Rights & Liabilities of Mortgagor and Mortgagee

Introduction

A mortgage creates a relationship between the mortgagor (borrower) and the mortgagee (lender). The law ensures a balance between their rights and duties. One of the most important principles is that the mortgagor must always have a right to get back his property.

Meaning / Definition

The rule “once a mortgage, always a mortgage” means that a mortgage cannot be converted into an absolute transfer (complete ownership transfer).

Under Section 60 of the Transfer of Property Act, the mortgagor has a right to redeem (take back) the property after repayment of the loan. This right is called the equity of redemption.

Any condition that restricts or takes away this right is called a clog on redemption, and such conditions are not valid.

Modes or Types

Equity of Redemption

The mortgagor has the right to:

• Repay the loan amount
• Get the property returned (re-conveyed) by the mortgagee

This right continues until it is legally ended (for example, by court order).

Clog on Equity of Redemption

A clog means any condition that restricts or makes it difficult for the mortgagor to redeem the property.

Common instances of clog:

Condition of sale in default

If the agreement says that the property will become the lender’s property on default, it is not valid.

Long period for redemption

If the time given for repayment is too long and unfair, the court may remove such condition.

Restriction after a certain period

If the right to redeem is taken away after a fixed time, it is invalid.

Postponement of redemption

If redemption is delayed unfairly beyond a reasonable time, it is treated as a clog.

Restraint on transfer

If the mortgagor is not allowed to transfer (sell) the property, it is a clog.

Redemption limited to mortgagor only

If only the mortgagor (and not his legal heirs) can redeem, it is invalid.

Penalty on default

Very high or unfair interest rates after default may be treated as a clog.

Collateral Advantage (additional benefit)

Sometimes, the mortgagee is given an extra benefit (additional advantage).

• Such benefit may be valid if it is reasonable
• If it unfairly restricts redemption, it will be treated as a clog and become invalid

Important Case Law

• Sher Khan v. Swami Dayal – condition delaying redemption was held invalid
• Fateh Mohammad v. Ram Dayal – long and unfair redemption period treated as clog
• Muralilal v. Deo Karan – restriction on redemption after time held invalid
• Gulab Chand v. Saraswati Devi – penalty clause treated as clog
• The Biggs Case – deals with validity of collateral benefits
• The Noakes Case – limits on collateral advantage
• The Bradley’s Case – fairness of conditions examined

Distinction / Comparison

Equity of Redemption vs Clog on Redemption

• Equity of redemption: Legal right to take back property after payment
• Clog on redemption: Any restriction on that right

Equity is protected by law, while clog is not allowed.

Practical Example

A takes a loan from B by mortgaging his house.

The agreement says that if A fails to repay within 5 years, he will lose the right to get back the house forever.

This condition is a clog on redemption and is not valid. A can still repay and get back the property.

Summary

• Mortgage does not transfer full ownership
• Mortgagor has right to redeem under Section 60
• This right is called equity of redemption
• Any restriction on this right is called clog
• Clogs are not valid in law
• Courts protect the mortgagor from unfair conditions
• Collateral benefits are allowed only if they are fair