Transfer of Property Act II

SALE

• Definition of A Sale S. 54

Sale is defined under section 54 of the Transfer of Property Act 1882, as a transfer of ownership
in exchange for a price paid or promised or part paid and part promised.

• Following are the essentials of a valid sale under TPA:

i. The seller must be a person competent to transfer. The seller should be either the owner
of the property or should have the authority to dispose of it.
ii. The buyer must be a person competent to the transferee.
iii. The subject matter must be a transferable immovable property which can be tangible
(building) or intangible (right of fishery).

Note – For movable property we have Sales of Good Act.

iv. There must be a transfer of ownership.

v. The transfer must be in exchange for a price. Price means money consideration. The
price must be paid or promised or partly paid. Court would not interfere whether price
is adequate or not, but price must be real and not fixitious.
• Minor

In Leslie v. Shell (1914) 3 K.B. 607, it was held that if the contract is for the benefit of minor
and minor has already done his part then contract is not void, at the option of minor it is a valid
contract.

In Ulfat Rai v. Gauri Shankar, the court stated that a duly executed transfer by way of sale
to a minor, who has paid the consideration, is valid.

• Sale under TPA how effected

There must be a registered conveyance in the case of

i) tangible immovable property of the value of Rs. 100 and upwards;

ii) a reversion or other intangible thing of any value.

In case of property of nominal value, the sale of the property could be completed by simple
delivery of possession of such property or by a registered instrument.

** Contract for sale

A contract for the sale of immoveable property is a contract that a sale of such property shall
take place on terms settled between the parties.

• The distinction between sale and contract of sale-

i. A sale under TPA of immovable property is a transfer of ownership. A contract for the
sale of immovable property is a mere agreement that a sale of the property is to take
place in the future on terms settled between the parties
ii. A sale under TPA creates a right in rem. A contract for sale creates a right in personam.

Difference between English law and Indian law in case of contract of sale - In English law
equitable interest is created in favour of buyer while in Indian law no equitable interest is
created. It means that in case of non-fulfilment buyer can only sue for compensation or specific
performance but can’t sue for the property.

RIGHTS AND LIABILITIES OF BUYER AND SELLER, S. 55

• Duties/Liabilities of the Seller before completion of Sale

1. The seller is bound to disclose any material defect in the property or the title of which the
buyer is not aware or with ordinary care cannot discover.

2. The seller is liable to produce all documents of title relating to the property to the buyer for
examination.

3. The seller is liable to answer all relevant questions put to him by the buyer with respect to
the property and its title, and give answers to the best of his information.

4. The seller on receiving the purchase price from the buyer has to execute a proper conveyance
of the property at a proper time and place.

5. The seller is liable to take proper care of the property and all relating documents as a man of
ordinary prudence would take between the date of the contract of sale and the delivery of the
property.

6. Seller is also liable to pay all public charges, rents and interests due up to the date of sale.
He is also liable to discharge all encumbrances on the property existing on the property.

• Duties/Liabilities of the Seller after completion of Sale [Section 55]

1. After the completion of the sale, the seller is liable to give to the buyer the possession of the
property.
2. Seller is further liable to deliver to the buyer all documents of title relating to the property
after the receipt of the purchase money. However, when the seller retains the part of a property
he entitled to retain all documents. When the property is sold in parts to different buyers, the
buyer of the highest value is entitled to retain the property documents.

3. Implied warranty of authority - The seller is deemed to contract with the buyer that the
interest which the seller professes to transfer to the buyer subsists and he (buyer) has the power
to transfer the same. That is he is bound to give a covenant for the title of the property.

• Rights of the seller before completion of Sale

1. Under section 55(4)(a) before the completion of the sale, the seller is entitled to all the rents
and profits before the ownership of the property passes to the buyer.

2. The seller is entitled to interest on the unpaid purchase money.

• Rights of the seller after completion of Sale

After the completion of the sale, the seller is entitled to non-possessory lien or charge upon the
property when the whole or a part of the purchase money is unpaid and the ownership of the
property has passed to the buyer under section 55(4)(b).

This charge may be excluded by –

(a) By express contract

(b) By circumstances which necessarily imply the existence of agreement inconsistent with
the continuance of charge. For eg – Seller asked buyer to pay certain amount to third
party by a promissory note, till that time charge is excluded.
(c) By circumstances which preclude the seller from availing himself of this charge.
Case - Tehilram Girdharidas vs Kashibai on 25 February, 1908, Bombay High Court
- In this case the sale was completed, property was conveyed, but the price was not
paid. But the seller endorsed on the sale deed that all amount has been paid. Buyer sold
the property to a subsequent purchaser. Seller sued the subsequent purchaser. Court
held that the seller can’t sue the subsequent purchaser because the act of seller made
the subsequent purchaser believe that price has been paid. Seller’s lein can be enforced
against a subsequent purchaser only when he/she has the notice of such unpaid price to
seller.
Seller’s non-possessory lien – When property is transferred to buyer and buyer transfers to
subsequent purchaser then this lien can be exercised against the buyer as well as a subsequent
purchaser provided that the subsequent purchaser has the notice of such charge.

• Duties/Liabilities of the buyer before completion of Sale

1. To disclose facts materially increasing value of property [Section 55(5)(a)] - The buyer is
bound to disclose to the seller any fact as to the nature or extent of the seller’s interest in the
property of which the buyer is aware and the seller is not aware and which materially increases
the value of such interest. However, the omission to make such disclosure amounts to fraud.

In Summers v. Griffiths, an old lady, contracted to sell a property at much less price believing
that her rights in the property were not absolute. The buyer had knowledge of the fact that the
lady’s interest in the property was perfect and absolute but he did not disclose it to the lady. He
was held liable for fraud and sale was set aside.

2. To pay the price [Section 55(5)(b)] - The buyer is bound to pay or tender, at the time and
place of completing the sale, the purchase-money to the seller or to such person as he directs,
provided that the property is sold for free from encumbrances. The buyer may retain out of the
purchase money the amount of any encumbrances on the property existing at the date of the
sale, and shall pay the amount so retained to the persons entitled thereto.

• Duties/Liabilities of the buyer after completion of Sale

1. To bear loss to the property [Section 55(5)(c)] - Where the ownership of the property has
passed to the buyer, the buyer is bound to bear any loss arising from the destruction, injury or
decrease in value of the property not caused by the seller.

2. To pay outgoings [Section 55(5)(d)] - Where the ownership of the property has passed to the
buyer, as between himself and the seller, the buyer is bound to pay the outgoings, for example,
Government dues, taxes, rents and revenue etc.

