Procedural mechanism to lift an encumbrance from an immovable property under Section 57 of the Transfer of Property Act 1882: Kerala High Court

IN THE HIGH COURT OF KERALA AT ERNAKULAM THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN WEDNESDAY THE 05TH DAY OF AUGUST 2020 14TH SRAVANA 1942 MFA.No.47 OF 2020 ORDER IN OP 107 2019 DATED 17 12 2019 OF I ADDITIONAL DISTRICT COURT ERNAKULAM M.P.VARGHESE AGED 73 YEARS S O. PATHROSE MADAPPILLY HOUSE MALAYIDOMTHURUTHU PO KIZHAKKAMBALAM BY ADVS. SRI.P.THOMAS GEEVERGHESE SRI.TONY THOMASstrangely appears very rarely to have been invoked in Courts which impression is inevitable because the case law on it is scarce if not none 2. 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 3. 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 4. This Section of the TP Act is with the exception of its last two sub sections almost verbatim of Section 5 of the English Conveyancing MFA 47 20 and Law of Property Act 1881 which reads as below “5.Where land subject to any incumbrance whether immediately payable or not is sold by the court or out of court the court may if it thinks fit on the application of any party to the sale direct or allow payment into court in case of an annual sum charged on the land or of a capital sum charged on a determinable interest in the land of such amount as when invested in government securities the court considers will be sufficient by means of the dividends thereof to keep down or otherwise provide for that charge and in any other case of capital money charged on the land of the amount sufficient to meet the incumbrance and any interest due thereon but in either case there shall also be paid into court such additional amount as the court considers will be sufficient to meet the contingency of further costs expenses and interest and any other contingency except depreciation of investments not exceeding one tenth part of the original amount to be paid in unless the court for special reason thinks fit to require a larger additional amount 2) Thereupon the court may if it thinks fit and either after or without any notice to the incumbrancer as the court thinks fit declare the land to be freed from the incumbrance and make any order for conveyance or vesting order proper for giving effect to the sale and give directions for the retention and investment of the money in court 3) After notice served on the persons interested in or entitled to the money or fund in court the court may direct payment or transfer thereof to the persons entitled to receive or give a discharge for the same and generally may give directions respecting the application or distribution of the capital or income thereof 4) This section applies to sales not completed at the commencement of this act and to sales thereafter made.” 5. After adopting the afore Section of the English Actwith minor modifications like substituting the word land with immovable property or adding that the words in execution of a decree along with sale by court or out of court and MFA 47 20 such other Section 57 of the TP Act through sub sectionsand2 Ch.256) Kekewich J spoke on the utility of the afore extracted Section 5 of the English Act “Until it came into force a purchaser was entitled to object that he did not get his estate in fee because there was a charge it might be only an insignificant charge such as a small legacy payable in future He got off his bargain unless he and the vendor could arrange on some scheme of indemnity.” 9. Needless to say no objection as afore noticed by Kekewich J can now thwart the purchaser since in the event of any such it can be removed by resorting to the provisions here made 10. Later in Wilberforce v. Wilberforce 1 Ch 94) Sargant J. spoke on the utility and purpose of the Section as “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. Of course a purchaser might think fit to take the land subject to the incumbrance but the purchase of land subject to an incumbrance is not usually a desirable investment and the object of the section was to enable the land to be conveyed to the purchaser so that he might get a full and complete title to it.” 11. Further even though the term encumbrance is not specifically defined in the TP Act the English Act provides for it under Section 2(vii) as MFA 47 20 “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.” 12. Thus moving on the purposive relevance of Section 57 of the TP Act 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 13. This assumes importance because Section 5 of the TP Act defines transfer of property to be an act by which a living person conveys property in present or in future to one or more other living persons or to himself . Hence even though transfer of property is defined to mean transfer inter vivos through Section 2(d) which prevails on it transfer by a court or under its orders are unequivocally protected.and MFA 47 20 concluded that in the case of sales by court it can direct payment and in the case of sales out of court it can allow payment 15. As I have said supra 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. 16. In this context a comparison of this section with Section 83 and Order XXXIV Rule 12 of the Code of Civil procedure would also be necessary. Section 83 of the Code of Civil Procedure makes provisions for the discharge of a mortgage on property after it has become due. This Section also provides for the declaration of an encumbered property which is the subject matter of a sale to be free of the encumbrance however with a cardinal difference that the court cannot compel the mortgage to accept the deposit in discharge of the mortgage. As far as Order XXXIV Rule 12 of the CPC is MFA 47 20 concerned it 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 17. Ineluctably thus 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 18. That said however a note of caution in the exercise of power under Section 57 of the TP Act was voiced by the Hon ble High Court of Madras in Mallikarjuna Sastri v. Narasimha Raoto the effect that 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. This certainly is the golden rule and must guide the minds of courts whenever the section is invoked by a party 19. Now that the legal provisions have been so purveyed I will set out the facts which obligates this Court to decide whether and MFA 47 20 how it comes to pay in this case 20. The appellant who is the petitioner in O.P.No.107 2019 on the files of the I Additional District Court Ernakulam states that he and the respondents are siblings. He says that the properties of their late father were partitioned in the year 1980 through a partition deed Document No.1873 1980 of the Puthencruz SRO whereby certain extents of it were allotted to him and to the second respondent his brother. He says that the said Deed however 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. 