Krishna Patil (D) By L.Rs Vs. Raghunath Revaji Patil & Anr  Insc 167 (20
S.B. Sinha & Markandey Katju
[Arising out of S.L.P. (Civil) No.24582 of 2004] S.B. SINHA, J :
Appellants herein were owners of land bearing Survey No.198/3/2 admeasuring
2 acres at Village Waghad. They, being in need of money, approached the
respondents. On negotiations having been held in that behalf by and between the
parties, a deed of sale was executed by the appellants in favour of the
respondents on 29.11.1966 for a sum of Rs.6,000/-. However, the said deed was
registered on 17.12.1966. On the same day an agreement of reconveyance was also
executed in terms whereof the respondents agreed to convey the property back to
the appellants herein after five years on receipt of the amount of
consideration specified therein. As the respondents failed and/or neglected to
act in terms of the said agreement of reconveyance, a suit for specific
performance was filed by the appellants herein against the respondents.
The said suit was decreed. However, on an appeal preferred thereagainst by
the respondents, the First Appellate Court, inter alia, held that the
appellants herein were not ready and willing to perform their part of contract.
The First Appellate Court, however, rejected the contention of the respondents
that time was of the essence of contract. The appeal was allowed, stating :
"To sum up, the agreement of reconveyance (exhibit 31) was the part and
parcel of the agreement of sale evidence by the sale deed (exhibit 30), and for
want of registration the plaintiff No. 2 Pandharinath did not acquire any right
on the basis of the said agreement of reconveyance. Moreover, the said
agreement of reconveyance is left vague on vital and important points discussed
above. Respondent No. 3 Vijayabai was not a party to the said agreement of
revonveyance and it was not signed, by her. We have also seen above that the
plaintiffs were not ready and willing to perform their part of contract. On all
these points, the learned Judge ought to have dismissed the suit for specific
performance. Relying on all these circumstances discussed above, I do find that
the plaintiffs are not entitled to claim a decree for specific performance.
Relying on all these circumstances discussed above, I do find that the
plaintiffs are not entitled to claim a decree for specific performance of
In the Second Appeal filed by the appellants herein being aggrieved by and
dissatisfied with the said judgment, the High Court also opined that as the
document of reconveyance was part and parcel of the same transaction and being
compulsorily registerable; for want of registration, the same was neither
admissible in evidence nor enforceable through a court of law.
Mr. Chinmoy Khaladkar, the learned counsel appearing on behalf of the
appellants, would submit that keeping in view the fact that the deed of sale
was executed on 29.11.1966, and the agreement of reconveyance was executed on
17.12.1966, the same was not required to be registered.
Mr. S.V. Deshpande, the learned counsel appearing on behalf of the
respondents, on the other hand, submitted that although the sale deed was
executed on 29.11.1966, but having been registered on 17.12.1966 itself on
which date the agreement of reconveyance was executed, the same must be held to
be a part of the same transaction and, thus, was compulsorily registerable.
In this connection, our attention was drawn to the agreement of reconveyance
dated 17.12.1966, the relevant portion whereof reads as under :
"I, above referred vendee write down that you above referred vendor are
selling the land to me for 6,000/- upon the condition that after cultivation
for 5 years this particular land would be reconveyed to Pandrinath Ukhardu
Patil as soon as he repays the amount i.e. 6,000/- But within 5 years all the
earnings of the land would be enjoyed by me as an interest."
The basic fact of the matter is not in dispute. Two documents were executed
on different dates and at different places. Whereas the deed of sale was
executed at Tal. Raver, the purported agreement of reconveyance was executed at
Waghad where the registration office was situated.
By reason of the sale deed dated 29.11.1966, the respondents obtained
possession of the entire suit property. The property was transferred absolutely
so as to enable the vendee to use the same till their life time as also by
their legal representatives. Appellants declared that they would have no right,
title and interest in the said land, nor they would have ownership right and in
case anyone claimed any such right, the same would be treated as cancelled. An
easementary right was also conveyed. It was stipulated that the land was not
encumbered as the mortgage which had been created in respect of the said land, has
been redeemed and in the event "anything is found", 'they would be
responsible for the same'.
The amount of consideration was received on different dates at different
places. The said deed must, therefore, be construed to be a deed of absolute
Furthermore, Section 58 (c) of the Transfer of Property Act, 1882 (for
short, "the Act") provides for satisfaction of the conditions for
mortgage by way of conditional sale providing :
"(c) Mortgage by
Where, the mortgagor ostensibly sells
the mortgaged property on condition that on default of payment of the
mortgage-money on a certain date the sale shall become absolute, or on condition
that on such payment being made the sale shall become void, or on condition that
on such payment being made the buyer shall transfer the property to the seller,
the transaction is called mortgage by conditional sale and the mortgagee a
mortgagee by conditional sale :
Provided that no such transaction shall be deemed to be a mortgage, unless
the condition is embodied in the document which effects or purports to effect
Proviso appended to Section 58(c) is clear and unambiguous. A legal fiction
is created thereby that the transaction shall not be held to be a mortgage by
conditional sale, unless a condition is embodied in the document which effects
or purports to effect the sale. Where two documents are executed, the
transaction in question would not amount to a mortgage by way of conditional
sale. In a case of this nature, ordinarily the same would be considered to be a
deed of sale coupled with an agreement of reconveyance.
