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
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