Professional Documents
Culture Documents
in sale
Mortgage.
Transfer of Property
The preamble of the Transfer of Property Act states that the Act is meant to define and
amend laws relating to transfer of Property – by act of parties.
Section 5 of the Transfer of Property Act defines ‘transfer of property’ as an act by which
a living being conveys property, in present or in future, to one or more other living
persons, or to himself (i.e. it is a transfer viter vivos)
Property:
In this Act the term property may be used in any of the following senses:
(i) Tangible or material things, e.g. land and houses.
(ii) Rights which are exercised over material things e.g. right to enjoy and
possess, right to sell or to make a gift of things.
(iii) Rights which are not exercised over material things e.g. a right to repayment
of a debt (an actionable claim).
Immovable Property:
In the T.P. Act, the definition of immovable property is negative.
According to Sec. 3 of the General Clauses Act, 1897: “Immovable property” shall
include lands, benefits to arise out of land, and things attached to the earth, or
permanently fastened to anything attached to the earth.”
Embedded in earth:
e.g. wall or building, but an anchor embedded in earth is not ‘immovable property’.
Standing timber:
regarded as severable – so not regarded as immovable property.
Trees are of two classes:
1) Fruit bearing trees
and 2) Timber trees (grown for the sake of wood)
1
Standing timber in Section 2 (6) of the Registration Act, means “a standing timber tree”.
Growing crop:
include creepers like betel leaves etc.
Grass:
can be used as fodder – so movable.
Transfer:
It may mean either transfer of all the rights and interests in the property or transfer of one
or more of subordinate rights in the property, e.g. lease.
Transfer of Property:
It may imply any of the following things:
(1) Transfer of things e.g. sale of a house.
(2) Transfer of one or more rights in a thing e.g. mortgage.
(3) Transfer of a debt.
Partition:
2
Easement:
Family Arrangement:
Previously, a person could not convey property to himself, though he could create a
trust in his favour.
But at present, it is clear from the section that a transfer can be made by a person to
himself, as for instance by a person making a settlement or trust in which he
constitutes himself a trustee.
Attested:
3
Notice
It may be:
(a) actual, or (b) constructive
Constructive notice:
- It may be defined as ‘knowledge which the court imputes to a person from the
circumstance of the case, upon a legal presumption, so strong that it cannot be allowed to
be rebutted that the knowledge must exist though it may not have been formally
communicated.
Doctrine of notice:
Legal presumptions are drawn from
(1) Wilful abstention from enquiry or search.
(2) Gross negligence.
(3) Registration of any transaction in relation to immovable
property.
(4) Actual possession
(5) Notice to an agent
The doctrine of notice has been applied in several sections of the Transfer of Property
Act viz Sec. 39, Sec. 41, Sec. 43, Sec. 51, Sec. 53, Sec. 53A, Sec. 100, Sec. 108, Sec.
108-A (6), Sec. 111, Secs. 130 and 131.
Section 6:
What cannot be transferred:
(a) The chance of an heir apparent succeeding to an estate, the chance of a relation
obtaining a legacy on the death of a kinsman, or any other possibility of a like nature
cannot be transferred.
(b) A mere right of re-entry for breach of a condition subsequent cannot be transferred to
any one except the owner of the property affected thereby.
(c) An easement cannot be transferred apart from the dominant heritage.
4
(d) An interest in property restricted in its enjoyment to the owner personally cannot be
transferred.
(e) A right to future maintenance in whatever manner arising, secured or determined,
cannot be transferred.
(f) A mere right to sue cannot be transferred.
(g) A public office cannot be transferred, nor can the salary of public officer, whether
before or after it has become payable.
(h) Stipends allowed to military, naval, air force and civil pensioners of the Government
and political pensioners cannot be transferred.
(i) No transfer can be made (1) in so far as it is opposed to the nature of the interest (2)
for an unlawful object or consideration within the meaning of Section 23 of the Indian
Contract Act, 1872 or (3) to a person legally disqualified to be transferee.
[Note – Section 6(a) and Section 43 have no conflict. The two should be read together.]
Section 7 –
- This section has two parts
- The first part provides that every person is competent to transfer, provided that –
5
(a) he is competent to contract;
(b) he is entitled to transferable property; or
(c) he is authorized to dispose of transferable property not his own.
- The latter part lays down that every person is competent to transfer such property –
(a) either wholly or in part;
(b) either absolutely or conditionally;
(c) in the circumstances;
(d) to the extent; and
(e) in the manner allowed and prescribed by any law for the time being in force.
- The expression ‘allowed and prescribed by any law for the time being in force’ governs
all the items described above as (a) to (e).
Section 8 –
- This section says, in the absence of a different intention, express or implied, the transfer
passes all the interest which the transferor is then capable of passing in the property and
in the legal incidents thereof.
- For application of the section, there must a transfer of property coupled with the
intention of the transferor to convey the title therein.
- According to it, it is only the transferor’s interest that passes to the transferee, the
general principle being that a person cannot transfer to another more than what he is
entitled to and that a transferee cannot, therefore, have a better or higher title or interest
than what the transferor himself had in the property transferred.
6
- Transfers which are not to be in writing-
Examples:
(1) Leases for agricultural purpose (Section 117)
(2) Agreements for treating sale deeds as mortgages
(3) Family arrangement
(4) Partition:
(a) In allotment of specific properties or parcels to individual coparceners
agreements may be made orally.
If the parties reduce the transaction to a formal document which is
intended to be evidence of partition, it has the effect of declaring the
exclusive title to the coparcener to whom the particular property is
allotted, and its registration is compulsory under section 17 (1) (b) of I.R.
Act.
(b) If the document does not evidence any partition by metes and bounds, it
does not come under section 17 (1) (b) of Registration Act, 1908.
Section 10:
Principle :
Absolute restraint of the right of transfer of property is repugnant to the nature of the
estate.
- Absolute restraint is void in law.
Thus a condition that the transferee shall not alienate the property to any one is an
absolute restraint, and so void.
- A restraint on alienation may be either (1) absolute or (2) Partial.
- An absolute restraint is void but a partial restraint is not.
Note: An agreement between two co-sharers at a partition, giving a right to one to buy
the share of the other, if sold, is a partial restraint on alienation and is not void.
[Ratanlal v. Ramanujdas, AIR 1944 Nag 187]
7
(a) a condition in a lease that the lessee shall not sublet or assign his interest in the lease,
even though the lease is a permanent lease;
(b) a condition requiring the lessee to pay in certain sum as nazrana to the lessor on
assignment or transfer of an interest under the lease.
(c) a condition in a perpetual lease entitling the lessor to terminate the lease at any time,
(d) a condition making the rights of the perpetual lessee non-transferable.
Partition:
- The right of a co-sharer to obtain a partition is an incident of joint ownership. An
agreement not to partition the party for an indefinite period will contravene that right and
be invalid.
[Chandra Sekhar v. Kundanlal, ILR 31 All 3]
:Section 12:
- Two conditions subject to which no transfer can be made:
(1) interest in the property transferred will cease on the transferee becoming
insolvent.
(2) interest in the property transferred with cease on the transferee endeavouring
to transfer a dispose of the property.
- Such conditions are illegal and void, and are ignored.
- Section 12 invalidates only those conditions which are in derogation of the rights of the
transferee.
- According to the proviso (i.e., 2nd part) the lessor may validly stipulate such condition in
the lease.
8
[Note – Section 20 deals with a cease where an unborn person acquires a vested interest
on transfer for his benefit. That section refers to the creation of a limited interest by
transferor in favour of someone in the first instance and the creation of a successive
interest in the unborn person thereafter.]
[N.B. – Section 14 read with section 54 of the T.P. Act makes out that a mere contract for
sale of immovable property does not create any interest in the immovable property.
[Ram Baran v. Ram Mohit, AIR 1967 SC 744.
- A contract for preemption does not create such an interest.]
- The time allowed, according to section 14, after the duration of existing lives should be
a term of 18 years (or 21 years) i.e., the period of minority, and the period of gestation in
case of possible issue.
Future interests:
- All future interests may be placed in two categories:
1) those which are vested, and
2) those which are contingent.
- Interests which are vested – may be vested either in possession or in interests.
An estate is vested in possession when its owner is entitled to present possession.
It is vested in interest when there is a present unqualified right of taking possession as
soon as it becomes vacant.
Thus where an estate is given to A for life and after his death to B for life. A has an estate
which is vested in possession and B has an estate which is vested in interest.
