Property Law

Ganga Dhar v. Shankar Lal

AIR 1958 SC 770; 1959 SCR 509

Facts

A shop was mortgaged in 1899.
The deed provided that:
it could not be redeemed for eighty-five years;
after that period, redemption had to occur within six months;
failing redemption within those six months, the mortgage would become an absolute sale and the mortgagor would lose all claim.
The mortgagor sought redemption before expiry of eighty-five years.
He argued that both restrictions were oppressive clogs upon the right of redemption.

Whether postponing redemption for eighty-five years was necessarily an invalid clog.
Whether a clause permanently extinguishing redemption after a six-month window was valid.

The principle “once a mortgage, always a mortgage” means that a security transaction must remain redeemable.
A contractual term that:
completely destroys;
unfairly restricts; or
makes redemption illusory, may be struck down as a clog.
A long redemption period is not automatically invalid.
The court examines:
bargaining position;
adequacy of consideration;
surrounding economic circumstances;
oppression or unconscionability at the time of the mortgage.
Invalidity of one severable term does not necessarily invalidate another independent condition.

No evidence showed that the mortgagee exploited:
poverty;
distress;
ignorance; or
unequal bargaining power.
On the circumstances, the parties dealt on substantially equal terms.
The eighty-five-year period, though unusually long, could not be struck down merely because of its length.
The suit filed before that period expired was therefore premature.
The second condition was fundamentally different.
It stated that failure to redeem during a narrow six-month window would:
eliminate the right permanently; and
convert the mortgage into an absolute sale.
Such a clause contradicted the essential nature of a mortgage.
The mortgagee could enforce the security, but could not contractually transform it into ownership solely because redemption was not exercised within that narrow period.
The two conditions were severable:
the long term remained operative;
the forfeiture of redemption did not.

The eighty-five-year term was valid on the particular facts.
The redemption suit filed before its expiry was premature.
The six-month forfeiture clause was an invalid clog on the equity of redemption.
The mortgagor’s right could not be permanently extinguished by that condition.