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DOCTRINE OF CLOG ON

EQUITY OF REDEMPTION
GENERAL INTRODUCTION
• A Mortgage is a security given by a person for ensuring or facilitating
the fulfilment of some obligation undertaken by him. Usually the
security is given in lieu of a debt owed by the Mortgagor to the
mortgagee.
• Mortgagor and Mortgagee have many rights and liabilities. Example:-
The Mortgagor's right to redeem is enshrined in S.60. The
Mortgagee’s right to foreclosure is enshrined in S.67.
Right to Redeem u/s 60, TP Act, 1882
• Mortgagor upon payment of the principal money (after it has become due)
has the right to require the mortgagee to deliver the mortgage deed or the
possession of the mortgage property to the mortgagor;
• The right to redeem in sec. 60 of TP Act can be exercised only if it has not
been extinguished by act of the parties or by decree of a Court.
• “Act of the parties" relate to some act on the part of the parties after the
creation of the mortgaged deed and not to the conditions or stipulations in
the mortgaged deed itself.
• Decree of a court would include a foreclosure decree where an opportunity
to the mortgagor to deposit the mortage money is provided. Sec. 60 of TP
Act does not allow part redemption and it is subject to the limitation
prescribed under the Limitation Act.
• S. 60 is not subject to contract to the contrary.
• Article 61 of the Limitation Act, 1963 prescribes the limitation period
of the right to redeem as 30 years. Earlier, it was 60 years under the
Indian Limitation Act, 1908
• Right to redeem u/s 60 is the statutory codification of the Equity of
Redemption.
Mortgagee’s Right to foreclosure u/s 67
• This right is subject to a contract to the contrary
• Right can be exercised at any time after the mortgage money has
become due to him
• Right must be exercised before a decree of redemption of mortgage
property is made
• Part foreclosure is not allowed unless interest is severed
• In a foreclosure proceeding, the mortgagor is given a chance to
redeem the property.
OPERATIVE DEFINITIONS
Black’s Law Dictionary
• Equity: “Fairness, impartiality; even handed dealing,” “The Body of
principles constituting what is fair and right; natural law”
• Redemption: “The act or an instance of reclaiming or regaining possession
by paying a specific price”
Lord Bramwell in Salt v. Marquess of Northampton
• Equity of Redemption “An equity of redemption is a right not given by the
terms of the agreement between the parties to it, but contrary to them, to
have back securities given by a borrower to a lender on payment, when by
the terms of the agreement between the parties the securities were to be
the absolute property of the creditor. This is now a legal right of the
debtor..”
• Clog on Equity of Redemption: “a contract forming part of the
mortgage and negativing or hampering the contractual; or equitable
right to redeem.”
INTRODUCTION
• Doctrine of clog on equity of redemption was judicially created to
mitigate the harshness of the common law relating to mortgage
transactions.
• The equity of redemption means that, subject to the rights of the
mortgagee as a secured creditor, the mortgagor was regarded by
equity as being the real owner of the mortgaged property. Pursuant
to this doctrine, rules were introduced to prevent the mortgagee
from introducing terms into the mortgage agreement which were
regarded as being a clog or a fetter on the equity of redemption.
HISTORY
• Anglo Saxon times - Piece of land is used as pledge
1. Vadium Vivam
2. Vadium Mortum
• 13th century – Charter of feoffment
• Mid 15th century- Relief of forfeiture
ORIGIN OF DOCTRINE IN UK
• The Common Law did not recognise the equity of redemption
• Equity courts dealt with those matters and applied doctrine of clog
• Later, Equity Courts’ intervention resulted in the creation of an
equitable right to redeem and the doctrine of clog on equity of
redemption.
ORIGIN OF DOCTRINE IN INDIA
• Initially not recognised by the Indian Courts. Forfeiture clauses were
strictly enforced. It was Imported from English Law.
• In 1858, the doctrine of equity of redemption was recognised by the
Madras Sudder Adaulat. Mortgagor was allowed to redeem even after
the due date.
ORIGIN OF DOCTRINE IN INDIA
• In 1870, The recognition of the doctrine was disapproved by the Privy
Council in the case of Pattabhiramier v. Venkatarao Naicken on the
ground that the doctrine was unknown to ancient law of India.
