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How to determine whether a document is a mortgage by conditional sale, or a sale with an option to repurchase

The Supreme Court, in Vithal Tukaram Kadam vs Vamanrao Sawalaram Bhosale, has observed that words like “repay”, “return” and “subject to this condition” in an agreement are not commensurate with a deed of absolute sale.

A bench, comprising Justice L Nageswara Rao and Justice Navin Sinha, made this observation while setting aside a high court judgment and holding that the deed in question is a mortgage by conditional sale and not a sale with an option to repurchase.

The Supreme Court said that question whether a document is a mortgage by conditional sale, or a sale with an option to repurchase, has to be determined in the facts of each case, dependent on the recitals in the document, intention of the parties, coupled with attendant surrounding circumstances. There can be no hard and fast rule for determining the nature of the document devoid of these circumstances. Precedents, in abundance, will not suffice alone, as observed in Pandit Chunchun Jha vs. Sheikh Ebadat Ali and Another, 1955.




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