1. This appeal has been filed against the judgment and decree of the Additional District Judge, Rohtak, by which a preliminary decree for redemption was passed by the Subordinate Judge, First Class, Rohtak, in favour of plaintiff-respondent No.1.
2. Briefly the facts of the case are that Rajphul Singh was the owner of the property in dispute which is comprised in shop No.426 and half share of shop No.427. He mortgaged the said property with Gobind Ram by means of registered mortgage deed dated March 27, 1959, for a consideration of Rs.7,500/-. The mortgagee was given the actual possession of the northern portion of shop bearing No.426 which has been shown in the plan by letters 'ABCD'. The actual physical possession of the remaining portion of shop No.426 could not be given as one Chaman Lal was a tenant in that shop under the plaintiff and similarly the possession of half portion of shop No.427 could not also be given as defendant No.5 Raghu Nath was a tenant therein. These tenants, however, attorned to the mortgagee. The relevant condition regarding redemption was that the plaintiff could redeem the property after one year and within a period of ten years from the date of registration. Another relevant clause in the deed was that in case of redemption if the mortgagee could not deliver the actual physical possession of the northern portion of shop No.426, then he would be deemed to be a tenant in that shop on payment of a rent of Rupees 16/- per mensem and the mortgagor's debt would be deemed to be reduced to the extent of Rs.2,800/-. In other words, the whole of the property could be redeemed on payment of Rs.4700/- but the mortgagee was entitled to retain the northern portion of shop No.426 on payment of Rs.16/- per mensen as rent. The plaintiff further stated that the above condition was a clog on equity of redemption and he was not bound by it. It was also averred that the mortgagee defendant No.1 gave on lease the northern portion of shop No.426 to Surjan Dass and southern portion thereof to defendants 3 and 4, Sawan Mal and Amir Chand respectively. He instituted the suit for possession by redemption on payment of Rs.7,500/-. Defendants 1 to 4 contested the suit and controverted the allegations of the plaintiff. According to the defendant No.1, he became a tenant by virtue of the option clause by which he was given a right to retain possession of the northern portion of shop No.426 on payment of Rs.16/- per mensem as rent. He however, pleaded that the rent was to be adjusted towards the amount of Rs.2800/- which was to be retained by the plaintiff as an advance rent. He also averred that the plaintiff was entitled to redeem the property on payment of Rs.4700/- as he was exercising the option to retain the northern portion of the shop in his possession as a tenant. He also submitted that the (defendant No.1) was carrying on business in partnership with defendants 3 and 4 in northern portion of shop No.426 and he would become tenant under him on redemption of the property. Defendant No.1 also claimed an amount of Rs.1935.33 np. as he spent this amount on the property in dispute with the consent of the plaintiff. The other defendants also contested the suit. On the pleadings of the parties, the following issues were framed:--
'1. Whether the property in dispute was mortgaged for Rs.7500.00?
2. Whether the condition regarding the grant of tenancy as mentioned in para 5 of the plaint is a clog on the right of redemption and is not binding on the plaintiff?
3. Whether the plaintiff is entitled to have physical possession from the defendants of the shop in dispute?
4. Whether there is a privity of contract between the plaintiff and the defendants Nos.3 and 4 and what is its effect?
3. Defendant No.1 was proceeded against ex parte but subsequently he got the proceedings set aside and filed a written statement which gave rise to the following three issues:--
'1. If issue No.2 is proved, whether the defendant No.1 is entitled to retain the possession of the shop, if so, on what terms?
2. Whether defendant No.1 has paid any house tax, if so, whether he is entitled to recover the same from the plaintiff and to what extent?
3. Whether defendant No.1 has made any improvement in the shop? If so, whether he is entitled to any compensation thereof and, if so, to what amount?'
