SETH GANGA DHAR versus SHANKAR LAL & OTHERS

S.C.R. sUPR~M~ COURT R:mPOR'rS

SETH GANGA DHAR v. SHANKAR LAL & OTHERS

(BHAGWATI, J. L. KAPUR and A. K. SARKAR JJ.)

Morlgage-Mortgago-r's right to redeem-:-lnstrument prtJVidittg that mortgage shall not be redeemable for eightyfive years-Term, if clog' on the equity of redemption-,-Pou·er of Co11.rt-Extent-Appiicc ability-Transfer of Property ACi, I882 (4 of I88z), s. 60.

The rule against clogs on the equity of redemption embodied ins. 60 of the Transfe.r1>f Property Act empowers the Court not only to relieve mortgagor of bargain whereby in certain circumstances his right to redeem the mortgage. is wholly taken :hvay, b.ut also where that right is restricted. The extent of this latter power is, however, limiteJi by the rea:Son that gave rise to it, namely, the unconscionable rtature of the bargain, which, to court of equity, would afford sufficient ground for relieving the rnortga~-0r of .his burden, and its exercise must, therefore, depend on whether the bargain, in the facts and circumstances .of aoy particular case, was· one imposed on the mortgagor. by taking advantage of his difficult and impecuni:ous position at the time when he borrowed the money. '

Vermon v. Bethell, (1762) 2 Eden no; 28 E. R. 838 and D, mid C. Kteg!fager v. New Patagonia Meat and Cold Storage Com-pany Ltd .. [1941] A.C. 25, relied on.

Santley v. !Yi/de, (1913) L. R. 41 I. A. 84 and Mohatiimad Sher Khan v. Seth Swami Dayal, (1912) L. R. 49 I. A. 60, refer-red to.

Consequently'. in suit for redemption where the mortgage deed, by two distinct and independent terms .provided that (l) the mortgage shall not be redeemed for eightyfive years and (2} that it could be redeemed only after that period and within six months thereafter, failing which the mortgagor would cease to have any claim on the mortgaged property and the mortgage deed would be deemed to be deed of sale in favour of the mortgagee, and t"t was clearly evident from the facts and circumstances of th.e case that the bargain was quite fair and one as between parties deali'ng with each other on an equal footing:

Htld, that the term providing for period of l;lightyfive ye'ai'S W.ls not clog on the equity of redemption and the tnere length af the period could not by itself. lead to an inference tha.t the bar-gain was in.any way oppress:ve or unreasonable. The term was enfotceablE'. in law and the suit for redemption filed before the ·expiry.of the period was pretnature.

Held', further, that the term that .on th.e failure of the mort· 'iag-0t ta Eedeem within the specified periocl o! ·six manths; ll'e

April z5.

Seth Ganga Dhar v.

Shankar Lal 0- Others

Stirkar ].

StJPR1ilME1 COtJR'r RlilPOR'rS

would lose his right to do so and the mortgage deed was to be deemed to be deed cif sale in favour o the mortgagee, was clearly clog on the equity of redemption and as such invalid but its invalidity could not in any way affect the validity of the other term as to the period of the mortgage, that stood clearly apart.

C1v1L APPELLATE JuRISDIOTION: C'ivil Appeal No. 150 of 1954. of 1954. 1954.

150 of 1954. of 1954. 1954. • Appeal from the judgment and decree dated March 21, 1950, of the Court of Judicial Commissioner at Ajmer in Civil First Appeal No. 13 of 1948, arising out of the judgment and decree dated March 30, 1948, of the Court of Sub-Judge. 1st .Class, Ajmer, in Civil Suit No. 1 of 1947. ·

Tarachand Brijmohan Lal, for the appellant.

S.S. Deedwania and K. L. Mehta, for the respon-dents.

