Property Law

1 DOCTRINE OF TACKING

A PROJECT ON:-

DOCTRINE OF TACKING SUBJECT: - PROPERTY LAW

SUBMITTED TO: B.R.N.SHARMA B.R.N.SHAR MA FACULTY: Property Law SUBMITTED BY: ANKUR ANAND 2

nd

rd

YEAR (3

ROLLNO: 316 B.A, L.L.B (Hons)

CHANAKYA NATIONAL

CHANAKYA NATIONAL LAW UNIVERSITY

LAW

UNIVERSITY

SEM)


I am feeling highly elated to work on the topic “Doctrine of tacking ” under u nder the guidance of my property law teacher. I am very grateful to him for his exemplary guidance. I would like to enlighten my readers regarding this topic and I hope I have tried my best to pave the way for bringing more luminosity to this topic.

I also want to thank all of my friends, without whose cooperation this project was not possible. Apart from all these, I want to give special thanks to the librarian of my university who made every relevant materials regarding to my topic available to me at the time of my busy research work and gave me assistance. And at last I am very much obliged to the God who provided me the potential for the rigorous research work.

At finally yet importantly I would like to thank my parents for the financial support.

-----------------Thanking you

Ankur Anand.

C.N.L.U

TABLE OF CONTENT

1) Research Methodology …………………………………………………………... …………………………………………………………...4 4


3 DOCTRINE OF TACKING 2) Introductions ……………………………………………………………………5-6 3) Section 79 (i) English and Indian Law Of Tacking Compared …………………………………7 -8 (ii) Scope of the section …………………………………………………………......8-9 (iii) To secure future advances ……………………………………………………..9-11 (iv) The performance of an engagement ……………………………………………...11 (v) Balance of a running account ……………………………………………… .....11-12 (vi) Expresses the maximum to be secured thereby ……………………………….12-13 (vii) In respect of all advances ……………………………………………………..13-14 (vii) Not exceeding the maximum ……………………………………………………..14 (ix) Notice……………………………………………………………………… ......14-15 (x) Charge……………………………………………………………………………….15 (xi) Further advance made after sale of equity of redemption …………………………..15

4) Section 93 (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix)

Legislature……………………………………………………………………16 Tacking ………………………………………………………………………16 Scope ……………………………………………………………… .…….17-18 Rule against Tacking……………………………………………..…………..18 With or without notice…………………………………………… ..…………18 Salvage Payments…………………………………………… ..……………...19 Mortgagor not affected………………………………………………………..19 Intermediate mortgage…………………………………………………………19 Subsequent advance……………………………………………………………20

Distiction between section 79 and 93 related to subsequent advances……………………20 5) Conclusion ……………………………………………………….……………………21 6) Bibliography………………………………………………………............................22

The project is basically based on the doctrinal method of research as no field work is done on this topic. The whole project is made with the use of secondary source.



AIMS & OBJECTIVES:

The aim of the project is to present a detailed study of „DOCTRINE OF TACKING‟ through decisions and suggestions and different writings, articles & reports.

SOURCES OF DATA:

The following secondary sources of data have been used in the project1. Articles 2. Books 3. Websites

METHOD OF WRITING:

The method of writing followed in the course of this research paper is primarily analytical.

MODE OF CITATION:

The researcher has followed a uniform mode of citation throughout the course of this research paper

Introduction:-



Section 79. Mortgage to secure uncertain amount when maximum expressed :- if a mortgage made to secure future advances, the performance of an engagement or the balance of a running account, expresses the maximum to be secured thereby, a subsequent mortgage of the same property shall, if made with notice of the prior mortgage, be postponed to the prior mortgage in respect of all advances or debits not exceeding the maximum, though made or allowed with notice of the subsequent mortgage. No mortgagee paying off a prior mortgage, whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his original security; and, except in the case provided for by section 79, no mortgagee making a subsequent advance to the mortgagor, whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his security for such subsequent advance.

