PROPERTY LAW-II NOTES

SALE....................................................................................................................P1-1,16,34 2
Essentials of a Valid Sale............................................................................................................2
DUTIES OF SELLER.................................................................................................................5
RIGHTS OF SELLER.................................................................................................................6
DUTIES OF THE BUYER..........................................................................................................6
RIGHTS OF BUYER..................................................................................................................7
GIFT......................................................................................................................P1-5,20,41 8
ESSENTIALS OF A GIFT..........................................................................................................8
ACTIONABLE CLAIM................................................................................…….P1-51,66 14
Transfer of an actionable claim.................................................................................................14
NOTICE.....................................................................................................................................15
MORTGAGE.....................................................................................................P1-37,46,61 18
KINDS OF MORTGAGE.........................................................................................................18
ESSENTIAL REQUISITES OF A MORTGAGE....................................................................21
RIGHTS AND LIABILITIES OF MORTGAGOR-.................................................................24
RIGHTS AND LIABILITIES OF MORTGAGEE-..................................................................27
LIABILITIES OF MORTGAGEE............................................................................................29
LEASE………………………………………………………………………………P1- 72, P2-6

Rights and Liabilities of Lessor and Lessee………………………………….P1-98

SALE
Sale is defined under the Act as a transfer of ownership1 in exchange for a price paid or
promised or part paid and part promised. As said earlier, an owner has three basic rights over his
property, a right of title, an exclusive right to possess and enjoy the property and an exclusive
right to alienate it. In a sale of property, all these rights are conveyed by the owner with his free
consent2 in favour of the transferee who is called a buyer. No rights remain with the seller, and
the transfer of this totality of rights is called an absolute transfer.

Power of attorney- A power of attorney is not a sale.7 A sale involves transfer of all the rights in
the property in favour of the transferee but a power of attorney simply authorises the grantee to
do certain acts with respect to the property including if the grantor permits an authority to sell the
property.

Difference between sale and hire-purchase- A transaction of a sale is different from a hire-
purchase agreement. A hire purchase agreement may culminate in a sale, but till it does so, there
exists a right in favour of the transferor to rescind the agreement and take back the possession of
his property. Secondly, while payment through instalment is an accepted feature of a hire
purchase agreement, the terms of payment of consideration in a sale are purely dependent upon
the agreement between the parties.

Sale and Exchange- Sale is the transfer of ownership in a property in exchange for a price that is
generally understood as money, but in an exchange there is a transfer of ownership in exchange
for something that is not money. For instance, A, sells a house to B for Rs 90,000. This would be
a sale. But, if A exchanges his house for the land of B, this would be an exchange.

Sale and Lease- In case of a lease, there is a partial transfer and the right of reversion remains
with the lessor, whereas in case of a sale, there must be an absolute transfer of ownership and not
some rights only as in the case of a lease.

Essentials of a Valid Sale

Also see P1, page 2-4

The essential elements of a sale are:

(i) Parties to a sale;

(ii) Subject matter of sale;
(iii) Price;
(iv) Mode of executing a sale.

Parties to a Sale- The parties to a sale are—the transferor who is called a seller, and the
transferee who is referred to as the buyer. A contract of sale must be based on a mutual
agreement between the seller and the buyer.12 The transferor or the seller must be a person
competent to contract, i.e., he must be major and of sound mind, and should not be legally
disqualified to transfer the property. Statutory incompetency refers to an incompetency imposed
under law or a statute.

When a person is declared as an insolvent, his property vests in the official receiver, and he is
incompetent to transfer the same. The seller must be competent to sell the property, as a
purchaser cannot have a better title than what his vender had. Ramdas v Sitabai.13 He should
either be the owner of the property or should have an authority to dispose it. The transferee must
be a person competent to receive a transfer in his favour. He should not be subject to a legal
disqualification. A minor is a competent transferee in a transaction of a sale.’

Subject Matter of a Sale- Section 54 only governs the sale of immovable property. Immovable
property can be tangible or intangible. The property must be sufficiently identified. In Ram
Jiwan Rai v Deoki Nandan Rai,31 the issue was whether the property that was the subject of
transfer was sufficiently identified. The controversy arose as the plot number mentioned in the
documents was incorrect. The court held that as both boundaries and plot number were given in
the sale certificate, a mistake in the plot number must be treated as a mis-description which did
not affect the identity of the property sold. Rather, it was intrinsic evidence in proving that seller
wanted to convey the right and title in the suit property to the buyer.

Consideration- The ordinary rule governing sale is that payment of consideration is

simultaneous with the time when the conveyance is executed by the seller. This rule can be
deviated from in case of an agreement to the contrary by the parties. Price is the essence of the
contract of sale, but the time for payment of it is not the essence of the sale, unless the contract
stipulates so.52 Therefore, it is not mandatory that payment of the price should be at the time of
the execution of the sale. Price can be paid even before, at the time or even subsequent to the
completion of the sale. Adequacy of price is not mandatory. It can be lower68 or higher than the
market value, yet the sale would be valid.

Formalities for Effecting a Sale (Conveyance)- Section 54 lays down a specific method for the
execution of a sale deed with respect to immovable property and completion of sale. Generally
speaking, in a sale, the three requirements of law are that transfer of property by sale must take
place with the help of a validly executed sale deed, by the transferor in writing, is properly
attested, and registered. in case the property is of nominal value, the sale of property can be
completed by a simple delivery of possession of such property. The test is the value of the
property and not the amount of consideration or the price. If the property is worth more than
hundred rupees, but is being sold for less than this value, the modalities of writing, attestation
and registration would be necessary.

Registration- Sale of tangible immovable property of the value of Rs 100 and upwards or in
case of a reversion or other intangible things as aforesaid, can be made only78 in writing. The
deed must be properly attested and should also be registered.79 Since sale of immovable
property becomes complete and effective only when it stands registered in a written instrument,
there may be issues for determination of the market value of the property where the land also has
a building over it, but the owner of the land does not own the building. Both the title in the land
and the building over the land are separable and vest in two different persons. In Ashok Kumar v
Chief Controlling Revenue Authority,90 the owner sold the land. The land had a hotel
constructed over it and the owner of the land was not the owner of this hotel. It was held that
while affixing stamps, the value of the land only would be included and not that of the hotel.
Further, in such a sale of land, the title with respect to the land only will pass and not in the
property constructed over the land, as the owner had no title in the hotel. In the case of tangible
immovable property of the value of less than Rs 100, transfers may be made either by a
registered instrument91 or by delivery of the property. If there is no registration of the sale deed,
no property passes as there is no transfer

Intention of the Parties- The general rule of passing of ownership on registration is subject to
the intention of the parties expressed in the contract. A document must be construed in its
entirety for it to satisfy all the requirements of a conveyance of sale as envisaged under section
54 of the Transfer of Property Act.

Agreement to Sell/ Contract of sale

(see P1, page 16)

There can be an agreement of sale before the execution of a sale deed.45 A contract for sale of
immovable property is a contract that a sale of such property shall take place on terms settled
between the parties.46 While a sale is a transfer of ownership, a contract for sale is merely a
document creating a right to obtain another document, namely a registered sale-deed to complete
the transaction of sale of an immovable property. Section 54 in its definition of sale, does not
include an agreement of sale. The Delhi High court has held that any contract/agreement of sale
which is not a registered deed of conveyance (deed of sale) would fall short of the requirements
of sections 54 and 55 of TP Act and will not confer any title nor transfer any interest in an
immovable property (except to the limited right granted under section 53A of TP Act).51

A contract of sale is different from a sale, as it need not be registered.52 It does not create a
charge or an interest in the property. A registered sale deed alone conveys a valid title over the
property, but a sale agreement does not create any valid title. As a contract for sale is not the
same as a sale and is not required to be compulsorily registered and title remains with the vendor,
but if an agreement of sale is coupled with delivery of possession in part performance of
conveyance, rights created under this document requires compulsory registration as this
agreement of sale partakes the character of a conveyance and would require both registration and
stamp duty.

