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:

Question

“… we had referred to the ill - effects of what is known as General Power of Attorney Sales (for short ‘GPA Sales’) or Sale Agreement/General Power of Attorney/Will transfers (for short ‘SA/GPA/WILL’ transfers). Both the descriptions are misnomers as there cannot be a sale by execution of a power of attorney nor can there be a transfer by execution of an agreement of sale and a power of attorney and will. As noticed in the earlier order, these kinds of transactions were evolved to avoid prohibitions/conditions regarding certain transfers, to avoid payment of stamp duty and registration charges on deeds of conveyance, to avoid payment of capital gains on transfers, to invest unaccounted money … and to avoid payment of ‘unearned increases’ due to Development Authorities on transfer.
The modus operandi in such SA/GPA/WILL transactions is for the vendor or person claiming to be the owner to receive the agreed consideration, deliver possession of the property to the purchaser and execute the following documents or variations thereof:
(a) An Agreement of sale by the vendor in favour of the purchaser confirming the terms of sale, delivery of possession and payment of full consideration and undertaking to execute any document as and when required in future.
or
An agreement of sale agreeing to sell the property, with a separate affidavit confirming receipt of full price and delivery of possession and undertaking to execute sale deed whenever required.
or
(b) An Irrevocable General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing him to manage, deal with and dispose of the property without reference to the vendor
or
A General Power of Attorney by the vendor in favour of the purchaser or his nominee authorizing the attorney holder to sell or transfer the property and a Special Power of Attorney to manage the property
(c) A will bequeathing the property to the purchaser (as a safeguard against the consequences of death of the vendor before transfer is effected).
These transactions are not to be confused or equated with genuine transactions where the owner of a property grants a power of Attorney in favour of a family member or friend to manage or sell his property, as he is not able to manage the property or execute the sale, personally. These are transactions, where a purchaser pays the full price, but instead of getting a deed of conveyance gets a SA/GPA/WILL as a mode of transfer, either at the instance of the vendor or at his own instance.”
[Extracted from Suraj Lamp & Industries (P) Ltd v. State of Haryana (2012) 1 SCC 656].

Answer 1

Step 1: Read the facts.
A sells his house to B for five lakh rupees. The same document says if A repays within three years, B must return the house, otherwise the sale becomes absolute. A does not repay. B claims full ownership.

Step 2: Find the law.
Section 58(c) of the Transfer of Property Act, 1882 deals with a mortgage by conditional sale.

Step 3: Understand the section.
When a sale carries a condition that the property will be returned on repayment, and this condition is written in the same document, the deal is treated as a mortgage and not a true sale.

Step 4: Apply to the facts.
Here the sale and the re-transfer condition are in one single document. So under the proviso to Section 58(c) it is presumed to be a mortgage by conditional sale, not an absolute sale.

Step 5: See the effect.
Because it is a mortgage, B does not become full owner just because three years passed. To end A's right to redeem, B must go to court and get a decree of foreclosure.

Step 6: Check the other options.
It is not a lease, it is not void for uncertainty, and it is not an outright sale.
\[ \boxed{\text{It is a mortgage by conditional sale; B must seek foreclosure through court.}} \]

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The Correct Option is A

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