Table of Cases
Introduction
“A mortgage at a Common Law was strictly an estate upon condition that the estate will be forfeited upon he breach of condition….Equity thus turned an absolute conveyance at Common Law into a real security or a pledge for the repayment of a debt. ”
-William on Real Property[i]
What is generally understood by the term mortgage is a conveyance of land or other immovable property as security for the payment of money. Such mortgage is made to secure the repayment of money, which is borrowed by the owner of property mortgaged. The first essential immutable characteristic of a mortgage is the mortgagors right to redeem. The idea of mortgages seems to have arisen in Roman law where due performance was secured by “pressurizing the debtors will or causing him inconvenience” by keeping him out of possession or ownership so that he can repay the money as early as possible. This was a very primitive way of dealing with the debtor but probably was in tune with the time.[ii]
Present paper attempts to give the reader a coherent idea of mortgagor’s this specific right. For this the next few pages are divided into three chapters. In the first chapter account of transformation of law from Anglo-Saxon times to 18th century is given in sufficient detail. After having developed a preliminary idea of ‘equity of redemption’ the researcher has taken various cases, using them as examples to enunciate upon the principles and to understand the modern judicial response to the rights of mortgagee. In the last the researcher has tried to test the viability of the doctrine of equity of redemption in modern times.
Present paper attempts to sketch the significance of the right of equity of redemption in mortgage transactions.
Scope and Limitations:
Scope of the present paper is to conceptualise and to analyse the doctrine of clog on equity of redemption. While writing the paper the biggest hurdle that the researcher had to face was of unavailability of certain old original judgements.
Research Questions:
I have attempted to answer the following questions in the present paper:
First chapter, as is evident by the title, aims to bring trace the evolution of doctrine of equity of redemption.
Second chapter has dealt with the various instances of clogs on equity of redemption?
Third chapter focuses upon the issue of the viability of the doctrine in increasingly becoming competitive market.
Style of Writing:
This paper has largely descriptive style of writing. Wherever necessary the researcher has analysed and criticized the various aspects also.
Mode of Citation:
A uniform mode of citation is followed throughout the project.
Articles in the present paper have been cited in the following manner:
Name of the Author, “Name of the article”, Vol. No. (Issue No.-if applicable) Name of the Journal Page no. (starting) (Year of Publication), Page No. (May Not be applicable for certain articles taken from websites).
Books in the present paper have been cited in this manner:
Name of the author (or Editor), Title of the Book, (Place of Publication: Publishing Co., Edition (if applicable), Year), Vol. No.(if applicable), Page No..
Sources of Data:
Mainly secondary sources of data such as articles, books and electronic resources have been used to answer the various research questions.
For some long years after it, the mortgage was often made by granting a term of years, which was conditional on its ceasing with the repayment of the money lent. The terms of years gave the lender possession of the land. The term of years gave the lender possession of the land. By the end of the thirteenth century the delivery of possession was also be accompanied by a charter of feoffment[iv] which would confer the right to the fee simple[v] if the money was not repaid.[vi] It was nothing but a situation in which the mortgagor conveyed the land to the mortgagee in the fee simple, subject to a condition that the mortgagor might re-enter and determine the mortgagee’s status if the money lent was repaid on the stipulated date.[vii] This must be noted that this condition was construed strictly: if the mortgagor was even a single day late in offering to repay the money, he would lose his land forever.[viii]
This forfeiture of the land because of inability to pay the debt on a certain date soon amounted to be realised as cause of hardship. There are reports of petitions being found in the middle of fifteenth century praying relief from forfeiture if the money be paid at a later date. In the reign of Edward IV there are evidences of the fact that the Chancellor by now had acquired some sort of jurisdiction, which was recognized even by the common law courts. In 1469 it was pointed out, in respect of a claim to recover land on repayment of the loan that “although there is no remedy in our law, he may have subpoena if he pays the money.” However scope of this relief was very limited. This relief was granted where failure to redeem was due to accident or misfortune or to any other ground on which equity was in the habit of interfering in private transactions.[ix]
Later during the early seventeenth century, the Chancellor began to recognise the inherent unfairness in situations where loan contracts had been repaid but, because repayment did not strictly comply with the terms of the contract, the mortgagor had no legal right to enforce a reconveyance of the secured property. The Court of Chancery felt that where a lender refused to reconvey the property that he or she had impliedly agreed to do once the debt had been settled, it amounted to bad faith, and it would be against the conscience of the court to condone such behaviour. In this fashion, equity first began to interest itself in mortgage transactions in some concrete form.[x]
As per Maitland “In consequence of its doctrine that a mortgage is merely a security for money, a security which can be redeemed although, according to its plain wording of the mortgage deed, the mortgagee has become the absolute owner of the land, [the Courts of chancery] drew almost every dispute about mortgages into the sphere of its jurisdiction and had the last word to say about them.”[xi]
Hence, during the early stages, the reason underlying intervention by the Chancery jurisdiction stemmed from the belief that in conscience, relief against forfeiture of the mortgagor’s interest should be granted.
Thus even after the day fixed for payment i.e. after the mortgagor had lost his legal right to redeem, he was deemed to have an equitable right to redeem his estate within a reasonable time of the principal, interests and costs. This right of mortgagee, after the mortgagor has become the absolute owner of land according to the provisions of the mortgage deed itself is known as the mortgagor’s equity of redemption. According to Maitland owing to the action of equity, the mortgage deed became “one long suppressio veri and suggestio falsi. It does not in the least explain the rights of the parties; it suggests that they are other than what really they are.”[xii] In other words, while the deed said that if the mortgagor defaulted in paying off the loan with the interest by the date fixed for payment, the mortgagee would at once become the absolute owner of the mortgaged property and in opposition to it equity said that even after the date fixed, the mortgagor would be entitled to redeem the mortgage on payment, at any time before a sale or foreclosure of the mortgage has taken place.[xiii]
Once the doctrine of redemption was formulated, it came to receive the most anxious protection of the Court of Equity, which held that the equity of redemption could not be barred or fettered in any way, not even by express stipulation.