This aspect of the matter has been considered by this Court in Bishwanath
Prasad Singh v. Rajendra Prasad and Another [(2006) 4 SCC 432], wherein it was
"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 a
condition of retransfer may be evidenced by more than one document.
A sale with a condition of retransfer, is not 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 (sic seller), and such a
personal right would be lost, unless the same is exercised within the
In Mushir Mohammed Khan (Dead) By L.Rs. v. Sajeda Bano (Smt.) and Others
[(2000) 3 SCC 536], this Court referring to a well-known decision of Pandit
Chunchun Jha v. Sk. Ebadat Ali and Another [(1955) SCR 174: AIR 1954 SC 345]
"Applying the principles laid down above, the two documents read
together would not constitute a mortgage as the condition of repurchase is not
contained in the same documents by which the property was sold.
The proviso to clause (c) of Section 58 would operate in the instant case
also and the transaction between the parties cannot be held to be a
"mortgage by conditional sale.""
In Shri Bhaskar Waman Joshi (deceased) and Others v. Shri Narayan Rambilas
Agarwal (deceased) and Others [(1960) 2 SCR 117], it was observed :
"The proviso to this clause was added by Act 20 of 1929. Prior to the
amendment there was a conflict of decisions on the question whether the
condition contained in a separate deed could be taken into account in
ascertaining whether a mortgage was intended by the principal deed. The
Legislature resolved this conflict by enacting that a transaction shall not be
deemed to be a mortgage unless the condition referred to in the clause is
embodied in the document which effects or purports to effect the sale. But it
does not follow that if the condition is incorporated in the deed effecting or
purporting to effect a sale a mortgage transaction must of necessity have been
intended. The question whether by the incorporation of such a condition a
transaction ostensibly of sale may be regarded as a mortgage is one of
intention of the parties to be gathered from the language of the deed
interpreted in the light of the surrounding circumstances. The circumstance
that the condition is incorporated in the sale deed must undoubtedly be taken
into account, but the value to be attached thereto must vary with the degree of
formality attending upon the transaction. The definition of a mortgage by
conditional sale postulates the creation by the transfer of a relation of
mortgagor and mortgagee, the price being charged on the property conveyed. In a
sale coupled with an agreement to reconvey there is no relation of debtor and
creditor nor is the price charged upon the property conveyed, but the sale is
subject to an obligation to retransfer the property within the period
specified. What distinguishes the two transactions is the relationship of
debtor and creditor and the transfer being a security for the debt. The form in
which the deed is clothed is not decisive. The definition of a mortgage by
conditional sale itself contemplates an ostensible sale of the property."
In Tulsi and Others v. Chandrika Prasad and Others [(2006) 8 SCC 322], it
"A distinction exists between a mortgage by way of conditional sale and
a sale with condition of purchase.
In the former the debt subsists and a right to redeem remains with the
debtor but in case of the latter the transaction does not evidence an
arrangement of lending and borrowing and, thus, right to redeem is not reserved
In the instant case, no relationship of debtor or creditor came into being.
No security was created and in fact conveyance of the title of the property by
the respondent to the appellant was final and absolute.
Reliance has been placed by the High Court on a Full Bench decision of the
Bombay High Court in Harkisandas Bhagvandas and Others v. Bai Dhanu [AIR 1926
Bombay 497] wherein, it was held that if the transaction is really one of
mortgage then the second deed would be inadmissible for want of registration;
but where the transaction is not one of mortgage, the second document would not
need registration, even if it is a part of the same transaction of sale.
In this case also the transaction is a mortgage by conditional sale and
having regard to the provisions of Section 17 of the Indian Registration Act,
the agreement of sale was not compulsorily registerable.
It has further been brought to our notice that whereas the Deed of Sale was
executed in favour of two persons; the purported agreement of reconveyance has
been executed by only one of the vendees, namely, Raghunath Revaji Patil, who
has been described as 'Benami'; but the same has not been proved. The High
Court did not go into the aforementioned question stating :
"Once, this issue is answered in the negative, the issue, whether
execution by Defendant No. 1 alone (Defendant No. 2 has not signed the reconveyance deed) would obstruct the court from granting a decree for specific
performance of reconveyance, is not required to be considered since, a finding
favourable to appellant on that issue is not going to make any favourable
impact on the conclusion of the appeal."
We, therefore, are of the opinion that the interest of justice will be
subserved if the matter is remitted to the First Appellate Court for
consideration of the matter afresh on the said question. The impugned judgments
cannot be sustained and are set aside accordingly. The Appeal is allowed and
the matter is remitted to the First Appellate Court for consideration of the
matter afresh .
In the facts and circumstances of this case, there is no order as to costs.