REDEMPTION

Section 60 gives a right of redemption to the mortgagor. At any time when the

money has become due, then upon payment or the tender of the mortgaged

money certain rights are accrued in favour of the mortgagor. The right of

redemption is a right of getting back the property and the interest. On

redemption, the interest given to the mortgagee ends or ceases and it goes back

to the mortgagor in simple words means to “call back the interest”, this rule is

based on equity and equity does not allow a transaction which was a borrowing

transaction to become a conveyance of property. It is an inherent right of every

mortgagor to redeem the property.

The equity of redemption has been incorporated in India as a statutory right

under Section 60 of the act. This is based on English Law of redemption. There

was a common law in England which provided that in case of a mortgage, if the

mortgage is not paid on time, it would become an absolute sale. But this right

was abused and therefore, the common law courts abolished this rule and held

a borrowing transaction shall not become a sale. It was also clarified that the

basic object of the mortgage was to secure the payment of money and never a

transfer of property. So, a mortgagor should be given a right of redemption and

there should be no penalty and punishment for not giving the loan. Infact, this

right is available even after the default. The principle evolved as above was called

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as. “Once a Mortgage, always a Mortgage” i.e., once a mortgage has been entered,

it would always be a mortgage and it would not cease to be a mortgage.

This right can be exercised in 3 ways –

1. Payment or tendering the money.

2. By depositing it in the court.

3. By filing a suit for redemption.

Clog On Redemption – The law always favours the mortgagors right of

redemption and it is also provided that, any stipulation (condition) which

prevents the mortgagor to redeem the property is also not allowed. The principle

of equity demands that there should be no denial of the right of redemption,

either directly or indirectly. So, any condition restraining the redemption is taken

as a clog on redemption and hence not allowed. So, where there was a condition

that restrained the transfer of property after the mortgage or where a condition

was that upon the failure on due date, the right of redemption would be

postponed for 30 years were held be clog on redemption.

In a mortgage both the mortgagor and the mortgagee have certain rights either

on the payment or on the failure to pay. Right upon payment is called the

redemption and upon a failure there can be a foreclosure.

As a general rule, the mortgage is considered to always have a right of

redemption. Even on non-payment section 67 also authorises mortgagee to

foreclose. But a question might arise that whether these statutory rights can

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be waived or not. A bare reading of S/67 would lay down that the right of

foreclosure can be waived. This is because of the fact s/67 uses the words “In

the absence of contract to the contrary” which means that if there is a contract

of a mortgage, the right of foreclosure can be waived. But, these words have not

been used u/s-60, so therefore as a general rule, the right of redemption cannot

be waived. In simple words, a waiver right of foreclosure can be there in the

mortgaged deed itself, but a mortgage deed should not contain a waiver of right

of redemption.

The reason may be that while making a contract of mortgage, a person is under

some stress and can be easily exploited and therefore, he might agree to any

term.

But exceptionally, even the right of redemption can be waived, the provisos to

S/60 would lay down that by act of parties this right can be waived. The words

act of parties here means making a separate new contract. So, if after a mortgage

deed a new contract has been entered, wherein, the right redemption has been

waived, then it would be held to be valid. The reason right be that it is a new

contract, with new circumstances, with new consideration which right be more

beneficial to the mortgagor and thereupon mortgage might have agree to forego

his right of redemption.

MARSHALLING:-

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Section 56 and Section 81 lays down about marshalling section 56 is as regards

marshalling by a subsequent purchaser of property whereas Section 18 talks

about a subsequent mortgagee. These sections incorporate that there were 2 or

more parties mortgaged to one person but one of them was sold to some other

person or was mortgaged to some other person.

In both these cases the subsequent purchaser or the mortgage has been given a

right but there should be an absence of the contract to the contrary. A right to

re-arrange the properties in such a manner that the mortgaged money be

recovered from the properties not sold or not mortgaged to the subsequent

purchaser or the subsequent mortgagee.

Marshalling means rearrangement in such a way that the 1 st discharge would be

from other properties and in case the mortgage money is not fully paid then that

property would be sold as the last resort.

For example, A who owns X,Y,Z properties which have been mortgaged to B then

if X property is sold to C, then in case of enforcement of the recovery can insist

that the mortgage be 1st realised from property Y and Z. But on such a sale if the

money is not recovered even the X property is sold.

This principle is based on the principle of equity and justice and protects the

purchaser in case money is recoverable from other properties.

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Right of mortgagee under different mortgages –

1. Simple Mortgage – under this Mortgage, the mortgagee has a right to sue for

sale but he cannot foreclose.