• Rights of the buyer before completion of Sale

1. Buyer’s non-possessory lien - If the seller defaults in completing the sale then the buyer has
lien (non-possessory lien) over the property which can be traced back to seller or any other
subsequent buyer irrespective of any notice to him/her. If the buyer defaults, then the earnest
money paid by him is forfeited.

• Rights of the buyer after completion of Sale

1. Improvements and Profits must go to buyer - Under section 55 (6)(a), the buyer is entitled
to the benefit of any improvement or increase in the value of the property. He is also entitled
to the rents and profits resulting from the property.

But where the sale is not free from encumbrances, and the amount of encumbrance is retained
by the buyer. Subsequently, encumbrance get invalidated then buyer is left with surplus. Now,
the question is where this surplus would go? There are two line of thought-

(i) Since it is a profit accruing after sale therefore it must go to buyer.

(ii) Other line of thought is that the buyer is acting as an agent of seller and must be
accountable to the seller for surplus. This was observed in the case of Waring v.
Wards.

In Izzat-un-Nissa Begam. v. Partab Singh, the encumbrance amount was allowed to be

retained by the buyer. The court further observed that subsequent to completion of sale any
profit or interest accrued, the seller is not entitled to such profit or interest. There line of
argument was that at the time of sale both parties have got for what they have bargained.

MARSHALLING BY THE BUYER

S. 56 deals with equitable doctrine of marshalling. Here, if the owner of one or more properties
mortgages them to one person and sells any one of those properties to another, the buyer can
insist the mortgagee to realise the debt from the remaining property. Marshalling is exercisable
only between buyer and seller.

Illustration – A has mortgaged his three properties X, Y and Z to B for 10 lac. Subsequently,
he sells X to C free from any encumbrance. Now as per S. 56, C is entitled to insist that B
should realise his debt from Y and Z first and then move to X in case of any due amount. So if
B can only recover 8 lac from Y and Z, he can proceed against X for the recovery of remaining
2 lacs unless they agree to otherwise.

The point to be noted is even though C has paid full price for X in taking it free from any
encumbrances, B still has the right to recover from it on non-realisation of full debt.
 MORTGAGES

As per Section 58 of Transfer of Property Act, 1882, a mortgage is the transfer of an interest
in immovable property for the purpose of securing the payment of money advanced, an existing
or future debt or the performance of an engagement which may give rise to a pecuniary liability.

** Essential conditions of a mortgage:

i. There is a transfer of interest to the mortgagee.

ii. The interest created in specific immovable property.
iii. The mortgage should be supported by consideration.

In mortgage no equity is created in favour of mortgagee. Against sale, no dominion is

transferred. Agreement of mortgage cannot be enforced specifically in court of law, the only
remedy is to claim damages.

** Difference between the mortgage (S. 58) and charge (S. 100)

i. Meaning - Mortgage means when there is a transfer of an interest in ownership of an

immovable property by the mortgagor as a security for the repayment of debt to the mortgagee.
Whereas a charge on an asset implies a security of an asset created to secure a debt or a loan
advanced by the lender, there is no transfer of ownership interest but a mere security for the
repayment of debt.

ii. In Mortgage there is transfer of an interest in the property. But in charge there is no transfer
of an interest, there is the only creation of the right to payment from a specific immovable
property without transfer of any interest in property or property.

iii. Nature of personal liability - A mortgage creates a personal liability on the borrower i.e. the
mortgagor for the repayment of the debt unless it is expressly mentioned otherwise in a
contract. However, a charge does not create a personal liability on the charge creator for the
repayment of debt. When a charge on a property is created under a contract, in such a case it
does create a personal liability for repayment.

iv. Creation - A mortgage on immovable property is created by the act of parties i.e. the lender
or the borrower. Whereas a charge is created by the act of parties i.e. the charge creator or the
charge holder or by the operation of law.

v. Right in Rem - A mortgage creates a right in rem i.e. a right enforceable against the world.
Whereas a charge is available only against a particular set of persons. It may become a right in
rem when a decree has been obtained.
vi. In Mortgage property can be further mortgaged but there is no such thing in charge.

vii. Foreclosure - Foreclosure means when a property is sold through the intervention of court.
In certain kinds of mortgages foreclosure can be done however in case of charge there can be
no foreclosure. Only remedy that the charge holder has is to sell the security held by him after
giving a notice to the charge creator.

viii. Instrument - Mortgage is executed by a mortgage deed which is executed in writing.

Whereas charge on a property can be created orally or in writing.
 ** Kinds of Mortgage

As per Section 58 of Transfer of Property, there are six kinds of mortgages –

1. Simple Mortgage

Simple Mortgage is defined under Section 58(b) of Transfer of Property Act, 1882.

Essentials of Simple Mortgage-

(i) In a simple mortgage, the mortgagor does not transfer immovable property.
(ii) Mortgagor personally become liable to pay the amount.
(iii) In the event of not paying the mortgage money, the mortgagee has every right to
sell the property and can use the proceeds of the sale.

Remedies available to mortgagee -

(i) He/She can cause the property to be sold

(ii) He/she can file suit for damages
(iii) He/she can file money suit.

2. Mortgage by conditional sale

Mortgage by conditional sale is defined under Section 58(c) of Transfer of Property Act, 1882.

Essentials –

i. There is ostensible sale from mortgagor to mortgage.

ii. It must contain a stipulation that on the repayment of money on certain date the sale
shall become void or the buyer shall re-transfer the property back to seller or in case
of default of payment on the specific date the sale shall become absolute.
iii. This stipulation must be embodied in the same document which purports to affect
the sale.
iv. In case of default, the right accrues in favour of mortgagee. It has to go to court for
foreclosure.
v. If sale and agreement to repurchase are imported in different document the
transaction cannot be a mortgage but the converse is not always true.

* Difference between mortgage by conditional sale and sale with condition of repurchase

Mortgage by conditional sale Sale with condition of repurchase

 There is debt which subsists and right of No debt subsists.
redemption is with Mortgagor.

There is lending-borrowing. There is no lending-borrowing.

Paramount right is with mortgagor. It is personal right given to seller.

In case of a default in payment of money, it The option of repurchase must be exercised

is not immediately followed by the forfeiture very strictly.
of property by making sale absolute because
there is equity in favour of mortgagor.

3. Usufructuary Mortgage

Usufructuary Mortgage is defined under Section 58(d) of Transfer of Property Act, 1882. In
this mortgage, the mortgagor delivers the possession of the property to the mortgagee and
authorises the mortgagee to retain such property until the payment is made by the mortgagor
and further authorise him to receive the rent or profit arising from such mortgaged property
and to appropriate the same instead of payment of interest.

