1. This is a plaintiff's appeal against the judgment and decree in O.S. No. 95 of 1968 on the file of the Court of the Subordinate Judge , Anantapur. The plaintiff filed the suit in forma pauperis for redemption alleging that Ex. B-1 dt. 25-6-1960 is a mortgage by conditional sale executed by the plaintiff in favour of the defendant. On a consideration of the evidence the Court below construed Ex. B-1 as an outright sale with a condition to repurchase. It was held that Ex. B-1 was not a mortgage by conditional sale. So the question in this appeal is whether Ex. B-1 is a mortgage by conditional sale or is a sale deed with a conditional reconveyance.
2. The question whether a given document is a mortgage by conditional sale or not has ever been a vexed question. After the amendment of Transfer of Property Act in 1929, in order to constitute a mortgage by conditional sale , under Sec. 58(c) of the Act unless the conditions provided by that section are embodied in the document, no transaction evidenced by a document shall be deemed to be a mortgage by conditional sale. Having regard to the definition of a mortgage in Section 58(a) of the Transfer of Property Act, there must be a transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan, an existing or future debt. It is , therefore , manifest that on the date of the transaction the existence of a relationship of a debtor and creditor is of the essence , as otherwise it cannot be called a mortgage at all. In constructing a document whether it is a mortgage by conditional sale or a sale with a condition to repurchase, there are pronouncements of the Supreme Court which indicate certain tests which are by no mens exhaustive. In Chunchun Jha v. Ebadat Ali, : 1SCR174 , Bose J., considered the question whether the document in that case was a mortgage by conditional sale. The learned Judge observed that it would be a fruitless talk to try to collate and analyse the various decisions bearing on the subject because no two documents are expressed in identical terms. Each case must be decided on its own facts. But nevertheless certain broad principles are there. The first of them is that the intention of the parties at the time of the execution of the document is to be the determining factor. The intention can only be gathered in the first place only from the recitals of the document are clear, effect has to be given to those words and extraneous enquiry should be ruled out. Where the words in the document are clear the legal effect of the document has to be decided on the words used in the document. IF the language employed in the document is ambiguous, then it would be permissible to look into the surrounding circumstances to determine what was intended. It was also pointed out that if an instrument clearly purported to be a mortgage, it should not be turned into a sale by reference to a host of extraneous and irrelevant considerations. Section 58(c) of the Transfer of Property Act as amended meant a clear cut Classification and excluded transactions embodied in more than one document from the category of mortgages by conditional sale. It was stated by the learned Judge that persons who after the amendment choose not to use two documents , it may be presumed that the parties did not intend the transaction to be a sale. There is thus a presumption that where there is only one document it is a mortgage by conditional sale and that the presumption had to be displaced by clear and express words. If the conditions of Section 58(c) are fulfilled, then the deed should be construed as a mortgage. It was observed (at page 348 of the report) as follows :
'Now , as we have already said once a transaction is embodied in one document and not two and once its terms are covered by Section 58(c) , then it must be taken to be a mortgage by conditional sale unless there are express words to indicate the contrary, or, in a case of ambiguity , the attendant circumstances necessarily lead to the opposite conclusion.'
Where the document does not contain express words as to the nature of the transaction and there is ambiguity , the Court has to probe further into the surrounding circumstances.
