Question

A executes a document in favour of B stating, "I hereby sell my house to B for ₹5,00,000. If I repay the amount within 3 years, B shall retransfer the property to me; otherwise, the sale shall become absolute." The condition is included in the same document. A fails to repay within 3 years. B claims absolute ownership. Examine the correct legal position under the Transfer of Property Act, 1882:

• A. It is a mortgage by conditional sale; B must seek foreclosure through court.
• B. It is a lease with an option to repurchase.
• C. The transaction is void for uncertainty.
• D. It is an outright sale; B becomes absolute owner automatically.

Hint:

For mortgage by conditional sale questions, always check whether the condition and sale are contained in the same document. If yes, Section 58(c) usually applies.

Answer 1

The Correct Option is A

Concept: Section 58(c) of the Transfer of Property Act, 1882 defines a Mortgage by Conditional Sale. Where an ostensible sale is accompanied by a condition that the property shall be re-transferred upon repayment of the money, and such condition is embodied in the same document, the transaction is generally treated as a mortgage and not as an absolute sale.

Step 1: Examine the nature of the document.
* A transferred the property to B for ₹5,00,000. * The same document provides that if A repays the amount within 3 years, B must re-transfer the property. * The condition and the sale are contained in a single instrument.

Step 2: Apply Section 58(c).
* The proviso to Section 58(c) states that where the condition is incorporated in the same document, the transaction is presumed to be a mortgage by conditional sale. * Therefore, B is not treated as the absolute owner merely because the repayment period expired.

Step 3: Legal consequence.
* To extinguish A's right of redemption, B must obtain a decree for foreclosure from a competent court. * Until such foreclosure, the mortgagor's right of redemption continues.

Same document + condition of re-transfer = Mortgage by Conditional Sale under Section 58(c).

Answer 2

Section 58(c) of the Transfer of Property Act, 1882 turns an ostensible sale into a mortgage by conditional sale whenever the sale deed and the condition of retransfer on repayment are contained in the same document. Testing each option against this same-document rule, and against what happens once the repayment period lapses, identifies the right answer.

1. It is a mortgage by conditional sale; B must seek foreclosure through court: The sale to B and the condition allowing A to get the house back on repayment within three years are written into one single document, exactly the fact pattern the proviso to Section 58(c) treats as a mortgage by conditional sale rather than an outright sale. Because it is a mortgage, A's right to redeem survives the missed deadline, and B can only extinguish that right by obtaining a decree of foreclosure from a court. This option correctly applies both parts of the rule.
2. It is a lease with an option to repurchase: Nothing in the facts describes periodic rent, possession for a term, or any feature of a lease; the document transfers ownership for a price with a condition of retransfer, which is the language of sale and mortgage, not tenancy, so this option mischaracterises the transaction.
3. The transaction is void for uncertainty: The document is clear on price, parties, the repayment period, and the consequence of default, none of which is left uncertain; Section 58(c) exists precisely to give legal effect to transactions drafted exactly this way, so there is no uncertainty that would void it.
4. It is an outright sale; B becomes absolute owner automatically: This would be correct only if the retransfer condition were in a separate document from the sale deed, since the proviso to Section 58(c) treats a same-document condition differently, this option ignores the same-document requirement that governs the classification.

Since the sale and the condition of retransfer sit in one document, the transaction is a mortgage by conditional sale, and B needs a court decree of foreclosure to become absolute owner.

Hence, the correct answer is It is a mortgage by conditional sale; B must seek foreclosure through court.