Write short note on Redeem up and Foreclose down.

Question: Write short note on Redeem up and Foreclose down. [BJS 1984, UPJS 1997]

Find the answer to the mains question of Property Law only on Legal Bites. [Write short note on Redeem up and Foreclose down.]

Answer

Decree in redemption suit, when defined in layman’s language shall mean a process by which a borrower called mortgagor files a suit in a court of law for repossessing his immovable property that was earlier pledged as security with the lender called mortgagee, for money. This shall fructify after payment of principal and interest due to the lender. Sections 58-104 of the TPA, deal with mortgages of immovable property and charges.

The maxim, ‘Redeem up and foreclose down’, means that whenever there is more than one mortgagee, the later mortgagee can redeem only those before him and foreclose those after him.

According to Section 94 of the TPA, where a property is mortgaged for successive mortgages, a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor. The maxim-redeem up, foreclose down how divided into sections 91(a) and section 94. Section 91(a) gives the right of redemption of a prior mortgage to a puisne mortgagee. Section 94 gives the right of foreclosure of a puisne mortgage to a prior mortgagee.

Section 94 of the Transfer of Property Act provides that where a property is mortgaged for successive debts to successive mortgagees, a mesne mortgagee has the same rights against mortgage posters to himself as he has against the mortgagor. That is a prior mortgagee has the same rights against the subsequent mortgagee can foreclose a puisne mortgagee.

The effect of these two sections is expressed by the familiar rule "redeem up, foreclose down". When a prior mortgagee suing to enforce his mortgage does not make the puisne mortgagee a party of the suit and brings the property to sale, the auction purchaser acquires the rights both of the mortgagee and mortgagor and as assignees of the mortgagor he may sue to redeem the puisne mortgagee. Under Section 91 the puisne mortgagee as an assignee of the equity of redemption has a statutory right to redeem an earlier mortgage.

As discussed in the case of Shanmugha Nadar v. Sivan Pillai And Ors., AIR 1967 Mad 418, between the prior mortgagee and the puisne mortgagees, it has to be noted that, while the puisne mortgagee can bring a suit without impleading the prior mortgagee, the prior mortgagee is required to implead the puisne mortgagee as a party to his suit. Thus, while the suit brought by the prior mortgagee is defective, the suit by the puisne mortgagee does not suffer from any such defect. While the puisne mortgagee has a statutory right to redeem the prior mortgagee, the right of the purchaser in a suit by the prior mortgagee is as an assignee of the mortgagor.

The auction purchaser's claim as assignees of the mortgagor is by a sale without notice to the puisne mortgagee as required under the law. If the puisne mortgagee has been made a party, he would have had the option of redeeming the mortgage. By not making the puisne mortgagee a party, the right to which the puisne mortgagee was entitled, cannot be taken away or the right of the purchaser without notice be enhanced.

The court further observed that the right of the puisne mortgagee to redeem a Puisne mortgagee cannot be prejudiced by a court sale at the instance of the prior mortgagee without impleading the puisne mortgage. Though in law the purchaser in the prior mortgagee's sale as an assignee of the mortgagor is entitled to redeem, his right of redemption or in equity cannot prevail over the puisne mortgagee's right to redeem.