http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 31

PETITIONER:

POMAL KANJI GOVINDJI & ORS.

Vs.

RESPONDENT:

VRAJLAL KARSANDAS PUROHIT & ORS.

DATE OF JUDGMENT04/11/1988

BENCH:

MUKHARJI, SABYASACHI (J)

BENCH:

MUKHARJI, SABYASACHI (J)

RANGNATHAN, S.

CITATION:

1989 AIR 436 1988 SCR Supl. (3) 826

1989 SCC (1) 458 JT 1988 (4) 307

1988 SCALE (2)1287

CITATOR INFO :

F 1989 SC1110 (11,14,16,18)

ACT:

Transfer of Property Act, 1882/Sections 60 and 76--

Whether long term 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.

%

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.

HEADNOTE:

In the matter giving rise to the Special Leave Petition

(Civil) No. 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. l and 2. The defendant No. 3 is the heir of the

attorney who was also managing the properties of the

defendants Nos. I and 2. The mortgage property 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 condition of

the father of the plaintiffs was weak and he was heavily

indebted to others. Taking advantage of that situation, the

mortgagees took mortgage deed from him on harsh and

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 principal amount in the mortgage

deed. Mereover, the mortgagees were given liberty to spend

any amount they liked for the improvement of the suit

property and were also permitted to rebuild the entire

property.

A registered notice to the defendants Nos. I and 2 was

given to redeem the mortgage, but they failed to do so,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 31

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.

PG NO 827

Defendant No. 1 resisted the suit alleging that the term

of the 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 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 Bombay Rent Act, because they were inducted by the

mortgagees. The Court proceeded against defendants Nos. 2/1

to 2/7 (heirs of mortgagee-defendant No. 2) ex-parte, and a

preliminary decree for redemption of mortgage 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 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 condition

in the mortgage deed that the mortgagor would pay principal

amount us 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 Koris for a

period of 29 years, that the total mortgage amount along

with interest would come to 47,400 koris equivalent to Rs.

15800 and the Civil Judge had no jurisdiction to try such

suit; that 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. l was also working as an

Advocate at the time of the mortgage, so they knew the legal

position; that at the relevant time the prevalent custom in

Kutch State was to take mortgages 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 lt.

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 present physically when

the transaction took place through their power of attorney

holders. If the conditions of mortgage deed did not amount

to clogs on equity of redemption, the suit would be clearly

premature. The plaintiff No. I had subsequently became 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

PG NO 828

said custom. The prices of immovable properties had

increased tremendously, therefore, the suit had been filed

with mala 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 equity of redemption and the Court had no jurisdiction to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 31

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 the

father of the plaintiffs and the mortgagees on 20th April,

1943, that the terms and conditions 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

jurisdiction 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 dismissed by the first appellate Court holding

that the terms and conditions 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 he 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 appeal.

Civil Appeal No. 9993 of 1983 is an appeal by the

tenant. Civil Appeal No. 397 of l980 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 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

the mortgage in the court. In pursuance of the final decree

the decree-holder took out the execution proceedings and

PG NO 829

deposited the dues in the Court and claimed possession of

the mortgage property from the appellant herein stating that

he was a tenant in the possession of the property. Notice

was issued to the tenant, who submitted his 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 District

Judge held that there was no conduct 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 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.

On behalf of the appellants it was contended that in the

former Kutch District there was a custom to mortgage for a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 31

long term 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

pattern, so the condition should not he treated as clog on

equity of redemption; (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 construction 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 in Civil Appeal No. 9993 of 1982 the

plaintiff's 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 he passed against

them except in accordance with the 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 the period of

PG NO 830

redemption of the mortgage if his rights are enlarged by

subsequent tenancy legislation in force in the area in which

the property is situated.

Dismissing the Appeals,

HELD: 1. 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

redemption is void. [846G]

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 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 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 mixed question of law and fact.

[848D]

7. Courts do not look with favour at any clause or

stipulation which clogs equity of redemption. A clog on the

equity of redemption is unJust and unequitable. The

principles of English law, as we have noticed from the

decisions referred to hereinbefore which have been 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.

