Rights of mesnee mortgagee

March 21, 2018 | Author: Shruti Sethi | Category: Mortgage Law, Foreclosure, Business Law, Law Of Obligations, Environmental Law


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A project Report on “Rights of Mesne Mortgagee”Submitted to: Mrs. Kiran Kori (Faculty: Transfer of Property Act) Submitted By: Shruti Sethi Semester-IV B HIDAYATULLAH NATIONAL LAW UNIVERSITY RAIPUR (C.G) Submitted on: 4th April 2013 Page | 1 Bibliography 3 4 5 6 7 8 9 15 18 Page | 2 .Table of Contents Acknowledgements Objectives of study Significance Research Methodology Abbreviation Introduction Chapter 1: Section 94: An Explanation Chapter 2: Cases of sales in execution of decrees of prior and puisne mortgagees who have not made each other a party. Acknowledgements I feel highly elated to work on the topic “Rights of Mesne Mortgagee. Some printing errors might have crept in. I take this opportunity to also thank the University and the Vice Chancellor for providing extensive database resources in the Library and through Internet. Shruti Sethi Semester IV Page | 3 . Her consistent supervision. I would be grateful to receive comments and suggestions to further improve this project report. which are deeply regretted.” The practical realization of this project has obligated the assistance of many persons. Mrs. I express my deepest regard and gratitude to my teacher. constant inspiration and invaluable guidance have been of immense help in understanding and carrying out the nuances of the project report. Kiran Kori for her unstinted support. 3. 2. To understand Section 94 of The Transfer of Property Act.Objective of study The specific objects of this project report are: 1. Page | 4 . To analyze its effect on rights of mesne mortgagee. To delve into its concept by studing case laws and articles. 1882 contains the general principles of transfer of property and detailed rules with respect tospecific transfer of immovable property by sale. the Transfer of Property Act saw the light of the day in 1882 and provided the basic principles for transfer of both movable and immovable properties. 1882 was amended in 1929. However. Based primarily on the English law of „Real Property‟. the provisions of Chapter II of the Act that are inconsistent with the Quranic laws are inapplicable to Muslims. each community in India was governed by its respective customary law in matters relating to transfer of property. exchange.Significance Before the advent of the Britishers. but certain provisions of the Act remained inapplicable to Hindus and Muslims. Page | 5 . the English judges applied the common law of England and the rules of equity. 1930‟ was passed to deal with transfer of movable property by sale. meaning of „transfer‟ under the Act. the resulting conflict and the need for clarity of rules relating to this important branch of law necessitated the enactment of a legislation. lease and gift. the Transfer of Property Act. With the establishment of the formal litigative system and in absence of any legislation in this area. justice and good conscience with respect to disputes relating to transfer of property. The Transfer of Property Act. a separate enactment titled the „Sale of Goods Act. In order to put at rest the confusion created by the conflicting decisions and extend the application of the Act in totality to Hindus. it attempted to mould these principles to suit the Indian conditions. general principles relating to transfer of property and definitions and rules relating tospecific transfers of immovable properties by mortgage. Moreover. The present course will cover a study of important terms relevant to transfer of property. Drafted in 1870. to begin with. lease and gift. to start with. mortgage. till date. The unsuitability of these provisions to the Indian conditions. Page | 6 .Research Methodology This project report is based on analytical and descriptive Research Methodology. Websites. Books and other reference as guided by Faculty have been primarily helpful in giving this project a firm structure. Secondary and Electronic resources have been largely used to gather information and data about the topic. dictionaries and articles have also been referred. ER Etc. and Section Sections Apex Court All India Reporter Bombay Company Delhi Edition Example England Reporter Etcetera Gujarat Karnataka Kings bench Kerala Limited Page Private Queens bench Division Supreme Court Uttar Pradesh versus Page | 7 . Del Ed.Abbreviation & § §§ AC AIR Bom Co. Eg. Pg.P. Guj Karn KB Ker Ltd. QBD SC U. Pvt. v. or mortgagees. as amended by Section 47. In the Act. the same rights against the prior mortgagee. 