4. The trial Court held that the condition of tenancy was a clog on equity of redemption and, as such unenforceable. He also held that the payment of Rs.2800/- to the plaintiff was an illegal condition and was void under the East Punjab Urban Rent Restriction Act, 1949 (hereinafter referred to as 'the Rent Act'). On issue No.3, the trial Court came to the conclusion that the plaintiff was not entitled to actual possession of the shop from Raghbir Nath but held that he was entitled to get possession of whole of Shop No.426. No finding was given by it on issue No.4. Additional issues 1 to 3 were decided by it against defendant No.1. The trial Court passed a preliminary decree for redemption on July 31, 1967, on payment of Rs.7500/- with a rider that he would not be entitled to actual possession of shop No.427 which was in possession of defendant No.5 but would be entitled to physical possession of both portions of shop No.426. A final decree was passed in the same terms on August 8, 1967. The defendants 1, 3 and 4 having felt aggrieved against the decree of the trial Court filed appeal to the Additional District Judge before whom only issue No.2, additional issues Nos.1 and 2, and question of costs, were pressed. The first appellate Court affirmed the findings of the trial Court and dismissed the appeal. The same defendants, namely, defendants 1, 3 and 4 have come up in appeal to this Court against the judgment and decree of the first appellate Court.
5. The first submission which has been made by the learned counsel for the appellants is that clause 6 of the mortgage deed dated March 27, 1959, Exhibit D-1, does not constitute a clog on the equity of redemption. The free translation of the abovesaid clause is as under:--
'The mortgagee shall deliver physical possession of the northern half portion of the aforesaid mortgaged shop No.426 after vacating the same as per above conditions. In case, he does not deliver the physical possession thereof Rs.2800/- shall be considered as paid out of the mortgage money and I shall be entitled to redeem the entire mortgage property by paying only the remaining mortgage money of Rs.5700/- and i shall deposit Rs.5700/- in the Court or if the physical possession is not delivered the mortgage money of Rs.5700/- instead of Rs.7500/- which is due, together with costs shall be considered. If the physical possession is not delivered northern shop No.426 shall be under the possession of mortgagee as tenant and after the redemption the mortgagee shall be liable to pay its rent at the rate of Rs.16/- per mensum. Shri Gobind Ram will be my, the executant's tenant. It shall be at the will of the mortgagee that he may change the possession of the northern portion of shop No.426 as a tenant from that of a mortgagee and shall remain in possession thereof on redemption.'
Note:--It is admitted by both the counsel, that Rs.5700/- has wrongly been mentioned in this clause, which ought to be Rs.4700/- according to correct calculations.
6. According to the learned counsel for the appellants, the mortgagor was entitled to redeem the property and the condition that the mortgagee would be entitled to retain possession of the northern portion of Shop No.426 on payment of Rs.16/- per mensum as rent adjustable towards the amount of Rs.2800/- which the mortgagor was entitled to retain out of the mortgaged money, cannot be said to be clog on equity of redemption. The learned counsel submits that the said term entitles the mortgagor to redeem the property and, therefore, the question of clog does not arise. He further submits that the mortgagee was also liable to ejectment from the shop in case there was breach of any provision of law as contained in the Rent Act and, therefore, the lease cannot also be said to be for an indefinite period and the mortgagee also cannot keep the mortgagor out of possession for a long time. He adds that for the purpose of finding out whether certain conditions in the mortgage deed amount to a clog, the mental condition of the parties at the time of execution of the mortgage deed have to be looked into and it is further to be seen in what circumstances the mortgagor took the loan from the mortgagee. In case the mortgagor was in such an embarrassed condition or financial difficulty that the mortgagee could dictate his terms on the mortgagor and he utilized that dominating position for the purpose of imposing onerous conditions so that redemption may be prevented, only then the conditions can be said to be clog and not otherwise. In other words, he contends, that oppressive conditions by which redemption is obstructed are to be interpreted in the light of the mortgagor's needs of money and the fact that his misery was exploited by the mortgagee. He has referred to the mortgage deed and says that no such condition is spelled out from it from which it can be inferred that the mortgagor was in dire need of the money and he accepted whatever terms were dictated by the mortgagee. On the other hand, the learned counsel for the respondents controverts this position and states that no such absolute principle can be laid down. Each case has to be decided on its facts. If the condition was clearly a clog, the question that the mortgagor was or was not in an embarrassing position should not at all be gone into.
