1. I agree with my brother Ramabhadran that the stipulations in the mortgage deed that the mortgage could not the redeemed for forty-nine years, that the mortgagees were entitled to rebuild the house and repair it and recover the costs from the mortgagors with interest at the high rate of 24 per cent per month along with the principal money and that they were entitled to recover from the mortgagors the taxes along with the principal money with interest at the same high rate amounted to a clog on the equity of redemption. There was no limit to the amount which the mortgagees could spend on rebuilding the house and the taxes were to be paid by them and the mortgagors were not allowed to pay the taxes or to compensate them at once. There is no doubt that these stipulations taken together made it practically impossible for the mortgage to be redeemed. The amount of the principal was only Rs. 334/- and making the mortgagors liable to pay a huge sum, out of all proportion to the principal, for redemption of the mortgage was tantamount to refusing them the right of redemption.
2. It may be that either the stipulation, that the mortgage could not be redeemed for 49 years, or the stipulation that the cost of rebuilding the house and the taxes will be recovered along with the principal after 49 years together with interest thereon at 24 per cent. per annum might not by itself amount to a clog on the equity of redemption. There are authorities laying down that the mere length of the period during which no redemption is allowed does not amount to a clog on the equity of redemption. Even if the rate of interest is very high, if the mortgagors are permitted to compensate the mortgagees for the cost of rebuilding the house and for the payment of the taxes at any time there may be no clog on the equity of redemption. The question arises how to give relief to the mortgagors when the two stipulations taken together amount to a clog but if taken individually they would not.
After the Court holds that the stipulations taken together amount to a clog, it may relieve the mortgagors from the stipulation about the mortgage not being redeemable for 49 years or may relieve them from the stipulation that the mortgagees are entitled to rebuild the house and pay the taxes arid recover the costs and the taxes at the time of redemption with interest, or may relieve them from both the stipulations. It would not be fair and just to relieve them of both the stipulations and if relieving them from either of the stipulations would remove the clog on the equity of redemption, they are entitled to be relieved only from one relief or the other but not both. As regards the choice of the stipulations from which they should be relieved, it would be just to relieve them from the first stipulation about the period of redemption. The mortgagees should have no choice in the matter; the choice should be of the mortgagors and they have chosen to be relieved from the first stipulation by suing for redemption within 49 years. If they are allowed to redeem the mortgage at any time the second stipulation will not be found to be a clog on the equity of redemption, especially when the mortgagors are allowed the benefit of the Usurious Loans Act.
3. In the result the mortgagors should be allowed to redeem the mortgage in spite of the stipulation in the mortgage deed that it cannot be redeemed within 49 years. The case should be remanded and the trial court will consider to what extent the mortgagors are entitled to the benefit of the Usurious Loans Act.
4. I agree that the respondents should recover along with the principal the money spent by them for reconstruction of the house and on paying the taxes but should not be entitled to recover any interest thereon.
5. This second appeal by four plaintiffs arises out of a suit for redemption of a usufructuary mortgage executed on 4-2-24 for a consideration of Rs. 465/- Under the terms of the mortgage deed, the mortgage could not be redeemed for 49 years from the date of the mortgage. Further, the mortgagees were entitled to rebuild a portion of the house, effect repairs and to recover the cost thereof from the mortgagors with interest at the rate of Rs. 2/- per cent. per mensem. Again, the mortgagees were entitled to recover from the mortgagors the taxes etc., paid by them on the mortgaged property along with interest at the above rate at the time of redemption. The suit which was instituted in 1947 was dismissed by the trial Court (Munsif, Saidpur) on the ground that it was premature, and that decision was maintained in appeal by the Civil Judge of Ghazipur. Hence this second appeal, which has been referred to a Bench by Upadhya, J., as, in his opinion, the question whether there was a clog on redemption in the present case, deserved consideration by a larger Bench.
6. Mr. H. N. Seth, for the appellant pointed out that under the terms of the mortgage deed, not only were the mortgagors debarred from redeeming the mortgage for a period of 49 years, but further they were made liable to pay to the mortgagees the sums paid by them towards rebuilding a portion of the house, the cost of repairs, and taxes and rates paid by them along with interest at the rate of Rs. 24/.- per cent, per annum. He urged, therefore, that this was a fit case for interference with the decisions of the courts below and sending the case back for further trial in accordance with law. Reliance was placed by him on the following authorities:
7. 1. Balbhaddar Prasad v. Dhanpat Dayal, AIR 1924 Oudh 193. There, property worth Rs. 9,000/- was to be redeemed at the end of fifty years at the cost of Rs. two and a half lacs. Wazir Hasan, A. J. C. held:
'In theory, the mortgagor still regains and will be found to retain, his ownership even at the end of fifty years, but in effect he had nothing left in him. He had validly parted with possession and residue was not worth a penny. The combined effect of the covenant postponing redemption for fifty years and other covenants was to render the mortgage irredeemable. The right of redemption is an essential and inseparable attribute of a mortgage security. Equity will relieve against any agreement purporting to defeat or restrict the right of redemption. The mortgage money becomes payable as soon as the mortgagor exercises his right to redeem or is entitled to redeem. The question, as to when a mortgagor is entitled to redeem, must be answered with reference to the terms of the contract as a whole, other relevant circumstances and the rules of Taw and equity, applicable to the particular case.'
