to sell without intervention of the court, before the incorporation of
such right under section 69 of the Transfer of Property Act, 1882, was a subject - matter of
-controversy and divergent views.

In Venkata Varada v Venkata4, the Privy Council negatived the power of sale, not on the ground
that it was invalid but on the ground that it was of a penal nature. The power of sale in favour of
the mortgagee and its validity in this country appear to have been, for the first time, raised before
the late Sudder Dewanny Adalat of Calcutta in the year 1847. There the judges were
unanimously of opinion that a sale by the mortgagee under his power would not pass a valid title
to the purchaser.

In Bhowani Charon Mitter v Joykissen Mitter5, the Court observed with reference to the power
of sale: “This court has only to declare such a condition legal, and in the course of a short time
not a mortgage - bond would be without it. The mortgagee would then sell the debtor’s property
to suit his own time, and in such manner with such publicity and formalities as he thought
proper. Fraud, it is to be feared, would frequently accompany the transfers, and the property fall
into the hands of the mortgagee, or some of his connections even (as in this case it is alleged the
purchaser is the son - in - law of the mortgagee) at an inadequate price, leaving the lender at
liberty still to pursue the borrower for the balance that may remain after the sale”. Thus, in the
situation that prevailed at the time of the consideration of the legislation on transfer of property,
inter alia, by way of security, justifiable apprehension was expressed in extending to the
mortgagee in India all the powers which a mortgagee in England was allowed. Particularly, this
was felt with reference to giving to the mortgagee the power of sale without the intervention of
the court. The original provision in the Bill conferring on the mortgagees the power to sell the
security without the intervention of the court was vehemently opposed before the Select
Committee.

The power of sale without intervention of the court, which is a feature of the English mortgage
was originally confined to Englishmen or to Indian residents in the Presidency towns who were
conversant with the forms of English mortgage and forms of English Law and procedure as
4
(1875) 23 W.R. (P.C)
5
(1847) S.D.A. 354

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administered in the Presidency towns. In the mofussil, prior to the Transfer of Property Act,
there were certain regulations governing the law of mortgages between the parties who were not
Europeans. Those regulations did not empower to effect sale of the mortgaged property without
the intervention of the court.

Section 69 of the Transfer of Property Act, 1882, dealing with mortgagee’s, power of sale, was
modelled on the English Conveyancing Act, 1881 and the English Law of Property Act 1925.
Section 69 was remodeled by the Amending Act 20 of 1929 drawing the principles from the
English Law.

It is, therefore, apt to trace the principles and statute of English Law on the power of mortgagee
to sell the mortgaged property.

Mortgagee’s Power of Sale in English Law

In English Law, until the end of the eighteenth century, a mortgage of land could not be realised
except through the tedious and expensivemedium of proceedings in Chancery. Attempts were
occasionally made to give the mortgagee power to sell, but such attempts, perhaps owing to a
doubt whether the power would infringe the rule concerning the clog on the equity of
redemption, were not common. In the first years of the nineteenthcentury more attention was
paid to the possibility of realising mortgages out of court through powers.

The legality of powers of sale was established, and after some doubts about the need for the
concurrence of the mortgagor in the sale and some further experiments with trusts, express
powers of sale became a regular feature of every mortgage deed5. Since the ordinary form of
these express powers adequately protected the mortgagor6, they were a legitimate improvement
of the creditor’s remedies for realising his security. At the same time the need to protect the
interests of both parties meant the insertion of a very elaborately drawn clause until the
legislature introduced a statutory power of sale satisfactory to creditors.

Lord Cranworth’s Act, 1860

This Act largely failed because the power of sale contained in it was less satisfactory to creditors
than the usual express power and did not induce them to omit the express power. The Act was

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repealed by the Conveyancing Act, 1881. Even then it can only be of importance in the
exceptional case when the mortgage did not contain an express power.

The Power of Sale under the Law of Property Act, 1925

The statutory power of sale in the Conveyancing Act, 1881, was satisfactory to creditors and led
to the omission of express power; the Act has, however, been repealed, the relevant provisions
being replaced in the Law of Property Act, 1925. The power of sale contained in the 1925 - as in
the 1881 Act is modelled on the express power of sale in common use before 1882, and is so
adequate that the statutory power is almost invariably relied on. It is introduced into all
mortgages under seal created after 1881 and an express power is only found in mortgages made
only by deed when there is some special reason for departing from the statutory power.

