Redemption of Mortgage
According to Black’s Law Dictionary, “Redemption” can be defined as the act of the vendor of property in buying it back again from the purchaser at the same or an enhanced price. Mortgage redemption is the endpoint of involvement with a mortgage for most borrowers with repayment mortgages, it occurs when the loan that has been taken out is paid off in full. Investors can make redemptions by selling part or all of their investments such as shares, bonds, or mutual funds. In business and marketing, consumers often redeem coupons and gift cards for products and services. Redemptions can trigger capital gain or loss. There are various rights available to the mortgagor or borrower such as:
· The mortgagor can avoid consolidation by the mortgagee in the mortgaged properties.
· The mortgagor has the right to deposit the mortgage money in the court and so on…
Right of redemption is the right which every mortgagor possess, which is created by virtue of the mortgage deed. This right is considered to be inalienable, and cannot be taken away from a mortgagor by means of any contract to the contrary. Right of redemption is discussed under section 60 of the Transfer of Property Act, 1882. There are three important provisions made in section 60 of the Transfer of Property Act 1882:
1. Right of redemption
2. Clog on redemption
3. Once a mortgage, always a mortgage.
Right of redemption
Right of redemption is the legal right of a mortgagor who owns real estate to reclaim his or her property once certain terms have been met.
Essential elements of right of redemption:
1. Legal validity of mortgage- it was decided in Vishnu Kaya vs Vishnu Maya that where registration of mortgage is necessary there a mortgage without registration will be considered illegal and the mortgage does not become entitled to getting compensation on the basis of the mortgage.
2. Due to principle- the mortgagor can read the mortgage anytime after the mortgage money speed and he can’t be avoided from it accept the degree of the court or any act of the court.
3. Payment of dues of money- mortgagor can pay the money to the mortgagor or to his agent.
4. Filing of the suit- this right is compulsory because the use of the right of redemption cannot be done without filing a suit. It can be filed by the mortgagor or by any transferee. In Pranil Kumar vs Kishori Lal, it was held that the purchaser of the property by auction can also file a suit of redemption because he has his interest in such property.
Clog on redemption
Clog on redemption means barrier on redeeming the mortgaged property. There are various judgments in which it was held that right of redemption of mortgagor cannot be finished even if the loan amount is not paid on time. In Murarilal vs. Devkaranit, it was held that the parties cannot restrict the right of redemption of mortgages even after the fixed period, if done so such agreement will be void. But there are certain exceptions to it they are:
· By submission of the right of redemption or by sale or by any method by the free transaction.
· The right can be finished by the degree of the court.
· If the right of redemption is vested in one person.
· If the mortgaged property is vested in state.
Once a mortgage, always a mortgage
It is well known principle that once a mortgage is always a mortgage, some changes or revision can be done to it. In a nutshell, the mortgage and right of redemption are coextensive of each other whether it is described or not.
When foreclosure of the property occurs?
When the mortgagor or the property owners fail to pay their loan amount to the mortgagee then the foreclosure of the property occurs. In other terms, auctioning is done of the said property to recover the loan amount. The right of foreclosure means a lender’s ability to take possession of a property through a legal process called foreclosure. But before foreclosure of property the lender had to give notice to the borrower stating the same legally. If the borrower pays the loan amount with late fine and interests after receiving notice in a specified time then the lender has no right to forfeit the property according to section 79.
Persons who may sue for redemption (section 91)
1. Any person who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;
2. Any surety for the payment of the mortgage-debt or any part thereof;
3. Any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property.
Section 92 of Transfer of Property Act talks about SUBROGATION
Subrogation means the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties.
The right conferred by this section is called the right of subrogation, and a person acquiring the same is said to be subrogated to the rights of the mortgagee whose mortgage he redeems. Nothing in this section shall be deemed to confer a right of subrogation on any person unless the mortgage in respect of which the right is claimed has been redeemed in full.
There are various rights available to both the mortgagor and mortgagee. Right to redemption is the right which is available to the mortgagor based on certain conditions. Exception of the right of redemption is the right which is available to the mortgagee if the mortgagor fails to do his duty or pay his loan in a specified time duration. But these rights are not used in a proper way so there is a need to implement the laws carefully for the smooth functioning of the system between the borrower and lender. And laws also need to be amended from time to time so that no problem occur for implementing the same.
Author Details: Shanu chandwasia (3rd year student of B.A. LL.B. (Hons.) at Amity University, Kolkata)