[N.B. – An estate vested in interest is always a present right in the sense that the owner is
clothed with an immediate power of transfer, though it not always present in the sense
that he is not entitled to the actual physical enjoyment of the estate at the moment.
An estate is contingent of the accrual of the owner’s title depends upon the occurrence of
some uncertain event.
So, where a property is transferred to A for life, and then to B when he obtains majority,
here so long as B is a minor, he has a mere contingent interest, for he has not yet satisfied
the condition upon which the acquisition of a definite interest depends.
1) He is not yet qualified to take possession when even it falls vacant.
2) It is even uncertain whether he will attain majority. He may die before attaining
majority.
9
If there is a limitation and the property is given to A and B for their lives, and then to
the survivor of them is absolute ownership stands contingently limited while A and B
are still alive for during that period neither of them can establish his claim to the
ownership of the estate, and it is also doubtful which of them will survive.]
Family arrangements:
- Family arrangements or family settlements may be divided into two categories, viz.-
1) those, whereby there is a transfer of property, and
2) those, whereby there is no transfer of property.
The former will be fit by the rule against perpetuity but not the latter.
Charge:
- The rule against perpetuity would not apply to a charge.
There can be no question of redeeming a charge but only of payment of the arrears of the
amount charged due.
- Charges does not amount to a transfer of interest in property within the meaning of the
section.
Section 15:
Class
- The term “class” is commonly used to mean a number of persons when they can be
designated by some general name, as ‘children’, ‘grandchildren’, ‘nephews’.
Example: A gift of an aggregate sum to a body of persons uncertain in number at the time
of the gift to be ascertained at a future time.
Section 16:
The three conditions are:
(1) There should be an interest created for the benefit of a person or class of persons
which must fail by reason of the rules contained in Sections 13 and 14.
(2) There should be another interest created in the same transaction.
(3) The other interest must intend to take effect after or upon failure of the prior
interests.
Example:
A bequest of the trust fund:
“My great-grandsons shall, when they attain majority, receive the whole to their
satisfaction, and they will take the same in accordance with the Hindu Law, God forbid it,
but should I have no greatgrandsons in the male line, then my daughter’s sons, when they
are of age, shall take the said property from the trust fund and divide it according to the
shastras in vogue.”
Here the bequest to the daughter’s sons was dependant on, and not alternative to, the gift
to the greatgrandsons, and therefore, a bequest which is void within this rule.
10
If the bequest was written as:
“If at the time when my daughters’ sons come of age, the gift to my great-grandsons for
any reason has not taken effect, then my daughters’ sons shall take the property.”
the gift being in the alternative would not infringe the rule
and would take effect.
The interest described in divisions (a), (b) and (c) is a vested interest, while according to
section 21, that described in division (d) [(i) & (ii)] is contingent.
Vested Interests:
- An interest may be vested, either
(i) in possession, or
(ii) in interest
- An estate is vested in possession when its owner is entitled to present possession.
- It is vested in interest, when there is a present unqualified right of taking possession as
soon as it becomes vacant.
Example:
When an estate is given to A for life and after his death to B for life.
11
A has an estate which is vested in possession, and B has an estate which is vested in
interest.
- An estate vested in interest is always a present right and the owner has an immediate
power of transfer though he is not entitled to the actual physical enjoyment of the estate
at the moment.
Note:-
- It is to be noted that a vested interest is not defeated by the death of the transferee.
Explanation-
- An intention that an interest shall not be vested is not to be inferred, merely from a
provision, which -
(a) postpones the enjoyment of such interest; or
(b) gives or reserves a prior interest in the same property to some other person; or
(c) directs the accumulation of income arising from the property until the time of
enjoyment arrives; or
(d) directs the passing of that interest to any other person on the happening of a specified
event.
In the latter case, as the explanation enacts, are intention that an interest shall not be
vested will not be inferred.
‘A prior interest in the same property is given or reserved to some other person.’ –
- Where an interest is created subject to a prior interest created or reserved, such interest
takes effect from its very inception and becomes vested as from the date of the transfer,
although the enjoyment of such subsequent interest is necessarily postponed during the
12
subsistence of the prior interest. A prior interest does not postpone the vesting of the
subsequent interest.
‘If a particular event shall happen the interest shall pass to another person.’ –
- A provision, that if a particular event shall happen the interest shall pass to another
person, ordinarily, divests an estate which has vested and vests it in another person. But
such a provision does not prevent an estate from vesting.
N.B. – A condition subsequent, on the other hand, operates, not to bring an interest into
existence, but to determine an interest which has already been granted.
(iii) Limitation:
- A limitation is a form of words which creates an estate and denotes its extent by
designating the event upon which it is to commence and the time for which it is to
endure. It marks the utmost time for which the estate can continue.
The limitation may be –
(a) a direct limitation, or
(b) a determinable limitation
A direct limitation marks the time by denoting the size of the estate e.g. as ‘for life’ or
in ‘absolute ownership.’
A determinable limitation not only gives an interest for one of the times possible in a
direct limitation, that is ‘for life’ or ‘in absolute ownership’ but also denotes some event
which shall determine the estate during the continuance of that time.
13
:The rule:
- A ‘contingent interest’ means an interest the vesting of which depends on the happening
or not happening of a specified uncertain event. The uncertainty of the happening or not
happening, of a stated event is of the essence of a contingent.
In either case, until the condition is fulfilled, an interest is contingent such interest
becomes a vested interest, in the former case on the happening of an event and in the
latter case, when the happening of the event becomes impossible.
Exception:
Where, under a transfer of property, a person becomes entitled to an interest therein upon
attaining a particular age, the interest is not contingent if the transferor also
(a) gives to such person absolutely the income to arise from interest before he reaches
that age,
(b) directs the income, or so much there of as may be necessary, to be applied for his
benefit.
- Section 25 deals with a rule relating to a condition precedent. It lays down that where
on a transfer of property -
(a) an interest is created, but
(b) the interest is dependent upon the fulfillment of a condition, such interest fails if, -
(1) the fulfillment of the condition is impossible, or
(2) condition is forbidden by law, or
14
(3) the condition is of such a nature that, if its fulfillment were permitted, it would
defeat the provisions of any law, or
(4) the condition is fraudulent, or
(5) the condition involves or implies injury to the person or property of another, or
(6) the court regards the condition as immoral, or
(7) the court regards the condition as opposed to public policy.
Meaning of condition:
- A condition specifies some event, which if it takes place during the time
for which the estate has been limited to continue will defeat the estate.
- Its office is to defeat the estate on some event happening or not happening.
- Conditions may be precedent or subsequent.
- Conditions precedent are those which must be fulfilled before an interest
can arise.
- An interest upon condition subsequent arises, where a qualification is
annexed to a transfer whereby it is provided that, if a particular event does
or does not happen, or in case the transferor or the transferee does or omits
to do any specified act, the interest shall be defeated.
- In the case of a breach of a condition, the prior interest terminates
automatically and is superseded by the ulterior interest.
15
Section 26: Fulfillment of condition precedent:
- The section enacts that where the terms of a transfer of property impose a condition to
be fulfilled before a person can take an interest in the property, the condition shall be
deemed to have fulfilled, if it has been substantially complied with.
- The words ‘substantially complied with’ means substantially complied with under the
circumstances of a particular case, having regard to the intention of the transferor.
Section 27:
The section means that when an interest in the same thing is given, or a transfer of
property, in favour of one person, and by the same transaction, on failure of the prior
disposition, an ulterior disposition of the same interest is made in favour of another, then
the ulterior disposition takes effect upon the failure of the prior disposition, although the
failure may not have occurred in the manner contemplated by the transferor, but in some
other manner.
Acceleration:
- The failure of the prior results in the acceleration of the subsequent interest.
- It is to be observed that the doctrine of acceleration is based on the principle that
property cannot be in vacuo.
- When a prior interest in some property fails, the subsequent interest in that property
becomes accelerated, because that property cannot lie in vacuo.
- But a failure of prior disposition cannot accelerate a subsequent disposition, not taking
effect on the determination of that prior disposition.
- Thus, a subsequent disposition cannot be accelerated, where the persons, who are to
take under it can only be ascertained at a future date, and it cannot take effect unless the
two dispositions are dependent upon each other.
Section 28:
:The scope of the section:
- This section deals with the divesting of interests created on a transfer of property.
- The ulterior disposition, as it is called in sections 27, 29 and 30 of the Act, and the
ulterior transfer, as it is called is marginal note in this section, is affected by a conditional
limitation, that is a limitation containing a condition which –
(i) divests an estate that invested, and
(ii) vests it in another person.
