| Introduction | jurisprudence |
| sections | section 58 – 60 TPA |
| relevant Case laws | Ganga Dhar vs Shankar Lal Pomal Kanji vs Vrajlal Karsandas Shivdev Singh vs Sucha Singh |
| present problem | question related |
| conclusion | decision as per our reasoning |
A mortgage is a transfer of an interest in immovable property and it is given as a security for a loan. The ownership of an immovable property remains with the mortgagor itself but some interest in the property is transferred to the mortgagee who has given a loan.It is a transfer of limited interest in property.
In simple words, Mortgage is a transfer, but not the transfer of ownership rights and the main purpose of mortgage is a transfer of an interest to secure the payment of money advanced as loan.The transferor is called a Mortgagor and the transferee a Mortgagee.The principle money and interest of which payment is secured for time being are called the Mortgage- money and the instrument by which the transfer is effected is called mortgage deed.
A mortgage must be supported by consideration, which may be either money advanced by way of loan, or an existing or future debt, or the performance of an engagement giving rise to pecuniary liability.
Section 58 TPA:
“Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mortgage-deed” defined.—
A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.
Essentials of Mortgage:
- Two parties are there.
- Transfer of an interest.
- Interest made in specific immovable property.
- Transfer must be to secure the payment of a loan or to secure the performance of a contract.
Types of Mortgage:
- Simple
- Conditional
- Usufructuary
- English
- Deposit of Title Deeds
- Anamalous
In a simple mortgage, the mortgagor does not transfer immovable property to the mortgagee but agrees to pay the mortgage money.The mortgagee agrees on a condition that in the event of not paying the mortgage money the mortgagee has every right to sell the property and can use the proceeds of the sale and such a transaction is called a simple mortgage.
In Conditional mortgage, mortgagee places three conditions to the mortgagor, and the mortgagee shall have the right to sell the property if: (i) mortgagor defaults in payment of mortgage money on a certain date. (ii) as soon as the payment is made by the mortgagor the sale shall become void. (iii) on the payment of money by the mortgagor, the property is transferred and such a transaction is called a mortgage by conditional sale.
In Usufructuary mortgage, the mortgagor delivers the possession of the property to the mortgagee and authorises the mortgagee to retain such property until the payment is made by the mortgagor and further authorise him to receive the rent or profit arising from such mortgaged property and to appropriate the same instead of payment of interest. Such a transaction is called a Usufructuary transaction.
In English mortgage, the mortgagor transfers the property absolutely to the mortgagee and binds himself that he will repay the mortgage money on the specified date and lays down a condition that on repayment of money mortgagee shall re-transfer the property. Such a transaction is called an English mortgage transaction.
In deposit of title deeds mortgage, where a person is in Calcutta, Madras, Bombay and in any other towns as specified by the state government and the mortgagor delivers to a creditor or his agent the documents of title of immovable property with an intent to create security and then such a transaction is called Deposits of title-deeds.
A mortgage which is not any one of the mortgages mentioned above is called an anomalous mortgage.
Rights of a Mortgagor:
- Right of mortgagor to redeem : Once the money has become due on the specified date the mortgagor has the right to get back the mortgaged property on paying the money to the mortgagee.
- Right to transfer to the third party : the mortgagor may direct the mortgagee to assign the mortgage debt and authorise him to transfer the property to a third party instead of transferring him the same.
- Right to inspection and production of documents : the mortgagor may inspect anytime the document of title relating to the mortgaged property which is in the custody of the mortgagee.
- Accession to mortgaged property: during the subsistence of the mortgage if any accession is made to the mortgaged property where the property is in possession of the mortgagor itself and then the mortgagor has a right to take in accession after the redemption of the mortgage.
- Improvements to mortgaged property : during the subsistence of the mortgage if any improvement is made to the property where the property is in possession of the mortgagee and then the mortgagor has a right to take the improvements made to the property upon the redemption.
- Renewal of Mortgaged Lease : where the property which the mortgagor has given for mortgage is a leasehold property if the mortgagee renews the leases during the subsistence of mortgage the mortgagor shall obtain the benefit of the lease upon the redemption of the mortgagor.
- Mortgagor’s power to lease : mortgagor shall have the right to grant a lease of which is lawfully in possession with the mortgagee and such lease shall be binding on the mortgagee.
Liabilities of Mortgagor:
- Covenant for the title: there is an implied covenant that the mortgagor transferring the interest in the property to the mortgagee belongs to the mortgagor only.In case mortgagor makes a breach in the covenant the mortgagor is liable to compensate.
- To Imdenify for defective title: If it is determined that the property title held by the mortgagor is flawed or defective, the mortgagor is responsible for compensating the mortgagee for any damages incurred.
- To avoid waste: there is an implied duty on mortgagor that he shall not do any act which is injurious or destructive to the mortgaged property.
- improvements to mortgaged property: If improvements are made to the mortgaged property during the term of the mortgage and they are necessary, the mortgagor is responsible for covering the expenses incurred for these improvements.
