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PROPERTY LAW PROJECT REPORT

MORTGAGE AND KINDS OF


MORTGAGE
Transfer of Property Act, 1882

SUBMITTED TO- SUBMITTED BY-

Prof. Rajinder Kaur Vivek,116/14

UILS, PANJAB UNIVERSITY B.A LL.B. (HONS.)

7th semester

Sec: B

1
ACKNOWLEDGEMENT

Firstly, I would like to express my special thanks of gratitude to my Teacher “Prof . Rajinder
Kaur” who gave me the golden opportunity to do this wonderful project on the topic
‘MORTGAGE AND KINDS OF MORTGAGE’, which also helped me in doing a lot of
Research and I came to know about so many new things and enhance my knowledge, I am really
thankful to them.

Secondly I would also like to thank my parents and friends who helped me a lot in finalizing this
project within the limited time frame.

Vivek

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INDEX
1. HISTORY OF MORTGAGE…………………………………………………………………….

2. MORTGAGE DEFINED…………………………………………………………………………

3. PARTIES TO A MORTGAGE…………………………………………………………………..

4. TRANSFER OF AN INTEREST………………………………………………………………..

5. PURPOSE OF MORTGAGE……………………………………………………………………

6. KINDS OF MORTGAGES………………………………………………………………………

a) Simple Mortgage…………………………………………………………………………………

b) Mortgage by Conditional Sale………………………………………………………………….

c) Usufructuary Mortgage………………………………………………………………………….

d) English Mortgage……………………………………………………………………………….

e) Mortgage by Deposit of Title Deeds…………………………………………………………….

f) Anomolous Mortgage…………………………………………………………………………..

7. Doctrine of clog on Redemption…………………………………………………………………

8.BIBLIOGRAPHY………………………………………………………………………………….

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HISTORY OF MORTGAGE
In the ancient system of law, a mortgage was really a pledge- the property being a gage which was
forfeited on default of payment. The transaction was effected either by delivery of possession, or
by conditional conveyance. Under early U.S. law, mortgage was treated as a complete transfer of
title from the borrower to the lender i.e. from the mortagagor to the mortgagee. The mortgagee
was entitled not only to payments of interest on the debt but also to the rents and profits of the
property. This meant that as far as mortgagor was concerned, the property was of no value, i.e.,
dead, until the debt was paid in full. Hence the name Mort(dead), gage(pledge).

A mortgage by conditional sale was a very early form of mortgage among Hindus. Among
Mohammedans, the mortgage by conditional sale was a device to evade the Islamic prohibition
of interest. This was literally a sale with a promise, so that the mortgagee enjoyed the rents and
profits in lieu of interest and became absolute owner of the property if the debt was not paid.
However, the earliest form of Mohammedan security was the ‘rahn’ or pledge with possession.
This developed by slow degrees into the recognition of a pledge without possession with a power
to sale. The development was slower than in Hindu law because interest not being added, the
security was always sufficient.

In England it seems certain that the original mortgage at common law was rather a pledge than
mortgage. The transfer was not of title, but of possession. This form was similar to usufructuary
mortgage under the transfer of property act. At a later time which cannot be exactly ascertained,
the English mortgage took the modern form of a conditional conveyance. The condition was
originally one of defeasance, that on repayment, the grant determined and the land reverted to the
mortgagor who was entitled to re-enter. Subsequently, the condition became one of re-
conveyance on repayment as defined in clause (e) of Section 58. Under common Law, if the
borrower failed to pay the debt in full at the appointed time, he suffered a complete loss of title.

The latest development of the law of mortgage in England is under the Law of Property Act, 1925
by which, condition has again become one of defeasance, there being an end of the term when
the money secured by the mortgage has been discharged.1

Mortgage defined :Sec 58(A)


1
Ibid. p-551

4
The Meaning of Mortgage as per the dictionary is “a conveyance of or lien against property as for
securing a loan that becomes void upon payment or performance according to stipulated terms”2

A mortgage involves the transfer of an interest in property as security for a loan or other
obligation.

