In this blog we will write about mortgagee’s right to foreclosure and sale. We will discuss the rules laid down by section 67, essential conditions of section 67 of TPA, 1882, the exceptions, the scope of applicability of section 67 and lastly remedies available for different kinds of mortgages.

Right to Foreclosure

Right to foreclosure or sale is the remedy of the mortgagee. Section 67 of Transfer of Property Act, 1882 deals with mortgagee’s right to foreclosure and sale. The mortgagee can exercise his right to foreclosure if the mortgagor defaults to pay the mortgage-money. The mortgagee gets a security over the mortgaged-property when the mortgagor mortgages his property to the mortgagee and receives money. This security is made of aggregate of various rights. The mortgagee has a right against the mortgaged property and against the mortgagor personally. Section 67 prescribes the rules for the right against the mortgaged property. The mortgagee can enforce this right only under section 67 of TPA, 1882 and not otherwise.

The Rules of Right to Foreclosure under Section 67

The right to foreclosure of mortgagee arises in default of payment of the mortgaged-money by the mortgagor. By exercising right to foreclosure, the mortgagee completely restricts the mortgagor from exercising his right to redeem the property. This right to foreclosure must be obtained by a competent court. Right to foreclosure is not an absolute right, this right is controlled by any contract to the contrary.

According to section 67, the right to foreclosure can be enforced by the mortgagee under the following situations –

• After the mortgaged-money has become due;
• Before a decree has been made for the redemption of the mortgaged property;
• When the mortgaged-money has not been paid or deposited by the mortgagor but the mortgaged money has already become due.

The mortgagor can pay off the mortgaged-money after the mortgaged money has become due in the following three manners –

1. The mortgagor can deposit the money in the court;
2. The mortgagor can file a suit for redemption in the court under section 60 of the TPA, 1882;
3. The mortgagor can tender or pay the money directly to the mortgagee.

Essential Conditions of Section 67 of TPA, 1882

The essential conditions for exercising right to foreclosure are –

1. The right to foreclosure is subservient to any contract in the contrary.
2. The above-mentioned duration when the right to foreclosure arises must be followed strictly.
3. The right to foreclosure can only be exercised by obtaining a decree from a competent court.

Scope of Applicability of Section 67 of TPA, 1882

By applying section 67 a mortgage can be foreclosed by the mortgagee even if a portion of mortgaged-money remains unpaid. A mortgagee by applying section 67 can sell the mortgaged-property as it stands at the date of his mortgage. A decree obtained by the subsequent mortgagee is controlled by prior encumbrances in existence at the date of the second mortgage. Under section 67 in respect of foreclosure by the mortgagee, when the period of grace is over, property passes to the mortgagee. But in respect of sale the mortgagor has time until the sell is completed and further confirmed by the court. A sub-mortgagee can file a suit of foreclosure against mortgagor or mortgagor’s mortgagor regarding simple debt or mortgage debt. A mortgagee’s right to foreclosure is not lost if a third-party claims title by adverse possession. Section 67 is not operative regarding securities created by the operation of law.

Exceptions under Section 67 of TPA, 1882

1. Under section 67(b) of TPA, 1882 a mortgagor cannot file a suit for foreclosure, if that mortgagor holds his mortgagee’s rights as his trustee or legal representative. But that mortgagor can sue for sell of the property but can not sue for foreclosure.
2. Under section 67(c) of TPA, 1882 a mortgagee of railway, canal or other public utility is restricted from instituting a suit for foreclosure due to the public interest. The proper remedy of mortgagee under this clause is the appointment of a receiver of the mortgaged property by a competent court.
3. Section 67(d) of TPA, 1882 deals with the rule of partial foreclosure or sale. One of the many mortgagees can file a suit for foreclosure or sale in respect of only his part of the mortgaged-property, merely when all the mortgagees have separated their interests under the mortgage with the consent of the mortgagor. The purpose of this provision is to safeguard the mortgagor from multiplicity of proceedings and harassment by the mortgagees.

The general rule is all the co-mortgagees must join together and file one suit for foreclosure or sale of the mortgaged property under section 67 of TPA, 1882 in respect of the total mortgage money.

Remedies for Different Kinds of Mortgages

Simple Mortgage

A simple mortgagee cannot file a suit for foreclosure but he can file a suit for sale of the mortgaged property. A simple mortgagee has another remedy against the mortgagor that is the mortgagee can sue on the personal covenant and attain a simple money decree from the court.

Both of these remedies are independent of each other.

Usufructuary Mortgage

The usufructuary mortgagee satisfies the mortgage-money from the rents and profits of the mortgaged property and keeps possession of the property until the debt is paid off completely. The usufructuary mortgagee can not file suit either for foreclosure or sale of the mortgaged property. If mortgagee’s possession is interfered with, then he can file a suit to recover his possession. In addition, he can also file suit for mesne profits.

Mortgage by Deposit of Title Deeds

The mortgagee can file a suit for a decree for sale but not for foreclosure.

Mortgage by Conditional Sale

This kind of mortgage turns itself into a sale in case of default of payment by the mortgagor. The mortgagee can file a suit for foreclosure to satisfy his mortgage debt.

English Mortgage

Prior to the Amendment of 1929 of Transfer of Property Act, 1882 an English mortgagee could file a suit either for sale or for foreclosure. The current position is that an English mortgagee can only file a suit for sale in default of payment.

Anomalous Mortgage

The proper remedy of the mortgagee in respect of anomalous mortgage depends upon the factual circumstances of the mortgage and stipulations of the mortgage deeds. If a mortgage is a mixture of simple and usufructuary mortgage then the mortgagee has two remedies. He can file a suit for money decree if he is deprived of the possession of the property. He can also file a suit for sale of the mortgaged property under section 67.

Conclusion

Where the mortgagee does not foreclose the mortgaged property then the right to redemption is not debarred. The main motive of this section is to protect the interest of the mortgagee in case of default in payment and to protect him from fraud by the mortgagee.