Conditional Sale In Mortgage And Sale With An Option To Repurchase: An Extensive Study

Sachin Drall, Jindal Global Law School

Introduction

This paper is committed to provide the reader an extensive understanding of the underlined topic i.e. ‘Mortgage by conditional sale’ and ‘sale with an option to repurchase’ in accordance with the Transfer property Act; 1882. Fundamentally, a contract of ‘mortgage by conditional sale’ is a form of security known under various names throughput India such as; Kut Kubala (‘conditional bills of sale’ in the presidency of Bengal), muddatakriyan in Madras, gahan lahan in Bombay, or as bai-bi-wafa in central provinces, but it is the acceptance of the principle understanding of ‘mortgage by conditional sale’ which since the ancient times has prevailed and was even widely acknowledged even before having a statutory validation in the Transfer of property act. An essential feature of this mortgage is that of self-execution, as on the breach of the condition to perform the due monetary transaction, the contract is termed that one of ‘absolute sale’1. To give an overview of the underlined principles, I would like to state that; in a mortgage by conditional sale, the mortgagor ostensibly sells the mortgaged property on condition that; the sale shall become absolute on default of payment of the mortgaged money on specified date, the sale shall become void on such payment once made and that buyer shall transfer the property to the seller on such payment being made. Whereas, in regard with the ‘sale with an option to repurchase’ it is to be understood that; primarily right to redeem is not reserved with the seller2. Though the distinction between the two underlined principles is not very clear, however, this paper is intended to provide an extensive understanding of the underlined principles in such a manner that it would leave no-stone unturned.