The case was sent back to the lower Court for decision according to law.
8. 2. Rajai Singh v. Randhir Singh : AIR1925All643 . There, the facts were that:
'A property was mortgaged for 95 years There was a stipulation that the mortgagor should not seek redemption before the expiry of the period fixed. There was also a stipulation for payment of interest not periodically but only with the principal sum at the time of redemption. The principal together with interest that would be payable to the mortgagee at the time of the redemption was more than three times of the property at the time it was mortgaged.'
Mears, C. J., and Piggott, J., held:
'In considering whether a condition In a mortgage amounts to a clog on the equity of redemption, each case must be examined individually on, its own merits. The whole circumstances of the case must be looked at and it must be seen whether the agreement was drafted with the intention that redemption of the property should be practically frustrated, i. e., made so difficult and so hedged about that there was no human likelihood of it's being redeemed.
....... It would be inequitable to uphold the transaction in its literal terms and that the mortgagor should be allowed to redeem the property before expiry of the term stipulated with the interest due up to the date of redemption.'
9. 3. Ganga Dhar v. Shankar Lal : 1SCR509 (referred to in the referring order). There, their Lordships of the Supreme Court observed that:
'Ordinarily, and in the absence of a special condition entitling the mortgagor to redeem, during the term for which the mortgage is created, the right to redeem can only arise on the expiration of the specified period.'
'The rule against clogs on the equity of redemption is that, a mortgage wag always to be redeemable and a mortgagor's right to redeem was neither to be taken away nor to be limited by any contract between the parties. The Courts will ignore any contract the effect of which is to deprive the mortgagor of his right to redeem the mortgage.''
'The rule against clogs on the equity of redemption, no doubt, involves that the Courts have power to relieve a party from a 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 The reason justifying the Court's powers to relieve the mortgagor from the effects of his bargain is its want of conscience. Putting it in more formal 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. Was the mortgagor oppressed? Was he imposed upon? If he was, then he may be entitled to relief.'
10. Learned counsel submitted that in England the right of redemption is recognised as a right in equity. He pointed out that in Halsbury's Laws of England (3rd Edition) Volume 27, paragraph 243, it has been stated that the right to redeem continues unless and until by judgment for foreclosure, or where the mortgagee is in possession, by running of time, the title of the mortgagor is extinguished, or the interest of the mortgagor, is destroyed, by sale either under the process of the Court, or of a power in the mortgage incident to the security. In his treatise on the Law of Mortgages, 7th Edition at page 1039, Jones says:
'It matters not, how strongly the parties may express their agreement that there shall be no redemption; the intent being contrary to the rules of equity, it cannot be carried into effect. Such contracts violate public policy.'
11. 4. Davis v. Symons, 1934 Ch D 442. There, the facts were:
'A mortgage of land, together with an endowment policy on the life of the mortgagor, made in 1926, contained mutual covenants between the mortgagor and mortgagee that the principal Sum should be allowed to remain on the security for a period of twenty years, or until the earlier death of the mortgagor, and so long as interest was punctually paid, and there was no breach of covenant should not be called in by the mortgagee, during the same period. The covenants in the mortgage were made applicable to a further charge provided that if the mortgagor survived the date of maturity, the policy moneys with profits should be paid to the mortgagee in reduction of the mortgage debt. The ether policy also would mature before the date for redemption..'
Eves, J., held;
'Postponement of redemption for twenty years, together with the other provisions, which made the policies in effect irredeemable, was a clog on the equity, and the mortgagor was entitled to adjustment in an action for redemption.'
Mr. Seth also urged that a contract which amounts to a clog on the equity of redemption, must be regarded as opposed to public policy and consequently void under Section 23 of the Contract Act.
12. It does seem to me that the sum total of the conditions imposed in the present mortgage deed was to place an intolerable burden upon the mortgagor and to make redemption if not impossible, costly out of all proportion to the nature of the transaction. In other words, there is a clog on the equity of redemption.
