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CS Professional · Drafting, Pleadings and Appearances · Drafting of Agreements, Deeds and Documents

Sunita Enterprises borrows Rs 5,00,000 from a lender and executes a mortgage by which the property is sold ostensibly, with the condition that the sale becomes void on repayment on the due date. The condition is not written in the sale deed but only orally agreed. What is the legal position under section 58(c) of the Transfer of Property Act, 1882?

The transaction is not deemed a mortgage. The proviso to section 58(c) requires the condition of defeasance to be embodied in the very document effecting the sale, so an merely oral condition cannot convert the ostensible sale into a mortgage by conditional sale.

  1. AIt is not deemed a mortgage, since the condition is not embodied in the document effecting the saleCorrect
  2. BIt is a valid mortgage by conditional sale, as oral conditions suffice
  3. CIt is a valid English mortgage
  4. DIt is a mortgage by deposit of title-deeds

Explanation

The proviso to section 58(c) states that no such transaction shall be deemed a mortgage unless the condition is embodied in the document which effects or purports to effect the sale. An oral condition therefore does not make it a mortgage by conditional sale. The English mortgage needs a repayment covenant and re-transfer proviso, which are absent.

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