This is due to the fact that, first of all you can sue him upon a personal

capacity and failing which, you can sue as a second option for the sale of

property. He can file these two separate suits or may file a common suit for

both (O2 R2, O2 R3)

2. Usufructuary Mortgage – There is neither a right of foreclosure or sale

because the possession in usufruct is already with the mortgagee and he can

continue with the same till a mortgage is satisfied.

3. Mortgage by Conditional Sale – The only remedy is the suit for foreclosure.

This is because of the fact that since there is already a conditional Sale, which

might become absolute upon the failure of the mortgagor, So, a mortgage has

to do nothing but has to do a certain at by which there is a failure on the part

of the mortgagor, and it is possible by a suit for foreclosure.

4. Mortgage by Deposit of title deeds – The only remedy is the Suit for sale.

S/96 lays down that, the rules as applied to simple mortgage would also apply

to a mortgage of deposit of title deed.

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5. English Mortgage – The only right is to sell the property. Though there is

already a sale, but such sales have not been considered to be real sales and

hence, the remedy is to sell the property.

6. Anomalous Mortgage – Since, these are customary mortgages, it would be

the custom, that would decide, it is a sale or foreclosure, but generally the

court passes a decree of sale.

THE PERSONS WHO MAY REDEEM AND SUBROGATION

Though the right of redemption belongs to the mortgagor, But S/91 also

authorizes some other persons to also redeem the debt. These persons are is

follows –

1. Any person interested or having a charge upon the properly, but he can be a

mortgagee also other than the mortgagee, whose interest has to be redeemed,

which in simple words would be a subsequent mortgagee.

2. Any Surety of the debt can also redeem.

3. Any creditor of the mortgagor, who has a decree to manage the estate of the

mortgagor.

If these persons redeem the property, then by virtue of S/92 they are given the

same rights as that of the mortgagee. S/93 also has to be read along these two

sections. As per S/93, the mortgagee, who is subrogating would be only allowed

a preference or priority of the amount he has redeemed. He would not get the

6
priority over his original Security. Subrogation means stepping into the shoes.

In simple words, when these 3 persons as above redeem the property, they step

into the Shoes of the mortgagee. So, in this case, if a subsequent mortgagee

redeems a prior mortgage, he would be preferred or would be given a priority.

For ex- If A mortgages a property to B for Rs. 150, then for C for 100 and to D

for Rs. 50. Then, here C and D would have a right to redeem. In case, D redeems

B, No doubt, D would step into the shoes of B and would have a priority over C.

But the question is upto what extent. The conjoint reading of S/93 and 80 would

lay down that no doubt, D would get a priority over C, but only in respect of Rs.

150 and he cannot claim and amount of Rs 50 under the guise of S/92

Subrogation. This is due to the fact that the tacking or adding or attaching the

original security is not allowed in India.

Section 94. Right of Mesne mortgagee

A –––––––––––––––––––––– B Redeem, Subrogate

C Mesne mortgagee

D Foreclosure

REDEEM UP FORECLOSURE DOWN – S/94

S/94 talks about the concept called as mesne mortgagee. Mesne Mortgagee is

nothing but a mortgagee in b/w two debts or two mortgagee. For eq- A mortages

a property to B then to C and then to D. Then, in such a case, C would be a

mesne mortgagee. S/94 gives him a same right as against a mortgagor and i.e.

a right of foreclosure. So, accordingly, here D, who is a posterior mortgage can

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be foreclosed by C. Elaborately, in this example by virtue of S/91, 92 and 94, C

can redeem B and foreclose D and this concept is called as redeem up foreclose

down.

Partial Foreclosure and Partial Redemption

(S/60 last Para).

As a general rule, partial redemption is not allowed. Partial Redemption means

that, the entire payment has not been made and it is the part Payment of the

loan or these is a particular share, which has been paid by one of the

mortgagors. For ex- If A, B and C are co-owners of the land, and they mortgage

the property jointly, for a loan of Rs. 90,000. Now, afterwards. If C agrees, to

pay his part of 30,000/- in lieu of redemption of 1/3rd of property, then it would

not be allowed as this is called as a partial redemption. As per the last paragraph

of S/60, no part redemption of the mortgage has been allowed. This rule is due

to the fact that, there is a concept of integration or indivisibility. This means

that a mortgagee always values his credit or security as indivisible and treats

the loan as a whole and not in part. So, he cannot be forced to accept the part

payment thereof. If a person is forced to accept a part payment, there might be

a probability that few parts of the property are struck in different parties and

with different status and it might lead to chaos. Even otherwise, there might be

a probability that with the left over property he might be not able to recover the

remaining debt.

Exception to this rule–

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But this rule is subject to an exception that if the mortgagee himself breaks this

integration and divide the property keeping one share as his own or buys some

interest in the property, the integration is broken then partial redemption would

be allowed.

