Seth Ganga Dhar Vs. Shankar Lal &
Ors [1958] INSC 44 (15 April 1958)
ACT:
Mortgage-Mortgagor's right redeem-Instruntent
providing that mortgage shall not be redeemable for eightyfive years-Term, if a
clog on the equity of redemption-Power of Court-ExtentApplicability-Transfer of
Property Act, 1882 (4 of 1882), s. 60.
HEADNOTE:
The rule against clogs on the equity of
redemption embodied in s. 60 of the Transfer of-Property Act empowers the Court
not only to relieve a mortgagor of a bargain whereby in certain circumstances
his right to redeem the mortgage is wholly taken away, but also where that
right is restricted.
The extent of this latter power is, however,
limited by the reason that gave rise to it, namely, the unconscionable nature
of the bargain, which, to a court of equity, would afford sufficient ground for
relieving the mortgagor of his burden, and its exercise must, therefore, depend
on whether the bargain, in the facts and circumstances of any particular case,
was one imposed on the mortgagor by taking advantage of his difficult and
impecunious position at the time when lie borrowed the money.
Vermon v. Bethell, (1762) 2 Eden 110; 28 E.
R. S38 and D. and C. Kreglinger v. New Patagonia Meat and Cold Storage Company,
Ltd., [1941] A.C. 25, relied on.
Santley v. Wilde, (1913) L. R. 41 I. A. 84
and Mohammad Sher Khan v. Seth Swami Dayal, (1912) L. R. 49 I. A. 60, referred
to.
Consequently, in a suit, for redemption where
the mortgage deed, by two distinct and independent terms provided that (1) the
mortgage shall not be redeemed for eighty five years and (2) that it could be
redeemed only after that period and within six months thereafter, failing which
the mortgagor would cease to have any claim on the mortgaged property and the
mortgage deed would be deemed to be a deed of sale in favour of the mortgagee,
and it was clearly evident from the facts and circumstances of the case that
the bargain was quite fair and one as between parties dealing with each other
on an equal footing :
Held, that the term providing for a period of
eighty five years was not a clog on the equity of redemption, and the mere
length of the period could not by itself lead to an inference that the bar.
gain was in any way oppressive or unreasonable. The term was enforceable in law
and the suit for redemption, filed before the expiry of the period waspremature.
Held, further, that the term that on the
failure of the mortgagor to redeem within the specified period of six months,
he 65 510 would lose his right to do so and the mortgage deed was to be deemed
to be a deed of sale in favour of the mortgagee, was clearly a clog on the
equity of redemption and as such invalid but its invalidity could not in any
way affect the validity of the other term as to the period of the mortgage,
that stood clearly apart.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 150 of 1954.
Appeal from the judgment and decree dated
March 21, 1950, of the Court of Judicial Commissioner at Ajmer in Civil First
Appeal No. 13 of 1948, arising out of the judgment and decree dated March 30,
1948, of the Court of Sub-Judge 1st Class, Ajmer, in Civil Suit No. I of 1947.
Tarachand Brijmohan Lal, for the appellant.
S. S. Deedwania and K. L. Mehta, for the
respondents.
