(1) Where a mortgage is executed in favour of a registered cooperative society for payment of prior debts or part thereof, of the mortgagor secured on the mortgaged property, the registered cooperative society may by notice in writing and served by registered post with due acknowledgement, require any person to whom any such debt is due to receive payment of such debt or part thereof from the co-operative society at its registered office within such period as may be specified in the notice.
(2) The person on whom such notice is served shall be bound to receive payment of-the amount offered by the co-operative society, but where there is disagreement or dispute between the mortgagor and such person as regards the amount of the debt, or where the co-operative society tenders less than the agreed amount of debt, the receipt of the sum offered by the co-operative society shall not debar such person from enforcing his right to recover the balance claimed by him.
(3) If any such person refuses to receive such notice or such payment, such debt or part thereof as the case may be, shall cease to cany interest from the expiration of the period specified in the notice and the property mortgaged under sub-section (1) shall be deemed to have been freed from the encumbrance of such prior mortgage.
(4) No co-operative society shall advance a loan on a mortgage without taking a declaration from the prospective mortgagor as to the names of prior mortgages of the property in question, if any.