In a significant judgment, the Kerala High Court explained the procedural mechanism under Section 57 of the Transfer of Property Act, 1882, to lift encumbrance from an immovable property.
The order, passed by Justice Devan Ramachandran, assumes relevance since there is no case law/ precedent on this subject.
The verdict opens with emphasis on the "efficacious and substantive" mechanism provided under Section 57 of the Transfer of Property Act, 1882.
Section 57 of the TPA enables any party to the sale of immovable property, burdened by an encumbrance, to apply to Court for a declaration that the said property is freed from such encumbrance on deposit of sums to be adjudged by it; and for the issuance of an order of conveyance or vesting order, proper for giving effect to the sale.
The judgment brings clarity on the following aspects of the provision:
Provision intended to effect sale of property subject to any encumbrances
The Court has clarified that Section 57 of TPA was enacted to assist any party to the sale of an immovable property, which is subject to an encumbrance, to fructify the sale for its fair value.
This is enabled by allowing the purchaser of the immovable property to receive, in deposit, either the capitalised value of the periodical charge or the capital sum charged on the property, as the case may be, together with incidental charges.
The realized amount is meant for payment to the incumbrancer.
It may be noted at this juncture that Section 57 of TPA was adopted from Section 5 of the English Conveyancing and Law of Property Act, 1881, with minor modifications. Thus, the High Court has placed reliance on the ruling of an English Court in Wilberforce v. Wilberforce, (1915) 1 Ch 94, whereby it was held,
"Prima facie, the object of the whole of S.5 is not to disturb any vested or other rights more than is necessary, but to enable a sale to be effected and the property to be transferred to the purchaser notwithstanding there may be on the land a liability for payment of a future sum which would, but for the provisions of the section, clearly have prevented the sale of the land free from incrumbrance."
Section 57 contemplates 'out of court sale' as well
The High Court has clarified that Section 57 provides for sale of immovable property, both 'by a court' or 'out of court' as also 'in execution of a decree'.
"There is thus no doubt that this section is intended to facilitate sale out of court, as much as it is for sale by a court or in execution of a decree," the bench stressed.
"Section 57 also provides that in the case of sale of immovable property subject to an encumbrance being sold by a court, or in execution of a decree, or out of court, any party to it can apply for a declaration that the said property is free of such; in which event, the appropriate court may direct or allow payment, sufficient to meet the encumbrance on the property, into court."
Consent of encumbrancer not required
The Court has clarified that Section 57 of the TPA "permits the court to declare a property free of encumbrance even against the will of the encumbrancer."
This position has been analysed in contrast to Order XXXIV Rule 12 (Sale of property subject to prior mortgage) of CPC, which provides that where any property subject to a prior mortgage is ordered to be sold, the court may, "with the consent of the prior mortgagee" direct that it be sold free from the mortgage, giving to the mortgagee the same interest in the proceeds of the sale as he had in the property sold.
Thus, it has been held that Section 57 of the TPA is wider in its amplitude and is operative even in the case where sale is not directed by Order XXXIV of the CPC.
"Section 57 of the TP Act is wider in its amplitude than Section 83 or Order XXXIV Rule 12 of the CPC, since it permits the court to declare a property free of encumbrance even against the will of the encumbrancer and even in the case of sales not directed by Order XXXIV of the CPC".
However, the Court has recalled a note of caution sounded by the Madras High Court in Mallikarjuna Sastri v. Narasimha Rao (1901) ILR 24 Mad 412, during exercise of powers under this provision.
It is reminded— "the section cannot be applied when it comes to a charge or encumbrance already adjudicated by a court and which has become part of a decree or even in a case of adjustment of a decree out of court."
The order has come in an appeal filed by one MP Varghese, against the order of the Additional District Court, Ernakulam, disallowing the Appellant's plea for discharge of encumbrance on his property under Section 57 of the TPA, for effecting sale.
The Appellant's property bore a charge of Rs. 500/-, payable to his sister, the Respondent. This amount was charged on the property in favour of his sister in the partition deed executed by his father.
The dispute arose as the Appellant wished to sell the encumbered property for getting his daughter married by after the charge whereas the Respondent refused to accept the amount due to her personal reasons.
The District Court rejected the application filed by Appellant under Section 57 holding the provision cannot be applied "where a direction for payment in a partition deed is sought to be enforced".
The HC disagreed with this reasoning :
"I am afraid that this view cannot obtain jural imprimatur in the light of the position of law seen above, since what is sought for by the petitioner is not to enforce a direction for payment in the Partition Deed, but to declare that the property is free of the encumbrance subsisting on account of the amount under the Partition Deed remaining unpaid".
Holding that the Appellant could not be put to a disadvantage merely based on the Respondent's "personal disputes" the bench observed,
"she has no case that their personal disputes casts any obligation or encumbrance over the property of the appellant. Further, she only says that 'her conscience is not willing to accept the money'; however, without showing any cause against its tender or deposit by the appellant."
The Respondent had also contended that the Appellant's daughter was already married and hence the reason given by him for making the sale was untrue.
Discarding this submission as well the bench clarified,
"section [57 of the TPA] does not mandate the court to be satisfied of the reasons for the proposed sale and hence the contention of the respondent - that the assertions of the appellant regarding the necessity of it so as to conduct his daughter's marriage being untrue - is irrelevant. All what is necessary for the appellant is to plead and show the factum of a proposed sale and nothing more."
Title : M P Varghese vs Annamma Yacob & others
Coram : Justice Devan Ramachandran.
Appearances : P Thomas Geevarghese, Tony Thomas & E S Firos, Advocates for the appellant; Shiju Varghese, Advocate, for respondent.
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