In Section 2(17) of the Indian Stamp Act, 1899, a mortgage is defined as follows: “Mortgage-deed
includes every instrument whereby, for the purpose of securing money advances or to be
advanced, by way of loan or an existing or future debt, or the performance of an engagement, one
person transfers or creates, to or in favour of another, a right over or in respect of specified
property.” This definition is much wider and more general than that given in the transfer of
Property Act, because it applies to any specified property both movable and immovable, whereas
mortgage of a movable property is excluded from the Transfer of Property Act, and refers to the
performance of an engagement and is not restricted to an engagement giving rise to a pecuniary
liability only. But definitions are materially different.3

Section 58(A) A mortgage is the transfer of interest in the specific immovable property for the
purpose of securing the payment of money advanced or to be advanced by way of loan, an
existing or future debt or the performance of an engagement, which may give rise to a pecuniary
liability. In Mortgage, the owner of the immovable property transfer to the lender an interest in
his immovable property to secure the repayment of a debt. When the debt is repaid, the mortgage
is discharged. The transferor is called the mortgagor, the transferee a mortgagee; the principal
money and interest of which payment is secured for the time being are called mortgage money
and the instrument if any by which the transfer is effected, is called mortgage deed.

Thus the essential elements of a transaction of a mortgage are:

(1) Parties to a mortgage;

(2) transfer of an interest;

(3) In a specific immovable property;

(4) the purpose is to secure the repayment of money advanced or to be advanced/or is for
performance of an engagement that may give rise to a pecuniary liability.

http://www.merriam-webster.com/dictionary/mortgage, accessed on 30th September, 2016 at 10:00 am


2

Tripathi, prof g.p., the transfer of property act 1882, 18th edition, central law publications, Allahabad, 2014. P-358
3

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PARTIES TO A MORTGAGE
Mortgagor:

A person effecting the mortgage of his property is called a mortgagor and the one in whose favour
it is executed is called a mortgagee. A mortgagor must be a person competent to contract and
capable to transfer of property.

A minor cannot affect a mortgage, but a guardian of minor can affect a valid mortgage with the
sanction of the court. If several persons execute a mortgage and some of them are minors, the
mortgage is only partly invalid. It remains valid and operative for those competent to execute it.
Where the guardian of a minor executes mortgage of the property of the minor without the
sanction of the court, the mortgage is not void but voidable at the option of the minor which he
can exercise on attaining majority.

If a karta of a joint Hindu family executes a mortgage of the joint family property without the
consent of the other coparceners, the mortgage is voidable at the option of the other coparceners.
If the mortgage is for a legal necessity, it is not necessary for the mortgagee to see the application
of his money and all that he needs to show to the court is that he made reasonable inquiries and
acted honestly.

A partner of a commercial firm, a pardanashin woman, one of the several co-owners, can effect a
valid mortgage. In case of joint tenants, mortgage by one severs the tenancy and in case of more
than one mortgage their share each is liable jointly and severally.4

Mortgagee:

As per the Free Legal Dictionary, Mortgagee is defined as “One, usually a lender or a bank, that
holds a mortgage.”5

Any person who is competent to hold property can be a mortgagee irrespective of his competency
to contract. It is competency to hold the property and not competency to contract which is
material here.

Therefore, as held in Thakur Das v. Putli6, even a minor is competent to be a mortgagee.

4
Supra 4 p-314
5
http://www.thefreedictionary.com/mortgagee, accessed on October 1, 2016 at 10:00am
6
A.I.R. 1942 Lahore 611

6
However, it was held in Mehdi Ali v. ChunniLal7, as the Court is not a person, it is not competent
to be a mortgagee.8

TRANSFER OF AN INTEREST
The words ‘transfer of an interest’ signify that the interest which passes to the mortgagee is not
ownership or dominion which, notwithstanding the mortgage, resides in the mortgagor. The right
of the mortgagee is only an accessory right which is intended merely to secure the due payment
of the debt. Further the words ‘transfer of an interest’ stand in contrast with the words ‘transfer
of ownership’, occurring in Section 54 in the definition of sale. In a sale, all the rights of
ownership which the seller has, pass to the buyer. In a mortgage, there is a transfer of some
interest only and not a transfer of the whole interest of the mortgagor.