* Essential features of usufructuary Mortgage –

i. Delivery of possession of property - In a usufructuary mortgage, the mortgagor transfers the

right to possess and enjoy the property in favour of the mortgagee for securing the repayment
of the loan.

ii. No Personal Liability - in a usufructuary mortgage, the mortgagor is not personally liable to
repay the loan amount and therefore the mortgagee cannot sue the mortgagor personally for the
debt5 nor can he bring the property to sale. He is entitled to retain the possession of the property
till the loan is repaid.

iii. Mortgagee to Appropriate Rents and Profits - Pursuant to a usufructuary mortgage, the
mortgagor authorises the mortgagee to retain the possession until payment of the mortgage
money and to receive the rents and profits and appropriate the same in lieu of interest, or in
payment of the mortgage money or partly in lieu of interest or partly in payment of the
mortgage money. The amount of rents and profits may be equal to or less or even more than
the interest amount.
* Remedies

i. The usufructuary mortgagee is entitled to be in possession of the mortgaged property

as long as it is not redeemed.
ii. Ordinarily, a usufructuary mortgagee is not entitled to institute a suit for sale.

* Usufructuary mortgages and zuripeshgi leases

A usufructuary mortgage resembles, but is different from a zuripeshgi lease. A zuripeshgi lease
is a transaction where non-returnable lumpsum money is paid in advance in exchange for the
possession of immovable property for a fixed time period. It bears a close resemblance to
usufructuary mortgage but is distinct in the following ways:

(i) In a mortgage transaction, there is a relationship of a creditor and a debtor but in a zuripeshgi
lease, there may not be a relationship of creditor and debtor;

(ii) In a zuripeshgi lease there is no right of redemption and the lessee is asked to quit at the
end of the lease term, while the right of redemption is an inherent feature of a transaction of
mortgage;

(iii) A mortgage is primarily a contract for the security of repayment of the loan advanced or
to be advanced but a zuripeshgi lease is not a mere contract for the cultivation of the land at a
rent but a security to the tenant for the money advanced.

(iv) In a zuripeshgi lease, the transferee always has the actual possession but in a usufructuary
mortgage, the mortgagee may have constructive possession and the mortgagor, in the capacity
of the lessee of the mortgagee, may have actual possession.

4. ENGLISH MORTGAGE

Where the mortgagor binds himself to repay the mortgage money on a certain date, and
transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he
will re-transfer it to the mortgagor upon payment of the mortgaged money as agreed, the
transaction is called an English mortgage.

Before the payment date the mortgagor has a legal interest in the land and after the date he has
the legal right of redemption.

* Essentials of an English Mortgage

(i) A loan is taken on the strength of the property by the mortgagor from the mortgagee;

(ii) There is an absolute transfer of this property in favour of the mortgagee;

(iii) The transfer is subject to a provision or condition that the mortgagee would return the
property to the mortgagor upon repayment of the loan by a certain date; and

(iv) The payment is to be made on a certain date fixed in advance.

In Jagdamba Loan Co Ltd v Raja Shiba Prasad, it was observed that the mortgagor has a
paramount right to redeem the property till it is foreclosed by the court.

In Fala Krista Pal vs Jagannath Marwari, it was observed that the definition of English
mortgage must be read subject to definition of mortgage under section 58(a) and consequently
it can hardly be regarded as the transfer of the entire estate of mortgagor to mortgage.

The above definition has been followed in Ram Kinkar Banerjee vs Satya Charan, in this
case the Privy council observed that whatever form is used in transferring property under
mortgage the only thing that is transferred is an interest in the property which is subject to right
of redemption and section 58(e) must be read in conjunction with section 58(a).

* Similarity between conditional mortgage and English mortgage – Property is

transferred absolutely to mortgagee.

* Difference between conditional mortgage and English mortgage

English mortgage Conditional mortgage

the mortgagor binds him personally to repay the mortgagor does not binds him personally
the money. to repay the money.

Mortgagee can file money suit The only remedy available is against the
property

The transaction of sale is absolute from the the sale transaction is not final initially and is
beginning contingent on any future event.

Absolute interest is transferred which is There is ostensible sale and mortgagee only
liable to divested on payment of mortgage acquire qualified ownership i.e. if mortgagor
money. fail to pay mortgage money, the sale
becomes absolute through machinery of
court.
5. MORTGAGE BY DEPOSIT OF TITLE DEEDS

Where a person delivers to a creditor or his agent documents of title to immovable property
with intent to create a security thereon, the transaction is called a mortgage by deposit of title
deeds. It is purely an oral transaction. The loan amount is raised against the title deeds of the
immovable property.

* Essentials of Mortgage by Deposit of Title Deeds

(i) The transferor borrows a sum of money from the transferee;

(ii) He delivers the title deeds of a specific immovable property;

(iii) He does it with an intention to keep the property as a security for the repayment of the
loan.

6. ANOMALOUS MORTGAGE

A mortgage, which is not a simple mortgage, mortgage by conditional sale, a usufructuary

mortgage, an English mortgage or a mortgage by deposit of title deeds, is called an anomalous
mortgage. An anomalous mortgage can be a combination of any of these mortgages.

For instance, where possession of property is delivered to the mortgagee with an additional
liability on the mortgagor to pay the interest on the loan amount, it would be an anomalous
mortgage.
 Rights of Mortgagor

The rights of the mortgagor are as follows:

(i) Right of redemption;

(ii) Right to transfer to a third party instead of re-transfer to himself;

(iii) Right to inspection and production of documents;

(iv) Right to accession;

(v) Right to confer a lease, and;

(vi) Right to reasonable waste.

I. RIGHT OF REDEMPTION, Section 60

A mortgage transaction is primarily a contract to ensure the repayment of the loan amount. The
mortgagor remains the owner of the property and is capable to obtain the property from the
mortgagee, when he repays the loan. This statutory right of mortgagor to take back the property
on repayment of the loan amount in full plus the interest on it, if any is called a right to redeem
and a suit to enforce it is called a suit for redemption. It cannot be taken away or defeated by
an agreement to the contrary. The right to redeem can be taken away only by means and manner
statutorily enacted for this purpose.

Right of redemption continues even though the mortgagor fails to pay the debt on the due date.
A borrower has a right to redeem the property at any time before the date the property is
transferred to auction purchaser by confirmation of sale

Clog on Right of Redemption

Clog literally means to obstruct or to block, and a clog on the right of redemption of the
mortgagor means an attempt of the mortgagee to obstruct this right of redemption. The
mortgagee may put a condition in the mortgage deed that may prevent the mortgagor from
redeeming his property even when he is prepared to repay the loan. This putting of obstructions
from getting back his property is called a clog on the statutory right of the mortgagor to get
back his property and would be void.

