The Right of Redemption, and Clogs on It

The proviso. The right must not have been extinguished by act of the parties or by decree of a Court. Those are the only two ways it ends. A decree here means a decree of foreclosure or sale. An act of the parties means a genuine, separate transaction by which the mortgagor sells his equity of redemption to the mortgagee, which is lawful if it is truly independent and not part of the original bargain.

Reasonable notice. The section preserves any provision that, where the time fixed for payment has passed or no time was fixed, the mortgagee is entitled to reasonable notice before payment or tender. A lender is not obliged to keep the money ready at a moment's notice.

Redemption of a portion. Nothing in the section entitles a person interested in a share only to redeem his own share on paying a proportionate part, except where the mortgagee, or all of several mortgagees, has acquired in whole or in part the share of a mortgagor.

This is the rule against piecemeal redemption, and it protects the mortgagee: he lent against the whole property and should not be left holding fragments. The exception exists because once the mortgagee has himself bought into one share, he has broken the integrity of the security by his own act and cannot complain.

Section 60A: redeem in favour of a third person

Where the mortgagor is entitled to redeem, he may require the mortgagee, instead of re-transferring the property to him, to assign the mortgage-debt and transfer the property to a third person he directs, and the mortgagee is bound to do so.

This is what makes refinancing possible. A borrower who has found a cheaper lender does not have to find the money, take a re-transfer, and then mortgage again, paying stamp duty and registration twice. The old mortgage is simply assigned to the new lender.

Sub-section (2): the right belongs to the mortgagor or to any encumbrancer, notwithstanding an intermediate encumbrance. An encumbrancer's requisition prevails over the mortgagor's; and as between encumbrancers, a prior encumbrancer's prevails over a subsequent one.

Sub-section (3): the section does not apply to a mortgagee who is or has been in possession. He would have to account for his period of possession, and an assignment would leave that unresolved.

Section 60B: inspection of documents

As long as the right of redemption subsists, the mortgagor is entitled, at all reasonable times, at his request and at his own cost, and on payment of the mortgagee's costs and expenses, to inspect and make copies, abstracts or extracts of the documents of title in the mortgagee's custody or power.

It matters because a mortgagor who cannot see his own title deeds cannot sell the property, raise money elsewhere, or check what is being claimed against him.

Section 61: redeem separately or together

A mortgagor who has executed two or more mortgages in favour of the same mortgagee is entitled, in the absence of a contract to the contrary, when the principal money of any two or more of them has become due, to redeem any one separately, or any two or more together.

This abolished the old doctrine of consolidation, by which a lender holding several mortgages from the same borrower could insist that none be redeemed unless all were. That doctrine let a lender use a well-secured debt to force payment of a badly-secured one. Note it yields to a contract to the contrary.

Section 62: the usufructuary mortgagor's right to recover possession

A usufructuary mortgagor has a right to recover possession, together with the mortgage-deed and documents:

(a) where the mortgagee is authorised to pay himself the mortgage-money from the rents and profits: when that money is paid, meaning when the income has discharged it; and

(b) where he is authorised to pay himself from the rents and profits a part only of the mortgage-money: when the term, if any, prescribed for payment has expired and the mortgagor pays or tenders the mortgage-money or the balance, or deposits it in Court.

The section exists because a usufructuary mortgage has no date and no personal covenant, so without it there would be no way of saying when the arrangement ends. Under limb (a) it ends by itself, without any payment, once the property has repaid the loan out of its own income.

What counts as a clog

The doctrine is judge-made and the section gives it room by protecting the right unless extinguished by act of the parties or by decree. Terms treated as clogs include:

• a condition that on default the mortgage shall become a sale, or that the property shall belong to the mortgagee absolutely;
• a term postponing redemption for an unreasonably long period;
• a term allowing redemption only within a short window, after which the right is lost;
• a collateral advantage to the mortgagee that continues after redemption, such as a right to buy the produce of the land for ever;
• a term that the mortgagor may redeem only during his lifetime, or only he and not his heirs.

The test to state is whether the term, in substance, prevents, hinders or postpones the return of the property once the debt is paid. A long term is not automatically bad and a collateral advantage during the mortgage is not automatically bad; what is fatal is a term that survives payment or makes payment pointless.

A worked example

Farida mortgages her house at Nanded to Girish for Rs. 25 lakh, repayable in five years. The deed contains four clauses.

Clause 1: "If Farida does not repay within five years, the house shall belong to Girish absolutely." A clog. It converts a security into a sale on default, contradicting "once a mortgage, always a mortgage". Struck out; the mortgage stands and Farida may still redeem.

