Case Summary
| Citation | Pomal Kanji Govindji v. Vrajlal Karsandas PurohitAIR 1989 SC 436 : (1989) 1 SCC 458 |
| Keywords | sec 58 tpa |
| Facts | The mortgage was a combination of a simple and a usufructuary mortgage. The terms of the mortgage provided that the right of redemption would arise only after the expiry of 99 years from the date of execution of the mortgage. Since the possession was delivered to the mortgagee, a condition in the deed also empowered him to demolish the existing structures on the property and rebuild the new ones and re-reimburse the entire cost of construction from the mortgagors. In addition, the entire amount was to be paid to the mortgagee only at the end of the term, and no periodical payment was permissible. The mortgagors filed a suit for redemption and for recovery of possession before 99 years. |
| Issues | Whether long term mortgages in the present inflationary market in fast moving conditions are clogs on equity of redemption and as such the mortgages are redeemable at the mortgagors’ instance before the stipulated period? |
| Contentions | |
| Law Points | Freedom of contract is permissible provided it does not lead to taking advantage of the oppressed or depressed people. The law must transform itself to the social awareness. Poverty should not be unduly permitted to curtail one’s right to borrow money on the grounds of justice, equity and good conscience on just terms. If it does, it is bad. Whether it does or does not, must, however, depend upon the facts and circumstances of each case. The mortgagee may put a condition in the mortgage deed that may prevent the mortgagor from redeeming his property even when he is prepared to repay the loan. This putting of obstructions, or preventing him from getting back his property is called a clog on the statutory right of the mortgagor to get back his property and would be void. Doctrine of clog on equity of redemption is a rule of equity, justice and good conscience. A tenant of a mortgagee in possession cannot continue in possession after redemption of the mortgage. |
| Judgement | The court held that in the present case, the whole amount of interest etc was to be paid only at the time of redemption, which would make redemption practically impossible. The term of 99 years coupled with these conditions were held as clog on the mortgagor’s right of redemption. |
| Ratio Decidendi & Case Authority |
Full Case Details
SABYASACHI MUKHARJI, J. – These appeals and the special leave petition are directed
against the decision of the High Court of Gujarat, upholding the right of the mortgagors to redeem the
properties before the period stipulated in the deeds, as well as the right of the mortgagors to recover
possession of the properties from the tenants and/or the mortgagees without resort to the relevant Rent
Restriction Act. All these matters were separately canvassed before us as these involved varying facts,
yet the fundamental common question is, whether long term mortgages in the present inflationary
market in fast moving conditions are clogs on equity of redemption and as such the mortgages are
redeemable at the mortgagors’ instance before the stipulated period and whether the tenants who have
been inducted by the mortgagees can be evicted on the termination of the mortgage or do these tenants
enjoy protection under the relevant Rent Restriction Acts. One basic fact that was emphasised in all
these cases was that all these involve urban immovable properties. In those circumstances, whether
the mortgages operate as clogs on equity of redemption is a mixed question of law and facts. It is
necessary to have a conspectus of the facts involved in each of the cases herein. We may start with the
facts relating to Special Leave Petition (Civil) No. 8219 of 1982 because that is a typical case.
3. This is an appeal from the judgment and order of the Gujarat High Court, dated 26-4-1982
dismissing the second appeal. The High Court observed that the learned Judge had followed the
judgment of the said High Court in Khatubai Nathu Sumra v. Rajgo Mulji Nanji [AIR 1979 Guj
171], where the learned Single Judge in the background of a mortgage, where the mortgagor was
financially hard-pressed and the mortgage was for 99 years and the terms gave the mortgagee the right
to demolish existing structure and construct new one and the expenses of such to be reimbursed by
mortgagor at the time of redemption, it was held that the terms were unreasonable, unconscionable
and not binding. In order, however, to appreciate the contentions urged therein, it will be necessary to
refer to the decision of the first appellate court, in the instant case before us. By the judgment, the
Assistant Judge, Kutch at Bhuj in Gujarat disposed of two appeals. These appeals arose from the
judgment and decree passed by the Civil Judge, Bhuj, in Regular Civil Suit No. 35 of 1972 by which
the decree for redemption of mortgage was passed and the tenants inducted by the mortgagees were
also directed to deliver up possession to the mortgagors. The plaintiffs had filed a suit alleging that the
deceased Karsandas Haridas Purohit was their father and he died in the year 1956, he had mortgaged
the suit property to Kansara Soni Shivji Jetha and Lalji Jetha for 30,000 koris by a registered
mortgage deed dated 20-4-1943. The mortgage deed was executed in favour of Soni Govindji
Narayanji who was the power of attorney holder and manager of Defendants 1 and 2. Defendant 3 is
the heir of said Govindji Narayanji and he was also managing the properties of Defendants 1 and 2.
