This document provides an overview and summary of key sections under the Transfer of Property Act (TOPA) related to mortgage rights and securitization. It discusses: 1) Sections 68-69 which outline the rights of a mortgagee to sue for mortgage money in specific cases and the power of sale without court intervention if certain conditions are met. 2) Section 69A which allows a mortgagee to appoint a receiver to collect income from mortgaged property, outlines the receiver's powers and responsibilities, and how income received is to be applied. 3) It provides context that TOPA established the framework for mortgagee rights in India that the SARFAESI Act later built upon, allowing secured creditors to sell

1. TOPA & SARFAESI Act
A Paradigm Shift
By the students of 2nd LLB,
Sundeep Bedi
Deepsh Banberu
Kunal R. Sarpal
Dhanashree Kendhe
Inayat Dhanda
Dr. Manish Machave

2. Overview
• Background – The rationale behind the
Acts
• Introduction & Explanation of key terms
• Definitions
• Relevant provisions
• Comparative Analysis
• Case Laws
• Conclusion

3. Background
Background, Why the Act was necessary?
Illustrations, then and now
Practical applications of the SARFAESI law
in comparison to other Countries.

4. Introduction
• Relevance of the Rights of Mortgagee
under TOPA in comparison to SARFAESI
• Concept of Securitization
• Understanding the Rights of Mortgagee
• The difference in the procedure under
TOPA in comparison to SARFAESI
• Assets that can be securitized

5. Sections Under the Transfer of
Property Act
• 68. Right to sue for mortgage-money
• (1) The mortgagee has a right to sue for the mortgage-money in the
following cases and no others, namely,-
• (a) where the mortgagor binds himself to repay the same;
• (b) where, by any cause other than the wrongful act or default of the
mortgagor or mortgagee, the mortgaged property is wholly or partially
destroyed or the security is rendered insufficient within the meaning of
section 66, and the mortgagee has given the mortgagor a reasonable
opportunity of providing further security enough to render the whole
security sufficient, and the mortgagor has failed to do so;
• (c) where the mortgagee is deprived of the whole or part of his security by or
in consequence of the wrongful act or default of the mortgagor;
• (d) where, the mortgagee being entitled to possession of the mortgaged
property, the mortgagor fails to deliver the same to him, or to secure the
possession thereof to him without disturbance by the mortgagor or any
person claiming under a title superior to that of the mortgagor:

6. Section 68 continued…
• PROVIDED that, in the case referred to in clause (a), a
transferee from the mortgagor or from his legal representative
shall not be liable to be sued for the mortgage-money.
• (2) Where a suit is brought under clause
• (a) or clause
• (b) of sub-section
• (1), the court may, at its discretion, stay the suit and all
proceedings therein, notwithstanding any contract to the
contrary, until the mortgagee has exhausted all his available
remedies against the mortgaged property or what remains of
it, unless the mortgagee abandons his security and, if
necessary, re-transfers the mortgaged property.

7. Section 69
• 69. Power of sale when valid
• (1) 5[***] A mortgagee, or any person acting on his behalf, shall, subject to
the provisions of this section have power to sell or concur in selling the
mortgaged property or any part thereof, in default of payment of the
mortgage-money, without the intervention of the court, in the following
cases and in no others, namely,-
• (a) where the mortgage is an English mortgage, and neither the mortgagor
nor the mortgagee is a Hindu, Mohammedan or Buddhist or a member of
any other race, sect, tribe or class from time to time specified in this behalf
by the State Government, in the Official Gazette;
• (b) where a power of sale without the intervention of the court is expressly
conferred on the mortgagee by the mortgage-deed and the mortgagee is the
government;
• (c) where a power of sale without the intervention of the court is expressly
conferred on the mortgagee by the mortgage-deed and the mortgaged
property or any part thereof was, on the date of the execution of the
mortgage-deed, situate within the towns of Calcutta, Madras, Bombay, or in
any other town or area which the State Government may, be notification in
the Official Gazette, specify in this behalf.

8. Section 69 continued…
• (2) No such power shall be exercised unless and until-
• (a) notice in writing requiring payment of the principal money has
been served on the mortgagor, or on one of several mortgagors, and
default has been made in payment of the principal money, or of part
thereof, for three months after such service; or
• (b) some interest under the mortgage amounting at least to five
hundred rupees is in arrear and unpaid for three months after
becoming due.
• (3) When a sale has been made in professed exercise of such a
power, the title of the purchaser shall not be impeachable on the
ground that no case had arisen to authorize the sale, or that due
notice was not given, or that the power was otherwise improperly or
irregularly exercised; but any person damnified by an unauthorized
or improper or irregular exercise of the power shall have his remedy
in damages against the person exercising the power.

