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CS Professional · Banking and Insurance - Laws and Practice · Advances, Securities and Documentation

Neeraj mortgaged a flat to Coastal Bank by way of a mortgage to secure future advances with an expressed maximum of Rs. 6,00,000. He then mortgaged the same flat to Divya, who had no notice of the bank's mortgage, for Rs. 4,00,000. Which analysis best fits the official text of Section 79?

The section postpones a later mortgage only if it was made with notice of the prior mortgage. Since Divya had no notice, Section 79 does not by itself postpone her, even though the bank's mortgage states a maximum.

  1. ASection 79 postpones Divya regardless of notice because the maximum was expressed
  2. BSection 79 postpones the subsequent mortgage only if made with notice of the prior mortgage, so it does not by itself postpone DivyaCorrect
  3. CSection 79 makes both mortgages void for uncertainty
  4. DSection 79 gives Divya priority for advances made after her mortgage in all cases

Explanation

Section 79 postpones a subsequent mortgage only when it was made with notice of the prior mortgage. Divya had no notice, so the section's postponement does not apply to her. The option ignoring notice misreads the text, and nothing in it voids either mortgage.

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