Meaning Of Mortgage:A mortgage, in its simplest form, is a means by which a mortgagor provides his real property as security in favour of a mortgagee, in return for an advance of money. Unlike general law mortgages, the registered proprietor will retain the legal interest in the real property and the mortgage, when registered, will have the effect as a security and create an interest in land but does not transfer the land.

Rep. by the Transfer of Property (Amendment) Act, 1929 (20 of 1929), s. 41.

Meaning of Tacking:Tacking is a technical legal concept arising under the common law relating to competing

priorities between two or more security interests arising over the same asset. Tacking means annexing or uniting one thing with the other. In mortgages „tacking‟ refers to annexing a security (in mortgage) with another security. In American jurisprudence Black's Law Dictionary defines tacking in slightly narrower terms:


6 DOCTRINE OF TACKING "The uniting of securities given at different times, so as to prevent any intermediate purchaser from claiming a title to redeem or otherwise discharging one lien, which is prior, without redeeming or discharging the other liens also, which are subsequent to his own title. The terms is particularly applied to the action of a third mortgagee who, by buying the first lien and uniting it to his own, gets priority over the second mortgagee."

Section 79. Mortgage to secure uncertain amount when maximun expressed :- if a mortgage made to secure future advances, the performance of an engagement or the balance of a running account, expresses the maximum to be secured thereby, a subsequent mortgage of the same property shall, if made with notice of the prior mortgage, be postponed to the prior


7 DOCTRINE OF TACKING mortgage in respect of all advances or debits not exceeding the maximum, though made or allowed with notice of the susequent mortgage.

Illustration:A mortgages sultanpur to his bankers, B and Co., to secure the balance of his account with them to the extent of Rs. 10,000. Athen mortgages sultanpur to C, to secure Rs. 10,000, C having notice of the mortgage, the balance due to B and Co., of the second motgage. At the date of the second mortgage, the balance due to B and Co., does not exceed Rs. 5,000, B and Co., subsequently advances to A sums making the balance of the account against him exceed the sum of Rs. 10,000, B and Co., are entitled to the extent of Rs. 10,000, to priority over C.

1.English and Indian Law Of Tacking Compared:Before the passing of the English Law of property act in the year 1925 the English Law as to tacking was as follows:(i)

The mortagagee of a legal estate could tack on to his mortgage any further any further advances made by him provided he had no notice of the other mortgages when he made the advances.

(ii)

A subsequent equitable mortgage could acquire the legal estate of the prior mortgagee and tack on his equitable mortgage to the legal mortgage provided that, at the time of advancing money on his equitable mortgage, he had no notice of the other mortgages.

Under the English Law of Property Act, 1925 (15 Geo. v. ch 20, s. 94) a prior mortgagee, whether legal or equitable, can, by tacking, gain priority over subsequent mortgages in respect of further advances only-----(i)

If an arrangement has been made to that effect with the subsequent mortgages; or

(ii)

If he had no notice of the susequent mortgages at the time when he made the further advances; or

(iii)

If he is bound under the terms of the mortgages to make further advances whether he has notice or not of the subsequent mortgages.


8 DOCTRINE OF TACKING The right of a subsequent encumbrancer to tack on his own mortgage to a prior mortgage by acquiring the legal estate of the prior mortgagee and thus to gain priority over the intermediate 1

incumbrances, has been abolished. In this country, it was held as early as the year 1869, that the principle of the english law of mortgage enabling a mortgagee to tack on his mortgage any further liability of the mortgagor to him was not recognised in India.

2

When the transfer of

property act was passed in the year 1882, S.80 (now S. 93) expressly provided that there shall be no tacking by a subsequent mortgagee paying off a prior mortgage. As to the tacking of further advances made by a prior mortgagee same section also provided that there shall be no such tacking except in the case specified thereby and the subsequent mortgagee advances money with notice of the prior mortgage. It will thus be seen that while under the English Law, a further advance by a prior mortgagee can, in certain circumtances, be tacked on to the mortgage independently of any question whether the prior mortgage expresses a maximum to be advanced or whether the subsequent mortgage has notice of the terms of the prior mortgage, a further advances by a prior mortgagee cannot, under this act, be tacked on to the mortgage, unless the mortgage expresses a maximum to be advanced, and unless the subsequent mortgagee had, at the time of his mortgage, notice of the prior mortgage.