9. Section 69 continued…
• (4) The money which is received by the mortgagee, arising
from the sale, after discharge of prior encumbrances, if any, to
which the sale is not made subject, or after payment into court
under section 57 of a sum to meet any prior encumbrance,
shall, in the absence of a contract to the contrary, be held by
him in trust to be applied by him, first, in payment of all costs,
charges and expenses properly incurred by him as incident to
the sale or any attempted sale; and, secondly, in discharge of
the mortgage-money and costs and other money, if any, due
under the mortgage; and the residue of the money so received
shall be paid to the person entitled to the mortgaged property,
or authorized to give receipts for the proceeds of the sale
thereof.
• (5) Nothing in this section or in section 69A applies to powers
conferred before the first day of July, 1882.

10. Section 69A
• 69A. Appointment of receiver
• (1) A mortgagee having the right to exercise a power of sale under section 69 shall,
subject to the provisions of sub-section (2), be entitled to appoint, by writing signed
by him or on his behalf, a receiver of the income of the mortgaged property or any
part thereof.
• (2) Any person who has been named in the mortgage-deed and is willing and able to
act as receiver may be appointed by the mortgagee.
• If no person has been so named, or if all persons named are unable or unwilling to
act, or are dead, the mortgagee may appoint any person to whose appointment the
mortgagor agrees; failing such agreement, the mortgagee shall be entitled to apply to
the court for the appointment of a receiver, and any person appointed by the court
shall be deemed to have been duly appointed by the mortgagee.
• A receiver may at any time be removed by writing signed by or on behalf of the
mortgagee and the mortgagor, or by the court on application made by either party
and on due cause shown.
• A vacancy in the office of receiver may be filled in accordance with the provisions of
this sub-section.

11. Section 69A continued…
• (3) A receiver appointed under the powers conferred by this
section shall be deemed to be the agent of the mortgagor, and
the mortgagor shall be solely responsible for the receiver's act
or defaults, unless the mortgage-deed otherwise provides or
unless such acts or defaults are due to the improper
intervention of the mortgagee.
• (4) The receiver shall have power to demand and recover all
the income of which he is appointed receiver, by suit,
execution or otherwise, in the name either of the mortgagor or
of the mortgagee to the full extent of the interest which the
mortgagor could dispose of, and to give valid receipts
accordingly for the same, and to exercise any powers which
may have been delegated to him by the mortgagee, in
accordance with the provisions of this section.

12. Section 69A continued…
• (5) A person paying money to the receiver shall not be concerned to
inquire if the appointment of the receiver was valid or not.
• (6) The receiver shall be entitled to retain out of any money received
by him, for his remuneration, and in satisfaction of all costs, charges
and expenses incurred by him as receiver, a commission at such rate
not exceeding five per cent, on the gross amount of all money
received as is specified in his appointment, and, if no rate is so
specified, then at the rate of five per cent on that gross amount, or at
such other rate as the court thinks fit to allow, on application made
by him for that purpose.
• (7) The receiver shall, if so directed in writing by the mortgagee,
insure to the extent, if any, to which the mortgagee might have
insured, and keep insured against loss or damage by fire, out of the
money received by him, the mortgaged property or any part thereof
being of an insurable nature.

13. Section 69A continued…
• (8) Subject to the provisions of this Act as to the application of insurance
money, the receiver shall apply all the money received by him as follows,
namely,-
• (i) in discharge of all rents, taxes, land revenue, rates and outgoings
whatever affecting the mortgaged property;
• (ii) in keeping down all annual sums or other payments, and the interest on
all principal sums, having priority to the mortgage in right whereof he is
receiver;
• (iii) in payment of his commission, and of the premiums of fire, life or other
insurances, if any, properly payable under the mortgage-deed or under this
Act, and the cost of executing necessary or proper repairs directed in writing
by the mortgagee;
• (iv) in payment of the interest falling due under the mortgage;
• (v) in or towards discharge of the principal money, if so directed in writing
by the mortgagee, and shall pay the residue, of any of the money received by
him to the person who, but for the possession of the receiver, would have
been entitled to receive the income of which he is appointed receiver, or
who is otherwise entitled to the mortgaged property.

