A sale with a mere condition of retransfer is not a mortgage by conditional sale

The Supreme Court yet again reiterated that if the sale and agreement to repurchase are embodied in separate documents then the transactions cannot be called mortgage by conditional sale irrespective of whether the documents are contemporaneously executed.

The above ratio was delivered by the Supreme court in the matter of Sopan (dead) through his LRs vs. Syed Nabi, Civil Appeal no. 3506 of 2010 decided on 16.07.2019

Challenge

The Plaintiff had taken money from the Defendant as and when required. At a stage when the plaintiff received a sum of Rs.5,000/-, the same was construed as the consideration for the land owned by the plaintiff bearing Survey No.2/A measuring 6 acres 2 guntas and the defendant already being put in possession of the said property, a registered sale deed dated 10th December, 1968 was executed in favour of the defendant. A separate agreement dated 10th December, 1968 was also entered into between the parties whereby the plaintiff had agreed to repay the said amount and secure reconveyance of the property. Another agreement was entered into on 29th August, 1969 between the parties under which the respondent-plaintiff agreed that he has taken Rs.5,000/- from the appellant-defendant and the possession of the land was given. In addition, respondent-plaintiff has received a sum of Rs.2,224/- without any interest, in all Rs.7,224/-. The respondent-plaintiff agreed if the amount is not repaid on “Velamavasya” the deed will be considered as sale deed.

The suit in question was filed seeking a judgment and decree for redemption of mortgage and recovery of the possession of the suit scheduled land. The Civil Court by its judgment accepted the contention of the plaintiff and decreed the suit whereby the redemption of the suit land was ordered treating the transaction to be a mortgage. The plaintiff, therefore, filed the suit as stated above. The trial court though had framed several issues, the entire consideration rested on the construction of the sale deed dated 10th December, 1968 and the contemporaneous documents, so as to consider whether the same amounts to a mortgage by conditional sale in the nature of contention put forth, or as to whether it is a sale transaction.

Held

The Supreme Court observed that the proviso to Section 58(c) indicated that no transaction shall be deemed to be a mortgage unless the condition is embodied in the document which effects or purports to affect the sale. Therefore, any recital relating to mortgage or the transaction being in the nature of a conditional sale should be an intrinsic part of the very sale deed which will be the subject matter. The Court noted that a perusal of the sale deed dated 10th December, 1968 clearly reflected that the document does not disclose that the transaction is one of mortgage or that of a conditional sale. Referring to the judgement in Dharmaji Shankar Shinde & Ors. Vs. Rajaram Sripad Joshi (D) Lrs. and Ors. (2019) 6 SCALE 682 where the Court had considered the entire conspectus of the provision contained in Section 58(c), the Court reiterated that the conclusion that a sale with a mere condition of retransfer is not a mortgage. It was 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 contemporaneously executed. 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.

Applying the above legal principles to the facts of the case, the Court held that in the instant case admittedly the claim of the plaintiff is based on the reliance placed on a contemporaneous document. That apart even if the nature of the transaction was to be noted, it not only does not indicate any clause to demonstrate it as a mortgage but, on the other hand, refers to the sale consideration, the manner in which it was received and the plaintiff as the vendor by executing the document has assured the defendant that he should enjoy possession of the said land ancestrally which, in other words, is an absolute conveyance. Hence at the outset, it is evident that the case of the plaintiff cannot overcome the rigour of law to term it as a mortgage by conditional sale.