(848D-E]

8. It is a right of the mortgagor on redemption, by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 31

reason of the very nature of the 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 mortgage. If he is

PG NO 831

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 clot is inequitable. The law does not

countenance it. [848F-G]

9. Whether or not in a particular transaction there is a

clog on 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 relationship 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 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

usufructuary mortgage to manage 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 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 discharge or some other obligation

for which il 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 thc equity of redemption and, hence.

bad and void. "Once a mortgage must always remain a

mortgage", and must not be transformed into a conveyance or

deprivation of the right over the

property. [849D-E]

11 . 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, law must take cognisance of

that fact and act accordingly. Ia the context of fast

changing circumstances and economic stability, long-term for

redemption makes a mortgage an illusory mortgage, though not

decisive. [850D-E]

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 intention to allow expressly creation

PG NO 832

of a tenancy beyond the term of' the 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 mortgage 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 the

mortgagee with possession to induct a tenant would not

create a tenancy binding on the mortgagor after the

redemption of the mortgage. [857E-G]

13. In the instant cases the tenancy rights did not come

to be enlarged by the Tenancy Legislation after the tenant

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 31

was put into possession by the mortgagee and the tenancy

created in favour of the tenants by the mortgagor did not

have the concurrence of the morfgagor 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. 1979 Gujarat 171; Lalji Purshottam v. Thacker

Madhavji Meghaji, 17 Gujarat Law Reporter 497; Maganlal

Chhotalal Chhatrappati and Ors. v. Bhalchandra Chhaganlal

Shal, 15 Gujarat Law Reporter 193; Soni Motiben v. M/s.

Hiralal Lakhasmhi, 22 Gujarat Law Reporter 473; Vadilal

Chaganlal Soni and Others v. Gokaldas Mansukh and Other,

A.I.R. 1953 Bombay 408; Sarjug Mahto and Others v. Smt.

Devruo Devi and Others, A.I.R. 1963 Patna 114; Kunjbiharilal

v. Pandit Prag Narayan, A.I.R. 1922 Oudh 283; S. V.

Venkatarama 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.

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 lndia Film Corporation v. Raja Gyan Nath, [1969] 3 SCC

79; Sachalmal Parasram v. Ratnabai, [1973] 3 SCC 198 and Om

Prakash Garg v. Ganga Sahai & Ors., [1987] 3 SCC 553, relied

on.

Seth Ganga Dhar v. Shankar Lal & Ors., [1959] S.C.R. 509

and Jadavji Purshottam v. Dhami Navnitbhai Amaratlal & Ors.,

[1987] 4 SCC 223, distinguished,

Aziz Khan v. Duni Chand and Others, A.I.R. 1918 P.C. 48;

Jarrah Timber & Wood Paving Corporation v. Samuel, 119031 2

Ch. l; Chhedi Lal v. Babu Nandan, AIR 1944 Allahabad 204;

PG NO 833

Bhika and Anr. v. Sheikh Amir and Ors., A.l.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. Kam Kali, [1958] SCR 986; Dahya

Lal v. Rasul Mohammed Abdul Rahim, [1963] 3 SCR 1; Madan Lal

v. Bedri Narain and Others, [1987] 3 S.C.C. 460; Mulla's

Transfer of Property Act, 7th Edition, pages 401 and 402;

Rashbehary Ghose's 'Law of Mortgage' 6th Edition, pages 227

and 228; Dalal's Rent Act 4th Edn. page 814 referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No 9993 of

1983 etc

From the Judgment and Order dated 16.12.1982 of the

Gujarat High Court in S A No. 168 of 1982.

B.K. Mehta, Kajinder Sachhar, T.U. Meita, S.K.

Dholakia. Vimal Dave Krishan Kumar. Mrs C.M. Chopra, P.H.

Parekh, Ms. Sunita Sharma, Mrs. Rani Chhahra. R C Bhatia and

P.C. Kapur for the appearing parties

The Judgment of that Court was delivered by

SABYASACHI MUMKHARJI. J. These appeals and the special

leave petition are directed against the decision of the

High Court of Gujarat, upholding the right of the

mortgagors to redeem the properties before the period

stipulated In the deeds. as well as the right of the

mortgagors to recover possession of the properties from the

tenants and/or the mortgagees without resort to the relevant

Rent Restriction Act. All these matters were separately

canvassed before us as these involved varying facts, yet

the fundamental common question is, whether long term

mortgages in the present infaltionary market in fast moving

conditions are clogs on equity of redemption and as such the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 31

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 Acts. One basic fact that was

emphasised in all these cases was that all these involve

urban immovable properties. In those cirumstances, whether

the mortgages operate as clogs on equity of redemption is a

mixed question of law and facts. It is necessary to have a

conspectus of the facts involved in each of the cases

herein. We may start with the facts relating to Special

Leave Petition (Civil ) No. 8219 of 1982 because that is a

typical case.