In Janardhana Mallan v. Gngadharan9, mortgage is simply a transfer of interest in the


immovable property while the ownership still retains with the mortgagors. Thus, where a joint
family property is subject to mortgage, there is no matter of ownership and the coparceners being
its lawful owners are competent to allot the mortgaged property in oral partition to any of the
coparceners. The coparcener to whom the mortgaged property is allotted becomes it absolute
owner and is entitled to redeem the mortgage.

SPECIFIC IMMOVABLE PROPERTY


The interest created by mortgage must be in some specific immovable property. In mortgage-deed
the property must be defined specifically and not in general terms. The property must be
immovable property. Things attached to what is embedded in the earth are also included in
immovable property. A life insurance policy cannot be the subject-matter of a mortgage because
it is not a property.10

7
A.I.R. 1929 Allahabad 834
8
Id. P-314
9
A.I.R. 1983 Kerala 178
10
Singh, avtar, the transfer of property act, central law publications, allahabad, 2006. P-201

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PURPOSE OF MORTGAGE
 Securing a debt

Every mortgage presupposes the existence of a debt, actual or contingent, and it is for securing the
repayment of the debt that a mortgage of property is made. Right in property is accessory to the
right to recover the debt. After effecting a mortgage, the same property can again be mortgaged
to raise an additional loan either to the same mortgagee or a different one. But raising additional
debt and introducing a co-mortgagee does not alter the relationship of the first mortgagee with
the mortgagor.11

 Money advanced or to be advanced

The primary purpose of the mortgage is to ensure the repayment of money advanced or to be
advanced. The clause ‘money advanced or to be advanced’ shows that the loan amount might be
paid to the mortgagor at the time of the execution of the mortgage deed or even subsequent
thereto. The date of the execution of the mortgage is effective even if the mortgage money is
undertaken to be advanced in future. But if there is no consideration, the mortgage is void as held
in BasantiLal v. Phaphi12. For example, A executed a mortgage deed of his house for Rs. 10
lakh, in favour of B on 10 January 2015. B promises to pay the money to A by 20 January 2015.
The mortgage is effective from 10 January itself, irrespective of the fact that money is yet to be
advanced. Even if B does not pay by the stipulated date, the mortgage does not become void. The
remedy of the mortgagor in such cases would be to rescind the contract and claim damages.13

 Mortgage money

The primary purpose of mortgage is to raise a loan and therefore, if there is no consideration the
mortgage is a nullity, but it does not fail merely because the mortgagor fails to advance the
money. Where part of the money is advanced it is a good security for the part advanced. It is
sufficient if the mortgagee leaves the money in a bank deposit at mortgagor’s disposal. Mortgage
money includes the interest accrued on it and the mortgagee is entitled to treat the interest due

11
Supra 4 p-318
12
A.I.R. 2008 Rajasthan 72
13
Id. P-318

8
under the mortgage as a charge on the estate, unless there is a contract to the contrary. It also
includes costs properly incurred by the mortgagee.

 Performance of an Engagement giving rise to a Pecuniary Liability

The term performance refers to an act of mortgagor resulting from an engagement. The term
engagement refers to a contract and due to this contract; there is a possibility that the mortgagor
may incur a financial liability. For instance, A borrows seeds from B, and mortgages his field to
secure its return. This undertaking to repay or return the seeds is an engagement giving rise to a
pecuniary liability. In the case of Ram Chand v. Ishwar Chandra14, the facts were A borrows
paddy from B in the form of interest. Paddy had pecuniary value and it was held that the
transaction was mortgage and the engagement to return paddy with interest was an engagement
and leads to pecuniary liability of A.