2. Scope of the section:It is a general principle of law that where the equities are equal, the first in time shall prevail qui 3

prior est tempore, potior est jure. This rule has been enacted in s. 48 with reference to transfer of property in general terms. It provides that where a person purports to create by transfer, at different times, rights in or over the same immovable property and such rights cannot all exist or be exercised to their full extent together, each later created right shall in the absence of a special contract or reservation binding the earlier transferee, be subject to the rights previously created. The same general rule is recognised by S. 93 which provides negatively that a mortgagee making a subsequent advance to the mortgagor whether with or without notice of an intermediate mortgage shall not therby acquire any priority in respect of his security for such subsequent 1

See sub-section (3) to S. 94 of the Law of Property Act. 1925. (1869) 2 Beng LR App 45 (45) (DR) 3 “ he who is first in point of time is more powerful in law”. 2


9 DOCTRINE OF TACKING advances. But this is made subject to the rule laid down in this section. exception to the general rule stated above

5

4

This section is thus an

and enables a prior mortgagee to tack on to his

mortgage a further advance made by him and thus gain priority over an intermediate incumbrance — (i)

If the prior mortgage is one made to secure further advance, the performance of an engagement or the balance of a running account and expresses the maximum to be secured thereby, and

(ii)

If the subsequent incumbrancer has notice of the prior mortgage.

6

The section has been based on the dissenting judgement of Lord Cranworth in Hopkinson v 7

Rolt, where his lordship observed as follows: “mortgages are but contracts; and when once the rights of parties under them are defined and understood, it is impossible to say that any rule regulating their priority is unjust. If the law is once laid down and understood, that a person advancing money on a second mortgage, with notice of a prior mortgage covering further as well as present debts, will be postponed to the first mortgagee, to the whole exent covered or capable of being covered by the prior security and acts at his peril.”

3.To Secure Future Advances. Section 79 provides another exception to the rule of priority in cases where the same property is mortgaged to two or more persons. Under this section, a subsequent mortgagee, having notice of the prior mortgage, is postponed as regards further advances made subsequently by the prior mortgagee. The rule under this section may be explained, thus; (i)

A mortgages property X to B.

(ii)

A mortgages property X to C

(iii)

A mortgages X once again to B for a fresh debt.

4

(1912) 17 Ind Cas 927 (929) (DB) (cal). AIR 1920 Pat 251 (254) (DB)** (1912) 17 Ind Cas 927 (929) (DB) (cal). 6 AIR 1955 Cal 194 (199, 204) (DB). (section 93 is thus complementary to s. 79) 7 (1861) 9 HLC 514 (539, 540): 11 ER 829. 5


10 DOCTRINE OF TACKING Here, as in between mortgage (i) and (ii), B is prior mortgagee and C is subsequent mortgagee. Althoudh B advances, on the same property X some fresh loan to the same mortgagor A but this mortgage (iii) is subsequent to mortgage (ii) in favour of C. under the rule of priority, mortgagee C shoul get priority over B for fresh loan under the mortgage (iii). But the exceptional rule given in this section is that if mortgage in favour of B under (i) was made to secure a so future advances upto a fixed maximum, then any further advance (such as third mortgage to B for fresh advance in this example) made by B shall be treated as part of mortgage (i) which is already a prior mortgage. Thus, the effect of the exceptional provision of section 79 is that although B under mortgage (iii) is a subsequent mortgagee as against C but he B would get priority over him (c). However, in order to attract the provisions of this section following conditions are necessary(a) The subsequent mortgagee must have notice of the prior mortgage, and (b) The prior mortgage expresses the maximum amount which can be secured in future on the same prorety. Section 58, cl. (a) provides that a mortgage may be made secure a loan advanced or to be advanced or an existing or future debt. Where a future advances is made it attaches itself, as it were, to the mortgage so as to put it in the same position as if it had been made when the mortgage was originally created.

