Clog on Redemption

Clog on Redemption

A clog on redemption refers to any condition or stipulation in a mortgage deed that restricts or obstructs the mortgagor’s right to redeem the property. A condition that restricts or takes away the right of redemption of the mortgagor is termed as a clog.

Rooted in equity, the principle ensures that a mortgage remains a security for a loan and cannot unfairly convert into a sale or create undue hardship for the mortgagor. Section 60 of the Transfer of Property Act, 1882, embodies this principle, protecting the absolute nature of the mortgagor’s right to redemption.

Clog on Redemption

Section 60 Provides That:

Right of mortgagor to redeem.—

At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee

(a) to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee,

(b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and

(c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:

Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a Court.

The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption.

Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.

Redemption of portion of mortgaged property.—Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor.”

Legal Basis and Landmark Case

The absence of the phrase “subject to a contract to the contrary” in Section 60 ensures that no agreement between the mortgagor and mortgagee can override the statutory right of redemption.

Case Reference:

Noakes & Co. Ltd. v. Rice (1902)

Any clause that alters or restricts the right of redemption is void. This case established that the mortgagor’s right to redeem the property is absolute and cannot be extinguished by contractual terms.
The maxim “Once a mortgage, always a mortgage” underpins the principle, ensuring that a mortgage cannot be converted into a sale or any other transaction.

Conditions Constituting a Clog on Redemption

  1. Origin of Restraint: The stipulation must originate from the mortgagee, not a third party.
  2. Inclusion in the Deed: The restraint must be part of the mortgage agreement.
  3. Unreasonable or Oppressive Nature: Clauses against public policy, or oppressive to the mortgagor, are invalid.
  4. Permanent or Unreasonable Postponement: Clauses permanently barring redemption or excessively delaying it constitute clogs.

Instances of Clogs on Redemption

Instances of Clogs on Redemption

Sale on Default

• A stipulation that the property vests in the mortgagee upon default is void. A mortgage must not convert into a sale.
• Equity’s Stance: Such clauses are invalid unless they are part of a separate and independent contract.

Postponement of Redemption

• Postponement alone is not necessarily a clog unless it is unreasonable.
• Case Reference: Seth Gangadhar v. Shankar Lal: The Supreme Court upheld an 85-year postponement as valid due to the reasonable circumstances of the case.

Restraint on Alienation

• Conditions restricting the mortgagor’s ability to transfer property are invalid.
• The mortgagor retains ownership rights, and the mortgagee cannot impose unreasonable restrictions.

Penalty Clauses

• Imposing excessive penalties or oppressive conditions upon default constitutes a clog.
Collateral Benefits:
• Agreements that provide additional benefits to the mortgagee, such as exclusive rights to use property, are valid only if reasonable and non-prejudicial.

Significance of the Principle - Clog on Redemption

The doctrine of clog on redemption ensures fairness and equity in mortgage transactions, protecting the mortgagor from exploitation. It upholds the maxim “Once a mortgage, always a mortgage,” preserving the original intent of a mortgage as a security for repayment and not a means to unjustly deprive the mortgagor of ownership.

Conclusion

The principle of clog on redemption, as codified in Section 60, is a vital safeguard in mortgage law, ensuring that the mortgagor’s right to redeem is absolute and cannot be unreasonably restricted. It strikes a balance between the rights of the mortgagor and the mortgagee, maintaining fairness and integrity in financial transactions.

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