- As regards the prior interest, it is a condition subsequent, but as regards the ulterior
interests, it is a condition precedent.
- This section enacts that, on a transfer, an interest in the property transferred may be
created to accrue to any person with the condition super-added that such interest shall
pass to another person in case –
(i) a specified uncertain event shall happen, or
(ii) a specified uncertain event shall not happen
- If a condition is laid down as aforesaid, such a condition is valid subject to the rules
contained in sections 10, 12, 21, 22, 23, 24, 25 and 27.
16
:Conditional limitation:
- A limitation is a form of words which creates an estate and denotes its extent by
designating the event upon which it is to commence and the time for which it is to
endure. It marks the utmost time for which the estate can continue.
- A condition, other the other hand, specifies some event, which if it takes place during
the time for which the estate has been limited to continue, will defeat the estate.
:Effect of ulterior conditional transfers:
- Ulterior transfers conditional on happening or not happening of specified uncertain
event, may be valid. Thus the transferor may direct that in case of one of the transferees
dying issueless, the property would go over to the surviving transferee.
Section 30: -
An ulterior disposition is not valid if –
(a) it is not one recognized by law, or
(b) the condition on which it is to take effect is invalid.
In such cases the prior disposition is not affected
Note:
- Section 25 of the Act lays down that an interest created on a transfer of property and
dependent upon a condition fails if the fulfillment of the condition is impossible etc. And
where a prior disposition is invalid, the subsequent interest also fails by virtue of section
16.
17
- But if the ulterior disposition is not valid, the prior disposition is not affected.
Section 31:-
- The section is subject to the provisions of section 12 which makes a
condition or limitation void, in case any interest in the property transferred
is reserved or given to or for the benefit of any person on condition to
cease on his becoming insolvent or endeavouring to transfer or dispose of
the same.
- It provides that, on a transfer of property, an interest in such property may
be created with the condition superadded that it shall cease to exist in case
–
(a) a specified uncertain event shall happen, or
(b) a specified uncertain event shall not happen.
Section 32:-
Such condition must not be invalid:
- This section is analogous to section 30, under which an invalid ulterior disposition does
not affect a prior interest.
So under this section an invalid condition subsequent does not divest the interest to which
it is attached.
- A condition which is void as a condition precedent is also void as a condition
subsequent.
:Invalid conditions:
- The following types of conditions subsequent are invalid i.e. void, when annexed to the
grant of an estate or interest.
(1) conditions repugnant to the interest granted in this class fall-
(a) conditions restraining alienation (section 10)
(b) restrictions repugnant to interests created (section 11)
(c) conditions making interests determinable on insolvency or attempted alienation
(section 12)
(2) conditions in total restraint of marriage;
(3) conditions contrary to public policy
(4) uncertain conditions
(5) conditions referred to in section 25
:Valid conditions:
- The following conditions have been held to be valid, -
(a) the donee shall not marry a Christian or become a Christian,
(b) the donee shall become a nun,
(c) the donee shall give up the habit of keeping low company,
(d) the donee would be divested; if married with the life-time of her father.
18
Section 35: Election when necessary:
- Doctrine of Election -
(1) The person who professes to transfer a property has no right to transfer.
(2) That person, as a part of the same transaction confers any benefit on the owner of the
property.
(3) The owner must elect either to confirm such transfer or to dissent from it.
(4) In case of dissent, the owner shall relinquish the benefit so conferred.
(5) The benefit relinquished shall revert to the transferor or his representative as if it had
not been disposed of.
(6) a) Where the transfer is gratuitous, and the transferor has, before the election, died or
otherwise become incapable of making a transfer, and
b) in all cases where the transfer is for consideration the benefit which reverts to the
transferor shall be subject to the charge of making good to the disappointed
transferee, the value of the property attempted to be transferred to him.
- This principle is based on a Rule of equity that a person cannot accept and reject the
same instrument, and this is the foundation of the law of election.
The Doctrine of Election may be defined as : (by Maetland) “that he who accepts a
benefit under a deed or will or other instrument must adopt the whole contents of that
instrument, must conform to all its provisions and renounce all rights that are inconsistent
with it.”
- The rule that “benefit shall revert to transferor” is subject to the following exception.
In case of, (i) a gratuitous transfer where the transferor dies or is incapacitated for making
a fresh transfer, or
(ii) where the transfer is for consideration the transferee is entitled to compensation
equivalent to the value of the property attempted to be transferred.
[In such a case, the balance or surplus, if any, would fall into the residuary bequest, or
devolve according to the rules of intestate succession, as the case may be vide Section
180 of the Indian Succession Act.]
:Election by conduct:
- Acceptance of the benefit by the donor constitutes election in the following cases:
(a) if he is aware of his duty to elect etc., and
(b) if he waives inquiry into the circumstances.
19
- For the acts to constitute a binding electio9=n the person doing them must have the
following knowledge:
1) Knowledge of both the rights
2) Knowledge of the need to elect which includes:
a) Knowledge that the instrument under which one benefit which is given to him conflicts
with his other rights, and also
b) knowledge that if he takes under the instrument, he must give up his other right to
make compensation for it.
(ii) such knowledge may be presumed from enjoyment of the benefit for two years;
or, (iii) from impossibility to replace parties in statusquo ante;
(iv) assent may be inferred from his non compliance with the requisition by the transferor
or his representatives to make his election.
Circumstances:
- Instance: On a question of election by a party bound to elect between two properties, it
is necessary to inquire into the circumstances of the property against which the election is
supposed to have been made.
- The general rule is that a party is not bound to elect until he is aware of all the
circumstances, and the state and condition and value of the funds are clearly ascertained.
:Waiver:
- A waiver of election has in law the same result as if the election had been made and the
true facts ascertained.
:Section 41:
The essential conditions for applicability of the section:
- The essential conditions for the applicability of the section are -
(1) a person must be ostensible owner of a property;
(2) he must be owner with the consent express or implied of the real owner;
(3) the transferee must purchase the property from such ostensible owner for
consideration;
(4) before taking the transfer, the transferee must take reasonable care to ascertain that
the transferor has power to make the transfer; in other words, he must act in good faith.
- If any of the above condition is wanting, the transferee would not be entitled to the
benefit of the section.
20
- These provisions are applicable in voluntary transfers and not in involuntary transfers,
like auction sales and even the court playing role of an ostensible owner of property,
when selling, cannot attract the provisions of Act.
[Tote Singh (dead) by LRS v. Ram Das Mahta, 1997 (1) MPLJ 446 (SC)]
- Distinction between this section and section 115 of the Evidence Act -
- Although this section also deals with a branch of the law of estoppel, yet section 115,
Evidence Act, does not impose upon a person acting on the faith of a representation made
to him, the same duty of making enquiries into the truth of the representation as is
imposed upon a transferee from an ostensible owner by this section.
- Estoppel applies to cases of intentional inducement to act upon the representation.
This section has reference to cases of unintentional inducements. It is not necessary that
the real owner should have intended that the transferee should take the transfer.
Note:
- This section itself is hinted in its terms to the position of the real owner as against the
purchasers for value from the ostensible owner.
- It does not apply –
(a) gratuitous transferees, or
(b) the rights of the successors-in-interest of the real owner, or
(c) the rights of subsequent purchaser from gratuitous transferees, or
(d) subsequent purchasers from first transferees for consideration from the ostensible
owner.
- The rights of such successors-in-interest or subsequent transferees are to be determined
on general equitable principles.
- The principle underlying this section is commonly understood to be that when one of
two innocent persons must suffer from the fraud of a third, he shall suffer who, by his
indiscretion, has enable such third person to commit the fraud.
- In Gurubux Singh vs. Nikka Singh (AIR 1963 SC 1917) their Lordships held that
section 41 was an exception to the general rule that a person could not confer better title
than what he had.
21
- Being an exception, the onus is upon the transferee to show:
(1) that the transferor was the ostensible owner of the property.
(2) that he had after taking reasonable care to ascertain that the transferor has the power
to make the transfer acted in good faith.
Section 43:
- The rule enacted in this section assumes -
(1) the transfer intended would be otherwise good, except for want of a perfect title in the
transferor,
(2) that it is made by fraudulent or erroneous representation of the transferor,
(3) that the transferor is competent to contract; and
(4) that the property he proposes to transfer is transferable.
