LEELA AGRAWALversusSARKAR & ANR.

                   [2024] 11 S.C.R. 1130 : 2024 INSC 946

                                  Leela Agrawal
                                        v.
                                  Sarkar & Anr.
                    (Civil Appeal No(s).12538-12539 of 2024)
                                 19 November 2024
               [Vikram Nath* and Prasanna B. Varale, JJ.]


                               Issue for Consideration
          Whether the mortgage deed dated 17.10.1990 constitutes a
          mortgage by conditional sale under Section 58(c) of the Transfer
          of Property Act, 1882 and whether the plaintiff is entitled to redeem
          the mortgage.

                                     Headnotes†
          Transfer of Property Act, 1882 – s.58(c) – Mortgage by
          conditional sale – The dispute centers around a piece of land
          and the plaintiff-respondent is the undisputed owner of this
          land – In 1990, the plaintiff in need of funds approached the
          defendant-appellant and mortgaged the suit land – In pursuant
          thereto, a mortgage deed dated 17.10.1990 was executed and
          registered – It was orally agreed that plaintiff could redeem the
          mortgage within three years – Thereafter, in 1993, the plaintiff
          attempted to redeem the mortgage – However, the defendant
          refused to accept the payment, asserting that, according to the
          terms of the mortgage deed, the mortgage had transformed
          into an absolute sale due to the plaintiff's failure to repay the
          amount within the stipulated time – Correctness:
          Held: The ingredients of a mortgage by conditional sale u/s.58(c)
          of the Act are as follows: (i) The mortgagor ostensibly sells the
          mortgaged property to the mortgagee – (ii) Such ostensible sale
          is subject to any one of the following conditions: On default of
          payment of the mortgage money on a certain date, the sale shall
          become absolute; or on payment of the mortgage-money on a
          certain date, the sale shall become void; or on payment of the
          mortgage-money on a certain date, the buyer shall re-transfer
          the property to the seller – (iii) The condition should be embodied


*Author
[2024] 11 S.C.R.                                                           1131

                      Leela Agrawal v. Sarkar & Anr.


     in the same document which effects or purports to effect the
     sale – In the instant case, the mortgage deed indicates that the
     mortgagor agreed to mortgage her land to the mortgagee for
     a sum of ₹75,000 due to personal financial needs, so the first
     condition i.e. Ostensible Sale of the Property is satisfied – The
     mortgage deed contains explicit condition that upon default in
     payment within the stipulated period, the sale would become
     absolute, satisfying the second ingredient under the first condition
     specified in s.58(c) of the Act that on default of payment on a
     certain date, the sale shall become absolute – As far as the
     last ingredient is concerned, as required under the proviso of
     s.58(c), the condition regarding the conversion of the mortgage
     into an absolute sale upon default is embodied within the same
     document i.e., the mortgage deed dated 17.10.1990 – This is
     evident from the clauses of the mortgage deed – Therefore, it
     can be concluded that all the essential ingredients of a mortgage
     by conditional sale u/s.58(c) of the Act are satisfied in the
     present case as there was an ostensible sale of the property by
     the mortgagor to the mortgagee and the sale was conditional,
     stipulating that upon default of payment within three years, the
     sale would become absolute as well as that the condition was
     embodied in the same document, i.e. the mortgage deed, that
     effected the transaction – Also, the permissive possession by the
     plaintiff in the present case does not alter the character of the
     transaction – The mortgage deed dated 17.10.1990 constitutes a
     mortgage by conditional sale u/s.58(c) of the Act – The condition
     converting the mortgage into an absolute sale upon default is
     valid and enforceable. [Paras 14, 15, 16, 17, 18, 21, 26]

                                List of Acts
     Chhattisgarh Land Revenue Code, 1959; Transfer of Property Act,
     1882; Specific Relief Act, 1963.

                             List of Keywords
     Mortgage Deed; Mortgage by Conditional Sale; Ostensible Sale;
     Redemption; Clog on Equity of Redemption; Mortgagor; Mortgagee;
     Permissive Possession; Intention of Parties; Default of Payment;
     Absolute Sale; Re-transfer; Mortgage-Money; Nature of Possession;
     Terms of the Mortgage Deed.
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                            Case Arising From
     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 12538-12539
     of 2024
     From the Judgment and Order dated 06.09.2018 and 30.01.2019
     of the High Court of Chhattisgarh at Bilaspur in FA No. 28 of 2004
     and REVP No. 222 of 2018 respectively

                         Appearances for Parties
     V. Chitambaresh, Sr. Adv., Kaustubh Shukla, Advs. for the Appellant.
     C.B. Gururaj, Prakash Ranjan Nayak, Animesh Dubey, Apoorv
     Nautiyal, Arjun D. Singh, Ms. Ankita Sharma, Advs. for the
     Respondents.

