A mortgages his property to B and later to C. B's mortgage is registered after C's. Who has priority?

Identifying the Conflict

A mortgages his property first to B — that is, B's mortgage is executed earlier in time. A then mortgages the same property to C, whose mortgage is executed later. However, B gets his mortgage registered after C has already registered his. So we have two competing claims: B has temporal priority by execution, while C has priority by registration.

It goes to the heart of whether the date of execution or the date of registration governs the contest between two transferees of the same property.

The Answer: B Prevails

The answer, in the settled law of India, is that B — the prior mortgagee by execution — has priority over C, the subsequent mortgagee. B's mortgage, having been executed first, carries the primacy conferred by section 48 of the Transfer of Property Act. The fact that C registered his mortgage before B does not displace that priority.

The reason lies in a careful reading of section 50 of the Registration Act, which is the provision that ordinarily gives a subsequently registered deed priority over a prior unregistered one. That section operates in a specific situation: it allows a registered deed to prevail over an unregistered deed relating to the same property. But in this problem, both B's and C's mortgages are ultimately registered. Section 50 of the Registration Act does not say that the deed first registered prevails over one registered later — it speaks of registered versus unregistered instruments. When both instruments are registered, we are taken outside the domain of section 50 entirely, and the general rule of section 48 of the Transfer of Property Act reasserts itself.

The Role of Notice

There is, however, one circumstance that could alter this outcome, and it must be addressed honestly. If C can establish that, at the time he advanced his money and took the mortgage, he had no notice whatsoever of B's prior mortgage — whether actual or constructive — a court would still need to examine whether equity demands a different result.

In practice, however, the question of notice in this scenario cuts against C rather than in his favour. B's mortgage was executed before C's. Even if it was not yet registered at the time C took his mortgage, the law of constructive notice requires C to have made reasonable inquiries. If a proper investigation of the title would have revealed B's prior mortgage — for instance, through possession of title documents, or through the mortgagor's own disclosure — C will be fixed with constructive notice and cannot claim the protection of a bona fide transferee without notice. The mere fact that B had not yet registered when C registered first does not give C a clean conscience if he failed to inquire adequately.

The Section 78 Angle

There is, however, a scenario where the outcome genuinely reverses in C's favour — and that is where section 78 of the Transfer of Property Act steps in. If B, the prior mortgagee, was responsible for inducing C to advance money on the same property through fraud, misrepresentation, or gross neglect, the law postpones B and gives C priority.

The classic illustration is this: C, before advancing money to A, goes to B and asks whether the property already carries any mortgage. B, to protect his own position or for some dishonest purpose, denies the existence of his mortgage. C, relying on that denial, advances money and registers his mortgage. Here B has committed fraud — an active concealment of a material fact when there was a duty to speak — and the law punishes him by reversing the priority he would otherwise have enjoyed under section 48. The later mortgagee C would be paid first, and B would recover only what remains.

Misrepresentation under section 78 is wider than fraud in this sense. Where a prior mortgagee merely omits — without any dishonest design — to notify the subsequent mortgagee of his charge, that innocent omission is still treated as misrepresentation sufficient to attract postponement. And where the prior mortgagee has been guilty of gross negligence — the paradigm case being the deposit of title deeds with the mortgagor who then uses them to raise a fresh mortgage from C — the same result follows. The prior mortgagee who trusted the mortgagor with the very documents that enabled the fraud must bear the consequence.

The Governing Principle

What the problem ultimately illustrates is the relationship between two distinct sets of rules. Between two unregistered transfers, section 48 of the Transfer of Property Act governs — the earlier in time prevails. Between a registered and an unregistered transfer, section 50 of the Registration Act governs — the registered one prevails, subject to notice. Between two registered transfers, section 48 reasserts its authority — the earlier in execution prevails, since section 50 has no application where both are registered. And overarching all of these, section 78 of the Transfer of Property Act stands as the equity-based corrective — ensuring that a prior mortgagee who has brought about, through his own misconduct, the very predicament of the subsequent mortgagee, cannot hide behind the priority that the law would otherwise give him.

In the problem as stated, therefore, B has priority — because both mortgages are registered, section 50 of the Registration Act does not apply, and section 48 of the Transfer of Property Act restores the temporal order. B recovers first from the proceeds of sale; C recovers only from what remains. This result holds unless B can be shown to have committed fraud, misrepresentation, or gross negligence that induced C to advance his money — in which case section 78 steps in to reverse their positions.