Sangar Gagu Dhula v. Shah Laxmiben Tejshi AIR 2001 Guj 329

Sangar Gagu Dhula v. Shah Laxmiben Tejshi    AIR 2001 Guj 329

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Second Appeal No. 131 of 1980  decided on 10/01/2001

Head Notes

(A) Transfer of Property Act (4 of 1882) , S.60— Limitation Act (36 of 1963) , Art.61(a)— Redemption of mortgage – Suit for – Limitation – Starting point – Stipulation in mortgage deed that redemption could be enforced only after expiry of period of 99 years – Such clause amounts to a clog on equity of redemption – It is only when the offending clause is struck down by Court the right to redeem accrues in favour of mortgagor – Period – Limitation of 30 years to file suit for redemption starts from that date.

AIR 1977 Madras 297 – Dissented from.

In the instant case the offending clause postpones the mortgagor’s right to redeem for 99 years. It is only when the mortgagor desires to redeem the property prior to 99 years that he approaches the Court. The mortgagor is conscious of the fact that by contract, he is a party to the postponement of the right to redeem for 99 years. In order to escape from this clause on the ground that it is oppressive and unconscionable, he satisfies the Court by leading appropriate and credible evidence, and satisfies the Court that the oppressive clause amounts to a clog. It is only when the Court finds on facts that this is a clog, that the Court strikes down the offending clause and thereby lifts the clog. It is then and only then, can the mortgagor seek redemption of the property. In other words, it is only when the offending clause is struck down by the Court, that the right to redeem the property accrues in favour of the mortgagor. It is also pertinent to note that the plaintiff does not acquire a right to redeem the property merely on the plea or averment that the offending clause is voidable. He has to establish the same on facts. It is only on the establishment of such facts that the Court would find that the oppressive clause is a clog on the equity of redemption and consequently lift or set aside such a clog. It can only be this judicial act of the Court which confers on the mortgagor a right to redeem the property. Therefore the period of limitation would commence only from the date of such declaration. Thus, in a suit filed by the mortgagor for the composite purpose of lifting the clog as also for redemption, it could not possibly be said that the suit is beyond limitation.

AIR 1977 Madras 297, Dissented from.

(B) Limitation Act (36 of 1963) , Art.61(a)— Transfer of Property Act (4 of 1882) , S.60— Redemption of mortgage – Suit for – Limitation – Starting point – Unreasonable period of 99 years for redemption of mortgage stipulated in mortgage deed – Suit for redemption filed after 99 years and within 30 years thereafter would be within period of limitation – Suit filed by mortgagor for redemption before 99 years with prayer for lifting the clog on redemption cannot be held to be barred by limitation on ground that the clause being void ab initio limitation would start from date of execution of mortgage deed.

Cases referred :

Rajgor Bhanji Mulji v. Sonbai Wd/o. Shah Kanji Vershi [(1993) 2 Guj LH 286] Para 24

Soni Motiben v. M/s. Hiralal Lakhamsi [AIR 1981 Gujarat 120] Para 26

Ramasubramania Mudaliar v. Soorianarayana  [AIR 1977 Mad. 297] Para 27

Ganga Dhar v. Shankar Lal [AIR 1958 SC 770] Para 29

Pomal v. Vrajlal [AIR 1989 SC 436] Para 31

Shivdev Singh v. Sucha Singh, [AIR 2000 SC 1935] Para 32 .

Satnpumn Singh v. Niranjan Kaur, [AIR 1999 SC 1047] Para 33

Murarilal v. Devkaran [AIR 1965 SC 225] Para 35

Judgement

Y. B. BHATT J. – 2. The original plaintiffs are heirs of the mortgagor who had mortgaged his property, being a residential house with appurtenant land, with the defendant-mortgagee. The consideration for the same was taken by the mortgagor in the sum of Rs. 11000/-. The mortgage deed specifically contemplated that this consideration will be repayable by the mortgagor to the mortgagee on the expiry of 99 years from the date of the transaction (the deed of mortgage), and on the consideration being repaid, the mortgagor shall be entitled to redemption of the property.

