Supreme Court of India
POMAL KANJI GOVINDJI & ORS.versusVRAJLAL KARSANDAS PUROHIT & ORS.
- Citation
- 1988 INSC 344
- Decided
- 4 November 1988
- Disposal
- Dismissed
- Bench
- SABYASACHI MUKHERJI
Holding
The mortgage terms constitute a clog on the equity of redemption, making the mortgage redeemable before the 99‑year term, and tenants inducted by the mortgagee are not protected by the Bombay Rent Act after redemption.
Summary
The plaintiffs sought redemption of a 99‑year mortgage executed in 1943 and possession of the mortgaged urban property from tenants inducted by the mortgagees. The mortgage deed imposed harsh conditions, including a clause that interest on a portion of the loan could be paid only at redemption after 99 years, effectively making redemption impossible. The Supreme Court held that such terms constitute a clog on the equity of redemption, rendering the mortgage redeemable before the stipulated period. It further ruled that tenants admitted by the mortgagee do not acquire protection under the Bombay Rents, Hotel and Lodging House Rates Control Act after redemption, as the lease was not expressly created to survive the mortgage. Consequently, the appeals by the tenants and mortgagees were dismissed, upholding the mortgagors' right to redeem and recover possession.
Issues considered
- Whether a 99‑year mortgage with oppressive conditions amounts to a clog on the equity of redemption and can be redeemed before the term expires.
- Whether tenants inducted by the mortgagee are entitled to protection under the Bombay Rents, Hotel and Lodging House Rates Control Act after the mortgage is redeemed.
Legislation cited
Subjects
mortgageclog on equity of redemptionlong‑term mortgageredemptiontenancyBombay Rent Actsection 60section 76urban immovable propertyequityoppressive termsundue influence
Judgment
POMAL KANJI GOVINDJI & ORS.
A
v.
VRAJLAL KARSANDAS PUROHIT & ORS.
NOVEMBER 4, 1988
B lSABYASACH1 MUKHARJI AND S. RANGANATHAN, JJ.}
Transfer of Property Act, 1882/Sections 60 and 76-Whether long
le.rm mortgages are clog, on equity redeemable at the mortgagor's
instance before the stipulated period-Tenants inducted by mortgagee's
can be evicted on termination of mortgage.
c Bombay Rents, Hotel and Lodging House Rates Control Act
1947, Lease created by mortgagee in possession of urban immovable
property-Tenancy whether entitled to statutory protection of Rent Act.
In the matter giving rise to the Special Leave Petition (Civil) No.
D 8219 of 1982 the plaintiffs filed a suit alleging that their father, who dies
in the year 1956, had mortgaged the suit property for 30,000 Koris by a
registered mortgage deed dated 20th April, 1943, executed in favour of
the power of attorney holder and manager of the defandants Nos. I and
2. The defendant No. 3 is the heir of the attorney who was also manag-
ing the properties of the defendants Nos. 1 and 2. The mortgage pro-
E perty consisted of two delis having residential houses, shops, etc. The
mortgagees had inducted tenants in the suit property being defandants
Nos. 4 to 9 in the original suit. When the mortgage transaction took
place the economic conditioin of the father of the plaintiffs was weak
and he was heavily indebted to others. Taking advantage of that situa-
tion, the mortgagees took mortgage deed from him on harsh and
F oppressive conditions by getting incorporated a long term of 99 years
for redemption of mortgage. Though possession was to be handed over
to the mortgagees, they took condition for interest on the part of princi-
pal amount in the mortgage deed. Moreover, the mortgagees were given
liberty to spend any amount they liked· for the improvement ofthe suit
property and were also permitted to rebuild the entire property.
G
A registered notice to the defendants Nos. 1 and 2 was given to
redeem the mortgage, but they failed to do so, hence, the present suit
was filed to redeem the mortgage and to recover actual possession from
the defendants Nos. 4 to 9 who were the tenants Inducted by the
mortgagees .
.H
P OMAL KANJJ v. V.K. PUROHIT 827
Defendant No. 1 resisted the suit alleging that the term ol the
A
mortgage was for 99 years, so the suit filed before the expiry of that
period was premature_. The defendant No. 3 resisted the suit by filing
the written statement. The defendants Nos. 4 to 9 resisted I.he suit on
the grounds that the plaintiffs were not entitled to redeem the mortgage
and even if they were so entitled, they could not get actual physical
possession from the tenants who were protected by the Bombay Rent il'
Act, because they were inducted by the mortgagees. The Court pro-
ceeded against defendants Nos. 2/1 to 2/7 (heirs of mortgagee-defen-
dant No. 2) ex-parte, and a preliminary decree for redemption of mort-
gage was passed on 2nd April, 1974 by the Trial Court. But this ex·parte
·decree was set aside by the District Court in the appeals filed by the
heirs of defendant No. 2 on the ground that summons of the suit had not
been duly served upon them. Thereafter defendent No. 2/1 filed his
c
written statement alleging that the suit was bad for non-joinder of the
sisters of the plaintiffs as parties. Moreover, as per the terms and
conditions of the mortgage deed, there was usufructuary mortgage for
20,000 koris, and the remaining 10,,000 koris were advanced to the
mortgagor at monthly interest at the rate of 1/2 per cent. There was a D
condition in the mortgage deed that the mortgagor would pay principal
amount as well as the interest at the time of redemption. When the suit
was filed in the year 1972, the mortgagees were entitled to recover
interest on 10,000· kori for a period of 29 years, that the total mortgage
amount ~long. with interest would come to 47 ,400 koris equivalent to
Rs, 15800 and the Civil Judge had no jurisdiction to try such suit; that E
the court fees was also not sufficient; that it was not true that the father
of the plaintiffs was of weak economic condition. The grand father of
the plaintiffs was as Advocate and the father of the plaintiffs was the
clerk of an Advocate. The plaintiff No. 1 was also working as an Advo-
cate at the time of the mortgage, so they knew the legal position; that at
the relevant time the prevalent custom in Kotch State was to take mort- F
gages of long term for 99 years and when it was permissible to take
mortgage deeds with such a long term, it was also necessary to give
permission for rebuilding the whole property, for better enjoyment of
it. So these terms could not amount to clog on equity of redemption of
mortgage, the mortgagees did not take any undue advantage and they
were not eresent physica!y when the transaction took place through their G
power of attorney holders. If the conditions of mortgage deed did not
amount to clogs on equity of redemption, the suit would be cleatly
. premature. The plaintiff No. 1 had subsequently ·became a·Civil Judge
and was ultimately the Chairman of the 'Tribunai so if the said terms
and conditions of the mortgage were onerous and oppressive, he .would
not have sat Idle for 29 years. But he remained ~llent bec11u.!e he. was H
828 SUPREME COURT REPORTS
"
[ 1988] Supp. 3 S.C.R.
aware of the said custom. The prices of immovable properties had
A
Increased tremendously, therefore, the suit had been Died with ma/a fide
intention; that in case the Court comes to the conclusion that there was
a clog. on equity or redemption and the plaintiffs were entitled to the
redemption, then the interest on 10,000 koris should be awarded to the
mortgages; and that the suit should be dismissed as there was no clog on
B equity of redemption and the Court had no jurisdiction to try the suit.
The other defendants remained absent.
The Trial Court while decreeing the suit came to the conclusion
that there was mortgage transaction between th.e father of the plaintiffs
and the mortgagees on 20th April, 1943, that the terms and conditions
C · in the mortgage deed being harsh and oppressive, amounted to clog on
equity of redemption, so the plaintiffs were entitled to file the suit even
before the expiry of the term of the mortgage; that the sisters of the
plaintiffs were not necessary parties to the suit and even if they were, a
co-mortgagor was entitled to file the suit for redemption so the suit was
not bad for want of non-joinder of necessary parties; that it had juris-
D diction to try the suit; that the mortgagees were not entitled to claim
interest on 10,000 koris and that the plaintiffs were entitled to recover.
possession from the defendants. Nos. 4 to 9 who were the tenants
inducted by the mortgagees.
The appeals filed by the mortgagees as well as the tenants were
E dismissed by the first appellate Court holding that the terms and condi-
tions of the mortgage deed were oppressive and harsh, there was clog on
equity of redemption and the mortgagor should be freed from that
bondage that the tenants had no right to be in possession and were not
entitled to the protection of the Bombay Rent Control Act after the
redemption of the mortgage. The High Court dismissed the second
F appeal.
Civil Appeal No. 9993 of 1983. is an appeal by the tenaut. Civil
Appeal No. 397 of 1980 is also an appeal by the tenant. In this case the·
decree-holder instituted a regular suit for redemption of the mortgage
property. The suit was· dismissed. Thereupon the respondent No. l
Q. preferred an appeal to the District Judge where the suit was decreed.
The defendants filed a second appeal which was dismissed. The decree-
holder made an application for final decree. The Court while giving the
final decree for redemption of the mortgage directed the judgment-
debtors to hand over the possession of the mortgage property within
three months on the decree-holder making payment of dues in respect of
.H . the mortgage in the court. In pursuance of the final decree the decree-
·l* , ;;..~ :·,{·~·~=_,., '*"
829
l. P OMAL KANJJ v. V.K. PUROHIT
holder took out the executiou proceedings and deposited the dues in the A
Court and claimed possession of the mortgage property from the appel-
lant. herein stating that he was a tenant in the possession of the pro-
perty. Notice was issued to the tenant, who submitted Ms objection
stating that he was a tenant, not to be evicted in the execution of the
decree and that he was entitled to get the protection under the Bombay
Rent Control Act. The Disctrict Judge held that there was no conduct B
on the part of the decree-holder which would stop him from claiming
physical possession from the tenant of the mortgagee in possession. ·The
High Court rejected the appeal summarily.'Hence the appeal.
Civil Appeal No. 1286 of 1981 is also an appeal by the tenant. The
appellant is the tenant of the mortgagee inducted in 1955. The property
was mortgaged in 1948 for a period of five years. It appears that the
c
tenant was inducted after the period of redemption had expired. The
mortgagor had a right to redeem after the expiration of the mortgage.
The first appellate court came to the conclusion that the tenants were
not protected under the provision of the Bombay Rent Control Act. The
appellant preferred this appeal in this Court. D
On behalf of the appellants it was contended that in the fomner
Kutch District there was a custom to mortgage for a long terni of 99
years ·and when the period was long, naturally the mortgagee would .he
required to give full authority to repair and reconstruct the mortgaged
property with a view to keep pace with new demands of changing pat- E
tern, so the condition should not be treated as clog on equity of redemp-
., lion; (2) that there is no evidence to lead to the conclusion that there was
any undue influence; (3) that the provision for the payment towards
cost and expenses of repairs and c11nstruction did not amount to a clog
on the equity of redemption; (4) that on the evidence and the facts the
transactions did not amount to clog on the equity of redemption; (5) that F
in Civil Appeal No. 9993 of 1982 the plaintiffs were not entitled to
recover possession from the appellants, who are tenants in the mortgage
properties, since their rights are protected under the Bombay Rents,
Hotel and Lodging House Rates Control Act, 1947 as the said Act
applies to the area of Kutch in the Bombay State. Therefore, no decree
for eviction could be passed against them except in accordance. with the G
provisions of the said Act; (6) that the Trial Court did not make any
finding as to when the tenants were inducted, either before or after the
rent restriction Act was made applicable to the area of Kutch and (7)
that the High Court has erred in not following the said legal position
entrenched by a line of decisions of this Court with the rights of a
tenant inducted by a mortgagee with possession would enure beyond H
'~(
830 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
the period of redemption of the mortg~ge if his rights are enlarged by
A
subsequent tenancy legislation in force in the are~ in which the property
is situated.
Dismissing the Appeals,
B HELD: I. The Court will ignore any contract the effect of which
is to deprive the mortgagor of his right to redeem the mortgage. [844E] .
2. The rights and liabilities of the mortgagor are controlled by the
provisions of section 60 of the Transfer of Property Act, 1882. [846F)
3. Any provision inserted to prevent, evade or hamper redemp-
('
tion is void. [846G J
4. The doctrine "clog on the equity of redemption" is a rule
of justice, equity and good conscience. It must be adopted in each
case to the reality of the situation and the individuality of the
D· transaction. [847A)
5. Freedom of contract is permissible provided it does not lead to
taking advantage of the oppressed or depressed people. The law must
transform itself to the social awareness. Poverty should not be unduly
permitted to curtail one's right to borrow money on the ground of
E justice, ·equity and good conscience on just terms. If it does, it is bad.