In Biggs v Hoddinott, Judge J. Romar has said in a mortgage one can't by contract between
mortgage and mortgagee clog the equity of redemption.
In Stanley v Wilde, Lord Lindley made the following observations: A mortgage is a
conveyance of land for the repayment of a debt and the security is redeemable on the payment
of discharge of such debt or obligation, and any provision to the contrary is void. It follows
from this, that once a mortgage always a mortgage.

In Vernon v Bethell, the court observed that it is an established rule that a mortgagee can never
provide, at the time of making the loan, any condition which destroys the equity of redemption
and makes the conveyance absolute. There is a great reason and justice in this rule as
necessitous men are not truly speaking free men and to answer the present exigencies, they will
submit to in any terms that mortgagee may impose upon them.

In Rev v Little, the court observed that doctrine of clog of redemption applies only to dealings
when contract of mortgage is entered under duress and the mortgagor may succumbs to
conditions which are oppressive and may take away there right of redemption.

* Illustrations on clog of redemption

1. A contract of mortgage cannot automatically be converted into a contract of sale in absence

of a separate transaction despite a covenant to that effect in the deed. For instance, A mortgages
his land to B. The contract provides that in the event of non-payment of loan by five years, the
property would be treated as sold to B. It is a clog on redemption.

2. Long-term Mortgages and Clog on Right of Redemption - Long-term of Mortgages may be

treated as clog on redemption. The Supreme Court has held that a mere long time period in
absence of evidence of fraud or undue advantage by the mortgagee would not of itself amount
to clog on equity of redemption, but if the length is unreasonable or oppressive, or makes
redemption impossible, it will be a clog.

In Seth Ganga Dhar v Shankar Lal, a mortgage was executed by A and included a condition
that the mortgagor will not be entitled to redeem the property for a period of 85 years. The
court held that there was no evidence to show that the mortgagor was oppressed. Long-term
mortgages by themselves would not amount to a clog on equity of redemption.

In Fateh Mohammed vs Ram Dayal, the period of redemption was 200 years. The court held
that it's a clog because facts do not favour mortgage for such long period.

In Hardayal Singh v Raja Ram Singh, the court observed that if length of time period is
oppressive, unreasonable and unjust then it will treated as clog on redemption and redemption
will be allowed even before the expiry of term.
3. Stipulations barring Mortgagor right of redemptions after a particular period of time

Murari Lal v Devkaran - This case relates to territory where TPA was not applied at the time
when mortgage was executed. The mortgage was executed with the condition that mortgagor
may redeem the property within period of 15 years otherwise property would be transferred
absolutely to the mortgagee. The court said that even though Section 60 does not apply here, it
is the duty of court to decide case on principle of justice, equity and good conscience. If
stipulation is unjust, unreasonable, oppressive and unconscious then that would be treated as
clog on principle of equity of redemption. In mortgage equity has great importance.

4. Condition postponing redemption in case of default is a clog

In Mohammad Sher Khan vs Seth Swami Dayal, the mortgage was for a term of five years
with the condition that if the money was not paid the mortgage might enter into possession for
a period of 12 years during which the mortgagor could not redeem. It was held at such a
condition was a clog because it hindered and existing right to redeem.

6. Restraint on alienation

A stipulation in a mortgage deed that the mortgagor shall not alienate the mortgage property or
shall not take loan on the security of the mortgage property has been held to be a clog (Ram
Saran v Amrit).

7. Redemption restricted to mortgagor

An agreement that redemption should be available to the mortgagor and not too is hires has
been held as a clog.

8. Penalty in case of default

A stipulation to charge at enhanced rate of interest from the date of mortgage, in case of default
in payment, has been held to be a blog. But if there is no undue influence, a high rate of interest
is not necessary a clog (Sarfaraz vs Udwat Singh).

In Gulabchand vs Saraswati Devi, there was a perpetual lease, mortgagor as a lessee transfer
property to mortgagee by way of conditional sale for 4 years. Clause 9 of the deed provided
that in the event that mortgagor receives the notice of re-entry for breaching the terms of lease
then the right of mortgagor would be transferred to mortgagee. The court held that it was a clog
because property was taken away even before date of redemption arises.
9. Collateral benefit to the mortgagee - A mortgagee may avail some collateral benefit during
the period of the mortgage, in which case it’ll be held valid. The mortgagee can also avail some
benefits after the mortgage gets over, but in some cases, it may be considered as void and a
clog.

In biggs case, 1898, the owner of a hotel mortgage property to brewers. A stipulation provided
that during mortgage, mortgagee only purchase bear exclusively from mortgagor. After two
years mortgagor repaid the mortgage money and stopped purchasing bear from them.
Mortgagee filed suit for injunction. Court granted injunction and held that mortgagor is bound
by stipulation and it is not a clog on redemption.

In the case of Noakes & Co. v. Rice there was a condition in the mortgage deed that the
mortgagor will sell all the beer brewed on his land to the mortgagee. The Court held that such
a condition was valid during the existence of the mortgage, but after the property has been
redeemed, such condition would not be valid. The property should be returned to the mortgagor
without any tie.

In Bradley v Carritt, Mortgage was a shareholder in a tea company e and mortgage was a tea
broker. Shares in a tea company had been mortgaged to secure a loan from a broker on terms
that the mortgagor would seek to ensure that the mortgagee should thereafter have sale of the
company’s teas. The mortgage contained a covenant that, if the company sold its teas otherwise
than through the mortgagee, the mortgagor would pay to the mortgagee an amount equivalent
to the commission that he would have earned from the company as broker. The court held that
it's a clog on redemption because even after payment it is still a bourdon on mortgagor.

Lord Lindley gave the dissenting opinion that it is a separate obligation, a collateral stipulation
not hindering the redemption therefore mortgagor is bound by it.

In Kreglinger v The New Patagonian Meat and Cold Storage Company: HL 20 Nov 1913,
the minority opinion of Lord Lindley become majority opinion. The House of Lords held that
the mortgagee is allowed to stipulate for a collateral benefit beyond the period of redemption
provided that the stipulation is not –

• Unconscionable or unfair.
• A penalty amounting to a clog on the right to redeem.
• Contrary to the right of redemption.
In Indian Kreglinger case is not followed, the parties are bound to collateral benefits only till
the time of redemption.

* Extinction of Right of Redemption

A right of redemption being a statutory right can only be extinguished by

(i) The act of the parties; or – By selling equity of redemption

(ii) By a decree of the court – the mortgage has right of foreclosure.

* Redemption of the Portion of the Mortgaged Property

A person interested in only a share of the mortgaged property and not in the whole of it, is not
entitled to redeem his own share only, on payment of a proportionate part of the amount. Partial
redemption of property is not permissible, have to redeem the property completely.

