Meaning and Concept
The remedy of foreclosure is a legal remedy available to a mortgagee when the mortgagor fails to repay the mortgage money within the stipulated time. Foreclosure means the termination of the mortgagor’s right to redeem the mortgaged property. Once foreclosure is decreed by a competent court, the mortgagor loses all rights over the property, and the mortgagee becomes the absolute owner. This remedy is primarily associated with simple mortgage, mortgage by conditional sale, and anomalous mortgage, depending upon the terms of the agreement. The remedy of foreclosure is equitable in nature and ensures that the mortgagee is not indefinitely deprived of his money due to default by the mortgagor.
Statutory Provision and Legal Basis
The remedy of foreclosure is governed by Section 67 of the Transfer of Property Act, 1882. According to this section, in the absence of a contract to the contrary, the mortgagee has the right to obtain a decree of foreclosure or sale. However, usufructuary mortgagees are not entitled to foreclosure, as they recover their money through possession and usufruct of the property. The section clearly states that foreclosure permanently bars the mortgagor from redeeming the property. Courts exercise this remedy cautiously, ensuring compliance with statutory requirements and principles of natural justice.
Nature and Legal Importance
Foreclosure is a strict remedy because it completely extinguishes the mortgagor’s equity of redemption. Therefore, courts prefer granting a decree of sale rather than foreclosure, especially when the value of the property exceeds the mortgage debt. The remedy is significant because it provides certainty and finality to mortgage transactions. It protects the mortgagee from prolonged litigation and repeated defaults. In examinations, questions often test the distinction between foreclosure and sale, making this topic crucial for LLB students.
Real-Time Example
Suppose A mortgages his house to B through a mortgage by conditional sale and agrees to repay ₹10 lakhs within five years. A fails to repay even after the expiry of the mortgage period. B approaches the court under Section 67 of the Transfer of Property Act, 1882 and seeks a decree of foreclosure. The court grants the decree, thereby extinguishing A’s right of redemption. As a result, B becomes the absolute owner of the house. This example clearly explains how foreclosure operates as a legal remedy.
Mnemonic to Remember
A simple mnemonic to remember Remedy of Foreclosure is “F-B-R-O”:
F – Failure to repay
B – Bar on right of redemption
R – Remedy under Section 67 TPA
O – Ownership passes to mortgagee
This mnemonic helps students recall the concept quickly during exams.
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