                Judgment / Order of the Supreme Court

                                 Judgment

     Vikram Nath, J.

1.   Leave granted.
2.   These appeals challenge the judgment and order dated 06.09.2018
     passed by the High Court of Chhattisgarh at Bilaspur in First
     Appeal No. 28 of 2004, as well as the subsequent order dated
     30.01.2019 in Review Petition No. 222 of 2018. The High Court
     dismissed both the appeal and the review petition filed by the
     appellant (defendant), thereby affirming the decree passed by the
     Additional District Judge, Manendragarh, District Korea, in Civil
     Suit No. 26-A/2001.
3.   For clarity, the parties will be referred to by their original status in
     the suit. The appellant will be referred to as the defendant, and the
     respondent as the plaintiff.
4.   The factual matrix leading to the present appeal is as follows:
     4.1 The dispute centers around a piece of agricultural land
         measuring 2 acres, bearing Khasra No. 202/7, situated in Patwari
         Halka No. 10, Manendragarh, near Hansiya River, Ward No. 1
         (hereinafter referred to as “the suit land”). The plaintiff is the
         undisputed owner of this land.
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                     Leela Agrawal v. Sarkar & Anr.


     4.2 In 1990, the plaintiff, in need of funds, approached the defendant
         and mortgaged the suit land for a sum of ₹75,000. A mortgage
         deed was executed and registered on 17.10.1990.
     4.3 The plaintiff contends that it was orally agreed that she could
         redeem the mortgage within three years by repaying a total
         sum of ₹1,20,000, which included the principal amount, interest,
         and expenses. She remained in possession of the suit land
         throughout this period.
     4.4 In 1993, the plaintiff attempted to redeem the mortgage by
         offering ₹1,20,000 to the defendant. However, the defendant
         refused to accept the payment, asserting that, according to the
         terms of the mortgage deed, the mortgage had transformed
         into an absolute sale due to the plaintiff’s failure to repay the
         amount within the stipulated time.
     4.5 Aggrieved by the defendant’s refusal, the plaintiff filed Civil Suit
         No. 26-A/2001 before the Court of Additional District Judge,
         Manendragarh, seeking redemption of the mortgage and a
         declaration that the defendant’s claim of ownership was invalid.
     4.6 The defendant contested the suit, asserting that the mortgage
         deed contained a condition converting it into a sale deed upon
         default and that the plaintiff had failed to repay the amount within
         three years. The defendant maintained that she had become
         the rightful owner of the suit land.
     4.7 After considering the evidence and hearing both parties, the Trial
         Court decreed the suit in favor of the plaintiff on 14.11.2003.
         The court held that the condition converting the mortgage into
         a sale was a clog on the equity of redemption and allowed the
         plaintiff to redeem the mortgage by paying ₹1,20,000 to the
         defendant. This amount has been deposited by the plaintiff with
         the Trial Court and is lying in deposit as such.
     4.8 Aggrieved by the Trial Court’s judgment, the defendant
         filed First Appeal No. 28 of 2004 before the High Court of
         Chhattisgarh at Bilaspur. The High Court, by its judgment
         dated 06.09.2018, dismissed the appeal and affirmed the
         Trial Court’s decision.
     4.9 The defendant subsequently filed Review Petition No. 222 of 2018
         before the High Court, challenging the dismissal of her appeal.
         The High Court dismissed the review petition on 30.01.2019.
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5.    Being aggrieved with the judgments of the High Court in both the
      appeal and the review petition, the defendant has preferred the
      present appeal before this Court.

