Case Summary
| Citation | Ganga Dhar v. Shankar LalAIR 1958 SC 770 : 1959 SCR 509 |
| Keywords | sec 60 tpa, clog on equity of redemption |
| Facts | Purshottamdas (appellant), created a mortgage in favor of Dhanurpmal (respondent).The mortgage instrument stated that the property (four roomed shop & a land) had been usufructuary mortgage in the lieu of 6,300 of which Rs. 5,750 were left with the mortgage to redeem a prior mortgage on the same and another property.As per the agreement between them, on redemption of the prior mortgage, the possession of the shop would be taken over and retained by the mortgagee.The mortgagee duly redeemed the earlier mortgage and went into possession of the shop.The mortgage deed had a provision that the Appellant and his legal heir would not be entitled to the right to redeem the property for a period of 85 years.After 85 years, they fixed a six-month period to redeem the property. If they fail to do the same, then they shall not have any right to claim the property.The appellant filed the case in court before completion of 85 years contending that this condition of 6 months is a clog on the right to redemption. |
| Issues | Whether the term in mortgage instrument prevents the right to redeem? |
| Contentions | |
| Law Points | The court looked into several cases and held that long-term mortgages by themselves would not amount to a clog on equity of redemption. With respect to the test to find out whether this condition would or would not amount to a clog, the court observed: → The reason then justifying the courts power to relieve a mortgagor from the effect of his bargain is its want of conscience. Putting it in more familiar language the courts jurisdiction to relieve a mortgagor from his bargain depends on whether it was obtained by taking advantage of any difficulty or embarrassment that he might have been in when he borrowed money on the mortgage. → Was the mortgagor oppressed? Was he imposed upon? If he was, then he may be entitled to a relief. But this is a question of fact and may vary from case to case. The court held that since this mortgage had enabled the mortgagor to redeem an earlier mortgage, it was advantageous to the mortgagor as well, and held that the time period of 85 years did not amount to a clog and was therefore valid. Accordingly, this suit was premature, as the mortgagor’s right of redemption would arise only after this period of 85 years. With respect to the second clause that the mortgagor could redeem within a period of six months after 85 years failing which the property would be deemed to be sold to the mortgagee without there being a need to execute a fresh sale deed, the court held that this clause amounted to a clog and was void. The test to determine whether long term would or would not amount to a clog on a mortgagor’s right of redemption is therefore, whether he was oppressed by the mortgagee at the time of executing the mortgage. Was it a contract between two unequals? Was the mortgagor in a disadvantageous position and did the mortgagee of his vulnerable position take an unfair advantage? If yes, then it would amount to a clog and if not, then long term in itself would not amount to a clog on mortgagor’s right of redemption. |
| Judgement | The court disallowed the appeal and stated that the mere length of the period could not by itself lead to a clog to redemption and the right to redeem has not been taken away but restricted. |
| Ratio Decidendi & Case Authority |
Full Case Details
SARKAR, J. – This appeal arises out of a suit for the redemption of a mortgage dated August 1,
1899. The property mortgaged was a four-roomed shop with certain appurtenances, standing on a
piece of land measuring 5 yards by 15 yards in Naya Bazar, Ajmere. The mortgage was created by
Purshottamdas who is now dead and was in favour of Dhanrupmal, a respondent in this appeal. The
mortgage instrument stated that the property had been usufructuarily mortgaged in lieu of Rs 6300 of
which Rs 5750 had been left with the mortgagee to redeem a prior mortgage on the same and another
property. It also provided that on redemption of the prior mortgage, the possession of the shop would
be taken over and retained by the mortgagee, Dhanrupmal, who would appropriate its rent in lieu of
interest on the money advanced by him and the possession of the other property covered by the prior
mortgage, being a share in a Kacheri, would be made over to the mortgagor, Purshottamdas. The
provisions in the mortgage instrument on which the present dispute turns were in these terms:
“I or my heirs will not be entitled to redeem the property for a period of 85 years. After
the expiry of 85 years we shall redeem it within a period of six months. In case we do not
redeem within a period of six months, then after the expiry of the stipulated period, I, my
heirs, and legal representatives shall have no claim over the mortgaged property, and the
mortgagee shall have no claim to get the mortgage money and the lagat (i.e. repairs) expenses
that may be due at the time of default. In such a case this very deed will be deemed to be a
sale deed. There will be no need of executing a fresh sale deed. The expenses spent in repairs
and new constructions will be paid along with the mortgage money at the time of redemption
according to account produced by the mortgagee.”
