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A mortgages Sultanpur to his bankers, B & Co., to secure the balance of his account with them to the…

The illustration to section 79 gives B & Co. priority over C "to the extent of Rs. 10,000". Where a mortgage for future advances or the balance of an account states a…

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A mortgages Sultanpur to his bankers, B & Co., to secure the balance of his account with them to the extent of Rs. 10,000. A then mortgages Sultanpur to C to secure Rs. 10,000; C has notice of the mortgage to B & Co. and gives B & Co. notice of his own. When C's mortgage is made, the balance due to B & Co. does not exceed Rs. 5,000. B & Co. later advance more, and the balance rises above Rs. 10,000. What priority do B & Co. have over C?

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Correct answer A

The illustration to section 79 gives B & Co. priority over C "to the extent of Rs. 10,000". Where a mortgage for future advances or the balance of an account states a maximum, a later mortgage made with notice of it is postponed for all advances "not exceeding the maximum, though made or allowed with notice of the subsequent mortgage". C's notice therefore does not freeze B & Co.'s priority at the Rs. 5,000 then due, but nothing above the stated maximum ranks ahead of C.

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