Transferee entitled to protect his possession of the property granted in furtherance of a

contract of sale- In Ramesh Chand Ardavatiya v Anil Pangwani,57 the owner of a piece of land
entered into an agreement for its sale with B. On payment of the advance amount, he handed
over the possession to B but failed to execute a sale deed in his favour. B constructed a boundary
wall, but this land was encroached upon by the trespassers on behest of A. B filed a suit in a
court of law for a declaration that he was in peaceful possession of the property and sought a
permanent injunction from the court restraining the trespassers from interfering with his peaceful
possession of the property. The court held that B was entitled to protect his possession. They
directed that A should assert his title through due process of law and was restrained from taking
the law in his own hands. The court observed,

A contract for sale of immovable property is a contract that a sale of such property shall take
place on terms settled between the parties; it does not of itself create any interest in or charge on
such immovable property. However, still if a person who entered into possession over
immovable property under a contract for sale and is in peaceful and settled possession of the
property with the consent of the person in whom the title vests, he is entitled to protect his
possession against the whole world, excepting a person having a title better than what he or his
vendor possesses. If he is in possession of the property in part performance of the contract for
sale and the requirements of S. 53A are satisfied, he may protect his possession even against the
true owner.

Contract of Sale does not Create a Charge- An agreement of sale does not of itself create any
interest or charge on such property61 even after a decree for specific performance has been
passed with respect to it.62 All that a person gets is a right of litigation on this basis.

Agreement to Sell and Suit for Specific Performance- Since an agreement to sell is primarily
a contract between two parties, they must follow the terms and conditions laid down in the
contract and if after entering into a contract for sale of property, the seller without any reasonable
excuse avoids executing a sale deed, the buyer can proceed to the court and file a suit for specific
performance of the contract. The court would award his suit and direct the seller to execute a sale
deed in his favour. But for that it must be established by the buyer, that he has fulfilled his part of
the bargain, be it payment of price or any other condition.

Cancellation of Sale Deed- After execution of sale deed, once the owner divests himself of his
ownership of property, he retains no control or right over the said property including one of
cancellation of the sale deed, and the purchaser becomes the absolute owner. Such sale deed
cannot be nullified by executing a deed of cancellation, even by consent or agreement between
the purchaser and vendor. Such a deed of cancellation of sale cannot be accepted for registration
and cancellation can be ordered only under section 31 of the Specific Relief Act.

Rights and Liabilities of Seller and Buyer Section 55 (see P1, page 17)

The buyer and the seller of immovable property respectively are subject to certain liabilities and
have the rights or such of them as are applicable to the property sold. The primary aim of laying
down the rights and duties of the seller and the buyer in case of sale is to ensure fair dealings,
and as far as possible, to minimise fraud and waste of the property. A contract to execute a sale
deed containing the necessary stipulations is a contract for sale on conditions implied by the
Act.90 This section is applicable only in absence of a contract to the contrary.91 Conditions
incorporated in the contract by mutual consent bind both the parties.

DUTIES OF SELLER
(P1, page 17)

Duty of disclosure- The seller is bound to disclose to the buyer any material defects (in the
property or in the seller's title thereto), of which the seller is aware and the buyer is not; and
which the buyer could not, with ordinary care, discover. If the buyer either knows about these
defects or could have known about it if he had acted as a reasonable prudent man, then there is
no such duty on the seller. The defect must be such that if it was known to the buyer, his decision
to purchase the property would have been fundamentally affected. Such defect may also hamper
the enjoyment of the property.

Duty to produce title deed- The primary duty of the seller is to convey a good title to the buyer
and therefore, he is bound to disclose a defect in title, if any. Seller is therefore, in law bound to
produce to the buyer, on his request for examination all documents of title relating to the
properties, which are in the seller's possession or power. Such documents should be made
available within a reasonable time period.

Duty to answer all relevant questions- Seller must answer to the best of his information all
relevant questions18 put to him by the buyer in respect to the property or the title thereto.

Duty to execute conveyance- The sale deed has to be executed by the seller. It is he who has to
sign the deed. It is his signatures that are to be attested properly, and it is at his behest that the
document has to be registered. Normally, till registration takes place, the ownership does not
pass and therefore, upon the payment or tender of the amount due in respect of the price, the
seller is under a duty to execute a proper conveyance of the property when the buyer tenders it to
him for execution at a proper time and place.

Duty to take care of property- He is bound between the date of the contract of sale and the
delivery of the property, to take as much care of the property and all documents of title relating
thereto which are in his possession as an owner of ordinary prudence would take of such
property and documents.

Duty to deliver possession- Once the formalities from the side of the buyer are complied with,
the seller has to give, on being so required, the buyer or such person as he directs such
possession of the property as its nature admits. It is the duty of the seller and he cannot leave the
buyer to get the possession himself,30 notwithstanding a condition in the sale deed that if no
possession is given, the buyer may get it himself.
Duty to Pay public charges- The seller is bound to pay all public charges and rent50 accrued
that are due in respect of the property up to the date of the sale or up to the date of possession, if
the parties so agree.51 He is also under an obligation to pay the interest on all encumbrances on
such property due.

Covenant for title- The buyer has a right to receive a good title to the property and the seller
shall be deemed to contract with the buyer that the interest which he professes to transfer to the
buyer subsists, and he has power to transfer the same. A transferor cannot enforce for specific
performance of the contract as against the buyer unless he gives him a title free from reasonable
doubt73

Duty to deliver title deed- Where the whole of the purchase money has been paid to the seller,
he is bound to deliver to the buyer all documents of title relating to the property, which are in the
seller's possession or power.

RIGHTS OF SELLER
Right to rent and profit- Where the property is in occupation of the tenants or otherwise
yielding income, the seller is entitled to the rents and profits of the property till the time
ownership thereof passes to the buyer, despite an agreement to sell the property which passes no
title to the prospective purchaser.29 Possession is to be given to the buyer when ownership
passes.

Right to payment of money and charge over the property- The seller is entitled to the full
consideration as agreed upon as between the parties. The money must be paid within a
reasonable time period unless a specific time has also been stipulated in the contract. It must be
remembered that time is the essence of the contract if the contract says so, and a buyer would
commit a breach of contract if he does not pay within the specified time. Where the ownership of
the property has passed to the buyer, but before the payment of the whole of the purchase money,
the seller is entitled to a charge upon the property in the hands of the buyer.

DUTIES OF THE BUYER

P1, page 34

Duty of disclosure- The buyer is bound to disclose to the seller any fact as to the nature and
extent of the seller's interest in the property of which the buyer is aware, but of which he has
reason to believe that the seller is not aware and which materially increases the value of such
interest.

Duty to pay the price- One of the primary duties of the buyer is to pay the consideration. He is
bound to pay or tender at the time and place of completing the sale, the purchase money to the
seller or such person as he directs.
Liability to bear losses- Where the ownership of the property has passed to the buyer, any loss
arising from the destruction, injury or decrease in the value of the property not caused by the
seller is to be borne by the buyer. The rule applies even in cases where the possession is yet to be
delivered to the buyer, or the payment of the price has not been made by the buyer.

Liability to Payment of Public Charges and Rent- The obligation to pay public charges is also
transferred along with the ownership of the property. The rule is that when the ownership of the
property has passed to the buyer as between himself and the seller, it is the buyer who is liable to
pay all public charges and rent which may become payable in respect of the property. The
obligation extends to pay the principle money due on any encumbrance subject to which the
property is sold and the interest thereon after accruing due.

RIGHTS OF BUYER
Benefits of improvement- If the value of the property increases in between the time when the
ownership in the property has passed but the price has not been paid by the buyer, the seller
cannot demand a higher price than the one agreed before, and the buyer would be entitled to the
increase in the value of the price of the property. He is also entitled to the benefit of any
improvement or increase in value of the property and to the rents and profits thereof,87 including
the repairs carried out by the seller after the completion of the sale.

MARSHALLING SECTION 56- (P1, page 35)

Marshalling by subsequent purchaser.—If the owner of two or more properties mortgages

them to one person and then sells one or more of the properties to another person, the buyer is, in
the absence of a contract to the contrary, entitled to have the mortgaged-debt satisfied out of the
property or properties not sold to him, so far as the same will extend, but not so as to prejudice
the rights of the mortgagee or persons claiming under him or of any other person who has for
consideration acquired an interest in any of the properties.

