PROPERTY LAW - I

TABLE OF CONTENTS

TOPIC

PAGE NO.

LEGAL PROVISION RULING THE CASE MATERIAL FACTS OF THE CASE ISSUE JUDGEMENT REASONS FOR DECISION CRITICAL COMMENTS

2 5 6 6 7 9

Manjabai Krishna Patil Vs. Raghunath Revaji Patil

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LEGAL PROVISION RULING THE CASE

Mortgage by Conditional Sale is an apparent sale with a condition that upon repayment of the consideration amount, the purchaser shall transfer the property to the seller. Although, the whole transaction looks into like a conditional sale yet, in essence the intention of the parties is to secure the money which the seller takes as loan from the purchaser. The Transfer of Property Act, 1882 provides for Mortgage y !onditional "ale as follows#

Secti ! 5"#c$ $ M %t&'&e () c !*iti !'+ ,'+e # %here, the mortgagor ostensi ly sells the mortgaged property$ on condition that on default of payment of the mortgage$money on a certain date the sale shall ecome a solute, or on condition that on such payment eing made the sale shall ecome void, or on condition that on such payment eing made the uyer shall transfer the property to the seller, the transaction is called a mortgage mortgagee y conditional sale. y conditional sale and the mortgagee a

P&'()*+* that no such transaction shall e deemed to e a mortgage, unless the condition is em odied in the document which effects or purports to effect the sale.

E,,e!ti'+ e+e-e!t, . M %t&'&e () C !*iti !'+ S'+e/ According to section ,8-c. the mortgage y conditional sale has following essential elements# 1. There is an ostensi le sale of an immova le property. 2. The sale is su /ect to any of the following conditions#
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'n non$payment of mortgage money the sale would ecome a solute or, 'n payment of mortgage$money, the sale shall ecome void or the uyer shall retransfer the said property to the seller. 0. The condition must e em odied in the same document. O,te!,i(+e ,'+e/ 'stensi le "ale means a sale which apparently looks like a sale ut in reality there is no sale. )n this mortgage, apparently there is a sale of an immova le property ut in reality it is intended to secure a de t. The whole transaction is given the appearance of a sale. The seller would sell his property for a certain sum of money. 1ut, seller and uyer oth know and intend that seller is taking loan from the uyer. "uch intention is inferred from the nature of condition attached to the sale. Accordingly, after the sale, the property does not vest in the uyer. E0i,te!ce . *e(t/ Although in appearance the transaction may e like a sale ut, since the intention of the parties is to treat it as security for de t, therefore there must e2ist a relation of de tor and creditor etween the seller and the uyer. The e2istence of de t is necessary. %here no de t e2ists etween seller and the uyer, the sale is not mortgage. C !*iti !,/ The characteristic feature of this form of mortgage is that it is a sale ut ecomes mortgage ecause of any peculiar condition attached to it. The e2istence of de t is inferred from the very nature of condition which makes it a mortgage. The condition may e that when the seller repays the price the sale shall e void or the uyer would e2ecute reconveyance of the property in favour of the seller. 'r, the condition may e that if the seller does not repay the price on a certain date, the sale would ecome a solute, i.e., the property shall vest in the uyer. Thus, whether an ostensi le sale ecomes a sale in the real sense and property goes to the uyer

Manjabai Krishna Patil Vs. Raghunath Revaji Patil

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a solutely or the sale does not take place and the property continues to elong to seller, depends on fulfillment or non$fulfillment of condition. C !*iti ! i! t1e ,'-e * c2-e!t/ )t is necessary that any of the conditions mentioned a ove, must e incorporated in the same document which has een e2ecuted as a sale deed. )n Pandit !hunchun 3ha v. "heikh ) adat Ali, the "upreme !ourt held that proviso to section ,8-c. makes it clear that if condition for repurchase is not em odied in the document which effects or purports to effect the sale, the transaction cannot e regarded as mortgage. Thus as ostensi le sale with any of the conditions mentioned a ove, cannot e regarded as mortgage if condition was laid down in a separate agreement.

Manjabai Krishna Patil Vs. Raghunath Revaji Patil

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MATERIAL FACTS OF THE CASE

Appellants herein were owners of land admeasuring 2 acres at (illage %aghad. earing "urvey 5o. 1687072

Appellants eing in need of money, approached the respondents to sell the mentioned land for &s. 8,999. After negotiations having een held, a deed of sale was e2ecuted y the appellants in favour of the respondents on 26.11.1688 for a sum of &s. 8,999. :owever, the said deed was registered on 1;.12.1688. 'n the same day an agreement of reconveyance was also e2ecuted in terms whereof the respondents agreed to convey the property ack to the appellants herein after five years on receipt of the amount of consideration specified therein. The respondents failed and7or neglected to act in terms of the said agreement of reconveyance, a suit for specific performance was filed y the appellants herein against the respondents. The said suit was decreed. :owever, on an appeal preferred there against y the respondents, the <irst Appellate !ourt re/ected the contention of the respondents that time was of the essence of contract. The appeal was allowed, stating that the agreement of reconveyance was the part and parcel of the agreement of sale. =)n the "econd Appeal filed y the appellants herein eing aggrieved y and dissatisfied with the said /udgment, the :igh !ourt also opined that as the document of reconveyance was part and parcel of the same transaction and eing compulsorily registera le> for want of registration, the same was neither admissi le in evidence nor enforcea le through a court of law.
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ISSUE/
%hether the sale was mortgage y conditional sale and the agreement for the reconveyance of the property was the part and parcel of the agreement of sale, the sale deed eing e2ecuted on 26.11.1688 and agreement of reconveyance eing e2ecuted on 1;.12.1688?