2. The mortgagee, Dhanrupmal, duly redeemed the earlier mortgage and, went into possession of
the shop while possession of the Kacheri was delivered to the mortgagor. On April 12, 1939,
Dhanrupmal assigned his rights under the mortgage to Motilal who died later and whose estate is now
represented by his sons, who are the other respondents in this appeal. The estate of Purshottamdas, the
original mortgagor, is now represented by his son, the appellant.
3. On January 2, 1947, the appellant filed the suit in the Court of the Sub-Judge, Ajmere, against
the respondents. The suit was contested by the sons of Motilal, the assignee of the mortgage, who are
the only respondents appearing in this appeal and whom we shall hence, hereafter refer to as the
respondents. They said that the suit was premature as under the mortgage contract there was no right
of redemption for eighty-five years after the date of the mortgage, that is to say, till August 1, 1984.
The learned Sub-Judge, purporting to follow a decision of the Judicial Commissioner, Ajmere, to
whom he was subordinate, held that the provision postponing redemption for eighty five years was
invalid as it amounted to a clog on the equity of redemption. He, therefore, passed a preliminary
decree for redemption. On appeal, the learned Judicial Commissioner, Ajmere, held, that the decision
which the Sub-Judge had purported to follow was distinguishable. He examined a large number of
cases on the subject and came to the conclusion that the provision in question did not amount to a clog
on the equity of redemption. He, therefore, allowed the appeal and dismissed the appellant’s suit.
From this decision the appeal to this Court arises.
4. It is admitted that the case is governed by the Transfer of Property Act. Under Section 60 of
that Act, at any time after the principal money has become due, the morgagor has a right on payment
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or tender of the mortgage money to require the mortgagee to recovery the mortgage property to
him. The right conferred by this section has been called the right to redeem and the appellant sought
to enforce this right by his suit. Under this section, however, that right can be exercised only after the
mortgage money has become due. In Bakhtawar Begum v. Husaini Khanam [AIR 1914 PC 36] also
the same view was expressed in these words:
“Ordinarily, and in the absence of a special condition entitling the mortgagor to redeem
during the term for which the mortgage is created, the right of redemption can only arise on
the expiration of the specified period.”
Now, in the present case the term of the mortgage is eighty-five years and there is no stipulation
entitling the mortgagor to redeem during that term. That term has not yet expired. The respondents,
therefore, contend that the suit is premature and liable to be dismissed.
5. The appellant’s answer to this contention is that the covenant creating the long term of eightyfive years for the mortgage, taken along with the provision that the mortgagor must redeem within a
period of six months thereafter or not at all and the other terms of the mortgage and also the
circumstances of the case, is really a clog on the equity of redemption and is therefore invalid. He
contends that, in the result the mortgage money had been due all along and the suit was not premature.
6. The rule against clogs on the equity of redemption is that, a mortgage shall always be
redeemable and a mortgagor’s right to redeem shall neither be taken away nor be limited by any
contract between the parties. The principle behind the rule was expressed by Lindley, M.R. in Santley
v. Wilde [(1899) 2 Ch 474] in these words:
“The principle is this: a mortgage is a conveyance of land or an assignment of chattles as
a security for the payment of a debt or the discharge of some other obligation for which it is
given. This is the idea of a mortgage: and the security is redeemable on the payment or
discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in
my opinion, is the law. Any provision inserted to prevent redemption on payment or
performance of the debt or obligation for which the security was given is what is meant by a
clog or fetter on the equity of redemption and is therefore void. It follows from this, that
‘once a mortgage always a mortgage’.”