1958. April 15. The Judgment of the Court was
delivered by SARKAR J.-This appeal arises out of a suit for the redemption of a
mortgage dated August 1, 1899. The property mortgaged was a four-roomed shop
with certain appurtenances, standing on a piece of land measuring 5 yards by 15
yards in Naya Bazar, Ajmere. The mortgage was created by Purshottamdas who is
now dead and was in favour of Dhanrupmal, a respondent in this appeal. The
mortgage instrument stated that the property had been usufructuarily mortgaged
in lieu of Rs. 6,300 of which Rs. 5,750 had been left with the mortgagee to
redeem a prior mortgage on the same and another property. It also provided that
on redemption of the prior mortgage, the possession of the shop would be taken
over and retained by the mortgagee, Dhanrupmal, who would appropriate its rent
in lieu of interest on the money advanced by him and the possession of the
other property covered by the prior mortgage, being a share in a Kachery would
be made over to the mortgagor, Purshottamdas. The provisions in the mortgage
instrument on which the present dispute turns were in these terms:
511 " I or my heirs will not be entitled
to redeem the property for a period of 85 years. After the expiry of 85 years
we shall redeem it within a period of six months. In case we do not redeem
within a period of six months, then after the expiry of the stipulated period,
1, my heirs, and legal representatives shall have no claim over the mortgaged
property, and the mortgagee shall have no claim to get the mortgage money and
the lagat (i. e., repairs) expenses that may be due at the time of default. In
such e, case this very deed will be deemed to be a sale deed. There will be no
need of executing a fresh sale deed. The expenses spent in repairs and new
constructions will be paid along with the mortgage money at the time of
redemption according to account produced by the mortgagee." The mortgagee,
Dhanrupmal, duly redeemed the earlier mortgage and, went into possession of the
shop while possession of the Kacheri was delivered to the mortgagor.
On April 12, 1939, Dhanrupmal assigned his
rights under the mortgage to Motilal who died later, and whose estate is now
represented by his sons, who are the other respondents in this appeal. 'The
estate of Purshottamdas, the original mortgagor, is now represented by his son,
the appellant.
On January 2, 1947, the appellant filed the
suit in the Court of the Sub-Judge, Ajmere, against the respondents.
The suit was contested by the sons of
Motilal, the assignee of the mortgage, who are the only respondents appearing
in this appeal and whom we shall hence, hereafter refer to as the respondents.
They said that the suit was premature as under the mortgage contract there was
no right of redemption for eighty five years after the date of the mortgage, that
is to say, till August 1, 1984. The learned Sub-Judge, purporting to follow a
decision of the Judicial Commissioner, Ajmere, to whom he was subordinate, held
that the provision postponing redemption for eightyfive years was invalid as it
amounted to a clog on the equity of redemption. He, therefore, passed a
preliminary decree for redemption. On appeal, the learned Judicial
Conmmissioner, Ajmere, held, that the decision 512 which the Sub-Judge had
purported to follow was, distinguishable. He examined a large number of cases
on the subject and came to the conclusion that the provision in question did
not amount to a clog on the equity of redemption. He, therefore, allowed the
appeal and dismissed the appellant's suit. From this decision the appeal to this
Court arises.
It is admitted that the case is governed by
the Transfer of Property Act. Under s. 60 of that Act, at any time after the
principal money has become due, the mortgagor has a right on payment or tender
of the mortgage money to require the mortgagee to reconvey the mortgage
property to him. The right conferred by this section has been called the right
to redeem and the appellant sought to enforce this right by his suit. Under
this section, however, that right can be exercised only after the mortgage
money has become due. In BakhtawaiBegum v. HusainiKhanam (1), also the same
view was expressed in these words:
" Ordinarily, and in the absence of a
special condition entitling the mortgagor to redeem during the term for which
the mortgage is created, the right of redemption can only arise on the
expiration of the specified period. " Now, in the present case the term of
the mortgage is eightyfive years and there is no' stipulation entitling the
mortgagor to redeem during that term. That term has not yet expired. The
respondents, therefore, contend that the suit is premature and liable to be
dismissed.
The appellant's answer to this contention is
that the covenant creating the long term of eightyfive years for the mortgage,
taken along with the provision that the mortgagor must redeem within a period
of six months thereafter or not at all and the other terms of the mortgage and
also the circumstances of the case, is really a clog on the equity of
redemption and is therefore invalid. He contends that, in the result the
mortgage money had been due all along and the suit was not premature.
(1) (1913) L.R. 41 I.A. 84, 89.
513 The rule against clogs on the equity of
redemption is that, a mortgage shall always be redeemable and a mortgagor's
right to redeem shall neither be taken away nor be limited by any contract
between the parties. The principle behind the rule was expressed by Lindley M.