PG NO 834

In this matter by our order dated 9th January, 1988 we

had 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 High Court, dated 26th April, 1~82 dismissing the

second appeal. The High Court observed that the learned

Judge had followed the judgment of the said High Court in

Khalubai 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 term gave the mortgagee the right to demolish

existing structure and construct new one and the expenses of

such to be reimbursed by mortgagor 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 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 alleging that the deceased

Karsandas Haridas Purohit was their father and he died in

the year 1956, he had mortgaged the suit property to

Kanasara Soni Shivji Jotha and Lalji Jetha for 30,000 Koris

by a registered mortgage deed dated 20th April, 1943. The

moltgage deed was executed in favour of Soni Govindji

Nalayanji who was the power of attorney holder and manager

of the defendants Nos. 1 and 2. The defendant No. 3 is the

heir of said Govindji Narayanji and he was also managing

the properties of the defendants Nos I 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, thc economic condition of the father 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

mortgage. It is further stated that though possession was to

be handed over to the mortgagees, they took condition for

interest on the part of principal amount in the mortgage

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 31

PG NO 835

deed. Moreover, the mortgagees were given liberty to spend

any amount they liked for the improvement of the suit

property. They were also permitted to rebuild the entire

property. Thus these terms and conditions, according to the

Appellate Judge, were incorporated in the mortgage deed to

ensure that the mortgagors were prevented for ever from

redeeming the mortgage. The terms and conditions, according

to the Assistant Judge, Bhuj, being the first 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 before

the expiry of the term of mortgage. A registered notice to

the defendants Nos. I 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.

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 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 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 the

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 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 summons of the suit had not

been duly served upon them. That prayer was 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 appeared in the

PG NO 836

suit and filed his written statement while other defendants

remained absent.

It was the case of the defendant No. 2/1 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 conditions of the mortgage

deed dated 20th April, 1943, there was usufructuary mortgage

for 20,000 koris and the remaining l0,000 koris were

advanced to the mortgagor at monthly interest at the rate of

1/2 per cent. There was a condition in the mortgage deed

that the mortgagor should 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 l0,000 koris for a period of 291 ears .

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 31

That interest would be 17,400 koris so the total mortgage

amount will be 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 was also not

sufficient. Moreover, it was not true that the father of the

plaintiffs was of weak economic condition. The grand father

of the plaintiffs was an Advocate and the father of the

plaintiffs was the clerk of an Advocate. The plaintiff No. l

was also working as an Advocate at the time of the mortgage.

so they knew the legal position. It was further alleged that

at the relevant time the prevalent custom in Kutch State was

to take mortgages 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 long term

mortgage and the conditions for reconstruction of the

property could not amount to clogs on equity of redemption

of mortgage it was the case of the mortgagees and/or

tenants. The mortgagees did not take any, it was pleaded.

undue advantage and they were not present physically when

the transaction took place through their power of attorney

holders If the conditions in the mortgage deed did not

amount to clogs on equity of redemption, the suit would be

clearly premature. It may be mentioned that the plaintiff

No. 1 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, th. suit had been filed

with mala fide intention. It was averred that in case the

Court came to the conclusion that there was clog on equity

of redemption and the plaintiffs were entitled to the

PG NO 837

redemption, then the interest on 10,000 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 ultimately decreed the suit on 28th

September, 1978. The Trial Court 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, 1943. 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 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 necessary parties. The

Trial Court further came to the conclusion that it had

jurisdiction to try the suit and held that the mortgagees

were not 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. Accordingly, a

preliminary decree was passed in the suit.

Aggrieved thereby the mortgagees filed Regular Civil

Appeal No. 149/78 and the tenants filed Regular Civil Appeal

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 31

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

deed dated 20.4.1943 amount to clog on equity of redemption?

(2) Whether the decree passed is bad for want of

jurisdiction with trial court?

(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?

PG NO 838

(5) Whether the decree passed by the trial court is

legal and proper?

(6) What order?"

It is not necessary any longer in view of the findings

made and the subsequent 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 mortgage 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 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 Jetha. According to this document, an

usufructuary mortgage was 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 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 redemption was not necessarily

a clog on equity of redemption. Certain deeisions 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 redemption, there were other circumstances to

suggest that the bargain 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 surrounding

circumstances. It may be noted here that there was a

condition in the mortgage deed permitting construction of

structure after demolishing the existing structure, costs of

which were to be paid by the mortgagor. After examining the

PG NO 839

facts and the relevant decisions, the first Appellate Court

came to the conclusion that the terms were oppressive and

harsh and there was clog on equity of redemption and the

mortgagor should be freed from that bondage.