7. The right of redemption, therefore, cannot be taken away. The courts will ignore any contract,
the effect of which is to deprive the mortgagor of his right to redeem the mortgage. One thing,
therefore, is clear, namely, that the term in the mortgage contract, that on the failure of the mortgagor
to redeem the mortgage within the specified period of six months the mortgagor will have no claim
over the mortgaged property, and the mortgage deed will be deemed to be a deed of sale in favour of
the mortgagee, cannot be sustained. It plainly takes away altogether, the mortgagor’s right to redeem
the mortgage after the specified period. This is not permissible, for “once a mortgage always a
mortgage” and therefore always redeemable. The same result also follows from Section 60 of the
Transfer of Property Act. So it was said in Mohammad Sher Khan v. Seth Swami Dayal [AIR 1922
PC 17]:
“An anomalous mortgage enabling a mortgagee after a lapse of time and in the absence of
redemption to enter and take the rents in satisfaction of the interest would be perfectly valid if
it did not also hinder an existing right to redeem. But it is this that the present mortgage
undoubtedly purports to effect. It is expressly stated to be for five years, and after that period
the principal money became payable. This, under Section 60 of the Transfer of Property Act,
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is the event on which the mortgagor had a right on payment of the mortgage money to redeem.
The section is unqualified in its terms, and contains no saving provision as other
sections do in favour of contracts to the contrary. Their Lordships therefore see no sufficient
reason for withholding from the words of the section their full force and effect.”
8. Under the section, once the right to redeem has arisen it cannot be taken away. The mortgagor’s
right to redeem must be deemed to continue even after the period of six months has expired and the
attempt to confine that right to that period must fail. The term in the mortgage instrument providing
that the mortgage can be redeemed only within the period of six months and not thereafter must be
held to be invalid and ignored. The learned Judicial Commissioner took the same view and this has
not been challenged in this appeal on behalf of the respondents.
9. With this term however this case is not really concerned. Learned advocate for the appellant
directed his attack on the term in the instrument of mortgage that it will not be redeemable for eightyfive years. He contended that this term amounts to a clog on the equity of redemption. We wish to
observe here that the learned advocate did not contend that the invalidity, as we have earlier held, of
the term taking away the right to redeem the mortgage after the period of six months makes the term
fixing the period of the mortgage at eighty-five years invalid. This latter term stands quite apart. It
only fixes the time when the principal sum is to become due, that is, when the right to redeem will
accrue and has, therefore, nothing to do with a term which provides when that right will be lost. The
invalidity of one does not make the other also invalid.
10. The term providing that the right to redeem will arise after eighty-five years does not, of
course, take away the mortgagor’s right to redeem and is not, therefore, in that sense, a clog on the
equity of redemption. It does, however prevent accrual of the right to redeem for the period
mentioned. Is it then, insofar as it prevents the right to redeem from accruing for a time, a clog?
11. As we have already said, the right to redeem does not arise till the principal money becomes
due. When the principal sum is to become due must of course depend on the contract between the
parties. In the present case the parties have agreed that the right to redeem will arise eighty-five years
after the date of the mortgage, that is to say, the principal money will then become due. The appellant
says that he should be relieved from this bargain that he has made. This is the contention that has to be
examined.
12. The rule against clogs on the equity of redemption no doubt involves that the courts have the
power to relieve a party from his bargain. If he has agreed to forfeit wholly his right to redeem in
certain circumstances, that agreement will be avoided. But the courts have gone beyond this. They
have also relieved mortgagors from bargains whereby the right to redeem has not been taken away but
restricted. The question is, is the term now under consideration such that a court will exercise its
power to grant relief against it? That depends on the extent of this power. It is a power evolved in the
early English courts of Equity for a special reason. All through the ages the reason has remained
constant and the court’s power is therefore limited by that reason. The extent of this power has,
therefore, to be ascertained by having regard to its origin. It will be enough for this purpose to refer to
two authorities on this question.
