Right of Redemption– Transfer of Property Act 

 

We are going to see about the “Right of Redemption” under Transfer of Property Act. 

 

The ownership of a property has many facets of rights attached to it and the rights and obligations arising thereto has been provided for in the Transfer of Property Act. Rights are in the nature of right to own, enjoy, alienate, lease, mortgage, assign, etc.

 

One such facet is a mortgage created on a property in favour of a creditor to secure a debt or to perform some obligations. Various types of mortgages have been set out in section 58 of the Act., Types of mortgages are, (a) simple mortgage, (b) mortgage by conditional sale, (c) usufructuary mortgage, (d) english mortgage, (e) mortgage by deposit of title deeds and (f) anomalous mortgage. 

 

The right of redemption is recognized as a statutory right by section 60 of the Transfer of Property Act, 1882, which has its roots from the principles derived in English law. Right of redemption was held to be a right in equity for the person creating a mortgage should be able to get back his property once he is ready to discharge the debt. 

 

Right to redeem is an incident to a mortgage and is inseparable from it. The mortgagee’s right to enforce a mortgage is the right to foreclose and the mortgagor’s right to discharge and seek for the property is the right to redeem.  Both the rights are co-extensive as one right would give rise to the demand for performance of the other. 

 

Chapter IV dealing with mortgages of immovable property, under the heading “Rights and liabilities of mortgagor”, has sections 60 to 66. The rights and liabilities of mortgagee starts only from section 67 and the chapter ends with section 104.

 

In the context of redemption, sections 60, 60-A, 61, 83 and 91 recovers to be looked into. 

 

    60  Right of mortgagor to redeem

The section sets out that the mortgage has a right, on payment or tender, at a proper time and place of the mortgage money. On such compliances the mortgagor can call upon the mortgagee to deliver, mortgage deed, documents, possession, re-transfer (can be to a third party also), execute and register an instrument for discharge. Proviso says that the right conferred has not been extinguished by act of parties or by decree of court. The mortgagee is entitled for a reasonable notice of such intention. 

 

Section 60-A permits transfer including to assign the mortgaged debt to a third party.  The encumbrancer is also entitled to seek for the same. 

 

Section 61 provides for redemption separately or simultaneously from the same mortgagee of different mortgages, in the absence of a contract to the contrary. 

 

Section 83  Power of deposit in Court money due on mortgage - 

At any time after the principal money payable in respect of any mortgage has become due and before a suit for redemption of the mortgaged property is barred, the mortgagor, or any other person entitled to institute such suit, may deposit, in any Court in which he might have instituted such suit, to the account of the mortgagee, the amount remaining due on the mortgage. 

 

RIGHT TO MONEY DEPOSITED BY MORTGAGOR: The

court shall thereupon cause written notice of the deposit to be served on the mortgagee, and the mortgagee may, on presenting a petition (verified in a manner prescribed by law for the verification of the plaints) stating the amount then due on the mortgage, and his willingness to accept the money so deposited in full discharge of such amount, and on depositing in the same court the mortgagedeed [and all documents in his possession or power relating to the mortgaged property], apply for and receive the money, and the mortgage deed [and all such other documents], so deposited shall be delivered to the mortgagor or such other person as aforesaid.

 

Where the mortgagee is in the possession of the mortgaged property, the court shall, before paying to him the amount so deposited direct him to deliver possession thereof to the mortgagor at the cost of the mortgagor either to retransfer the mortgaged property to the mortgagor or to such third person as the mortgagor may direct or to execute and (where the mortgage has been effected by a registered instrument)  Have registered an acknowledgement in writing that any right in derogation of the mortgagors interest transfer to the mortgagee has been extinguished.   

 

Section 91  

Persons who may sue for redemption : besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property namely:

a.       Any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same:

b.      Any surety for the payment of the mortgaged debt or any part thereof: or 

c.       Any Creditor of the mortgagor who has in a suit for the administration of his estates obtained a decree for sale of the mortgaged property  

 

C. Principles derived –  1) Right created in statute 

Right of redemption is a right created in statute.  The statute states that the mortgagor has a right. What flows of such right is also set forth and held by courts to be sacrosanct. While the section states it to be a right of the mortgagor, the further wording as to the reliefs to be sought for by the mortgagor, establishes the obligations of the mortgagee to preserve those incidents. It is incumbent that the mortgagee has to hold the mortgage deed, possession, documents of title,  preserve the property, etc. 

 

Part Redemption:

A person interested in only a share of the mortgaged property cannot redeem it by paying a proportional amount of the debt owed. (Chhaganlal Keshavlal Mehta v Patel Narendas Maribhai AIR 1982 SC 121). However, when a mortgagee acquires the whole or part of the mortgaged property, the mortgagor can redeem his share. 

 

Therefore, the mortgaged property can only be redeemed if the debt owed is paid in entirety and the holder of a share of the mortgaged property cannot redeem it by payment of proportional amount that is owed. The exceptions to this rule:

 

1.    When the terms of mortgage provide a partial redemption

2.    When co-mortgagors have separate interests, redemption can be made in part

3.    When there is a partition of the mortgaged property between the co-mortgagors and the mortgagee recognises the same. 