7. The law in India regarding the redemption in analogous to the one in England and the principles which have been enunciated by the Courts in England have been followed in this country. Lord Lindley in Santley v. Wilde, (1899) 2 Ch 474 has held as follows:--
'The principles is this. A mortgage is a conveyance of land or an assignment of chattels 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 of discharge of such debt or obligation, any provision to the contrary 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 that once a mortgage, always a mortgage, but I do not understand that this principle involves the further proposition that the amount or nature of the further debt or obligation, the payment or performance of which is to be secured, is a clog or fetter within the rule.'
8. The above language was approved by Lord Halsbury in Noakes and Co. Ltd. v. Rice, (1902) AC 24. Lord Macnaghten has added at pages 31 and 32 of the same report as follows:--
'It seems to me to be contrary to principle that a mortgagee should stipulate with his mortgagor that after full payment of principal, interest and costs he should continue to receive for a definite or an indefinite period a share of the rents and profits of the mortgagee property as the result of an obligation arising from the contract made when the mortgage was created.'
9. From the above dicta, it is clear that redemption is the essence of a mortgage and is inherent in it and the equity will not permit any device or contrivance to prevent or impede redemption. In Mohammad Sher Khan v. Raja Seth Swami Dayal, AIR 1922 PC 17, the mortgage was for a period of five years with a condition that if the money was not paid, the mortgagee might enter into possession for a period of 12 years and the mortgagor could not redeem during that period. it was held there in that the condition hindered an existing right to redeem and was, therefore, invalid. In Khan Bahadur Mehrban Khan v. Makhana, AIR 1930 PC 142, the conditions of the mortgage were that the mortgagees were entitled to possession for 19 years. At the end of the period, if the mortgagor paid off the mortgage money the property was to belong, as to a limited interest therein only, to the mortgagor, and as to the major interest therein, to the mortgagee. In case, the mortgagor could not pay off the mortgaged money at the end of 19 years, the property was to belong to the mortgagee absolutely. After the expiration of 19 years, the property was to belong to the mortgagee absolutely. After the expiration of 19 years, the appellant as an assignee of the mortgagor, brought a suit for redemption. It was held that the provisions in the deed being a clog on the equity of redemption were void and could have no more binding force against the assignee of the mortgagor than they had against the mortgagor himself. It was also held that the provisions of the mortgage deed conferring on the mortgagee on redemption an interest in the property constitute a clog or fetter upon the equity of redemption. It is clear from the aforesaid observations that any fetter placed on the mortgagor after the redemption of the property is to be treated as a clog on the equity of redemption. A similar case to that which is now in hand arose and came up for decision before a Division Bench of the Allahabad High Court in Parmanand Pandit v. Mata Din Raj, AIR 1925 All 427, consisting of Mukerji and Sulaiman, JJ. In that case, there was a clause in the mortgage deed that even after redemption the mortgagees would not be rejected by they could hold on the land as lessees on payment of annas 8 per Bigha annually. There was a further provision that the mortgagees would be entitled either to cultivate the land or to plant a grove on it. The plaintiffs in a suit for redemption claimed that they were entitled to actual possession on payment of the principal sum only. The defendants contested the claim and pleaded that even after redemption, they were entitled to hold the property on payment of the agreed rent. The question which arose for decision was whether the plaintiffs were entitled to actual possession of the leased land on redemption or whether the mortgagees could be allowed to retain possession as lessees even after the redemption. Sulaiman, J. (as his Lordship then was) while speaking for the Court observed as follows:--
'It seems to me that the condition that even after redemption the mortgages would hold on the land, was a clog on the equity of redemption. Conditions which prevent, or impede the right of redemption even after redemption if such conditions are entered into at the time when the mortgage is made, must be taken to be clog on the equity of redemption.'
