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(REPORTABLE)

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL NO. 1740 OF 2007

Dr. Thakar Singh (D) by Lrs.&  Anr.                 ………Appellants

Vs.

Sh. Mula Singh (D) thr. LR. & Ors.                    ………Respondents

J U D G M E N T

R.F. NARIMAN, J.

1. In this Civil Appeal an interesting question arises for decision.  

One Nand Singh and Dr. Thakar Singh filed a suit for recovery for  

possession of various shops cum vacant sites situated in the main  

Bazar of Moga Town against 14 defendants.  The suit property had  

been  mortgaged  to  one  Suba  Singh  and  Saudagar  Singh,  

defendants  1  and  2,  for  a  sum  of  Rs.26,000/-  vide  registered  

mortgage deed dated 9th March 1942.  After taking an additional  

amount of Rs.3,000/- from the aforesaid Suba Singh and Saudagar

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Singh,  the  plaintiffs  executed  an  additional  registered  mortgage  

deed dated 3rd March 1943.  The material terms of the mortgage  

deed dated 9th March 1942, with which we are concerned, reads as  

follows:

“Now  we  the  executants  while  in  our  full  senses and with our free will having mortgaged  with  possession  the  aforesaid  shops,  Ahatas  including lane passage together with material  (malba)  chob  kari  (wooden  shafts)  etc.,  including  well  together  with  right  to  ingress  and  egress  convenience  and  residence  in  favour  of  Suba  Singh  s/o  Mutsada  Singh,  caste Jat resident of Wara Bhai and Saudagar  Singh son of Sh. Rattan Singh caste Jet r/o  Jawahar  Singh  Didar  Singh  wala  in  equal  share  for  a  sum of  Rs.26,000/-  (Twenty  Six  thousand)  only  half  of  which  comes  to  Rs.13000/-(Thirteen  thousand)  only  possession of which has been given to them.  The  present  mortgagees  shall  get  the  actual  possession from the previous mortgagees after  paying their mortgage money to them and after  getting  the  land  redeemed  from  them.  The  mortgagees  are  competent  either  to  be  in  occupation  themselves  or  to  give  on  rent  to  anyone. Whenever the total mortgage money is  paid  in  two  lots  the  half  of  the  mortgage  property shall be got redeemed in two lots at  the  discretion  of  the  mortgagors.   The  redemption of southern side of the lane shall  be deemed to be half and that of the northern  side shall be other half, meaning thereby that  it  will  be  discretion  of  the  mortgagors  to

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redeem  the  southern  side  of  lane  or  the  northern  side  on  receipt  of  the  half  of  the  mortgage  money.  We  shall  be  liable  for  any  proceedings  arising  out  of  any  objection  thereto. We shall also be liable to make good  the loss or damage caused to the mortgagees  on account of any legal or factual defect in the  mortgaged  property.  The  expenses  for  white  washing and plastering shall be borne by the  mortgagees,  but  the  expenses of  repairs  and  reconstructions  shall  be  borne  by  us,  the  executants.  In  case  of  our  failure,  the  mortgagees shall get it done after giving notice  to us and then we shall be liable to pay the  expenses  borne  by  the  mortgagees.  On  the  payment  of  mortgage  money  when  the  mortgage  money  is  paid,  from  that  day  on  taking  possession  we  shall  be  entitled  to  receive rent in future.”  (Underlining ours)

2. On 25th August 1969, the plaintiffs redeemed the mortgaged  

properties by depositing a sum of Rs.29,000/- . The cause of action  

for filing the present suit arose on account of the fact that physical  

possession of the suit property was not handed over to the plaintiffs  

even  after  the  redemption  of  the  mortgaged  property.  The  

defendants 1 and 2 are said to have rented out portions of the suit  

property  to  defendants  3  to  14.  Since  the  defendants  failed  to  

deliver  possession,  the  plaintiffs  filed  a  suit  for  possession  and  

recovery of damages.  In the Trial Court, a number of issues were

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struck  between  the  parties.   In  the  present  appeal,  we  are  

concerned basically with Issue 4, which reads as under:

“Whether  the  suit  is  barred  under  the  provisions of the Rent Restrictions Act?”