- The section applies only to cases where the invalidity of a transfer is due merely to the
transferor, either -
(1) not having a title, or
(2) having only a defective title
in which cases, the subsequent acquisition of a good title enables the transferee to claim
the benefit of that good title, but it can have no application 1) where to the knowledge of
the transferee, the transfer is forbidden by law or 2) where the transferee fails to obtain a
registered deed of transfer or 3) to transfers of spes successonis, where there is no
representation by the transferor, or 4) to transfer of immovable property which, though
not transferable at the time of transfer, become transferable afterwards.
:Proviso:
- The proviso expressly lays down that transferee in good faith for consideration without
notice of the existence of the option of the transferee will be protected.
- The section itself creates two equities, namely –
(1) the one between the transferor and his privies on the one hand and the transferee on
the other hand; and
(2) the other in favour of a bonafide transferee for consideration without notice of the
equity in favour of the first transferee.
- The second equity mentioned in the proviso cannot come into play unless there is an
option in favour of the first transferee.
22
:Note:
- The phrase ‘notice of the existence of the option’ has been used as the first transferee,
who has an equitable interest only, has nothing more than an option to proceed against
the property included in his transfer, it being merely an equitable right and not a transfer
of a legal interest.
:Section 44:
- This section is founded on the principle of subrogation or substitution.
- Where one, two or more co-owners transfers his share, the transferee stands in the shoes
of his transferor. The latter acquires, as to such share or interest, the same rights, as
against the other co-owners, as the transferor had, but subject to any conditions and
liabilities affecting the share or interest at the date of the transfer.
[see also section 4 (1) of the Partition Act, 1893]
:Section 51:
- The important ingredients of the section are -
(a) a transferee of immovable property must have made an improvement on the property;
(b) he must have made the improvement believing good faith that he was absolutely
entitled to the property, and
(c) he must be subsequently evicted from the property by any person having a better title.
If the above conditions are fulfilled such transferee has right to require the person
causing his eviction either – (1) to have the value of the improvement estimated and paid,
or secured to him, or
(2) to sell his interest in the property to him at the then market-value thereof, irrespective
of the value of such improvement.
23
(ii) he has made the improvements believing in good faith that he was absolutely
entitled to the interest in immovable property by virtue of which he had authority to
make the improvements.
:Position of licensees:
- Under section 60 (b) of Easements Act, 1882, a licence cannot be revoked, if the
licensee, acting upon the licence, has executed a work of a permanent nature and
incurred expenses in the execution. Although a person is neither given, nor acquires,
any right over the land, yet he may have the right to its possession, as an incident to
the building erected thereon, to which he has a right, as the owner of the land has
granted him a licence permitting their erection, and the buildings erected are
permanent. What is a work of permanent character is a question of fact.
Note:
- Where, however, the licence has been revoked and the licensee having not executed
any work of permanent nature he cannot take the benefit of Section 51, as he would
not be in bonafide possession in their own right.
It is true that this section, strictly speaking, does not apply to involuntary alienations,
such as court sales, but the principle of his Lis pendens does apply to such
alienations. (Vide Samarendranath Sinha v. Krishnakumar Nag, AIR 1967 SC 1440)
- Pendency of a suit or proceeding continues till the satisfaction and discharge of the
decree passed in the suit. But, where the discharge or satisfaction of the decree
becomes barred by limitation the pendency ends and the bar of this section ceases.
[Sohanlal v. Raghunath Prasad, AIR 1981 All 235]
24
:Essential ingredients of the section:
- To apply section 52, the essential ingredients are:
(i) the pendency of any suit or proceeding;
(ii) the court must have jurisdiction over the person or property;
(iii) the property must be specifically described and be necessarily affected by the
termination of the suit or proceeding;
(iv) the right to immovable property be directly and specifically in question in any
suit or proceeding;
(v) there be transfer made of such immovable property or the same be otherwise
dealt with without the authority of the court;
(vi) the suit or proceeding concerned is not collusive.
25
(4) a compromise which affects the title of a party, if made during the pendency of the
suit
(5) an injunction, in execution of a decree, to remove an obstruction to a passage, when it
is found that another obstruction has also been erected after the institution of the suit.
[Karain Singh v. Imam Din, AIR 1934 Lah 978]
Though the section in term applies only to transfer of immovable property, yet the
principles underlying the section, as they are based on justice, equity and good
conscience, and are of universal application, are applicable to transfers of movable
properties.
:Fraudulent transfer:
- The factors which constitute a fraudulent transfer must necessarily depend upon the
circumstances of each case. But the following are some of the broad indicia namely -
(a) the continuance of transferor in possession of the property he has purported to
transfer, when such continuance in possession is not in accordance with the tenor and
object of the transfer; continuance in possession is not however, evidence of fraud where
possession is consistent with the nature of the transfer;
(b) the insolvency or indebtedness of the transferor;
(c) lack of consideration for the transfer;
(d) the reservation of benefit to the transferor;
(e) the relationship between transferor and the transferee;
(f) the pendency or threat of litigation, secrecy or concealment;
(g) the transfer of the debtor’s entire estate, or substantially the whole of the estate;
(h) the fact that the transfer is made after execution has been issued or a writ has been
issued against the transferor.
- The primary object of sub-section (1) is to make the assets of the transferor available to
the general body of creditors.
26
- The test whether a transfer is hit by the section is whether the debtor intended to
prejudice the creditors as a whole by:-
(1) parting with his property without consideration, or
(2) securing or reserving a benefit to himself.
- But not, at the instance of a party to the transfer on the ground that it was made to
defraud third persons, for such fraud does not invalidate the transfer as between the
parties themselves.
:Sub-section (2):
- This sub-section comes into play in the case of a competition between subsequent
transferee and a prior transferee without consideration.
- In this respect, a bonafide transferee even from a transferee is protected, but the
voluntary transfer is not displaced unless it is fraudulent.
27
:Section 53A – Part-performance:
- The doctrine of part-performance by handing over possession is a recognised doctrine
that subscribes to an equitable title statutorily enacted section 53A of the Transfer of
Property Act.
- The basic requirement of section 53A is that the transferee has taken possession of the
property in part-performance of the contract, or if he is already in possession continues so
in part-performance of the contract and has done some act in furtherance of the contract.
Note:
-The word ‘transfer’ has no application to
(a) family arrangements
(b) partitions
(c) surrenders
28
:Proviso:
- The proviso carves out an exception to the general rule enacted in the section.
- It enacts that the section shall not affect the rights of a transferee, if –
(a) he is a transferee for consideration; and
(b) he has no notice;
(c) either of the contract, or
(d) of the part-performance thereof.
:Section 54:
- To constitute a valid sale, the following ingredients must be present:
(1) there must at least two parties, the seller and the buyer.
(2) the seller must be competent to transfer, within the meaning of section 7 of this Act.
(3) the buyer must be a person who is not disqualified to be a transferee within the
meaning of section 6 (h) (3) of the Act.
(4) the subject-matter of the sale must be a transferable immovable property;
(5) there must be a price in money, paid or promised.(6) the sale must conform to the
requisite form.
(7) the sale must result in a transfer of ownership of the property sold from the seller to
the buyer.
- Paragraphs 2 and 3 lay down the mode of transfer. There are only two modes of
transfer, namely -
(1) by a registered instrument; and
(2) by delivery of possession
- It is only in the case of a sale of tangible immovable property of the value of less than
one hundred rupees that the sale may be made by the delivery of possession.
- In all other cases, a registered deed of conveyance is compulsory and essential.
:Price:
- The word ‘price’ is used in its ordinary sense as meaning money only.
- The price is an essential ingredient for sale.
- The property does not pass, even though a sale deed is duly executed and registered,
unless the deed specifies definite means of ascertaining the price, and provides for its
payment.
- The section uses the word ‘price’ and not ‘money’. The word price is wide enough to
include any amount which can be definitely ascertained and worked out in term of
money, such as an outstanding debt.
29
It may be classified as –
(1) physical, or corporeal or tangible or material which is capable of being perceived
by external organs of senses;
(2) non-physical or incorporeal or intangible, or artificial, which cannot be perceived
by the senses, but is recognised as property in the eye of law.
:Easements:
- The section can relate to the transfer of an easement but not to the creation thereof.
- The grant of an easement is not a transfer of ownership within the meaning of this
section.
[Satyanarayan v. Lakshmayya, AIR 1929 Mad 79]
:Profit a prendre:
- Profit a prendre is immovable property.
- It is regarded as a benefit that arises out of the land and as such is immovable property.
