DECLARATION

I, SHEELAM ABHIJEETH do hereby declare that the project entitled

RIGHT TO FORECLOSURE submitted to Tamil Nadu National law
school in partial fulfilment of requirement of award of degree in
undergraduate in law is a record of original work done by me under the
supervision and guidance of Professor Mohammed Azaad Department of
Transfer of Property, Tamil Nadu National law school and has not formed
basis for award of any degree or diploma or fellowship or any other title to
any other candidate of any university.

SHEELAM ABHIJEETH
B.A, LL.B (Hons)

1|Page
 ACKNOWLEDGEMENT

First of all, I thank my Transfer of Property Teacher Prof Mohammed

Azaad for allotting me such a challenging and dynamic topic. Even
repaying him through mere words is beyond the domain of my lexicon that
was the backbone during all hurdles that I confronted during making this
project. Hence I am forever duly indebted to him as a student.

Also, I am grateful to the staff and administration of TNNLS who

contributed useful resources tremendously in the making this project by
providing library infrastructure and database connection.

This project would not have been possible without the involvement of
precious inputs of friends who sacrificed their valuable time to guide and
advise me in all times of need to make this project a successful one.

Last but not the least I would like to thank the Almighty for giving to
courage and strength to with stand all the hindrances during this
project and making it successful finally since its inceptions.

2|Page
Table of Contents
INDEX OF AUTHORITIES............................................................................................................. 4

Introduction........................................................................................................................................5

RESEARCH METHODOLOGY..................................................................................................... 6

OBJECTIVES................................................................................................................................ 6

SOURCES.......................................................................................................................................7

RESEARCH QUESTION................................................................................................................. 7

Conditions :........................................................................................................................................ 7

Right to foreclosure and right of redemption:................................................................................ 8

Foreclosure and different kinds of mortgages:............................................................................... 9

Partial foreclosure:...................................................................................................................... 11

Subrogation:.................................................................................................................................11

Estoppel of right of foreclosure:.....................................................................................................12

conclusion..........................................................................................................................................14

BIBLIOGRAPHY..............................................................................................................................15

3|Page
INDEX OF AUTHORITIES

Section 58, Transfer of Property Act, 1882.

Section 58 (a), Transfer of Property Act, 1882.
Section 60, Transfer of Property Act, 1882.
Section 67, Transfer of Property Act, 1882.
Section 67-A, Transfer of Property Act, 1882.
Section 82, Transfer of Property Act, 1882.
Section 91, Transfer of property Act, 1882.
Section 92, Transfer of property Act, 1882.
Mhadagonda Ramgonda Patil v. Shripal Balwant Rainade (1988) 3 SCC 298.
Maina Devi v. Thakur Mansinh & ors., AIR 1986 Raj 44.
Prabhakaran and Ors.v. M. Azhagiri Pillai (Dead) by LRs. and Ors. , AIR 2006 SC 1567.
Achaldas Durgaji Oswal v. Ramvilas Gangabesan Heda AIR 2003 SC 1017.
Parichchan Mystry v. Acchiabar Mytry, AIR 1997 SC 456.
Variavan Saraswathi v. Eachampi Thevi 1993 Supp(2)SCC 201.
Krishna Pillai Rajasekharan Nair v. Padmanabha Pillai (2004)12 SCC 754.
K. Vilasini v. Edwin Periera (2008) 14 SCC 349.

4|Page
Introduction

The right of foreclosure is a right available to a mortgagee to recover his outstanding money.
Mortgage is a transfer of interest in a property to secure payment of money advanced. A mortgagee
advances money to the mortgagor. The mortgagor provides some property as security to the
mortgagee. this transaction is legally valid after a document called the mortgage deed is
created.Section 67 of The Transfer Property Act contains the relevant provisions regarding the
same. This right can be enforced when the mortgagor fails to repay the amount due to the
mortgagee on the date that it was due. the mortgagee then obtains a decree from the court enforcing
the mortgagor to be barred from using or redeeming his property. He can also obtain a decree to sell
the mortgaged property.