KINDS OF MORTGAGE

Simple Mortgage Sec. 58(b)


Where, without delivering possession of the mortgaged property, the mortgagor binds himself
personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event of
his failing to pay according to his contract, the mortgagee shall have a right to cause the
mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary,
in payment of the mortgage-money, the transaction is called a simple mortgage and the
mortgagee a simple mortgagee.

Personal Undertaking: A personal undertaking to pay is an essential element of a simple


mortgage. The covenant to pay may be express or implied from the terms of particular
transaction.

Right to have the Mortgaged Property sold: To constitute a simple mortgage it is also
necessary that the mortgagee be given the right to cause the property to be sold for the purpose of
realizing the mortgage-debt. The words “cause the property to be sold” indicate that the power of
sale is not to be exercised without the intervention of the Court as held in Kishanram v.
Gangaram15.

14
AIR 1921 Cal. 172
15
(1891) 13 Allahabad 28

9
No delivery of Possession: The outstanding feature of a simple mortgage is that possession is not
delivered to the mortgagee, but remains with the mortgagor. Since the mortgagee is not put into
possession of the property, he has no right to satisfy the debt out of the rents and profits.

Registration: Registration is compulsory irrespective of the value in case of a simple mortgage

Remedy to Mortgagee: in the case of simple mortgage, the mortgagee has two fold security.
Firstly, the mortgagor takes personal obligation and secondly, the property, which may be sold in
case mortgagor fails to pay back.16

Mortgage by Conditional Sale Sec 58(c)


Under such Mortgage, the mortgagor apparently sells the property to the mortgagee on certain
conditions –

1) On failure to repay the Mortgage money before a certain date the sale shall be considered
absolute, or

2) On condition that on such repayment of mortgage money the sale shall become invalid, or

3) On condition that on such repayment the mortgagee shall retransfer the property.

In such case, the mortgagee is a “mortgagee by conditional sale”.

Ostensible Sale: A mortgage by conditional sale is an ostensible sale which ripens only on the
breach of condition as to payment into an absolute sale. The mortgagor here has no personal
liability. The mortgagee remains content with the mortgaged property only. On the breach of
conditions of payment, the contract executes itself and becomes one of absolute sale which can
be enforced in a particular manner known as foreclosure. The mortgagee cannot look towards the
personal properties of the mortgagor because he has no personal liability towards mortgagee.
Ostensible sale means a sale which apparently looks like a sale but in reality it is not a sale but a
security for debt. The existence of debt can be inferred from the very nature of the conditions
contained in the mortgage-deed.17

Non-possessory mortgage: a mortgage by conditional sale is non-possessory mortgage because


no delivery of possession is given under it. Therefore, the mortgagee does not have the right of
repaying himself.
16
Supra 12p-237
17
C. Raghunandan v. K Nageshwar Rao AIR 2009 AP 205

10
Registration: Where the principal money secured is Rs.100 or above, registration is compulsory.
Where it is less than Rs.100, registration is optional and it may be done by delivery of the
property.

Remedy to mortgagee: The remedy open to the mortgagee by conditional sale is by foreclosure
only and not by sale.

Difference between Conditional Sale and Sale with Condition to Repurchase: Whether a
particular transaction is a mortgage by conditional sale or an out-and-out sale with a right to
repurchase is to be determined by the intention of the parties which can be gathered by terms of
the deed. These two transactions can be distinguished on the following two grounds- Firstly, in a
mortgage by conditional sale, the relationship of debtor and creditor is necessary. The existence
of a debt is must. But in sale with a condition to repurchase, there is no such relationship of
debtor and creditor between seller and the buyer and no debt exists. Secondly, in a mortgage by
conditional sale there is transfer of only some interest in the property mortgaged but in sale by
condition to repurchase there is a transfer of whole of the interest in the property except a
personal right to repurchase the property which is lost if it is not exercised within the given
time.18

Usufructuary Mortgage Sec 58(d)


Where the mortgagor delivers possession or expressly or by implication binds himself to deliver
possession of the mortgaged property to the mortgagee, and authorize him to retain such
possession until payment of the mortgage-money, and to receive the rents and profits accruing
from the property or any part of such rent or profits and to appropriate the same in lieu of
interest, or in payment of the mortgage-money, or partly in lieu of interest or partly in payment
of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee as
usufructuary mortgagee.19

Delivery of Possession: The possession of the mortgaged property is handed over to the
mortgagee by the mortgagor as a security for the payment of mortgage-money. It is not necessary
that the delivery of possession must be made at the time of execution of the deed. The mortgagor
may give express or implied undertaking to deliver possession.
18
Supra 14 p- 203-05
19
Section 58(d) TPA, 1882.