The mortgage property consisted of two delis in which there were residential houses, shops etc. The
mortgagees had inducted tenants in the suit property and they were Defendants 4 to 9 in the original
suit. When the mortgage transaction took place, the economic condition of the father of the plaintiffs
was weak, he was heavily indebted to other persons. It was alleged and it was so held by the learned
Judge and upheld by the appellate Judge that the mortgagees took advantage of that situation and took
mortgage deed from him on harsh and oppressive conditions. They got incorporated long term of 99
years for redemption of mortgage. It is further stated that though possession was to be handed over to
the mortgagees, they took condition for interest on the part of principal amount in the mortgage deed.
Moreover, the mortgagees were given liberty to spend any amount they liked for the improvement of
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the suit property. They were also permitted to rebuild the entire property. Thus these terms and
conditions, according to the appellate Judge, were incorporated in the mortgage deed to ensure that
the mortgagors were prevented forever from redeeming the mortgage. The terms and conditions,
according to the Assistant Judge, Bhuj, being the first appellate court were unreasonable, oppressive
and harsh and amounted to clog on equity of redemption and, as such, bad and the plaintiffs were
entitled to redeem the mortgage even before the expiry of the term of mortgage. A registered notice to
Defendants 1 and 2 was given to redeem the mortgage but they failed to do so, hence, the present suit
was filed to redeem the mortgage and to recover actual possession from the Defendants 4 to 9 who
were the tenants inducted by the mortgagees.
4. Defendant 1 resisted the suit. It was his case that the term of mortgage was for 99 years, so the
suit filed before the expiry of that period was premature. Defendant 3 resisted the suit by written
statement. Defendants 4 to 9 resisted the suit on the grounds that the plaintiffs were not entitled to
redeem the mortgage and even if they were so entitled, they could not get actual physical possession
from the tenants who were protected by the provisions of the relevant Bombay Rent Act. It was their
case that the plaintiffs were not entitled to get actual possession of the premises in which they were
inducted by the mortgagees. Defendants 2/1 to 2/7 who were the heirs of mortgagee Shivji Jetha were
residing in London and New Delhi, so the personal service of summons could not be effected upon
them. The summons was published in the local newspapers but none of them appeared before the
court so the court proceeded ex parte against them. The trial was conducted and a preliminary decree
for redemption of mortgage was passed on 2-4-1974 by the trial court. Thereafter, the decree-holder
applied for final decree so the notices were issued to all the defendants. The heirs of Shivji Jetha
appeared m response to that notice and filed applications before the trial court to set aside the ex parte
decree on the ground that summons of the suit had not been duly served upon them. That prayer was
rejected by the trial court. Thereafter, they filed civil miscellaneous appeals in the District Court. The
appeals were allowed by the District Court and the ex parte decree for redemption of mortgage was
set aside. The trial court was directed to proceed with the suit after permitting the concerned
defendants to take part in the proceedings right after receiving their written statements. Accordingly
Defendant 2/1 appeared in the suit and filed his written statement while the other defendants remained
absent.