Exceptions-

i. if there is contract to the contrary

ii. if the mortgagor has distinct and separate interest

iii. Property was not partitioned during mortgage but later on partitioned and that partition is
recognised by mortgaee.

iv. Once the property is mortgaged the integrity is of paramount but if mortgagee himself
acquire share in the property then this integrity is broken. for example, A property mortgaged
from A to B for Rs 4 lakhs. Later A sells 1st part to X for Rs 1 lakh, 2nd part to Y for Rs 1 lakh,
3rd part to Z for Rs 1 lakh, and 4th part to B for Rs 1 lakh. Hair the integrity is broken and XYZ
can redeem the property by paying their respective Rs 1 lakh.

* Who may sue for redemption (S. 91)

Besides the mortgagor, any of the following persons may redeem, or institute a suit for
redemption of, the mortgaged property, namely :-

(a) any person who has any interest in, or charge upon, the property mortgaged or in or upon
the right to redeem the same;

(b) any surety for the payment of the mortgage-debt; or

(c) any creditor of the mortgagor who has in a suit for the administration of his estate obtained
a decree for sale of the mortgaged property.

* Right of Subrogation (S. 92)

The term subrogation literally means substitution. The right of subrogation means when the
mortgagee transfers his mortgaged debt in favour of an assignee, the assignee will have all the
rights of the mortgagee. In order to be entitled to subrogation, the assignee shall pay off the
entire mortgaged debt, only on redeeming the mortgaged debt will the assignee be entitled to
subrogation. All the person mentioned in s. 91 has right of subrogation.

• Types of Subrogation

Subrogation is of two types –

Legal Subrogation - A legal subrogation takes place by the operation of law. When a mortgage
debt is paid off by some person (mentioned in s. 91) who has interest, it is a legal subrogation.
It is not available to strangers.

Conventional Subrogation - A conventional subrogation takes place when the person paying
off the mortgaged debt is a stranger, such a person has no interest to protect the mortgaged
property. This person satisfies the debt under an agreement that he would be subrogated with
the rights of the mortgagee who is paid off.
II. Right to compel redelivery- section 60

On repayment of mortgage money, mortgagor can compel mortgagee to re-deliver the property
to him.

II. Right to transfer to a third party

As per Section 60A, the mortgagor may direct the mortgagee to assign the mortgage debt and
authorise him to transfer the property to a third party instead of transferring him the same. The
object of this section is to enable the mortgagor to pay off the debt of the mortgagee by taking
a loan from another person on the security of the same property.

III. Right to accession

As per Section 63, during the subsistence of the mortgage if any accession is made to the
mortgaged property where the property is in possession of the mortgagor itself and then the
mortgagor has a right to take in accession after the redemption of the mortgage.

Accession can be of two types:

(i) Natural accession.

(ii) Acquired/Artificial accession.

National accession - It has nothing to do with the conduct of the parties, it is natural so it revert
back to mortgagor. for example land is near sea, sea changed course over time and there is an
enhancement of land, it is natural accession so it will revert back to mortgagor.

In Sadashiv Anand vs Vitthal, a village has been mortgage without well-defined boundary.
There was a survey by the government and the area of village was increased. It was held that
land should revert back to mortgagor.

Artificial accession - If this accession is separable then the right is given to mortgagor to accept
or deny the accession. Mortgagor has to pay the cost of accession. for example. For example
joining the mortgage property some construction work is done.

If inseparable then mortgagor is entitled to that accession but do not have to pay the accession
money as one cannot burdened the mortgagor to pay extra amount. In certain conditions
mortgagor is bound to pay the accession money which are as follows-

i. if the accession is necessary to protect the property from destruction. for example, agricultural
land and to preserve land constructed well, here mortgagor is bound to pay the cost.
ii. if mortgagor is assented to accession.

IV. Right to improvement

As per Section 63A, during the subsistence of the mortgage if any improvement is made to the
property where the property is in possession of the mortgagee, then the mortgagor has a right
to take the improvements made to the property upon the redemption.

In Shepherd v. Jones, the court on ground of equity held that if those improvements are
reasonable to preserve the property then mortgagor can claim the cost. But if it make the
redemption more costly and therefore burdensome on mortgagor then can't claim the cost. It
depends on nature property that what amount is reasonable.

Indian jurisprudence - It permits to make improvement. In absence of contract to contrary the

improvement shall go back to mortgagee on redemption.

If following conditions mortgagee can claim compensation for improvement-

i. If improvement is to preserve the property. for example well dried up maintaining this well
is improvement and mortgagee can claim compensation from mortgagor.

ii. if that improvement is necessary to prevent the security from becoming insufficient. The
rule is that security is said to be sufficient if the value of security exceed by one third of the
cost of the property. If it is a is building than one half of the cost of building.

iii. if improvement is made in compliance with some legal order.

V. Right to grant a lease

As per Section 65A, a mortgagor shall have the right to grant a lease of which is lawfully in
possession with the mortgagee and such lease shall be binding on the mortgagee subject to the
following conditions:

i. lease shall be according to the local laws, custom or usages.

ii. no rent or premium shall be paid in advance.
iii. the lease shall not contain a covenant for renewal.
iv. the lease shall come into effect within six months from the date on which it is made.
v. in case lease of buildings, the duration of the lease shall not exceed more than three
years.
In Balmukund vs Motilal, (Cal HC) the court has said that this power of lessee is granted
subject to section 66. It further observed that let the property deteriorated but do not do any act
that lessens the value of security or security becomes insufficient.

In India the court started differentiating between English mortgage and other mortgage.
Subsequently this line of reasoning was not followed in Madan Mohan Singh vs Raj Kishore.
In this case the court have chopped out the right of mortgagor to grant lease subject to some
reasonable restrictions which are as follows-

i. A mortgagor may lease the property to use it in the ordinary course of management but is not
competent to grant the lease on unusual terms or alter the characteristics of land or to authorise
its use in a manner or for a purpose different from what mortgagor himself had used the
property before the mortgage.

ii. He cannot alter the character of land for example agriculture land that can't give for mining.

Govind Chandra vs Sasadhan Mandal, the court observed that mortgagor can grant lease
from month to month, year to year but can't grant a permanent lease with rent fixed in perpetuity
as it amount to alteration of his right to raise rent in future and is as good as a sale which is not
sanctioned by ordinary course of management of the property nor warranted by its previous
use.

In Mangru Mahto v. Thakur Tarakeswar Nath, the issue was if property is mortgaged by
in violation of section 65A then what its effect on right of lessee? The court held that lease by
mortgage out of ordinary course is not binding on mortgagee but it is binding on lessee.