3. The mortgage deed was executed on 15th December 1914. However, before the expiry of the stipulated period of 99 years, the heirs of the mortgagor sought to redeem the property by filing a suit on 5th February 1974. The redemption was sought before the expiry of the stipulated period on the specific averment and contention that the period of 99 years before which redemption could not be enforced was an oppressive term and would in law amount to ―a clog on the equity of redemption‖.

4. It also requires to be noted that under the terms of the mortgage, the mortgagee entered into possession of the property, coupled with the right to reconstruct the same or to make further construction.

5. The trial Court, after considering the evidentiary material on record, found that the relevant term in the mortgage deed postponing the right of redemption to the expiry of 99 years from the date of the mortgage is oppressive qua the mortgagor and amounts to a clog on the equity of redemption and therefore the clog requires to be lifted. The trial Court, however, found that the suit was barred by limitation.

6. In the appeal filed by the plaintiff-mortgagor the lower Appellate Court upheld the findings of fact on the appreciation of the evidentiary material on record also found that the oppressive clause amounted to a clog on the equity of redemption which requires to be lifted and also confirmed the finding of the trial Court that the suit was filed beyond limitation. The appeal was, therefore, dismissed. The lower appellate Court came to this conclusion on the basis that the limitation for such a suit under Art. 61(a) of the Limitation Act would commence to run from the date of the document, since the oppressive term is ―void‖. The lower Appellate Court therefore found that the suit was filed beyond 30 years from the date of the documents and was therefore barred by limitation.

7. The plaintiff-mortgagor thereupon filed a second appeal under S. 100, CPC in the High Court. During the course of hearing of the Second Appeal before the learned Single Judge of this Court, a question arose as to whether the oppressive term would be ―voidable‖ or whether it would be ―void ab initio‖, even if the finding that the oppressive term in the mortgage deed amounts to a clog on the equity of redemption is accepted.

7.1 The learned Single Judge hearing the appeal was of the opinion that there is a conflict of opinion between two decisions of this High Court, and that this conflict requires to be resolved by a Larger Bench. It is under these circumstances that this appeal has been placed before this Larger Bench for consideration of the following questions framed by the learned
Single Judge :

(1) Whether a condition in a mortgage deed which is found by the Court to be a clog on the equity of redemption is void ab initio or merely voidable at the instance of the suffering party i.e. the mortgagor?

(2) When a mortgage deed stipulates a condition that the mortgage is irredeemable for a period of 99 years or any such long period, whether the starting point of the period of limitation prescribed by Art. 61(a) of the Limitation Act, 1963 for filing a suit for redemption would be the date of execution of the mortgage deed or the date of declaration by the Court that such a condition was a clog on the equity of redemption?

(3) Whether a suit for a declaration that any such condition is void or voidable (with or without a prayer for redemption of mortgage) filed after expiry of the period of 30 years from the date of execution of the mortgage deed would be time barred under S. 61(a) of the Limitation Act. 1963?

It is under these circumstances and in respect of the aforesaid questions framed for our consideration, that this Bench is required to apply our minds to the resolution of the controversy. In this context it would be both relevant and pertinent, in order to retain focus on the root of the controversy, to refer to Art. 61(a) of the Limitation Act, 1963, which reads as under:

 

Table to be inserted

 

8. It is also relevant and pertinent to retain focus on the concurrent findings of fact recorded by both the Courts below, that the offending clause complained of by the plaintiff mortgagor has in fact been found to be oppressive to the mortgagor, that it amounts to a clog on the equity of redemption, and that the same requires to be lifted. Since this is a question of fact and law on which concurrent findings of fact have been recorded, I am required to address only the legal consequences flowing from this finding, without questioning the merits of this finding.

9. Without elaborating at length I may merely summarise the concept of what amounts to ―a clog on the equity of redemption‖, as laid down by Courts of law formerly under English Law, and subsequently followed by Courts in India.

