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Analysis Of Section 54 To Section 81 Transfer Of Property Act And Study Of Shankars Skharam Kenjale v/s Narayan Krishna Gade - 2020

Transfer Of Property Act 1882

The transfer of property act came into force on 1st of July, 1882 and may be extended to the whole or any part of India by notification in the official gazette. The act further states that the state government can exempt any part or whole of the territory under it from certain specific provisions of the act. Just in the manner mentioned above, the exemption can be made by notification in the official gazette.

Following are the provisions under which exemption can be provided by the state government:
Section 54 (para2 and3) - this Section explains the meaning of sale and how sale can be made. In the paragraphs which are under the ambit of exemption, the act states that if any intangible immovable property, reversion or intangible thing costs or holds a value of more than 100 rupees then such transfer of property will be considered to be valid in the eyes of law if a the transfer takes place through a registered instrument.

Section 59- this Section comes under the scope of chapter IV which is related to mortgage. It substantiates very much like the previously mentioned Section that if the principal amount to be paid by the mortgagee is more than 100 rupees then such a mortgage shall take place only through a registered instrument and if the amount is lesser than 100 then there is no need of a registered instrument. The mortgage can take place by simple attestation or delivery of property.

Section 107- registered instrument is required in case the lease is exceeding the period of 1 year.

Section 123- elucidates transfer in case of gifts has to be done by a registered instrument.

These provisions as per the transfer of property act 1882 are flexible in the sense that they can be molded or exempted based on the decision of the state government.

TPA usually deals with immovable property therefore before any provisions of the act can be applied or interpreted, it is important to administer that what all are included in the definition of immovable property.

Section 3 of transfer of property act states that:
Immovable property does not include standing timber, growing crops and grass.

This means that the above mentioned are movable property. This definition is so vague that it does not help in understanding what all is movable and what all are not. Therefore, the courts were left with no other choice but to interpret and examine this definition with the help of various legislations. According to Section 3(26) of the General Clauses Act 1897, immovable property includes land, benefit which arise out of that land and things attached to the earth.

On the other hand, Section 3 Para 6 of transfer of property act states that things attached to earth are those things which are:
  • Rooted in the earth- which means things which derive nutrition from the soil.
  • Embedded in the earth- as in the case of buildings
  • Furthermore, it also explains that those things which are embedded for the purpose of permanent beneficial enjoyment
Therefore, the courts in order to define what immovable property in a real scenario means then it has to interpret and interconnect the two definitions, i.e., the one provided under general clauses act Section 3(26) and the other provided under transfer of property act Section 3 Para 6

Mortgage

In most layman terms, can be derived with the help of the following illustration- ‘A’ is the owner of property ‘X and he has taken a loan of rupees 15000 from a person ‘B’. ‘A’ is unable to arrange the money to repay ‘B’. therefore, he decides to keep ‘X' as a guarantee that he would pay the money back to ‘B’ in the stipulated time, and if he is still unable to pay back the money the ‘B’ will have all the rights to derive the loan amount from the property of ‘A’.

According to Section 58 (a) of the transfer of property act 1882, Mortgage means a transfer of interest in the property solely for the purpose of securing the money already advanced or yet to be advanced as a loan or securing existing or future debt. The keyword in this definition of mortgage mentioned in the act is ‘immovable property’. The interest which has to be transferred is that of an immovable property.

Key terminologies- Section 58(a)}

Mortgagor - the person who is transferring the interest in his property for the sole purpose of paying back the money advanced is called mortgagor. In other words, mortgagor is the transferor.

Mortgagee:

the person who is receiving the interest in the property or the person to whom the payment of money has to be made is called Mortgagee. In other words, mortgagee is the transferee.

Mortgage money:

it is the principal amount + the interest of which the payment is secured for the time being is called mortgage money.

Mortgage-deed:

for a mortgage to take place, it is necessary that it is done through an instrument. Therefore, the instrument through which the mortgage takes place is called mortgage deed.

If the loan amount for the payment of which mortgagor is keeping his property as mortgage is less than rupees 100 then the mortgage can take place either by a registered instrument or by delivery of possession. The exception to this is simple mortgage and if the loan amount is more than 100 rupees then a mortgage deed has to compulsorily be formulated, registered and attested. However, the only exception to this if the mortgage is simple in nature. The registered mortgage deed has to be has to be signed by the mortgagor or the person transferring interest in the property for payment of loan amount. Furthermore, the registered instrument or the mortgage deed has to be attested by at least 2 witnesses.

