Transfer of Property Act, 1882 / Chapter IV / Mortgages
Section 69: Power of sale when valid
Section 69 permits a mortgagee to sell mortgaged immovable property without intervention of a court only in the limited circumstances expressly specified by law. It also governs default and notice, protects purchasers and prescribes the use of sale proceeds.
Full text of Section 69 of the Transfer of Property Act, 1882
69. Power of sale when valid
(1) A mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section, have power to sell or concur in selling the mortgaged property, or any part thereof, in default of payment of the mortgage-money, without the intervention of the Court, in the following cases and in no others, namely:-
(a) where the mortgage is an English mortgage, and 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;
(b) 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;
(c) where a power of sale without the intervention of the Court is expressly conferred on the mortgagee by the mortgage-deed, and the mortgaged property or any part thereof was, on the date of the execution of the mortgage-deed, situate 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.
(2) No such power shall be exercised unless and until-
(a) notice in writing requiring payment of the principal money has been served on the mortgagor, or one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service; or
(b) some interest under the mortgage amounting at least to five hundred rupees is in arrear and unpaid for three months after becoming due.
(3) When a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorised, or improper, or irregular exercise of the power shall have his remedy in damages against the person exercising the power.
(4) The money which is received by the mortgagee, arising from the sale, after discharge of prior incumbrances, if any, to which the sale is not made subject, or after payment into Court under section 57 of a sum to meet any prior incumbrance, shall, in the absence of a contract to the contrary, be held by him in trust to be applied by him, first, in payment of all costs, charges and expenses properly incurred by him as incidental to the sale or any attempted sale; and, secondly, in discharge of the mortgage-money and costs and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof.
(5) Nothing in this section or in section 69A applies to powers conferred before the first day of July, 1882.
Meaning and limited scope of the power of sale
A mortgage is a transfer of an interest in specified immovable property to secure payment of a loan or other monetary obligation under Section 58. The mortgagor creates the security; the mortgagee receives the secured interest; mortgage-money is the money secured by the mortgage. An English mortgage has the specific characteristics set out in Section 58(e), including a binding promise to repay on a certain date and an absolute transfer subject to re-transfer upon repayment.
Ordinarily, mortgage enforcement by foreclosure or sale involves a decree under Section 67. Section 69 is a narrow exception. Sub-section (1) permits sale without court intervention only in one of three situations: a qualifying English mortgage under clause (a); an express power in a mortgage-deed where the mortgagee is the Government under clause (b); or an express power in a mortgage-deed covering property in the specified towns or duly notified areas under clause (c). For clause (c), location is tested on the date the mortgage-deed was executed. The statutory references to Calcutta, Madras and Bombay correspond to present-day Kolkata, Chennai and Mumbai; applicable notifications and State amendments must be checked.
When may the mortgagee exercise the power?
Even where sub-section (1) applies, sub-section (2) requires one of two alternative default conditions. Under clause (a), written notice demanding the principal must be served on the mortgagor (or one of several mortgagors), followed by three months of non-payment of all or part of the principal after service. Alternatively, under clause (b), mortgage interest of at least Rs. 500 must remain in arrears and unpaid for three months after it became due. A power of sale cannot be presumed merely because the borrower defaults; the statutory basis and conditions must be established.
For example, an express sale clause in a mortgage of property situated in Mumbai on the date of execution may bring the mortgage within clause (1)(c), but the mortgagee must still satisfy one of the conditions in sub-section (2). A property outside the specified or notified area does not qualify under clause (1)(c) merely because the lender has included a power-of-sale clause.
Effect of an irregular sale: Section 69(3)
Where a sale is made in professed exercise of the statutory power, sub-section (3) protects the purchaser's title against challenges based solely on absence of the requisite case, defective notice or improper or irregular exercise of the power. A person harmed by such exercise may instead claim damages against the person exercising the power. This protection should be read within the terms of the provision and does not eliminate all possible questions concerning fraud, title or other applicable law.
How sale proceeds must be distributed: Section 69(4)
After dealing with prior incumbrances as provided in sub-section (4), and unless the contract provides otherwise, the mortgagee holds the proceeds in trust. The proceeds are applied first to proper costs and expenses of the sale or attempted sale, second to the mortgage debt and other sums due, and the balance is paid to the person legally entitled to it. Section 57 is relevant to payment into court for prior incumbrances. Sub-section (5) preserves the special exclusion for powers conferred before 1 July 1882.
Related provisions and official legal resources
Section 69A deals with appointment of a receiver of income where a mortgagee has a power of sale under Section 69. Also see Section 68 (right to sue for mortgage-money) and Section 67A (multiple mortgages). For the central enactment and amendments, consult the India Code: Transfer of Property Act, 1882 and the Legislative Department. Special statutes, including applicable secured-creditor enforcement legislation, and State-specific amendments or notifications may affect a particular transaction.