Suits Relating to Mortgages of Immovable Property

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

(c) directing 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, or from the date the amount is declared, and thereafter pays such further sums as are adjudged due for subsequent costs, charges and expenses under Rule 10 with subsequent interest under Rule 11, the plaintiff shall deliver up all documents relating to the mortgaged property and, where necessary, retransfer the property and put the defendant in possession.

The important figure is six months, and the important structure is the alternative between taking an account under clause (a) and simply declaring the amount under clause (b).

Rule 3 then provides for the final decree in a foreclosure suit. Where the payment is made, the Court passes a final decree ordering the plaintiff to deliver up the documents and, if necessary, retransfer and deliver possession. Where the payment is not made, the plaintiff may apply for a final decree debarring the defendant from all right to redeem the property.

Sale: Rules 4, 5 and 6

Rule 4(1): in a suit for sale, if the plaintiff succeeds, the Court shall pass a preliminary decree to the effect mentioned in clauses (a), (b) and (c)(i) of Rule 2(1), and further directing that, in default of payment, the plaintiff shall be entitled to apply for a final decree directing that the mortgaged property or a sufficient part of it be sold, and the proceeds, after deducting the expenses of the sale, be paid into Court and applied in payment of what was found due, together with subsequent costs, charges, expenses and interest, the balance, if any, being paid to the defendant or other persons entitled.

Rule 4(2): the Court may, on good cause shown and on terms, from time to time and at any time before a final decree for sale is passed, extend the time fixed for payment.

Rule 4(3) allows the Court in a foreclosure suit, in the case of an anomalous mortgage and certain other cases, to decree sale instead.

Rule 5 governs what happens where payment is made before the sale is confirmed, and Rule 6 provides for the recovery of the balance where the net proceeds of the sale are insufficient: the plaintiff may, if the balance is legally recoverable otherwise than out of the property sold, apply for a personal decree against the defendant for that balance.

Rule 6 is the practical answer to the exam question "what if the property does not fetch enough".

Redemption: Rules 7 and 8

Rule 7(1) is the mirror of Rule 2. In a suit for redemption, if the plaintiff succeeds, the Court shall pass a preliminary decree ordering that an account be taken of what was due to the defendant at the date of the decree for principal and interest, costs of suit awarded to him, and other proper costs, charges and expenses with interest; or declaring the amount so due; and directing that if the plaintiff pays into Court that amount, on or before such date as the Court may fix within six months, together with subsequent sums under Rules 10 and 11, the defendant shall deliver up the documents and, where necessary, retransfer the property and put the plaintiff in possession.

Rule 8 provides for the final decree in a redemption suit: where payment is made, the Court passes a final decree ordering the defendant to deliver up the documents and, where appropriate, to retransfer and deliver possession. Where payment is not made, the consequences depend on the nature of the mortgage: the Court may pass a final decree for foreclosure or direct a sale, according to the case.

Rules 10 and 11 run through all three. Rule 10 provides for the costs, charges and expenses subsequent to the preliminary decree to be added on, and Rule 11 governs the interest payable, on principal and on those subsequent sums.

Rule 14 is a separate and important prohibition: where a mortgagee has obtained a decree for the payment of money in satisfaction of a claim arising under the mortgage, he shall not be entitled to bring the mortgaged property to sale otherwise than by instituting a suit for sale in enforcement of the mortgage. In other words, a money decree does not let him short-circuit Order XXXIV.

A worked example

Sameer mortgages a plot in Panvel to Tanya for Rs. 20,00,000. He does not repay. Tanya sues for sale.

Where is the suit filed? Under section 16(c), in the Court within whose local limits the property is situate, that is Panvel.

Who must be joined? Under Rule 1, all persons having an interest in the mortgage security or in the right of redemption, so any subsequent mortgagee or purchaser of the equity.

What is the preliminary decree? Under Rule 4(1), the Court orders an account of what is due to Tanya for principal and interest, her costs of the suit, and her other proper costs and charges with interest; or declares that amount. It then fixes a date, within six months of the account being confirmed or the amount declared, by which Sameer may pay. And it directs that in default Tanya may apply for a final decree for sale.

Sameer needs longer. Rule 4(2): the Court may, on good cause and on terms, extend the time at any time before the final decree for sale is passed. After that decree, it cannot.

