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Right of Redemption under Transfer of Property Act

Updated: May 3


Right to redemption under Transfer of property Act
Right to redemption under Transfer of property Act

Content:-


Right Of A Mortgagor To Redeem (Sec. 60)


As per Section 60 of the Transfer of Property Act, the mortgagor holds the prerogative to redeem the mortgage once the principal money becomes due. Upon payment or tender of the mortgage money, the mortgagor is entitled to:


- Retrieve the mortgage instrument along with all related title deeds.


- Obtain possession of the mortgaged property if the mortgagee is in possession.


- Demand either the retransfer of the property at the mortgagor's expense or a written acknowledgment of the extinguishment of the mortgagee's rights, particularly if the mortgage was executed through a registered instrument.


The paramount right vested in the mortgagor is the right to redeem the mortgage. 'Redemption' entails settling the mortgage debt and reclaiming ownership of the mortgaged property. This entitlement of the mortgagor, known as the 'right of redemption,' signifies the liberation or release of the mortgaged property upon repayment of the loan.


However, this right may be extinguished by the actions of the parties or by a court decree. Additionally, any provision stipulating that the mortgagee must receive reasonable notice before the payment of the principal money remains valid.


This remedy is accessible to the mortgagor only prior to the mortgagee initiating a suit for mortgage enforcement. It is crucial to note that the mortgagor cannot exercise the right to redeem before the mortgage money becomes due, i.e., before the specified payment date for the mortgage money.


Clog on Redemption (‘Once a Mortgage Always a Mortgage’)


A mortgage, by its very nature, is always subject to redemption. The right to redeem is inherent to a mortgage transaction. Despite any contractual provision to the contrary, a mortgagor retains the right to reclaim their property by settling the debt at any time after the principal money becomes due and before foreclosure occurs.


Until a decree is passed in a foreclosure suit, the mortgagor's equity of redemption remains intact. This fundamental principle is encapsulated in the maxim "once a mortgage, always a mortgage."


The essence of a mortgage is to provide the lender with security for repayment of the loan. It would be unjust if the lender were allowed to retain the security even after the borrower is capable of repaying the debt within a reasonable timeframe.


For instance, unforeseen circumstances or deliberate evasion by the lender should not result in the forfeiture of the property due to non-payment on the stipulated date.


The right of redemption is not merely a contractual right; it is a statutory right that cannot be circumvented or restricted by any agreement between the parties.


Even if the mortgage deed contains provisions hindering the right of redemption, such conditions are considered as impediments or fetters on redemption and are deemed null and void under the law.


The principle underlying the doctrine of "clog on the equity of redemption" is to safeguard the interests of the mortgagor, recognizing the inherent inequality in bargaining power between the mortgagor and mortgagee.


Any condition that unduly restricts the mortgagor's right to redeem the property, regardless of whether initially agreed to by the mortgagor, is deemed unenforceable by law.


The doctrine of "clog on the equity of redemption" applies to agreements made at the time of entering into the mortgage contract and does not extend to subsequent variations in the terms of redemption. Furthermore, it is subject to the mortgagee's rights established prior to the mortgage.


Case Laws

Some of the illustrative cases are:


(i) Condition of Sale in Default:

If a term of the mortgage stipulates that in the event of the mortgagor's failure to redeem the mortgage within a specified period, the mortgagor forfeits any claim over the mortgaged property, and the mortgage deed is automatically converted into a deed of sale in favor of the mortgagee, such a condition cannot be enforced.


It is considered a clog on the mortgagor's right of redemption, as established in the case of Gangadhar v Shankar Lal (AIR 1958 SC 773).


However, if a separate sale transaction is executed in conjunction with the mortgage or upon the mortgagor's voluntary surrender of rights, it remains valid and effectively extinguishes the mortgagor's right of redemption.



(ii) Long Term for Redemption:

When a mortgage can only be executed by a mortgagor who is of legal age, and the term of the mortgage exceeds 100 years, it may raise concerns regarding the mortgagor's ability to redeem the property within their lifetime.


Such a condition may prima facie appear to constitute a clog on the right of redemption. However, the Supreme Court has held that a long redemption period is not inherently indicative of a clog unless there is evidence of fraud or undue influence.