VI. Right to reasonable waste.

Ordinarily the mortgagor is deemed to take care of it as the owner of the property would do. If
he allows the property to deteriorate, he is not liable. But a voluntary act leading to destruction
of his own property would affect the mortgagee adversely.

VII. Right to redeem separately or simultaneously

A mortgagor who has executed two or more mortgages in favour of the same mortgagee shall
be entitled to redeem anyone such mortgage separately or any two or more of such mortgages
together. However, this is subject to contrary contract, i.e the mortgagor and mortgagee may
exclude this provision from their mortgage. It is possible only when the principal money of any
two or more of the mortgages has become due.
 Rights of Mortgagee

I. Right to foreclosure or sale

As per Section 67, the mortgagee has a right to foreclosure or sale. A suit to obtain a decree
that a mortgagor shall be absolutely debarred of his right to redeem the mortgaged property is
called a suit for foreclosure. The components for the section are:

(i) In the absence of a contract to the contrary, the mortgagee has, at any time after

(a) the mortgage-money has become due to him, and

(b) before a decree has been made for the redemption of the mortgaged property,

(c) or the mortgage-money has been paid or deposited,

(ii) A right to obtain from the Court a decree;

(iii) That the mortgagor shall be absolutely barred of his right to redeem the property; or

(iv) A decree that the property be sold.

Contract to the Contrary

The rights of the mortgagee to foreclose can be partially or fully curtailed, or accelerated by a
contract to the contrary, but at the same time, that may have no impact on the mortgagor’s right
to redeem.

When does the Right to Foreclose Arise?

Where no time is fixed for repayment of debt, the right to foreclose arises from the date of the
execution of the deed, or from the date of demand for repayment is made and is refused by the
mortgagor. In case a time is fixed, the right arises after the time expires. In case the agreement
is to repay in instalments, the right to sue arises each time an instalment is due.

Foreclosure is allowed in two cases-

i. In case of mortgage by conditional sale.

ii. in case of anomalous mortgage if condition permits.

At the time of foreclosure, the property goes absolutely to mortgagee, whether there is profit
or loss, it has to be bear it. While in sale if proceeds are more, then the remaining amount goes
back to mortgagor, if less than mortgagee can file money suit against mortgagor.
Simple mortgage – Right of foreclosure is not available Only right of sale or money suit is
available.

Usufructuary mortgage - right of foreclosure is not available also so can't sale because property
is with mortgagee.

Conditional mortgage - right to foreclosure and for sale not available because already sold.

English mortgage – It is kind of simple mortgage.

Mortgage by transfer of title deeds – it is a kind of simple mortgage

Anomalous mortgage – It depends on types of mortgage.

Mortgagor make mortgage trustee – Mortgagee as a trustee cant sue for foreclosure because
he/she cannot be trustee as well as owner.

Partial Foreclosure

A mortgage interest cannot be severed without the consent of all the mortgagees and
mortgagors, as it is inequitable to split the security.

* Mortgagee when bound to bring one suit on several mortgages (s. 67A)

A mortgagee is bound to bring one suit on several mortgages when

(i) A mortgagee who holds two or more mortgages;

(ii) Executed by the same mortgagor;

(iii) In respect of each of them he has a right to obtain the same kind of decree under section
67;

(iv) He sues to obtain such decree on any one of the mortgages, in the absence of a contract to
the contrary,

(v) Be bound to sue on all the mortgages in respect of which the mortgage-money has become
due.

This rule is primarily for the benefit of the mortgagor, and he may waive its benefit.

II. RIGHT TO SUE FOR MORTGAGE-MONEY (S. 68)

The mortgagee has a right to sue for the mortgage-money only

(i) Where the mortgagor binds himself to repay the same; or

(ii) Where, by any cause other than the wrongful act or default of the mortgagor or mortgagee,
the mortgaged property is wholly or partially destroyed; or

(iii) The security is rendered insufficient, and

(iv) The mortgagee has given the mortgagor a reasonable opportunity of providing further
security enough to render the whole security sufficient, and the mortgagor has failed to do so;
or

(v) Where the mortgagee is deprived of the whole or part of his security by or in consequence
of the wrongful act or default of the mortgagor; or

(vi) Where the mortgagee being entitled to possession of the mortgaged property, the
mortgagor fails to deliver the same to him; or

(vii) To secure the possession thereof to him without disturbance by the mortgagor or any
person claiming under a title superior to that of the mortgagor.

The provisions are of an enabling nature and do not preclude the mortgagee from suing a
trespasser who has possession.

III. POWER OF SALE (S. 69)

The power of the mortgagee to sell the property referred to in here is the power to sell it without
the intervention of the court. It is different from the right of a simple mortgagee to cause the
property to be sold with the help of the court. This power can be exercised if:

(i) the mortgage is an English mortgage; (ii) where a power of sale without the intervention of
the court is expressly conferred on the mortgagee by the mortgage-deed and the mortgagee is
the government;

(iii) there is a default of payment of the mortgage-money;

(iv) neither the mortgagor nor the mortgagee is a Hindu, Muhammadan or Buddhist or a
member of any other race, sect, tribe or class from time to time specified in this behalf by the
state government in the Official Gazette; and

(v) the mortgaged property or any part thereof was, on the date of the execution of the
mortgage-deed, situated within the towns of Calcutta, Madras, Bombay or in any other town
or area which the State Government may, by notification in the Official Gazette, specify in this
behalf.

Conditions for Exercise of Power

There are three conditions that are mandatory for the exercise of this power. These conditions
cannot be varied even by a contract to the contrary:

(i) such power of sale can be exercised after notice in writing requiring payment of the principle
money has been served on the mortgagor, or on one of several mortgagors; and

(ii) default has been made in payment of the principal money, or of part thereof, for three
months after such service; or

(iii) some interest under the mortgage amounting at least to five hundred rupees is in arrear and
unpaid for three months after becoming due.

IV. RIGHT TO APPOINT A RECEIVER

A receiver is appointed only if there happens to be a sale under Section 69. The appointment
of the receiver is made according to the mortgaged deed. The person appointing as a receiver
should be willing to act as a receiver if he is unable to act as a receiver then the mortgagee can
appoint the receiver if the mortgagor agrees. In case the mortgagor does not agree to the
appointment made by the mortgagee then the mortgagee can apply to the court for the
appointment.

The money received by the receiver shall distribute for the following to below case

• he may discharge all the rents, taxes, land revenues, and any other charge which is
affecting the property.
• he can claim back the payment along with the interest.
• he can keep a sum of money as commission and he may pay premiums on the various
insurances insured.

