Permissive Possession Of Land By Mortgagor Does Not Negate Nature Of Transaction As Mortgage By Conditional Sale: SC
The Supreme Court has upheld the validity of a mortgage by conditional sale observing that permissive possession of land by the mortgagor does not negate the nature of the transaction as a mortgage by conditional sale.
The Court set aside the judgment of the Chhattisgarh High Court which affirmed the decree passed by the Trial Court. The Trial Court had held that the condition converting the mortgage into a sale was “a clog on the equity of redemption” and allowed the Respondent to redeem the mortgage by paying an amount to the Appellant.
The Bench of Justice Vikram Nath and Justice Prasanna B. Varale reiterated “The Trial Court and the High Court erred in disregarding the express terms of the registered mortgage deed and in holding that the condition was a clog on the equity of redemption without sufficient basis. The permissive possession of the suit land by the plaintiff does not negate the nature of the transaction. The conditions stipulated in the mortgage deed fulfil all statutory requirements of mortgage by conditional sale, and the intention of the parties regarding the same was clear and unambiguous.”
Senior Advocate V. Chitambaresh represented the Appellant, while Advocate C.B. Gururaj appeared for the Respondents.
The Respondent mortgaged agricultural land to the Appellant, and the mortgage deed stated that if the Respondent failed to repay the principal amount, including interest, within three years, the mortgage would convert into an absolute sale deed.
The Respondent alleged that the transaction was a simple mortgage, and upon her alleged attempt to repay, the Appellant refused, claiming absolute ownership under the terms of the agreement. She argued that the condition converting the mortgage into a sale was a clog on the equity of redemption.
The Trial Court and the Chhattisgarh High Court permitted the Respondent to redeem the property by repaying the amount. The Appellant challenged the same before the Supreme Court.
The Supreme Court examined the mortgage deed and found it consistent with the provisions of Section 58(c) of the Transfer of Property Act, 1882, which defines a mortgage by conditional sale. The Court noted, “The conditions stipulated in the mortgage deed fulfill all statutory requirements of mortgage by conditional sale, and the intention of the parties regarding the same was clear and unambiguous.”
The Bench clarified that the Respondent’s continued possession of the property after the mortgage was permissive and intended to safeguard the land.
It further observed, “The permissive possession of the suit land by the plaintiff does not negate the nature of the transaction. Allowing the plaintiff to retain possession without fulfilling her obligations under the mortgage agreement would result in unjust enrichment.”
Consequently, the Court held, “The appeals are allowed and the suit filed by the plaintiff is dismissed. The judgments and decree passed by the High Court of Chhattisgarh…as well as the judgment and decree passed by the Additional District Judge are set aside and the suit is dismissed.”
Accordingly, the Supreme Court allowed the Appeal.
Cause Title: Leela Agrawal v. Sarkar & Anr. (Neutral Citation: 2024 INSC 946)
Appearance:
Appellant: Senior Advocate V. Chitambaresh; AOR Kaustubh Shukla
Respondents: Advocates C.B. Gururaj, Animesh Dubey, Apoorv Nautiyal and Arjun D. Singh; AOR Prakash Ranjan Nayak and Ankita Sharma