1958. April 15. The Judgment of the. Court was deliver0d by

SARKAR J.-This appeal arises out of suit for the

redemption of mortgage dated August 1, 1899. The property mortgaged was four-roomed shop with certain appurtenances, standing on piece of I.and measuring 5 yards by 15 yards in Kaya Bazar, Ajmere. The mortgage was created by Purshottamdas who is now dead and was in favour of Dhanrupmal, res, pondent in this appeal. The mortgage instrument stated that the property had been usufructuarily mortgaged in lieu of Rs. 6,300 of which Rs. 5,750 had been left with. the mortgagee to redeem prior mort. gage on the same and another property. It also pro-vid,ed that on redemption of the prior mortgage, the possession of the shop would be taken over and retain-ed by the Illortgagee, Dhanrupmal, who would appro-priate its rent in lieu of interest on the money ad vane·-·• ed by him and the possession of the other property covered by the prior mortgage, being share in Kacheri, would be made over to the mortgagoi;, Purshottamdas. The provisions in the mohgage instrument on whi1ih the present dispute turns were in these terms : •

s.c.R. SUPREME' COURT REPORTS

"1 or my heirs will not'be entitled to redeem the r958 property for period of 85 years. After the . expiry 5 l -. Dh 4. of 85 years we shall redeem it within· period . of six et' Ga~~a • ·. months. In case we do not redeem within period of Shankai Laf ·six months, .then after the expiry of the stipulated & others period;!, my .heirs, and legal representatives shall have no claim over the mortgaged property, and the mort-Sarkar J. ga~e shall have no claim to get the mortgage money and the lagat.(i. e., repairs) expenses that may be due · at the time of default. In such case this very deed will. be deemed to be sale deed. There will be no need of executing fresh sale· deed. The expenses spent in repairs and new constructions 'Yill be paid along with the mortgage money at the 'time of. redemp-tion according to . account produced by the mort-gagee.': -. The mortgagee, Dhanrupmal, duly redeemed. the . earlier mortgage and, went into possession of the .shop while possession of the Kacheri was delivered to the mortgagor. On April 12, 1939, Dhanrupmal assigned . his rights under the mortgage to Motilal who died later . and whose estate is now represented by his sons, who are the other respondents in this appeal. The estate of Purshottamdas, the original mortgagor, is now represented by his son, the appellant. · · . On January 2, 1947, the appellant filed the suit in the. Court of the Sub-Judge, Ajmere, against the res-1 . ponde:qts. The suit was contested by the sonsof Motilal,.the assignee of the mortgage, who are th<:l only respondents appearing in this. appeal and whom we shall hence, hereafter refer to as the respondents .• . They said that the suit was premature as under the mortgage contract there was no right of redemption for eightyfive years aftel' the date of the mortgage, that is to say, till August l, 1984. The learned .Sub-Judge, purporting to follow decisi9n of the Judicial Commis-sioner, Ajmere, to whom he was subordinate, held that the provision postponing redemption for eightyfive years was invalid as it amounted to clbg on the equity 'Of re\iemption. He, therefore, passed _prelimi-nary decree for redemption. On appeal, the learned Judicial Commissioner, Ajme;e, h('.lld, tha~ .the decisio12-

'95[8 ]which the Sub.Judge had purported to follow wa3 Set Ganga -v. 1 ••Y distinguishable. on the su iect b" an He . came examined to t cone usron t 11. large 1 · number of at cases t Sha>1kay L,,z provision in question did not amount to clog on the & 01i.m equity of redemption. He, therefore, allowed the appeal and dismissed the appellant's suit. From this SaYka• .J. decision the appeal to this Court arises.

It is admitted that the case is governed by'the Transfer of Property Act. Under s. 60 of that Act, at any time after the principal money has become due,. the mortgagor has right on payment or tender of the mortgage money to require the mortgagee to reconvey the mortgage property to him. The right conferred by this section has been called the right to redeem and the appellant sought to enforce this right by his suit. Under this section, however, tha,t right can be exercised only after the mortgage money has become due. In Bakhtawar Begum v. Husaini J{hanam ('), also the same view was expressed in· these words:

"Ordinarily, and in the absence of special condi. ti on entitling the mortgagor to redeem during the term for which the mortgage is created, the right of redemp-tion can only arise on tho expiration of the specified period."

