The Transfer of Property Act 1882 brought within its
purview five modes of transfer. Mortgage is one of them through which a partial
transfer takes place. The Essential nature of mortgage is that, it is the transfer of an interest in
specific immovable property as a security for the repayment of a debt.[1]
Mortgage is similar to lease in terms of partial transfer.
Because, in both cases there is no transfer of absolute interest. In mortgage,
an interest is transferred to secure the payment of loan. On the other hand, in
lease an interest is transferred on the payment of rent.[2]
Here amid these modes of transfer, only mortgage will
be taken into discussion. The Transfer of Property Act 1882 deals with mortgage
in a very extensive mode (sections: 58-98).
I will try my best to shed light on all of them.
Section No.
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Issues
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58
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Definition and nature of Mortgage
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59
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Mortgage when to be by assurance
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60
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Rights of Mortgagor to Redeem
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60A
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Obligation to
transfer to third party instead of re-transference to mortgagor
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60B
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Right to inspection and
production of document
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61
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Right to redeem separately or
simultaneously
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62
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Right of usufructuary mortgagor to recover
possession
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63
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Accession to mortgaged property
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63A
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Improvements to mortgaged property
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64
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Renewal of mortgaged lease
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65
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Implied contract by mortgagor
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65A
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Mortgagor’s power to lease
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66
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Waste by mortgagor in possession
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67
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Right to foreclosure or sale
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67A
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Mortgagee when bound to bring one
suit on several mortgages
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68
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Right to sue for mortgage-money
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69
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Power of sale when valid
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69A
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Appointment of receiver
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70
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Accession to mortgaged property
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71
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Renewal of mortgaged lease
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72
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Rights of mortgagee in possession
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73
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Right to compensation on
acquisition
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76
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Liabilities of mortgagee in
possession
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77
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Receipts in lieu of interest
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78
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Postponement of prior mortgagee
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79
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Mortgage to secure uncertain
amount when maximum is expressed
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81
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Marshalling securities
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82
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Contribution to Mortgage-debt
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85
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Parties to Suits foreclosure, sale
and redemption
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91
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Persons who may sue for redemption
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92
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Subrogation
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93
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Prohibition of tacking
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95
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Right of redeeming co-mortgagor to
expenses
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96
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Mortgage by deposit of title-deeds
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98
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Rights & liabilities of
parties to anomalous mortgages
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Definition of Mortgage:
[Section 58 of Transfer of Property Act 1882]
Mortgage
is the second mode of transfer of immovable property. The most important kind
of security is mortgage.
The
word ”mortgage” is a French Law term
meaning ”death contract”, meaning that the pledge(mortgage) ends (dies) when
either the obligation is fulfilled or the property is taken through
foreclosure.[3]
A
Mortgage is the transfer of an interest in specific immovable property for the
purpose of securing-
(1)
payment of money advanced or to be
advanced by way of loan
(2)
payment of an existing or future debt, or
(3)
the performance of an engagement which may give rise to pecuniary liability.[4]
According
to Black’s Law Dictionary :
“A conveyance of
title to property that is given as security for the payment of a debt or the
performance of a duty and that will become void upon payment or performance
according to the stipulated terms.”
In
short, mortgage is the transfer of an interest in specific immovable property
as a security for the repayment of a debt.
Going
through the definition of mortgage, we find three essentials of a mortgage as
shown in the diagram below-
Competency
of Parties:
Since a mortgagor is incurred some obligations and
liabilities in redeeming the mortgaged property, he must be competent to
contract.
On the other hand, the mortgagee should not be
competent to contract. Only capability to hold the property is sufficient.
A minor, a person of unsound man and a person
disqualified by any law are not competent to a contract.[5]
So, a minor or a man of unsound mind or a person
disqualified by any law cannot be a mortgagor.
The right of mortgagee is only an accessory right
which is intended merely to secure the due payment of the debt. The ownership
will remain with the mortgagor.