92 and 94. 1908. or mortgagees and the same rights against the subsequent mortgagees (if any) as he has against his mortgagor”.—Every second or other subsequent mortgagee has. as against the first mortgagee. Page | 8 . that the transferee acquires. This section gives a prior mortgagee a right to foreclose a puisne mortgage. The first portion of the old Section 95 is covered by Sections 91 and 92. A mortgagor can deal with the interest remaining in him and transfer it by sale. as his mortgagor has against such prior mortgagee. has been placed after Section 92. The old Section 75 ran as follows: “75. The doctrine of „redeem up and foreclose down‟ begin akin to the doctrine of subrogation. mortgage or lease to other persons. 1929 the old Section 75 is divided between three Sections 91(a). the result of such a transfer being. so far as regards redemption. Rights of mesne mortgagee against prior and subsequent mortgagees. all the rights of the mortgagor. fore-closure and sale of the mortgaged property.Introduction The original Section 94 of the Act of 1882 was repealed by the Civil Procedure Code. Section 91(a) confers upon the puisne mortgagee a right to redeem a prior mortgage. a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor. Section 94 reads: Rights of mesne mortgagee: Where a property is mortgaged for successive debts to successive mortgagees. This section corresponds with Section 75 of the Act. prior to the amendment of 1929. Transfer of Property (Amendment) Act. but not so as to prejudice the interest of his mortgagee. and lastly. B as assignee of part of the right of redemption of the mortgagor has same right to redeem A as is possessed by the mortgagor. conferred on him by his mortgage. or. It is applicable to a case. who takes his mortgage subject to the prior mortgage. Venkataramana v. Lahiri. the principle expressed by the phrase „redeem up and foreclose down‟. 1986). 108 (10 ed. as he has against the mortgagor.3 Effect of a decree obtained by the prior mortgagee on the rights of puisne mortgagee. AIR 1929 Lah 207 (208) : 117 IC 666. Narain Singh. Thus. to submit to a foreclosure or sale of whatever interest he holds in the property. a prior mortgagee can require the second mortgagee to redeem him.-Sections 67 to 73 treat the rights of mortgagees against mortgagors. a priormortgagee is entitled to enforce the rights.-Where the prior mortgagee institutes a suit for foreclosure or sale on his mortgage. ILR 31 Mad 425 (428) : 18 Mad LJ 298. e. in part.Chapter 1 Section 94: An Explanation The section enacts.. in favour of C. th Page | 9 ..— first. in default.g. where a property is mortgaged for successive debts to successive mortgagees.g. This section provides that a mesne mortgagee has the same rights against mortgagees. a subsequent mortgagee. in favour of A. Transfer of Property Act. posterior to himself. in favour of B.2 In other words.M.1 „Has the same rights against mortgagees posterior to himself as he has against the mortgagor‟. 3 Nand Lal v. not only against the mortgagor but also against those who derive their title from or under him. next. And C can redeem B or A. e. making the 1 2 S. Gompertz. the puisne mortgagee may. Madura Hindu Sabha Nidhi Co. 10 AMA Firm v. 12 Umesh Chunder v. Maroti. though the decree may not operate as res judicata between the mortgagor and the puisne mortgagee. Ltd.12 4 5 Vedavyasa v. an application to set it a side by prior mortgagee was held not maintainable. AIR 1999 Ker 213 (FB). be given the right to redeem the prior mortgagee. which provides a period of thirty years for redemption under Article 61(a) of the Act of 1963. But where the decree is in proper form and the puisne mortgagee under it has a right to redeem. 