14. Section 69A continued…
• (9) The provisions of sub-section (1) apply only if and as far as a contrary intention is not
expressed in the mortgage-deed; and the provisions of sub-sections (3) to (8) inclusive may
be varied or extended by the mortgage-deed; and, as so varied or extended, shall, as far as
may be, operate in like manner and with all the like incidents, effects and consequences, as
if such variations or extensions were contained in the said sub-sections.
• (10) Applications may be made, without the institution of a suit, to the court for its opinion,
advice or direction on any present question respecting the management or administration
of the mortgaged property, other than questions of difficulty or importance not proper in
the opinion of the court for summary disposal, A copy of such application shall be served
upon, and the hearing thereof may be attended by such of the persons interested in the
application as the court may think fit.
• The costs of every application under this sub-section shall be in the discretion of the court.
• (11) In this section, "the court" means the court which would have jurisdiction in a suit to
enforce the mortgage.

15. Definitions
z.Securitisation means acquisition of
financial assets by any securitisation
company or reconstruction company from
any originator, whether by raising of funds
by such securitisation company or
reconstruction company from qualified
institutional buyers by issue of security
receipts representing undivided interest in
such financial assets or otherwise;

16. • ze. secured debt means a debt which is
secured by any security interest;
• zf. security interest means right, title and
interest of any kind whatsoever upon
property, created in favour of any secured
creditor and includes any mortgage,
charge, hypothecation, assignment other
than those specified in section 31;

17. • zc. secured asset means the property on which
security interest is created;
• zd. secured creditor means any bank or financial
institution or any consortium or group of banks or
financial institutions and includes-
i. debenture trustee appointed by any bank or financial
institution; or
ii. securitisation company or reconstruction company; or
iii. any other trustee holding securities on behalf of a
bank or financial institution; in whose favour security
interest is created for due repayment by any borrower
of any financial assistance;

18. • za. securitisation company means any
company formed and registered under the
Companies Act, 1956 (1 of 1956) for the
purpose of securitisation;
• zb. security agreement means an agreement,
instrument or any other document or
arrangement under which security interest is
created in favour of the secured creditor
including the creation of mortgage by deposit
of title deeds with the secured creditor;

19. • zg. security receipt means a receipt or
other security, issued by a securitisation
company or reconstruction company to
any qualified institutional buyer pursuant
to a scheme, evidencing the purchase or
acquisition by the holder thereof, of an
undivided right, title or interest in the
financial asset involved in securitisation;

20. Summary of the provision under TOPA
Conclusion of Part A
Now, beginning with the SARFAESI Act,
2002

21. The Securitization & Reconstruction of
Financial Assets & Enforcement of Security
Interest Act, 2002
• Why this Act was necessary?
• Basic Overview
• What to expect?
• Provisions, Analysis and Case Laws (M. R.
Umarji & mention the name of the other
authors)

22. Section 9
• What does it deal with?
• 9. Measures for assets reconstruction : -
• Without prejudice to the provisions contained in any other law for the time
being in force, a securitisation company or reconstruction company may, for
the purposes of asset reconstruction, having regard to the guidelines framed
by the Reserve Bank in this behalf, provide for any one or more of the
following measures, namely:-
• a. the proper management of the business of the borrower, by change in,
or take over of, the management of the business of the borrower;
• b. the sale or lease of a part or whole of the business of the borrower;
• c. rescheduling of payment of debts payable by the borrower;
• d. enforcement of security interest in accordance with the provisions of
this Act;
• e. settlement of dues payable by the borrower;
• f. taking possession of secured assets in accordance with the provisions of
this Act.

23. Section 13
• What does it deal with?
• 13. Enforcement of security interest.-
• 1. Notwithstanding anything contained in
section 69 or section 69A of the Transfer of
Property Act, 1882 (4 of 1882), any security
interest created in favour of any secured
creditor may be enforced, without the
intervention of the court or tribunal, by such
creditor in accordance with the provisions of
this Act.

24. Section 13 continued…
• 2. Where any borrower, who is under a liability to
a secured creditor under a security agreement,
makes any default in repayment of secured debt or
any instalment thereof, and his account in respect
of such debt is classified by the secured creditor as
non-performing asset, then, the secured creditor
may require the borrower by notice in writing to
discharge in full his liabilities to the secured
creditor within sixty days from the date of notice
failing which the secured creditor shall be entitled
to exercise all or any of the rights under sub-
section (4).

