Comprehension
Whether an agreement is a mortgage by conditional sale or sale with an option to repurchase is a vexed question to be considered in the facts of each case. The essentials of an agreement, to qualify as a mortgage by conditional sale, can succinctly be summarized. An ostensible sale with transfer of possession and ownership, but containing a clause for reconveyance in accordance with Section 58(c) of the Act, will clothe the agreement as a mortgage by conditional sale. Referring to Section 58(c) of the Transfer of Property Act the observed, “A deeming fiction was added in the negative that a transaction shall not be deemed to be a mortgage unless the condition for reconveyance is contained in the document which purports to effect the sale.” The issue under adjudication was whether the transaction between the parties was an absolute sale of the property or it was a mortgage. The court relied upon the case Bishwanath Prasad Singh v. Rajendra Prasad and Anr, 2006 SC and held that A bare perusal of the said provision clearly shows that a mortgage by conditional sale must be evidenced by one document whereas a sale with condition of retransfer may be evidenced by more than one document. A sale with a condition of retransfer is not a mortgage. It is not a partial transfer. By reason of such a transfer all rights have been transferred reserving only a personal right to the purchaser and such a personal right would be lost unless the same is exercised within the stipulated time. The execution of separate agreement for reconveyance, either contemporaneously or subsequently, shall militate against the agreement being mortgaged by conditional sale. There must exist a debtor and creditor relationship. The valuation of the property, and the transaction value, along with the duration of time for reconveyance, are important considerations to decide the nature of the agreement. There will have to be a cumulative consideration of these factors, along with the recitals in the agreement, intention of the parties, coupled with other attendant circumstances, considered in a holistic manner. The language used in the agreement may not always be conclusive. (Extract from Prakash (Dead) By LR. V. G. Aradhya & Ors, 2023 SC)
Question: 1

The proper remedy for the mortgagee in a mortgage by conditional sale is:

Updated On: Jan 13, 2026
  • To institute a suit for sale
  • To suit for recovery of money
  • To institute a suit for foreclosure
  • Both (A) and (B)
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The Correct Option is C

Solution and Explanation

In legal mortgage analysis, particularly for mortgages by conditional sale, selecting the right remedy for the mortgagee hinges on the agreement's specifics. As per Section 58(c) of the Transfer of Property Act, this mortgage type features a seemingly outright sale involving possession and ownership shift, alongside a reconveyance clause. It's distinct from a sale with a retransfer option, differentiated by multiple documents and not categorized as a mortgage.

A mortgage by conditional sale necessitates a debtor-creditor connection, with property value, transaction value, and reconveyance timeframe being crucial. These aspects, combined with the agreement's wording, the parties' intent, and other factors, require comprehensive assessment. The agreement's wording alone isn't decisive.

Considering these points, the correct legal remedy for a mortgagee in a conditional sale mortgage is to file a foreclosure suit. This action suits the mortgage's nature, where reconveyance conditions reside within the mortgage document, making foreclosure the proper legal route.

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Question: 2

One of the conditions of mortgage by conditional sale is that:

Updated On: Jan 13, 2026
  • On payment of mortgage money, the sale shall be voidable
  • On payment of mortgage money, the sale shall become void
  • The mortgagee shall receive the rent and profits and will appropriate the same towards the dues
  • All of the above
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The Correct Option is B

Solution and Explanation

A mortgage by conditional sale describes a property sale with a stated ownership transfer, but with a reconveyance clause. This is covered in Section 58(c) of the Transfer of Property Act.

Per this section, the sale is nullified upon payment of the mortgage money. This defines a mortgage by conditional sale, establishing a debtor-creditor relationship. Once the financial debt is settled (through mortgage money payment), the mortgagor regains the property, rendering the sale void.

This differs from a sale with retransfer, potentially involving multiple documents and not constituting a mortgage.

In summary, the correct answer concerning the condition of a mortgage by conditional sale is:

On payment of mortgage money, the sale shall become void.

 

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Question: 3

What is the common clause between mortgage by conditional sale and English mortgage?

Updated On: Jan 13, 2026
  • Transfer of ownership of mortgaged property
  • Transfer of possession of mortgaged property
  • The right of mortgagee to sell the property
  • Delivery of documents of title
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The Correct Option is A

Solution and Explanation

Both "mortgage by conditional sale" and "English mortgage" involve transferring ownership of the mortgaged property. Here's a closer look:

Mortgage by Conditional Sale: As defined by Section 58(c) of the Transfer of Property Act, this mortgage involves the mortgagor seemingly selling the property to the mortgagee, with the condition that the property is returned to the mortgagor after the mortgage money is repaid. It's like a sale with a repurchase clause, but it's legally a mortgage. Key requirement: it must be a single documented transaction with the reconveyance explicitly stated.

