Explain the rights of a mortgagor and mortgagee.

The law of mortgage under the Transfer of Property Act, 1882 is built on a careful equilibrium. On one side stands the mortgagor, who remains the owner of the property despite having parted with certain rights; on the other stands the mortgagee, who holds those rights only as a security for his money. The Act, through Sections 60 to 66 and 67 to 73, gives each of them a defined set of rights — and the system works because these rights are, in a significant measure, co-extensive and reciprocal.

Rights of the Mortgagor

The Right of Redemption — Section 60

The most important and the most jealously guarded right of the mortgagor is the right of redemption. Under Section 60, at any time after the principal money has become due, the mortgagor has the right, on payment or tender of the mortgage-money at a proper time and place, to require the mortgagee: (a) to deliver to him the mortgage-deed and all related documents; (b) to deliver possession of the property, if the mortgagee is in possession; and (c) to re-transfer the property to the mortgagor or to such third person as the mortgagor may direct.

This right is not merely contractual — it is a statutory right, and no provision in the mortgage deed, howsoever cleverly worded, can take it away. The principle that captures this most vividly is "once a mortgage, always a mortgage." In Seth Gangadhar v. Shankerlal (AIR 1958 SC 770), the Supreme Court reaffirmed that the right of redemption cannot be extinguished by any agreement made at the time of the mortgage as part of the mortgage transaction itself, and any provision to that effect is void as a clog on the equity of redemption. The right subsists so long as the mortgage subsists, and is extinguished only by an act of the parties subsequent to the mortgage (such as repayment), or by a court decree in the proper form.

The right can be exercised in three ways: by payment or tender outside court, by depositing the mortgage-money in court under Section 83, or by filing a suit for redemption. Under Article 61 of the Limitation Act, 1963, a suit for redemption must be filed within thirty years from the date the right to redeem accrues.

The Doctrine of Clog on Redemption

So seriously does the law protect the right of redemption that it has evolved a doctrine expressly to guard it — the doctrine of clog on the equity of redemption. A "clog" is any provision inserted into the mortgage deed that obstructs, hampers, or renders illusory the mortgagor's right to get back his property on repayment. Lindley MR in Stanley v. Wilde put it with characteristic clarity: any provision inserted to prevent redemption on payment of the debt for which the security was given is a clog on the equity of redemption and is, therefore, void.

Conditions that have been held to be clogs include: a stipulation that on non-payment within a fixed period, the mortgage shall automatically become a sale; a restraint on the mortgagor from alienating the mortgaged property during the continuance of the security; a right of pre-emption in favour of the mortgagee; and a covenant that the mortgagee shall become a permanent tenant on redemption. The Supreme Court in Murarilal v. Devkaran upheld this doctrine emphatically, holding that courts are empowered to ignore any stipulation in the mortgage deed that unreasonably restrains the mortgagor's equity of redemption.

Right to Transfer to a Third Party — Section 60A

Rather than requiring re-transfer to himself, the mortgagor, on fulfilment of the conditions for redemption, may require the mortgagee to assign the mortgage-debt and transfer the mortgaged property to a third person of his choice. This gives the mortgagor flexibility in settling his affairs and is especially useful where he wishes to raise fresh credit or satisfy a second creditor.

Right to Inspect Documents — Section 60B

As long as the right of redemption subsists, the mortgagor is entitled, at all reasonable times and at his own cost, to inspect and make copies of documents of title relating to the mortgaged property that are in the custody of the mortgagee. This ensures that the mortgagor is never in the dark about his own property.

Right to Redeem Separately — Section 61

Where a mortgagor has executed two or more mortgages in favour of the same mortgagee, he is entitled, in the absence of a contrary contract, to redeem any one mortgage separately and is not compelled to redeem all of them together. This is the rule against consolidation from the mortgagor's side, which mirrors Section 67A that operates from the mortgagee's side.

Right of Usufructuary Mortgagor to Recover Possession — Section 62

In a usufructuary mortgage, where the mortgagee has been authorised to repay himself from rents and profits, the mortgagor has the right to recover possession once the mortgage-money has been fully paid out of those rents and profits, or on tendering the balance if any. The mortgagee cannot unilaterally convert his status from mortgagee to owner by mere efflux of time.

Right to Accessions and Improvements — Sections 63 and 63A

Upon redemption, the mortgagor is entitled to any accessions — that is, physical additions or improvements — made to the mortgaged property during the continuance of the mortgage. This rule applies whether the accession arose naturally or was acquired at the mortgagee's expense, though in the latter case the mortgagor must reimburse the cost in certain defined situations — for instance, where the improvement was necessary to preserve the property from destruction or was made on the order of a public authority.