25. Section 13 continued…
• 3. The notice referred to in sub-section (2)
shall give details of the amount payable by
the borrower and the secured assets
intended to be enforced by the secured
creditor in the event of non-payment of
secured debts by the borrower.

26. Section 13 continued…
• 4. In case the borrower fails to discharge his liability in full within the
period specified in sub-section (2), the secured creditor may take recourse
to one or more of the following measures to recover his secured debt,
namely:-
• a. take possession of the secured assets of the borrower including the
right to transfer by way of lease, assignment or sale for realising the secured
asset;
• b. take over the management of the secured assets of the borrower
including the right to transfer by way of lease, assignment or sale and realise
the secured asset;
• c. appoint any person (hereafter referred to as the manager), to manage
the secured assets the possession of which has been taken over by the
secured creditor;
• d. require at any time by notice in writing, any person who has acquired
any of the secured assets from the borrower and from whom any money is
due or may become due to the borrower, to pay the secured creditor, so
much of the money as is sufficient to pay the secured debt.

27. Section 13 continued…
• 5. Any payment made by any person referred to in
clause (d) of sub-section (4) to the secured creditor
shall give such person a valid discharge as if he has
made payment to the borrower.
• 6. Any transfer of secured asset after taking
possession thereof or take over of management
under sub-section (4), by the secured creditor or
by the manager on behalf of the secured creditor
shall vest in the transferee all rights in, or in
relation to, the secured asset transferred as if the
transfer had been made by the owner of such
secured asset.

28. Section 13 continued…
• 7. Where any action has been taken against a
borrower under the provisions of sub-section (4), all
costs, charges and expenses which, in the opinion of
the secured creditor, have been properly incurred by
him or any expenses incidental thereto, shall be
recoverable from the borrower and the money which is
received by the secured creditor shall, in the absence of
any contract to the contrary, be held by him in trust, to
be applied, firstly, in payment of such costs, charges
and expenses and secondly, in discharge of the dues of
the secured creditor and the residue of the money so
received shall be paid to the person entitled thereto in
accordance with his rights and interests.

29. Section 13 continued…
• 8. If the dues of the secured creditor
together with all costs, charges and
expenses incurred by him are tendered to
the secured creditor at any time before the
date fixed for sale or transfer, the secured
asset shall not be sold or transferred by the
secured creditor, and no further step shall
be taken by him for transfer or sale of that
secured asset.

30. Section 13 continued…
• 9. In the case of financing of a financial asset by more than one
secured creditors or joint financing of a financial asset by secured
creditors, no secured creditor shall be entitled to exercise any or all
of the rights conferred on him under or pursuant to sub-section (4)
unless exercise of such right is agreed upon by the secured creditors
representing not less than three-fourth in value of the amount
outstanding as on a record date and such action shall be binding on
all the secured creditors
• Explanation.-For the purposes of this sub-section,-
• a. record date means the date agreed upon by the secured creditors
representing not less than three-fourth in value of the amount
outstanding on such date;
• b. amount outstanding shall include principal, interest and any
other dues payable by the borrower to the secured creditor in
respect of secured asset as per the books of account of the secured
creditor.

31. Section 13 continued…
• 10. Where dues of the secured creditor are not fully satisfied
with the sale proceeds of the secured assets, the secured
creditor may file an application in the form and manner as
may be prescribed to the Debts Recovery Tribunal having
jurisdiction or a competent court, as the case may be, for
recovery of the balance amount from the borrower.
• 11. Without prejudice to the rights conferred on the secured
creditor under or by this section the secured creditor shall be
entitled to proceed against the guarantors or sell the pledged
assets without first taking any of the measures specified in
clauses (a) to (d) of sub-section (4) in relation to the secured
assets under this Act.

32. Section 13 continued…
• 12. The rights of a secured creditor under this Act
may be exercised by one or more of his officers
authorised in this behalf in such manner as may be
prescribed.
• 13. No borrower shall, after receipt of notice
referred to in sub-section (2), transfer by way of
sale, lease or otherwise (other than in the ordinary
course of his business) any of his secured assets
referred to in the notice, without prior written
consent of the secured creditor.

