Once a Mortgage, Always a Mortgage — The Right of Redemption Cannot Be Defeated by Labeling the Transaction as Sale: Madhya Pradesh High Court

“It is very surprising that on the one hand, land measuring 4.95 acres was sold for ₹10,000, and on the other hand, 1.60 acres fetched ₹11,000 — strongly indicative of mortgage and not absolute sale” - Madhya Pradesh High Court reversed concurrent findings of the courts below and declared that the transaction recorded through the document dated 17.03.1969, titled as Shartiya Farokhtnama, was nothing but a mortgage by conditional sale within the meaning of Section 58(c) of the Transfer of Property Act, and not an absolute sale.

Justice Prem Narayan Singh emphatically held — “Both the Courts below have erred in holding that the document Ex.P/1 is an absolute sale deed… The contents of Ex.P/1 which is in dispute are totally different from Ex.P/6, Ex.D/34 and Ex.D/35, which are absolute sale deeds.”

This ruling restored the mortgagor's right to redemption, which the Court held had been improperly denied.

The Court categorically stated: “It is clearly stipulated in the deed that if the executant repays the entire consideration by 17.03.1974, the purchaser would reconvey the property and deliver possession thereof.”

Further observing the comparative land transactions, the Court remarked:

“It is very surprising that on the one hand, the land measuring 4.95 acres was sold for ₹10,000 and on the other hand, the respondent paid ₹11,000 for just 1.60 acres. Such disparity points towards a mortgage transaction.”

The case revolved around the appellant, Gopal Krishna, who sought redemption of the mortgaged property on the strength of the document Ex.P/1. According to the appellant, the property was mortgaged by his father Shivnarayan through a Shartiya Farokhtnama (conditional sale) for five years in 1969. After the stipulated five years, the appellant attempted to redeem the mortgage, but the respondents denied the existence of any mortgage and claimed absolute ownership.

The trial court and the first appellate court both rejected the appellant’s case, erroneously treating the transaction as an absolute sale, dismissing the suit on the grounds of limitation and non-joinder of necessary parties.

On the issue whether the transaction was an outright sale or a mortgage, the Court observed: “The transaction, however, categorically stated that the plaintiff is entitled to divert the use of agriculture at the expense of the seller. If the intention of the parties was to transfer the suit property absolutely, no such stipulation was required to be made at all.”

Referring to Section 58(c) of the Transfer of Property Act, the Court clarified: “Where the mortgagor ostensibly sells the mortgaged property with a condition to reconvey, it is deemed to be a mortgage by conditional sale.”

On the limitation question, the Court ruled: “Since the suit was filed in 2002, well within 30 years from the date of expiry of the mortgage period, the suit is clearly within limitation as per Article 61(a) of the Limitation Act, 1963.”

On the question of non-joinder of parties, the Court applied Hindu law principles and held: “The appellant, being the Karta of Hindu Undivided Family, is alone competent to sue on behalf of other heirs of the mortgagor. No brother of the appellant has ever raised objection in this regard.”

Justice Prem Narayan Singh placed strong reliance on the Supreme Court's formulation in Indira Kaur vs. Sheo Lal Kapoor, AIR 1988 SC 1074, reiterating: “There is an increasing tendency in recent years to enter into such transactions in order to deprive the debtor of his right of redemption within the prescribed period of limitation.”

Quoting from Setheth Ganga Dhar vs. Shankar Lal, AIR 1998 SC 770, the Court emphasized: “The rule against clogs on the equity of redemption is that a mortgage shall always be redeemable and a mortgagor’s right to redeem shall neither be taken away nor be limited by any contract between the parties.”

The High Court decisively overturned both the lower courts’ judgments and decreed the suit in favor of the appellant:

“Document Ex.P/1 is definitely a mortgage deed; it cannot be treated as absolute sale deed. The appellant is entitled to a decree of redemption of suit properties.”

The Court directed the respondents to reconvey the property to the appellant on repayment of ₹11,000 within the stipulated period, reaffirming the core principle — “Once a mortgage, always a mortgage.”

Date of Decision: 26 March 2025