1988 (11) TMI 360 - SC - Indian Laws

Court rules on oppressive mortgages, tenants' rights post-redemption.

Pomal Kanji Govindji and Ors. Versus Vrajlal Karsandas Purohit and Ors.

The court found that the long-term mortgages with harsh and oppressive terms constituted clogs on equity of redemption, emphasizing that mortgages should ... - Issues Involved:1. Whether long-term mortgages in the present inflationary market are clogs on equity of redemption.2. Whether tenants inducted by mortgagees can be evicted on the termination of the mortgage or if they enjoy protection under the relevant Rent Restriction Acts.Issue-Wise Detailed Analysis:1. Clog on Equity of Redemption:The fundamental question was whether long-term mortgages, in the context of inflation and fast-moving market conditions, constituted clogs on equity of redemption. The court examined the circumstances under which the mortgage deeds were created, particularly focusing on the financial condition of the mortgagors and the terms of the mortgage deeds. The court noted that the terms were harsh and oppressive, including a 99-year term for redemption, interest on part of the principal amount, and the liberty given to mortgagees to spend any amount on property improvements, which were to be reimbursed by the mortgagor at redemption. These conditions were deemed to be designed to prevent the mortgagors from redeeming the mortgage, thus creating a clog on equity of redemption.The court reiterated the principle that a mortgage should always be redeemable, and any provision that hampers redemption is void. The court emphasized that the right of redemption is an incident of a subsisting mortgage and cannot be taken away or limited by any contract between the parties. The court also considered the changing economic conditions, noting that long-term mortgages might create a presumption of clog on equity of redemption in the context of inflation and increased property values.2. Protection of Tenants Under Rent Restriction Acts:The second issue was whether tenants inducted by mortgagees were protected under the relevant Rent Restriction Acts after the redemption of the mortgage. The court examined whether the leases created by mortgagees were acts of prudent management and whether the tenants' rights were enlarged by subsequent tenancy legislation. The court referred to several precedents, including the Full Bench decision of the Gujarat High Court, which held that a lease created by a mortgagee in possession of urban immovable property would not be binding on the mortgagor after redemption unless the mortgage deed expressly allowed for the creation of a tenancy beyond the term of the mortgage.The court concluded that the tenants were not entitled to protection under the Rent Restriction Acts after the redemption of the mortgage. The court emphasized that the authority of the mortgagees to lease out the property was circumscribed by a stipulation that the mortgagees should re-deliver possession of the property upon redemption. The court held that the tenants' rights did not get enlarged by subsequent tenancy legislation, and the tenants could not claim protection under the Rent Acts.Conclusion:The court upheld the decisions of the lower courts, concluding that the terms of the mortgage deeds amounted to clogs on equity of redemption and that the tenants inducted by the mortgagees were not protected under the relevant Rent Restriction Acts after the redemption of the mortgage. The appeals were dismissed, and the parties were directed to bear their own costs.