Professional Documents
Culture Documents
Final
Final
Effect of the decree for foreclosure and the decree for sale (Under section 67 of the Transfer of Property Act 1882) Statement 5: Liability as effectuation of the ordinate propositions. Statutory liabilities as parameters of the ordinate propositions in case of usufructuary mortgage, or mortgagee in possession (Under section 76 of the Transfer of Property Act 1882).
After having gone through the relevant material (s), I shall establish how the mortgagee becomes the absolute owner of the mortgaged property (Under Section 67 of the TP Act 1882). Afterwards, I shall establish that other liabilities purported to be imposed on the mortgagee by terms of the mortgage contract will be in addition to the statutory liabilities (Under section 76 of the TP Act 1882).
Statement 4: The effect of contingencies in the vesting of interest in Mortgagee. (1) Effect of the contingency of default. A usual contract to the contrary accelerating the mortgagees right of foreclosure or sale, is that in case of default in payment of interest on the specified dates, or of any act of the mortgagor which causes loss to the mortgagee, the mortgagee shall have the power to realize the mortgage without waiting for the due date. The Privy Council have held in two decisions that such a condition is exclusively for the benefit of the mortgagee, and that it gives him the option either to enforce his security at once, or if the security is ample, to stand by the investment for the full term of the mortgage.1 (2) Effect of the contingency of extinguishing the equity of redemption. So long as the equity of redemption is not released or foreclosed or extinguished by lapse of time, the mortgagee's interest continues to be personal estate, notwithstanding that he may have entered into possession.2 If, however, a decree for foreclosure absolute is made, then the effect of the order for foreclosure absolute is to transfer the equitable estate of the mortgagor to the mortgagee, and the mortgagor has thenceforth no interest in the property. The
Lasa Din v Gulab Kuar AIR 1932 PC 207; Panchan v Ansar Husain AIR 1926 PC 85 (Overruled). This view was reaffirmed in Abdul Rahman v Sheo Dayal AIR 1934 All 152. 2 Halsburys Laws of England, Vol. XXI, at p. 184.
mortgagee holds the mortgaged property as absolute owner in lieu of the mortgage money, and, if it is real estate, he holds it as such, and not as personally.3 Nature of Final Decree in Foreclosure Suit It is submitted that the suits for foreclosure are suits to recover land. 4 Invariably, there are two aspects of the mortgage. One relates to the security part and second relates to the element of personal debt. In a mortgage decree no doubt an opportunity is given to the mortgagor to pay up the debt within a certain time, but the main object of a mortgage decree is to operate on the mortgaged property or land itself. The case is to some degree different if decree for foreclosure is the remedy given, for in that case the ultimate result is that a mortgagee acquires the sole interest in the land, whereas previously he had only an interest subject to redemption. In that case the mortgagee becomes the absolute owner of the land.5 For example: In Ekadasi Sahu v State Of Orissa6, it was observed by their justices that in view of the terms and conditions contained in the deed of transfer, we agree that it is a deed of mortgagee by conditional sale. But the question that remains for consideration is whether the mortgagee becomes the absolute owner of the property automatically or he only gets the right for foreclosure and becomes absolute owner only on a decree for foreclosure being obtained. In case of a mortgagee by conditional sale, the remedy of a mortgagee is to institute a suit for foreclosure and the mortgagee does not automatically mature into a sale. It is only a decree for foreclosure that extinguishes the mortgagor's right to redeem and makes the mortgagee the absolute owner of the property from the date of the decree. Nature of Final Decree in Suit for Sale The real nature of a suit for sale is a suit to realize and dispose of his (mortgagee) and his (mortgagee) debtors' interests in the land. The object of the suit is not to obtain land or to obtain a declaration of title to land or to obtain damages for interference with land, but to obtain repayment of debt owing to the plaintiff and for that purpose to realize the security which has been vested in him.7 The primary object of such a suit is to recover the mortgage
3 4
Halsburys Laws of England, Vol. XXI, at p. 294. As held by Lord St. Leonards in Wrixon v. Vize (1842) 3 Dr. & War. 104. Re-affirmed in Harlook v. Ashberry (1882) 19 Ch. D. 539. 5 Per Amberson Marten, Kt., C.J. in Hatimbhai Hassanally v Framroz Eduljee Dinshaw AIR 1927 Bom 278; MANU/MH/0010/1927. 6 1992(1) OLR 356; MANU/OR/0356/1991. 7 Per Scott C.J. in Venkatrao Sethupathy v. Khimji Assur Virji (1924) 26 Bom. L.R. 535; MANU/MH/0052/1916.
debt, if necessary out of the sale proceeds of the security. The mortgagee does not claim the land. He admits it is the mortgagor's land and asks that it may be sold.8 Moreover the suit for sale is not to recover the land like the suit foreclosure nor it is suit for land. Because a "suit for land" is a suit which is substantially for land, which is, for the purpose of acquiring title to or control over land.9 Statement: 5. Liability as effectuation of the ordinate propositions Section 76 does not lay down any new principles; the rules laid down by the section were recognized even before the passing of the Transfer of Property Act and the provisions of the section, are a mere codification of the law in existence before the passing of the Act. The principles of the clauses have been applied to cases arising out of mortgages executed prior to the Act.10 The provisions of Section 76 in terms are not limited to usufructuary mortgagee or to a mortgagee who is entitled to claim possession on the basis of the terms of the mortgage bond. The opening words of Section 76 are quite general and they include a mortgagee who obtained possession of the mortgaged property.11 In the case of the lease in question being held to be not an act of prudent management on the part of the mortgagee within the meaning of Section 76(a) of the Transfer of Property Act, 1882, the alleged lease could not subsist after termination of the mortgage by passing of the final decree of redemption and the appellant could not take advantage of the act as there was no subsisting lease in his favour.12 The obligation does not extend to other lands and the mortgagee is not responsible if the property mortgaged is sold to realize arrears of rents.13
Per Kemp, J. in Hatimbhai Hassanally v Framroz Eduljee Dinshaw AIR 1927 Bom 278; MANU/MH/0010/1927. 9 Per Mirza, J. in Hatimbhai Hassanally v Framroz Eduljee Dinshaw AIR 1927 Bom 278; MANU/MH/0010/1927. 10 Tara Chand v Ganga Ram AIR 1978 Delhi 58. 11 Suratsing Chandanmal Marwadi v. Nomanbhai Abdulhussein Bohari, AIR 1961 Bom 43;.MANU/MH/0009/1961. 12 Om Parkash Garg v Ganga Sahai and Ors. AIR 1988 SC 108. 13 Jadubans Sahai v. Bahuria Phulpati, AIR 1957 Pat 452.