(iii) Stipulation Barring Mortgagor's Right of Redemption After Certain Period

According to Sec. 60, the mortgagor's right to redeem the property arises after the principal money becomes due.


Hence, if a deed stipulates that the mortgagor cannot redeem the mortgage for a period of 10 years, the right to redeem would also arise after 10 years, as the principal money becomes due only after that period.


In the absence of a special condition allowing redemption during the mortgage term, the right of redemption typically arises only upon the expiration of the specified period.


Since the legislature does not specify a time for repayment, parties may do so, and the right arises after the expiration of that period. If no specific time is fixed, redemption can occur at any time.


(iv) Condition Postponing Redemption in case of Default

In Mohammad Sher Khan v Seth Swami Dayal (1922) 44 All 185, a mortgage for 5 years included a condition allowing the mortgagee to enter into possession for 12 years if the money was not paid, during which the mortgagor could not redeem. This condition was deemed a clog as it hindered the existing right to redeem.


Similarly, a condition granting the mortgagee the right to enter possession as a tenant in case of default by the mortgagor is void (Ramlochan Singh v Pradip Singh AIR 1959 Pat 230).


Also, a condition denying the mortgagee the right of redemption until the loan of a subsequent mortgage is paid is considered a clog (Rangli v Peay Lal AIR 1940 AU 101).


In a mortgage lasting 40 years, a covenant for automatic renewal for another 40 years in case of default has been held to be a clog [Sarbdawan v Singh (1914) ILR 36 AU 551].


Similarly, a covenant by the mortgagee for perpetual renewal of the mortgage is also considered a clog [Neelakhandan v Ananthakrishna (1907) ILR 30 Mad 61].


However, a condition allowing redemption only in a specific month of the year (e.g., June) is not considered a clog (Kripal v Shewaber AIR 1930 AU 283).


Conversely, a condition allowing redemption only on a specific date after 60 years and no other day is considered a clog (Bhulla v Bachcha AIR 1931 AU 380).


(v) Restraint on Alienation

A stipulation in a mortgage-deed that the mortgagor shaU not alienate the mortgaged property or sha not take loan on the security of the mortgaged property has been held to be a clog [Ram Saran v Amrit (1980) 3 AU 369]. 


(vii) Penalty in case of Default (Collateral Benefit/Burden)

An agreement that provides a collateral benefit to the mortgagee, thereby imposing a collateral burden on the mortgagor, may be deemed void or invalid based on the terms and circumstances. Such contracts are considered valid if they are not oppressive, do not resemble penalties, and do not contradict the equity of redemption [Kreglinger’s case (1914) A.C. 25].


A stipulation to charge an enhanced rate of interest from the date of mortgage in case of default has been deemed a clog. However, if there is no undue influence, a high rate of interest is not necessarily considered a clog.

The principles outlined in Kreglinger’s case are not applicable in India. A collateral benefit, regardless of its effect on the land, cannot extend beyond the redemption period [Bhimrao v Sakharam (1922) 46 Bom. 409]. Conditions such as granting the mortgagee a right of pre-emption or partnership in a firm intended as mere security are seen as unfair and constitute clogs.


Granting a lease during the mortgage period, paying a fixed annual sum for repairs to a possessory mortgagee, or compensating the mortgagee for managing a mortgaged mill are not considered clogs on equity of redemption. However, a condition allowing the mortgagee to remain in possession as a permanent tenant even after redemption has been held to be a clog [Maina Devi v Thakur Mansingh (AIR 1957 A.P. 30)]. 



Leading Case Laws


  1. In the case of GANGADHAR v SHANKAR LAL (AIR 1958 SC 773), the mortgage agreement included a provision stating that the mortgagor could not redeem the property for 85 years, and if not redeemed within six months thereafter, the property would be considered sold to the mortgagee. The appellant argued that this condition was a clog on the equity of redemption, rendering it invalid. However, the Supreme Court held that the long-term condition alone did not constitute a clog unless it was found to be oppressive or unreasonable.


The court emphasised that the power to relieve a mortgagor from such bargains depends on whether it was obtained unfairly, taking advantage of the mortgagor's circumstances. The court's jurisdiction to grant relief against clogs on the equity of redemption is based on protecting necessitous individuals from unfair terms imposed by lenders.