5. It was the case of Defendant 2/1 that the sisters of the plaintiffs had not been joined as parties
in the suit, so the suit was bad for want of necessary parties. Moreover, as per the terms and
conditions of the mortgage deed dated 20-4-1943, there was usufructuary mortgage for 20,000 koris
and the remaining 10,000 koris were advanced to the mortgagor at monthly interest at the rate of half
per cent. There was a condition in the mortgage deed that the mortgagor should pay principal amount
as well as the interest at the time of redemption. When the suit was filed in the year 1972, the
mortgagees were entitled to recover interest on 10,000 koris for a period of 29 years. That interest
would be 17,400 koris so the total mortgage amount would be Rs 47,400 which will be equivalent to
Rs 15,800 and the Civil Judge had no jurisdiction to try such suit so the plaint should have been
returned for presentation in the proper court. It was further alleged that the court fees paid by the
plaintiffs was also not sufficient. Moreover, it was not true that the father of the plaintiffs was of weak
economic condition. The grandfather of the plaintiffs was an advocate and the father of the plaintiffs
was the clerk of an advocate. Plaintiff 1 was also working as an advocate at the time of the mortgage,
so they knew the legal position. It was further alleged that at the relevant time the prevalent custom in
Kutch State was to take mortgages of long term for 99 years and when it was permissible to take
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mortgage deeds with such a long term, it was also necessary to give permission for rebuilding the
whole property, for better enjoyment of it. So long term mortgage and the conditions for
reconstruction of the property could not amount to clogs on equity of redemption of mortgage, it was
the case of the mortgagees and/or tenants. The mortgagees did not take any, it was pleaded, undue
advantage and they were not present physically when the transaction took place through their power
of attorney holders. If the conditions in the mortgage deed did not amount to clogs on equity of
redemption, the suit would be clearly premature. It may be mentioned that Plaintiff 1 had
subsequently become a Civil Judge and was ultimately the Chairman of the Tribunal so if the said
terms and conditions of the mortgage were onerous and oppressive he would not have sat idle for 29
years. But he remained silent because he was aware of the custom, it was pleaded. It was alleged that
the prices of immovable properties had increased tremendously, therefore, the suit had been filed with
mala fide intention. It was averred that in case the court came to the conclusion that there was clog on
equity of redemption and the plaintiffs were entitled to the redemption, then the interest on 10,000
koris should be awarded to the mortgagees. In the premises, it was averred that the suit should be
dismissed as there was no clog on equity of redemption and the court had no jurisdiction to try the
suit. The trial court then recorded additional evidence in the suit and ultimately decreed the suit on
September 28, 1976. The trial court came to the conclusion that there was mortgage transaction
between the father of the plaintiffs and Soni Shivji Jetha and Lalji Mulji on 20-4-1943. The trial court
further came to the conclusion that the terms and conditions in the mortgage deed were harsh and
oppressive, which amounted to clog on equity of redemption, so the plaintiffs were entitled to file the
suit even before the expiry of the term of the mortgage. The trial court also came to the conclusion
that the sisters of the plaintiffs were not necessary parties to the suit and even if they were necessary
parties, a co-mortgagor was entitled to file the suit for redemption, so the suit was not bad for want of
non-joinder of necessary parties. The trial court further came to the conclusion that it had jurisdiction
to try the suit and held that the mortgagees were not entitled to claim interest on 10,000 koris. It was
further directed that the plaintiffs were entitled to recover possession from Defendants 4 to 9 who
were the tenants inducted by the mortgagees. Accordingly, a preliminary decree was passed in the
suit.
6. Aggrieved thereby the mortgagees filed Regular Civil Appeal No. 149 of 1978 and the tenants
filed Regular Civil Appeal No. 150 of 1978. These were disposed of by the judgment of the first
appellate court. The learned Judge of the first appellate court framed the following issues:
(1) Whether the terms and conditions in the mortgage deed dated 20-4-1943 amount to
clog on equity of redemption?
(2) Whether the decree passed is bad for want of jurisdiction with trial court?
(3) Whether the mortgagees are entitled to get interest on 10,000 koris?
(4) Whether the tenants are protected from the effect of redemption decree by virtue of
the provisions of Bombay Rent Act?
(5) Whether the decree passed by the trial court is legal and proper?
(6) What order?
7. It is not necessary any longer in view of the findings made and the subsequent course of events
to detain ourselves on all the issues. For the purpose of the present appeal as well as the connected
appeals we are concerned with two issues, namely, issues 1 and 4 stated above, in other words,
whether the terms and conditions of the mortgage deed dated 20-4-1943 amounted to clog on equity
of redemption and secondly, whether the tenants are protected from the effect of redemption decree by
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virtue of the provisions of the Bombay Rent Act. The learned Assistant Judge in the first appeal
had noted that it was not in dispute that the document, Ex. 103 dated 20-4-1943, the certified copy of
which was also produced at Ex. 51 was executed by the father of the plaintiffs in favour of Kansara
Soni Shivji Jetha. According to this document, an usufructuary mortgage was created on the suit
property for 20,000 koris and the possession was to be delivered to the mortgagees. Over and above
that a further amount of 10,000 koris was also paid to the mortgagor for which he had to pay interest
at the rate of half per cent per month. The mortgage period was fixed for 99 years and after the expiry
of that period, the mortgagor had to pay 30,000 koris as principal amount along with interest due on
10,000 koris. This was a registered document and it was acted upon by the parties.
8. The learned trial Judge held that the long term of 99 years for redemption coupled with other
circumstances, indicated that there was clog on equity of redemption. It was argued that the long term
for redemption was not necessarily a clog on equity of redemption. Certain decisions were referred to.