A%&2-e!t . %3'%*e* () A44e++'!t,/

Mr. !hinmoy @haladkar, the learned !ounsel appearing on ehalf of the appellants, su mitted that keeping in view the fact that the deed of sale was e2ecuted on 26.11.1688, and the agreement of reconveyance was e2ecuted on 1;.12.1688, the same was not reAuired to e registered.

A%&2-e!t . %3'%*e* () Re,4 !*e!t,/

Mr. ".(. *eshpande, the learned !ounsel appearing on ehalf of the respondents, on the other hand, su mitted that although the sale deed was e2ecuted on 26.11.1688, ut having een registered on 1;.12.1688 itself on which date the agreement of reconveyance was e2ecuted, the same must e held to e a part of the same transaction and, thus, was compulsorily registera le.

JUDGEMENT/
The "upreme !ourt held that the sale was not a mortgage y conditional sale and that the agreement for the reconveyance of the property was not the part and parcel of the agreement of sale. &ather it was an a solute sale as the reconveyance was e2ecuted on a date different from that of e2ecution of sale deed, and was not part of the sale deed document itself.

Manjabai Krishna Patil Vs. Raghunath Revaji Patil

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Re', !, . % Deci,i !/
)n connection to the arguments forwarded y oth the parties, the court drew its attention to the agreement of reconveyance dated 1;.12.1688, the relevant portion whereof reads as under# ), a ove referred vendee write down that you a ove referred vendor are selling the land to me for 8,9997$ upon the condition that after cultivation for , years this particular land would e reconveyed to Pandrinath Bkhardu Patil as soon as he repays the amount i.e. 8,999. 1ut within , years all the earnings of the land would e en/oyed y me as an interest. The asic fact of the matter was not in dispute. Two documents were e2ecuted on different dates and at different places. The deed of sale was e2ecuted at Tal, the purported agreement of reconveyance was e2ecuted at %aghad. 1y reason of the sale deed dated 26.11.1688, the respondents o tained possession of the entire suit property. The property was transferred a solutely so as to ena le the vendee to use the same till their life time as also y their legal representatives. Appellants declared that they would have no right, title and interest in the said land, nor they would have ownership right and in case anyone claimed any such right, the same would e treated as cancelled. An easementary right was also conveyed. )t was stipulated that the land was not encum ered as the mortgage which had een created in respect of the said land, has een redeemed and in the event Canything is foundC, Dthey would e responsi le for the sameD. The amount of consideration was received on different dates at different places. The said deed must, therefore, e construed to e a deed of a solute sale. <urthermore, "ection ,8 -c. of the Transfer of Property Act, 1882 provides for mortgage y way of conditional sale as#
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Mortgage y conditional sale# %here, the mortgagor ostensi ly sells the mortgaged property $ on condition that on default of payment of the mortgage$money on a certain date the sale shall ecome a solute, or on condition that on such payment eing made the sale shall ecome void, or on condition that on such payment eing made the uyer shall transfer the property to the seller, the transaction is called mortgage y conditional sale and the mortgagee a mortgagee y conditional sale# Provided that no such transaction shall e deemed to e a mortgage, unless the condition is em odied in the document which effects or purports to effect the sale. Proviso appended to "ection ,8-c. is clear and unam iguous. A legal fiction is created there y that the transaction shall not e held to e a mortgage y conditional sale, unless a condition is em odied in the document which effects or purports to effect the sale. %here two documents are e2ecuted, the transaction in Auestion would not amount to a mortgage y way of conditional sale. )n a case of this nature, ordinarily the same would e considered to e a deed of sale coupled with an agreement of reconveyance. Applying the principles laid down a ove, the two documents read together would not constitute a mortgage as the condition of repurchase is not contained in the same documents y which the property was sold. The proviso to clause -c. of "ection ,8 would operate in the instant case also and the transaction etween the parties cannot e held to e a mortgage y conditional sale. )n the instant case, no relationship of de tor or creditor came into eing. 5o security was created and in fact conveyance of the title of the property y the respondent to the appellant was final and a solute.

Manjabai Krishna Patil Vs. Raghunath Revaji Patil

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Also the transaction is not a mortgage y conditional sale and having regard to the provisions of "ection 1; of the )ndian &egistration Act, the agreement of re$ conveyance was not compulsorily registera le.

CRITICAL COMMENTS
<or Mortgage y !onditional "ale, there must e an ostensi le sale of an immova le property, the sale eing su /ect to following conditions# 'n non$payment of mortgage money the sale would ecome a solute or, 'n payment of mortgage$money, the sale shall ecome void or the uyer shall retransfer the said property to the seller. And the condition must e em odied in the same document. )f the condition is not part and parcel of the sale deed itself, then the sale would not e a mortgage y conditional sale ut it would e an a solute sale and the proviso to section ,8-c., Transfer of Property Act, 1882 would apply. There must e2ist a Ecreditor$de torF relationship etween the uyer and the seller to certain the e2istence of a de t and thus the sale to e a mortgage y conditional sale. The e2istence of de t can e inferred from the very nature of the condition which makes it mortgage. The acts of the parties are important as to certain the nature of the sale. That id to say the parties must act in a way as if a de t has een created for the sale to e a mortgage y conditional sale.

Manjabai Krishna Patil Vs. Raghunath Revaji Patil

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