Clause 2: "Farida may redeem only in the sixth year, and not afterwards." A clog. A window that extinguishes the right if missed hinders redemption. Struck out.

Clause 3: "Girish shall have the right to purchase the mango crop at half price for twenty years, whether or not the mortgage is redeemed." A collateral advantage that survives redemption. That part is a clog and falls; an advantage confined to the life of the mortgage would have been unobjectionable.

Clause 4: "Girish shall be entitled to one month's notice before repayment." Valid. Section 60 expressly preserves a provision for reasonable notice where the time has passed or none was fixed.

Farida pays in year six. She may require the mortgage-deed and documents under limb (a); possession if Girish had it, under limb (b); and at her own cost a re-transfer or a registered acknowledgement under limb (c).

She has found a cheaper lender. Under section 60A she may require Girish to assign the debt and transfer the property to that lender instead of re-transferring to her. Unless Girish is or has been in possession, in which case sub-section (3) excludes it.

She owns only a half share and wants to redeem that half. She cannot, on the rule against piecemeal redemption, unless Girish has himself acquired a share of a mortgagor.

She has three separate mortgages with Girish and wants to redeem one. Under section 61 she may redeem any one separately, or two or more together, absent a contract to the contrary.

What it does NOT mean

The right does not arise before the money is due. Section 60 opens with "at any time after the principal money has become due".

A clog does not destroy the mortgage. Only the offending term goes; the mortgage and the right to redeem survive.

Not every long postponement is a clog. The question is whether the term in substance prevents or hinders redemption.

A collateral advantage is not always bad. One that ends with the mortgage is permissible; one that continues after redemption is a clog.

The mortgagor pays the costs of redemption. Section 60 says the re-transfer or acknowledgement is at his cost, and section 60B puts the cost of inspection on him too.

Section 60A does not apply to a mortgagee in possession.

Section 61 yields to a contract to the contrary.

Piecemeal redemption is not allowed, except where the mortgagee has acquired a mortgagor's share.

Distinctions

Quick revision

• Once a mortgage, always a mortgage; a clog on the equity of redemption is void.
• Section 60: after the principal money is due, on payment or tender at a proper time and place, the mortgagor may require (a) the deed and documents, (b) possession where the mortgagee has it, (c) at his own cost a re-transfer or a registered acknowledgement.
• Extinguished only by act of the parties or decree of a Court.
• Reasonable notice before repayment may be stipulated.
• No piecemeal redemption, except where the mortgagee has acquired a share of a mortgagor.
• Section 60A: require an assignment to a third person instead of a re-transfer; an encumbrancer's requisition beats the mortgagor's, a prior encumbrancer's beats a later one; not available against a mortgagee in or formerly in possession.
• Section 60B: inspection and copies of title documents while the right subsists, at the mortgagor's cost.
• Section 61: several mortgages to the same mortgagee may be redeemed separately or together; consolidation abolished, subject to contrary contract.
• Section 62: the usufructuary mortgagor recovers possession when the income has paid the debt, or on paying the balance after the term expires.

Test yourself

1. When does the right of redemption arise, and how does it end? It arises at any time after the principal money has become due. It ends only when extinguished by act of the parties or by decree of a Court.

2. What is a clog on the equity of redemption? Any term whose effect is to prevent, hinder or postpone the mortgagor's right to recover his property on payment. Equity strikes the term out and leaves the mortgage standing.

3. A deed provides that on default the property becomes the mortgagee's absolutely. Effect? The clause is a clog and is void, because it would turn a security into a sale. The mortgage stands and the mortgagor may still redeem.

4. Can a mortgagor with a half share redeem that share alone on paying half the debt? No. Section 60 does not entitle a person interested in a share only to redeem his own share on a proportionate payment, except where the mortgagee, or all of several mortgagees, has acquired in whole or in part the share of a mortgagor.

5. What does section 60A allow, and when is it unavailable? It allows the mortgagor to require the mortgagee to assign the debt and transfer the property to a third person he directs, instead of re-transferring to him. It does not apply to a mortgagee who is or has been in possession.

6. What doctrine did section 61 abolish? Consolidation, by which a mortgagee holding several mortgages from the same mortgagor could refuse to allow any to be redeemed unless all were. Section 61 permits separate or joint redemption, subject to a contract to the contrary.

7. When does a usufructuary mortgagor recover possession where the mortgagee was authorised to pay himself the whole mortgage-money from the rents and profits? When that money is paid, that is when the rents and profits have discharged it. No further payment is needed.

8. Is a stipulation for notice before repayment a clog? No. Section 60 expressly preserves a provision entitling the mortgagee to reasonable notice where the time fixed has passed or no time was fixed.