Legal Mortgagee and Power of Sale

The relevant power of sale is now to be found in the Law of Property Act, 1925. Section 101 (1)
deals with when the power arises and provides that:

“A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the
following powers, to the like extent as if they had been in terms conferred by the mortgage deed,
but not further (namely) :

(i) A power, when the mortgage money has become due, to sell, or to concur with any other
person in selling, the property, or any part thereof, either subject to prior charges or not, and
either together or in lots by public auction or by private contract, subject to such conditions
respecting title, or evidence of title, or other matter, as the mortgagee thinks fit, with power to
vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to
resell, without being answerable for any loss occasioned thereby;

This power is ample; the sale may be of the whole property or only of a part; it may be by public
auction or private contract, and the wording of the Act does not mean that the property must first
have been put up for auction before the mortgagee can proceed to sell by private contract. The
mortgagee may vary or cancel a sale, and an ineffectual attempt to sell does not affect his power
to enter into a new contract for sale.

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Where the property is subject to a right of pre-emption binding on the mortgagee, there is
nothing more the mortgagee can do than offer theproperty to the person with the benefit of the
right.

Mortgagee’s Duty

The power of sale is given to the mortgagee for his own benefit, to enable him the better to
realise his debt. The court may interfere with the exercise of the power at the instance of those
interested in the proceeds of sale, but the court will not interfere merely to prevent its exercise
contrary to the wishes of the mortgagor, or even (except on terms of payment of the mortgage
debt), it has been said, because the mortgagee is seeking some collateral object and not merely
the payment of his debt. For the mortgagee is not the trustee of the power for the mortgagor, and
the court will not inquire into his motives for exercising it. So the mortgagor may consult his
own convenience as regards the time of the sale, subject to his duty to obtain the best price
reasonably obtainable. While the mortgagee may look to his own interests, he must pay some
regards to the interests of the mortgagor. "Where their interests conflict, he is not entitled to act
in a manner which sacrifices the interests of the mortgagor.

The duty of the mortgagee in respect of the sale itself was, formerly, generally put on the basis of
good faith alone. There were dicta that something more was required of the selling mortgagee
besides absence of bad faith, namely that he was also under a duty to take reasonable care to
obtain whatever was the true market value of the mortgaged property atthe moment he chose to
sell it.

There has been a certain amount of discussion about whether the duty to act reasonably is just
part of the duty to act in good faith but the important message is that the courts are now applying
the "Neighbour Principle" found elsewhere in the law and are seeking to give the mortgagor
rather more protection than was formerly the case. This need not cause great alarm amongst
mortgagees who seek to exercise their powers conscientiously. As long as they take reasonable
steps to ascertain the value of the property and to expose it to the market and generally act in the
way a prudent vendor would who was selling on his own behalf they are not going to suffer.
There has to be some exposure for a mortgagee in agreeing to a "Crash Sale" and the mortgagee
may well have to make out a case for doing so but there is certainly no obligation to actually

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hold back and wait for a rising market24 or to put up the property for auction. Similarly there is
no obligation to keep the mortgagor advised of the progress of the sale although failure to do so
may suggest a lack of good faith.

In Standard Chartered Bank v Walked6, Lord Denning

observed, "If a mortgagee enters into possession and realises a mortgaged property, it is his duty
to use reasonable care to obtain the best possible price which the circumstances of the case
permit. He owes this duty not only to. himself to clear off as much of the debt as he can, but also
to the mortgagor so as to reduce the balance owing as much as possible, and also to the guarantor
so that he is made liable for as little as possible on the guarantee. This duty is only a particular
application of the general duty of care to your neighbour which was stated by Lord Atkin in
Donoghue v Stevenson7. The mortgagor and the guarantor are clearly in very close proximity to
those who conduct the sale. The duty of care is owing to them if not to the general body of
creditors of the mortgagor. There are several dicta to the effect that the mortgagee can choose his
own time for the sale, but I do not think this means that he can sell at the worst possible time. It
is at least arguable that, in choosing the time, he must exercise a reasonable degree of care".

The Privy Council has, however, held in China and South Sea Bank Ltd v Tan Soon Gin 8that
the mortgagee can "decide in his own interest if and when he should sell".

Before starting to sell the mortgaged property, it is clearly essential to verify that the power of sale has
actually arisen. Then the branch will send a letter to the borrower by registered post formally
demanding repayment of the quoted amount and stating that, in the event of default, the bank will
exercise its legal remedies. If this letter has no effect, the power of sale will be exercisable automatically
at the expiration of the period of notice set out in the mortgage, and further reference need not be
made to the mortgagor.

