Report No. 70
Discharge of Incumbrances on Sale
Section 57, which we now proceed to consider, is one of the least used section in the Act. Its principal object is to enable a prospective seller to apply for the discharge of incumbrances on sale so that the property can be conveniently sold.
This is how the section reads:-
"57. (a) Where immovable property subject to any incumbrance, whether immediately payable or not, is sold by the Court or in execution of a decree, or out of Court, the Court may, if it thinks fit, on the application of any party to the sale, direct or allow payment into Court-
(1) in case of an annual or monthly sum charged on the property, or of a capital sum charged on a determinable interest in the property-of such amount as, when invested in securities of the Central Government, the Court considers will be sufficient, by means of the interest thereof, to keep down or otherwise provide for that charge, and
(2) in any other case of a capital sum charged on the property-of the amount sufficient to meet the incumbrance and any interest due thereon. But in either case there shall also be paid into Court such additional amount as the Court considers will be sufficient to meet the contingency of further costs, expenses and interest, and any other contingency, except depreciation of investments, not exceeding one tenth part of the original amount to be paid in, unless the Court for special reasons (which it shall record) thinks fit to require a larger additional amount.
(b) Thereupon the Court may, if it thinks fit and after notice to the incumbrancer, unless the Court, for reasons to be recorded in writing thinks fit to dispense with such notice, declare the property to be freed from the incumbrance, and make any order for conveyance, or vesting order, proper for giving effect to the sale, and give directions for the retention and investment of the money in Court.
(c) After notice served on the persons interested in or entitled to the money or fund in Court, the Court may direct payment or transfer thereof to the persons entitled to receive or give a discharge for the same, and generally may give directions respecting the application or distribution of the capital or income thereof.
(d) An appeal shall lie from any declaration, order or direction under this section as if the same were a decree.
(e) In this section "Court" means-(1) a High Court in the exercise of its ordinary or extra-ordinary original civil jurisdiction, (2) the Court of a District Judge within the local limits of whose jurisdiction the property or any part thereof is situate, (3) any other Court which the State Government may, from time to time, by notification in the Official Gazette, declare to be competent to exercise the jurisdiction conferred by this section."
This section has been borrowed from section 5 of the Conveyancing and Law of Property Act, 1881, now replaced by section 50 of the Law of Property Act, 1925. Where the subject of a sale is property subject to an incumbrance, this section empowers the Court to provide for the discharge of the incumbrances, and then to declare the property free from sum incumbrances.1 It is a remedial enactment for facilitating the sale of land.2 The object of section 5 of the Conveyancing and Law of Property Act, 1881, was stated by Sargent, J. in the following terms in the case of Wilberforce3:-
"prima facie, the object of the whole of section 5 is not to disturb any vested or other rights more than is necessary, but to enable a sale to be effected and the property to be transferred to the purchaser notwithstanding there may be on the land a liability for payment of a future sum which would, but for the provisions of the section, clearly have prevented the sale of the land free from incumbrance. Of course, a purchaser might think fit to take the land subject to the incumbrance, but the purchase of land subject to an incumbrance is not usually a desirable investment, and the object of the section was to enable the land to be conveyed to the purchaser so that he might get a full and complete title to it."
1. AIR 1916 Pat 113 (114): 2 Pat I Jour 118 (DB).
(See also AIR 1937 Nag 36-If appropriate procedure is taken under section 57 the charge may be wiped out).
2. Wilberforce v. Wilberforce, (1915) 1 Ch 94 (101): 84 LJ. Ch 252 (256).
3. Wilberforce v. Wilberforce, (1915) 1 Ch 94 (102): 84 LJ Ch 252.
53.3. Analogous provisions.-
Section 83 provides for the discharge of a mortgage on property after it has become due. Section 57 provides for declaring an incumbered property free of the incumbrance (which is not confined to mortgage), where such property is the subject-matter of a sale. Under section 83, the Court cannot compel the mortgagee to accept the deposit in discharge of the mortgage, while, under section 57, the Court can declare the property free of incumbrance even against the will of the incumbrancer.
Order 34, rule 12 of the Code of Civil Procedure, 1908, provides that where any property, the sale of which is directed by that Order, is subject to a prior mortgage, the Court may, with the consent of the prior mortgagee, direct that the property be sold free from the same, giving to such prior mortgagee the same interest in the proceeds of the sale as he had in the property sold. This section is wider than the said rule, and applies to sales by the Court or in execution of a decree or out of Court, and not merely to a sale directed by Order 34 of the Code.
