Whether the transaction will be mortgage by conditional sale if two contemporaneous documents sale and agreement to is repurchase executed between the parties?

  It is further held therein that keeping in view the proviso to Section 58(c) if the sale and agreement to repurchase are embodied in separate documents then the transactions cannot be a mortgage by conditional sale irrespective of whether the documents are the contemporaneously executed. It is further held therein that even in the case of a single document the real character of the transaction is to be ascertained from the provisions of the deed viewed in the light of the surrounding circumstances and intention of the parties.

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3506 OF 2010

Sopan (dead) through His L.R. Vs v Syed Nabi 

Author: A.S. Bopanna,J.

Dated: July 16, 2019

Citation: (2019)7SCC 635,2019 SCCONLINE SC 862

Print Page

Basic principles for determining whether a document is mortgage by conditional sale or sale with option to repurchase

Whether an agreement is a mortgage by conditional sale or sale with an option for repurchase is a vexed question to be considered in the facts of each case. The essentials of an agreement, to qualify as a mortgage by conditional sale, can succinctly be summarised. An ostensible sale with transfer of possession and ownership, but containing a Clause for reconveyance in accordance with Section 58(c) of the Act, will clothe the agreement as a mortgage by conditional sale. The execution of a separate agreement for reconveyance, either contemporaneously or subsequently, shall militate against the agreement being mortgage by conditional sale. There must exist a debtor and creditor relationship. The valuation of the property, and the transaction value, along with the duration of time for reconveyance, are important considerations to decide the nature of the agreement. There will have to be a cumulative consideration of these factors, along with the recitals in the agreement, intention of the parties, coupled with other attendant circumstances, considered in a holistic manner. The language used in the agreement may not always be conclusive.

11. In Bhaskar Waman Joshi (deceased) and Ors. v. Shrinarayan Rambilas Agarwal (deceased) and Ors. MANU/SC/0161/1959 : AIR 1960 SC 301, the principles for determination of the nature of the document were explained as follows:

7...The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the deed viewed in the light of surrounding circumstances. If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their true legal effect. If there is ambiguity in the language employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts.

12. In the light of the aforesaid discussion and the facts of the present case, an examination of the recitals in the agreement dated 29.04.1971 holistically, including the heading of the document, we are left with no doubt that it was not a sale deed with an option for repurchase but a document of mortgage by conditional sale. An agriculturist will normally not so easily dispose his agricultural land, the source of his survival and livelihood merely for purchases made by him on credit. The dire financial straits of the Plaintiffs is evident from the fact that they were left with no option but to mortgage 2½ acres of their agricultural lands for credit purchase of daily necessities. The financial stringency of the Plaintiffs is apparent from their failure to repay anything even after execution of the instalment bond. Given the limitations of the Plaintiffs because of their poor financial status, the fact that they may not have objected to the mutation so done three years later cannot be considered as sufficient for a contrary interpretation of the agreement dated 29.04.1971, especially when the Appellate Court held that the Plaintiffs were in possession of the lands. In the facts of the case, a debtor and creditor relationship stands clearly established and hardly needs further elucidation. 

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 3960 of 2011

Decided On: 12.09.2019

 Ganpati Babji Alamwar Vs.  Digambarrao Venkatrao Bhadke 

Hon'ble Judges/Coram:

Navin Sinha and Indira Banerjee, JJ.

Citation: AIR 2019 SC 4292

Print Page

How to compute limitation if period mentioned in instrument is as per vernacular calender?

 In the case of Roshan Lal Vs. Chaudhari Bashir Ahmad MANU/UP/0069/1924 : AIR 1925 ALLAHABAD 138, the issue was regarding the starting point of limitation. The principal amount was payable within three years and interest was payable every six months according to the Hindi Calender and if any interest remain unpaid the mortgagee would be entitled to enforce his bond without waiting for three years' time. It was observed - The true principle seems to be this. If the starting point is to be calculated, as so many months or so many years from a particular date, that point was be calculated according to the Gregorian calender. On the other hand, if the starting point is otherwise fixed by the stipulation itself, the Court cannot apply section 25 of the Limitation Act.

15. The deed exhibit-27 provides for period of five years as compulsory period for refund of amount and obtaining reconveyance. The subsequent period of five years was discretionary. The terms clearly indicate that the amount was to be repaid by the end of the Phalgun month. It also states that within a period of five years,  [during the period of five years, when there would be no standing crop).