Even the Partial Foreclosure is not allowed by S/67(d) on the same principles

upn which the partial redemption is not allowed i.e. the rule of integration or

rule of indivisibility.

CHARGE – SECTION 100

Under both charge and mortgage – there is right to recovers money from

immovable property.

But, the debt which covered under definition of mortgage is mortgage, other as

such are charge.

S/100 gives a right over an immovable property and this right is also to recovers

money from the property. Though a mortgage also gives a right to recover but,

it is different from a charge. Generally, a mortgage is a recovery of money after

a debt or a loan and a mortgage gives a right to recover the loan. In simple

words, in a mortgage before this right exist it is preceded by debt. Whereas in a

charge there might not be a debt but still there is a right to recover money.

Maintenance allowance gives a right to recover money from the property or is a

right having some pecuniary benefit but it is not based upon loan. So, here

maintenance would be a charge and not a mortgage. So, in case where – A

transfer property to his son with a condition that he shall have a duty to pay

9
5000 p/m to the sister, otherwise she has a right to recover from the property

then such right is a charge and not a mortgage.

Charge is almost like a mortgage, but a mortgage is wider than the charge. These

is transfer of infact in the mortgage but there is no transfer of interest in a

charge. In a case of Raja Shri Shiv Prasad vs. Beni Madhab AIR 1922 Patna.

529. It was held that charge only gives a right to payment from a particular

fund without transferring that fund. But, in a mortgage, there is a transfer of

interest of that fund in favour of the mortgagee. In other words, though these

can be a sale of a mortgage property but the transfer would only be perfect after

the Payment of the mortgage. But whereas in a charge these can be a complete

and absolute sale because no interest is transferred in a charge.

GIFT [S/122-129]

Gift is a transfer of ownership without money/consideration. Gift can be both

of movable or immovable property.

Specific Existing property.

Two parties – Donor and Donee

Acceptance of gift – There has to be an acceptance for the completion of gift can

gift be revoked? Can condition control be imposed on gift?

Section 126

––––––––––––––Event–––––––––––

Happening Condition Non happening

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 Control of Donor

Void Not control of Donor

Valid

• If the happening is under the control of donor is void.

Gift is a transfer of ownership without consideration. It is also called as

gratuitous transfer (gratitude/ love and affection/ respect). A gift can take place

either intervivous or after the death of any party. The gift intervivos are covered

by TPA, but the gift on death i.e., Mortis cause are excluded from the pervievos

of TPA. Even in Muslim Law, the gift is called as Hiba is also excluded by the

preview of S/126 (Hafiza Bibi case vs. Sheik fareed, AIR 2011 SC 1695.) it

was held that the law as regard gifts specially s/123 providing for registration is

not applicable to Muslim gifts.

The essential ingredient of gift are as follows–

1. Transfer of ownership – There is a transfer of ownership from the donor to

the donee. The donor must be a competent person but it can be made to a

minor or insane person, but the same has to be accepted by a competent

person in his behalf A donee can be a justice person. The transfer of property

in a gift should be absolute.

2. Existing Property – The property must be existing and per section 124, a gift

of future property is void.

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3. No Consideration – The essence of the gift is that no consideration has been

paid, the value of consideration is immaterial. A gift made with a little bit of

consideration would not amount to a gift.

4. Voluntarily – A gift must be made without any force, in other words, it must

be with free consent and should not be caused by coercion, undue influence,

fraud, misrepresentation or mistake.

5. In simple words, a property cannot be given to a person against his or her

wishes. The law lays down that the gift has to be accepted by the person to

whom it has been given.

6. Registration – S/123 r/w S/17 (1)(a) of Registration Act, lays down that a gift

irrespective of the value would require compulsory registration. But yes, it

must be attested by atleast two witnesses.

7. In the case of Gomti Bai vs. M. Lal AIR 1997 SC 127 it was held that if

there is no written instrument of the gift or if it is not registered, or it is not

attested, the gift is not complete. In the case of R. Rayamma vs. K.

Sarvanamma AIR 2014 SC, it was held that the delivery of Possession is not

necessary and the gift has been accepted and is registered it is a valid gift.

S/126 lays down that a gift can be suspended or revoked, meaning there by some

conditions can be attached to the gift and that condition would provide for that

the gift can be suspended or revoked. Suspension means temporary

postponement of enjoyment of the gift or the transfer of the gift. Whereas

revocation would mean to withdraw or recall or to bring back or to call back the

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gift to the donor. As per this section, there are exhaustive grounds contained in

this section only upon which there can be a revocation otherwise there is no

revocation.

A gift can be revoked by mutual consent of the donor and the donee on the

happening of the event, provided that the event is not under control of the donor.