The trial court noted that there was no quarrel with the proposition of law that long term itself could
not amount to clog on equity of redemption, when the bargain otherwise was reasonable one and the
mortgagee had not taken any undue or unfair advantage. But, if in a mortgage with long term of
redemption, there were other circumstances to suggest that the bargain was unreasonable one and the
mortgagee had taken unfair advantage, then certainly long term also will be clog on equity of
redemption. It is a question to be judged in the light of the surrounding circumstances. It may be noted
here that there was a condition in the mortgage deed permitting construction of structure after
demolishing the existing structure, costs of which were to be paid by the mortgagor. After examining
the facts and the relevant decisions, the first appellate court came to the conclusion that the terms were
oppressive and harsh and there was clog on equity of redemption and the mortgagor should be freed
from that bondage.
9. Shri Rajinder Sachar, Shri B.K. Mehta as well as Shri Dholakia urged on behalf of their
respective clients that in former Kutch district, there was a custom to take mortgages for long term of
99 years and when the period was long, naturally the mortgagee would be required to give full
authority to repair and reconstruct the mortgaged property with a view to keep pace with new
demands of changing pattern, so the condition permitting the mortgagee to reconstruct the whole
premises was natural consequence of long term and that should not be treated as clog on equity of
redemption. The learned Assistant Judge had rejected the similar contention made before him on
behalf of the mortgagees and tenants in view of the decisions of the Gujarat High Court which were
also arising out of the decisions in the suits filed in Kutch district and in those cases it was held that
there was clog on equity of redemption. The learned Assistant Judge referred to another circumstance,
i.e., to the condition of mortgage which indicated the oppressive nature of the term. By mortgage deed
usufructuary mortgage was created for 20,000 koris only and additional mortgage of 10,000 koris was
also created for which the mortgagor had to pay interest at the rate of half per cent per month.
Furthermore, the mortgagor was not allowed to discharge interest liability periodically, but he had to
pay the whole amount of interest at the end of 99 years at the time of redemption of the mortgage.
Naturally, there would be huge accumulation of interest which for all practical probabilities in most of
the cases will be an impossibility to discharge. It was held that the purpose was to ensure that the right
of redemption could never be exercised. On the other hand, it was contended before the learned
Assistant Judge that the transaction was bona fide because reasonable consideration was paid as
mortgage money. There was no direct contact between the mortgagor and the mortgagee. There could
not be any collusion. The mortgagees were abroad. The learned Assistant Judge examined the
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evidence of one Madhavji Shivji Soni in order to show comparable instances for reasonableness of
the consideration. The learned Assistant Judge after discussing the evidence proceeded on the
assumption that the consideration paid as mortgage money was reasonable and proper and, according
to him, it did not make any difference if the other conditions in the mortgage deed were found to be
oppressive and amounting to clog on equity of redemption.
10. Attention of the learned Assistant Judge was drawn to the fact that this was a bona fide
transaction at the time when made, but subsequently, the prices of immovable properties increased so
the plaintiffs had come forward to file suits after a lapse of long time. It was highlighted that Plaintiff
1 was serving as a Civil Judge and if he came to know that the transaction was oppressive, he would
not have sat idle for such a long period. Reference was made to the decision of this Court in Seth
Ganga Dhar v. Shankar Lal [AIR 1958 SC 770]. We will examine that decision in detail. The
learned Assistant Judge came to the conclusion on point 1 that there was clog on equity of redemption
and accordingly answered issue 1 in the affirmative.