Shri Rajinder Sachar, Shri B.K. Mehta as well as Shri

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 31

Dholakia urged on behalf of their respective clients that in

former Kutch district, 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 rejected the

similar contention made before him on behalf of the

mortgagees and tenants in view of the 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, presently. The learned Assistant Judge referred

to another circumstance i.e., to the condition of mortgage

which indicated the oppressive nature of the term. By

mortgage deed being Ext. 103 usufructuary mortgage was

created for 20,000 koris only and additional mortgage of

10,000 koris was also created for which the mortgagor had

to pay interest at the rate of 1/2 per month. Furthermore,

the mortgagor was not allowed to discharge interest

liability periodically, but he had to pay to whole amount of

interest at the end of 99 years at the time of redemption of

the mortgage. Naturally, there would be hugh accumulation

of interest which for all practical probabilities 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 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. They was no direct contact

between the mortgagor and the mortgagee. There could not be

any collusion. The mortgagees were abroad. The learned

Assistant Judge examined the evidences of one Madhavji

Shivji Soni in order to show comparable instances for

reasonableness of the consideration. The learned Assistant

Judge after discussing the 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 redemption.

PG NO 840

Attention of the learned Assistant Judge was drawn to

the fact 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 suits after a lapse of long time. It was highlighted

that the plaintiff No. I was serving as a Civil Judge and if

he came to know that the transaction was oppressive, he

would not have sat idle for such for a long period.

Reference was made 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.

1 in the affirmative. With the other issues we are not

concerned in this appeal except Issue No. 4. Regarding Issue

No. 4, as mentioned hereinbefore, which is on the 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 31

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 thc 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 competent 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 to an

end on the redemption of mortgage, it was argued. The Full

Bench of the Gujarat High Court in Lalji Purshottam v.

Thacker Madavji Meghaji, 17 Gujarat Law Reporter 497 held

that the mortgagee in possession might lease the property,

but authorisation 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 mortgage. The appeal was accordingly disposed of.

As mentioned hereinbefore, there was a second appeal to

the High Court and thc 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 possession.

So far as the question of jurisdiction and Damdupat, the

High Court observed that the Assistant Judge was right. This

PG NO 841

point is not 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 Sumra v.

Rajgo Mulji Nanji and others, (supra).

Before we deal with the question of law and the

respective submissions, 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 have been set out

hereinbefore and it is not necessary to reiterate these. We

will deal with the contentions 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, 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 respondent No. I 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 possession of the mortgaged property within

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 31

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 herein, stating that he was a tenant in the

possession of the property. The notice was issued to

Shambhulal Vallabhji, who appeared before the Court 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.

PG NO 842

The learned District Judge held that there was no conduct on

the part 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 property under the

ordinary prudent management of the mortgaged property the

mortgagor on redemption of the mortgage was not entitled to

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 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 though the mortgagee had

inducted tenants in the suit property with a mala fide

intention on the part of the mortgagee, 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. Thacker Madhavji

Meghaji (supra) that the tenants were not so protected

under the provisions of the Bombay Rent Act 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 Special Leave Petition (Civil) No. 8219 of 19X

2 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. 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 deed was executed.

PG NO 843

Shri Sachar drew our attention to the observations of

the Judicial Committee in the case of Aziz Khan v. Duni

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 31

Chand and others, A.I.R. 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 circumstances of the instant case that there is no

evidence to lead to the conclusion that there was any undue

influence. Great deal of reliance, however, by the

appellants as well as the respondents was placed on the

observations 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 bargain whereby in certain

circumstances his right to redeem the mortgage 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 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 the

mortgage would not be redeemed for eightyfive years all(l

that it could be redeemed only after that period and within

six months thereafter, 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

fair and as between parties dealing with each other on equal

footing. 1. 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

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 clearly a clog 011 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 mortgage, that stood apart. It was

PG NO 844

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 of

such debt or obligation, any provision to the contrary

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 31

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 is therefore void. It follows from this,

that "once a mortgage 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 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 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 Northington 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

established rule, that a mortgagee can never provide at the

PG NO 845

time of making the laon for any event or condition on 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 speaking,

free men, but, to answer a present exigency, will submit to

any terms that the craft may impose upon them."

The same view was reiterated by Viscount Haldane L.C.

in G. and C. Kreglinger v. New Patagonia Meat and Cold

Storage Company 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

latter, but that if the condition was not strictly and

literally fulfilled he should lose the land for ever. What

made 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 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 jurisdiction which

we are now considering, and it is important to bear that

origin in mind. For the end to accomplish which the

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 place it on that footing.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 31

It was, in ordinary cases, only where there was conduct

which the Court of Chancery regarded as unconscientious that

it interfered with freedom of contract. The lending of

money, on mortgage 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."