7 Brahmdeo v.6 But.9 though the former obtains a decree and the property is sold in execution thereof. even though his suit to enforce the puisne mortgage is barred by limitation. ILR 27 All 326 : 32 IA 23. and thereafter the puisne mortgagee has only a right to look to the surplus sale-proceeds for the satisfaction of his dues. sell the property subject to the first mortgage. if the puisne mortgagee does not redeem the prior mortgagee. Marudachalam. His right under Section 91 to redeem the prior mortgage is not taken away by such a decree for sale. 8 Kerala Financial Corpn. Calicut. the rights of the latter are in no way affected. Tara Chand. ILR 30 Cal 599 (FB). If a subsequent mortgagee is not made a party to the suit brought by the prior mortgagee to enforce his mortgage.puisne mortgagee a party to the suit. 41 Cal 654 : 21 IC 961 (PC). Lallanji. the auction-purchaser gets the property free from the encumbrances. 6 Yamunabai v.8 Effect of omission to implead puisne mortgagee in the suit. v.5 This is so. even in execution of his own decree. Ramratan.. the proceedings there under do not affect his rights.11 The right of the puisne mortgagee toredeem is not barred. AIR 1948 Mad 412 : 61 LW 318 : (1948) 1 Mad LJ 288. and the property is allowed to be sold in execution of the decree. for a suit for redemption is governed by Article 61. ILR 43 All 204 : 61 IC 942 (FB). corresponding to Article 148 of the Acts of 1908 and 1877.7 Where puisne mortgagee sold property in pursuance of the decree obtained. Syndicate Bank. the puisne mortgagee cannot pay off the mortgagee decree-holder and adopt the decree as his own. 9 Hukam Singh v. AIR 1933 Nag 163 : 146 IC 514. under the decree.-Where the prior mortgagee omits to implead the puisne mortgagee in a suit on his mortgage. 17 IA 201 : ILR 18 Cal 164. Jahoor Fatima. and thereafter to take proceedings for foreclosure or sale against the mortgagor. Page | 10 . 11 Debendra Narayan v. Gopi Narain v.4 But where the decree does not give this liberty.10 and he may. which he exercises while the mortgagor fails to pay the decretal debt. since the payment satisfies the decree and there is nothing left to execute. Bansidhar. AIR 1919 Mad 100 (2) : ILR 42 Mad 90 : 49 IC 36.. the Court can substitute the puisne mortgagee as decree-holder. 14 Rights of auction-purchaser. who has not been made a party to the suit. ILR 26 All 404. ILR 28 Bom 153. can. 13 But if the mortgagor has ceased to have any title in the right of redemption. 16 Dinanath v. Badar-ud-din v. 17 Ram Prasad v. ILR 31 Bom 112. ILR 16 Mad 121. ILR 22 Bom 945.17 13 Lallubhai v. and the person. in execution of a decree passed on a mortgage. is not represented in the suit. Karim Baksh. Mundas. though he acquires the rights both of the mortgagee and the mortgagor.-Where the prior mortgagee omits to implead the puisne mortgagee in his suit. Pandurang v. AIR 1931 Lah 438 : 135 IC 200.15 but he himself is liable to be redeemed by the puisne mortgagee. ILR 20 Bom 390. the auction-purchaser. ILR 25 All 446. Venkat Reddy v. in his capacity as the purchaser of the interest of the mortgagor. Sarvothama v. Kaveri. having an interest in the right of redemption. Sakhar Chand. 15 Hasan Bhai v. 16 or by any other person. yet he does not acquire that of the puisne mortgagee.Sale in execution of mortgagee‟s decree-Rights of auction-purchaser. a nullity. Shakra Girdhar. Bhikari Das. the decree is. AIR 1933 Cal 912 : ILR 60 Cal 1193 : 147 IC 808. Lachmi Narain. Veerasami. vests in the auction-purchaser the rights both of the mortgagee and of the mortgagor as they existed at the date of the mortgage. Page | 11 . Raja Row. Perumal v. AIR 1924 Mad 650 : ILR 47 Mad 551 : 83 IC 1022. 14 Surendralal v. so far as the property is concerned. ILR 26 Mad 537. AIR 1921 Mad 648 : 1921 Mad WN 603. Magan Lal v. Goverdhana Doss v. if puisne mortgagee is not party to the decree. Kunjappa. In such a case. sue to redeem the puisne mortgagee. the auction-purchaser. Ahmad Ali.-The sale. Umaji. having the mortgagor‟s rights. passes the entire interest in the property to the auction -purchaser. and (2) to set up his rights under the prior mortgage as a shield. (a) The respective rights of such auction-purchaser. unless the right of redemption has already been sold in execution of the decree on the prior mortgage. and the subsequent mortgagee has no remedy against the mortgaged property. in the property. if the subsequent mortgagee desires to proceed against the entire interest. in which case. and the auction-purchaser in execution of the subsequent mortgagee‟s Page | 12 . if the subsequent mortgagee was made a party to the suit on the prior mortgage.