8

In a mortgage made to secure future advances, the consideration is expressly agreed to be paid, either in whole or in part in future. Such a mortgage is essentially different from the one where the consideration through payable immediately is in fact paid i n future. The words “ future advances” are general and will include all advances made in pursurance of the mortgage contract at any time. It is not necessary that the parties should specify the time when the advances are to be made at the time of the mortgage.

4.The performance of an engagement Section 58, cl. (a) provides that a mortgage can be made for the purpose of securing the “performance of an engagement which may give rise to a pecuniary liability.‟ 8

(1861) 9 HLC 514 (543) : 11 ER 829, hopkinson v Rolt. (Per Lord Cranworth).


11 DOCTRINE OF TACKING A partition deed provided that the common family debts should be discharged by the respective sharers to whom they fell as per schedule of the deed, and that if any sharer failed to discharge the debts falling to his share, his properties should be liable for such debts and for the losses that might happen to the family. It was held that the provision was a mortgage for securing the performance of an engagement within the meaning of this section.

9

4 -A. Balance of a running account. It will be noticed that the section applies also to a mortgage to secure the balance of a running account. It will depend on the construction of the mortgage bond and the circumstances in each case whether the mortgage is to secure the balance due on the date of the mortgage or the balance that may be found due from time to time up to a certain limit. In the undermentioned case

10

a

mortgage was executed in respect of an overdraft account with a bank and the amount secured was expressed to be Rs.15,000. At the date of the mortgage, the amount due from the mortgagor was about Rs. 7500. The question arose in the case whether the mortgage security would enure in respect of sums overdrawn after the date on which the balance due from the mortgagor exceeded Rs. 15000. The contention on behalf of the mortgagor was that the security would not apply to such sums and that the payements made by him after the above date must be adjusted towards the balance due on that date, and if such balance was found to be have been entirely discharged in this manner, the bank would not be entitled to a mortgage decree in regard to the surplus amount, but only to a personal decree. On construing the mortgage deed and taking into consideration the conduct of the parties and the circumstances of the cases, it was held that this contention was not tenable and the mortgage would be good in respect of a balance of Rs. 15,000 whenever the balance might be struck, that the mortgage was intented to be a continuing security for such balance and not merely for the amount that was due from the mortgagor at the mortgage but that the bank was not entitled to a mortgage decree for any amount in excess of Rs. 15,000.

5. Expresses the maximum to be secured thereby.

9

AIR 1921 Mad 459 (460) (DB) Air 1943 Pat 301 (303, 304) : 22 Pat 213 (DB). (Claton’s case(1816) 1 Mer 572 and In re

10


12 DOCTRINE OF TACKING The section has no application unless the prior mortgage expresses a maximum amount up to which the advances are to be made.

11

In the imperical bank v Rai gyaw thu and co.

12

it was

observed by their lordships of the privy council: “the words of S. 79 mean that the mortgage there referred to must express a maximum. The words „ to secure further advances,‟ etc. denominate the different classes of mortgages, but to bring them under S. 79 they must have the common feature of a maximum expressed.” It is not, however, necessary that a definite figure should be expressly mentioned as the maximum to be secured by the mortgage. It is sufficient if the maximum is expressed in such terms that the definite figure can be determine when required. A took a lease from B for a period of nine years on 14

th

june, 1900 for a certain annual rental. As security for the payment of te

annual rent and interest on defaulted instalments. A mortgage his immovable property to B on the same date. Subsequently, A mortgaged the same property to C on 12

th

oct., 1900. In a suit

brought by B on his mortgage the question for determination was whether the mortgage to him expressed the maximum to be secured thereby within the meaning of this section. It was held that the aggregate rent payable under the lease could be determined by a simple arithmetical calculation and that on the principle that “that is certain which can be made certain” the mortgage did express the maximum to be secured by it. Where the bank extends overdraft facility to a party up to Rs. 2,50,000/- on security of present and future goods and informs the tax Authorities that the maximum limit applicable will be Rs. 3, 50,000/- the bank is not liable for damages for not honouring the cheques drawn in excess of Rs.2,50,000/- because the security was only in respect of future advances which might or might not be made by the bank. undermentioned case

