JUDGMENT
K.A. Swami, J.
1. The appellants are defendants 1 to 3. Respondents 1 to 5 are the
plaintiffs Respondent No. 6 is the 4th defendant. In this Judgment,
the parties will be referred to with reference to the position
assigned to them in the trial Court. Defendants 1 to 3 have preferred
this appeal against the Judgment and decree dated 31-10-1986 passed by
the Additional Civil Judge. Hubli in O.S.No. 146 of 1980
2. The trial Court apart from other findings has also recorded a
finding that Clause 9 of the mortgage deed in so far it enables the
mortgagees to continue in possession as tenants even after the
redemption of the mortgage is a clog on the right of redemption and as
such is not enforceable. The terms of the decree are as follows:
“1) The suit of the plaintiff is decreed as under. 2)
Preliminary decree be drawn as follows:
(1) The plaintiffs are entitled to redeem the suit property
mortgaged by them under Ex.P. 1 to the defendant 1 to 3 in respect of
CTS Nos.3560/3.3600.3601 and 3561 and
A
3562 (HDMC Nos.32/2, 32/3 and 32/4).
(2) Defendants 1 to 4 are directed to execute the registered
reconveyance deed in favour of the plaintiffs and defendants 1 to 4
are directed to deliver the mortgage deed Ex.P. 1 after substituting
it by a certified copy in Court.
(3) Defendants 1 to 4 and 10 shall put plaintiffs in actual
possession of the property which are lying in their possession,
failing which the plaintiffs are entitled to actual possession of the
properties by dispossessing defendants 1 to 4 and 10 from their
possession.
(4) The plaintiffs are entitled to nominal possession of the
property which are in possession of defendants 5 to 9 and 11.
(5) Plaintiffs are entitled to future mesne profits and a separate
enquiry be held after the plaintiffs are put in possession of the
property under Order 20 Rule 12 CPC;
(6) The plaintiffs are entitled to recover costs from the
defendants 1 to 4 only;
(7) Defendants 1 to 4 are entitled to recover Rs. 2,000/- towards
the improvements made in the building on payment of Court fee on this
amount under Section 32(2) of the Karnataka Court Fees and Suits
Valuation Act, on their W.S.”
3. Defendants 1 to 3 are the mortgagees. Plaintiffs 1 to 5 are the
mortgagors. The suit properties in question were mortgaged to
defendants 1 to 3 by the, plaintiffs on 21st April, 1965 under a
registered deed of possessory mortgage marked as Ex.P. 1 for a sum of
Rs. 25,000/-.
4. Sri V. Tarakaram, learned Counsel for defendants 1 to 3 has
advanced one and the only contention. It is contended that as per
Clause 9 of the deed of mortgage even after redemption of mortgage the
mortgagees are entitled to continue in possession as tenants and
therefore the decree for possession passed by the trial Court pursuant
to redemption of mortgage is illegal. The learned Counsel submits that
the trial Court is not justified in holding that Clause 9 of the deed
of mortgage amounts to clog on the right of redemption and it is
unreasonable and unconscionable, therefore, it is void and
unenforceable in law.
5. After the expiry of the period of 15 years, the plaintiffs
called upon the defendants 1 to 3 to receive the mortgage amount and
redeem the mortgage and hand over possession of the mortgaged
properties Defendants 1 to 3 did not comply with it and gave a reply
dated 26-5-1980 as per Ex.P. 2 stating that as per the terms of Clause
9 of the deed of mortgage they are entitled to be continued as tenants
even after the redemption of mortgage and as such they are to be
continued as tenants and they have no objection for redeeming the
mortgage.
6. In the light of the contentions urged, the point that arises for
consideration in this appeal is as to whether Clause 9 of the mortgage
gives an unqualified right to the defendants 1 to 3 mortgagees to
continue as tenants even after the redemption of mortgage. If so
whether such a term is a clog on the right of redemption and as such
is not enforceable?
7. Clause 9 of the mortgage deed reads thus:
“On repayment of Rs. 25,000/- the mortgagees at the
cost of mortgagors shall redeliver the mortgaged properties to the
mortgagors of the first part free from encumbrances; and the
mortgagees of the second part shall be allowed to continue if
necessary as tenants on reasonable rent after the expiry of 15
years.”