Whether it does or does not, however, depends upon the facts and the
circumstances of each case. [847H; 848A]
6. Whether in the facts and the circumstances of these cases, the
morgage transaction amounted to clog on the equity of redemption, is a
p mixed question of law and fact. [848D I
I
7. Courts do not look with favour at any cl~use or stip11lation
which clogs equity of redemption. A clog on the equity of redemption is
unjust and .unequltable. The principles of English law, as we have
nQticed from the decisions referred to hereinbefore which have been
G accepted by this Court in this country, looks with disfavour at clogs on
the equity of redemption. Section 60 of the Transfer of Property Act, in
India, also recognises the same position. T848D-E]
8. It is a right of the mortgagor on redemption, by reason of the
very nature of the mortgage, to get b~ck the subject of the mortgage and
H to hold and enjoy as he was entitled to hold and enjoyit before .the
P OMAL KANJI v. V.K. PUROHIT 831
mortgage. If he is prevented from doing so or is prevented from re- A
deeming the mortgage, such prevention is bad in law. If he is so pre-
vented, the equity of redemption is affected by that whether aptly or
not, and it has always been termed as a clog. Such a clot is inequitable.
The law does not countenance it. [848F-G]
9. Whether or not in a particular transaction there is a clog on B
the equity or redemption, depends primarily upon the period of
redemption, the circumstances under which the mortgage was created,
the economic and financial position of the mortgagor, and his relation-
ship vis-a-vis him and the mortgagee, the economic and social condition
in a particular country at a particular point of time, customs if any,
prevalent in the community or the society in which the transaction takes C
place, and the totality of the circumstances under which a mortgage is
created, namely circumstances of the parties, the time, the situation,
the clauses for redemption either for payment of interest or any other
sum, the obligation of the mortgagee to construct or repair or maintain
the mortgaged property in cases of usul'ructuary mortgage to manage
as a matter of prudent management, these factors must be co-related to D
each other and viewed in a comprehensive conspectus in the back-
ground of the facts and the circumstances of each case, to determine
whether these are clogs on equity of redemption. [848H; 849A-C]
10. A mortgage is essentially and basically a conveyance in law or
an assignment of chattels as a 'security for the payment of debt or for E
discharge or some other obligation for which'it is given. The security
must, therefore, be redeemable on the payment or discharge of such
debt or obligation. Any provision to the contrary, notwithstanding, is a
clog or fetter on the equity of redemption and, hence, bad and void.
"Once a mortgage must always remain a '1tortgage", and must not be
transformed into a conveyance or deprivation of the right over the F
property. l849D-E]
11. The law must respond and be responsive to the felt and dis-
~- cernible compulsions of circumstances that would be-equitable, fair and
just, and unless there is anything to the contrary in the Statute, law
must take cognisance of that faot and act accordingly. In the context G
of fast changing circumstances and economic stability, long-term for
redemption makes a mortgage an illusory mortgage, though not
decisive. [850D-EJ
12. Even apart from section 76(a) of the Transfer of Property Act
if the words of the mortgage deed clearly and indubitably express an H
832 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
intention to allow expressly creation of a tenancy beyond the term of the
A
mortgage, then only the lease created in exercise of the power expressly
conferred by the mortgage deed would be binding on the mortgagor. If
the words of the mortgiige deed do not clearly and indubitably disclose
the intention to allow expressly the creation of a tenancy beyond the
terms of the mortgage, the mere fact that the mortgage deed authorises
B the mortgagee with possession to induct a tenant would not create a
tenancy binding on the mortgagor after the redemption of the
mortgage. [857E-GJ
13. In the instant cases the tenancy rights did not come to be
enlarged by the Tenancy Legislation after the tenant was put into
C possession by the mortgagee and the tenancy created in favour of the
tenants by the mortgagor did not have the concurrence of the mort.
gagor so as to claim tenancy rights even after redemption of the
mortgage. [866C]
Khatubai Nathu Sumra v. Rajgo Mulji Nanji and Ors., A.I.R.
D 1979 Gujarat 171; Lalji Purshottam v. Thacker Madhavji Meghaji, 17
Gujarat Law Reporter 497; Magan/al Chhotalal Chhatrappati and Ors.
v. Bhalchandra Chhaganlal Sha/, 15 Gujarat Law Reporter 193; Soni
Motiben v • .M/s. Hirata/ Lakhasmhi, 22' Gujarat Law Reporter 473;
Vadilal Chaganlal So.ni and Others v. Gokaldas Mansukh and Other,
A.I.R. 1953 Bombay 408; Sarjug Mahto and Others v. Smt. Devruo
E Devi and Others, A.I.R. 1963 Patna 114; Kunibiharilal v. Pandit Prag
Narayan, A.I.R. 1922 Oudh 283; S. V. Venkatara!'la Reddiar v. Abdul
Ghani Rowther & Ors., A.I.R. 1980 Mad. 276 and Devkinandan and
Another etc. v. Roshan Lal and Others, A.I.R. 1985 Rajasthan 11,
approved.
f Santley v. Wilde, (1989] 2 Ch. 474; Vermon v. Betheli, 28 E.R.
838 and 839; G. and C. Kreglinger v. New Patagonia Meat and Cold ·
Storage Company Ltd., (1914] Appeal Cases 25; All India Film Corpo- ·
ration v. Raja Gyan Nath, [1969] 3 SCC 79; Sacha/ma/ Paras ram v..
Ratnabai, [1973] 3 SCC 198 and Om Prakash Garg v. Ganga Sahai &
Ors., [1987] 3 sec 553, relied on. . ••
G ~
Seth Ganga Dhar v. Shankar Lal & Ors., [1959] S.C.R. 509 and j
Jadavji Purshottam v. Dhami Navnitbhai .(1.maratlal & Ors., [1987] 4
sec 223, diStinguished,
Aziz Khan v. Duni Chand. and Others, A.I.R. 1918 l!..C. 48;
.H Jartah Timber & Wood Paving Corporation v. Samuel, l1903l 2 Cit. 1;
POMAL KANJI v. V.K. PUROHIT [MUKHARJl, J:] 833
Chhedi Lal v. Babu Nandan, AIR 1944 Allahabad 204; Bhika and Anr.
A
v. Sheikh Amir and Ors., A.I.R. 1923 Nagpur 60; Mahabir Gope v.
Harbans Narain Singh, [1952] SCR 775; Hariher Prasad Singh v. Must.
of Munshi Nath Prasad, [1956] S.C.R. l; Asa Ram v. Mst. Ram Kali,
[1958] SCR 986; Dahya Lal v. Rasul Mohammed Abdul Rahim, [1963]
3 SCR l; Madan Lal v. Bedri Narain and Others, [1987] 3 S.C.C. 460;
Mu/la's Transfer of Property Act, 7th Edition, pages 401and402; Rash- B
behary Ghose's 'Law of Mortgage' 6th Edition, pages 227 and 228;
[Jala/'s Rent Act, 4!h Edi!· P~!le 814 referr~d to,
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9993
of 1983-etc.
From the Judgmetll anct Order dated 16.12. 1982 of the Gujarat
c
High Court in S.J\. No. 168 of 1982.
B.K. Mehta, Rajinder Sachhar, T.U. Mehta, S.K. Dholakia,
Vimal Dave, Krishan j(umar, Mrs. C.M. Chopra, P.H. Parekh,
! Ms. Sunita Sharma, Mrs. Rani Chhabra, R.C. Bhatia and P.C. Kapur D
}' for the appearing parties.
The Judgment of the Court was delivered by
SABYASACHl MUKHARJI, J, These appeals and the special
leave petition are directed against the decision of the High Court of E
Gujarat, upholding the right ·of the mortgagors to redeem the proper-
ties before the period stipµlated in the deeds, as well as the right of the
mortgagors lo recover possession of the properties from the tenants
and/or the mortgagees without resprt to the releyant Rent Restriction
Act. All these niat\ers were separately canvassed before us as these
involved varying facts, yet the fundanien(al common yuestion is, fl
whether long term mortgages in the present inflationary market in fast
moving conditions are clogs on equity of redemption and as such the
mortgages are redeemable at the mortgagors' instance before the
stipulated period and whether the tenants who have been inducted by
the mortgagees can be evicted on the termination of the mortgage or
do these tenants enjoy protection under the relevant Rent Restriction G
Acts, One basic fact that was emphasised in all these cases was that all
these involve urban immovable properties. In those circumstances,
whether the mortgages op0rnte as clogs on equity of redemption is '1
mixed qµestion pf law anct facts. It is necessary to have a conspectus of
the facts involved in each of the cases herein. We may start with tl1e
faq~ relating to Special Leave Petition (Civil) No. 8219 of 1982 H
!Jernufie !hM is a !ypic~I case.
834 SUPREME COURT REPORTS [1988) Slllpp. 3 S.C.R.
In this matter by our order dated 9th January, 1988 we had
A directed that this special leave petition should be heard first in these
series of matters. We do so accordingly. We grant leave and dispose
of the appeal by the judgment herein along with other appeals.
This is an appeal from the. judgment and order of the Gujarat
B High Court, dated 26th April, 1982 dismissing the second appeal. The
High Court observed that the learned Judge had followed the judg-
ment of the said High Court in Khatubai Nathu Sumra v. Rajgo Mulji
Nanji and others, AIR 1979 Gujarat 171, where the learned Single
Judge in the background of a mortgage, where the mortgagor was
financially hard-pressed and the mortgage was for 99 years and the
terms gave the mortgagee the right to demolish existing structure and
0 construct new one and the expenses of such to be reimbursed by mort-
gagor at the time of redemption, it was held that the terms were
unreasonable, unconscionable and not binding. In order, however, to
appreciate the contentions urged therein, it will be necessary to refer
to the decision of the first Appellate Court, in the instant case before
J) us. By the judgment, the Assistant Judge, Kutch at Bhuj in Gujarat
disposed of two appeals. These appeals arose from the judgment and
decree passed by the Civil Judge, Bhuj, in Regular Civil Suit No. 35/72
by which the decree for redemption of mortgage was passed and the
tenants inducted by the mortgagees were also directed to deliver up
possession to the mortgagors. The plaintiffs had filed a suit all~ging
E that the deceased Karsandas Haridas Purohit was their father and he
Clied in the year 1956, he had mortgaged the suit property to Kansara
Soni Shivji Jetha and Lalji Jetha for 30,000 Koris by a registered
mortgage deed dated 20th April, 1943. The mortgage deed w~s
executed in favour of Soni Govindji Narayanji who was the power of
attorney holder and manager of the defendants Nos. 1 and 2. The
JI defendant No. 3'is the heir of said Govindji Narayanji and he was also
managing the properties of the defendants Nos. 1 and 2. The mortgage
property consisted of two delis in which there were residential houses,
shops etc. The mortgagees had inducted tenants in the suit property
and they were defendants Nos. 4 to 9 in the original suit. When the
mortgage transaction took place, the economic condition of the father
q of the plaintiffs was weak, he was heavily indebted to other persons. It
was alleged and it was so held by the learned Judge and upheld by the
Appellate Judge that the mortgagees took advantage of that situation
and took mortgage deed from him on harsh and oppressive conditions.
They got incorporated long term of 99 years for redemption of mort-
gage. It is further stated that though possession was to be handed over
Ill to the mortgagees, they took condition for interest on the part of
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.) 835
principal amount in the mortgage deed. Moreover, the mortgagees
were given liberty to spend any amount they liked for the improve- A
ment of the suit property. They were also permitted to rebuild the
entire property. Thus these terms and conditions, according to t\l.e
Appellate Judge, were incorporated in the mortgage deed to ensure
that the mortgagors were prevented for ever from redeeming the mort-
gage. The terms and conditions, according to the Assistant Judge, B
Bhuj, being the fiFst Appellate Court were unreasonable, oppressive
and harsh and amounted to clog on equity of redemption and, as such,
bad and the plaintiffs were entitled to redeem the mortgage even be-
fore the expiry of the term of mortgage. A registered notice to the
defendants Nos. 1 and 2 was given to redeem the mortgage but they
failed to do so, hence, the present suit was filed to redeem the mort-
gage and to recover actual possession from the defendants Nos. 4 to 9 c
who were the tenants inducted by the mortgagees.