16. Article 61 of the Limitation Act, 1963 reads as follows:

ARTICLE 61

17. The period of fixed five years has been vaguely stated and the specific time is by the end of Phalgun, which is year end of Hindu Calendar. The word  (within five years) clearly indicates that the period provided was not more than five years. It was for the period of five years, but by the end of Phalgun month from the date of document, as rightly suggested by learned Advocate.

18. The reliance in the present case is on the words 'till the end of month of Phalgun.' Ms. Kulkarni placed reliance on section 24 of Limitation Act, which reads as follows:

24. Computation of time mentioned in instruments - All instruments shall for the purposes of this Act be deemed to be made with reference to the Gregorian calender.

The illustration shows that where a promissory note shall execute deed showing native date payable four months after that date, it was held that the period of limitation applicable to a suit on the note runs from the expiration of four months after date computed as per the Gregorian calender year.

19. In the present case, issue is not about the calculation of the period, but determination of the starting point. The right to redemption was existing and accrued to the plaintiff by the end of deed. Right to redeem is co-extensive with right of foreclosure. As per Article 63 of right of foreclosure accrues when the money secured by the mortgage becomes due. In the present case, the money was due and payable within five years at the end of Phalgun month from the year 1964. Thus, the initial payment became due by the end of Phalgun of 1969. 

IN THE HIGH COURT OF BOMBAY (AURANGABAD BENCH)

Second Appeal No. 122 of 2018 and Civil Application No. 1875 of 2018

Decided On: 04.12.2018

 Gulabchand  Vs.  Indubai Pundalik Jape and Ors.

Hon'ble Judges/Coram:

A.M. Dhavale, J.

Citation: 2019(3) MHLJ 829

Print Page

Whether sale with condition of re-transfer is mortgage by conditional sale?

However, the learned Counsel for the Plaintiff has contended that when the documents at Exhibits 24 and 14/1 is admitted by the Defendant and since it refers to the relationship of debtor and creditor the sale deed dated 10th December, 1968 (Exh. 23) is to be construed as a mortgage by conditional sale. The learned Counsel has referred to the decision of this Court in the case of P.L. Bapuswami v. N. Pattay Gounder MANU/SC/0284/1965 : (1966) 2 SCR 918 to contend that it should be construed as mortgage and in that context would also refer to the decision in the case of Pandit Chunchun Jha v. Sheikh Ebadat Ali MANU/SC/0111/1954 : (1955) 1 SCR 174 to contend that the subsequent document would rebut the presumption. In so far as the legal position relating to the manner in which the document is to be construed, we notice that this Court in the case of Dharmaji Shankar Shinde and Ors. v. Rajaram Sripad Joshi (D) L.Rs. and Ors. MANU/SC/0587/2019 : (2019) 6 SCALE 682 had considered the entire conspectus of the provision contained in Section 58(c) with reference even to the decisions relied upon by the learned Counsel for the Plaintiff and had arrived at the conclusion that a sale with a mere condition of retransfer is not a mortgage. It is further held therein that keeping in view the proviso to Section 58(c) if the sale and agreement to repurchase are embodied in separate documents then the transactions cannot be a mortgage by conditional sale irrespective of whether the documents are the contemporaneously executed. It is further held therein that even in the case of a single document the real character of the transaction is to be ascertained from the provisions of the deed viewed in the light of the surrounding circumstances and intention of the parties.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 3506 of 2010

Decided On: 16.07.2019

 Sopan (Dead) through his L.R.Vs. Syed Nabi

Hon'ble Judges/Coram:

R. Banumathi and A.S. Bopanna, JJ.

Print Page

When plea of defendant that agreement of sale was mortgage by conditional sale is not tenable?

The finding of the Court below that since the defendant had pleaded that it was a loan, therefore, the burden would be shifted on the plaintiff that it was not a sale agreement appears to be not according to the law as Section 58(c) of the Transfer of Property Act covers such transaction. For sake of brevity, Section 58(c) of the Transfer of Property Act is reproduced as under.

58(c) Mortgage by conditional sale. - Where the mortgagor ostensibly sells the mortgaged property-

on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or

on condition that on such payment being made the sale shall become void, or

on condition that on such payment being made the buyer shall transfer the property to the seller,

the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale:

[Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale].