11
Rents and Profits: The mortgagee becomes entitled to receive rents and profits of the property
mortgaged till the money is repaid. He may either appropriate this money towards interest on the
mortgage-money or in payment of the mortgage-money or partly for both. Where the rents and
profits are agreed to be retained by the mortgagee in lieu of only the principal money, the
mortgagor is entitled to get back the possession when he pays the principal money. But where
they are in lieu of interest, the mortgagor gets back the possession of property as soon as he pays
the debt. Where some part of the rent and profits is agreed by the mortgagee to be retained as
interest and remaining to be adjusted against the principal money, the mortgagor can get back the
possession only when both the interest and the principal amount are fully paid.

No Personal Liability of Mortgagor: The mortgagor is not personally liable for the mortgage
money so the mortgagee cannot sue the mortgagor personally for his debt. The mortgagee can
only retain the possession. He cannot compel the mortgagor to pay back the mortgage-debt. Only
the mortgagor himself can pay off the debt and take back the property.

No Time Limit: The main characteristic of usufructuary mortgage is that no time limit is fixed for
the repayment.

Mortgagee cannot Foreclose or sell: The right of foreclosure or sale is not available to the
usufructuary mortgagee. In such a mortgage no time limit is fixed. Therefore, the mortgagee is
entitled to possession till the money due is paid to him.

Registration: Where money taken is Rs.100 or more, registration is necessary. In other case,
mortgage is complete only by delivery of possession.20

English Mortgage Sec 58(e)


In an English Mortgage –

1. The mortgagor binds himself to repay the borrowed money on a certain date.
2. The mortgagor transfers the property absolutely to the mortgagee.
3. But such transfer is subject to the condition that the mortgagee will retransfer the property
on repayment before the agreed date.

20
Supra 14 p- 210-11.

12
Difference from Mortgage by Conditional Sale: An English mortgage resembles a mortgage by a
conditional sale in so far as both of them belong to that class of securities in which the ownership of
the property mortgaged is liable to be transferred from the mortgagor to the mortgagee on default of
the payment.

There are however the following points of difference between the two forms of mortgage-

(a) In an English mortgage, the mortgagor ordinarily undertakes to pay the debt personally.
But in a mortgage by conditional sale, the mortgagor does not necessarily make himself
personally liable for the payment of the mortgage money and accordingly the mortgagee has his
remedy against the mortgaged property alone.
(b) In an English mortgage, the ownership in the mortgaged property is absolutely transferred
to the mortgagee, which is, however, liable to be divested by the repayment of the loan as agreed.
In a mortgage by conditional sale, the mortgagor acquires only a qualified ownership, which, by
terms of the agreement, generally ripens into absolute proprietorship on the default of the
mortgagor.

Registration: Where money taken is Rs.100 or more, registration is necessary. In other case,
mortgage is complete only by delivery of possession.21

Mortgage by Deposit of Title Deeds Sec 58(f)


Where a person in any of the following town, namely, the towns of Calcutta, Madras and Bombay,
and in any other town which the State Government concerned may, by notification in the Official
Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable
property, with intent to create a security thereon, the transaction is called a mortgage by deposit
of title-deeds.

Territorial Restrictions: Mortgage by deposit of title deeds can be effected in Calcutta, Madras,
Bombay and Shimla. Where the transaction takes place outside the notified area the provisions
will not apply. Territorial restrictions do not apply to the registration of the transaction, which
can be even outside the notified towns.