If the event can be control by the donor the gift would be void. If the illustration

to this section one gift contains a term which is at the pleasure of the donor. In

such cases, the term confining the death is valid as death cannot be controlled

by the donor whereas the term containing pleasure would obviously mean the

mercy or the will of the donor.

Section127 ONEROUS GIFTS

An onerous gift is a gift coming with a liability. So where in a single transaction

where gift has been made of property but there is an attached liability with it

then the donee would have an option to accept the gift but if does so he would

also get the liabilities also. Incase he wants to avoid the liabilities then he would

also not get the gift. It cannot be done he keeps the gift and leaves the liabilities.

In simple words either accept both or reject both. But one thing should be kept

in mind that it should be in the same transaction and if the transactions are

different i.e one giving gift and the other liability then in such a case the donee

if free to accept the gift and reject the liability.

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If the minor accepts the onerous gift then he would be not bound by his

acceptance but on attaining majority and becoming aware of the obligations if

he keeps the gift then he would be bound by it.

UNIVERSAL DONEE

Section 128 lays down if in a transfer all the properties have been transferred

then the transferee also gets all the liabilities also. So wherein a gift of all the

properties of the donor has been made then all the liabilities of the donor would

be borne by the done. It is done to protect the creditors of the donor. Because

very easily one person can obtain a loan then gift the property and then creditors

might not be in a position to recover money so to protect them this principle has

been laid down.

Exchange

Section 118 to 121

S/118 provides for a concept called as exchange. In simple sense, it is a transfer

of ownership in consideration of the ownership of other property. It is transfer of

an absolute interest. An exchange can also includes a Barter. Barter is an

exchange of a movable property with another movable property No doubt, on a

barter the provisions of sale of goods applies. But even the provisions of TPA also

applies.

So, in a general sense, the properties under an exchange need not be immovable.

There can be a certain element of a movable property also. Even sometimes for

14
equality of valuation, if some money is given, still that transaction would be

called as an exchange. For ex- If a house valued at 1 Lakh is exchanged with the

property of along with 5000 as cash the transaction would still be called as an

exchange. In case of commission of Income Tax vs. Motor and General Store

PVT. Ltd. AIR 1968 SC 200 There was a transaction wherein some property

were exchanged in lieu of shares in a limited company, they were held to be an

exchange.

As a general rule, in an exchange, either both the thing should be money or

neither should be money but exceptionally to bring out the equality in valuation

some amount of money can be given and still the transaction would be called as

an exchange.

Generally, there should be no money considered on but sometimes a

proportional amount can be allowed. For eg. if a house for Rs. 1 lakh is

exchanged with the house of Rs 98,000/- and Rs. 2000/- is paid in cash, it is

an exchange. It must be in writing and registered like a sale if its more than Rs

100/-.

In an exchange either none of the things or both then things should be money

because of one thing is money the transaction would be of a sale. According to

section 121 if parties are exchanging money each party would warrant the

genuineness of the monay given by them.

Sellers Duties (Liabilities) before the Sale. – Before the sale is completed, the

seller’s duties are as under:

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 (i) To disclose material defects in the property or title, if any.

(ii) To produce the title-deeds for inspection

(iii)To answer relevant questions as to title

(iv) To execute conveyance

(v) To take care of the property and title – deeds.

(vi) To pay the out goings.

Seller’s Duties (Liabilities) after sale. – Seller’s duties after the completion of

the sale are given below:

(i) To give possession of the buyer

(ii) To covenant for title

(iii) To deliver title – deeds on receipt of the price

Buyer’s Duties after Sale. – After completion of sale, the buyer has following

two liabilities:

(i) To bear the loss to property, if any.

(ii) To pay the outgoing.

Section 41: SALE BY OSTENSIBLE OWNER.

 It lays down that the transfer would not be a voidable transfer on the ground

that the transferor was not authorised to make it. In other words, where the

16
 person is not the owner but presents himself to be an owner would be an

ostensible owner and if transfers property then the contract is not voidable

because he was not the actual owner.

 Ostensible owner is also called the benamidar. Basically, he is the owner to

the outer world but in reality he has not paid the consideration, and due to

his fact if he transfers the property, it would be considered to be valid.

 But now this section 41 is controlled by the Benami Transactions Prohibition

Act, 1988 whereby now the ostensive owner has become the owner.

Section 43: FEEDING THE GRANT BY ESTOPPEL.

In this section there is an estoppel against the person who transfers the

property to another person claiming to be owner but infact he was not the

owner. If in such a case, the contract has not been rescinded and

subsequently he becomes the owner the purchaser can force him to transfer

the property to him.