PG NO 846

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 from his bargain depends

on whether it was obtained by taking advantage of any

difficulty or embarrassment that he might have been in when

he borrowed the moneys on the mortgage. Length of the term,

according to Sarkar, J. in the aforesaid decision, was not

by itself oppressive and could not operate as a clog on the

equity of redemption. There was a term in the mortgage deed

that the mortgagees could spend any amount on repairs and

those expenses would be paid, according to the account

produced by the mortgagees. All that it meant was that in

claiming moneys on account of repairs and construction the

mortgagees had to show from their accounts that they had

spent these moneys. This Court on that basis held that the

clause which provided that the mortgage had to be redeemed

within the specified period of six months was bad. The

principle, however, is that it was not an unconscionable

bargain and it did not in effect deprive the mortgagor of

his right to redeem the mortgage or so to curtail his 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 mind that the English authorities relied upon by

Sarkar, J. and the principles propounded by this Court in

the case of Seth Ganga Dhar's, case (supra) were in the

background of a sedate and fixed state of affairs. The

spiral and escalation of prices of the immovable properties

was not then there. Today, perhaps, a different

conspectus would be required to consider the right to redeem

the property after considerable length of time pegging the

price to a small amount of money, the value of which is fast

changing.

The rights and liabilities of the mortgagor are controlled

by the provisions of section 60 of the Transfer of Property

Act, 1882. The clog on redemption has been noted in Mulla's

Transfer of Property Act. 7th Edition, page 401 that a

mortgage being a 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

"once a 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 of 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 mortgage.

PG NO 847

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 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 that there

was no clog on the equity of redemption in these cases.

A very large number of decisions have been cited at the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 31

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.

Our attention was drawn to the observations of the

Allahabad High Court in Chhedi Lal v. Babu Nandan, A.I.R.

1944 Allahabad 204 where it was held that the provision

inserted to prevent redemption on payment or performance of

the debt or obligation for which security was given, was a

clog on equity of redemption. Condition in 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

redemption. It was argued before us by th. mortgagees that

the provision for the payment towards cost and expenses of

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 to the

observations of the Viscount Haldane L.C. in G & C.

Kreglinger v. New Patagonla 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 mortgagee in this case tried to gain a

collateral advantage. His argument was that a onerous term

has been incorporated in the deed which placed such a burden

on the mortgagor as to make it impossible for him to redeem.

There 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 in a changed time.

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.

PG NO 848

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 circumstances of each case.

Reference was also be made to the case of Bhika and

Anr. v. Sheikh Amir and Ors., A.I.R. 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

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 a

clog on the equity of redemption.

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 not look with favour at any clause or stipulation

which clogs equity of redemption. A clog on the equity of

redemption is unjust and unequitable. The principles of

English law, as we have noticed from the decisions referred

to hereinbefore which have been accepted by this Court in

this country, looks with disfavour at clogs on the equity of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 31

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 very nature of the 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 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

inequitable. The law does not countenance it. Bearing the

aforesaid back-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 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

PG NO 849

relationship vis-a-vis him and the mortgagee, the economic

and social conditions in a particular 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 sum, the obligations of

the mortgagee to construct or repair or maintain the

mortgaged property in cases of usufructuary mortgage to

manage 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 redemption.

These principles have been recognised by this Court in

Ganga Dhar v. Shankar Lal (supra). It has also to be borne

in mind that long-term for redemption in respect of

immovable properties was prevalent at a time when things and

the Society were, more or less, in a static condition. We

live in changing circumstances. Mortgage is a security of

loan. It is an axiomatic principle of life and law that

necessitous 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, notwithstanding, is a clog or fetter on the

equity of redemption and, hence, bad and void. "Once a

mortgage must always remain a mortgage", 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 Indian law based on justice, equity and good

conscience. We reiterate that position. Though, long-term by

itself as the period for redemption, is not necessarily a

clog on equity but in the changing circumstances 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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 31

the payment of interest even in case of usufructuary

mortgage not periodically but at the time of ultimate

redemption imposing a burden on the mortgagor to redeem, the

clauses permitting construction and reconstruction of the

PG NO 850

building in this inflationary age and debiting the mortgagor

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 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 particular case. The doctrine of clog on

equity of redemption has to be 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 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 redemption 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 the principal amount at the end of the long

period, the clause regarding 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 Mr. Mehta are, therefore, unacceptable.

