DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY,

LUCKNOW

SESSION: 2019-2024

TRANSFER OF PROJECT

FINAL DRAFT

CLOG ON REDEMPTION

SUBMITTED TO- SUBMITTED

BY-

DR. MANISH SINGH KARTIKAY AGARWAL

ASSISTANT PROFESSOR ENROLMENT NO.-190101079
(LAW) B.A LL.B.
(HONS.)
Dr. Ram Manohar Lohiya National Law University 6TH SEMESTER, SECTION-A
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

7.

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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 Manish 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 Dr. Ram

Manohar Lohia National Law University, Lucknow 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 find 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
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mortgage was valid 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

lease. The deed provided that in case the mortgagee received any notice

1 AIR 1997 SC242

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 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 Lal2 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

mortgagor could not pay the money the mortgagee was entitled to take

possession of the mortgage property.

2 AIR 2000 SC 770
3 AIR 1922 PC 17
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 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 –

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

4 Sanjiva Row, Transfer of Property Act 879 (7th ed., 2011).

5 Rama Krishnayya v. Venkata Somayajulu, AIR 1934 Mad 31.
6 Sunday Koer v. Sham Krishnen, ILR 34 Cal 150.
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 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.

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 (2nd 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.

Mullo14, 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.

13 (1899)2 Ch 474.
14 AIR 1957 MP 200.
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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

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.

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.
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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.

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

19 Shankar Dhonddev v. Yeshwant Raghunath, AIR 1928 Bom 82.

20 Sanjiva Row, Transfer of Property Act 1095 (6th ed., 1999).
21 AIR 1927 Oudh 199.
22 ILR 26 All 559.
23 ILR 28 Bom 349.
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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.

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