— The subsequent mortgagee is not bound to implead the prior mortgagee in his suit.Chapter 2 Cases of sales in execution of decrees of prior and puisne mortgagees who have not made each other a party. but where the subsequent mortgagee was not imp leaded in the suit of the prior mortgagee. the sale in execution of the prior mortgagee‟s decree. Such cases raise questions as to— (a) the mutual right of the parties. — (1) to redeem the subsequent mortgage. if the prior mortgagee has a proper defence. the auction-purchaser gets the prior mortgagee‟s right plus the right of redemption of the mortgagor subject to the subsequent mortgage. the auction-purchaser acquires the interest of the mortgagor in the mortgaged property. In the latter case. in such a suit. the subsequent mortgagee can sell the mortgaged property subject to the prior mortgage. Therefore. And. if the right of redemption is sold in execution of the subsequent mortgagee‟s decree. namely. and (b) the right of possession. the subsequent mortgagee can sell the right of redemption. but the auctionpurchaser has two rights. the prior mortgagee‟s auction-purchaser acquires no right of possession either against 18 Venkatanarasammah v.— first. and the puisne mortgagee‟s auction-purchaser is not entitled to dispossess him unless he pays him off. the right of possession has been determined according to the priority of the mortgages. Venkatasamy. Many cases proceed on the view that after the sale by one mortgagee nothing is left for the other mortgagee to sell. 19 Gangadhar v. AIR 1933 Mad 583 : ILR 56 Mad 846 : 144 IC 833 (FB). 22 Chinnaswami v. and the mortgaged property is sold and purchased by different auction-purchasers. the High Court of Madras held. the auction-purchaser in execution of the decree of B can redeem the interest under the mortgage of A. ILR 40 Mad 77 : 34 IC 507.decree is entitled to obtain possession of the mortgaged property until redeemed by the auctionpurchaser in execution of the prior mortgage decree.21 But. ILR 2 Mad 108. Page | 13 . neither of them has a right to obtain possession unless any of them redeems the usufructuary mortgage. that where the puisne mortgagee was not joined in a suit on the prior mortgage. and the puisne mortgagee who represents the ultimate right of redemption is entitled to retain possession.—In cases where the mortgagor makes. Lakshmi Ammal. the right of the auctionpurchaser to be treated as the owner of the right of redemption was imperfect. AIR 1932 Mad 566 : 139 IC 309. ILR 32 Cal 891. a simple mortgage in favour of A. 22 Yet another view is. AIR 1934 Pat 648 : ILR 13 Pat 364 : 155 IC 635. 20 Bhekdhari v. AIR 1930 Bom 221 : 125 IC 905. (b) Case where the mortgagor was not entitled to possession. Ram Kinkar v. a usufructuary mortgage. Nagendran v. in another case. AIR 1933 Cal 181 : 145 IC 175. (c) Case-law on the point. 21 Chinnu v. ILR 32 Mad 485 : 4 IC 1077. and the auction-purchaser in execution of the decree of A can redeem the interest under the simple mortgage of B. then. a decree is to be passed for possession. and the right of possession passes according to priority of sale. another simple mortgage in favour of B. that under such circumstances the prior mortgagee was entitled to use the prior mortgage as a shield. In such a case. Har Pershad v. Radhika Koer. and lastly. the same Court held. Muhammad Amir Ahmad Khan.19 One view is that when the prior mortgagee auction-purchaser sues the puisne mortgagee auction-purchaser for possession and the latter fails to redeem. Muhammad Jaman v. Lakshman. without impleading each other. Darmalinga. Kutti v. Afsar Jehan Begum v. Subramania. AIR 1937 Oudh 478 : 171 IC 56. Ramiah.—The decisions are not uniform.20 In one case. 18 In some cases. that if the prior mortgage is not usufructuary. Hareram. Dalmardan Singh. AIR 1943 Cal 577 : 47 Cal WN 682 : 210 IC 67. Akali Mudiani. and both A and B obtain decrees on their respective mortgages. Dev Narain. for it is effectual as against persons interested in the right of redemption who have been made parties. 