3. In Bhaskar v. Shrinarayan, : 2SCR117 Shah, J., in delivering the Judgment of the Court did not refer to the above decision in : 1SCR174 (Supra) but laid down the principles governing a situation such as the present, It was stated thus (at page 304) :-
'The proviso to this clause was added by Act XX of 1929. Prior to the amendment there was a conflict of decisions on the question whether the condition contained in a separate deed could be taken into account in ascertaining whether a mortgage was intended by the principal deed. The Legislature resolved this conflict by enacting that a transaction shall not be deemed to be a mortgage unless the conditions referred to in the clause is embodied in the document which effects or purports to effect the sale. But it does not follow that if the condition is incorporated in the deed affecting or purporting to effect a sale a mortgage transaction must of necessity have been intended. The question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is of one intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances. The circumstance that the condition is incorporated in the sale deed must undoubtedly be taken into account, but the value to be attached thereto must vary with the degree of formality attending upon the transaction. The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to reconvey , there is no relation of debtor and creditor nor is the price charged on the property conveyed , but the sale is subject to an obligation to retransfer the property within the period specified. What distinguishes the two transaction is the relationship of debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is not decisive. The definition of a mortgage by conditional sale itself contemplates an ostensible sale of the property. As pointed out by the Judicial Committee of the Privy Council in Narsingerji Gyanagerji v. P . Parthasaradhi, 51 Ind App 305 = AIR 1924 PC 226, the circumstance that the transaction as phrased in the document is ostensibly a sale with a right of repurchase in the vendor, the appearance being laboriously maintained by the words of conveyance needlessly iterating the description of an absolute interest or the right of repurchase bearing the appearance of a right in relation to the exercise of which time was of the essence is not decisive. The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the deed viewed in the light of the surrounding circumstances. If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their true legal effect. If there is ambiguity in the language employed , the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts. Oral evidence of intention is not admissible in interpreting the covenants of the deed but evidence to explain or even to contradict the recitals as distinguished from the terms of the documents may of course be given. Evidence of contemporaneous conduct is always admissible as a surrounding circumstance, but evidence as to subsequent conduct of the parties is admissible.
In the light of these principles, the real character of the document of Ex. A-1 may be ascertained.'
The same principles were reiterated by the Supreme Court in P. L. Bapuswami v. N. Pattay, : 2SCR918 .
4. The question as to the nature of the transaction evidenced by Ex. B-1 in the case has to be considered in the light of the principles aforementioned in the decision of the Supreme Court. The document Ex. B-1 is dated 25-6-1960. It was for a consideration of Rs. 10,000/- . It consisted of two items, the first being Acs. 21-81 cents and the second item being Acs. 4-16 cents.
5. About nine years earlier on 1-9-1951 the plaintiff had taken a Taccavi loan from the Government for Rs. 5,000/-. He had then mortgaged item 1 to the Government thereupon brought item 1 to sale. On 2-3-1960 at an auction sale, the first item was purchased by one Ramana for Rs. 9050/- . Before the sale was confirmed , the plaintiff filed O. S. No. 119 of 1960 on the file of the Sub-Court, Anantpur , to set aside the sale and by reason of an interlocutory order passed in the suit, the plaintiff was directed to deposit a sum of Rs. 7585-4-0 being the amount due to the Government on or before 20-6-1960 . The plaintiff who had not the money to make the required deposit had approached the defendant , who on 20-6-1960 , had deposited the amount of Rs. 7846-4-0 into Court on behalf of the plaintiff. Soon thereafter on 25-6-1960 Ex. B-1 was executed and also registered on the same day.
6. Ex. B-1 purports to be a sale deed dated 25-6-1960 . It was executed by the plaintiff Obayya, a resident of Kalyanadurg, in favour of Amilineni Chinna Venkatappa (defendant) , a resident of Venkatadripalli Hamlet of Sarpi , kalyanadurg Taluk. The document commences with a recital that the excutant had taken a Taccavi loan of Rs. 5000/- from the Government by mortgaging the property covered by the first item to the schedule to the document and that in a public auction held in regard to that item, it was sold by the Tahsildar , Kalyanadurg , on 2-3-1960 for discharge of the Taccavi loan. It went on to recite that B. Ramanna purchased the property for Rs. 9050/- at the said auction and before the sale was confirmed, the executant had filed O. S. 11 of 1961 and also I. A. No. 240 of 1960 in the said suit. The executant was directed by the Court to deposit a sum of Rs. 7846/4/0 on or before 20-6-1960 . As the executant had no capacity to deposit the said amount, he had agreed to sell the property to the defendant for a sum of Rs. 10,000/-. As per that agreement , the defendant had deposited the sum of Rs. 7846-4-0 and 2-6-1960 on behalf of the executant in the Court. The balance of Rs. 2153/- and odd was received from the defendant in cash. Thus, the entire sale consideration of Rs. 10,000/- was received. The property was given in possession to the defendant after selling the same to him. The property was not subject to any alienation of nay kind and from then onwards the defendant should enjoy the same without any concern on the part of the plaintiff or his heirs. Ex. B-1 further recited.
