Abstrsct

The right of redemption allows individuals who have defaulted on their mortgages the ability
to reclaim their property by paying the amount due (plus interest and penalties) before the
foreclosure process begins, or, in some states, even after a foreclosure sale (for the
foreclosure price, plus interest and penalties).Right of redemption is a legal process that
allows a delinquent mortgage borrower to reclaim their home or other property subject to
foreclosure if they are able to repay their obligations in time. In some states, this right can be
exercised even if the lender has already re-sold the property, as long as it is still within the
redemption time frame and all conditions are met. A successful redemption will also typically
require the borrower to repay any costs incurred to the lender or other parties as a result of the
foreclosure process.

Keywords
Right of Redemption, essential elements, clog on redemption, subrogation foreclosure,
election,
Introduction

Introduction to Redemption of Mortgage

According to Black’s Law Dictionary, “Redemption” can be defined as the act of the vendor
of property in buying it back again from the purchaser at the same or an enhanced price.
Mortgage redemption is the endpoint of involvement with a mortgage for most borrowers
with repayment mortgages, it occurs when the loan that has been taken out is paid off in full.
Investors can make redemptions by selling part or all of their investments such as shares,
bonds, or mutual funds. In business and marketing, consumers often redeem coupons and gift
cards for products and services. Redemptions can trigger capital gain or loss. There are
various or borrower such as:

The mortgagor can avoid consolidation by the mortgagee in the mortgaged properties.
The mortgagor has the right to deposit the mortgage money in the court and so on…

Right of redemption is the right which every mortgagor possess, which is created by virtue of
the mortgage deed. This right is considered to be inalienable, and cannot be taken away from
a mortgagor by means of any contract to the contrary. Right of redemption is discussed under
section 60 of the Transfer of Property Act, 1882.
UNIT I-

Right of redemption

Once a mortgage always a mortgage

Clog on redemption

Foreclosure

Election

Right of redemption, Once a mortgage always a mortgage and Clog on redemption-

A mortgagor is entitled to redeem their property once the debt secured by the mortgage has
been discharged, or the surplus remaining after a power of sale has been exercised by the
mortgagee. This is referred to as the mortgagor‟s „equitable right of redemption‟.

However, if an option to purchase (or transfer) is included as part of the mortgage transaction
(as is the case in the above example), then the option will be void for extinguishing – or
„clogging‟ – the mortgagor‟s equity of redemption. This position is consistent with the
doctrine that „once a mortgage, always a mortgage‟.

Example-

A lender (as mortgagee) advances 1 Lakh to a borrower (as mortgagor), and to secure its
repayment, the lender takes a mortgage over the mortgagor‟s land, which is currently valued
at Rs. 2 Lakh. The wider property market considers the mortgaged land to be undesirable, but
the lender sees potential in the land and thinks it could soon be valued at Rs. 3 Lakh. The
lender has therefore decided to insert an „option to transfer‟ clause in the deed of mortgage
with words to
following effect:

„ upon an event of default, the mortgagor must transfer the mortgaged property to the
mortgagee as full satisfaction of the mortgage debt.‟

That is, upon an event of default, the lender will receive full possession of the mortgaged
property. If the lender‟s predictions are correct, they would receive a Rs. 3 Lakh property,
which
if they could realise at that price, may result in them earning a Rs. 2 Lakh profit on their
original Rs. 1 Lakh loan.

Another reason why an option to purchase (or transfer) won‟t work is because it would likely
be a penalty. It would be construed as a penalty if the amount to be paid by the mortgagor on
default exceeds what can be regarded as a genuine pre-estimate of the damage likely to be
caused by the breach.

Indian Law-
Right of redemption section 60 of Transfer of Property Act describes the right of redemption-
Right of the mortgagor to redeem at any time once the principal cash 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 mortgage holder to deliver to the mortgagor the mortgage-deed and
every one documents concerning the encumbered property that area unit within the
possession or power of the mortgage holder, where the mortgagee has the mortgaged
property, to deliver possession thereof to the mortgagor, and at the cost of the mortgagor
either to re-transfer the mortgaged property to him or to such person as he could direct or to
execute and (where the mortgage has been affected by a registered instrument) to have
registered an acknowledgment in writing that any right in derogation of his interest
transferred to the mortgagee has been extinguished provided that the correct presented by this
section has not been destroyed by the act of the parties or by decree of a court.
Nothing during this section shall be deemed to render invalid any provision to the result that,
if the time fixed for payment of the principal money has been allowed to pass or no such time
has been fastened, the mortgagee shall be entitled to reasonable notice before payment or
tender of such money.