9. Reading of the aforesaid provision would show the defendant though had raised the defence that it was a loan but the transaction is not been embodied in the document Ex. P-1, therefore, as per the proviso clause the transaction cannot be deemed to be a mortgage as condition do not have been incorporated in the document Ex. P-1 except the defence and the oral evidence. Consequently, the finding of the trial Court cannot be sustained on this issue.

11. Further more, the defendant stated that the husband of the defendant has demanded a loan of Rs. 40,000/- which was arranged by the plaintiff and thereafter a fiduciary agreement of sale was executed which is Ex. P-1, thereby the defendant admitted the existence of agreement (Ex. P-1) but stated that it was for a mortgage. No such averments have been contained in the document. Therefore, it would be difficult to accept such defence in view of proviso to section 58(c) of the Transfer of Property Act the document was of a mortgage.

IN THE HIGH COURT OF CHHATTISGARH AT BILASPUR

First Appeal No. 72 of 2004

Decided On: 03.01.2019

Santosh Mahobiya  Vs.  Mahendra Tamboli

Hon'ble Judges/Coram:

Goutam Bhaduri, J.

Citation: AIR 2019 Chhat 92

Print Page

Whether there will be implied surrender of tenancy on execution of mortgage deed?

 In the facts of the present case, admittedly, there is no mention of the alleged tenancy in the mortgage deed. Moreover, the mortgage deed was admittedly for a fixed term of five years. The liability to pay rent was not kept alive and the right was given to consider it as a sale-deed, if the Respondent was unable to redeem the mortgage within stipulated period of 5 years. Therefore, the terms and conditions of the mortgage deed clearly spell out the implied surrender of the tenancy. Hence, as held in this judgment of Tarachand V/s. Sagarbai Alias Chaiyalibai (supra), assuming that the Appellant was in possession of the suit premises as a tenant, in view of the implied surrender of tenancy on execution of the mortgage deed, on redemption of mortgage the Respondent becomes entitled to get possession of the suit property. The Respondent-landlord was therefore not required to proceed against the Appellant under the provisions of Rent Control statute to recover the possession. Therefore, having surrendered his tenancy may be impliedly, the Appellant cannot retain his possession. Hence, on this ground also, the judgment and decree passed by the trial Court and confirmed by the Appellate Court does not call for any interference.

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 265 of 1991 and Civil Application No. 1225 of 2017

Decided On: 27.06.2018

 Nivruti Dnyanu Patil Vs. Shankar Krishna Bhagat-Patil and Ors.

Hon'ble Judges/Coram:

Dr. Shalini Phansalkar Joshi, J.

Citation: 2018(6) MHLJ 167

Print Page

How to ascertain that a document is mortgage by conditional sale or sale with condition to repurchase?

 The recitals reveal no reference to any loan taken or mortgage created with regard to any immovable property as security for such loan, much less to discharge any debt. It does not evince the creation of a debtor and creditor relationship. On the contrary, the recitals are specific that the vendor was in need of money to run the vehicle purchased by him on hire, and was selling the shop to raise money for the purpose. The suit for redemption was also filed beyond the period of 5 years. Significantly, the first appellate court observed that the recitals indicated that it was a sale deed, but concluded that it was a mortgage by conditional sale, only because the right to redemption was incorporated in the same document, which was but only one of the factors amongst others, to determine the true nature of the document.

9. In Tamboli Ramanlal Motilal (Dead) by L.Rs. v. Ghanchi Chimanlal Keshavlal (Dead) by L.Rs. and Anr. MANU/SC/0229/1992 : 1993 Supp. (1) SCC 295, the question was similar with regard to the nature of the document, in absence of any intention expressed with regard to creation of a debtor and creditor relationship. Holding that the document was not a mortgage by conditional sale but sale with an option to repurchase, it was held:

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 1300 of 2009

Decided On: 24.10.2017

 Suraj Narain Kapoor and Ors. Vs. Pradeep Kumar and Ors.

Hon'ble Judges/Coram:

Ranjan Gogoi and Navin Sinha, JJ.

Citation:(2017) 16 SCC 487

Print Page

How to ascertain whether a transaction is sale transaction or mortgage transaction?

