Comprehension
Whether an agreement is a mortgage by conditional sale or sale with an option to repurchase is a vexed question to be considered in the facts of each case. The essentials of an agreement, to qualify as a mortgage by conditional sale, can succinctly be summarized. An ostensible sale with transfer of possession and ownership, but containing a clause for reconveyance in accordance with Section 58(c) of the Act, will clothe the agreement as a mortgage by conditional sale. Referring to Section 58(c) of the Transfer of Property Act the observed, “A deeming fiction was added in the negative that a transaction shall not be deemed to be a mortgage unless the condition for reconveyance is contained in the document which purports to effect the sale.” The issue under adjudication was whether the transaction between the parties was an absolute sale of the property or it was a mortgage. The court relied upon the case Bishwanath Prasad Singh v. Rajendra Prasad and Anr, 2006 SC and held that A bare perusal of the said provision clearly shows that a mortgage by conditional sale must be evidenced by one document whereas a sale with condition of retransfer may be evidenced by more than one document. A sale with a condition of retransfer is not a mortgage. It is not a partial transfer. By reason of such a transfer all rights have been transferred reserving only a personal right to the purchaser and such a personal right would be lost unless the same is exercised within the stipulated time. The execution of separate agreement for reconveyance, either contemporaneously or subsequently, shall militate against the agreement being mortgaged by conditional sale. There must exist a debtor and creditor relationship. The valuation of the property, and the transaction value, along with the duration of time for reconveyance, are important considerations to decide the nature of the agreement. There will have to be a cumulative consideration of these factors, along with the recitals in the agreement, intention of the parties, coupled with other attendant circumstances, considered in a holistic manner. The language used in the agreement may not always be conclusive. (Extract from Prakash (Dead) By LR. V. G. Aradhya & Ors, 2023 SC)
Question: 1
The proper remedy for the mortgagee in a mortgage by conditional sale is:
The proper remedy for the mortgagee in a mortgage by conditional sale is:
Updated On: Dec 3, 2024
- To institute a suit for sale
- To suit for recovery of money
- To institute a suit for foreclosure
- Both (A) and (B)
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The Correct Option is C
Solution and Explanation
In a mortgage by conditional sale, the mortgagee has two remedies:
1. He can file a suit for sale if the mortgagor defaults, allowing the sale of the property to recover the debt.
2. He can also sue for the recovery of money if the mortgagor fails to repay the loan as per the agreement.
Thus, both (A) and (B) are correct.
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Question: 2
One of the conditions of mortgage by conditional sale is that:
One of the conditions of mortgage by conditional sale is that:
Updated On: Dec 3, 2024
- On payment of mortgage money, the sale shall be voidable
- On payment of mortgage money, the sale shall become void
- The mortgagee shall receive the rent and profits and will appropriate the same towards the dues
- All of the above
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The Correct Option is B
Solution and Explanation
In a mortgage by conditional sale, the sale becomes voidable on payment of the mortgage money, meaning the mortgagor can redeem the property.
Option (C) is true for mortgage by possession, not conditional sale.
Thus, the correct answer is (A).
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Question: 3
What is the common clause between mortgage by conditional sale and English mortgage?
What is the common clause between mortgage by conditional sale and English mortgage?
Updated On: Dec 3, 2024
- Transfer of ownership of mortgaged property
- Transfer of possession of mortgaged property
- The right of mortgagee to sell the property
- Delivery of documents of title
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The Correct Option is A
Solution and Explanation
Both mortgage by conditional sale and English mortgage allow the mortgagee to sell the mortgaged property in case of default.
The key distinction is that in an English mortgage, the mortgagee holds the property in trust until the loan is repaid, while in a conditional sale, the property is sold conditionally.
Thus, the correct answer is (C).
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Question: 4
What is the limitation period in case of mortgage by conditional sale?
What is the limitation period in case of mortgage by conditional sale?
Updated On: Dec 3, 2024
- 3 years
- 12 years
- 30 years
- No time limit
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The Correct Option is B
Solution and Explanation
The limitation period for the redemption of a mortgage by conditional sale is 12 years. This is the period within which the mortgagor can reclaim the property after payment of the mortgage debt.
Thus, the correct answer is (B).
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Question: 5
Which of the following expresses the distinction between a mortgage by conditional sale and a sale with a condition of repurchase?
Which of the following expresses the distinction between a mortgage by conditional sale and a sale with a condition of repurchase?
Updated On: Dec 3, 2024
- In a mortgage the debt subsists and a right to redeem remains with the debtor, but a sale with a condition of repurchase is not a lending and borrowing arrangement
- In a mortgage by conditional sale, generally the amount of consideration is far below the value of the property in the market, but in a sale with a condition of repurchase, the amount of consideration is generally equal to or close to the value of the property
- Both (A) and (B)
- Neither (A) nor (B)
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The Correct Option is C
Solution and Explanation
Option (A) : In a mortgage, the debt remains, and the mortgagor has a right to redeem. In a sale with a condition of repurchase, the transaction is considered a sale with a repurchase option and not a borrowing arrangement.
Option (B) : In a mortgage by conditional sale, the consideration is often less than the property value, while in a sale with a condition of repurchase, the consideration is closer to the property’s value.
Thus, the correct answer is (C).
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