10. The doctrine of the equity of redemption flows from the early development of case law on the subject by the Courts in England to the effect that although a transaction of a mortgage pertains to immovable property, it is also a contract between the parties relating to such property. Since it is a transaction in the nature of a contract, it is not beyond the scope and ambit of the law pertaining to contracts (in India this refers to the Contract Act.). Normally Courts would bind each party and make each of them responsible for the mutual rights and obligations created by such a contract voluntarily entered into by the parties. However, the Courts have always refused to recognize or enforce contracts which are unconscionable, opposed to public policy, immoral contracts, etc. A transaction of a mortgage has always been recognized by Courts under the principles ―once a mortgage always a mortgage‖. A mortgagor‘s right to redeem the property, the subject of the mortgage, has been recognized as fundamental to the transaction of a mortgage. If the right to redeem the property is denied to the mortgagor, the same would amount to usurpation of the title by the mortgagee, which would result in the transgression of the intention of the mortgagor and would therefore tend to frustrate the transaction etc. The Courts have therefore taken a view that the denial of a right to redeem the property, or delaying the exercise of this right to redeem by an unconscionable period, or creating other contractual barriers against the exercise of the right to redeem, is not acceptable to the Courts in equity. The Courts have therefore struck down, have refused to recognise or have refused to enforce such covenants.

10.1 It is in the context of such oppressive covenants that I am required to examine the question, as referred to this Bench, as ―voidable‖ or ―void ab initio‖.

11. Again without dilating at length I may merely summarise the case law on what amounts to ―a clog on the equity of redemption‖. It is well settled law that what precisely amounts to a clog is a mixed question of fact and law. Whether a particular clause alleged to be offending against the doctrine amounts to a clog or not, is not a question that can be answered without examining the peculiar facts and circumstances attendant and appurtenant to the transaction itself. This examination can only be accorded upon the facts and circumstances established by appropriate and acceptable evidence on record.

11.1 Merely because the mortgagor‘s right to redeem is delayed or postponed by a long period of time would not ipso facto amount to a clog. The material aspect which requires emphasis at this stage is that relief from the specific terms of the mortgage deed (although alleged to be oppressive to the mortgagor and amounting to a clog) is not granted merely for the asking, or merely by resorting to the overriding principles of equity, but only when the inequity of the particular clause of the contract is actually brought home and established by facts and evidence.

12. In the aforesaid context, when I shift my attention to the scope and ambit of Art. 61(a) of the Limitation Act, I must take note of the fact that the period of limitation commences to run from that point of time ―when the right to redeem or to recover possession accrues‖.

12.1 For all practical purposes and particularly on the facts of the present case, the right to recover possession is both incidental and consequential to the rights to redeem the property. It is only when the right to redeem accrues to the mortgagor that the mortgagor also acquires the right to recover possession. In the premises therefore, I may retain focus on the prime question, as to when does the right to redeem accrue to the mortgagor?

13. Reverting to the specific controversy placed before us for resolution, the contesting parties in turn contend that the offending clog is ―void ab initio‖ and ―voidable‖. Learned counsel for the mortgagor and mortgagee have referred to various decisions in support of their respective contentions. Obviously, learned counsel for the mortgagor submits that the offending clause is merely ―voidable‖, as against which learned counsel for the mortgagee submits that it is ―void ab initio‖. It is further submitted on behalf of the mortgagee that if it is void ab initio, it is as though the offending clause never existed or never had any place in the mortgage deed at all, and that therefore the right to redeem would commence on the day of the execution of the document itself. If that is so, the period of limitation would expire 30 years from the date of the document itself. As against this, the mortgagor would submit that the actual term in the mortgage deed would confer on him a right to redeem only after the stipulated period has expired viz. 99 years. However, if the offending term is found on facts to be a ―clog on the equity of redemption‖ and therefore the clog is lifted, it is only then that the right to redeem the property accrues to the mortgagor and that therefore the limitation would commence only from the date when the clog is lifted, by an appropriate finding or declaration by the Court.

14. With a view of resolve this controversy, I would adopt different perspectives in the matter. I would also examine the consequences flowing from the acceptance of either view canvassed before this Bench.

