Supreme Court of India
VITHAL TUKARAM KADAM AND ANOTHERversusVAMANRAO SAWALARAM BHOSALE AND OTHERS
- Citation
- 2017 INSC 721
- Decided
- 9 August 2017
- Disposal
- Appeal(s) allowed
- Bench
- L NAGESWARA RAO
Holding
A deed that appears as a sale but contains a reconveyance clause, where the parties are in a debtor‑creditor relationship and the consideration is grossly inadequate, is to be treated as a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act.
Summary
The plaintiff executed a deed in 1953 that was styled as a sale of land for a nominal sum of Rs.700, but included a clause that the land would be returned if the amount was repaid within ten years. The parties were long‑time acquaintances, with the plaintiff having repeatedly borrowed money from the defendant, establishing a debtor‑creditor relationship, and the land’s market value far exceeded the consideration. The plaintiff sued for redemption of the mortgage and obtained decrees in his favour, which the High Court reversed, holding the deed to be a simple sale with an option to repurchase. On appeal, the Supreme Court examined the recitals, the parties’ intention, the inadequate consideration, the long redemption period, and the presence of a reconveyance clause, concluding that the deed qualified as a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act. Consequently, the Court set aside the High Court’s order, allowed the appeals, and affirmed the plaintiff’s right to redeem the property.
Issues considered
- Whether the deed dated 21.04.1953, styled as a sale, constitutes a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act, 1882, or merely a sale with an option to repurchase.
Legislation cited
- Transfer of Property Act, 1882s. 58(c), s. 60
Subjects
mortgage by conditional saleTransfer of Property Actsale with option to repurchasedebtor creditor relationshipredemption of mortgageproperty law
Judgment
[2017] 8 S.C.R. 379
VITHAL TUKARAM KADAM AND ANOTHER A
v.
VAMANRAO SAWALARAM BHOSALE AND OTHERS
(Civil Appeal Nos. 7245-7246of2011)
AUGUST09,2017 B
(L. NAGESWARA RAO AND NAVIN SINHA, JJ.)
Transfer of Property Act, 1882 - s.58(c) - Mortgage by
conditional sale - When - Appellant-plaintiff's suit for redemption
of mortgage, decreed by two courts - Decree reversed in second C
appeal by High Court holding that the agreement in question was a
sale with an option to repurchase and not a mortgage by conditional
sale - On appeal, held: 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, depending on the recitals in
the document, intention of the parties, coupled with attendant D
surrounding circumstances - In the instant case, the language used
in the agreement conveys that the plaintiff did not intend to relinquish
all rights, title and claims in his lands - Parties were admittedly well
known to each other - Thus, there was a relationship of debtor and
creditor - Further, the clause for reconveyance was in requirement E
with s.58(c) - Agreement in question, though styled as a sale deed,
is a mortgage by conditional sale and not a sale with an option to
repurchase - Mortgage.
Allowing the appeals, the Court
HELD: 1.1 The question whether a document is a mortgage F
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. (Para 7)(383-D-EJ G
1.2 An ostensible sale with transfer of possession and
ownership, but containing a clause for reconveyance in accordance
with Section 58 (c) of the Transfer of Property Act, 1882 will clothe ·
the agreement as a mortgage by conditional sale. The execution
H ,
379
380 SUPREME COURT REPORTS [2017] 8 S.C.R.
A 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
B 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. [Para 141(386-B-DI
1.3 In the instant case, the agreement, Exhibit 62, though
C styled as a sale deed, for a consideration of Rs.700/- is but an
ostensible sale, containing a clause for reconveyance. 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
D 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. (Para 151(386-E-Gl
E 1.4 The parties were admittedly well known to each other
since before. The plaintiff had been borrowing money from the
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
F in cross-examination did not deny 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
G mutation in the name of the defendant. 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
H
VITHAL TUKARAM KADAM v. VAMANRAO SAWALARAM 381
BHOSALE
relationship between the parties, and that the agreement was a A
sale deed with an option to repurchase. The fip.dings are clearly
unsustainable. [Para 17)(387-A-D]
Tamboli Ramanlal Motilal (dead) by lrs. v. Ghanchi
Chimanlal Keshavlal (dead) by Lrs. (1993) Suppl. 1
SCC 295 - distinguished. B
P. L. Bapuswami v. N. Pattay Gounder AIR 1966 SC
902 : [1966) SCR 918 - followed.
Vishwanath Dadoba Karate v. Parisa Shantappa
Upadhye (D) thr. Lrs. (2008) 11 SCC 504 : (2008)
4 SCR 993; Patel Ravjibhai Bhulabhai (D) thr. Lrs. v. c
Rahemanbhai M. Shaikh (D) thr. Lrs and Ors. (2016)
12 SCC 216; Bhaskar Waman Joshi (deceased) and
Ors. v. Shrinarayan Rambilas Agarwal (deceased) and
Ors. AIR 1960 SC 301 : [1960] SCR 117; Indira Kaur
v. Shea Lal Kapoor (1988) 2 SCC 488 - relied on. D
Pandit Chunchun Jha v. Sheikh Ebadat Ali and Another
(1955) SCR 174; Ramlal v. Phagua (2006) 1 SCC 168
: [2005] 4 Suppl. SCR 331 - referred to.