• However, the Supreme Court and High Court in various decisions
applied the doctrine of equity of redemption.
ORIGIN OF DOCTRINE IN INDIA
• In 1875, in the case of Thumbuswami v. Hossein, Doctrine of equity of
redemption was recognised by privy council.
• it was held that the doctrine can be applied in a case of security
executed since 1858, but whereas the courts should refrain from
applying the doctrine in mortgages executed prior to 1858.
• The statutory interference suggested by the Privy council in
Thumbuswani’s case was effected by the enactment of the TP Act.
• The Doctrine of Clog on Equity of Redemption was thereby
recognised as a right of redemption by the enactment of the TP Act,
1882.
RATIONALE BEHIND DOCTRINE
• In Pomal Kanji Govindji & Ors. v. Vrajalal Karsandas Purohit &
Ors.,(AIR 1989 SC 436) the Court examined the principles of
redemption of a mortgage and clog on equity of redemption. The
Court observed that freedom of contract is permissible provided it
does not lead to taking advantage of the oppressed or depressed
people. The court held that the law must transform itself to the social
awareness and that Poverty should not be unduly permitted to curtail
one's right to borrow money on the ground of justice, equity and
good conscience on just terms.
VARIOUS INSTANCES OF CLOG
• Subsequent Agreement to postpone redemption
• Condition providing collateral benefit to Mortgagee
• Condition Postponing redemption for a long period
• Condition stipulating transfer or sale upon failure to redeem
• Conditions restricting period of redemption to certain number of
years
• Conditions imposing Exorbitant interest
SUBSEQUENT AGREEMENT TO POSTPONE
REDEMPTION
• Sheo Shankar v. Parma: 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.
• Hari v. Vishnu: a loan of ₹1500 was advanced to the plaintiff on mortgage
by the defendant. The mortgage deed provided that ₹5000 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 ₹6500. It was held that since both the
transactions were clubbed into one, the provision was not a clog.
CONDITION PROVIDING COLLATERAL BENEFIT TO
MORTGAGEE
• Noakes & Co. v. Rice: A covenant in the mortgage agreement stipulated that the
mortgagee would buy all the beer he would consume on his property from the
mortgagor who was a brewer. It was held that the tie was valid during the
subsistence of the mortgage but not beyond redemption. The property must be
delivered back without any tie.
• Kreglinger v. New Patagonia Meat and Cold Storage Co. Ltd.: In this case, the
mortgage was of a term of 5 years with an option to the mortgagor to redeem the
property before completion of the term. The agreement further stipulated that
the mortgagor should sell sheepskins exclusively to the mortgagee as long as both
parties agreed to a fixed price. The mortgagee paid the mortgage before 5 years
and filed a suit for declaring the tie of exclusive selling to be declared as a clog on
redemption. The House of Lords held that the provision of exclusive sale to
lenders did not amount to a clog. It was reasoned that the mortgagee is allowed
to stipulate for a collateral benefit beyond the period of redemption provided
that the stipulation is not unconscionable or unfair.
CONDITION STIPULATING TRANSFER OR SALE
UPON FAILURE TO REDEEM
• Vasantrao & Ors. v. Kishanrao & Ors., Bombay HC held that a
Condition in mortgage deed effecting sale upon failure to pay within
stipulated time is a clog on equity of redemption.
• Karnataka HC in Bharati v. Smt. Seema, allowed redemption by
holding Condition in deed which specified that title in schedule
property would transfer from Plaintiff to Defendant after five years
upon default to pay the loan amount as clog.
• Patna HC in Dipak Singh v. Dinesh Singh &Ors., held that Provision for
conditional sale in mortgaged deed must be held void as it creates
clog on right of mortgager to redeem mortgaged property.