The recitals "your amount shall carry no interest and my fields will not carry any rent" indicate that the consideration received by the transferor was to be treated as a debt. The interest was payable in the shape of appropriation by the transferee of the rent which he would otherwise be liable to pay to the transferor. That there has been an express mention of interest militates against any assumption that the transaction was intended to operate as an absolute sale. The stipulation that the transferee was to pay land revenue appears to be of no significance beyond the fact that the person who was to enjoy the profits was to bear the burden. Then the recital "I cease to have any right, etc., for five years" followed by the expression "I shall pay and shall redeem my fields" clearly goes to prove the existence of the relation of debtor and creditor between the parties. The vernacular words equivalent to the word "redeem" are "sodun ghein"  which mean 'release or redeem.' These are significant inasmuch as if there had been an intention to purchase back the fields, the words used would have been 'vikat ghein' .

10. In the premises, the impugned judgment and order of the lower Appellate Court does not disclose any error of law in the matter of construction of the document. The construction of a document is a mixed question of law and fact. As I have noted above, it is essentially to be decided by considering the words employed by the parties, though it is permissible to take into account surrounding circumstances in case the words used are not sufficiently clear to designate their effect. The words used in the present case are sufficiently clear and their effect is to create a mortgage by conditional sale with a right of redemption preserved unto the debtor. The relationship conveyed by the document is of debtor and creditor and not of vendor and buyer.

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 369 of 2013 and Civil Application No. 1011 of 2013 in Second Appeal No. 369 of 2013

Decided On: 07.03.2017

Mangal Popatrao Sodmise Vs.  Abdagiri Vishvanath Narale

Hon'ble Judges/Coram:

S.C. Gupte, J.

Citation: 2017(6) MHLJ 152

Print Page

Whether right to seek sale of mortgaged property is available to mortgagee by conditional sale?

 It is important to remember that mortgage is a transfer of interest in specific immovable property towards "security for repayment of a debt". The interest itself may be different in different forms of mortgage. In a simple mortgage, what is transferred is a power of sale, whilst in a usufructuary mortgage it is the right of the mortgagor to the enjoyment of the usufruct. In a mortgage by conditional sale or an English mortgage what is transferred is the right of ownership subject to a condition that on default of payment on a certain date the sale shall become absolute, or that on such payment being made the sale shall become void, or that on such payment being made the buyer shall transfer the property to the seller. Whatever be the form of mortgage, the transfer is of "some" interest only and not of the "whole" interest of the mortgagor. Unlike in the case of a sale in payment of a debt which extinguishes the debt, the debt always subsists in a mortgage. When a mortgagor mortgages his immovable property, he does not cease to be its owner; the equity of redemption still vests in him. This equity is lost unto him only when there is a final decree of foreclosure or sale in favour of the mortgagee. This has always been our law and a mortgage by conditional sale is no exception to it.

7. The statutory provisions, which are reflected in Sections 58, 60 and 67 of the Transfer of Property Act and Order XXXIV of the Code of Civil Procedure make this position clear. Clause (a) of Section 58 of the Transfer of Property Act defines a mortgage as "transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability." Clause (c), which deals with mortgage by conditional sale, provides as follows :-

"(c) Mortgage by conditional sale.----Where the mortgagor ostensibly sells the mortgaged property-

on a condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or

on a condition that on such payment being made the sale shall become void, or

on a condition that on such payment being made the buyer shall transfer the property to the seller,

the transaction is called mortgage by conditional sale and the mortgagee, a mortgagee by conditional sale:

Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale."

Section 60 of the Transfer of Property Act provides for the mortgagor's right to redeem. At any time after the principal money has become due, the mortgagor has a right, on payment or tender of the mortgage money, at a proper time and place, to require the mortgagee to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in possession or power of the mortgagee and at the cost of the mortgagor either to re-transfer the mortgaged property to him or to his nominee and to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished. Section 67 deals with the mortgagee's right to foreclosure or sale. In the absence of a contract to the contrary, the mortgagee has, at any time, after the mortgage-money has become due to him and "before a decree has been made for the redemption of the mortgaged property" or before the mortgage- money has been paid or deposited as provided in Section 67, a right to obtain from the court a decree that the mortgagor shall be absolutely debarred of his right to redeem the property or a decree that the property be sold. It is pertinent to note that the right to seek foreclosure is not available to any mortgagee other than a mortgagee by conditional sale or a mortgage under an anomalous mortgage by the terms of which he is entitled to foreclose. So also, the right to seek sale is not available to a usufructuary mortgagee or a mortgagee by conditional sale. What the scheme of this Section indicates is that the only remedy of a mortgagee by conditional sale is to apply for foreclosure and not for a decree of sale. 

