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ONCE A MORTGAGE ALWAYS A MORTGAGES.DISCUSS?

Doctrine of equity of redemption


The doctrine of equity of redemption is inherent in the maxim "Once a mortgage, always
a mortgage". This maxim denotes that a mortgage cannot be made irredeemable and that
a provision to that effect is void.

A mortgage is only a security for payment of a debt or the performance of an obligation on


redemption of the mortgage, the mortgagor is bound to release security in favour of
mortgagor. The law of mortgage requires that there shall be a right of redemption in a
mortgage and when the mortgagor exercises that right, he shall be entitled to hold his
property free from any disadvantage.

The Supreme Court observed that the doctrine of clog on the equity of redemption is a rule
of justice, equity and good conscience. It is a right of the mortgagor to get back the subject
of the mortgage and to hold and enjoy the same as he was entitled so to do 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, and has always been termed as a clog. Such a clog is inequitable. Under Section-60
of the TP Act, it is provided that, at any time after the principal money has become payable,
the mortgagor has a right to redeem.

Registration and stamp duty


Registration charges in case of principal money covered is Rs 100, for a mortgage other
than a mortgage by deposit of title deeds can be effected by registered instruments signed
by the mortgagor and attested by at least two witnesses. By mortgage, a person is not
transferring any property, but there is a transfer of interest in specified immovable
property by mortgage.

Thus, once a mortgage is always a mortgage, unless it is foreclosed by order of the court.
Adversity of a person is not a boon for others. If a person in stringent financial conditions
had taken the loan and placed his properties as a security, the situation cannot be
exploited by the person who had advanced the loan.

Vernon v Bethell (1762) 28 ER 838 is an English property law case, where it was affirmed that
there could be no clog on the equity of redemption. In justifying this rule, Lord Henley LC made
the famous observation that,

“ ”
necessitous men are not, truly speaking, free men, but, to answer a present
exigency, will submit to any terms that the crafty may impose upon them.

The case stands for the principle that "once a mortgage, always a mortgage", meaning a
borrower cannot contract to give up his right to redeem title to his property once his debt is
discharged. It was a landmark decision in upholding some basic protection at common law for
debtors. It also had historic significance in the principle it laid out inspired the Second Bill of
Rights, proclaimed by the American President Franklin D. Roosevelt in his 1944 State of the
Union Address, to promote basic social and economic rights for all citizens.
Introduction

A mortgage is a transfer of an interest in some immovable property, as a


security for advancement of some loan. A person who gives security and takes
the loan is called as mortgagor and person who advances the money is known
as mortgagee. The relationship between the mortgagor and mortgagee is that
of a creditor and debtor. The law on mortgage in India is governed by Transfer
of Property Act, 1882.

The right of foreclosure is a right available to a mortgagee to recover his


outstanding money. This right is available under Section 67 of the Transfer of
Property Act, 1882. After the principal amount has become due, and before
payment of mortgage money by mortgagor or before decree of redemption
has been passed by Court, mortgagee has a right to obtain a decree of
foreclosure from the Court. A suit to obtain a decree that a mortgagor will be
absolutely debarred from exercising his right to redeem the mortgaged
property is called a suit for foreclosure.

Conditions:

The right to foreclosure can be exercised by mortgagee only when:

 The debt amount has become due for payment.


 There are no contrary conditions in the mortgage deed as to the time fixed for
repayment etc.
 Mortgage money has become due but mortgagor has not got a decree of
redemption of the mortgaged property.
 Mortgage money has become due but mortgagor has not paid or deposited the
amount. After the mortgage money has become due, the mortgagor can pay off
his debt in three ways:
 By tendering or making payment of the mortgage money directly to mortgagee
 By filing a suit for redemption
 By depositing the amount in court.
 Mortgagee should not be mortgagee of public works like canal, railway etc.
 A trustee or legal representative of mortgagee cannot file a suit for foreclosure
but for sale only.

However, when mortgagor fails to redeem the property, the mortgagee does
not become the owner of the property, he has to file a suit for recovery of the
amount due. The limitation period for instituting a suit is 12 years. The final
decree in a suit for foreclosure on the failure of defendant to pay all amounts
due extinguishes the right of redemption which has to be specifically declared.
A mortgagee may hold two or more mortgages executed by the same
mortgagor. In respect of each of such mortgages, he may have a right to
obtain a decree of foreclosure. In case he sues to obtain such a decree on any
one of the mortgages, he will be bound to sue on all the mortgages in respect
of which the mortgage money has become due.

