TRANSFER OF PROPERTY ACT , 1882

[An assignment submitted to Himachal Pradesh National Law University]

VALIDITY OF CLOG ON REDEMPTION

SUBMITTED BY SUBMITTED TO
Shivam Ms. Navditya tanwar
1020202126 Assistant Professor of Law
B.A LLB(Hons.) HPNLU

HIMACHAL PRADESH NATIONAL LAW UNIVERSITY, SHIMLA 16 MILE, SHIMLAMANDI

NATIONAL HIGHWAY, GHANDAL DISTRICT SHIMLA, HIMACHAL PRADESH-171014 Ph.
0177-2779802, 0177-2779803, Fax: 0177-2779802

1| VALIDITY OF CLOG ON REDEMPTION

 ACKNOWLEDGEMENT

I wish to take this opportunity to offer my sincere gratitude to my academic

supervisor, Ms. Navditya Tanwar , Assistant Professor of law of Himachal Pradesh
National Law University, Shimla. Without his kind direction and proper guidance, this
study would have never come to fruition.

I am also greatly indebted to Himachal Pradesh National Law University’s e-library

resources for providing me with the necessary online subscriptions in order to conduct
this research which helped me in making this assignment.

Last but not the least; I would want to thank everyone who guided me throughout the
process of making this study a successful venture.

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 TABLE OF CONTENTS

1. INTRODUCTION
2. SECTION 60 OF THE TPA ACT – RIGHT TO REDEMPTION
3. DOCTRINE OF CLOG ON REDEMPTION
i. LONG TERM MORTGAGES
ii. CONDITION OF SALE OF PROPERTY
iii. PENALTY IN CASE OF DEFAULT
iv. COLLATERAL BENEFIT TO MORTGAGOR
v. SUBSEQUENT AGREEMENT TO POSTPONE
REDEMPTION
4. EXCEPTIONS TO CLOG ON REDEMPTION
i. CASE LAWS ON EXCEPTIONS TO CLOG ON
REDEMPTION
5. VALIDITY OF DOCTRINE OF CLOG ON REDEMPTION
6. CONCLUSION
7. REFERENCES
8. CONCLUSION
9. REFERENCES

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 INTRODUCTION

Equity would mean in a layman’s life as fairness. Back during the middle Ages in England,
there were certain grey areas where it was observed that the Common Law was inadequate in
its abilities to deliver justice to the common person 1. This led to a directive by the King to
appoint Chancellors in special courts who would go beyond the realm of the law to dole out
justice and fairness to the parties2. In Common Law, equity is used as a means to sharpen the
meticulousness of the law in order to achieve justice 3. Such courts were called Courts of
Equity.

Under a mortgage, two interests are generated by the owner of the property. One is the
interest of the creditor on the property, which is limited and fixed and another, is the
residuary interest left which can be quantified only by deducting the creditor’s interest from
the value of the security4. The fundamental bargain from this division of interests is the
presence of a right to buy back the property without any encumbrances by paying the loan 5.
This right is called the equitable right to redeem. The first instance of the presence of the
right of redemption was found in Roman law 6. It has been rightfully said that “Redemption is
purely a creature of courts of equity”7.

1
S.N. Shukla, The Transfer of Property Act 219 (23rd ed., 2001).
2
Id.
3
F.H. Lawson & Bernard Rudden, The Law of Property 15 (Peter Birks ed., 3rd ed., 2002).
4
Id. at 131.
5
Id.
6
2 Leonard A. Jones, A Treatise on the Law of Mortgages of Real Property 1 (The Riverside Press, Cambridge
1894).
7
Posten v. Miller, 19 N.W. 540.

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 SECTION 60 OF THE TPA ACT- RIGHT TO REDEMPTION

The title of this section reads as Right of Mortgagor to Redeem. This section incorporates the
right to redemption in the property law. This right is a statutory right in India.8 This section
mentions that the mortgagor on the payment of the principal money should be returned the
property secured.9 In mortgage, the property is not absolutely transferred to the mortgagee
and Therefore it needs to be returned on the payment.