For a right of foreclosure to be exercised by a mortgagee certain conditions have to be fulfilled

These conditions include, The money has become due for payment, that There are no contrary
conditions in the mortgage deed, that At any time after the mortgage money has become due to the
mortgagee but before the mortgagor gets a decree of redemption of the mortgaged property
and that At any time after the mortgage money has become due to him but before the mortgage
money has been paid or deposited by the mortgagor. The remedy depends on the nature of the
mortgage. In case of a simple mortgage, the right of foreclosure is not available. The remedy is
either to proceed against the mortgagor personally or for sale of the mortgaged property. This is
also the option available in case of usufructuary mortgage. In this case, the mortgagee will be in
possession of the property and will continue to be so until the debt is repaid in full. A person
interested in only a part of the mortgage money may institute a suit relating only to a
corresponding part of the mortgaged property. However, this is subject to the condition that the
mortgagees have severed their interests under the mortgage with the consent of the mortgagor. In
case of anomalous mortgage, the remedy depends on the terms of the mortgage.

In the case of an English mortgage, the mortgagee may bring a suit for sale of the property. In case
of conditional sale, the mortgage matures into sale on the failure of the payment of debt. The
mortgagee may foreclose depriving the right of redemption. In case of mortgage by deposit of titles
deeds, the remedy is to sue for personal decree or for sale of the property. The right to institute a
suit for foreclosure or sale is not available to a mortgagee for any work of maintenance in which the
public is interested. A mortgagee may hold two or more mortgages executed by the same
5|Page
mortgagor. In respect of each of such mortgages, he may have a right to obtain a decree of
foreclosure. In case he sues to obtain such a decree on any one of the mortgages, he will be
bound to sue on all the mortgages in respect of which the mortgage money has become due.

A mortgage is a transfer of an interest in some immovable property, as a security for advancement

1
of some loan. A person who gives security and takes the loan is called as mortgagor and person
2
who advances the money is known as mortgagee. The relationship between the mortgagor and
mortgagee is that of a creditor and debtor. The law on mortgage in India is governed by Transfer of
Property Act, 1882.

3
The right of foreclosure is a right available to a mortgagee to recover his outstanding money. This
right is available under Section 67 of the Transfer of Property Act, 1882. After the principal amount
has become due, and before payment of mortgage money by mortgagor or before decree of
redemption has been passed by Court, mortgagee has a right to obtain a decree of foreclosure from
4
the Court. A suit to obtain a decree that a mortgagor will be absolutely debarred from exercising
5
his right to redeem the mortgaged property is called a suit for foreclosure.

RESEARCH METHODOLOGY
The author would adopt a doctrinal research methodology.

OBJECTIVES
The researcher in this research paper would like to elucidate on the concept of Right to
foreclosure, especially on conditions. This paper would also deal with the concept of right to
foreclosure and right of redemption.

SCOPE AND LIMITATIONS

The researcher would like differentiate the rights of foreclosure depending on the kinds of
mortgage.

1
Dr. Avtar Singh, Textbook on the Transfer of Property Act, 3rd Edition (New Delhi: Universal Law
Publishing Co. Pvt. Ltd., 2012).
2Section 58 (a), Transfer of Property Act, 1882.
3Section 67, Transfer of Property Act, 1882.
4Ibid.
5Ibid.
6 |Page
SOURCES
BOOK

Darashaw J Vakils, Commentaries on Transfer of Propert Act,1882, Lexis Nexis Butterworths

th
publication, Gurgoan, Volume 2, 4 Edition (reprint 2015) the aforementioned book gave a
clear distinction between right to foreclosure and right to redemption .

th
Sir Dinshaw Fardunji Mulla, Transfer of Property Act, 1882, 12 Edition, 2015, Lexis Nexis
Butterworth the aforementioned books helped understand the researcher the kinds of
mortgage and their remedies.

ARTICLES

Janet Portman, Rights of Redemption and Foreclosure, Lawctopus Law Journal, 2015. The
aforementioned article gave the researcher the Rights of Redemption in different kinds of
mortgage .
Glossary, understanding your foreclosure rights, consumer law review. the aforementioned article
gave the researcher the detail study of when and how the property can be foreclosure

RESEARCH QUESTION
what are the conditions in which the right to foreclosure can be exercised, and how does the right
vary on the type of mortgage?

