Allahabad High Court
Ram Das Gupta vs Bhajan Prakash Girhotra And Ors. on 9 December, 2004
Equivalent citations: 2005(2)AWC2287
Author: Janardan Sahai
Bench: Janardan Sahai
JUDGMENT Janardan Sahai, J.
1. A suit for redemption of mortgage of 2 shops filed by the plaintiff-respondent has been decreed by both the courts below. The plaintiffs case was that Ashok Kumar Sharma the original owner of the two shops in dispute had executed a deed of mortgage dated 13.1.1969 in favour of the appellant Ram Das Gupta. Ashok Kumar Sharma subsequently executed a sale deed dated 15.9.1975 of the disputed shops in favour of the plaintiff respondent who brought the suit for redemption. The defence was that the deed in question though described as mortgage was a sale as it bears a condition that if the mortgage money was not paid within a period of four years the transaction will be treated as a sale. Both the Courts below have found that this condition in the deed was a clog on the equity of redemption and therefore void.
2. Heard Shri R.P. Tewari learned counsel for the appellant and Shri G. N. Verma, learned senior counsel for the respondent.
3. The appeal was admitted on the following substantial question of law :
(1) Whether the Courts below were right in holding that the condition in the mortgage deed dated 13.1.1969 that if the mortgage is not redeemed within four years, it will be treated as sale is a clog on the equity of redemption?
4. Before dealing with the contention of the learned counsel for the parties, it is necessary to state the material terms of the deed. The deed recites that Ashok Kumar Sharma is the owner of the two shops in dispute ; that he has taken a loan of Rs. 8,000 from the appellant on the assurance that the money will be paid back ; that the mortgagee was being put into possession of the two shops ; that no interest would be payable by the mortgagor on the loan taken by him nor any rent would be paid by the mortgagee ; that if the payment is made within a period of four years the possession of the property would be handed over to the mortgagor but if the payment is not made within the stipulated time the mortgage deed would be treated as a sale deed.
5. Counsel for the appellant submitted that it is clear from the terms of the deed that it was the intention of the parties to make a sale of the property and therefore the condition referred to does not amount to a clog on the equity of redemption. In support of this submission he laid emphasis upon the fact that the mortgagee has been given a right to remain in occupation himself or to let out the property to any person and that no interest was to be paid to the mortgagor nor any rent was payable by the mortgagee and that if the mortgage is not redeemed within 4 years the transaction will be treated as sale. I am not inclined to accept the submission made by the learned counsel. It is well settled that the intention of the parties is to be gauged from the recitals in the deed itself. It is stated in the deed that Ashok Kumar was in need of money ; that advance of Rs. 8,000 was paid to him and that the deed was being executed as an assurance (security) for the loan. The transaction was described as a 'mortgage'. From the terms it is clear that a usufructuary mortgage was created. The intention of the parties was to secure the money paid to Ashok Kumar by the deed and interest was not payable by the mortgagor nor rent was payable by the mortgagee. A mortgage by conditional sale and usufructuary mortgage are both mortgages. Where the intention of the parties is to secure a debt, it is a mortgage. If, therefore, there is a subsisting relationship of debtor and creditor between the parties created by the deed, it will be a mortgage deed but if the ownership is transferred outright, it would be a sale. If a transaction is not a sale in its origin but is a mortgage in origin, a condition which provides that on the default of the mortgagor to redeem the mortgage within a stipulated time, the transaction would become a sale, would be void for once a mortgage, always a mortgage. Section 60 of the Transfer of Property Act gives statutory right to the mortgagor to redeem the mortgage. Any condition, which puts a clog on the equity of redemption, is void. From the terms in which the deed is couched, it appears that the transaction was not a sale in its origin but was a mortgage. The condition in the deed that if the money is not paid within four years by the mortgagor the transaction would be treated as sale, is a clog on the equity of redemption. Any obstruction in the way of the mortgagor for the redemption of the mortgaged property is a clog. The principle behind the doctrine has been stated to be that a person in need of money is not a free person and he will readily accept whatever condition is imposed upon him.
