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Doctrine of clog on Redemption
Under a mortgage, two interests are generated by the owner of the property. One is the interest of the creditor on the property, which is limited and fixed. Another one, is the residuary interest left which can be quantified only by deducting the creditor’s interest from the value of the security. The fundamental bargain from this division of interests is the presence of a right to buy back the property without any paying the loan. This right is called the equitable right to redeem. The first instance of the presence of the right of redemption was found in Roman law. It has been rightfully said that “Redemption is purely a creature of courts of equity”.
In Stanley v. Wilde, Lindley M.R. gave the following explanation of the basis of doctrine –
“The principle 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 or 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 this, that ‘once a mortgage always a mortgage’.
Section 60 of the Transfer of Property Act, 1882 provides the right of redemption to the mortgagee. This right becomes alive only after the principal money becomes. There are certain limitations to this right by the fact that it exists only till the mortgagee decides to exercise his right of foreclosure on the property. Thus, the contract of mortgage between the parties ends, when the debtor exercises his right to redeem through paying off the loan.
This right provided by the Transfer of Property Act is a statutory right which can only be done away by compliance to the procedure established by law. It would henceforth follow that any obstruction to this right would be declared as void as a clog on the equity of redemption.
The maxim once a mortgage always a mortgage means that there can no covenant that modifies the character of the mortgage agreed between the parties that would stop the mortgagor to redeem his property back on payment of the principal and respective interests.
The basis of this doctrine lies in exercise equity, justice, and good conscience and is extensive to areas where the act is not applicable. On a realistic perusal of the workings of a mortgage, it is observed in most of the cases that the mortgagor enters into such an agreement because of some financial predicament. The law recognizes the power of the dominant party to insert clauses that will serve his personal interests by creating impediments on the right to redeem the property. Such obstructions are henceforth struck down by the courts to enable the mortgagee to redeem his property.
Subsequent agreement to postpone redemption;
Any subsequent agreement which acts as an obstruction to the mortgagor by creating any personal obligation will be considered as a clog on the right to redemption. This is because, until and unless there is a charge on the transferred property, the mortgagor is not liable for any sum personally except the mortgage amount.
The collateral benefit to the mortgagee:
A mortgagee may avail some collateral benefit during the period of the mortgage, in which case it’ll be held valid. The mortgagee can also avail some benefits after the mortgage gets over, but in some cases, it may be considered as void and a clog.