R. in Santley v. Wilde (1) in these words:
" The principle is this: a mortgage is a
conveyance of land or an assignment of chattles as a security for the payment
of a debt or the discharge of some other obligation for which it is given. This
is the idea of a mortgage: and the security is redeemable on the payment or
discharge of such debt or obligation, any provision to the contrary
notwithstanding. That, in my opinion, is the law. Any provision inserted to
prevent redemption on payment or performance of the debt or obligation for
which the security was given is what is meant by_ a clog or fetter on the
equity of redemption and is therefore void. It follows from this, that
"once a mortgage always a mortgage ".
The right of redemption, therefore, cannot be
taken away.
The Courts will ignore any contract the
effect of which is to deprive the mortgagor of his right to redeem the
mortoage. One thing, therefore, is clear, namely, that the term in the mortgage
contract, that on the failure of the mortgagor to redeem the mortgage within
the specified period of six months the mortgagor will have no claim over the
mortgaged property, and the mortgage deed will be deemed to be a deed of sale
in favour of the mortgagee, cannot be sustained. It plainly takes away
altogether, the mortgagor's right to redeem the mortgage after the specified
period. This is not permissible, for " once a mortgage always a mortgage
" and therefore always redeemable. The same result also follows from s. 60
of the Transfer of Property Act. So it was said in Mohammad Sher Khan v. Seth
Swami Dayal (2) :
"An anomalous mortgage enabling a
mortgagee after a lapse of time and in the absence of redemption to enter and
take the rents in satisfaction of the interest. would be perfectly valid if it
did not also hinder an (1) [1899] 2 Ch, 474.
(2) (1921) L.R. 49 1,A. 60, 65.
514 existing right to redeem. But it is this
that the present mortgage undoubtedly purports to effect. It is expressly
stated to be for five years, and after that period the principal money became
payable. This, under s. 60 of the Transfer of Property Act, is the event on
which the mortgagor had a right on payment of the mortgage money to redeem.
The section is unqualified in its terms, and
contains no saving provision as other sections do in favour of contracts to the
contrary. Their lordships therefore see no sufficient reason for withholding
from the words of the section their full force and effect. " Under the
section, once 'the right to redeem has. arisen it cannot be taken away. The
mortgagor's right to redeem must be deemed to continue even after the period of
six months has expired and the attempt to confine that right to that period
must fail. The term in the mortgage instrument providing that the mortgage can
be redeemed only within the six months and not thereafter must be held period
of to be invalid and ignored. The learned Judicial Commissioner took the same
view and this has not been challenged in this appeal on behalf of the
respondents.
With this term however this case is not
really concerned.
Learned advocate for the appellant directed
his attack on the term in the instrument of mortgage that it will not be
redeemable for eighty five years. He contended that this term amounts to a clog
on the equity of redemption. We wish to observe here that the learned advocate
did not contend that the invalidity, as we have earlier held, of the term
taking away the right to redeem the mortgage after the period of six months
makes the term fixing the period of the mortgage at eighty five years invalid.
This latter term stands quite apart. It only fixes the time when the principal
sum is to become due, that is, when the right to redeem will accrue and has,
therefore, nothing to do with a term which provides when that right will be
lost. The invalidity of one does not make the other also invalid.
The term providing that the right to redeem
will arise after eighty five years does not, of course, take 515 away the
mortgagor's right to redeem and is not, therefore, in that sense, a clog on the
equity of redemption. It does, however prevent accrual of the right to redeem
for the period mentioned. Is it then, in so far as it prevents the right to
redeem from accruing for a time, a clog ? As we have already said, the right to
redeem does not arise till the principal money becomes due. When the principal
sum is to become due must of course depend on the contract between the parties.
In the present case the parties have agreed that the right to redeem will arise
eighty five years after the date of the mortgage, that is to say, the principal
money will then become due. The appellant says that he should be relieved from
this bargain that he has made. This is the contention that has to be examined.
The rule against clogs on the equity of
redemption no doubt involves that the Courts have the power to relieve a party
from his bar 'gain. If he has agreed to forfeit wholly his right to redeem in
certain circumstances, that agreement will be avoided. But the Courts have gone
beyond this.