21. 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 says that this is more so because the stipulations in the Partition Deed make it incumbent on the first respondent to accept the amount of Rs.500 and execute necessary receipt in his favour. MFA 47 20 22. The petitioner submits that in the meanwhile so as to obtain resources for the marriage of his adopted daughter he entered into an agreement for sale of the property obtained by him under the Partition Deed with a certain Sri.Muhammed Raphic N.P. but that on account of the charge of Rs.500 on it as explained above he has been unable to execute the sale deed. He submits that in such circumstances he had no other option but to approach the learned District Court Ernakulam under Section 57 of the TP Act volunteering to deposit the amount of Rs.500 in favour of the first respondent so as to obtain a declaration from the said court that the property is free of the said encumbrance 23. The appellant submits that however on a misdirection as to the scope and amplitude of Section 57 of the TP Act the District Court dismissed his application through the impugned order holding it to be not maintainable 24. It is this order which is assailed by the appellant in this 25. When I noticed the afore singular facts on 15.07.2020 when this appeal was first considered I had directed the first respondent through the order of the said date to file an affidavit stating if she is unwilling to accept the amount of Rs.500 from the MFA 47 20 appellant and if so why. The first respondent has in obedience thereto filed an affidavit dated 29.07.2020 averring that she is unwilling to accept the amount from the appellant since there are certain other personal issues between them and because it has not been offered by him within the time granted in the Partition Deed or even later and further contending that his application under Section 57 of the TP Act is not maintainable 26. I have heard Sri.P.Thomas Geeverghese learned counsel for the appellant and Sri.Shiju Varghese learned counsel for the first 27. Sri.P.Thomas Geeverghese learned counsel for the appellant set forth his arguments in line with the afore narrated factual matrix contending that even in the case of a sale conducted out of court the jurisdiction of the statutorily competent court can be invoked by any party to it. He submitted that this is manifest from the words or out of court in sub sectionto Section 57 of the TP Act and thus asserted that the learned District Judge has erred in issuing the impugned order. He further predicated that since the sum charged on the appellant s property under the partition Deed is only Rs.500 it providing for no interest or other charges even if it had not been paid within the period of one year stipulated therein this MFA 47 20 construes to be the capital sum charged on it and that hence that his client was wholly justified in invoking Section 57 of the TP Act so as to fructify the sale of the property as per the agreement of sale entered by him with a certain Sri.Muhammed Raphic N.P. a copy of which has been produced before the District Court as Exhibit A5 28. The learned counsel for the appellant thus prays that the impugned order be set aside and this Court permit his client to deposit the amount of Rs.500 favouring the first respondent and declare that the property is now free of the said encumbrance adding that it has been clearly averred by his client in the application before the District Court that the first respondent is actuated by confutative intentions because she expects that if the appellant is some how incapacitated from selling the property the same will be inherited by her after his life time since he is unmarried and survived only an 29. In response Sri.Shiju Varghese learned counsel for the first respondent argued that Section 57 of the TP Act cannot be invoked except in the case of sale of immovable property through court and that in other instances the appellant ought to have filed a regular suit. He further submitted that his client and the appellant have deep seated disputes between them and that the former is not MFA 47 20 willing to accept Rs.500 from the latter in such circumstances. He then added that since the amount has now become a charge on the property it not having been paid within the time stipulated in the Partition Deed the appellant must discharge it in the manner as prescribed in Chapter IV of the TP Act and not through the mechanism under Section 57 of it. 30. However in the same breath Sri.Shiju Varghese admitted that the Partition Deed only charges the property to the sum of Rs.500 and nothing more and further that the second respondent who is his client s other brother has already paid her a like sum for which she has issued a receipt to him. On a pointed question from this Court he further conceded that his client has no case that the Partition Deed is void or ineffective on account of the failure of the appellant to tender his share of Rs.500 but that because of the personal rift between them she is not willing to execute a discharge or receipt in his favour. He submits that all this has been stated by his client in the affidavit dated 29.07.2020 filed by her in response to the order of this court dated 15.07.2020 