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 306 of 1994

Decided On: 25.01.2017

Pandurang Maruti Dombale Vs. Bapurao Piraji Owal and Ors.

Hon'ble Judges/Coram:

S.C. Gupte, J.

Citation:2017(5) Bom CR 276

Print Page

How to decide whether particular transaction is mortgage by conditional sale or sale with condition of repurchase?

 The question whether a transaction is a mortgage by conditional sale or a sale with a condition of re-purchase has to be decided on the basis of interpretation of the document itself. The intention of the parties is the determining factor. The intention has to be gathered, in the first place, from the document. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If, however, there is ambiguity in the language employed, then it is permissible to look into the surrounding circumstances to determine what was intended (See: Pandit Chunchun Jha v. Sheikh Ebadat Ali MANU/SC/0111/1954 : (1955) 1 SCR 174). The extrinsic evidence of surrounding circumstances, as may be required to show in what manner the language of the document is relating to the existing facts, is a relevant criteria. (See: Balkishen Das v. Legge [MANU/PR/0026/1899 : (1899) L.R. 27 IA 58]).

8. This Court in Pandit Chunchun Jha's case (supra) considered the background in which the amendment was made to Section 58 (c) of the Act by the Transfer of Property (Amendment) Act, 1929 and held as follows:

Because of the welter of confusion caused by a multitude of conflicting decisions the legislature stepped in and amended Section 58(c) of the Transfer of Property Act. Unfortunately that brought in its train a further conflict of authority. But this much is now clear. If the sale and agreement to repurchase are embodied in separate documents, then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not. But the converse does not hold good, that is to say, the mere fact that there is only one document does not necessarily mean that it must be a mortgage and cannot be a sale. If the condition of repurchase is embodied in the document that effects or purports to effect the sale, then it is a matter for construction which was meant. The legislature has made a clear cut classification and excluded transactions embodied in more than one document from the category of mortgages, therefore it is reasonable to suppose that persons who, after the amendment, choose not to use two documents, do not intend the transaction to be a sale, unless they displace that presumption by clear and express words; and if the conditions of Section 58(c) are fulfilled, then we are of opinion that the deed should be construed as a mortgage.

9. One circumstance which favours the document being read as a mortgage by conditional sale is that the relationship between the parties is of a debtor and creditor and the transaction is a loan (See: Bhaskar Waman Joshi v. Narayan Rambilas Agarwal, MANU/SC/0161/1959 : (1960) 2 SCR 117, at p.122-123). The consideration amount being lesser than the market value is another circumstance by which the document can be treated as a mortgage by conditional sale. (See: P.L. Bapuswami v. N. Pattay Gounder, MANU/SC/0284/1965 : (1966) 2 SCR 918 at p. 923). The mutation not being done in favour of the transferee (See: Tulsi v. Chandrika Prasad, MANU/SC/8449/2006 : (2006) 8 SCC 322), the possession being with the transferor and the length of the period for re-transfer of the property (See: Indira Kaur v. Sheo Lal Kapoor, MANU/SC/0448/1988 : (1988) 2 SCC 488), are all circumstances which are indicative of a document being a mortgage by conditional sale.

10. On the other hand, it is settled law that a mere condition of repurchase will not make a document a mortgage by conditional sale as there can be an absolute sale with a condition for repurchase. It is also no more res integra that the mere title of the document is not determinative of the nature of the document and the document must be looked at in its entirety. (See: P.L. Bapuswami v. N. Pattay Gounder MANU/SC/0284/1965 : (1966) 2 SCR 918 at p. 921).

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 7023 of 2012

Decided On: 01.08.2017

Bibi Fatima and Ors.Vs. M. Ahamed Hussain and Ors.