It must be noted that the equitable right to redeem is not same as the equity of redemption. Equitable right to redeem is a right conferred by the equity to redeem at any time after the stipulated date; but it is exercisable only on terms considered proper by equity, for he who seeks equity must do equity. Equitable right to redeem doesn’t arise until the contractual date for redemption has passed whereas the equity of redemption arises as soon as mortgage is made. Secondly, and more important, the equitable right to redeem is a particular right, whereas the equity of redemption is an equitable interest in the land consisting of the sum total of mortgagor’s rights in property. Although at law he has parted with his land and has only a limited right to recover it, in equity he is owner of the land, though subject to the mortgage; the mortgagee on the other hand, is at law the owner but in equity a mere encumbrancer.[xiv]
In other words the mortgagor’s equitable right to redeem coupled with other rights in the property constitute his equity of redemption.[xv]
Clogs on Equity of Redemption: A Study Through Case Laws
As is evident from the preceding chapter that equity regarded mortgage as solely a security for a loan with interest and the loan-seeking mortgagor as being in need of protection. It therefore developed the following three principles[xvi]:
(a) That the mortgagor is allowed to redeem even after the legal date has passed so long as he repays all money outstanding under the mortgage.
(b) That any term of the mortgage which is a clog on the equity of redemption will be void and can be ignored by the mortgagor.
(c) That equity will apply to the above two principles to any transaction, which is in substance a mortgage whatever outward form the transaction takes.
As far as Indian position in this regard is considered, as much of the Indian law stems from English law, rights and liabilities of mortgagor in transfer of property being no exception to the rule, is also congruous (in many aspects) with the corresponding English position. These rights are dealt with in s.60 of the Transfer of Property Act, 1882.[xvii]
As is clear from the reading of section 60 that the right of redemption in India is a statutory right and therefore cannot be extinguished even by express agreement made at the time of mortgage as part of transaction. This right of redemption is an incident of a subsisting mortgage and it subsists as long as mortgage subsists.[xviii] Right of redemption presupposes the existence of a ‘mortgage’.[xix]
It must also be noted that the section 60 is not prefaced by any words like ‘in the absence of contract to contrary’. Therefore the right of redemption is a statutory right, which can be fettered by any condition that impedes or prevents redemption. Any such condition is void as clog on redemption.
Now the researcher would take a few instances in the form of cases to reflect upon the judicial attitude.
In the case of Ganga Dhar v. Shankar Lal[xx], the Supreme Court of India observed that the Court’s jurisdiction to relieve a mortgagor from his bargain depends upon whether it was obtained by taking advantage of any difficulty or embarrassment that mortgagor might have been in at the time of borrowing the money on the mortgage. The question therefore is whether there is anything unconscionable in the agreement, which depends upon facts and has to be decided on the facts of each case.
In this case in the mortgage deed there was a stipulation, which provided that mortgagor would be entitled to redeem for a period of 85 years, and thereafter he should redeem within six months and not thereafter. Hon’ble Court held that the latter term amounted to clog and was invalid and must be ignored. But the Court also made it clear that this did not have any bearing on the other clause i.e. of prohibition on redemption before the expiry of 85 years. The Court here rejected the contention on behalf of the mortgagor that the aforesaid term of 85 years was a clog on the equity on the following grounds:
(a) The mortgagee’s right to enforce the mortgage being co-extensive with the mortgagee’s right to redeem, the mortgagor can not demand payment of his money before the expiry of the period of eighty-five years. Hence, the clause postponing redemption operated equally on both the parties.
(b) The circumstances existing at the time of the execution of the mortgage showed that the bargain had been freely made.
Though the court had not referred to in the above-mentioned case to an English decision the principle of which in the opinion of the researcher however has been adopted by the court. In the case of Knightsbride Estates Trust Ltd. v. Byrne[xxi] a freehold estate was mortgaged which was repayable by instalments over forty years. When the mortgagors claimed to redeem just after five years later, it was held that they could not: the postponement for forty years was held valid because it was a commercial arrangement between businessmen, not an oppressive bargain where the borrower was at the mercy of an unscrupulous lender.[xxii]
In an another case of Ajit Singh v. Kakbhir Singh[xxiii] a clause in the mortgage deed which stipulated that the land would not be redeemable for a period of 95 years was held to be a clog on the equity and the mortgagor was allowed to redeem the suit land before the expiry of the stipulated period of 95 years fixed for redemption in the mortgage deed ignoring the clog clause, taking into consideration the fact that at the time when mortgage was executed, the mortgagee was in financial difficulty and addicted to alcohol.
However the principles upon which above cases were decided were given a little twist by the Supreme Court in the case of Pomal Kanji Govindji v. Vrajlal Karsandas Purohit & Ors.[xxiv] The court in this case observed that though the long term by itself as the period for redemption is not necessarily a clog on the equity but in the changing economic scenarios it would create a presumption that it would be a clog. Here court specifically mentioned that the time since when Ganga Dhar v. Shankar Lal[xxv] is decided has undergone an enormous change. It further observed that 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 and the times have changed now.[xxvi]
In the opinion of the researcher this was the correct view taken by the Hon’ble Supreme Court necessitated by the needs of the changing times. In the instant case it was held that the facts that there was a long period of 99 years for redemption; the provision for interest @1/2 per annum payable on the principle amount at the end of long period…etc and the mortgagor’s financial condition suggested that there was a clog on the equity.
In the case of Murarilal v. Devkaran[xxvii] where a clause in the mortgage deed stipulated that if the debt was not paid off within the expiry of the 15 years, the mortgagee would become absolute owner of the mortgaged property was held to be a clog on the equity of redemption.[xxviii]
This has been followed in the case of Jadam Jampur Bai v. Jinki Sidappa and another[xxix]. In this case in a deed of conditional sale it was recited by the transferor, “if we do not pay your amount by the due date (viz. within five years) we agree to this document being treated as sale deed.”[xxx] Here Hon’ble High Court said that the conveyance was not a sale but was to operate as sale after the period of five years if the amount was not paid, and the transferor was entitled to redeem. The recital that “after the due date you and your heirs will have the absolute powers in respect of the property. We and our heirs will not have any rights”[xxxi] would only amount to a clog on the equity of redemption.
Similarly a stipulation in a mortgage deed that after the deposit of the title deeds in suits in which the mortgage property was involved, the mortgagor would execute a deed in sale in favour of the mortgagee, failing which the mortgagee can have the sale deed executed in his favour through the court was held to be a clog on the equity of redemption.[xxxii]
However it must be taken note of that there is nothing in the Transfer of Property Act, which prevents the mortgagee from buying the equity of redemption. In the case of Reeve v. Lisle[xxxiii] it was observed, “the mortgagee cannot at the moment when he is lending his money and taking his security, enter into an agreement the effect of which would be that the mortgagor should have no equity of redemption. But there is nothing to prevent that being done by an agreement which in substance and in fact is subsequent and independent of the original bargain.”[xxxiv]
This principle has been followed in India in Shankar Din v. Gopal[xxxv] whereby it was held that a subsequent and independent contract qualifying the right of redemption is valid.[xxxvi]
This fact is also made clear by the section 60 of the Transfer of Property Act, which says that the right of redemption may be extinguished by the act of parties. This in the opinion of the researcher means nothing but an act subsequent to the execution of mortgage.
