Clog on Redemption

A STUDY
SUBMITTED TO VIJAY KUMAR SINGH SIR
SUBMITTED BY JAY SINGHEE
2016BALLB131
Contents

Acknowledgement ...................................................................................3

Abstract ....................................................................................................4

Introduction .............................................................................................. 5

Once a Mortgage always a Mortgage ...................................................... 6

Clog on Redemption ................................................................................9

Instances of Clog on Redemption ......................................................... 9

Extinguishment of Right of Redemption ...............................................13

Long Term Mortgages ...........................................................................14

Cases Dealing with Clog on Redemption ..............................................16

Conclusion ............................................................................................. 20

Bibliography .......................................................................................... 22

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Acknowledgement

I have taken efforts in this project. However, it would not have been possible

without the kind support and help of many individuals and organizations. I would

like to extend my sincere thanks to all of them.

I am highly indebted to Vijay Kumar Singh Sir for his guidance and constant

supervision as well as for providing necessary information regarding the project &

also for his support in completing the project.

I would like to express my gratitude towards all staff member of National Law

Institute University, Bhopal for their kind co-operation and encouragement which

help me in completion of this project and providing us with all the resources

required to make this project.

My thanks and appreciations also go to my colleague in developing the project and

people who have willingly helped me out with their abilities.

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Abstract

When a mortgage takes place, there exists a right of the mortgagee

to buy back the property without any encumbrances by paying the

loan. This right arises out of equity, and is commonly known as the

right to redemption. It is codified under § 60 of the Transfer of

Property Act, 1882. Any obstruction to this right is void as it

constitutes a clog on the equity of redemption. The maxim ‘once a

mortgage always a mortgage’ means that there can no covenant

that modifies the character of the mortgage agreed between the

parties that would stop the mortgagor to redeem his property back

on payment of the principal and respective interests.

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Introduction

Right of redemption is the right which every mortgagor possesses, which is created

by virtue of the mortgage deed. This right is considered to be inalienable, and

cannot be taken away from a mortgagor by means of any contract to the contrary.

According to Black’s Law Dictionary, term “redemption” can be defined as the act

of the vendor of property in buying it back again from the purchaser at the same

or an enhanced price. “Right of Redemption” can be defined under the same

dictionary as an agreement or paction, by which the vendor reserves to himself the

power of taking back the thing sold by returning the price paid for it. This right

finds place under Section 60 of the Transfer of Property Act, 1882 which makes

mortgagor the owner of the property mortgaged, and makes him able to get his

property back from the mortgagee on paying the amount borrowed from him.

The mortgagee cannot retain any interest in the mortgage property if debt does not

exist. By making payment of the loan with its interest the mortgagor becomes

entitled to redeem. Clog on a right means the insertion of any clause or any

provision under the mortgaged deed which would alienate mortgagor of his

property under certain circumstances. Under Indian legal system, such provisions

would not be able to alienate a mortgagor of his “Right of Redemption”, and such

provisions would be void ab initio. This is also known as the doctrine of a clog on

redemption.

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Once a Mortgage always a Mortgage

Equity of redemption was introduced by the Chancery Courts of England to give

relief to those mortgages who could not repay the loan within stipulated time. The

main purpose of developing the doctrine of redemption was to protect the interests

of mortgagors who in default of repayment of loan had to lose all rights in their

properties. But, the mortgagee by taking advantage of the depressed position of

debtor at the time of taking loan could very easily make an agreement that he would

not exercise the right of redemption after expiry of the due date. Thus, by an express

contract entered into between mortgagor and mortgagee, the mortgagor could be

deprived of his right of redemption which equity provided him against the strict

provisions of common law.

To overcome such situations, the equity had to go a step further by declaring that:

once a mortgage, always a mortgage and nothing but a mortgage. In essence it

provided that mortgagor’s right of redemption would not be defeated by any

agreement to the contrary even though mortgagor himself had agreed to it. The

maxim „once a mortgage always a mortgage‟ simply means that a transaction

which at one time is mortgage could not cease to be so by having any stipulation in

the mortgage-deed calculated to prevent the right of redemption. In other words,

the well-known rule that agreement of the parties overrides the law, does not apply

to mortgages. Accordingly, it was established in equity that no contract between

mortgagor and mortgagee which was entered into at the time of mortgage was valid
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if tit prevented mortgagor’s right of calling back his property on repayment of the

loan.

The maxim „once a mortgage, always a mortgage‟ may be applied to explain

following two situations:

1. First, where a transaction is intended by the parties to be a borrowing

transaction under a mortgage, though it is carried out in the form of sale,

equity will not allow the mortgagor to be deprived of his right of redemption.