Hon'ble Judges/Coram:

L. Nageswara Rao and Navin Sinha, JJ.

Citation:(2017) 11 SCC 832

Print Page

Leading judgment on basic concept of mortgage

  It is important to remember that mortgage is a transfer of

interest in specific immovable property towards “security for repayment

of a debt”.   The interest itself may be different in different forms of

mortgage.  In a simple mortgage, what is transferred is a power of sale,

whilst in a usufructuary mortgage it is the  right of the mortgagor  to the

enjoyment of the  usufruct.   In a mortgage  by conditional sale or an

English mortgage what is transferred is the right of ownership subject to

a condition that on default of payment on a certain date the sale shall

become absolute, or that on such payment being made the sale shall

become   void,   or   that   on   such   payment   being   made   the   buyer   shall

transfer the property to the seller.  Whatever be the form of mortgage,

the transfer is of “some” interest only and not of the “whole” interest of

the mortgagor. Unlike in the case of a sale in payment of a debt which

extinguishes the debt,  the debt always subsists in a mortgage. When  a

mortgagor mortgages his immovable property, he does not cease to be

its owner; the equity of redemption still vests in him.  This equity is lost

unto him only when there is a final decree of foreclosure or sale in favour

of the mortgagee.   This has always been our law and a mortgage by

conditional sale is no exception to it.                                                                                                                    

    IN THE HIGH COURT OF JUDICATURE AT BOMBAY

              CIVIL APPELLATE JURISDICTION

SECOND APPEAL NO.306 OF 1994

Pandurang Maruti Dombale Vs  Bapurao Piraji Owal & Ors.

CORAM :  S.C. GUPTE, J.

      

  DATED  :  25 JANUARY 2017

Citation: 2017(3) ALLMR 348

Print Page

How to determine whether particular document is mortgage by conditional sale or sale with option of repurchase?

 In Tulsi and Others vs. Chandrika Prasad and Others 1
(2006) 8 SCC 322
this Court explaining difference between mortgage by
conditional sale or sale with condition to repurchase has
observed as under:

“15. A distinction exists between a mortgage by way
of conditional sale and a sale with condition of
purchase. In the former the debt subsists and a
right to redeem remains with the debtor but in case
of the latter the transaction does not evidence an
arrangement of lending and borrowing and, thus,
right to redeem is not reserved thereby”.
11. In P.L. Bapuswami vs. N. Pattay Gounder 
AIR 1966 SC 902
, it is held that:
“The definition of a mortgage by conditional sale
postulates the creation by the transfer of a relation
of mortgagor and mortgagee, the price being
charged on the property conveyed. In a sale coupled
with an agreement to reconvey there is no relation
of debtor and creditor nor is the price charged upon
the property conveyed, but the sale is subject to an
obligation to retransfer property within the period
specified. The distinction between the two
transactions is the relationship of debtor and
creditor and the transfer being a security for the
debt. The form in which the deed is clothed is not
decisive. The question in each case is one of
determination of the real character of the
transaction to be ascertained from the provisions of
the document viewed, in the light of surrounding
circumstances. If the language is plain and
unambiguous it must in the light of the evidence of
surrounding circumstances, be given its true legal
effect”.

12. In Vishwanath Dadoba Karale vs. Parisa Shantappa
Upadhya
, the facts of the case were somewhat similar to the
present case, and as is evident from paragraph 2 in said case,
the Court held the deed was a mortgage by conditional sale,
and upheld the decree of redemption for mortgage.
13. In C.Cheriathan vs. P. Narayanan Embranthiri 
, the
principle relating to interpreting of document as to whether
the sale is mortgage by conditional sale or sale with a
condition to repurchase was discussed, and this Court held as
under:
“12. A document, as is well known, must be read
in its entirety. When character of a document is in
question, although the heading thereof would not be
conclusive, it plays a significant role. Intention of
the parties must be gathered from the document
itself but therefor circumstances attending thereto
would also be relevant; particularly when the
relationship between the parties is in question. For
the said purpose, it is essential that all parts of the
deed should be read in their entirety”.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4683 OF 2016

 Patel Ravjibhai Bhulabhai (D) Thr. LRS.
V
 Rahemanbhai M. Shaikh (D) Thr. LRS. & Ors.
Citation:(2016) 12 SCC216

Print Page

When Sale Deed would not constitute a mortgage by conditional sale?

 As pointed out earlier, Exhibit D/1 Sale Deed executed by the 1st respondent-plaintiff in the instant case does not embody any condition as stipulated in Section 58 (e) of the Transfer of Property Act, 1882. On facts and evidence, Courts below rightly held that Exhibit D/1 Sale Deed would not constitute a mortgage by conditional sale.