The doctrine of clogging on the equity in order to guard against the oppression of necessitous landowners by moneylenders was extended so that a stipulations in a mortgage besides the payment of principal, interest…etc were regarded as bad by the court if they extended beyond the period of redemption.[xxxvii] A modern authority on this point is Kreglinger v. New Patagonia Meat and Cold Storage Co. Ltd.[xxxviii] Here money was lent to a limited company, secured by a floating charge on the company’s business. It was agreed between the parties that the company should not sell sheep skins to any person other than the lenders, if the lenders were willing to pay as good as a price was obtainable elsewhere. It was held that the lenders could exercise their right of pre-emption, notwithstanding the repayment of loan before the expiry of five years. Here the right was held to not to form any part of mortgage transaction but to be a collateral contract entered into as a condition of the company obtaining the loan.[xxxix]
The above-mentioned case also laid down that there is no rule in equity which prevents a mortgagee from stipulating for any collateral advantage to endure beyond redemption provided, such advantage is not
(a) unfair and unconscionable, or
(b) in the nature of a penalty clogging the equity of redemption, or
(c) otherwise inconsistent with or repugnant to the right to redeem.[xl]
In other words, a mortgagee can stipulate for a collateral benefit to endure beyond redemption, if it does not prevent free dealings with the property mortgaged.
In the case of Maina Devi v. Thakur Mansingh & others[xli] while dealing with a clause in the mortgage deed which provided that after redemption the mortgagee should continue in possession as permanent tenant, Guman Mal Lodha J. said that it would be inequitable and injustice, if under the garb of advancing monies as mortgaee to the mortgagor, a mortgagee is allowed to abuse and misuse his possession and become a perpetual tenant which, in the present set of circumstances would tantamount to giving him almost right to enjoy the property unless evicted by due course of law in separate proceedings under the rent Control Act.
These were a few instances of clogs on equity of redemption.
The Role of Equity of Redemption in Modern Commercial Dealings
Once a mortgage, always a mortgage. This often repeated comment summarizes a central tenet of mortgage law: It essentially implies, every mortgage borrower has the right, at any time after default, to redeem the collateral by repaying the debt until the lender has completed a ‘foreclosure’ on the property.
By now, it has also become very clear that the present law in the cases of mortgage favours the mortgagee under the garb of traditional justification of unfair bargaining power. This unfair bargaining power justification is susceptible to a few strong criticisms in the increasingly becoming competitive credit market.
First of all this traditional justification does not clearly explain as to why the sophisticated-commercial borrowers are put on the same paddle of necessitious borrower. Let us take an example and make it very clear. Let us assume a person, namely Vishal, a contractor, who owns assets of worth Rs.5 crores goes to ICICI bank to ask for a loan of Rs.3 crores payable within two years for building an apartment. Now as it is obvious that the ICICI bank by granting the loan would incur a huge risk. Naturally, for the sake of safety it asks for security which is given to it in terms of a piece of land. Keeping in mind the rate of Non Performing Assets, ICICI amidst of other clauses also adds a stipulation that in case of default it would become the owner of property.
Any one having a little knowledge of Transfer of property would instantaneously reply that such term is void as being a clog on the equity of redemption.
As a result of this in the opinion of the researcher, ICICI bank, which has performed its obligation, will unnecessarily have to incur the additional cost of going to court for seeking a declaration of foreclosure. In the similar various cases if the argument for maintaining the present approach is vulnerability of the borrower, then that in the opinion of the researcher does not hold water in the changing times.
It is submitted that the researcher has taken such a view because, as mentioned earlier that the market is increasingly going competitive and if the mortgagor finds that the mortgagee is taking undue advantage of his position, he can go to another office down the block. On the possibility of counter argument of there being no competitiveness in the market, it is submitted that prohibition of waiver of the equity of redemption will not solve the problem; the lender can use its market power to extract some other concession from the borrower, such as a higher interest rate. Another way out that can be adopted by the lender is to force the borrower to execute a separate document, which essentially contains of it being wholly unrelated to the mortgage deed.
In the opinion of the researcher the job of making a good bargain must be left to the parties themselves rather than for the court.
For these reasons, certain mortgagor protections, in the opinion of the researcher act as unwarranted interference in the market, which fail to produce desired results.
To quote Sir Fredrick Pollock
“Today [the doctrine of clogging] is an anachronism and might with advantage be jettisoned. Instead the courts have taken to emphasising the doctrine in all its crudity. It was open to them a few years since to have moulded the doctrine to meet the changing conditions of modern life, and to have confined redress to cases where there was anything oppressive or unconscionable in the bargain, to make this the test, as it was the origin of the doctrine.”[xlii]
Conclusion
Historically, a mortgage was given as security for a loan, which took the form of a conveyance to the lender of the borrower’s legal title. It is upon repayment of the loan, the mortgagee reconveyed legal title to the mortgagor. However if the mortgagor failed to pay the contractual date of redemption, the mortgagee’s title would become absolute at law. To mitigate the harshness of the common law relating to mortgage transactions, equity had to step in and create the equitable right of redemption and equity of redemption.
The equity of redemption regarded the mortgagor by equity as being the real owner of the mortgaged property, which still provides the theoretical underpinning of mortgage law. It essentially put a check upon three main types of additional gains that mortgagees sought through mortgage deeds: to become owners of the mortgaged property, to get back more than they advanced, and to secure collateral advantages.
Therefore even after having introduced the concept, equity had to introduce again certain rules so as to prevent the mortgagee from introducing terms into the mortgage agreement that were regarded as being a clog or a fetter on the equity of redemption.
The essence of this doctrine can be summarized as ‘once a mortgage always a mortgage’. The justification that it gives while disregarding the terms of contract and going ahead to protect the mortgagor is of his vulnerable position and unequal bargaining power. This is best represented by the case of Kreglinger v. New Patagonia Meat and Cold Storage Co. Ltd.[xliii]
However the doctrine today in the opinion of the researcher should give way to contractual freedom, where both parties have equal bargaining power and should take into consideration the nature of changing economic society. This is particularly so where the borrower is a large commercial organisation. In such circumstances, the borrower cannot be regarded as being in need of protection.
[i] B M Gandhi, Equity, Trusts And Specific Relief, (Lucknow: Eastern Book Co., 3rd edition, 2001), p.141. [ii] Ibid., pp.142-144.