10. It was further observed in the said case that although the principle underlying the rule of a clog on redemption was very old, yet it still prevailed and would not permit any device or contrivance, being part of the mortgage transaction or contemporaneous with it, to prevent or impede redemption. Any covenant under which some right to retain possession was reserved to the mortgagee even after the property was redeemed was a clog on redemption as it both prevents and impedes redemption. In a case reported as Rattan Singh v. Kishen Das AIR 1937 Lah 49, a Division Bench of Lahore High Court observed that permanent lease by mortgagor in favour of the mortgagee, though by a separate deed and for consideration not included in mortgage debt was part of the same mortgage transaction and was therefore, a clog on equity of redemption. By perusal of the aforesaid case, it is clear that any condition which impedes the mortgagor to take possession of the land after redemption was a clog on equity of redemption. The learned counsel for the appellants has relied on Ganga Dhar v. Shankar Lal, AIR 1958 SC 770. In that case, a mortgage was created with a condition that it would not be redeemed before the expiry of 85 years and in case it was not redeemed within a period of six months, thereafter, the mortgagor or his legal representatives would have no claim over the mortgaged property after the expiry of the stipulated period. A suit for redemption was filed and a plea was taken by the defendant that the suit was premature as under the mortgage contract, there was no right of redemption for 85 years after the date of mortgage, which was August 1, 1899. According to the defendant, the property could not be redeemed earlier than August 1, 1984. The plaintiff took up the plea that the period of 85 years as period of redemption was a clog on equity of redemption. Their Lordships of the Supreme Court followed Mt. Bakhtawar Begam v. Husaini Khanum, AIR 1914 PC 36, wherein it was observed as follows:--
'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 of redemption can only arise on the expiration of the specified period.'
11. Their Lordships further observed that the term providing that the right to redeem would arise after 85 years did not take away the mortgagor's right to redeem and was, therefore, not in that sense, a clog on equity of redemption. It, however, prevented accrual of right to redeem for the period mentioned. The observations to which my attention has been drawn by the learned counsel for appellants were made in view of the circumstances of that case. The fact in the present case are peculiar and those observations will not be applicable here. If the condition itself is a clog on equity of redemption, it will not cease to be a clog merely because the mortgagor was not in difficult or embarrassed situation or that those conditions were not imposed on him by the mortgagee forcibly. The right of redemption is an inherent right and any clause that impedes that rights a clog on equity of redemption. The mortgagee while lending money cannot enter into an agreement, the effect of which is that the mortgagor cannot have possession of the mortgaged property after redemption. A long term provided in the mortgage deed, for redemption may not necessarily be a clog on equity of redemption but a collateral advantage which goes beyond the period of redemption is a clog and such a condition is invalid. A condition that after redemption the mortgagee should continue in possession as a permanent tenant has been held to be invalid in India. After coming into force of legislation providing security of tenancies in urban as well as rural areas, the agreement to retain property as tenants by the mortgagees after redemption is equally cumbersome and onerous. In case of commercial premises the rent legislation in the State of Haryana provides that it cannot be got vacated even for personal requirements. The chances of vacation of such premises became very bleak and the condition in mortgage deed to retain possession as a tenant after redemption is harsh and burdensome and amounts to a clog on equity of redemption. Such a clause cannot be enforced after the property has been redeemed. In my view, the decision of the learned Additional District Judge is correct on this issue and I affirm the same.