The defendant No. 1 resisted the suit. It was .his case that the
term of mortgage was for 99 years, so the suit filed before the expiry of
that period was premature. The defendant No. 3 resisted the suit by D
written statement. The defendants Nos. 4 to 9 resisted the suit on the
grounds that the plaintiffs were not entitled to redeem the mortgage
and even if they were so entitled, they could not get actual physical
possession from the tenants who were protected by the provisions of
the relevant Bombay Rent Act. It was their case that the plaintiffs
were not entitled to get actual possession of the premises in which they E
were inducted by the mortgagees. The defendants Nos. 2/1 to 2/7 who
were the heirs of mortgagee Shivji Jetha were residing in London and
New Delhi, so the personal service of summons could not be effected
upon them. The summons was published in tne local newspapers but
none of them appeared before the Court so the Court proceeded ex-
parte against them. The trial was conducted and a preliminary decree F
for redemption of mortgage was passed on 2nd April, 1974 by the Trial
Court. Thereafter, the decree-holder applied for final decree so the
notices were issued to all the defendants. The heirs of Shivji Jetha
appeared in response to that notice and filed applications before the
Trial Court to set aside the ex-parte decree on the ground that sum-
mons of the suit had not been duly served upon them. That prayer was G
rejected by the Trial Court. Thereafter, they filed Civil Misc. Appeals
in the District Court. The appeals were allowed by the District Court
and the ex-parte decree for redemption of mortgage was set aside. The
Trial Court was directed to proceed with the suit after permitting the
concerned defendants to take part in the proceedings right after
receiving their written statements. Accordingly defendant No. 2/1 H
836 I SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
A appeared in the suit and filed his wntten statement while the other
defendants remained absent.
It was the case of the defendant No. 211 that the sisters of the
plaintiffs had not been joined as parties in the suit, so the suit was bad
for want of necessary parties. Moreover, as per the terms and condi-
B tions of the mortgage deed dated 20th April, 1943, there was
usufructuary mortgage for 20,000 koris and the remaining 10,000 koris
were advanced to the mortgagor at monthly interest at the rate of l/2
. , cen't'.'rhere was a condition in the mortgage -deed ihat the mart-
per
gagor should pay principal amount as well as the interest at the time of
redemptiqn. )Vhen the suit was filed in the year l972, the mortgagees
;ve~re" entitled to recover interest on 10,000 foris for a ·period of 29
c years.' That iµterest would be 17,400 koris so the total mortgage
amount wijl by Rs.47400 which would be equivalent to Rs, 15,800 and
and the Civil Judge had no jurisdiction to try such suit so the plaint
should have been returned for presentation in the proper court. It was
further alleged that the court fees paid by the plaintiffs ;,,,as also not
D sufficient. Moreover, it was not true that the father of the plaintiffs
wai of weak economic condition. The grand father of the plaintiffs was
aq Advocate and the father of the plaintiffs was the clerk of an Advo-
c;ate. The plaintiff No. I was also working as an Advocate at the time
of \he mortgage, so they knew the legal position. It was forther alleged
that at the relevant time the prevalent custom in Kutch State was to
E take mortgages of long term for 99 years and wh~n it was permissible
to lake mortgage deeds with such a long term, it was also nece~sary to
give permission for rebuilding the whole property, for better enjoy-
ment of it.' So long term mortgage and the conditions for reconstruc-
tion of the property could not amount to clogs on equity of redemption
of ~ortgage, it was the case of the mortgagees and/or tenants. The
F mortgagees
~·
.. ' ! ..••..
did' not
' .
take any, it was pleaded, undue' advantage
.
and
- ..
they were 11ot present physically when the transaction took place
t~{pugh their p 0wer of a\torney. holders. If the conditions in the mort-
gage deed did not amount to clogs on equity of redemption, the suit
v.;oulct be clearly premat~re. It may be mentioned that the plaintiff No.
l had subsequently become a Civil Judge and was ultimately the
Chairman of the Tribunal so if the said terms and conditions of the
mortgage were onerous and oppressive, he would not have sat idle for
29 years. But he remained silent because he was aware of the custom,
it was pleaded. It was alleged that the prices of immovable properties
had increased tremendously, therefore, the suit had been filed with
ma/a fide intention. It was averred that in case the Court came ·ta the
H conclusion that there was clog on equity of redemption and the
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.l 837
plaintiffs were entitled to the redemption, then the interest on 10,000 A
koris should be awarded to the mortgagees. In the premises, it was
averred that the suit should be dismissed as there was no clog on equity
of redemption and the court had no jurisdiction to try the suit. The
Trial Court then recorded. additional evidence in the suit and ulti-
mately decreed the suit on 28th September, 1978. The Trial Court B
came to the conclusion that there was mortgage transaction between
the father of the plaintiffs and Soni Shivji Jetha and Lalji Mulji on 20th
April, 194:t The Trial Court further came to the conclusion that the
terms and conditions in the mortgage deed were harsh and oppressive,
which amounted to clog on equity of redemption, so the plaintiffs were
entitled to file the suit even before the expiry of the term of the
mortgage. The Trial Court also came to the conclusion that the sisters C
of the plaintiffs were not necessary parties to the suit and even if they
were necessary parties, a co-mortgagor was entitled to file the suit for
redemption, so the suit was not bad for want of non-joinder of neces-
sary parties. The Trial Court further came to the conclusion that it had
jurisdiction to try the suit and held that the mortgagees were not D
entitled to claim interest on 10,000 koris. It was further directed that
the plaintiffs were entitled to recover possession from the defendants
Nos. 4 to 9 who were the tenants inducted by the mortgagees. Accord-
ingly, a preliminary decree was passed in the suit.
Aggrieved thereby the mortgagees filed Regular Civil Appeal E
No. 149/78 and the tenants filed Regular Civil Appeal No. 150/78.
These were disposed of by the judgment of the first Appellate Court.
The "learned Judge of the first Appellate Court framed the following
issues:
"(1) Whether the terms and conditions in the mortgage p
deed dated 20.4.1943 amount to clog on equity of
redemption?
(2) Whether the decree passed is bad for want of jurisdic-
tion with trial court?
G
(3) Whether the mortgagees are entitled to get interest on
10,000 koris?
(4) Whether the tenants are protected from the effect of
redemption decree by virtue of the provisions of Bombay
Rent Act? H
838 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.
(5) Whether the decree passed by the trial court is legal
A
and proper?
(6) What order?"
It is not necessary any longer in view of the findings made and
B the subseqoent course of events to detain ourselves on all the issues.
For the purpose of the present appeal is well as the connected appeals
we are concerned with two issues, namely, Issue Nos. 1 and 4 stated
above, in other words, whether the terms and conditions of the mort-
gage· deed dated 20th April, 1943 amounted to clog on equity of
redemption and secondly, whether the tenants are protected from the
effect of redemption decree by virtue of the' provisions of the Bombay
c Rent Act. The learned Assistant Judge in the first appeal had noted
that it was not in dispute that the document, Ext. 103 dated 20th April,
1943, the certified copy of which was also produced at Ext. 51 was
executed by the father of the plaintiffs in favour of Kansara Soni Shivji
J etha. According to this document, an usufructuary mortgage was
D created on the suit property for 20,000 koris and the possession was to
be delivered to the mortgagees. Over and above that a further amount
of 10,000 koris was also paid to the mortgagor for which he had to pay
interest at the rate of 1/2 per cent per month. The mortgage period was
fixed for 99 years and after the expiry of that period, the mortgagor
had to pay 30,000 koris as principal amount along with interest due on
E 10,000 koris. This was a registered document and it was acted upon by
the parties.
The learned Trial Judge held that the long term of 99 years for
redemption coupled with other circumstances, indicated that there was
clog on equity of redemption. It was argued that the long term for
F redemption was not necessarily a clog on equity of redemption.
Certain decisions were referred to. The Trial Court noted that there
was no quarrel with the proposition of law that long term itself could
not amount to clog on equity of redemption, when the bargain
otherwise was reasonable one and the mortgagee had not taken any
undue or unfair advantage. But, if in a mortgage with long term of
G redemption, there were other circumstances to suggest that the bar-
gain was unreasonable one and the mortgagee had taken unfair
advantage, then certainly long term also will be clog on equity of
redemption. It is a question to be judged in the light of the surround-
ing circumstances. It may be noted here that there was a condition in
the mortgage deed permitting construction of structure after demolish-
H ing the existing structure, costs of which were to be paid by the mort-
POMAL KANJI v. V.K. PUROHJT (MUKHARJI, J.) 839
gagor. After examining the facts and the relevant decisions, the first
Appellate Court came to the conclusion that the terms were oppressive A
and harsh-and-There -was-Clog on equity Of redemption and the mort·
gagor shouldbe freed from that bondage.
Shri Rajinder Sachar, Shri B.K. Mehta as well as Shri Dholakia
urged on behalf of their respective clients that in former Kutch district, B
there was a custom to take mortgages for long term of 99 years and
when the period was long, naturally the mortgagee would be required
to give full authority to repair and reconstruct the mortgaged property
with a view to keep pace with new demands of changing pattern, so the
condition permitting the mortgagee to reconstruct the whole premises
was natural consequence of long term and that should not be treated as
clog on equity of redemption. The learned Assistant Judge had c
rejected the similar contention made before him on behalf of the mort·
gagees and tenants in view of tl)e decisions of the Gujarat High Court
which were also arising out of the decisions in the suits filed in Kutch
district and in those cases it was held that there was clog on equity of
redemption. We will deal with some Gujarat decisions separately, D
presently. The learned Assistant Judge referred to another cir·
cumstance i.e., to the condition of mortgage which indicated the
oppressive nature of the term. By mortgage de~d being Ext. 103
usufructuary mortgage was created for 20,000 koris only and addi·
tional mortgage of 10,000 koris was also created for which the mort·
gagor had to pay interest at the rate of 1/2 per cent per month. Fur· E
thermore, the mortgagor was not allowed to discharge interest liability
periodically, but he had to pay the whole amount of interest at the end
I of 99 years at the time of redemption of the mortgage. Naturally, there
-would be huge accumulation of interest which for all practical prob·
abilities in most of the cases will be an impossibility to discharge. It
was held that the purpose was to ensure that the right of redemption F
could never be exercised. On the other hand, it was contended before
the learned Assistant Judge that the transaction was bona fide because
reasonable consideration was paid as mortgage money. There was no
direct contact between the mortgagor and the mortgagee. There could
not be any collusion. The mortgagees were abroad. The learned As·
sistant Judge examined the evidence of one Madhavji Shivji Soni in G
order to show comparable instances for reasonableness of the consid·
·eration. The learned Assistant Judge after discussing tbe evidence
proceeded on the assumption that the consideration paid as mortgage
money was reasonable and proper and, according to him, it did not
make any difference if the other conditions in the mortgage deed were
found to be oppressive and amounting to clog on equity of H
redemption.
840 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
Attention of the learned Assistant Judge was drawn to the fact
A that this was a bona fide transaction at the time when made, but
subsequently, the prices of immovable properties increased so the
plaintiffs had come forward to file suit.s after a lapse of long time. It
was highlighted that the plaintiff No. 1 was serving qs a Civil Judge and
if he came to know that the transaction was oppressive, he would not
I.I have sat idle for such for a long period. Reference was l)lade to the
decision of this Court in Seth Ganga Dhar v. Shankar Lal & Ors.,
[ 1959] S.C.R. 509. We will examine that decision in detail. The
learned Assistant. Judge came to the conclusion on point No. 1 that
there was clog on equity of redemption and accordingly answered the
Issue No. l in the affirmative. With the other issues we are not con-
cerned in this appeal except Issue No. 4. Regarding Issue No. 4, as
c mentioned hereinbefore, which is on th~ question whether the tenants
are protected from the effect of redemption decree· by virtue of the
provisions of the Bombay Rent Act; it may be mentioned that the
tenants had filed regular civil appeal and it was urged before the
learned Assistant Judge that even if the mortgage was redeemed, the
tenants inducted by the mortgagees would be entitled to continue in
possession of the properties in question as they were protected by the
provisions of the said Rent Act. There was no dispute in this case and
in the facts of the other three appeals that the tenants were inducted by
the mortgagees after the mortgage was created. It is also true that in all
these mortgage deeds, there was provision that the mortgagees were
conpetent to lease out the suit property and if in exercise of that
power, they inducted the tenants in the suit properties, their tenancies
would not come t.o an end on .the redemption of mortgage, it was
argued. The Full Bench of the Gujarat High Court in La/ji Purshottam
v. Thacker Madavji Meghaji, 17 Gujarat Law Reporter 497 held that·
the mortgagee in possession might lease the property, but authorisa-
F tion to the mortgagee to let out the property to any other tenant would
not amount to an intention to create tenancy beyond the term of
mortgage. Following the said decision, however, it was held that the
tenant had no right to be in possession and was not entitled to the
protection of the Bombay Rent Act after the redemption of the mort-
gage. The appeal was accordingly disposed of.