15. On the plain reasoning presented by the mortgagor, it would appear to be obvious that the offending clause postpones the mortgagor‘s right to redeem for 99 years. It is only when the mortgagor desires to redeem the property prior to 99 years that he approaches the Court. The mortgagor is conscious of the fact that by contract, he is a party to the postponement of the right to redeem for 99 years. In order to escape from this clause on the ground that it is oppressive and unconscionable, he satisfies the Court by leading appropriate and credible evidence, and satisfies the Court that the oppressive clause amounts to a clog. It is only when the Court finds on facts that this is a clog, that the Court strikes down the offending clause and thereby lifts the clog. To my mind it is then and only then, can the mortgagor seek redemption of the property. In other words, it is only when the offending clause is struck down by the Court, that the right to redeem the property accrues in favour of the mortgagor. It is also pertinent to note that the plaintiff does not acquire a right to redeem the property merely on the plea or averment that the offending clause is viodable. He has to establish the same on facts. It is only on the establishment of such facts that the Court would find that the oppressive clause is a clog on the equity of redemption and consequently lift or set aside such a clog. It can only be this judicial act of the Court which confers on the mortgagor a right to redeem the property. In my opinion therefore the period of limitation would commence only from the date of such declaration. Thus, in a suit filed by the mortgagor for the composite purpose of lifting the clog as also for redemption, it could not possibly be said that the suit is beyond limitation.

16. On the other hand, in case the contention of the mortgagee is to be accepted, I may examine the consequences and impact of such a finding.

17. If the offending clause is regarded to be ―void ab initio‖, and regarded to be non-existent from the very beginning, and the mortgage document be regarded to be free from all stipulations as to when the property could be redeemed, it would prime facie appear that the right to redeem would accrue from the day of the mortgage itself. If this was so, the period of limitation would commence from the day of the execution of the mortgage deed itself. However, if such a view were to be accepted, it would amount to conferring upon the plaintiff a retrospective cause of action, which is neither pleaded nor urged by the plaintiff, and on the basis of which no relief was sought by the plaintiff. The conferment of such a retrospective cause of action is to my mind, contrary to all jurisdictional principles, and even contrary to the principles of interpretation of statutory intent.

17. It requires to be noted that it is only this conferment by the Court of a retrospective cause of action that causes the limitation to start running, and this suit to be labelled as time-barred.

18. Another consequence of such a view would be that on the one hand, the Court frees the mortgagor from an oppressive covenant and on the other hand dismisses the suit on the ground of limitation.

19. Another consequence of the acceptance of such a view would be that a mortgagor who chooses to suffer by accepting the oppressive clause retains his right to redemption (albeit exercisable after the expiry of that term), but a mortgagor who chooses to challenge the restrictive term effectively loses his right to redemption, and consequently loses title to the property as well. This offends the principle of ―once a mortgage always a mortgage‖.

20. Another consequence that follows is that the mortgagor who chooses to suffer the oppressive term would only postpone the redemption for the stipulated period, whereas the mortgagor who succeeds in his protest against the offending term, loses his right of redemption for ever.

21. The fundamental principles underlying the Law of Limitation, as accepted by judicial interpretation over decades, is that the Court would give relief to those plaintiffs who are vigilant in the exercise of their rights, but would refuse relief to those plaintiffs who are indolent or indifferent in the timely exercise of their rights. In case the view canvassed by the mortgagee is accepted, the consequence would be that the mortgagor who prefers or chooses to sleep over his right to challenge the offending clause (by accepting the restrictions thereof) would be entitled to redeem the property on the expiry of the stipulated period; on the other hand the vigilant and assertive mortgagor who approaches the Court with a view to strike down the offending clause, and further succeeds in this attempt, ultimately loses for ever his right of redemption. Surely, this cannot be the legislative intent behind Art. 61(a).

22. Another perspective may also be brought to bear on the controversy, I may consider a hypothetical case where a mortgagor sues only for a declaration that the offending clause is a clog on the equity of redemption, but does not seek in the same suit the redemption of the mortgage. Let us assume for the sake of argument that such a suit is not dismissed only on the ground that a declaratory relief cannot be granted without a consequential relief, or that Order 2 Rule 2 would be a bar to a subsequent suit for redemption. In such a case, if the mortgagor succeeds on facts and establishes that the offending clause amounts to a clog on the equity of redemption, it is then and only then, could it be urged against the mortgagor that the period of limitation commences from the date of such a declaration, since it is this declaration/decree which confers on the mortgagor a right to redeem the property.

