1. Facts of the Case
A mortgagor mortgages his immovable property in favour of a mortgagee. The mortgage deed contains a condition that if the mortgagor chooses to sell the property during the subsistence of the mortgage, he shall sell it only to the mortgagee and at a pre-determined fixed price. Despite this condition, the mortgagor subsequently sells the mortgaged property to a third party without offering it to the mortgagee. The mortgagee challenges the validity of this sale, claiming a contractual and legal right to purchase the property under the mortgage agreement.
2. Issues in the Case
- Whether a condition restricting the mortgagor’s right to sell property only to the mortgagee is valid under Indian law.
- Whether such a condition amounts to a clog on the equity of redemption.
- Whether the sale made to a third party is legally valid.
- Whether the mortgagee can enforce the condition against the third-party purchaser.
3. Legal Principles Covered to Support Case Proceeding and Judgements
Under Section 60 of the Transfer of Property Act, 1882, a mortgagor has an absolute right of redemption, which cannot be fettered or restricted by any agreement. Any condition that directly or indirectly prevents redemption is void as a clog on the equity of redemption.
The Supreme Court in Kreglinger v. New Patagonia Meat & Cold Storage Co. and Indian courts in Pomal Kanji Govindji v. Vrajlal Karsandas Purohit have held that conditions compelling sale only to the mortgagee are oppressive and void. A mortgagee cannot obtain ownership through indirect means. Such clauses are unenforceable as they violate public policy and the fundamental nature of a mortgage.
4. Possible Judgement
The court is likely to hold that the condition restricting sale only to the mortgagee at a fixed price is void and unenforceable as it constitutes a clog on the equity of redemption. Consequently, the sale made by the mortgagor to the third party is valid, subject to the mortgagee’s right to recover the mortgage debt. The mortgagee cannot compel specific performance of the restrictive sale clause but may proceed to enforce his mortgage rights according to law.
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