12. The next contention raised by the learned counsel for the appellants is that the findings of the first appellate Court to the effect that the aforesaid condition is forbidden by law and, therefore, the whole contract of tenancy becomes void and cannot be enforced in a Court of law is incorrect. The learned counsel for the appellants has faintly argued that the condition incorporated in clause 6 of the mortgage deed was a valid one and there was nothing illegal in it. On the other hand, the learned counsel for the respondents has contended that the finding arrived at by the first appellate Court is perfectly valid. According to the terms of the mortgage deed, the mortgagee on redemption was entitled to retain possession of the northern portion of shop No.426 and was liable to pay rent thereof at the rate of Rupees 16/- per mensem. In addition to that, the mortgagee (sic) (mortgagor?) was entitled to retain an amount of Rupees 2800/- and could seek redemption on payment of Rupees 4700/-. The said amount of Rupees 2800/- is a premium which cannot legally be charged by the landlord from a tenant. Section 7 of the Rent Act is in the following terms:--
'(1) No landlord shall in consideration of the grant, renewal or continuance of a tenancy of any building or rented land require the payment of any fine, premium or any other like sum in addition to the rent.
(2) Nothing in this section shall apply to any subsisting agreement entered into before the 1st day of January, 1939.'
The landlord according to this section is forbidden to accept any fine, premium or any other like sum in addition to rent. It is not only the 'premium' but also any other like sum which a landlord is forbidden to charge under the Rent Act from the tenant in consideration of leasing out the premises to him. The word 'premium' has not been defined in the Rent Act. The Transfer of Property Act, 1882, is not applicable to the State of Haryana. Though the word 'premium' has been defined in Section 105 of the Transfer of Property Act it will not be safe to rely on that definition for the aforementioned reasons in spite of the fact that general principles of that Act are applicable in the State. The word 'premium' according to the words and Phrases Legally Defined, Second Edition by John B. Saunders, means as under:--
'The expression premium includes any fine or other like sum or any other pecuniary consideration in addition to rent. Payment at the request of a landlord of a sum in discharge of an accrued liability of the landlord would be a premium, but not, it seems, a payment made to a third party, for example, a builder, with whom the tenant is required by the landlord to contract. It would seem that a requirement by a landlord that a tenant should contribute to repairs for which the tenant is not responsible or that he should buy the goodwill of a business would constitute a premium. It is sometimes difficult to distinguish between a payment of a premium and a payment of rent in advance. Each case must be decided on its own facts and the substance of the transaction must be regarded not the name given to the payment (23 Halsbury's Laws (3rd Edition) 804.)
'Premium' includes any fine or like sum or any other pecuniary consideration in addition to rent (Housing, Repairs and Rents Act, 1954, Section 49; Rent Act, 1968, Section 92)'.
13. In Wharton's Law Lexicon, Fourteenth Edition, by A.S. Oppe, the word 'premium' has been defined as the consideration paid to the assignor by the assignee of a lease. According to Manual of Law and Phrases, Sixth Edition, by K.J. Aiyer, the terms 'premium' or 'salami' are used in the same sense in which the word 'premium' is understood in English Rent Control Acts. 'Premium' means a cash payment made to the lessor and representing or supposed to represent the capital value of the differences between the actual rent and the best rent that might otherwise be obtained. In connection with leases, the word 'premium' has well known meaning. In my view it means a sum of money paid as consideration for grant of lease by the lessee to the lessor. it represents capitalized rent which might otherwise be obtained by the lessor. The lessee pays such amount to the lessor as he would not otherwise part with possession of the property for the reason that the rent he is entitled to charge under certain Rent Restriction Legislations is too small. No other inference can be drawn from the terms of the mortgage deed that the payment of Rs.2800-was a premium. As the charging of such an amount is prohibited by the Rent Act, clause 6 of the mortgage deed cannot enforced under Sections 23 and 24 of the Contract Act. If this clause is allowed to be enforced, it would defeat the provisions of the Rent Act which is forbidden by Section 23 of the Contract Act. It is also hit by Section 24 of the Contract Act. as part of the consideration is unlawful. In view of the aforesaid circumstances, I am of the view that the said clause is illegal and unenforceable. The finding of the first appellate Court is correct and I affirm the same.
14. For the reasons recorded above, this appeal has no merit, which fails and is dismissed with costs.
15. Appeal dismissed.