The Trial Court decided the case on all 11 issues and held that on a  

true reading of the mortgage deed, the mortgagor had recognized  

the tenants of the mortgagee whose tenancy therefore did not come  

to an end with redemption of the mortgage.  In First Appeal, the  

High Court of Punjab and Haryana did not go into any of the other  

issues including the issue as to whether the tenancies were created  

before or after the execution of the two mortgage deeds.  It held on a  

reading  of  a  clause  in  the  first  mortgage  deed  that  since  the  

mortgagors would be entitled to future rent after redemption, it is  

clear  that  the  mortgagors  recognized  all  tenants  created  by  the  

mortgagees during the subsistence of the mortgage. Issue No.4 was  

answered accordingly and the suit for vacant possession of the suit  

property from defendants was held not to be maintainable in law.

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3. Learned  counsel  for  the  appellants  raised  a  two-fold  

contention before us.  Firstly, a correct reading of the two mortgage  

deeds  would  only  lead to  the  conclusion  that  on redemption all  

tenancies created by the mortgagees would cease to have any effect  

and would not be binding on the mortgagors.  Alternatively, it was  

also argued that if it were found that on a true construction of the  

mortgage deed the mortgagors’ right  to redeem was in fact clogged  

such clog would not be countenanced by the courts and full effect  

of  redemption including the right to take back possession of  the  

mortgaged  property  free  from  all  encumbrances  would  ensue.  

Learned  counsel  for  the  respondents  basically  supported  the  

judgment under appeal and argued that it was clear from a reading  

of  the mortgage deed that the mortgagors had in fact recognized  

tenancies created by the mortgagees and therefore the present suit  

would not be maintainable - the mortgagors have to go to a Rent  

Court  to  make  out  some  ground  of  eviction  against  tenants  

recognized by them.

4. The right of a mortgagor to redeem is dealt with by Section 60  

of the Transfer of Property Act.  Section 60 reads as follows:

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“60.  Right  of  mortgagor  to  redeem At  any  time  after  the  principal  money  has  become  due,  the  mortgagor  has  a  right,  on  payment or tender, at a proper time and place,  of  the  mortgage-money,  to  require  the  mortgagee  (a)  to  deliver  to  the  mortgagor  the  mortgage-deed and all documents relating to the  mortgaged property which are in the possession  or  power  of  the  mortgagee,  (b)  where  the  mortgagee  is  in  possession  of  the  mortgaged  property,  to  deliver  possession  thereof  to  the  mortgagor, and (c) at the cost of the mortgagor  either to re-transfer the mortgaged property to  him or to such third person as he may direct, or  to execute and (where the mortgage has been  effected  by  a  registered  instrument)  to  have  registered an acknowledgement in writing that  any  right  in  derogation  of  his  interest  transferred  to  the  mortgagee  has  been  extinguished:

Provided that the right conferred by this section  has not been extinguished by act of the parties  or by decree of a Court.

The right conferred by this section is called a  right to redeem and a suit to enforce it is called  a suit for redemption.

Nothing  in  this  section  shall  be  deemed  to  render invalid any provision to the effect that, if  the  time  fixed  for  payment  of  the  principal  money has been allowed to pass or no such time  has been fixed, the mortgagee shall be entitled  to reasonable notice before payment or tender of  such money.”

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Section 62 also recognizes the right of a usufructuary mortgagor to  

recover  possession  under  certain  circumstances.   Further,  the  

rights of a mortgagee in possession are dealt with by Section 72 of  

the Transfer of Property Act.  Suffice it to say that the right to create  

tenancies  is  not  one  of  the  rights  enumerated  in  this  section.  

Section 76 (a) deals with a usufructuary mortgagee managing the  

property as a person of ordinary prudence would manage if it were  

his own.  Section 111(c) of the Transfer of Property Act states:

“S. 111 Determination of lease. —A lease of  immovable property determines –-  

(c)  where  the  interest  of  the  lessor  in  the  property terminates on, or his power to dispose  of the same extends only to, the happening of  any event –- by the happening of such event;”

