REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs. 7245-7246 OF 2011

VITHAL TUKARAM KADAM AND ANOTHER ..........APPELLANT(S)

versus

VAMANRAO SAWALARAM BHOSALE AND OTHERS ......RESPONDENT(S)

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.

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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 2

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  vs.  Parisa  Shantappa

Upadhye  (D)  thr.  Lrs.,  (2008)  11  SCC  504,  and  Patel

Ravjibhai  Bhulabhai  (D)  thr.  Lrs.  vs.  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,

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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.  vs.  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 vs.

Sheikh Ebadat Ali and Another, 1955 SCR 174, as follows:-

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“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,  clause  (c)  of  the  Transfer  of  Property  Act,

1882 defines mortgage by conditional sale as follows:-

“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. In  Bhaskar  Waman  Joshi  (deceased)  and  Ors.  vs.

Shrinarayan Rambilas Agarwal (deceased)  and Ors., AIR

1960 SC 301, the principles for determination of the nature of

the document were explained as follows:- 5

“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.”

10. In  P.L. Bapuswami  vs.  N. Pattay Gounder,  AIR 1966

SC  902,  it  was  further  observed  that  the  difference  in  the

valuation of the property, and the consideration mentioned in

the agreement, was also relevant for deciding the nature of the

document:-

“6…The criticism of learned counsel for the appellant is justified and we must proceed on the basis that the valuation of the property was Rs.8000/- and since the consideration for Ex- B-l was only Rs.4000/- it was a strong circumstance suggesting that the transaction was a mortgage and not an outright sale….”

Similar is the view expressed in Ramlal vs. Phagua, (2006) 1

SCC 168.  In Vishwanath Dadoba Karale (supra) the recitals

in the agreement were similar to that in the present case.  It

was  held  that  limited  transfer  of  title  with  option  for

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reconveyance  in  one  document,  qualified  the  agreement  as

mortgage by conditional sale.  

11.  In  Indira Kaur vs.  Sheo Lal Kapoor, (1988) 2 SCC

488, it was held that the  inordinately long period of time for

ten  years,  under  the  agreement  to  seek  reconveyance,  was

indicative of the intention of the parties to create a mortgage

by conditional sale, observing as follows:-

“5. There is no manner of doubt that the transaction in question  was  one  of  mortgage  in  essence  and substance  though  it  was  clothed  in  the  garb  of  a transaction of ostensible sale. The factors adumbrated hereinunder leave no room for doubt on this score:  (2) The stipulated period for conveying the property was a very long period of 10 years. The very length of the period is suggestive of a transaction of mortgage and  not  a  transaction  of  absolute  sale  with  a stipulation to reconvey the property in such peculiar circumstances,  bearing  on  the  relationship  between the parties or some other relevant consideration. (5)  The  obvious  reason  for  entering  into  such  a transaction  of  ostensible  sale  coupled  with  a contemporaneous  agreement  to  sell  within  10  years was that if it was not garbed with this paraphernalia and  was  given  the  nomenclature  of  a  mortgage  the period of redemption would have been 30 years. This period  could  not  have  been  curtailed  without attracting the doctrine of clog on equity of redemption. This was obvious reason for resorting to this device.”

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12. In  Patel  Ravjibhai  Bhulabhai  (D)  thr.  Lrs.  vs.

Rahemanbhai M. Shaikh (D) thr. Lrs. and ors., (2016) 12

SCC  216,  the  document  was  held  to  be  a  mortgage  by

conditional  sale,  in  view  of  the  clause  for  reconveyance

contained in the same in view of Section 58 (c) of the Act, and

the existence of a debtor and creditor relationship.

13. Tamboli  Ramanlal  Motilal  (dead)  by  Lrs. (supra)  is

distinguishable on facts. It was held therein that there existed

no relationship of debtor and creditor. The absence of any right

in the  mortgagee  to  foreclose  the  mortgage  was also  noticed

observing:-

“20. The further clause in the document is to the effect  that  the  executant  shall  repay  the  amount within a period of five years and in case he fails to repay  neither  he  nor  his  heirs  or  legal representatives will have any right to take back the said properties. Here only the right of the transferor is emphasised, while the right of the transferee to foreclose the mortgage is not spoken to….”

14. The essentials of an agreement, to qualify as a mortgage

by  conditional  sale,  can  succinctly  be  broadly  summarised.

An ostensible sale with transfer of possession and ownership,

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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.   

15. The agreement, Exhibit 62, though styled as a sale deed,

for  a  consideration  of  Rs.700/-  is  but  an  ostensible  sale,

containing a clause for reconveyance. The agreement concludes

as follows:-

“If I repay your amount of Rs.700/- in any year (at any time) during the period of ten years from now

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then you have to return my said land to me, subject to this condition I have sold land to you.”   

The significance of the words “repay”, “return” and “subject to

this  condition”  cannot  be  overlooked.  They  are  not

commensurate  with  a  deed  of  absolute  sale.  The  language

used, conveys the distinct impression that the plaintiff did not

intend to relinquish all  rights,  title  and claims to his lands.

The  defendant  was  aware  of  the  limited  nature  of  right

conveyed and had agreed to a conditional sale along with an

obligation to return the lands if the amount was repaid.

16. The  plaintiff  initially  filed  Civil  Suit  no.  89/1975  for

specific performance to transfer the lands back to him.  It was

withdrawn with liberty to file a fresh suit for redemption.  The

filing of the fresh suit in 1986, beyond the period of ten years is

hardly relevant. The limitation for the right to redeem, under

Section 60 of the Act is thirty years.  

17. The  parties  were  admittedly  well  known to  each  other

since before. The plaintiff had been borrowing money from the

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defendant even earlier from time to time according to need, and

even at the time of execution of the agreement he was in need

of money.  The value of the land was Rs. 3500/- far in excess of

the  amount  of  Rs.700/-  mentioned  in  the  agreement.   The

defendant  in  cross-examination  did  not  deny  the  recital  in

Exhibit  66,  dated 11.6.1975 in reply  to  notice,  that  he  had

demanded the sum of Rs.3500/-with interest for reconveyance.

The relationship of debtor and creditor cannot be faulted with.

The respondent did not take any steps for mutation for three

long years after  the execution of  the deed. The plaintiff  had

specifically objected to mutation in the name of the defendant,

by Exhibits 33 and 34.  The period for reconveyance provided

in the agreement itself was inordinately long for ten years. The

clause for reconveyance was in requirement with Section 58 (c)

of  the  Act.  The  High  Court  failed  to  consider  the  aforesaid

factors in totality and in a holistic manner, while arriving at the

finding  that  there  was  no  debtor  and  creditor  relationship

between the parties, and that the agreement was a sale deed

with  an  option  to  repurchase.  The  findings  are  clearly

unsustainable.

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18. The agreement, Exhibit 62, is held to be a mortgage by

conditional sale and not a sale with an option to repurchase.

Consequently  the  order  of  the  High  Court  is  held  to  be

unsustainable and is set aside.  The appeals are allowed.

………………………………….J.  (L. Nageswara Rao)   

……….………………………..J.    (Navin Sinha)   

New Delhi, August 09, 2017

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