CONDITION POSTPONING REDEMPTION FOR A
LONG PERIOD
• Some mortgage deeds stipulate a Condition that the right to redeem
accrues only after an unreasonable period of years (99 years, etc.) – held to
be Clog – Void
• Held as Clog
• Shivdev Singh & Anr. v. Such Singh & Anr (SC) – 99 years + deriving usufructs for 27
years
• Sangar Gahu Dhula v. Shah Laxmiben Tejshi (Guj HC) – 99 Years
• Mukhtiar Singh. v. Gurmej Singh (P&H HC) – 99 years + unfair clauses
• Not held as Clog
• Mangal Prasad Tamoli v. Narvedshwar Mishra (SC) – 60 years – suit premature
• Usha Rani v. Pushpa Devi (P&H HC) – 58 Years
• Tara Singh v. Amrik Singh (P&H HC) – accrues after 5 years – No evidence to prove
pressure to accept condition
CONDITIONS RESTRICTING PERIOD OF
REDEMPTION TO CERTAIN NUMBER OF YEARS
• The Limitation Act provides the number of years after which the right to redeem
becomes extinguished. As Sec. 60 of TP Act is not subject to any contract to the contrary,
a condition which restricts the period of redemption is supposed to be held as void. This
sort of a condition mostly finds a place in mortgages by conditional sale.
• Samadh Baba Narain Dass v. Surta & Ors, Punjab & Haryana High Court held that
condition imposing non-exercise of right of redemption within 4 years as sale to be a
clog on equity of redemption.
• The Allahabad High Court held a similar condition to be void in the case of Ram Das
Gupta v. Bhajan Prakash Girhotra & Ors. In that case, there was a Condition in the
mortgage deed that if mortgage was not redeemed within four years, it will be treated as
sale. It was held to be a clog on equity of redemption.
• In Baby Ammal v. V. Srinivasan, the Madras High Court held that a condition which said
that the mortgagee would execute sale deed only upon repayment of the loan amount
within 5 years in a mortgage by condition sale to be a clog on the equity of redemption.
• Vasantrao v. Kishan Rao similar to Baby Ammal case where the
Bombay High Court holds the condition to be a clog as well.
• Shivram & Ors. v. Sadashiv Laxman Sanap, Bombay High Court held
that a condition which stipulated that reconveyance is allowed only
upon repayment within 5 years is a clog.
• The Patna High Court in Deepak Singh v. Dinesh Singh & Ors held that
a provision in the deed for sale of the mortgage land in the condition
of non payment of principal loan amount within 7 years has to be
treated as clog on the right of redemption.
EXORBITANT INTEREST

• In Samadh Baba Narain Dass v. Surta & Ors., the Punjab and Haryana
High Court held that the terms of mortgage permitting interest at rate
equal to income from the land on a part of the principal amount and
interest at the rate of Re. 1 and 9 annas per month on rest of the
amount were hit by provisions of Usurious Loans Act, 1918, and
Punjab Relief of Indebtedness Act, 1934, and further such provisions
were in the nature of clog on equity of redemption and on that
account were liable to be modified.
CRITICISM
• Courts of Equity were going to order redemption in all cases holding any
condition which prevents redemption as clog – Scholars, Acamedicians &
Judges not in favour of it
• The rule against any clog on the equity became a necessary corollary of the
principle of redemption.
• 1903 - Sir Frederick Pollock called the doctrine an Anachronism
• In 1904, Lord Halsbury L.C. in Samuel v. Jarrah Timber described it as “a
principle of equity, the sense or reason of which I am not able to
appreciate”.
• Seven years later, the then Lord Chancellor, Lord Loreburn, expressed
concern that the doctrine was becoming “an aid instead of a hindrance to
unjust dealing”.
• In 1913, in the leading case of G. and C. Kreglinger v. New Patagonia
Meat and Cold Storage Co. Ltd, Lord Mersey described the doctrine as
“an unruly dog, which, if not securely chained to its own kennel, is
prone to wander into places where it ought not to be.”
• Ninety years later in Jones v. Morgan, Lord Phillips of Worth
Matravers M.R. described the doctrine as “an appendix to our law
which no longer serves a useful purpose and would be better excised”.
CONCLUSION
• Though there is no specific test or formula to determine whether a
condition is a clog on the equity of redemption, there exists some sort of
uniformity in the way courts deal with those cases.
• There is a certain degree of absurdness in the way courts decide cases
where conditions which postpone redemption by 60 years, 99 years etc.
exist as part of the mortgage transaction. The limitation period on the right
to redeem is thirty years but conditions which postpone redemption to 60
years have not been held as a clog.
• The rationale for not holding a condition which postpones redemption to
60 years as a clog but holding a condition which restricts period of
redemption to a specific period of years as a clog thereby setting it aside
making the right of redemption available to the mortgagor from the time
of executing the mortgage is strange.