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Report No. 70

Chapter 68

Personal Liability

Section 68

68.1. Introductory.-

The remedies of the mortgagee are not exhausted by foreclosure and sale, which are dealt with in section 67. There is the important personal remedy against the mortgagor, and then there is the extraordinary remedy of extra-judicial sale. The personal remedy is not available in every case. There must be some basis, either in contract or equity or in some conduct of the mortgagor.

68.2. Section 68.-

Section 68 deals with the personal liability of the mortgagor for the mortgage-money. The mortgagor may, in the mortgage contract, bind himself to pay the amount, in which case, the personal liability will arise under clause (a) of section 68 by the terms of the contract of mortgage. However, independently of such a contractual obligation, such a liability may arise under clause (b), (c) or (d), As was pointed out by the High Court of Calcutta in Sukhadakanta v. Jogineekantn, AOR 1934 Cal 73 (76), clause (a) of section 68 gives the mortgagee a right excontractal now (b) gives a right on equitable grounds and, clauses (c) and (d) give a right ex-delicto. It may be stated that the rules laid down in the section were well recognised1 even before 1882.

1. Shabbu Ram v. Girdhar Singh, 1884 ILR 6 All 298 (301) (Discussion as to deprivation of possession).

68.2A. Cases within the section.-

The mortgagee has a right to sue for the mortgage-money according to section 68 "in the following cases and no others, namely". The precise and exclusionary language of the section is due to the fact that for a long time there existed a controversy in what cases the personal remedy is available. The legislature has now made it clear that it is only in the specified cases that the remedy is available, and having regard to the legislative scheme it is fair to take the view that in case of controversy the section should be construed strictly rather than liberally.

The first case in which the right arises is "where the mortgagor binds himself to repay the same"-clause (a). The proviso at the end of sub-section (1) however, provides that in this case a transferee from the mortgagor or from his legal representative shall not be liable to be sued for the mortgage-money. This is implicit in the personal nature of the obligation.

Clause (b), (c) and (d) of section 68(1) read as follows:-

"(b) where, by any cause other than the wrongful act or default of the mortgagor or mortgagee, the mortgaged property is wholly or partially destroyed or the security is rendered insufficient within the meaning of section 66 and the mortgagee has given the mortgagor a reasonable opportunity of providing further security enough to render the whole security sufficient, and the mortgagor has failed to do so;

(c) where the mortgagee is deprived of the whole or part of the security by or in consequence of the wrongful act or default of the mortgagor;

(d) where, the mortgagee being entitled to possession of the mortgaged property, the mortgagor fails to deliver the same to him, or to secure the possession thereof to him without disturbance by the mortgagor or any person claiming under a title superior to that of the mortgagor."

68.3. Personal liability.-

Where the mortgagor binds himself to repay the mortgage money, the mortgagee is obviously entitled to sue on the covenant for recovery of the money personally from the mortgagor. Clause (a) so provides. The covenant may be express or implied. A personal covenant to pay the mortgage-money (i.e., a covenant to pay apart from the mortgaged property) must be presumed to exist in all mortgages, unless there is something in the nature of a usufructuary mortgage or a mortgage by conditional sale, indicating that there is no personal liability to pay implied in it.

The remedy of the mortgagee is, as a general rule in such cases, intended to be only against the mortgaged property. The test to be applied, to find out whether the mortgagor has "bound himself" to pay the amount within the meaning of this section, is to see what remedy the mortgagee is intended to have for the recovery of the amount; the general rule is that a remedy limited to a particular mode of recovery, or a promise to pay out of a particular fund or in a particular manner, will exclude the general personal liability for such payment.

Where the remedy of the mortgagee is intended to be only against the mortgaged property, there is no personal liability, even if the mortgagor has stated in the mortgage document that he will pay the money, for some such clause is found almost in all mortgages.

68.4. Section 68(a).-

With reference to clause (a) of section 68, it may be noted that a personal covenant to pay the amount of the mortgage money exists in a simple mortgage or in an English mortgage.1 The obligation may be expressed or implied. Ordinarily, a loan involves a liability to pay and the mere circumstances that it is secured by mortgage upon immovable property does not affect the right of a covenantee to sue the borrower personally.2 But such liability may be expressly excluded or by implication, as we have already stated.3

An important consequence of personal liability is that the liability undertaken by the original mortgagor survives even if he assigns the mortgage. Conversely, the third person, who is an assignee, does not, by merely taking the assignment of an equity of redemption, make himself personally liable.4

1. See discussion as to section 58, supra.

2. Ghose Law of Mortgage in India, (1902), p. 104.

3. Para. 68.3, supra.

4. Ghose Law of Mortgage in India, (1902), pp. 847-848.

68.5. Section 68(1)(b).-

In contrast with clause (a) which is based on contract, clause (b) of section 68 is based on considerations of equity. No party is here at fault, nor is there any agreement, but the circumstances justify a personal decree even though the parties did not contract for it. Such a principle seems to have been recognised in decision before the Act, and, in fact, it was known to Hindu law.1

1. Vayavahara Mayukha, Chapter 5, section 11, referred to in Vithobalava v. Chhotalal, (1967) 7 Born HCR AC 116.

68.6. Section 68(1)(b)-Compulsory acquisition.-

With reference to this clause-section 68(1)(b)-there appears to be considerable obscurity on the question whether there is a "destruction" of the property within the meaning of clause (b) when the property is compulsorily acquired under law.

Some High Courts have taken the view that in such a case, the property is "destroyed".1 If the matter were to be decided theoretically, we would prefer the opposite view, since acquisition does not affect existence of the property.

However, the practical importance of this question has been considerably reduced by the fact that after the amendment made in 1929, section 73(2) now provides that where the mortgaged property or any part thereof or any interest therein is acquired under the Land Acquisition Act, 1894, or any other enactment for the time being in force, providing for mortgagor a reasonable opportunity of providing further security enough the compulsory acquisition of immovable property, the mortgagee shall be entitled to claim payment of the mortgage money in whole or in part out of the amount due to the mortgagor as compensation.

That provision is based on the principle of "substitution" of one security for another. There is no new cause of action, but the security is shifted from one item to the other. In this position, we do not consider it necessary to recommend any amendment of section 68 on the point under consideration.

1. (a) Sajjode Begam v. Janki Bibi, AIR 1917 Oudh 233;

(b) Prokash Chandra v. Hassan Banu, AIR 1915 Cal 699 (700) (assumption to above effect).



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