Balkishen Das v. Legge
Rule established
Courts look behind the form to the substance; a conditional sale intended as security for a debt is a mortgage, not a sale
Facts
- A document was executed in the form of a sale deed with a condition for reconveyance on repayment
- The "price" was significantly below market value
- Possession remained with the "seller"
- The question was whether this was a genuine sale or a mortgage disguised as a sale
Issue
- Whether a transaction framed as a conditional sale is in substance a mortgage (S.58(c)) or a genuine sale with option to repurchase.
Held
- The transaction is a mortgage by conditional sale. The court must look behind the form to the substance. Where: (a) the consideration is below market value; (b) possession remains with the ostensible seller; (c) the relationship is debtor-creditor; the transaction is a mortgage regardless of the label used by the parties.
Ratio Decidendi
The principle of substance over form applies to property transactions. Parties cannot convert a mortgage into a sale merely by using the word "sale" in the document. The court examines: adequacy of consideration, retention of possession, debtor-creditor relationship, conduct of parties, and surrounding circumstances.
How to use it in an exam
Critical for problems involving disguised mortgages. Use the three-factor test: (1) price below market; (2) possession retained; (3) debtor-creditor relationship. Key line: "The court looks to the substance, not the form; a conditional sale intended as security is a mortgage."
Source
Source: Mulla TPA 13th ed.
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.