There are three important provisions made in section 60 of the Transfer of Property Act 1882:

1. Rightofredemption

2. Clog on Redemption
3. Once mortgage, always a mortgage.

Redemption is a right of the mortgagor by which the mortgaged property is kept secure and
the property is returned to the mortgagor. The word redemption means to make free or get
back the mortgaged property by paying mortgage debt.
Anything which obstructs the right of the mortgagor to redeem his property is void, and such
obstruction constitutes a clog on the right to redemption.

Essential elements of Right of Redemption:

From the definition u/s 60, following essential of the right of redemption are viewed:

  Legal validity of mortgage- the first compulsory element for the applicability of
right of redemption is the legal validity of the mortgage.
  Due to principle- the mortgagor can redeem the mortgage anytime after the
mortgage money is paid and he can‟t be avoided from it accept the degree of the court
or any act of the court.
  Payment of dues money – The third essential condition of applicability of the right
of redemption is the payment of dues money can be done to mortgagee himself or to
his agent. But it is compulsory that such payment must be done without condition and
at the proper time and place.
  Filing of the suit – filling of the suit is compulsory for The Redemption of
mortgage the use of the right of redemption cannot be done without filing a suit the
suit of redemption can be filed by the mortgagor or by any transferee from his side.

Once a mortgage, always a mortgage-

The rule of opposition on the right of redemption is based on the maximum once a mortgage
always a mortgage. Mortgage always remain a mortgage and no change or revision can be
done in it. Such right of redemption of mortgage cannot be put to an end or cannot be limited.

As per this maxim, the right of redemption is inherent to all mortgages on the full payment of
the debt, for which such an immovable property was used as a security.

In this regard, the case of Knocks vs Roulds (1902 Sc 24) is a good example where under
lord Dev laid down that- “ once a mortgage always a mortgage and nothing but a mortgage”.
The right of redemption of mortgage cannot be failed by any activity that is it cannot be made
non- redeemable. If any exercises is made then it will null and void. If any condition is
imposed by the party then it will also be void.

In the instant case, the goodwill and premise were mortgaged by Mr rice to company and a
condition was laid down that on payment of mortgage money and interest by Mr rice he will
have the right to get back the mortgaged property. The court stated the mortgage deed created
a mortgage and such mortgage always remain mortgage. But the limitation of the right of
redemption after mortgage by a contract will not be considered an opposition. The Indian
courts have reiterated the same principle in Jaimal v State of HP, wherein the right to
redemption was found to be an absolute right that cannot be waived by any contract to
contrary.

The condition of converting the mortgage into the sale is also considered as opposition on the
right of redemption.

A condition that in case of non-payment of mortgage money the mortgagee will hold the
mortgaged property as a lease, in the mortgage deed has also been considered illegal and
ineffective.

In nutshell, the intention is that mortgage and the right of redemption of mortgagee are co-
extensive whether the right of redemption has been a mention or not. The mortgage and right
of redemption are coextensive whether the right of redemption is described or not. Thus
meaning that once a mortgage is done it will always be a mortgage. It cannot be transferred in
any other transaction.

The doctrine of Clog on Redemption -

The right of redemption is a right free from restrictions and always remains. In other words, it
can be said that the mortgage is always redeemable. It can neither be finished nor making
limits. However, there have been situations in the past where the mortgagee has made
attempts to obstruct the mortgagor‟s right of redemption by putting conditions in the
mortgage- deed that forbids the mortgagor from exercising the right to redemption. These
obstacles are called „clogs‟ and any deed with such a „clog‟ has been declared void ab initio
by the courts. The deeds that have a clog on redemption are often seen as having been signed
under coercion. This can be seen as the mortgagee, possess the financial resources to
pressurize the mortgagor to accept any terms in the deed. Apart from this, any clog on
redemption affects the mortgagor‟s right to enjoy and possess property, along with the right
to alienate. These rights are fundamental to having an interest in the property. Thus, the
courts to protect the rights of the mortgagor have found deeds with any clog, to be void ab
initio.

This principle was first laid down in an English case Santley v Wilde and has been adapted
into Indian jurisprudence to protect the mortgagor.

The courts in India have declared any „clog‟ on redemption in the mortgage deed as void ab
initio. This is done to protect the mortgagor who is in a vulnerable position, in the mortgage
deed as the mortgagee has the financial resources, for which the mortgagor is ready to
temporarily depart with his/her interest in the immovable property. Another reason for
following the position has been the widespread abuse of powers by the mortgagees against
the mortgagors.

It is known that the main object of mortgage is to secure the repayment of mortgage money
hence the mortgage exists in the repayment of debt irrespective of the matter passing of the
date of repayment. The right of redemption neither can be extinguished nor be made limited
or restricted.