Illustration: ‘A’, is a farmer who went to ‘B’, a shopkeeper requesting him to give seeds as loan and in lieu of it, the farmer is willing to keep his property as a security. In this way, if the money is not paid to the shopkeeper by the farmer then the shopkeeper can take the money from that property.

Mortgage may differ from case to case and it is not necessary that all mortgages are of a similar nature. Therefore, under the transfer of property act 1882 a total of 6 types of mortgagees are elucidated.

Types Of Mortgage

Simple Mortgage Mortgage By Conditional Sale Usufructuary By Mortgage English Mortgage Anomalous Mortgage Mortgage By Deposit Of Title Deeds

Simple Mortgage Section 58(b)}:

In this type of mortgage, the mortgager with the help of a deed binds himself to pay the money to the mortgagee and both the parties agree that in case of failure of the mortgage money, the mortgagee will be entitled to derive the money by selling the property or in any other way prescribed by law.

The most important factor is that the delivery of possession of the property is not done. This is the reason that even if the property holds a value of more than 100 rupees, a registered instrument or a registered mortgage deed is not necessary in case of simple mortgage. When the delivery of possession of property is not made and there is a failure in the payment of money then the court can be approached then the court can transfer the property to the mortgagee.

Mortgage by conditional sale Section 58(C)}:

In this type of mortgage, the mortgagor sells the property or transfers the property to the mortgagee but on certain conditions:
  • The first condition is that if the mortgagor is unable to pay the mortgage money back to the mortgagee then such a transfer made in the name of mortgagee shall become absolute.
  • The second condition states that after the mortgagor has made the full payment to the mortgagee then the sale by which the property was transferred to the mortgagee shall become void.
  • The third condition elucidates that after the money is paid by the mortgagor then the mortgagee has to transfer the sold property back to the mortgager.
  • The backbone of this mortgage is the mortgage deed. It is of utmost importance that all the details related to the mortgage including the above mentioned conditions shall be expressly stated in the mortgage deed. If all the credentials are not mentioned in the documents then it shall not be deemed to be a mortgage. Both the parties have to agree with conditions mentioned in the deed for it to be a bona fide mortgage.

Usufructuary mortgage Section 58(d):

The mortgager under this type of mortgage delivers the possession of the mortgage property to the mortgagee on the pretext that the mortgagee shall hold the property until the mortgager pays the money to the mortgagee. In this period, whatever rent or profits which are accruing from the property shall be collected by the mortgagee in lieu of interest or the mortgage money. Usufructuary mortgage basically means handing over the possession of a property to the mortgagee till the time the mortgage money is not paid.

For example- mortgage property is giving Rs 1lakh per year, when mortgage takes place, the property will go to mortgagee and the rent will be given to either mortgager or mortgagee only after the discussion takes place between them.

English mortgage Section 58(e):

The mortgagor in this type of mortgage promises to make the payment on a certain specific date and transfers the property to the mortgagee absolutely. The only condition of such transfer is, just like the mortgage on condition sale is that once the money is paid, the mortgagee has to transfer the property back to the mortgagor.

Mortgage by deposit of title deeds Section 58(f):

under this, the people living in Calcutta, Madras and Bombay deliver the documents of title to immovable property to a creditor or his agent as a security. For example, if a person wants to take a loan from bank, he shall have to submit the title deeds to the bank with all the other relevant documents as the bank may ask. Upon completion of this, the bank shall grant a loan to the person. In order to extend the scope of this type of mortgage to other states, the respective state governments are authorized to do so by a notification the official gazette.

Anomalous Mortgage Section 58(g):

Any other mortgage which is not simple, usufructuary, mortgage by deposit of title deeds, English mortgage or mortgage by conditional sale shall fall under the category of Anomalous mortgage.

