Ganga Dhar v Shankar Lal (1958)

Every student can say that a clog on the equity of redemption is void. Ganga Dhar is the case that asks the harder question: is a very long term, by itself, a clog? The answer is no, and the reason given is the reason the whole doctrine exists — the court intervenes where the bargain was unconscionable, not merely where it was long. An eighty-five year mortgage was upheld, and the redemption suit dismissed as premature.

It is also the case that gives you, in one judgment, the four classical statements of the doctrine: Lindley MR's once a mortgage always a mortgage, the Privy Council in Mohammad Sher Khan, Lord Northington's necessitous men are not, truly speaking, free men, and Viscount Haldane LC's account of the origin of the equity in Kreglinger.

By a mortgage of 1 August 1899 Purshottamdas usufructuarily mortgaged a four-roomed shop with appurtenances on land of 5 yards by 15 yards at Naya Bazar, Ajmere, to Dhanrupmal, for Rs 6,300, of which Rs 5,750 was left with the mortgagee to redeem a prior mortgage on this and another property. The mortgagee was to take the shop and appropriate its rent in lieu of interest; possession of the other property, a share in a Kacheri, was to go back to the mortgagor. The disputed clause read:

"I or my heirs will not be entitled to redeem the property for a period of 85 years. After the expiry of 85 years we shall redeem it within a period of six months. In case we do not redeem within a period of six months, then after the expiry of the stipulated period, I, my heirs, and legal representatives shall have no claim over the mortgaged property, and the mortgagee 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 a case this very deed will be deemed to be a sale deed."

The mortgagee redeemed the prior mortgage and entered. In 1939 he assigned to Motilal. On 2 January 1947 — over forty-seven years after the mortgage — the mortgagor's son sued to redeem. The defence was that there was no right to redeem until 1 August 1984.

1. Is a term postponing redemption for eighty-five years a clog on the equity of redemption?
2. Is the clause turning the mortgage into a sale on default within six months thereafter valid?

On the second question, the clause is void. On the first, the term is valid. The appeal was dismissed with costs: the suit was premature.

The rule against clogs is stated first: "a mortgage shall always be redeemable and a mortgagor's right to redeem shall neither be taken away nor be limited by any contract between the parties."

Then Lindley MR in Santley v Wilde:

"Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or fetter on the equity of redemption and is therefore void."

from which "It follows from this, that 'once a mortgage always a mortgage'."

Then s. 60, and the Privy Council in Mohammad Sher Khan v Seth Swami Dayal, whose reasoning is the statutory half of the answer: the section giving the right to redeem when the principal becomes payable "is unqualified in its terms, and contains no saving provision as other sections do in favour of contracts to the contrary."

Then, on why equity interferes at all, Lord Northington in Vernon v Bethell:

"a mortgagee can never provide at the time of making the 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 a present exigency, will submit to any terms that the crafty may impose upon them."

And Viscount Haldane LC in Kreglinger, who explains that the jurisdiction was "merely a special application of a more general power to relieve against penalties and to mould them into mere securities", and that its end "has always been to ascertain, by parol evidence if need be, the real nature and substance of the transaction, and if it turned out to be in truth one of mortgage simply, to place it on that footing", equity interfering with freedom of contract "only where there was conduct which the Court of Chancery regarded as unconscientious".

1. The sale-on-default clause is void. A term that on failure to redeem within the six months the mortgagor "will have no claim over the mortgaged property, and the mortgage deed will be deemed to be a 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." That is a clog, and it also falls foul of s. 60.

2. The eighty-five year term is not, by itself, a clog. The test is stated in three short questions that are worth reproducing verbatim in an answer: "Was the mortgagor oppressed? Was he imposed upon? If he was, then he may be entitled to relief." And: the court's jurisdiction "depends on whether it was obtained by taking advantage of any difficulty or embarrassment that he might have been in when he borrowed the moneys on the mortgage."

Whether a term is oppressive "is essentially one of fact and has to be decided on the circumstances of each case", and it would be "wholly unprofitable" to work through the reported cases, "for each turns on its own facts."

On the facts, the Court found no oppression, for these reasons — memorise them as a checklist, because they are how you argue such a problem:

- Delay. The suit came more than forty-seven years after the mortgage. "It seems to us impossible that if the term was oppressive, that was not realised much earlier and the suit brought within a short time of the mortgage." The real motive was the post-war rise in land prices. - Custom. Long-term mortgages are "not uncommon in various parts of India". - Benefit to the mortgagor. The transaction freed the Kacheri from the prior mortgage, and he has enjoyed it ever since. - No pressure by the lender. The money advanced was larger than under the earlier mortgage, yet the mortgagee took a smaller security. - No complaint of a high rate. The interest was measured by the rent of the shop. - The alleged one-sidedness fails. The argument that the mortgagee could call in his money at any time while the mortgagor could not redeem is "plainly fallacious": nothing in the deed permitted him to demand payment, and "it is well settled that the mortgagee's right to enforce the mortgage and the mortgagor's right to redeem are coextensive." - The repairs clause is a safeguard, not a trap. The shop and plot were tiny, large expenditure was impossible, and over eighty-five years repairs were plainly contemplated. Requiring the mortgagee to prove the expenditure from his accounts protects the mortgagor. - A prior mortgage does not prove poverty. "Every debtor is not necessarily impecunious."

1. A stipulation that the mortgage shall become a sale on failure to redeem within a fixed period is void as a clog, and is also inconsistent with s. 60, which is unqualified and admits no contract to the contrary. 2. The mere length of the term does not make the postponement of redemption a clog. The question is whether the bargain was unconscionable — whether the mortgagee took advantage of the mortgagor's difficulty or embarrassment — and that is a question of fact in each case. 3. The right of the mortgagee to enforce and the right of the mortgagor to redeem are coextensive.