'In case , I pay to you a sum of Rs. 10,000/- . (Rupees Ten thousand) within a period of five years , that is, on before 25-6-1965 , you shall have to sell the schedule mentioned property to me again at my expense .'
Then followed the schedule to the items of property. The above recitals make it clear to all intents and purposes that the document is a sale deed with a condition and an obligation is cast on the defendant to resell the property if the sum of Rupees 10,000/- was to be paid within a period of five years , that is, on or before 25-6-1965. What is contended by the plaintiff-appellant is that this document as per its recitals fulfills all the requirements of Sec. 58(c) of the Transfer of Property Act. It is an ostensible sale. There is the condition that on the payment of Rs. 10,000/- being made, the buyer should transfer the property to the seller. The condition is embodied in the same document as required by the Proviso to Section 58(c) of the Transfer of Property Act. Ex facie , therefore, the document satisfies the requirements of the section. The seller is in the position of a mortgagor, and the buyer is in the position of a mortgagee, as on that date the buyer had advanced the bulk of the consideration which went towards the deposit directed by the Court in order to enable the seller to obtain a cancellation of the auction held. As the plaintiff admittedly had no money at all , the balance which remained out of Rs. 10,000/- the sale consideration , was paid to the seller . Undoubtedly as on 25-6-1960 it could be said that there was the relationship of creditor and debtor between the seller and the buyer . As the recitals stand in the document , Ex. B-1 , to adopt the language of the Supreme Court
'it is reasonable to suppose that persons, who after the amendment of Transfer of Property Act, choose not to use two documents , do not intend the transaction to be a sale unless they displace that presumption by clear and express words ; and if the conditions of Section 58(c) are fulfilled , then we are of opinion that the deed should be construed as a mortgage .'
(See : 1SCR174 ) (supra). The presumption in favour of the document being a mortgage is not in any way displaced by any express words to indicate the contrary and one should hold in favour of the document being only a mortgage. It is only in case of ambiguity that the attendant circumstances have to be seen in order to arrive at the true nature of the transaction . It what was observed by the Supreme Court in : 1SCR174 (supra) alone is to be applied , there can be no difficulty in holding in the case that , the intention of the parties in entering into the suit transaction was to create a mortgage by conditional sale . The Bench in the above case consisted of four learned Judges, B. K. Mukherje , Bose , Ghulam Hasan and Venkarama Ayyar , JJ. At the same time , the later Supreme Court case in : 2SCR117 (supra) presided over by three learned Judges, P. B. Gajendragadkar , K. Subha Rao and J. C. Shah , JJ., have not referred to the earlier decision of the Supreme Court . But they made a reference to a case of the Privy Council in AIR 1924 PC 226 . I have earlier in this Judgment quoted from paragraph 7 of this decision (at page 304 of the report). It was pointed out in this later case that merely because one of the conditions under Section 58(c) was incorporated in the deed , it must necessarily have been intended , and a sale should be construed as a mortgage transaction, as that must of necessity have been intended (sic). The later decision of the Supreme Court appears to have some-what qualified the previous dicta of the Court.
7. I have already stated that on the date of Ex. B-1 in my opinion, there was a relationship of debtor and creditor between the parties. That fact and the inclusion of the condition as to resale by the buyer within a period of five years on payment of money prima facie makes the transaction a mortgage by conditional sale. The onus is on the buyer who has to displace this presumption.
