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Section 79: Mortgage to secure uncertain amount when maximum is expressed

Transfer of Property Act • Official Statutory Text & Practice Guide

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Act 1882
Section 78 All 137 Sections of Transfer of Property Act Section 80

Legal Commentary & Landmark Judgments: Section 79

Section 79 regulates mortgages made to secure future advances or running accounts up to an expressed maximum, conferring priority on subsequent advances over intermediate mortgages where the intermediate lender had notice.

  • Mortgage for Future Advances: If a mortgage made to secure future advances, the performance of an engagement, or the balance of a running account, expresses the maximum to be secured thereby.
  • Priority of Subsequent Advances: A subsequent mortgage of the same property shall, if made with notice of the prior mortgage, be postponed to the prior mortgage in respect of all advances not exceeding the maximum.
  • Condition of Express Maximum: Maximum ceiling amount must be explicitly stated in the registered mortgage deed.
  • Constructive Notice Impact: Registration of the prior master mortgage fixes the junior lender with notice under Section 3 TPA.
Key Landmark Precedents:
  • State of Haryana v. Narvir Singh, (2014) 1 SCC 105: The Supreme Court affirmed that Section 79 protects cash-credit and overdraft facilities by giving priority to fluctuating future advances up to the registered maximum limit.
  • Nahar Industrial Enterprises Ltd. v. Hong Kong & Shanghai Banking Corp., (2009) 8 SCC 646: Reaffirmed the commercial necessity of Section 79 for corporate consortium credit limits.
Courtroom Practice & Strategic Litigation Guidance:

In corporate overdraft or working capital mortgages, explicitly specify an upper monetary ceiling (e.g., 'to secure advances up to ₹50 Crores') to preserve priority for all future drawdowns under Section 79.

Section 78 All 137 Sections of Transfer of Property Act Section 80