Mortgage is a terminology that most of us know in our day to day lives. The
concept of mortgage is even known to a layman. The majority idea about mortgage
is moreover about the simple mortgage however in legal parlance we know that the
transaction is not just restricted to simple mortgage and there are many facets
The ambit of the transactions involving mortgage is extremely wide and includes
six major types of mortgage out of which the researcher in this project is
concerned with the second type of mortgage, i.e. Mortgage by conditional sale
and before the researcher starts delving deep in the topic, the researcher has
made an attempt to give an overview of mortgage as a whole in the introductory
Mortgage by sale is referred to as multiple names in various parts of India. Its
known as Khtkhabala in Bengal, Gahan Lagan in Bombay and Muddata Kriyam or
Peruarthum in Madras and in Islam its denoted by the phrase Bye-bil-Wafa.
Mortgage by conditional sale allows the mortgagee to become an absolute owner of
the property in case mortgagor defaults in repayment of debt.
However, the researcher in her project has made an attempt to write the relevant
case laws according to the topic and has elucidated the concept with most recent
judgments available as per the topic. The researcher has tried to explain the
concept in detail and then substantiated them with valid case laws thus making
it easier for the reader to not just understand the topic in general but rather
get a legal insight of the topic as a whole.
The very concept of mortgage is defined under section 58 of the Transfer of
Property Act which states that a mortgage is the transfer of an interest in an
immovable property for the purpose of securing the payment of money advanced by
the way of loan, an existing or a future debt, or performance of an engagement
that may give rise to a pecuniary liability.
The concept ideally involves two parties the mortgagor and the mortgagee.
transferor is called the mortgagor while the transferee here is called
mortgagee. When a person takes a secured loan and specifies certain immovable
property as security, its deemed that he took the loan by simply mortgaging his
property. The concept of mortgage is there since ancient times and was known to
the oldest systems of law.
In case of common law, in England the mortgage
created a legal estate in the favour of the creditor. And once the time period
for repayment was lapsed and the debtor was unable to pay the entire amount the
property was ceased by the creditor forever. This was regarded unjust by the
rule of equity. Notwithstanding any circumstances any such condition that
abridges the right of mortgagor in his property was void.
Section 58 talks about six different types of mortgages namely:
- Simple mortgage,
- Mortgage by conditional sale,
- Usufructuary mortgage,
- English mortgage,
- Mortgage by the deposit of title deeds, and
- Anomalous mortgage.
This very classification is made on the grounds of nature of interest which is
transferred for securing the loan. In this project, the researcher shall deal
with the second type of mortgage i.e. Mortgage by conditional sale in details an
make an attempt to see the timeline of its judicial development.
Meaning And Essential Elements
Section 58 (c) of the Transfer of Property Act deals with the concept of
Mortgage by conditional sale which is apparently a sale with a condition that
post the repayment of the consideration amount, the purchaser shall be liable to
transfer the property again to the seller.
The act provides that- where, the mortgagor ostensibly sells the mortgaged
On a condition that on default of payment of the mortgage money on 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 such payment being made the buyer shall transfer the property
to the seller, The transaction is called the mortgage by conditional sale and
the mortgagee a mortgagee by conditional sale. Here there is no personal
liability of the mortgagor to pay and the liability is only limited to the
property. In Balkishen v. Legge, wherein the privy council in reference to
mortgage by conditional sale observed that the framers of act, never intended to
attach personal liability of mortgagor to the mortgage and the act intended to
state the existing law and practice in India while enacting the definition of
The essential elements of the mortgage by conditional sale are:
- There is an ostensible sale of an immovable property.
- The sale is subject to any of these conditions:
- On the repayment of the price of the mortgage the sale would become
- On payment of mortgage money, the sale shall become void or the buyer
shall retransfer the said property to the seller.
- The condition must be embodied in the same document.
But we must take into account that the basic principal of this form of
transaction is not the finality of the test rather it is the intention of the
parties that is to be taken into account while at the time of entering the
transaction and creating a security for their property by the channel of
The Concept Of Ostensible Sale
The concept of ostensible is enticing because it apparently looks like sale but
in reality there is no sale. Here in mortgage of this kind there is a sale of an
immovable property but in reality it is intended to secure a debt. The entire
transaction appears to be sale rather than a full-fledged mortgage.
agrees to sell his property on a certain sum of money but both the buyer and the
seller have the knowledge that the seller is apparently taking the loan from the
buyer. The intention is derived from the nature of condition attached to sale
and post-sale the property did not vest in the hands of the buyer.