However, the court ruled that the mortgagor's right to redeem continued beyond the specified six-month period after the 85-year term expired.



  1. In the case of POMAL KANJI GOVINDJI v VRAJLAL KARSANDAS PUROHIT (AIR 1989 SC 436), the issue revolved around the mortgagors' right to redeem the property before the stipulated period of 99 years. The mortgage agreement included conditions that restricted the mortgagors' ability to redeem the property and imposed significant obligations on them. The court held that these conditions amounted to a clog on the equity of redemption.


The court emphasised that freedom of contract should not exploit vulnerable individuals, and the law should evolve to reflect social awareness. The right of the mortgagor to redeem has been safeguarded by the courts over the years, expressed through the maxim 'once a mortgage, always a mortgage,' and the avoidance of provisions obstructing redemption as "clogs on redemption."


The court noted that a long-term redemption period alone does not necessarily constitute a clog, and each case must be evaluated based on various factors, including the circumstances of the mortgage creation, the economic position of the parties, prevailing customs, and the totality of circumstances.


It reiterated that any clause or stipulation hindering the equity of redemption is unjust and inequitable, emphasising the importance of adapting the doctrine of "clog on the equity of redemption" to the reality of each transaction.


Ultimately, the court ruled that in the case at hand, the conditions imposed in the mortgage agreement made redemption practically impossible, thereby constituting a clog on the mortgagor's right of redemption.



  1. In the case of SHIVDEV SINGH v SUCHA SINGH (AIR 2000 SC 1935), the dispute centred around the mortgagors' right to redeem a property mortgaged for a period of 99 years. The mortgagors argued that this clause constituted a clog on the equity of redemption, hindering their ability to reclaim the property.


The trial court and the appellate court both ruled in favor of the mortgagors, holding that the clause prescribing the lengthy mortgage period indeed constituted a clog on the equity of redemption. They emphasized that the right of redemption is a statutory and legal right that cannot be extinguished by any agreement made at the time of the mortgage.


Furthermore, the courts noted the need to adapt the doctrine of clog on the equity of redemption to modern conditions. They stressed that a mortgage cannot be made altogether irredeemable or redemption made illusory, especially in light of changing economic circumstances.


Ultimately, the courts upheld the findings that the mortgage deed's 99-year term constituted a clog on the equity of redemption, considering the financial position of the mortgagor and the substantial benefits accrued to the mortgagee over the years.


The courts affirmed that the mortgagors were entitled to redeem the property, and no interference was required with the lower courts' decisions.



Conditions amounting to Clog Void ab initio or Voidable

A clog is merely voidable and not void ab initio (i.e. deemed to be nonexisting).


In the case of Sangar Gagu Dhula v Shah Laxmiben Tejshi (AIR 2001 GUJ. 329), the court addressed the issue of a mortgagor seeking redemption before the expiry of a stipulated 99-year period, arguing that such a long term constituted a clog on the equity of redemption.


The mortgage-deed contained a clause delaying redemption for 99 years, prompting the heirs of the mortgagor to file a suit for redemption before the stipulated period elapsed. The lower courts found the suit barred by limitation despite recognizing the oppressive nature of the clause.


Key issues before the court were whether the clause was void ab initio or merely voidable, and when the period of limitation begins for filing a suit for redemption.


The court emphasized that the right to redeem accrues only when the clog on the equity of redemption is lifted, rejecting the notion of a retrospective cause of action. It held that limitation begins to run from the date of lifting the clog, not from the execution of the mortgage deed.


The decision clarified that a suit challenging the oppressive clause and seeking redemption cannot be deemed time-barred, provided it includes a prayer for lifting the clog.


Ultimately, the court ruled that limitation begins to run only when the clog on the equity of redemption is removed, ensuring that a suit for redemption, coupled with a request to lift the clog, cannot be barred by limitation.



Conclusion

Any provision in the original mortgagee-deed to the effect that if the debt is not paid at the proper time, the mortgagee shall become the owner of the property is void, and indeed the courts treat as void any provisions which clog the right to redeem i.e. either makes redemption unduly difficult or provides that the mortgagee shall retain some right affecting property after the debt has been redeemed.



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