Deposit of Title Deeds: The essential feature of a mortgage by deposit of title deeds is the
delivery of title deeds to the mortgagee. An actual or even constructive delivery of title deeds
relating to the property and showing the title of the depositor is sufficient and it is not necessary
21
Supra 12 p- 247-48.

13
that there must be a physical delivery. A patta of land, a hundi, along with an agreement of
previous purchaser and a tax receipt, as a document of title are sufficient and their delivery with
an intention to secure a loan against this property would effect a valid mortgage of property.
However, a mere tax receipt and a plan, or a copy of the title deeds, are not documents of title.

Intention to Create a Security: The title deed must be deposited with an intention that the
property should stand as a security for the repayment of the loan by the mortgagor. Mere
possession of title deeds coupled with the debt is not enough to raise the presumption that the
deeds are a security for the debt.

No Registration Required: A mortgage by deposit of title deeds is an oral transaction, and does
not require writing or registration, but if written it needs registration and no oral evidence to
contradict is admissible. The rule is either effect it orally or in accordance with the provisions of
law.22

Anomolous Mortgage Sec 58(g)


A mortgage, which is not a simple mortgage, mortgage by conditional sale, a usufructuary
mortgage, an English mortgage or a mortgage by deposit of title deeds, within the meaning of
this section, is called an anomalous mortgage.

Registration: Registration is compulsory irrespective of the value.

Examples:

(1) Combination of Simple and usufructuary mortgage. The mortgagee is in possession of


the property and pays himself out of rents and profits of the property, the mortgagor has a
personal covenant to pay with express or implied right of sale.
(2) Mortgage usufructuary by conditional sale. The mortgagee is in possession as
usufructuary mortgagee for a fixed period and if the debt is not paid within the fixed period, he
becomes mortgagee by conditional sale.
(3) Customary mortgages. There are mortgages in which special conditions are attached by
local usage. For instance, Otti and Kanom mortgages cannot be redeemed before the expiry of 12
years in the absence of an agreement to the contrary. The Kanompretakes the nature of a
mortgage and a lease and the Otti-holder has a right of pre-emption.

22
Supra 4 p- 335-38.

14
Doctrine Of Clog on Redemption:
Clog on Redemption-The right of redemption is, therefore, inevitable in the sense that it
cannot be denied to the mortgagor even though he may by express contract abandon his
right to redeem the property. Equity in its insistence upon the principle that a mortgage is
intended merely to afford security to the lender, has held an agreement which prevents
redemption as void. Lord Lindley in Stanley v. Wilde, expounded the principle as under. :

“The principle is this- A mortgage is a conveyance of land or an assignment of chattels as


securities for the payment of a debt or the discharge of some other obligation for which it is
given. That 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. 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 mortgage'. A 'clog' or 'fetter’ is something which consistent with the idea of
security. if i give a mortgage on a condition, that I shall not redeem, that is a repugnant
condition. The courts of Equity have fought for years to maintain the doctrine that a
security is redeemable.

But when and under what circumstances? "If the performance of the obligation for
which it was given. If the obligation It the payment of a debt, the security is redeemable on
the payment of the debt.

Earlier in Vernon v. Bethell, it was said that, this court as a coon 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 mortgage can never
provide at the time of making the loan for any event or condition 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 cxigcncy, will submit to any terms that the craft may impose upon them.

In Kreligner v. New Patagonia Meat and Cola Storage Cit Ltd, it was said that this
jurisdiction was merely a special application of a more general power to relieve against
penalties and to mould them into mere securities. The case of the common law mortgage of

15
land is indeed a gross one. The land was conveyed to the creditor upon the condition that if
the money, he had advanced to the debtor, 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 and land for ever. What made the hardship on the debtor a glaring
one was the debt still remained unpaid and could be recovered from the debtor
notwithstanding that he had actually forfeited the land to the mortgage: 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.”

