Understanding Mortgage by Conditional Sale: Key Supreme Court Judgment

The case of Patel Ravjibhai Bhulabhai (D) Thr. LRS. vs. Rahemanbhai M. Shaikh (D) Thr. LRS. & Ors. revolves around the legal interpretation of a property transaction, whether it constitutes a mortgage by conditional sale or a sale with an option to repurchase. This judgment, delivered by the Supreme Court of India, clarifies significant aspects of property law under the Transfer of Property Act, 1882.

Background of the Case

The dispute originated from a deed executed on December 30, 1960, between the original plaintiffs and defendants. The plaintiffs claimed that the transaction was a mortgage, thereby granting them a right to redeem the property. In contrast, the defendants contended that it was a sale with an option for repurchase, making the property theirs after the stipulated period.

Arguments Presented

Petitioner’s Argument: The plaintiffs argued that the deed in question was a mortgage and, as such, they had the right to redeem the property by repaying Rs. 10,000 within the stipulated five-year period. They contended that the condition of taking back possession upon repayment suggested a loan relationship, thus making it a mortgage.

Respondent’s Argument: The defendants maintained that the transaction was a conditional sale and that they had acquired the absolute right over the property after five years. They pointed out that the possession was transferred at the time of execution, making it a valid sale agreement rather than a mortgage.

Judgment Analysis

The Supreme Court analyzed whether the transaction was a mortgage by conditional sale or a sale with an option to repurchase. Under Section 58(c) of the Transfer of Property Act, 1882, a mortgage by conditional sale occurs when the seller retains the right to take back the property upon repayment, indicating a debtor-creditor relationship. The Court noted:

• The language in the deed indicated an obligation to return the property upon repayment.
• The transaction created a debtor-creditor relationship.
• The deed was executed with a condition to revert ownership upon repayment.

The Court relied on precedents such as Tulsi & Others vs. Chandrika Prasad & Others and P.L. Bapuswami vs. N. Pattay Gounder, reinforcing the distinction between mortgage and sale.

Final Verdict

The Supreme Court upheld the Gujarat High Court’s ruling that the transaction was a mortgage by conditional sale, allowing the plaintiffs to redeem the property by repaying Rs. 10,000. The appeal was dismissed.

Key Takeaways

• A mortgage by conditional sale exists when the seller retains the right to repurchase.
• The intent of the parties and language of the deed play crucial roles in interpretation.
• Property law ensures protection for individuals entering into mortgage agreements.

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Download Judgment: Patel Ravjibhai Bhul vs Rahemanbhai M. Shaik Supreme Court of India Judgment Dated 02-05-2016-1741860690343.pdf