English Mortgage: In an English mortgage, both ownership and possession of the property go to the mortgagee. The mortgagor agrees to repay the loan by a specific date, and the mortgagee agrees to return the property upon repayment. The initial ownership transfer is absolute, with a reconveyance agreement upon payment.

The common element in both is the transfer of ownership of the mortgaged property to the mortgagee. In both instances, ownership initially transfers from the mortgagor to the mortgagee, serving as loan security. However, unlike a standard sale, both include conditions that allow the mortgagor to reclaim the property by fulfilling specific requirements.

Conclusion: Therefore, the correct answer to the original question is the transfer of ownership of the mortgaged property.

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Question: 4

What is the limitation period in case of mortgage by conditional sale?

Updated On: Jan 13, 2026
  • 3 years
  • 12 years
  • 30 years
  • No time limit
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The Correct Option is B

Solution and Explanation

Legal analyses confirm that a mortgage by conditional sale has a limitation period of 12 years. This is determined by the Transfer of Property Act, specifically Section 58(c), which defines a mortgage by conditional sale as a transaction resembling a sale (with transfer of both possession and ownership) but includes a condition for returning the property. Legal debates often center on differentiating between a mortgage by conditional sale and a straightforward sale with a repurchase option. Key legal precedents, such as Bishwanath Prasad Singh v. Rajendra Prasad and Anr, 2006 SC, establish that a mortgage by conditional sale requires a single document, unlike a sale with retransfer conditions, which may involve multiple documents. Consequently, the limitation period for a mortgage by conditional sale is 12 years.
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Question: 5

Which of the following expresses the distinction between a mortgage by conditional sale and a sale with a condition of repurchase?

Updated On: Jan 13, 2026
  • In a mortgage the debt subsists and a right to redeem remains with the debtor, but a sale with a condition of repurchase is not a lending and borrowing arrangement
  • In a mortgage by conditional sale, generally the amount of consideration is far below the value of the property in the market, but in a sale with a condition of repurchase, the amount of consideration is generally equal to or close to the value of the property
  • Both (A) and (B)
  • Neither (A) nor (B)
Show Solution

The Correct Option is C

Solution and Explanation

When dealing with legal contracts, distinguishing between a mortgage by conditional sale and a sale with a repurchase condition is difficult. These two arrangements have different legal consequences and are subject to specific laws.

A mortgage by conditional sale, as defined by Section 58(c) of the Transfer of Property Act, presents as a property sale but includes a clause for reconveyance when certain conditions are met. Key characteristics include:

  • The transfer of possession and ownership appears absolute, but the transaction secures a debt.
  • The original document includes a reconveyance clause, preserving the debtor's right to reclaim the property.
  • The entire agreement is typically documented in a single document.

Conversely, a sale with a condition of repurchase involves:

  • A complete transfer of ownership and possession, without implying a debtor-creditor relationship.
  • The transaction might be documented across multiple documents.
  • The buyer decides whether the property is repurchased, dependent on fulfilling specific conditions within a specific timeframe.

Key differences between these transactions are:

AspectMortgage by Conditional SaleSale with Condition of Repurchase
Nature of TransactionDebt secured by propertyOutright sale; no debt
Number of DocumentsOne documentPotentially multiple documents
ValuationUsually less than property valueAmount close to property value

Consequently, both options (A and B) correctly represent the differences between these agreement types, thus, the correct answer is: Both (A) and (B).

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Top Questions on Property Law