14

13

In the

a partition deed between brothers, A and B, provided as follows:

“the common family debts should be discharged by the respective sharers to whom they fell, as per schedule of the document, and that, if any sharer failed to discharge accordingly, such sharer‟s properties‟ should be liable for such debts and for the losses that might happen to the family.”

11

AIR 1955 cal 194 (204) (DR)**AIR 1938 All 473 (476) (DB). AIR 1923 PC 211 (215): 1 Rang 637 : 50 Ind App 283. 13 Air 1972 Mad 275 (277, 278): 85 Mad Lw 246 (DB). 14 AIR 1921 Mad 459 (460, 461) (DB). 12


13 DOCTRINE OF TACKING It was held that the document read with the schedule specified the maximum secured by the document and that the reference to losses would not impair the adequacy of the specification of the maximum.

6. In respect of all advances:Section 93 provides that “ except in the case provided for by s. 79, no mortgagee making a subsequent advance to the mortgagor……… shall therby acquire any priority in respect of his security for such subsequent advances.” In the Imperical bank of india v U. Rai gyaw thu and co., their lordship of the privy council held that the word “subsequent ” in that section, must, from the context, be taken to mean subsequent to the intermediate mortgage and that an advances when made after another mortgage is granted becomes a “subsequent advance.” The words “advance” must be understood as meaning a “subsequent advance” as explained above. It has accordingly been held that this section has been enacted with a view to protect a prior mortgage by giving him priority over a subsequent mortgage with respect to advances made by him after the subsequent mortgage and that it has no application where no advances are made by the prior mortgage after the creation of the subsequent mortgage. Where, therefore, a mortgagee under a mortgage to secure future advances, sues merely in respect of advances made previous to a subsequent mortgage, this section will have no application to the case; the matter would be governed by the general rule of priority enacted in s 48 and the plaintiff would be entitled to recover the amount so advanced in priority to the subsequent mortgage. A made on 27-3-1925 a mortgage, by deposit of title deeds, with B to secure advances “ up to the limit of Rs 1,25,000 togather with interest thereon. It was held that s. 79 had no application as no advances were made after the subsequent mortgage and that B was entitled to recover as claimed not only the principal but also the interest.

7. Not exceeding the maximum. Under this section, the subsequent mortgage will be postponed to the prior mortgage only in respect of advances or debits not exceeding the maximum expressed by the prior mortgage. If the advances made by the mortgage after the subsequent mortgage exceed the maximum expressed by the prior mortgage the advances exceeding the maximum will not have priority over the subsequent mortgage.



8. Notice Unlike the English law, the question whether the prior mortgage has not notice of the subsequent mortgage, when he makes the further advances, is immaterial under this section. The material question is whether the subsequent mortgagee has notice of the prior mortgage at the date of subsequent mortgage. Section 3 provides that “ a person is said to have notice of a fact when he actually knows thatfact or when, but for willful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have taking a mortgage in a place where he knows that mortgages by deposit of title deeds are legal and usual, does not ascertain whether the title deeds were already pledged, his failure to so ascertain is such abstention from an inquiry which he ought to have made or such negligence as to infer notice in terms of s. 3 Where a mortgage for future advances was executed on 28-9-1930, and registered on 11-101930, and a subsequent mortage was executed on 12-10-1930 and registered the same day, it was held that it could not be said except from evidence aliunde, that the subsequent mortages could have, when the mortgagor negotiated for the loan, discovered by the most diligent search in the registrar‟s office, the fact of the prior mortgage and cannot, therefore, be said to have had notice.