In that view of the matter, we are of the opinion that

the decision 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 which reference had been made and some of which

also referred before us. We have noticed the decision of the

PG NO 851

Gujarat High Court in Khatubai Nathu Sumra v. Rajgo Mulji

Nanji and others, (supra). In Maganlal Chhotalal Chhatrapati

and Ors. v. Bhalchandra Chhaganlal Shah, 15 Gujarat Law

Reporter 193. P.D. Desai, J. as the learned Chief Justice

then was, held that the doctrine of clog on the equity of

redemption means that no contract between a mortgagor and

mortgagee made at the time of the mortgage and as a part of

the mortgage transaction or, in other words, as a part of

the loan, would be valid if it in substance and effect

prevents the mortgagor from getting back his property on

payment of what 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 brings out the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 31

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 by the mortgagor indicated

that there was clog on equity of redemption. The learned

Judge referred to certain observations of Mr. Justice

Macklin of the Bombay High Court where Justice Macklin had

observed that anything which does have the appearance of

clogging redemption must be examined critically, and that if

the conditions in the mortgage taken as a whole and added

together do create unnecessary difficulties in the way of

redemption it seems that is a greater or less clog upon the

equity of redemption within the ordinary meaning of the

term. In our opinion, such observations 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 Motiben v. M/s. Hiralal

Lakharnshi, 22 Gujarat Law Reporter 473. This also

reiterates the same principle. In Vadilal Chhaganlal Soni

and Others v. Gokaldas Mansukh and Others, A.I.R. 1953

Bombay 408 also, the same principle was reiterated. In that

case, it was held by Gajendragadkar J., as the learned Chief

Justice then was, that the agreement between the mortgagor

and mortgagee was that the mortgagor was to redeem the

mortgage 99 years after its execution and the mortgagee was

given full authority to build any structure on the plot

mortgaged after spending any amount he liked It was held

that the two terms of the mortgage were so unreasonable and

oppressive that these amounted to clog on the equity of

redemption. Similar was the position in the case of Sarjug

Mahto and other. v. Smt. Devrup Devi and Others A.I.R. l963

Patna 114, where also the mortgage was for 99 years. In

Chhedi Lal v. Babu Nandan's case (supra), the court

reiterated that freedom of contract unless it is vitiated by

undue influence or pressure of poverty should be giver. a

PG NO 852

free play. In the inflationary world, long term for

redemption would prima facie raise a presumption 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

analyse the 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,

(supra). We have noted the salient features of the said

decision. The High Court, 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 Judge of the Appellate Court had referred to the

ratio of the decision in Gangadhar v. Shankerlal (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 regard to the position of the parties,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 31

the transaction did not amount to clog on the equity of

redemption. It was emphasised by the First Appellate Court

that the fact that the son of the mortgagor subsequently

became Civil Judge would not affect the position because

what was relevant 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 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 mortgage the only house

which is sole abode on the earth.

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

Kunjbiharilal v. Pandit Prag Narayan, AIR 1922 Oudh 283. In

that case there was a condition that the mortgagor should

PG NO 853

pay interest along with the 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 dog on the equity of redemption and could not be

enforced. Similar was the position of the Allahabad High

Court in Rajai Singh v. Randhir Singh, 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 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 was a clog on equity

of redemption.

On the second aspect of the question whether the right

of the tenants of the mortgagees are protected after the

redemption of mortgage, 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 redemption of mortgage such lease is binding on the

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 mortgage the relationship 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

Tenancy Act, this Court reiterated that the general rule is

that a person cannot by transfer or otherwise confer a

better title on another than he himself has. A mortgagee

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 31

cannot, therefore, create an interest in the mortgaged

property which will enure beyond the termination of his

interest as mortgagee. Further the mortgagee, who take

possession of the mortgaged property, must manage it is

Person of ordinary prudence would manage if it were his own;

PG NO 854

and he must not commit any act which is destructive or

permanently 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 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 mortgage with possession effected on

agricultural land. This Court had to 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 section 2 1

of the Bihar Tenancy Act, the tenant could not get such a

right as a result of the interaction of both those sections.

This Court ultimately held that the tenants inducted by the

mortgagee with possession 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 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 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

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 to other persons

whether or not their authority was derived directly from the

PG NO 855

owner of the land must be deemed tenants of the lands under

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, [1966] 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 were protected by the provisions of the Rajasthan

Tenancy Act, 1955. In view of the special status, the tenant

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 31

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, 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 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 has. A mortgagee is a transfer of an

interest in specific immovable property for the purpose of

securing repayment of a loan. A mortgagee'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 111(c) of the Transfer

of Property Act 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 possession. It is provided there that when

during the continuance of the mortgage, the mortgagee takes

possession of the mortgaged property, 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 to the management of agricultural lands and has

been extended to urban property so as to tie it up in the

hands of lessees or to confer on them rights under special

PG NO 856

statutes. It was emphasised by the Chief Justice that lease

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 events that had happened

in that particular case, that since there was no landlord

and no tenant, the 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

Sachalmal 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.