There are also certain documents which needs to be returned to the mortgagor such as the
mortgage deed or any document related to the property.10 It is not fair to keep the property
forever on the ground that the mortgagor did not pay the amount on time. This is against the
principal of justice, equity and good conscience11. There are two terms that are incorporated
within the section. They are: 1) Clog on Redemption 2) Once a mortgage, always a mortgage.
Both are interrelated to the section and are necessary to be understood.

8
Mulla, The Transfer of Property Act, 1882 656 (Solil Paul ed., 9th edition, 2000).
9
Poonam Pradhan Saxena, Property Law 344 (2nd ed., 2011).
10
Parmeswaran Govindan v. Krishnan Bhaskaran, AIR 1992 SC 1135
11
Id.

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 DOCTRINE OF CLOG ON REDEMPTION

In Stanley v. Wilde12, Lindley M.R. gave one of the founding explanations of the basis of this
doctrine – “The principle is this: a mortgage is a conveyance of land or an assignment of
chattels 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 maxim ‘once a mortgage always a mortgage’ means that there can no covenant that
modifies the character of the mortgage agreed between the parties that would stop the
mortgagor to redeem his property back on payment of the principal and respective interests13.
The basis of this doctrine lies in the exercise equity, justice and good conscience 14 and is
extensive to areas where the act is not applicable 15. On a realistic perusal of the workings of a
mortgage, it is observed in most of the cases that the mortgagor enters into such an agreement
because of some financial predicament16. The law recognizes the power of the dominant party
to insert clauses which will serve his personal interests by creating impediments on the right
to redeem the property17. Such obstructions are henceforth struck down by the courts to
enable the mortgagee to redeem his property18. In U. Nilan v. Kannayyan (Dead) Through
Lrs.19, explaining the philosophy behind the doctrine, it was said that – “Adversity of a person
is not a boon for others. If a person in stringent financial conditions had taken the loan and
placed his properties as security therefor, the situation cannot be exploited by the person
who had advanced the loan. The Court seeks to protect the person affected by adverse
circumstances from being a victim of exploitation. It is this philosophy which is followed by

12
(1899) 2 Ch 474
13
G.C.V. Subha Rao, Law of Transfer of Property Act 882 (4th ed., 2006).
14
Murarilal v. Dev Karan, AIR 1965 SC 225.
15
Ambalal Jasraj v. Ambalal Badarwal, AIR 1957 Raj 321.
16
Poonam Pradhan Saxena, Property Law 348 (2nd ed., 2011)
17
 Id.
18
Id.
19
U. Nilan v. Kannayyan (Dead) Through Lrs AIR 1999 SC 3750.

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the Court in allowing that person to redeem his properties by making the deposit under
Order 34 Rule 5 C.P.C.”

There are no fixed qualifying circumstances in determining what would or would not amount
to a clog20. It has been something that would have to be decided on the facts and
circumstances of the case21. There are certain situations where it was held that the covenant
was a clog on the right.

Long Term Mortgages

Long term mortgages are common in cases of usufructuary mortgages. A term of 95 years or
100 years would definitely extend beyond one’s lifetime and superficially seems like a clog 22.
Taking cognizance of the same, the Supreme Court has ruled that only by virtue of lengthy
period, a mortgage would not amount to a clog, there must exist a presence of undue
advantage or fraud to term it as a clog23.

In Vadilal Chhaganlal v. Gokaldas Mansukh24, the mortgage agreement provided that it

would subsist for 99 years and the mortgagee would be allowed to construct any structure on
the property without any limit on the cost. The Supreme Court reasoned that it would be
beyond the ability of the mortgagor to repay the principal money along with the interests and
the construction expenses. It was held that both the conditions amounted to a clog on the
mortgagee’s right of redemption.