Rights And Liabilities/Duties Of Mortgager

Right of Redemption
  1. Right to take back the possession of the property upon payment of mortgage money-once the mortgage money is due and at the time and place prescribed by the mortgagee, the mortgager pays the mortgage money then he has all the rights to take the possession of his property from the mortgagee. However, in these cases it is necessary that proper provisions related to this have been mentioned in the registered instrument.
  2. Right to inspection and production of documents Section 60(b)}- this right is available only after execution of mortgage deed upon which the mortgagee is in possession of the original documents. The mortgager in such a case has theright to ask the mortgagee to provide such documents for the purpose of inspection or any other purpose the mortgagor might substantiates.
  3. Right to transfer the property to a third party- the mortgagor, upon payment of the mortgage money to the mortgagee can transfer the property to a third party rather than taking the possession back and then again transferring it to another person. This however, has to be done on the expense of the mortgagor.
  4. redemption of a portion- under this Section, a person who holds the interest in the mortgage property has all the rights to pay his part of the amount and redeem his part in the property provided that all the mortgagees (in case of more than 1 mortgagee) have acquired the amount.
  5. Section 60(a) - it is expressly provided that the mortgager has the right to direct the mortgagee to assign the mortgage debt and instead of transferring the property to him, transfer it to a third party as may be recommended or prescribed by him.
  6. Section 61- this Section prescribes that if the mortgagor has kept 2 or more properties as mortgage to the same mortgagee and has to pay the due mortgage money for both then for his ease, he has the right to redeem either both or one property at a time as is feasible for him.
  7. Section 62- in case of usufructuary mortgage, the usual term is that the mortgagee shall derive money from rents or any other way from the property and upon fulfillment of the debt amount, the possession will be taken over by the mortgager. Therefore, the mortgager has the right to redeem is possession or the document kept with the mortgagee if the amount of loan has been recovered from the rent and other profits arising out of the property.
  8. Section 63- Accession under mortgaged property- if the mortgaged property receives an accession and that too during the tenure of mortgage then the mortgagor shall be entitled to it but only after the redemption of the property but this shall happen only if there is no contradictory contract in this aspect. This Section also makes it clear that if the accession has been acquired upon payment of money by the mortgagee and the mortgagor upon redemption wishes to acquire such accession then he has the right to do so but for this he shall pay a sum of money to the mortgagee.
  9. Section 63(a)- in case a mortgaged property undergoes certain improvement during the tenure of the mortgage or when it was under the possession of the mortgagee then the mortgagor has the right to such improvement and in order to enjoy it, he does not have to pay any amount to the mortgagee. However, if the improvement is made because there was no other option left with the mortgagee and it was necessary in order to preserve the property or the court or any other authority had directed him to make improvements then the mortgagor will have to pay the amount for such improvement but only if there is no contract to the contrary.
  10. power of the mortgagor to lease Section 65A}- when the mortgagor is legally in possession of a property and that property can be put on lease then he shall have the right to do so and these lease/leases will be considered as binding on the mortgagee. Furthermore, this Section states that the best rent possible shall be obtained on the property when it is given on lease. It is to be noted that such lease can be under an agreement by which it can be renewed.
  11. Rights in case of waste (Section 66)- this Section elucidates that is a mortgagor is in possession of a property and the property is deteriorating and he does nothing for then also he shall not be liable to the mortgagee. The only condition being that such deterioration or harm to the property shall not be self done.
  12. Section 65(c)- states that the mortgagor shall have to make sure that the mortgagee is given the payment for all the taxes or any other form of public expenses paid by the mortgagee.
  13. it is furthermore the duty of the mortgagor to make sure that before putting the property on lease for acquiring rent, all the details related to amount which shall be taken as rent and all the other credentials necessary shall be inflicted to the mortgagee.

Rights And Liabilities Of Mortgagee

Right to foreclosure or sale- Under Section 67 of the transfer of property act, The mortgagee has the right to debar the mortgagor’s right to redemption only if there is no pre existing contract which stops such activity.

Banning the right of the mortgagor to redeem his property with the help of a suit is known as a suit for foreclosure. The time period mentioned for making a foreclosure is literally any time the mortgage money has become due or the mortgaged money has been payed or before any decree or suit for redemption has been made. For this, the mortgagee has to obtain such decree from the court which states that the mortgagee shall be debarred from the redemption of the property or stating that the property be sold.

Right to sue for mortgage money- the purpose of a mortgage is payment of money advanced in the form of loan by the mortgagor to the mortgagee for which a property belonging to the mortgagor is kept as a security. However, the law clearly lays down certain cases and it is only of the mortgagor and mortgagee fall under these cases, the mortgagee shall be authorized to sue the mortgagor.

As per the deed of the mortgage, the mortgagor is bound to make the payment of the mortgage money to the mortgagee.