Questions Asked in CLAT PG exam

An unpleasant tussle ensured between the TATA Sons and Cyrus Pallonji Mistry (“CPM”) in October 2016, when Mistry, who was the sixth chairman of Tata Sons, was ousted from the position of Executive Chairman of Tata Sons Limited. CPM took over as the chairman in 2012 after Ratan Tata announced his retirement. Tata Group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as chairman of Tata Sons as the board had lost faith in him, but his refusal led to the removal via majority vote. Cyrus Investments Private limited and Sterling Investment Corporation Private Limited belonged to the Shapoorji Palloni Group in which CPM held a controlling interest (about 2% of the issued share capital of Tata Sons). Seven out of the nine directors of Tata Sons voted for CPM’s replacement after Farida Khambata abstained and Mistry was declared ineligible to vote as he was an interested director. Mistry challenged his removal, accusing the board of mismanagement and of oppressing minority shareholders. however, the National Company Law Tribunal (NCLT) rejected his petition. After this Mistry challenged his removal in National Company Law Appellate Tribunal (NCLAT). In 2018, NCLAT order restored Mistry as the group’s executive chairman. Tata Sons challenged that NCLAT order in Supreme Court. CPM also challenged the order for few more relief. Supreme Court stayed NCLAT’s order reinstating Cyrus Mistry as the executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies, with a preliminary observation that the first impression of the order was “not good” and that the tribunal ‘could’ not have given consequential relief that had not been sought in the first place. Ultimately, the Supreme Court decided the case in favour of Tata Sons. One of the issues decided by Supreme Court was that “whether the case was fit to be qualified as a situation of ‘Oppression and Mismanagement’ under Section 241 of the Companies Act, 2013?”. On this issue, the Supreme Court observed that “unless the removal of a person as a chairman of a company is oppressive or mismanaged or done in a prejudicial manner damaging the interests of the company, its members or the public at large, the NCLT cannot interfere with the removal of a person as a Chairman of a Company in a petition under Section 241 of the Companies Act, 2013.” This case highlighted the point that “an executive chairman does not have sovereign authority over the company. In corporate democracy, decision making always remains with the Board as long as they enjoy the pleasure of the shareholders. Likewise, an executive chairman will continue as long as he/she enjoys the pleasure of the Board. An assumption by the executive chairman that he/she would have a free hand in running the affairs of the company is incongruous to corporate governance and corporate democracy. The Tribunal held that the concept of ‘free hand rule’ is antithesis to collective responsibility and collective decision making”.
[Based on Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd., 2021 SCC 122].
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Alastair Hudson in his book ‘Securities Law’ First Edition (Sweet & Maxwell), 2008 at page 342, refers to ‘Restricted Offers’ and noticed that there is no contravention of Section 85 of FSMA 2000, if: “(b) the offer is made to or directed at fewer than 100 persons, other than qualified investors, per EEA State”. The purpose underlying that exemption, the author says, is mainly the fact that the offer is not being made to an appreciable section of “the public” such that the policy of the prospectus rules generally is not affected. Further, the author says that “Self-evidently, while an offer to 99 ordinary members of the public would be within the literal terms of the exemption, it would not be the sort of activity anticipated by the legislation. Moreover, if a marketing campaign were arranged such that ordinary members of the people were approached in groups of 99 people at a time in an effort to avoid the prospectus rules, then that would not appear to be within the spirit of the regulations and might be held to contravene the core principle that a regulated person must act with integrity.”
I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty-nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. Facts clearly reveal that Saharas have issued securities to the public more than the threshold limit statutorily fixed under the first proviso to Section 67(3) and hence violated the listing provisions which may attract civil and criminal liabilities. Principles of listing, which I may later on discuss, is intended to assist public companies in identifying their obligations and responsibilities, which are continuing in nature, transparent in content and call for high degree of integrity. Obligations are imposed on the issuer on an ongoing basis. Public companies who are legally obliged to list their securities are deemed to accept the continuing obligations, by virtue of their application, prospectus and the subsequent maintenance of listing on a recognized stock exchange. Disclosure is the rule, there is no exception. Misleading public is a serious crime, which may attract civil and criminal liability. Listing of securities depends not upon one’s volition, but on statutory mandate.
[Extract from Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (SEBI), Para 89-91, Civil Appeal No. 9833/2011 (SC)]
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The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it included just two rules namely: (1) no one shall be a judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem).
Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is not questioned.
If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries. Enquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries. An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi-judicial enquiry as observed by this Court in Suresh Koshy George v. University of Kerala [Civil Appeal No. 990/68, decided on 15-07- 1968], the rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
[Extract from the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1969) 2 SCC 262, decided on April 29, 1969, hereafter ‘A.K. Kraipak’].
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The doctrine of promissory estoppel is by now well recognized and well defined by a catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard-and-fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of the doctrine of promissory estoppel the promise must establish that he suffered in detriment or altered his position by reliance on the promise.
Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promise and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law.
[Extract from the judgment of the Supreme Court in Shree Sidhbali Steels Limited v. State of Uttar Pradesh, (2011) 3 SCC 193, decided on January 20, 2011, hereafter ‘Shree Sidhbali Steels’].
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