In Prakasam v. Rajambal
, the facts of the case are that the document was
ascribed as sale deed but the stamp paper but the stamp paper was provided by
the transferor while the price provided was much lesser than the actual price of
the property. A specific condition was attached that post the payment of the ‘principal
' amount the property shall be reconvened.
It was held by the Madras High Court that the transaction was not an outright
sale rather was mortgage by conditional sale.
In Vithal Tukaram Kadam v. Vamanrao Sawalaram Bhosale
 the facts revolved
around a loan which was taken by the plaintiff in the given case and if in case
the plaintiff fails to repay the amount then the plaintiff would sell it.
Apparently the borrowed amount for loan was 700 rupees while the plaintiff sold
the land for 3500 Rupees. The very agreement for sale had a clause of reconveyance embodied in it upon the virtue of the clause the defendant demanded
Rupees 3500 along with interest affecting relationship of the debtor and the
creditor. The defendant was well aware of the nature of the transaction and he
knew that he would be obliged to return the land back if the amount was paid
back by the plaintiff.
The Bombay High Court held that the transaction here was more in the nature of
conditional sale and not an absolute sale by the defendant.
In Rajamma(Smt.) v. B. Renuka Murthy
 the facts of the case were that there
was a certain family property that was sold for the payment of a prolonged
family debt. The possession of the property was delivered to the purchasers. An
undertaking was provided by the mortgagors to the mortgagee that they would
repay the entire amount within the stipulated time frame that was 5 years and
ensure that the sale deed gets executed.
The Supreme Court in this case held that it was not a case of simple mortgage
but was of conditional sale with an option to repurchase.
Conditions Of Ostensible Sale
The intrinsic feature of this kind of mortgage is that of a sale but becomes
mortgage because of a particular condition that is attached to it. The very
existence of debt can be figured out from the fact that it is the nature and the
manner of the condition that makes it a mortgage.it could be a condition that
when the seller makes the repayment of the full price of the loaned property
then onwards the sale shall be considered void or the buyer could reconstitute
the reconveyance of the property in favour of the seller.
The other condition could be such that if the seller does not the entire amount
on the agreed date then the sale shall become absolute and the entire rights in
the property shall now vest in the hands of the buyer. Here it is the fulfilment
of those conditions that play the key role in deciding upon the facts that
whether an ostensible sale is a real sale or not or whether the property will go
absolutely to the buyer or not or in what manner will the sale take place. It is
subject to the conditions specified at the time of the mortgage.
However at the time of the execution of the sale deed there is no intention that
sale in appearance is to sale in reality. This idea was brought about in the
case of Rajawati Devi v. Prem Nandani Sinha
 where the sale deed had
embodied a condition for the repayment of the consideration money in account and
the possession was supposedly to be delivered in two years during which the
mortgagor had to pay back the stipulated amount, notwithstanding the fact that
the amount paid was equal to the price did not necessarily make it an outright
sale. The Patna High Court held that the mortgagor was entitled to take back the
Also the Existence for debt is a necessary condition for the existence of debtor
and the creditor so the concept of mortgage could take place. Although the
transaction might appear as a sale but since the intention of the parties is to
treat that as a security for debt so such condition is a prerequisite for the
mortgage to take place. When there is absence of such stipulation then that sale
is not mortgage.
In Gurunath v. Yamanava
 the defendant sold the land for Rupees 600 and thus
the plaintiff had the possession of the aforesaid land. He in the sale deed
mentioned a condition that whenever he wanted the land back will pay Rupees 600
and the maintenance amount occurred for the land and then then the plaintiff
shall have to transfer the land in its entirety. The plaintiff contended before
the court that this was not a mortgage of the property by the plaintiff. The
Bombay High Court agreed to the plaintiff contention and said that the
conditions in the document don't portray it as mortgage rather of a sale as
there was no such existence of debts between the parties.
Taking into account another condition when the Mortgagee Transfers the
Property to another person it is deemed that the mortgagee had no such right to
execute the transfer. In the Gujarat High Court judgment it was seen that such
transfers are void.
