1. Suit for redemption of property — Dispute over whether a transaction is a mortgage by conditional sale or a sale with a condition to repurchase under Transfer of Property Act. (Para 1 , 2 )
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2019 Supreme(SC) 479
SUPREME COURT OF INDIA
R. BANUMATHI, R. SUBHASH REDDY, JJ.
DHARMAJI SHANKAR SHINDE AND OTHERS – Appellants
VERSUS
RAJARAM SHRIPAD JOSHI (DEAD) THROUGH LRs. AND OTHERS – Respondents
CIVIL APPEAL NO.7448 OF 2008 WITH CIVIL APPEAL NO.7449 OF 2008
Decided On : 23-04-2019
Advocates Appeared:
For the Appellant :Ms. Qurratulain, Advocate, Mr. Shivaji M. Jadhav, Advocate, Mr. Brij Kishor Sah, Advocate, Mr. Nicholas Chaudhary, Advocate, M/S. S.M. Jadhav and Company, Advocate
For the Respondent:Mr. Arvind S. Avhad, Advocate, Mr. Rajat Kapoor, Advocate, Ms. Abha R. Sharma, Advocate and Ms. Sujata Kurdukar, Advocate.
For the Appellant :Ms. Qurratulain, Advocate, Mr. Shivaji M. Jadhav, Advocate, Mr. Brij Kishor Sah, Advocate, Mr. Nicholas Chaudhary, Advocate, M/S. S.M. Jadhav and Company, Advocate
For the Respondent:Mr. Arvind S. Avhad, Advocate, Mr. Rajat Kapoor, Advocate, Ms. Abha R. Sharma, Advocate and Ms. Sujata Kurdukar, Advocate.
IMPORTANT POINT
Nature of a document depends upon intention of the parties.
Headnote:(a) Transfer of Property Act – Section 58(c) – Mortgage by conditional sale or a sale with condition for reconveyance – Document titled as “mortgage by conditional sale” – Parties intending to create a relationship of vendor and vendee by transfer of the suit property for a consideration of Rs.2500/- repayable in five years – Possession of property handed over to vendee – Mortgage to be redeemed on repayment of consideration amount within five years – If not, mortgage to be treated as absolute sale – Parties not described as mortgagor or mortgagee – Non-mention of the mortgage amount for which the interest in the immovable property was created as security indicating parties’ intension not to create a mortgage deed – Document, held, a conditional sale with an option to repurchase. (Para 16, 17, 20)
(1960) 2 SCR 117 : AIR 1960 SC 301; AIR 1954 SC 345 – Relied upon
(2018) 11 SCC 172 – Distinguished
(b) Transfer of Property Act – Section 58(c) – Transaction and condition to repurchase embodied in one document – In view of intention of parties and surrounding circumstances, held, section 58(c) not applicable – Document held not a mortgage but a transaction of sale with condition to repurchase. (Para 27)
Facts of the case:
Respondents-plaintiffs filed a suit for redemption of the suit property. Case of the respondents-plaintiffs is that the suit property was mortgaged by their father Shripad Joshi on 28.07.1967 in favour of Shankar Shinde who is the predecessor-in-interest of the appellants-defendants for Rs.2500/-. The said deed (Ex.P-73) is a deed of “mortgage by conditional sale” with a condition that if the amount is not repaid within a period of five years from the date of execution of the deed, then the same would be treated and construed as an absolute sale between the parties conferring absolute right of ownership on Shankar Shinde and his legal representatives. The possession of the suit property was also handed over to Shankar Shinde on the date of execution of the deed. The respondents-plaintiffs further averred that on 26.07.1972, their father had paid an amount of Rs.800/-to Shankar Shinde and to that effect Ex.P-69-receipt was executed. Shripad Joshi died in the year 1973 and the respondents-plaintiffs succeeded to his estate. Further case of the respondents-plaintiffs is that in spite of repeated request to the appellants-defendants for redemption of the suit property and delivery of possession of the property, they failed to receive the money and had not handed over the possession of the property.
The trial court dismissed the respondents-plaintiffs suit.
The first Appellate Court set aside the judgment of the trial court and allowed the first appeal.
The High Court dismissed the second appeal.
Finding of the Court:
The document is a conditional sale with an option to repurchase.