10. On the basis of oral and documentary evidence, the Courts below recorded that Exhibit D/1 Sale Deed dated 14.06.1972 and Exhibit P/1 Agreement dated 14.06.1972 having been executed on the same day and both ought to be read together. The Courts below have also recorded a concurrent finding of fact that Exhibit D/1 Sale Deed was executed only as a security for the loan and it was never the intention of the 1st respondent-plaintiff to convey the suit property. Since 1st respondent- plaintiff has paid back the loan amount i.e. Rs.6,700/- as is evident from the subsequent Agreement Exhibit P/2 dated 05.06.1974, the Courts below rightly recorded the concurrent findings of fact that Exhibit D/1 Sale Deed is not binding on the 1st respondent-plaintiff. Once repayment was made, the 1st respondent-plaintiff was entitled to the declaration as prayed for.

11. Yet another reason could be pointed out for affirming the impugned judgment of the High Court. It has been held by the trial Court that at the time of selling the suit property the extent was more than 10 Bighas i.e. 1/3rd share of 1st respondent-plaintiff in 2.856 hectares of the total land. Referring to the oral and documentary evidence of 1st respondent- plaintiff's witness Ajay Singh, the trial Court recorded a finding that at the time of sale of the land in 1972, the market value of the land in Padariya was Rs.2000/- per Bigha and at the time of the sale, the value of the property would have been not less than Rs.15000/-. The inadequacy of the sale consideration stated in Exhibit D/1 Sale Deed is yet another circumstance to indicate that the 1st respondent-plaintiff could not have intended to sell the property to the appellants-defendants.

Reportable

Supreme Court of India

Ramvilas (Dead) Thr. Lrs. & Anr vs Karim Khan & Anr on 1 December, 2016

  CIVIL APPEAL NO.2078/2008

Bench: R.K. Agrawal, R. Banumathi

Print Page

When plaintiff is not entitled to get reconveyance of mortgaged property?

 If the Deed is read as it is, it clearly provides that if the
Respondent failed to pay the amount within period of 10 years then the
Respondent would lose the rights to the property and the Appellant will
become owner thereof. There cannot be a dispute regarding this position
as it is the clear recital in the deed. Both the Courts have rendered a
factual finding that the Respondent – Plaintiff did not make any attempt
to pay the amount within period of 10 years. When the Civil Judge
recorded this finding, the Respondent did not file any cross-objection.
Same is the position in this Second Appeal. The District Judge has also
confirmed that the Respondent did not pay the amount within period of
10 years. The learned Counsel for the Respondent contended that the
Respondent had gone with the amount but he was turned away by the
Appellant. This version has not been accepted by both the Courts and
this factual finding has become final. Both the Court after rendering this
factual finding failed to give effect to the sequitor. The sequitor being
that the sale had become absolute. Nothing stopped the Respondent to
send the money by money order if the Appellant was not accepting the
amount. Both the parties consciously signed the deed, which contained a
clear stipulation that if amount is not paid within ten years, the deed was

to be treated as a sale deed, and the Respondent was fully aware of the
same. In fact the Trial Court at one place came to the conclusion that
the sale had become absolute but again deviated therefrom to hold that
mortgage had to be redeemed. This error has been repeated by the
District Judge. Therefore, even if the Deed is termed in either forms, the
consequence of non-payment within 10 years cannot be lost sight of.
 Going by the plain language of the Deed, if the amount was
not repaid by the Respondent within the stipulated period, the deed was
to be considered as an absolute sale deed and Appellant was to become
owner of the property. Both the Courts have rendered the finding of fact
that the amount was not paid within period of 10 years. Inspite of this
finding of fact, both the Courts have directed the Appellant to hand over
possession to the Respondent on the basis that the mortgage had to be

redeemed which is clearly erroneous.
 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
 CIVIL APPELLATE SIDE JURISDICTION

 SECOND APPEAL NO. 587 OF 1993
Mr. Shivaji Dagadu Mahangade,

V/s.
Aba Gopala Shinde,
 CORAM : N.M. Jamdar, J.

 22 April, 2016.
Citation: AIR 2016 Bom 213

Print Page

What is distinction between mortgage by conditional sale or sale with condition of repurchase?

 Bare   reading   of   the

registered Sale Deed dated 21.02.1980 shows that the plaintiff and his
father sold the suit land to the defendants for an amount of Rs.6000/­
without any condition for repurchase.  Though the plaintiffs relied on
the agreement dated 29.06.1986 by which the defendants agreed to
reconvey the suit land in their favour, that agreement was not admitted
by the defendants.   Even the plaintiffs failed to prove the same by
cogent evidence to show that the said agreement was duly signed by
the defendants. 