Now, in the present case the term of the mortgage is eighty.five years and there is no stipulation entitling the mortgagor to redeem during that term. That term has not yet expired. The respondents, therefore, contend that the suit is premature and liable to be . dismissed.

The appellant's answer to this contention is that the covenant creating the long term of eightyfive years for the mortgage, taken along wi~1 the provision that the mortga,gor must redeem within period of six months thereafter or not at all and the other terms of t.he mortgage and also the circumstances of the case, is really clog on the equity of redemption and is therefore invalid. He contends that, in the result the mortgage money had been due all along and the suit was not premature.

• (1) (1913) L.R. 41 I.A. 84, 89.

S.C.R. SUPREME COURT REPORTS

The rule agi,tinst clogs on the equity of redemption r958 is that, a. mortgage shall always be redeemable and 5 1 ";--· a;~11 mortgagor's right to redeem shall neither be taken · 'a;~11 away nor be limited by any contract between the Shanllar parties.. The principle behind the rule was . expressed & by Lindley M. R. in Santley v. Wilde (1) in these words : Sarkar • "The principle is this: mortgage is conveyance of hind or an assignment of chattles as security for the payment of debt or the discharge of some other ,obligation for which it is given. This is the idea of mortgage: and the security is redeemable on the pay-ment or discharge of such debt or 'obligation, any pro· vision to the contrary notwithstanding. That, in my opinion, is the law. Any provision inserted to preverit redJlmption on payment or performance of the debt or obligation for which the security was given is what is meant by clog or fetter on the equity of redemption and is therefore void. It follows from this, that "once mortgage always mortgage". . '

r958 1 ";--· a;~11 . "" '

Shanllar Lal

& Others

Sarkar J.

· The right of redemption, therefore, cannot be taken

away. The Courts will ignore any contract the effect of which is to deprive the mortgagor of his right to redeem the mortgage. One thing, . therefor~, is clear, namely, that the term in the mortgage contract, that on the failure of the mortgagor to redeem the mort. gage within the specified period of six months the mortgagor will have no claim O\;'er the mortgaged pro. perty, and the mortgage deed will be deenied to be deed of sale in. favour of the mortgagee, cannot be sustained. It plainly takes away altogether, . the mortgagor's right to redeem ·the mortgage after the specified period. This is not permissible, for "once mortgage always mortgage" and therefore· always -/ redeemable. The same result also follows from s. 60 of the Transfer of Property Act. So 1t was said in 'Mohammad Sher Khan v. Seth Swami Dayal ([2]):

"An anomalous mortgage enabling mortgagee a,fter lapse of time and in the absence of redemption to~nter and take the rents in satisfaction of the interest would be perfectly valid if it did not also hinder an

(2) (1921) L.R. 49 I.A. 6o, 65 . •

(I) [1899) 2 Ch. 474·

'[1959]

existing right to redeem. But it is this that the pre-sent mortgage undoubtedly purports to effect. It is l fi express y state to or 1ve years, an after that period the principal money became payable. This, under s. 60 of the Transfer of Property Act, is the event on which the mortgagor had right on payment of t.~e mortgage money to redeem. ,

S,cth Ga11gtJ v. Dhar Shankar Lal . &· Othm sa.·kar J.

The section is unqualified in its terms, and con-• tains no saving provision as other sections do in favour . of contracts to the contrary. Their lordships there-fore see no sufficient reason for withholding from the words 0f the section their full force and effect_"

Under the section, once the right to redeem. has arisen it cannot be taken away. The mortgagor's . right to redeem must be deemed to continue <;iven after the period of six months has expired and the .attempt to confine that right to that period must fail. 'i'he term in .the mortgage imtrument providing that the mortgage can be redeemed only within the periocj. of six months and not thereafter must be held to be in-valid and ignored. The learned Judicial Commis-sioner took the same view and this has not. been challenged in this appeal on behalf of the respondents . . With this term however this case is not really con-cerned. Learned advocate for the appellant directed his a.ttack on the term in the instrument of mortgage · that it will not be redeemable for eightyfive years. He · contended that this term a.mounts to clog on ·the equity of redemption. We wish to observe here that the learned advocate did not contend that the invali-dity, as we have earlier held, of the term taking away the right to redeem the mortgage after the period of six months makes the term fixing the period of the mortgage at eightyfive years invalid. This latter term stands quite apart. It only fixes the time when the principal s1frn is tc)'become due, thatis, when the right to redeem will accrue and has, therefore, nothing to do with term which provides when that right will be lost. The invalidity of one does not make the 'other also invalid. The term providing that the right to redeem will ii,rise after eightyfive years does not,. of course, take - .

