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Friday, May 13, 2016

whether the sale is mortgage by conditional sale or sale with a condition to repurchase=Distinguishing features between ‘mortgage by conditional sale’ and ‘sale with an option to repurchase’ are enumerated in Mulla’s Transfer of Property Act (11th Edition) as under:- “(i) In a mortgage with conditional sale, the relation of a debtor and a creditor subsists while in a sale with an option of re-purchase, there is no such relationship and the parties stand on an equal footing. (ii) A mortgage by conditional sale is effected by a single document, while a sale with an option of repurchase is generally effected with the help of two independent documents. (iii) In a mortgage with conditional sale the debt subsists as it is a borrowing arrangement, while in a sale with an option of repurchase, there is no debt but a consideration for sale. (iv) In a mortgage with conditional sale, the amount of consideration is far below the value of the property in the market but in a sale with an option of repurchase the amount of consideration is generally equal to or very near to the value of the property. (v) In a mortgage with conditional sale, since this is a mortgage transaction, the right of redemption subsists in favour of the mortgagor despite the expiry of the time stipulated in the contract for its payment. The mortgagor has the option to redeem the mortgage and take back the property on the payment of the mortgage money, after the specified time, but in a sale with an option of re-purchase, the original seller must re- purchase the property within the stipulated time period. If he commits a default the option of re-purchase is lost.”= mortgage by way of conditional sale = “In this deed condition is that the said amount of Rs.10,000.00 when we pay back to you within five years from today, you shall give back the said property to us with possession. And in the same manner, we shall have no right to ask back the same after expiry of the time limit.” The above condition in Exh.23 that if the plaintiffs (respondents) make repayment of Rs.10,000/- within a period of five years, the defendants shall handover the possession of property in suit back to the plaintiffs, reflects that the actual transaction between the parties was of a loan, and the relationship was of debtor and creditor existed, as such, we are of the view that the High Court has rightly held that the deed in question Exh.23 read with Exh. 37 is a mortgage by way of conditional sale and the decree passed in favour of the plaintiffs does not require to be interfered with. Needless to say, since the possession of the land was handed over to the mortgagee, no interest was charged. It has also come on record that the defendants leased the land to third parties, after possession was given by the plaintiffs in 1960. In the circumstances, after perusal of the evidence on record, we agree with the view taken by the High Court. For the reasons as discussed above, we find no force in this appeal. Accordingly, the appeal is dismissed with no order as to costs.

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                      CIVIL APPEAL NO.  4683   OF 2016
              (Arising out of S.L.P. (Civil) No. 9513 of 2013)

  Patel Ravjibhai Bhulabhai (D) Thr. LRS.                …..Appellants

                                   Versus

   Rahemanbhai  M.  Shaikh  (D)  Thr.  LRS.  &   Ors.         .….Respondents







                               J U D G M E N T

Prafulla C. Pant, J.

      Leave granted.

This appeal is directed against judgment and decree dated  20/21/24-09-2012,
passed by High Court of Gujarat at Ahmedabad, whereby Second Appeal No.  107
of 1994 is allowed, and dismissal of suit by  trial  court  as  affirmed  by
First Appellate Court is reversed. The suit  of  the  respondents/plaintiffs
for redemption of suit property is decreed by High Court on the  payment  of
Rs.10,000/- within a period of six months by the plaintiffs  from  the  date
of the decree.

We have heard learned counsel for the parties  and  perused  the  papers  on
record.

Brief facts of the case are  that  original  plaintiffs  Shaikh  Rahemanbhai
Mohamadbhai (since died) and  Shaikh  Ismailbhai  Moahamadbhai,  executed  a
deed dated 30.12.1960 in favor of defendant nos.  1  and  2,  namely,  Patel
Ravjibhai Bhulabhai (since died) and Patel Dahyabhai Bhudarbhai,  which  was
titled as conditional sale, for a sum of Rs.10,000/- providing therein  that
if the repayment is made within a  period  of  five  years,  the  defendants
shall give back the property in suit with possession to the plaintiffs  with
further stipulation that the plaintiffs would have no right to get back  the
property after the expiry of  the  period  of  five  years.  The  plaintiffs
instituted Civil Suit No. 156 of 1984 before Civil Judge,  Junior  Division,
Dakor, for  redemption  of  property  in  question  (i.e.  Survey  No.  148,
admeasuring 3 acres 29 guntas situated in Village Rustampura, Taluk  Thasra)
on repayment of the mortgage money under  the  deed  dated  30.12.1960,  and
further sought  to  recover  the  possession  of  the  property  with  mesne
profits.  The plaintiffs pleaded that the deed in question  was  a  mortgage
deed, and as such they have right to redeem the same.

The defendants contested the suit, and pleaded that  deed  dated  30.12.1960
is not a mortgage transaction but a conditional  sale  with  stipulation  of
repurchase within a period of five years.  Denying that the plaintiffs  have
any right to redeem the property, it is stated by the  defendants  that  the
land was purchased by the defendants for a consideration of Rs.10,000/-  and
possession was delivered to them in 1960 along with execution of the deed.

