A very important section of the Transfer of Property Act (TP Act) has come to light through appeal filed before Kerala High Court in M.P.VARGHESE vs ANNAMMA YACOB.
In this matter, the petitioner and the respondents are siblings and the partition deed of the properties of their late father contained a covenant that both he and his brother - the second respondent - must pay an amount of Rs.500/- each to their sister - the first respondent - within a year, failing which she has been allowed to recover it, for which purpose, the said amounts would stand charged on the respective properties. The petitioner says that though the first respondent accepted Rs.500/- from the second respondent, she refused to do so when he offered her the same and therefore, that the property allotted to him under the Partition Deed is still burdened with this obligation. He said that he unable to sale the property as the said due amount is standing as a charge on the property. However as the District Court refused to entertain his application under Section 57 of the TP Act, he has approached the High Court.
The High Court first observed that while a very efficacious, substantive and procedural mechanism to facilitate the realisation of the deserving and intrinsic value of encumbered estates and other immovable properties under this Section 57 of the TP Act, it strangely appears very rarely to have been invoked in Courts, which impression is inevitable because the case law on it is scarce, if not, none.
The provision in reference is Section 57 of the TP Act, which 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 apparent fact that this Section, though in the TP Act for the past more than a century and quarter, has attracted little or no reported judgments anywhere in India, obligates me to examine it very closely and carefully from both its academic and practical ambit.
The High Court then observed that with the exception of its last two sub sections, almost verbatim of Section 5 of the English Conveyancing and Law of Property Act, 1881 (English Act).
The purpose of Section 57 of the TP Act is unmistakable from its tenor that it is intended 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 after receiving in deposit - for payment to the incumbrancer - the capitalised value of the periodical charge, or the capital sum charged on the property, together with incidental charges. It thus enables the parties to a sale to invoke the jurisdiction of the court for the purpose of fulfilling their contracts, notwithstanding the encumbrances on the property.
Referring to judgments of the English Court, the High Court further observed that even though the term 'encumbrance' is not specifically defined in the TP Act, the English Act provides for it under Section 2(vii) as:
“Incumbrance includes a mortgage in fee, or for a less estate, and a trust for securing money, and a lien, and a charge of a portion, annuity, or other capital or annual sum; and incumbrancer has a meaning corresponding with that of incumbrance, and includes every person entitled to the benefit of an incumbrance, or to require payment or discharge thereof.”
Further, the court observed that the importance of Section 57 is accentuated by Section 2(d) of it, which declares that nothing contained in the Act will, 'save as provided by Section 57 and Chapter IV of this Act', effect 'any transfer by operation of law, or in execution of, a decree or order of a Court of Competent jurisdiction'.
Referring to the judgment of the English Court in Great Northern Railway Co. v. Sanderson, the High Court decided that the TP Act adopts the spirit and soul of the English Act, with very minor lexical variations and 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. 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.
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.
The High Court also noted that as decided in Mallikarjuna Sastri v. Narasimha Rao ((1901) ILR 24 Mad 412), 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.
In the present case, the High Court observed that the First Respondent was not accepting the money from the Petitioner for personal reasons and there was no due beyond the amount stipulated in the Partition Deed, nor was there any provision for interest to be paid.
The High Court allowing the appeal also observed that the District Courts contention that it is only after a sale is over can Section 57 of the TP Act be invoked or that the petitioner was trying through the Section to use the court to enforce payment by directing the Respondent to accept payment was an incorrect interpretation of the law and the application, as 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 encumbranceubsisting on account of the amount under the Partition Deed remaining unpaid.
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