Rights of mesne mortgagee.

Rights of mesne mortgagee

Author : Ayush Kumar Jain, Presidency University, Bangalore.

Introduction

The original Section 94 of the Transfer of Property Act, 1882 was repealed by the Civil Procedure Code. 1908. This section corresponds with Section 75 of the Act, prior to the amendment of 1929.

According to Section 75 of the Transfer of Property Act, 1882 says that Rights of mesne mortgagee against prior and subsequent mortgagees—“Every second or other subsequent mortgagee has, so far as regards redemption, fore-closure and sale of the mortgaged property, the same rights against the prior mortgagee, or mortgagees, as his mortgagor has against such prior mortgagee, or mortgagees and the same rights against the subsequent mortgagees (if any) as he has against his mortgagor”.

According to Section 94 says that Rights of mesne mortgagee—“Where a property is mortgaged for successivedebts to successive mortgagees, a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor”.

The doctrine of Redeem up and foreclose downbegin akin to the doctrine of subrogation, has

Been placed after Section 92”.

A mortgagor can deal with the interest remaining in him and transfer it by sale, mortgage or lease

To other persons, but not so as to prejudice the interest of his mortgagee, the result of such a transfer being, that the transferee acquires, as against the first mortgagee, all the rights of the mortgagor.

 

Rights of mesne mortgagee

(1). This Section (Foreclose down) read with Section 91(a) (Redeem up) lays down the rights of mesne mortgagee. Mesne mortgagee can redeem up under Sec. 91(a) and foreclose down under Section 94 of Transfer of Property Act, 1882.

(2). This Section applies when same property is mortgaged for successive debts to successive mortgagees—

(a) Mesne mortgagee has same rights against mortgagees.

(b) Posterior to himself (those to whom mortgage is subsequent)

(c) As has against the mortgagor, a mortgagee has foreclosure and sale only, as such—

(i) He can foreclose and has right of sale against subsequent mortgagee and,

(ii) He can redeem any prior mortgagee.

(3) Mesne mortgagee can redeem all mortgagees before him and cannot in any way affect his rights.[1]

  • Has the same rights against mortgagees posterior to himself as he has against the mortgagor.–

Sections 67 to 73 treat the rights of mortgagees against mortgagors. This section provides that aMesne mortgagee has the same rights against mortgagees, posterior to himself, as he has against the mortgagor. Thus, a prior mortgagee can require the second mortgagee to redeem him, or, in default,to submit to a foreclosure or sale of whatever interest he holds in the property.[2]  In other words, a prior mortgagee is entitled to enforce the rights, conferred on him by his mortgage, not only against the mortgagor but also against those who derive their title from or under him, e.g., a subsequent mortgagee, who takes his mortgage subject to the prior mortgage[3].

 

  • Effect of a decree obtained by the prior mortgagee on the rights of puisne mortgagee.-

 

Where the prior mortgagee institutes a suit for foreclosure or sale on his mortgage, making the puisne mortgagee a party to the suit, the puisne mortgagee may, under the decree, be given the right to redeem the prior mortgagee, and thereafter to take proceedings for foreclosure or sale against the mortgagor, though the decree may not operate as res judicata between the mortgagor and the puisne mortgagee.[4]But where the decree does not give this liberty, the puisne mortgagee cannot pay off the mortgagee decree-holder and adopt the decree as his own.[5]

 

 

Forclosure without redemption, but no redemption without foreclosure

This doctrine has been deduced from Order XXXIV, Rule 11 of the Civil Procedure Code, 1908, which provides as follows: “Subject to the provisions of the code, all persons having an interest either in the mortgage-security or in the right of redemption shall be joined as parties to any suit relating to the mortgage”.

A puisne mortgages may sue for foreclosure or for sale without making the prior mortgagee a party to the suit and a prior mortgagee need not be joined in a suit to redeem a subsequent mortgage”.

Suppose M executes successive mortgages in favour of A, B and C, respectively. Then—

  • A, is entitled to foreclose or bring to sale according to his mortgage B, C and the mortgagor.
  • B is entitled to foreclose C and the mortgagor. To this action A is not a necessary party. B need not redeem A in such a suit. There can thus be foreclosure without redemption.
  • C can foreclose the mortgagor. To this section A and B are not necessary parties for their rights would be unaffected by C’s action for foreclosures.

B as assignee of part of the right of redemption of the mortgagor has same right to redeem A as ispossessed by the mortgagor. And C can redeem B or A[6].

 

English and Indian law distinguished

The English and Indian law on the doctrine of redeem up and foreclose down have got certain difference.

Under English law, a puisne mortgagee can redeem a mortgagee who is immediately prior to him or above him. The puisne mortgagee cannot redeem the anterior or prior mortgagee except first the immediate one.

It means let us suppose there are three subsequent mortgagees of a property which is mortgaged by mortgagor A to B, C and D.

So, if the third mortgagee D wants to redeem the first mortgagee B then he cannot do so unless first he redeems his prior mortgagee C and foreclose against A the mortgagor who is just subsequent to him. D cannot redeem C before he foreclose his own mortgage against A.

 

Under Indian law, the third mortgagee is entitled to redeem the first mortgagee without redeeming the second mortgagee who is just above him. Similarly, the third mortgagee can redeem the second mortgagee without foreclosing the subsequent mortgagor. The only requirement under Indian law is that all these persons who are having interest in the mortgaged property must be made parties to any of such suits.[7]

 

Books Referred

 

  • P.Tripathi, The transfer of property Act (17th Ed., Central Law publications).
  • Poonam Saxena, „Property and Easement‟, Halsbury Laws of India; Vol. 12 (2002).
  • M. Lahiri, Transfer of Property Act (10th ed., 1986).
  • Solil Paul (Rev.), Mulla‟s the Transfer of Property Act (9th ed. 1999).

 

 

[1]Hukum Singh vs. Lallanji, 43 All. 204 (F.B.) and Kaiser khan vs. Abdul Ghani

[2]Venkataramana v. Gompertz, ILR 31 Mad 425 (428)

[3]Nand Lal v. Narain Singh, AIR 1929 Lah 207 (208)

[4]Vedavyasa v. Madura Hindu Sabha Nidhi Co., Ltd., AIR 1919 Mad 100 (2)

[5]Gopi Narain v. Bansidhar, ILR 27 All 326: 32 IA 23.

[6]S.M. Lahiri, Transfer of Property Act, 108 (10th ed., 1986).

[7] Order XXXIV Rule 1 of CPC, 1908

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