2024 INSC 946

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 12538-12539 OF 2024
(@ SLP (CIVIL) Nos.7940-7941 OF 2019)
LEELA AGRAWAL …APPELLANT
VERSUS
SARKAR & ANR. ...RESPONDENTS
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
Signature Not Verified

Digitally signed by
NEETU KHAJURIA
Date: 2024.12.09
original status in the suit. The appellant will be
19:01:39 IST
Reason:

SLP (CIVIL) No.7940-7941 OF 2019 1

 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.
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.

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 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.

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 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.

SLP (CIVIL) No.7940-7941 OF 2019 4

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, 18821. 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

1
In short, ‘the Act’

SLP (CIVIL) No.7940-7941 OF 2019 5

 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,
19592, 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.

2
In short, ‘the Code’

SLP (CIVIL) No.7940-7941 OF 2019 6

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 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

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 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

SLP (CIVIL) No.7940-7941 OF 2019 8

 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 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

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 • 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

SLP (CIVIL) No.7940-7941 OF 2019 10

 anybody else. Mortgagee with condition
purchaser can use this land from today
onwards. Entire money is received in
cash."
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

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 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

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 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 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

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 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

SLP (CIVIL) No.7940-7941 OF 2019 14

 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 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

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 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

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 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 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

SLP (CIVIL) No.7940-7941 OF 2019 17

 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

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 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 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,

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 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.

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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.

……………………………J.
(VIKRAM NATH)

……………………………J.
(PRASANNA B. VARALE)
NEW DELHI
NOVEMBER 19, 2024

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