In All Indian Film Corpoation Ltd. & Ors. v. Sri Raja Gyan Nath  

&  Ors. [1969  (3)  SCC  79],  a  similar  question  arose  before  this  

Court.  In the facts of that case, the mortgage was redeemed on 19 th  

April  1958  after  which  the  respondent  No.1  filed  a  suit  for  

possession  of  the  property  from  the  head  lessee  and  his  sub-

lessees.   The sub-lessees claimed the benefit  of  the East Punjab  

Urban  Restriction  Act.   In  repelling  the  contention  of  the  sub-

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lessees that they were protected tenants as against the mortgagor,  

this Court stated:

“7. The first question to consider is this: Did  the  tenancy  created  by  the  mortgagee  in  possession  survive  the  termination  of  the  mortgagee interest so as to be binding on the  purchaser?  A  general  proposition  of  law  is  that no person can confer on another a better  title  than  he  himself  has.  A  mortgage  is  a  transfer of an interest in specific immovable  property  for  the  purpose  of  securing  -repayment of a loan. A mortgagee's interest  lasts  only  as  long as  the  mortgage  has  not  been paid off. Therefore on redemption of the  mortgage the title of the mortgagee comes to  an  end.  A  derivative  title  from  him  must  ordinarily  come  to  an  end  with  the  termination  of  the  mortgagee's  title.  The  mortgagee by creating a tenancy becomes the  lessor  of  the  property  but  his  interest  as  lessor  is  co-terminous  with  his  mortgagee  interest.  Section  111(c)  of  the  Transfer  of  Property  Act  provides  that  a  lease  of  immovable  property  determines  where  the  interest  of  the  lessor  in  the  property  terminates on, or his power to dispose of the  same, extends only to the happening of any  event-by  the  happening  of  such  event.  The  duration  of  the  mortgagee's  interest  determines  his  position  as  the  lessor.  The

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relationship  of  lessor  and  lessee  cannot  subsist  beyond  the  mortgagee's  interest  unless  the  relationship  is  agreed  to  by  the  mortgagor or a fresh relationship is recreated.  This the mortgagor or the person succeeding  to  the mortgagor's  interest  may elect  to do.  But if  he does not,  the lessee cannot  claim  any  rights  beyond  the  term  of  his  original  lessor's interest. These propositions are well- understood and find support in two rulings of  this  Court  in  Mahabir  Gope  and  Ors.  v.  Harbans  Narain  Singh  [1952]1SCR775  and  Asaram  and  Ors.  v.  Mst.  Ram  Kali  [1958]  S.C.R.986

8.  To  the  above  propositions  there  is,  however,  one  exception.  That  flows  from  Section 76(a) which lays down liabilities of a  mortgagee in possession. It is provided there  that  when  during  the  continuance  of  the  mortgage, the mortgagee takes possession of  the mortgaged property, he must manage the  property  as  a  person  of  ordinary  prudence  would manage it if it were his own. From this  it  is  inferred  that  acts  done  bona  fide  and  prudently  in  the  ordinary  course  of  management,  may  bind  even  after  the  termination  of  the  title  of  the  mortgagee  in  possession.  This  principle  applies  ordinarily  to the management of agricultural lands and  has seldom been extended to urban property  so as to tie it up in the hands of lessees or to  confer on them rights under special statutes.

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To this again there is an exception. The lease  will  continue  to  bind  the  mortgagor  or  persons  deriving  interest  from  him  if  the  mortgagor had concurred to grant it.”

This judgment was followed in  M/s. Sachalmal Parasam v.  Smt.  

Ratnabai & Ors. [1973 (3) SCC 198] at paragraphs  5 to 9.

5. In Pomal Kanji Govindji & Ors. v. Vrajlal Karsandas Purohit  

& Ors. [1989 (1) SCC 458], this Court dealt with the same question  

and arrived at two basic conclusions. The first is that a clog on the  

equity  of  redemption  will  be  disregarded  by  a  Court  of  law  and  

secondly that a lease created by a mortgagee in possession of an  

urban immovable property would not be binding on the mortgagor  

after redemption of a mortgage even assuming such lease is as a  

prudent owner of property would have granted in the usual course  

of management.  This Court held:

“32. It is a settled law in England and in India  that  a  mortgage  cannot  be  made  altogether  irredeemable or redemption made illusory. The  law must respond and be responsive to the felt  and discernible compulsions of circumstances  that  would  be  equitable,  fair  and  just,  and  unless there is anything to the contrary in the

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statute,  court  must  take  cognisance  of  that  fact and act accordingly. In the context of fast  changing  circumstances  and  economic  stability,  long-term  for  redemption  makes  a  mortgage  an  illusory  mortgage,  though  not  decisive. It should prima facie be an indication  as to how clogs on equity of redemption should  be judged.