15

The decission was before the amendment of S 3 by the addition of the Explanation

thereto which provides that a person acquiring any interest in property will be deemed to have notice of any prior transaction with reference to that property which is acquired by law to be registered, from the date of the registration. It is conceived that the decision would be different under the present law.

9.Charge. In Sesha Iyer v Srinivasa

16

the high court of madras applied this section to the case of a charge

created by a partition deed executed between brothers.

10.Further advance made after sale of equity of redemption.

15 16

(1912) 17 Ind Cas 927 (930) (DB) (Cal). AIR 1921 Mad 459 (461) (DB).


15 DOCTRINE OF TACKING This section deals only with the postponement of the rights of a subsequent mortgage in respect of advances made after the subsequent mortgage but in pursunance of a maximum fixed in the prior mortgage. It has no application of any kind where a mortgagee advances amounts to the mortgagor after the equity of redemption has passed into the hands of a purchaser of the mortgagor‟s right. Thus, if A is the mortgagee and B the mortgagor, and B himself sells away his equity of redemption if sold in court auction to C, and then A make a further advances to B, he cannot get any priority or other right in respect of advance as against C, were such as to operate as an estoppel

17

unless the conduct of C

18

No mortgagee paying off a prior mortgage, whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his original security; and, except in the case provided for by section 79, no mortgagee making a subsequent advance to the mortgagor, whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his security for such subsequent advance.

1. Legislative changes. The present section corresponds word for word with the old s.80. the old s. 93 was repealed by act V of 1908 and re-enacted as O. 34, R. 8 of the civil P. C. the old S. 80 was re-numbered as s. 93 and inserted after S.92 by the transfer of property (amendment) act, 1929. The reason for the

17 18

(1909) 3 Ind Cas 44 (45) (DB) (All)** (1901) 23 All 429 (431) (DB). (1888) 12 Bom 33 (35, 36) (DB).


16 DOCTRINE OF TACKING change given in the report of the special committee is : “ as the principal of tacking is closely allied to subrogation, we propose to put S. 80 as S . 93.”

2. Tacking:If there are successive mortgages thus: A mortgages to………………..B A mortgages to………………..C And A mortgages to………………..D D may redeem B and be subrogated to the rights of B; but he only takes priority over C in 19

respect of B‟s mortgage, and not in respect of his o wn mortgage. The section was considered in Mittu Kishan lal

20

with reference to a question of ratable

distribution under s 295 of the code of civil procedure 1882, corresponding to s 73 of the code of 1908. The first and third mortgages were to B, and the second to C. B obtained two decrees for sale on his mortgages and received payment of the scale proceeds. C obtained a decree for sale and claimed that, after deducting the amount due on the first mortgage only, the balance of the sale proceeds should be paid to him. C‟s claim was allowed on the ground that neither the rule of rateable distribution under the code of civil rocedure, nor s 80 (now s 93) of TP act gave priority to a subsequent encumbrancer.

3. scope. This section deals with two clases of cases, namely,--(1) Where a mortgagee pays off an earlier mortgage with or without notice of an intermediate mortgage, and (2) Where a mortgagee makes a subsequent advance to the mortgagor with or without notice of an intermediate mortgage. As to the first class of the cases the section provides that mortgagee cannot tack on his mortgage to the mortgage which he has paid off. As to the second class of cases it provides that the mortgagee cannot, except as provided by s 79, tack on his subsequent advance to his mortgage. The effect of s. 79 and this section is that where a mortgage to secure future advances expresses the maximu to be secured, but after certain advances within maximum have been made, a second 19 20

Chhotey lal v dharajit 96 IC 1054, AIR 1926 All 744. (1890) ILR 12 All 546.


17 DOCTRINE OF TACKING mortgage is executed, the second mortgagee, if he had notice of the prior mortgage, will have to yield to the prior mortgagee in respect of further advances made after the second mortgage by the latter up to the maximum stated, although such advances may be made with knowledge of a subsequent mortgage; but if no maximum was expressed or if the subsequent mortgagee had no notice of the prior mortgage, the prior mortgagee making further dvances after the second mortgage will have no priority in respect of such advances. Section 93 is thus complimentary to s. 79.

