Once a Mortgage Always a Mortgage

Abstract

The mortgage remains one of the most popular and successful techniques for financing real
estate transactions. Over the past 25 years, mortgages have also been sold on the secondary
market and included in mortgage securitizations. A mortgage is the transfer of real estate interest
for the purpose of securing loan payments. The presumptive creditor is the owner who has the right
to dispose of certain real rights and recover the mortgaged property when exercising his/her real
rights. The right of repayment is in the case of an existing mortgage and exists as long as it exists
in itself. Mortgage lenders default, but they always have the right to repay, and any exclusions to
this right are void.

Keywords: Mortgage, right to redeem, clog on redemption, estate, immovable property,

Introduction

As per Section 58 of the Transfer of Property Act, 18821, the mortgage is a conditional conveyance
of certain interests in immovable property as security for payment of the loan or performance of a
duty that may give rise to a pecuniary liability. In general-parlance, if a person takes a loan, he
grants some interest in his immovable property as security for repayment of such loan to the
lender, it is known as a mortgage of a property. The person raising funds through keeping his/her
property as security or lien is the mortgagor and the person in whose favor the interest has been
transferred is the mortgagee.

It is to be noted that mortgagors are irrefutably bestowed with the right of redemption2 i.e. they can
get their property back by repaying the loan, without any encumbrances, because the ownership
still remains with the mortgagor.

Meaning of redemption

1
Transfer of Property Act, 1882,Book.
2
lawcorner.in/right-of-redemption-under-transfer-of-property-act-1882/

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An act of redeeming or atoning for a fault or mistake, or the state of being redeemed. deliverance;
rescue. Theology. deliverance from sin; salvation. atonement for guilt.

Right of Redemption3

Ownership of immovable property is associated with a bundle of rights. Upon a mortgage, a

mortgagor generate two interests,

The interest of the creditor/lender on the property (limited, fixed, and temporary)

Residuary interest qua the interest that remains with the mortgagor (can be estimated through
deducting the interest transferred to the mortgagee)

The mortgagor can retain the former division of interest by paying off the borrowed principal money
with interest. Per contra, the status quo is that since mortgagors borrow money out of some
financial predicaments, lenders often ostensibly purported to take advantage of it by persuading
mortgagors to sign agreements that transcends mere mortgage qua intends to turn a mortgage
deed into a sale deed. Such covenants are of nature that deliberately seizes the mortgagor’s right
of redemption conferred by Section 60 of Transfer of Property Act, 1882.

It is pertinent to note that the mortgagor’s right to redeem is a statutory right; thereby, the parties
are no way competent to withhold such an absolute right through any agreement. To address the
bone of contention and to reinforce the mortgagor’s right to buy back the mortgaged property, the
principle ‘once a mortgage always a mortgage,’ was laid down in the case of Harris v. Harris4.

Construing the right to redemption as a right of equity, any impediment to this right is void, and it
constitutes a clog on the equality of redemption. Thus, covenants that modify the character of the
mortgage would not defeat the mortgagor’s right of redemption, even he himself agrees to it.

Basis of right to redemption = Mortgagor’s ownership in the mortgaged property.

clog on redemption?

3
ibid
4
AIR (1965) SC 225.

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Let us suppose that a clause in a mortgage deed debars the mortgagor from getting back his
property on default in repayment of the loan within a stipulated deadline i.e. if the mortgagor is not
able to repay the loan within 5 years of the execution of the sale deed. Then, he is left with no
option but to sell his property to the mortgagee. This condition/stipulation would be a clog on the
equity of redemption, such clog is inequitable and hence, void.

Similarly, in the case of Murari Lal v. Devkaran 5, a condition was imposed by the mortgage deed
that the mortgaged money must be paid within 15 years; otherwise, the mortgagee would become
the owner of the property. It was held that the condition is void as it is unreasonable and implies an
impediment to the mortgagor’s right to redemption.

Provisions under the Transfer of Property Act,

1. Section 606– It confers the Right of Redemption and the suit by which this right can
be enforced is Suit for Redemption. Unlike common law, since the right to
redemption and equity of redemption are indistinguishable under the Transfer of
Property Act, this Section is the one catchall provision that dealt with the rights of
the mortgagor on redemption. The mortgagee must recover the title to the
mortgagor upon the satisfaction of the debt. In a nutshell,

 This right comes into play only when the mortgage money becomes due.
 Upon the payment of the mortgage money, the mortgagee has to return all the documents
related to the mortgaged property and the possession as well.
 The Mortgaged property can be delivered to any third party as directed by the mortgagor.
 No additional clause in the mortgage deed can preclude the mortgagor from redeeming his
property.
 Such a clause constitutes a clog on the equity of redemption.