24. Learned counsel for the mortgagor relies upon a decision of the learned single Judge of this Court in the case of Rajgor Bhanji Mulji v. Sonbai [(1993) 2 Guj LH 286]. The view expressed therein in unequivocal terms is to the effect that the offending clause, postponing the mortgagor‘s right to redeem the property for an unconscionable period (coupled with other necessary and relevant facts) is merely voidable and not void ab initio. This decision specifically finds that the right to redeem the mortgaged property and to seek possession would accrue in favour of the mortgagor only when the clog on equity of redemption is removed. Until the embargo is lifted the right to redeem the mortgaged property or to seek its possession would not accrue in favour of the mortgagor. The starting point of limitation in that case would be the date on which the clog on equity of redemption is lifted. To hold otherwise would tantamount to voilating the principle behind grant of equitable relief and it would operate against the principles of equity, justice and good conscience.

26. Learned counsel for the mortgagee, however, placed strong reliance on another decision of a single Judge of this Court in the case of Soni Motiben v. M/s. Hiralal Lakhamsi [AIR 1981 Gujarat 120]. This decision, I find, is mainly concerned with the interpretation of S. 60 of the Transfer of Property Act, deals with the principles of what amounts to a clog on the equity of redemption, and that an unconscionable term must be held as a clog on the equity of redemption. It is only incidentally that the decision holds that such a clog is void. In my opinion, when the learned Judge referred to such a clog as ―void ab initio‖ this was a mere label attached to the offending clause with a view to establish that the same requires to be struck down. The reference to such a clog being ―ab initio null and void and non est‖ was not with a view to differentiate between ―void ab initio‖ and ―voidable‖. Furthermore, the phrase ―void ab initio‖ has not been used in the aforesaid decision in contra-distinction of the phrase ―voidable‖. It is further found that the entire reference to the offending clause as being void ab initio is merely in the context of the discussion as to what amounts to a clog, and not in the context of the question of limitation. Reliance has been placed by learned counsel for the mortgagee on certain observations in the said decision to the effect that once the fact is established (that the offending term amounts to a clog), ―the term becomes non-existence from the very inception‖. In short, such observations appear to have been made in the aforesaid decision only with a view to demonstrate that any such or similar terms found oppressive by the Court, on facts and evidence, cannot be held against the mortgagor and his right to redeem the property, and consequently the clog is required to be lifted. However, this decision does not in any manner lay down the proposition propounded by the mortgagee before us, that since the offending clause is non est, the right to redeem the property would accrue to the mortgagor on the date of the mortgage itself and that the limitation would commence from the day.

27. Learned counsel for the mortgagee heavily relied upon a decision of a single Judge of the Madras High Court in the case of Ramasubramania Mudaliar v. Soorianarayana Iyer [AIR 1977 Mad. 297]. No doubt, this decision clearly lays down that once an offending term is held to be invalid as a clog on redemption, the right to sue for redemption accrues not from the date when the term was held as invalid,but from the date of the mortgage itself. With all due respect to the learned single Judge of the Madras High Court. I am unable to agree with the line of reasoning adopted in the said decision, particularly in the light of the discussion in the earlier part of the present opinion, and the detailed reasons assigned therefor,

29. Learned counsel for the mortgagee also sought to rely upon a decision of the Supreme Court in the case of Gangadhar v. Shankar Lal [AIR 1958 SC 770]. In the said decision the Supreme Court has discussed the principle of equity of redemption, and what amounts to a clog on the equity of redemption. After discussing the basic principles (which are otherwise well settled and discussed hereinabove), the Supreme Court in this decision held that the particular clause complained of, whereby the mortgage could be redeemed only within six months from the stipulated date and not thereafter was in fact and law unconscionable, held to be invalid as a clog and therefore ignored. However, in the peculiar facts and circumstances of that case, it was found that the stipulated date for redemption viz. Expiry of 85 years from the mortgage was not a clog on the equity of redemption. Therefore this particular stipulation that the mortgagor could only obtain redemption on the expiry of 85 years from the date of mortgage was enforceable against the mortgagee, and consequently on the facts of the case the suit filed for an earlier redemption before the expiry of 85 years was found to be premature and therefore liable to be dismissed. I do not find any proposition in this decision which would be of assistance to the mortgagee in the context of the present controversy.