Thus where a joint family property is mortgaged,
there is no transfer of ownership and the ownership will remain with the
coparceners. The coparceners are competent to allot the mortgaged property in
oral partition to any of the coparceners. The coparcener to whom the mortgaged
property is allotted becomes its absolute owner and is entitled to redeem the
mortgage.[6]
Classification of Mortgage:
[Section
58 of Transfer of Property Act 1882]
Section 58 classifies mortgage in the following-
a.
Simple Mortgage
b.
Mortgage by
Conditional Sale
c.
Usufructuary
Mortgage
d.
English Mortgage
e.
Mortgage by
deposit of title-deeds
f.
Anomalous
Mortgage
a.
Simple Mortgage
In a simple
mortgage, the possession of mortgaged property is not delivered to the
mortgagee. The mortgagor binds himself to pay the mortgage-money and gives the
mortgagee the right to cause the mortgaged property to be sold in the event of
his failure to repay.[7]
b.
Mortgage by Conditional Sale
Mortgage by
Conditional Sale is an ostensible sale on the condition that upon repayment,
the buyer will transfer the property to the seller.
There must be a
condition that either,
(a)
one
the repayment, the sale will become void and
the
buyer has to retransfer the property to the seller,
(b)
in
default of repayment, the sale will become absolute.[8]
c.
Usufructuary Mortgage
In usufructuary mortgage, the mortgagor delivers
possession of the property to the mortgagee and authorizes the mortgagee to get
rents and profits accruing from the property in lieu of interest or principal
or both. The mortgagee will retain such possession until payment of mortgage
money. [9]
The essence of this mortgage is that the mortgagor
is bound to put the mortgagee in possession of the property. If the possession
is delivered, the mortgagee can sue for possession or for the recovery of the
mortgage money under section 68(d) of TP Act, 1882.
Main Characteristics of Usufructuary Mortgage:
v Possession of the property is transferred.
v The mortgagee gets rents
and profits accruing from the property.
v The mortgagee will
retain such possession until payment of mortgage money.
v No personal liability
is incurred by the mortgagor.
v The mortgagee cannot
foreclose or sue for sale.
d.
English Mortgage
An English mortgage is a transaction in which the
mortgagor binds himself to repay the mortgage money on certain date, and
transfers the mortgaged property absolutely to the mortgagee with the condition
that he will retransfer it to the mortgagor upon the payment of mortgage money
as agreed.[12]
e.
Mortgage by Deposit of Title Deeds
When the mortgagor mortgages his property by
depositing the title deeds of the immovable property to the mortgagee and receives
debts from him it is called mortgage by deposit of title deeds.[13]
f.
Anomalous Mortgage
The
mortgage which does not fall under any of the above five kinds of mortgages.[14]
Registration of Mortgage :
[Section
59 of Transfer of Property Act 1882]
If the principal money secured is Tk.100 or upwards,
registration is compulsory. When the principal money secured is less than
Tk.100, a mortgage may be affected either by a registered instrument or by
delivery of possession.
In case of a mortgage by deposit of title-deeds,
registration is not necessary. Provided
that a mortgage by deposit of title-deeds, where the mortgagee is the
government or a scheduled Bank as defined in the Financial Institutions Act,1993
shall also be effected only by a registered instrument in the aforesaid manner.[15] If a deed is executed, it is prima facie proof of the fact that, the mortgage is complete and it
will not fail.[16]
Rights and liabilities of Mortgagor
Right
of Mortgagor to Redeem:
[Section 60 of
Transfer of Property Act 1882]
Right of redemption is one of the most important
rights of mortgagor. This right cannot be denied even though he may by express
contract abandon his right to redeem.
At any time on the payment of principal money, the
mortgagor has a right to require the mortgagee to recover the mortgage property
to him. Such a right of mortgagor is called the “Right of Redemption”.
This remedy is available to the mortgagor only
before the mortgagee filled a suit for enforcement of the mortgage. Subsequent
to the filling of the suit no remedy is available to the mortgagor.[17]
In default of mortgagor, the mortgagee, by a decree of the court, can sell the
mortgaged property to get back the money given by him as a loan to the
mortgagor. Thus in that case, the mortgagor’s right of redemption is
extinguished.
The right of redemption includes three things as
below:
1.
Delivery
of the mortgage-deed and documents of title relating to the mortgaged property,
2.