So for example if A being the father and B being the son are owners of 50% of

the property each being ancestral. Then if B represents himself to be the

owner of the 100% property and then enters into contract to sell the same

then the ownership would be passed on for 50% only. But before the contract

is rescinded if the father dies and the son gets absolute ownership of 100%

being class I heir then he can be made to deliever the entire property to the

purchaser and he cannot claim that only 50% would be transferred.

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LEASE:

Section 105, TPA lays down about the concept called as lease. Lease in simple
words means transfer of possession under a contract whereby the transferee
enjoys the property upon the payment of the consideration which is either called
as premium or as rent. Lease is a transfer of limited or partial interest.

The essentials of a lease are as follows––

(i) Lessor or a lessee: Since it is contract there must be atlest two parties
one the lessee and second the lessor. The lessor must be competent to
contract and he must have a right to transfer. Here the word right may be
exercised by the owner. So even a power of attorney holder, manager,
authorised by the owner may give the property on lease and then he would
be called as a lessor meaning thereby a lessor need not be the owner,
owner and landlord can be two different person.
(ii) Right to enjoy the property: The main important ingredient of a tenancy
is the transfer of right to enjoy. In a lease there is a transfer of interest and
this interest means the right to enjoy the property, exclusive possession
and independent and freedom of enjoyment. Whereas, if there is a right to
use without any independence or with limited possession, it would amount
to license and not a lease. Lease has been defined under section 105, TPA
whereas a licence has been defined under Section 52, of Easements Act.

In the case of – Associated Hotels of India Pvt. Ltd. vs. RN Kapoor [1959 SC]
it was a transfer of interest in a lease whereas there is no such transfer in a
license. A lease includes exclusive possession and an unlimited right to enjoy
whereas in license there is a limited right to use.

Section 106 talks about the concept of notice and also a concept of statutory
tenancy. A tenancy created by a statute would mean a statutory tenancy. Section
106 has to be read along section 116 TPA. Section 116 TPA lays down about the
effect of holding over. In a statutory tenancy there can be 2 types of tenancies

(i) tenancy by holding over

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 (ii) tenancy by sufferance

When the tenant is continuing the possession with the permission of landlord it
is tenancy by holding over but where there is no consent of landlord then its
tenancy by sufferance.

Various Aspects under SECTION 106 TPA

1. NOTICE FOR TERMINATION .

2. TIME OF LEASE IN CASE OF ABSENCE OF CONTRACT
3. STATUTORY TENANCY.

Section TPA gives a right of termination to both the lessor and the lessee by a
service of notice. Once a notice has been served, the benefit of the statutory
tenancy would be over and the person would be liable to be evicted by lessor.
But this right of eviction is confined to leases only under TPA whereas leases
under the RCAs are immuned from this notice and there would be no eviction by
service of notice eviction would only be there when the grounds under RCAs have
been satisfied.

TERMINATION OF LEASE SCETION 111

(a) by lapse of time: a lease is determined by effuse of time i.e. the period of
tenancy is over
(b) by happening of a specified event: – for eg, where the lease was made
upto the death of lessee, so when the lessee expires it comes to an end.
(c) termination of lessor’s interest – if the lessor sells the property or if the
lessor himself is the tenant, in case of sub – tenancy then if the tenant is
thrown out of the property, the sub tenancy is also extinguished.
(d) Merger: If the lessee himself acquires the premises it would come to an
end.
(e) Surrender: if the lessee himself surrenders then the lease would come to
an end.

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 (f) Forfeiture: A lease may come to an end by a forfeiture which includes that
if.
(a) the tenant has sub-let though he was not authorised by law and
without permission of landlord.
(b) In case the tenant denies the title of landlord.
(c) If the lessee is adjudicated as insolvent and the contract had provided
for on such happening the lease would be terminated.

Section 116, IEA Tenant is possession cannot question the title of the owner

Eg. Landlord A (elder son) – lets property to [C]

B (younger son) found that property to B through

succession. C cannot question the
title of owner (here, B)

(g) By notice to quit: Section 106 TPA

Mortgage by Conditional Sale and Sale with Condition of Retransfer

There can be two differences between mortgage by conditional sale and sale
with condition of retransfer:-

1. In the conditional sale mortgage, there is a debt between seller and

buyer but in condition of retransfer, there is no debt. There is no
relation of debtor and creditor between seller and buyer.

2. In the conditional sale mortgage, only one interest in the property is

transferred to the mortgagee while in the sale with condition of retransfer
mortgage, all the interest in the property is transferred except a personal
right of repurchase.

Section 58 (c) defines the same as:-

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 (c) Mortgage by conditional sale. - 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 the sale.”

This means that the condition of the repurchase should be contained in the
same document if the transaction has to be considered as a mortgage.