To avoid difficulties, it is usual for an equitable mortgage to contain some device which will
enable the mortgagee to convey the legal estate. Two conveyancing devices are commonly
employed to enable the mortgagee to deal with the legal estate.

6
[1982] 1 WLR 1410, CA
7
[1932] AC 562
8
[1990] 1 AC 536 at 545 D, PC

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1. Power of Attorney

A power of attorney might be granted to the mortgagee empowering the mortgagee to convey the
legal estate which remains vested, until sale, in the mortgagor. Such a power is irrevocable and is
not revoked by the death, incapacity or bankruptcy of the mortgagor, under Section 4 (1) of the
Powers of Attorney Act, 1971. This power is given to secure the proprietary interest of the donee
of the power. On enforcing the security the mortgagee sells the legal estate and conveys it by
using the power of attorney.

2. Declaration of Trust

A clause is inserted in the mortgage^whereby the mortgagor declares that he holds the legal
estate on trust for the mortgagee31, and authorizes the mortgagee to appoint himself or his
nominee as trustee in place of the mortgagor. The instrument appointing the new trustee will
divest the mortgagor of the legal estate and vest it in the new trustee who could quite easily be
the mortgagee or a nominee for the mortgagee. This will enable a conveyance of the legal estate
to the purchaser to take place. Where the mortgage is not made by deed or does not contain one
or both of these devices the mortgagee will need an order from the Court directing a sale under
Section 91 (2) of the Law of Property Act, 1925.

Mortgagee’s Power of Sale in the American Law

The Common - Law courts treated the mortgage as a conveyance of real estate which was to be
defeated by the happening of a stated event - the payment of the debt; and on the failure of the
occurrence of the event, the conveyance became absolute - that is, the mortgagee became the
unconditional owner of the real estate. The courts of equity treated the mortgage as security for
the payment of a debt. They recognised the mortgagee as the title owner of the land, but held that
the mortgagor was the equitable owner - that is, was entitled to the possession of the real estate
and to all the rents and profits arising thereform - and that the mortgagor’s right to pay the debt
and redeem the mortgaged real estate was not cut off until the mortgage was foreclosed and a
decree of foreclosure was entered by the court. Foreclosure by exercise of power of sale was, in
its inception, based on a grant included in the mortgage granting to the mortgagee the power to
sell (a special type of right) the mortgaged property if the mortgagor defaulted in the
performance of his duties under the mortgage.

The courts have generally recognised the enforceability of a power of sale included in a
mortgage. That is, foreclosure by exercise of power of sale must be expressly conferred in the
deed so that it becomes enforceable.

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In American Law, over the years a costly and complicated system of equitable foreclosure had
evolved, partly to give debtor some protection. It’s essential feature was the debtor’s "equity" or
right to redeem his lost land. Draftsmen then invented a clause to undo this "equity". The debtor
would agree, in advance, that if he defaulted, his creditor could sell the land without going to
court. In American Law as a general rule, the formal requirement for a valid mortgage are the
same as those for a valid deed. An equitable mortgage is a promise to execute a legal mortgage
as security for the loan. It is submitted that in English Law legal mortgages must be made by
deed and a power of sale is a statutory right of the mortgagee, whether the deed includes a
"Power of Sale" or not. But the power of sale may be excluded by an express clause in the
mortgage deed; otherwise the power of sale becomes statutory right of the mortgagee. It is also
submitted that an equitable mortgage in English Law be by deed if the mortgagee is to have the
power of sale and other powers conferred on a mortgagee by statute under Section 101 (1) of the
Law of Property Act, 1925. The power of sale must be expressly included in the deed, unlike the
legal mortgage. It is further submitted that the American law is, to some extent, analogous to the
English law in the matter of the mortgagee’s power of sale. In English law, equitable mortgage is
not put on the same footing as legal mortgage; rather is inferior to legal mortgage since equitable
mortgage is only an agreement to create a legal mortgage. It is, therefore, submitted that legal
mortgagee in English law is entitled to exercise the power of sale by statute whether the deed
provides therefore or not, whereas equitable mortgagee acquires power of sale provided the
mortgage is by deed with an express clause conferring power of sale on him.