Possession
of mortgaged property, and
3.
Reconveyance
or acknowledgement.[18]
Clog on Redemption:
Any provision inserted to prevent the right of
redemption on payment of principle money is called a clog on redemption. A clog
on redemption is void. It is not permissible for “once a mortgage always a
mortgage” and therefore always redeemable.[19]
Extinguishment of Right of Redemption:
Sec. 60 of the Transfer of Property Act confers a
right of redemption on the mortgagor. The right of redemption will be
extinguished
(1) by act of the parties or
Exercise of the Right of Redemption:
The mortgagor’s right of redemption is exercised
(a)
By
paying or tendering mortgage-money to the mortgagee outside the court i.e.
privately;
(b) By depositing the
amount in the court; and
(c)
By
suit for redemption.
Before redemption can be claimed the mortgage money
must have been paid at the proper time and place. When there are several
mortgagees, the payment should be made to all of them jointly.
Some Forms of “Clogs”:
1. Long Term for Redemption:
A long term for redemption is not necessarily a clog
on redemption. Accordingly, the rule is that if the length of term is found
oppressive or conscionable redemption would be allowed before the expiry of the
term.[21]
2. Condition Postponing Redemption in
Case of Default:
In Muhammad Sher Khan v. Seth Swami Dayal, the
mortgage was for a term of 5 years with a condition that if money is not paid ,
the mortgagee might enter into possession for a period of 12 years during which
the mortgagor cannot redeem. It was held
that such a condition is a clog an existing right to redeem.
3.
Restraint on Alienation:
A stipulation that mortgagor shall not alienate the
mortgaged property or shall not take loan on the security of the mortgage
property has been held to be a clog.[23]
4.
Redemption Restricted
only to Mortgagor :
An agreement that redemption should be available to
the mortgagor and not to his heirs has been held as a clog.
5.
Penalty in Case of
Default :
A provision containing that if there was default in
payment of the mortgage money as stipulated in the deed the transaction should
be regarded as an absolute sale must be regarded as one which operates as a
clog and this clause will be of no effect.[24]
Obligation
to Transfer to third party Instead of Re-transference to Mortgagor :
[Section
60-A of the Transfer of Property Act 1882]
When the mortgagor has fulfilled the conditions of
mortgage-deed, the mortgagor may require the mortgagee to assign the
mortgage-debt to a third person.[25]
The main purpose for this provision is to give the
mortgagor an opportunity to pay off the mortgagee by raising a loan from
another person on the same property without having first re-conveyed it to himself
and then later creating a fresh mortgage in favor of the new creator.
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A, on the payment of loan, can have authority to
direct the mortgage to assign the mortgaged property to C, the third party.
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Right
to Inspection and Production of Document :
[Section 60-B of the
Transfer of Property Act, 1882]
A mortgagor has a right to inspect and take copies
of the documents of title relating to the mortgaged property which are in the
possession of the mortgagee.
This right subsists as long as his right of redemption
subsists.[26]
Right to Redeem Separately or Simultaneously:
[Section
61 of the Transfer of Property Act, 1882]
Section 61 abolished consolidation where different
properties were mortgaged, and not where the same property was mortgaged under
several mortgages.
A mortgagee who had successive mortgages of same
property could consolidate them and compel that all mortgages should be
redeemed together. [27]
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Accession to Mortgaged Property: |
[Section 63 of the
Transfer of Property Act, 1882]
Where the mortgaged property in possession of the
mortgagee has received any accession, the mortgagor, upon redemption, is
entitled to such accession. It is the usual rule as ensured by the section 63
of T.P. Act.
[Section
63-A of the Transfer of Property Act, 1882]
There are two general rules-
1.
A
mortgagee is not ordinarily at liberty to make improvements and charge the
mortgagor therewith without any reasonable grounds. If the mortgagee made any
improvement without any reasonable grounds, the mortgagor is entitled on
redemption to the improvement. In this case, the mortgagor is not required to
pay any cost.[28]
2.
A
mortgagee will make improvements only on some reasonable grounds as follow-
a. Preserving the property
from destruction,
b. Preventing the security
from being insufficient, and
c. Complying the lawful
orders of any public servant or any public authority.