Exceptions to Clog on redemption being void-

Under the following circumstances the right of redemption can be limited or restricted-
   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.
  The right can be finished by the degree 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.
  If the right of redemption and interest of mortgage vested in one person then the
right is finished.
  If the mortgaged property is vested in-state or if the mortgaged property acquisition
by the government the right is finished.

In Rama Shankar Singh vs Silver Screen Corp. Pvt. Ltd (1998) it was decided the
right of redemption of mortgagor cannot be finished.

In Shiv Dev Singh vs Sucha Singh (2001) it was sad that no condition can be put in
the deed of mortgage which makes it irredeemable.

In Gangadhar vs Shankarlal (1958) it has been stated by the supreme court that the
right of redemption of mortgage to mortgagor there exist forever this right neither can
be finished no limited by any condition of the parties if any such condition is imposed
then it will be void.

In Murarilal vs Devkaranit was said that the parties cannot restrict the right of
redemption of mortgages. Even after a fixed period if done so such agreement will be
void.

Foreclosure-

The right of foreclosure is a right available to a mortgagee to recover his outstanding money.
This right is available under Section 67 of the Transfer of Property Act, 1882.

After the principal amount has become due, and before payment of mortgage money by
mortgagor or before decree of redemption has been passed by Court, mortgagee has a right to
obtain a decree of foreclosure from the Court. A suit to obtain a decree that a mortgagor will
be absolutely debarred from exercising his right to redeem the mortgaged property is called a
suit for foreclosure.
Conditions:

The right to foreclosure can be exercised by mortgagee only when:

  The debt amount has become due for payment.

  There are no contrary conditions in the mortgage deed as to the time fixed for
repayment

etc.

  Mortgage money has become due but mortgagor has not got a decree of redemption
of

the mortgaged property.

  Mortgage money has become due but mortgagor has not paid or deposited the
amount.

Section 67 of Transfer of Property Act, 1882 defines foreclosure as “A suit to obtain a

decree that a mortgagor shall be absolutely debarred of his right to redeem the
mortgaged property is called a suit for foreclosure.”

Thus it is a tool by which the mortgagee can deprive the mortgagor of his right
interest in property, by barring his right of redemption. However, this right to
foreclose the mortgage property is not existent in all forms of mortgage. A simple
mortgage, usufructuory mortgage, English mortgage, equitable mortgage doesn‟t find
this right to foreclose. Therefore, in such mortgages, other remedies such as a suit for
money decree or for sale of the property can be exercised.

Section 67 is the counterpart of S. 60 of the Transfer of Property Act, 1882, therefore

the right to foreclose only occurs after the debt becomes due. The right of foreclosure
is counter-part of right

of redemption. Mortgagor gets a right of redeeming his security after payment of debt
amount; similarly mortgagee has a right of foreclosure or sale in default of redemption by the
mortgagor. Section 67 protects interest of a mortgagee who has advanced a loan in pursuance
of some interest in a security and mortgagor has defaulted in payment. The right of
foreclosure of mortgagee is co-extensive to right of redemption of mortgagor.

The right of foreclosure gets diminished in cases where the mortgagor has deposited the
mortgage money. Therefore only once the mortgagor has defaulted on the debt becoming
due, can the mortgagee exercise this right. This right is only available in cases of mortgage by
conditional sale and certain kinds of anomalous mortgage.

However, when mortgagor fails to redeem the property, the mortgagee does not become the
owner of the property, he has to file a suit for recovery of the amount due. The limitation
period for instituting a suit is 12 years. The final decree in a suit for foreclosure on the failure
of defendant to pay all amounts due extinguishes the right of redemption which has to be
specifically declared.

Election-

„Election‟ means choosing between two inconsistent or alternative rights. Principle

Underlying the Doctrine of Election is Allegans contraria non est audiendus: he is not to be
heard who alleges things contradictory to each other. In other words, a man cannot approbate
and reprobate or blow hot and cold. It means that a man taking a benefit under an instrument
must also bear the burden. Under any instrument if two rights are conferred on a person in a
manner one right is in lieu of the other, he is bound to elect the proposal on whole or reject on
whole. In other words, he can elect only one of them. A person cannot take under and against
the same instrument. Election is an obligation to choose in a case where there is a clear
intention of the grantor that the grantee should not enjoy both. The foundation of the doctrine
is that the person taking a benefit under an instrument must also bear the burden.

The doctrine of election is based on the rule in Cooper v. Cooper and is stated in Section 35
of the Transfer of Property Act, 1882 alongside Section 180 to 190 of the Indian Succession
Act.

It states that when a party transfers a property over which he does not hold any right of
transfer and entailed in that transaction is the benefit conferred upon the original owner of the
property, such title holder must elect his opinion to either validate such transfer of property or
reject it; upon rejection, the benefit shall be relinquished back to the transferor. The basic of
this doctrine is that a person who gets the benefits must also bear the burden.

