Explain the mortgagor's right of redemption.

There is no right in mortgage law more fundamental, more jealously protected, or more deeply embedded in the philosophy of equity than the mortgagor's right to redeem. Every mortgage, by its very definition, is a temporary transfer of an interest in property for the purpose of securing a debt — not a permanent alienation. From the moment the mortgage is created, the mortgagor retains something infinitely precious: the right to recover what he has pledged, once he repays what he owes. This right is embodied in Section 60 of the Transfer of Property Act, 1882, and every student of property law must understand it not merely as a statutory provision, but as an expression of a wider principle that equity will never allow a lender to convert a security into an ownership.

The Statutory Basis

Section 60 declares, without any qualification or equivocation, that at any time after the principal money has become due, the mortgagor has a right, on payment or tender of the mortgage money at a proper time and place, to require the mortgagee — (a) to deliver to the mortgagor the mortgage deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee; (b) where the mortgagee is in possession of the property, to deliver possession thereof; and (c) at the cost of the mortgagor, either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and register an acknowledgement in writing that any right in derogation of the mortgagor's interest has been extinguished. The right so conferred is called the right to redeem, and a suit to enforce it is called a suit for redemption.

Two things about the structure of this section deserve immediate attention. First, notice that the words "in the absence of a contract to the contrary" — which appear in many provisions of the Act — are conspicuously absent from Section 60. This is not an accident. It is the legislature's deliberate signal that the right of redemption is a statutory right which cannot be contracted away, not even with the mortgagor's own consent. Second, the right arises after the principal money has become due — not before. A mortgagor cannot insist on redeeming while the term of the mortgage is still running, just as the mortgagee cannot foreclose before the money becomes due. The two rights are co-extensive.

The Equity of Redemption

In England, the right now recognised under statute was originally created by the Courts of Equity. The common law mortgage was a brutal instrument — the land was conveyed to the creditor on condition that if the debt was not repaid on the exact day and at the exact place specified, the mortgagor forfeited the land forever, while still remaining personally liable for the debt. Equity intervened with the doctrine known as the equity of redemption — the principle that a mortgage is always a security, and that the mortgagor may always redeem it on payment of what is due. In India, there is no distinction between the equity of redemption and the statutory right to redeem. They are one and the same. As Viscount Haldane observed in Kreglinger v New Patagonia Meat and Cold Storage Co. Ltd, the jurisdiction of equity was merely a special application of a more general power to relieve against penalties and to mould them into mere securities.

Once a Mortgage, Always a Mortgage

The most powerful expression of the mortgagor's right of redemption is the maxim: once a mortgage, always a mortgage. This maxim carries a double meaning. First, a mortgage can never be made irredeemable — the mortgagor can always pay and take back his property. Second, a mortgage cannot be converted, by any unilateral act of the mortgagee, into a sale or absolute ownership. As Lindley MR stated in the celebrated English case of Stanley v Wilde — a formulation that has been repeatedly cited with approval by Indian courts — 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, he added, that once a mortgage, always a mortgage.

The Supreme Court has consistently followed this principle. In Murarilal v Devkaran, a mortgage deed contained a clause that if the mortgage money was not repaid within 15 years, the mortgagee would become the absolute owner. The Rajasthan High Court, affirmed by the Supreme Court, held that any such stipulation unreasonably restraining the equity of redemption is void, and the courts will ignore it. The right of redemption cannot be extinguished by efflux of time specified in a mortgage deed.

The Doctrine of Clog on Redemption

A clog on redemption is any provision, whether inserted at the time of the mortgage or subsequently as part of the same transaction, that obstructs, impedes, or makes illusory the mortgagor's right to get back his property on payment. The doctrine applies only to conditions forming part of the original mortgage transaction — not to subsequent independent agreements between the parties.

Several specific types of clogs have been identified through judicial decisions:

• Condition of sale in default: A condition that on failure to repay within a stated time, the mortgage will be treated as an absolute sale and the mortgagee will become the owner is a direct clog on redemption and void.

• Long unreasonable term for redemption: A term of 200 years has been held unreasonable and a clog. A term of 90 years has been held permissible in some circumstances. The Supreme Court cautioned in Purohit K. Govind Ji v. Vraj Lal K. Purohit that in times of inflation and rising property values, a very long term, taken with other relevant factors, would create a presumption that it is a clog.

• Collateral benefit to mortgagee: In Noakes & Co. v. Rice, a brewer mortgagee insisted that even after full repayment, the mortgagor publican would buy liquor exclusively from the mortgagee. The House of Lords held this to be a clog — the property must be restored to the mortgagor unfettered upon redemption. The House of Lords, however, modified this in Kreglinger v New Patagonia Meat, holding that a collateral stipulation is not necessarily a clog if it is an independent contract entered into as a condition of the loan, and is neither unfair and unconscionable, nor in the nature of a penalty, nor repugnant to the right to redeem.