In the above cases, the mortgagor must pay cost of
improvements.[29]
Renewal of Mortgaged Lease :
[Section
64 of the Transfer of Property Act, 1882]
If the mortgaged property is a lease, and the mortgages
obtains a renewal of the lease, the mortgagor, upon redemption, in the absence
of a contract by him to the contrary, is entitled to have the benefit of the
new lease.
Rights and liabilities of Mortgagee
Right
to Foreclosure or Sale :
[Section
67 of the Transfer of Property Act, 1882]
The mortgagee has two types of remedies, they are-
1.
Remedy
against the mortgaged property[30]; and
2.
Personal
remedy of mortgagee.[31]
Section 67 of T.P. Act deals with the remedy against
the mortgaged property.
Meaning of “Foreclosure” :
Generally foreclosure means-
a.
To
deprive a mortgagor of the right to redeem mortgaged property,
as when payments have
not been made.
b. To bar
an equity or a right to redeem a mortgage.
Foreclosure
is a specific legal process in which a mortgagee attempts to recover the
balance of a loan from the mortgagee who has stopped making payments to the
mortgagee by forcing the sale of the mortgaged property used as the collateral
for the loan.
Formally, a mortgage lender (mortgagee) obtains a
termination of a mortgage borrower (mortgagor)'s equitable right of redemption,
either by court order or by operation of law.
There is a very basic difference between the
mortgagor’s right of redemption and the mortgagee’s right to foreclosure or
sale. The difference is that the right of redemption is not subject to any
contract to the contrary while the right to foreclosure or sale may be
curtailed by the agreements by the parties.
Some
Basic Points Relating to Foreclosure :
1. In
simple mortgage, the mortgagee cannot foreclose. His remedy is to sue for sale
of the mortgaged property to realize the loan.
2. An
usufructuary mortgagee is a transferee of a right of possession only and he
retains the possession unless the debt is paid off from the usufruct. So, he cannot sue either for sale or for
foreclosure.
3. In
a mortgage by conditional sale, the mortgage works itself out into a sale in
the event of default in payment. Accordingly, the appropriate remedy in this
mortgage is to deprive the mortgagor of the right not be able to redeem the
mortgaged property.
4. A
mortgage by deposit of title-deeds stands on the same footing as simple
mortgage and the mortgagee’s right is limited to one for a decree for sale.
5. In
an anomalous mortgage, the right of the mortgagee depends upon the terms of the
deed and he may have both or only one of two reliefs of foreclosure or sale.
6. Partial
foreclosure is not allowed. One of the
several mortgagees cannot foreclose in respect of his share unless several
mortgagees have, with consent of the mortgagor, severed their interests under
mortgage. Accordingly, all the co-mortgagees must join together and file one
suit in respect of the whole mortgage-money.
Mortgagee
When Bound to Bring One Suit on Several Mortgages:
[Section
67-A of the Transfer of Property Act, 1882]
A
mortgagee who holds two or more mortgages executed by the same mortgagor in
respect of each of which he has a right to obtain the same kind of decree under
section 67, and who sues to obtain such decree on any one of the mortgages,
shall in the absence of a contract to the contrary, be bound to sue on all the
mortgages in respect of which the mortgage-money has become due.[32]
To
explain in short,
a
mortgagee having successive mortgages of the same property or different
mortgages of different properties from the same mortgagor must enforce all of
them together or none at all. But this rule does not apply where the mortgagee
has two mortgages and terms of one mortgage are such that he is entitled to a
decree for foreclosure, and of the other are that he is entitled to a decree
for sale.