26 Ram Sanehi Lal v. or (b) to institute a suit on his own mortgage and bring the right of redemption to sale. Kristopada v. if either no suit by subsequent mortgagee is pending or the purchase in execution of the prior mortgagee‟s decree was earlier in point of time.24 It seems. Tarak Chandra.23 or against an assignee of part of the right of redemption who has.the auction-purchaser of a prior mortgagee. subject to redemption by the person interested in it who was not made a party to the proceedings. vests the estate. Somi. who was a party. in cases where both the mortgages are simple. Lachmi Narain v. Janki Prasad. and the question of 23 Madan Lal v. not been joined. AIR 1926 All 480 : 97 IC 4 : 24 All LJ 661. unless the parties are content with the then state of affairs. In no case. Hirdey Narain. in the purchaser. 27 Id. AIR 1923 Cal 274 : ILR 49 Cal 1048 : 69 IC 530. Ram Narayan v. Govind Lal. that when an encumbrancer is not made a party to a suit on a prior mortgage. nor can he have the sale set aside. 25 Bhagaban Chandra v.25 The proper view seems to be— (1) the auction-purchaser. AIR 1927 Cal 259 : 45 Cal LJ 4 : 100 IC 420. The auction-sale operates as a transfer of the rights of the prior mortgagee and of the mortgagor to the auction-purchaser. in execution of a decree obtained on a prior mortgage without impleading the subsequent mortgagee. the foreclosure or sale is not altogether void. Chaitanya Charon. 24 Hargu Lal v. the auction-purchaser under the prior mortgage-decree can compel the subsequent mortgagee to redeem him. the remedy of the person interested who was not impleaded is— (a) to redeem. he must redeem the subsequent mortgage. Aghore Nath v. 11 Cal WN 314. the right to the property. but if it is time-barred. that is.26 (2) if the mortgage is not time-barred. Bhagwan Das. If such auction-purchaser has obtained possession by virtue of the auctionpurchase. the rights of the mortgagor to possession will ultimately vest in him.2727 (3) it is the first purchaser who gets the property. Page | 14 . including his right to possession. A sale. if held in execution of such a decree. AIR 1923 All 449 : ILR 45 All 189 : 74 IC 277. can he maintain an action for ejectment against the auction-purchaser in execution of the decree on the prior mortgage. acquires all the rights of the mortgagor. if the first mortgagee be the earlier purchaser. AIR 1931 All 466 : 134 IC 1 1931 All LJ 729 (FB). ILR 19 All 541 (FB). ILR 21 All 235 (FB). nor does the puisne mortgagee implead the prior mortgagee in his suit. Id G. but both obtain decrees for sale of the mortgaged property and the mortgaged property is sold in execution of both the decrees and is purchased by different auction-purchasers. if limitation on the prior mortgage he has not yet run out.P. the auction-purchaser acquires the right both of the mortgagee and mortgagor. as plaintiff. but the purchaser under the prior mortgage will have the right to redeem the purchaser under the second mortgage next and retain possession of the mortgaged property. he can redeem the prior mortgage and the purchaser under the prior mortgage cannot compel the purchaser under the second mortgage to submit to redemption by him.29 for he does not own the right of redemption and as representative of the prior mortgagee he cannot redeem. AIR 1931 All 466 : 134 IC 1 1931 All LJ 729 (FB). he can redeem the second mortgage and recover possession.. Janki Prasad. but if he was the later purchaser in point of time. the purchaser in execution of the subsequent mortgagee‟s decree. then. The transfer of property Act. he can enforce his remedy.Tripathi. When a prior mortgagee suing to enforce his mortgage does not make the puisne mortgagee a party to the suit and brings the property to sale. he may sue to redeem the puisne mortgagee.28 (4) if the purchaser in execution of the prior mortgagee‟s decree is not in possession and is suing.purchase has nothing to do with the priority or posterity of the mortgage in enforcement of which the property is sold. (5) if the purchaser in execution of the second mortgagee‟s decree is suing the purchaser in execution of the prior mortgagee‟s decree.30 The priority of the date of sale carries 28 29 Ram Sanehi Lal v. but he cannot recover the mortgage-money.