13. In a very early case, namely, Vermon v. Bethell [(1762) 28 ER 838] Earl of Northington L. C.
said,
“This court, as a court of conscience, is very jealous of persons taking securities for a
loan, and converting such securities into purchases. And therefore I take it to be an
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established rule, that a mortgagee can never provide at the time of making the loan for any
event or condition on which the equity of redemption shall be discharged, and the conveyance
absolute. And there is great reason and justice in this rule, for necessitous men are not, truly
speaking, free men, but, to answer a present exigency, will submit to any terms that the crafty
may impose upon them.”
14. In comparatively recent times Viscount Haldane, L.C. repeated the same view when he said in
G. and C. Kreglinger v. New Patagonia Meat and Cold Storage Company Ltd.[(1914) AC 25]:
“This jurisdiction was merely a special application of a more general power to relieve
against penalties and to mould them into mere securities. The case of the common law
mortgage of land was indeed a gross one. The land was conveyed to the creditor upon the
condition that if the money he had advanced to the feoffor was repaid on a date and at a place
named, the fee simple would revest in the latter, but that if the condition was not strictly and
literally fulfilled he should lose the land for ever. What made the hardship on the debtor a
glaring one was that the debt still remained unpaid and could be recovered from the feoffor
notwithstanding that he had actually forfeited the land to the mortgagee. Equity, therefore, at
an early date began to relieve against what was virtually a penalty by compelling the creditor
to use his legal title as a mere security.
My Lords, this was the origin of the jurisdiction which we are now considering, and it is
important to bear that origin in mind. For the end to accomplish which the jurisdiction has
been evolved ought to govern and limit its exercise by equity judges. That end has always
been to ascertain, by parol evidence if need be, the real nature and substance of the
transaction, and if it turned out to be in truth one of mortgage simply, to place it on that
footing. It was, in ordinary cases, only where there was conduct which the Court of Chancery
regarded as unconscientious that it interfered with freedom of contract. The lending of
money, on mortgage or otherwise, was looked on with suspicion, and the court was on the
alert to discover want of conscience in the terms imposed by lenders.”
15. The reason then justifying the court’s power to relieve a mortgagor from the effects of his
bargain is its want of conscience. Putting it in more familiar language the court’s jurisdiction to
relieve a mortgagor from his bargain depends on whether it was obtained by taking advantage of any
difficulty or embarrassment that he might have been in when he borrowed the moneys on the
mortgage. Was the mortgagor oppressed? Was he imposed upon? If he was, then he may be entitled to
relief.
16. We then have to see if there was anything unconscionable in the agreement that the mortgage
would not be redeemed for eighty-five years. Is it oppressive? Was he forced to agree to it because of
his difficulties? Now this question is essentially one of fact and has to be decided on the
circumstances of each case. It would be wholly unprofitable in enquiring into this question to examine
the large number of reported cases on the subject, for each turns on its own facts.