S.O;'BJ. SUPREME COURT 'REPORTS

away the mortgagor's. right to redeem and .is not, z958 therefore, in t1on. · · t oes, . owever prevent accrua o . rig I that sense, clog on · the equity I th of redernp-· · ht t o s '[[1]]" LG-·-. anga v. DL "44redeem for the pedod mentioned. Is it then, in so far shankar LaI as it prevents the right to redeem from accruing for & Others time, clog ? . . As we have already said, the right ·to redeem .. does Sarkar J. 'not arise till the principal money becomes due: When the principal sum is to become due· must of. co11rse depend on the contract between the parties. IIi the present case the parties have agreed that. the right to redeem will· arise eightyfive years· after the date of the mortgage, that is to say, the principal money will .1 then become due. The appellant says that he. should be relieved from this bargain that he has; made. This · is tl;ie contention that has to be examined.

'"44[[1]]" anga v. '

shankar LaI · & Others

The rule against clogs on the equity ·of redemption no d.oubt involves that the Courts have the power to relieve party from his bargain.· .If he has agreed to forfeit wholly his right to redeem .in certain circum-stances, that agreement will be voided'. But the Courts· have gone beyond this. They have. also relieved mortgagors from bargains whereby the right to redeem has not been taken away but restricted., The ques-tion 1s, is the term now under consideration such that Court will exercise its power to grant relief against it? That depends on the extent of this po~er. It is power evolved in the early English Courts of Equity for special reason. All through the ages the. reason has remained constant and the Court's power is there-fore limited by that reason.. The extent of this power has, therefore, to be ascertained by· having. regard to its'origin. It will be enough for this purpose to· refer to two authorities·on this question .

. In very early case, namely, Vermmi v. Bethell (1!, Earl of Northington L. C. said, ·

. " This court, as court of conscience, is very . jealous of persons taking securities for loan,. and copverting such securities into pui:chases. And there-fore• I take it to be an established rule, that mort-gagee can never provide at the time of making the

{I) (i762) 2 Eden no, u3; 28 E.R. 838, 839.

Sdlh Ganga Dhar v. Shanknr Lal ~Others SMbr ].

516 SU1?tt:EM:E COURT ttEPORTS

loan for any event or condition on which the equity of redemption shall be discharged, and the conveyance absolute. And there is great reason and justice in this rule, for necessitous men are not, truly speaking, free men, but, to answer present exigency, will sub-mit to any terms that the crafty may impose upon -them."

In comparatively recent times Viscount Halda1ie -L. C. repeated the same view when he said in G. and G. Kreglinger v. New Patagonia Meat and Gold Storage Company Ltd.('): .

"This jurisdiction ·was merely special applica-tion of more general power to relieve against penalties and to mould th~m into mere securities. The case of the coµimon law mortgage of land was indeed gross one. The land was conveyed to the creditor upon the condition that if the money he had advanced to the fcoffor was repaid on date and at place named, the fee simple would revest in the latter, but that if the condition was not strictly and literally fulfilled be should lose the land for ever. What made the hardship on the d~btor glaring one was that the debt still remained unpaid and could be recovered from the feoffor notwithstanding that he had actually forfeited the land to the mortgagee. Equity, there-fore, at an[1]early date began to relieve against what was virtqil.lly penalty by compelling the creditor to use his legal title as mere security.My Lords, this was the origin of the jurisdiction which we are now considering, and it is important to bear that origin in mind. For the end to accomplish which the jurisdiction has been evolved ought to govern and limit its exercise by equity judges. That end has always been to ascertain, by parol evidence if need be, t!w real nature and substance of the trans-aetion, and if it turned out to be in truth one of mort-gage simply, to place it on that footing. It was, in ordinary cases, only where there was conduct which the· Court of Chaneery regarded as unconscientious that it interfered with freedom of contract. The fend-"ing of money, on mortgage or otherwise, -was looked o(1) [19l~J A.C. 2~, 3$0 36,