further pointing out that she takes great umbrage to the uncharitable allegation of the appellant that she is expecting to inherit the property after his life time. He thus prays that this appeal be dismissed MFA 47 20 31. From the facts afore noticed and the submissions of the learned counsel it is perspicuous that there is no dispute between the parties that an amount of Rs.500 alone is charged on the property of the appellant as per the Partition Deed in favour of the first respondent. The specific covenant of the said Deed which is extracted under makes this incontestable 32. Hence when the amount of Rs.500 alone stands charged on the property as a capital sum without any further obligation on the appellant towards interest or other incidental expenses it is irrefragible that if the appellant pays it to the first respondent or deposits it in court the said encumbrance would stand extinguished Indubitably it is only on account of this amount being still unpaid whether because the first respondent has refused to accept it or whether the appellant has failed to offer it that the charge on the property still subsists MFA 47 20 33. Pertinently the first respondent does not have a case that any amount more than Rs.500 is due to her under the Partition Deed even as on date nor that the said Deed has been rendered void or ineffective on account of this amount not having been offered to her within the period of one year stipulated therein. She however asserts very strongly that she will not accept this amount from the petitioner solely for the reasons stated by her in the affidavit dated 29.07.2020 the averments in which are as below “3. I painfully submit that my conscience is not willing to accept the money though the same was never tendered to me The reasons for taking such a decision are the following a. Ever since my marriage in 1967 the appellant my elder brother never had any contact with my family. None of the family functions were invited by him b. My husband is an autorickshaw driver aged 78 and the appellant maintains a hostile attitude towards him and our family through out On many occasions he insulted my husband in the presence of our relatives and public c. The Marriage of the appellant s daughter Jyothi was conducted on 17.2.2020. Neither myself nor my other brother the 2 nd respondent d. In 2007 on the 1st death anniversary ceremony of mother the appellant publicly humiliated me and my husband in the presence of our other relatives e. He was dead against our marriage since my husband belongs to a poor family compared to my family. The appellant thereafter never f. I was physically prevented from attending my mother at her last days by the appellant MFA 47 20 g. My daughter in law aged 34 passed away on 16.7.2020 and even after knowing the casualty the appellant had not even made a phone 4. The following facts are also submitted 4.1. On 15.7.2020 the appellant submitted before this Court that the marriage of his daughter could not be conducted due to the encumbrance over the property. The marriage was already solemnized on 17.2.2020 at Kothamangalam 10 days prior to the filing of the Appeal 4.2. The appellant never offered the money and we are not in talking terms since my marriage in 1967 4.3. On 30.11.2019 the Trial Court recorded that the petitioner has no oral evidence whereas it is averred that my counsel refused to cross examine the appellant 4.4. Even though the appellant admitted that the amount is not paid so far it is also averred in the appeal memorandum that the amount is already paid 5. I will not raise any claim over the property owned by the appellant as his sister by way of succession. I don t want an inch of his 34. It is thus luculent that the respondent has no case that the petitioner is legally incompetent to tender Rs.500 to her or that such payment can be refused to be accepted by her for any justified cause Her only assertion is that she is refusing the payment solely because of the personal reasons afore. Of course she also has a contention that since the marriage of the appellant s daughter had been conducted even prior to the Original Petition before the District court had been filed his averment that the property was being sold for such purpose is untrue MFA 47 20 35. In the conspectus of the above the question that emerges is whether in the circumstances ut supra the appellant was justified in invoking Section 57 of the TP Act 36. From the discussion on the law indited in the earlier paragraphs of this judgment there can be little ground for divergence that the provisions of Section 57 of the TP Act would come to play in a case of this nature whether the sale been conducted by the court or in execution of a decree or by parties outside court 37. However as noticed above the learned District Judge has dismissed the appellant s application acceding to the contention of the first respondent stating: It was argued that from above it can be taken that the section encompasses a situation prior to the sale also and since the petitioner intends to sell the property after removing the encumbrance it will apply I do not agree. What is stated is only that the section empowers a party to free an encumbrance before a sale and by no means it can be brought to the case at hand where a direction for payment in a partition deed is sought to be enforced . 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 MFA 47 20 subsisting on account of the amount under the Partition Deed remaining unpaid. 