Transfer of Property Act (TPA)
Sale Free from Encumbrances under Section 57: Discharging an Encumbrance on a Sale by Order of the Court
A property worth selling is often a property nobody will buy, because an encumbrance sits on it and the encumbrancer cannot be found, will not cooperate, or holds a charge that nobody can value. Section 57 supplies the machinery. On the application of a party to the sale, the court may direct a sufficient sum to be paid into court, and, after notice to the encumbrancer, declare the property free from the encumbrance. The burden moves from the land to a fund; the buyer gets a clean title, and the encumbrancer loses nothing but his security's form.
Figure 1: The encumbrance lifted from the land and attached to money in court
1. What the Section Provides
Section 57, TPA — the substance Where immoveable property subject to an encumbrance is sold, whether the sale is made by the court or out of court, the court may, on the application of any party to the sale, direct or allow payment into court: (a) in the case of an annual or monthly sum charged on the property, or of a capital sum charged on a determinable interest in it, of such amount as, when invested in securities, the court considers will be sufficient by means of the interest to keep down or otherwise provide for that charge; and (b) in any other case of a capital sum charged on the property, of the amount sufficient to meet the encumbrance and any interest due on it — together, in each case, with such additional amount as the court considers sufficient to meet the contingency of further costs, expenses and interest, and any other contingency, except depreciation of investments. On such payment being made, the court may declare the property free from the encumbrance, and make any order it thinks fit for conducting the sale, for the retention and investment of the money in court, and for the payment of the money to the person entitled to the encumbrance. |
2. The Steps
- An application by a party to the sale. Either the seller or the buyer may apply; the section is not confined to sales in execution, and applies to a private sale as well as to one made by the court.
- A determination of the sum. For a periodical charge, an amount which, invested, will produce enough to keep the charge down; for a capital charge, an amount sufficient to meet it with interest — in each case with a margin for contingencies.
- Notice to the encumbrancer. He is entitled to be heard before his security is converted into money.
- A declaration that the property is free from the encumbrance, which is what makes the sale worth completing.
- Orders about the fund — its retention, its investment, and its payment out to the person entitled.
3. Why the Section Is Needed
The difficulty | How section 57 answers it |
|---|---|
The encumbrancer cannot be traced, or refuses to accept payment | The sum is paid into court instead, and the encumbrance is declared discharged |
The charge is periodical, and nobody can say what capital sum represents it | The court capitalises it: it fixes a sum which, invested, will keep the charge down |
The buyer will not complete without a clean title | The declaration removes the encumbrance from the property before completion |
The seller cannot perform his duty under section 55(1)(g) | The section is the machinery by which encumbrances are discharged where he cannot discharge them himself |
Costs and interest may still accrue | The court adds a margin for the contingency of further costs, expenses and interest |
4. The Interests the Section Protects
- The buyer obtains what he bargained for — property free from the charge — without having to negotiate with a stranger to the sale.
- The seller is enabled to sell property that would otherwise be unsaleable, and to perform his obligation to discharge encumbrances.
- The encumbrancer is not deprived of anything of value. His security is replaced by a fund in court, held and invested under the court's orders and paid out to him when his claim is established.
- And the court retains control of both the sale and the fund, which is why the section works where private negotiation does not.
5. Section 57 in Its Place
Provision | Relationship |
|---|---|
Section 55(1)(g) | The seller's duty to discharge all encumbrances then existing on the property; section 57 is the procedure where he cannot do it by agreement |
Section 56 | Marshalling arranges the order in which a mortgagee resorts to his securities; section 57 removes an encumbrance from the property altogether |
Section 100 | Charges on immoveable property, which are among the encumbrances the section deals with |
The Code of Civil Procedure | Sales in execution, and the court's power to order payment into court and to deal with the proceeds |
Retention aid Pay the money in, and the charge comes off. A periodical charge is capitalised; a capital charge is met in full; a margin is added for contingencies; the encumbrancer is given notice; and the property is declared free. |
6. Related Topics and Provisions
- Marshalling by a Subsequent Purchaser, Section 56 — the preceding provision
- Rights and Liabilities of Buyer and Seller, Section 55 — the duty to discharge encumbrances
- Section 100, TPA — charges on immoveable property
- Sale, Section 54 — and the buyer's expectation of a marketable title
- Section 55(6)(a), TPA — the buyer's charge where he properly declines to accept delivery
- Order 21, Code of Civil Procedure, 1908 — sales in execution and the distribution of proceeds