8. Reported decisions of the Indian Courts have indicated the following tests , though these tests must be taken to be merely illustrative and not exhaustive. They are in general :--
1. The existence of relationship of a creditor and debtor between the parties as on the date of the transaction ;
2. The period of repayment, a short period being indicative of a sale and a long period of a mortgage. The fact that time was made the essence of the contract to repurchase is not decisive.
3. The continuance of the seller is possession indicates a mortgage.
4. If there is a stipulation for payment of interest , on repayment it indicates a mortgage.
5. A price below the true value indicates a mortgage; a fair market value is strong evidence that the transaction is a sale. I will now judge the transaction in the light of the above tests .
9. At the forced sale by the Government item 1 , which is of an extent of abbot Acs. 21 , had fetched a sum of Rupees 9050/-. It is quite well-known that at such forced sales , the properties do not fetch their true and proper value. In the suit transaction another item of property also was included. But that item of property also was included . But that item of property also was included . But that item as per the evidence is not of any considerable value. Only one thing can safely be said, that item I should have been of more value than what is fetched at the forced sale which is Rs. 9050/- . the plaintiff sought to prove by the evidence of Ex. A-1 that the market value of the property in 1961 was very high. Ex. A-1 is the Minutes Book of the Kalyabadurg Co-operative Marketing Society. Resolution No. 6 at page 42 of the book shows that the Society resolved to purchase 150 cents of land from item 1 of the suit property at the rate of Rs. 30/- per cent , which would make the value of the property at about Rs. 3,000/- per acre. It is also in evidence that a portion of this property (about one acre) was earlier sold for the construction of huts. This fact was recited in Ex. B-1. It is also to be seen that in its item 1 there were wells , houses and all kinds of fruit bearing trees as per the description in Ex. B-1. It is therefore clear that some portions of item 1 were sold as house sites. I am of opinion that item 1 of the schedule is of considerable value i.e., more than Rupees 7,800/- and odd which forms the bulk of the consideration for Ex. B-1 .
10. Then again the period for repayment and resale was a long period of five years. In spite of the sale, the patta was not transferred in favour of the buyer and it is admitted that patta transfer forms were filed at the time of the registration of the document. It is of course admitted that the defendant was in possession of the property. It is curious that neither party had produced any cist receipts. but it makes no difference in this case.
11. I think in that instant case, Ex. A-3 , which is an Inland letter written by the defendant to the plaintiff on 5-10-1965 is clinching. The trial Court did not place reliance upon Ex. A-3 holding that it could not be held to be a latter written by the defendants. If Ex. A-3 is accepted as a letter written by the defendant to the plaintiff , I should think it is decisive of the question whether Ex. B-1 is a mortgage by conditional sale or not. Ex. A-3 is dated 5-10-1965 . It may be noticed that by this time the time stipulated for repayment and re-sale of the suit property had expired. The letter would show that item for repayment was extended. But curiously the extended time was mentioned as 25th of August , while the letter was being written on 5-10-1965 . But the calculation of the amounts due in this letter shows that the amount of interest was calculated upto 25-12-1965 . The accords with the statement in the letter that as the plaintiff was a good person the defendant had given him six months time over and above five years which would only end with 25-12-1965. I am inclined to think that the date 25th August , mentioned in this letter was a mistake for 25th December . It is also to be noticed that in this letter the debto incurred on 25-6-1960 i.e., the date of Ex. B-1 is for Rs. 10,000/- . If Ex. A-3 is not genuine, I fail to see why Rs. 9100/- was mentioned. The defendant would say it is indicative of the letter not being genuine. I am unable to agree. In this case , there is something about the consideration of Rs. 9100/- mentioned in Ex. A-1 which is not brought out by either party. But one thing is certain that there can be no doubt that Ex. A-3 is in relation to Ex. B-1 transaction. It bears the postal mark of Siripi which is the defendants village. It is addressed to the plaintiff and bears the date of delivery . The suggestion that the plaintiff himself might have written the letter and posted it at the defendants