Leela Agrawal Vs. Sarkar & Anr.

Introduction

This case involves a dispute over the nature of a mortgage agreement concerning agricultural land. The appellant, Leela Agrawal (“Defendant”), challenges concurrent judgments by the Trial Court and the High Court, which allowed the respondent, Sarkar (“Plaintiff”), to redeem the mortgage despite a clause in the agreement converting the mortgage into an absolute sale upon default. The Supreme Court (“SC”) examines the validity of this condition under Section 58(c) of the Transfer of Property Act, 1882 (“TPA”).

Issues

1. Whether the mortgage deed dated 17.10.1990 constitute a mortgage by conditional sale under Section 58(c) of the TPA?
2. Whether the plaintiff is entitled to redeem the mortgage?
3. Whether the condition of converting the mortgage into an absolute sale is a clog on the equity of redemption?
4. Whether Section 165 of the Chhattisgarh Land Revenue Code, 1959, apply to this case, rendering the transaction invalid?

Rules

• Section 58(c), Transfer of Property Act, 1882: Defines a mortgage by conditional sale and lays down its essential requirements.
• Section 165, Chhattisgarh Land Revenue Code, 1959: Restricts land transfers that reduce the transferor’s holdings below prescribed limits.
• The doctrine of Equity of Redemption: Mortgagors have an inalienable right to redeem their property unless explicitly extinguished.

Analysis

The Court’s analysis included the following:

• The deed explicitly stated that upon failure to repay INR 1,20,000 within three years, the transaction would be treated as an absolute sale. It determined that the transaction met the criteria for a “mortgage by conditional sale” under Section 58(c), as the condition was documented in the agreement.
• The clause converting the mortgage into an absolute sale was valid. It did not constitute an impermissible clog on the equity of redemption, as the terms were agreed upon and documented transparently.
• The plaintiff remained in possession of the land after the agreement, but this was deemed permissive and for safeguarding purposes. The Trial Court and High Court erred in treating possession as evidence negating the nature of the mortgage.
• The plaintiff failed to provide evidence proving that the land was agricultural or that the transaction violated Section 165. The SC found no grounds to invalidate the agreement under this provision.

Conclusion

The SC held that the mortgage deed constituted a valid mortgage by conditional sale. The plaintiff failed to fulfill her repayment obligations within the stipulated period, making the condition of absolute sale enforceable. The earlier judgments were set aside, with the court allowing the defendant to claim ownership of the land under the agreement. However, the defendant was advised to seek possession through appropriate legal channels.