G
As mentioned hereinbefore, there was a second appeal to the
1-righ Court and the High Court expressed the view in brief order and
dismissed the second appeal on 26th April, 1982. It appears, however,
that in second appeal two questions were agitated, (1) the question of
jurisdiction and Damdupat and (2) the tenants' right to be in posses-
H sion. So far as the question of jurisdietion and Damdupat, the High
POMAL KANJJ v. V.K. PUIWHIT [MUKHARJI, J.] 841
Court observed that the Assistant Judge was right. This point is not A
before us in this appeal under Article 136 of the Constitution. So far as
the question of tenants' right to be in possession after the redemption
of mortgage, the High Court followed the decision in Khatubai Nathu
S,umra v. Rajgo Mulji Nanji and others, (supra).
Before we deal with the question of law and the respective sub- B
missions, we may briefly so far as relevant for the present purpose
refer to the facts of the other three appeals.
Civil Appeal No. 9993 of 1983 is an appeal by the tenant arising
out of the Regular Civil Appeal No. 150 of 1978 before the learned
Assistant Judge, Kutch, at Bhuj, referred to hereinbefore. The facts C
have been set out hereinbefore and it is not necessary to reiterate these. '
We will deal with the contention.s in respect of ·the same at the
appropriate stage.
Civil Appeal No. 397 of 1980 is also an appeal by the tenant. It
arises from the judgment and order of the High Court of Gujarat, D
dated 7th November, 1978 in Civil.Revision Application No. 1447 of
1978. One Naranji Nanshi Thacker (hereinafter referred to as the
decree-holder) instituted a Regular Civil Suit No. 10 of 1968 in the
Court of the learned Civil Judge (J.D.), Bhuj. The suit was originally
dismissed on 29th November, 1967. It was a suit for redemption of the
mortgaged property located in the town of Bhuj. Thereupon, the E
respondent No. 1 preferred an appeal to the District Judge where the
suit was decreed .. The defendants filed a second appeal which was
dismissed and the decree-holder made an application for final decree
and the Court gave the final decree on 30th November, 1974. While
giving the final decree for redemption of the mortgage a direction was
given in the decree to the judgment debtors to hand over the posses- F
sion of the mortgaged property within three months on the decree-
holder making payment of dues in respect of the mortgage in the
Court. In pursuance of the final decree the decree-holder took out the
execution proceedings and deposited the dues in the Court. At the
same time the decree-holder claimed possession of the mortgaged
property from one Shambhulal Vallabhji Thacker, the appellant G
herein, stating that he was a tenant in the possession of the property.
The notice was issued to Shambhulal Vallabhji, who appeared before
the Col!rt and submitted his objections stating that he was a tenant
protected by law and he could not be evicted in the execution of the
decree obtained by the decree-holder. He also stated that he was
entitled to get the protection under the Bombay Rent Control Act. H
841 SUPREME COURT REPORTS I1988) Supp. 3 S.C.R.
The learned District Judge held that there was no conduct on the part
A
of the decree-holder which would estop him from claiming physical
possession from the tenant of the mortgagee in possession. It was
contended that when the mortgagee leased out the mortgaged pro-
perty under the ordinary prudent management of the mortgaged pro-
perty the mortgagor on redemption of the mortgage was not entitled to
ii recover physical possession of the property from the tenant. The
learned Judge negatived this contention. The High Court rejected the
appeal summarily. Hence, this appeal.
Civil Appeal No. 1286 of 1981 is also an appeal by the tenant.
The appellant is the tenant of the mortgagee. The plaintiffs Nos. 1 to 6
are the heirs and legal representatives of deceased Mehta Kanji
c Bhagvanji. It may be mentioned that the tenant was inducted by the
mortgagee in 1955. The property was mortgaged in 1948 for a period of
five years. It appears, therefore, that the tenant was inducted after the
period of redemption had expired. The mortgagor had a right to
redeem after the expiration of the mortgage. It was contended that
D though the mortgagee had inducted tenants in the suit property with a
ma/a fide intention on the part of the mortgl!gee, it was still an act of
prudent management. The first Appellate Court on the question
before us, namely, whether the tenant was protected by the Bombay
Rent Act, came to the conclusion after discussing all the ·relevant
evidence and relying on the decision of the Lalji Purshottam v.
E Thacker Madhavji Meghaji, (supra) that the tenants were not so pro-
tected under the provisions of the Bombay Rent (\ct in the facts of the
case. The appellant preferred this appeal and this is in issue in this
case.
Shri Rajinder Sachar appearing for the appellant-mortgagee in
F Special Leave Petition (Civil) No. 8219 of 1982 drew our attention to
the evidence of Vrajlal which appears at page 163 of the Special Leave
Petition (Civil) No. 8219/82 wherein he stated about the execution of
the documents. He stated that when document, Exhibit No. 51 was
made, his father's economic (financial) position was bad. On his
father,'there was a debt of 12,000 koris of Kansara Motilal Madhavji.
G There was also sundry debt of 7 ,000-8,000 koris. His father was an
Advocate in Kutch since old times. He was in service. The younger
brother was studying. Therefore, father-mortgagor was in need' of
money, it was clear. Motilal Madhavji was pressing for his debt. They
were staying in suit property and had no property except the suit·
property. He tried to explain the circumstances in which the mortgage
H deed was executed.
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.I 843
Shri Sachar drew our attention to the observations of the Judicial
Committee in the case of Aziz Khan v. Duni Chand and others, A.LR. A
1918 P.C. 48, where it was held that even where the transaction in
question was undoubtedly improvident in the absence of any evidence
to show that the money-lender had unduly taken advantage of his
position, it was difficult for a Court of justice to give relief on grounds
of simple hardship. Shri Sachar tried to urge in the facts and cir- B
cumstances of the instant case that there is no evidence to lead to the
conelusion that there was any undue influence. Great deal of reliance,
however, by the appellants as well as the respondents was placed on
the observatio.ns of this Court in Seth Ganga Dhar v. Shankar Lal &
others, (supra). There, this Court observed that the rule against clog
on equity of redemption embodied in section 60 of the Transfer of
Property Act empowers the Court not only to relieve a mortgagor of a C
bargain whereby in certain circumstances his right to redeem the mort-
gage is wholly taken away, but also where that right is restricted. The
extent of the latter power is, however, limited by the reason that gave
rise to it, namely, the unconscionable nature of the bargain, which, to
a court of equity, would afford sufficient ground for relieving the O
mortgagor of his burden, and its exercise must, therefore, depend on
whether the bargain, in the facts and circumstances of any particular
case, was one imposed on the mortgagor by taking advantage of his
difficult and impecunious position at the time when he borrowed the
money. In that case it was held that in a suit for redemption where the
mortgage deed, by two distinct and independent terms provided that E
the mortgage would not be redeemed for eightyfive years and that it
could be redeemed only after that period and within six months there-
after, failing which the mortgagor would cease to have any claim on
the mortgaged property and the mortgage deed would be deemed to
be a deed of sale in favour of the mortgagee, and it was clearly evident
from the facts and circumstances of the case that the bargain was quite F
fair and as between parties dealing with each other on equaHoofmg. It
was held that the term providing for a period of eightyfive years was
not a clog on the equity of redemption and the mere length of the
period could not by itself lead to an inference that the bargain was in
any way oppresive or unreasonable. The term was enforceable in law
and the suit for redemption filed before the expiry of the. period was G
premature. It was further held that the term that on the failure of the
mortgagor to redeem within the specified period of six months, he
would lose his right to do so and the mortgage deed was to be deemed
to. be a deed of sale in favour of the mortgagee, was c!~rly a clog on
the equity of redemption and as such invalid but its invalidity could not
in any way affect the validity of the other term as to the period of the H'
844 SUPREME COURT REPORTS I1988] Supp. 3 S.C.R.
A mortgage, that stood apart. It was explained by Sarkar, J. as the
learned Chief Justice then was, that the rule against clogs on the equity
of redemption is that, a mortgage shall always be redeemable and a
mortgagor's right to redeem shall neither be taken away nor be limited
by any contract between the parties. This principle was clearly
established by the observations of Lindley M.R. in Santley v. Wilde,
(1899] 2 Ch. 474, where the Master of Rolls observed as follows:
"The principle is this: a mortgage is a conveyance of land
or an assignment of chattles as a security for the payment of
a debt or the discharge of some other obligation for which
it is given. This is the idea of a mortgage: and the security is
redeemable on the payment or discharge oLsuch debt or
c obligation, any provision to the contrary notwithstanding.
That, in my opinion, is the law. Any provision inserted to
prevent redemption on payment or performance of the
debt or obligation for which the security was given is what
is meant by a clog or fetter on the equity of redemption and
J) is therefore void. It follows from this, that "once a mort-
gage always a mortgage". ·
The right of redemption, therefore, cannot be taken away. The
Courts will ignore any contract the effect of which is to deprive the
mortgagor of his right to redeem the mortgage. It was further
E reiterated at page 515 of the report in Seth Ganga Dhar's case (supra)
that the rule against clogs on the equity of redemption no doubt
involves that the Courts have the power to relieve a party from his
bargain. If he has agreed to forfeit wholly his right to redeem in
certain circumstances, that agreement will be avoided. But the Courts
have gone beyond this. They have also relieved mortgagors from
F bargains whereby the right to redeem has not been taken away but
restricted. It is a power evolved by the early English Courts of Equity
for a special reason. All through the ages the reason has remained
constant and the Court's power is, therefore; limited by that reason.
The extent of this power has, therefore; to be ascertained by having
regard to.its origin. It is better to refer to the observations of Northing-
0 ton L.C. in Vermon v. Bethell, 28 E.R. 838 and 839. Lord Chancellor
observed therein as follows:
"This court, as a court of conscience, is very jealous of
persons taking securities for a loan, and converting such
securities into purchases. And therefore I take it to be an
H established rule, that a mortga!lee can never provide at the
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.J 845
time of making the laon for any event or condition on
A
which the equity of redemption shall be discharged, and
the conveyance absolute. And there is great reason and
justice in this rule, for necessitous men are not, truly speak-
ing, free men, but , to answer a present exigency, will
submit to any terms that the craft may impose upon them."
B
The same view was reiterated by Viscount Haldane L.C. in
G. and C. Kreglinger v. New Patagonia Meat and Cold Storage Com-
pany Ltd., (1914) Appeal Cases 25, where it was observed at pages 35
and 36 of the report as follows:
"This jurisdiction was merely a special application of a
more general power to relieve against penalties and to
mould them into mere securities. The case of the common
law mortgage of land was indeed a gross one. The land was
conveyed to the creditor upon the condition that if the
money he had advanced to the feoffor was repaid on a date
and at a place named, the fee simple would revest in the D
latter, but that if the condition was not strictly and literally
fulfilled he should lose the land for ever. What !Dade the
hardship on the debtor a glaring one was that ,the debt still
remained unpaid and could be recovered from the feeoffor
notwithstanding that he had actually forfeited the land to
the mortgagee. Equity, therefore, at an early date began to E
relieve against what was virtually a penalty by compelling
the creditor to use his legal title as a mere security.