Mortgagee’s
Right to Sue for Mortgage-money:
[Section
68 of the Transfer of Property Act, 1882]
Apart from the remedy of foreclosure or sale, the
mortgagee has an alternative remedy called money decree, that is – to sue for
the mortgage-money. This kind of remedy is available only in certain cases as
follow-
a. where the mortgagor
binds himself to repay the same
(as in simple mortgage).
b. where, without any
fault of either party, the mortgaged property is wholly or partially destroyed.
c. where the mortgagee is
deprived of the whole or part of his security by reason of the wrongful act or
default of the mortgagor; or
d. where the mortgagee
being entitled to possession, the mortgagor fails to deliver the same.[33]
Mortgagee’s
Right to Sue for Mortgage-money:
[Section
69 of the Transfer of Property Act, 1882]
In certain special cases, the mortgagee has the
power to sell mortgaged property without recourse to court. They are as follow-
a.
where
the mortgagee is the government,[34]
b.
where
the deed of mortgage confers an express power of sale,
c.
where
the mortgaged property or any part thereof was, on the date of the execution of
the mortgaged deed ,situate within the town of Dhaka or in any other town or
area which the government may, by notification in the Official Gazette, specify
in this behalf.[35]
However,
as s 69(2) provides, the above power of sale must not be exercised unless and
until –
v notice in writing requiring payment
of the principal money has been served on the mortgagor, or on one of several
mortgagors, and default has been made in payment of the principal money, or of
part thereof, for three months after such service; or
v some interest under the mortgage
amounting at least to Tk 500/- is in arrear and unpaid for three months after
becoming due.
Provided
that the power of a schedule bank under clause (b) of s 69(1) as mentioned
above should further be subject to such conditions as may be prescribed in this
behalf by notification in the official Gazette by the Government in
consultation with the Bangladesh Bank.
Appointment
of Receiver:
[Section
69-A of the Transfer of Property Act, 1882]
Appointment
of a receiver is very exigent to ensure the prudent management of the property
where it was in the possession of the mortgagee.
The
receiver is initially appointed by the mortgagor but later on he could be
appointed, if provided in the deed, by the mortgagee himself on behalf of the
mortgagor so that the receiver is the agent of mortgagor.[36]
The
receive may be appointed in one of the three ways-
i.
he may be
nominated in the mortgage-deed;
ii.
he may be
appointed by the mortgagee with the consent
of the mortgagor;
iii.
where the
parties do not agree, the mortgagee may apply to the court, and the court may
appoint the receiver.
Unlike the ordinary agent, the power of the receiver
does not terminate by the death of the mortgagor, nor is he subject to the control
or direction of the mortgagor in the management of the property, his powers and
duties being defined by this section.
Rights of Mortgagee
in Possession:
[Section
72 of the Transfer of Property Act, 1882]
A mortgagee, whether he is in possession or not, has
a right to spend money for some specific purposes as follow-
a.
for
the preservation of the mortgaged property from destruction, forfeiture or
sale;[37]
b.
for
the supporting of the mortgagor’s title to the property;[38]
c.
the
defence of his own as against the mortgagor;[39]
d.
the
renewal of the lease where the mortgaged property is a renewable lease; and [40]
e.
the
insuring of the property which is by its nature insurable against loss or
damage by fire.
Liabilities
of Mortgagee in Possession :
[Section
76 of the Transfer of Property Act, 1882]
The mortgagee who is in possession of mortgaged
property, has some liabilities as they follow-
1.
to
manage the property with ordinary prudence;
2.
to
collect rents and profits;
3.
to
pay Government Revenue;
4.
to carry necessary repairs under certain
circumstances;
5.
not
to commit any act of waste;
6.
to
apply the insurance money in reinstating the property;
7.
to
keep proper accounts;
8.
to
apply the rents and profits in discharge of the interest after making certain
deduction; and
9.
to
account for gross receipt.
Postponement of Prior Mortgagee :
[Section
78 of the Transfer of Property Act, 1882]
(First Exception of The Rule of Priority)
The
general rule is that- ‘He who is prior in time is prior in right’.
Section 78 is an exception to this general rule, namely, that where
through
1.
fraud,
2.
misrepresentation;
or
3.
gross
neglect of prior mortgagee,
another person has been induced to advance money on
the security of the property mortgaged, the prior mortgagee shall be postponed
to the subsequent mortgagee.
Illustration:
A has advanced TK. 5000 to B by way of deposit of title-dead. C, before advancing money to B
enquires of A whether property is
free from encumbrance and A does not
mention his own mortgage and tells C
that the property is free from mortgage. In such circumstances C will have priority over A. Due to prior mortgagee’s fraud,
misrepresentation or gross neglect, Rule of Priority fails i.e. priority
of a previous mortgagee is lost.