17. Shri Sachar drew our attention to the observations of the Judicial Committee in the case of
Aziz Khan v. Duni Chand [AIR 1918 PC 48], where it was held that even where the transaction in
question was undoubtedly improvident in the absence of any evidence to show that the moneylender
had unduly taken advantage of his position, it was difficult for a court of justice to give relief on
grounds of simple hardship. Shri Sachar tried to urge in the facts and circumstances of the instant case
that there is no evidence to lead to the conclusion that there was any undue influence. Great deal of
reliance, however, by the appellants as well as the respondents was placed on the observations of this
Court in Seth Ganga Dhar v. Shankar Lal. There, this Court observed that the rule against clog on
equity of redemption embodied in Section 60 of the Transfer of Property Act empowers the court not
only to relieve a mortgagor of a bargain whereby in certain circumstances his right to redeem the
mortgage is wholly taken away, but also where that right is restricted. The extent of the latter power
is, however, limited by the reason that gave rise to it, namely, the unconscionable nature of the
bargain, which, to a court of equity, would afford sufficient ground for relieving the mortgagor of his
burden, and its exercise must, therefore, depend on whether the bargain, in the facts and
circumstances of any particular case, was one imposed on the mortgagor by taking advantage of his
difficult and impecunious position at the time when he borrowed the money. In that case it was held
that in a suit for redemption where the mortgage deed, by two distinct and independent terms provided
that the mortgage would not be redeemed for eighty-five years and that it could be redeemed only
after that period and within six months thereafter, failing which the mortgagor would cease to have
any claim on the mortgaged property and the mortgage deed should be deemed to be a deed of sale in
favour of the mortgagee, and it was clearly evident from the facts and circumstances of the case that
the bargain was quite fair and as between parties dealing with each other on equal footing. It was held
that the term providing for a period of eighty-five years was not a clog on the equity of redemption
and the mere length of the period could not by itself lead to an inference that the bargain was in any
way oppressive or unreasonable. The term was enforceable in law and the suit for redemption filed
before the expiry of the period was premature. It was further held that the term that on the failure of
the mortgagor to redeem within the specified period of six months, he would lose his right to do so
and the mortgage deed was to be deemed to be a deed of sale in favour of the mortgagee, was clearly
a clog on the equity of redemption and as such invalid but its invalidity could not in any way affect
the validity of the other term as to the period of the mortgage, that stood apart. It was explained by
Sarkar, J. as the learned Chief Justice then was, that the rule against clogs on the equity of redemption
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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. This principle was clearly established
by the observations of Lindley, M.R. in Stanley v. Wilde, where the Master of Rolls observed as
follows:
“The principle is this: a mortgage is a conveyance of land or an assignment of chattels 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.”
18. 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. It was further
reiterated at page 515 of the Report in Seth Ganga Dhar case that the rule against clogs on the equity
of the 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. It is a power evolved by 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 is better to refer to the observations of Northington
L.C. in Vernon v. Bethell [(1762) 28 ER 838]. Lord Chancellor observed therein as follows:
“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
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 craft
may impose upon them.”
19. The same view was reiterated by Viscount Haldane L.C. in G. and C. Kreglinger v. New
Patagonia Meat and Cold Storage Company Ltd. [1914 AC 23], where it was observed at pages 35
and 36 of the report as follows:
“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.
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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.”
20. The reason 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. Length
of the term, according to Sarkar, J. in the aforesaid decision, was not by itself oppressive and could
not operate as a clog on the equity of redemption. There was a term in the mortgage deed that the
mortgagees could spend any amount on repairs and those expenses would be paid, according to the
account produced by the. mortgagees. All that it means was that in claiming moneys on account of
repairs and construction the mortgagees had to show from their accounts that they had spent these
moneys. This Court on that basis held that the clause which provided that the mortgage had to be
redeemed within the specified period of six months was bad. The principle, however, is that if it was
not an unconscionable bargain and it did not in effect deprive the mortgagor of his right to redeem the
mortgage or so to curtail his right to redeem that it has become illusory and non-existent, then there
was no clog on equity of redemption. It has to be borne in mind that the English authorities relied
upon by Sarkar, J. and the principles propounded by this Court in the case of Seth Ganga Dhar case
were in the background of a sedate and fixed state of affairs. The spiral and escalation of prices of the
immovable properties was not then there. Today, perhaps, a different conspectus would be required to
consider the right to redeem the property after considerable length of time pegging the price to a small
amount of money, the value of which is fast changing.
21. The rights and liabilities of the mortgagor are controlled by the provisions of Section 60 of the
Transfer of Property Act, 1882. The clog on redemption has been noted in Mulla’s Transfer of
Property Act, 7th edn., page 401 that a mortgage being a security for the debt, the right of redemption
continues although the mortgagor fails to pay the debt at due date. Any provision inserted to prevent,
evade or hamper redemption is void. That is implied in the maxim “once a mortgage always a
mortgage”. Collins, M.R. in Jarrah Timber & Wood Paving Corporation v. Samuel [(1903) 2 Ch 1]
at page 7 observed that it is the right of a mortgagor on redemption, by reason of the very nature of a
mortgage to get back the subject of the mortgage and to hold and enjoy as he was entitled to hold and
enjoy it before the mortgage.
22. The doctrine “clog on the equity of redemption” is a rule of justice, equity and good
conscience. It must be adopted in each case to the reality of the situation and the individuality of the
transaction. We must take note of the time, the condition, the price spiral, the term bargain and the
other obligations in the background of the financial conditions of the parties. Therefore, in our
opinion, in view of the evidence it is not possible to hold that there was no clog on the equity of
redemption in these cases.