My Lords, this was the origin of the juiisdiction
which we are now considering, and it is important to bear
that origin in mind. For the end to accomplish which the F
jurisdiction has been evolved ought to govern and limit its
exercise by equity judges. That end has always been to
ascertain, by parol evidence if need be, the real nature and
substance of the transaction, and if it turned out to be in
truth one of mortgage simply, to pipe~ it on that footing. It
was, in ordinary cases, only where there was conduct which G
the Court of Chancery regarded as unconscientious that it
interfered with freedom of contract. The lending of money,
on morgage or otherwise, was looked on with suspicion,
and the court was on the alert to discover want of con-
science in the terms imposed by lenders."
H
846 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
A The reason justifying the Court's power to relieve a mortgagor
from the effects of his bargain is its want of conscience. Putting it in
more familiar language the Court's jurisdiction to relieve a mortgagor
froin his bargain depends on whether it was obtained by iaking
advantage of any difficulty or embarrassment that he might have been
in when he borrowed the moneys on the mortgage .. Length of the term,
B according to Sarkar, J. in the aforesaid decision, was not by itself
oppressive and could not operate as a clog on the equity of redemp-
tion. There was a term in the mortgage deed that the mortg'\gees could
spend a11y amount on repairs and those e"xpen,ses ·wpulil be paid,
' according to the account produced by the mortgagees. All th~t j\
meant was that in claiming moneys on account of repairs a\ld cpnst111c-
C tip!\ the mortgagees had to show from their '\!=£0Unts t!il!t th~Y, Ji~d
spent the .. ·' moneys. This Court on that basis helcl that the cla'lse ~hich
provid\ld that the mortgage had tp be redeemed within the specified
period of six months was bad. The principle, however; is thai it was not
an. J.nconscionable bargain and it did not in effect dep~ive the mort-
D gagor of his right to redeem the mortgage or so to curt~il hjs right to
redeem that it has become illusory and non-existent, then there was no
clog on equity of redemption. It has to be borne in '1!ind that the
):lnglish authorities relied upon by Sarkar, J. anp the prln~ipie~ pro-
pounded by this Court in the case of Seth Ganga Dha~'s, cas.e (supra) 0
were in the background of a sedate and fixed state of affairs." The spiral
and escalation of prices of the immovable prop~itj~~ ~as. not then
E there. Today, perhaps, a different conspeCtJ!S would b~ require~ tp
consider ,the right to redeem the property after considerable length of
tim.e pegging the price to a small amount of money, the value of which
is fast ciianging. · · .'
/ The rights and liabilities of the mortgagor are controlled by the
F provisions of section 60 of the Transfer of Property Act, 1882. The
clog on redemption has been noted in Mulla's Transfer of Property
a
Act, 7th Edition, page 401 that a mortgage being security for the
debt, the right of redemption continues although the mortgagor fails to
pay the debt at due date. Any provision inserted to prevent, evade or
hamper redemption is void .. That is implied in the maxim "on.ce a
(j mortgage always a mortgage". Collins, M.R. in Jarrah Timber &
Wood Paving Corporation v. Samuel, [1903] 2 Ch. 1 at page 7 observed
that it is the right of a mortgagor on redemption, by reason ot' the very
nature of a mortgage to get back the subject of the mortgage ·and to
hold and enjoy as he was entitled. to hold and enjoy it before the
M mortgage.·
POMAL KAM "· V.K. PUROHIT [MUKHARJI, J.] 847
The doctrine "clog on the equity of redemption" is a rule of A
justice, equity and good conscience. It must be adopted in each case to
the reality of the situation and the individuality of the transaction. We
' must take note of the time, the condition, the price spiral, the term
bargain and the other obligations in the background of the financial
conditions of the parties. Therefore, in our opinion, in view of the
evidence it is not possible to hold tha~ there was no clog on the equity B
of redemption in these cases.
A vei.;y large number of decisions have been cited at the Bar. Shri ·
T.U. Mehta, Shri Rajinder Sachar, Shri B.K. Mehta and Shri
Dholakia very ably and painstakingly argued this case in respect of
their cotentions.
c
Our attention was drawn to the observations of the Allahabad
High Court in Chhedi Lal v. Babu Nandan, A.LR. 1944 Allahabad
204 where it was held that the provision inserted to prevent redemp-
tion on payment or performance of the debt or obligation for which
security was given, was a clog on equity of redemption. Condition in D
mortgage was in that case that if mortgagee constructed new building
by demolition of mortgaged property which was kachcha structure,
mortgagor would pay cost of construction at the time of redemption.
Stipulation in circumstances of the case, it was held, did not amount to
clog on equity of redl)'11ption. It was argued before us by the mort-
gagees that the provision for the payment towards cost and expenses of E
repairs and construction did not amount to a clog on the equity of
redemption because the repairs and construction were to be
effectuated to keep the property in good condition. In the aforesaid
decision Verma, J. at page 207 of the report observed that in the case
before the Court it was not pleaded that any pressure and undue
influence had been exercised upon the mortgagors. Verma, J. referred F
to the observations of the Viscount Haldane L.C. in G. & C.
Kreglinger v. New Patagonia Meat and Cold Storage Co., (supra) and
Lindley M.R. in Santley v. Wilde, (supra). Sir Tej Bahadur Sapru
argued before Verma, J. that it is not his contention that the mort-
gagee in. this case tried to gain a collateral advantage. His argument
was that a onerous term has been incorporated in the deed which G
placed such a burden on the mortgagor as to make it impossible for
him to redeem. Th.ere is a freedom of contract between the mortgagor
and the mortgagee as observed by Verma, J. at page 207 of the report.
We must, however, observe that we live ma cnanged time. Freedom of
contn1ct is permissible provided it does not lead to taking_ advantage
of the oppressed or c!epressed people. The law must transform itself to
848 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
A the .social awareness. Poverty should not be unduly permitted to
curtail one's right to borrow money on the ground of justice, equity
and good conscience on just terms. If it does, it is bad. Whether it does
or does not, must, however, depend upon the facts and the circum-
stances of each case.
B Reference was also be made to _the case of Bhika and Anr. v.
Sheikh Amir and Ors., A.LR. 1923 Nagpur 60 where there was no
provision under which power was given to the executant of the Deed to
pay off the amount which was the consideration for the Deed, and no
accounts were to be rendered or required. It was held that relief
against an agreement forming a clog on-the equity of redemption can
C only be obtained if it was challenged within a reasonable time. It was
an equitable relief which cannot be granted as a matter of course, In
that decision Sri Vivian Bose, as the learned counsel appearing for the
appellant unsuccessfully sought to obtain relief against an agreement
containing aclog on the equity ofredemption.
D Whether in the facts and the circumstances of these cases, the
mortgage transaction amounted to-clog on the equity of redemption, is
a.·mixed question of law and fact. Courts do notfook with favour at any
clause or stipulation which clogs equity of redemption. A clog on the
equity o_f redemption is unjust and unequitable. The principles of
English law, as we have noticed from t_he decisions referred to
E hereinbefore which have been accepted by this Court in this country,
looks with disfavour a\ clogs on the equity of redemption. Section 60
of the Transfer of Property Act, in India, also recognises the same
position.
It is a right of the mortgagor on redemption, by reason of the
F very nature of the mortgage, to get back the subject of the mortgage
and to hold and en joy as he was entitled to hold and en joy it before the
mortgage. If he is prevented from doing so or is prevented from
redeeming the mortgage, such prevention is bad in law. If he is so
prevented, the equity of redemption is affected by that whether aptly
or not, and it has always been termed as a clog. Such a clog _is ine<iuit-
0 able. The l•w does not countenance it. Bearing the aforesaid' l?ack-
ground in mind, each case has to be judged and decided in its own
perspective. As has been observed by this Court that long-term for
redemption by itself, is not a clog on equity of redemption. Whether or
not in a particular transaction there is clog on the equity of redemp-
tion, depends primarily upon the period of redemption, the circum-
}( _ stances under which the mortgage was cre;itc:d, the economic and
-· POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.) 849
financial position of the mortgagor, and his relationship vis-a-vis him
and the mortgagee, the economic and social conditions in a particular
A
country at a particular point of time, custom, if any, prevalent in the
community or the society in which the transaction takes place, and the
totality of the circumstances under which a mortgage .is created,
namely, circumstances of the parties, the time, the situation, the
clauses for redemption either for payment of interest or any other B
sum, the obligations of the mortgagee to construct or repair or main-
tain the mortgaged property in cases of usufructuary mortgage to man-
age as a matter of prudent management, these factors must be
co-related to each other and viewed in a comprehensive conspectus in
the background of the facts and the circumstances of each case, to
determine whether these are clogs on equity of redemptfon.
c
these principles have been recognised by this Court in Ganga
Dhar v. Shankar Lal (supra). It has also to b"e borne in mind that
• long-term for redemption in respect of immovable properties was pre-
valent at a time when things and the Society were, more or less, in a
static condition. We live in changing circumstances. Mortgage is a D
security of loan. It is an axiomatic principle of life and law that neces-
sitous men are not free men. A mortgage is essentially and basically a
conveyance in law or an assignment of chattels as a security for the
payment of debt or for discharge of some other obligation for which it
is given. The security must, therefore, be redeemable on the payment
or discharge of such debt of obligation. Any provision to the contrary, B
1totwithstanding, is a clog or fetter on the equity of redemption and,
hence, bad and void. "Once a mortgage must always remain a mort-
gage'\ and must not be transformed into a conveyance or deprivation
of the right over the property.
This is the English law based on principles of equity. This is the F
Indian law based on justice, equity and good conscience. We reiterate
that position. Though, long-term by itself as the period for redemp-
tion, is not necessarily a clog on equity but in the changing cir·
cumstances of inflation and phenomenal increase in the prices of real
estates, in this age of population-explosion and consciousness and
need for habitat, long-term, very long-term, taken with other relevant G
factors, would create a presumption that it is a clog on equity of
redemption. If that is the position then keeping in view the financial
and economic conditions of the mortgagor, the clause obliging the
payment of interest even in case of usufructuary mortgage not periodi-
cally but at the time of ultimate redemption imposing a burden on the
mortgagor to redeem.• the clauses permitting construction and recon- H
850 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R. ;.
struction of the building in this inflationary age and debiting the mort-
A
gagor with an obligation to pay for the same as an obligation for ;.
redemption, would amount to clog on equity.
Section 60 of the Transfer of Property Act, 1882, conferred on ..
the mortgagor the right of redemption. This is a statutory right. The
B right of redemption is an incident of a subsisting mortgage and it
subsists _so long as the mortgage subsists. See the observations in
R. Ghose "Law of Mortgage" 6th Edn. page 227.
Whether in a particular case there is any clog on the equity of
redemption, has to be decided in view of its background of the particu-
lar case. The doctrine of clog on equity of redemption has to be
c moulded in the modern conditions. See Mulla: 'Transfer of Property
Act', 17th Edn. 402. Law does not favour any clog on equity of
redemption.
It is a settled law in England and in India that a mortgage cannot
D be made altogether irredeemable or redemption made illusory. The
law must respond and be responsive to the felt and discernible
compulsions of circumstances that would be equitable, fair and just,
and unless there is anything to the contrary in the Statute, Court must
take cognisance of that fact and act accordingly. In the context of fast
changing circumstances and economic stability, long-term for redemp- "
E tion _makes a mortgage an illusory mortgage, though not decisive. It
should prima facie be an indication as to how clogs on equity of
redemption should be judged.
In the facts and the circumstances and in view of the long period
for redemption, the provision for interest (1/2% per annum payable on
F the principal amount at the end of the long period, the clause regard-
ing the repairs etc., and the mortgagor's financial condition, all these
suggest that there was clog on equity. The submissions' made by
Mr. Sachar and M;r. Mehta are, therefore, unacceptable.
In that view of the matter, we are of the opinion that the decision
O of the High Court as well as the Courts below that there existed clog on
the equity of redemption in case of these mortgages, is correct and
proper' and we hold so accordingly.