(Underlining by us)
8. Sri. Tarakaram, learned Counsel for defendants 1 to 3 the
appellants contends that Clause 9 cannot at all be regarded as a clog
on the right of redemption as it only enables the mortgagees to
continue as tenants of the mortgaged properties on payment of
reasonable rent on the expiry of the period of 15 years stipulated in
the mortgaged deed; that leasing of the properties is one of the
accepted and normal modes of enjoying and exercising the right of
ownership, there is nothing wrong with Clause 9, as such, defendants 1
to 3 – the appellants are entitled to continue in possession of the
mortgaged properties tenants even after redemption of the
mortgage.
9.1. Clause 9 neither reserves the rent payable by defendants 1 to
3 if they are to continue in possession of the mortgaged properties,
as tenants even after redemption, nor specifies the period of lease.
Thus, Clause 9 does not stipulate essential ingredients of a lease. It
is vague in this regard. However, it is not necessary to go into this
aspect of matter. We shall first examine Clause 9 on the basis that it
gives an unqualified right to defendants 1 to 3 – mortgagees to
continue in possession of the mortgaged properties as tenants even
after redemption of the mortgage.
9.2. It has always been anxious to protect the right of redemption.
It has always been the attempt not to recognise a condition in the
mortgage deed which has the effect of placing fetter on the right of
redemption. In this connection, it is very relevent to notice the
words “in the absence of any contract to the contrary” which are found
in many of the Sections of the Transfer of Property Act (for short the
T.P. Act) are not found in Section 60 of the T.P. Act. When the
legislature has enacted Section 60 of the T.P. Act in unqualified
terms, the Courts have endeavoured and must endeavour to relieve the
mortgagors from a condition in the mortgage deed which fetters their
right of redemption by refusing to recognise and enforce it or by
declaring it as void. Right of redemption is of the very nature, and
essence of the mortgage. It is inherent in the mortgage. To put it
axiomatically “Once a mortgage always a mortgage.” This maxim is
further reinforced by Lord Davey in NOAKES v. RICE, 1902 AC 24 by adding to it
the words “and nothing but a mortgage.” Of course, we are aware that
still there are some decisions which have adopted the line of
reasoning that even though Section 60 of the T.P. Act is unqualified
in its terms, but nothing prevents the parties to agree to the
contrary. Whether a particular term in the contract should be regarded
as a clog on the right of redemption depends upon the terms of the
mortgage and the circumstances as they existed at the time of the
execution of the mortgage. No hard and fast rule can be laid down. If
on taking into consideration the circumstances that existed at the
time of execution of the mortgage and all the terms of the mortgage
deed, the Court is able to come to the conclusion that a particular
covenant is undoubtedly hard and unconscionable and has the effect of
nullifying the right of redemption or restricts the exercise of right
of redemption in such manner as practically to deny it, such a
convenant can be regarded as a clog on the right of redemption and as
such it has to be ignored and the party has to be relieved from it. As
far as the condition in a mortgage deed which enables the mortgagee to
continue in possession of the mortgaged property even after redemption
as a permanent lessee is concerned it is a settled position in law in
India that such a condition is invalid and unenforceable.
9.3. In GANGADHAR v. SHANKAR LAL AND ORS., , the Supreme Court
has observed thus:
“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.
xx xx xx xx xx xx
The right of redemption, therefore, cannot be taken away. The
Courts will ignore any contract the effect of which is to deprive the
mortgagors of his right of redemption of the mortgage.
xx xx xx xx xx
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 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.”
10. On examining the terms of the mortgage deed, we find that all
the terms are in favour of the mortgagees. The mortgagors are made to
effect repairs immediately to the mortgaged properties to suit the
business requirements of the mortgagees and in case they fail to
effect repairs the mortgagees were at liberty to get it repaired and
to recover the costs of such repairs from the mortgagors. The
mortgagors were required to pay all the taxes of the mortgaged
properties. The mortgagors were also made to fix rolling shutter to
the shop, doors, stone slabs flooring and partition wall in the ground
floor within a fortnight in addition to the repairs, failing which the
mortgagees were given liberty to get it done and recover the costs
from the mortgagors. The mortgagors were not entitled to claim any
rent to the mortgaged properties given into the possession of the
mortgagees and the mortgage money had to carry no interest. From
Clause 7 of the mortgage deed, it is clear that the mortgaged
properties were subjecte of earlier mortgage. Thus, from the aforesaid
terms of the mortgage deed it is clear that the mortgagees have tried
to take advantage of the situation in which the mortgagors were placed
at the time when they borrowed the money on the mortgage and imposed
the terms in the deed which were wholly to the benefit of the
mortgagees. This becomes further clear when we consider the extent of
the properties mortgaged. The Schedule to the deed of mortgage
describes the mortgaged properties as follows:
SCHEDULE OF PROPERTIES:
All that building with ground floor and two storeyed above,
together with right of way, privy and easement of right appurtenant to
the properties mortgaged with possession, situated on Azad Road
(Station Road) Hubli, District Dharwad in the jurisdiction of the
Sub-Registrar, Hubli Taluk, bearing C.T.S. No. 3560/3, 3600, 3601
A
Ward I, and measuring 183 Square Yards and as all properties are
together forming one whole and complete building, bounded by:
To East – Municipal Road; To West – The property belonging
to one Srimati Divalibai;
To North – Property of Balannavar Sullad; To South – Property of
Balannavar Sullad.
