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Section 56: Marshalling by subsequent purchaser

Transfer of Property Act • Official Statutory Text & Practice Guide

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Section 55 All 137 Sections of Transfer of Property Act Section 57

Legal Commentary & Landmark Judgments: Section 56

Section 56 codifies the doctrine of marshalling by subsequent purchaser, providing that if the owner of two or more properties mortgages them to one person and then sells one of them to another, the buyer is entitled to have the mortgage satisfied out of the unsold properties.

  • Marshalling by Purchaser: If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person.
  • Satisfaction from Unsold Estate: The buyer is, in the absence of a contract to the contrary, entitled to have the mortgage-debt satisfied out of the property or properties not sold to him, so far as the same will extend.
  • No Prejudice to Mortgagee or Third Parties: Cannot be exercised to prejudice the rights of the mortgagee or persons claiming under him, or of any other person who has for consideration acquired an interest in any of the properties.
  • Equitable Protection to Buyers: Directs the lender to exhaust the borrower's retained collateral before touching the bona fide purchaser's plot.
Key Landmark Precedents:
  • J.P. Builders v. A. Ramadas Rao, (2011) 1 SCC 429: The Supreme Court explained the equitable doctrine of marshalling under Section 56, holding that equity protects subsequent purchasers by compelling the mortgagee to exhaust unsold properties first.
  • Asset Reconstruction Co. (India) Ltd. v. S.P. Velayutham, (2022) 8 SCC 210: Affirmed that marshalling protects innocent homebuyers where a developer mortgages a master parcel and sells individual plots.
Courtroom Practice & Strategic Litigation Guidance:

When a bank threatens to auction your flat to recover a builder's master loan, invoke Section 56 in the DRT or High Court to demand that the bank exhaust the builder's unsold commercial towers first.

Section 55 All 137 Sections of Transfer of Property Act Section 57