He does not pay. Tanya applies for a final decree directing that the property, or a sufficient part of it, be sold, the proceeds after the expenses of sale being paid into Court and applied to what was found due with subsequent costs and interest, and any balance paid to Sameer.

The plot fetches only Rs. 16,00,000. Rule 6: Tanya may apply for a personal decree against Sameer for the shortfall, provided the balance is legally recoverable otherwise than out of the property sold.

Change the facts. Suppose Sameer sues Tanya for redemption. Rule 7 mirrors the process: the account is of what is due to Tanya, and it is Sameer who must pay into Court within the period fixed, not exceeding six months, whereupon Tanya delivers up the documents and, where necessary, retransfers and gives possession. If he fails to pay, Rule 8 allows a final decree for foreclosure or a direction for sale, according to the nature of the mortgage.

And another. Suppose Tanya had obtained an ordinary money decree against Sameer on the debt and wanted to attach and sell the mortgaged plot in execution of it. Rule 14 forbids it: she cannot bring the mortgaged property to sale otherwise than by instituting a suit for sale to enforce the mortgage.

What it does not mean

A mortgage suit is not decided in one decree. The preliminary decree settles the amount and fixes a period; the final decree gives effect to what follows.

Six months is not the period from the decree. It runs from the date the Court confirms and countersigns the account, or from the date the amount is declared in Court.

The time cannot be extended after the final decree for sale. Rule 4(2) allows extension only before it is passed.

A shortfall is not automatically lost. Rule 6 permits a personal decree for the balance where it is legally recoverable otherwise than out of the property sold.

A money decree does not let a mortgagee sell the property. Rule 14 requires a suit for sale.

Quick revision

Three suits: foreclosure and sale by the mortgagee, redemption by the mortgagor. All persons interested in the security or the right of redemption are joined, Rule 1. The suit goes where the property is situate, section 16(c).

Preliminary decree, Rules 2, 4 and 7: an account taken of principal, interest, costs of suit, and other proper costs, charges and expenses with interest; or the amount declared; and a date fixed for payment, within six months of the account being confirmed or the amount declared, plus subsequent sums under Rules 10 and 11.

Final decree: on payment, documents delivered up and, where necessary, retransfer and possession. On default, foreclosure debars the right to redeem, Rule 3; sale directs the property to be sold, the proceeds applied, and the balance paid to the defendant, Rule 4; redemption may end in foreclosure or sale according to the mortgage, Rule 8.

Rule 4(2): time may be extended on good cause before the final decree for sale. Rule 6: a personal decree for any balance legally recoverable otherwise than out of the property sold. Rule 14: a mortgagee with a money decree may not bring the mortgaged property to sale except by a suit for sale.

Test yourself

1. Name the three kinds of mortgage suit and who brings each. Foreclosure and sale, both brought by the mortgagee, and redemption, brought by the mortgagor.

2. What does the preliminary decree in a suit for sale contain? An order that an account be taken of what is due to the plaintiff for principal and interest, the costs of the suit awarded to him, and other costs, charges and expenses properly incurred with interest, or a declaration of that amount; a direction fixing a date for payment within six months of the account being confirmed and countersigned or the amount declared; and a direction that in default the plaintiff may apply for a final decree for the sale of the mortgaged property or a sufficient part of it.

3. From what date does the six-month period run? From the date on which the Court confirms and countersigns the account taken, or from the date on which the amount is declared in Court, as the case may be.

4. Can the time for payment be extended? Yes. Under Order XXXIV Rule 4(2) the Court may, on good cause shown and on terms it fixes, extend the time from time to time at any time before a final decree for sale is passed.

5. The sale proceeds are insufficient to satisfy the decree. What can the mortgagee do? Under Rule 6 he may apply for a personal decree against the defendant for the balance, if that balance is legally recoverable from him otherwise than out of the property sold.

6. A mortgagee holds an ordinary money decree. May he attach and sell the mortgaged property in execution of it? No. Under Order XXXIV Rule 14, where a mortgagee has obtained a decree for payment of money in satisfaction of a claim arising under the mortgage, he is not entitled to bring the mortgaged property to sale otherwise than by instituting a suit for sale in enforcement of the mortgage.

7. What happens in a redemption suit if the mortgagor does not pay within the period fixed? Under Rule 8 the Court may pass a final decree for foreclosure, or direct a sale of the mortgaged property, according to the nature of the mortgage.