      Arguments for the Defendant (Appellant)
6.    Learned counsel for the defendant contends that the courts below
      erred in holding that the mortgage deed dated 17.10.1990 was a
      simple mortgage under Section 58(b) of the Transfer of Property Act,
      1882.1 It is submitted that the mortgage deed was, in fact, a mortgage
      by conditional sale as per Section 58(c) of the Act, containing a clear
      stipulation that if the plaintiff failed to repay the mortgage amount along
      with interest within three years, the mortgage would automatically
      convert into an absolute sale in favour of the defendant.
7.    It is further argued that the plaintiff failed to tender the amount within
      the agreed period of three years, and therefore, the defendant lawfully
      became the owner of the suit land. It is emphasized that the terms of
      the registered mortgage deed were fully explained to the plaintiff, and
      there is no credible evidence to suggest otherwise. Furthermore, it is
      submitted that the plaintiff did not personally appear in the witness
      box to substantiate her claims. Instead, her husband, acting as her
      power of attorney holder, deposed on her behalf.
8.    The learned counsel also contends that Section 165 of the
      Chhattisgarh Land Revenue Code, 1959,2 does not apply to the
      present case. It is argued that the suit land is not agricultural land,
      as residential structures have been constructed on it, and therefore,
      the restrictions under Section 165 of the Code are inapplicable.
9.    Lastly, it is submitted that the plaintiff failed to seek the consequential
      relief of possession in her suit. As per Section 34 of the Specific Relief
      Act, 1963, a suit for declaration without seeking consequential relief
      is not maintainable, and thus, the suit ought to have been dismissed
      on this ground alone.

      Arguments for the Plaintiff (Respondent)
10. Opposing the appeal, learned counsel for the plaintiff supports
    the concurrent findings of the Trial Court and the High Court. It is



1    In short, ‘the Act’
2    In short, ‘the Code’
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                      Leela Agrawal v. Sarkar & Anr.


     argued that the mortgage was a simple mortgage, and the condition
     purporting to convert it into an absolute sale upon default is a clog
     on the equity of redemption and is void. It is argued that the plaintiff
     remained in possession of the suit land throughout, cultivating it
     continuously, which indicates that the transaction was not a mortgage
     by conditional sale. The exorbitant interest rate of 4% per month is
     unconscionable and supports the plaintiff’s contention that the terms
     were oppressive.
11. It is further argued that the plaintiff’s husband, who deposed on her
    behalf, had personal knowledge of the transaction and was competent
    to testify. The evidence provided by him is credible and sufficient to
    support the plaintiff’s case.
12. Regarding Section 165 of the Code, it is contended that the provision
    applies, rendering the mortgage invalid since the plaintiff was left
    with less than 10 acres of un-irrigated land after the mortgage.

     Analysis
13. The central issue for determination is whether the mortgage deed
    dated 17.10.1990 constitutes a mortgage by conditional sale under
    Section 58(c) of the Act, and whether the plaintiff is entitled to redeem
    the mortgage. To address this issue, it is pertinent to examine the
    provisions of Section 58(c) of the Act, which has been reproduced
    hereunder:
          “Section 58(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:
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           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 affect the sale.”
14. On a bare reading of this provision, it can be deduced that the
    ingredients of a mortgage by conditional sale under Section 58(c)
    of the Act are as follows:
    (i)    The mortgagor ostensibly sells the mortgaged property to the
           mortgagee.
    (ii)   Such ostensible sale is subject to any one of the following
           conditions:
           •    On default of payment of the mortgage-money on a certain
                date, the sale shall become absolute; or
           •    On payment of the mortgage-money on a certain date,
                the sale shall become void; or
           •    On payment of the mortgage-money on a certain date, the
                buyer shall retransfer the property to the seller.
    (iii) The condition should be embodied in the same document which
          effects or purports to effect the sale.
    We shall now examine whether these ingredients are satisfied in the
    present case by analyzing the terms of the mortgage deed dated
    17.10.1990.

15. (i) Ostensible Sale of the Property
    The mortgage deed indicates that the mortgagor agreed to mortgage
    her land to the mortgagee for a sum of ₹75,000 due to personal
    financial needs. Clause 1 of the mortgage deed is reproduced
    hereunder:
           “1. That the mortgagor is the owner of the above land. The
           above land is mortgaged for a sum of Rs. 75,000 (seventy-
           five thousand). From today onwards possession of the
           above land will remain with the mortgagee with conditions
           purchaser. The above land prior to this has neither been
           mortgaged nor sold to anybody else. Mortgagee with
           condition purchaser can use this land from today onwards.
           Entire money is received in cash.”
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                     Leela Agrawal v. Sarkar & Anr.


     The use of the term “mortgage with condition to sell” and references
     to the mortgagee as “mortgagee with condition purchaser” indicate
     that the mortgagor ostensibly sold the property to the mortgagee,
     satisfying the first ingredient.