17. First then, does the length of the term – and in this case it is long enough being eighty-five
years – itself lead to the conclusion that it was an oppressive term? In our view, it does not do so. It is
not necessary for us to go so far as to say that the length of the term of the mortgage can never by
itself show that the bargain was oppressive. We do not desire to say anything on that question in this
case. We think it enough to say that we have nothing here to show that the length of the term was in
any way disadvantageous to the mortgagor. It is quite conceivable that it was to his advantage. The
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suit for redemption was brought over forty-seven years after the date of the mortgage. It seems to
us impossible that if the term was oppressive, that was not realised much earlier and the suit brought
within a short time of the mortgage. The learned Judicial Commissioner felt that the respondents’
contention that the suit had been brought as the price of landed property had gone up after the war,
was justified. We are not prepared to say that he was wrong in this view. We cannot also ignore, as
appears from a large number of reported decisions, that it is not uncommon in various parts of India to
have long term mortgages. Then we find that the property was subject to a prior mortgage. We are not
aware what the term of that mortgage was. But we find that that mortgage included another property
which became freed from it as a result of the mortgage in suit. This would show that the mortgagee
under this mortgage was not putting any pressure on the mortgagor. That conclusion also receives
support from the fact that the mortgage money under the present mortgage was more than that under
the earlier mortgage but the mortgagee in the present case was satisfied with a smaller security.
Again, no complaint is made that the interest charged, which was to be measured by the rent of the
property, was in any manner high. All these, to our mind, indicate that the mortgagee had not taken
any unfair advantage of his position as the lender, nor that the mortgagor was under any financial
embarrassment.
18. It is said that the mortgage instrument itself indicates that the bargain is hard, for, while the
mortgagor cannot redeem for eighty-five years, the mortgagee is free to demand payment of his dues
at any time he likes. This contention is plainly fallacious. There is nothing in the mortgage instrument
permitting the mortgagee to demand any money, and it is well settled that the mortgagee’s right to
enforce the mortgage and the mortgagor’s right to redeem are coextensive.
19. Then it is said that under the deed the mortgagee can spend any amount on repairs to the
mortgage property and in putting up new constructions there and the mortgagor could only redeem
after paying the expenses for these. We are unable to agree that such is the effect of the mortgage
instrument. We cannot lose sight of the fact that the mortgaged shop and the area of the land on which
it stood were very small. It was not possible to spend a large sum on repairs or construction there.
Furthermore, having agreed to 85 years as the term of the mortgage, the parties must have imagined
that during this long period repairs and constructions would become necessary. It is only such
necessary repairs as are contemplated by the instrument and we do not consider that it is hard on the
mortgagor to have to pay for such repairs and construction when he redeems the property and gets the
benefit of the repairs and construction. Neither do we think that there is anything in the contention
that under the document the mortgagor was bound to accept whatever was shown in the mortgagee’s
account as having been spent on the repairs and construction. That is not, in our view, the effect of the
relevant clause which reads, “The expenses spent in repairs and new constructions will be paid…
according to the account produced by the mortgagee”. All that it means is that in claiming moneys on
account of repairs and construction the mortgagee will have to show from his account that he spent
these moneys. It is really a safeguard for the mortgagor. It was also said that all the terms in the deed
were for the benefit of the mortgagee and that showed that the bargain was a hard one. We do not
think that all the terms were for the benefit of the mortgagee, or that what there was in the instrument
was for his benefit and indicated that the mortgagee had forced a hard bargain on the mortgagor. We
have earlier said how the bargain appears to us to have been fair and one as between parties dealing
with each other on equal footing.
20. We have no evidence in this case of the circumstances existing at the date of the mortgage as
to the pecuniary condition of the mortgagor or as to anything else from which we may come to the
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conclusion that the mortgagee had taken advantage of the difficulties of the mortgagor and
imposed a hard bargain on him. It was said that the fact that the property was subject to a prior
mortgage at the date of the mortgage in suit indicates the impecunious position of the mortgagor. We
are unable to agree with this contention. Every debtor is not necessarily impecunious. The mortgagor
certainly derived this advantage from that mortgage that he was able to free from the earlier mortgage
the kacheri and he has been in enjoyment of it ever since. That, to our mind, indicates that the bargain
had been freely made. There was nothing else to which our attention was directed as showing that the
bargain was hard. We, therefore, think that the bargain was a reasonable one and the eighty-five
years’ term of the mortgage should be enforced. We then come to the conclusion that the suit was
premature and must fail. In the result we dismiss this appeal with costs.
