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Report No. 54

Chapter 34

Suits on Mortgages

Introductory

34.1. Order 34 deals with suits on mortgages.

The scheme of the Code in relation to suits on mortgages is as follows:-

Whether the suit be one for foreclosure, sale or redemption, the preliminary decree in each case must either declare the amount due on the mortgage, or direct an account to be taken of what is due to the mortgagee for principal, interest and costs, and for other costs, charges and expenses in respect of the mortgage-security. An account is then taken of what is due on the mortgage, the sums so found due,to each mortgagee are included in one report, and the sale-proceeds are subsequently divided between the plaintiff and the puisne mortgagees in accordance with their claims as found by the report. Where the mortgagee is in possession, an account is to be taken of what is due to the mortgagee for principal and interest, and also of the income derived by him from the property.

34.2. After this, a final decree is passed. The shape which the final decree takes depends on whether the mortgagor has or has not paid the total amount due on the mortgage. If he has not paid it, the final decree is for foreclosure or sale.

34.3. A fundamental defect in the present procedure under Order 34 is that it necessitates two decrees in the same suit and also the possibility of two appeals against decrees in the same suit.

34.4. We think that this should be avoided. The scheme which we propose is, that there should be only one decree in suits on mortgages. That decree will correspond to the present preliminary decree. All subsequent proceedings will take place in execution.

Recommendation

34.5. Accordingly, we recommend the following re-drafts of the relevant rules in Order 34:

Re-draft of Order 34, rule 2

2.(1) In a suit for foreclosure, if the plaintiff succeeds, the Court shall pass a decree-

(a) ordering that an account be taken of what was due to the plaintiff at the date of such decree for

(i) principal and interest on the mortgage;

(ii) the costs of suit, if any awarded to him; and

(iii) other costs, charges and expenses properly incurred by him up to that date in respect of his mortgage-security, together with interest thereon; or

(b) declaring the amount so due at that date; and

(c) directing

(i) that, if the defendant pays into Court the amount so found or declared due on or before such date as the Court may fix within six months from the date on which the Court confirms and countersigns the account taken under clause (a), or from the date on which such amount is declared in Court under clause (b); as the case may be, and thereafter pays such amount as may be adjudged due in respect of subsequent costs, charges and expenses as provided in rule 10, together with subsequent interest on such sums respectively as provided in rule 11, the plaintiff shall deliver up to the defendant, or to such person as the defendant appoints, all documents in his possession or power relating to the mortgaged property, and shall, if so required, re-transfer the property to the defendant at his cost free from the mortgage and from all incumberances created by the plaintiff or any person claiming under him, or, where the plaintiff claims by derived title, by those under whom he claims, and shall also, if necessary, put the defendant in possession of the property; and

(ii) that, if payment of the amount found or declared due under or by the decree is not made on or before the date so fixed, or the defendant fails to pay, within such time as the Court may fix, the amount adjudged due in respect of subsequent costs, charges, expenses and interest, the plaintiff shall be entitled to apply in execution for an order debarring the defendant from all right to redeem the property.

(2) The Court may, on good cause shown and upon terms to be fixed by the Court, from time to time, at any time before an order under sub-clause (ii) of clause (c) of sub-rule (1) is passed, extend the time fixed for the payment of the amount found or declared due under sub-rule (1) or of the amount adjudged due in respect of subsequent costs, charges, expenses and interest.

(3) Where, in a suit for foreclosure, subsequent mortgagees, or persons deriving title from, or subrogated to the rights of, any such mortgagees are joined as parties, the decree shall provide for the adjudication of the respective rights and liabilities of the parties to the suit in the manner and form set forth in Form No. 9 or Form No. 10, as the case may be, of Appendix D, with such variations as the circumstances of the case may require.

Re-draft of Order 34, rule 3

3.(1) Where, before an order debarring the defendant from all right to redeem the mortgaged property has been passed, the defendant makes payment into Court of all amounts due from him under sub-rule (1) of rule 2, the Court shall, on application made by the defendant in this behalf, in execution pass an order-

(a) ordering the plaintiff to deliver up the documents referred to in the decree, and, if necessary-

(b) ordering him to re-transfer at the cost of the defendant the mortgaged property as directed in the decree, and also, if necessary-

(c) ordering him to put the defendant in possession of the property.

(2) Where payment in accordance with sub-rule (1) has not been made, the Court shall, on application made by the plaintiff in this behalf in execution, pass an order declaring that the defendant and all persons claiming through or under him are debarred from all right to redeem the mortgaged property and also, if necessary, ordering the defendant to put the plaintiff in possession of the property.

(3) On the passing of an order under sub-rule (2), all liabilities to which the defendant is subject in respect of the mortgage or on account of the suit shall be deemed to have been discharged.