According to Section 53D which was added by the Transfer
of Property (Amendment) Act, 2004 and came into force on 1’st July of 2005:
An immovable property under a registered mortgage
cannot be sold or re-mortgaged without the written consent of the mortgagee and
otherwise the re-mortgage or sale will be void.
So, section
78 will not apply in case of a registered mortgage as section 53D mandates that the
written consent of prior mortgagee and fraud, misrepresentation or gross
negligence of prior mortgagee is of no effect.
Mortgagee to Secure Uncertain Amount When Maximum is Expressed:
[Section
79 of the Transfer of Property Act, 1882]
(Second
Exception of The Rule of Priority)
The
general rule is that- ‘He who is prior in
time is prior in right’. Like
the section 78 like sec. 79 is another exception to this general rule.
If a mortgage made to secure future advances, the
performance of an engagement or the balance of running account, expresses the
maximum to be secured thereby, a subsequent mortgage of the same property shall
, if made with notice of prior mortgage, be postponed to the prior mortgage in
respect of all advances of debits not exceeding the maximum, though made or
allowed with notice of the subsequent mortgage.[41]
Marshalling Securities :
[Section
81 of the Transfer of Property Act, 1882]
Marshalling
means to arrange, systematize or regulate.
Where one creditor has security on two funds of his
debtor, and another creditor has security for his debt on only one of those
funds, the latter has a right in equity to compel the former to resort to the
other fund, if [such an action] is necessary for the satisfaction of both
creditors, provided it will not prejudice the rights or interests of the party
entitled to the double fund, nor do injustice to the common debtor, nor operate
inequitably on the interests of other persons.
To sum up, if the ownr of the two or more properties
mortgages them to one person and then mortgages one or more of the properties
to another person, the subsequent mortgagee is entitled to compel the prior
mortgagee to resort to the property not mortgaged to him.
There
are separate rules for marshalling in respect of sale and mortgage.
·
In respect of
sale, the rule of marshalling is that a subsequent purchaser has a right to claim
marshalling. For instance, there are three properties A, B and C subjected to
mortgage. The mortgagor sells A to Mr. X free from any encumbrances. Mr. X is entitled to insist that the
mortgagee should realize his mortgage money out of the properties B and C as far as possible. If the whole of the debt is not capable of
being realized from B and C, the mortgagee has a right to proceed against A. In that event, the purchaser Mr. X has a right to claim from the mortgagor, the amount realized
from A. This
rule applies in the absence of any contract to the contrary.
·
In respect of
mortgage, the subsequent mortgagee is entitled to regulate or marshal the order
in which the debt is to be realized by prior mortgagees. For instance, Mr.
A mortgages X and Y properties to Mr. B and then mortgages
Y alone to Mr. C. If Mr. B seeks to realize his mortgage out
of Y, Mr. C can compel Mr.
B to proceed first against X and
realize the debt from it. If Mr. B is unable to realize the whole
amount due to him from X, he is
entitled to recover the balance from Y.
First Emergence of
The Doctrine of Marshalling
The doctrine of marshalling was first emerged in the
famous case Aldrich v. Cooper[42]. In that case Lord Eldon stated:
“If a creditor has two funds, the interest of the
debtor shall not be regarded, but the creditor having two funds shall take that
which, paying him will leave another fund for another creditor.”
Conditions of Application of the Doctrine of Marshalling :
a.
There
should be a common debtor,
b. All properties
subjected to the prior mortgage cannot be re-mortgaged and only a portion of
them can be re-mortgaged,
c. It
will not prejudice the rights or interests of prior mortgagee or third party
who has acquired an interest in any of the properties for consideration.
d. After
the re-mortgage, no further mortgage of same property can be made.
Limitations of the Doctrine of Marshalling:
a.
The
doctrine applies only in case of mortgage of immovable property.
b. The doctrine does not apply in case of
coparcenery property before partition.
c.
The
doctrine does not apply in presence of a contract to the contrary.
d.
It
will not prejudice rights of a third party who has acquired an interest for
consideration.