Essentials of Marshalling

(i) The owner of two or more properties mortgages them to one person;

(ii) He then sells one or more of the properties to another person;

(iii) The buyer is, in the absence of a contract to the contrary entitled to have the mortgaged debt
satisfied out of the property or properties not sold to him so far as the same will extend;

(iv) But not so as to prejudice the rights of the mortgagee or persons claiming under him;

(v) Or of any other person who has for consideration acquired an interest in any of the properties.
Example- A mortgages his properties X, Y and Z in favour of B for a loan of Rs. 50,000. A later
sells property X to C for a consideration of Rs 50,000. A does not repay the loan to B and B
causes the property to be sold with the help of the court. Here, C can claim that the debt of Rs
50,000 that A owes to B, should be satisfied out of the sale of the properties Y and Z, that
property X that has passed to him should not be made the subject matter of sale. This is despite
the fact that property X was also the security kept with the mortgagee. Further, marshalling is
possible where the debt can be satisfied out of the other properties. But if it cannot be so satisfied
with the help of the other properties, then marshalling will not be permissible.
 GIFT
Also seeP1, page 5-15

A gift is a transfer of property without any monetary consideration by one person in favour of
another and accepted by him or by a person on his behalf.

ESSENTIALS OF A GIFT
P1, page 7

1. Donor and donee- The parties to the gift are, the donor, who makes the gift and the donee who
or on whose behalf the gift is accepted. The donor must be a person who is competent to contract
and authorised to transfer the property. The donor must be either the owner of the property or
should possess an express authorisation from the owner to execute a gift, otherwise it would be
invalid. The donee on the other hand can even be a minor.9 The donee must be an ascertainable
person.

Therefore a public10 or an unregistered society11 cannot be a donee. A gift can be made in

favour of two or more donees, but they must be ascertainable persons. Gift to an idol is not a
valid gift because idol is not a living person but property can be gifted to religious or charitable
institutions with conditions.

Patel Prabhudas Hergovandas v Heir of PB Kachrabhai

2. Subject Matter of a gift- Gift must be made of existing movable or immovable property capable
of being transferred. Future property cannot be transferred.

Interest created by the donor- The donor is competent to create either an absolute interest in the
property in favour of the donee or even a limited interest. For example, A gifts his immovable
property in favour of B and puts a condition that he would enjoy the property exclusively without
any body else having any right over it. This interest created here is an absolute interest, but if the
gift says that he must enjoy the property only for his life time and after his death, the property
would revert back to A or his heirs, it would be the creation of a limited estate or a life estate in
favour of B.

CIT Kanpur v RS Gupta

3. Free and voluntary consent- The offer to make the gift must be voluntary. A gift therefore
should be executed with the free consent of the donor. This consent should be untainted by force,
fraud or undue influence. For proving that the deed was executed with free and voluntary consent
of the donor, it must be proved that the physical act of signing the deed coincided with the
animus, or the mental act, i.e., an intention to execute the gift.
Undue Influence- If the transaction appears to be unconscionable, then the burden of proving that
it was not induced by undue influence is upon the person who was in a position to dominate the
will of the other. In such cases, the burden of proof shifts on the donee.
Roshan Lal v Kartar Chand
Ajmer Singh v Atma Singh
ChaudharyRamesar v Prabhawati Phool Chand
Rule relating to pardanashin women- The burden of proof is on the done. If the gift deed was in a
language that is understood by the woman, it must also be proved that the implication of the act
was explained to her. If the deed is in a language that the executant is not familiar with, the
beneficiaries must prove that it was not only read over to her, but was translated to her in a
language that she understood and was also explained to her. If they fail to prove it, the gift deed
would be treated as invalid. This rule was also applied to a very old woman.

In Kartari v Kewal Kishan,33 the property was owned by a 70 year old widow, W who was
ailing. She had a daughter to whom she was very attached. This daughter was looking after her
mother as well as managing her properties. When the daughter was away, the distant male
collaterals of W approached her and on the pretext of showing her to a doctor, took the old lady
to a place away from her place of residence and got her signature on the gift deed already
prepared by them. The deed was attested and registered the same day and the lady was brought
back to her house after that. This whole episode happened while the daughter was away. On
returning the daughter heard from people about the gift deed and when she inquired from her
mother, all that the lady could tell was that she was taken to some place and was made to sign
some papers. The daughter and the mother then went to the place where the deed was registered
and lodged a complaint at the police station to the effect that the deed was obtained by the
collaterals by fraud and undue influence. The lady died shortly thereafter and the collaterals took
possession of the property. The daughter filed a suit on the ground that the gift deed was
obtained by the collaterals through fraud, and undue influence and was therefore void. The court
explained the meaning of undue influence and observed, that the beneficiaries here had taken a
leading part in the execution of the gift deed, and this by itself is sufficient to prove that they
dominated the will of the donor and exercised undue influence in obtaining an unfair advantage
in as much as they deprived the natural heir, namely the daughter, of the entire properties.

The court also observed that the beneficiaries under the deed failed in proving that, the lady
understood what was written in the deed, or that it was read over and explained to her. This was
mandatory to prove as the language of the deed was one that she was not familiar with. The
physical act of signing the deed did not coincide with the mental act of an intention to sign it.
The court held that the gift deed was not valid as it was not executed with the free consent of the
donor. Her consent was tainted with undue influence and fraud.

It must be noted that age alone is not the determining or the disability criteria for the validity of
the gift. The primary consideration is the free and voluntary desire of the donor to execute the
gift.
 In Krishna Prasad v Gopal Prasad,39 a woman aged 90 years executed a gift of her property in
favour of B who was her grandson. His mother had died and his father had remarried. His step
mother used to torture him and the grandmother was very fond of him. It was due to the
considerations of fondness or love and affection for him that she gifted her property to him
surpassing her own son, i.e., the donee's father. The validity of this gift was challenged by the
father of the donee and the donor's son, on the ground that undue influence and fraud had been
exercised at the instance of the donee. On evidence it was conclusively established that despite
her age, the donor was quite intelligent and not infirm and knew the implication of her acts. The
court also held that burden of proof here, was on the person who had challenged the validity of
the gift and not on the beneficiary under the gift. The gift was held as valid.

A gift of immovable property effected by a deed of gift but brought about by undue influence of
the donee, though the donor acted voluntarily in making it, is not void but is only voidable.

4. Acceptance of the gift- The gift must be accepted by the donee himself. Acceptance must be
made during the life time of the donor and while he is capable of giving. According to section
122, if the donee dies before acceptance, the gift is void. Law does not specify any specific mode
of acceptance, but it should be clear and not ambiguous. Once the gift is accepted and acted upon
it is valid and complete66 and cannot be cancelled.
Kamakshi Ammal v Rajalakshmi
5. Without consideration- If the consideration is a nominal amount of money, or the property is
grossly undervalued, even then the transfer would not be a gift but a sale. The object of the gift
should not be unlawful or immoral. A "gift" in consideration of past or future cohabitation is
immoral and thus invalid.

Difference between gift and will

In a gift, generally, there is an immediate transfer of ownership, while a Will takes effect from
the death of the person who executes it. Secondly, a Will by its very nature is revocable, while a
gift can be revoked only when it is a conditional gift. Unless there is a transfer in praesenti, the
document cannot be a gift or a settlement. Unlike a gift, a Will need not be necessarily registered.

TRANSFER HOW EFFECTED

(page 23)

[s 123] Transfer how effected.—For the purpose of making a gift of immovable property, the
transfer must be effected by a registered instrument signed by or on behalf of the donor, and
attested by at least two witnesses. For the purpose of making a gift of movable property, the
transfer may be effected either by a registered instrument signed as aforesaid or by delivery.

Registration- Registration is necessary in all cases of gift of immovable properties and the title
cannot pass without there being a registered deed of gift.21 Any gift of immovable property
cannot be made in violation of this rule, as mere delivery of possession without registered
instrument cannot confer any title
Transfer of movable property- For the purpose of making a gift of movable property, the
transfer may be effected either by a registered instrument signed by the transferor or by delivery
of the subject matter of the gift.38 Such delivery may be made in the same way as sold goods
may be delivered.

Delivery of Possession- Section 123 superseded the rules of old Hindu law and delivery of
possession of immovable property is not an essential condition. A gift after delivery of
possession becomes irrevocable50 but in order to be valid, normally a gift should be followed by
possession.

Collusive Gifts- A collusive gift is one that is not genuine and has been executed in order to
defeat the rights of a third party. Such collusive deeds are void.

GIFT OF EXISTING AND FUTURE PROPERTY

[s 124] Gift of existing and future property.—A gift comprising both existing and future property
is void as to the latter. A gift must be of existing property and cannot be of future property.53 A
gift comprising both existing and future property is void as to the latter.