Mortgagee’s Power of Sale in Indian Law

In Indian Law, the right of the mortgagee to exercise his power of sale without intervention of
the court arises out of Section 69, sub sections 1 and 2 of the Transfer of Property Act, 1882. Sec
69 (1) and Sec 69 (2) of the Transfer of Property Act, 1882 are reproduced as under:

"69 (1) Power of sale when valid : A mortgagee, or any person acting on his behalf, shall, subject
to the provisions of this section have power to sell or concur in selling the mortgaged property or
any part thereof, in default of payment of the mortgage - money, without the intervention of the
court, in the following cases and in no others, namely :

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(a) where a mortgage is an English mortgage, and neither the mortgagor nor the mortgagee is a
Hindu, Muhammadan or Buddhist or a member of any other race, sect, tribe or class from time to
time specified in this behalf by the State Government in the Official Gazette;

(b) where a power of sale without the intervention of the court is expressly conferred on the
mortgagee by the mortgage deed and the mortgagee is the Government.

(c) where a power of sale without the intervention of the court is expressly conferred on the
mortgagee by the mortgage – deed and the mortgaged property or any part thereof was, on the
date of the execution of the mortgage - deed, situated within the towns of Calcutta, Madras,
Bombay or in any other town or area which the State Government may, by notification in the
Official Gazette, specify in this behalf.

69 (2) No such power shall be exercised unless and until _

(a) notice in writing requiring payment of the principal money has been served on the mortgagor,
or on one of several mortgagors, and default has been made in payment of the principal money,
or of part thereof, for three months after such service; or

(b) some interest under the mortgage amounting at least to five hundred rupees is in arrear and
unpaid for three months after becoming due". Section 69 of the Transfer of Property Act, 1882
contains five sub - sections. Sub sections 1 and 2 deal with the circumstances under which the
mortgagee’s right to exercise the power of sale without the intervention of the court arises. Sub
sections 3 and 4 respectively dwell on the title of the purchaser from the mortgagee and the
manner of deployment of sale proceeds of the mortgaged property by the mortgagee, his duties
and responsibilities. Sub - section 5 states that nothing in this section applies to powers conferred
before the first day of July, 1882. It is submitted that sub - sections 1 and 2 of Section 69 of the
Transfer of Property Act, 1882 are only relevant for the purpose of this research since these sub -
sections enunciate the circumstances under which the mortgagee acquires the right of sale
without intervention of the court. Therefore, the analysis is confined to only sub sections 1 and 2
of Section 69 of the Transfer of Property Act, 1882 in this work.

The right of sale of the mortgaged property, without the intervention of the process of court,
which the mortgagee has under Sec 69 of the Transfer of Property Act, 1882, is a statutory right.

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It is as much and as full a right as the right of redemption of the mortgagor. The mortgagee is, in
no sense, a trustee for the mortgagor in the matter of the power of sale; as he holds it for
protection of his interest and for his benefit. The mortgagee is not debarred from exercising the
power of sale, even though the mortgagor files a suit for redemption. So long as the mortgage -
money is not paid or validly tendered the mortgagee with full knowledge of a pending suit for
redemption and even to defeat the suit can enforce his power of sale under this section. It is
submitted that while clauses (b) and (c) of sub-section 1 require that a power of sale without
intervention of the court must be expressly conferred on the mortgagee by the mortgage - deed,
no such conditions need be fulfilled, where the mortgage is an English Mortgage and neither of
the parties is a Hindu, Muhammadan or Buddhist or any sect, race etc as stipulated under the
clause (a) of sub - section 1. It is also submitted that where the mortgage - deed contains a clause
giving the mortgagee the power to sell in case interest falls in arrears but it does not provide that
on such default the mortgagee shall have the right to claim the repayment of the principal, the
mortgagee has no right to sue on the mortgage until the mortgage debt becomes repayable.

Who may Exercise the Power of Sale

The power to sell, or concur in selling, the mortgaged property, without the intervention of the
court, under this section can be exercised only by -

a) a mortgagee, or

b) any person acting on his behalf. The words "any person acting on his behalf' would include an
agent acting on behalf of the mortgagee or mortgagees, provided he is authorised to make the
sale, or concur in selling the mortgaged property. By virtue of Section 13 (2) of the General
Clauses Act, 1897, in all Central Acts, unless there is anything repugnant in the subject or
context words in the singular include plural. Therefore, it is submitted that where the number of
mortgagees is more than one, either all of them, or any person acting on their behalf, has the
power under the section to sell, or concur in selling, the mortgaged property without the
intervention of the court. But the prefix "a" before the word "mortgagee" lends support to the
view, that any one of the mortgagees has power to sell the property, though this runs counter to
the provisions of Section 45 of the Contract Act, 1872 which do apply to mortgage contract. The
principle of the indivisibility of the mortgage, and the principle that all the joint promisees must

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combine to enforce the claim against the promisors, apply in cases of mortgages35. Therefore,
the power to sell, or concur in selling, the mortgaged property, must be exercised by all the
mortgagees conjointly. On the other hand, it may be said that all the mortgagees may not concur
in selling the mortgaged property, as when one of the mortgagees is won over by the mortgagor.
To avoid this mischief, and an inequitable situation, it is reasonable to suppose that the
legislature has deliberately used the expression "a mortgagee", and conferred the power of
making a sale under this section, upon any one of the mortgagees, where there are several.