Before we dispose of the contentions on the second aspect, we
must deal with some of the decisions of the Gujarat High_ Court to
H Which reference had been made and some of_ which also referred
POMAL KANJI v. V.K. PUROHIT [MUKHA:RJI, J.] 851
before us. We have noticed the decision of the Gujarat High Court in A
Khatubai Nathu Sumra v. Rajgo Mulji Nanji and others, (supra). In
Magan/al Chhotalal Chhatrapati and Ors. v. Bhal_chandra Chhaganlal
Shah, lS Gujarat Law Reporter 193. P.O. Desai, J. as th" leaf!ied Chief
Justice then was, held that the doctrine of clog on the equity of
redemption means that no contract between a mortgagor and mort-
gagee made at the time of the mortgage and as a part of the mortgage B
transaction or, in other words, as a part of the loan, would be valid if it
in ~ubstimce anc! effect prevents the mortgagor from getting back his
property on paym,ent ofwhat is due on his security. Any such bargain
which has that effect is invalid. The learned Judge reiterated that
whether in a particular case long term amounted to a clog on the equity
of redemption had to be decided on the evidence on record which c
brings out the attending circumstances or might arise by necessary
implication on a combined reading of all the terms of the mortgage.
The learned Judge found that this long term of lease along with the
cost of repairing or reconstruction to be paid at the time of redemption
py the mortgagor indicated that there was clog on equity of redemp-
tion. The learned Judge referred to certain observations of Mr. Justice D
Macklin of the Bombay High Court where Justice Macklin had
observed ~hat anything which does have the appearance of clogg_ing
redemption must be examined critically, and that if the conditions in
the mortgage taken as a whole and added together do create unneces-
sary diffi~ulties in the way of redemption it seems that is a greater or
less clog upon the equity of redemption within the ordinary meaning of E
the term. In our opinion, such -observaJions will apply with greater
force in the present inflationary market. The other.decision to which
reference may be made is the decision of the Gujarat High Court in
Soni Jl!otiben v. 11!/s. Hiralal Lakhamshi, 22 Gujarat Law Reporter
473. This also reiterates the same principle. In Vadilal Chhaganlal Soni
and Others v. Gokaldas Mansukh and Others, A.LR. 1953 Bombay 408 F
also, !he same principle was reiterated. In that case, it was hela by
Gajendragac!kar J":, as the \earned Cl]i~f ~ustice then was, that the
agreement bety;een the 111ortgagor an\! 11\ortgagee V'as that \he mort-
gagor· was to redeem the mortgage 99 years after its execution and tl]e
mortgagee was given full authority to build any structure on the plot
mortgaged after spending aµy amount he liked. It was held that thetwo G
terms of the mortgage wer~ so uqreasonable and oppressive that these
amounted to clog on the eql.\ity of redempjion. S4'1jlar was the posi-
tion in the case of Sarjug Mahto and others v. Smt. Devrup Devi and
Others, A. I. R. 196~ Patna 114, where also the mortgage was for 99
·years. In Chhedi _Lal v. Babu Nandan's case (sup!a), the cou~t reite-
rated that freedol!'._o_f contract unless it !s vitiated_ by undue influen_ce H
852 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
~
A or pressute of poverty should be giver. a free play. In the inflationary
world, long term for redemption would prima facie raise a presump-
tion of clog on the equity of redemption. See also the observations in
Rashbehary Ghose' 'Law of Mortgage' 6th Edn. pages 227 and 228.
Bearing the aforesaid principles in mind we must anal}'se the
B facts involved in these appeals. It has been noticed in S.L.P. (Civil)
No. 8219 of 1982 that the High Court of Gujarat by its order impugned
had dismissed the second appeal. The High Court had merely
observed in dismissing the second appeal that the First Appellate
Court had followed the decision of the Gujarat High Court in
Khatubai Nathu Sumra v. Rajgo Mulji Nanji and Others, (suprl!). We
have noted the salient features of the said decision. The High Court,
C therefore, found no ground to interfere with the decision of the First
Appellate Court and accordingly dismissed the second appeal. The
First Appellate Court by its judgment disposed of Civil Regular
Appeal No. 149 of 1978 and another civil appeal which was the appeal
by the tenant was also disposed of by the said judgment. The learned
D Judge of the Appellate Court had referred to the ratio of the decision
in Gangadhar v. Shanker/al (supra). The learned Judge bearing in
mind the principle of the aforesaid decision and the relevant Clause of
Ext. 103 came· to the conclusion that the clauses amounted to clog on
the equity of redemption in the facts of this case. Shri Sachhar tried to
urge before us that 'on the evidence and the facts in this case having
E regard to the position of the parties, the transaction did not amount to
clog· on the equiiy ·of redemption. It was emphasised by the First
Appellate Court that the fact that the son of the mortgagor subse-
quently became Civil Judge would not affect the position because what_
was reievant was the financial condition at the time of the transaction.
We have further to bear in mind that it has come out in the evidence
F that the father of the plaintiff was residing in the suit property at the
relevant time and there was no other residential house except the suit
property. The First Appellate Court, therefore, emphasised in our
opinion rightly that if there was no pressure from the creditor•. no body
would like to ·mortg~ge the only house which is sole abode on the
earth.
G
In that view of the matter and in view of the position in law, we
are of the opinion that the First Appellate Court was right in the view
it took. ·
The First Appellate Court referred to the decision of Kunjbihari-
H lalv. Pandit Prag Narayan,_AIR 1922 Oudh 283. In that case there was
POMAL KANJI v. V.K. PUROHIT (MUKHARJI, J.] 853
-
a condition that the mortgagor should pay interest along with the A
principal amount at the time of redemption after 50 years. It was held
that the intention was to see that right of redemption could never be
exercised. If the condition was such which would result in making
redemption rather difficult, if not impossible, it would be a clog on the
equiiy of redemption and could not be enforced. Similar was the posi-
tion of the Allahabad High Court in Rajai Singh v. Randhir Singh, B
A..I.R. 1925 Allahabad 643. There the term fixed for redemption was
of 96 years and there was a stipulation for payment of interest along-
with principal not periodically but only at the time of redemption. In
the instant case before us the mortgagor was required to pay the whole
amount of interest at the end of 99 years which will practically make
the redemption impossible. Applying the well-settled principles which C
will be applicable to the facts of this case in determining whether there
was in fact a clog on the equity of redemption, we are of the opinion
what the First Appellate Court was right in holding that there w!S a
clog on equity of redemption-.
On the second aspect of the question whether the right of the D
tenants of the mortgagees are ~otected after the redemption of mort-
gage, reliance was placed by the First Appellate Court on the decision
of the Full Bench of the Gujarat High Court in Lalji Purshottam v.
Thacker Madhavji Meghaji, (supra). There urban immovable property
was mortgaged with possession, mortgagee creating lease during the
subsistence of the mortgage. The question was whether after redemp- E
ti on of mortgage such lease is binding on che mortgagor. It was held
that Section 76(a) of the Transfer of Property Act would not apply to
such cases. There must be express words showing an intention if
tenancy was to be created beyond the term of the mortgage. Mere
reference that mortgagee is entitled to lease property does not create a
binding tenancy on the mortgagor. After the redemption of the mort- F
gage the relationsnip of landlord and tenant does not exist. Such
tenant, therefore, does not get any protection under section 12 of the
Bombay Rent Control Act, it was held. The Gujarat High Court had
referred to several decisions of this Court. In Mahabir Gope v.
Harbans Narain Singh, [1952] SCR 775 which was a decision dealing
with a lease created by a mortgagee with possession under the Bihar G
Tenancy Act, this Court reiterated that the general rule is that a
person cannot by transfer or otherwise confe_r a better title on
another than he himself has. A mortgagee cannot, therefore, create an
interest in the mortgaged property which will enure beyond the ter-·
mination of his interest as mortgagee. Further the mortgagee, who
takes possession of th~ Illortgaged property, must manage it is.per~n ' H
854 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.
A of ordiniliy prudence wouid manage if it were his own; and he must not
commit any act which is destructive or pennanently. injurious to the
property. Reliance may be placed for this purpose on section 76,
clauses (a) and (e) of the Transfer of Property Act, 1882. It was held
that the provisions of sections 20 and 21 of the Bihar Tenancy Act, did
not apply to the lessees since they were not 'settled raiyats' and the
B lessees could not claim to have secured under the statute occupancy
rights in the land. It was further held that the mortgagor was entitled
to the possession of the land upon redemption of the mortgage. In a
slightly different context in Harihar Prasad Singh v. Must. of Munshi
Nath Prasad, [1956] S.C.R. 1 this Court was concerned with a mort·
gage with possession effected on agricultural land. This Court had to
C consider in that decision whether under the provisions of the Bihar
Tenancy Act the tenant inducted on the mortgaged property during
the pendency of the mortgage could claim right to remain in possession
after the redemption. Venkatarama Ayyer, J., speaking for the Court
pointed out that if the tenant could not resist the suit for ejectment
either by reason of section 76(a) of the Transfer of Property Act or
D section 21 of the Bihar Tenancy Act, the tenant could not get such a
ri3ht as a result of the interaction of both those sections. This Court
ultimately held that the tenants inducted by the mortgagee with pos-
session had failed to establish that they had any right of occupancy
over the suit lands and that the plaintiffs were entitled to a decree in
ejectment; with future mesne profits as claimed in the plaint. Thus a
E right claimable under section 76(a) of the Transfer of Property Act
because.of a lease created in the course of prudent management of the
property was put on a different footing altogether from a right created
by a special statute.
Similarly, 'in Asa Ram v. Mst. Ram Kali, [1958] SCR 986, the
F question before this Court was again of mortgage of agricultural land
when the mortgage was with possession and of the tenant inducted by
the mortgagee with possession. In Dahya Lal v. Rasul Mohammed
Abdul Rahim, [1963] 3 SCR 1, this Court was concerned with the case
of a tenant inducted on agricultural land by a mortgagee in possession.
There under the Bombay Tenancy and Agricultural Lands Act, 1948, a
G tenant lawfully inducted by the mortgagee on the land would on
redemption of the mortgage be deemed to be a tenant of the owner
mortgagor under section 4 of the Bombay Tenancy and Agricultural
Act. This court held that all persons other than those mentioned in
clauses (a), (b) and (c) of section 4 of the Bombay Tenancy and
Agricultural Lands Act, 1948, who lawfully cultivated land belonging
H to other persons whether or not their authority was derived directly
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.] 855
from the owner of the land must be deemed tenants of the lands under
A
section 4 of the said Act. So, therefore, the Bombay Tenancy Act
required at the relevant time the lawful cultivation by tenant. This
Court had also considered this question in Prabhu v. Ramdev, 11966] 3
S.C.R. 676. There the same problem again arose in connection with a
person inducted into agricultural land as a tenant by an usufructuary
mortgagee and the question was whether the rights of such a tenant B
were protected by the provisions of the Rajasthan Tenancy Act, 1955.
In view of the special status, the tenant in question was held to be
entitled to the protection. It must be noted as observed by the Full
Bench of the Gujarat High Court that all the cases that we have so far
considered are cases of agricultural lands and in each of these cases the
question was examined from two points; first, whether the lease could
be said to be a lease granted in the course of prudent management and, c
in the alternative, whether the rights of the tenant inducted by the
mortgagee with possession had been enlarged as a result of a special
statute dealing with the rights of tenants of agricultural lands.
This question, however, has been agitated before this Court in D
the background of the non-agricultural lands especially in urban areas.
In All India Film Corporation v. Raja Gyan Nath, [1969] 3 SCC 79, the
question was in respect of lease of a cinema house granted by the
mortgagee with possession. Hidyatullah, C.J. delivering the judgment
of the Court. observed in paragraph 7 that a general proposition of law
is that no person can confer on another a better title than he himself E
has. A mongagee is a transfer of an interest in specific immovable
property for the purpose of securing repayment of a loan. A mon-
gagee's interest lasts only as long as the mortgage has not been paid
off. It was further observed by the learned Chief Justice that on
redemption of the mortgage the title of the mortgagee comes to an
end. It was ·held that section lll(c) of the Transfer of Property Act F
provides that a lease of immovable property determines 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. The duration of the mortgagee's interest
determines his position as the lessor. But there is one exception. That
flows from section 76(a) which lays down liabilities of a mortgagee in G
possession. It is provided there that when during the continuance of
the mortgage, the mortgagee takes possession of the mortgaged pro-
perty, he must manage the property as a· person of ordinary-prudence
would manage it if it were his own. It was observed that this principle
applied ordinarily ro the management of agricultural lands and has
seldom been extended to urban property so as to tie it up in the hands H
856 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
of lessees or to confer on them rights under special statutes. It was
A emphasised by the Chief Justice thatlease would continue to bind the
mortgagor or persons deriving interest from him if the mortgagor had
concurred to grant it. Ultimately, this Court in that case held that on
the termination of the mortgage in the even.ts that had happened in •
that particular case, that since there was no landlord and no tenant,. the
B provisions of the Rent Restriction Act could not apply beyond the date
of the termination of the mortgagee's interest. Similar, is the view in
the case of Sacha/ma/ Parasram v. Ratnabai, [1973) 3 S.C.C. 198.
