Section 82 of Transfer of Property Act, 1882 - Contribution to Mortgage Debt

Section 82 of the Transfer of Property Act, 1882 lays down the principle of contribution to mortgage-debt. Where distinct ownership interests or different properties are subject to the same mortgage debt, the burden is ordinarily distributed proportionately according to the value of the relevant interests, subject to the statutory deductions, contrary agreements and the protection afforded by Section 81.

Section 82 - Complete statutory provision

82. Where property subject to a mortgage belongs to two or more persons having distinct and separate rights of ownership therein, the different shares in or parts of such property owned by such persons are, in the absence of a contract to the contrary, liable to contribute rateably to the debt secured by the mortgage, and, for the purpose of determining the rate at which each such share or part shall contribute, the value thereof shall be deemed to be its value at the date of the mortgage after deduction of the amount of any other mortgage or charge to which it may have been subject on that date.

Where, of two properties belonging to the same owner, one is mortgaged to secure one debt and then both are mortgaged to secure another debt, and the former debt is paid out of the former property, each property is, in the absence of a contract to the contrary, liable to contribute rateably to the latter debt after deducting the amount of the former debt from the value of the property out of which it has been paid.

Nothing in this section applies to a property liable under section 81 to the claim of the subsequent mortgagee.

Meaning and definitions

Mortgage: Under Section 58(a), a mortgage is a transfer of an interest in specific immovable property for securing payment of money advanced or to be advanced, an existing or future debt, or performance of an engagement giving rise to a pecuniary liability. The transferor is the mortgagor, the transferee the mortgagee, and the secured principal and interest are called mortgage-money.

Contribution: An equitable allocation of the secured burden between different ownership shares or properties. Rateably means proportionately, rather than automatically in equal shares. A charge is a legally recognised security burden on property; Section 100 separately governs charges that do not amount to mortgages.

First paragraph: Distinct owners of mortgaged property

If mortgaged property belongs to two or more persons with distinct and separate ownership rights, their respective shares or parts ordinarily contribute to the mortgage debt in proportion to their relevant values. The valuation date is the date of the mortgage, not the date of redemption, litigation or subsequent appreciation. Any other mortgage or charge already affecting a share on that date is deducted when determining its value for contribution. A valid contract to the contrary can alter this default allocation.

Example: Two separately owned portions are jointly mortgaged to secure Rs. 6 lakh. On the mortgage date, the portions are worth Rs. 8 lakh and Rs. 4 lakh respectively, with no earlier encumbrances. Their respective contribution, ordinarily, is in the ratio 2:1: Rs. 4 lakh and Rs. 2 lakh. If an existing charge affected one portion at the mortgage date, its relevant net value would first need adjustment.

Second paragraph: Earlier debt secured on one property

Where the same owner first mortgages property A for one debt and later mortgages both A and B for another debt, and the earlier debt is paid from A, Section 82 requires the two properties to contribute rateably to the later mortgage debt, absent a contrary contract. For this calculation, the amount of the earlier debt is deducted from the value of A, the property from which that debt was paid.

Example: A is valued at Rs. 10 lakh and B at Rs. 8 lakh. A previously secured a debt of Rs. 2 lakh, which is discharged out of A. Both properties subsequently secure a separate debt of Rs. 8 lakh. For allocation of the latter debt, A is treated at Rs. 8 lakh (10 minus 2) and B at Rs. 8 lakh, so the two properties ordinarily contribute equally. This example assumes the relevant valuation facts and no contrary agreement.

Third paragraph: Exception for marshalling under Section 81

The final paragraph expressly provides that Section 82 does not apply to property liable under Section 81 to the claim of the subsequent mortgagee. Section 81 protects a subsequent mortgagee of only some properties by allowing, subject to conditions and third-party rights, the prior mortgage debt to be met first from other properties. Contribution under Section 82 must not defeat that statutory marshalling protection.

Practical considerations

Determine the identity and ownership shares of all mortgaged properties, the dates and scope of each mortgage, their values on the legally relevant date, existing charges and prior mortgages, the amount and source of payments made, and any express agreement varying contribution. The rights of secured creditors and third parties, together with applicable registration, enforcement and insolvency laws where relevant, may affect the remedy and procedure; Section 82 does not by itself cancel a mortgage or prescribe a universal recovery mechanism.

Section 81 - Marshalling securities governs the order in which multiple securities may be resorted to. Section 92 - Subrogation addresses specified rights arising upon redemption. Section 95 - Expenses of redeeming co-mortgagor concerns related expense entitlements. Each provision has separate conditions.

Official legal resources

For the authoritative Act and amendments, consult India Code - Transfer of Property Act, 1882 (PDF) or the India Code official portal. Check applicable state amendments and case-specific documents before applying the rules.