  Generally, the benefit is greater in value than the burden.

  The benefit should be express and particular. It must be in the same transaction
(The

Doctrine of Election only applies when the two donations are part of the same

transaction).

  The transfer and benefit should be gratutious without money.

  If the transferor has died or has become incapable of making a fresh transfer before
such

election, then the subsequent election by owner of the property is void.

For example, by a deed A gives to B a house belonging to C, and by the same

instrument gives other property belonging himself to C. C is entitled to A‟s property
only upon the connection of C‟s conforming to all the provisions of the instrument by
renouncing the right to his own property given in favor of B; he must consequently
make his choice, or as it is technically termed

“he is put to his election”, to take either under or against the instrument. If C elects to take
under the instrument, he must relinquish in favor of B his property given to B by A; and takes
the property which is given to him by A.

It was held in Codrington v. Lindsay (1873) 8 Ch 578 that the doctrine of election is based on
the principle of equity that one cannot take what is beneficial to him and disapprove that
which is against him under the same instrument. One cannot approbate and reprobate at the
same time.
A Transferor

PROPERTY

C transferee

Benefit of Rs 30,000

The real owner of the property

Property worth Rs 20,000

   There is a property worth Rs. 20,000.
  B is the real owner of the Property.
  A is a transferor who has got no rights over the property.
  C is the transferee who wants the property
  A says to B, if you agree to sell your property to C, I will give you Rs. 30,000.

Doctrine of Election starts here when the real owner, i.e., B now has to give effect to this
transaction. He has to elect - To Either Accept the offer i.e. to agree to sell his property to C
and receive the benefit given by A of Rs. 30,000 Or Reject the whole of it, i.e., Reject to
transfer the property to C and refuse to accept the benefit. This is Doctrine of Election i.e. B
has to choose from the two alternative (accept / refuse) rights.

Conditions in Election-(explaining with the help of the abovementioned example)-

 The transferor should dispose of the property in which he has no right to transfer.

B the real owner, but A is the one (the transferor) who has got no right to transfer but is
willing to sell B‟s property to C. B is not the one who wanted to transfer the property to C
but it is A, the transferor who is neither the real owner nor he has got any such rights of
transfer, but will transfer the property to C.

 The transferor must confer a benefit to the real owner of the property.

A (the transferor), when he is willing to transfer the property to C, tells B that your property
is of Rs. 20,000 but I will give you a gift of Rs 30,000 if you give your property (and A will
transfer it to C).

 Both the benefits conferred and the transfer made must be part of the same transaction or
document. This doctrine only applicable when transfer and benefit a part form the same
transaction which means the benefit and transaction are interdependent and inseparable.

In the example everything (transfer of property + benefit) was covered under the same
transaction between A, B and C.

 The owner is now given a choice of election either to accept the benefit and allow the
transfer or to reject both.
If B allows A to transfer the property to C, then B gets the benefit of Rs 30,000, C gets the
property of B and A gets whatever he had demanded of C or else B gets nothing.

Mode of Election :

Election must be divide into two : 1. Direct Election or

2. Indirect Election.

1. Direct Election :

There is no prescribed form. A letter, telegram, oral words of transferor or any other sign by
the
person which conveys the intention of the transferor is enough.

2. Indirect Election :

There are three types of Indirect Election. They are :-

1. Acceptance of benefit without knowledge of duty to elect 2. Enjoyment for two years and
3. Status quo cannot be restored.

Effect of election against the transfer-

Where the owner dissents from the transfer of his property –

  He must relinquish the benefit ;

  The benefit intended for him would then revert to the transferor.
Conclusion
The right of redemption of the mortgagor is the inherent right provided in the mortgage deed.
On looking at the various aspects of the mortgage deed, the right of redemption forms a
primary part of the mortgage deed. Furthermore, the right of redemption is applicable only
after the mortgagor has performed the rights and duties assigned to them.

A mortgage deed cannot be altered and made a sale deed, neither the mortgagee becomes the
owner of the property as the same is against basic principle of the mortgage deed. Thus, the
right of redemption of a mortgagor is secured by the court and provides them protection
against exploitation caused to them. Furthermore Section 60 of TPA aims to secure the
interest of the mortgagor and also it provides the essentials of the mortgage deed and the
movement of the property.
There are various rights available to both the mortgagor and mortgagee. Right to redemption
is the right which is available to the mortgagor based on certain conditions. Exception of the
right of redemption is the right which is available to the mortgagee if the mortgagor fails to
do his duty or pay his loan in a specified time duration. But these rights are not used in a
proper way so there is a need to implement the laws carefully for the smooth functioning of
the system between the borrower and lender. And laws also need to be amended from time to
time so that no problem occur for implementing the same.