Sec.60,62 and Sec.111 of T.P. Act - Clog on Redemption of Mortgaged Property - suit for eviction of Tenants created by Mortgagee - suit dismissed as Tenants are recognized tenants of Mortgagor , No suit is maintainable as he ought to have file a Rent control case - Whether the clog on redemption is valid and is maintainable ?-- 2015 S.C.(2014) MSK Law Reports 3

 On 25th August 1969, the plaintiffs redeemed the mortgaged  properties
by depositing a sum of Rs.29,000/- . The cause  of  action  for  filing  the
present suit arose on account of the fact that physical  possession  of  the
suit property  was  not  handed  over  to  the  plaintiffs  even  after  the
redemption of the mortgaged property. The defendants 1 and  2  are  said  to
have rented out portions of the suit property to defendants 3 to  14.  Since
the defendants failed to deliver possession, the  plaintiffs  filed  a  suit
for possession and recovery of damages.  

            “Whether the suit is barred under the  provisions  of  the  Rent
           Restrictions Act?”

The Trial Court decided the case on all 11 issues and held that  on  a  true
reading of the mortgage deed, the mortgagor had recognized  the  tenants  of
the  mortgagee  whose  tenancy  therefore  did  not  come  to  an  end  with
redemption of the mortgage.  

In First Appeal, the High Court of  Punjab  and
Haryana did not go into any of the other issues including the  issue  as  to
whether the tenancies were created before or after the execution of the  two
mortgage deeds.  It held on a reading of a  clause  in  the  first  mortgage
deed that since the mortgagors  would  be  entitled  to  future  rent  after
redemption, it is clear that the mortgagors recognized all  tenants  created
by the mortgagees during the subsistence of the  mortgage.  Issue  No.4  was
answered accordingly  and  the  suit  for  vacant  possession  of  the  suit
property from defendants was held not to be maintainable in law.


Apex court held that

The right of a mortgagor to redeem is dealt with by Section 60 of  the
Transfer of Property Act.  Section 60 reads as follows:




           “60. Right of mortgagor to redeem
           At any time  after  the  principal  money  has  become  due,  the
           mortgagor has a right, on payment or tender, at a proper time and
           place, of the mortgage-money, 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 mortgaged property, to deliver possession thereof  to  the
           mortgagor, 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 (where  the  mortgage  has  been
           effected by  a  registered  instrument)  to  have  registered  an
           acknowledgement in writing that any right in  derogation  of  his
           interest transferred to the mortgagee has been extinguished:

           Provided that the right conferred by this section  has  not  been
           extinguished by act of the parties or by decree of a Court.

           The right conferred by this section is called a right  to  redeem
           and a suit to enforce it is called a suit for redemption.

           Nothing in this section shall be deemed  to  render  invalid  any
           provision to the effect that, if the time fixed  for  payment  of
           the principal money has been allowed to pass or no such time  has
           been fixed, the mortgagee shall be entitled to reasonable  notice
           before payment or tender of such money.”



Section 62 also recognizes the right of a usufructuary mortgagor to  recover
possession under certain circumstances.  Further, the rights of a  mortgagee
in possession are dealt with by Section 72 of the Transfer of Property  Act.
 Suffice it to say that the right to create tenancies  is  not  one  of  the
rights  enumerated  in  this  section.   Section  76  (a)   deals   with   a
usufructuary mortgagee  managing  the  property  as  a  person  of  ordinary
prudence would manage if it were his own.  Section 111(c)  of  the  Transfer
of Property Act states:

           “S. 111 Determination of lease. —A lease of immovable property
           determines –-

           (c) where the interest of the lessor in the property  terminates
           on, or his power to dispose of the same  extends  only  to,  the
           happening of any event –- by the happening of such event;”

In Shivdev Singh & Anr. v. Sucha Singh &  Anr.  [2000  (4)  SCC  326],
this Court held  that  a  mortgage  for  a  period  of  99  years  being  an
unreasonably long period before which redemption could not take place  would
be a clog on the equity of redemption and would therefore be disregarded  by
the Court.  On the facts of the case,  the  mortgage  deed  was  dated  19th
March 1968 and the mortgage was  sought  to  be  redeemed  long  before  the
period of 99 years came to an end.  It was held  that  such  redemption  was
possible and the 99 year period was  held  unenforceable.   It  was  further
held that it is a right of the mortgagor  on  redemption  to  get  back  the
subject of the mortgage and to hold and  enjoy  the  property  in  the  same
manner as he was entitled to hold and enjoy it before the mortgage.   If  he
is prevented from so doing such prevention is bad in law.

There is a long line  of  High  Court  judgments  which  hold  that  a
mortgagee continuing in possession as a tenant after redemption  is  a  clog
on redemption and is invalid as it prevents the mortgagor from getting  back
the property in the same condition as he  gave  it  when  the  mortgage  was
executed
 On the facts of this case, it will be seen that  the  mortgagees  were
entitled to create tenancies by virtue of the mortgage deed dated 9th  March
1942. However, there is nothing in the language  of  the  mortgage  deed  to
indicate clearly that the tenancies  created  by  the  mortgagees  would  be
binding on the mortgagors. 
 At the  highest,  after  redemption,  and  after
possession is taken, the mortgagor or mortgagors will also  be  entitled  to
receive rent in future.  It will be seen that the mortgagor’s right  to  get
back possession is expressly recognised by the  mortgage  deed  without  any
clear and unambiguous language entitling tenants created by  the  mortgagees
to become tenants of the mortgagors. 
The  entitlement  to  receive  rent  in
future can by no stretch be held to create a tenancy between  the  mortgagor
and the tenants of the mortgagees.  This phrase has to  be  reconciled  with
the expression immediately preceding it namely “on taking  possession”.   It
is clear that taking of possession from the mortgagees and  his  tenants  is
completely antithetical  to  recognizing  the  mortgagees’  tenants  as  the
mortgagors’ tenants.  
If the clause is to be read in  the  manner  that  the
High Court has read it, the  mortgagors  would  not  be  able  to  get  back
possession on redemption which would in fact be a serious interference  with
their right to redeem the property inasmuch as the mortgagors would have  to
evict such tenants after making out a ground for  eviction  under  the  Rent
Act.  Such ground can only be bonafide requirement of the landlord  or  some
ground based on a fault committed by the tenant such as non-payment of  rent
or unlawful subletting etc. Further, such ground may never become  available
to the mortgagor/landlord or may become available  only  after  many  years.
It has already been seen that a mortgagee  continuing  in  possession  after
redemption as tenant of the mortgagor is regarded as a clog  on  redemption.
The position is  not  different  if  the  mortgagee’s  tenants  continue  in
possession after redemption.  
This would necessarily have to be  disregarded
as a clog on redemption as  the  right  to  redeem  would  in  substance  be
rendered illusory.  
In the circumstances, the judgment  of  the  Punjab  and
Haryana High Court dated 31st March 2004 is set  aside. 2015 S.C.(2014) MSK Law Reports 3

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