It is obvious that, the claim to marshal must not be
allowed to prejudice the rights of the prior mortgagee.
Suit
for Redemption:
[Section: 91 of TP Act 1882]
The Following Persons may sue for redemption:-
Section 91 of the TP Act provides that besides
the mortgagor, any of the following persons may redeem, or institute a suit for
redemption of, the mortgaged property, namely:
1. any person (other than the mortgagee
of the interest sought to be redeemed) who has any interest in, or charge upon,
the property mortgaged or in or upon the right to redeem the same;
2. any surety for the payment of the
mortgage-debt or any part thereof; or
3. any creditor of the mortgagor who
has in a suit for the administration of his estate obtained a decree for sale
of the mortgaged property.
Subrogation:
[Section 92 of the
Transfer of Property Act, 1882]
The doctrine of subrogation is an equitable doctrine
which is based on the principles of natural justice. Subrogation
is the legal doctrine
whereby one person takes over the rights or remedies of another against a third
party.[44]
In other words, 'The substitution of another person in
place of a creditor to whose rights he succeeds in relation to the debt.'[45]
Subrogation
is a roman law term meaning “substitution”.
It is the right of a person to stand in the place of a creditor. When a
mortgagee transfers his mortgage-debt, his assignee becomes vested with all his
rights i.e. his assignee is substituted or subrogated in the place of
mortgagee. In order to be entitled to subrogation, a person must pay off the
entire amount of a prior mortgage, because subrogation takes place by
redemption, and unless there is redemption, there can be no subrogation.
Section
92 makes it very clear that the doctrine of subrogation cannot be invoked unless the prior mortgage is discharged as a whole. The principle of this rule
is that there cannot be subrogation without redemption. Therefore, a partial
payment of the mortgage-debt cannot give rise to a claim for a partial
subrogation.
Section 92
of the TP Act deals with the doctrine of Subrogation. Section 92 of the TP Act provides
that any of the persons referred to in s 91 (other than the mortgagor) and any
co-mortgagor shall, on redeeming property subject to the mortgage, have, so far
as regards redemption, foreclosure or sale of such
property, the same rights as the
mortgagee whose mortgage he redeems may have against the mortgagor or any other
mortgagee.
The
right conferred by this section is called the right of subrogation, and a
person acquiring the same is said to be subrogated to the rights of the
mortgagee whose mortgage he redeems.
A
person who has advanced to mortgagor money with which the mortgage has been
redeemed shall be subrogated to the rights of the mortgagee whose mortgage has
been redeemed, if the mortgagor has by a registered instrument agreed that such
persons shall be so subrogated.
However, the above provisions of s 92 shall not be deemed to
confer a right of subrogation on any person unless the mortgage in respect of
which the right is claimed has been redeemed in full.
Section 92 of the Transfer of
Property Act does not have the effect of a substitutee becoming a
mortgagee. The provision confers certain rights on the redeeming co-mortgagor
and also provides for the remedies of redemption, foreclosure and sale being
available to the substitutee as they were available to the substituted. These
rights he exercises not as a mortgagee reincarnate but by way of rights akin to
those vesting in the mortgagee.
A
court must determine the following in order for equitable subrogation to apply:
(i)
the subrogee
made the payment to protect his or her own interest,
(ii)
the subrogee did
not act as a volunteer,
(iii)
the subrogee was
not primarily liable for the debt paid,
(iv)
the subrogee
paid off the entire encumbrance, and
(v)
subrogation
would not work any injustice of the rights of the junior lien holder.
Kinds of
Subrogation :
Legal Subrogation Conventional Subrogation
Section
92 of the TP Act includes both. Legal subrogation takes place by operation of
law, which the mortgage-debt is paid off by some person who has some interest
to protect, e.g. where a subsequent mortgage pays off a prior one.
Four Ways
of Legal Subrogation:
Conventional
Subrogation:
This kind of subrogation is also known as
“subrogation by agreement”. This kind of subrogation takes place where the
person paying off the mortgage-debt is a stranger and has no interest to
protect, but he advances the money under an agreement, express or implied, that
he would be subrogated to the rights and remedies of the mortgage who is paid
off.
