Sections 56-57 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 56 and 57 close the Chapter on sales. Section 56 helps a buyer when the seller had mortgaged several properties to one lender and sold only some. Section 57 lets a Court allow money to be paid in so that a property can be sold clear of an encumbrance. This article reads both as per the text of the Act consulted, and flags the printing slips in section 57.
Section 56: if an owner mortgages two or more properties to one person and then sells one or more to another, the buyer is entitled, absent a contrary contract, to have the mortgage debt satisfied out of the properties not sold to him, so far as they will extend, but not so as to prejudice the mortgagee, persons claiming under him, or any other person who has acquired an interest in any of the properties for consideration. Section 57: where property subject to encumbrances is sold, the Court may allow payment into Court of a sum sufficient to meet the encumbrance, plus an additional amount for contingencies, and then declare the property discharged from the encumbrance and make the orders needed to give effect to the sale.
Section 56: marshalling by a subsequent purchaser
Marshalling means arranging the order in which several properties are used to pay one debt, so that the burden falls fairly.
Section 56 reads: "If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person, the buyer is, in the absence of a contract to the contrary, entitled to have the mortgaged-debt satisfied out of the property or properties not sold to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or persons claiming under him or of any other person who has for consideration acquired an interest in any of the properties."
The section is printed within square brackets in the copy consulted, which marks amended wording.
The elements
| Element | Meaning |
|---|---|
| One owner, two or more properties | The same owner holds several properties |
| All mortgaged to one person | A single mortgagee holds all of them as security |
| Then one or more sold to another | A buyer takes some, not all |
| Buyer's entitlement | To have the debt satisfied from the properties not sold to him, as far as they extend |
| Limits | Not to prejudice the mortgagee, his successors, or any other person who has acquired an interest in any property for consideration |
Example. Rakesh Mehta mortgages a shop and a godown to a lender for Rs. 30,00,000. He then sells the shop to Sunita Rao. Absent a contract to the contrary, Sunita may require that the debt be satisfied first from the godown, which she did not buy, so far as the godown's value will cover it. The lender's rights are not reduced by this; if the godown is not enough, the lender can look to the shop too. And if another person had bought an interest in the godown for consideration before Sunita's purchase, that person's rights are also protected.
Because this is a default rule, a sale agreement can exclude it. A buyer of a mortgaged property should have the mortgage papers checked before paying; a legal due diligence review identifies which properties secure the debt. The rule on marshalling of securities and contribution in the Chapter on mortgages is covered in our article on sections 81 and 82. For the mortgage itself, see our guides on mortgage types.
Section 57: sale discharged from encumbrances
The heading in the copy consulted is run together with the sub-heading "Discharge of encumbrances on sale". The section lets the Court assist a sale where the property carries encumbrances, "whether immediately payable or not", and the property is sold by the Court, in execution of a decree, or out of Court.
Clause (a): payment into Court
The Court may, if it thinks fit, on the application of any party to the sale, direct or allow payment into Court of:
- for an annual or monthly sum charged on the property, or a capital sum charged on a determinable interest: an amount that, when invested in securities of the Central Government, the Court considers sufficient, by means of the interest, to keep down or otherwise provide for that charge; and
- in any other case of a capital sum charged on the property: an amount sufficient to meet the encumbrance and any interest due on it.
In either case there must also be paid in such additional amount as the Court considers sufficient to meet the contingency of further costs, expenses and interest and any other contingency, except depreciation of investment not exceeding one-tenth part of the original amount to be paid in, unless the Court, for special reasons which it shall record, thinks fit to require a larger additional amount.
In plain terms, the one-tenth limit means that, for depreciation of the investment, the Court will not ordinarily ask for more than a tenth of the original amount, unless it records special reasons for asking for more.
Clause (b): declaration that the property is discharged
After payment, the Court may, if it thinks fit, and after notice to the encumbrancer (unless, for reasons recorded in writing, it dispenses with the notice), declare the property discharged from the encumbrance, make any order for conveyance or vesting order proper for giving effect to the sale, and give directions for the retention and investment of the money in Court.
Clause (c): paying out
After notice served on the persons interested in, or entitled to, the money in Court, the Court may direct payment or transfer to the persons entitled to receive or give a discharge for it, and may give directions on the application or distribution of the capital or income.