[iii] A K R Kiralfy, Historical Introduction to English Law, (Delhi: Universal Law Publications, 4th edition, 1999), p.619.
[iv] Feoffment means the act of conveying a freehold estate. See, B A Garner (ed.), et.al., Black’s Law Dictionary, (Minn.: Publishing Co., 7th edition, 1999).
[v] Fee simple is an interest in land that, being the broadest property interest allowed by law, endures until the current holder dies without heirs. Fee simple is not a term likely to be found in modern conversation between laymen, who would in all probabilities find it quite unintelligible. Yet to a layman of 14th century the term would have been perfectly intelligible, for it refers to the elementary social relationship of feudalism with which he was familiar…Traditionally, the fee simple has two distinguishing features: first the owner (tenant in fee simple) has the power to dispose of the fee simple, either inter vivos or by will. Second, on intestacy the fee simple descends, in the absence of linear heirs, to collateral heirs. See, Id.
[vi] Supra, n.3, p.619.
[vii] R Megary, et.al., The Law of Real Property, (London: Stevens & Sons, 1984), p.915.
[viii] Ibid., p.916.
[ix] Supra, n.3, p.621.
[x] P H Clarke, Principles of Property Law, (Sydney: Cavendish Pub. Ltd., 1998), 14.3.3.1.
[xi] Id.
[xii] D D Basu, Equity, Trusts, Specific Relief, (Calcutta: Kamal Law House, 6th edition, 1996), pp.73-74.
[xiii] Ibid., pp.73-74.
[xiv]Supra,n.7, pp.918-919.
[xv] J Mcghee, Snell’s Equity, (London: Sweet & Maxwell, 30th edition, 2000), p.449.
[xvi] M Harwood, English Land Law, (London: Sweet & Maxwell, 1975), pp.402-403.
[xvii] Section 60 reads as follows:
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 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.
[xviii] However it can be extinguished as provided in the section and when it is alleged to be extinguished by a decree, the decree should run strictly in accordance with the form prescribed for the purpose. See, Thota China Subba Rao v. Mattapalli Raju AIR 1950 SC 1 Cited from S Paul, (ed.), Mulla-Transfer of Property Act, 1882, (New Delhi: Butterworths, 9th edition, 2000), p.655.
[xix] Mortgage is defined in section 58 of the Transfer of Property Act.
[xx] AIR 1958 SC 770.
[xxi] [1939] Ch. 620 cited from, G W Keeton, et.al., Equity, (London: Sir Isaac Pitman and Sons Ltd., 1969), p.204.
[xxii] See, Id.
[xxiii] AIR 1992 P & H 193.
[xxiv] AIR 1989 SC 436.
[xxv] AIR 1958 SC 770.
[xxvi] It observed “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. …. 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.” See, Supra, n.24.
[xxvii] AIR 1965 SC 225.
[xxviii] This decision in the opinion of the researcher is similar to a case of Salt v. Marques of Northampton [1892] A C 1 (H L). In this case a loan secured on a life insurance policy provided that if the mortgagor died before redemption, the whole policy money should belong to the mortgagees. This was held to be a clog and the mortgagor’s personal representatives were entitled to recover the balance of money after payment of loan. Cited from, Supra, n.16, p.405.
[xxix] AIR 1944 Mad 237. Similarly a clause in the mortgage deed that the property would be redeemed within a period of one year failing which the transaction would be treated as a sale constitutes a clog on the equity of redemption and is therefore void. Banwarilal v. Puran Chand AIR 1985 Punj 189 cited from B B Mitra, et.al., The Transfer of Property Act, 1882, (Calcutta: Kamal Law House, 15th edition, 1988), p.444.
[xxx] AIR 1944 Mad 237.
[xxxi] Id.
[xxxii] Manekchand v. Baldeo Chaudhary AIR 1951 Pat 327cited from S Paul, (ed.), Mulla-Transfer of Property Act, 1882, (New Delhi: Butterworths, 9th edition, 2000), p.661.
[xxxiii] Supra, n.12, p.76.
[xxxiv] Supra, n.12, p.76.
[xxxv] (1912) 34 All 620 P C. Cited from Id..
[xxxvi] Supra, n.12, p.76.
[xxxvii] See, Ibid., p77.
[xxxviii] (1914) A C 25 cited from, P V Baker, Snell’s Principles of Equity, (London: Sweet & Maxwell, 27th edition, 1973), p.380. .
[xxxix] Id.
[xl] Supra, n.12, p.78.
[xli] AIR 1986 Raj 44.
[xlii] (1903) 19 L.Q.R. 359 cited from M P Thompson, “Do We Really Need Clogs”, 2001, Conveyancer and Property Lawyer, 502-515.
[xliii] Supra, n.38
- Ajit Singh v. Kakbhir Singh AIR 1992 P & H 193.
- Banwarilal v. Puran Chand AIR 1985 Punj 189.
- Ganga Dhar v. Shankar Lal AIR 1958 SC 770.
- Jadam Jampur Bai v. Jinki Sidappa and another AIR 1944 Mad 237.
- Knightsbride Estates Trust Ltd. v. Byrne [1939] Ch. 620.
- Kreglinger v. New Patagonia Meat and Cold Storage Co. Ltd (1914) A C 25.
- Maina Devi v. Thakur Mansingh & others AIR 1986 Raj 44.
- Manekchand v. Baldeo Chaudhary AIR 1951 Pat 327.
- Murarilal v. Devkaran AIR 1965 SC 225.
- Pomal Kanji Govindji v. Vrajlal Karsandas Purohit & Ors. AIR 1989 SC 436.
- Salt v. Marques of Northampton [1892] A C 1 (H L).
- Shankar Din v. Gopal (1912) 34 All 620 P C.
- Thota China Subba Rao v. Mattapalli Raju AIR 1950 SC 1.
Table of Statutes
- Transfer of Property Act, 1882
Introduction
“A mortgage at a Common Law was strictly an estate upon condition that the estate will be forfeited upon he breach of condition….Equity thus turned an absolute conveyance at Common Law into a real security or a pledge for the repayment of a debt. ”
-William on Real Property[i]
What is generally understood by the term mortgage is a conveyance of land or other immovable property as security for the payment of money. Such mortgage is made to secure the repayment of money, which is borrowed by the owner of property mortgaged. The first essential immutable characteristic of a mortgage is the mortgagors right to redeem. The idea of mortgages seems to have arisen in Roman law where due performance was secured by “pressurizing the debtors will or causing him inconvenience” by keeping him out of possession or ownership so that he can repay the money as early as possible. This was a very primitive way of dealing with the debtor but probably was in tune with the time.[ii]
Present paper attempts to give the reader a coherent idea of mortgagor’s this specific right. For this the next few pages are divided into three chapters. In the first chapter account of transformation of law from Anglo-Saxon times to 18th century is given in sufficient detail. After having developed a preliminary idea of ‘equity of redemption’ the researcher has taken various cases, using them as examples to enunciate upon the principles and to understand the modern judicial response to the rights of mortgagee. In the last the researcher has tried to test the viability of the doctrine of equity of redemption in modern times.