6. Learned Counsel for the appellant relied upon the provisions of Section 58(c) of the Transfer of Property Act and submitted that it relates to an ostensible sale. Reliance. has been placed upon the proviso to the section which stipulates that no such transaction shall be deemed to be a mortgage unless the condition is embodied in the document which effects or purports to effect the sale. This provision does not support the case of the appellant. In this case the condition that after a period of 4 years the deed would be treated as a sale deed is incorporated in the mortgage deed itself.
7. In Murari Lal v. Devakaran, , the stipulated period for the redemption was 15 years. It was agreed that if the redemption was not made within this time the transaction would be treated as 'Mala Kalam' which was interpreted literally to mean 'where there is no scope for any say' and in effect to mean a sale. In para 5 of the judgment the Apex Court observed that it was undisputable that a stipulation of this kind amounts to a clog on the equity of redemption. In Shivdev Singh and Anr. v. Sucha Singh and Anr., AIR 2000 SC 1935, it was held in para 10 that the Court will ignore any contract the effect of which is to deprive the mortgagor of his right to redeem the mortgage and the term in the mortgage deed that on the failure of the mortgagor to redeem the mortgage within the specified period of six months the mortgagor will have no claim over the mortgaged property and the mortgage deed would be deemed to be a deed of sale in favour the mortgagee was unsustainable. In Mushir Mohammed Khan v. Smt. Sajeda Bano and Ors., , the distinction between a mortgage by conditional sale and a sale with the condition of repurchase has been explained-the distinction being that in a mortgage by conditional sale there is a relationship of debtor and creditor and the money sought to be secured is a charge upon the property whereas in a sale with a condition for repurchase there is no relationship of debtor and creditor nor is the price a charge upon the property sold. The right to repurchase is a personal right of the seller like a right of pre-emption.
8. Learned counsel for the appellant submitted that the decisions cited by the counsel for respondent are not applicable to the facts of the present case. The decision of the Apex Court in Murari Lal v. Devakaran, (supra) has been sought to be distinguished on the ground that it was based on the principles of equity and good conscience and not upon the provisions of Section 58 of the Transfer of Property Act. The decision of the Apex Court in Mushir Mohammed Khan v. Smt. Sajeda Bano and Ors., (supra) is also sought to be distinguished on the ground that the Supreme Court did not interpret the effect of Section 58(c) of the Transfer of Property Act. The distinction is of no consequence. The application of the equitable doctrine of clog on the equity of redemption applied in Murrari Lal's case is not affected by Section 58(c) of the Transfer of Property Act. Section 60 of the Transfer of Property Act gives statutory sanction to the mortgagor to redeem the mortgaged property.
9. Learned counsel for the appellant relied upon Vidyadhar v. Manikrao and Anr., 1999 (1) ARC 632 ; Gulab Chand Sharma v. Saraswati Devi and Anr., and Pomal Kanji Govindji and Ors. v. F. Vrajilal Karsandas Purohit and Ors., 1989 (1) ARC 41. The decisions cited by the counsel for the appellant do not advance the case of the appellant. In Vidyadhar's case the transaction in question was held to be a mortgage by conditional sale. Section 60 of the Transfer of Property Act which gives the mortgagor a right to redeem the mortgaged property is applicable to all mortgages. In Gulab Chand Sharma (supra) it/was held that the condition in the mortgage deed, which seeks to take away the right of redemption even before the period within which the mortgagor was entitled to pay off the mortgage debt had run out is a clog on the right of redemption. This case is distinguishable on facts and does not help the appellant. In Pomal Kanji Govindji (supra) it was held that if the mortgagor is prevented from redeeming the mortgage the prevention is bad in law. Whether or not in a particular transaction there is a clog on the equity of redemption, said the Supreme Court, depends upon the period of redemption, the circumstances in which the mortgage was created, the economic and financial position of the mortgagor the economic and social conditions of the country and the totality of circumstances in which the mortgage is created. In that case there was a long period of redemption. On facts it was held that there was a clog on the equity of redemption. The condition in the impugned deed that if the mortgage is not redeemed within 4 years it shall be treated as sale obstructs the right of the mortgagor to redeem the property after four years and is, therefore, a clog on the equity of redemption.
10. In view of the above discussion, the question is answered in favour of the plaintiff-respondent and it is found that the condition in the mortgage deed that if the security money is not paid within 4 years the document would be treated as sale is void. The appeal therefore lacks merit and is dismissed.