Recently in AUGUST 2023 THE SC in the case of

PRAKASH (DEAD) BY LR. V. G. ARADHYA & ORS has considered the scope of
the Section 58(c) in paras 27 to 33 thereof which are extracted below:

“27. 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 stipulated time.

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 28. In Pandit Chunchun Jha v. Sk. Ebadat Ali [(1955) 1 SCR 174 : AIR
1954 SC 345] this Court clearly held:

“We think that is a fruitless task because two documents are seldom
expressed in identical terms and when it is necessary to consider the
attendant circumstances the imponderable variables which that brings in
its train make it impossible to compare one case with another. Each must
be decided on its own facts.”

29. Yet again in Mushir Mohd. Khan v. Sajeda Bano [(2000) 3 SCC 536]
this Court upon construing Section 58(c) of the Transfer of Property Act
opined:

“9. The proviso to this clause was added by Act 20 of 1929 so as to set at
rest the conflict of decisions on the question whether the conditions, specially
the condition relating to reconveyance contained in a separate document
could be taken into consideration in finding out whether a mortgage was
intended to be created by the principal deed. The legislature enacted 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.”

30. Referring to Chunchun Jha [(1955) 1 SCR 174 : AIR 1954 SC 345] it
was held:

“14. 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’.”

31. In Umabai v. Nilkanth Dhondiba Chavan [(2005) 6 SCC 243] wherein

one of us was a party, this Court held:

“21. There exists a distinction between mortgage by conditional sale

and a sale with a condition of repurchase. In a mortgage, the debt subsists

22
 and a right to redeem remains with the debtor; but a sale with a condition
of repurchase is not a lending and borrowing arrangement. There does
not exist any debt and no right to redeem is reserved thereby. An
agreement to sell confers merely a personal right which can be enforced
strictly according to the terms of the deed and at the time agreed upon.
Proviso appended to Section 58(c), however, states that if the condition for
retransfer is not embodied in the document which effects or purports to
effect a sale, the transaction will not be regarded as a mortgage.

A perusal of the aforesaid paras of the judgment shows that the proviso was
added in Section 58(c) of the Act vide Act No. 20 of 1929, so as to put at rest the
conflicting decisions on the issue. 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 judgment of this Court in Umabai v. Nilkanth Dhondiba Chavan, (2005) 6

SCC 243, has also been referred to, which defines the distinction between
mortgage by conditional sale and a sale with a condition of repurchase. In a
mortgage, the debt subsists and a right to redeem remains with the debtor; but
a sale with condition of repurchase is not a lending and borrowing arrangement.
Proviso to Section 58(c) of the 1882 Act. was referred to in the aforesaid judgment
to hold that if the condition for re-transfer is not embodied in the document
which effects or purports to effect a sale, the transaction will not be regarded as
a mortgage.

In the case of BIBI FATIMA v M. AHAMED HUSSAIN & ORS.2017 (11) SCC 832

The question whether a transaction is a mortgage by conditional sale or a sale

with a condition of re-purchase has to be decided on the basis of interpretation
of the document itself. The intention of the parties is the determining factor. The
intention has to be gathered, in the first place, from the document. If the words
are express and clear, effect must be given to them and any extraneous enquiry
into what was thought or intended is ruled out. The real question in such a case

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is not what the parties intended or meant but what is the legal effect of the words
which they used. If, however, there is ambiguity in the language employed, then
it is permissible to look into the surrounding circumstances to determine what
was intended. Pandit Chunchun Jha v. Sheikh Ebadat Ali, (1955) 1 SCR 174).

The Supreme Court in Pandit Chunchun Jha’s case (supra) considered the
background in which the amendment was made to Section 58 (c) of the Act by
the Transfer of Property (Amendment) Act, 1929 and held as follows:

“Because of the welter of confusion caused by a multitude of conflicting decisions

the legislature stepped in and amended Section 58(c) of the Transfer of Property
Act. Unfortunately that brought in its train a further conflict of authority. But
this much is now clear. If the sale and agreement to repurchase are embodied in
separate documents, then the transaction cannot be a mortgage whether the
documents are contemporaneously executed or not. But the converse does not
hold good, that is to say, the mere fact that there is only one document does not
necessarily mean that it must be a mortgage and cannot be a sale. If the
condition of repurchase is embodied in the document that effects or purports to
effect the sale, then it is a matter for construction which was meant. The
legislature has made a clear cut classification and excluded transactions
embodied in more than one document from the category of mortgages, therefore
it is reasonable to suppose that persons who, after the amendment, choose not
to use two documents, do not intend the transaction to be a sale, unless they
displace that presumption by clear and express words; and if the conditions
of Section 58(c) are fulfilled, then we are of opinion that the deed should be
construed as a mortgage”.

