The Supreme Court has clarified the distinction between a “simple mortgage” and a “mortgage by conditional sale” under Section 58(c) of the Transfer of Property Act, 1882. It ruled that mere possession by the mortgagor does not alter the conditional nature of the mortgage, provided the deed explicitly outlines terms converting the mortgage into an absolute sale upon default.
This judgment arose from a civil appeal challenging lower court decisions that allowed the redemption of mortgaged property, ignoring the explicit conditions of the mortgage deed. The apex court overturned these rulings, reaffirming the sanctity of contract terms when backed by clear intent.
The Dispute and Key Terms
The case involved a 1990 mortgage agreement where the plaintiff mortgaged property for ₹75,000, with a provision to repay ₹1,20,000 within three years. Failure to redeem within the stipulated time meant the property would transfer absolutely to the mortgagee. The mortgagor remained in possession of the property under an arrangement termed “permissive possession.”
In 1993, the plaintiff offered the repayment amount, which was refused by the defendant, asserting that the time lapse had already converted the mortgage into a sale.
Trial and High Court Rulings
Lower courts allowed redemption, deeming the mortgage terms as a “clog on the equity of redemption” and emphasizing the plaintiff’s continued possession. However, the Supreme Court observed these interpretations failed to account for the permissive nature of the possession and the unambiguous terms of the mortgage deed.
Supreme Court’s Analysis
The judgment emphasized three key factors:
- Nature of Possession: Possession was permissive and did not indicate ownership or negate the conditional sale.
- Intent of the Parties: The deed and testimony established the intention to transfer ownership upon default clearly.
- Terms of the Deed: The document explicitly detailed the conditions, fulfilling all statutory criteria for a mortgage by conditional sale.
Verdict
The Court underscored that permissive possession cannot override the mortgage’s conditional terms. It noted that the lower courts erred in treating possession as evidence of a “simple mortgage,” disregarding the contractual stipulations. The appeal was allowed, reinstating the conditional nature of the transaction and denying the plaintiff’s redemption claim under these terms.
This ruling reinforces the importance of adhering to the explicit terms of mortgage deeds and provides clarity on how possession should be interpreted in such cases.