In Ramkhilawan Dilrakhan Ahwashi v. Mullo25, the case of the plaintiff was that a covenant
for the payment of principal money after 80 years and only in the month of Baisakh, was a
clog. The Trial Court dismissed the suit by calculating that the profits from the mortgaged
property was sufficient to pay the interests on the principal. On appeal, the High Court upheld
the lower courts decision. However in Balbhaddar Prasad v. Dhanpat Dayal26, the property
mortgaged for 50 years was worth ₹9000. The final amount to be paid after deducting the
profits from the property was around two and a half lakhs. The Court held that such an
enormous fund had led the property to be irredeemable and the terms of the contract were
oppressive and unconscionable.
20
Bhullan v. Bachcha, AIR 1931 All 380.
21
Pomal Kanji Govindji v. Vrajilal Karsandas Purohit, AIR 1989 SC 436.
22
Saxena, supra note 17, at 354.
23
Valdas and Ors. v. Bai Jivi and Ors, AIR 1973 Guj 93. Saleh Raj v. Chandan Mal, AIR 1960 Raj 47, held that
a term of 99 years was not held as  not oppressive and not amounting to clog.
24
AIR 1953 Bom 408.
25
AIR 1957 MP 200.
26
AIR 1924 Oudh 193.

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Condition of Sale of Property

A covenant that a mortgaged property, if not redeemed within a fixed time, would translate
into a sale is a clog 27. However if there is a separate agreement whereby the mortgagor
executes a sale deed in favor of the mortgagee as an independent transaction, such sale deed
is valid28.

In Meharban Khan v. Makhna29, the mortgage agreement provided that the mortgagee was to
be entitled to possession of the property for 19 years. There was a stipulation that if the
mortgagor paid off his debt, he would be allowed to redeem the property only till a limited
interest and the residual interest would belong to the mortgagor. It was further envisaged that
on failure of the mortgagor to pay, the property would be deemed to be sold to the mortgagee
permanently. The Court ruled that both conditions amounted to a clog. It was held that on
payment of the full amount due, the property would be reverted back without any
encumbrance.

This principle would also extend to cases where on default of payment, the property would be
deemed to have been foreclosed, amounts to a clog 30. However parties are free to stipulate
such a condition subsequently after the mortgage agreement31.

In Kuddi Lal v. Aisha Jehan Begam32, the plaintiff-mortgagor was allowed to redeem the
property back by paying from her own pockets and not through transferring the property. The
Court held that such a covenant was a clog on redemption since it restrained alienation by the
mortgagor.

Penalty in case of default

Payment of a penalty if there is default on behalf of the mortgagor can reasonable but in
certain situations it may be unreasonable and penal33. Certain situations where a penalty has
been held to be unreasonable are –

1. On default, compound interest is stipulated even when the original interest was very
high34.
27
Rocky Flora v. Parvarthy Ammal, AIR 1957 Ker 175. Hajee Fatma Bee v. Prohlad Singh, AIR 1985 MP 1.
28
Poonam Pradhan Saxena, Property Law 359 (2nd ed., 2011).
29
AIR 1930 PC 142
30
Shankar Dhonddev v. Yeshwant Raghunath, AIR 1928 Bom 82.
31
2 Sanjiva Row, Transfer of Property Act 1095 (6th ed., 1999).
32
AIR 1927 Oudh 199.
33
1 Sanjiva Row, Transfer of Property Act 879 (7th ed., 2011).
34
Rama Krishnayya v. Venkata Somayajulu, AIR 1934 Mad 31.

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 2. On default, increased rate of interest would apply from the time the agreement is
made35.

By merely the virtue of there being a high interest does not lend the condition to be a clog on
redemption unless it could be shown that there was undue influence in the dealing36.

Collateral Benefit to Mortgagor

A mortgagor may avail of a collateral benefit either during the subsistence of the mortgage,
which is valid, or after the redemption, which in some cases is not valid37.

In Noakes & Co. v. Rice38, a covenant in the mortgage agreement stipulated that the
mortgagee would buy all the beer he would consume on his property from the mortgagor who
was a brewer. It was held that the tie was valid during the subsistence of the mortgage but not
beyond redemption. The property must be delivered back without any tie.

One of the famous cases on collateral benefit was Kreglinger v. New Patagonia Meat and
Cold Storage Co. Ltd39. In that case, the mortgage was of a term of 5 years with an option to
the mortgagor to redeem the property before completion of the term. The agreement further
stipulated that the mortgagor should sell sheepskins exclusively to the mortgagee as long as
both parties agreed to a fixed price. The mortgagee paid the mortgage before 5 years and filed
a suit for declaring the tie of exclusive selling to be declared as a clog on redemption.