It should be noted that the doctrine of clog on redemption applies only to dealings which
take place between the parties to a mortgage at the time when the contract of mortgage is
entered into. lt does not apply where they subsequently vary the terms upon which the
mortgage may Be redeemed.

In Indian Law: Redemption involves two things : (a) re-transfer of the interest which had
been originally transferred to the mortgagee, and (b) delivery of the possession.

Both these things are done by virtue of the terms of mortgage, and in pursuance of an
agreement between the Parties. Thus, the re-transfer of the interest is also by virtue of an
agreement.

Under the Indian Law, the right of redemption is a statutory right which cannot be fettered
by any condition which impedes or prevents redemption. Any such condition is void as a
clog on redemption. The Legislature has quite advisedly not used any such words as “in the
absence of a contract to the contrary” in Section 60 with a view to prevent the mortgagor
from contracting himself out of his right of redemption at the time of the mortgage. It is,
therefore, manifest that the right cannot be clogged.

Illustrative cases on 'Clog' ~What is a clog on equity of redemption is a matter of fact in


each case. Following instances would make it clear:

(1) Condition of sale in default- The courts will ignore any contract the effect of which is
to deprive the mortgagor of his right to redeem the mortgage. Accordingly, if one of the
terms of the mortgage is that on the failure of the mortgagor to redeem the mortgage within
the specified period, 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, it cannot be
given effect to. It plainly takes away altogether the mortgagor's right to redeem the

16
mortgage after the specified period. This is not permissible for “ once a mortgage always a
mortgage” and therefore always redeemable.(Gangadhar v. Shankar Lal)

(2)Long term for redemption-A long term is not necessarily a clog on redemption. In
Gangadhar v. Shankariala, it was held by the Supreme Court of India that the terms in the
mortgage that it will not be redeemable until the expiry of 85 years was not a clog in the
circumstances of the case. Delivering the opinion of the Court, SarkarJ. observed : The rule
against clogs on the equity of redemption no doubt involves that the courts have the power
to relieve a party from his bargain. 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 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 be borrowed the money 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 agreement that the
mortgage would not be redeemed for 85 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.”

(3) Stipulation barring mortgagor‘s right of redemption after certain period -If there is a
stipulation which bars mortgagor's right of redemption after certain period, the stipulation is
treated as a “clog” on the mortgagor's equitable right of redemption.

(4) Condition postponing redemption in case of default- In Mohammad Sher Khan vs.
Seth Swami Dayal, the mortgage was for a term of five years with a condition that if the
money was not paid, the mortgagee might enter into possession for a period of twelve years
during which the mortgagor could not redeem It was held that such a condition was a clog
because it hindered an existing right to redeem.

(5) Restraint on alienation-A stipulation that the mortgagor shall not alienate the
mortgaged property or shall not take loan on the security of the mortgaged property has
been held to be a clog.

(6) Redemption restricted to Mortgagor-An agreement that redemption should be available


to the mortgagor, and not to his heirs has been held as a clog.

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(7) Penalty in case of default-Stipulation to charge at enhanced rate of interest from the
date of mortgage, in case of default in payment, has been held to be a clog.

BIBLIOGRAPHY
(1) G. P. Tripathi, TheTransfer of Property Act,1882, 18th Edition, 2014, Central Law
Publications, Allahbad.
(2) Avtar Singh, Textbook on The Transfer of Property Act, 2006, Universal Law Publishing
Co. Pvt. Lmt., Delhi.
(3) S. N. Shukla, The Transfer of Property Act, 2011, Allahabad Law Agency, Faridabad.
(4) Mulla, The Transfer of Property Act, 10th edition, 2006, Lexis Nexis, New Delhi.

WEBLIOGRAPHY
(5) http://www.thefreedictionary.com/mortgagee
(6) http://www.merriam-webster.com/dictionary/mortgage,
(7) http://legal-dictionary.thefreedictionary.com/mortgage last visited at 12:30 p.m. at
15/10/2017
(8) http://indialawfirms.blogspot.in/2007/11/types-of-mortgages-in-india.html last visited on
12:34 p.m. at 15/10/2017

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