GIFT TO SEVERAL OF WHOM ONE DOES NOT ACCEPT S. 125

The rule contained herein refers to gift made by a donor to two or more persons. As the gift is
not valid till it is accepted, acceptance by all is necessary if the gift as a whole is to be treated as
valid. If one out of several donees or more do not give the consent, the gift does not fail in its
entirety and is valid with respect to the shares of those who have accepted it. It be void only to
the extent of the shares of those who have not given the consent. For example, A is the owner of
three pieces of land, X, Y and Z. He gifts these three properties by the same document to B, C,
and D respectively. B and C do not accept the gift but D gives his acceptance. The gift is valid to
the extent of the shares of D and is void with respect to X and Y that were given to B and C.

WHEN GIFT MAY BE SUSPENDED OR REVOKED (page 26)

[s 126] When gift may be suspended or revoked.—The donor and donee may agree that on the
happening of any specified event which does not depend on the will of the donor a gift shall be
suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at
the mere will of the donor, is void wholly or in part, as the case may be.

Illustrations

(a) A gives a field to B, reserving to himself, with B's assent, the right to take back the field in
case B and his descendants die before A. B dies without descendants in A's lifetime. A may take
back the field.
(b) A gives a lakh of rupees to B, reserving to himself, with B's assent, the right to take back at
pleasure Rs. 10,000 out of the lakh. The gift holds good as to Rs. 90,000, but is void as to Rs.
10,000 which continue to belong to A.

No Revocation for any other Reason- A gift deed once executed and registered cannot be
revoked unless the mandatory requirements of the said section are fulfilled.88 It is effective but
cannot be enforced until the deed is registered.89 A donor cannot unilaterally revoke a valid
registered and complete gift by executing a registered deed of cancellation,90 for any other
reason91

CONDITIONAL GIFTS (page 28)

A gift is primarily a contract and if both the parties agree that the gift would be revoked on the
happening of an event the happening of which does not depend purely on the wishes of the
donor, if that event happens, the gift will be revoked. This event may be certain or uncertain. It
may happen or may not happen, but if the revocation of the gift is purely on the wishes of the
donor, then the gift is void.

Condition Precedent and Condition Subsequent

A gift may be subject to a condition precedent or a condition subsequent if the condition

precedent is impossible or illegal, or immoral, the gift fails. A gift may be subject to a condition
subsequent and the gift fails and property reverts back to the donor if the condition is not
fulfilled.58 In this connection section 126 is not to be read in isolation and has to be read along
with section 10 of the Transfer of Property Act which says that any stipulation completely
restraining the donee from transferring the gifted property is void.

In Tila Bewa v Mana Bewa,69 A was the owner of certain properties. She executed a gift deed in
favour of W, in the hope that W would marry her son, live with them, and look after both of
them in their old age. Thereafter W married her son and came to live with them. Subsequently
the son died, and after a while W felt neglected and went back to her natal place. W applied for
mutation of names, but A executed a deed of cancellation on the ground that as the gift was not
acted upon the same could be cancelled. She pleaded that it was a conditional gift and was
subject to a condition that W would live with her and look after her. Since W had gone back to
her father's place, the condition was not fulfilled and she was empowered to revoke the same.
The court held that if the deed is a conditional gift, the fact that it is conditional must be apparent
from the language of the document. The document should also provide that in case the condition
that the gift is subject to is not fulfilled, the gift would be revoked. It is only in such a situation
that the gift can be revoked. Unless the gift deed contains a clause for its revocation, it cannot be
revoked.

Absolute Gifts- An absolute gift is without a condition and is irrevocable, but it can be cancelled
only by mutual consent with participation of both parties and in absence of consent or
participation would be improper. An absolute gift subject to a condition restricting alienation
absolutely is valid4 but the condition would be void.

ONEROUS GIFT (S. 127) (page 32)

Illustrations for understanding

(a) A has shares in X, a prosperous Joint stock company, and also shares in Y, a joint stock
company in difficulties. Heavy calls are expected in respect of the shares in Y. A gives B all his
shares in joint stock companies. B refuses to accept the shares in Y. He cannot take the shares in
X.

(b) A, having a lease for a term of years of a house at a rent which he and his representatives are
bound to pay during the term, and which is more than the house can be let for, gives to B the
lease, and also, as a separate and independent transaction, a sum of money. B refuses to accept
the lease. He does not by this refusal forfeit the money.

A gift with a burden is an onerous gift. This section incorporates a rule that if by a single
instrument the donor confers in favour of the donee a benefit and a burden, the donee has to
either accept the gift in totality or reject it in its entirety. He cannot accept only the benefit and
reject the burden. This principle is based on a maxim, qui sentit commodum sentire debetet onus.
It means that the one who receives an advantage must bear the burden as well. The
distinguishing feature between the first and the second paragraph is that gift by a single transfer
is to be accepted or rejected by the donee in its entirety, but if several properties are gifted to a
donee through separate transfers, then, he is at liberty to pick and choose the ones he wants and
validly reject the one he does not want.

UNIVERSAL DONEE (s. 128) (page 41)

Universal donee is a person who gets the complete property of another under a gift deed. If any
portion of the donor's property, whether movable or immovable, is excluded from the gift, the
donee is not a universal donee. This section enacts a principle, that if a person who has to pay
debts, gives his total property to another under a gift deed, this donee becomes personally liable
to pay the debts of the donor. This liability can extend only to the extent of the property that he
receives under the gift but cannot exceed it. If the total property is not gifted and the donor
retains a part, the creditor is not entitled to the benefit of this rule.11

For instance, A owes B a debt of Rs 20 lakh. A has property worth Rs 40 lakh. He executes a gift
of this property and all his assets in favour of C and does not retain anything of value with him.
C would be termed as a universal donee. It is his liability to pay the debt of Rs 20 lakh to B,
failing which B can rightfully proceed against C for this claim. In the same illustration, suppose
the value of the property that C receives under the gift is Rs 15 lakh. In this case C's liability
would be only to the extent of Rs 15 lakh and not more.
Mahadev case

SAVING OF DONATIONS MORTIS CAUSA AND MUHAMMADAN LAW

[s 129] Saving of donations mortis causa and Muhammadan law.—Nothing in this Chapter
relates to gifts of movable property made in contemplation of death, or shall be deemed to affect
any rule of Muhammadan law. Section 191, of the Indian Succession Act, 1925, enables an
Indian, except a Muslim to make a gift in contemplation of death. The primary difference
between the gifts under this Act and the rule of donation mortis causa is that the latter applies
only to movable property while gifts under this Act can be of both movable or immovable
property.

According to section 191, where a person is ill and he is under an apprehension that he may die
soon, he is empowered to dispose of his movable property by a gift in the same manner as under
a Will. These gifts are called donation mortis causa. They can be of only movable property and
not immovable property. Secondly, if the person recovers from his illness, the gift is
automatically revoked. Thirdly, if during the illness of the donor, the donee dies the property
reverts back to the donor. What is essential for donation mortis causa is that there must be
delivery of possession of this property.

The five essentials of donation mortis causa are:

(i) The gift must be of movable property only;

(ii) It should have been made in contemplation of death;

(iii) The donor is suffering from an illness and has an immediate apprehension of death;

(iv) The possession of the property is delivered to the donee;

(v) The gift becomes void if the donor recovers from his illness or the done predeceases him.

The rules of the TP Act do not apply to a gift under Muslim law. An oral gift by a Muslim is
valid, if the requirements of Muslim law are satisfied. A gift made in contemplation of death
under Muslim law is called gift, made during death bed/fatal illness or marz-ul maut. Such a gift
is, in fact, a combination of both a gift and a Will. Unlike donation mortis causa, they can be
made with respect to both movable and immovable property of the donor.

Imtiaz Rasul v Ahir Rasul

Constitutionality of S. 129- Bibi Maniran v Mohammad Ishague- This provision provides an

exception in favour of only Muslims and has been challenged as violative of arts 14 and 15 of the
Constitution of India that prohibit discrimination on grounds of religion. The court has held that
it is not violative of art. 14 of the Constitution on grounds of discrimination based on religion
even though it applies only to Muslims as it is based on a reasonable classification between
Mohammedans and others, having regard to the well-known fundamental differences between
the religion and customs of Mohammedans on one hand and the religion and customs of others.
ACTIONABLE CLAIM
Actionable claims are claims recognised by the courts of law for providing relief with reference
to unsecured debts or beneficial interests in movable property. According to s. 3, an actionable
claim means a claim to:

(i) Any debt,1 other than a debt secured by:

(a) Mortgage of immovable property, or

(b) By hypothecation or pledge of movable property, or;

(ii) To any beneficial interest in movable property2 not in the possession either actual or
constructive of the claimant, which the civil court3 recognises as affording grounds for relief
whether such debt or beneficial interest be existent, accruing, conditional or contingent.