In Ramlal v. Phagua the mortgagee had obtained the property by advancing
certain sum of money as a loan to the mortgagor. In the deed the stipulated time
period for the repayment of the amount by the mortgagor was 3 years and upon the
payment of the amount within the time frame the mortgagee was supposed to return
the property to the mortgagor. The Supreme Court held that since no title or
interest was passed on to the mortgagee, he was not competent to pass on any
title or convey or transfer the property to anyone else so the sale of the
mortgagors property by the mortgagee to third party before the mentioned and
agreed time period was held to be void.
Condition To Be Embodied In The Same Document
It is mandatory that in case of mortgage by conditional sale the condition must
be embodied in the same document that effects or purports the purpose of sale.
That doesn't necessarily mean that if the stipulation of reconveyance is
embodied in the same document then the transaction is necessarily a mortgage.
This provision was added in the by proviso to section 58 (c) by the amending act
The Supreme Court in Pandit Chunchun Jha v. Sheikh Ibadat Ali
that the proviso to section 58(c) makes it specific and clear that if the
condition for repurchase is not embodied in the same document then the
transaction shall not be regarded as mortgage.
The terms and the conditions contained in the document must necessarily
adjudicate upon the nature and the character of the document as whether it is a
mortgage by conditional sale or a sale with a condition to retransfer. If the
document appears to contain provisions of an absolute sale without any
stipulation of treating it as mortgage then a further separate document of
reconveyance cannot convert it as mortgage.
In Sunil v. Aghor[
17] a separate document of sale deed, deed of reconveyance and
lease deed were executed in the same transaction but the condition stipulating
the sale as mortgage was not embodied in the sale deed. The Guwahati High Court
held in this case that the transaction was not in the nature of mortgage by
conditional sale. It further substantiated that the conditions effecting the
sale as mortgage in one and the same document.
In Ramegowda v. Boramma
deed was in nature as the sale deed and the condition to repurchase was embodied
in the same document. The condition was levied that the amount of Rupees 4000
was to be repaid by the transferor within the prescribed time period and then
the possession of the land will be given back to him. The second condition in
the deed was that the purchaser shall have absolute right and interest and would
permanently enjoy property from the date of possession.
The Karnataka High Court
decided that if a condition to repurchase in provided in a separate document and
the execution occurs on a different date then the nature of the transaction
shall be regarded as sale and the court shall have no duty to investigate the
possibility of loan if the document doesn't contain conditions of mortgage
with conditional sale.
The court also concluded that by taking in account former
condition we could ascertain that it was mortgage by conditional sale not sale
with a condition to repurchase., but the subsequent condition indicated the
nature of the document to be similar like the sale deed, thus the features of
mortgage by conditional sale and the sale with a condition to repurchase were
present. The transaction however was in the nature of mortgage and therefore,
the transferor would be entitled to redeem mortgage and delivery of possession
of the property.
In Mangtin v. Rahibhai
 an illiterate mortgagor was made to sign a set of
documents, he claimed that it was a transaction of mortgage and not of sale by
purporting to two documents i.e. a mortgage document and a reconveyance deed.
The Chhattisgarh High Court held that the document constituted mortgage and the
burden of proof shall be upon the transferee to show that it was a case of
outright sale and not mortgage. The consideration paid shall not affect or alter
the nature of transaction and just because the consideration paid was equal to
the market price would not make it sale.
In those cases where transactions shows some instances of sale and some of
mortgages then it would depend upon the facts and circumstances of the given
case. In Shivaji Dagadu Mahangade v. Aba Gopala Shinde
 the deed stipulated
that after ten years of non-repayment the sale shall become absolute. The terms
were somewhat in nature of sale and some of mortgage. The plaintiff here failed
to repay within the prescribed time. The Bombay High Court held that the deed
now was of nature of an absolute sale deed and the plaintiff shall now not be
entitled to regain the property.
But in the case of Srinivasaiah v. H.R.Channabassappa
 where the case was
about the determination of the nature of transaction that whether it was a
conditional sale or an outright sale. Here the document had a title of “deed
of conditional sale
”, the document itself contained the condition for
repurchase and offered sales money sans interest.it was held by the Supreme
Court that the document was mortgage deed by conditional sale.