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.I.R. 1980 Mad. 276. There Justice

Natarajan, as the learned Judge then was, of 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 31

fresh forging of the relationship of landlord and tenant

between the mortgagor and the erst-while tenant by (i) the

voluntary act of the parties or (ii) a deemed 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

management of agricultural lands and has seldom been

extended to 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 notwithstanding 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.I.R. 1985 Rajasthan 11 where several relevant authorities

have been discussed. The question before the Full Bench was

whether a tenant of a mortgagee in possession is entitled to

PG NO 857

the protection of the 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

discussing 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 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

got 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

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 property, such a lease

would not be binding on the mortgagor after 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.

Even apart from section 76(a) of the Transfer of Property

Act if the words of the mortgage deed clearly and indubitaly

express an intention to allow expressly creation of a

tenancy beyond the term of the 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 mortgage deed do not clearly and

indubitably disclose the intention to allow expressly the

creation of a tenancy beyond the terms of the mortgage, the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 31

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 the redemption of the

mortgage. In such a case a tenant inducted on the property

by a mortgagee with possession when the tenancy of that

tenant is not binding on the mortgagor after the redemption

of the mortgage, is not protected under the provisions of

the Bombay Rents, Hotel and Lodging House Rates Control Act,

1947. We are of the opinion that the aforesaid view

expressed by the Chief Justice Diven on behalf of the Full

Bench represents the correct position in law in respect of

the second aspect of the question canvassed before us.

PG NO 858

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 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 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 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 legislation

after he was put in possession by the mortgagee. The fact

founding that case was that the tenant-appellant was not

inducted into possession 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 o f tenancy of that

tenant the Saurashtra Act 22 of 1951 came to be enacted and

gave protection to the tenants from paying exorbitant rent

and from unreasonable eviction. Despite the enlargement of

his tenancy right 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 cannot be 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 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 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 1951. 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 property because the Saurashtra Act was

already In force when the mortgagee granted lease to the

appellant and it was only from January' 64 the Bombay Rent

PG NO 859

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 31

act came to replace the Saurashtra Act. In Civil Appeal No.

9993 of 1982, Pomal Kanji Govindji & Ors. v. Vrajlal

Karsandas Purohit ,& Ors., Shri B.K. Mehta took us to the

factual background. The appellants who are tenants in the

mortgage properties being defendants Nos. 4 to 9 in the

original suit had resisted the suit for redemption and

contended that the plaintiffs were not entitled to recover

possession from them since their rights are protected under

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 possible and the suit was maintainable as

mentioned hereinbefore. However, as regards the question of

protection of the tenants under the Bombay Rent Act, Shri

Mehta proceeded to submit that the learned Judge did not

make any finding 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 their tenants were

inducted, either before or after the rent restriction Act

was made 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 he tenants. Shri

Mehta submitted hat the High Court has erred in not

following the settled legal position entrenched by a line of

decision of this Court that he rights of a tenant inducted

by a mortgagee with possession would enure beyond the period

of redemption of the mortgage if his rights are enlarged by

subsequent tenancy legislations in force in the area in

which the property is situated. He drew our attention to the

decision in the case of Mahabair Gope v. Harbans Narain,

(supra). There as mentioned hereinbefore this Court had

found 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'. 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 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 renancy. 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 this Court that there

PG NO 860

was no such rule of general acceptance that 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 create, in the tenant inducted by him, a

right to continue in possession beyond the period of

redemption. Before this Court, in that case, a reference

was made to the Full Bench decision of the Rajasthan High

Court in Devkinandan 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 prudent management on

the part of the mortgagee in possession in terms of section

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 31

76(a) was left open and that to be determined by the learned

trial Judge. It has been held by this Court in numerous

decisions that in case of immovable properties in urban

areas, unless the leases specifically and categorically make

an exception in favour of the tenant that they would

continue in possession even after the expiry of termination

of the leases, and those leases were acts of prudent

management, in no other case, the tenants inducted by the

mortgagee would be titled to the production under the Rent

Act after the redemption of mortgage.