It includes a decree for specific performance in case of an agreement to sell.

Debt

A debt is a liquidated or certain sum of money which the debtor is under an obligation to pay.5 It
is an ascertained sum due from one person to another. It can be existing or present or a future
debt.7 Where a debt has already become due it is called an existing debt, but if it is due at present
but payable in future it is called accruing debt. Where the claim of a certain sum of money exists,
but is payable subject to certain conditions, it is called a conditional debt. Similarly, contingent
debts are payable on the happening of a contingency. The debt may be a secured debt or an
unsecured debt. Where a security is given for the repayment of a debt it is called a secured debt,
e.g., mortgage of immovable property or hypothecation of movables to secure repayment of loan
are instances of secure debts, while a debt taken on the strength of a promise to pay is an
unsecured debt. Conditional or contingent debts cannot be attached, but are actionable claims.

Jai Narayan v Krishna Dutt

Transfer of an actionable claim

Section 130- The transfer of an actionable claim whether with or without consideration shall be
effected only:

(i) By the execution of an instrument in writing;

(ii) Signed by the transferor or his duly authorised agent;

(iii) It shall be complete and effectual upon the execution of such instrument, and thereupon;

(iv) All the rights and remedies of the transferor, whether by way of damages or otherwise;
(v) Shall vest in the transferee;

(vi) Irrespective of whether such notice of the transfer be given or not.

A right to sue for damages cannot be transferred and where an advocate assigned his right to
petitioner to sue the defendant and claim compensation for defamation, it was held that right to
sue for damages concerning defamation cannot be transferred by one person in favour of another.

Actionable claim can be gifted coz section 130 says without consideration.

Instrument in writing

The first requirement of law is that every transfer of an actionable claim should be in writing43
and an oral transfer is invalid.

Mode of Assignment

No particular form of words is necessary to effect an assignment but the intention must be clear
from the language used in the document.53 The instrument of transfer should, in general, contain
words of transfer.

In a transfer of actionable claim "all rights and remedies" of the transferor vest in the transferee
vis-à-vis the debtor, and the transferor cannot, after assignment, even by way of security, sue the
debtor, for that remedy is vested by the assignment in the transferee.

Proviso to S.130- Every dealing with the debt or other actionable claim by the debtor, or other
person, from or against whom the transferor would, but for such instrument of transfer of
actionable claim, have been entitled to recover or enforce such debt or other actionable claim,
shall (save where the debtor or other person is a party to the transfer or has received express
notice thereof as hereinafter provided) be valid as against such transfer.

A debtor, the debt due from whom has been assigned over to a third person, cannot, after the
notice of the assignment of the debt, pay a portion of the debt, even under the order of the court
in a case to which the assignee was not a party, so as to protect him from paying it over again to
the assignee.

Right to Suit

Upon a transfer of an actionable claim, the transferee acquires the rights of the transferor and
may, sue or institute proceedings for the same in his own name without obtaining the transferor's
consent to such suit or proceedings, and without making him a party thereto. The assignee is the
only person entitled to recover the debt after assignment.

Marine or Fire Policies

Nothing in this section applies to the transfer of a marine or fire policy of insurance or affects the
provisions of section 38 of the Insurance Act, 1938.

NOTICE
[s 131] Notice to be in writing, signed.—Every notice of transfer of an actionable claim shall be
in writing, signed by the transferor or his agent duly authorised in this behalf, or, in case the
transferor refuses to sign, by the transferee or his agent, and shall state the name and address of
the transferee.

An assignment is not valid against the debtor until the debtor has notice of the assignment,3 and
till the time the debtor receives notice of the assignment in accordance with law, his dealings
with the original creditor will be protected.4 A debtor can waive the requirement of notice.5 If
the assignment is by a registered document, notice is not necessary.6

The notice must be an express notice in writing7 and should be given by the transferor. If it is
given by the transferee, it must be shown that the transferor had refused to sign it.8 A notice
without the address of the transferee is invalid.

[s 132] Liability of transferee of actionable claim.—The transferee of an actionable claim

shall take it subject to all the liabilities and equities to which the transferor was subject in respect
thereof at the date of the transfer.

Illustrations

(i) A transfers to C a debt due to him by B, A being then indebted to B. C sues B for the debt due
by B to A. In such suit B is entitled to set off the debt due by A to him; although C was unaware
of it at the date of such transfer.

Mortgaged Debt Sec. 134

A debt may be assigned by way of sale or a mortgage.13 This section provides that when it is
transferred, the debt if received by the transferor or recovered by the transferee, should be
applied in the following manner:

(i) First, in payment of the costs of such recovery;

(ii) Secondly, in or towards satisfaction of the amount for the time being secured by the transfer;
and

(iii) Lastly, the residue, if any, belongs to the transferor or other person entitled to receive the
same.

[s 135] Assignment of rights under policy of insurance against fire.—Every assignee by

endorsement or other writing, of a policy of insurance against fire, in whom the property in the
subject insured shall be absolutely vested at the date of the assignment, shall have transferred and
vested in him all rights of suit as if the contract contained in the policy has been made with
himself.

[s 136] Incapacity of officers connected with Courts of Justice.- This section provides a
statutory disqualification on certain officers, associated or connected with courts to be a
transferee of actionable claims. The predominant reason behind this rule is to prevent the
probable misuse of the official position and information that these officials may have with
respect to these claims.

The officials referred to in the section are judges, legal practitioners or any officer connected
with any court of justice, and the restriction is to buy; or traffic in, or stipulate for, or agree to
receive any share of, or interest in, any actionable claim. The prohibition applies whether a suit
has been filed on an actionable claim or not.

[s 137] Saving of negotiable instruments, etc.- This section expressly saves the application of the
rules to stocks, shares or debentures, or to instruments which are for the time being, by law or
custom, negotiable. Shares are not actionable claims and are excluded from the operation of this
rule.22 The bar imposed by section 130, that transfer of an actionable claim can be effected only
by an instrument in writing, does not affect negotiable instruments by virtue of this section.25
The rule gives an extended privilege to mercantile documents.
MORTGAGE
(Page- 37,46

A mortgage is the transfer of an interest in specific immovable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, an existing or future
debt, or the performance of an engagement which may give rise to a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest
of which payment is secured for the time being are called the mortgage money, and the
instrument (if any) by which the transfer is effected is called a mortgage-deed.

The essential elements of a transaction of a mortgage are:

(i) Parties to a mortgage;

(ii) Transfer of an interest;

(iii) In a specific immovable property;

(iv) the purpose is to secure the repayment of money advanced or to be advanced/or is for
performance of an engagement that may give rise to a pecuniary liability.

KINDS OF MORTGAGE
Simple mortgage.—Where, without delivering possession of the mortgaged property, the
mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or
impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall
have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so
far as may be necessary, in payment of the mortgage-money, the transaction is called a simple
mortgage and the mortgagee a simple mortgagee. The mortgagee, in the event of non-payment of
loan, can proceed against the mortgagor personally and obtain a money decree against him or can
proceed against the mortgaged property and file a suit for foreclosure, and cause the property to
be sold and realise his loan amount from the sale of the property. This is a simple mortgage, as
not only the property is mortgaged, but also, the mortgagor is personally bound to repay the
money. The mortgagee has an option here to proceed either against the mortgagor or against the
mortgaged property. In a simple mortgage, the mortgagor retains the possession of the property.
There is no need to deliver possession41
Mortgage by conditional sale.—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 on condition that on such payment being made the sale shall become void,
or the buyer shall transfer the property to the seller, the transaction is called a mortgage by
conditional sale. The term ostensible means seeming or apparent, but not actually the same thing.
It imports that it is really not a sale. There is no personal liability of the mortgagor to pay and the
liability is only of the property.
Mortgage by conditional sale v. sale with a condition of re-purchase- In Chennammal v
Munimalaiyan,69 A executed a simple mortgage of three properties for securing the repayment
of money that he borrowed from B. He was unable to repay the money by the stipulated time and
he entered into a second contract with B. As per this contract, he sold one out of the three
properties to B with a right to repay within a period of three years, for Rs 3,000. The possession
of the property was delivered to B. A little period after the completion of three years, A filed a
suit for redemption of the mortgage. B claimed that since it was a sale with an option of re-
purchase, and three years were over, A had lost the right to exercise the option of re-purchase.

