Question

A mortgaged his property to B for Rupees 50 lakhs. Later, A sold the same property to C for Rupees 60 lakhs and allowed C to retain Rupees 50 lakhs to redeem the mortgage. B then sued C for recovery of the mortgage amount. What is the correct legal position?

Hint:

For mortgage-related legal problems: \begin{itemize} \item Always check for privity of contract, \item A purchaser of mortgaged property is not personally liable unless there is an express contract, \item Mortgagee’s primary right is against the mortgagor. \end{itemize}

Answer 1

Step 1: The mortgage contract was originally created between A (mortgagor) and B (mortgagee).
Step 2: When A sold the property to C, no direct contractual relationship (privity of contract) was created between B and C.
Step 3: Although C retained Rupees 50 lakhs to redeem the mortgage, this was an internal arrangement between A and C.
Step 4: In the absence of privity of contract, B cannot directly sue C for recovery of the mortgage amount.
Step 5: B’s remedy lies against A, the original mortgagor.