They have also relieved mortgagors from
bargains whereby the right to redeem has not been taken away but restricted.
The question is the term now under consideration such that a Court will
exercise its power to grant relief against it ? That depends on the extent of
this power. It is a power evolved in the early English Courts of Equity for a
special reason. All through the ages the reason has remained constant and the
Court's power is therefore limited by that reason. The extent of this power
has, therefore, to be ascertained by having regard to its origin. It will be
enough for this purpose to refer to two authorities on this question.
In a very early case, namely, Vermon v.
Bethell Earl of Northington L. C. said, " This court, as a court of
conscience, is very jealous of persons taking securities for a loan, and
converting such securities into purchases. And therefore I take it to be an
established rule, that a mortgagee can never provide at the time of making the
(1) (1762) 2 Eden 110, 113; 28 E.R. 838,839.
516 loan for any event or condition on which
the equity of redemption shall be discharged, and the conveyance absolute.
And there is great reason and justice in this
rule, for necessitous men are not, truly speaking, free men, but, to answer a
present exigency, will submit to any terms that the crafty may impose upon
them. " In comparatively recent times Viscount Haldane L. C.repeated the
same view when he said in G. and C. Kreglinger v. New Patagonia Meat and Cold
Storage Company Ltd. (1): This jurisdiction was merely a special application of
a more general power to relieve against penalties and to could them into mere
securities. The case of the common law mortgage of land was indeed a gross one.
The land was conveyed to the creditor upon the condition that if the money he
had advanced to the reoffer was repaid on a date and at a place named, the fee
simple would revest in the latter, but that if the condition was not strictly
and literally fulfilled he should lose the land forever. What made the hardship
on the debtor a glaring one was that the debt still remained unpaid and could
be recovered from the feoffor notwithstanding that he had actually forfeited
the land to the mortgagee.
Equity, therefore, at an early date began to
relieve against what was virtually a penalty by compelling the creditor to use
his legal title as a mere security.
My Lords, this was the origin of the
jurisdiction which we are now considering, and it is important to bear that
origin in mind. For the end to accomplish which the jurisdiction has been
evolved ought to govern and limit its exercise by equity judges. That end has
always been to ascertain, by patrol evidence if need be, the real nature and
substance of the transaction, and if it turned out to be in truth one of
mortgage simply, to place it on that footing. It was, in ordinary cases, only
where there was conduct which the Court of Chancery regarded as unconscientious
that it interfered with freedom of contract. The lending of money, on mortgage
or otherwise, was looked 517 on with suspicion, and the court was on the alert
to discover want of conscience in the terms imposed by lenders." The reason
then justifying the Court's power to relieve a mortgagor from the effects of
his bargain is its want of conscience. Putting it in more familiar language the
Court's jurisdiction to relieve a mortgagor from his bargain depends on whether
it was obtained by taking advantage of any difficulty or embarrassment that he
might have been in when he borrowed the moneys on the mortgage. Was the
mortgagor oppressed ? Was he imposed upon ? If he was, then he may be entitled
to relief.
We then have to see if there was anything
unconscionable in the agreement that the mortgage would not be redeemed for eighty-five
years. Is it oppressive ? Was he forced to agree to it because of his
difficulties ? Now this question is essentially one of fact and has to be
decided on the circumstances of each case. It would be wholly unprofitable in
enquiring into this question to examine the large number of reported cases on
the subject, for each turns on its own facts.
