Right of Redemption
Right of redemption refers to the mortgagor’s right to redeem his property from the hands of the mortgagee. This implies that once the mortgagor pays off his mortgaged debt he can claim the mortgaged property back which is held as security by the mortgagee. Hence the term redemption refers to the return of the mortgaged property by paying off the mortgaged debt. The right of redemption is a statutory right of the mortgagor. He becomes entitled to have his property revested in him, free of charge on fulfilling his obligations.
Once a mortgage, always a mortgage
A mortgagor is legally entitled to the mortgaged property once he pays off the principal money and unless there is no foreclosure by the Court. He is entitled to the mortgaged property free from any conditions imposed on him unless there is any stipulation to the contrary. It is an indefeasible right of the mortgagor which cannot be taken away from him by law. Hence the right of redemption is inseparable and co-extensive with a mortgage.
Section 60 of the Transfer of Property Act 1882
The section lays down that at any time after the principal money is due and on payment or tender of the mortgaged money, the mortgagor has the right to get back his property and also demand the following-
1. Return of the mortgage instrument that is the mortgaged deed along will all the title deeds
2. The delivery of possession of the mortgaged property from the mortgagee who has the possession of such property
3. Retransfer of the property which would be at the mortgagor’s cost or an acknowledgement in writing of the extinction of the mortgagee’s right in the mortgaged property.
Such a right mentioned above cannot be exercised if it has been extinguished specifically by the act of parties or by a decree of the court. This right available to the mortgagor is called as the right of redemption. However if any provision expressly provides that the time fixed for the payment of mortgage debt is allowed to pass, it will not be invalid. Also if no time is fixed for the payment of the debt, the mortgagee is entitled to receive a reasonable notice before the payment of such money.
Right to redeem a part of the mortgaged property
A mortgage is indivisible. That means a person interested in a part of the mortgaged property is not entitled to redeem only his share by paying the proportionate amount due on the mortgage. However, when a mortgagee acquires the whole or part of the share of the mortgagor, the person interested in a part of the property is entitled to redeem it on payment of part debt. This implies that mortgage is one whole and cannot be divided into parts. Therefore the mortgaged debt can be redeemed only if it is paid in entirety and the holder of part interest cannot redeem a part of the property by paying the proportionate debt. [i]
There are a few exceptions to the right of redemption of part of the mortgaged property, which are as follows-
1. When the terms of the mortgage provide for a partial redemption, then it can take place according to the contract between the parties.
2. When the co-mortgagors have separate interests, mortgage property can be redeemed in part.
3. When there is a partition of the mortgaged property between the co-mortgagors and the mortgagee recognizes the same. [ii]
4. When the mortgagee himself acquires the whole or part of the mortgaged property, the mortgagor will be allowed to redeem his share. [iii]
Right to redeem separately or simultaneously
Under section 61 of the Act states that when a mortgagor has executed several mortgages in favour of the same mortgagee, he may redeem one or more of such mortgages when they become due without redeeming the other mortgages. When there are several mortgagees, the mortgagor can redeem the mortgage separated or simultaneously according to his convenience. However, the parties may allow consolidation of mortgages by mutual consent.[iv]
Clog on redemption
Clog means to stop something from taking place. Hence clog on redemption implies to debarring a mortgagor from exercising his right of redemption. It is a restriction imposed on the mortgagor to redeem his mortgaged property by paying his mortgaged debt. The right to redemption is absolute and cannot be fettered by imposing any condition. Any condition that hinders the right of redemption will be null and void. The clog of redemption relates to transactions that take place between the mortgagor and mortgagee when the mortgage is executed.
In the case of Shankar v. Yeshwant,[v] A had mortgaged his land to B, the mortgage deed stated that in default of redemption after 20 years, B would be the owner of half of the land. This condition was a clog on the equity of redemption. However 4 years after the expiry of the 20 years, B was still in possession of the mortgaged property and A executed a mortgage deed which stated that B would be release half the mortgaged property and the other half would be conveyed to B. The court stated that this condition was valid as it was a mere arrangement between the two parties.