S.C.R. SUPREME COtJRT REPORTS

on with suspicion, and the court was on the alert to discover want of conscience in the terms imposed by 1 en ers. ,,

Seth G.anga. Dh11r

. The reason then justifying the Court's power to relieve mortgagor from the effects of his . bargain is its want of conscience. Putting it in more familiar language the Court's jurisdiction to relieve mortgagor frl'.lm his bargain depends on whether it wa~ obtained by taking ad vantage of any difficulty or embarrass-ment that he might have been in when he borrowed the moneys on the mortgage. Was the mortgagor oppressed ? Was he imposed upon ? If he was, then he may be entitled to relief;

shankar .Lal & Others

Sar.kar J.

We then have to see if there was anything imcon- • scionable in the agreement that the mortgage would not be redeemed for eightyfive years. ls it oppressive ? Was he forced to ·agree to it because of his difficulties ? Now this question is essentially one of fact and has to be decided on the .circumstances of each case. would be wholly unprofitable in ·enquiring into this question to examine the large number of reported cases on the subject, for each turns on its own facts. ,

First then, does the length of the term-· and in this case it is long enough being eightyfive years-itself lead to the conclusion that it was an oppressive term ? In our view, it does not do so. It is not necessary for us to go so far as to say that the length of the term of the mortgage can never by itself show that the bargain was oppressive. We do not desire to say anything on that question in this case. We think it enough to say that we .have nothing here to show tha·t the length Qf the term was in any way dis-advantageous to the mor_tgagor. It is quite conceivable that it was to his advantage. The suit for redemption was brought over forty-seven years after the date of the ·mortgage. lt seems to us impossible that .if the term wa~., oppressive, that was not realised much earlier and the suit brough-t within short time of the mortgage. The learned Judicial Commissioner felt that the respondents' con-tention that the suit had been brought as the price of landed property had gone · up after the war, wa.$ ·

justified. \Ve are not prepared to say that he was wrong in this view. We cannot also ignore, as appears from large number of reported decisions, that it is· not uncom:mon in various parts of India to have long term mortgages. Then we find that the property· was sub-ject to prior mortgage. We are not aware what the term of that mortgage was. But we find that that mortgage. included another property which became freed from it as result of the mortgage in suit. This would show that the mortgagee under this mortgage Was not putting any pressure on the mortgagor. That conclusion also receives support from the fact that the mortgage money under the present mortgage was more than that under the earlier mortgage but the mort-gagee in the. present case was satisfied with smaller security. Again, no complaint is made that the interest charged, which was to be measured by the rent of the property, was in any manner high. All these, to our mind, indicate that the mortgagee had not taken any unfair advantage of his position as the lender, nor that the mortgagor was under any finan-cial embarrassment.

Seth Ganga Dhar v.

Shankar Lal & Otiim Sarkar J.

It is said that the mortgage instru-ment itself indica-

tes that the bargain is hard, for, while the mortgagor cannot redeem for eighty-five years, the mortgiigee is free to demand payment of his dues at any time he likes. This contention is plainly fallacious. There is nothing in the mortgage instrument permitting the mortgagee to demand any money, and it is well settled that the mortgagee's right to enforce the mortgage and the mortgagor's right to redeem ·are co-extensive. Then it is said that under the deed the mortgagee can spend any amount on repairs to the mortgage pro-perty and in pntting up new constructions there. and the mortga~or could only redeem after paying the expenses for these. w·e are unable to agree that· such is the effect of the mortgage instrument. We cannot lose sight of the fact that the mortgaged shop and the area of the land on which it stood were very small. It was not possible to spend large sum on rep;i.irs or · construction there. Furthermore, having agreed to 8~ years as th~ term of the. mortgage, the parties must

