Right Of Redemption Subsists So Long As Mortgage Itself Subsists, Clause To Restrict Period Of Redemption In Conflict With Law: Jharkhand HC

The Jharkhand High Court has affirmed that term of mortgage placing embargo on the redemption of mortgage of property by shortening the period within which the redemption could be sought, is a clog on redemption and as such void.

Referring to L.K. Trust v. EDC Ltd., (2011) 6 SCC 780, it reiterated that a right of redemption is an incident of a subsisting mortgage and exists so long as the mortgage itself subsists. Justice Gautam Chaudhary remarked,

"The clause purporting to limit and restrict the period of limitation for redemption was in conflict with the provision of Article 61 (a) of the limitation and was a clog on the equity of redemption."

The appellants are in appeal against the judgment of affirmance arising out of the judgment and decree, out of common judgment delivered by Additional district Judge Lohardaga. The Mortgage Title Suits were filed by Ram Dayal Sahu against Lal Pashupati Nath Sahdeo for foreclosure and to debar the defendant from redeeming the mortgaged property comprising land measuring 1.28 acres fully detailed in both the plaints.

The plaintiffs brought the suit for foreclosure of the mortgage against the defendant, Lal Pasupati Nath Sahdeo. The mortgage deed was executed by Lal Pasupati Nath Sahdeo to Ram Dayal Sahu, father of the plaintiff, for Rs.2000. The deed of mortgage concerned the land measuring an area of 1.28 acres, fully detailed in the plaint schedule. The terms and conditions of the mortgage deed were that the property should be redeemed within five years of the mortgage, failing which the mortgage deed would be deemed of absolute sale. The mortgagor failed to repay the amount of Rs.2000 within the stipulated period. The mortgagee's name was mutated, and a rent receipt was issued on his payment of rent; the plaintiff was not a professional moneylender. The suit was filed under Section 67 of the Transfer of Property Act for foreclosure on the default in payment of the mortgage amount.

The case of the defendant, that mortgage money of Rs.2000 was tendered, and the plaintiff received the same to return the mortgage deed and deliver the back in possession of the mortgaged land. It is the specific defence of the defendant the Bihar Moneylenders Act hit that suit. The plaintiff has been enjoying the usufruct of the land in a suit by advancing a mortgage amount of Rs.4000 by both the mortgage deeds. The annual income of the said land was not less than Rs.5000, and thus the plaintiff has earned about Rs.85,000 from the said land. The term of mortgage placing an embargo on the redemption of mortgage of property by shortening the period within which the redemption could be sought a clog on redemption and, as such, void ab initio. The redemption period is 30 years provided by statute, which the mortgage term cannot shorten. It has been denied that it was a mortgage by conditional sale.

The trial court dismissed the suit because the defendant had a right to redeem within 30 years from the date of execution, and he can't be prevented from the equity of redemption against the law. It has also been held that this was not a case of sale with the option to repurchase; therefore, it came under Section 58 of the Transfer of Property Act. The deed was styled as a conditional sale if the mortgagor failed to redeem the same within five years, but the nature and intention of the deed and executor were to mortgage the land to secure the loan. The suit was also hit by Section 12 of the Bihar Moneylenders Act. Even in case of a foreclosure, the defendant had a right of repayment under Order 34 of CPC. The Court of the first appeal concurred with the fact-finding and dismissed the appeal.

The issue before the Court is: Whether a document is a mortgage deed or a mortgage with the conditional sale is a question of fact, and both the Courts below have held that it was not a mortgage with the conditional sale.

The Court referred to the case of Ganpati Babji Alamwar v. Digambarrao Venkatrao Bhadke, (2019) 8 SCC 651, where it was held that whether an agreement is a mortgage by conditional sale or sale with an option for repurchase is a vexed question to be considered in the facts of each case. It remarked,

"An ostensible sale with transfer of possession and ownership, but containing a clause for reconveyance in accordance with Section 58(c) of the Act, will clothe the agreement as a mortgage by conditional sale. The valuation of the property, and the transaction value, along with the duration of time for reconveyance, are important considerations to decide the nature of the agreement. There will have to be a cumulative consideration of these factors, along with the recitals in the agreement, intention of the parties, coupled with other attendant circumstances, considered in a holistic manner. The language used in the agreement may not always be conclusive."

It also referred to the case of L.K. Trust v. EDC Ltd., where it was held that the mortgagor under Indian law is the owner who had parted with some rights of ownership and the right of redemption is the right which he exercises under his residuary ownership to resume what he has parted with. Dismissal of an earlier suit for redemption whether as abated or as withdrawn or in default would not debar the mortgagor from filing a second suit for redemption so long as the mortgage subsists.

Finding no infirmity with the lower courts' decision, the Court dismissed both the appeals.

Case Title: Braj Kishore Sahu v. Tribhuwan Nath Sahdeo and other connected matters

Citation: 2022 LiveLaw (Jha) 43

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