Supreme Court states transaction is not ‘mortgage by conditional sale' if reconveyance not specified in same deed

Supreme Court states transaction is not ‘mortgage by conditional sale' if reconveyance not specified in same deed

Refuses to interfere with the orders of the trial court and the Karnataka High Court

The Supreme Court has held that under Section 58(c) of the Transfer of Property Act, 1882, no transaction will be considered a mortgage, unless the condition for reconveyance is contained in the document, affecting the sale.

A division bench of Justice Hima Kohli and Justice Rajesh Bindal observed that in the two documents executed the same day, one was a sale deed and the other a reconveyance/agreement of buy-back.

The court stated that the proviso to Section 58(c) was added to create the effect that a transaction could not become a mortgage unless the agreement for sale was contained in the document.

The appellant had approached the apex court against the trial court and the Karnataka High Court order refusing to grant him relief in a suit filed for the redemption of the mortgage.

The issue before the top court was whether the transaction between the parties was an absolute sale of the property or a mortgage.

Appearing for the appellant, senior advocate Kiran Suri argued that on the interpretation of the documents, the intention of the vendor to mortgage the property was clearly established. It could be inferred from two separate documents executed on the same date. He stated that even if under Section 58(c) of the Act, it meant that clauses to treat the transaction of the sale as a mortgage were to be in a single document, it was not a pre-condition.

On the other hand, while appearing for the respondents, senior advocate Aditya Sondhi argued that a case of mortgage was not made out from the documents. He explained that Section 58(c) stated that whether it was a mortgage or not, could be inferred only when it was a single document, and the clauses were contained therein. But herein, two separate documents were executed.

The judges examined the sale deed, which specified that it was an absolute sale for a consideration of Rs.5,000 to meet the expenses of the vendor. Also, the possession of the property was to be delivered on registration of the sale deed. The vendee was allowed to enjoy the property by getting it mutated in her name and by paying taxes. There were no encumbrances attached to the property.

Thus, the bench refused to interfere with the high court order finding that the two deeds for sale and reconveyance together cannot be said to constitute a transaction of mortgage of property.

It stated, “In terms of the sale deed and the reconveyance deed, reconsidered in the light of the enunciation of law, the same cannot be held to be a transaction of mortgage of property. The sale of property initially, was absolute. By way of execution of the reconveyance deed on the same day, the only right given to the appellants was to repurchase the property.”