Power of Courts to declare a property free of Encumbrances against the will of Encumbrancer

Passing a landmark judgment on 9 Aug 2020, the Kerala High Court has issued a judgment explaining the process mechanism as stated under section 57 of the TP Act 1882 relating to removing encumbrances created on immovable property. The judgment is exemplary because there was no prior case or precedent established in such cases in such matters and it gives an emphasis on the “efficacious and substantive “mechanism as provided under section 57 of the Transfer of Property Act 1882.

What does the Act state about section 57?

It allows any party to the sale of immovable property, troubled with the prior encumbrances to apply to the court for making a declaration that the property concerned is free from such impediments on the deposit a certain sum adjudged by the court and the issue of an order of conveyance or vesting order, appropriate to give effect to the sale.

Accordingly, the judgment given by the Kerala High Court has the following aspects of the provision-

a.    Section 57 aims to give effect to the sale of the property subject to any encumbrance created-

The Court has elucidated that the object of section 57 of the Act to aid any party for effecting a sale of immovable property subject to an encumbrance to effect the sale at its proper value, by permitting the buyer of the immovable property to obtain, in deposit either the capitalized value of the periodical charges or the capital sum on the property as the case may be, together with subsidiary charges. The amount received from the sale shall be understood as for payment making the property free from encumbrances.

b.    Section 57 recognizes "Court sale as well as “Out of court sale” too-

The High Court has clarified that section 57 provides for the sale of immovable property, both made under a decree of a court or out of the court as also known as “execution of decree”. 

Thus there is no doubt that the section intended to enable“sale out of court”, in the same manner as it provides for the sale by a court or under the execution of the decree.

c.    Consent of the encumbrancer not necessary-

Through the judgment, the HC also explains that the TP Act permits the court to affirm a property is free from encumbrances even without the will or consent of the encumbrancer if the conditions are fulfilled.
 

Which is in strike contrast with Order XXXIV of Rule 12 (Sale of property subject to a prior mortgage) of CPC that provides” where any property subject to a prior mortgage is ruled to be sold the court may allow such “with the prior consent of mortgagee”. Thus, it has been held that section 57 is wider in its generosity and could be applied even in the case where the sale is not directed by the related order of the CPC.

However, the Madras High Court in Mallikarjun Sastri vs. Narsimha Rao (1901) in the exercise of powers under the said provision which provided “the section 57 cannot be functional when it relates to any interest adjudicated already by the court which has become part of a decree or even in cases of adjustment of a decree out of court”.

Facts of the case-

The order has come in an appeal filed by one MP Varghese against the order of the Additional District Court Ernakulum, disapproving of the appellant's plea for the release of encumbrances on the property under s.57 of TPA and ultimately for effecting the sale.

The Appellant’s property had a charge of Rs.500 payable to his sister, the respondent. The amount was charged on the property in the favor of his sister in the partition deed was executed by his father.

The dispute arose when the appellant intended to sell the encumbered property for his daughter’s marriage after the charge whereas the respondent refused to accept the amount due to her reasons. The district court rejected the appellant’s contention under section 57 holding that the provision could not be applied “where a direction for payment in a partition deed is sought to be enforced”.

The ruling of the Court-

However, the HC disagreed with the reasoning given by the district court by maintaining that no appellant could not be put to a disadvantage merely based on "personal reasons" of the respondent when the appellant was ready to pay the amount.

Section 57 of the TPA does not necessitate the court to be content of the reasons for the sale and hence the contention of the respondent that the assertions of the appellant regarding the necessity of sale of the immovable property are irrelevant for the judgment. The importance lies in the necessity of pleading and showing the facts of a proposed sale and nothing more.

Author:

eStartIndia Team