HM Journal

Difference between conditional sale and a mortgage


1.BHIMRAO RAMCHANDRA KHALATE (APPELLANT) appeal before this Court aggrieved against the suit for redemption of the mortgage property. The plaintiff was the owner of 20 gunthas of agricultural land situated in village Khunte. The plaintiff was in need of money so he borrowed  from defendant No. 1 by executing a document titled “conditional sale deed” as a security for the loan amount. The plaintiff requested defendant No. 1 to reconvey the suit land by accepting the loan amount but defendant No. 1 refused to do so. Defendant No. 1 transferred the suit land in favour of his brother (defendant No. 2). The plaintiff filed a suit against the defendants under the Transfer of Property Act, 1882 for redemption of mortgaged property and possession. The claim of the plaintiff is that the transaction was in the nature of mortgage even though it was titled as the conditional sale. The entire dispute revolves around whether the document was a conditional sale or a mortgage?

2. The argument raised by the transferor was that the property transferred was intended to be mortgage under a deed of conditional sale. The transferees contended that the deed was absolute sale and that the conveyance was subject to a condition of repurchase.

3. The Court had rightly found that it is not a document of mortgage but a conditional sale. Learned counsel for the defendants has also referred to the fact that the suit for redemption was filed after twenty years of the document being executed and, in the meantime, defendants have made improvements over the land. Thus, the plaintiff would not be entitled to seek redemption.

4. A mortgagee spends such money as is necessary for the preservation of the mortgaged property for destruction, forfeiture or sale; for supporting the mortgagor’s title to the property; for making his own title thereto good against the mortgagor; and when the mortgaged property is a renewable lease-hold, for the renewal of the lease, such expenditure incurred by the mortgagee can be added to the cost of improvements in the principal amount due. However, in the absence of any positive evidence of any improvement and the cost incurred, the defendants are not entitled to recover anything more than the mortgage amount. Since the possession was given to the mortgagee, he has enjoyed usufruct from the mortgage property which compensates not only of the user of the land but also improvements made by him. The improvements were to enjoy the usufruct of the property mortgaged.

5. The argument that plaintiff has filed suit for redemption after 20 years of execution of the document is not tenable as the suit for redemption can be filed within 30 years from the date fixed for redemption. The period of 30 years is within the period of limitation.

Judgement- Appeal allowed within three months of the receipt of copy of the order


Judgement date- 13th August, 2021

Citation – CIVIL APPEAL NO. 10197 OF 2010

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