That is to say, where in essence a transaction is a mortgage but may be given

the form of sale, its nature of mortgage cannot be converted to that of a sale

merely because of any stipulation in the mortgage deed that after expiry of

due date mortgagor has no right to redeem and the property shall belong to

mortgagee. A mortgage is always considered as redeemable even though

there is an express agreement between the parties that it cannot be redeemed

after the due date.

2. Secondly equity does not permit any clog on redemption. A clog on

redemption means any stipulation or provision in the mortgage deed which

restricts the mortgagor’s right of redemption. Any contract or agreement or

provision incorporated in the mortgage to prevent mortgagor’s right of

calling back the property on payment of loan is a clog on equity of

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redemption. A clog on redemption is void. A stipulation which amounts to a

clog on redemption is void and cannot be enforced as being contrary to the

very nature of mortgage.

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Clog on Redemption

Clog on redemption means condition or stipulation which prevents the mortgagor

from redeeming the mortgage property on payment of the loan. Right of redemption

in England is known as mortgagor’s equity of redemption. Equity does not permit

any fetters or clog on mortgagor’s right of redemption and holds that once a

mortgage always a mortgage. In India the mortgagor’s right of redemption is laid

down in section 60 of this act. In India to a clog on mortgagors right of redemption

is void because no condition or stipulation can prevail against the statutory right

given under section 60. This section does not use the words in absence of contract

to the contrary. This means to suggest that any contract by mutual agreement

between the parties which is against its provisions has not been contemplated by

section 60 and cannot be regarded as valid.

Instances of Clog on Redemption

1. Condition of Sale in Default - A condition which makes mortgage a sale in

default is clog on redemption. Stipulation entered into at the time of

mortgage and included in the deed that in default of repayment of loan within

the fixed date, the mortgagee shall be deemed to be purchaser of the

mortgage property is a clog on redemption. In Gulab Chand v. Saraswati

Devi1 there was a mortgage by conditional sale. The mortgagor was given a

time of four years for repayment of the loan. The mortgage property was on

1
AIR 1997 SC242
9
 lease. The deed provided that in case the mortgagee received any notice from

any public authority for breach of covenants of lease within four years’ term,

the mortgagee shall become owner of the property. The Supreme Court held

that this stipulation in the mortgage deed was a clog on mortgagor’s right of

redemption and as such it cannot be enforced.

2. Postponement of Redemption for Long Term – The postponement of right

of redemption for a long period is not necessarily a clog on redemption. This

is because in certain cases postponement of right of redemption for a long

term may be convenient for both the parties. It may be convenient for the

mortgagor who will not have to search out another creditor. In Seth Ganga

Dhar v. Shanker Lal 2 the Supreme Court held that postponement of

redemption for 85 years is not a clog on right on redemption under the

circumstances of the case because it was not unreasonable.

3. Condition Postponing Redemption in Default on a Certain Date – The

condition or stipulation which postpones the mortgagor’s right of

redemption in case of default in payment on a certain date is regarded as a

clog on redemption. Stipulation postponing further the mortgagor’s right of

redemption is a clog because it bars or restricts the redemption. In

Mohammed Sher Khan v. Seth Swami Dayal3 the mortgage was for a term

of five years. There was a stipulation in the deed according to which if

2
AIR 2000 SC 770
3
AIR 1922 PC 17
10
 mortgagor could not pay the money the mortgagee was entitled to take

possession of the mortgage property.

4. Restraint on Alienation – A condition which restraints the mortgagor from

transferring the mortgage property is a clog. In mortgage the mortgagor

transfers only an interest of the mortgage property. After transferring his

interest, he still has the residuary ownership in the property. So during the

mortgage the mortgagor still continues to be the owner of the property and

he has every right to transfer the property by sale, gift, etc. and can even

effect another mortgage of the property.

5. Collateral Benefits to Mortgagee – Collateral benefits to mortgagee are not

necessarily clog on redemption. Under a mortgage the mortgagee is entitled

to get back his money together with interest at usual rate. In a usufructuary

mortgage, the mortgagee has right of possession and taking rents and

benefits are inherent of the mortgagee. Such benefits are not collaterals

benefits.

6. Penalty in Case of Default – Payment of a penalty if there is default on

behalf of the mortgagor can reasonable but in certain situations it may be

unreasonable and penal.4

Certain situations where a penalty has been held to be unreasonable are –

4
Sanjiva Row, Transfer of Property Act 879 (7 th ed., 2011).
11
 a. On default, compound interest is stipulated even when the original

interest was very high.5

b. On default, increased rate of interest would apply from the time the

agreement is made.6

By merely the virtue of there being a high interest does not lend the condition

to be a clog on redemption unless it could be shown that there was undue

influence in the dealing.7 In Safaraj Singh v. Udwat Singh the stipulation in

a mortgage provided that in case of default in payment of loan on due date,

the mortgagor was liable to pay one murra of rice for every one rupee. The

Oudh High Court held that stipulation as clog as being unreasonable that it

amounted to penalty in default.

