Dismissed

Birendra Kumar Singh and Ors. v. Sri Satya Narayan Yadav

Patna HC6 Feb 2013SA/257/2010

Case brief

AI extract

What is this about?

The Patna High Court dismissed the appeal. The court held that a mortgage by conditional sale requires a foreclosure decree under Section 67 of the Transfer of Property Act to extinguish the right to redeem. Since the appellants claimed title without seeking such a decree, the suit was liable to be dismissed.

What did the court decide?

The appeal was dismissed, upholding the First Appellate Court's decision to set aside the trial court's judgment.

Birendra Kumar Singh and Ors. Vs Sri Satya Narayan Yadav — Property and Title | Patna HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT PATNA Second Appeal No.257 of 2010

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1.Birendra Kumar Singh

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Saraveshwar Prasad Singh

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Rajesh Singh @ Karo Pd. Singh

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Maneshwar Pd. Singh alias Mankeshwar Pd. Singh

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Jitendra Pd. Singh All sons of Late Kapileshwar Prasad Singh resident of village-Gamail, P.S. Bihariganj District-Madhepura .... .... Appellant/s Versus Sri Satya Narayan Yadav son of late Sumrit Yadav resident of village-Biri Ranpal, P.S. Udakishunganj, District Madhepura .... .... Respondent/s ====================================================== Appearance :

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For the Appellant/s : Mr. Amarnath Jha

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====================================================== CORAM: HONOURABLE MR. JUSTICE CHAKRADHARI SHARAN SINGH ORAL ORDER

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13 06-02-2013

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The appellants herein are aggrieved by the judgment and decree dated 30.5.2001 and 14.6.2001 passed by the learned Additional District Judge-FTC No.II, Madhepura in Title Appeal No. 27 of 2001, whereby he has set aside the judgment and decree passed by the learned Additional Munsif-IVth, Madhepura in Title Suit No. 86 of 1997. The plaintiffs are the appellants before this Court in the present appeal under Section 100 of the Code of Civil Procedure (hereinafter referred to as the Code). The said Title Suit No. 86 of 1997 was filed by the appellants for a declaration of title over the suit land after 30.8.1997 i.e. after expiry of the conditional sale and other consequential relief. The

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plaintiffs’ case before the trial Court was that the respondent/defendant had executed two conditional sale-deeds in his favour (Exts. 1 and 1/A) on 25. 7. 1990 for a consideration money of Rs. 20,000/-. The terms and conditions of conditional sale was that the defendant would pay the consideration money by 30.6. 1997 to the plaintiffs/appellants and thereupon the appellants after making the endorsement on the back of the documents of the conditional sale regarding receiving of the money will return the document of conditional sale to the appellants/plaintiffs. It further stipulated that in case the defendant/respondent failed to repay the consideration money by 30.6.1997 the conditional sale would become absolute sale. It was pleaded by the plaintiffs that they made regular request to the defendant to repay the consideration money but he failed to repay the same by the stipulated date being 30.6.1997 and stopped to give the usufruct of the land to him which gave cause of action and thus the suit was filed by the plaintiffs with the prayer as noted above.

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A written statement was filed on behalf of the defendant/respondent, wherein he admitted that he had executed conditional sale in favour of the plaintiffs/appellants in respect of the suit land but at the same time he took the plea that as per the terms and conditions of the conditional sale, the defendant was

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required to repay the money by 30.6.1997 and if he failed to do it, the conditional sale would become absolute. The defendant/respondent took the plea that the terms and conditions of the conditional sale deeds were that of a mortgage by conditional sale. It was further pleaded by the defendant that before the stipulated date i.e. 30.6.1997, repeated requests were made to the plaintiffs to receive the mortgage money and hand over the conditional sale deeds to him after proper endorsement on its back as agreed upon. But plaintiffs/appellants had covetous eyes over the suit land and on one pretext or the other, did not receive the consideration money. It was further pleaded by the defendant/respondent that the mortgage money had already been redeemed under Section 12 of the Bihar Money Lenders Act, 1974.

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On the basis of the respective pleadings of the parties the learned trial Court framed altogether six issues including issue no.4 which reads as follows:-

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“(iv). Whether the transaction between the plaintiff and the defendant was out and out sale or it was a mortgage?”

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The learned trial Court on the basis of the material available before it held that the transaction through the

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deeds of conditional sale being Exts. 1 and 1/A was mortgage by conditional sale and declared the right title of the plaintiffs/appellants over the suit property on the basis that the conditional sale became absolute sale after 30.6.1997 as the defendant failed to repay the consideration money within the stipulated time.

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An appeal was preferred on behalf of the respondents herein. The learned First appellate Court framed altogether four points for determination in the said Title Appeal No. 27 of 2001. Point Nos.1,2 and 3 as framed by the learned First Appellate Court are as follows:-

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“(i) Whether the suit is barred under section 12 of the Money Lenders Act, 1974 and the whole mortgage money can be treated to be redeemed under Section 12 of the Money Lenders Act, 1974?

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(ii) Whether the transaction between the parties is conditional sale or sale?

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(iii) Whether the plaintiff/respondents got right title over the suit land on the basis of transaction between the parties and the defendant/appellant had no right to redeem the mortgage deeds?”