Power of Sale without Intervention of Court

The words "Power of Sale" refer to a clause expressly included in the mortgage - deed. They
mean conveyancing. The expression has not been defined in the Act. It is a technical expression,
and has the meaning given to it by judicial interpretation. It includes all steps, which are
necessary to be taken in connection with a sale. In order to make the power bad, words must be
pointed out, which render the whole power invalid according to law. The law permits the
greatest freedom of contract, unless it is expressly taken away. If any party contends that a
particular clause restricts, in any way, the power of parties to enter into a contract, the burden
rests on him to show that the words prevent an agreement between the parties.

In default of Payment A mortgagee has no right of sale if there is no default in payment of the
mortgage - money. There can be default in payment of mortgage - money only after it has
become due, and not before. In cases, where no time is fixed for payment of the mortgage -
money, there must be a demand for payment before it can be said that the mortgagor has made a
default in payment of the mortgage - money. It has been held in Purasaivalkam Hindu
Janopakara Sanstha Nidhi Ltd v Kuddus 9that where the amount due for principal is not
repayable at any particular date, nor is anything stated as to when it is to be repaid, there can be
no default in the payment of the principal sum due until there is a demand made for the money.

Mortgage Money

9
AIR 1926 Madras 841 at 844

18 | P a g e
The words "mortgage money" as defined in Section 58 means the principal money and interest of
which payment is secured for the time - being. And when the mortgage - debt is reduced by the
operation of some Relief Act, it is the reduced amount that represents the mortgage - Money.

Section 69 (1) (a)

The first case in which the mortgagee can have the power to sell is mentioned in clause (a) of sub
section 1 of Section 69 of the Transfer of Property Act, 1882. It lays down the following
conditions for the acquisition of the power namely (1) that the mortgage must be an English
mortgage, as defined in Section 58 (e) of the Transfer of Property Act, 1882; and (2) neither the
mortgagor nor the mortgagee must be

a) a Hindu, Muhammadan or Buddhist, or

b) a member of any other race, sect, tribe, or class from time to time specified in this behalf by
the State Government in the Official Gazette. The power of sale is always taken to inhere in the
mortgagee, if conditions (1) and (2) mentioned above are present. Thus it can be exercised where
an English mortgage is executed by a company, which can be said to have no religion as held by
the Andhra Pradesh High Court in L.V. Apte v Price. In this case, the court applied Section 69 to
an English mortgage between a company and trustees for debenture - holders, some of the
trustees being Hindus. It was held in Re Sree Yellamma Cotton Woollen and Silk Mills Co. Ltd
10
by the Mysore (now Karnataka) High Court that the argument that the reference to a mortgagee
as a Hindu, Muhammadan or Buddhist in Section 69 (1) (a) may suggest that the right of private
sale conferred by the section is a right which can be exercised only by a living person and not by
a fictitious person like an incorporated company is not acceptable. The terms "Hindu,
Muhammadan, Buddhist" are used to describe a class which is excluded from the larger class of
mortgagees and the term "mortgagee" is defined in Section 58 as merely the transferee
mentioned in the main definition of a mortgage as a transferee of interest in a specific
immovable property for the purpose of securing the payment of money advanced etc. The term is
large enough to include all persons, living or fictitious, capable of bearing rights and liabilities.
Sec 69 (1) (a) is confined only to a select sect of mortgagors and mortgagees who are not the
majority communities in India. This section is taken advantage of by corporate bodies who are

10
AIR 1969 Mysore 280 at 288

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not natural persons since such bodies are not deemed to belong to any religion. As far as
individuals are concerned this section can be adopted if both the mortgagor and mortgagee
belong to the religion of Christianity which is not excluded from the purview of Section 69 (1)
(a). Power of sale under section 69 (1) (a) of the Transfer of Property Act, 1882 is inherent and
statutory, and the mortgage deed does not require a specific clause of power of sale being
conferred on the mortgagee. If the conditions in Sec 69 (1) (a) and sec 69 (2) are complied with,
mortgagee’s power of sale automatically arises. It is submitted that Sec 69 (i) (a) is out - dated in
the present circumstances since the stipulations cannot be applied to the commercial transactions
like mortgages, in letter and spirit. No community can be compelled to exclude themselves from
a particular commercial venture as it would affect their constitutional rights.