Research Methodology
Aims and objectives:Present paper attempts to sketch the significance of the right of equity of redemption in mortgage transactions.
Scope and Limitations:
Scope of the present paper is to conceptualise and to analyse the doctrine of clog on equity of redemption. While writing the paper the biggest hurdle that the researcher had to face was of unavailability of certain old original judgements.
Research Questions:
I have attempted to answer the following questions in the present paper:
- How did the doctrine of Clog of equity evolve?
- How has this doctrine been applied and what are its justifications?
- How viable is it in today’s economic scenario?
First chapter, as is evident by the title, aims to bring trace the evolution of doctrine of equity of redemption.
Second chapter has dealt with the various instances of clogs on equity of redemption?
Third chapter focuses upon the issue of the viability of the doctrine in increasingly becoming competitive market.
Style of Writing:
This paper has largely descriptive style of writing. Wherever necessary the researcher has analysed and criticized the various aspects also.
Mode of Citation:
A uniform mode of citation is followed throughout the project.
Articles in the present paper have been cited in the following manner:
Name of the Author, “Name of the article”, Vol. No. (Issue No.-if applicable) Name of the Journal Page no. (starting) (Year of Publication), Page No. (May Not be applicable for certain articles taken from websites).
Books in the present paper have been cited in this manner:
Name of the author (or Editor), Title of the Book, (Place of Publication: Publishing Co., Edition (if applicable), Year), Vol. No.(if applicable), Page No..
Sources of Data:
Mainly secondary sources of data such as articles, books and electronic resources have been used to answer the various research questions.
Historical Development
Pledges of land are a very old form of security for money lent, and date back to the Anglo-Saxon times. There appeared to have been two main forms of pledges, the vadium mortuum and vadium vivam. The vadium vivam, was a pledge under which the capital of debt was redeemed out of the rents and profits. The vadium mortuum was closer to the modern mortgage. It was a delivery of possession of the property and the rents and profits did not go in reduction of the principal debt. Interest on this was to be paid usually at a fixed period. These pledges would contain an agreement that if the money was not repaid on a fixed day, the land should belong to the creditor. If there was no such clause in the agreement, the creditor could apply to the court for the declaration that the land was his. This was the position in general at the time of twelfth and early thirteenth century.[iii]For some long years after it, the mortgage was often made by granting a term of years, which was conditional on its ceasing with the repayment of the money lent. The terms of years gave the lender possession of the land. The term of years gave the lender possession of the land. By the end of the thirteenth century the delivery of possession was also be accompanied by a charter of feoffment[iv] which would confer the right to the fee simple[v] if the money was not repaid.[vi] It was nothing but a situation in which the mortgagor conveyed the land to the mortgagee in the fee simple, subject to a condition that the mortgagor might re-enter and determine the mortgagee’s status if the money lent was repaid on the stipulated date.[vii] This must be noted that this condition was construed strictly: if the mortgagor was even a single day late in offering to repay the money, he would lose his land forever.[viii]
This forfeiture of the land because of inability to pay the debt on a certain date soon amounted to be realised as cause of hardship. There are reports of petitions being found in the middle of fifteenth century praying relief from forfeiture if the money be paid at a later date. In the reign of Edward IV there are evidences of the fact that the Chancellor by now had acquired some sort of jurisdiction, which was recognized even by the common law courts. In 1469 it was pointed out, in respect of a claim to recover land on repayment of the loan that “although there is no remedy in our law, he may have subpoena if he pays the money.” However scope of this relief was very limited. This relief was granted where failure to redeem was due to accident or misfortune or to any other ground on which equity was in the habit of interfering in private transactions.[ix]
Later during the early seventeenth century, the Chancellor began to recognise the inherent unfairness in situations where loan contracts had been repaid but, because repayment did not strictly comply with the terms of the contract, the mortgagor had no legal right to enforce a reconveyance of the secured property. The Court of Chancery felt that where a lender refused to reconvey the property that he or she had impliedly agreed to do once the debt had been settled, it amounted to bad faith, and it would be against the conscience of the court to condone such behaviour. In this fashion, equity first began to interest itself in mortgage transactions in some concrete form.[x]
As per Maitland “In consequence of its doctrine that a mortgage is merely a security for money, a security which can be redeemed although, according to its plain wording of the mortgage deed, the mortgagee has become the absolute owner of the land, [the Courts of chancery] drew almost every dispute about mortgages into the sphere of its jurisdiction and had the last word to say about them.”[xi]
Hence, during the early stages, the reason underlying intervention by the Chancery jurisdiction stemmed from the belief that in conscience, relief against forfeiture of the mortgagor’s interest should be granted.
Thus even after the day fixed for payment i.e. after the mortgagor had lost his legal right to redeem, he was deemed to have an equitable right to redeem his estate within a reasonable time of the principal, interests and costs. This right of mortgagee, after the mortgagor has become the absolute owner of land according to the provisions of the mortgage deed itself is known as the mortgagor’s equity of redemption. According to Maitland owing to the action of equity, the mortgage deed became “one long suppressio veri and suggestio falsi. It does not in the least explain the rights of the parties; it suggests that they are other than what really they are.”[xii] In other words, while the deed said that if the mortgagor defaulted in paying off the loan with the interest by the date fixed for payment, the mortgagee would at once become the absolute owner of the mortgaged property and in opposition to it equity said that even after the date fixed, the mortgagor would be entitled to redeem the mortgage on payment, at any time before a sale or foreclosure of the mortgage has taken place.[xiii]
Once the doctrine of redemption was formulated, it came to receive the most anxious protection of the Court of Equity, which held that the equity of redemption could not be barred or fettered in any way, not even by express stipulation.