In 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:

"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 clause

(a) was an exception to the general rule that a person

cannot confer a better title on another than he possesses

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 recognised, however,

that in some cases the granting of a 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 been followed in Harihar Prasad Singh

v. Deonarayan Prasad, [1956] S.C.R. 1 where the Suprerne

PG NO 861

Court held that 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

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 that

legislation. The Court explained Mahabir Gope's case as

being a decision given with reference to the normal

relationship of landlord and tenant. and stressed that the

Supreme Court in that case had contemplated an extraordinary

situation arising from a tenant acquiring rights 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. Gyan Nath, [1970] 2 S.C.R. 581 the

Supreme Court again considered the question. The 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 mortgagor

"ordinary'' applies only to agricultural lands and has

"seldom" been extended to urban property. This observation

is strictly speaking, obiter, as the Court found that the

lease in question was neither bona fide nor prudent in view

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 31

of the long term and the low rent. It is respectfully

submitted that there is no warrant for limiting sec. 76(a)

to agricultural land. Whether a particular lease is bona

fide or prudent is a question of fact; obviously a lease of

urban land which would confer on the lesson the protection

of special statutes such as the Rent Acts would prima facie

be imprudent. In Sachalmal Parasram v. Ratanbai, [1987] 3

S.C.C. 198, however, the Supreme Court has repeated the

obiter observation in the Film Corporation case (supra) that

except in the case of agricultural land acts of a mortgagee

would not bind the mortgagor.

PG NO 862

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

would give the lessee rights after the redemption of the

mortgage. Such leases would prima facie be imprudent, and

not binding on the mortgagor as beyond the powers conferred

by clause (a). If, however, it can be shown in any given

case that such a lease was prudent, it would bind that

mortgagor, even after redemption, and even though the lessee

acquires thereunder rights of a permanent or quasi-permanent

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 mortgage. It is

submitted that this statement of the law is consistent 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 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, when a lessee cultivates land by the very process

of cultivation he brings inputs and improves the fertility

of the soil. Constant and continuous cultivation by proper

manuriny 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 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 of this aspect that in all countries legislation

has been enacted to protect the actual tiller of the soil,

fixity of tenure has been given and all the different

measures of tenancy legislation regarding agricultural lands

PG NO 863

have provided for sufficiently long 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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 31

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 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 ettorts

put in during the terms of the tenancy. There is, therefore,

no question of a prudent owner of urban immovable property

granting a long term lease merely with a view to improve the

quality of the land. Barring Rent Control and Rent

Restriction Act which deal with urban immovable property, in

areas where there is scarcity of accommodation both for

residential and nonresidential purposes, there is no concept

of protection to tenants of urban immovable property. We are

of opinion that this is the rationale behind the distinction

which the Supreme Court has pointed out between leases of

agricultural lands and leases of urban immovable property

while dealing with the provisions of sec. 76(a) of the

Transfer of Property Act, whereas a a prudent owner would

not ordinarily speaking think of creating a long term lease

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

Hidayatullah C.J. in All India Film Corporation's case

(supra) while dealing with the application of the exception

carved out by see 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."

PG NO 864

We have noted hereinbefore the ratio and the basis of

the decision of this Court in Jadavji Purshottam v. Dhami

Navnitbhai Amaratlal (supra). Shri Mehta submitted 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

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 would 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 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 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 stipulation

that the mortgagee should re-deliver the possession of the

property when the mortgage was redeemed. In that context, we

are of the opinion that the submissions on behalf of the

tenants cannot be entertained.

As mentioned hereinbefore, Sh. B.K. Mehta, especially

in the background of the facts in C.A. No.9993/83, has made

certain submissions relying on the observations of this

Court in Jadavji Purshottam's case (supra). That decision

requires recapitulation of the basic principle. That

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 31

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 hut 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 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 beyond the period of mortgage. The question

in that decision was whether the lease granted to the tenant

by the appellant had the approval or concurrence of the

PG NO 865

mortgagor so as to entitle the tenant to claim tenancy right

even against the mortgagor 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 mortgagees to create tenancy beyond

the period of the mortgage. This 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 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 premises. But that,

in our opinion, has indeed never been 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.

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 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 tenants were enlarged by the

subsequent Act. In view of the tact that the mortgage deed

did not contemplate rights of the mortgagees to grant

tenancy beyond the period 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.

PG NO 866

Incidentially, it may also be mentioned that in C.A.

No. 1286/81, the suit property was mortgaged in 1948 for a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 31 of 31

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

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

mortgagee and the tenancy created ia 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).

In the premises, the appeals must fail and are

dismissed. Civil Miscellaneous Petition in C.A. No. 397/80

must also fail and is dismissed. The parties will pay and

bear their own costs.

A.P.J. Appeals dismissed.