Case Law Reference
E
[1955] SCR 174 referred to Para 7
[1960] SCR 117 relied on Para9
(1966) SCR 918 followed Para 10
[2005] 4 Suppl. SCR 331 referred to Para 10
F
(2008) 4 SCR 993 relied on Para 10
(1988) 2 sec 488 relied on Para 11
(2016) 12 sec 216 relied on Para 12 ·
(1993) Suppl. 1 sec 295 distinguished Para 13
G
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 7245-
7246 of 2011. .
From the Judgment and Order dated 17 .11.2005 in Second Appeal
No. 552 of1996 and Judgment dated23.12.2005 in Review Petition No.
30 of 2005 of the High Court of Judicature at Bombay. H
382 SUPREME COURT REPORTS [2017) 8 S.C.R.
A Ms. Mukti Chowdhary, Adv. for the Appellants.
Dilip Annasaheb Taur, Amo! V. Deshmukh (for Ranjith K. C.),
Advs. for the Respondents.
The Judgment of the Court was delivered by
B NAVIN SINHA, J. I. 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 oflaw for consideration is, whether the deed
C dated 21.04.1953, Exhibit 62, was a mortgage by conditional sale, or a
sale with an option to repurchase.
3. The Civil Judge and the Additional District Judge in appeal,
after consideration of the recitals in the deed, intention of the parties,
D 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
E
and possession. The option for reconveyance, was not exercised within
the stipulated period often 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 ofRs.700/- mentioned in the
deed, seeking consequent return of the lands. The agreement was held
F 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 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
G 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
H
VITHAL TUKARAM KADAM v. VAMANRAO SAWALARAM 383
BHOSALE [NAVIN SINHA, J.]
. for a paltry sum ofRs.700/-. The High Court erred in not appreciating A
the distinction between a mortgage by conditional sale and a sale with
an option to repurchase. Reliance was placed on Vishwanath Dadoba
Karate 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.
B
6. Learned counsel for the respondent submitted that mere
incorporation in the agreement of a provision for reconveyance, 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, C
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 Raman/a/ Motilal (dead)
by Lrs. vs. Ghanchi Chimanla/ Keshavla/ (dead) by Lrs., 1993
Supplement (I) SCC 295.
7. The question whether a document is a mortgage by conditional D
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 E
alone, as observed in Pandit Chrmchun Jha vs. Sheikh Ebadat Ali
and Another, 1955 SCR I 74, as follows:-
"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 F
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."
G
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
H
384 SUPREME COURT REPORTS [2017] 8 S.C.R.
A 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,
B
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
C 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
30 I, the principles for determination of the nature of the document were
explained as follows:-
D "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
E
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
F
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 oflearned counsel for the appellant is justified
and we must proceed on the basis that the valuation of the property
G was Rs.8000/- and since the consideration for Ex- B-1 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 Ram/al vs. Phagua. (2006) 1
SCC 168. In Vishwanath Dadoba Karale (supra) the recitals in the
H
VITHAL TUKARAM KADAM v. VAMANRAO SAWALARAM 385
BHOSALE [NAVIN SINHA, J.]
agreement were similar to that in the present case. It was held that A
limited transfer of title with option for 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 B
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: c
(2) The stipulated period for conveying the property was a very
long period of! 0 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 D
some other relevant consideration.
(5) The obvious reason for enteri_ng 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 E
period ofredemption 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."
12. In Patel Ravjibhai Blmlabhai (D) thr. Lrs. vs. Rahema11bhai F
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 Rama11lal Motilal (dead) by Lrs. (supra) is G
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 thatthe
executant shall repay the amount within a period of five years
H
386 SUPREME COURT REPORTS (2017] 8 S.C.R.
A ~~~e~fuls~re~~~~nm~~mle~
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
B conditional sale, can succinctly be broadly summarised. An ostensible
sale with 1ransfer of possession and ownership, 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
c 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
D 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 ofRs.700/- is but an ostensible sale, containing a clause
for reconveyance. The agreement concludes as follows:-
E "If I repay your amount of Rs.700/- in any year (at any time)
during the period often years from now 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
F 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
coqveyed and had agreed to a conditional sale along with an obligation
G to return the lands ifthe 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
H for the right to redeem, under Section 60 of the Act is thirty years.
VITHAL TUKARAM KADAM v. VAMANRAO SAWALARAM 387
BHOSALE [NAVIN SINHA, J.]
17. The parties were admittedly well known to each other since A
before. The plaintiff had been borrowing money from the 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 ofRs.700/- mentioned
in the agreement. The defendant in cross-examination did not deny the B
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 C
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
0
agreement was a sale deed with an option to repurchase. The findings
are clearly unsustainable.
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. E
Divya Pandey Appeals allowed.
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