Re-draft of Order 34, rule 4

4.(1) In a suit for sale, if the plaintiff succeeds, the Court shall pass a decree to the effect mentioned in clauses (a), (b) and (c) (i) of sub rule (1) of rule 2 and further directing that, in default of the defendant paying as therein mentioned, the plaintiff shall be entitled to apply in execution for an order directing that the mortgaged property or a sufficient part thereof be sold, and the proceeds of the sale (after deduction therefrom of the expenses of the sale) be paid into Court and applied in payment of what has been found or declared under or by the decree due to the plaintiff, together with such amount as may have been adjudged due in respect of subsequent costs, charges, expenses and interest, and the balance, if any, be paid to the defendant or other persons entitled to receive the same.

(2) The Court may, on good cause shown and upon terms to be fixed by the Court, from time to time, at any time before an order for sale is passed, extend the time fixed for the payment of the amount found or declared due under sub-rule (1) or of the amount adjudged due in respect of subsequent costs, charges, expenses and interest.

(3) In a suit for foreclosure in the case of an anomalous mortgage, if the plaintiff succeeds, the Court may, at the instance of any party to the suit or of any other person interested in the mortgage-security or the right of redemption, pass a like decree (in lieu of a decree for foreclosure) on such terms as it thinks fit, including the deposit in Court of a reasonable sum fixed by the Court to meet the expenses of the sale and to secure the performance of the terms.

(4) Where, in a suit for sale or a suit for foreclosure in which sale is ordered, subsequent mortgagees or persons deriving title from, or subrogated to the rights of, any such mortgagees are joined as parties, the decree referred to in sub-rule (1) shall provide for the adjudication of the respective rights and liabilities of the parties to the suit in the manner and form set forth in Form No. 9, Form No. 10 or Form No. 11, as the case may be, of Appendix D with such variations as the circumstances of the case may require.

Re-draft of Order 34, rule 5

5.(1) Where, on or before the day fixed or at any time before the confirmation of a sale made in pursuance of an order passed under sub-rule (3) of this rule, the defendant makes payment into Court of all amounts due from him under sub-rule (1) of rule 4, the Court shall, on application made by the defendant in this behalf in execution, pass an order-

(a) ordering the plaintiff to deliver up the documents referred to in the decree. and if necessary-

(b) ordering him to transfer the mortgaged property as directed in the decree, and also, if necessary-

(c) ordering him to put the defendant in possession of the property.

(2) Where the mortgaged property or part thereof has been sold in pursuance of an order passed under sub-rule (3) of this rule, the Court shall not pass an order under sub-rule (1) of this rule, unless the defendant, in addition to the amount mentioned in sub-rule (1), deposits in Court for payment to the purchaser a sum equal to five per cent. of the amount of the purchase-money paid into Court by the purchaser. Where such deposit has been made, the purchaser shall be entitled to an order for re-payment of the amount of the purchase-money paid into court by him, together with a sum equal to five per cent. thereof.

(3) Where payment in accordance with sub-rule (1) has not been made, the Court shall, on application made by the plaintiff in this behalf in execution, pass an order directing that the mortgaged property or a sufficient part thereof be sold, and that the proceeds of the sale be dealt with in the manner provided in sub-rule (1) of rule 4.

Re-draft of Order 34, rule 6

6.Recovery of balance due on mortgage in suit for sale.-Where the net proceeds of any sale held under rule 5 are found insufficient to pay the amount due to the plaintiff, the Court, on application by him may, if the balance is legally recoverable from the defendant otherwise than out of the property sold, pass an order for such balance in execution.

Re-draft of Order 34, rule 7 Decree in redemption-suit

7.(1) In a suit for redemption, if the plaintiff succeeds, the Court shall pass....a decree-

(a) ordering that an account be taken of what was due to the defendant at the date of the decree for

(i) principal and interest on the mortgage.

(ii) the costs of suit, if any, awarded to him, and,

(iii) other costs, charges and expenses properly incurred by him up to that date, in respect of his mortgage-security, together with interest thereon, or

(b) declaring the amount so due at that date; and

(c) directing

(i) that, if the plaintiff pays into Court the amount so found or declared due on or before such date as the Court may fix within six months from the date on which the Court confirms and countersigns the account taken under clause (a), or from the date on which such amount is declared in Court under clause (b), as the case may be, and thereafter pays such amount as may be adjudged due in respect of subsequent costs, charges and expenses as provided in rule 10 together with subsequent interest on such sums respectively as provided in rule 11, the defendant shall deliver up to the plaintiff, or to such person as the plaintiff appoints, all documents in his possession or power relating to the mortgaged property, and shall, if so required, re-transfer the property to the plaintiff at his cost free from the mortgage and from all incumberances created by the defendant or any person claiming under him, or, where the defendant claims by derived title, by those under whom he claims, and shall also if necessary put the plaintiff in possession of the property; and

(ii) that, if payment of the amount found or declared due under or by the decree is not made on or before the date so fixed, or the plaintiff fails to pay, within such time as the Court may fix, the amount adjudged due in respect of subsequent costs, charges expenses and interest, the defendant shall be entitled to apply in execution for an order-

(a) in the case of a mortgage other than usufructuary mortgage, a mortgage by conditional sale, or an anomalous mortgage the terms of which provide for foreclosure only and not for sale, that the mortgaged property be sold, or

(b) in the case of a mortgage by conditional sale or such an anomalous mortgage as aforesaid, that the plaintiff be debarred from all right to redeem the property.

