In this law note, we will help you understand one of the essential doctrines of the Transfer of Property Act (TPA) – the doctrine of priority, i.e. priority of rights created by transfer under section 48 of the TPA.
What Is the Doctrine of Priority?
The doctrine of priority is based on the principle of natural justice.
The doctrine of priority is provided under section 48 of the Transfer of Property Act of 1882. The doctrine of priority is based on the principle of the legal maxim ‘Qui prior est tempore, portior est jure,’ which means ‘he who is prior in time is better in law.’
According to the doctrine of priority, if a right is made in favour of a person at a particular point of time in some property and subsequently another right is made in favour of another person in the same property, then the person who had a priority of right in the property will also get the priority in law to such property.
In simple terms, if a transferor transfers or creates a right in favour of two different persons, then the person whose right was created first will get the advantage over the right of another person (whose right was created later).
Section 48 of TPA can be invoked only when there is a clash of rights as to which right will get the priority.
Illustration: Rani is the owner of a piece of land. She mortgaged the property to Vikram in 2020. Later, in 2021, Rani transferred the same property to Priya. Applying the doctrine of priority in the above case, Vikram will get a right of priority of all the rights of the property over Priya.
Note: Priority of rights under section 48 of the Transfer of Property Act is applicable only to immovable property.
Exceptions to the Doctrine of Priority
The Transfer of Property Act under sections 78 and 79 provides for the exception to the general rule of doctrine priority under section 48.
Let us discuss the exceptions one by one.
1. Postponement of Prior Mortgagee
Postponement of a prior mortgagee is an exception to the doctrine of priority. It is provided under section 78 of the Transfer of Property Act.
According to this exception, if the prior mortgagee creates some fraud, misrepresentation or gross negligence and induces any third person to advance money for the mortgaged property, then the prior mortgagee is postponed to the subsequent mortgagees. The subsequent mortgagee will get priority in the rights of the property over the prior mortgagee.
The third person, that is, the subsequent person, was innocent at his end, which means the third person was unaware of such fraud, misrepresentation or gross negligence.
Example: Sanjay mortgages a property to Mukesh. Later, Sanjay mortgages the same property to Shyam. Before advancing the money to Sanjay, Shyam enquires from Mukesh whether the said property is free from encumbrances or charges. Mukesh fraudulently conceals his own mortgage, and Shyam advances money. Though Mukesh was the prior mortgagee, since he had committed fraud, his prior right was postponed.
2. Mortgage to secure uncertain amount when the maximum is expressed
Section 79 of the Transfer of Property Act provides for the second exception to the general rule of right to priority. These are its essentials:
- There must be a maximum sum that has been secured under the first mortgage.
- The second mortgagee must have notice of the existence of the first mortgage.
- The prior mortgagee must have advanced more money within the maximum limit after the second mortgage.
Let us understand section 79 with the help of an example:
Mukesh mortgages a property to Shyam to secure Rs. 5,000 (as a present as well as a future advance upon a fixed sum of money, i.e. Rs. 5,000). Later, Mukesh mortgages the same property to Priya to secure Rs. 2,000. Subsequently, Shyam advances Rs. 1,000 to Mukesh on the same security.
Under the rule of priority, the subsequent advance of Rs. 1,000 made by Shyam is not prior to Priya’s mortgage. Priya’s mortgage of Rs. 2,000 is prior to Shyam’s subsequent advance of Rs. 1,000. Thus, any further advance made by Shyam within that maximum will be treated as part of the first mortgage and take priority over Priya’s mortgage of Rs. 2,000.
The doctrine of priority protects the rights of the person who is created first. The legal maxim ‘Qui prior est tempore, portior est jure’ supports and protects the interest of the person whose rights are created first in time.
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