SC Determines Whether a Deed is of Absolute Transfer or Mortgage by Conditional Sale

Background of the Case

• In this case, the Plaintiff had borrowed Rs. 3000 from the Defendant for household expenses in respect of a land that was in the Plaintiff's possession.
• The Defendant was given possession of the land on the condition that it be returned to the Plaintiff within one year of the date of the conditional sale deed.
• However, it was also a condition that the Defendant is bound to retransfer the land to the Plaintiff only when the Plaintiff repays Rs. 3000.
• The deed also stipulated that if the amount is not paid within the specified time, the conditional sale deed may be considered a permanent one.
• The Plaintiff then requested the Defendant to transfer the land to him in respect of the repayment of the borrowed amount.
• The Defendant refused to do so. Further, he transferred the land to his brother.

Plaintiff's Claim

• Hence, the Plaintiff had filed a suit for redemption of the mortgaged property. The Plaintiff claims that the nature of the original transaction was that of a mortgage, even though it was titled as a conditional sale.
• Plaintiff's claim was rejected by both the First Appellate Court as well as the High Court.

Defendant's Contentions

• Referring to a case, the Defendant contended that it cannot always be assumed that the transaction agreed upon was a mortgage transaction simply because of a term incorporated in the same document.
• The Defendant also contended that the Plaintiff had filed for redemption after 20 years of execution of the document.

The Order and Observations

• The Supreme Court Bench constituting of Justices Hemant Gupta and AS Bopanna heard the case.
• While taking the contentions raised into consideration, the Court stated that the case referred to by the Defendants cannot be used as a binding precedent.
• Further, the Court also cleared that as the suit for redemption can be filed within 30 years, it is clear that the claim is within the period of limitation.
• The Court observed that the parties' intentions must be considered to determine whether a document is an absolute sale or a mortgage by conditional sale.
• Hence, the Court allowed the appeal of the Plaintiff.

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