1. Suit for redemption of mortgage — Dispute over whether a deed constitutes a mortgage by conditional sale or a sale with an option to repurchase under Transfer of Property Act. (Para 1 , 2 )
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2017 Supreme(SC) 737
SUPREME COURT OF INDIA
L. Nageswara Rao, Navin Sinha, JJ.
Vithal Tukaram Kadam and Another – Appellants
Versus
Vamanrao Sawalaram Bhosale and Others – Respondents
Civil Appeal Nos. 7245-7246 of 2011
Decided On : 09-08-2017
Advocates Appeared:
For the Appellants :- Ms. Mukti Chowdhary, Adv.
For the Respondents:- Dilip Annasaheb Taur, Amol V. Deshmukh, Ranjith K.C., Advs.
For the Appellants :- Ms. Mukti Chowdhary, Adv.
For the Respondents:- Dilip Annasaheb Taur, Amol V. Deshmukh, Ranjith K.C., Advs.
IMPORTANT POINT
Decisive factors for determination whether a document is a mortgage by conditional sale and not a sale with an option to repurchase are: ostensible sale with transfer of possession and ownership, but containing a clause for reconveyance in one document; debtor and creditor relationship; valuation of property and transaction value; and duration of time for re-conveyance.
Headnote:Transfer of Property Act, 1882 – Section 58(c) – Mortgage by conditional sale, or a sale with an option to repurchase – Decisive factors – Ostensible sale with transfer of possession and ownership, but containing a clause for reconveyance in one document – Debtor and creditor relationship – Valuation of property and transaction value and duration of time for reconveyance – Instant document styled as sale deed for consideration of Rs. 700/- – Held, ostensible sale with condition of reconveyance – Use of words "repay", "return" and "subject to this condition" – Document held mortgage by conditional sale and not a sale with an option to repurchase. (Para 14, 15, 18)
(2008) 11 SCC 504; 1955 SCR 174; AIR 1960 SC 301; AIR 1966 SC 902; (2006) 1 SCC 168; (1988) 2 SCC 488; (2016) 12 SCC 216 – Relied upon
(2016) 12 SCC 216 – Referred
1993 Supplement (1) SCC 295 – Distinguished
Facts of the case:
The appellants' suit for redemption of mortgage, decreed by two courts, has been reversed in second appeal by the High Court.
Finding of the Court;
Instant document is a mortgage by conditional sale and not a sale with an option to repurchase.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether a reconveyance clause, debtor-creditor relationship, and valuation disparity characterize a transaction as a mortgage by conditional sale versus a sale with an option to repurchase. (Para 5 , 6 )
3. The court evaluated the deed's language, the significant gap between property valuation and consideration, the long reconveyance period, and the established debtor-creditor relationship. (Para 7 , 9 , 10 , 11 , 15 , 17 )
4. A mortgage by conditional sale requires an ostensible sale with a reconveyance clause in the same document, a debtor-creditor relationship, and cumulative consideration of valuation and duration. (Para 8 , 14 )
5. The deed was held to be a mortgage by conditional sale; the High Court's order was set aside and the appeals were allowed. (Para 18 )
6. How is a mortgage by conditional sale distinguished from a sale with an option to repurchase?
The distinction is determined by analyzing the recitals in the document, the intention of the parties, and surrounding circumstances. Key factors include the presence of a reconveyance clause in the deed, the existence of a debtor-creditor relationship, the property's valuation relative to the consideration, and the duration for reconveyance. (Para 7 , 14 )
7. What are the essential requirements for a transaction to be a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act?
The transaction must be an ostensible sale where the condition—that the sale becomes void or the buyer transfers the property back upon payment—is embodied within the document that effects or purports to effect the sale. (Para 8 , 14 )
8. Does a long stipulated period for reconveyance suggest a mortgage by conditional sale?
Yes, an inordinately long period for reconveyance is indicative of the parties' intention to create a mortgage by conditional sale rather than an absolute sale with a stipulation to reconvey. (Para 11 , 17 )
9. How does the difference between property valuation and sale consideration influence the characterization of a deed?
A significant disparity where the property valuation is far in excess of the consideration mentioned in the agreement is a strong circumstance suggesting the transaction is a mortgage and not an outright sale. (Para 10 , 17 )
JUDGMENT
Navin Sinha, J.
The appellants' suit for redemption of mortgage, decreed by two courts, has been reversed in second appeal by the High Court. The parties shall be referred to by their respective positions in the suit, for convenience and better appreciation.
2. The only question of law for consideration is, whether the deed dated 21.04.1953, Exhibit 62, was a mortgage by conditional sale, or a sale with an option to repurchase.
3. The Civil Judge and the Additional District Judge in appeal, after consideration of the recitals in the deed, intention of the parties, and the attendant circumstances, held that it was a mortgage by conditional sale.
4. The High Court in second appeal, opined that there did not exist a debtor and creditor relationship between the parties. The deed contained no recital that the suit lands were being transferred for securing payment of money. The agreement was a sale deed, transferring title and possession. The option for reconveyance, was not exercised within the stipulated period of ten years. The suit itself was thus not maintainable. The plaintiff, while objecting to mutation in the name of the defendant, did not make any offer to repay the amount of Rs. 700/- mentioned in the deed, seeking consequent return of the lands. The agreement was held to be a sale, with an option to repurchase.
5. Learned counsel for the plaintiff submits that the clause for reconveyance being contained in the agreement itself, it was a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act, 1882 (hereinafter referred to as `the Act'). It was redeemable at any time during ten years under the agreement. The plaintiff had objected to mutation in the name of the defendant. The defendant in his evidence, had admitted that the plaintiff had taken money from him from time to time. The land was valued at Rs. 3500/- and the defendant was demanding that amount for reconveyance. The plaintiff could not have sold his lands for a paltry sum of Rs. 700/-. The High Court erred in not appreciating the distinction between a mortgage by conditional sale and a sale with an option to repurchase. Reliance was placed on Vishwanath Dadoba Karale v. Parisa Shantappa Upadhye (D) thr. Lrs., (2008) 11 SCC 504, and Patel Ravjibhai Bhulabhai (D) thr. Lrs. v. Rahemanbhai M. Shaikh (D) thr. Lrs and Ors., (2016) 12 SCC 216.
6. Learned counsel for the respondent submitted that mere incorporation in the agreement of a provision for reconveyance, cannot be singularly determinative of the deed being a mortgage by conditional sale. The agreement was styled as a sale deed, conveying an absolute title, free of encumbrances. The failure to redeem within ten years, coupled with the absence of a debtor and creditor relationship, were sufficient evidence of the agreement being a sale with option to repurchase. Reliance was placed on Tamboli Ramanlal Motilal (dead) by Lrs. v. Ghanchi Chimanlal Keshavlal (dead) by Lrs., 1993 Supplement (1) SCC 295.
7. The question whether a document is a mortgage by conditional sale, or a sale with an option to repurchase, has to be determined in the facts of each case, dependent on the recitals in the document, intention of the parties, coupled with attendant surrounding circumstances. There can be no hard and fast rule for determining the nature of the document devoid of these circumstances. Precedents, in abundance, will not suffice alone, as observed in Pandit Chunchun Jha v. Sheikh Ebadat Ali and Another, 1955 SCR 174, as follows:-
"There are numerous decisions on the point and much industry has been expended in some of the High Courts in collating and analyzing them. We think that it is a fruitless task because two documents are seldom expressed in identical terms and when it is necessary to consider the attendant circumstances the imponderable variables which that brings in its train make it impossible to compare one case with another. Each case must be decided on its own facts."
8. Section 58, clau
