Detailed Study Notes for Unit III

Unit-III: Sale, Mortgage, Marshalling, Contribution & Charges

1. Sale of Immovable Property (Sections 54 to 57 of TPA)

A. Essential Features and Definition (Section 54)

Definition: Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
How Sale is Made:
- For tangible immovable property of the value of one hundred rupees and upwards, or for a reversion or other incorporeal thing, a sale can be made only by a registered instrument.
- For tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

B. Rights and Liabilities of Buyer and Seller (Section 55)

Seller’s Liabilities: Disclose latent material defects in property, produce documents of title for inspection, answer questions regarding title truthfully, and execute a proper conveyance deed upon payment.
Buyer’s Liabilities: Disclose any facts known to the buyer that increase the value of the property, pay the purchase price to the seller, and bear the loss of destruction of property after ownership has passed.

2. Mortgage of Immovable Property (Sections 58 to 104)

A. Definition and Key Terms (Section 58)

Mortgage: The transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
Mortgagor: The transferor who borrows money and mortgages property.
Mortgagee: The transferee to whom the property is mortgaged as security.
Mortgage Deed: The formal instrument by which the mortgage is effected.

B. Kinds of Mortgages (Section 58(a) to (g))

Simple Mortgage: No transfer of possession; the mortgagor binds himself personally to pay the mortgage-money and agrees expressly that in the event of failure to pay, the mortgagee shall have a right to cause the mortgaged property to be sold through court.
Mortgage by Conditional Sale: The mortgagor ostensibly sells the mortgaged property on condition that on default of payment of mortgage-money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void.
Usufructuary Mortgage: The mortgagor delivers possession (or expressly binds himself to deliver possession) of the mortgaged property to the mortgagee, authorizing him to receive rents and profits accruing from the property and appropriate them in lieu of interest or principal.
English Mortgage: The mortgagor binds himself to repay the mortgage-money on a certain date and transfers the property absolutely to the mortgagee, subject to a proviso that the mortgagee will re-transfer it upon repayment.
Mortgage by Deposit of Title Deeds (Equitable Mortgage): Created in notified commercial towns (like Kolkata, Mumbai, Chennai) where a person delivers to a creditor documents of title to immovable property with intent to create a security thereon.
Anomalous Mortgage: A mortgage which is not any of the aforementioned standard categories.

3. Rights and Liabilities of Mortgagor and Mortgagee

A. Rights of the Mortgagor

Right of Redemption (Section 60): At any time after the principal money has become due, the mortgagor has the right, upon payment or tender of the mortgage-money, to require the mortgagee to deliver back the mortgage deed and property (Equity of Redemption: “Once a mortgage, always a mortgage”).
Right to Inspection of Documents and Right to Accession.

B. Rights of the Mortgagee

Right to Foreclosure or Sale (Section 67): Right to obtain a decree from the court for foreclosure (in mortgage by conditional sale) or sale of the mortgaged property upon default.

4. Marshalling, Contribution and Charges (Sections 81, 82 & 100)

A. Marshalling Securities (Section 81)

If the owner of 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 have the prior mortgage satisfied out of the property not mortgaged to him, to the extent that such property will extend.

B. Contribution (Section 82)

Where property subject to a mortgage belongs to two or more persons severally, they shall contribute to the mortgage-debt in proportion to the value of their respective shares in the property.

C. Charges (Section 100)

Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter is said to have a charge on the property. (Distinction: Every mortgage is a charge, but every charge is not a mortgage; charges do not transfer any interest in property).

5. In-Depth Landmark Case Studies

Case Study 1: The Principle of “Once a Mortgage, Always a Mortgage”

Case Title: Stanley v. Wilde (and Indian precedent Mohd. Sher Khan v. Seth Swami Dayal)
Citation & Court: [1899] 2 Ch. 474 / AIR 1922 PC 17
Related Statutory Provisions: Section 60 of TPA (Right of redemption).
The Story & Real-Line Background: A mortgagor mortgaged his property and agreed in the mortgage deed that the mortgagee would have an option to purchase the mortgaged property within 25 years. The mortgagor later sought to redeem the mortgage early, but the mortgagee argued the purchase option barred early redemption.
Legal Issues Involved: Whether a clog on the equity of redemption (any covenant preventing redemption) is legally valid.
Final Judgement & Ratio Decidendi:
- Ruling: The court held that any provision in a mortgage deed that clogs, fetters, or impedes the mortgagor’s right of redemption is void. The golden rule of equity is “Once a mortgage, always a mortgage,” meaning a mortgage cannot be made irredeemable.
- Ratio: Any condition attempting to extinguish or restrict the mortgagor’s statutory right to redeem the property upon payment of debt is a void clog.

Case Study 2: Nature of Equitable Mortgage by Deposit of Title Deeds

Case Title: K.J. Nathan v. S.V. Maruthi Rao
Citation & Court: AIR 1965 SC 430 (Supreme Court of India)
Related Statutory Provisions: Section 58(f) of TPA (Mortgage by deposit of title deeds).
The Story & Real-Line Background: A debtor deposited title deeds of his property with a bank in a notified town to secure an overdraft facility. A dispute arose over whether the mere physical deposit of deeds without a registered written agreement constituted a valid equitable mortgage.
Legal Issues Involved: Essential ingredients required to constitute a valid mortgage by deposit of title deeds under Section 58(f).
Final Judgement & Ratio Decidendi:
- Ruling: The Supreme Court held that three conditions are essential for an equitable mortgage: (1) debt (existing or future), (2) deposit of title deeds, and (3) an intention that the deeds shall constitute security for the debt. No registered document is necessary for creating an equitable mortgage by deposit of title deeds in notified towns.
- Ratio: Deposit of title deeds with intent to create security creates a valid equitable mortgage without requiring formal registration.

Quick Reference Guide: Unit-III Law of Property

Unit Number	Topic / Concept Name	Relevant TPA Provision	Core Description / Subject Matter
Unit-III	Sale of Property	Section 54	Transfer of ownership for a price; mandatory registration for value above ₹100.
Unit-III	Kinds of Mortgages	Section 58	Simple, conditional, usufructuary, English, and equitable mortgage by deposit of deeds.
Unit-III	Right of Redemption	Section 60	Mortgagor’s unyielding statutory right to redeem property (“Once a mortgage, always a mortgage”).
Unit-III	Charges	Section 100	Security for payment of money created by act of parties or law without transferring property interest.