There, the question was whether the tenant was protected under the
Madhya Pradesh Accommodation Control Act, 1961. The Court did
not accept the rights of the tenant in possession.
c The question whether the tenant from usufructuary mortgagee of
building was entitled to protection on redemption of mortgage, was
considered by the Full Bench of the Madras High Court in S. V.
Venkatarama Reddiar v. Abdul Ghani Rowther & Ors., A.LR. 1980
Mad. 276; There Justice Natarajan, as the learned Judge then was, of
D the Madras High Court delivering the judgment of the Full Bench of
the said Court held that if a tenancy was created by a mortgagee with ·
possession, the ties of landlord and tenant were snapped eo instanti the
mortgage is redeemed and, unless there is a fresh forging of the rela"
tionship of landlord and tenant between the mortgagor and the erst-
while tenant by (i) the voluntary act of the parties or (ii) a deemed
E forging of the relationship by express provision in the Act itself, the
erstwhile tenant cannot claim protection under the Act so as to
perpetuate his occupation of the building as a tenant. The rule of
exception contained in Section 76(a) of the T.P.-Act cannot be readily
and automatically invoked by a tenant let into possession of urban
property by a mortgagee with possession. The principle of exception
afforded by section 76(a) of that Act applies ordinarily to the manage-
ment of agricultural lands and has seldom been extended tc urban
property so as to tie it up in the hands of lessees or to confer on them
rights under special statutes. It may be open to a tenant inducted upon
urban property by a mortgagee with possession to rely upon Section
76(a) to claim tenancy right for the full term of the tenancy notwith-
G standing the redemption of the mortgage earlier. But, it is for the
person who claims such benefits to strictly establish the binding nature
of the tenancy, created by the mortgagee, on the mortgagor.
Reference may be made to a Full Bench decision of the Rajasthan
High Court in Devkinandan and another etc. v. Roshan Lal and others,
A.LR. 1985 Rajasthan 11 where several relevant authorities have
H been discussed. The question before the Full Bench was whether a
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.J 857.
tenant of a mortgagee in possession is entitled to the protection of the
A
provisions of the Rajasthan Premises (Control of Rent and Eviction)
Act, 1950 against the mortgagor after the redemption of the mortgage.
P .K. Banerjee, C.J. delivering the judgment of the Court after discus-
.,
sing all relevant authorities held that in respect of tenancy of urban
property or premises, the mortgagee in possession has no right to
jeopardise the right of the mortgagor by giving a tenancy which would B
continue even after the redemption of the mortgage. This negates the
submission that as a matter of prudent management the tenants had
been inducted and after induction the tenants ggt their rights enlarged.
In Lalji Purshottam v. Thacker Madhavji Meghaji, (supra), where the
Full Bench of the Gujarat High Court had considered the effect of
continuation of tenancy under the Bombay Rents, Hotel and Lodging
Houses Rates Control Act,_ 1947 which are precisely the cases in the c
facts of the instant appeals, after discussing all the relevant provisions
of the Act including the theory of the prudent management the Full
Bench of the Gujarat High Court observed that Where a lease is
created by the mortgagee in possession of an urban immovable pro-
perty, such a lease would not be binding on the mortgagor after D
redemption of mortgage assuming that the lease is such as a prudent
owner of property would have granted in'usual course .of management.
The Court observed that that was so because section 76(a) could not
apply to a case of urban immovable property and hence a lease created
by the mortgagee in possession of an urban immovable property would
not be binding on the mortgagor after redemption of the mortgage. E
Even apart from section 76(a) of the Transfer of Property Act if the·
words of the mortgage deed clearly and indubitably express an inten-
tion to allow expressly creation of a tenancy beyond the term of the
mortgage, then only the lease created in exercise of the power expre-
ssly conferred by the mortgage deed would be binding on the mort-
gagor. If the words of the mortgage deed do not clearly and indubit- F
ably disclose the intention to allow expressly the creation of a tenancy
beyond the terms of the mortgage, the mere fact that the mortgage
deed authorises the mortgagee with possesion to induct a tenant would
not create a tenancy binding on the mortgagor after ihe redemption of
the mortgage. In such a case a tenant inducted on the property by a
mortgageti with possession when the tenancy of that tenant is not G
binding ori the mortgagor after the redemption of the mortgage, is not
protected itiuier the provisions of the Bombay Rents, Hotel and
Lodging House Rates Control Act, 194(. We are of the opinion that
the aforesaid view expressed by the Chief Justice Diveri on behalf of
the Full Bench represents ihe correct position in law in respect of the
second aspect of the cjlltistion canvassed before us.
858 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.
We have noticed the view of the Full Bench of the Rajasthan
A High Court on this aspect. This question was again envisaged by this
Court in the background of the Rajasthan Premises Act in Om
Prakash Garg v. Ganga Sahai & Ors., [1987) 3 SCC 553 holding that
on passing of the final decree of redemption of the mortgage, the lease
did not subsist and the tenant is not entitled to protection under the
B Rajasthan Premises (Control of Rent & Eviction) Act, 1950. Again
viewing this question in the context of the Bombay Rents, Hotel &
Lodging House Rates Control Act, 1947 in Jadavji Purshottam v.
Dhami Navnitbhai Amaratlal. & Ors., [1987) 4 SCC 223, in which the
judgment was delivered by Natarajan J., and one of us was a party to
that decision, it was held that it was recognised by this Court in a
c number of cases that the question of imprudent management of the
mortgaged property by the mortgagee would not arise where the rights
of the tenant were enlarged by the tenancy legislation enacted after the
tenant was put in possession by the mortgagee. Hence, in that case the
question was whether the tenancy rights of the appellant-tenant, who
was inducted by the mortgagee, came to be enlarged by tenancy legis-
D lation after he was put in possession by the mortgagee. The fact found
in that case was that the tenant-appellant was not inducted into posses-
sion soon after the execution of mortgage deed and the mortgagee was
put in possession of the property but long thereafter. In fact, there was
already a tenant on the mortgage property when the mortgagee was
put in possession. During the period of tenancy of that tenant the
E Saurashtra Act 22 of 1951 came to be enacted and gave protection to
the tenants from paying exorbitant rent and from unreasonable evic-
tion. Despite the enlargement of his tenancy rights by the Act, that
tenant vacated the lease premises in 1956 and thereafter the mortgagee
inducted the appellant in possession. It was held that that was a case where
the Saurashtra Act was already in force when the appellant was
inducted into possession. The tenancy rights of the appellant cannot be
said to have become enlarged after the mortgagee granted him the
lease by subsequent legislation enacted for affording protection to
tenants. The fact that the mortgagee had granted lease only for a
period of one year will not alter the case in any manner as not only had
the mortgagee executed the lease deed after the. expiry of the lease
G period but also because the restriction of the lease period to one year
was of no consequence in view of the provisions contained in the
Saurashtra Act 22 of 195 L The enlargement of the tenancy rights
cannot also be claimed on the basis of the fact that the Bombay Rent
Act had been enacted after the appellant was inducted into the pro-
perty because the Saurashtra Act was already in force when the mort·
H. gagee granted lease to the appellant and it was only from January'64
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J. [ 859
the Bombay Rent act came to replace the Saurashtra Act. In Civil
A
Appeal No. 9993 of 1982, Poma/ Kanjl Govindji & Ors. v. Vrajlal
Karsandas Purohit & Ors., Shri B.K. Mehta took us to the factual
background. The appellants who are tenants in the r.nortgage proper-
ties being defendants Nos. 4 to 9 in the original suit had resisted the
suit for redemption and contended that the plaintiffs were noi entitled
to recover possession from them since their rights are protected under B
the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
and the said Act has applied to the area of Kutch in the Bombay State.
Therefore, no decree for eviction could be passed against them except
in accordance with the provisions of the said Act. The High Court held
that redemption of mortgage was possiole and the suit was maintainable
as mentioned hereinbefore. However, as regards the question of pro-
tection of the tenants under the Bombay Rent Act, Shri Mehta pro-
c
ceeded to submit that the learned Judge did not make anyfinding as to
when the tenants were inducted nor did he express his opinion about
the evidence of respondent No. 5. Shri Mehta further submitted that
the learned Judge did not. make any finding as to when these tenants
were inducted, either before or after the rent restriction Act was made D
applicable .to the area of Kutch. On that basis, following the Full
Bench decision of the Gujarat High Court in Lalji Purshottam v.
Thacker Madhavji Meghaji, (supra), the courts below rejected the
claim of the tenants. Shri Mehta submitted that the High Court has
erred in not following the settled legal position entrenched by a line of
decisions of this Court that the rights of a tenant inducted by a mort- E
gagee with possession would enure beyond the period of redemption
of the mortgage if his rights are enlarged by subsequent tenancy legis-
lations in force in the area in which the property is situated. He drew
our attention to the decision in the case of Mahabair Gape v. Harbans
Narain, (supra). There as mentioned hereinbefore this Court had
found that the provisions of sections 20 and 21 of the Bihar Tenancy F
Act, did not apply to the lessees since they were not 'settled raiyats'.
Shri Mehta also drew our attention to the observations of this Court in
Asa Ram v. Mst. Ram Kali, (supra). He also drew our attention to
Dahya Lal v. Rasul Mahommed, (supra) which we have discussed
hereinbefore. Similar, was the position in Prabha v. Ramdev (supra)
which is also being discussed hereinbefore. Reference was made to the G
decision in All India Film Corporation v. Gyan Nath, (supra), the basis
of which has been explained hereinbefore. The said decision will not
be applicable in respect of the facts and circumstances of the case and
in view of the terms of the tenancy. Our attention was drawn by Shri
Mehta to the observations of this Court in Madan Lal v. Badri Narain
and others, [1987] 3 S.C.C. 460. In that case, it was contended before R
860 . SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
this Court that there was no such rule of geoeral acceptance that a
A lease of urban property by the mortgagee in possession cannot be
regarded to be an act of prudent management within the meaning of
section 76(a) of the Transfer of Property Act which. carves out an
exception to the general rule that a mortgagee in possession cannot
creaie, in the tenant inducted by him, a right to continue in possession
B beyond the period of redemption. Before this Court, in that case, a
referei1ce was made to the Full Bench decision of the Rajasthan High
Court in bevkinandan v. Roshan Lal, (supra). But in view of the facts
that there was no definite finding the question whether the alleged
lease was an act of prudent management on the part of the mortgagee
in possession in terms of section 76(a) was left open and that to be
determined by the learned trial Judge. It has been held-by this Court in
c numerous decisions that in case of immovable properties in urban
areas, unless the leases specifically and categorically make an excep-
tion in favour of the tenant that they would continue in possession
even after the expiry of termination of the leases, .and those leases I-
were acts of prudent management, in no other case, the tenants
D inducted by the mortgagee would be titled to the production under the
Rent Act after the redemption of mortgage.