4.    When mortgagee acquires the whole or part of the mortgaged property, the mortgagor can redeem his share.

 

2) Clog on Right of Redemption

Having said that a right is created in the statute, namely the right of redemption, can the parties contract to the contrary or any clause of the contract defeat the same. That is recognized by the principle clog on right of redemption. Any clause in the contract affecting the right of redemption is held to be void and non est. 

 

A condition that stipulated, the mortgaged property would be deemed to be sold to the mortgagee permanently if the mortgagor fails to pay the amount, is a clog. Accelerated interest after a period of time is found to be a clog. 

 

The jurisprudence on this throws lots of insights for us to look into. Let us see one of the oldest case law on the subject. 

 

In Vermon Vs Bethel (1762) 2 Eden 110, 113, Earl of Northington, said

 

“This court, as a court of conscience, is very jealous of persons taking securities for a loan, and converting such securities into purchases. And therefore I take it to be an established rule, that a mortgagee can never provide at the time of making the loan for any event or condition on which the equity of redemption shall be discharged, and the conveyance absolute. And there is great reason and justice in this rule, for necessitous men are not, truly speaking, free men, but, to answer a present exigency, will submit to any terms that the crafty may impose upon them.”

 

In Stanley v. Wilde (1899) 2 Ch 474 the founding explanations of the basis of this doctrine was given as follows:

 

“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’.”

 

These was relied upon by the Privy Council while laying down law in the case of Khan Bahadur Mehrban Khan – Vs – Makhna and Ors. reported in AIR 1930 PC 142.

 

The Hon’ble Supreme Court in the case of Ganga Dhar Vs Shankar

Lal and Ors, reported in AIR 1958 SC 770, followed the same.

Following is the extract of para 8,

“8. The right of redemption, therefore, cannot be taken away. The Courts will ignore any contract the effect of which is to deprive the mortgagor of his right to redeem the mortgage. ……….  For “once a mortgage always a mortgage” and therefore always redeemable. …. ”

 

3) Extinguishment of the right

The Proviso to section 60 makes it clear as to when this right of redemption stands extinguished. Only by acts of parties, which the court have held that should be a subsequent act and not any covenants in the contract, which would extinguish the right. If it is part of the contract, then the same is void being a clog in the right of redemption. The acts of the parties would include the discharge of debt, payment received from usufructuary, or other means of discharge of the debt. Likewise when the decree of the court provides for foreclosure the right stands extinguished. 

 

The action of the mortgagee for foreclosure had been contentious issues. As could be derived by the provision, the filing of the suit for the foreclosure may be extinguish the right to seek for redemption or filing of such suit.  But once a decree is passed the change of filing a suit is no more available.  However in terms of the decree, the debt can be still discharged and the property redeemed. Like wise even in the execution till the property is sold, registered and transferred in full, the party has an opportunity to deposit the amounts and seek for discharge and redemption of the property. 

 

The Hon’ble Supreme Court, in the case of Chhaganlal Keshavlal Mehta Vs Patel Narandas Haribhai, reported in (1977) 3 SCC 247, held that the mortgagor has a right of redemption unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act. 

 

When a question of whether there could be relinquishment based on the endorsements made so as to estop the party came up for consideration, the Hon’ble Supreme Court in the case of Chhaganlal Keshavlal Mehta Vs Patel Narandas Haribhai, reported in AIR 1982 SC 122 = (1982) 1 SCC 223, held in the negative stating that the endorsement cannot amount to extinguishment and that there cannot be any estoppel against statute. 

 

4) Limitation

The interesting feature while considering the right of redemption is that the limitation period in case of right to foreclosure under Art 62 of the Limitation Act is 12 years, while for the redemption the limitation period is 30 years under Art 61 (a) of the Limitation Act. In the first instance the period reckoned from the date when the money sued for becomes due and in the second instance the date is reckoned from the date when the right to redeem or to recover possession accrues.  

 

In the case of Ganga Dhar Vs Shankar Lal and Ors, reported in AIR 1958 SC 770, the deed provided for a term of 85 years and right to redeem as 6 months thereafter. The suit was brought for redemption in about 45 years and a contention was raised that it is barred by limitation. On the other issue, the Hon’ble Supreme Court held that the suit is premature and right to redeem does not accrues before the agreed term of the mortgage and the contention that it was clog on right of redemption was negative and also holding that there is no question of bar of limitation. The Court further held that the 6 months after the term of mortgage was held to be a clog on right of redemption. 

 

The reference of other judgement on limitation is the case of Singh Ram Vs Sheo Ram reported in AIR 2014 SC 3447 = (2014) 9 SCC 185.

 

A Full Bench of Hon’ble Gujarat High Court in the case of Sangar Gagu Dhula Vs Shah Laxmiben, reported in AIR 2001 Guj 329 held that a clog on right of redemption is void abinitio but that needs to be declared by a Court and that the limitation starts from such date of declaration.