Difference Between ‘Mortgage By Conditional Sale’ & ‘Sale With Condition Of Retransfer’: Supreme Court Explains
Case: Prakash (Dead) By LR. v. G. Aradhya & Ors.
Coram: Justices Hima Kohli and Rajesh Bindal
Case No.: CIVIL APPEAL NO.706 OF 2015
Court Observation: A deeming fiction was added in the negative that a transaction shall not be deemed to be a mortgage unless the condition for reconveyance is contained in the document that purports to effect the sale.
It is the undisputed case in hand that it was not a single document, the conditions contained have to be considered by this Court to opine that the transaction was not a sale, but a mortgage. Admittedly, there are two separate documents.
A bare perusal of the said provision clearly shows that a mortgage by conditional sale must be evidenced by one document whereas a sale with a condition of retransfer may be evidenced by more than one document. A sale with a condition of retransfer is not a mortgage. It is not a partial transfer. By reason of such a transfer, all rights have been transferred reserving only a personal right to the purchaser (sic seller), and such a personal right would be lost unless the same is exercised within the stipulated time.
In terms of the Sale Deed and the Reconveyance Deed, reconsidered in the light of the enunciation of law, the Court opined that 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, namely, on the same day, the only right given to the appellants was to repurchase the property.
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