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Report No. 70

Chapter 56

Persons Deriving Title from Mortgagors and Mortgagees

Section 59A

56.1. Section 59A-Definition of "mortgagor" and "mortgagee".-

The expressions "mortgagor" and "mortgagee", occurring so frequently in the provisions relating to mortgages, are not confined to the person who created, the mortgage or the person in whose favour it was created. Since the mortgagor's interest as well as the mortgagee's interest is transferable,1 the rights conferred and liabilities imposed by the Act on each would attach to the transferee also. Incorporating this principle, section 59A provides as follows:-

"59A. Unless otherwise expressly provided, references in this Chapter to mortgagors and mortgagees shall be deemed to include references to persons deriving title from them respectively."

This section was inserted in 1929, but the position was substantially the same according to judicial decisions pronounced before that year.

1. Section 6.

56.2. Right of second mortgagee.-

The only question of detail to be considered in connection with this section is whether a mortgagee from a mortgagee falls within the section. It has been held by the High Court of Allahabad1 that the section draws a distinction between two categories of mortgagors and mortgagees, and that the intention of the section is that persons who derive title from them are to be persons who derive title as a mortgagor or as a mortgagee. In other words, the word "mortgagor" would not, according to this view, include a subsequent mortgagee from the mortgagor, but would include only persons succeeding (by inheritance or by will or by sale or by auction-sale).

A similar view has been taken also by the Calcutta and the Madras High Courts. The Calcutta case2 holds that a puisne mortgagee is not included in the term "mortgagor" in section 72, proviso. The Madras case3 holds that the term "mortgagor" in section 69 does not include a second mortgagee, so that the first mortgagee, when exercising a power of extra-judicial sale, need not notify the second mortgagee.

In a case arising before the section was added, it was held by the High Court of Madras,4 that the word "mortgagee" in section 60 (right of redemption) would include his sub-mortgagee. In another case,5 it was held that the word "mortgagee" in section 83 includes his sub-mortgagee.

In 1965 the Madras High Court held6 that the term "mortgagor" in section 69 (Power of sale), does not cover a second mortgagee.

1. Piarey Lal v. Dina Nath, AIR 1939 All 190 (192).

2. Midnapore Zamindari Co. v. Saradindu, AIR 1948 Cal 250 (255).

3. D. Guruswami, AIR 1965 Mad 142 (143).

4. AIR 1927 Mad 703 (704).

5. AIR 1924 Mad 453 (454, 455).

6. AIR 1965 Mad 142 (143).

56.3. Case law as to foreclosure against second mortgagee.-

In a Madras case,1 it was held that the sub-mortgagee is entitled to a decree for the sale of the original mortgagor's interest, in cases and in circumstances which would have entitled the original mortgagee on the date of the sub-mortgage to claim such relief. The Court quoted "Seton on Decrees", "Deniels' Chancery Practice", an American writer, Washburn, on "Real property", also Salkowski's work on "Roman Private Law", and Mackeldey's "Roman Law". Differing with this view the Rangoon High Court observed2-"I do not suppose that one of these learned authors had even read the Indian Transfer of Property Act, and I personally have not be least idea what the American law of mortgages may be."

The Rangoon view is that the word "mortgagee" would not include a mortgagee from the mortgagee (i.e., a sub-mortgagee), and that he cannot sue for foreclosure of the original mortgage.

This is contrary to the Madras view, taken not only in the earlier case referred to above, but also in a case reported in 1954. The Madras High Court has held3 that a "mortgagee" for the purpose of redemption or foreclosure would include all persons who derive title from him, and it is immaterial whether that title is derived by a sale in invitum or by private treaty or whether it is by an act of parties or by operation of law. It held that a sub-mortgagee can file a suit for foreclosing the principal mortgage.

1. Muthu Vijia v. Venkatachallam Chetti, 1897 ILR 20 Mad 35.

2. AIR 1937 Rang 56 (58).

3. Karuppan v. Devasigamania, AIR 1954 Mad 650 (656) (Rajamannar, C.J. & Venkata Ram Ayyar, J.).

56.4. No change.-

On the specific question whether a sub-mortgagee can foreclose the mortgagor, we are of the view that the wider view-i.e., the Madras view1-is correct. That seems to be the view intended by the Legislature, and is more likely than the narrower view to advance the general intendment of the scheme of the Act. However, since, in other sections a different view may be intended, it is not possible to recommend any categorical provision amplifying the definition in section 59A in relation to sub-mortgagees.

1. Para. 56.3, supra.

The Transfer of Property Act, 1882 Back

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