It must be noted that the equitable right to redeem is not same as the equity of redemption. Equitable right to redeem is a right conferred by the equity to redeem at any time after the stipulated date; but it is exercisable only on terms considered proper by equity, for he who seeks equity must do equity. Equitable right to redeem doesn’t arise until the contractual date for redemption has passed whereas the equity of redemption arises as soon as mortgage is made. Secondly, and more important, the equitable right to redeem is a particular right, whereas the equity of redemption is an equitable interest in the land consisting of the sum total of mortgagor’s rights in property. Although at law he has parted with his land and has only a limited right to recover it, in equity he is owner of the land, though subject to the mortgage; the mortgagee on the other hand, is at law the owner but in equity a mere encumbrancer.[xiv]
In other words the mortgagor’s equitable right to redeem coupled with other rights in the property constitute his equity of redemption.[xv]
Clogs on Equity of Redemption: A Study Through Case Laws
As is evident from the preceding chapter that equity regarded mortgage as solely a security for a loan with interest and the loan-seeking mortgagor as being in need of protection. It therefore developed the following three principles[xvi]:
(a) That the mortgagor is allowed to redeem even after the legal date has passed so long as he repays all money outstanding under the mortgage.
(b) That any term of the mortgage which is a clog on the equity of redemption will be void and can be ignored by the mortgagor.
(c) That equity will apply to the above two principles to any transaction, which is in substance a mortgage whatever outward form the transaction takes.
As far as Indian position in this regard is considered, as much of the Indian law stems from English law, rights and liabilities of mortgagor in transfer of property being no exception to the rule, is also congruous (in many aspects) with the corresponding English position. These rights are dealt with in s.60 of the Transfer of Property Act, 1882.[xvii]
As is clear from the reading of section 60 that the right of redemption in India is a statutory right and therefore cannot be extinguished even by express agreement made at the time of mortgage as part of transaction. This right of redemption is an incident of a subsisting mortgage and it subsists as long as mortgage subsists.[xviii] Right of redemption presupposes the existence of a ‘mortgage’.[xix]
It must also be noted that the section 60 is not prefaced by any words like ‘in the absence of contract to contrary’. Therefore the right of redemption is a statutory right, which can be fettered by any condition that impedes or prevents redemption. Any such condition is void as clog on redemption.
Now the researcher would take a few instances in the form of cases to reflect upon the judicial attitude.
In the case of Ganga Dhar v. Shankar Lal[xx], the Supreme Court of India observed that the Court’s jurisdiction to relieve a mortgagor from his bargain depends upon whether it was obtained by taking advantage of any difficulty or embarrassment that mortgagor might have been in at the time of borrowing the money on the mortgage. The question therefore is whether there is anything unconscionable in the agreement, which depends upon facts and has to be decided on the facts of each case.
In this case in the mortgage deed there was a stipulation, which provided that mortgagor would be entitled to redeem for a period of 85 years, and thereafter he should redeem within six months and not thereafter. Hon’ble Court held that the latter term amounted to clog and was invalid and must be ignored. But the Court also made it clear that this did not have any bearing on the other clause i.e. of prohibition on redemption before the expiry of 85 years. The Court here rejected the contention on behalf of the mortgagor that the aforesaid term of 85 years was a clog on the equity on the following grounds:
(a) The mortgagee’s right to enforce the mortgage being co-extensive with the mortgagee’s right to redeem, the mortgagor can not demand payment of his money before the expiry of the period of eighty-five years. Hence, the clause postponing redemption operated equally on both the parties.
(b) The circumstances existing at the time of the execution of the mortgage showed that the bargain had been freely made.
Though the court had not referred to in the above-mentioned case to an English decision the principle of which in the opinion of the researcher however has been adopted by the court. In the case of Knightsbride Estates Trust Ltd. v. Byrne[xxi] a freehold estate was mortgaged which was repayable by instalments over forty years. When the mortgagors claimed to redeem just after five years later, it was held that they could not: the postponement for forty years was held valid because it was a commercial arrangement between businessmen, not an oppressive bargain where the borrower was at the mercy of an unscrupulous lender.[xxii]
In an another case of Ajit Singh v. Kakbhir Singh[xxiii] a clause in the mortgage deed which stipulated that the land would not be redeemable for a period of 95 years was held to be a clog on the equity and the mortgagor was allowed to redeem the suit land before the expiry of the stipulated period of 95 years fixed for redemption in the mortgage deed ignoring the clog clause, taking into consideration the fact that at the time when mortgage was executed, the mortgagee was in financial difficulty and addicted to alcohol.
However the principles upon which above cases were decided were given a little twist by the Supreme Court in the case of Pomal Kanji Govindji v. Vrajlal Karsandas Purohit & Ors.[xxiv] The court in this case observed that though the long term by itself as the period for redemption is not necessarily a clog on the equity but in the changing economic scenarios it would create a presumption that it would be a clog. Here court specifically mentioned that the time since when Ganga Dhar v. Shankar Lal[xxv] is decided has undergone an enormous change. It further observed that 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 and the times have changed now.[xxvi]
In the opinion of the researcher this was the correct view taken by the Hon’ble Supreme Court necessitated by the needs of the changing times. In the instant case it was held that the facts that there was a long period of 99 years for redemption; the provision for interest @1/2 per annum payable on the principle amount at the end of long period…etc and the mortgagor’s financial condition suggested that there was a clog on the equity.
In the case of Murarilal v. Devkaran[xxvii] where a clause in the mortgage deed stipulated that if the debt was not paid off within the expiry of the 15 years, the mortgagee would become absolute owner of the mortgaged property was held to be a clog on the equity of redemption.[xxviii]
This has been followed in the case of Jadam Jampur Bai v. Jinki Sidappa and another[xxix]. In this case in a deed of conditional sale it was recited by the transferor, “if we do not pay your amount by the due date (viz. within five years) we agree to this document being treated as sale deed.”[xxx] Here Hon’ble High Court said that the conveyance was not a sale but was to operate as sale after the period of five years if the amount was not paid, and the transferor was entitled to redeem. The recital that “after the due date you and your heirs will have the absolute powers in respect of the property. We and our heirs will not have any rights”[xxxi] would only amount to a clog on the equity of redemption.
Similarly a stipulation in a mortgage deed that after the deposit of the title deeds in suits in which the mortgage property was involved, the mortgagor would execute a deed in sale in favour of the mortgagee, failing which the mortgagee can have the sale deed executed in his favour through the court was held to be a clog on the equity of redemption.[xxxii]
However it must be taken note of that there is nothing in the Transfer of Property Act, which prevents the mortgagee from buying the equity of redemption. In the case of Reeve v. Lisle[xxxiii] it was observed, “the mortgagee cannot at the moment when he is lending his money and taking his security, enter into an agreement the effect of which would be that the mortgagor should have no equity of redemption. But there is nothing to prevent that being done by an agreement which in substance and in fact is subsequent and independent of the original bargain.”[xxxiv]
This principle has been followed in India in Shankar Din v. Gopal[xxxv] whereby it was held that a subsequent and independent contract qualifying the right of redemption is valid.[xxxvi]
This fact is also made clear by the section 60 of the Transfer of Property Act, which says that the right of redemption may be extinguished by the act of parties. This in the opinion of the researcher means nothing but an act subsequent to the execution of mortgage.
