The Supreme Court ruled that the mortgage deed was a valid conditional sale under Section 58(c) of the Transfer of Property Act and dismissed the plaintiff's appeal, setting aside previous rulings.
Brief Facts:
The dispute involves a 2-acre agricultural land (Khasra No. 202/7) owned by the plaintiff, who mortgaged it to the defendant for ₹75,000 in 1990, with a deed registered on 17.10.1990. The plaintiff claims an agreement to redeem the mortgage within three years by paying ₹1,20,000, including principal and interest. However, when she attempted to repay in 1993, the defendant refused, claiming the mortgage had become an absolute sale due to her failure to repay on time.
In 2001, the plaintiff filed a suit seeking redemption of the mortgage. The defendant argued that the mortgage deed converted it into a sale on default. In 2003, the Trial Court ruled in favor of the plaintiff, allowing redemption upon payment, which was deposited with the court. The High Court dismissed the defendant’s appeal in 2018 and the review petition in 2019. Aggrieved by these decisions, the defendant filed the appeal in Supreme Court.
Contentions of the Petitioner:
The defendant argued that the mortgage deed dated 17.10.1990 was a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act, and not a simple mortgage. It stipulates that if the plaintiff failed to repay within three years, the mortgage would automatically convert into a sale. Since the plaintiff did not repay in time, the defendant claims ownership of the land.
The defendant also asserted that the terms of the deed were explained to the plaintiff, who did not personally testify in court. Additionally, the defendant argued that Section 165 of the Chhattisgarh Land Revenue Code is inapplicable, as the land is not agricultural, and that the plaintiff’s suit was not maintainable under Section 34 of the Specific Relief Act for lack of consequential relief.
Contentions of the Respondent:
The plaintiff argued that the mortgage was a simple mortgage, and the condition converting it into a sale is void. She maintained possession of the land, which indicates the transaction was not a conditional sale. The high interest rate of 4% per month is also deemed oppressive.
The plaintiff further argued that her husband's testimony, based on personal knowledge, is credible. Regarding Section 165 of the Chhattisgarh Land Revenue Code, she claimed it renders the mortgage invalid, as she was left with less than 10 acres of un-irrigated land.
Observation of the Court:
The Court analysed the provisions of Section 58(c) of the Transfer of Property Act, and concluded that the mortgage deed met all necessary conditions for a conditional sale, as it included an ostensible sale, a condition for the sale to become absolute upon default, and the condition was embodied within the same document.
The Court observed that the mortgage deed explicitly stated: “If the mortgagor fails to return back the said money within a period of three years from the date of execution of this document, then the present mortgage deed will be treated as sale deed." This clearly outlined that upon default, the sale would become absolute. The condition was also embodied within the same document, fulfilling the requirements of Section 58(c).
The Court emphasized that while the plaintiff remained in possession of the land, it was "permissive and for the purpose of safeguarding the property." This did not alter the nature of the transaction, as "the possession was permissive and at the discretion of the defendant." The Court criticized the lower courts for focusing too heavily on possession and concluded that the mortgage deed was valid, and the plaintiff's failure to repay the amount within the stipulated period rendered the mortgage a conditional sale. The Court observed that “the Trial Court and the High Court had erred in disregarding the express terms of the registered mortgage deed and placed undue emphasis on the issue of possession.”
The Court also noted that the plaintiff failed to provide credible evidence that she attempted to repay the mortgage, stating: "There is no credible evidence to suggest that she attempted to tender the amount within the time frame."
The Court also noted that the applicability of Section 165 of the Chhattisgarh Land Revenue Code was not established. Finally, the Court cautioned that the defendant could pursue appropriate legal remedies for possession if necessary.
The Decision of the Court:
The appeals were allowed, and the suit filed by the plaintiff was dismissed. The judgments and decree passed by the High Court of Chhattisgarh were set aside, and the suit was dismissed.
The Trial Court was directed to refund the entire amount deposited by the plaintiff, along with the accrued interest on the fixed deposit from the date of deposit.
Case Title: Leela Agrawal v. Sarkar & Anr.
Case no: CIVIL APPEAL NOS. 12538-12539 OF 2024
Citation: 2024 Latest Caselaw 758 SC
Coram: Hon’ble Mr. Justice Vikram Nath and Hon’ble Mr. Justice Prasanna B. Varale
Advocate for Petitioner: Adv. Kaustubh Shukla
Advocate for Respondent: Adv. Prakash Ranjan Nayak [For Respondent-1],
Adv. Ankita Sharma [For Respondent-2]
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