(2) The Court may, on good cause shown and upon terms to be fixed by the Court, from time to time, at any time before the passing of an order for foreclosure or sale, as the case may be extend the time fixed for the payment of the amount found or declared due under sub-rule (1) or of the amount adjudged due in respect of subsequent costs, charges, expenses and interest.

Re-draft of Order 34, rule 8 Final Order in redemption suit

8.(1) Where, before an order debarring the plaintiff from all right to redeem the mortgaged property has been passed or before the confirmation of a sale held in pursuance of an order passed under sub-rule (3) of this rule, the plaintiff makes payment into Court of all amounts due from him under sub-rule (1) of rule 7, the Court shall, on application made by the plaintiff in this behalf, pass a decree or, if a decree has been passed, an order in execution-

(a) ordering the defendant t deliver up the documents referred to in the decree. and if necessary-

(b) ordering him to re-transfer at the cost property as directed in decree, and also if necessary-

(c) ordering him to put the plaintiff in possession

(2) Where the mortgaged property or a part thereof has been sold in pursuance of an order passed under sub-rule (3) of this rule, the Court shall not pass an order under sub-rule (1) of this rule, unless the plaintiff, in addition to the amount mentioned in sub-rule (1), deposits in Court for payment to the purchaser a sum equal to five per cent. of the amount of the purchase money paid into Court by the purchaser. Where such deposit has been made, the purchaser shall be entitled to an order in execution for re-payment of the amount of the purchase-money paid into Court by him, together with a sum equal to five per cent. thereof.

(3) Where payment in accordance with sub-rule (1) has not been made, the Court shall, on application may by the defendant in this behalf in execution,-

(a) in the case of a mortgage by conditional sale or of such an anomalous mortgage as it hereinbefore referred to in rule 7, pass an order declaring that the plaintiff and all persons claiming under him are debarred from all right to redeem the mortgaged property and, also, if necessary, ordering the plaintiff to put the defendant in possession of the mortgaged property; or

(b) in the case of any other mortgage, not being a unfractuary mortgage, pass an order that the mortgaged property or a sufficient part thereof be sold, and the proceeds of the sale (after deduction there from of the expenses of the sale) be paid into Court and applied in payment of what is found due to the defendant and the balance, if any, be paid to the plaintiff or other persons entitled to receive the same.

Re-draft of Order 34, rule 8A Recovery of balance due on mortgage in suit for redemption

Re-draft of Order 34, rule 9, Order where nothing is found due or where mortgagee has been over-paid

9. Notwithstanding anything hereinbefore contained, if it appears, upon taking the account referred to in rule 7, that nothing is due to the defendant or that he has been overpaid, the Court shall pass an order directing the defendant, if so required, to re-transfer the property and to pay to the plaintiff the amount which may be found due to him; and the plaintiff shall, if necessary, be put in possession of the mortgaged property.

Re-draft of Order 34, rule 10

10. In finally adjusting the amount to be paid to a mortgagee in case of a fore-closure, sale or redemption, the Court shall, unless in the case of costs of the suit the conduct of the mortgagee has been such as to disentitle him thereto, add to the mortgage-money such costs of the suit and other costs, charges and expenses as have been properly incurred by him since the date of the decree for foreclosure, sale or redemption up to the time of actual payments.

Re-draft of Order 34, rule 11-Payment of interest

11. In any decree passed in a suit for foreclosure, sale or redemption, where interest is legally recoverable, the Court may order payment of interest to the mortgagee as follows, namely:-

(a) interest upto the date on or before which payment of the amount found or declared due is under the........decree to be made by the mortgagor or other person redeeming the mortgage--

(i) on the principal amount found or declared due on the mortgage-at the rate payable on the principal, or where no such rate is fixed, at such as the Court seems reasonable;

(ii) on the amount adjudged due to the mortgagee for costs, charges and expenses properly incurred by the mortgagee in respect of the mortgage-security upto the date of the.....decree and added to the mortgage-money-at the rate agreed between the parties, or, failing such rate, at such rate not exceeding six per cent. per annum as the Court deems reasonable;

(b) subsequent interest upto the date of realisation or actual payment on the aggregate of the principal sums specified in clause (a) as calculated in accordance with that clause at such rate as the Court deems reasonable.

1. For further amendment see below "Recommendations as to Order 34, rule 10".



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