Clause (d): appeal
"An appeal shall lie from any declaration, order or direction under this section as if the same were a decree."
Clause (e): meaning of "Court"
In section 57, Court means:
| No. | Court |
|---|---|
| (1) | A High Court in the exercise of its ordinary or extraordinary original civil jurisdiction |
| (2) | The Court of a District Judge within the local limits of whose jurisdiction the property or any part of it is situate |
| (3) | Any other Court which the State Government may, by notification in the Official Gazette, declare competent to exercise the jurisdiction conferred by the section |
State notifications are not in the copy consulted and should be checked.
Printing slips in section 57
The copy consulted shows several slips. Each is flagged here as printed:
- "directs or allow" in clause (a), where "direct or allow" is meant;
- "propertyof" appears twice, with a space missing before "of";
- "notice to the encumbrance" in clause (b), where "encumbrancer" seems meant;
- "unless the Court of special reasons" in clause (a), where "for" seems meant;
- "a large additional amount", where "a larger" seems meant; and
- "the money or fraud in Court" in clause (c), where "fund" seems meant.
The sense of the section is clear despite these slips, and the official text should be checked.
Example
Pooja Desai agrees to sell a building that carries a charge of Rs. 5,000 a month in favour of an old relative. The buyer, Naveen Kapoor, wants to take the building clear of that charge. Under section 57, on an application by a party to the sale, the Court may allow Pooja to pay in an amount that, invested in Central Government securities, will produce enough interest to meet the charge, together with the additional amount for contingencies. Then the Court may declare the building discharged from the encumbrance after notice to the person who holds the charge, unless it dispenses with notice for reasons recorded in writing. The text does not set a form, a fee or a time limit; those depend on the Court's procedure and the current law.
Differences between sections 56 and 57
| Point | Section 56 | Section 57 |
|---|---|---|
| Subject | Which property pays a mortgage debt first | Clearing an encumbrance so the property can be sold discharged from it |
| Who acts | The buyer, relying on a statutory entitlement | The Court, on application of a party to the sale |
| Contract can change it? | Yes ("in the absence of a contract to the contrary") | The section is framed around the Court's discretion |
| Protects | The subsequent buyer | The sale and the encumbrancer |
Practical checklist
- Before buying one of several mortgaged properties, find out which others secure the same debt.
- Ask the seller to confirm whether marshalling under section 56 is excluded in the agreement.
- If the property carries encumbrances that cannot be cleared by agreement, consider whether an application for payment into Court under section 57 is available, with advice on the Court's procedure.
- Keep records of any payment into Court and any order.
- Registration and stamp duty are outside this Act; see our State-wise posts, and our guide to how to register a mortgage deed for mortgage papers.
Need help with a property that carries a mortgage or encumbrance?
If you are buying one of several properties under a single mortgage, or a property with encumbrances that must be cleared, the order of recovery and the clearing steps matter. Our team can examine the papers through legal due diligence.
Key takeaways
- Section 56: where an owner mortgages several properties to one person and sells some, the buyer may, absent a contrary contract, have the debt satisfied out of the unsold properties as far as they extend, without prejudicing the mortgagee or others who acquired interests for consideration.
- Section 57: the Court may allow payment into Court of a sum to meet the encumbrance plus an additional amount for contingencies, and then declare the property discharged from the encumbrance.
- The depreciation allowance is limited to one-tenth of the original amount unless the Court records special reasons.
- An appeal lies from a declaration, order or direction under section 57 as if it were a decree.
- The copy consulted has several printing slips in section 57, flagged above.
- Later amendments and State changes should be checked.
Read next
- Section 55: duties and rights of the buyer of immovable property
- Section 58: mortgage defined and six kinds of mortgage
- Sections 81 and 82: marshalling of securities and contribution to mortgage debt
- Mortgage Types -- Simple, English, Usufructuary, Equitable
Disclaimer: Based on a publisher's print of the Transfer of Property Act, 1882 showing amendments up to the Transfer of Property (Amendment) Act, 2002 (3 of 2003), as consulted on 2 October 2026. State amendments, later amendments, stamp duty and registration charges are not covered and should be checked. This article is general information, not legal advice; check the official text before acting.