For a Transaction to be regarded as 'Mortgage by conditional sale, the condition for reconveyance has to be specified in the same deed : Supreme Court
The recent Supreme Court ruling, under Section 58(c) of the Transfer of Property Act, 1882, states that a transaction cannot be considered a mortgage unless the condition for reconveyance is included in the document effecting the sale. This decision was made by a division bench of Justice Hima Kohli and Justice Rajesh Bindal. They emphasized that the addition of the proviso to Section 58(c) aimed to establish that the transaction must include reconveyance conditions to prevent it from being deemed a mortgage. The court referred to previous judgments for interpretation.
The case involved two documents executed on the same day – a sale deed and a reconveyance/buy back agreement. The central issue was whether the transaction represented a sale or a mortgage. The appellant challenged the lower courts' decisions denying relief in a redemption suit. The appellant's argument was that the intention to mortgage was evident from the documents, even if they were separate, and that the single-document condition wasn't a prerequisite.
However, the respondent's argument was that the documents didn't demonstrate a mortgage case. They contended that Section 58(c) required the clauses determining mortgage status to be within a single document.
After reviewing the documents, the Supreme Court upheld the High Court's decision, stating that the sale and reconveyance deeds combined did not constitute a mortgage transaction. The Sale Deed indicated an absolute sale for ₹5,000, with possession transfer and property enjoyment as per its terms. The Court's conclusion was that the documents did not fulfill the criteria for a mortgage transaction, and the Reconveyance Deed only granted the right to repurchase.