Sangar Gagu Dhula vs Shah Laxmiben Tejshi And Ors. on 10 January, 2001 – Case Summary

In the case of Sangar Gagu Dhula vs Shah Laxmiben Tejshi And Ors. on 10 January 2001, the Gujarat High Court was presented with a complex legal issue involving a mortgage agreement and the right to redemption. The case was presided over by a bench consisting of D Dharmadhikari, Y Bhatt, and J Panchal, with the judgment delivered by Y.B. Bhatt, J.

Facts of the Case

The original plaintiff, as a mortgagor, had mortgaged his property, a residential house with appurtenant land, to the defendant-mortgagee for a sum of Rs. 11000. The mortgage deed stipulated that the mortgagor could repay the consideration and redeem the property after 99 years from the date of the transaction. However, before the expiry of the stipulated period, the heirs of the mortgagor sought to redeem the property by filing a suit on 5th February 1974. They contended that the 99-year term was an oppressive term and amounted to “a clog on the equity of redemption.”

Issues Raised

The primary issue raised was whether the 99-year term before which redemption could not be enforced was an oppressive term and would in law amount to “a clog on the equity of redemption”. The plaintiff-mortgagor sought to avoid this term and obtain a decree of redemption.

Another issue was whether the suit was barred by limitation. The trial court found that the suit was barred by limitation, a finding upheld by the lower appellate court.

Court’s Observations

The court observed that the right to redeem the property is fundamental to the transaction of a mortgage. If the right to redeem the property is denied to the mortgagor, it would amount to usurpation of the title by the mortgagee, which would result in the transgression of the intention of the mortgagor and would therefore tend to frustrate the transaction.

The court also noted that the denial of a right to redeem the property, or delaying the exercise of this right to redeem by an unconscionable period, or creating other contractual barriers against the exercise of the right to redeem, is not acceptable to the Courts in equity. The Courts have therefore struck down, have refused to recognise or have refused to enforce such covenants.

The court further observed that the right to redeem accrues only when the Court confers upon the mortgagor the right to redeem by striking down the offending clause as a clog. The period of limitation would commence only from the date of such declaration. Thus, in a suit filed by the mortgagor for the composite purpose of lifting the clog as also for redemption, it could not possibly be said that the suit is beyond limitation.

Conclusion

The court concluded that the oppressive clause amounted to a clog on the equity of redemption which requires to be lifted. However, the court also confirmed the finding of the trial court that the suit was filed beyond limitation. The appeal was therefore dismissed. The court held that the right to redeem the property and to seek possession would accrue in favour of the mortgagor only when the clog on equity of redemption is removed. Until the embargo is lifted, the right to redeem the mortgaged property or to seek its possession would not accrue in favour of the mortgagor. The starting point of limitation in that case would be the date on which the clog on equity of redemption is lifted.