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

Courts examining transactions of this kind look past the label sale used in the document and ask what the parties actually intended, to transfer ownership for good, or to use the property as security for money advanced with a right to get it back. Reading the facts through that lens sorts the options quickly.

1. It is a mortgage by conditional sale; B must seek foreclosure through court: A retains a three-year window to repay and get the house back, showing the underlying intention was to secure repayment of five lakh rupees rather than to part with the house forever. Where that intention exists and is captured in the same document as the sale, the law treats the deal as a mortgage, and A's right of redemption cannot be cut off except through a foreclosure decree.
2. It is a lease with an option to repurchase: A lease reflects an intention to grant temporary possession in exchange for rent, not to secure a debt; nothing about periodic payments or possession-for-rent appears here, so this label does not match the parties' evident purpose.
3. The transaction is void for uncertainty: The parties clearly intended a specific, workable arrangement, sale now, repayment option within three years, failing which the sale stands, a common and legally recognised structure, not an uncertain or unworkable one.
4. It is an outright sale; B becomes absolute owner automatically: If the parties truly intended a final sale, there would be no reason to write in a repayment-triggered retransfer clause at all; the presence of that clause is itself evidence against treating the deal as an outright, no-strings sale.

Reading the transaction for its real purpose, security for repayment rather than a final transfer, again points to a mortgage by conditional sale that only a foreclosure decree can convert into absolute ownership.

Answer 2

It helps to compare this document against the two other structures the law recognises for a sale-plus-repurchase arrangement, since the classification changes entirely depending on which structure is actually used.

1. It is a mortgage by conditional sale; B must seek foreclosure through court: Compared to a genuine outright sale (a single, unconditional transfer with no repurchase language) and to a sale coupled with a separate repurchase agreement (two distinct documents), this transaction matches neither. It is one document containing both the sale and the repayment-triggered retransfer condition, exactly the structure the proviso to Section 58(c) earmarks as a mortgage by conditional sale, carrying with it the safeguard that only a court's foreclosure decree can finally cut off A's right to redeem.
2. It is a lease with an option to repurchase: A lease-with-repurchase structure would involve rent for use of the property during the lease term and a separate repurchase right, an entirely different arrangement from a lump-sum sale with a same-document retransfer condition, so this comparison rules the option out.
3. The transaction is void for uncertainty: Compared against genuinely uncertain agreements (missing price, unclear parties, or unresolved terms), this document specifies price, parties, timeline and consequence in full, so it cannot be placed in the void-for-uncertainty category.
4. It is an outright sale; B becomes absolute owner automatically: This describes the first comparator, a true unconditional sale, which is not what happened here since a retransfer condition is written into the very same deed; conflating the two structures is the precise error the proviso to Section 58(c) is designed to prevent.

Placing this document alongside the other recognised structures confirms it fits the mortgage-by-conditional-sale category, requiring B to obtain a court decree of foreclosure before he can claim absolute ownership.

The correct answer is therefore It is a mortgage by conditional sale; B must seek foreclosure through court.