Clog on redemption and its implication on

modern commercial dealings

PRESENTED BY,
AKRITI SINHA
CUSB1913125010
BA LLB (6TH SEMESTER)
 SYNOPSIS

 INTRODUCTION

 HISTORICAL DEVELOPMENT

 ESSENTIAL ELEMENTS OF CLOG ON REDEMPTION

 INSTANCES ON THE CLOG OF REDEMPTION

 IMPLICATION OF CLOG ON MODERN DEALINGS

 CONCLUSION
 Terms to be understood

 A mortgage is the transfer of an interest in immovable property for the purpose

of securing the payment of money advanced, an existing or future debt or the

performance of an engagement which may give rise to a pecuniary liability.
 The person who transfers the interest in an immovable property is called the

mortgagor.
 The person to whom interest is transferred is called the mortgagee.

 The principal money and interest of which payment is secured for time being is

called mortgage money.

 The instrument by which the transfer is effected is called a mortgage deed.
 INTRODUCTION

Whenever the mortgage takes place, the mortgagor do have right to take back the
property once he pays back the mortgage amount.

This concept basically arises from equity .

Clog is a condition or stipulation, which obstructs the right of the mortgagor to

redeem his property. Clog makes the agreement void.

In India clog on redemption is void and also no stipulation prevails against the
statutory right.

In the case of mortgage, two categories of interest are created.

This division of interest gives mortgagor to redeem his property after the
repayment of loan.
 HISTORICAL DEVELOPMENT

Stanley v. Wilde (1899) 2 Ch 474

 It was held by the Court that a mortgage means transferring the interest in an immovable

property to a party as security for the loan that the party has advanced.
 Such security is redeemable by the transferor once he repays the loan or discharges his

liability.
 If the party fails to redeem the mortgaged property, anything done to obstruct the party from

redeeming the property is a clog and it's simply void.

 The doctrine of clog on redemption is based on the principles of justice, equity and good

conscience.
 A person taking loan in lieu of his property as security cannot be exploited by the other party.
 ESSENTIAL ELEMENTS OF CLOG ON REDEMPTION

Such condition or stipulation

Condition or stipulation must be
must be mentioned in the
applied by the mortgagee only.
mortgage deed.

Condition or stipulation must be

The condition or stipulation must
unreasonable, against the public
put restrain on mortgagor’s right
policy and with mala fide
of redemption.
intention.
 INSTANCES ON THE CLOG OF REDEMPTION

Condition of the sale of property in default:

A condition that makes the mortgage a sale is clog on redemption. If a condition
in the mortgage is stated that, in case the mortgagor fails to redeem the
property within a fixed period, it will be considered as sale is a clog. But there
might be a situation when a separate deed is executed in the favor of mortgage,
then such sale would be valid.

Postponement of redemption for long term:

The postponement of redemption for long term is not necessarily a clog because
it may be beneficial for both the parties. In case of long term mortgage, the
mortgagor does not have to find a creditor and the mortgagee is secured with
increasing rate of interest in his investment.
Continued….

Penalty in case of default:

In case the mortgagor has defaulted on any grounds, then the mortgagee do
have right to impose penalty. But such penalty must be fair and just. In case of
small default, the mortgagee imposing compound interest instead of simple
interest is unjust and cannot be given effect.

• Benefit given to mortgagee is unfair and unconscionable.

• Benefit was not the part of mortgage transaction rather it was an independent
benefit.

Collateral benefit to the mortgagee:

A mortgagee may avail some collateral benefit during the period of mortgage. In
case of usufructuary mortgage, the mortgagee has right of possession and taking
rent of that property in order to adjust the sum due. Collateral benefit becomes
clog only when:-
Continued….

Condition postponing redemption in a default on a certain date

(Subsequent agreement to postpone redemption):
A subsequent agreement which becomes obstruction to the mortgagor is a clog
on redemption. Stipulation that postpones the date of redemption is a clog.

Restraint on alienation:
A stipulation that restrains the mortgagor from transferring mortgage property
is a clog. In mortgage as discussed above only certain interests are transferred
and the mortgagor is still residuary owner of that property. Agreement that
restrains the mortgagor from mortgaging the property once again or even
agreement that prevents him from making gift of the mortgaged property is a
clog.
 IMPLICATION OF CLOG ON MODERN DEALINGS

 Once a mortgage, always a mortgage, and nothing else.

 The agreement between parties cannot prevail against statutory provision.

 The present law favors mortgagee under the grab of traditional justification of

unfair bargaining.
 This unfair bargaining power may subject to criticism.

 The present approach puts the lender to risk because the market is increasingly

going competitive.
 Making a good bargain should be left at option of parties rather than the

courts.
 CONCLUSION

The clog on redemption is something that cannot be determined absolutely.

Clog has to be settled through close perusal of the mortgage deed.

Sir Fredrick Pallock has termed the doctrine as complete anachronism.

This doctrine considers one party that is mortgagor as the only victim, it is
against public policy.

This precedent set a bad rule.

In India, the complete discretion is given the court to decide as to which

conditions form the part of clog.