- It Profit a prendre is transferred, the conveyance requires writing and registration
because of this section.
[Ananda Behara v. State of Orissa, AIR 1956 SC 17]
:Reversion:
- A reversion is particularly mentioned in the second paragraph of the section and is
treated as an intangible thing. The transfer of property in the possession of a tenant is
really the transfer of a ‘reversion’ and can be made only by a registered instrument.
30
N.B.- The words ‘price paid or promised’, in the definition of sale, indicate that
payment of price is not necessarily a sine quanon to the completion of the sale, and the
deed may expressly provide that the ownership will not pass until the price is paid or that
sale will be void unless the price in full is paid within a fixed time.
:Doctrine of Marshalling:
- The equitable principle underlying the doctrine, as embodied in this section, is that if a
creditor has a mortgage, charge or lien on two or more properties out of which to satisfy
it, he must not, by his election, prejudice another person who has a mortgage, charge, or
lien on only one of the properties.
- If one encumbrancer has a security on two or more properties of the same mortgagor,
and another person has an interest whether by purchase or mortgage in one property only,
the doctrine of marshalling will come into operation so as to throw the first encumbrance,
as far as possible, on the first property not included in the subsequent purchase or
mortgage.
- The section itself states that the marshalling by subsequent purchaser will not extend to
prejudice the right 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.
31
(c) there is no contract to the contrary, that is, against the right to obtain marshalling;
(d) the marshalling does not prejudice the rights of the mortgagee, or of persons claiming
under him, or of any other person who has, for consideration, acquired an interest in any
of the properties.
- If the above four conditions are fulfilled, the purchaser will have the right to have the
mortgage – debt satisfied out of the property, or properties, not sold to him, so far as the
same will extend.
I. Simple Mortgage:
- The elements of simple mortgage:
(1) possession of the mortgaged property is not delivered to the mortgagee. It remains
with the mortgagor.
(2) the mortgagor binds himself personally to pay the mortgage-money; in other words,
he undertakes either expressly or impliedly a personal obligation to pay the mortgage-
money;
(3) the mortgagor agrees, expressly or impliedly, that in the event of his failing to pay
according to his contract, mortgagee shall have a right to cause the mortgaged property
sold, and the proceeds of the sale to be applied, so far as may be necessary, in payment of
the mortgage-money [or in other words the mortgagor transfers a right to the mortgagee
to cause the property to be sold in the event of the mortgagor failing to pay according to
his contract.]
32
(ii) In a mortgage by conditional sale the mortgagor does not make himself personally
liable for repayment of the loan, but only covenants that on default of payment on a
certain date, the property shall pass to the mortgagee.
- Such a mortgage may or may not be usufructuary. If usufructuary, it usually contains a
stipulation that the usufruct shall be taken by the mortgagee in lieu of interest.
33
:Distinction between a mortgage by conditional sale and a sale with a condition of
repurchase:
- The following facts are to be considered:
(i) whether the relationship of creditor and debtor is intended to be subsisting even
subsequent to the execution of the document evidencing the transaction.
(ii) whether there are an outright sale by one party in favour of another with a condition
enabling the other party to reconvey on the performance of a certain condition.
(iii) whether the consideration for the document is said to be adequate so as to take the
transaction as a sale-deed.
(iv) whether possession of the property mentioned in the document was given to the other
party.
(v) whether the title deeds were handed over by one party to another.
(vi) if the language employed in the document is clearly unambiguous, no extrinsic
evidence need be resorted to;
(vii) if, on the other hand, there is any ambiguity or dubiety in the language employed in
the document, then resort to the contemporaneous and surrounding circumstances also is
justified, but the subsequent conduct of the parties, cannot be resorted to for the purpose
of ascertaining the intention of the parties.
:Usufructuary mortgage:
- The transaction is called a usufructuary mortgage where the mortgagor -
(1) (a) delivers possession or
(b) expressly, or by implication, binds himself to deliver possession of the mortgaged
property to the mortgagee; and
(2) authorises the mortgagee to retain such possession until payment of the mortgage-
money, and
(3) to receive –
(a) rents and profits accruing from the property, or
(b) any part of such rents and profits, and
(4) to appropriate the same –
(i) in lieu of interest, or
(ii) in payment of the mortgage money, or
(iii) partly in lieu of interest and partly in payment of the mortgage money
34
(4) as the mortgagor does not bind himself to repay (though may repay the mortgage-
money if and when he chooses), there can be no forfeiture, and therefore, the remedies by
way of foreclosure or sale are not open to the mortgagee.
Note:
- A usufructuary mortgagee is not entitled to sue for sale of the property, and when there
is a stipulation to the contrary, the transaction ceased to be one of usufructuary mortgage
and is described as an anomalous mortgage.
:English Mortgage:
- The transaction is called an English mortgage, where the mortgagor -
(i) binds himself to repay the mortgage money on a certain date and
(ii) transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso
that he will retransfer it to the mortgagor upon payment of the mortgage money as
agreed.
- The essentials of an English mortgage are:
(i) the undertaking of an obligation by the mortgagor to repay the mortgage money on a
certain date,
(ii) the transfer of the mortgaged property absolutely to the mortgagee; and
(iii) the undertaking or covenant by the mortgagee to retransfer the mortgaged property to
the mortgagor upon payment of the mortgage-money according to the contract.
- Under the English mortgage the debtor is personally liable to pay the debt.
Note:
- In Jagadananda Loan Co. Ltd. V. Shiba Prasaid Singh [681A67] it was held that in
India, a legal interest remains in the mortgagor of a leasehold even in the case of an
English mortgage, and the interest taken by the mortgagee is not an absolute interest and,
whether or not he has entered into possession of the mortgaged property, is not such as to
render him liable for the burdens of the lease by reason of privity of estate.
- The English mortgagee does not forfeit his rights by allowing the mortgagor to take
rents and profits.
35
:Some important characteristics of English mortgage:
- In an English Mortgage:
(1) the obligation to repay the mortgage money personally remains and the mortgagor
remains personally liable for the debt, and under section 69 of the Act.
(2) the mortgagee has power, without intervention of the court to sell, or concur in selling
the mortgaged property, or any part thereof, in default of payment of the mortgage
money. Besides
(3) the mortgagee acquires the right to take possession, on the execution of the deed,
whether a right of entry is expressly covenanted for or not.
[Rukmini Kanta v. Baldeo Das, AIR 1925 Cal 77]
- Under a mortgage in the form of an English Mortgage, unless there is contract to the
contrary, the rents and profits arising out of the land form part of the property subject to
the mortgage.
- If the mortgagee allows the mortgagor to remain in possession, he holds possession
merely as a tenant on sufferance and may be ejected, in the absence of a contract to the
contrary.
:Registration:
- Mortgage by deposit of title deeds may be oral. However to obviate a possible defence
that the deeds were left with the creditor for other purposes, usually a writing
accompanies, or is, at some time or other, handed over to the creditor by the debtor.
- Where such a writing is taken to connect the deposit with the security, it will depend
upon the intention of the parties whether -
1) the writing is to be merely evidence of the security for the loan, or
36
2) is an integral part of the transaction.
- In the former case, registration is not necessary but in the latter case, it is, and if the
document is not registered, no other evidence for this mortgage is admissible.
[UBI Ltd. v. Lekharam Sonaram and Co., AIR 1958 Pat 472]
- In United Bank of India Ltd. v. M/s. Lekharam Sonaram and Co. [AIR 1965 SC 1951],
the Supreme Court has held that if the document is an integral part of the transaction of
mortgage and is an essential ingredient in the creation of a mortgage, it will require
registration.
Remedy
- Section 96 of the Act provides that the provisions which apply to simple mortgage shall,
so far as may be, apply to mortgage by deposit of title deeds.
- The remedy of a mortgagor in such a case is only in an action for redemption.
(1) A simple usufructuary mortgage may be primarily a simple mortgage with a right to
take possession in case of default superadded, in which case a suit for sale is permissible.
(2) A mortgage may be a combination of usufructuary mortgage and a mortgage by
conditional sale, in which the mortgagee gets possession as usufructuary mortgagee for a
fixed period, and it is provided that, if the debt is not discharged at the expiry of that
period, he would be a mortgagee by conditional sale.
(3) Customary mortgages:
- Mortgages to which special incidents are attached by local customs may be called
‘customary mortgages’. In this class fall, for example, otti and kanom mortgages, as well
as peruarthan mortgages.