In another case of Pomal Govindji v. Vrajlal Purohit,[vi] the Supreme Court held that a long term for the payment of mortgaged debt will not be a clog on redemption. However, a very long period for redemption along with considering the other relevant facts could create a presumption that it was a clog on redemption.
Right of Subrogation
The term subrogation literally means substitution. The right of subrogation means when the mortgagee transfers his mortgaged debt in favour of an assignee, the assignee will have all the rights of the mortgagee. It is the right of a person to stand in place of the creditor. In order to be entitled to subrogation, the assignee shall pay off the entire mortgaged debt, only on redeeming the mortgaged debt will the assignee be entitled to subrogation. Hence there is no subrogation without redemption.
Section 92 of the Act
This provision of the Act states that any person other than the mortgagee who has any interest or charge upon the mortgaged property or right of redemption of the mortgaged property or any surety for the payment of mortgaged debt or a creditor of the mortgagor or any co-mortgagor, on redeeming the property subject to the mortgage will have the same rights as that of the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee.[vii] Hence the essence of this doctrine is that the party who pays off the mortgage debt gets clothed with all the rights of the mortgagee.
Ganeshi Lal v. JyotiPershad:[viii] The Apex Court held that the doctrine of subrogation will apply to those parts of India where the Act itself is not applicable. This doctrine is based on the principles of justice, equity and good conscience.
Types of Subrogation
Subrogation is of two types –
- Legal Subrogation
A legal subrogation takes place by the operation of law. When a mortgage debt is paid off by some person who has interest or charge or is a surety, creditor or co- mortgagor to protect the interest, it is a legal subrogation. Legal subrogation can take place when the subsequent mortgagee redeems the prior mortgagee or the co-mortgagor redeems the mortgage or the surety redeems the mortgagee or the purchaser of equity of redemption redeems the mortgage.[ix]
- Conventional Subrogation
A conventional subrogation takes place when the person paying off the mortgaged debt is a stranger, such a person has no interest to protect the mortgaged property. This person satisfies the debt under an agreement that he would be subrogated with the rights of the mortgagee who is paid off. It is a subrogation by an agreement. This agreement of subrogation may be express or implied, in writing and registered. [x]
Narain v. Narain:[xi] the court held that the rule of subrogation cannot be applied when the mortgagor himself redeems the mortgage debt. The mortgagor who discharges a prior mortgage debt is not entitled to be subrogated because by doing so he is merely discharging his obligation to the creditor.
Hence the doctrine of subrogation and redemption are co-extensive. There can be no subrogation without redemption. The rule of redemption highlights the recovery of the mortgaged property by the mortgagor after satisfying his mortgaged debt payable to the mortgagee whereas the rule of subrogation states that a person other than the mortgagor who redeems the mortgaged debt due is entitled to all the rights of the mortgagee in the mortgaged property. The above-stated rules are based on principles of equity.
Frequently Asked Questions
How is the right of redemption exercised?
The right of redemption can be exercised by depositing the amount due on the mortgage to the Court or by a instituting a suit for redemption or by paying the mortgaged money to the mortgagee outside the Court.
What is the effect of redemption?
When the mortgagor pays off the mortgaged debt the mortgagee must return all the relevant documents and the possession of the mortgaged property to the mortgagor. Further, the mortgagor may require the mortgagee to retransfer the mortgaged property to the assignee of the mortgagor who is a third person. The mortgagor will be entitled to all the accessions or improvements or a renewed mortgage lease made to the mortgaged property.
Edited by Sakshi Agarwal
Approved & Published – Sakshi Raje
[i] Transfer of Property Act 1882, Section 60
[ii]Mahadaji v. Gampatishet 15 Bom. 257
[iii] Moro v. Balaji 13 Bom. 45
[iv] Transfer of Property Act 1882, Section 61
[v] 22 B.L.R. 965
[vi] A.I.R. 1989 S.C. 436
[vii] Transfer of Property Act 1882, section 92
[viii] AIR 1935 SC 1
[x]Gurudeo Singh v. Chandrika Singh AIR 1909 36 Cal. 193
[xi] AIR 1931 All. 40