21

The basis of this section is to be found in the general principle, enunciated by the maxim „qui prior est tempore, prior est jure (where the equities are equal, the first in time shall prevail) and which is found enacted in s. 48. The effect of the section is, in fact, to state that the general principle cannot be defeated by the mortgagee claiming to tack his mortgage on to a prior mortgage paid off by him or to tack on to his mortgage a subsequent advance made by him, to the prejudice of intermediate mortgagees.

22

The section only enacted what had already been

regarded before as settled law in India. This section and S. 79 deal with a case where there are two different mortgagees and have no relevancy in a case where there is only one mortgagee and will not apply to the question relating to the character or constituion of the said mortgage.

23

4. Rule against taking:Tacking means annexing or uniting one thing with the other. In mortgages „tacking‟ refers to annexing a security (in mortgage) with another security. Doctrine of tacking was a rule of English Law. Under this rule, when a subsequent mortgagee discharges a prior mortgage he gets priority in respect of an intermediate mortgagee as well as his original (own) security. For example, a mortgages his property first to B and then to C. he mortgages the same property to D. now D as subsequent discharges mortgage in favour B and gets priority in respect of the intermediate (puisne) mortgage of B he (D) would acquire priority not only in respect of the intermediate mortgage but also I respect of his original mortgage (security).

21

AIR 1955bCal 194, 204 (DB) (1912) 15 Oudh Cas 211 (213)** 1904 Pun Re No, 30, page 105 (108): 1904 Pun RR No. 139 (DB). 23 AIR 1955 Cal 194(199) (DB). 22


18 DOCTRINE OF TACKING Section 93 prohibits tacking. This section lays down that no mortgagee paying off a prior mortgage shall thereby acquire any priority in respect of his original security. Doctrine of tacking was recognized under English law before the commencement of the Law of Property Act, 1925. But under this act it has now bee abolished in England. In India, tacking was never recognized by the courts. Section 93 expressly lays down the rule aginst tacking. Therefore, when a third mortgagee pays off the first mortgage, he requires priority only in respect of the puisne (intermediate) mortgage. He cannot annex his original security for purposes of priority.

5. With or without notice. Notice of the existence of an intermediate mortgage is immaterialunder this section, except in cases falling under s. 79.

24

6. Salvage payments:When a prior mortgagee makes payments of arrears of government revenue to protect the property from forfeiture and sale, such payments are in the nature of salvage payment on behalf of all persons interested, and are added to the prior mortgage either under s 72 of TP act or s 9nof Bengal Revenue Sales Act 1859, and have priority over puisne encumbrances.

7. Mortgagor not affected:The section refers to the rights of successive mortgagees inter se, and has no bearing on the question which may arise between the mortgagor and mortgagee with reference to consolidation, or tacking or adding expenses to the mortgage debt under ss 61 or 72. In a case where the mortgagor had been in possession and a suit was compromised on terms that the mortgagor should pay the arrears of rent with the mortgage debt, it was held that a transferee of the equity

24

AIR 1923 PC 211 216: 50 Ind App 283.


19 DOCTRINE OF TACKING of redemption was not bound to pay the arrears, as the rent could not be tacked on to the mortgage debt.

25

8. Intermediate mortgage. The section, in terms, applies only to the question of priority of an intermediate mortgage over a subsequent mortgage or a subsequent advance is made by prior mortgagee. The principle on which the section is based is, however, applicable even to intermediate purchasers of the 26

property. In Bhagwan das v Sham das , X mortgaged his property to A in february 1893, and sold a portion of the equity of redemption to B in august 1894. A subsequent advanced a further sum of money to X in 1895. B claimed to redeem the mortgage of 1893 ad was met by plea that he should pay up the subsequent advance also before redemption.it was held by H.C. of allahabad that to allow such a plea would violate the principle laid down in old S. 80 corresponding to this section.