The Apex Court laid down the following distinguishing features between a mortgage with
conditional sale and a sale with an option of re-purchase:

(i) In a mortgage with conditional sale, the relation of a debtor and a creditor subsists while in a
sale with an option of re-purchase, there is no such relationship and the parties stand on an equal
footing.

(ii) A mortgage by conditional sale is effected by a single document, while a sale with an option
of re-purchase is generally affected with the help of two independent documents.

(iii) In a mortgage with conditional sale the debt subsists as it is a borrowing arrangement, while
in a sale with an option of re-purchase, there is no debt but a consideration for sale.

(iv) In a mortgage with conditional sale, the amount of consideration is far below the value of the
property in the market but in a sale with an option of repurchase the amount of consideration is
generally equal to or very near to the value of the property.

(v) In a mortgage with conditional sale, since this is a mortgage transaction, the right of
redemption subsists in favour of the mortgagor despite the expiry of the time stipulated in the
contract for its payment. The mortgagor has the option to redeem the mortgage and take back the
property on the payment of the mortgage money, after the specified time, but in a sale with an
option of repurchase, the original seller must re-purchase the property within the stipulated time
period. If he commits a default the option of re-purchase is lost.

Usufructuary mortgage.—Where the mortgagor delivers possession or expressly or by

implication binds himself to deliver possession of the mortgaged property to the mortgagee, and
authorises 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 rents 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
mortgage90. The essential feature of usufructuary or possessory mortgage is delivery of
possession of the mortgaged property to the mortgagee. The essential features of a usufructuary
mortgage must be evident from the recitals of the mortgage deed itself. The principal
characteristic of a usufructuary mortgage is that there is no personal liability and the mortgagee
has no right to have the mortgaged property brought to sale. The mortgagee is entitled to retain
the possession of the property till the loan is repaid.
English mortgage.—Where the mortgagor binds himself to repay the mortgagemoney on a
certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a
proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as
agreed, the transaction is called an English mortgage.

Essentials- (i) A loan is taken on the strength of the property by the mortgagor from the
mortgagee;

(ii) There is an absolute transfer of this property in favour of the mortgagee;

(iii) The transfer is subject to a provision or condition that the mortgagee would return the
property to the mortgagor upon repayment of the loan by a certain date; and

(iv) The payment is to be made on a certain date fixed in advance.

Under an English mortgage the mortgagee acquires a right to take possession as soon as the
mortgage is executed

Mortgage by deposit of title-deeds.—Also called equitable mortgage. Where a person in any of

the following towns, namely, the towns of Calcutta, Madras, and Bombay, and in any other town
which the State Government concerned may, by notification in the Official Gazette, specify in
this behalf, delivers to a creditor or his agent documents of title to immoveable property, with
intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.

The most prevalent form of mortgage presently is mortgage by deposit of title deeds. It is purely
an oral transaction. The loan amount is raised against the title deeds of the immovable property
which are delivered to the mortgagee. It need not be in writing.

Essentials-

(i) The transferor borrows a sum of money from the transferee;

(ii) He delivers the title deeds of a specific immovable property;

(iii) He does it with an intention to keep the property as a security for the repayment of the loan.

In order to create a valid mortgage, but it is not necessary that the whole, or even the most
material of the documents deposited should show a complete or good title in the depositor and it
is sufficient if the deeds deposited bona-fide relate to the property or are material evidence of
title and which are shown to have been deposited with the intention of creating a security
thereon.

A mortgage by deposit of title deeds is an oral transaction, and does not require writing or
registration,93 but if written it needs registration94 and no oral evidence to contradict it is
admissible. The essential feature of a mortgage by deposit of title deeds is the delivery of title
deeds to the mortgagee.67 An actual or even constructive delivery68 of title deeds69 bona fide
relating to the property70 and showing the title of the depositor71 is sufficient and it is not
necessary that there must be a physical delivery.

Anomalous mortgage.—A mortgage which is not a simple mortgage, a mortgage by conditional

sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds
within the meaning of this section is called an anomalous mortgage.

ESSENTIAL REQUISITES OF A MORTGAGE

Parties to mortgage-

Mortgagor- A mortgagor must be a person competent to contract and capable to transfer the
property.4 A minor cannot affect a mortgage,5 but a guardian of minor can affect a valid
mortgage with the sanction of the court.

Mortgagee- Any person who is competent to hold property can be a mortgagee irrespective of
his competency to contract. It is the competency to hold the property and not the competency to
contract which is material here, and therefore in earlier cases it was held that even a minor16 is
competent to be a mortgagee. The Supreme Court in a case17 clarified that since the conditions
of validity of a mortgage must entail both parties, and a mortgagor and mortgagee must be
competent to enter into a contract, a minor, being incompetent to contract cannot be a mortgagee.

Transfer of an interest- In a mortgage there is, necessarily, a transfer of an interest in the

property for a specific purpose. This is not a transaction of mortgage, as no interest has been
transferred in favour of the mortgagee. What that interest is, would depend upon the nature and
type of mortgage which is effected. For example, in a simple mortgage, the transferor transfers a
right to cause the property to be sold. In usufructuary or possessory mortgage, the right to
possess and enjoy the property is transferred. Likewise, in an English mortgage, what is
transferred is the ownership while the mortgagor retains a right of redemption. After effecting a
mortgage by transferring an interest in the property, if the mortgagor sells the property to a third
party, the mortgage would continue to be effective and valid.

Interest- Ownership of the property comprises a bundle of rights and when a person executes a
mortgage, he parts with some of the rights in favour of the mortgagee.19 At the same time, the
ownership,20 a right to redeem,21 and a right to transfer the property,22 remain with the owner.

Covenant not to Sell the Property- A covenant by the owner not to sell his property till the loan
is repaid does not make this a transaction of mortgage. Transfer of an interest in a specific
immovable property is a must.

Movable Property- The TP Act lays down rules governing the mortgage of only immovable
property,31 though mortgage of movables is also recognised in India.
Specific Immovable Property- The security must be in the shape of a specific immovable
property, i.e., transfer of a specific right in a specific immovable property is the fundamental
requirement in a mortgage. Specific immovable property means that the property should be
sufficiently identified,57 and the description should not be general or ambiguous in character.
For instance, A borrows money from B and undertakes to repay it within a period of two years.
The contract also provides that if A failed to repay the loan within a period of two years, B can
sell any of his properties. A owns three properties, X, Y and Z. This is not a transaction of
mortgage, as the security for repayment of money has not been identified as a specific
immovable property. The description of the property as aforesaid should be as specific as
possible. If, from the description of the property, it cannot be easily identified, the transaction
would not amount to a mortgage transaction.

PURPOSE OF MORTGAGE

Securing a Debt- Every mortgage presupposes the existence of a debt, actual or contingent, and
it is for the purpose of securing the repayment of the debt that a mortgage of property is made.64
Right in property is accessory to the right to recover the debt.65 Hence, a transfer of property
made for the purpose of discharging the debt,66 or a mere covenant not to alienate the property
till the debt is discharged67 unless coupled with words expressly making property as a security
for debt68 or a sale with a condition of re-transfer,69 is not a mortgage.

Money Advanced or to be Advanced- The primary purpose of the mortgage is to ensure the
repayment of money advanced or to be advanced. The clause 'money advanced or to be
advanced' shows that the loan amount might be paid to the mortgagor at the time of the execution
of the mortgage deed or even subsequent thereto. The date of execution of the mortgage is
effective even if the mortgage money is undertaken to be advanced in future. But if there is no
consideration, the mortgage is void.

Mortgage and Charge- A mortgage and a charge are fundamentally different from each other.
In a charge there is no transfer of an interest in the property, while transfer of an interest in a
specific immovable property is the fundamental requirement of a mortgage. A charge is a little
more than a personal obligation without a right in rem,9 and gives a right of payment out of a
specific fund or property without its transfer,10 such as an agreement giving immovable property
for the satisfaction of a debt,11 or payment of maintenance allowance.12 It is good against a
subsequent transferee for value with notice, or with or without notice13 against a transferee
without consideration, but a mortgage, which is good against all subsequent transferees.14 A
mere agreement to create a mortgage is neither a mortgage nor a charge.15 Every mortgage is a
charge but every charge is not a mortgage,16 but whether it is a charge or a mortgage, has to be
determined in accordance with the intention of the parties.