38. Further the impugned order seems to travel in the direction that it is only after a sale is over can Section 57 of the TP Act be invoked. This again is misplaced because it is limpid from a mere reading of the said Section that a party to a sale can seek the assistance of the Court at the time when the sale of an encumbered property is proposed which is apodictic from sub section 2(b) of the said Section that enables the court to issue appropriate orders as mentioned therein for giving effect to the sale 39. As far as the present case is concerned the first respondent is refusing to accept the amount of Rs.500 from the appellant or to issue the receipt for discharge of the said encumbrance without any valid legal reason except that on account of the rift between her and the appellant she is unwilling to do so However 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. Moreover since the section does not mandate the court to be satisfied of the reasons for the proposed sale MFA 47 20 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 40. In such scenario I am of the sure opinion that the learned District Judge has erred in dismissing the application of the appellant under Section 57 of the TP Act holding it to be not maintainable since the appellant has clearly averred therein that he intends to sell his property as per Exhibit A5 sale agreement 41. Axiomatically I am of the considered view that the impugned order must fail and that the appellant is entitled to a declaration under Section 57 of the TP Act since the first respondent has shown no legally acceptable cause whatsoever against such 42. What now survives is whether the Original Petition would need to be remanded to the District Court or if this Court would be justified in issuing the declaration as sought for by the appellant Since the stand of the first respondent is available on record through the affidavit dated 29.07.2020 there arises no reason for further evidence to be led by the parties and this is conceded by Sri.Shiju Varghese also. I am therefore convinced that even if this Court MFA 47 20 remands the Original Petition it would only be a formality since the learned District Court will be obligated in the afore factual narration and the admissions of the first respondent to issue necessary directions and declarations in favour of the appellant within the purlieus of Section 57 of the TP Act Thus in summation I allow this appeal and set aside the impugned order of the learned District Judge consequently permitting the appellant to tender the amount of Rs.500 to the first respondent by depositing it in the District Court in which event the same will be entitled to be withdrawn by her. It is resultantly declared that on such payment by the appellant the petition schedule property will stand freed from the charge on it created as per the terms of the Partition Deed Document No.1873 1980 of the Taking into account the rather exceptional nature of the legal issues presented in this appeal I make or order as to costs and direct the parties to suffer their respective costs Devan Ramachandran Judge

Summary: The object behind Section 57 of the TP Act is indisputable from its tenor that it is proposed to help any gathering to the offer of a resolute property, which is dependent upon an encumbrance, to fructify the deal for its reasonable worth in the wake of getting in-store – for installment to the encumbrancer – the promoted worth of the periodical charge, or the capital entirety charged on the property, together with accidental charges. It subsequently empowers the gatherings to a deal to conjure the locale of the court to satisfy their contracts, despite the encumbrances on the property. The judgment passed by the Kerala High Court (High Court), in its decision in MP Varghese v Annamma Yacob &amp; Ors (MFA No 47/2020)  by Hon’ble Shri Justice Devan Ramachandran The facts of the case were such that the appellant and the subsequent respondent were kin who had gotten the property of their father through an enlisted partition deed in 1980 (Partition Deed). The Partition Deed contained an agreement that both the brothers should pay an amount of INR 500 each to their sister, that is, the principal respondent, inside one year of the Partition Deed, bombing which the primary respondent was permitted to recuperate it, for which reason, the said sums would stand charged on the separate properties of the appellant and the subsequent respondent. While the primary respondent acknowledged the installment from the subsequent respondent, she would not acknowledge installment from the appellant because of her own reasons, because of which the property assigned to him under the Partition Deed (Appellant’s Property) was as yet troubled with this commitment.  The appellant had moved to the District Court, Ernakulam (District Court) under Section 57 for affecting the deal liberated from encumbrance. The District Court refused the appellant’s supplication for release of encumbrance on the Appellant’s Property holding it to be not viable. The appellant council argued that Section 57 of the TPA applied to ‘out of court’ sales as well, that is, sale transaction which is not arranged by the court, as is showed by the utilization of the words ‘or out of court’ in Section 57(a) of the TPA. The council of  respondent presented that Section 57 of the TPA couldn’t make a difference to out of court deals and the appellant should release the obligation as per the provisions of Chapter IV of the TPA which manages home loans of steadfast properties and charges The High Court, while examining Section 57 of the TPA meticulously from both its academic and practical ambits described it as “a very efficacious, substantive and procedural mechanism to facilitate the realization of the deserving and intrinsic value of encumbered estates and other immovable properties The High Court further struck down the wrong understanding by the District Court to the degree that the Section 57 can be conjured solely after the sale is finished and rather explained unequivocally that help of the court can be looked for even while the sale is proposed. The High Court allowed the appeal and set aside the impugned order of the District Court, consequently, permitting the appellant to tender the amount of INR 500 to the first respondent, by depositing it in the District Court; in which event, the same will be entitled to be withdrawn by her. The High Court further declared that on such payment by the appellant, the Appellant’s Property will stand freed from the charge on it, created in pursuance of the terms of the Partition Deed.