 In order to consider as to whether the document is a document of
mortgage by conditional sale, or is a sale with condition of repurchase,
the distinction between two transactions must be borne in mind.  In the
former case, there is a relationship of debtors and creditors and the
transfer is by way of security for repayment of debt, whereas in the
later case, there is condition of reconveyance in the event the amount
equivalent to the consideration is paid by the vendor to the purchaser.
If the condition of repurchase is contained in a separate deed, the
original sale deed can never be regarded as mortgage in view of the
provisions of Section 58(c) of the Transfer of Property Act, 1882. 
It is true that the condition of the repurchase is not contained in
the   document   of   transfer   itself,   but   it   is   contained   in   a   separate
document. The document of transfer cannot be regarded as a mortgage
by a conditional sale, in view of provisions of Section 58(c) of the
Transfer of Property Act, where a condition is contained in a separate
document. The deed of transfer would be regarded as an out­and­out
sale and the condition contained in a separate document would only be
regarded as separate agreement for reconveyance. In that event, the
conditions   for   reconveyance   including   condition   of   time   would   be
required to be strictly complied.   In case of Agreement for Sale of
immovable   property,   time   is   generally   not   an   essence   of   Contract.
However,   the   Agreement   to   reconvey   is   essentially   entered   by   the
purchaser with the vendor in the nature of concession, wherein timewould ordinarily be regarded as an essence of contract.  In that event,
the   original   vendor   would   be   required   to   strictly   comply   with   the
conditions including the condition of time, contained in the agreement
of reconveyance.
 Admittedly, in the case in hand, there was no provision in the
Sale deed dated 21.02.1980 to reconvey the property to the plaintiffs.
There   was   an   alleged   separate   agreement   dated   29.06.1986.
Therefore, in view of Section 58(c) of the Transfer of Property Act,  in
view of the Judgment of the Apex Court in the matter of Vanchalabai
(supra) and in the matter of C. Cheriathan (Supra), it is crystal clear
that on the basis of sale deed dated 21.02.1980 and the subsequent
agreement dated 29.06.1986, the plaintiffs are not entitled for decree
to direct the defendants to execute the reconveyance in respect of the
suit land in their favour. These facts are properly considered by the
Appellate Court, hence, I do not find any reason to interfere in the well

reasoned order on this point. 

IN THE HIGH COURT OF  JUDICATURE AT BOMBAY.
CIVIL APPELLATE JURISDICTION.
SECOND APPEAL NO.   161  OF   2013
WITH
CIVIL APPLICATION NO.  502  OF   2013
 Shri. Nanda @ Sadanand Dattu Barmukh 
Vs
Shri. Chhotubhai Kasambhai Inamdar 
CORAM : K. K. TATED, J.
DATED   : 04/09/2015.
Citation; 2016(2) ALLMR162

Print Page

Rules for interpretation whether a document is sale deed or mortgage deed

 The Proviso to this clause was added by Section 19 of the Transfer of Property (Amendment) Act, 1929 (XX of 1929). The Proviso was introduced in this clause only to set at rest the controversy about the nature of the document; whether the transaction would be a sale or a mortgage. It has been specifically provided by the Amendment that the document would not be treated as a mortgage unless the condition of repurchase was contained in the same document.

49. The basic principle is that the form of transaction is not the final test and the true test is the intention of the parties in entering into the transaction. If the intention of the parties was that the transfer was by way of security, it would be a mortgage. The Privy Council as early as in Balkishen Das and Ors. v. Legge, 27 Indian Appeals 58, had laid down that, as between the parties to the document, the intention to treat the transaction as an out and out sale or as a mortgage has to be found out on a consideration of the contents of document in the light of surrounding circumstances. The decision of this Court in Bhaskar Woman Joshi v. Shrinarayan Rambilas Agarwal and P.L. Bapuswami v. N. Pattay Gounder

are also to the same effect.

Supreme Court of India

Vidhyadhar vs Manikrao & Anr. on 17 March, 1999

Equivalent citations: AIR 1999 SC 1441, 1999 (3) ALT 1 SC, JT 1999 (2) SC 183

Print Page