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Learned First appellate Court held Exts 1 and 1/A, the conditional sale deeds to be out and out a document of mortgage by conditional sale within the meaning of Section 58 (c)of the Transfer of Property Act, 1882. Dealing with the point no.3, learned First appellate Court held that in terms of Section 58 (c)

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of the Transfer of Property Act, 1882 a mortgagee could claim for a decree of foreclosure or for a decree that the property should be sold if the mortgaged money became due to him, before the decree has been made for redemption of mortgage property and the mortgaged money has been paid or deposited. Learned First Appellate Court took note of the fact that the mortgagor had not filed any suit for redemption after a period of seven years but he deposited the mortgage money before the Court through challan and the challan had been deposited in the case records of the Court below. The learned First appellate Court further noted that there was no prayer seeking decree of foreclosure on behalf of the appellants, rather he claimed his right title over the suit land only on the basis of the mortgage deed. The First appellate Court, accordingly, held that the finding of the trial Court as regards issue no.5 was not sustainable and, therefore, set aside the judgment of the trial Court.

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Learned Counsel appearing on behalf of the appellants has vehemently argued that the right to redeem the mortgage continued with the mortgagor before passing of the decree of foreclosure. He has submitted that finding arrived at by learned First appellate Court is a result of mis-construction of the Exts. 1 and 1/A and has wrongly held the documents of mortgage

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to be conditional sale.

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This is not in dispute that as per the terms of transaction between the parties, the mortgagor was required to repay the mortgaged money by 30.6.1997 but he failed to repay the same. This is also not in dispute that as per the contents of Exts. 1 and 1/A the mortgagor intended to sale the mortgaged property on the condition that on default of payment of mortgage money on a certain date the same shall become absolute. Such recital in the document has all the ingredients of mortgage by conditional sale within the meaning of Section 58(c) of the Transfer of Property Act, 1882 which reads as follows:-

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“58 ( c ) Mortgage by conditional sale.- Where the mortgagor ostensibly sells the mortgaged propertyOn condition that on default of payment of the mortgage money on a certain date the sale shall become absolute, or

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on condition that on such payment being made the sale shall become void, or

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On condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called a 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 effect or purports to effect the sale.”

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Section 67 of the Transfer of Property Act, 1882 lays down the rights and liabilities of the mortgagor, according to which, the mortgagee, at any time after mortgage money had become due and before the decree has been made for redemption of the mortgaged property will have a right to obtain from the Court a decree that the mortgagor be absolutely debarred of his right to redeem the property or a decree that the property be sold. In the present case, however, the appellants/plaintiffs did not seek any relief of a decree of foreclosure and he simply claimed the right title over the suit land on the basis of the aforesaid mortgaged deed.

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It is true that mortgagor’s interest in the mortgaged property passes to the mortgagee on the date of the mortgage and is lost on failure to pay on the due date; in a mortgage by conditional sale. But Section 67 of the Transfer of Property Act, 1882 steps in at this point which requires the mortgagee to obtain a decree that mortgagor shall be absolutely debarred of his right to redeem the mortgaged property i.e. a suit of foreclosure. Section 67 of the Transfer of Property Act, 1882 allows the mortgagor a further period of grace as the mortgagee is required to take steps to perfect his title to the mortgaged property

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by instituting a suit of foreclosure.

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In a mortgage by conditional sale, the mortgage itself works out into a sale, i.e. the conditional sale becomes absolute. A mortgagee is therefore, not entitled to seek an order for sale under Section 67 of the Transfer of Property Act, 1882 rather to seek a decree for foreclosure. As in the present case, the appellants did not seek decree for foreclosure, the suit was liable to be dismissed.

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In such view of the matter, I am of the view that learned First appellate Court rightly set aside the judgment of the trial Court, treating Exts. 1 and 1/A to be documents of mortgage by conditional sale within the meaning of Section 58 (c) of the Transfer of Property Act, 1882. Learned First Appellate Court rightly relied on the judgment of the Apex Court reported in 2006(4) PLJR (SC) 55 ( Tulsi and others vs. Chandrika Prasad and others ) which lays down the distinction between the mortgage by way of conditional sale and sale with condition of purchase. Reference may be made to paragraphs 14,15 and 16 of the said judgment which reads as follows:-

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“14. Before we consider the stipulations contained in the deed dated 30.12.1968, it may be noticed that in terms of Section 58( c) of the Transfer of Property Act, a transaction may be held to be a mortgage with conditional sale if it is evidenced by one document. The condition precedent for arriving at a finding that the

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transaction involves mortgage by way of conditional sale is that there must be an ostensible sale, it must contain a condition that on default of payment of mortgage money on 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. 15. 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 latter the transaction does not evidence an arrangement of lending and borrowing and, thus, right to redeem is not reserved thereby.

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16. The proviso appended to Section 58( c) of the Transfer of Property Act was added by Act No. 20 of 1929 for resolution of the conflict in decisions on the question whether 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.”

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In such view of the matter, I do not find any merit in this appeal. The appeal is, accordingly, dismissed.

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(Chakradhari Sharan Singh, J)

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Arun Kumar/-

Birendra Kumar Singh and Ors. v. Sri Satya Narayan Yadav

Case brief

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Birendra Kumar Singh and Ors. v. Sri Satya Narayan Yadav

Case brief

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