16. (ii) Condition Attached to the Ostensible Sale
     The mortgage deed contains explicit conditions further in clause 1
     that align with this condition:
          “1……..
          The above land has been mortgaged for a period of three
          years. If the mortgagor returns the above money along
          with interest within three years to the mortgagee, then
          the mortgagee and her legal heirs will return back the
          possession of the mortgaged land to the mortgagor.”
          “If the mortgagor fails to return back the said money within
          a period of three years from the date of execution of this
          document, then the present mortgage deed will be treated
          as sale deed. Then the mortgagor and her legal heirs will
          have no right to claim their possession over the said land
          from the mortgagee. That after the expiry of the said period
          of mortgage, the mortgagee will herself become the owner
          of said land and the right of mortgagor to get release her
          land will automatically close.”
     This establishes that upon default in payment within the stipulated
     period, the sale would become absolute, satisfying the second
     ingredient under the first condition specified in Section 58(c) of
     the Act that on default of payment on a certain date, the sale shall
     become absolute.

17. (iii) Condition Embodied in the Same Document
     As required under the proviso of Section 58(c), the condition regarding
     the conversion of the mortgage into an absolute sale upon default is
     embodied within the same document i.e., the mortgage deed dated
     17.10.1990. This is evident from the clauses cited above and further
     reinforced by Clause 6 and 7 of the mortgage deed as follows:
          “6. That the right of foreclosure of mortgagor will
          automatically close after 3 years of registration of this
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          document and will have no right of getting released this land
          and shall be debarred from the proceedings of releasing
          the said land.”
          “7. That the expenses towards execution of this document
          will be borne by the mortgagor and after completion of the
          said period if the mortgagor with condition seller fails to
          repay the principal amount along with interest then this
          document will be treated as Sale Deed and the mortgagor
          with condition seller will have the right to demand the money
          towards expenses of this document from the mortgagee
          but the mortgagor will have no right to: claim interest on
          this amount.”
     The inclusion of the condition within the same document satisfies
     the third essential ingredient as mandated by the proviso to Section
     58(c) of the Act.
18. Therefore, it can be concluded that all the essential ingredients of
    a mortgage by conditional sale under Section 58(c) of the Act are
    satisfied in the present case as there was an ostensible sale of
    the property by the mortgagor to the mortgagee and the sale was
    conditional, stipulating that upon default of payment within three
    years, the sale would become absolute as well as that the condition
    was embodied in the same document, i.e. the mortgage deed, that
    effected the transaction.
19. At this juncture, we must address that the Trial Court and the High
    Court placed significant emphasis on the fact that the plaintiff remained
    in possession of the suit land after the execution of the mortgage
    deed. They inferred that since possession was not delivered to the
    defendant, the transaction could not be a mortgage by conditional
    sale but was instead a simple mortgage. However, this conclusion
    overlooks critical aspects of the evidence and the nature of the
    possession in the present case. It is an admitted position by both
    parties that the plaintiff (mortgagor) remained in possession of the suit
    land after the execution of the mortgage deed. Importantly however,
    the nature of this possession was permissive and for the purpose of
    safeguarding the property. This is also evident from the testimony of
    the defendant-DW1, Vijay Kumar Khedia, who stated in his deposition:
          “After the documentation, Sarkar gave the possession of
          the land to my sister. Later on, Sarkar said that they will
[2024] 11 S.C.R.                                                         1139

                     Leela Agrawal v. Sarkar & Anr.