The trial court after framing issues, and recording of evidence,  held  that
plaintiffs have failed to prove that the transaction  was  a  mortgage.  The
trial court further held  that  suit  is  barred  by  time,  and,  as  such,
dismissed the suit on 27.11.1987.  The  First  Appellate  Court  (2nd  Joint
District Judge, Nadiad) affirmed the decree of dismissal of suit  passed  by
the trial  court,  vide  its  judgment  and  order  dated  30.09.1993.   The
plaintiffs preferred Second Appeal (S.A. No. 107 of 1994)  before  the  High
Court, and the High Court after hearing  the  parties  reversed  the  decree
passed by the two courts below. Hence the defendants are  in  appeal  before
this Court.

At the outset we may state that issue of limitation is  not  pressed  before
us as Article 60(a) of Limitation Act, 1963  provides  thirty  years  period
for filing the suit for redemption.  The question before us is that  whether
document Exh. 23, in its true interpretation,  is  mortgage  by  conditional
sale, as interpreted by High Court, or the sale with  option  to  repurchase
as held by the two courts subordinate to it.


Section 58 (c) of The Transfer of Property Act,  1882  defines  mortgage  by
conditional sale, and reads as under:-
“(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 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,  1882  provides  right  of
mortgagor to redeem the property.

Distinguishing features between ‘mortgage by  conditional  sale’  and  ‘sale
with an  option  to  repurchase’  are  enumerated  in  Mulla’s  Transfer  of
Property Act (11th Edition) as under:-
“(i)  In a mortgage with conditional sale, the relation of a  debtor  and  a
creditor subsists while in a sale with an option of  re-purchase,  there  is
no such relationship and the parties stand on an equal footing.

(ii)  A mortgage by conditional sale  is  effected  by  a  single  document,
while a sale with an option of repurchase is  generally  effected  with  the
help of two independent documents.

(iii) In a mortgage with conditional sale the  debt  subsists  as  it  is  a
borrowing arrangement, while in a sale with an option of  repurchase,  there
is no debt but a consideration for sale.

(iv)  In a mortgage with conditional sale, the amount  of  consideration  is
far below the value of the property in the market but  in  a  sale  with  an
option of repurchase the amount of consideration is generally  equal  to  or
very near to the value of the property.

(v)   In a  mortgage  with  conditional  sale,  since  this  is  a  mortgage
transaction, the right of redemption subsists in  favour  of  the  mortgagor
despite the expiry of the time stipulated in the contract for  its  payment.
The mortgagor has the option to  redeem  the  mortgage  and  take  back  the
property on the payment of the mortgage money,  after  the  specified  time,
but in a sale with an option of re-purchase, the original  seller  must  re-
purchase the property within the stipulated time period.  If  he  commits  a
default the option of re-purchase is lost.”

In  Tulsi  and  Others  vs.  Chandrika  Prasad  and  Others[1],  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”.


In P.L. Bapuswami vs. N. Pattay Gounder[2], 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”.

In Vishwanath Dadoba Karale vs. Parisa Shantappa Upadhya[3],  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.

In C.Cheriathan vs. P. Narayanan Embranthiri [4], 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”.

In the case at  hand  the  document  in  question  (Exh.  23)  contains  the
condition as under: -
“In this deed condition is that the said amount of Rs.10,000.00 when we  pay
back to you within five years from today,  you  shall  give  back  the  said
property to us with possession.  And in the same manner, we  shall  have  no
right to ask back the same after expiry of the time limit.”


The above condition in Exh.23 that  if  the  plaintiffs  (respondents)  make
repayment of Rs.10,000/- within a  period  of  five  years,  the  defendants
shall handover the possession of property in suit back  to  the  plaintiffs,
reflects that the actual transaction between the parties was of a loan,  and
the relationship was of debtor and creditor existed, as such, we are of  the
view that the High Court has rightly held that the deed in  question  Exh.23
read with Exh. 37 is a mortgage by way of conditional sale  and  the  decree
passed in favour of the plaintiffs does not require to be  interfered  with.
Needless to say, since the possession of the land was  handed  over  to  the
mortgagee, no interest was charged. It has also  come  on  record  that  the
defendants leased the land to third parties, after possession was  given  by
the plaintiffs in 1960. In the circumstances, after perusal of the  evidence
on record, we agree with the view taken by the High Court.

For the reasons as discussed  above,  we  find  no  force  in  this  appeal.
Accordingly, the appeal is dismissed with no order as to costs.

……………………………..J.
                                                              [Ranjan Gogoi]



                                                             ……………………………..J.
                                                          [Prafulla C. Pant]
New Delhi;
May 02, 2016.
-----------------------
[1]    (2006) 8 SCC 322
[2]    AIR 1966 SC 902
[3]    (2008)11 SCC 504
[4]    (2009) 2 SCC 673


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