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

Under the Transfer of Property Act, 1882, Bank M sanctions a housing loan on a mortgage deed that says the mortgaged interest shall cease to exist if the borrower, Sunil, commits an act that could not legally be the condition of creating an interest. What is the effect of this condition?

The condition is invalid. Section 32 of the Transfer of Property Act requires the event on which an interest ceases to be one that could legally be a condition for creating an interest. Mutual agreement or registration cannot validate an unlawful event.

  1. AIt is valid because the parties agreed to it
  2. BIt is valid only if the bank is a scheduled bank
  3. CIt is invalid, because the event must be one which could legally constitute the condition of creating an interestCorrect
  4. DIt is valid if registered with the sub-registrar

Explanation

Section 32 requires that the event to which a condition of cessation relates be one that could legally constitute a condition for creating an interest. If it is not, the condition is invalid. Agreement between the parties or registration cannot cure this.

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