33. In the facts and the circumstances and in  view  of  the  long  period  for  redemption,  the  provision for interest @ ½ per cent per annum  payable on the principal amount at the end of  the  long  period,  the  clause  regarding  the  repairs  etc.,  and  the  mortgagor's  financial  condition, all these suggest that there was clog  on  equity.  The  submissions  made  by  Mr.  Sachar  and  Mr.  Mehta  are,  therefore,  unacceptable.  

35. Before we dispose of the contentions on the  second aspect, we must deal with some of the  decisions of the Gujarat High Court to which  reference had been made and some of which  was also referred before us. We have noticed  the  decision  of  the  Gujarat  High  Court  in  Khatubai Nathu Sumra v. Rajgo Mulji Nanji. In  Maganlal  Chhotalal  Chhatrapati  v.  Bhalchandra Chhaganlal Shah, P.D. Desai, J.  as  the  learned  Chief  Justice  then  was,  held  that  the  doctrine  of  clog  on  the  equity  of  redemption means that no contract between a  mortgagor and mortgagee made at the time of  the  mortgage and as  a  part  of  the  mortgage  transaction or, in other words, as a part of the

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loan,  would  be  valid  if  it  in  substance  and  effect prevents the mortgagor from getting back  his property on payment of what is due on his  security.  Any  such  bargain  which  has  that  effect is invalid. The learned Judge reiterated  that  whether  in  a  particular  case  long  term  amounted  to  a  clog  on  the  equity  of  redemption had to be decided on the evidence  on  record  which  brings  out  the  attending  circumstances  or  might  arise  by  necessary  implication on a combined reading of  all  the  terms  of  the  mortgage.  The  learned  Judge  found that this long term of lease along with  the  cost  of  repairing  or  reconstruction  to  be  paid  at  the  time  of  redemption  by  the  mortgagor  indicated  that  there  was  clog  on  equity  of  redemption.  The  learned  Judge  referred to certain observations of Mr. Justice  Macklin  of  the  Bombay  High  Court  where  Justice  Macklin  had  observed  that  anything  which  does  have  the  appearance  of  clogging  redemption must  be examined critically,  and  that if the conditions in the mortgage taken as  a  whole  and  added  together  do  create  unnecessary  difficulties  in  the  way  of  redemption it seems that is a greater or less  clog upon the equity of redemption within the  ordinary meaning of the term. In our opinion,  such observations will apply with greater force  in the present inflationary market.  The other  decision to which reference may be made is the  decision  of  the  Gujarat  High  Court  in  Soni  Motiben v. M/s. Hiralal Lakhamshi. This also  reiterates  the  same  principle.  In  Vadilal  Chhaganlal  Soni  v. Gokaldas  Mansukh  also,  the same principle was reiterated. In that case,  it  was  held  by  Gajendragadkar,  J.,  as  the  learned  Chief  Justice  then  was,  that  the  agreement  between  the  mortgagor  and

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mortgagee  was  that  the  mortgagor  was  to  redeem  the  mortgage  99  years  after  its  execution  and  the  mortgagee  was  given  full  authority  to  build  any  structure  on the  plot  mortgaged  after  spending  any  amount  he  liked.  It  was held  that  the  two terms of  the  mortgage were so unreasonable and oppressive  that these amounted to clog on the equity of  redemption.  Similar  was  the  position  in  the  case  of  Sarjug  Mahto  v. Smt.  Devrup  Devi,  where also the mortgage was for 99 years. In  Chhedi  Lal  v.  Babu  Nandan,  the  court  reiterated that freedom of contract unless it is  vitiated  by  undue  influence  or  pressure  of  poverty  should  be  given  a  free  play.  In  the  inflationary  world,  long  term  for  redemption  would prima facie raise a presumption of clog  on  the  equity  of  redemption.  See  also  the  observations  in  Rashbehary  Ghose's  'Law  of  Mortgage' 6th Edn. pages 227 and 228.