Conditions :

The right to foreclosure can be exercised by mortgagee only when:

The debt amount has become due for payment.

There are no contrary conditions in the mortgage deed as to the time fixed for repayment
etc. Mortgage money has become due but mortgagor has not got a decree of redemption of
the mortgaged property.
7|Page
Mortgage money has become due but mortgagor has not paid or deposited the amount. After the
mortgage money has become due, the mortgagor can pay off his debt in three ways:
By tendering or making payment of the mortgage money directly to mortgagee
6
By filing a suit for redemption.
7
By depositing the amount in court.
Mortgagee should not be mortgagee of public works like canal, railway etc.
A trustee or legal representative of mortgagee cannot file a suit for foreclosure but for sale only.
However, when mortgagor fails to redeem the property, the mortgagee does not become the owner
of the property, he has to file a suit for recovery of the amount due. The limitation period for
instituting a suit is 12 years. The final decree in a suit for foreclosure on the failure of defendant to
8
pay all amounts due extinguishes the right of redemption which has to be specifically declared. A
mortgagee may hold two or more mortgages executed by the same mortgagor. In respect of each of
such mortgages, he may have a right to obtain a decree of foreclosure. In case he sues to obtain
such a decree on any one of the mortgages, he will be bound to sue on all the mortgages in respect
9
of which the mortgage money has become due.

Right to foreclosure and right of redemption:

The right of foreclosure is counter-part of right of redemption. Mortgagor gets a right of redeeming
his security after payment of debt amount; similarly mortgagee has a right of foreclosure or sale in
default of redemption by the mortgagor. Section 67 protects interest of a mortgagee who has
advanced a loan in pursuance of some interest in a security and mortgagor has defaulted in
payment. The right of foreclosure of mortgagee is co-extensive to right of redemption of
10
mortgagor. Subject to the intention expressed in the contract, the mortgagee gets the right to
11
enforce his security when the mortgagors right to redeem accrues. But the rule may be limited
by the terms of the mortgage and if the limitation is not oppressive or unreasonable, it will be given
12
effect to. Right to foreclosure can be limited in nature subject to the contract between parties, but
right to redemption is an absolute right, which cannot be limited in any way.

6Section 67, Transfer of Property Act, 1882.

7 Section 82, Transfer of Property Act, 1882.
8 Mhadagonda Ramgonda Patil v. Shripal Balwant Rainade (1988) 3 SCC 298.
9 Section 67-A, Transfer of Property Act, 1882.
10 Section 60, Transfer of Property Act, 1882 gives the right to redemption to mortgagor.
11 Supra note 1.
12 Maina Devi v. Thakur Mansinh & ors., AIR 1986 Raj 44.
8|Page
It follows that when a mortgagee makes a statement about his right to recover the mortgage amount,
such statement impliedly acknowledges the corresponding right of redemption of the mortgagor.
Further, a statement admitting jural relationship, need not refer to or reiterate the rights and
obligations flowing there from. Where a party to the mortgage, by his statement, admits the
existence of the mortgage or his rights under the mortgage, he admits all legal incidents of the
13
mortgage including rights and obligations of both parties that is mortgagee and mortgagor.

Foreclosure and different kinds of mortgages:

Section 58(a) of The Transfer Of Property Act, 1882 define A mortgage is the transfer of an
interest in specific Immoveable property for the purpose of securing the payment of money
advanced or to be advanced by way of loan, an existing or future debt, or the performance of
an engagement which may give rise to a pecuniary liability.

The act contemplates six kinds of mortgage, namely simple mortgage, mortgage by conditional
sale, usufructuary mortgage, English mortgage, mortgage by deposit of title deeds and anomalous
14
mortgage.

Section 58(b) Simple mortgage-Where, without delivering possession of the mortgaged property,
the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or
impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have
a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as
may be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage
and the mortgagee a simple mortgagee.
The mortgagee in such scenario does not get possession of the mortgaged property and
therefore cannot exercise right of foreclosure. The remedy is either to proceed against the
mortgagor personally or for sale of the mortgaged property.