(4) Other anomalous mortgages: Instances -
(a) a mortgage with possession for a term of years, the property mortgaged to be
redeemed automatically at the expiry of the term;
(b) a mortgage with possession for a number of years, the mortgagee to credit the rent
and profits first towards interest and the balance, if any, towards principal, the mortgagor
covenanting to pay the amount remaining due at the end of the term;
(c) a mortgage with possession for a number of years, the mortgagee’s right to cease at
the end of the term;
(d) where there is a covenant to pay interest but none to repay the principal, but
subsequently the mortgagor deposits certain title-deeds as further security, thus creating
an equitable mortgage, the transaction not amounting to either a simple mortgage, or an
usufructuary mortgage or an English mortgage, or a mortgage by conditional sale.
37
Note:- In case of anomalous mortgages, the rights and liabilities of the parties are
governed by the contract between the parties as evidenced by the mortgage-deed or by
local usage.
:Sub-mortgage:
- A transfer by way of mortgage of his security by the mortgagee is called a sub-
mortgage.
- According to the definition in clause (a) of Section 58, a mortgage is the transfer of an
interest in specific immovable property. An interest under mortgage is itself immovable
property and can be the subject of a valid mortgage by the mortgage.
- All the provisions of law, applicable to mortgages, apply to sub-mortgage also, such as
attestation, registration, etc.
- In the absence of a contract to the contrary, a sub-mortgage comprises:
(a) a personal covenant of the mortgagee, that is, the sub-mortgagor;
(b) the transfer of an interest in the original mortgage-debt and security with the benefit
of all powers and remedial clauses, contained in the original mortgage; and
(c) in the case of a simple mortgage, a power of sale enabling the sub-mortgagee to
dispose of the original mortgage-debt and security.
38
(1) by a registered instrument, signed and attested, as in the case of a mortgage, where the
principal money secured is one hundred rupees or upwards, or
(2) except in the case of a simple mortgage, by delivery of the property.
:Execution:
- It consists in signing a document written out and read over and under noted by the
executant. It does not include merely signing a name upon a blank paper, or even on a
written instrument which is not read or understood by the executant.
- For execution, a document must be in existence, and the executant must sign it after
reading or knowing its contents.
- ‘Signature’ includes ‘mark’ and ‘writing’ includes printing, lithography, photography,
and other modes of representing or reproducing words as a visible form.
[Section 3(52), General Clauses Act, 1897]
:Attestation:
- The section enacts that a mortgage, in order to be valid, must be attested by at least two
witnesses. A mortgage not so attested is not enforceable as a mortgage.
- And since it would fail to operate as a mortgage, it will not be used as creating a charge.
[Pran Nath v. Jadu Nath, ILR 32 Cal 729]
39
:Rights and Liabilities of Mortgagor:
the mortgagor may, at any time, after the principal money has become due, on payment
or tender, at a proper time and place, of the mortgage-money, require the mortgagee to do
any of the various things mentioned in items (a), (b) and (c) and to effect redemption of
mortgage.
- It further lays down two propositions that nothing in this section shall -
(1) be deemed to render invalid any provision to the effect that if -
(a) the time fixed for payment of the principal money has been allowed to pass
(b) no such time has been fixed,
the mortgagee shall be entitled to reasonable notice before payment or tender of such
money;
(2) entitle a person interested in a share only of the mortgaged property to redeem his
share only, on payment of a proportionate part of the amount remaining due on the
mortgage, except only, where mortgage, or, if there are more mortgagees than one, all
such mortgages, has or have acquired, in whole or in part, the share of a mortgagor.
:Right of redemption:
40
- When there is nothing to pay, the mortgagor is entitled to obtain (a) the mortgage deed
etc; (b) possession of the mortgaged property if the mortgagee is in possession; (c) a re-
transfer, etc, of the mortgaged property.
:Right of redemption:
- The section only means that there is an inherent right in the mortgagor to require the
mortgagee to deliver the mortgage deed etc., when the mortgagor pays the amount at a
proper time and place.
- It seems that three remedies are open to the mortgagor:
1) he may either deposit the money under section 83; or
2) he may tender the amount of Court to the mortgagee and obtain redemption, or
3) he may institute a suit for redemption and pray for a decree on condition of his
depositing in court the amount found to be due, within a time fixed by the court.
: The mortgage comes to an end when the mortgage-money has been paid up:
- The principle ‘once a mortgage always a mortgage’ implying that a mortgage must
coexist with a right to redeem is an embodiment of the principles of equity, justice and
good conscience, the right to redeem the same must always be there, whether or not such
a right is conferred to recognised by any express enactment and the right will continue
until the same is barred by limitation or foreclosure. And the inevitable corollary to the
above noted principle is that all provisions or stipulations operating as bar or clog on the
right or the equity of redemption must be struck down as void. There is no manner of
doubt as to the application and operation of the aforesaid principles even in places and
cases covered by the provisions of the Transfer of Property Act.
[B.K. Karki Dholi v. B.M. Darjeeni, AIR 1980 Sikkim]
41
- Ordinarily the right to redeem cannot be exercised till the mortgage money becomes due
unless there is a specific term conferring such a right on the mortgagor to redeem it
earlier.
- The right of redemption is an incident of a subsisting mortgage and subsists so long as
the mortgage itself subsists. It is statutory, and therefore, is a legal right, which cannot be
fettered by any condition which amounts to a clog and impedes or prevents redemption.
- The mortgagor will have no right to pay the mortgage amount even after a final decree
for sale is passed and a sale is held.
[K. Rajendra Prasad v. South Indian Bank, AIR 1998 Ker. 215]
42
:Section 62:: Right of usufructuary mortgagor to recover possession:
- This section embodies a special provision which deals with usufructuary mortgages
only to recover possession. It is supplementary to the general provisions of section 60.
- It provides summary remedy which is available to a mortgagor in three special cases of
usufructuary mortgages:
(1) Where the mortgagee is authorised to pay himself from the rents and profits of the
mortgaged property the interest of the principal money;
(2) Where the mortgagee is authorised to pay himself the principal and interest from the
rents and profits of the mortgaged property; and
(3) Where the mortgagee is authorised to pay himself in part the principal, or interest, or
both, from the rents and profits of the mortgaged property.
- Clause (a) applies to cases where the rents and profits of the mortgaged property are to
be appropriated in lieu of principal and interest.
- Clause (b) applies to cases where rents and profits are to be appropriated either in lieu
of interest or in part towards principal, or interest, or both.
In cases coming under clause (b), the court may have to go into the question of accounts
between the parties.
Note:- A term can be fixed in a usufructuary mortgage for the mortgagee’s enjoyment
during which redemption cannot take place.
43
If the above conditions are fulfilled, the mortgagor –
(a) upon redemption, and (b) in the absence of a contract to the contrary, is entitled,
as against the mortgagee to such accession.
This paragraph apparently deals with natural accessions, and accessions other than those
acquired at the cost of the mortgagee. Such accessions, normally, ensure to the benefit of
the mortgagee and his security, but, at the same time, are subject to redemption.
(ii) The second paragraph – This paragraph deals with accessions, acquired in virtue of
the transferred ownership, that is, those -
(a) acquired at the expense of the mortgagee, and
(b) capable of separate possession or enjoyment without detriment to the principal
property
This paragraph treats of such accessions in two categories, namely –
(1) where such accessions are capable of separate possession or enjoyment,
(2) where such possession or enjoyment is not possible. Accessions of the former
kind pass to the mortgagor, if he desires to take them and pays to the mortgagee
the expenses of acquiring them. Accessions of the second kind must be delivered
with the property, but the mortgagor must, if acquisition – (a) was necessary to
preserve the property from destruction, forfeiture or a sale, or (b) was made with
his assent, pay the proper cost thereof with interest to the mortgagee.
(iii) The third paragraph – In the case of an acquisition necessary to preserve the property
from destruction, forfeiture or sale made with the assent of the mortgagor the profits
arising from the acquisition during the possession of the mortgagee accrue to the
mortgagor, if the mortgagee can charge the mortgagor with the cost of making them,
which normally he is entitled to.
(iv) The fourth paragraph – This chapter particularly refers to usufructuary mortgages
whereas the rest of the section treats of mortgagees in possession generally. It enacts that
any profits resulting to the mortgagee from the expenditure on the occasion shall be
applied in the absence of a contract to the contrary, in satisfaction of his claim for
interest, payable on the money so expended, as far as they will go.