Right to Grant Leases — Section 65A

A mortgagor who remains in lawful possession of the mortgaged property retains the power to grant leases of that property, and such leases are binding on the mortgagee — subject to conditions prescribed in Section 65A, such as the lease being for not more than three years in the case of buildings, reserving the best obtainable rent, and containing no covenant for renewal.

Rights of the Mortgagee

Right to Foreclosure or Sale — Section 67

The primary right of the mortgagee upon default by the mortgagor is the right to seek enforcement of his security through court. Under Section 67, at any time after the mortgage-money has become due and before a decree for redemption has been passed, the mortgagee may apply to the court either for a decree of foreclosure — absolutely debarring the mortgagor from the right to redeem — or for a decree of sale, depending on the type of mortgage.

The right to foreclose is available only to a mortgagee by conditional sale and to an anomalous mortgagee where the terms of the mortgage so permit. A simple mortgagee and a mortgagee by deposit of title deeds are not entitled to foreclose — their remedy is by sale. A usufructuary mortgagee cannot foreclose or sue for sale at all; his remedy is to remain in possession and appropriate rents and profits. Section 67 is, in a meaningful sense, the mirror image of Section 60 — the mortgagor's right of redemption and the mortgagee's right to foreclose or sell are co-extensive; when one becomes enforceable, so does the other.

Right to Sue for Mortgage-Money — Section 68

Under Section 68, the mortgagee has the right to sue the mortgagor personally for the mortgage-money in four specific situations: (a) where the mortgagor has bound himself to repay; (b) where the mortgaged property is destroyed or the security rendered insufficient through no fault of either party; (c) where the mortgagee is deprived of his security through the wrongful act or default of the mortgagor; and (d) where the mortgagor fails to deliver possession to a mortgagee who is entitled to it. A mortgagee by conditional sale or usufructuary mortgage has no personal remedy under clause (a) unless there is an express or clearly implied personal covenant — because the liability is confined to the property in such mortgages.

Right to Sell Without Court — Section 69

In certain limited and defined circumstances, the mortgagee has the extraordinary power to sell the mortgaged property without the intervention of the court. This right is available where the mortgage is an English mortgage and neither party belongs to a specified community; where a power of sale without court is expressly conferred and the mortgagee is the government; or where such power is conferred and the property is situated in specified towns such as Calcutta, Madras, or Bombay. Even in these cases, a written notice demanding repayment must be served, and three months must pass after service before the power is exercised, or interest of at least Rs. 500 must be in arrear for three months. This power cannot be exercised without fulfilling these statutory prerequisites.

Right to Accessions — Section 70

Just as the mortgagor claims accessions upon redemption, the mortgagee, during the subsistence of the mortgage, is entitled to the benefit of any accession to the mortgaged property for the purposes of his security. If A mortgages a plot of land to B and subsequently builds a house on it, B's security extends to the house as well as the plot.

Right to Renewal of Lease — Section 71

Where the mortgaged property is a lease and the mortgagee obtains a renewal of that lease during the continuance of the mortgage, the mortgagor, upon redemption, is entitled to the benefit of the new lease. The mortgagee, by reason of his fiduciary-like position in relation to the mortgagor's property, cannot keep the renewal for himself.

Right to Spend Money on the Property — Section 72

If the mortgagee is in possession of the mortgaged property, he is entitled to spend money necessary for the preservation of the property, the payment of prior encumbrances, or the fulfilment of any condition on the breach of which the property might be forfeited. The amounts so spent are added to the principal mortgage-money and carry interest at the stipulated rate, or at nine per cent per annum in default of a specified rate.

Right to Proceeds of Revenue Sale or Compensation — Section 73

Where the mortgaged property is sold for arrears of government revenue or any public demand, or where it is acquired compulsorily under any law, the mortgagee has a charge on the proceeds for the mortgage-money remaining due. The mortgagee's security interest thus follows the monetary proceeds of the property, ensuring that a public sale or acquisition cannot defeat his claim.

The Transfer of Property Act has, over more than a century, been interpreted by the courts in a way that strikes a balance between these twin sets of rights. The mortgagor is protected from being permanently dispossessed of his property by reason of economic helplessness; and the mortgagee is assured that his security is real and enforceable. As the Supreme Court observed in Achaldas Durgaji Oswal v. Gangabisan Heda (2003) 3 SCC 614, the right of redemption is not lost lightly — it subsists until the mortgage is extinguished in the manner known to law, and the courts are vigilant against any attempt by the stronger party to convert what is a security transaction into an out-and-out forfeiture.