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VALIDITY OF CLOG ON REDEMPTION

INTRODUCTION

One who studies Contract law is more familiar with the words Mortgage and Redemption. Also, these words play vital roles in Contracts associated with a property and, everybody should remember these terms and other doctrines related to this. One of the doctrines that we are going to deal with is the Doctrine of clog on Redemption. To comprehend this, it is critical to first understand the definitions of the phrases Mortgage and Redemption. To keep things easy, let me give you an example. If you possess property and need money, you can mortgage it in favour of someone, which means you are temporarily giving up ownership of the property in exchange for a loan. It’s the equivalent of borrowing money from a lender and temporarily transferring property rights to him as security for his money. This conveyance of a property to the creditor is called a Mortgage.[1] The one who lends money is called “Mortgagee,” and the one who mortgages his property is called a “Mortgagor”. Redemption is the process of reacquiring the property back by clearing off the debts. So, if you mortgage your property by borrowing money and subsequently seek to reclaim it by paying off your debts, this is referred to as Redemption.

These terms were mentioned in the Transfer of Property act, 1882 (hereafter referred to as TPA). Generally, according to Section 60 of the TPA, every person who mortgages his property has a right to redeem whenever he clears off the debts.[2] It follows from this that ‘once a mortgage, always a mortgage.’[3] So, the mortgaged property always remains as a mortgage, and the mortgagor has the right to redeem the property after the completion of payment or after clearing the debts. This right to the mortgagor is known as the “Equitable right to redeem.”

DOCTRINE OF CLOG ON REDEMPTION

According to this Doctrine, “Any condition introduced to prevent redemption on payment or execution 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 thus void.” The provision which obstructs the Right is called the clog on Redemption, and the clog here is void. The Doctrine of clog on Redemption is what it’s called. The purpose of this Doctrine is to save mortgagors. However, there have been numerous situations where this Doctrine has failed, and the legitimacy of this Doctrine has already been a question in many instances.

WHETHER THE DOCTRINE IS VALID OR NOT?

There are several examples of this concept being utilized for the benefit of mortgagors, as well as numerous cases where the Doctrine has aided the honesty. As a result, we can’t state the Doctrine is flawed or valid at the same time. This Doctrine, like everything else in the law, has some exceptions. Let’s start with the instances where it helped the mortgagor.

In the case of Bhullan v. Bachcha[4], the mortgagor and Mortgagee agreed to a condition that the property can only be redeemed after the completion of 59 years and can only be redeemed on a particular day in the 60th year. If the mortgagors fail to redeem the property on that particular day in the 60th year, then it cannot be redeemed. The plaintiffs (sons of original mortgagors) appealed in Court after 29 years. They argued that the stipulation restricted the exercise of the right of Redemption in such an unreasonable manner as practically to nullify it. The defense was that the suit was premature. The Court held that the condition that the mortgagor has to redeem his property only after 59 years is a clog on Redemption as it is a usufructuary mortgage (in which the Mortgagee also enjoys the income of and from the property). In this case, the period of 59 years is considered a clog. So, time is one of the obstructions or one of the clogs on Redemption.

The Court concluded in Kanaram v. Kuttooly[5] that if payments or debts were not cleared before the due period, the Mortgagee has no authority to sell the mortgaged property, and any condition that grants the Mortgagee the ability to sell the mortgaged property is unlawful. As a result, the appellants were able to reclaim their property. There is also a question over the Doctrine’s legitimacy here. During the Agreement, both the mortgagor and the Mortgagee agree to this condition. Even if the mortgagor agrees to it during the contract, this Doctrine states that the condition they agreed is void. What is the point of this theory if the individual who mortgages his property agrees to this condition? It may raise your doubts, but without this Doctrine, mortgagees have a greater probability of alienating the statements in the mortgage deed. Mortgagees have so many opportunities to take advantage of mortgagors. The Doctrine of clog on Redemption was intended to save mortgagors from these scenarios. When hearing these types of cases, the courts or other organizations must first determine the intents of both the Mortgagee and the mortgagor. In the case of Gangadhar v. Sankar lal[6], for example, the condition is that the mortgagors can only redeem their property after the completion of 85 years. The mortgagors stated that the 85-year period is a stumbling block to Redemption and requested the Court to declare it void, while the mortgagees argued that the suit was filed too soon and asked the Court to dismiss the appeal. Finally, the Court ruled that “the right to redemption has not taken away from the mortgagors; it is just restricted for a certain time.” The clog on redemption doctrine does not apply here because the mortgagor agreed to the period of 85 years with a sound mind, and there is no pressure from the Mortgagee on the mortgagor to agree to the contract. Hence, the appeal is dismissed.

CONCLUSION

So it’s evident that not every lender is evil, and not every borrower is impecunious. As a basis, one must first determine the intentions of both the Mortgagee and the mortgagor. To summarize, the presence of this Doctrine is required since it is the only method to defend the mortgagor’s rights. It protects the mortgagor’s rights and puts obligations on the Mortgagee. Of course, this philosophy has flaws and isn’t appropriate in all circumstances. The courts can follow the legislative provisions because this is statutory law. This notion can only be used when the mortgagor is exploited, and it is expected that the mortgagors will not misuse it. In conclusion, the Doctrine is valid when used correctly, and it also has some restrictions or exceptions that allow us to conclude that it is legitimate.

Author(s) Name: T. Adesh Sri Dattu (M.S.Ramaiah College of Law)

References:

[1] Section 58 of TPA,1882

[2] Section 60 of TPA,1882

[3] Santley v. Wilde (1899) 2 Ch. 474

[4] (1898) 21 Mad. 110

[5] AIR 1945 All. 380.

[6] AIR 2000 SC 770

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