5
Rama Krishnayya v. Venkata Somayajulu, AIR 1934 Mad 31.
6
Sunday Koer v. Sham Krishnen, ILR 34 Cal 150.
7
Sarfarz Singh v. Udwat Singh, AIR 1929 Oudh 30.
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Extinguishment of Right of Redemption

The right of redemption is a statutory right. It can be extinguished only in the

manner provided under Section 60 of this act i.e. by

(a) By Act of Parties – By act of parties the right of redemption is extinguished

when the parties themselves stipulate for it under a separate agreement after

execution of the mortgage deed. Such extinction of right is possible only

where it is outside the transaction of mortgage. Thus by act of parties’

redemption may be terminated only if such termination is not included in the

Mortgage deed. If stipulation for extinguishing mortgagor’s right of

redemption is included in the mortgage deed it is a log and therefore void it

cannot be given effect. Secondly such stipulation must also be subsequent to

the mortgage deed. The act of parties intended to extinguish the right of

redemption must not form part of mortgage transaction, it must be outside

the mortgage.

(b) By Decree of Court – The right of redemption may be extinguished also by

decree of court. Such decree must be final decree. The suit on mortgages,

two decrees are passed by the court. One is preliminary decree and the other

is final decree. Extinguishment by Court as contemplated under this section

is by final decree of the Court. The final decree declares that the mortgage is

foreclosed i.e., no mortgage exist as well.

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Long Term Mortgages

Long term mortgages are common in cases of usufructuary mortgages. A term of

95 years or 100 years would definitely extend beyond one’s lifetime and

superficially seems like a clog.8 Taking cognizance of the same, the Supreme Court

has ruled that only by virtue of lengthy period, a mortgage would not amount to a

clog, there must exist a presence of undue advantage or fraud to term it as a clog.9

In Vanilla Chagall v. Gokaldas Mansukh10, the mortgage agreement provided

that it would subsist for 99 years and the mortgagee would be allowed to

construct any structure on the property without any limit on the cost. The

Supreme Court reasoned that it would be beyond the ability of the mortgagor to

repay the principal money along with the interests and the construction expenses.

It was held that both the conditions amounted to a clog on the mortgagee’s right of

redemption.

In Ramkhilawan Dilrakhan Ahwashi v. Mullo11, the case of the plaintiff was that a

covenant for the payment of principal money after 80 years and only in the month

of Baisakh, was a clog. The Trial Court dismissed the suit by calculating that the

profits from the mortgaged property was sufficient to pay the interests on the

principal. On appeal, the High Court upheld the lower court’s decision. However

8
Poonam Pradhan Saxena, Property Law 354 (2 nd ed., 2011).
9
Valdas and Ors. v. Bai Jivi and Ors, AIR 1973 Guj 93. Saleh Raj v. Chandan Mal, AIR 1960 Raj 47, held that a
term of 99 years was not held as not oppressive and not amounting to clog.
10
AIR 1953 Bom 408.
11
AIR 1957 MP 200.
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in Balbhaddar Prasad v. Dhanpat Dayal12, the property mortgaged for 50 years

was worth Rs. 9,000. The final amount to be paid after deducting the profits from

the property was around two and a half lakhs. The Court held that such an enormous

fund had led the property to be irredeemable and the terms of the contract were

oppressive and unconscionable.

12
AIR 1924 Oudh 193.

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Cases Dealing with Clog on Redemption

In the judicial pronouncement of Stanley v. Wilde13, 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 Ramkhilawan Ashwasi v. Mullo 14 , there was a condition that the

13
(1899)2 Ch 474.
14
AIR 1957 MP 200.
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mortgage money will be paid after 80 years and only of Baisakh. The Court opined

that such a condition was a clog.

In U. Nilan v. Kannayyan (Dead) Through Lrs.15, explaining the philosophy behind

the doctrine, it was said that –

“Adversity of a person is not a boon for others. If a person in stringent

financial conditions had taken the loan and placed his properties as

security therefor, the situation cannot be exploited by the person who had

advanced the loan. The Court seeks to protect the person affected by

adverse circumstances from being a victim of exploitation. It is this

philosophy which is followed by the Court in allowing that person to

redeem his properties by making the deposit under Order 34 Rule 5

C.P.C.”

There are no fixed qualifying circumstances in determining what would or would

not amount to a clog.16 It has been something that would have to be decided on the

facts and circumstances of the case.17 There are certain situations where it was held

that the covenant was a clog on the right.