9. Subsequent advance —Meaning of. It has been held by their lordships of the privy council in „ the Imperical bank of India v U rai Gyaw Thu and co. ltd.

27

that the word “subsequent” in this section must, from the context, be

taken to mean subsequent to an intermediate mortgage and that an advance when made after another mortgage is granted becomes a “subsequent advance.” A mortgage his property to B in 1874. He subsequently mortgaged the same property to C in march 1877, and thereafter to B in November 1877. B obtained a decree on bot his mortgages without impleading c, got the property sold in the court auction, and took the sale proceeds in satisfaction of both the mortgages. C then sued on his mortgage, obtained a decree, and then claimed to recover the surplus proceeds of the said sale in the hands of B to retain the proceeds in satisfaction of both his mortgages would be against the provisions of sold S. 80 corresponding to this section.

25

Unni v nagammal (1895) ILR 18 Mad 368. (1901) 23 All 429 (431) (DB). 27 AIR 1923 PC 211 (215) : 50 Ind App 283. 28 (1890) 12 All 546 (547) .(DB) 26


28

20 DOCTRINE OF TACKING Section 93 provides that there cannot be tacking by a mortgagee making future except as provided in section 79. Section 93 lays down that except as provided in section 79, no mortgagee making a subsequent advances to the mortgagor, whether with or without notice of an intermediate mortgage, shall acquire priority in respect of his security for such advances. However, tacking in respect of subsequent advance has been permitted subjected to the conditions of tacking in the cases of subsequent advances are:(i)

The subsequent mortgagee must have notice of the prior mortgage,

(ii)

The first mortgage fixes the amount to be secured.

In the absence of any of the above- mentioned conditions, tacking cannot be claimed by a mortgagee making subsequent advance to the mortgagor.

Conclusion:A mortgage, in its simplest form, is a means by which a mortgagor provides his real property as security in favour of a mortgagee, in return for an advance of money. Unlike general law mortgages, the registered proprietor will retain the legal interest in the real property and the mortgage, when registered, will have the effect as a security and create an interest in land but does not transfer the land. Section 80. Tacking abolished. Rep. by the Transfer of Property (Amendment) Act, 1929 (20 of 1929), s. 41.

Tacking is a technical legal concept arising under the common law relating to competing

priorities between two or more security interests arising over the same asset. In American jurisprudence Black's Law Dictionary defines tacking in slightly narrower terms: "The uniting of securities given at different times, so as to prevent any intermediate purchaser from claiming a title to redeem or otherwise discharging one lien, which is prior, without redeeming or discharging the other liens also, which are subsequent to his


21 DOCTRINE OF TACKING own title. The terms is particularly applied to the action of a third mortgagee who, by buying the first lien and uniting it to his own, gets priority over the second mortgagee." Doctrine of tacking was recognized under English law before the commencement of the Law of Property Act, 1925. But under this act it has now bee abolished in England. In India, tacking was never recognized by the courts. Section 93 expressly lays down the rule aginst tacking. Therefore, when a third mortgagee pays off the first mortgage, he requires priority only in respect of the puisne (intermediate) mortgage. He cannot annex his original security for purposes of priority.

Books Referred1. Singh Avtar, Transfer of property, (Universal Law publishers, 2007). 2. Dr. G. C. Bharuka, Mulla Transfer of property, (Lexis Nexis Butterworths, 10

th

edn.

2006.). 3. H.N. Tiwari, Transfer of property, (Allahabad Law Agency publishers, 2005) 4. Vepa p. sarathi, Law of Transfer Of property,(Eastern Book Company,5 5.

th

edn., 2005)

Manohar and Chitraley, AIR commentaries The Transfer of Property,(All India Reporter Rotary printing press and published, vol.2, 6

Websites 1. www.legalserviceindia.com 2. www.outlaw.com


th

edn., 2001)

22 DOCTRINE OF TACKING 3. www.manupatra.com 4. www.wikipedia.com 5. www.ask.com 6. www.google.com


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