The House of Lords held that the provision of exclusive sale to lenders did not amount to a
clog. It was reasoned that the mortgagee is allowed to stipulate for a collateral benefit beyond
the period of redemption provided that the stipulation is not –

1. Unconscionable or unfair.

2. A penalty amounting to a clog on the right to redeem.

3. Contrary to the right of redemption.

35
Sunday Koer v. Sham Krishnen, ILR 34 Cal 150.
36
Sarfarz Singh v. Udwat Singh, AIR 1929 Oudh 30.
37
Row, supra note 34, at 883.
38
1902 AC 24.
39
1914 AC 25.

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Kreglingers case is important in recognizing the limits of the doctrine by the terms of the
contract unless they are oppressive, unconscionable or unreasonably hard40. The freedom of
the parties to contract is asserted by this case41.

The rule enunciated in Kreglingers met with approval in re Cuban Land and Development
Co.42, where it was stipulated that in the event of the winding up of the company, the
debenture-holders were entitled to a part of the remaining profits. Such a provision was held
not to be a penalty clogging the right of redemption.

It has also been approved by Indian Courts. A provision that allowed the mortgagee to remain
in possession of the mortgaged property through permanent tenancy was held to be clog
because the collateral benefit extended beyond the period of redemption43.

Subsequent Agreement to postpone redemption

A subsequent agreement which becomes an obstruction to the mortgagee by creating a

personal obligation is a clog on his right to redemption 44. The reason is that unless the
agreement forms a charge on the property, the mortgagee is not liable to pay any sum arising
from his personal obligation except the mortgage amount.

In Sheo Shankar v. Parma45, the mortgagor had already executed a usufructuary mortgage in
favor of the mortgagee. He further executed a simple mortgage in order to borrow more
money. A provision in the simple mortgage provided that the mortgagor was stopped from
redeeming the property till the amount in the simple mortgage was paid. It was held that such
a provision was void as a clog.

In Hari v. Vishnu46, a loan of ₹1500 was advanced to the plaintiff on mortgage by the
defendant. The mortgage deed provided that ₹5000 was still to be paid by the plaintiff on a
previous mortgage and stipulated that till both the sums were paid, the plaintiff was not
entitled to redeem the property. The deed was stamped at a value on ₹6500. It was held that
since both the transactions were clubbed into one, the provision was not a clog.

EXCEPTIONS TO CLOG ON REDEMPTION

40
2 Sir Hari Singh Gour, The Transfer of Property Act, 1882 1248 (10th ed., 2002).
41
Id.
42
 (1921) 2 Ch 147.
43
Bhimrao Nagojirao Patankar v. Sakharam Sabaji Kantak, AIR 1922 Bom 277.
44
1 Sanjiva Row, Transfer of Property Act 884 (7th ed., 2011).
45
ILR 26 All 559.
46
ILR 28 Bom 349.

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Every rule has an exception to it, so even the right to Redemption has some limitations, even
though it can’t be extinguished but it may be restricted.

The major exceptions on Clog on Redemption

1. The right of redemption cannot be finished in mortgage deed of the agreement but
after it can be finished by submission of the right of redemption or by sale or by any
method by the free transaction.

2. The right can be finished by the decree of court. the mortgagor only has the right to
get such decree the right of redemption can be awaited till exercising after the degree
for forfeiture of the right of redemption can be passed by the court.

3. If the right of redemption and interest of mortgage vested in one person then the right
is finished.

4. If the mortgaged property is vested in-state or if the mortgaged property acquisition

by the government the right.

5. If the mortgagee himself acquires a share in the mortgaged property, the indivisibility
of the mortgage is broken, and sharer in the remaining or integrity property is then
entitled to redeem his share.

Case Laws on Exceptions to Clog on Redemption

Narandas Karsondas vs S.A. Kamtam & Anr47

It is only on execution of the conveyance and registration of transfer of the mortgagor's

interest by registered instrument that the mortgagor's right of redemption will be
extinguished. The conferment of power to sell without intervention of the Court in a
Mortgage Deed by itself will not deprive the mortgagor of his right to redemption. The
extinction of the right of redemption has to be subsequent to the deed conferring such power.
The right of redemption is not extinguished at the expiry of the period. The equity of
redemption is not extinguished by mere contract for sale. The mortgagor's right to redeem
will survive until there has been completion of sale by the mortgagee by a registered deed.