39.  On  the  second  aspect  of  the  question  whether  the  right  of  the  tenants  of  the  mortgagees are protected after the redemption  of mortgage, reliance was placed by the First  Appellate  Court  on  the  decision  of  the  Full  Bench  of  the  Gujarat  High  Court  in  Lalji  Purshottam  v.  Thacker  Madhavji  Meghaji.  There  urban  immovable  property  was  mortgaged with possession, mortgagee creating  lease during the subsistence of the mortgage.  The question was whether after redemption of  mortgage  such  lease  is  binding  on  the  mortgagor. It was held that Section 76(a) of the  Transfer  of  Property  Act  would  not  apply  to  such  cases.  There  must  be  express  words  showing  an  intention  if  tenancy  was  to  be

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created beyond the term of the mortgage. Mere  reference  that  mortgagee  is  entitled  to  lease  property does not create a binding tenancy on  the  mortgagor. After  the  redemption  of  the  mortgage  the  relationship  of  landlord  and  tenant does not exist. Such tenant, therefore,  does  not  get  any  protection  under  Section 12 of the Bombay Rent Control Act, it  was held. The Gujarat High Court had referred  to several decisions of this Court. In Mahabir  Gope  v. Harbans  Narain  Singh  which  was  a  decision  dealing  with  a  lease  created  by  a  mortgagee  with  possession  under  the  Bihar  Tenancy  Act,  this  Court  reiterated  that  the  general  rule  is  that  a  person  cannot  by  transfer  or  otherwise  confer  a  better  title  on  another  than  he  himself  has.  A  mortgagee  cannot,  therefore,  create  an  interest  in  the  mortgaged  property  which  will  enure  beyond  the termination of  his  interest as mortgagee.  Further the mortgagee, who takes possession  of the mortgaged property, must manage it as  person of ordinary prudence would manage if  it were his own; and he must not commit any  act  which  is  destructive  or  permanently  injurious  to  the  property.  Reliance  maybe  placed for this purpose on Section 76, clauses  (a)  and  (e)  of  the  Transfer  of  Property  Act,  1882.  It  was  held  that  the  provisions  of  Sections 20 and 21 of the Bihar Tenancy Act,  did not apply to the lessees since they were not  'settled raiyats' and the lessees could not claim  to have secured under the statute occupancy  rights in the land. It was further held that the  mortgagor was entitled to the possession of the  land upon redemption of  the  mortgage.  In  a  slightly  different  context  in  Harihar  Prasad  Singh  v. Mst.  of  Munshi  Nath  Prasad,  this  Court  was  concerned  with  a  mortgage  with

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possession effected on agricultural land. This  Court had to consider in that decision whether  under the provisions of the Bihar Tenancy Act  the tenant inducted on the mortgaged property  during  the  pendency  of  the  mortgage  could  claim right to remain in possession after the  redemption. Venkatarama Ayyar, J., speaking  for  the  Court  pointed  out  that  if  the  tenant  could not resist the suit for ejectment either by  reason  of  Section 76(a) of  the  Transfer  of  Property  Act  or  Section 21 of  the  Bihar  Tenancy Act, the tenant could not get such a  right  as  a  result  of  the  interaction  of  both  those sections. This Court ultimately held that  the  tenants  inducted  by  the  mortgagee  with  possession  had  failed  to  establish  that  they  had any right of occupancy over the suit lands  and that the plaintiffs were entitled to a decree  in  ejectment,  with  future  mesne  profits  as  claimed in the plaint. Thus a right claimable  under Section 76(a) of the Transfer of Property  Act because of a lease created in the course of  prudent management of the property was put  on a different  footing altogether  from a right  created by a special statute.

