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Transfer of Property Act

The document discusses the doctrine of marshalling under Indian property law. [1] Marshalling allows a subsequent purchaser or mortgagee of a property to demand that any prior mortgage on the property be satisfied from other properties owned by the mortgagor before affecting the purchased or mortgaged property. [2] Sections 56 and 81 of the Transfer of Property Act 1882 govern marshalling for subsequent purchasers and mortgagees respectively. [3] The doctrine aims to balance the interests of precedent and subsequent interest holders in a property.

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41 views11 pages

Transfer of Property Act

The document discusses the doctrine of marshalling under Indian property law. [1] Marshalling allows a subsequent purchaser or mortgagee of a property to demand that any prior mortgage on the property be satisfied from other properties owned by the mortgagor before affecting the purchased or mortgaged property. [2] Sections 56 and 81 of the Transfer of Property Act 1882 govern marshalling for subsequent purchasers and mortgagees respectively. [3] The doctrine aims to balance the interests of precedent and subsequent interest holders in a property.

Uploaded by

cifex10357
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Property Law

Topic:-Marshalling by subsequent purchaser


Introduction

 The term marshalling means to collect or gather and then arrange in proper
order, in case of differences or conflicts in interests or claims rearrange in
such a way that there is justice and maximum satisfaction to all.
 The doctrine of marshalling has been set out under section 56 and 81 of the
Transfer of Property Act 1882.
 Section 56 lays down the provision of marshalling by subsequent purchaser
under sale and section 81 lays down the provision of marshalling under
mortgage.
Marshalling By Subsequent Purchaser.
(Sec.56)
 This section mainly deals with the subsequent purchaser, who has a right to
claim marshalling.
 This section is operative between the purchaser and the original mortgager
and not between one purchaser and another
 Section 56 may be explained in the following manner:
 There must be an owner of two or more properties,
 He must mortgage two or more of his properties to any person,
1. Thereafter, he must sell one or more of these properties to any person other than the one
he mortgages the properties to. The sale must include at least one property that has
been mortgaged by the owner,
4. The buyer of such properties is entitled to have the owner satisfy the mortgage-
debt out of the property or the properties not sold him before he purchases the
property. This can be subject to a contract stating the contrary,o
5. The rule of marshalling should not be so exercised so as to prejudice the rights of
the mortgagee, any persons claiming under the mortgagee, or any person who has
acquired an interest with consideration in any of the properties.

In short, the Rule of Marshalling provides the buyer, in the above case, the right
to demand from the owner that the property be free from any and all
encumbrances before the buyer purchases the property.
 In the case of Mahatab Uddin v Nim Chandra Shaha the court said that
although a mortgagee has a right to have all properties mortgaged to him to
put up for sale, the court has a discretionary power to make an arrangement
in which the properties should be sold without prejudicing the interest of the
mortgagees.
 Exceptions to Section 56 of TPA, 1882
Section 56 does not apply in the following cases –
1. Auction Sale
2. Leases
3. Purchases subject to prior encumbrance
Doctrine of Marshalling (Sec.81)
According to Sec. 81 of the Transfer of Property Act:
If the owner of two or more properties –
mortages them to one person,
i) and then mortages one or more of the properties to another person
in such a case, the subsequent mortage is entitled to have prior mortage-debt satisfied
out of property or properties which are not mortaged to him. This will not affect the
right of the prior mortagee who has aquired an interest in any of the properties for
consideration.
 The doctrine of marshalling was first emerged in the famous case-
‘Aldrich vs Cooper’
Lord eldron in this case said that
“If a creditor has two funds, the interest of the debtor shall not be regarded, but the
creditor having two funds shall take that which, paying him will leave another fund for
another creditor.”
Limitations Imposed by Section 56 and 81 of TPA, 1882
Right of marshalling can only be availed of by following
three limitations.
This right cannot be used to prejudice the right of prior mortgagee;

This right cannot be used to defeat or unduly delay the mortgagees;


This right cannot be used to cause injury to the rights of third parties.
 The object to be achieved and the principle involved under section 81 and
section 56 is the same.
 These doctrines are based upon the principle of equity.
 The interest of both the precedent and subsequent mortgagees are protected
under this section.
 It aims to provide justice to the mortgagor and the mortgagee and is based on
the maxim “equality is equity”
 The first mortgagee shall not do any act that will harm the interest of the
second mortgagee.
Conclusion
 Marshalling protects the interests of the subsequent mortgagees by satisfying
the debt out of the properties not mortgaged to them.
 The doctrine of Marshalling is based on the principle of sharing funds
 Marshalling is thus based on the principle that a creditor who has the means
of satisfying his debt out of several funds shall not, by the exercise of his
right, prejudice another creditor whose security comprises only one of those
funds.
Thank you

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