Section 58(c) Mortgage by conditional sale-Where, the mortgagor ostensibly sells the
mortgaged property-

13 Prabhakaran and Ors.v. M. Azhagiri Pillai (Dead) by LRs. and Ors. , AIR 2006 SC 1567.
14 Section 58, Transfer of Property Act, 1882.
9|Page
on condition that on default of payment of the mortgage-money on a certain date the sale
shall become absolute, or
on condition that on such payment being made the sale shall become void, or
on condition that on such payment being made the buyer shall transfer the property to the
seller, the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee
by conditional sale:

PROVIDED that no such transaction shall be deemed to be a mortgage, unless the condition is
embodied in the document which effects or purports to effect the sale.
Mortgage by conditional sale provides in case of default of payment, mortgage will become a sale.
The remedy in such a situation is not foreclosure but debarring mortgagors right of redemption.

Section 58(d) Usufructuary mortgage-Where the mortgagor delivers possession or expressly or by

implication binds himself to deliver possession of the mortgaged property to the mortgagee, and
authorises him to retain such possession until payment of the mortgage-money, and to receive the
rents and profits accruing from the property or any part of such rents and profits and to appropriate
the same in lieu of interest or in payment of the mortgage-money, or partly in lieu of interest or
partly in payment of the mortgage-money, the transaction is called a usufructuary mortgage and the
mortgagee a usufructuary mortgagee.
Under this mortgage, mortgagee retains possession until repayment of money and receives rents
and profits or part thereof in lieu of interest, or in payment of mortgage money or partly in lieu of
interest and partly in payment of mortgage money. There is redemption when the amount due is
personally paid or is discharged by rents or profits received. He does not have a right to foreclose or
15
sale.

Section 58(e) English mortgage-Where the mortgagor binds himself to repay the mortgage-money
on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to
a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as
agreed, the transaction is called an English mortgage.

15 Achaldas Durgaji Oswal v. Ramvilas Gangabesan Heda AIR 2003 SC 1017.

10 | P a g e
A mortgagor binds himself personally to pay the debt, and there is an absolute transfer of
mortgaged property in favour of mortgagee. Therefore he does not have a right of foreclosure but
a right to file a suit for sale of the mortgaged property.

Section 58(f) Mortgage by deposit of title-deeds-Where a person in any of the following towns,
namely, the towns of Calcutta, Madras, and Bombay, and in any other town which the State
Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers
to a creditor or his agent documents of title to immovable property, with intent to create a security
thereon, the transaction is called a mortgage by deposit of title-deeds.
As per Section 96, the mortgagee of title deeds is on the same footing as a simple mortgagee,
therefore remedy available is sale of the mortgaged property.

Section 58(g) Anomalous mortgage-A mortgage which is not a simple mortgage, a mortgage by
conditional sale, a usufructuary mortgage, an English mortgage or a mortgage by deposit of
title-deeds within the meaning of this section is called an anomalous mortgage.
The remedy depends on the terms contained in the mortgage deed as anomalous mortgage
16
is combination of two or more types of mortgages.

Partial foreclosure:

Partial foreclosure is not a remedy under Section 67. The rule is that one of the several
mortgagees cannot foreclose or sell in respect of his share unless several mortgagees have, with
17
consent of the mortgagor, severed their interests under the mortgage. The reason of this rule is
to protect the mortgagor from being harassed by a multiplicity of suits where the severance of
18
interest of the mortgagees has taken place without the consent of the mortgagor. Accordingly all
the co-mortgagees must join together and file one suit in respect of the whole mortgage money.

Subrogation:

16 Supra note 14.

17 Supra note 3.
18 Supra note 1.

11 | P a g e
Where redemption of mortgaged property is carried out by any person who has interest in the
mortgaged property other than the mortgagee, like subsequent mortgagees, co- mortgagors, buyer
19
of mortgaged property, surety of mortgaged debt or creditor of mortgagor, such person enters into
the shoes of mortgagee. He gets all the rights that the creditor (mortgagee) had against the principal
debtor (mortgagor) including right to foreclosure, redemption or sale. This is known as
20
subrogation. However, the entire mortgage should be paid off by the person.

