Transfer of Property Act, 1882 (4 of 1882)

Section 56, 81 – Marshalling -- Concept of marshalling by subsequent purchaser can be explained by the following illustration -- A owns properties X and Y -- Both these properties are mortgaged to C -- Later, A sells property X to B -- Now, B will be entitled to insist that his vendor A, shall satisfy his mortgage debt out of property Y (unsold) in the first instance as far as possible -- If after property Y is exhausted there still remains balance of debt, only then property X will be drawn upon -- Section 56 deals with the concept of marshalling in a transaction involved in subsequent sale, on the other hand, Section 81 is applicable only to mortgages -- Doctrine of marshalling rests upon the principle that a creditor who has the means of satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another creditor whose security comprises only one of the funds. M/s J.P. Builders & Another v. A. Ramadas Rao & Another, 2011(2) L.A.R. 12 (SC).

Section 56, 81 – Sale of mortgaged property – Marshalling -- In view of the sale agreement which results into decree for specific performance, the plaintiff is entitled to insist upon defendant Nos. 1 to 3 to have the mortgage debt satisfied out of the properties not sold to the plaintiff and in any case if the sale proceeds are not sufficient then to proceed against the said suit properties. M/s J.P. Builders & Another v. A. Ramadas Rao & Another, 2011(2) L.A.R. 12 (SC).

Section 56, 81 –Marshalling – Plea of -- Plea of marshalling being pure question of law based upon the decree obtained for specific performance, cannot simply be thrown out merely because the same was not specifically pleaded. M/s J.P. Builders & Another v. A. Ramadas Rao & Another, 2011(2) L.A.R. 12 (SC).

Section 107 – Registration Act, 1908 (16 of 1908), Section 17(1) -- Lease – Registration of – Unregistered lease – Lease deed reserved annual rent of Rs.99/- and the lease was from year to year -- In view of Section 17 (1) (d) of the Registration Act, 1908 and Section 107 of the Transfer of Property Act, 1882, the lease deed required compulsory registration, but the same is unregistered – Held, the unregistered lease deed could not transfer any right, title or interest in the suit land in favour of the plaintiff – Contention that even unregistered lease deed can be looked into for collateral purposes like nature of possession has no merit because the lease deed, being unregistered, could not have the effect of creating lease rights in favour of the plaintiff. Ram Bhul and others v. Ram Chand, 2011(2) L.A.R. 547 (P&H).