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24. Our attention was drawn to the observations of the Allahabad High Court in Chhedi Lal v.
Babu Nandan [AIR 1944 All 204] where it was held that the provision inserted to prevent redemption
on payment or performance of the debt or obligation for which security was given, was a clog on
equity of redemption. Condition in mortgage was in that case that if mortgagee constructed new
building by demolition of mortgaged property which was kachcha structure, mortgagor would pay
cost of construction at the time of redemption. Stipulation in circumstances of the case, it was held,
did not amount to clog on equity of redemption. It was argued before us by the mortgagees that the
provision for the payment towards cost and expenses of repairs and construction did not amount to a
clog on the equity of redemption because the repairs and construction were to be effectuated to keep
the property in good condition. In the aforesaid decision Verma, J. at page 207 of the report observed
that in the case before the court it was not pleaded that any pressure and undue influence had been
exercised upon the mortgagors. Verma, J. referred to the observations of the Viscount Haldane L.C. in
G. & C. Kreglinger v. New Patagonia Meat and Cold Storage Co. and Lindley M.R. in Santley v.
Wilde. Sir Tej Bahadur Sapru argued before Verma, J. that it is not his contention that the mortgagee
in this case tried to gain a collateral advantage. His argument was that an onerous term has been
incorporated in the deed which placed such a burden on the mortgagor as to make it impossible for
him to redeem. There is a freedom of contract between the mortgagor and the mortgagee as observed
by Verma, J. at page 207 of the report. We must, however, observe that we live in a changed time.
Freedom of contract is permissible provided it does not lead to taking advantage of the oppressed or
depressed people. The law must transform itself to the social awareness. Poverty should not be unduly
permitted to curtail one’s right to borrow money on the ground of justice, equity and good conscience
on just terms. If it does, it is bad. Whether it does or does not, must, however, depend upon the facts
and the circumstances of each case.
25. Reference was also made to the case of Bhika v. Sheikh Amir [AIR 1923 Nag 60] where
there was no provision under which power was given to the executant of the deed to pay off the
amount which was the consideration for the deed, and no accounts were to be rendered or required. It
was held that relief against an agreement forming a clog on the equity of redemption can only be
obtained if it was challenged within a reasonable time. It was an equitable relief which cannot be
granted as a matter of course. In that decision Sri Vivian Bose, as the learned counsel appearing for
the appellant, unsuccessfully sought to obtain relief against an agreement containing a clog on the
equity of redemption.
26. Whether in the facts and the circumstances of these cases, the mortgage transaction amounted
to clog on the equity of redemption, is a mixed question of law and fact. Courts do not look with
favour at any clause or stipulation which clogs equity of redemption. A clog on the equity of
redemption is unjust and unequitable. The principles of English law, as we have noticed from the
decisions referred to hereinbefore which have been accepted by this Court in this country, looks with
disfavour at clogs on the equity of redemption. Section 60 of the Transfer of Property Act, in India,
also recognises the same position.
27. It is a right of the mortgagor on redemption, by reason of the very nature of the mortgage, to
get back the subject of the mortgage and to hold and enjoy as he was entitled to hold and enjoy it
before the mortgage. If he is prevented from doing so or is prevented from redeeming the mortgage,
such prevention is bad in law. If he is so prevented, the equity of redemption is affected by that
whether aptly or not, and it has always been termed as a clog. Such a clog is inequitable. The law does
not countenance it. Bearing the aforesaid background in mind, each case has to be judged and decided
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in its own perspective. As has been observed by this Court that long term for redemption by itself,
is not a clog on equity of redemption. Whether or not in a particular transaction there is clog on the
equity of redemption, depends primarily upon the period of redemption, the circumstances under
which the mortgage was created, the economic and financial position of the mortgagor, and his
relationship vis-a-vis him and the mortgagee, the economic and social conditions in a particular
country at a particular point of time, custom, if any, prevalent in the community or the society in
which the transaction takes place, and the totality of the circumstances under which a mortgage is
created, namely, circumstances of the parties, the time, the situation, the clauses for redemption either
for payment of interest or any other sum, the obligations of the mortgagee to construct or repair or
maintain the mortgaged property in cases of usufructuary mortgage to manage as a matter of prudent
management, these factors must be co-related to each other and viewed in a comprehensive
conspectus in the background of the facts and the circumstances of each case, to determine whether
these are clogs on equity of redemption.
