Conditional Sale Mortgage

Mortgage by conditional sale is defined under Section 58(c) of Transfer of Property Act, 1882.

In mortgage by conditional sale the mortgagor sells the property to the mortgagee under certain conditions- on the failure of repayment before the due date or repayment of mortgage amount; the sale will remain invalid or mortgagee shall retransfer the property to mortgagor after repayment.

It is a type of mortgage where there occurs an ostensible sale, which is converted into absolute sale in the event that the ostensible seller is unable to repay the loan. The ostensible seller in such a mortgage incurs no personal liability as far as the debt is concerned.

CONDITIONS PLACED BY MORTGAGEE

In this mortgagee places three conditions to the mortgagor, and the mortgagee shall have the right to sell the property if:

  • mortgagor defaults in payment of mortgage money on a certain date.
  • as soon as the payment is made by the mortgagor the sale shall become void.
  • on the payment of money by the mortgagor, the property is transferred to the seller.

Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.

A mortgage by conditional sale is required to be evidenced by atleast one document.

Thus, in nutshell, conditional sale mortgage is a mortgage which appears to be a sale with a condition that the property sold would be transferred back to the original owner on the repayment of the loan.

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