The doctrine of clogging on the equity in order to guard against the oppression of necessitous landowners by moneylenders was extended so that a stipulations in a mortgage besides the payment of principal, interest…etc were regarded as bad by the court if they extended beyond the period of redemption.[xxxvii] A modern authority on this point is Kreglinger v. New Patagonia Meat and Cold Storage Co. Ltd.[xxxviii] Here money was lent to a limited company, secured by a floating charge on the company’s business. It was agreed between the parties that the company should not sell sheep skins to any person other than the lenders, if the lenders were willing to pay as good as a price was obtainable elsewhere. It was held that the lenders could exercise their right of pre-emption, notwithstanding the repayment of loan before the expiry of five years. Here the right was held to not to form any part of mortgage transaction but to be a collateral contract entered into as a condition of the company obtaining the loan.[xxxix]
The above-mentioned case also laid down that there is no rule in equity which prevents a mortgagee from stipulating for any collateral advantage to endure beyond redemption provided, such advantage is not
(a) unfair and unconscionable, or
(b) in the nature of a penalty clogging the equity of redemption, or
(c) otherwise inconsistent with or repugnant to the right to redeem.[xl]
In other words, a mortgagee can stipulate for a collateral benefit to endure beyond redemption, if it does not prevent free dealings with the property mortgaged.
In the case of Maina Devi v. Thakur Mansingh & others[xli] while dealing with a clause in the mortgage deed which provided that after redemption the mortgagee should continue in possession as permanent tenant, Guman Mal Lodha J. said that it would be inequitable and injustice, if under the garb of advancing monies as mortgaee to the mortgagor, a mortgagee is allowed to abuse and misuse his possession and become a perpetual tenant which, in the present set of circumstances would tantamount to giving him almost right to enjoy the property unless evicted by due course of law in separate proceedings under the rent Control Act.
These were a few instances of clogs on equity of redemption.
The Role of Equity of Redemption in Modern Commercial Dealings
Once a mortgage, always a mortgage. This often repeated comment summarizes a central tenet of mortgage law: It essentially implies, every mortgage borrower has the right, at any time after default, to redeem the collateral by repaying the debt until the lender has completed a ‘foreclosure’ on the property.
By now, it has also become very clear that the present law in the cases of mortgage favours the mortgagee under the garb of traditional justification of unfair bargaining power. This unfair bargaining power justification is susceptible to a few strong criticisms in the increasingly becoming competitive credit market.
First of all this traditional justification does not clearly explain as to why the sophisticated-commercial borrowers are put on the same paddle of necessitious borrower. Let us take an example and make it very clear. Let us assume a person, namely Vishal, a contractor, who owns assets of worth Rs.5 crores goes to ICICI bank to ask for a loan of Rs.3 crores payable within two years for building an apartment. Now as it is obvious that the ICICI bank by granting the loan would incur a huge risk. Naturally, for the sake of safety it asks for security which is given to it in terms of a piece of land. Keeping in mind the rate of Non Performing Assets, ICICI amidst of other clauses also adds a stipulation that in case of default it would become the owner of property.
Any one having a little knowledge of Transfer of property would instantaneously reply that such term is void as being a clog on the equity of redemption.
As a result of this in the opinion of the researcher, ICICI bank, which has performed its obligation, will unnecessarily have to incur the additional cost of going to court for seeking a declaration of foreclosure. In the similar various cases if the argument for maintaining the present approach is vulnerability of the borrower, then that in the opinion of the researcher does not hold water in the changing times.
It is submitted that the researcher has taken such a view because, as mentioned earlier that the market is increasingly going competitive and if the mortgagor finds that the mortgagee is taking undue advantage of his position, he can go to another office down the block. On the possibility of counter argument of there being no competitiveness in the market, it is submitted that prohibition of waiver of the equity of redemption will not solve the problem; the lender can use its market power to extract some other concession from the borrower, such as a higher interest rate. Another way out that can be adopted by the lender is to force the borrower to execute a separate document, which essentially contains of it being wholly unrelated to the mortgage deed.
In the opinion of the researcher the job of making a good bargain must be left to the parties themselves rather than for the court.
For these reasons, certain mortgagor protections, in the opinion of the researcher act as unwarranted interference in the market, which fail to produce desired results.
To quote Sir Fredrick Pollock
“Today [the doctrine of clogging] is an anachronism and might with advantage be jettisoned. Instead the courts have taken to emphasising the doctrine in all its crudity. It was open to them a few years since to have moulded the doctrine to meet the changing conditions of modern life, and to have confined redress to cases where there was anything oppressive or unconscionable in the bargain, to make this the test, as it was the origin of the doctrine.”[xlii]
Conclusion
Historically, a mortgage was given as security for a loan, which took the form of a conveyance to the lender of the borrower’s legal title. It is upon repayment of the loan, the mortgagee reconveyed legal title to the mortgagor. However if the mortgagor failed to pay the contractual date of redemption, the mortgagee’s title would become absolute at law. To mitigate the harshness of the common law relating to mortgage transactions, equity had to step in and create the equitable right of redemption and equity of redemption.
The equity of redemption regarded the mortgagor by equity as being the real owner of the mortgaged property, which still provides the theoretical underpinning of mortgage law. It essentially put a check upon three main types of additional gains that mortgagees sought through mortgage deeds: to become owners of the mortgaged property, to get back more than they advanced, and to secure collateral advantages.
Therefore even after having introduced the concept, equity had to introduce again certain rules so as to prevent the mortgagee from introducing terms into the mortgage agreement that were regarded as being a clog or a fetter on the equity of redemption.
The essence of this doctrine can be summarized as ‘once a mortgage always a mortgage’. The justification that it gives while disregarding the terms of contract and going ahead to protect the mortgagor is of his vulnerable position and unequal bargaining power. This is best represented by the case of Kreglinger v. New Patagonia Meat and Cold Storage Co. Ltd.[xliii]
However the doctrine today in the opinion of the researcher should give way to contractual freedom, where both parties have equal bargaining power and should take into consideration the nature of changing economic society. This is particularly so where the borrower is a large commercial organisation. In such circumstances, the borrower cannot be regarded as being in need of protection.