L.K. Trust Vs EDC Ltd. and Others Respondent48

47
1977 AIR 774, 1977 SCR (2) 341

48
AIR 2011 SC 2060.

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The mortgagor under Indian law is the owner who had parted with some rights of ownership
and the right of redemption is the right which he exercises by virtue of his residuary
ownership to resume what he has parted with. In India this right of redemption, however, is
statutory one. A right of redemption is an incident of a subsisting mortgage and subsists so
long as the mortgage itself subsists. The judicial trend indicates that dismissal of an earlier
suit for redemption whether as abated or as withdrawn or in default would not debar the
mortgagor from filing a second suit for redemption so long as the mortgage subsists. This
right cannot be extinguished except by the act of parties or by decree of a court.

Jaya Singh D. Mhoprekar and Anr.v. Krishna Balaji Patil and Anr.49

The right of redemption under a mortgage deed can come to an end only in a manner known
to law. Such extinguishment of the right can take place by contract between the parties, by a
merger or by statutory provision which debars the mortgager from redeeming the mortgage.
The mortgagor’s right of redemption is exercised by the payment or tender to the mortgagee
at the proper time and at the proper place of the mortgage money. When it is extinguished by
the act of parties, the act must take the shape and observe the formalities which the law
prescribes. A mortgage being a security for the debt, the right of redemption continues
although the mortgagor fails to pay the debt at the due date. Any provision inserted to
prevent, evade or hamper redemption is void.

VALIDITY OF DOCTRINE OF CLOG ON REDEMPTION

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

49
(1985) 4 SCC 162.

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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 50, 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 51 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 Mortgagee and the mortgagor. In the case of Gangadhar v. Sankar lal 52, 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

50
(1898)21 Mad.110
51
AIR 1945 All. 380
52
AIR 2000 SC 770

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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

As we have seen, whether something would or would qualify as clog on the right of
redemption is something that cannot be determined absolutely. It has to be settled through a

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careful perusal of the of the mortgage deed, the circumstances surrounding the parties
entering into a mortgage, the amount advanced and nature of the transaction53.

However the doctrine has not escaped without controversy. Sir Fredrick Pollock has made his
displeasure known by terming this doctrine as an ‘anachronism’54. He believed that the
doctrine cannot keep on assuming that the mortgagor is a victimized party in the bargain.
According to him, in the modern age, both parties are at a level playing field and giving a
mortgagor a ground to repudiate his obligations by portraying one of the clauses of the
contract as unconscionable, it works against public policy as a whole55.

Pollock isn’t completely wrong in his analysis of the doctrine. The doctrine was envisaged at
a time when feudal landlords would use their power over oppressed peasants to enter into
unfair agreements by virtue of their necessity. But with the growth of commerce and passage
of time, such inequality has been more or less abolished. Providing an excuse to one party to
escape his obligations is a bad precedent to set. However these criticisms have not stopped
the courts in India to apply this test. Where a major chunk of the population in India still
works in the agrarian sector and lives under below poverty line without any formal banking
systems, the doctrine still has some prevalence in such situations. It is left at the discretion of
the judiciary to decide in which cases a prudent application of this doctrine lies.

REFERENCES

1. The Riverside Press, Cambridge 1894.

2. Poonam Pradhan Saxena, Property Law 344 (2nd ed., 2011).
3. Mulla, The Transfer of Property Act, 1882 656 (Solil Paul ed., 9th edition, 2000).

53
2 Sir Hari Singh Gour, The Transfer of Property Act, 1882 1260 (10th ed., 2002).
54
 19 L. Q. Rev. 359 (1903)
55
Id.

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 4. G.C.V. Subha Rao, Law of Transfer of Property Act 882 (4th ed., 2006).
5. 1 Sanjiva Row, Transfer of Property Act 879 (7th ed., 2011).
6. S.N. Shukla, The Transfer of Property Act 219 (23rd ed., 2001).

16| VALIDITY OF CLOG ON REDEMPTION