Right to foreclosure and right of redemption:

The right of foreclosure is counter-part of right of redemption. Mortgagor gets


a right of redeeming his security after payment of debt amount; similarly
mortgagee has a right of foreclosure or sale in default of redemption by the
mortgagor. Section 67 protects interest of a mortgagee who has advanced a
loan in pursuance of some interest in a security and mortgagor has defaulted
in payment. The right of foreclosure of mortgagee is co-extensive to right of
redemption of mortgagor. Subject to the intention expressed in the contract,
the mortgagee gets the right to enforce his security when the mortgagor’s
right to redeem accrues. But the rule may be limited by the terms of the
mortgage and if the limitation is not oppressive or unreasonable, it will be
given effect to. Right to foreclosure can be limited in nature subject to the
contract between parties, but right to redemption is an absolute right, which
cannot be limited in any way.

It follows that when a mortgagee makes a statement about his right to recover
the mortgage amount, such statement impliedly acknowledges the
corresponding right of redemption of the mortgagor. Further, a statement
admitting jural relationship, need not refer to or reiterate the rights and
obligations flowing there from. Where a party to the mortgage, by his
statement, admits the existence of the mortgage or his rights under the
mortgage, he admits all legal incidents of the mortgage including rights and
obligations of both parties that is mortgagee and mortgagor.

Foreclosure and different kinds of mortgages:

The act contemplates six kinds of mortgage, namely simple mortgage,


mortgage by conditional sale, usufructuary mortgage, English mortgage,
mortgage by deposit of title deeds and anomalous mortgage.

Simple mortgage: The mortgagee in such scenario does not get possession of
the mortgaged property and therefore cannot exercise right of foreclosure. The
remedy is either to proceed against the mortgagor personally or for sale of the
mortgaged property.

Mortgage by conditional sale: Mortgage by conditional sale provides in case of


default of payment, mortgage will become a sale. The remedy in such a
situation is not foreclosure but debarring mortgagor’s right of redemption.

Usufructuary mortgage: Under this mortgage, mortgagee retains possession


until repayment of money and receives rents and profits or part thereof in lieu
of interest, or in payment of mortgage money or partly in lieu of interest and
partly in payment of mortgage money. There is redemption when the amount
due is personally paid or is discharged by rents or profits received. He does
not have a right to foreclose or sale.

English mortgage: A mortgagor binds himself personally to pay the debt, and
there is an absolute transfer of mortgaged property in favour of mortgagee.
Therefore he does not have a right of foreclosure but a right to file a suit for
sale of the mortgaged property.

Mortgage by deposit of title deeds: As per Section 96, the mortgagee of title
deeds is on the same footing as a simple mortgagee, therefore remedy
available is sale of the mortgaged property.
Anomalous mortgage: The remedy depends on the terms contained in the
mortgage deed as anomalous mortgage is combination of two or more types
of mortgages.

Partial foreclosure:

Partial foreclosure is not a remedy under Section 67. The rule is that one of
the several mortgagees cannot foreclose or sell in respect of his share unless
several mortgagees have, with consent of the mortgagor, severed their
interests under the mortgage. The reason of this rule is to protect the
mortgagor from being harassed by a multiplicity of suits where the severance
of interest of the mortgagees has taken place without the consent of the
mortgagor. Accordingly all the co-mortgagees must join together and file one
suit in respect of the whole mortgage money.

Subrogation:

Where redemption of mortgaged property is carried out by any person who


has interest in the mortgaged property other than the mortgagee, like
subsequent mortgagees, co- mortgagors, buyer of mortgaged property, surety
of mortgaged debt or creditor of mortgagor, such person enters into the shoes
of mortgagee. He gets all the rights that the creditor (mortgagee) had against
the principal debtor (mortgagor) including right to foreclosure, redemption or
sale. This is known as subrogation. However, the entire mortgage should be
paid off by the person.

The person can enforce the security over the original debtor for
reimbursement. A person pays a mortgage to protect his/her own interest in
the property or because s/he is secondarily liable for the debt or for the
discharge of the lien. However, if the borrower used the proceeds of the loan
to discharge a prior encumbrance, it is not a sufficient reason to entitle the
lender to subrogation. There should be ample proof that the loan was made
for that purpose.
A co- mortgagor in possession, of excess share redeemed by him can enforce
his claim against non redeeming mortgagor by exercising rights if foreclosure
or sale as exercised by mortgagee under Section 67 of the Transfer of property
Act but that does not make him a mortgagee. The remedy of redemption,
foreclosure and sale available to such co-mortgagor are the rights as a
subrogee not as a mortgagee reincarnate but by way of rights akin to those
vesting in the mortgage.