In certain cases, there is a possibility that without any external pressure or force, the property kept as security starts deteriorating or gets destroyed (partly or wholly) as discussed in Section 66. The mortgagee in such cases asks the mortgagor to provide him with certain sum of security which has in order to render the whole security sufficient. If, even after such notice or opportunity the mortgagor does not provide further security then the mortgagee shall have all the rights to approach the court or sue the mortgagor for mortgage money.

Another possible scenario is that the mortgagor has done something wrong or malicious and because of his acts the mortgagee is not getting the security (part of it or whole security) then in such cases as well the mortgagee can sue the mortgagor.

If the mortgagor has finalized the deed and is ready to keep his property as security for the payment of money to the mortgagee but because of certain reasons he does not or is unable to transfer the possession of the property to the mortgagee then it would be considered as a breach of the provisions of the mortgage deed. Till the time mortgagee does not get the possession of the property then that particular property cannot be termed as security for the payment of mortgage money. Therefore, the mortgagee has the rights to sue the mortgagor under such cases.

Right of the mortgagor to sell the mortgaged property- by Section 69 of the act it can be interpreted that it is not necessary that whenever there is non-payment of mortgage money by the mortgagor the mortgagee shall file a suit. It is only possible in cases mentioned in the previous Section. Under this Section certain circumstances are provided under which the mortgagee shall have the rights to sell of the property. they are as follows:
  • The conferred under this Section is applicable only if the type of mortgage is an English mortgage and another condition is that the members f the mortgage shall not be Hindu, Muhammad an or Buddhist. Other sects, religions, race or tribe can be added under this Section if the state government deems fit but by a notification in the official gazette.
     
  • There might be cases in which the mortgagee is the government and while formulating the mortgage deed, it was expressly mentioned that the court shall not interfere with mortgagee’s right to sell off the property.
     
  • Under sub Section ‘c’ three states are mentioned namely:
    Madras, Bombay and Calcutta and it states that if the mortgage took place in these states and the property is situated in the boundaries of these states then the mortgagee shall have the rights to sell the property and the court shall have no power to interfere in this decision of the mortgagee. In this list of states, the mortgagee can also add states by a notification the gazette.
     
  • Accession:
    Accession basically means an addition or improvement in the value of the property. Section 70 of the transfer of property act states that if there is an accession to the property during the period of mortgage then the mortgagee shall have the right to such accession provided that no other contract was signed between the mortgagor and the mortgagee stating otherwise.
     
  • Renewal of the mortgage lease:
    there are cases in which the mortgaged property is leased out by the mortgagor for the payment of mortgage money. If, during the tenure of the mortgage, the lease deed has to be renewed then the mortgagee shall have the right to such lease. However, this shall also depend on a pre existing contract. If it is expressly mentioned in the deed that states otherwise then this right of the mortgagee cannot be exercised.
     
  • Right to spend money on the property:
    The mortgagee shall have the right to spend money if necessary to preserve the mortgaged property, to support the title of the mortgagor to the property, to make his own title good against the mortgagor or when the lease of the mortgaged property is to be renewed.
     
  • The right to proceeds of revenue sale and compensation on acquisition:
    Section 73 states that under certain conditions there might arise a situation under which the mortgage property had to be sold off. these conditions or cases might arise because of nonpayment of arrears ( arrears are those payments which had to be paid regularly), it is important to make sure that such nonpayment is not a result of default on the part of the mortgagee and these have to be paid out of any surplus sale proceeds.
     
  • Liability of mortgagee while taking possession of the property:
    if the mortgagee takes possession of the property during the mortgage was in force then he has to do the following things:
    • The mortgagee has to manage the property as if he was the absolute owner of the property.
    • If the property mortgaged is on a lease or in any other way deriving any income then the mortgagee has to collect the rent and profits.
       
    • If during the time of possession of property by the mortgagee then he shall be liable to pay the money which is of public nature and this money has to be paid from the income arising out of the property. This provision however can be put into practice or exercised only if there is no prior contract stating anything different.
       
    • The mortgagee is also liable to pay the money for repairing the mortgage property only if the damage is natural and occurred over a period of time. However if there is no contract to the contrary then he has to pay both the repair money as well as the payment mentioned under clause (c) together out of the money arising out of profits and rents.
    • The law does not allow the mortgagee to cause any damage to the mortgage property by any act of his own.
       
