BAR ON RIGHT TO REDEMPTION OF MORTGAGE INVALID, SAYS SC

The Supreme Court ruled last week that a mortgagor can file suits for redemption so long as the mortgage subsists. Dismissal of an earlier suit for redemption would not bar the mortgagor from filing a second such suit, the court held in the case, L K Trust vs EDC Ltd. In this case, Falcon Retreat Ltd took a loan from the Goa Government-owned investment company, EDC Ltd by mortgaging its property for a hotel project. It also took loans from State Bank of India. Though 80 per cent of the project was completed, due to global recession, the company could not repay the loan. EDC then took steps to auction the property. The trust was a contender and entered into an agreement with EDC. However, Falcon offered a better deal. The trust claimed that EDC must act according to the agreement, while Falcon argued that it was ready to redeem the mortgage. The case travelled twice to the Bombay high court and the Supreme Court. The apex court ruled that Falcon had a right to redemption till the mortgage existed and dismissed the claim of the trust. It said: “A mortgage being a security for debt, the right of redemption continues although the mortgagor fails to pay the debt at the due date. Any provision inserted to prevent, evade or hamper redemption is void.”