Judgement Briefs

Property Law

Pomal Kanji Govindji v. Vrajlal Karsandas Purohit

AIR 1989 SC 436; (1989) 1 SCC 458

Citation
AIR 1989 SC 436; (1989) 1 SCC 458
Court
Supreme Court of India
Date
1989
Bench
Supreme Court Bench

Facts

  • Financially distressed owners executed long-term possessory mortgages, including one for ninety-nine years.
  • The mortgagees were permitted to:
  • possess the properties;
  • collect income;
  • undertake reconstruction and improvements; and
  • induct tenants.
  • The mortgagors later sued for redemption before the long period expired.
  • They argued that the terms were harsh and had been imposed by taking advantage of their financial distress.
  • Tenants inducted by the mortgagees also resisted delivery of possession, claiming statutory rent protection.

Issue

  • Whether the long redemption term and accompanying conditions were oppressive clogs.
  • Whether tenants inducted by the mortgagee could remain after redemption.
  • Whether a mortgagee can create tenancy rights extending beyond the mortgage.

Rule

  • Section 60 protects the mortgagor’s right to:
  • redeem the mortgage; and
  • recover the property in substantially the same proprietary condition.
  • Any term making redemption unfairly difficult or illusory may be invalid.
  • A long period is assessed with all circumstances, including:
  • financial distress;
  • value of the security;
  • mortgage amount;
  • continuing interest;
  • rebuilding powers;
  • mortgagee’s possession and profits.
  • A mortgagee in possession must manage prudently under Section 76.
  • A lease created by the mortgagee ordinarily ends with redemption unless:
  • authorised by the mortgage;
  • binding under Section 76 or Section 65A; or
  • enlarged by applicable tenancy legislation in legally recognised circumstances.

Application

  • Unlike Ganga Dhar, the mortgagors were financially weak and heavily indebted.
  • The mortgagees obtained extensive control for a very long period.
  • They could:
  • enjoy possession and income;
  • charge interest;
  • spend on reconstruction; and
  • substantially change the property.
  • Viewed cumulatively, the ninety-nine-year restriction was not merely a neutral postponement.
  • It was part of a harsh arrangement making meaningful redemption practically impossible.
  • The Court therefore treated the long-term restriction as an oppressive clog.
  • Regarding tenants:
  • a mortgagee cannot normally confer an interest greater than the mortgagee’s own temporary estate;
  • a tenant inducted with knowledge of the mortgage ordinarily takes subject to redemption.
  • However, statutory tenant protection may survive where later legislation enlarged a tenancy created in circumstances recognised by law.
  • The question depends upon:
  • when the tenant was inducted;
  • what rent law then applied;
  • whether the tenancy was prudent management; and
  • whether the mortgagor authorised it.
  • Mortgagees could not use tenants as a device to prevent the mortgagor from recovering possession.

Conclusion

  • The oppressive long-term conditions amounted to a clog on redemption.
  • The mortgagors could redeem before expiry of the nominal ninety-nine-year period.
  • Tenancies created by the mortgagees did not automatically bind the mortgagors after redemption.
  • Any claim to continued protection had to be tested under the applicable rent law and the circumstances of induction.