Section 69 (1) (b) & 69 (1) (c)

The words "expressly conferred" in the clauses (b) and (c) indicate that the inherent power
available under clause (a) is not available under clauses (b) and (c). The essential condition for
mortgagee’s power of sale without intervention of the court under the clauses (b) and (c) is that
the power should be expressly conferred on the mortgagee by the mortgage - deed. In Mata
Prasad v Kunnon Devi 11it was held that this section does not purport to confer any power upon
the mortgagees, but as its wording clearly shows, it is intended (when a power is actually
conferred by a mortgage - deed) to prescribe the procedure, to curtail unfettered exercise of
power; that the provision is not generally applicable to all mortgagees. In this case, it was held
that a provision in the mortgage - deed to the effect that the mortgagee, his heirs, representatives
and assigns shall have all the rights, powers, remedies and privileges conferred upon the
mortgagee by the Transfer of Property Act, does not confer on the mortgagee the power of sale
out of the court. This decision makes it clear that the section itself does not confer any power to
sell without the intervention of the court upon the mortgagee, which must be expressly conferred
on the mortgagee by the mortgage - deed, as has been expressly stated in clauses (b) and (c) of
sub - section 1 of Section 69 of the Transfer of Property Act, 1882.

To bring a case under sec 69 (1) (b), it is necessary to establish that

11
AIR 1928 Rangoon 128

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 1) a power of sale without the intervention of the court is expressly conferred on the
mortgagee by the mortgage – deed and 2)
2) the mortgagee is Government. This clause is applicable only where the mortgagee is the
Government and does not extend to any other person. It applies both to State
Governments and the Central Government. Another case in which a mortgagee has
power to sell the mortgaged property without the intervention of the court is mentioned in
section 69 (1) (c). This clause requires that a) a power of sale without the intervention of
the court must have expressly been conferred on the mortgagee by the mortgage - deed,
and b) the mortgaged property, or any part thereof, must, on the date of the execution of
the mortgage - deed, have been situate within the towns of Calcutta, Madras, Bombay or
in any other town, or area, which the State Government may, by notification in the
official Gazette, specify in this behalf. It is submitted that the three cases mentioned in
clauses (a), (b) and (c) of sub - section 1 of section 69 of the Transfer of Property Act are
independent and mutually exclusive. Clause (a) applies only where the mortgage is an
English mortgage and the parties do not belong to certain religions, or sects, etc. Clause
(b) applies only to cases where the mortgagee is the Government. Under clauses (a) and
(b), it is not necessary that the property mortgaged should be situated in any particular
place. It may be situated in any part of India. But an essential condition of clause (c) is
that the mortgaged property must be situated within any of the towns or area, specified in
the clause.

Conditions of Exercise of Power

Section 69 (2) (a) and Section 69 (2) (b) specify the conditions for exercise of the power. These
conditions are imperative and cannot be varied by an agreement between the parties. The power
to exercise the right of sale arises when 1) (a) notice in requiring payment of the principal money
has been served on the mortgagor, or on one of several mortgagors, and (b) default has been
made in payment of the principal money, or of part thereof, and (c) such default has continued
for three months after such service; Or 2) some interest under the mortgage amounting at least to
five hundred rupees, is a) in arrear and b) remains unpaid for three months after becoming due.
Conditions (1) and (2) are in the alternative. It is sufficient if any one of them is fulfilled. It is not
necessary that both of them must be fulfilled to enable the mortgagee to exercise the power of

21 | P a g e
sale without the intervention of the court. It is submitted that the power of sale under Sec 69 (1)
can be exercised by the mortgagee only when the conditions under Section 69 (2) are fulfilled.
Where a period for payment of mortgage - money is not fixed, there can be no default until
demand is made. It was held by the Madras High Court in Purasawalkam Hindu Janopakara
Sanstha Nidhi Ltd v Kuddus that where the amount due for principal is not repayable at any
particular date, nor is anything stated as to when it is to be repaid, then until there is a demand
made for the money, there can be no default in payment of the principal sum due. No notice is
necessary when default is made for the payment of interest. It is sufficient that interest under the
mortgage amounting at least to five hundred rupees is in arrear and unpaid for three months after
becoming due. If the power of sale in the mortgage - deed is limited to default in payment of
principal and does not extend to default in payment of interest, the mortgagee cannot sell for
default. Default in payment of interest for three months does not amount to default of payment of
mortgage – money. The Supreme Court in R.Santhankumar Nadar v Indian Bank Ltd 12held
that the requisite notice may be given to the mortgagor, or to one of several mortgagors. Where
there is a number of them, the mortgagor who is given the notice is constituted the agent of the
other mortgagor to receive the same, in the absence of fraud or collusion or a provision in the
mortgage - deed that notice shall be given to all of them or their assigns.