First then, does the length of the term-and
in this case it is long enough being eightyfive years-itself lead to the
conclusion that it was an oppressive term ? In our view, it does not do so. It
is not necessary for us to go so far as to say that the length of the term of
the mortgage can never by itself show that the bargain was oppressive. We do
not desire to say anything on that question in this case. We think it enough to
say that we have nothing here to show that the length of the term was in any
way dis-advantagous to the mortgagor. It is quite conceivable that it was to
his advantage. The suit for redemption was brought over forty-seven years after
the date of the mortgage. It seems to us impossible that if the term was
oppressive, that was not realised much earlier and the suit brought within a
short time of the mortgage. The learned Judicial Commissioner felt that the
respondents' contention that the suit had been brought as the price of landed
property had gone up after the war, was 66 518 justified. We are not prepared
to say that he was wrong in this view. We cannot also ignore, as appears from a
large number of reported decisions, that it is not uncommon in various parts of
India to have long term mortgages. Then we find that the property was subject
to a prior mortgage. We are not aware what the term-of that mortgage was' But
we find that mortgage included another property which became freed from it as a
result of the mortgage in suit. This would show that the mortgagee under this
mortgage Was not putting any pressure on the mortgagor. That conclusion also receives
support from the fact that the mortgage money under the present mortgage was
more than that under the earlier mortgage but the mortgagee in the present case
was satisfied with a smaller security. Again, no complaint is made that the
interest charged, which was to be measured by the rent of the property, was in
any manner high. All these, to our mind, indicate that the mortgagee had not
taken any unfair advantage of his position as the lender, nor that the
mortgagor was under any financial embarrassment.
It is said that the mortgage instrument
itself indicates that the bargain is hard, for, while the mortgagor cannot
redeem for eighty-five years, the mortgagee is free to demand payment of his
dues at any time he likes' This contention is plainly fallacious. ; There is
nothing in the mortgage instrument permitting the mortgagee to demand any
money, and it is well settled that the mortgagee's right to enforce the
mortgage and the mortgagor's right to redeem are co-extensive.
Then it is said that under the deed the
mortgagee can spend any amount on repairs to the mortgage property and in
putting up new constructions there and the mortgagor could only redeem after
paying the expenses for these. We are unable to agree that such is the effect
of the mortgage instrument. We cannot lose sight of the fact that the mortgaged
shop and the area of the land on which it stood were very small. It was not
possible to spend a large. sum on repairs or construction there. Furthermore,
having agreed to 85 years as the term of the mortgage, the parties must 519
have imagined that during this long period repairs and constructions would
become necessary. It is only such necessary repairs as are contemplated by the
instrument and we do not consider that it is hard on the mortgagor to have to
pay for such repairs and construction when he redeems the property and gets the
benefit of the repairs and construction. Neither do we think that there is
anything in the contention that under the document the mortgagor was bound to
accept whatever was shown in the mortgagee's account as having been spent on
the repairs and construction. That is not, in our view, the effect of the
relevant clause which reads, " The expenses spent in repairs and new
constructions will be paid...... according to the account produced by the
mortgagee. " All that it means is that in claiming moneys on account of
repairs and construction the mortgagee will have to show from his account that
he spent these moneys. It is really a safeguard for the mortgagor. It was also
said that all the terms in the deed were for the benefit of the mortgagee and
that showed that the bargain was a hard one. We do not think that all the terms
were for the benefit of the mortgagee, or that what there was in the instrument
was for his benefit and indicated that the mortgagee had forced a hard bargain
on the mortgagor. We have earlier said how the bargain appears to us to have
been fair and one as between parties dealing with each other on equal footing.
We have no evidence in this case of the
circumstances existing at the date of the mortgage as to the pecuniary
condition of the mortgagor or as to anything else from which we may come to the
conclusion that the mortgagee had taken advantage of the difficulties of the
mortgagor and imposed a hard bargain on him. It was said that the fact that the
property was subject to a prior mortgage at the date of the mortgage in suit
indicates the impecunious position of the mortgagor. We are unable to agree
with this contention.
Every debtor is not necessarily impecunious.
The mortgagor certainly derived this advantage from that mortgage that he was
able to free from the earlier mortgage the kacheri and he has been in enjoyment
of it ever since.
520 That, to our mind, indicates that the
bargain had been freely made, There was nothing else to which our attention was
directed as showing that the bargain was hard. We, therefore, think that the
bargain was a reasonable one and the eighty-five years term of the mortgage
should be enforced. We then come to the conclusion that the suit was premature
and' must fail.
In the result we dismiss this appeal with
costs.
Appeal dismissed.
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