Section 52 Lis Pendens

Lis Pendens means pending litigation, Lis means litigation and Pendens means
pending.

According to this doctrine a property which is a subject matter of litigation or a

suit property it should not be transferred till the suit is pending. This doctrine is

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based on the maxim Pendent lite Nihil Innovature which means that when the
litigation is pending no new title shall be introduced.

The basis of this rule was considered to be based on 2 logics:-

1. Constructive notice
2. The necessity rule

The rule of constructive notice means the rule of knowledge i.e. if a person is
buying a property with the knowledge of the litigation than is such a case he has
the knowledge of the risk and therefore he must suffer the consequence.

But it is the Rule of Necessity that has been considered to be more appropriate
for this rule. Rule of necessity means that is necessary to have such rules and
the litigants should not be allowed to take decision by themselves and they
should wait for the judgement of the court and then decide about the transfer.
It is basically the authority of the court to decide who has the authority to sell.
The parties should not by themselves assume such authority & should respect
the judgement.

In the case of Bellamy v. Sabine

It was held that if we allow such transfers it would directly or indirectly defeat
the judgement and it is the rule of necessity that should be present and people
should not transfer the property till the suit is pending.

Essential of Lis Pendens

1. Pendency of suit
This section would only apply if the suit is pending. Pending means a suit
has been instituted and has not been decided till date. The starting point
of the suit has been considered from the filling of the plaint and generally
by a decree it would come to an end. But the explanation to this sec would
clarify that even the execution of the decree would also be considered to
be pendency & a suit would be deemed to be pending till the execution is
discharged or satisfied.

Even the plaint should be filed in a proper court or it should be filled in

the court of competent jurisdiction. The competency should be as per
Section 9, 15, 16 of CPC.

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 In the case of Naggubai Ammal v. B. Shama Rao AIR 1956 SC 593 in
this case an application to sue as forma pauperis O 33 R 3 or as an indigent
person was filed. The question was from which date the pendency would
start.
It was held that the pendency would start four the date of application
provided that it is accepted by the court. But if it is not accepted than it
would be considered from the date when the court fee is filed & the plaint
is accepted by the court.

In the case of V.A. Joshi v. MaltiBai AIR 2003 SC 2673 it was held that
even if there is transfer made during the pendency of the appeal it would
be hit by Section 52 as logically the appeal is a continuation of the suit
itself.

2. Suit must not be collusive (Collusion- MiliBhagat between Plaintiff &

Defendant) a collusive suit is a suit with a malafide intentions. So where
in a suit either the Ps or Ds are in collusion with each other with an intent
to defraud the court or the other parties it would be called as collusive
suit.

A collusive suit is like a conspiracy or a pre-arranged plan sometimes

either to extort some money or to unnecessary harass the other party. So
in such a situation where the court concludes that it was collusive suit
Section 52 would not apply and the property is free to be transferred.

So for example:- If there was a self-acquired property of a person who dies

leaving behind 2 sons than these 2 sons would have the power to sell the
property being class I heirs. When they were planning to sell the property
their uncles filed a suit impleading then as a Def. 2 + 3 and themselves
being P & D no. 1.
The D no. 1 i.e. one of the uncles filed WS admitting that it is an ancestral
property and not a self-acquired property. But, if upon evidence it is clearly
proved that the question of the nature or property had been already been
decided then it would be a collusive suit and section 52 would not apply.

3. Rights in an immovable property should be involved Section 52 only

applies if the rights in an immovable property are involved.
If the matter pertains to movable properties than Section 52 would not
apply. So a suit a partition, suit on mortgage, presumption, easements etc.
have been considered to be suit involving rights in an immovable property.

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 4. The transfer should be made by the parties to the suit it is only the parties
involved in a suit upon whom this principle would apply and the persons
who are not the parties to the suits are not governed by Section 52.
The parties here means the contesting parties so if any person has been
deleted from the array of parties then upon him Lis pendens would not
apply.

In the case of Maqbool Alam Khan v. Khodaija AIR 1966 SC 1194 there
was a party to the suit whose name was deleted (striking O 1R10) as a
contesting party & thereafter the transfer was made by him. It was held
that lis pendens would not apply.

In the case of Thomson Press vs Nanak Builders 2013 (5) SCC 397
It was held that the Section 52 Lis Pendens does not make the transfer
void but only renders it subservient to the decision of the case.

Fraudulent Transfers

Section 53 of TPA lays down about transfer which have been made to defeat or
delay the creditors. So in simple sense if there is a bogus or sham transactions
with an intention to defraud the creditors or to defeat their decree such transfers
would be called as fraudulent transfers.