V. RIGHT TO ACCESSION TO MORTGAGED PROPERTY

As per Section 70, if there is a contract between the mortgagor and mortgagee that after the
date of mortgage that the mortgagee shall have the right to the accession made to the mortgaged
property then the mortgagee shall have right to all the accessions made.

VI. RIGHT OF MORTGAGE TO SPEND THE MONEY

As per Section 72, the mortgagee has a right to spend the money when it is necessary.

There are few circumstances in which the mortgagee has a right to spend the money:
 • the mortgagee can spend the money on preserving the mortgaged property from
destruction, forfeiture and sale.
• the mortgagee can spend the money if circumstances arise to protect the mortgagor’s
title to the property.
• when the mortgaged property happens to be a renewable leasehold property.
• the mortgagee can spend the money on insuring the mortgagor’s property.

VII. RIGHT TO PROCEED OF REVENUE SALE OR COMPENSATION ON

ACQUISITION

As per Section 73(1), if the mortgaged property is sold due to the non-payment of government
dues then the mortgagee shall have every right to claim back his mortgaged money from such
sale.

As per Section 73(2), if the mortgaged property is acquired under the land acquisition act or
any other act and the compensation is paid the mortgagee can claim his debt from such
compensation.
 LEASE

Definition of Lease (Sec. 105)

A lease of immovable property is a transfer of a right to enjoy such property for a certain time
(express or implied), or in perpetuity, in consideration of (i) a price paid or promised, or (ii) of
rnoney, (iii) a share of crops, (iv) service, or (v) any other thing of value, to rendered
periodically, or on specified occasions, to the transferor by the transferee, who accepts the
transfer on such terms.

Essentials of a Lease

(i) The Lessor - He must be competent to contract and he must have title or authority

(ii) The Lesse - He also must be competent to contract at the date of execution of the lease. A
sale or a mortgage to a minor is valid. But a lease to a minor is void, as the lease is to be
executed both by the lessor and the lessee. A man could not grant a lease to himself (Rye v
Rye, 1962 A.C. 496).

(iii) The subject-matter of the lease must be immovable property.

(iv) There must be a transfer of a right to enjoy such property.

(v) Duration of the lease - A lease must be made for a certain time, express or implied, or in
perpetuity.

(vi) Consideration, which may be premium plus rent, as well as premium alone. Premium is
the price paid or promised in consideration of a transfer by way of lease. Any payment by the
lessee that is part of the consideration of the lease is rent.

(vii) The lessee must accept the transfer. It must be in the mode indicated by Sec. 107.

(viii) The interest that the lessee acquires is a transferable interest and can be further be
transferred in favour of a sub-lessee or a sub- tenant. The relationship of the lessee is created
with the property and not merely with that of the owner.

(ix) A lease is both heritable and transferable. A monthly tenancy is a heritable asset but a lease
for life of the grantee terminates on his death.

Lease and Licence

The term ‘lease’ and ‘license’ are defined under Section 105 of the Transfer of Property Act
and Section 52 of the Indian Easements Act respectively.

Section 105 of Transfer of Property Act: A lease of immovable property is a transfer of a right
to enjoy such property, made for a certain time, express or implied, or in perpetuity, in
consideration of a price paid or promised, or of money, a share of crops, service or any other
thing of value, to be rendered periodically or on specified occasions to the transferor by the
transferee, who accepts the transfer on such terms.

Section 52 of the Easements Act, 1882: Where one person grants to another, or to a definite
number of other persons, a right to do, or continue to do, in or upon the immovable property of
the grantor, something which would, in the absence of such right, be unlawful, and such right
does not amount to an easement or an interest in the property, the right is called, a license.

A licence is a right to do or continue to do, in or upon the immovable property of the grantor,
something which would in the absence of such right is unlawful, and such right does not amount
to an easement or an interest in the property. Further, it is an authority to do a particular act or
series of acts upon another’s land without possessing any estate therein.

* Distinctions between Lease and Licence:

1. A lease is a transfer of an interest in a specific immovable property, while licence is a bare

permission, without any transfer of an interest.

2. A lease creates an interest in favour of the leassee with respect of the property, but a licence
does not create such an interest.

3. A lease is both transferable and heritable, a sub tenancy can be created by the tenant and on
the death of the tenant, the tenancy can be inherited by his/her legal heir, whereas, licence is
neither transferable nor heritable.

4. A licence comes to an end with the death of either the grantor or the garantee, since it is a
personal contract, but a lease does not comes to an end on either the death of the grantor or
grantee.

5. A licence can be withdrawn at any time at the pleasure of the grantor but the lease can come
to an end only in accordance with the terms and condition stipulated in the contract of tenancy
agreement.

6. A lease is unaffected by the transfer of the property by sale in favour of a third party. It
continues and the purchaser has to wait till the time period for which the tenancy was created
is over before he can get the possession, whereas, in case of a licence, if the property is sold to
a third party, it comes to n end immediately.

7. A lessee has a right to protect the possession in his own right. Whereas, a licencee cannot
defend his possession in his own name as he does not have any proprietary right in the property.

8. A lessee in possession of the property is entitled to any improvements or accessions made to

the property, while a licencee is not.

In Birendra Pratap Singh And Another vs Gulwant Singh AIR 1968 SC 1068, the court
held that the mere delivery of the lease and the counterpart by one party to the other does not
make the lessee under the lease a lessee from the date of delivery or the written documents, nor
is any such principle laid down is sec. 55(1) of the Tenancy Act. The rights under the lease can
only arise in accordance with the terms of the lease. In the present case, the terms of the sub-
lease themselves laid down that the appellants were to be sub-lessees from 1st July, 1947, and
consequently, the mere delivery of the documents could not bring into existence the
relationship of lessor and lessee from an earlier date.

In Puran Singh Sahni vs. Sundari Bhagwandas Kripalani the issue was whether the
agreement dated 11.6.1969 was one of licence or lease? The court held that by mere use of the
word lease or licence the correct categorisation of an instrument under law cannot be affected.
Whether a particular grant amounts to lease or a licence, depends on its substance. If a
document gives only a right to use the property in a particular way or under certain terms while
it remains in possession and control of the owner thereof, it will be a licence. If there is a
transfer of interest in law and exclusive possession is given to the grantee or where the
ingredients of a lease are present and the licensee is, according to law, a tenant, then it is a lease
and he ought to be given benefit of the Rent Act.