5
AIR (1965) SC 225.
6
Transfer property act 1882

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  Exception: This Section puts a restriction that the mortgagor’s right to redemption is
exercisable unless and until extinguished by the parties conduct or court’s decree.
 Thereon, the only relief available to the mortgagee is to file a suit for foreclosure before a
competent court.

2. Section 917-  This provision lists individuals empowered to redeem the mortgaged
property or sue for redemption other than the mortgagor. They are,

 Any person who has an interest in the property other than mortgagee,
 Any surety for the payment of mortgaged debt,
 Any creditor of the mortgagor who has obtained a decree for sale of the mortgaged
property.

Once a Mortgage always a Mortgage The doctrine of equity of redemption is expressed in this
maxim and it is an exception to the principle, ‘ the agreement of the parties overrides the law .’
Reiteratively, the maxim, established in 1681 by Lord Nottingham in the case of Harris v. Harris8 is
basically to safeguard the mortgagor’s right to redemption. In the case of Noakes & Co v. Rice9, the
maxim was interpreted by Lord Davey as ‘That a mortgage cannot be made irredeemable and that
a provision to that effect is void’. Therefore, one of the manifestations of this maxim is that the clog
on the equity of redemption is void. No matter whether the provision that makes a mortgage
irredeemable is there in the mortgage deed itself or any collateral but connected transaction
outside the mortgage contract, it is void to the extent to which it prevents the mortgagor from
getting his whole of the property back on repayment of the mortgaged money.

Sometimes, such provision may have been disguisedly inserted in the mortgage deed, like in the
case of Samuel v. Jarrah Timber and wood paving corporation10. Wherein, a Timber Company
7
Transfer property act 1882
8
ibid
9
1902 AC 24
10
[1904] UKHL 2; [1904] AC 323.

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borrowed money on the security of its debenture stock and granted the lender with an option to buy
its stocks within the next twelve months upon the nonpayment of the loan. Within the stipulated
time, the lender wanted to exercise the granted option, before the company gave notice of its
intention to repay the loan amount. It was held by the House of Lords that the option itself is void
as it debars the mortgagor from redeeming his property back upon the repayment of the principal
amount along with the interest and costs.

Historical Development of the Doctrine “Once A Mortgage Always a Mortgage”

This doctrine “Once A Mortgage Always a Mortgage” is the outcome of combined notions viz.
Equity, Justice, and Good Consciences. In layman’s terms, equity is equivalent to fairness and
egalitarianism. Back then, the major lacuna in the justice delivery system was emerging in
England. To cope with such an inadequacy, the Chancellors were appointed by the king in special
courts to outreach the sphere of the law to dole out justice and fairness to common people. Court
under the control of Lord Chancellor was named the Court of Chancery qua Court of Equity, which
was developed to provide remedies that are not available in the Court of Common Law.

The mortgage law was developed almost completely in the Court of Equity. It is pertinent to note
that the equity of redemption principle was found in England mortgage law originated under roman
civil law.

The maxim ‘once a mortgage always a mortgage,’ is the connotation of the fact that the mortgagee
will always remain as a mortgagee and can never become an owner. All acts he commits in order
to exalt himself as an owner are perceived to be a clog on redemption.

Conclusion

The maxim "Once a mortgage, always a mortgage" details that the essence of a mortgage can
never be changed. Mortgages and repayment rights are inextricably linked. H. The right to repay is
always on the mortgage certificate and cannot be restricted or closed. The provisions/conditions

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that the mortgagee includes in the mortgage certificate that are unreasonable and offensive to
public order and morals are invalid because they completely limit the mortgagee's right to repay.

References

 https://www.lawctopus.com/academike/doctrine-of-clog-on-redemption/#_ftn33
 https://lordsoflaw.com/once-a-mortgage-always-a-mortgage/
 https://blog.ipleaders.in/critical-analysis-mortgagors-right-redemption/

 Thomas W. Bigley, William Mitchell Law Review, Volume 21 Issue 1,

 Property Law—The Equity of Redemption: Who Decides When it Ends?
https://open.mitchellhamline.edu/cgi/viewcontent.cgi?
referer=&httpsredir=1&article=2153&context=wmlr.