Rights of Mortgagee:
- Right to foreclosure or Sale
- Right to Sue
- Right to Sell
- Right to appoint a receiver
- Right to accession to mortgaged property
Section 60. Right of mortgagor to redeem.—
At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee (a) to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:
Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a Court.The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption.
Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.
Redemption of portion of mortgaged property.—Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor.
Clog on Redemption (once a mortgage, always a mortgage)
The right to redeem is a natural incident of a mortgage. Notwithstanding any stipulation to the
contrary, a mortgagor, at any time after the principal money has become payable and before his
equity of redemption has been actually foreclosed (ie. till a decree is passed in foreclosure suit),
has, on payment of his debt. the right to get back his property free of all conditions or liens. Any
law or contract cannot take this right of redemption away from him; it cannot be detached from
the mortgage. This rule is well expressed by the maxim “once a mortgage always a mortgage”.
The true object of a mortgage being to give the lender security for repayment of his loan. the lender
ought not to be able in any case to claim to retain the security if his money is forthcoming from
the borrower within a reasonable time of his demanding it. It would be inequitable if the property
were forfeited for non-payment on the fixed day. For instance, the lender might intentionally evade
payment by hiding or some unexpected accident might prevent the borrower from having the
money ready.
The right of redemption is a statutory right, and it is so absolute that even the parties themselves
cannot defeat it. Nor can this right be fettered by any condition.
The doctrine “clog on the equity of redemption” is a rule of equity, justice and good conscience. However, it may be noted that the doctrine relates only to dealing which take place between the parties to a mortgage at the time when the contract of mortgage is entered into it does not apply where they subsequently vary the terms upon which the mortgage may be redeemed. The doctrine is also subject to the mortgagee’s rights prior to the mortgage. The doctrine is similar to the ‘rule against perpetuity. The principle is that no one can take away the right which the law vests in him. What is a clog on equity of redemption is, however, a matter of fact in each case (depending upon the nature of transaction, the time the condition the price spiral, the term of bargain and the other obligations in the background of the financial conditions of the parties, etc.)
Relevant Case Laws:
Ganga Dhar vs Shankar Lal
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.
issue:
Whether the term in mortgage instrument prevents the right to redeem?
judgement:
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.
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.
Pomal Kanji vs Vrajlal Karsandas
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.
issue:
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?
judgement:
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.
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.
Shivdev Singh vs Sucha Singh
facts:
Claiming to be the owner of the disputed property being land measuring 23 canals 2 marlas situate in village Sansra, Tehsil Ajnala, Punjab, the respondent plaintiff field a suit for possesion by way of redemption against the appellants in the Court of Additional Senior Sub Judge, Ajnala. The suit was decreed by the trial Court with a direction for delivery of possession by way of redemption on paying depositing the mortgage money of Rs. 7,000/- minus the cost of the decree. The appeal filed by the appellants was dismissed by the First Appellate Court on 25th July, 1998 and second appeal was dismissed vide the judgment impunged in this appeal.
issue:
Whether the period of 99 years of mortgage is a clog on the equity of redemption?
judgment:
In the context of fast-changing circumstances and economic stability, long term for redemption makes a mortgage an illusory mortgage, though not decisive. It should prima facie be an indication as to how clogs on equity of redemption should be judged.
It was further held that Section 60 of the Transfer of Property Act confers on the mortgagor the right of redemption which is a statutory right. The right of redemption is an incident of a subsisting mortgage and it subsists so long as the mortgage subsists.
Whether or not in a particular transaction there is a 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-à-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.
The mortgage was found to be in an advantageous position qua the mortgagor.
The court held that the condition postponing the right of redemption for a period of 99 years for a meagre sum amounted to a clog; more so as the mortgagor was hard pressed.
A’ executed an Anomalous mortgage of his land in favour of ‘B’ in 2010 for a period of 30 years with a condition that entire amount along with the interest would be payable at the time of redemption and property can be redeemed within 6 months after the completion of term. In 2015, ‘A’ expressed his intention to redeem the mortgage on ‘B’s refusal, ‘A’ filed suit for redemption of mortgage. ‘B’ pleads that such suit is premature & not maintainable. Decide.
Answer: B’s plea that the suit is premature and not maintainable is correct. The suit for redemption filed by A in 2015 is not maintainable as it is before the agreed redemption period. Therefore, the court should dismiss the suit on the grounds of prematurity.
On 1st September, 1990, Shyam executed a mortgage deed in favour of Krishan with the following conditions: (i) That Shyam or his heirs shall not be entitled to redeem the property within a period of 87 years. (ii) That after expiry of 87 years, it shall be redeemed within a period of 180 days and in case of failure to do so, the deed shall be deemed to be a sale deed. State whether the above conditions can be enforced against Shyam or his heirs. Discuss with the help of leading rulings.
Answer: Both conditions stipulated in the mortgage deed executed by Shyam in favor of Krishan are likely to be held unenforceable: (i)The 87-year period restriction on redemption is excessive and constitutes a clog on redemption. (ii)The conversion of the mortgage into a sale deed if not redeemed within 180 days after 87 years imposes an unfair penalty and further restricts the right of redemption.
Therefore, these conditions cannot be enforced against Shyam or his heirs.