44
with interest, and the profits accruing by reason of the improvement shall be credited to
the mortgagor.
- The improvements must, however, be reasonable, having regard to the nature and value
of the estate.
- The improvements must be made during the continuance of the mortgage.
:Clause (a):
- The mortgagor covenants both -
(a) his title, that is, the quantum of his interest; that is, he contracts that the interest which
he professes to transfer subsists; and
(b) his power to deal with it, that is, the interest which he professes to transfer is
transferable, and that he has power to deal with it.
:Clause (b):
- A mortgagee in possession, suing for mortgage-money on the ground of defect in title,
is not entitled to interest on the decretal amount so long as he remains in possession.
- The obligation to indemnity the mortgagee against expenses incurred in protecting the
title is one implied by law, and does not need an express contract to bring it into
existence.
45
:Clause (c):
- By virtue of this clause, is the absence of a contract to the contrary, a mortgagor is
deemed to contract that he will, so long as the mortgagee is not in possession of the
mortgaged property, pay all public charges accruing due in respect of the property.
:Clause (d):
- When the mortgaged property is a base, the mortgagor is deemed to contract with the
mortgagee that the rent payable under the base, the conditions contained therein, and the
contracts binding on the lessee have been paid, performed and observed down to the
commencement of the mortgage.
For the future he is deemed to have covenanted that so long as the mortgagee does not get
into possession, he will pay the rent and perform the conditions of the lease, and
indemnify the mortgagee against the claim paid and losses sustained by him by reason of
the non-payment of the said rent, or non performance and non-observance of the said
conditions and contracts.
:Clause (e):
- The clause enacts that, in the absence of a contract to the contrary, the mortgagor is
deemed to contract with the mortgagee, and where the mortgage is a second or
subsequent encumbrance on the property, he will pay the interest accruing due on the
prior encumbrance and will, at the proper time, discharge the principal money due on
such prior encumbrance, or otherwise the mortgagee may be deprived of his security.
46
- This section provides for a suit for foreclosure, and a suit for sale, by a mortgagee,
subject to the following limitations, -
(1) a usufructuary mortgagee, as such, cannot sue either for foreclosure or for sale; a
mortgagee by conditional sale, as such, cannot sue for sale, a simple mortgagee, as such,
cannot sue for foreclosure
(2) a mortgagor, who holds the mortgagee’s right, as his trustee or legal representative,
and who may sue for sale of the property, cannot institute a suit for foreclosure.
(3) a mortgagee of a railway, canal or other work in the maintenance of which the public
are interested, cannot institute a suit for foreclosure.
(4) a person, interested in part only of the mortgage-money, cannot institute a suit,
relating only to a corresponding part of the mortgaged property, unless the mortgagees
have, with the consent of the mortgagor, severed their interests under the mortgagee.
- This section applies to all kinds of mortgages and also to charges. Section 100 of the
Act lays down that all the provisions hereinbefore contained which apply to a simple
mortgage shall apply to charges.
[Note: (a) Right to sue can be curtailed by contract
(b) Right to sue can also be accelerated by contract.]
:Clause (a):
- The clause lays down that nothing in this section shall be deemed to authorise
(1) any mortgage other than –
(a) a mortgagee by conditional sale, or
(b) a mortgagee under an anomalous mortgage by the terms of which he is entitled
to foreclose,
(c) to institute a suit for foreclosure,
2. (a) a usufructuary mortgagee as such, or
(b) a mortgagee by conditional sale as such, to institute a suit for sale.
- The reason for the distinction is that neither the simple mortgagee nor the usufructuary
mortgagee has the property in the mortgaged property transferred to him. Neither of
them, therefore, can sue for foreclosure, as foreclosure implies that the property is vested
in the mortgagee subject to a condition and that a right of redemption only remains with
the mortgagor. [see Sec. 93]
- The simple mortgagee can only sue to obtain a decree for sale of the mortgaged
property.
- For usufructuary mortgagee neither sale nor foreclosure is necessary. He realizes his
right by possession and enjoyment of the usufruct.
- The mortgagee by conditional sale does not require a suit for sale. All that he can
require is to prevent the mortgagor redeeming him, that is, he can obtain a foreclosure
decree, and if he not in possession, a decree for possession.
:Section 67A:: Mortgagee when bound to bring one suit on several mortgages:
- The section enacts that a mortgagee is bound to bring only one suit on several
mortgages, -
(a) when he holds two or more mortgages
47
(b) which are executed by the same mortgagor, and
(c) in respect of each of which he has a right to obtain the same kind of decree under
section 67, and
(d) he sues to obtain such decree on any one of the mortgages provided –
(1) there is contract to the contrary, and
(2) the mortgage money has become due under them.
- In order that the section may be applicable, all the above conditions must be satisfied.
- This section is primarily meant for the benefit of the mortgagor and the mortgagor may
waive its benefit.
- It only regulates the procedure to be followed by the mortgagee when he holds several
successive mortgages in respect of the same property from the same mortgagor.
- The right conferred by this section is not a right to enforce the mortgage but a right to
sue for the mortgage-money on the personal covenant or to claim compensation when the
mortgagee is deprived of his security.
[Monimala v. Indu, AIR 1964 SC 1295]
- This section differs from Section 67. The latter refers to the right and remedy of the
mortgagee against the property mortgaged, but section 68 refers to the personal remedy
of the mortgagee, and limits the personal remedy to cases mentioned in clauses (a) to (d)
only.
- The section embraces two different classes of suits, viz. – (a) those based on a
contractual obligation, and (b) those founded on no such contractual obligation; but
brought independently of any contractual obligation.
- In the former class of cases, the personal liability arises under clause (a) by the terms of
the contract of mortgage itself. But under clauses (b), (c) and (d) the liability arises
independently of such contractual obligation.
[Note: By virtue of section 100 of the Act, all the provisions applicable to simple
mortgages apply, so far as may be to charges. This section is, therefore, applicable also
to charges.]
- No personal decree can ordinarily be made against purchase of right of redemption:-
- The purchaser of the right of redemption who, by agreement with his vendor, the
mortgagor, retains the amount of the mortgage-debt out of the price due, does not thereby
48
become personally liable to the mortgagee in respect thereof, since the mortgagee was no
party to the sale and the purchaser entered into no contract with him, and is not
personally bound to pay the mortgage-debt, and he is not a person from whom the
amount is legally recoverable.
- The personal covenant does not run with the land and no personal decree can be passed
against a purchaser of the right of redemption.
- This is made clear by the proviso which lays down that a transferee from the mortgagor
or his legal representatives shall not be liable to be sued for the mortgage money.
:Sub-section (2):
- This sub-section makes it clear that the remedy in clause (a) or clause (b) is not
concurrent with the remedy under section 67 against security.
- A suit under this section is not a suit on the mortgage. It is suit by the mortgagee for
recovery of the mortgage-money. A suit on the mortgage falls under section 67.
- In a suit under this section, the only decree that can be passed is a decree for money.
- The causes of action as well as the right to relief in cases of suits under section 67 and
section 68 are different. If the mortgagee brings a suit under this section, then, according
to sub-section (2) itself, second suit is not barred. And, if the mortgagee institutes a suit
first under section 67, and then under this section, the court has a discretionary power to
stay the subsequent suit under the provisions of subsection (2).
- A suit under this section is not a suit on the mortgage. Therefore, Order XXXIV, Rule
6, CPC has no application.
- It is open to the mortgagee to execute his decree against the mortgagor personally and
preserve his rights under the mortgage.
- Since this might involve hardship to the mortgagor, the sub-section enacts that in cases
where the mortgagor binds himself to repay the mortgage-money, and in cases where the
mortgagor is not in default, that is in cases falling under clauses (a) and (b), the suit
instituted under the provisions of this section shall be stayed until the mortgagee has
exhausted all available remedies against the mortgaged property, or what remains of it, or
unless the mortgagee abandons his security.
49
-:Distinction between Section 70 and Section 63:-
- Under section 63, the mortgagor is not entitled to accessions, acquired at the expense of
the mortgagee unless he pays the expenses, but, under this section, the mortgagee is
entitled to the security of the accession, and he is not bound to bear any portion of the
expenses incurred by the mortgagor in acquiring such accession.
:Clause (b):
- The clause enables the mortgagee to spend such money as is necessary for the
preservation of the mortgaged property from destruction, forfeiture or sale.