33. Section 14
• 14. Chief Metropolitan Magistrate or District Magistrate to
assist secured creditor in taking possession of secured
asset.-
• 1. Where the possession of any secured asset is required to be
taken by the secured creditor or if any of the secured asset is
required to be sold or transferred by the secured creditor under the
provisions of this Act, the secured creditor may, for the purpose of
taking possession or control of any such secured asset, request, in
writing, the Chief Metropolitan Magistrate or the District Magistrate
within whose jurisdiction any such secured asset or other
documents relating thereto may be situated or found, to take
possession thereof, and the Chief Metropolitan Magistrate or, as the
case may be, the District Magistrate shall, on such request being
made to him-
• a. take possession of such asset and documents relating thereto;
and
• b. forward such asset and documents to the secured creditor.

34. Section 15
• 2. For the purpose of securing compliance
with the provisions of sub-section (1), the
Chief Metropolitan Magistrate or the District
Magistrate may take or cause to be taken
such steps and use, or cause to be used, such
force, as may, in his opinion, be necessary.
• 3. No act of the Chief Metropolitan
Magistrate or the District Magistrate done in
pursuance of this section shall be called in
question in any court or before any authority.

35. Section 15 continued…
• 15. Manner and effect of takeover of management.-
• 1. When the management of business of a borrower is taken
over by a secured creditor, the secured creditor may, by
publishing a notice in a newspaper published in English
language and in a newspaper published in an Indian language
in circulation in the place where the principal office of the
borrower is situated, appoint as many persons as it thinks fit-
• a. in a case in which the borrower is a company as defined in
the Companies Act, 1956 (1 of 1956), to be the directors of that
borrower in accordance with the provisions of that Act; or
• b. in any other case, to be the administrator of the business
of the borrower.

36. • 2. On publication of a notice under sub-section (1),-
• a. in any case where the borrower is a company as defined in the Companies Act,
1956 (1 of 1956), all persons holding office as directors of the company and in any
other case, all persons holding any office having power of superintendence, direction
and control of the business of the borrower immediately before the publication of the
notice under sub-section (1), shall be deemed to have vacated their offices as such;
• b. any contract of management between the borrower and any director or manager
thereof holding office as such immediately before publication of the notice under sub-
section (1), shall be deemed to be terminated;
• c. the directors or the administrators appointed under this section shall take such
steps as may be necessary to take into their custody or under their control all the
property, effects and actionable claims to which the business of the borrower is, or
appears to be, entitled and all the property and effects of the business of the borrower
shall be deemed to be in the custody of the directors or administrators, as the case
may be, as from the date of the publication of the notice;
• d. the directors appointed under this section shall, for all purposes, be the directors
of the company of the borrower and such directors or as the case may be, the
administrators appointed under this section, shall alone be entitled to exercise all the
powers of the directors or as the case may be, of the persons exercising powers of
superintendence, direction and control, of the business of the borrower whether such
powers are derived from the memorandum or articles of association of the company
of the borrower or from any other source whatsoever.

37. Section 15 continued…
• 3. Where the management of the business of a borrower, being
a company as defined in the Companies Act, 1956 (1 of 1956),
is taken over by the secured creditor, then, notwithstanding
anything contained in the said Act or in the memorandum or
articles of association of such borrower,-
• a. it shall not be lawful for the shareholders of such
company or any other person to nominate or appoint any
person to be a director of the company;
• b. no resolution passed at any meeting of the shareholders of
such company shall be given effect to unless approved by the
secured creditor;
• c. no proceeding for the winding up of such company or for
the appointment of a receiver in respect thereof shall lie in any
court, except with the consent of the secured creditor.

38. Section 15 continued…
• 4. Where the management of the business
of a borrower had been taken over by the
secured creditor, the secured creditor
shall, on realisation of his debt in full,
restore the management of the business of
the borrower to him.

39. Important case laws
• M/s. Transcore V. Union of India - Held that,
the secured creditor can simultaneously
proceed under both, DRT and SARFAESI.
• Mardia Chemicals Ltd. V. Union of India -
SC, upheld the validity of the Act, especially
that sub-section (2) of section 17 of the Act,
which was earlier declared as
unconstitutional under the act.

40. Thank you!
• Students of 2nd LLB
• Presenters,
• Deepesh & Kunal
• Researchers
• Dhanashree, Inayat & Dr. Manish
• For feedback and presentation copy, please
write to kunal.sarpal@gmail.com