• Restraint on alienation: A condition in a mortgage deed preventing the mortgagor from selling or transferring the property during the continuance of the mortgage, even for the purpose of paying the debt, is a clog and void.

• Right of pre-emption: Where the mortgage deed gives the mortgagee the first option to purchase the property on redemption, it prevents the mortgagor from transferring freely, and the Supreme Court has held this to amount to a clog.

Modes of Exercising the Right

The mortgagor may exercise the right of redemption in three ways. He may pay or tender the mortgage money directly to the mortgagee outside of court; he may deposit the amount in court under Section 83; or he may file a suit for redemption. Under Section 83, the deposit must be made after the principal money has become due and before the suit for redemption is time-barred. Once a valid deposit is made, the court serves written notice on the mortgagee, who must then deliver the mortgage deed and all related documents and accept the money in full discharge of the debt.

It is important to note that a suit for redemption may be filed without a prior tender of the amount — it is not a pre-condition. What is necessary is that the mortgagor prove his title and the subsistence of the mortgage.

Who May Sue for Redemption

Section 91 extends the right to redeem beyond the mortgagor himself to the following persons: (i) any person, other than the mortgagee, who has any interest in or charge upon the mortgaged property or in the right to redeem it — this includes subsequent mortgagees or puisne mortgagees, purchasers of the equity of redemption, co-mortgagors, sub-mortgagees, and lessees of the mortgaged property; (ii) any surety for the payment of the mortgage debt or any part thereof; and (iii) any creditor of the mortgagor who has obtained a decree for sale of the mortgaged property in a suit for administration of the mortgagor's estate. Legal heirs and personal representatives of the mortgagor are equally entitled to redeem by virtue of Section 59A.

The Right of Subrogation on Redemption

When any person other than the mortgagor redeems a mortgage, Section 92 confers upon him the right of subrogation — that is, he steps into the shoes of the mortgagee whose mortgage he has redeemed, acquiring all the rights of that mortgagee against the mortgagor or any other mortgagee, including the rights of redemption, foreclosure, or sale. This doctrine, rooted in equity, was applied by the Privy Council in the leading case of Gokuldas v Puranmal, where a creditor of the mortgagor who purchased the equity of redemption and paid off a prior mortgage was held to be subrogated to the rights of the prior mortgagee and entitled to priority over a puisne mortgagee.

Subrogation does not apply where the mortgagor himself redeems, because the mortgagor by paying his own debt is merely discharging his own obligation — there can be no subrogation to the rights of the very mortgagee you are paying off when you yourself created the mortgage.

Extinguishment of the Right

The right of redemption subsists as long as the mortgage subsists. Section 60 itself provides that the right is extinguished in two ways: by the act of the parties, and by a decree of the court. When the mortgagor sells his equity of redemption to a third party, the right passes to that third party and is extinguished as against the original mortgagor. When a court passes a decree in a foreclosure suit in the prescribed form, the right of redemption is lost. It is also extinguished when the mortgagee purchases the property at a court auction and the sale is confirmed, as the Supreme Court held — once the sale certificate is issued to an auction purchaser, the mortgagor's right to redeem is gone and the sale cannot be set aside on equitable grounds or mere willingness to pay.

Importantly, the right is not lost by the mere lapse of time agreed upon in the mortgage deed — a condition in the deed that "if money is not paid within X years the property shall be deemed sold" is a clog and void. Nor is the right lost where the mortgagee simply refuses to accept payment.

Limitation Period

The period of limitation for a suit for redemption is thirty years from the date on which the right to redeem accrues, under Article 61 of the Limitation Act, 1963. Where no time is fixed for repayment, no limitation applies until the mortgagor makes a demand. In Ganga Dhar v Shankar Lal, the Supreme Court confirmed that when no period of redemption is specified, the right to redeem arises when the mortgagor pays or deposits the mortgage money in court, and no fixed limitation begins to run against an indefinite-term mortgage.

Effect of Redemption

Upon redemption, the mortgagor is entitled to: the return of all documents relating to the mortgaged property; delivery of possession if the mortgagee was in possession; all accessions to the mortgaged property made during the continuance of the mortgage under Section 63; improvements made by the mortgagee if not at the mortgagor's liability under Section 63A; the renewed lease of the mortgaged property under Section 64; and the benefit of any improvements made by the mortgagee which were not necessitated by preservation of the security. The mortgaged property must be restored to the mortgagor entirely unfettered — free from any condition favouring the mortgagee that might have been inserted in the deed.

The right of redemption is thus not merely a provision in a statute. It is the very soul of the mortgage transaction — the ever-present guarantee that however desperately a man may mortgage his property, he never loses the right to reclaim it, so long as he is willing to pay what he owes.