—A prior mortgagee has the same rights against the subsequent mortgagee as he has against the mortgagor. (d) In sum. if limitation has run out. A prior mortgagee can foreclose a puisne mortgagee. per Mukerji. then the suit even for redemption cannot be decreed. who is the defendant in possession. If he was the earlier purchaser in point of time. J. if the purchaser under the second mortgage was later in point of time. if the purchaser under the second mortgage was the earlier purchaser in point of time. then he must first redeem the prior mortgage. th 30 Page | 15 . and as assignee of the mortgagor. Central Law publications). even though the prior mortgage is barred by time. 209 (17 Ed. Where a prior mortgagee does not implead the puisne mortgagee in his suit on the mortgage. in determining which of the two purchasers is entitled to possession—what has to be seen is which of the auction sale is prior to the other. -Where a prior mortgagee institutes a suit for sale on his mortgage and purchases the right of redemption in execution of his mortgage-decree. Thus. Sarvothama v. and the priority of the mortgagees need not be considered. as auction-purchaser. in law. Though. his right. ILR 28 Bom 153. Rukmanand. the auction-purchaser. the rule „redeem up and foreclose down‟ should be followed. is entitled to redeem the puisne mortgagee. is by virtue of a sale without notice to the puisne mortgagee as required under law. Umaji.32 Priority as regards redemption. 34 . in the prior mortgagee‟s sale. AIR 1925 All 804 : ILR 47 All 751 : 89 IC 295.. 33 Hansabhai v. Parasuram Singh v. While the puisne mortgagee has a statutory right to redeem the prior mortgage. Parasuram Singh v. Hansabhai v. The right of a prior simple mortgagee cannot be enlarged by his omission to implead the puisne mortgagee and he cannot take advantage of his own omission. Padohoilal. ILR 28 Bom 153. while the puisne mortgagee can bring a suit without impleading the prior mortgagee. AIR 1922 All 135 : ILR 44 All462 : 67 IC 533.P. AIR 1967 Mad 418 (420) : ILR (1967) 1 Mad 378 : (1967) 2 Mad LJ 233 (237). the mortgagor who still retains an interest in the right of redemption has a preferential right to redeem a prior mortgage as against the last subsequent mortgagee while the last subsequent mortgagee has a 31 32 G. th Page | 16 . AIR 1924 Nag 198 : 75 IC 899. Central Law publications). Umaji. the right to possession of the mortgaged property. he. Ram Varan v.(17 Ed. he would have had the option of redeeming the prior mortgage. AIR 1922 All 135 : ILR 44 All 462 : 67 IC 533. Raja Row Sahib.purchaser‟s claim. The transfer of property Act 201. is entitled to redeem the puisne mortgagee. the prior mortgagee is required to implead the puisne mortgagee as a party to his suit. cannot prevail over the puisne mortgagee‟s right to redeem. Govindrao v.33 Where there is a conflict between the right of the puisne mortgagee to redeem the prior mortgage and the right of the prior mortgagee as a purchaser of the right of redemption to redeem the puisne mortgagee the prior mortgagee has a prior right to redeem the puisne mortgagee. Bhagwati. in his capacity as purchaser of the right of redemption.with it. The auction. as an assignee of the mortgagor. AIR 1921 Mad 648 : 1921 Mad WN 603. By not making the puisne mortgagee a party. The right of the puisne mortgagee to redeem a prior mortgage cannot be prejudiced bya Court sale at the instance of the prior mortgagee who has failed to implead the puisne mortgagee. the right to which the puisne mortgagee was entitled could not be taken away or the right of the purchaser without notice be enhanced. Shanmugha v. as an assignee of the mortgagor. in law or in equity.31 If the puisne mortgagee had been made a party. the right of the purchaser in a suit by the prior mortgagee is as an assignee of the mortgagor.Tripathi.34 In all difficult cases. Sivas. As between the prior mortgagee and the puisne mortgagee. Padohilal. Bhotong. 35 Madhuram v. AIR 1925 Cal 59 : 86 IC 193. and so on. Page | 17 . Kamta Prasad.preferential right to redeem a prior mortgage than an intermediate mortgagee. Sheo Narain v. A prior mortgagee is not a necessary party to a suit by a puisne mortgagee on his mortgage. This is made plain by Order XXXIV. Rule 1 of the Code of Civil Procedure. Wahidullah. Amba Prasad v. Ram Nirekhan. 52 IC 512. 1908. AIR 1932 Pat 270 : ILR 11 Pat 415 : 139 IC 78. Sheoratan Koer v. AIR 1922 All 405 : ILR 44 All 708 : 68 IC 961.35 Prior mortgagee is not a necessary party to a suit by puisne mortgagee. 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