S.C.R. SUPREME COURT REPORTS

:have imagined that during this long period repairs ·and constructions would become necessary. It is only :such necessary repairs as are contemplated by the instrument and we do not consider that it is hard_ on ·the mortgagor to have to pay for such repairs and ·construction when he redeems the property and gets the benefit of the repairs and construction. Neither do we think that there is anything in the contention that under the document the mortgagor was bound to accept whatever was shown in the r!iortgagee's account as having been spent on the repairs and con-struction. That is not, in our view, the effect of the relevant clause which reads, "The expenses spent in repairs and new constructions will be paid ...... accord-ing to the account produced by the mortgagee. " All that it means is that ii} claiming _mcm~y~ on. account 'of repairs and construction the mortgagee will have to show from his account that he spent these moneys. It is really safeguard for.the mortgagor. It.was also said that all the terms in the deed were for the benefit of the mortgagee and that showed that the bargain was hard one. VVe do not think that all the terms were for the benefit of the mortgagee, or .that what there was in the instrument was for his benefit and indicated that the mortgagee had forced hard bargain on the mortgagor. VVe have earlier said how the bargain appears to us to ha ye been fair and one as oetween part'ies dealing with each other on equal footing. .. . .-'Ve have no evidence in this case of the circum-stances existing at the date of the mortgage as to the· pecuniary. condition of the mortgagor or as to anything Blse from which we may come to the conclusion that :the mortgagee had taken advantage of the difficulties .of the mortgagor a:nd imposed hard bargain on him. It. was said that the fact that the propert}' was subject to prior mortgage at the date of the mortgage in suit indicates the 'impecunious position of the mortgagor. We· are unable to agree with thi1;1 contention. Every debtor is not necessarily impecunious. The mortgagor 'certainly derived. this advantage from that mortgage that he was able to free from the earlier mortgage the· ~ach,eri .. 2 and h.e has been.in • enjoy~ient -. of • it ev;er -sin_ce. .

Seth Gang" Dhllf

Shankar Lal &- Others

Sark/Jr J.

, __ ..

Sdh Ganga Dhar v. Slta11kar ·Lal 6' Others Sarkar].

April Ij.

That, to our mind, indicates that the bargain had been freely made. There was 'nothing else to which our attention was directed as showing that the bargain was hard. 'Ve, therefore, think that the bargain was reasonable one and the eighty-five years' term of the mortgag\l should be enforced. vV then come to the conclusion that the suit was premature and miist fail. .

In the result we dismiss this appeal with costs.

Appeal di.smissed .

SALES TAX OFFICEH, CUTTACK A::'\D ANOTHER

M/s. B. C. PATEL & CO.

(S. Il. DAS C. J., VENKATARAMA AIYAH, S. K. DAS,

A. K. SARKAR and VIVIAN BosE JJ.)

Sales Tax-l\[1]otification e11jorci11g the charge not wholly in con-snnance tf'ith t.lze charging provision-Validity-Assessn1cnt for periods both before .and aftci· the Constituti.011-Legality:-Orissa Sales Tax Act, r947 (Omsa XIV of r947), s. 4-Consl1tution of India, Art. r86.

This appeal by the Sales Tax authorities was directed against the judgment and order of the Orissa High Court, passed under Art. 226 of the Constitution, quashing five orders of assessment covering five quarters made against the rPspondents \Vho carried on the business of collection and sale of l{endu leaves in the erst-\vhile Feudatory State of Pallahara to \vhich, on its 1nerger into the province of Orissa on January 1, i948, the provisions of the Orissa Sales Ta.x Act, 1947, were extended on March r, 1949· On the same date the Government of Orissa issued notification under s. 4(1) of the Act which was in the following terms:"In exercise of the powers conferred by sub-section (1) of Section 4 of the Orissa Sales Tax Act, 1947 (Orissa Act XIV of 1947), as applied to Orissa State, the Government of Orissa are . pleased to appoint the 31st March, 1949· as the date with effect from \Vhich every dealer \vhose gross turnover during the year end-ing the 31st Marci], 1949· exceed~d Rs. ~,ooo shall be liable to pay