When a mortgage takes place, the mortgagor has the right to get back his property

when he pays back the mortgage amount. This is known as the right of redemption
and arises out of equity. Anything which obstructs the right of the mortgagor to
redeem his property is void, and such obstruction constitutes a clog on the right to
redemption. This is also known as the doctrine of a clog on redemption.

In the case of a mortgage, two categories of interest are generated. The first interest
which is created is the interest of the creditor on the property. This interest is
limited and temporary. The second category is the residuary interest which can be
determined by deducting the interest of the creditor or the mortgagee, and this
interest stays with the mortgagor. This division of the interest gives the right of
redemption to the mortgagor when the loan is repaid. This right of the mortgagor is
known as the equitable right to redeem. The right of redemption to the mortgagor
is provided under Section 60[1] of the Transfer of Property Act, 1882. The contract
of mortgage comes to an end when the mortgagor repays the amount of the loan
and exercises his right to redeem the property. The right provided under the Act is
a statutory right and to enforce it statutory provisions has to be followed.

Doctrine of Clog on Redemption

In the judicial pronouncement of Stanley v Wilde[2] (an English case), it was held

by the Court that a mortgage means transferring the interest in an immovable
property to a third party as security for the loan that the party has advanced. The
security is redeemable by the transferor when he pays back the loan or discharges
his obligation. If any act is done, or any provision is there which obstructs the right
of redemption on payment of the debt or performance of the obligation, then it acts
as a fetter or clog on the equity of redemption and will be held as void. This
doctrine also follows the principle of “once a mortgage, always a mortgage.” This
means that there cannot be any covenant that modifies the character of the
mortgage and would bar the mortgagor to redeem his property on payment of the
loan. The doctrine of a clog on redemption is based on the principle of justice,
equity, and good conscience. The Court recognizes the fact that the party who
forwards the loan is in a dominant position than the person who takes the loan. The
law also recognizes the fact that the dominant party may insert a clause in the
agreement which can act as a barrier to the right of redemption. Such barrier in
exercising the right is struck down by the Courts as invalid so that the mortgagor
can exercise his right of redemption. In the case of U. Nilan v. Kannayyan through
Lrs,[3] The Court held that hardship of one person should not act as an opportunity
for some other person. If a person is taking a loan by giving his property as
security, the opposite party cannot exploit him, and the Court seeks to protect the
victim.

There are a few situations where it was held by the Court that the condition or
covenant acts as a clog on redemption.

Long Term Mortgages

Every long term mortgage agreement cannot be said to be a clog on the right of
redemption of the mortgagor. But if a mortgage is for say 100 years, it’ll go
beyond the life of the mortgagor and seem like a clog on the right to redemption, at
least superficially. The Court also of the same opinion, but has made the stand
clear by saying that only by the virtue of a long mortgage period, the mortgage
wouldn’t be considered as a clog. There should be a condition which gives an
undue advantage to the opposite party for the mortgage to be considered as a clog.
[4]

In the judicial pronounce of Vadilal Chhaganlal v. Gokaldas Mansukh,[5] there

was a condition in the mortgage deed that the period for the mortgage will be for
99 years, and also the mortgagee will have the authority to construct any structure
on the property. A subsequent condition that there would be no limitation on the
cost of the construction was imposed. The Court was of the opinion that it would
be impossible for the mortgagor to repay the loan amount along with the expenses
of the construction, and such a condition amounted to a clog. In the case of
RamkhilawanAshwasi v Mullo,[6] There was a condition that the mortgage money
will be paid after 80 years and only of Baisakh. The Court opined that such a
condition was a clog.

Condition of sale of property

If a condition is stated in the agreement of mortgage that, if the property is not
redeemed within a fixed period, it’ll be considered as a sale is a clog. This was held
by the Court in the cases of Rocky Flora v. Parvarthy Ammal[7] and Hajee Fatma
Bee v. Prohlad Singh.[8] But in the case where there is a separate agreement
between the mortgagor and the mortgagee and a sale deed is executed in the favor
of the mortgagee independently, then such sale would be valid. In the judicial
pronouncement of Meherban Khan v. Mekhna,[9] Property was mortgaged. The
conditions of the mortgage were that even on payment of the debt, the mortgagor
would be able to redeem the property only till a limited interest. It was further
stipulated that in case the mortgagor is unable to pay back the loan, the property
will be considered sold to the mortgagee permanently. The Court reached the
decision that these conditions acted as a clog. Also, when the amount of the loan
has been repaid in full, the mortgagor has the right to get back his property without
any impediment. In the judicial pronouncement of Kuddi Lal v. Aisha Begam, the
Court allowed the mortgagor to redeem the property by paying through her pocket
and not by transferring the property. The Court said that such alienation of the
property would act as a clog.

Penalty in case of default

In case the mortgagor has defaulted on any grounds, then the mortgagee can
impose a penalty on the mortgagor. But the penalty should be fair and reasonable.
In some situations, penalty imposed by the mortgagee can be unreasonable.

1. In the case of default, the mortgagee charges compound interest, instead of

charging simple interest even when the original interest rate is extremely
high.[10]
2. In case there is any default on the part of the mortgagor, the mortgagee
charges the interest by taking in consideration the date when the mortgage
agreement was made and not from the date of default. For instance, the
mortgage agreement was made on 1st of the month. The mortgagor defaults
of 10th of the month. The mortgagee, instead of charging interest from the
10th, charges the interest from the 1st of the month itself.[11]

Having only a high rate of interest does not mean that the condition will act as a
clog. There should be some undue influence of the dominant party over the weaker
party to constitute the stipulated condition as a clog on the right to redemption.

Subsequent agreement to postpone redemption

Any subsequent agreement which acts as an obstruction to the mortgagor by
creating any personal obligation will be considered as a clog on the right to
redemption. This is because, until and unless there is a charge on the transferred
property, the mortgagor is not liable for any sum personally except the mortgage
amount. In the judicial pronouncement of Sheo Shankar v. Parma,[12] The
mortgagor transferred some property to the mortgagee. Subsequently, the
mortgagor needed more money. So through a simple mortgage, the mortgagor took
another loan from the mortgagee. A condition was inserted in the simple mortgage
agreement by the mortgagee that until and unless the amount of simple mortgage
was repaid the property cannot be redeemed by the mortgagor. The Court opined
that this condition was a clog.

Collateral benefit to the mortgagee

A mortgagee may avail some collateral benefit during the period of the mortgage,
in which case it’ll be held valid. The mortgagee can also avail some benefits after
the mortgage gets over, but in some cases, it may be considered as void and a clog.

In the case of Noakes & Co. v. Rice there was a condition in the mortgage deed that
the mortgagor will sell all the beer brewed on his land to the mortgagee. The Court
held that such a condition was valid during the existence of the mortgage, but after
the property has been redeemed, such condition would not be valid. The property
should be returned to the mortgagor without any tie.

This proposition of the law is also backed by the Indian Courts. In the case
of Bhimrao Nagojirao Patankar v. Sakharam Sabajikathak,[13] The Court held
that where a condition in the mortgage deed allowed the mortgagee to remain in
the possession of the property through permanent tenancy will be considered as a
clog. The Court was of the view that the collateral benefit went beyond the period
of redemption and hence invalid.