In default of payment of the mortgage money a Mortgagee in which cases and under what conditions can sell the mortgaged property, without the intervention of the court?

Question: In default of payment of the mortgage money a Mortgagee in which cases and under what conditions can sell the mortgaged property, without the intervention of the court? [MPJS 2013]

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Answer

Section 69 of the Transfer of Property Act deals with mortgagees' power of sale. Under the said section 69(1)(c), a mortgagee has the power of sale without the intervention of the Court where power is conferred by the mortgage deed and the mortgaged property or any part thereof was on the date of the execution of the mortgage deed, situate within the towns of Calcutta, Madras, Bombay or in any other town or area which the State Government, may, by notification in the official Gazette, specify.

The words "power of sale" refer to a clause expressly included in the mortgage deed. They mean conveyancing. The expression has not been defined in the Act. It includes all steps which are necessary to be taken in connection with a sale. The law permits the greatest freedom of contract unless it is expressly taken away. If any party contends that a particular clause restricts, in any way, the power of parties to enter into a contract, the burden rests on him to show that the words prevent an agreement between the parties.

In cases of default of payment of the mortgage money, a mortgagee can sell the mortgaged property without the intervention of the court under certain conditions as specified in Section 69 of the Act. Section 69 provides the mortgagee with the right to sell the property when the mortgagor fails to repay the debt. The conditions under which the mortgagee can sell the mortgaged property without court intervention are outlined below:

Express Power of Sale: The mortgage deed must explicitly grant the mortgagee the power to sell the property in case of default. The provision allowing for the sale should be clearly stated in the mortgage agreement.

Notice to the Mortgagor: Before selling the mortgaged property, the mortgagee is generally required to give notice to the mortgagor about the intention to sell. The notice should specify the amount due and the intention to proceed with the sale.

Conditions Stipulated in the Mortgage Deed: The conditions and procedures for the sale without court intervention should be stipulated in the mortgage deed. This may include the method of sale, the time frame within which the sale can occur, and any other relevant details.

Compliance with Legal Requirements: The mortgagee must ensure compliance with any legal requirements or formalities specified by the relevant laws or regulations governing mortgage transactions.

No Specific Restriction by the Court: Section 69 implies that the mortgagee can exercise the power of sale unless there is a specific legal restriction imposed by the court preventing such a sale. If the court has given specific directions regarding the sale, those directions must be followed.

It is pertinent to mention the Supreme Court observation in the case Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247, wherein, the court held that the conferment of power on mortgagee to sell without the intervention of the court in a mortgage deed by itself will not deprive the mortgagor of his right of redemption. The equity of redemption is not extinguished by mere contract for sale. Therefore, until the sale is complete by registration the mortgagor does not lose his right of redemption. In view of the fact that only on execution of conveyance ownership passes from one party to another, it cannot be said that the mortgagor lost the right of redemption just because the property was put to auction. The mortgagor has a right to redeem unless the sale of the property was complete by registration by the provisions of the Registration Act.