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Mortgaged Property - Inalienable “Right of Redemption” of a Mortgagor

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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. According to Black’s Law Dictionary, term “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. “Right of Redemption” can be defined under the same dictionary as an agreement or paction, by which the vendor reserves to himself the power of taking back the thing sold by returning the price paid for it. This right finds place under Section 60 of the Transfer of Property Act, 1882 which makes mortgagor the owner of the property mortgaged, and makes him able get his property back from the mortgagee on paying the amount borrowed from him. Clog on a right means the insertion of any clause or any provision under the mortgaged deed which would alienate mortgagor of his property under certain circumstances. Under Indian legal system, such provisions would not be able to alienate a mortgagor of his “Right of Redemption”, and such provisions would be void ab initio. The reason for such clauses under the mortgage deed being void is quite interesting and reasonable. It would not be difficult to understand that a person mortgages his property when he is in need of money, and would not be in the same position as that of the mortgagee. Also, it would not be difficult to understand that mortgagee would try to misuse his position to exploit the mortgagor, and it is for this reason that such clause becomes obvious which would alienate a mortgagor of his property. It is highly possible that a person agrees to enter in a mortgage having clauses which extinguish his right of redemption, but it would not be necessary that the provisions have been accepted by him willingly. In need of money, a person would agree to the terms and conditions of the mortgagee even if he doesn’t want to do so. But, law doesn’t sit silent and in such cases it steps in the picture, and save the basic rights of a mortgagor. Law doesn’t allow any person to alienate a mortgagor of his “Right of redemption”. Such right would remain effective unless the property has been sold off or under any statutory provision. Even if mortgage has went to the court for the foreclosure of the property mortgaged, mortgagor can redeem his property by paying off the full amount in the court.

Time period is not the essence in case of right of redemption. One such case was decided by the court in Achaldas Durgaji Oswal v Gangabisan Heda (2003) 3 SCC 614 , where a suit was filed by the mortgagee for the foreclosure of the property, and another suit was filed by the mortgagor. Lower court asked mortgagor to pay off the amount within 3 months, but he was not able to do so. Instead, he paid off the amount after a period of 3 years and at that point of time his suit was rejected by the lower court on ground of exceeding the limitation period as decided by the court. Lower court’s decree was reversed by the High Court, which was upheld by the Supreme Court. It was held by the Supreme Court that “the right of redemption of mortgagor being a statutory right, the same can be taken away only in terms of the proviso appended to Section 60 of the Act which is extinguished either by a decree or by act of parties. Admittedly, in the instant case, no decree has been passed extinguishing the right of the mortgagor nor such right has come to an end by act of the parties.” Another view was taken by the Supreme Court in K.Vilasini and Ors v Edwin Periera CIVIL APPEAL NO. 5476 OF 2008,where a suit was filed by the mortgagor for the foreclosure but it was prayed by the mortgagor that he would pay the amount and required some time. The time was granted by the court with the consent of the mortgagee, but mortgagor was not able to pay the amount in the stipulated time. He later deposited the amount claimed to redeem his property. The same was decreed by the court and confirmed by the High Court. Supreme Court also decreed in favour of the mortgagor stating that mortgagee had himself allowed mortgagor to pay off the amount and also took part in the proceedings therein. In Hasthimal and Sons v. Tej Raj Sharama 2007 AIR SCW 6135 ,where a pre-emption clause was introduced by the mortgagee stating that he would have a right to purchase the property if the same was intended by the mortgagor. In this case, Supreme Court relied on a judgment of House of Lords in Lewis v. Frank Love, Ltd, 1961 All. E.R. 446, where it was held by the court that “where one of the terms arranged between the mortgagor and the mortgagee was that the mortgagee should have a right to pre-emption in case the mortgagor wishes to transfer the property to a third party, such a condition operates as a clog on the right of redemption of the vendee from the mortgagor.

In Harbans v. Om Prakash AIR 2006 SC 686, Supreme Court referred Mulla’s The Transfer of Property Act, 9th Ed, where it is stated that “The right of redemption is an incident of a subsisting mortgage and subsist as long as the mortgage itself subsists. It can be extinguished as provided in the section and when it is alleged to be extinguished by a decree, the decree should run strictly in accordance with the forum prescribed for the purpose. Dismissal of an earlier suit for redemption whether as abated or as withdrawn or in default would not be barred the mortgagor from filing a second suit for redemption so long as the mortgage subsists and the right of redemption is not extinguished by the efflux of time or decree of the court in the prescribed form.”Consequently, the suit was decreed in favour of the mortgagor. Similar view was taken by the Supreme Court in Pomal Kanji Govindji v Vrajlal Karsandas Purohit AIR 1989 SC 436.Further it was held by the Supreme Court in Shivdev Singh v Sucha Singh air 2000 SC 1935, that a provision incorporated in the mortgage deed to prevent or hamper the redemption would be void, and that the right provided by section 60 of the Transfer of Property Act, 1882 is a statutory right and clog on this right should be determined depending on the facts and circumstances of each case. Full Article

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Comments

  • mel
    mel Wednesday, 1 Jun 11

    hi.. i knw this is about right of redemption.. i jus wanted to ask you something else..
    if 'A' mortgages property to 'B' n sells the property to 'C'.. n then later releases the property by paying the amount to the mortgagee.. i wanted to knw wat is the position of the mortgagor after the mortgage is released.

  • legaljunction
    legaljunction Thursday, 2 Jun 11

    When 'A' is selling his property, he is selling it in the capacity of a seller. His position as a seller wont be affected after the realization of the mortgage deed. His position with respect to C was always that of a seller.

  • mel
    mel Thursday, 2 Jun 11

    yes.. will he still be the owner of the property?.. coz isnt the sale of the property which is mortgaged suppose to be void?

  • legaljunction
    legaljunction Thursday, 2 Jun 11

    No, sale would not be void at the first place. When a mortgagor sells a property during the period of mortgage, interest of mortgagee is not extinguished. A mortgagee will still have interest in the property sold to the third party, that is why we have "TRANSFER OF INTEREST". What a mortgagee needs the interest in the property, unless and until he is getting that interest sale would not be void.

    And, in mortgages where possession of the property is required or deposit of title deeds is required (eg. Usufructuary , mortgage by deposit of title) mortgagor can direct mortgagee to transfer such title or property to the third party

  • mel
    mel Friday, 3 Jun 11

    thanks for the information..though i still have some questions unanswered.. it was really helpfull :)

  • Guest
    appy Tuesday, 13 Mar 12

    Suppose I have mortgaged my property to some bank. meanwhile i have taken a loan from a coop bank which I could not pay. Now these co op. bank officials are telling that even if my property is mortgaged to some other bank....they will dispossess me from my premises and then would sell my property to recover the loan amount... Is it possible?

  • Guest
    Moonmoon Ghosal Thursday, 25 Jul 13

    Dear Experts
    Thanks in advance.
    Deceased father took loan from a Society by mortgaging the title deed of the property.He failed to repay the loan.Nominee is his wife i.e mother.According to the Society mother has to repay the loan, demortgage the property as being nominee hence she is the sole owner of the title of the property .They will transfer the title deed in her name after the loan is paid.
    Mother has 3 children.
    Please advice.
    Mother's ownership right on the property.Is she the sole owner ?

  • Guest
    ravisankar Saturday, 9 Nov 13

    My mother would like to transfer her property to me. But the property have a loan on it. Is that a issue for transfer to me?

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