Result: Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether the transaction constitutes a mortgage by conditional sale due to the condition being embodied in the sale deed or a sale with an option to repurchase. (Para 3 , 6 , 7 )
3. Absence of debtor-creditor relationship, interest clauses, or foreclosure rights, coupled with the transferee's exercise of ownership rights, indicates a sale with a condition to repurchase. (Para 16 , 18 , 19 , 20 , 21 , 24 , 25 , 26 )
4. Distinction between mortgage by conditional sale and sale with repurchase depends on the intention of parties and the existence of a debtor-creditor relationship. (Para 10 , 12 , 13 , 14 , 15 )
5. Appeals allowed — High Court judgment set aside — Suit for redemption dismissed — Trial Court judgment restored. (Para 27 , 28 )
6. What is the legal distinction between a mortgage by conditional sale and a sale with a condition to repurchase?
A mortgage by conditional sale is a transfer made as security for a loan, establishing a debtor-creditor relationship. In contrast, a sale with a condition to repurchase is a sale where the vendor reserves a right to repurchase within a stipulated time, without a debtor-creditor relationship or the price being charged as security. (Para 10 , 12 )
7. What is the effect of the proviso to Section 58(c) of the Transfer of Property Act?
The proviso mandates that a transaction is not deemed a mortgage unless the condition for the sale to become absolute or void is embodied in the document effecting the sale. However, the mere incorporation of such a condition in one document does not automatically make it a mortgage; the parties' intention remains the determining factor. (Para 11 , 12 , 13 )
8. How is the intention of parties determined to distinguish between a conditional sale and a mortgage?
Intention is primarily gathered from the recitals of the document. If the language is ambiguous, the court examines surrounding circumstances and contemporaneous conduct, such as the existence of a debtor-creditor relationship, payment of land revenue, mutation of property records, and the presence of interest or foreclosure clauses. (Para 10 , 13 , 14 , 21 )
JUDGMENT
R. BANUMATHI, J.
These appeals arise out of the judgment dated 15.11.2006 passed by the High Court of Bombay dismissing the Second Appeal No.887 of 2003 thereby upholding the decision of the first Appellate Court holding that Ex.P-73 is a “mortgage by conditional sale” and that the respondents-plaintiffs are entitled to redeem the suit property upon payment of the balance amount.
2. Facts giving rise to these appeals are that the respondents-plaintiffs filed a suit for redemption of the suit property bearing S.No.147 present G.No.750 admeasuring 2 Hectares 18 Are situated in village Kudal, Jawli taluka and district Satara. Case of the respondents-plaintiffs is that the suit property was mortgaged by their father Shripad Joshi on 28.07.1967 in favour of Shankar Shinde who is the predecessor-in-interest of the appellants-defendants for Rs.2500/-. The said deed (Ex.P-73) is a deed of “mortgage by conditional sale” with a condition that if the amount is not repaid within a period of five years from the date of execution of the deed, then the same would be treated and construed as an absolute sale between the parties conferring absolute right of ownership on Shankar Shinde and his legal representatives. As per the recitals in the document, the possession of the suit property was also handed over to Shankar Shinde on the date of execution of the deed. The respondents-plaintiffs further averred that on 26.07.1972, their father had paid an amount of Rs.800/-to Shankar Shinde and to that effect Ex.P-69-receipt was executed. Shripad Joshi died in the year 1973 and the respondents-plaintiffs succeeded to his estate. Further case of the respondents-plaintiffs is that in spite of repeated request to the appellants-defendants for redemption of the suit property and delivery of possession of the property, they failed to receive the money and had not handed over the possession of the property. After issuance of legal notice dated 19.02.1980, the plaintiffs filed the suit for redemption of the mortgage.
3. The appellants-defendants resisted the suit contending that the transaction between their father-Shankar Shinde and the father of the respondents-plaintiffs-Shripad Joshi was a sale with condition to repurchase within a stipulated period of five years. Case of defendants is that since Shripad Joshi, father of the respondents-plaintiffs failed to repay the money within the stipulated period of five years and failed to take any step to get the property reconveyed to them, after the period of five years as per the terms and conditions of Ex.P-73, father of the appellants-defendants Shankar Shinde has become the absolute owner of the suit property and the plaintiffs have no right, title or interest in the suit property.
4. The trial court dismissed the respondents-plaintiffs suit by holding that the relationship of debtor and creditor is not established and the respondents have failed to prove that the transaction (Ex.P-73) was a mortgage and therefore, they are not entitled to redemption and possession of the suit property. After referring to the recitals in Ex.P-73, the trial court held that the respondents-plaintiffs have agreed that if Shripad Joshi does not pay the amount within stipulated period of five years, the said document was to be treated as sale deed and in his life time executant Shripad Joshi did not take any action to get the property reconveyed. The trial court also held that Ex.P-69-receipt has not been proved by the respondents-plaintiffs and the respondents-plaintiffs are not entitled to the decree prayed for by them.
5. In appeal, the first Appellate Court set aside the judgment of the trial court by holding that Ex.P-73 is a “mortgage by conditional sale” and not an absolute sale deed or a sale with a condition to repurchase. The first Appellate Court held that payment of Rs.800/-by Shripad Joshi has been proved and that the respondents have proved the execution of Ex.P-69-receipt by examining Prabhakar (PW-2) who