13. Mr. Sadiq Ali, for the respondents, on the other hand, urged that the mere fact, that the mortgage could not be redeemed for a period of 49 years would not amount to a clog on redemption. He relied upon. Mt. Sabratan v. Dhanpat Gadariya : AIR1933All70 . There a mortgage sought to be redeemed was made in 1905 for a term of sixty years in consideration of a sum of Rs. 75/-. The mortgagee was put in possession of the premises. The rent of the premises was taken to be eight annas per mensem. The mortgage money carried interest at the rate of Rs. 2/- per cent. per mensem. Thus after deducting eight annas per mensem as rent of the house, the mortgagor had to pay Re 1/- p. m. at the end of sixty years at the time of redemption. It was further agreed that the mortgagee would be free to build or to re-build the 'house and in that case, in the event of redemption of mortgage, the mortgagor was to pay the amount of the money spent over the building or rebuilding with interest at the same Rs. 2/- per cent per mensem. The trial Court decreed redemption subject to payment of Rs. 2,300/-. The lower appellate Court, however, directed redemption on payment of Rs. 711/- holding that the cost of the building? was only Rs. 300/.- and as the house was capable of fetching Rs. 5/- or Rs. 6/- p. m., the interest should be set off against the Usufruct and the only principal amount of Rs. 300/- was to be paid under this head.
14. In the High Court, on behalf of the mortgagee, appellants, it was argued that the courts below were not entitled to interfere with the terms of the contract. In agreeing with this contention Mukherji and Bennet, JJ., observed:
'Under the law of the land, a contract has to be respected and cannot be interfered with except on well known lines. Mere vague grounds of equity will not justify a Court in interfering with the terms of the contract. In certain cases, the Courts in, India have followed the English rule which sets aside what it calls 'clogs on equity of redemption'. Those rules have to be applied within well defined limits and what contract may be set aside in Engand as a mere clog on redemption, need not, necessarily, be set aside having regard to the conditions of the Indian Law. Broadly speaking, a stipulation, which gives the mortgagee an advantage which does not arise legitimately out of the mortgage contract is treated as a stipulation to clog the redemption.'
They held that the mere fact that the period of redemption was large, was no ground for holding that the agreement was bad and should be relieved against. The Bench observed:
'In our view, neither the Court of first instance was right in reducing the interest, nor was the appellate court right in setting off the usufruct against the interest, there being no stipulation, to that effect. The stipulation was that the mortgagee would be entitled to interest on the money laid out by him in building or rebuilding the house. The lower appellate Court has held that Rs. 300/- were spent in building the house. The appellants, therefore, are entitled to interest on this sum at 2 p. c., p. m. from 1908 when the building was erected to the date of the decree which we take to be the present date. The interest will be calculated in complete years, as the exact dates are not forthcoming, i.e., for 24 years. The interest will be simple.'
15. The view taken in the above case must give way to the Supreme Court decision in : 1SCR509 cited earlier. The test laid down there, for deciding whether a mortgagor would be entitled to relief against the Oppressive conditions set forth in the mortgage deed has to be followed. In the present case, the conditions are definitely oppressive and the plaintiffs were, therefore, entitled to move the Court for relief. The suit ought not to have been dismissed as premature.
16. There remains the question, as to subject to what terms redemption should be permitted. Obviously, the mortgagees are entitled to the amount of the original loan (Rs. 465/-) as well as the amount spent by them on the reconstruction of the house and the taxes paid by them. Interest, however, should not be allowed on the latter sums. Further, the question whether the mortgagors are entitled to the benefit of the provisions of the Usurious Loans Act will also have to be gone into.
17. Accordingly, I would allow this appeal set aside the decisions of the courts below and send the case back to the trial Court for disposal with the direction that redemption should be allowed in favour of the plaintiffs on payment of the amount of the original loan (Rs. 465/-) plus the actual sums spent by the defendants over the reconstruction of the house and on paying the taxes. No interest, however, will be allowed on the latter sums. The trial court will also go into the question whether the mortgagors are entitled to the benefit of the provisions of the Usurious Loans Act, in spite of the stipulated rate of interest on, the principal amount, and, if so, to what extent.
18. The costs of this appeal will form part of the costs of the suit.
BY THE COURT:
We allow this appeal, set aside the judgments of the courts below and remand the case to the trial Court for disposal. The appellants are entitled to redeem the mortgage and the trial Court shall proceed to determine the amount due from them. It shall add to the principal, interest thereon and the sum of money spent by the respondents on the reconstruction of the house and on paying the taxes, but shall disallow interest on this sum. It shall consider whether the mortgagors are entitled to the benefit of the Usurious Loans Act in spite of the stipulated rate of interest on the principal, and if so, to what extent.
19. The costs of this appeal shall form part of costs of the suit.