28. These principles have been recognised by this Court in Ganga Dhar v. Shankar Lal. It has
also to be borne in mind that long term for redemption in respect of immovable properties was
prevalent at a time when things and the society were, more or less, in a static condition. We live in
changing circumstances. Mortgage is a security of loan. It is an axiomatic principle of life and law
that necessitous men are not free men. A mortgage is essentially and basically a conveyance in law or
an assignment of chattels as a security for the payment of debt or for discharge of some other
obligation for which it is given. The security must, therefore, be redeemable on the payment or
discharge of such debt or obligation. Any provision to the contrary, notwithstanding, is a clog or fetter
on the equity of redemption and, hence, bad and void. “Once a mortgage must always remain a
mortgage”, and must not be transformed into a conveyance or deprivation of the right over the
property.
29. This is the English law based on principles of equity. This is the Indian law based on justice,
equity and good conscience. We reiterate that position. Though, long term by itself as the period for
redemption is not necessarily a clog on equity but in the changing circumstances of inflation and
phenomenal increase in the prices of real estates, in this age of population explosion and
consciousness and need for habitat, long term, very long term, taken with other relevant factors,
would create a presumption that it is a clog on equity of redemption. If that is the position then
keeping in view the financial and economic conditions of the mortgagor, the clause obliging the
payment of interest even in case of usufructuary mortgage not periodically but at the time of ultimate
redemption imposing a burden on the mortgagor to redeem, the clauses permitting construction and
reconstruction of the building in this inflationary age and debiting the mortgagor with an obligation to
pay for the same as an obligation for redemption, would amount to clog on equity.
30. Section 60 of the Transfer of Property Act, 1882, conferred on the mortgagor the right of
redemption. This is a statutory right. The right of redemption is an incident of a subsisting mortgage
and it subsists so long as the mortgage subsists.
31. Whether in a particular case there is any clog on the equity of redemption, has to be decided
in view of its background of the particular case. The doctrine of clog on equity of redemption has to
be moulded in the modern conditions. See Mulla’s Transfer of Property Act, 17th edn., page 402.
Law does not favour any clog on equity of redemption.
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32. It is a settled law in England and in India that a mortgage cannot be made altogether
irredeemable or redemption made illusory. The law must respond and be responsive to the felt and
discernible compulsions of circumstances that would be equitable, fair and just, and unless there is
anything to the contrary in the statute, court must take cognisance of that fact and act accordingly. In
the context of fast changing circumstances and economic stability, long term for redemption makes a
mortgage an illusory mortage, though not decisive. It should prima facie be an indication as to how
clogs on equity of redemption should be judged.
33. In the facts and the circumstances and in view of the long period for redemption, the provision
for interest @ ½ per cent per annum payable on the principal amount at the end of the long period, the
clause regarding the repairs etc., and the mortgagor’s financial condition, all these suggest that there
was clog on equity. The submissions made by Mr Sachar and Mr Mehta are, therefore, unacceptable.
34. In that view of the matter, we are of the opinion that the decision of the High Court as well as
the courts below that there existed clog on the equity of redemption in case of these mortgages, is
correct and proper, and we hold so accordingly.
35. Before we dispose of the contentions on the second aspect, we must deal with some of the
decisions of the Gujarat High Court to which reference had been made and some of which was also
referred before us. We have noticed the decision of the Gujarat High Court in Khatubai Nathu Sumra
v. Raj Mulji Nanji. In Maganlal Chhotalal Chhatrapati v. Bhalchandra Chhaganlal Shah [(1974)
15 Guj LR 193], P.D. Desai, J. as the learned Chief Justice then was, held that the doctrine of clog on
the equity of redemption means that no contract between a mortgagor and mortgagee made at the time
of the mortgage and as a part of the mortgage transaction or, in other words, as a part of the loan.
would be valid if it in substance and effect prevents the mortgagor from getting back his property on
payment of what is due on his security. Any such bargain which has that effect is invalid. The learned
Judge reiterated that whether in a particular case long term amounted to a clog on the equity of
redemption had to be decided on the evidence on record which brings out the attending circumstances
or might arise by necessary implication on a combined reading of all the terms of the mortgage. The
learned Judge found that this long term of lease along with the cost of repairing or reconstruction to
be paid at the time of redemption by the mortgagor indicated that there was clog on equity of
redemption. The learned Judge referred to certain observations of Mr Justice Macklin of the Bombay
High Court where Justice Macklin had observed that anything which does have the appearance of
clogging redemption must be examined critically, and that if the conditions in the mortgage taken as a
whole and added together do create unnecessary difficulties in the way of redemption it seems that is
a greater or less clog upon the equity of redemption within the ordinary meaning of the term. In our
opinion, such observations will apply with greater force in the present inflationary market. The other
decision to which reference may be made is the decision of the Gujarat High Court in Soni Motiben v.