Mortgage By Conditional Sale With A Condition To Repurchase
A mortgage is fundamentally different from sale with condition to repurchase.
Where the condition is for the repurchase and is embodied in the same document,
it is presumed that it is a case of mortgage but when both the sale and the
agreement to repurchase are embodied in the separate document it cannot be
These two concepts appear to be similar but they have been elaborately
- In a mortgage by conditional sale, the existence of debt between
mortgagor and the mortgagee or the debtor or creditor is necessary. But in
sale with a condition to repurchase there is existence of no such futuristic
debt. There is no such correlation between debtor and the creditor as seller
- Mortgage by conditional sale is a mere transfer of some interest in
property, hence, it is the transfer of partial interest. Sale with the
condition to repurchase is the transfer of the entire interest in the
property except where the personal right to repurchase which will be
extinguished if it is not exercised within the prescribed time period.
Now as far as the intrinsic legal nature of the both transactions are concerned
they are clearly demarcated by the intention. Sometimes it is an arduous task
whether it was a transaction to determine whether it is mortgage or sale with a
condition to repurchase. This is majorly due to the effect that both the
transactions provide for retransfer of property from buyer to the seller.
Mortgage by conditional sale is a type of mortgage where there is an occurrence
of ostensible sale and which later is converted in absolute sale on the account
of the seller's inability to pay the loan. The provisions have been amended
with time to provide that both the document for sale and re conveyance occurs in
the single and the same document.
There have been multiple instances of
confusion between mortgage by conditional sale and real sale. In this project
the researcher has dealt with many case laws regarding the topic and has tried
to deal with the confusion taking in account a number of factors, primarily the
intention of the parties and the nature and the purpose of the transaction and
also has tried her best to demarcate between the concepts in a lucid manner.
Notwithstanding various intertwined pertinent concepts, the practice of
mortgaging property has been prevalent in India since a long time and not just
India but even in the other parts of the world under different names and it can
be vehemently said that the practice of mortgage by conditional sale shall
continue to flourish even in the times to come.
Thus, the researcher has tried her best to answer the research questions that
were put forward by her in the beginning of the project and has adhered to the
prescribed scope of the project. Also the researcher has tried to fulfil all the
objectives that were laid down for this project and has tried her level best to
do complete justice to the project.
- Transfer of property act 1882, Bare act, (Universal publishing house,
21st ed., 2014).
- Dr R.K Sinha, The Transfer Of Property Act 280 ( Dr. Shreedutta Arvind
Pandey, 19th ed. 2018).
- Transfer of property act 1882,( India).
- MULLA , supra note 6, at 373-374
- Balkishen v. Legge (1899) 22 All 149 (India)
- SINHA, supra note 5, at 282
- Prakasam v. Rajambal, AIR 1975 Mad. 282. (India)
- Vithal Tukaram Kadam v. Vamanrao Sawalaram Bhosale, AIR 2017 Bom 232.
- Rajamma(Smt.) v. B. Renuka Murthy, AIR 2017 SC 5046, (India
- Rajawati Devi v. Prem Nandani Sinha , AIR 2013 Pat 166, (India).
- Gurunath v. Yamanava, (1911), 35 Bom. 258.
- Jairambhai Ramabhai Rabari v. Bipinchandra Naranbhai Barot, AIR 2013 Guj
- Ramlal v. Phagua, AIR 2006 SC 623, (India).
- Section 58( c) of the the transfer of property (amendment), act 1929
[Provided that no such transaction shall be deemed to be a mortgage, unless
the condition is embodied in the document which effects or purports to
effect the sale
- Pandit Chunchun Jha v. Sheikh Ibadat Ali ,AIR 1954 SC 345,( India).
- Amir Bee v. The Sub Divisional Magistrate Sakaleshpur, AIR 1980 Kant 154,
- Sunil v. Aghor, AIR 1989 Gau. 39 (India).
- Ramegowda v. Boramma, AIR 2012 , Kar 52 ( India).
- Mangtin v. Rahibhai, AIR 2012, Chh 77, (India).
- Shivaji Dagadu Mahangade v. Aba Gopala Shinde, AIR 2016 Bom.213 (India).
- Srinivasaiah v. H.R.Channabassappa, AIR 2017 SC 2141( India).
- SINHA, supra note 5, at 287-288.