While under section 76, clause (d), the mortgagee is bound to make such necessary
repairs as can be for out of the rent and profits thereof after deducting from such rents
and profits, the Government revenue, or other charges of a public nature, and all rents
accruing due in respect thereof and any arrears of rent in default of which the property
may be summarily sold, and the interest on the principal money, under this clause the
mortgagee is at liberty to spend money for the preservation of the property from
destruction, forfeiture or sale. In the absence of a contract to the contrary, he could, in
such a case, add such money with the principal money and recover it with interest.
[Chellasivalingam Nadar v. Aruldas (1975) 1 Mad LJ 85]
:Clause (a):
- This clause puts an obligation on the mortgagee that he must manage the property as a
person of ordinary prudence would manage it if it were his own.
50
:Clause (b):
- This clause imposes a duty upon a mortgagee when during the continuance of the
mortgage, he takes possession of the mortgaged property, to use his best endeavours to
collect rents and profits thereof.
:Clause (c):
- Where there is no contract to the contrary, the clause imposes a duty on the mortgagee,
when, during the continuance of the mortgage, he takes possession of the mortgaged
property, to pay out of the income of the property -
(a) the Government revenue,
(b) all other charges of a public nature,
(c) all rents accruing due in respect of the mortgaged property during such possession,
and
(d) any arrears of rent in default of payment of which the property may be summarily
sold.
:Clause (d):
- The clause provides that, when, during the continuance of the mortgage, the mortgagee
takes possession of the mortgaged property, he must, in the absence of a contract to the
contrary, make such necessary repairs of the property as he can pay out of the rents and
profits thereof, after deducting from such rents and profits -
(a) the payments mentioned in clause (c), and
(b) the interest on the principal money.
- Under clause (b) of section 72, the mortgagee is entitled in order to prevent the
destruction of the security, to spend money on repairs out of his own pocket, and to add
the amount to the mortgage money.
:Clause (e):
- This clause enjoins the mortgage in possession during the continuance of the mortgage
not to commit any act which is destructive or permanently injurious to the property.
:Clause (f):
- This clause imposes an obligation on the mortgagee in possession, during the
continuance of the mortgage, where he has insured the whole or any part of the
mortgaged property against loss or damage by fire, in case of such loss or damage, to
apply any money which he actually receives under the policy, or so much thereof as may
be necessary, in -
(a) reinstating the property; or
(b) reduction or discharge of the mortgage-money if the mortgagor so directs,
if there is no contract to the contrary.
[Note:
- A contract of insurance is a contract of indemnity. It is a contract by the insurer to
indemnify the insured against the loss that he may suffer in certain conditions.]
51
:Clause (g):
- The clause imposes upon a mortgagee, in possession, during the continuance of the
mortgage, the obligation -
(1) to keep clear, full and accurate accounts of all sums received and spent by him as
mortgagee, and
(2) at any time during the continuance of the mortgage, to give to the mortgagee, at his
request and cost, true copies of such accounts and the vouchers by which they are
supported.
:Clause (h):
- This clause deals with the system of accounting, when, during the continuance of the
mortgage, the mortgagee takes possession of the mortgaged property.
:Clause (i):
- This clause enacts that, when, during the continuance of the mortgage, the mortgagee
takes possession of the mortgaged property, and the mortgagor tenders or deposits, in
manner provided in section 83, the amount for the time being due on the mortgage, the
mortgagee must, notwithstanding the provisions in the other clauses of this section -
(1) account for his receipts from the mortgaged property-
(a) from the date of the tender, or
(b) from the earliest time when he could take such amount out of the court as the case
may be, and
(2) not deduct any amount therefrom on account of any expenses incurred after such date
or time in connection with the mortgaged property.
:Priority:
Section 78 :: Postponement of prior mortgage:
- The priority of successive mortgages is determined by section 48 of the Act, which
enacts the rule qui prior est tempore positor est jure .
- Section 78 must be read as a proviso to section 48, which lays down a general rule that
transfers of immovable property takes effect in order of time.
- Section 78 enacts, in plain words, that the prior mortgagee shall be postponed to the
subsequent mortgage, it, through the fraud, misrepresentation or gross-neglect of a prior
mortgagee, another person has been induced to advance money on the security of the
mortgaged property.
52
:Marshalling and Contribution:
53
marshalling, and it does not apply where, in fact, its operation would affect the interest of
third parties other than volunteers.
[Gopilal v. Abdul Hamid, AIR 1928 All 381]
54
properties belonging to all/of them respectively, has been or may be enforced in a manner
not unjust, as regards the person by whom it was or may be enforced, but not just as
between the persons or properties liable.
-: Suit for foreclosure or sale after deposit but before receipt of notice:-
- A decree for foreclosure or sale can be passed only, if the mortgage money has not been
paid or deposited, for when the mortgage money is paid, the mortgage is extinguished
and no question of foreclosure or sale can arise.
- Where a deposit complies with the requirements of this section, the mortgagee cannot
obtain a decree for foreclosure or sale, whether or not he accepts the deposit.
- It is different though, if the deposit is held invalid, for, in that case, it does not amount
to a deposit and there can be no bar to the passing of a decree for foreclosure or sale in
accordance with the provisions of section 67.
55
:Section 84:: Cessation of interest:
[Note:
- The interest need not be the interest as owner. It may be any interest in the property
mortgaged, however small, and may accrue by -
(i) succession; or
(ii) conveyance; or
(iii) contract; or
(iv) otherwise.
[S. 60 Proviso:]
Once a mortgage is validly created, it continues to subsist until -
1) it is redeemed, or
2) it is extinguished.
56
The right of redemption is extinguished by –
1) act of parties, or
2) decree of the court, or
3) operation of law.
[Note: Limitation
- The mortgagor is entitled to redeem within the period prescribed by the Limitation
Act, unless the mortgage has been foreclosed.
- A suit for redemption or for recovery of possession of the immovable property
mortgaged, must be filed within thirty years from the date the right to redeem or to
recover possession accrues.
:Doctrine of subrogation:
- Subrogation means the right of one creditor to stand in the place of another and to avail
himself of that other’s security.
- Subrogation means the substitution of one person for another in regard to the latter’s
rights and liabilities in a certain matter.
- Subrogation being a more substitution, does not create fresh rights, but puts the claimant
in the shoes of the creditor.
- In a subrogation what the redeeming co-mortgagor obtains is a right to stand in the
shoes of the mortgagee whom he had satisfied.
57
Under this section, therefore, the essential requisites for a valid claim of subrogation are:
(1) the person claiming the right -
(a) must have an interest in or charge upon, the property mortgaged entitling him to
redeem the mortgage; and
(b) must redeem the mortgage; or
(2) the person claiming the right must have advanced money to a mortgagor to under an
agreement in writing and registered, that he shall be subrogated to the right of the
mortgagee whose mortgage is discharged.
58
- A charge shall not be enforced against any property in the hands of a person to whom
such property has been transferred for consideration and without notice of charge.
: By operation of law:
- A charge created ‘by operation of law’ includes -
(1) a charge created directly by the provisions of an Act, and
(2) other charges created indirectly as a legal consequence of certain conditions.
:Illustrative case:
- The following are some instances of charges by operation of law created directly by the
provisions of statute -
(1) those created under section 55 (4) (b), when the ownership of the property has passed
to the buyer, before payment of the whole of the purchase-money.
(2) those created as against the seller and all persons claiming under him, to the extent of
the seller’s interest in the property, for the amount of any purchase-money properly paid
by the buyer in anticipation of the delivery, under section 55 (6) (b);
(3) those created for contribution under section 82 of the Act;
(4) those created under section 8 of the Bihar and Orissa Public Demands Recovery Act,
read with this section, when the Government becomes a simple mortgagee;
(5) those created in favour of Municipal Boards for the amount of taxes;
(6) those created in respect of house-tax and sanitary cess imposed in the form of rate on
land or building under Bombay District Municipal Act, 1901;
(7) those created by section 85, Madras District Municipalities Act, 1920;
(8) those created in favour of Government for a loan advanced under the Land
Improvement Loans Act, 1833, Section 7 (1);
59
(9) those created in respect of the arrears of property tax under section 212 of the
Bombay City Municipal Act, 1888;
(10) a co-sharer paying Land Revenue gets a charge upon the share of each of his co-
sharers.
[Note:
- A charge created by a decree other than a compromise-decree, is not a charge created by
the act of the parties or by operation of law without the meaning of this section.
- A right to maintenance does not create a charge on the property unless there is an
agreement or a decree which creates a charge, as the maintenance decree is not only
declaratory decree but is also an executory decree.]
60