Ii1. this connection, it will be appropriate here to refer to the
position as mentioned in the Mulla's 'Transfer of Property Act', 7th
Edn. pages 513 and 514, which is as follows:
E
"Whether a mortgagee in possession can by reason of
clause (a) grant a lease of the mortgaged property has been
considered in several decisions of the' Supreme Court. In
Mahabir Gope v. Harbans Narain, (1952 S.C.R. 775, the
Supreme Court observed that the right conferred under
F clause (a) was an exception to the general rule that a
. person cannot confer a better title on another than he pos-
sesses himself. The Court pointed out that it followed that
though a mortgagee may, if it is prudent, grant leases,
these would determine on redemption. The Court re-
cognised, however, that in some cases the granting of a
G lease in the course of prudent management might result in
the tenant acquiring rights under other laws so that he
could not be evicted by the mortgagor, but this was an
exception, and could not apply where the mortgage deed
prohibits such a lease either expressly, or. by necessary
implication. These observations do not appear to have
H beei1 followed in Harihar Prasad Singh v. Deonarayan
~ll ..I
POMAL KANJI v. V.K. PUROHIT [MUKHARJI, J.l 861
Prasad, [19561 S.C.R. 1 where the Supreme Court held that
A
even a lease created· by a mortgagee in possession in the
course of prudent management though binding on the
mortgagors after redemption, could not create the rights of
a raiyat on the tenants. The question was next considered
· in Asa Ram .v. Ram Kali, [1958] S.C.R. 986, where the
Supreme Court held that the creation of a lease which B
would create occupancy rights in favour of the tenants
could not be regarded as a prudent transaction. In Prabhu
v. Ramdev, [1966] 3 S.C.R. 676, however, the Supreme
Court without referring to Asa Ram's case held that a
tenant of a mortgagee can invoke the benefit of subsequent
Tenancy legislation which provided that such a tenant
could not be evicted except in the circumstances set out in c
that legislation. The Court explained Mahabir Gope's case
as being a decision given with reference to the normal rela-
tionship of landlord and tenant, and stressed that the
Supreme Court in that case had contemplated an extra-
ordinary situation arising from a tenant acquiring rights D
under other laws. The Court explained Harihar Prasad
Singh's case as having been decided on the peculiar facts of
the case, viz., that in that case the tenants were not entitled
under the Local law to invoke the protection of that law. In
Film Corporation Ltd. v. Gyun Nath, [1970] 2 S.C.R. 581
the Supreme Court again considered the question. ;fhe E
Court did not refer to either Harihar Prasad Singh's case
(supra) or Prabhu v. Ramdev, (supra). The Court observed
that the principle laid down in Mahabir Gope's case (supra)
that a bona fide and prudent lease would bind the mort-
gagor "ordinary" applies only to agricultural lands and has
"seldom .. been extended to urban property. This observa- F
tion is strictly speaking, obiter, as the Court found that the
lease in question was neither bona fide nor pruden\ in view
of the long term and the low rent. It is respectfl!lly submit-
ted that there is no warrant for limiting sec. 76(a) to
agricultural land. W]}eti)er a particular lease is bona fide or
prudent is a question of fact; obviously a lease of urban G
land which would confer ·on the lessor the protection of
special statutes such as the Rent Acts would prima facie be
imprudent. In Sacha/ma! Parasram v. Ratanbai, [1973] 3
S.C'.C. 198, however, the Supreme Court has rep\!ated the
obi(er observation in the Film Corporation case (supra)
that except in the cas.e of agricultural land acts of a mort- H
gagee would l!Ot bind the mortg!lgor,
862 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
It is respectfully submitted that the position could be
more satisfactorily stated with reference to the language of
clause (a). The right conferred by that clause is to manage
the property during the subsistence of the mortgage. It is
unlikely that a prudent manager would create a lease for a
period longer than the mortgage, or in circumstances which
B would give the lessee rights after the redemption of the
mortgage. Such leases would prima jacie be imprudent, and
not binding on the mortgagor as beyond tbe powers confer-
red by clause (a). If, however, it can be shown in any given
case that such a lease was prudent, it would bind that mort-
gagor, even after redemption, and even though the Jessee
acquires thereunder rights of a permanent or quasi-per-
manent nature. No question of imprudence can arise
where, as in Prabhu v. Ramdev, [1966] 3 S;C.R. 676 the
rights of the tenant were enlarged by Tenancy legislation
enacted after the tenant was put in possession by the mort-
gage. It is submitted that this statement of the law is consis-
tent with .all the Supreme Court decisions-quoted above."
We are of the opinion that the rationale of the various decisions
of this Court have been explained by Chief Justice Diven in the Full
~-
Bench decision of the Gujarat High Court in Lalji Purshottam v.
Madhavji Meghaji, (supra) which is the correct enunciation of law.
E The learned Chief Justice observed at pages 514 and 515 of the report
as follows:
"In our opinion, on the general aspect of the matter based
on facts on which judicial notice can be taken, it is clear
that so far as leases· of agricultural lands are concerned,
F when a Jessee cultivates land by the very process of cultiva-
tion ne brings inputs and improves the fertility of the soil.
Constant and continuous cultivation by proper manuring
·etc. would improve the fertility of the soil and on the
determination of the lease, that fertility would still remain
in the land. It is, therefore, necessary that security of
G tenure should be given to the tenant of agricultural land so
that by his proper husbandry and agricultural practices, he
himself may derive good benefits from the land and also
improve the fertility of the soil. It is because cif this aspect
that in all countries legislation has been enacted to protect
the actual tiller of the soil, fixity of tenure has been given
H and all the different measures of tenancy legislation regard-
' ~·
POMAL KANJI v. V.K. PUROHIT [MUKHARJI; J.l 863
ing agricultural lands have provided for sufficiently long A
leases and protection of his tenure so as to induce the
agriculturist to put in his best efforts and best inputs as they
are called now-a-days, during the term of the lease. A
prudent owner of property would, therefore, see to it that
the term of lease which he grants in respect of agricultural
land is sufficiently long to induce the tenant to put in the B
best efforts which would incidentally benefit the owner of
the land by improving the fertility of the land itself. In
contrast, to the-agricultural lands, so far as non-agricultural
and urban lands are concerned, on determination of the
lease the tenant who has been on the property under the
terms of the lease is bound to put back the property in the C
condition in which it was at the time when he entered into
possession and nothing is normally done by the tenant
which is likely to improve the quality of the soil property by
his own efforts put in during the terms of the tenancy.
There is, therefore, no question of a prudent owner of
urban immovable property granting a Jong term lease D
merely with a view to improve the quality of the land.
Barring Rent Control and Rent Restriction Acts which deal
with urban immovable property, in areas where there is
scarcity of accommodation both for residential and non-
residential purposes, there is no concept of protection to
tenants of urban immovable property. We are of opinion E
that this is the rationale behind the distinction which the
Supreme Court has pointed out between leases of agri-
cultural lands and leases of urban immovable property
while dealing with the provisions of sec. 76(a) of the Trans-
fer of Property Act, whereas a prudent owner would not
ordinarily speaking think of creating a long term lease F
purely as a matter of prudent management, an owner of
agricultural land in the course of prudent management
would create a long term lease purely from the aspect of
prudent management. In our opinion, therefore, the word
"seldom" used by Hidayatullah C.J. in All India Film
Corporation's case (supra) while dealing with the applica- G
lion of the exception carved out by sec. 76(a) to urban
immovable property has to be read as not being extended
at all and it is merely a term of the phrase to say that this
exception has seldom been extended to urban immovable
property."
H
864 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.
We have noted hereinbefore the ratio and the basis of the deci-
A sion of this Court in Jadavji Purshottam v. Dhami Navnitbhai Amarat-
lal (supra). Shri Mehta submit.ed that there was no clear finding as to
when the tenants were inducted whether before or after the Rent
Restriction Act and therefore, he pleaded that the matter should be
referred to the larger Bench. In. view of the facts found in this case
B which were similar to the facts mentioned in Jadavji Purshottam's case,
(supra) there is no specific authority in the lease which stated that the
lease wmlid continue beyond the period of mortgage. There is no
extended authority as contemplated in -Jadavji Purshottam's case
found in this case. The submission was. that the matter should be
considered by a larger Bench in the light of the Jadavji Purshottam's
case (supra). We are unable to accept the said submission. In this case
c the words in the mortgage deed, as we are taken through, did not
clearly allow creation of tenancy beyond the period of mortgage. That,
in any event, would not have been prudent management, hence, there
is no finding that the mortgage deed permitted, either expressly or
impliedly, creation of tenancy beyond the period. We think that the
D tenants were not entitled to protection after redemption of mortgage.
Furthermore, in all these cases the authority of the mortgagees to lease
out the property, expressed or implied, was circumscribed by a stipula-
tion that the mortgagee should re-deliver the possession of the pro-
perty when the mortgage was redeemed. In that context, we are of the
opinion that the submissions on behalf of the tenants cannot be
E entertained.
As mentioned hereinbefore, Sh. B.K. Mehta, especially in the
background of the facts in C.A. No. 9993/83, has made certain submis-
sions relying on the observations of this Court in Jadavji Purshottam's
case (supra). That decision requires recapitulation of the basic princi-
F ple. That decision reiterated that the tenant-appellant therein was not
inducted into possession soon after the mortgage deed was executed
and the mortgagee was put into possession of the property but long
thereafter. It is not necessary to detain us on the facts of this case. The
basis of that decision was: whether the Saurashtra Act was already in
force. The appellant therein was inducted into possession and his
G tenancy rights could not have become enlarged after the mortgagee
granted him the lease by a subsequent legislation enacted for affording
protection to tenants. In this case, relying on the said decision, it may
be reiterated that the tenancy right was not created by a mortgagee in
possession, wherein the mortgagor had not concurred in the grant of a
lease beyonq the period of mortgage. The question in that decision was
wiJ.ether the lease grantee! to the tenant by the appellant had the
POMAL KANJI v. V.K. PUROHIT (MUKHARJI, J.] 865
approval or concurrence of the mort.g_agor so as to entitle the tenant to
A
claim tenancy right even against the mungagor after redemption of the
mortgage. In all these cases the major term in the mortgage deed was
that the possession would be delivered on redemption. In none of
these cases was there any term, at least none was adverted to, which
stipulated any condition in the mortgage deed which entitled the mort-
gagees to create tenancy beyond the period of the mortgage. This B
factor along with the condition in the mortgage deed postulating the
obligation to deliver possession at the expiry of the term of mortgage
to the mortgagors, in our opinion, are the decisive factors showing that
the tenants did not get their rights enlarged on the coming into force of
the subsequent Rent Legislation. The very Preamble to the Bombay
Rents, Hotel and Lodging House Rates Control Act, 1947 indicates
that it was "An Act to amend and consolidate the law relating to the
c
control of rents and repairs of certain premises, of rates of hotels and
lodging houses and of evictions (and also to control the charges for
licence of premises etc.)". It was thought expedient to amend and
consolidate the law relating to the control of rents and repairs of
certain prem;~es. But that, in our opinion, has indeed never been D
construed as enlarging the rights of any group of tenants who were not
the tenants of the mortgagors. Hence, the question of enlargement of
right by tenancy legislation of persons who were in occupation but had
no rights as tenants of the mortgagors, would not arise in the context
of these cases.
E
Incidentally, it may be referred that in appeal from S.L.P.
No. 8219/82, this question does not arise.
In C.A. No. 1286/81, the tenancy after the period of mortgage
was not bona fide. In C.A. No. 9993/83, it was submitted that the
tenants were inducted after the mortgage on 28th April, 1943. The F
Bombay Rent Act was made applicable to the area of Kutch in
September, 1951.
See Dalal's Rent Act, 4th Edn. page 814 on that basis it was
submitted that as there was no Act in the area of Kutch which is in pari
materia with the Bombay Rent Act and therefore the rights of the G
tenants were enlarged by the subsequent Act. In view of the fact that
the mortgage deed did. _!l,()t contemplate rights of the mortgagees to
grant tenancy beyond the per.i.od of mortgage, and had imposed an
obligation that on the expiry of the period of mortgage, mortgagors
were entitled to the possession of the demised premises. In our
-. opinion, these contentions cannot be entertained. H
:;-
866 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.
A Incidentially, it may also be mentioned that in C.A. No. 1286/81,
the suit property was mortgaged in 1948 for a period of 5 years. The
tenant was inducted by the mortgagee in 1955. The period of mortgage
had expired in 1953. Apparently, the mortgagee .had inducted the
tenant after expiry of the period of mortgage, and such a conduct was
B grossly imprudent management, and was not bona fide. Such tenant
cannot, in any event, claim any protection.
Having considered the facts and the circumstances and the ratio
of the decision in Jadavji Purshottam's case (supra), we are clearly of
the opinion that the tenancy rights did not come to be enlarged by the
Tenancy Legislation after the tenant was put into possession by the
C mortgagee and the tenancy created in favour of the tenants by the
mortgagor did not· have the concurrence of the mortgagor so as to
claim tenancy rights even after redemption of the mortgage. See the
observations in para 12 of the Jadavji Purshottam' s case· (supra).
D In the premises, the appeals must fail and are dismissed. Civil
Miscellaneous Petition in C.A. No. 397 /80 must also fail and is dismis-
sed. The parties will pay and bear their own costs.
A.P.J. .Appeals dismissed.
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