Right of Redemption- In the transaction of a mortgage, the mortgagor keeps his property as a
security with the mortgagee, by transfer of an interest in it in his favour. So the interest or right
of the mortgagee is to cause the property to be sold in the event of non-payment of the loan. The
duty of the mortgagor is to repay the loan by the specified time, and his right is to get back or
reclaim whatever he had transferred in favour of the mortgagee. This right of the mortgagor to
get back, what all he had transferred in favour of the mortgagee after the payment of the loan is
called a right of redemption. This is presently a statutory right, unlike the right in equity under
English law. Redemption literally means release or liberation, and by repaying the loan the
property of the mortgagor is released or liberated from the mortgage.

Right of Foreclosure - It is the duty of the mortgagee to deliver all the papers and the property if
it is in his possession, back to the mortgagor, when he receives the mortgage money. If the
mortgagor fails to repay the loan amount within the specified time, the right arising in favour of
the mortgagee is called a right of foreclosure. It must be understood that the old rule enabling the
mortgagee to forfeit the property in the event of non-payment of loan is not a good law any
more. He can cause the property to be sold, which means that he can neither appropriate the
property himself, nor can sell it himself, but must approach the court for its sale. The right of the
mortgagee to approach the court with a prayer for sale of the mortgaged property in the event of
nonpayment of loan is in the shape of a suit for foreclosure of the mortgage. This right arises in
favour of the mortgagee only after the expiry of the time period mentioned in the mortgage deed
for its repayment. Where the right to repay the loan arises immediately after execution of
mortgage, the right to foreclose it is also simultaneous and can be exercised within a period of
twelve years from the date it arose, failing which it would be barred by the law of limitation.

Interests of Mortgagor and Mortgagee, Assignable- Interest created in a mortgage, of the

mortgagor, i.e., of redemption as well as of the mortgagee, even of a foreclosure, is
transferable.22 As this right is again in immovable property, it can be assigned only through a
written, attested23 and registered instrument.24 The property that is once mortgaged by the
mortgagor can be mortgaged in favour of a third person again. This is called a sub-mortgage, and
a sub mortgagee takes the property subject to the right of the principal mortgagee.

For instance, A mortgages his house to B for a consideration of Rs 10 lakh and undertakes to
repay it within a period of five years. He can affect a sub-mortgage of the same property either in
favour of the same mortgagee or a third person for raising another loan. For affecting a sub-
mortgage, the same procedural formalities and the statutory requirements are to be adhered to. It
must be in writing, attested and registered.

A sub-mortgagee has two rights in the alternative, one based on the personal covenant and the
other on a derivative title to the mortgage right.26 As between the submortgagor and the sub-
mortgagee the rights and liabilities are the same as in case of an ordinary mortgagor and
mortgagee and if the original mortgagor sues to redeem, he must make the sub-mortgagee a
party,27 otherwise, the suit will be dismissed.
[s 59] Mortgage when to be by assurance.—Where the principal money secured is one hundred
rupees or upwards, a mortgage other than a mortgage by deposit of titledeeds can be effected
only by a registered instrument signed by the mortgagor and attested by at least two witnesses.

Where the principal money secured is less than one hundred rupees, a mortgage may be effected
either by a registered instrument signed and attested as aforesaid, or (except in the case of a
simple mortgage) by delivery of the property.

RIGHTS AND LIABILITIES OF MORTGAGOR-

The rights of the mortgagor are as follows:

(i) Right of redemption;

(ii) Right to transfer to a third party instead of re-transfer to himself;
(iii) Right to inspection and production of documents;
(iv) Right to accession;
(v) Right to confer a lease, and;
(vi) Right to reasonable waste.

Right to redeem (page 46)- A mortgage transaction is primarily a contract to ensure the
repayment of the loan amount. The mortgagor remains the owner of the property and is capable
to obtain the property from the mortgagee, when he repays the loan. This statutory right of
mortgagor to take back the property on repayment of the loan amount in full plus the interest on
it, if any is called a right to redeem and a suit to enforce it is called a suit for redemption. The
right to redeem arises only after the principal money has become due. It cannot be taken away or
defeated by an agreement to the contrary made either at the time of the execution of the
mortgage as part of the contract, even if the mortgagor had expressly agreed to abide by it or by
efflux of time.

In theory, the right of redemption of the mortgagor comes to an end when the mortgagee files a
suit for foreclosure, but practically, the right continues even where the matter goes to the court
and the mortgagor is entitled to deposit the entire amount in the court and redeem his property.

In Achaldas Durgaji Oswal v Gangabisan Heda,78 the Apex Court considered whether the right
of redemption can be exercised in an appeal from the judgment of the High Court. The facts of
the case were that A had mortgaged his property for a period of five years in favour of B. The
mortgage executed was a usufructuary mortgage wherein the possession of the property was
delivered to the mortgagee. A failed to repay the loan within the stipulated period. The
mortgagee filed a suit for foreclosure and the mortgagor filed a suit for redemption of the
property.

The court directed the mortgagor to deposit the money in the court within a period of three
months, which he failed to do. He deposited the amount after three years, and then applied for a
final decree from the court. The lower court rejected his prayer as being barred by limitation but
the High Court reversed this judgment. The matter went to the Supreme Court and the court
upholding the decision of the High Court held that the mortgagor has a right to redeem his
property and despite the fact that he had committed a default in its payment, he would not be
debarred from redeeming his property. The mortgagor had deposited the amount within the
period of limitation for redemption of mortgage under the Limitation Act, i.e., within 30 years.

Clog on equity of redemption (page 47)- clog on the right of redemption of the mortgagor means
an attempt of the mortgagee to obstruct this right of redemption. The mortgagee may put a
condition in the mortgage deed that may prevent the mortgagor from redeeming his property
even when he is prepared to repay the loan.

This putting of obstructions, or preventing him from getting back his property is called a clog on
the statutory right of the mortgagor to get back his property and would be void. Doctrine of clog
on equity of redemption is a rule of equity, justice and good conscience25 and is applicable in
areas where the Act26 is not in force.

Murari Lal v. Dev Karan

A right of redemption being a statutory right can only be extinguished by

(i) The act of the parties; or

(ii) By a decree of the court.

Right to transfer to a third party instead of re-transfer to himself (Sec. 60A)- Where a
mortgagor is entitled to redemption, then, on the fulfilment of any conditions on the fulfilment of
which he would be entitled to require a re-transfer, he may require the mortgagee, instead of re-
transferring the property, to assign the mortgage-debt and transfer the mortgaged property to
such third person as the mortgagor may direct; and the mortgagee shall be bound to assign and
transfer accordingly.

Right to inspection and production of documents (sec. 60B)- A mortgagor, as long as his right
of redemption subsists, shall be entitled at all reasonable times, at his request and at his own cost,
and on payment of the mortgagee's costs and expenses in this behalf, to inspect and make copies
or abstracts of, or extracts from, documents of title relating to the mortgaged property which are
in the custody or power of the mortgagee.

Right of usufructuary mortgagor to recover possession (sec 62)- In the case of a usufructuary
mortgage, the mortgagor has a right to recover possession of the property together with the
mortgage-deed and all documents relating to the mortgaged property which are in the possession
or power of the mortgagee. In usufructuary mortgages there is no time fixed for repayment of
money. Limitation for redemption of mortgage would be 30 years as prescribed under the
limitation Act.
Right of accession- Accession, here, means an addition or improvement leading to expansion of
or benefit of the mortgaged property.13 Since the mortgage is a transfer of an interest in the
mortgaged property, the mortgagee acquires the beneficial of the accession as well. But the
general rule is when the mortgagor redeems the property, the right to get the benefit of such
accession would be with the mortgagor and not the mortgagee. Accession can be of two types—
natural accession and acquired accession. Acquired can again be classified into two parts—
separable accession and those which are inseparable, which are integrated with the property.

[s 63A] Improvements to mortgaged property.—(l) Where mortgaged property in possession of

the mortgagee has, during the continuance of the mortgage, been improved, the mortgagor, upon
redemption, shall, in the absence of a contract to the contrary, be entitled to the improvement;
and the mortgagor shall not, save only in cases provided for in sub-section (2), be liable to pay
the cost thereof.