Basis of
the Doctrine of Subrogation:
The
essence of the doctrine of subrogation is that the party who pays off a
mortgage gets clothed with all the rights of the mortgagee. The doctrine is
based on the principles of justice,
equity and conscience.
In
Transfer of Property Act 1882, we find plenty of laws relating to Mortgage but
the application of these laws is not practically well-established. The proper
implementation of the statutory laws should be ensured in the practical fields.
Conclusion:
Mortgage
is such a mode of transfer, which plays a significant role in securing money
advanced as debt. The creditor can safely advance money as debt without any
tension of refunding that money. In mortgage, when the debtor becomes unable to
repay, the creditor gets a right to sell or foreclose the mortgaged-property
under a decree of the court.
Regarding
Mortgage in Transfer of Property Act 1882, there are sufficient laws but I
specially think that the application of these laws in the practical field is
not well-founded. So, it is expected that the statutory law will be implemented
in the practical field.
Bibliography :
1.
Molla, The Transfer of Property Act,1882
2.
Shukla, The Transfer of Property Act,1882
3.
Shah, Principles of the Law of Transfer
4.
Jhabvala, The Transfer of Property Act,1882
5.
Obaidul Huq Chowdhury, The Transfer of Property Act,1882 (DLR)
6.
মো: আব্দুর রহমান
হাওলাদার, সম্পত্তি হস্তান্তর আইনের বিশ্লেষণ
[1]. Transfer of Property Act,1882 Section 58.
[2]. Ibid. Section 105.
[3] . Mortgage law-
Wikipedia.
[4]. Ibid. Section 58.
[5] . The Contract
Act,1872 Section 11
[6] . Sita Ram Prasad v. Mahadeo Rai, A.I.R.1980
[7] . Transfer of
Property Act,1882 Section 58(b).
[8] . Ibid. Section
58(c).
[9] . Ibid. Section
58(d).
[10] . Ibid.
[11] . Anaji Thamaji Patil v. Rabho Bhivraj Patil
and another, A.I.R.1973 Bom 75.
[12] . Transfer of
Property Act,1882 Section 58(e).
[13] . Ibid. Section
58(f).
[14] . Ibid. Section
58(g).
[15]. The Transfer of Property (Amendment)
Act,2004 Amended Section 59.
[16] . Raghunath v. Amir Baksh, (1922) ILR 1 Pat
281,65 IC 329,AIR 1922 AP 299.
[17] . Poulise and
another v. State Bank of Travancore
[18]
. Transfer of Property Act,1882 Section 60.
[19] . Gangadhar v. Shankar
Lal, A.I.R. 1958 S.C.773.
[20] . V. Paily v. K.
Augusty, A.I.R. 1967 Ker. 247
[21] . Har Dayal Singh v. Raja Ram Singh,(1933) 9
luck. 151
[22] . Fateh Muhammad
v. Ram Dayal(1927) 2 Luck. 588 I.C. 160
[23] . Ram Saran v .
Amrit,(1980) 3 All. 369 F.B.
[24] . Dhanalakshami
Ammal v. G. Anthuraj, A.I.R. 1972 mad. 150
[25]
. Transfer of
Property Act, 1882 Section 60-A
[27]
. Joys Singh v. Krishna, A.I.R. 1985, 36
[28] . Transfer of Property,1882 Section 63-A(1)
[29] . Ibid.
Section 63-A(2)
[30] . Ibid. Section 67
[31] . Ibid. Section 68
[32]
. Ibid. Section 67-A
[33]
. Ibid. Section 68
[34] .
Ibid.
Section 69 (1)(b)
[37]
. Transfer of Property Act, 1882 Sec. 72
(b)
[38]
. Ibid (c)
[39]
. Ibid (d)
[40]
. Ibid (e)
[41]
. Ibid Sec. 79
[42]
. (1803) 8
Ves. 382
[43]
. Kashi Ram v. Het Singh (1915) ILR 37 All
101,26 IC 417
[44].
Subrogation- Wikipedia, the free encyclopedia.
[45].
Legal & Commercial Dictionary, by A. N. Saha, 5th Edition, Eastern Law
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