Hiralal Lakhamshi [AIR 1981 Guj 120]. This also reiterates the same principle. In Vadilal
Chhaganlal Soni v. Gokaldas Mansukh [AIR 1953 Bom 408] also, the same principle was reiterated.
In that case, it was held by Gajendragadkar, J., as the learned Chief Justice then was, that the
agreement between the mortgagor and mortgagee was that the mortgagor was to redeem the mortgage
99 years after its execution and the mortgagee was given full authority to build any structure on the
plot mortgaged after spending any amount he liked. It was held that the two terms of the mortgage
were so unreasonable and oppressive that these amounted to clog on the equity of redemption. Similar
was the position in the case of Sarjug Mahto v. Smt. Devrup Devi [AIR 1963 Pat 114], where also
the mortgage was for 99 years. In Chhedi Lal v. Babu Nandah [AIR 1944 All 204], the court
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reiterated that freedom of contract unless it is vitiated by undue influence or pressure of poverty
should be given a free play. In the inflationary world, long term for redemption would prima facie
raise a presumption of clog on the equity of redemption. See also the observations in Rashbehary
Ghose’s Law of Mortgage 6th edn. pages 227 and 228.
36. Bearing the aforesaid principles in mind, we must analyse the facts involved in these appeals.
It has been noticed in S.L.P. (Civil) No. 8219 of 1982 that the High Court of Gujarat by its order
impugned had dismissed the second appeal. The High Court had merely observed in dismissing the
second appeal that the first appellate court had followed the decision of the Gujarat High Court in
Khatubaj Nathu Sumra v. Rajgo Mulji Nanji. We have noted the salient features of the said decision.
The High Court, therefore, found no ground to interfere with the decision of the first appellate court
and accordingly dismissed the second appeal. The first appellate court by its judgment disposed of
Civil Regular Appeal No. 149 of 1978 and another civil appeal which was the appeal by the tenant
was also disposed of by the said judgment. The learned Judge of the appellate court had referred to
the ratio of the decision in Ganga Dhar v. Shankar Lal. The learned Judge bearing in mind the
principle of the aforesaid decision and the relevant clause of Ex. 103 came to the conclusion that the
clauses amounted to clog on the equity of redemption in the facts of this case. Shri Sachar tried to
urge before us that on the evidence and the facts in this case having regard to the position of the
parties, the transaction did not amount to clog on the equity of redemption. It was emphasised by the
first appellate court that the fact that the son of the mortgagor subsequently became Civil Judge would
not affect the position because what was relevant was the financial condition at the time of the
transaction. We have further to bear in mind that it has come out in the evidence that the father of the
plaintiff was residing in the suit property at the relevant time and there was no other residential house
except the suit property. The first appellate court, therefore, emphasised in our opinion rightly that if
there was no pressure from the creditor, nobody would like to mortgage the only house which is sole
abode on the earth.
37. In that view of the matter and in view of the position in law, we are of the opinion that the
first appellate Court was right in the view it took.
38. The first appellate Court referred to the decision of Kunjbiharilal v. Pandit Prag Narayan
[AIR 1922 Oudh 283]. In that case there was a condition that the mortgagor should pay interest along
with the principal amount at the time of redemption after 50 years. It was held that the intention was
to see that right of redemption could never be excercised. If the condition was such which would
result in making redemption rather difficult, if not impossible, it would be a clog on the equity of
redemption and could not be enforced. Similar was the position of the Allahabad High Court in Rajai
Singh v. Randhir Singh [AIR 1925 All 643]. There the term fixed for redemption was 96 years and
there was a stipulation for payment of interest along with principal not periodically but only at the
time of redemption. In the instant case before us the mortgagor was required to pay the whole amount
of interest at the end of 99 years which will practically make the redemption impossible. Applying the
well-settled principles which will be applicable to the facts of this case in determining whether there
was in fact a clog on the equity of redemption, we are of the opinion that the first applellate Court was
right in holding that there was a clog on equity of redemption.
52. In the premises, the appeals must fail and are dismissed. Civil Miscellaneous Petition in C.A.
No. 397 of 1980 must also fail and is dismissed.