(2) Where any such improvement was effected at the cost of the mortgagee and was necessary to
preserve the property from destruction or deterioration or was necessary to prevent the security
from becoming insufficient, or was made in compliance with the lawful order of any public
servant or public authority, the mortgagor shall, in the absence of a contract to the contrary, be
liable to pay the proper cost thereof as an addition to the principal money with interest at the
same rate as is payable on the principal, or, where no such rate is fixed, at the rate of 9% per
annum, and the profits, if any, accruing by reason of the improvement shall be credited to the
mortgagor.

Essentials of improvement

(i) The mortgaged property is in possession of the mortgagee;

(ii) It has during the continuance of the mortgage, been improved;
(iii) The mortgagor, upon redemption, shall, in the absence of a contract to the contrary, be
entitled to the improvement.
(iv) The mortgagor shall be liable to pay the cost of such improvements where any such
improvement was effected at the cost of the mortgagee and was
(a) necessary to preserve the property from destruction or deterioration, or
(b) was necessary to prevent the security from becoming insufficient,
(c) or was made in compliance with the lawful order of any public servant or
public authority,
(v) The mortgagor shall, in the absence of a contract to the contrary;
(vi) Be liable to pay
(a) the proper cost of such improvements, and
(b) an addition to the principal money with interest at the same rate as is payable
on principal, or, where no such rate is fixed,
(c) at the rate of 9% per annum and the profits, if any, accruing by reason of the
improvements shall be credited to the mortgagor.
Right to confer a lease (sec. 65A) - A mortgagor, while lawfully in possession of the mortgaged
property, shall have power to make leases thereof, which shall be binding on the mortgagee.76
The effective conditions for these are governed by this section.

Right to reasonable waste (Sec. 66)- Ordinarily the mortgagor is deemed to take care of it as
the owner of the property would do. If he allows the property to deteriorate, he is not liable. But
a voluntary act leading to destruction of his own property would affect the mortgagee adversely.
Since this property is the security for the repayment of loan, no such act that leads to or may lead
to its devaluation should be permitted. The mortgagee has a right to have the mortgaged property
secured from deterioration in the hands of the mortgagor or any other person to whose rights, his
own were superior.

Liability of Mortgagor- P1, page 49-50

RIGHTS AND LIABILITIES OF MORTGAGEE-

Right to foreclosure or sale (S. 67)- In the absence of a contract to the contrary, the mortgagee
has, at any time after the mortgage-money has become due to him, and before a decree has been
made for the redemption of the mortgaged property, or the mortgage-money has been paid or
deposited as hereinafter provided, a right to obtain from the court a decree that the mortgagor
shall be absolutely debarred of his right to redeem the property, or a decree that the property be
sold.

Where no time is fixed for repayment of debt, the right to foreclose arises from the date of the
execution of the deed,98 or from the date of demand for repayment is made and is refused by the
mortgagor.1 In case a time is fixed, the right arises after the time expires.

Right to sue for mortgage money (S. 68)- The mortgagee has a right to sue for the mortgage-
money in the following cases and no others, namely:—

(a) where the mortgagor binds himself to repay the same;

(b) where, by any cause other than the wrongful act or default of the mortgagor or mortgagee, the
mortgaged property is wholly or partially destroyed or the security is rendered insufficient within
the meaning of s. 66, and the mortgagee has given the mortgagor a reasonable opportunity of
providing further security enough to render the whole security sufficient, and the mortgagor has
failed to do so;

(c) where the mortgagee is deprived of the whole or part of his security by or in consequence of
the wrongful act or default of the mortgagor;

(d) where, the mortgagee being entitled to possession of the mortgaged property, the mortgagor
fails to deliver the same to him, or to secure the possession thereof to him without disturbance by
the mortgagor or any person claiming under a title superior to that of the mortgagor:
Where the mortgagor binds himself personally to repay the debt, it becomes a personal covenant,
but where it is only his property that is kept as a security, the mortgagee cannot sue him but can
proceed against the property.

Right to sell (S. 69)- The power of the mortgagee to sell the property referred to in here is the
power to sell it without the intervention of the court. It is different from the right of a simple
mortgagee to cause the property to be sold with the help of the court. This power can be
exercised if:

(i) the mortgage is an English mortgage;58

(ii) where a power of sale without the intervention of the court is expressly conferred59 on the
mortgagee by the mortgage-deed and the mortgagee is the government;

(iii) there is a default of payment of the mortgage-money;

(iv) 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; and

(v) 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,60 Bombay61 or in any other town or area
which the State Government may, by notification in the Official Gazette, specify62 in this
behalf.

There are three conditions that are mandatory for the exercise of this power. These conditions
cannot be varied even by a contract to the contrary:

(i) such power of sale can be exercised after notice in writing requiring payment of the principle
money has been served on the mortgagor, or on one of several mortgagors; and

(ii) default has been made in payment of the principal money, or of part thereof, for three months
after such service;66 or

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

Right to appoint receiver (S. 69A)- According to section 69A, a mortgagee19 who has a right
to exercise power of sale is entitled to appoint20 a receiver of the income of the mortgaged
property or any part thereof. This power can be exercised only in writing, and should be signed
by mortgagee or on his behalf. Any person who has been named in the mortgage-deed and is
willing and able to act as receiver may be appointed by the mortgagee. If no person has been so
named, or if all persons named are unable or unwilling to act, or are dead, the mortgagee may
appoint any person to whose appointment the mortgagor agrees; failing such agreement, the
mortgagee shall be entitled to apply to the court for the appointment of a receiver, and any
person appointed by the court shall be deemed to have been duly appointed by the mortgagee.

A receiver may at any time be removed22 in writing, signed by or on behalf of the mortgagee
and the mortgagor, or by the Court on application made by either party and on due cause shown.

Right to accession (S. 70)- If, after the date of a mortgage, any accession is made to the
mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the
purposes of the security, be entitled to such accession.

Right to spend money (S. 72)- A mortgagee may spend such money as is necessary:63

(i) for the preservation of the mortgaged property from destruction, forfeiture or sale;

(ii) for supporting the mortgagor's title to the property;64

(iii) for making his own title thereto good against the mortgagor, and when the mortgaged
property is a renewable leasehold;

(iv) for the renewal of the lease;65 and

(v) may, in the absence of a contract to the contrary,66 add such money to the principal
money,67 at the rate of interest payable on the principal,68 and,

(vi) where no such rate is fixed,69 at the rate of 9% per annum

LIABILITIES OF MORTGAGEE
Sec. 76 (page 64)

The duties of the mortgagee under this section are as follows:

(i) a duty to manage the property as a person of ordinary prudence- A usufructuary mortgagee
having possession of the mortgaged property is under a duty to manage the property as a person
of ordinary prudence would manage it if it were his own. If he fails to carry necessary repairs, he
would be liable for the loss.

(ii) to collect the rents and profits thereof- A mortgagee in possession must try his best to collect
the rents and profits thereof. A condition about crediting the rents and profits is always
implied65 and need not be specifically laid down.

(iii) to pay the Government revenue and all other charges of a public nature- A mortgagee in
possession must, in the absence of a contract to the contrary,80 out of the income of the
property,81 pay the government revenue, all other charges of a public nature,82 and all rents
accruing due in respect thereof during such possession83 and any arrears of rent84 in default of
payment of which the property may be summarily sold.
(iv) to make such necessary repairs of the property as he can pay for out of the rents and profits
thereof- A mortgagee in possession must, in the absence of a contract to the contrary, make such
necessary repairs4 of the property as he can pay for out of the rents and profits thereof,5 after
deducting from such rents and profits the payments mentioned in clause (c)6 and the interest on
the principal money.

(v) not to commit any act which is destructive or permanently injurious to the property-

(vi) to apply insurance money in reinstating the property- Where a mortgagee16 in possession
has insured the whole or any part of the property against loss or damage by fire, he must, in case
of such loss or damage, apply any money which he actually receives under the policy or so much
thereof as may be

necessary, in reinstating the property, or, if the mortgagor so directs, in reduction or discharge of
the mortgage-money.

(vii) to keep clear, full and accurate accounts of all sums received and spent by him as
mortgagee- A mortgagee in possession must keep clear, full and accurate accounts17 of all sums
received and spent by him as mortgagee, and, at any time during the continuance of the
mortgage, give the mortgagor,18 at his request and cost, true copies of such accounts and of the
supporting vouchers. The mortgagee, as required by law, must maintain accounts.19 A duty to
keep accounts is a rule of justice, equity and good conscience.

(viii) to apply rents and profits in discharge of interest after making deductions; and

(ix) to account for gross receipts.