Notice cannot be Waived

The notice required by Section 69 (2) (a) is not only necessary, but is imperative, and even the
period of three months cannot be curtailed by agreement of the parties.

Instalments

If the mortgage - money is payable by instalments, the power of sale accrues when an instalment
of mortgage - money becomes due.

Arrears of Interest

Notice to the mortgagor is not necessary before the mortgagee exercises his power of sale in a
case where interest amounting at least to five hundred rupees or more is in arrear and remains
unpaid for three months after becoming due50. The Madras High Court in Yuvarajan v
12
AIR 1967 SC 1296

22 | P a g e
 13
Mylapore Hindu Permanent Fund Ltd and others held that the right of the mortgagor to
redeem the mortgage comes to an end once the power of sale has been exercised. If the purchaser
has paid the money and the mortgagee has received it, the mortgage stands discharged, and
thereafter there is nothing to redeem. For this purpose, it is immaterial that no conveyance in
favour of the purchaser has been executed in respect of the property mortgaged and sold at the
private sale. In the present case, the purchaser had paid the money and had also obtained a
conveyance. Therefore, the right of redemption the plaintiffs claimed stood, in any case
extinguished. The proviso as to interest is designed to secure punctual payment during the term
of the mortgage; and it has the effect of overruling the Privy Council decision that a power of
sale in default of interest is invalid as a penalty.

Service of Notice

Notice may be served either personally upon the mortgagor, or delivered or left at the last place
of abode of the mortgagor if his present whereabouts are unknown and cannot be ascertained53.
The Supreme Court in Narandas Karsondas v S.A.Kamtam 14held that the conferment of power
on mortgagee to sell without intervention of the court in a mortgage deed by itself will not
deprive the mortgagor of his right to redemption. The extinction of the right of redemption has to
be subsequent to the deed conferring such power. The right of redemption is not extinguished at
the expiry of the period. The equity of redemption is not extinguished by mere contract for sale.
Therefore, until sale is complete by registration the mortgagor does not lose his right of
redemption. In view of the fact that only on execution of conveyance ownership passes from one
party to another, it cannot be said that the mortgagor lost the right of redemption just because the
property was put to auction. The mortgagor has a right to redeem unless the sale of property was
complete by registration in accordance with the provisions of the Registration Act. The Mysore
(now Karnataka) High Court in State of Mysore v Basappa Naidu 15held that Section 69 of the
Transfer of Property Act, 1882 does not, by itself, purport to confer any power upon the
13
(1975) 2 MU 414
14
AIR 1977 SC 774
15
(1968) 1 Mys LJ 69 (80) (DB)

23 | P a g e
mortgagee; it only prescribes the procedure for the exercise of the power when it is conferred by
the mortgage deed.

Mortgagee’s Power of Sale and Mortgagor’s Fundamental Right

It will be seen that the power of the mortgagee to sell under Section 69 of the Transfer of
Property Act, 1882 coming from England got extended to this country because it is absolutely
necessary for promoting quick credit. The Madras High Court, while dealing with the
mortgagee’s power of sale and mortgagor’s fundamental right, observed in V.Narasimhachariar
v Egmore Benefit Society, 3rd Branch Ltd 16as follows : "The power of sale is the subject -
matter of a freely negotiated contract between the mortgagor and the mortgagee. The State only
provides a particular prdfieiure in the case of mortgagees in Presidency towns and when the
freely negotiated contract is not kept up what happens is the mortgagees who are citizens of the
Union of India like the mortgagors, only come to enforce their rights under the contract entered
into between them. Article 14 of the Constitution can have no application. There is no
discrimination looked at from any point of view between the persons similarly situated or
circumstanced and there is no denial of equal protection. Therefore, Section 69 of the Transfer of
Property Act, 1882 does not offend the equal protection of law guaranteed under Article 14 of
the Constitution. The contention that the power of the mortgagee to sell offends Article 19 (1) (f)
of the Constitution has no substance. The ideology behind this right is individualism and private
property. It means that a man is free to acquire any property including means of production
either by inheritance, personal earnings or by other lawful means, to hold it as his own and
dispose of it limited only by the exigencies of public welfare. "Dispose of' means (a) to
determine the fate of, to exercise a power of control over, to fix the condition, employment, etc.,
to direct or assign for a use; (b) to exercise finally one’s power of control over, to pass over into
the control of someone else by selling, to get rid of. "Hold" means to possess the property, to
enjoy the benefits which are ordinarily attached to its ownership. The power of mortgagee to sell
does not in any way interfere with the freedom of the mortgagor to acquire property or dispose
of property or hold property. On the other hand, this is a case of the mortgagor, under the
freedom guaranteed under Article 14, holding property and subject to a freely negotiated contract
by him, acquiring funds thereon providing for the disposal of the property in the event of his not