In Meharban Khan v. Makhna, 18 the mortgage agreement provided that the

mortgagee was to be entitled to possession of the property for 19 years. There was

15
AIR 1999 SC 3750.
16
Bhullan v. Bachcha, AIR 1931 All 380.
17
Pomal Kanji Govindji v. Vrajilal Karsandas Purohit, AIR 1989 SC 436.
18
AIR 1930 PC 142.
17
a stipulation that if the mortgagor paid off his debt, he would be allowed to redeem

the property only till a limited interest and the residual interest would belong to the

mortgagor. It was further envisaged that on failure of the mortgagor to pay, the

property would be deemed to be sold to the mortgagee permanently. The Court

ruled that both conditions amounted to a clog. It was held that on payment of the

full amount due, the property would be reverted back without any encumbrance.

This principle would also extend to cases where on default of payment, the property

would be deemed to have been foreclosed, amounts to a clog.19 However parties

are free to stipulate such a condition subsequently after the mortgage agreement.20

In Kuddi Lal v. Aisha Jehan Begam, 21 the plaintiff-mortgagor was allowed to

redeem the property back by paying from her own pockets and not through

transferring the property. The Court held that such a covenant was a clog on

redemption since it restrained alienation by the mortgagor.

In Sheo Shankar v. Parma,22 the mortgagor had already executed a usufructuary

mortgage in favor of the mortgagee. He further executed a simple mortgage in order

to borrow more money. A provision in the simple mortgage provided that the

mortgagor was stopped from redeeming the property till the amount in the simple

mortgage was paid. It was held that such a provision was void as a clog.

19
Shankar Dhonddev v. Yeshwant Raghunath, AIR 1928 Bom 82.
20
Sanjiva Row, Transfer of Property Act 1095 (6 th ed., 1999).
21
AIR 1927 Oudh 199.
22
ILR 26 All 559.
18
In Hari v. Vishnu,23 a loan of Rs. 1,500 was advanced to the plaintiff on mortgage

by the defendant. The mortgage deed provided that Rs. 5,000 was still to be paid

by the plaintiff on a previous mortgage and stipulated that till both the sums were

paid, the plaintiff was not entitled to redeem the property. The deed was stamped

at a value on Rs. 6,500. It was held that since both the transactions were clubbed

into one, the provision was not a clog.

23
ILR 28 Bom 349.
19
Conclusion

It can be concluded that the right to redeem is an inalienable right and it would not

be possible for a mortgagee to take away this right from a mortgagor so easily.

Right of redemption can only be extinguished in two ways viz. Act of the parties,

or by a decree of a court. Act of the parties can be understood in various ways. One

can be the sale of the property by the mortgagee, but sale would not be complete

unless the money is paid by the purchased and hence the right to redeem would

exist unless the amount agreed the mortgagee and the purchaser are paid off.

Moreover, a

mortgagee may lose his right over the mortgaged property if he doesn’t take any

remedial steps in a reasonable time and his right to sale the mortgaged property

becomes invalid because of his inability to file a suit for the foreclosure of the

property within the limitation period. But, it is also the necessary to understand the

need of this right to remain present under legal system. Reason being very simple,

as in the absence of such provision on any of the enacted statues or laws in the legal

system it would become easy for mortgagee to gain advantage of his position. The

principle behind can the responsibility of the state towards society where every

breed of person stays, and a person who is at a higher position would try to take

advantage of that position. Reason for having the provisions relating to mortgages

is also the same. It was generally a tradition in ancient time to take the possession

of the property by the money lender and if debtor was not able to pay the amount,

20
then money lender would get the ownership of the property. Usually, the price of

the property kept as a security was much higher than that of the money borrowed.

The doctrine has not escaped without controversy. Sir Fredrick Pollock has made

his displeasure known by terming this doctrine as an „anachronism‟.24 He believed

that the doctrine cannot keep on assuming that the mortgagor is a victimized party

in the bargain. According to him, in the modern age, both parties are at a level

playing field and giving a mortgagor a ground to repudiate his obligations by

portraying one of the clauses of the contract as unconscionable, it works against

public policy as a whole.25

Pollock isn’t completely wrong in his analysis of the doctrine. The doctrine was

envisaged at a time when feudal landlords would use their power over oppressed

peasants to enter into unfair agreements by virtue of their necessity. But with the

growth of commerce and passage of time, such inequality has been more or less

abolished. Providing an excuse to one party to escape his obligations is a bad

precedent to set. However, these criticisms have not stopped the courts in India to

apply this test. Where a major chunk of the population in India still works in the

agrarian sector and lives under below poverty line without any formal banking

systems, the doctrine still has some prevalence in such situations. It is left at the

discretion of the judiciary to decide in which cases a prudent application of this

doctrine lies.

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Bibliography

1. Mulla‟s The Transfer of Property Act

2. The Transfer of Property Act, by Dr. G.P. Tripathi 3.

Poonam Pradhan Saxena, Property Law (2nd ed., 2011).

4. Sanjiva Row, Transfer of Property Act (7th ed., 2011).

5. Study Material for Property Law

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