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Bibliography
Articles:- M P Thompson, “Do We Really Need Clogs”, 2001, Conveyancer and Property Lawyer, 502-515.
- A K R Kiralfy, Historical Introduction to English Law, (Delhi: Universal Law Publications, 4th edition, 1999).
- B B Mitra, et.al., The Transfer of Property Act, 1882, (Calcutta: Kamal Law House, 15th edition, 1988).
- B M Gandhi, Equity, Trusts And Specific Relief, (Lucknow: Eastern Book Co., 3rd edition, 2001).
- D D Basu, Equity, Trusts, Specific Relief, (Calcutta: Kamal Law House, 6th edition, 1996).
- G W Keeton, et.al., Equity, (London: Sir Isaac Pitman and Sons Ltd., 1969).
- J Mcghee, Snell’s Equity, (London: Sweet & Maxwell, 30th edition, 2000).
- M Harwood, English Land Law, (London: Sweet & Maxwell, 1975).
- P H Clarke, Principles of Property Law, (Sydney: Cavendish Pub. Ltd., 1998).
- P V Baker, Snell’s Principles of Equity, (London: Sweet & Maxwell, 27th edition, 1973).
- R Megary, et.al., The Law of Real Property, (London: Stevens & Sons, 1984).
- S Paul, (ed.), Mulla-Transfer of Property Act, 1882, (New Delhi: Butterworths, 9th edition, 2000).
- B A Garner (ed.), et.al., Black’s Law Dictionary, (Minn.: Publishing Co., 7th edition, 1999).
- www. manupatra.com
[i] B M Gandhi, Equity, Trusts And Specific Relief, (Lucknow: Eastern Book Co., 3rd edition, 2001), p.141. [ii] Ibid., pp.142-144.
[iii] A K R Kiralfy, Historical Introduction to English Law, (Delhi: Universal Law Publications, 4th edition, 1999), p.619.
[iv] Feoffment means the act of conveying a freehold estate. See, B A Garner (ed.), et.al., Black’s Law Dictionary, (Minn.: Publishing Co., 7th edition, 1999).
[v] Fee simple is an interest in land that, being the broadest property interest allowed by law, endures until the current holder dies without heirs. Fee simple is not a term likely to be found in modern conversation between laymen, who would in all probabilities find it quite unintelligible. Yet to a layman of 14th century the term would have been perfectly intelligible, for it refers to the elementary social relationship of feudalism with which he was familiar…Traditionally, the fee simple has two distinguishing features: first the owner (tenant in fee simple) has the power to dispose of the fee simple, either inter vivos or by will. Second, on intestacy the fee simple descends, in the absence of linear heirs, to collateral heirs. See, Id.
[vi] Supra, n.3, p.619.
[vii] R Megary, et.al., The Law of Real Property, (London: Stevens & Sons, 1984), p.915.
[viii] Ibid., p.916.
[ix] Supra, n.3, p.621.
[x] P H Clarke, Principles of Property Law, (Sydney: Cavendish Pub. Ltd., 1998), 14.3.3.1.
[xi] Id.
[xii] D D Basu, Equity, Trusts, Specific Relief, (Calcutta: Kamal Law House, 6th edition, 1996), pp.73-74.
[xiii] Ibid., pp.73-74.
[xiv]Supra,n.7, pp.918-919.
[xv] J Mcghee, Snell’s Equity, (London: Sweet & Maxwell, 30th edition, 2000), p.449.
[xvi] M Harwood, English Land Law, (London: Sweet & Maxwell, 1975), pp.402-403.
[xvii] Section 60 reads as follows:
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 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.
[xviii] However it can be extinguished as provided in the section and when it is alleged to be extinguished by a decree, the decree should run strictly in accordance with the form prescribed for the purpose. See, Thota China Subba Rao v. Mattapalli Raju AIR 1950 SC 1 Cited from S Paul, (ed.), Mulla-Transfer of Property Act, 1882, (New Delhi: Butterworths, 9th edition, 2000), p.655.
[xix] Mortgage is defined in section 58 of the Transfer of Property Act.
[xx] AIR 1958 SC 770.
[xxi] [1939] Ch. 620 cited from, G W Keeton, et.al., Equity, (London: Sir Isaac Pitman and Sons Ltd., 1969), p.204.
[xxii] See, Id.
[xxiii] AIR 1992 P & H 193.
[xxiv] AIR 1989 SC 436.
[xxv] AIR 1958 SC 770.
[xxvi] It observed “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. …. 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.” See, Supra, n.24.
[xxvii] AIR 1965 SC 225.
[xxviii] This decision in the opinion of the researcher is similar to a case of Salt v. Marques of Northampton [1892] A C 1 (H L). In this case a loan secured on a life insurance policy provided that if the mortgagor died before redemption, the whole policy money should belong to the mortgagees. This was held to be a clog and the mortgagor’s personal representatives were entitled to recover the balance of money after payment of loan. Cited from, Supra, n.16, p.405.
[xxix] AIR 1944 Mad 237. Similarly a clause in the mortgage deed that the property would be redeemed within a period of one year failing which the transaction would be treated as a sale constitutes a clog on the equity of redemption and is therefore void. Banwarilal v. Puran Chand AIR 1985 Punj 189 cited from B B Mitra, et.al., The Transfer of Property Act, 1882, (Calcutta: Kamal Law House, 15th edition, 1988), p.444.
[xxx] AIR 1944 Mad 237.
[xxxi] Id.
[xxxii] Manekchand v. Baldeo Chaudhary AIR 1951 Pat 327cited from S Paul, (ed.), Mulla-Transfer of Property Act, 1882, (New Delhi: Butterworths, 9th edition, 2000), p.661.
[xxxiii] Supra, n.12, p.76.
[xxxiv] Supra, n.12, p.76.
[xxxv] (1912) 34 All 620 P C. Cited from Id..
[xxxvi] Supra, n.12, p.76.
[xxxvii] See, Ibid., p77.
[xxxviii] (1914) A C 25 cited from, P V Baker, Snell’s Principles of Equity, (London: Sweet & Maxwell, 27th edition, 1973), p.380. .
[xxxix] Id.
[xl] Supra, n.12, p.78.
[xli] AIR 1986 Raj 44.
[xlii] (1903) 19 L.Q.R. 359 cited from M P Thompson, “Do We Really Need Clogs”, 2001, Conveyancer and Property Lawyer, 502-515.
[xliii] Supra, n.38
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