16
AIR 1955 Madras 135

24 | P a g e
being able to discharge the mortgage in the manner agreed to by him. Therefore, Section 69 of
the Transfer of Property Act, 1882 does not offend Article 19 (1) (f) of the Constitution.

25 | P a g e
 Relevant Case Law

P. Saraswathi Bai vs P.T. Varadarajulu Naicker

on 6 December, 1954

(1956) 1 MLJ 223

Judges: Ramaswami, J.

Facts: To meet certain urgent expenses a registered deed of simple mortgage, dated 6th April,
1949, was executed by respondents 1 and 2, who are members of a joint undivided Hindu family
in respect of their property No. 12, Venkatier Street, Muthialpet, in favour of the petitioner for a
sum of Rs. 11,379-4-6. The mortgage deed confers specifically upon the mortgagee in this
Presidency Town the right of private sale. Inasmuch as the mortgagors had failed to pay interest
even for a single month, the principal and interest were accumulating and the value of house
property was going down in Madras, the mortgagee took steps under Sections 69 and 69-A of the
Transfer of Property Act. The property was brought to sale repeatedly after complying with all
formalities required by Section 69, and Messrs. Murray & Co. were the auctioneers. But, owing
to the obstructive tactics of the mortgagors and their family the property could not be sold for a
proper price. The mortgagee then resorted to proceedings under Section 69-A and by order of
this Court, dated 30th July, 1953, Panchapakesa Ayyar, J., appointed J.R. Alwar Naidu as
receiver under Section 69-A. The mortgagee has filed this application stating that, though she is
entitled to enforce the concurrent right to bring the property to sale by public auction
under Section 69 notwithstanding the appointment of a receiver under Section 69-A, she is
advised in view of the appointment of a receiver by this Court it will be better by way of
abundant caution to obtain leave of this Court before bringing the property to sale by public
auction through the auctioneers, if such leave is considered necessary.

Issue: whether leave of this Court is necessary for the mortgagee to exercise her right of private
sale under Section 69 on account of a receiver being appointed by this Court at the instance of
the mortgagee under Section 69-A of the Transfer of Property Act.

26 | P a g e
Observation: This Section 69-A closely follows Section 109 of the English Law of property Act,
1925. Its provisions are more extensive than those of the Trustees' and Mortgagees 'Powers Act,
1886, in that, firstly, a receiver may now be appointed in respect of the income generally and not
merely of the rents and profits, and secondly, a receiver may now be appointed in respect of "all"
mortgages where there is an express power of sale under Section 69 and not merely in the case of
English mortgages.

Judgement: The court held that As soon as the mortgagee has made default in payment of the
mortgage debt (I)-that is, where a time for payment is fixed, by non-payment on that day; or
where no time is fixed by non-payment on demand-the mortgagee is entitled to pursue any or all
of his remedies against the debtor, or his assets, or the incumbered estate, subject as regards the
appointment of a Receiver and the power of sale to the restrictions imposed by the mortgage
deed, if the powers are conferred by that deed, or by statute, if they are statutory. And contrary to
the general rule, that a person liable to be sued is not to be harassed by a multiplicity of suits, it
was the right of the mortgagee, or other secured creditor, so long as any part of his debt remained
unpaid, to enforce at the same time, and in different Courts, all his legal and equitable remedies.
But nevertheless, after obtaining a judgment nisi for foreclosure, he cannot sell without the leave
of the Court before the judgment is made absolute.

In the result, no leave of this Court is necessary and it is open to the mortgagee to sell the
property out of Court under the powers vested in her under the mortgage deed under Section
69 of the Transfer of Property Act.

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 BIBLIOGRAPHY

WEBSITES

Scconline.com

Heinonline.com

Manupatra.ac.in

BOOKS

Transfer of property act by mulla.

ARTICLES

All about sale and mortgage under transfer of

property act 1882 by Rohan Upadhay.

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