46. We have noted hereinbefore the ratio and  the  basis  of  the  decision  of  this  Court  in  Jadavji  Purshottam  v.  Dhami  Navnitbhai  Amaratlal.   Shri  Mehta submitted that  there  was no clear finding as to when the tenants  were inducted whether before or after the Rent  Restriction Act and therefore, he pleaded that  the  matter  should  be  referred  to  the  larger  Bench. In view of the facts found in this case  which were similar to the facts mentioned in

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Jadavji Purshottam's case, there is no specific  authority  in  the  lease  which  stated  that  the  lease  would  continue  beyond  the  period  of  mortgage. There  is  no  extended authority  as  contemplated  in  Jadavji  Purshottam  case  found in this case. The submission was that  the  matter  should  be  considered by a  larger  Bench in the light of  the Jadavji  Purshottam  case.  We  are  unable  to  accept  the  said  submission.  In  this  case  the  words  in  the  mortgage deed, as we are taken through, did  not  clearly  allow  creation  of  tenancy  beyond  the  period  of  mortgage. That,  in  any  event,  would  not  have  been  prudent  management,  hence,  there is  no finding that  the mortgage  deed permitted, either expressly or impliedly,  creation  of  tenancy  beyond  the  period.  We  think  that  the  tenants  were  not  entitled  to  protection  after  redemption  of  mortgage.  Furthermore, in all these cases the authority of  the  mortgagees  to  lease  out  the  property,  expressed or implied, was circumscribed by a  stipulation  that  the  mortgagee  should  re- deliver the possession of the property when the  mortgage  was  redeemed. In  that  context,  we  are  of  the  opinion  that  the  submissions  on  behalf of the tenants cannot be entertained.”

(Emphasis supplied)

6. In  Shivdev Singh & Anr. v.  Sucha Singh & Anr. [2000 (4)  

SCC 326], this Court held that a mortgage for a period of 99 years  

being an unreasonably long period before which redemption could

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not take place would be a clog on the equity of  redemption and  

would therefore be disregarded by the Court.  On the facts of the  

case,  the  mortgage  deed  was  dated  19th March  1968  and  the  

mortgage was sought to be redeemed long before the period of 99  

years  came  to  an  end.   It  was  held  that  such  redemption  was  

possible and the 99 year period was held unenforceable.  It was  

further held that it is a right of the mortgagor on redemption to get  

back the subject of the mortgage and to hold and enjoy the property  

in the same manner as he was entitled to hold and enjoy it before  

the mortgage.  If he is prevented from so doing such prevention is  

bad in law.

7. There is a long line of High Court judgments which hold that a  

mortgagee continuing in possession as a tenant after redemption is  

a clog on redemption and is invalid as it prevents the mortgagor  

from getting back the property in the same condition as he gave it  

when the mortgage was executed.  In  Mahomed Muse v.  Jijibhai  Bhagvan [(1885) 9 Bom 524 at pg 525], it was held:

“The objection to the condition in the mortgage,  that  if  the  mortgagor  redeemed  the  land,  the  mortgage right only should be extinguished, and  the lands should remain in the right hands of  the mortgagee, he paying a rent of 2 Rupees per  bigha, has not been dealt with by the Assistant

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Judge,  although  it  was  raised  by  the  fourth  ground  of  the  plaintiffs’  appeal.  Such  a  condition, although it does not exclude the right  of  redemption,  fetters  it  with  the  onerous  obligation  of  accepting  the  mortgagee  as  a  perpetual  tenant,  and ought not,  therefore,  in  our  opinion,  to  be  enforced  in  a  Court  of  Equity.”  

In  Parmanand Pandit v. Mata Din Rai [(1925) 47 All 582 at pg  584], it was held:

“As to the first point, it seems to me that the  condition  that  even  after  redemption  the  mortgagees 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  same  time  when  the  mortgage  is  made, must be taken to be a clog on the equity  of  redemption.  On  the  other  hand,  a  subsequent contract which modifies the right of  redemption may not be such a clog. Although  the principle underlying the rule of  a clog on  redemption is very old yet it still prevails and  will not permit any device or contrivance, being  part  of  the  mortgage  transaction  or  contemporaneous with it, to prevent or impede  redemption. It follows that any covenant under  which  some  right  to  retain  possession  is  reserved  to  the  mortgagee  even  after  the  property is redeemed is a clog on redemption as  it both prevents and impedes redemption. That  such a clause amounts to a clog on redemption  is covered by authority. In the case of Mahomed  Muse v. Jijibhai Bhagvan, which was followed

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by a learned judge of this court in the case of  Sheo Singh v. Birbahadur Singh, and has been  subsequently  followed  by  the  Madras  High  Court  in the  case of  Ankinedu v.  Subbiah,  a  covenant  under  which  the  mortgagee,  even  after  redemption,  was  entitled  to  retain  the  property  on  payment  of  a  fixed  rent,  was  considered  to  be  a  clog  on  the  equity  of  redemption  and  unenforceable  in  a  court  of  equity.  I  am  accordingly  of  opinion  that  the  clause  cannot  bind  the  mortgagor’s  representatives and that, therefore, if they have  paid the entire amount due, they are entitled to  take possession of the land unencumbered of  any contract for the grant of perpetual lease.”  