          guard the land, so they will be allowed to live there.” Here,
          “Sarkar” refers to the plaintiff and her husband, and “my
          sister” refers to the defendant.
20. The permissive possession granted by the defendant to the plaintiff
    was a practical arrangement, given that the plaintiff was already
    residing on the land. This arrangement does not confer any additional
    rights upon the plaintiff beyond those specified in the mortgage
    deed. The Trial Court and the High Court erred in concluding that
    the continuous possession of the plaintiff negated the possibility of
    the transaction being a mortgage by conditional sale. The key factors
    that need to be considered are:
     •    Nature of Possession: The possession was permissive and
          at the discretion of the defendant. It was not an indication of
          ownership or an absolute right but was granted to safeguard
          the property.
     •    Intention of the Parties: The intention, as explicitly stated in
          the mortgage deed and corroborated by DW1’s testimony, was
          that the property would become the absolute property of the
          defendant upon default of payment within the stipulated period.
     •    Terms of the Mortgage Deed: The mortgage deed allowed
          the defendant to use the land and specified that the right of
          the mortgagor to reclaim the property would be extinguished
          upon default.
21. The permissive possession by the plaintiff in the present case
    does not alter the character of the transaction. Allowing the plaintiff
    to remain on the land was a matter of convenience and does not
    affect the rights and obligations established by the mortgage deed.
    It is also pertinent to note that permitting the plaintiff to enjoy both
    the possession of the property and the benefit of the ₹75,000
    received from the defendant, without fulfilling her obligations under
    the mortgage agreement, would result in unjust enrichment at the
    expense of the defendant. Therefore, the courts below erred in relying
    heavily on the aspect of possession to conclude that the transaction
    was a simple mortgage.
22. It should also be noted that the plaintiff failed to repay the mortgage
    amount along with the agreed interest within the stipulated period
    of three years. There is no credible evidence to suggest that she
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     attempted to tender the amount within the time frame. Her assertion
     that the defendant refused to accept repayment is unsubstantiated.
23. It is to be also considered that the plaintiff did not enter the witness
    box to testify regarding her claims, including her understanding of
    the mortgage deed and the alleged refusal by the defendant to
    accept repayment. Her husband, acting as her power of attorney
    holder, deposed on her behalf. However, matters within the personal
    knowledge of the plaintiff could not be adequately addressed by her
    husband.
24. The plaintiff also contends that the mortgage is invalid under Section
    165(2) of the Code, which restricts the transfer of agricultural land by
    a Bhumiswami if less than 10 acres of unencumbered un-irrigated
    land would remain with the transferor. However, the defendant
    asserts that the suit land is not agricultural land, as residential
    structures have been constructed on it. This is supported by the
    testimony of DW-1. The plaintiff failed to provide concrete evidence,
    such as revenue records or land use certificates, to establish the
    agricultural nature of the land or to demonstrate that she was left
    with less than 10 acres of unencumbered un-irrigated land after
    the transaction.
25. In the absence of clear evidence, the applicability of Section 165
    of the 1959 Code cannot be presumed. Moreover, even if the
    provision were applicable, it would render the transaction voidable
    at the instance of the State or the affected party. Neither the State
    has challenged the transaction, nor did the plaintiff seek to have the
    mortgage declared void on this ground at the earliest opportunity.
26. In light of the observations and findings made, we find that the mortgage
    deed dated 17.10.1990 constitutes a mortgage by conditional sale
    under Section 58(c) of the Act. The condition converting the mortgage
    into an absolute sale upon default is valid and enforceable. The
    plaintiff failed to repay the mortgage amount within the stipulated
    period and did not provide credible evidence of any attempt to do
    so. Moreover, the plaintiff’s failure to testify personally undermines
    her case. It is also observed that the applicability of Section 165 of
    the Code is not established
27. The Trial Court and the High Court erred in disregarding the express
    terms of the registered mortgage deed and in holding that the
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                        Leela Agrawal v. Sarkar & Anr.


     condition was a clog on the equity of redemption without sufficient
     basis. The permissive possession of the suit land by the plaintiff does
     not negate the nature of the transaction. The conditions stipulated
     in the mortgage deed fulfil all statutory requirements of mortgage
     by conditional sale, and the intention of the parties regarding the
     same was clear and unambiguous. The Trial Court and the High
     Court erred in their interpretation by placing undue emphasis on
     possession without considering its permissive nature and the explicit
     terms of the mortgage deed.
28. Only as a caution, we may record here that the plaintiff’s possession
    being admitted to the defendant right from the time of the mortgage
    and having continued throughout even till the time of filing the suit
    and even thereafter it would be open for the defendant to pursue
    appropriate remedy seeking possession in accordance to law.
29. The appeals are allowed and the suit filed by the plaintiff is dismissed.
    The judgments and decree passed by the High Court of Chhattisgarh
    at Bilaspur in First Appeal No. 28 of 2004 and Review Petition No.
    222 of 2018, as well as the judgment and decree passed by the
    Additional District Judge, Manendragarh, District Korea, in Civil Suit
    No. 26-A/2001, are set aside and the suit is dismissed.
30. The Trial Court is directed to refund the entire amount deposited by
    the plaintiff, along with accrued interest on the amount in the fixed
    deposit since the date of deposit.
31. There shall be no order as to costs.

     Result of the case: Appeals allowed.



     †
         Headnotes prepared by: Ankit Gyan