An "incumbrance" is not defined in the section. It is "a claim, lien or liability attached to property" according to Wharton. Bouvier, in his Law Dictionary, defines an "incumbrance" as "any right to, or any interest in, land which may subsist in a third person to the diminution of the value of the land and not inconsistent with the passing of the fee in it by a deed of conveyance". The word has also been defined in section 2 of the Conveyancing and Law of Property Act, 1881 (now replaced by section 205 of the Law of Property Act, 1925), as follows:-
"Incumbrance includes a mortgage in fee, or for a less estate, and a trust for securing money, and a lien, and a charge of a portion, annuity or other capital or annual sum; and incumbrancer has a meaning corresponding with that of incumbrance, and includes every person entitled to the benefit of an incumbrance, or to require payment or discharge thereof."
Since section 57 has been borrowed from section 5 of the Conveyancing and Law of Property Act, 1881, the word "incumbrance" may also, appropriately, be taken to have the same meaning as it has in that Act. Thus, maintenance charged on property would be included.1
1. Seth Ghasiram v. Acharaj Kaur (Mt.), AIR 1937 Nag 38.
53.5. First alternative.-
The first alternative provided by the section in regard to annual or monthly sums charged on the property or in regard to capital sums charged on a determinable interest in the property, is to allow payment into court of the appropriate amount, that is to say, an amount which, when invested, will provide for the charge by means of the interest. Here, the straightaway payment of the entire sum is out of question, because the sum charged is to be paid at intervals, or is charged on a determinable interest in the property.
53.6. Second alternative.-
The second alternative provided by the section provides that in any other case of a capital sum charged on the property, the Court may direct or allow payment into Court of "the amount sufficient to meet the incumbrance and any interest due thereon". The "amount sufficient" to be paid into Court is the amount which, in the opinion of the Court, is sufficient when invested in Government securities, to meet the incumbrance and any interest thereon. In coming to this conclusion Mr. Justice Sargent observed in In re Wilberforce1, as follows:-
"Then comes the other alternative-'In any other case of capital money charged on the land', when the payment into Court is to be 'of the amount sufficient to meet the incumbrance and interest thereon'. Does that merely mean the actual amount of the capital money, or does it mean the amount which is considered by the Court sufficient, when invested in Government securities, to meet the incumbrance and any interest thereon;-that is to say, are the words in the first alternative reflected in the second alternative, so that, by the words 'the amount'.
I am to understand the Legislature as meaning the sufficient amount as set out in the earlier part of sub-section (1), i.e., clause (a), or am I to take 'the amount' as meaning merely the bare amount of the capital charge? In my opinion, the former is the truer construction. It seems to me that there is no reason why, in the second part of the sub-section, the Court should not have the same discretion that it has in the first part of the sub-section or be limited to directing payment into Court of the bare amount of the charge itself. It seems to me that the amount which is to be paid into Court, is the amount which in the opinion of the Court is sufficient, when invested in Government securities, to meet the incumbrance and any interest thereon."
1. Wilberforce (in re), (1915) 1 Ch 84 (102, 103).
53.7. Specified Courts.-
The reasons for limiting the exercise of the powers given by section 57 to the specified Courts are stated in Whitley Stoke's Anglo-Indian Codes1 as follows:
"The corresponding section in 44 & 45 Vict., C. 41 has been hailed in England as likely to effect one of the greatest reforms ever made in the law of real property, and there is reason to believe that it will be equally beneficial in India. But to prevent any chance of error in the exercise of a novel jurisdiction, the India Legislature has taken two precautions; first, it has confined the jurisdiction to the High Courts, the District Courts, and any other Courts specially empowered by the Local Government; and, secondly, it has declared that an appeal shall lie from all directions and orders given under this section."
1. Whitley Stokes The Anglo-Indian Codes, Vol. I, 1892 Edn., Introduction to the Transfer of Property Act, p. 731.
53.8. Recommendation to extend section 57 to all courts.-
While the above reasoning was valid at the time when Stokes wrote, we do not think it retains its force today. Courts other than district Courts have been vested with many important powers, and there is every reason why the beneficial provision in section 57 should apply to all Courts competent to try a suit for redemption of the mortgage. We recommend accordingly.