To the same effect the following judgments have also held that a  

mortgagee remaining in possession as a tenant post-redemption is  

invalid as a clog on redemption:  

Sheo Singh v. Birbahadar Singh, (1910) 6 IC 707 (All) at pg 708,  709;  

Aukinidu v. Subbiah, (1912) 35 Mad 744 at pg 749;

Daolal Rai v. Sheikh Chand, (1915) 31 IC 869 (Nag) at pg 870;

Ram Narain Pathak  v. Surathnath,  (1920) 57 IC 327 (Pat) at pg  338;

Bhimrao v. Sakharam, AIR 1922 Bom 277 at pg 278;

Satyavatamma v. Padmanabhan, AIR 1957 AP 30 at para 19;

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Gobind Ram v. Rajphul Singh, AIR 1973 P & H 94 at para 11, and

Maina Devi v. Thakur Mansingh & Ors., AIR 1986 Raj 44 at para  30.

8. On the facts of this case, it will be seen that the mortgagees  

were entitled  to  create  tenancies  by virtue  of  the  mortgage  deed  

dated 9th March 1942. However, there is nothing in the language of  

the mortgage deed to indicate clearly that the tenancies created by  

the  mortgagees  would  be  binding  on  the  mortgagors.   At  the  

highest,  after  redemption,  and  after  possession  is  taken,  the  

mortgagor  or  mortgagors  will  also  be  entitled  to  receive  rent  in  

future.   It  will  be  seen  that  the  mortgagor’s  right  to  get  back  

possession is expressly recognised by the mortgage deed without  

any clear and unambiguous language entitling tenants created by  

the  mortgagees  to  become  tenants  of  the  mortgagors.  The  

entitlement to receive rent in future can by no stretch be held to  

create  a  tenancy  between  the  mortgagor  and the  tenants  of  the  

mortgagees.  This phrase has to be reconciled with the expression  

immediately preceding it namely “on taking possession”.  It is clear  

that taking of possession from the mortgagees and his tenants is

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completely  antithetical  to  recognizing  the  mortgagees’  tenants  as  

the mortgagors’ tenants.  If the clause is to be read in the manner  

that the High Court has read it, the mortgagors would not be able  

to  get  back possession on redemption which would in  fact  be a  

serious  interference  with  their  right  to  redeem  the  property  

inasmuch as the mortgagors would have to evict such tenants after  

making out a ground for eviction under the Rent Act.  Such ground  

can only be bonafide requirement of the landlord or some ground  

based on a fault committed by the tenant such as non-payment of  

rent or unlawful  subletting etc.  Further,  such ground may never  

become  available  to  the  mortgagor/landlord  or  may  become  

available only after many years.  It has already been seen that a  

mortgagee continuing in possession after redemption as tenant of  

the mortgagor is regarded as a clog on redemption.  The position is  

not different if the mortgagee’s tenants continue in possession after  

redemption.  This would necessarily have to be disregarded as a  

clog on redemption as the right to redeem would in substance be  

rendered  illusory.   In  the  circumstances,  the  judgment  of  the  

Punjab and Haryana High Court dated 31st March 2004 is set aside.  

All other issues are left open and can be agitated before the High

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Court.  It  will  be  open  to  all  parties  to  raise  such  pleas  as  are  

available to them in law.  Considering that the cause of action in  

the suit arose in 1969, the High Court is requested to take up RFA  

No.238/1979 to decide the other issues as early as possible and  

preferably  within  six  months  from  the  date  of  delivery  of  this  

judgment.

     ………………………………J.       (Dipak Misra)

      …….……………………….J.        (R.F. Nariman)

New Delhi, October 14, 2014.