In Jai Singh Morarji vs M/S Sovani Pvt. Ltd, AIR 1973 SC 772 the issue was whether, the
Private Company was sub-lessee and hence protected under Section 15(2) of Bombay Rent Act
1947? The court held that the provision contained in Section 108(j) of the Transfer of Property
Act notices the distinction between the sub-lease by a lessee and transfer by such sub-lessee of
his interest by a subsequent transfer. In the present case the tenant of property was granted sub-
lease to Director of Private Company and not to the Private Company which claimed to be sub-
leasee. The Private Company was a subsequent assignee from sub-lessee. Section 15(2) of
Bombay Rent Act 1947 protected only sub-lease or transfer by tenant and it did not protect any
further lease or transfer by sub-lessee. Therefore, the Private Company was not within
protection of Section 15(2) of Bombay Rent Act 1947.

Bejoy Gopal Mukherji vs Pratul Chandra Ghose, AIR 1953 SC 153.

The case relates to permanent tenancy. The court observed that permanency of tenure does not
necessarily imply both fixity of rent and fixity of occupation and the fact of enhancement of
rent does not necessarily militate against the tenancy being a permanent one. Mere possession
for generations at a uniform rent, or construction of permanent structures by itself may not be
conclusive proof of a permanent right but the cumulative affect of such facts coupled with other
facts may lead to the inference of a permanent tenancy. In the present case, the deeds of transfer
provided that the transferee was given the right to enjoy from generation to generation for ever,
pucka structures and tanks had been constructed. So, the court held that all these circumstances
put together irresistibly led to the conclusion of a permanency of the tenure.

Jaswant Singh Mathura Singh vs Ahmedabad Municipal Corporation, AIR 1991 SC 385

The question was whether the tenant or a sub-tenant is a person interested and is entitled to
notice. The court held that under s. 105 of Transfer of Property Act, a lease creates right or an
interest in enjoyment of the demised property and a tenant or a sub-tenant is entitled to remain
in possession of the demised property until the lease is duly terminated and eviction takes place
in accordance with law. Therefore, a tenant or a subtenant in possession of a tenement shall be
entitled to a notice and opportunity.

Rights and Liabilities of Lessor and Lessee

Section 108, sub-section (a) to (q), of the Act mentions the Rights and Liabilities of Lessor and
Lessee. It is pertinent to note that s. 108 applies only in the absence of a contract or local custom
usage to its contrary.

* Liabilities/Duties of Lessor

i. Duty to Disclosure [Clause (a)]

It provides that the lessor is obliged to report any material defect in the property to the Lessee
concerning its intended usage of which the lessor is conscious but which the Lessee does not
know. The defects could be visible and latent. The lessor is required to expose latent defects
because ordinary attention cannot discover such defects. The obligation to report is especially
important where there are defects which affect the right of enjoyment of the property for the
Lessee.
ii. To Give Possession [Clause (b)]

The lessor is under an obligation to place Lessee in possession of the land, upon the request of
the Lessee. Unless he grants the lessee possession, he will not be able to recover the rent or
execute Lessee’s obligations under the lease.

iii. The Directive for Quiet Enjoyment [Clause (c)]

The lessee has all the rights to enjoy the property. It is the duty of the lessor to not cause any
form of interruptions during the tenancy period.

* Rights of Lessor

i. Right to Accretions [Clause (d)]

If any accession or addition to the property is rendered by way of a contract during the duration
of a contract, then that accession or addition shall be considered to be included in the original
lease. The addition could be natural or on the Lessee’s cost. The Lessee may, however, have
no title to such accretion and the Lessee should return the same at the termination of the lease
or after the due duration of the contract.

* Liabilities of Lessee

i. Duty to disclose facts material to increase the value of the property [Clause (k)]

Under this Clause, the Lessee is obliged to report any defect to the lessor of which he is aware,
but lessor is not aware and which significantly increases the value of that interest. Where the
Lessee refuses to report the reality, and the lessor thus loses, he can sue for compensation.

ii. Duty to pay rent [Clause(l)]

Lessee is under a duty or obligation to pay in due time or place the payment or rental to the
lessor or his agent. The responsibility to pay rent occurs after the Lessee has been put in charge
of everything. Where the Lessee refuses to pay the rent and is in arrears, the lessor is entitled
to file a claim for rent arrears or to commence the eviction on the ground of unpaid rent.

iii. Duty to maintain the property [Clause (m)]

The Lessee is obliged to hold the property in as good condition as it was when he was put in
charge until the lease is terminated. He is obliged to allow the lessor and his agents to access
property and examine its conditions at all appropriate times.

iv. Duty to Give Notice [Clause (n)]

When the Lessee is aware that another person has launched proceedings to reclaim whole or
part of the land, or has infringed on it or interfered with the lessor’s right, he must bring such
a fact to lessor’s awareness.

v. Duty to use the property Reasonably [Clause (o)]

This provision specifies that if the property were his own, the Lessee would use the property
and its goods as a person of ordinary prudence. He must not cut down the trees or sell the wood,
or teardown or destroy the house.

vi. Duty not to erect permanent Structure [Clause (p)]

A lessee shall have no duty to erect any permanent structure on the land, except for agricultural
purposes or without the lessor’s permission. Within this provision, the prohibition is against
creating a permanent structure only.

vii. Duty to restore possession [Clause (q)]

The Lessee is obliged to place the property back in the hands of the lessor upon the termination
of a contract. If the occupant does not vacate the property, he is liable to pay damages as well
as mesne profits to the lessor.

* Rights of Lessee

i. Right to Avoid Lease [Clause(e)]

When the property/object of the lease is damaged, the Lessee may terminate the lease at his
discretion if he is not to be blamed for such loss. Where the entire rent has been paid in advance,
and the property is lost before the lease period ends, the Lessee shall have the right to recover
the proportionate part of the rent previously deposited.

ii. Right to Charge for Repair [Clause (f)]

This provision provides that if the lessor fails to make any repairs that he is bound to make
after notice within a reasonable period, the tenant may make the repair himself and deduct the
cost of such repairs with interest from the rent or otherwise reclaim it all from the property
owner.

iii. Right to Make Payments [Clause (g)]

This provision provides that if the lessor fails to make any payment which he is obliged to
make and which is recoverable from the Lessee or against the property if he does not cause it,
the Lessee can make such payment himself and deduct it from the rent with interest or otherwise
reclaim it from the leaseholder.

iv. Right to remove fixtures [Clause (h)]

The Lessee may remove all things that he has attached to the land, even after the lease has been
decided, at any time while he owns the leased property, but not afterwards. However, the
property must be returned in the state in which he acquired it.

v. Right to have the benefit of Crops [Clause (i)]

Each Lessee is entitled to everything grown, cultivated or harvested by him to his/her benefit.

vi. Right to Assign his Interest [Clause (j)]

This provision empowers the Lessee to pass the entire or any part of his interest in the land,
entirely or by way of mortgage or sub-lease. Similarly, the transferor or assignor can further
transfer his interest.