Essential Conditions of Section 53

1. Transfer to Immovable Property

There must have been a transfer of an immovable property and the transfer
here would mean transfers as per section 5. Where the transfer in itself
VOID Section 53 would have no application because if the transfer is void
the property still remains with the debtor and the creditors can still recover
the money.

2. Intention to Commit Fraud

The transfers so made shall be with the intent that the creditors are not
able to recover their money from the debtor. In other words the sole object
would be defeating the interest of the creditors rather to give the property
to the transferee honestly.
The section uses the word creditor but this word includes all the creditors’
i.e. even if the suit is filed by one creditor only it would deemed to have
been instituted on behalf of all for the benefit of all.

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 3. It is voidable not Void
The transfers made for the purpose of defeating the creditors is a valid
transfer untill the creditors exercise their option of making the contract
void.

There are certain exception to this rules:-

(a) A bonafide transfers: if any person purchases such property but is
buying the property in good faith and for consideration and if he proves
as such in the court than the transfer would be valid ab initio and not
voidable.

(b) Laws relating to insolvency: Insolvency means where the person is not
having the capacity to pay off the entire debts or where the liability is
more than the assets.
Sometimes under insolvency laws some preference are given to certain
creditors & if a transfer is made to such creditors it would not amount
to a fraudulent transfer under section 53.

Section 53(2) also lays down that the gratuitous transfer can also be
made voidable if it is with an intent to avoid the subsequent transfers.
So if A makes a gift to B in the month of April and also transfer it for
money to C in the month of May. Than the question is who would
become the owner of the property B or C.
In such a situation if it is proved that the 1st transfer is fraudulent than
the subsequent transfer shall prevail & the 1st would be voidable.

Election

Section 35 incorporates the principle of election which is simple words would

means choosing between 2 alternative rights.

So where by an instruments 2 rights have been conferred in such a manner that

one right is in lieu of some another right than the person is bound to choose or
select any one of the rights under the instrument & this right of choosing
between 2 rights is called as a right of election.

So where a person A gives Rs. 1000 to B but transfers the house belonging to B,
to C than here B would be put to election either to choose Rs. 1000 or he can
retain the property transferred by A to C. This doctrine is based on equitable
doctrine that no one can approbate or reprobate at the sometime which means

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that if there is a benefit under the instrument and also a burden or a liability
than if the person has taken the benefit, he must also bear the liability.

So in the above example if B accepts Rs. 1000 he has to forgo the property. But
if he accepts the property he would have no right on Rs. 1000.

Exception to the Rule

As a general rule when the person elects or chooses one right he has to return
the benefit which he has received before the election, obviously for which he has
no right.

So in the above example if B wants to keep the land and elects to keep the land
obviously he has to return Rs. 1000. But if the election is taking or if there is a
reasonable time within which election should take place + B is exercising the
right within the time than he has to Rs. 1000 only. But if it goes beyond he has
to pay the interest also.

But the exception to this section explains something more. According to the
exception the person is only bound to return the benefit in lieu of the other right
but he is not bound to return any other benefit in the same transaction which is
apart from election and it is not in lieu of the right.

So for ex:- in a example A had a marriage settlement with wife upon which she
was given a life interest / estate. But thereafter by a will A give Rs. 200 per
annum to wife in lieu of her life interest. A also transfered the same to the son.
A part from this Rs. 200 he also gave the wife a legacy of Rs. 1000.

In this example the women would be put to election either to keep the life interest
or Rs. 200 per annum. If she keeps the life interest she will lose Rs. 200 or if she
accepts Rs. 200 she will lose the life interest.

But in every case she does not have to return Rs. 1000 as it is the ‘another
benefit’ conferred by the same transaction.

Time Period of Election

As a general rule there is a reasonable time of election but if the reasonable time
has expired the circumstances can still denote that the election has taken place.
So where there is an acceptance of the benefit or enjoyment of the benefit by the
owner it can be infered that there has been election but this acceptance has to
be seen in a facts & circumstances of each case.

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But if the enjoyment is there for a continuous period of 2 years it can be
presumed that there is an election in favour of the transfer.

But even after 1 year if there has been no election the transfers may require the
person to make a election and after a reasonable time till there is no election it
shall be deemed that there has been a election to confirm the transfer.

If there is a disability we need to wait till the disability cases.

In case if the election does not allow the transfer to take place than there would
be a case of disappointed transferee.

Section 35itself lays down that what are the rights of disappointed transferee. So
in case of gift if the transfers dies before election or in case of a transfer for
considerate the disappointed transferee would be entitle to the loss which has
resulted into no transfer of property in his favour.

So if in the illustration in bare act if the owner of the farm does not accepts Rs.
1000 & certain the form the disappointed transferee should receive the amount
which would be equal to the loss or which is equal to the value of the property
which right have been received by him.

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