The person can enforce the security over the original debtor for reimbursement. A person pays a
mortgage to protect his/her own interest in the property or because s/he is secondarily liable for
the debt or for the discharge of the lien. However, if the borrower used the proceeds of the loan to
discharge a prior encumbrance, it is not a sufficient reason to entitle the lender to subrogation.
21
There should be ample proof that the loan was made for that purpose.

A co- mortgagor in possession, of excess share redeemed by him can enforce his claim against non
redeeming mortgagor by exercising rights if foreclosure or sale as exercised by mortgagee under
22
Section 67 of the Transfer of property Act but that does not make him a mortgagee. The remedy
of redemption, foreclosure and sale available to such co-mortgagor are the rights as a subrogee not
23
as a mortgagee reincarnate but by way of rights akin to those vesting in the mortgage.

Estoppel of right of foreclosure:

Where mortgagee has accepted the redemption amount and revalued amount and right to redeem
has been enforced, it cannot be interfered with. Mortgagee could not approbate and reprobate, since
mortgagee didnt challenge execution proceedings during pendency of appeal in Supreme Court,
24
the right of foreclosure is lost by estoppel.

19 Section 91, Transfer of property Act, 1882.

20 Section 92, Transfer of property Act, 1882.
21 Parichchan Mystry v. Acchiabar Mytry, AIR 1997 SC 456.
22 Variavan Saraswathi v. Eachampi Thevi 1993 Supp(2)SCC 201.
23 Krishna Pillai Rajasekharan Nair v. Padmanabha Pillai (2004)12 SCC 754.
24 K. Vilasini v. Edwin Periera (2008) 14 SCC 349.
12 | P a g e
13 | P a g e
conclusion
In case of default of payment of debt or the mortgage money by the mortgagor the mortgagee
assumes the right to foreclosure. The right would exist only in case of default by the mortgagor and
after giving proper notice to him. In case of default the mortgagee can approach a court of law and
file for a suit for foreclosure and request the court to pass a decree permitting him to either sell the
property to redeem his debt or to grant him right over the property. The right to foreclosure can be
exercised only after the due date. The right to foreclosure is not available in all kinds of mortgages,
the researcher have made a comparative study of all the kinds of mortgage to analyse under which
mortgage right is available. The mortgagors right to redemption and the mortgagees right to
foreclosure are co-extensive. Hence there arises cases where both the rights may be conflicting.

14 | P a g e
BIBLIOGRAPHY
BOOKS REFERRED

Darashaw J Vakils, Commentaries on Transfer of Propert Act 1882.Lexis Nexis

th
Butterworts publication, Gurgoan, Volume 2, 4 Edition (reprint 2015).

nd
Dr. Poonam Pradhan Saxena, Property law, Lexis Nexis, ,Gurgoan. (2 Edition 2016).

th
Sir Dinshaw Fardunji Mulla, Transfer of Property Act, 1882, 12 Edition, 2015,
Lexis Nexis Butterworth.

A K R Kiralfy, Historical Introduction to English Law, (Delhi: Universal Law Publications,

th
4 edition, 1999).

Feoffment means the act of conveying a freehold estate. See, B A Garner (ed.),

th
et.al.,Blacks Law Dictionary, (Minn.: Publishing Co., 7 edition, 1999).

P H Clarke, Principles of Property Law, (Sydney: Cavendish Pub. Ltd., 1998)

th
Vepa P Sarathi, Law of Transfer of Property , Eastern Book Company, Lucknow 5
Edition, 2013.

ARTICLES
Janet Portman, Rights of Redemption and Foreclosure, Lawctopus Law Journal, 2015.
Glossary, Understanding your foreclosure rights, consumer law review.
www.credit.com/understanding the foreclosure.
Jaburg Wilk, judicial foreclosure creates conflict for Redemption Rights, legal Resources,
www.hg.org/article.asp
Michael Price, The right of redemption, www.alllaw .com/ articles/ nolo/foreclosure/right of
redemption.html

15 | P a g e
WEBLIOGRAPHY

www.Jstor.org

www.heinonline.com

www.legalservicesindia.com

http://www.scconline.com/Members/Search2014.aspx

http://www.academia.edu

www.moef.nic.in

http://www.thehindu.com

16 | P a g e
17 | P a g e