    • If the property was insured against any damage or fire because of which damage was caused in the first place then the mortgagee has to use the insurance money for the payment in order to get the property repaired
       
    • The mortgagee has to keep a clear account stating all the transaction including the money received and spent and these account hold relevance because the mortgagor can at any time ask for the account of which the mortgagee has to provide copies of.

In certain cases, during the mortgage, the mortgagee resides in the same property the possession of which has been transferred to him but such possession cannot be free of cost. He has to provide an occupation rent for the same and because all the other types of expenses are also being incurred by the mortgagee therefore, he has all the rights to deduct such amount which he has paid for some or the other reason from the rent amount before payment.

Basic Difference Between Right To Foreclosure And Right To Sale

Under foreclosure, the mortgagee is already in the possession of the property and therefore he just has to go to the court and ask the court to permanently take away the mortgagor’s right to redemption. Right to sale on the other hand means that the mortgagee has to approach the court and request the court to sell the property for claiming the unpaid mortgage money after which the money shall go to him

Marshalling
Section 81 of the transfer of property talks about the concept of marshaling securities. The concept of marshaling means that there is a property which has once been kept mortgage is again kept as mortgage for the second time.

Illustration:
A has three properties, X, Y and Z and he mortgages all of them to B for rupees 10000

First Mortgage
‘A’ mortgages property ‘Z’ to ‘C’ for an amount of rupees 5000. It is important to know that in this case, ‘C’ is well aware of the fact that this property has already been mortgaged once.

Second Mortgage
It shall be noted here that if ‘A’ by any chance is unable to pay the money back then ‘B’ by law, will have all the rights to claim his money back but the problem arises that the property Z has again been mortgaged to ‘C’. Therefore, if ‘A’ is really unable to pay back the money then ‘B’ shall claim the money by selling property X and Y and if any amount is still left to be claimed then ‘B’ and ‘C’ can get into an agreement under which ‘C’ shall allow ‘B’ to take the rest of the amount from property ‘Z’.

Case Analysis
Shakar Sakharam Kenjale (Died Through) Lrs V. Narayan Krishna Gade And Another:
on 17th April 2020, A 2 judge bench in civil appeal 4594 of 2010, gave judgment. The facts of the case are as follows:
  • There was a land/watan which came under Bombay Hereditary Offices Act, 1874. The original landowner or the Watandar of the property had made a permanent tenant on the land in 1947.
  • He mortgaged the property for a total period of 10 years but after that Bombay Paragana and Kulkarni Watans (abolition) act was passed in 1950 and the government permanently abolished Watans and took everything under it.
  • However, this did not mean that now the original landowners cannot get their property back. The government gave them the opportunity to re-grant the possession of land for which a fee was charged.
  • The Standard, however, denied paying the fee or filing regrant claiming that he was already in possession of the property and was staying there.
  • The case- the mortgagor decided to file a suit substantiating the redemption of the property and to support his the word he also showed the mortgage receipts This case dealt with the concept of redemption and its newfound importance.

Court’s judgment
The case first went to the trial court which gave a decision against the mortgagor and stated that he could not exercise his right to redemption anymore because his right had become invalid because the act had been abolished.

Further, the mortgagor made an appeal for the same case but this time it was dismissed by the trial court but the second time, the high court took the matter into its own hands and passed a judgment contrary to the one the trial court had given. The high court held that the right of the mortgagor to redeem the property was not lost.

As a result, an appeal was filed in the Supreme Court against the judgment passed 8th of June 2009 which was passed by the high court of adjudicature of Bombay. The court totally discarded the findings of the trial court and directed that a decree for redemption of property shall be made in favor of the respondent.

The court under this case stated that the right of a mortgagor to redeem the property of mortgage can only be taken away by law or any procedure established by it. These rights stood fundamental to the mortgage and cannot be taken away from the mortgagor.

Another interesting factor of the judgment was that the court states that even if the mortgagor himself gives away his right to redeem the mortgaged property by the way of a contract.
Further, it was held a legal principle as supreme in this case which states that once a mortgage, always a mortgage

Precedents used by the court:
The the court took reference from 2 cases namely:
  1. Namdev Shripati Nale v. Bapu Ganapati Jagtap and Another, (1997) 5 SCC 185.
  2. Jayasingh Dnyanu Mhoprekar and Another v. Krishna Babaji Patil and Another, [(1985) 4 SCC 162]
Written By: Ashna Sharma, BA LLB (H), Semester- 08, Batch- 2017-2022
Mentor: Dr. Ruchi Lal

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