Thus a vast extent of valuable properties situated in an important
commercial city like Hubli were mortgaged for a sum of Rs. 25,000/-
only for a period of 15 years in the year 1965. Clause 9 read in the
background of the other terms of the mortgage and the extent of the
mortgaged properties in so far it enables the mortgagees to continue
as tenants even after the redemption of the mortgage, is
unconscionable and it is undoubtedly a clog on the right of
redemption. It comes in the way of the mortgagors to secure possession
of the mortgaged properties even after redemption. The mortgaged
properties are situated in Hubli City and are governed by the
Karnataka Rent Control Act. Mortgagees become the tenants on the
redemption of the mortgage, the mortgagors will not be able to secure
possession of the mortgaged properties except in accordance with the
provisions of the Karnataka Rent Control Act. The mortgagors may or
may not be able to secure possession under the provisions of the
Karnataka Rent Control Act as they would be required to make out a
case for possession as per the provisions of the said Act. Thus,
Clause 9, if read as enabling the mortgagees to continue in possession
of the mortgaged properties as tenants even after the redemption of
the mortgage it is undoubtedly a clog on the right of redemption
because it nullifies the right of redemption, inasmuch as, it deprives
the mortgagors of their right to redeem the mortgage and secure
possession of the mortgaged properties, and thereby it renders the
right of redemption illusory and enables the mortgagees to remain in
possession of the mortgaged properties beyond the period of, and
after, the redemption of the mortgage.
11. In GOVIND RAM AND ANR. v. RAJPHUL SINGH AND ORS., ; while
considering the similar terms in the mortgage deed, it has been held
thus:
“…….A long term provided in the mortgage deed, for
redemption may not necessarily be a clog on equity of redemption but a
collateral advantage, which goes beyond the period of redemption, is a
clog and such a condition is invalid. A condition that after
redemption the mortgagee should continue in possession as a permanent
tenant has been held to be invalid in India. After coming into force
of legislation providing security of tenancies in urban as well as
rural areas, the agreement to retain property as tenants by the
mortgagees after redemption is equally cumbersome and onerous. In case
of commercial premises, the rent legislation in the State of Haryana
provides that it cannot be got vacated even for personal requirements.
The chances of vacation of such premises become very bleak and the
condition in mortgage deed to retain possession as a tenant after
redemption is harsh and burdensome and amounts to a clog on equity of
redemption. Such a clause cannot be enforced after the property has
been redeemed. In my view, the decision of the learned Additional
District Judge is correct on this issue and I affirm the
same.”
We are in agreement with the aforesaid view expressed in Govind
Ram’s case, . Accordingly, the contentions urged on behalf of
defendants 1 to 3 (appellants) are liable to be rejected and the same
are rejected. Accordingly, the point raised for determination is
answered as follows:
Even if it is regarded that Clause 9 enables the mortgagees
(defendants 1 to 3) to remain in possession of the mortgaged
properties (suit properties) as tenants even-after redemption of the
mortgage, it operates as a clog on the right of redemption and as such
it is void and unenforceable.
12. No other contention is urged.
13. In the view we take it is not necessary to consider whether
Clause 9 gives an unqualified right to the mortgagees (defendants 1 to
3) to continue in possession of the mortgaged properties as tenants
even after redemption of the mortgage.
14. For the reasons stated above, we do not see any ground to
interfere with the decree passed by the trial Court. Accordingly, the
appeal fails and the same is dismissed.