31. Learned counsel for the mortgagee also sought to place reliance upon a decision of the Supreme Court in the case of Pomal v. Vrajlal [AIR 1989 SC 436]. This decision also examines the question of a clog on the equity of redemption in the context of the doctrine of justice, equity and good conscience. Specific reliance was placed on the observations made in paragraphs 21 and 25 of the said decision. These paragraph deal only with the facts of the case before the Supreme Court, wherein the Supreme Court found on the basis of the evidence on record that it is not possible to hold that there was no clog on the equity of redemption. It can only be noted that this decision does not in any manner deal with the so-called distinction between void and voidable, neither does it deal with its effect on the question of limitation set out by Art. 61(a) of the Act.

32. Learned counsel for the mortgagee also sought to place reliance upon a decision of the Supreme Court in the case of Shivdev Singh v. Sucha Singh [AIR 2000 SC 1935]. Once again it is found that this decision only discusses the principles pertaining to the right of redemption, clauses which prevent or hamper redemption, clauses alleged to be oppressive and which create a clog on the right of redemption, are questions of fact which require to be determined on the evidence on record; that such terms which place a clog on the right of redemption have to be avoided. No doubt, paragraph 10 of the said decision does refer to such offending clauses as void. However, this is an observation only in the context of the offending terms and does not in any manner hold such offending term to be ―void ab initio‖ so as to confer a retrospective cause of action to the mortgagor and to permit the mortgagee to plead that the period of limitation would commence from the date of mortgage itself. Therefore this decision would not be of any assistance to learned counsel for the mortgagee.

33. Reliance was also sought to be placed upon a decision of the Supreme court in the case of Sumpuran Singh v. Niranjan Kaur [AIR 1999 SC 1047]. This decision, firstly, deals with the redemption of an oral mortgage and consequently there were no restrictive terms or covenants in respect of which any complaint as to oppression could be made. Secondly, this decision deals mainly with the validity of such an oral mortgage in the year 1893, when S. 59 of the Transfer of Property Act was not applicable to the State of Punjab. It was therefore in this context that the Supreme Court held such an oral mortgage to be valid, and that in the absence of any restriction contained in the mortgage deed, a right to redeem had accrued from the very first day of the mortgage and consequently the suit filed in 1960 was barred by limitation. Once again, I am obliged to wonder as to how this decision is applicable or relevant to the present controversy. In this case, limitation had commenced from the date of the mortgage merely because there was no restriction contained in the mortgage deed, it being a case of an oral mortgage. Therefore, there was no question of there being any offending clause, or consideration of lifting of a clog on the equity of redemption.

35. Reliance was also sought to be placed on the decision of the Supreme Court in the case of Murarilal v. Devkaran [AIR 1965 SC 225]. Once again, I am obliged to observe that this decision deals only with the facts of that case in the light of S. 60 of the Transfer of Property Act and holds (on the facts of that case) that if the mortgage is not redeemed within 15 years of the mortgage, the same would be deemed to be an absolute transfer amounting to a sale. This clause was found by the Supreme Court to be oppressive, found to be violative of the principle ―once a mortgage always a mortgage‖ and therefore found to be a clog on the equity of redemption. This decision therefore has no relevance to the controversy at hand.

37. In the light of the aforesaid discussion. I find that the contentions raised by learned counsel for the mortgagee are not well founded and cannot be sustained. In view of the aforesaid discussion I find and hold that ―the right to redeem or to recover possession‖ would accrue to the mortgagor within the meaning of Art. 61(a) of the Limitation Act only when the Court lifts the clog on the equity of redemption. Consequently, limitation would begin to run only from that day, and therefore necessarily such a suit could not be said to be barred by limitation (provided the suit prays both for lifting the clog against the equity of redemption and also prays for a decree of redemption of the mortgage).

39. This appeal will therefore be placed before the learned single Judge for decision on merits in the light of the opinion expressed above.