village to himself is not acceptable to me. The trial Court had compared it with his hand-writing in Ex. A-7, Ex. A-7 was written by the defendant in Court as ordered by it. But I am inclined to think that Ex. A-7 would not afford a safe basis for comparison. Naturally the defendant would try to disguise and distort his hand-writing , as it was written for purposes of comparison in Court. I have examined the signatures in the written statement and Vakalat of the defendant . I do not think that the signature in the disputed letter, Ex. A-3 , is in any way different from the admitted signature contained in the written statement and Vakalat. All told I am satisfied that Ex. A-3 , is a genuine letter written by the defendant to the plaintiff on 5-10-1965. Once this letter is accepted , there is no escape from holding that the suit transaction was only a mortgage by conditional sale. Apart from this , I must also refer to the fact that in Ex. A-4 dated 20-12-1965, which is an office copy of the notice issued by the plaintiff to the defendant before suit, there is a reference to Ex. A-3. In this letter (Ex, A-4) it is written as follows :--
'On 5-10-1965 you wrote a letter to my client extending the period for payment of the consideration and obtaining a document from you by another six months. You also gave an extract of your account informing my client that a sum of Rupees 14,888/- is due to you. My client submits that the accounts are not correct. My client is ready to pay you the correct amount due under the mortgage by conditional sale dated 25-6-1960.'
It is significant that there was no reply by the defendant to this notice , Ex, A-4 . In the written statement filed by the defendant , in paragraph 10 the notice dated 20-12-1965 is admitted. Though it is stated that a suitable reply was sent, the same has not been filed. It is also significant that though it is stated in paragraph 10 of the written statement that defendant at first got a notice issued to the plaintiff immediately after the expiry of the date fixed under the sale deed viz., soon after 25-6-1965, no such notice has been produced by the defendant and exhibited in the case.
12. What I have said above must conclude the matter in controversy in favour of the plaintiff and against the defendant . I hold that Ex. B-1 is a mortgage by conditional sale.
13. In my opinion , the Court below had taken each of the circumstances urged by the plaintiff in support of his case and decided each of them against the plaintiff. In matter like this , I am of the view that the Court should consider those with the various circumstances urged by the plaintiff cumulatively. That is to say , all these circumstances must be considered in conjunction with each other , but not distinctively.
14. I shall however advert to some of the circumstances urged by the learned counsel appearing for the respondent-defendant . He pointed out that prior documents of titled were handed over to him and they are Exs. B-2 and B-3 . It is also urged by him that possession was delivered as per Ex. B-1 recitals. It has also pointed out that the plaintiff in his evidence as P. W. 1 in cross-examination had admitted that he had executed Ex. B-1 after understanding the contents thereof and that he knew the difference between a mortgage and a promissory note. Strong reliance was placed upon these portions in the evidence of P. W. 1:
'I executed Ex. B-1 after understanding its contents. The contents of Ex. B-1 are correct. The recitals in Ex. B-1 were made according to the agreement between me and the defendant .............. ........ I refused first to sign in Ex. B-1 as it was not a mortgage deed. But on the persuasion of some elders who were near the Sub-Registrar's Office, I signed Ex. B-1.'
I do not think any of those circumstances referred to above can be said to be in favour of the defendant's contention. For one thing it must be remembered that the transaction evidenced by Ex. B-1 was executed ostensibly as a sale and contains the necessary recitals for a valid sale deed. The fact that Exs, B-2 and B-3 were handed over to the defendant at the time of execution of Ex. B-1 is not of much importance because it was no doubt a sale when it was effected but with a condition to recover the property on payment of the consideration within a period of five years. That might or might not happen. That being so, it was quite natural that on the date of Exs. B-1, B-2 and B-3 the two prior documents of title, were handed over . That possession was delivered also is immaterial for the same reason as it was a sale. Reliance placed upon the portions of the deposition extracted by me above also do not help the defendant. Since it was the plaintiff's intention that a mortgage deed should be executed and as Ex. B-1 stated it was a sale deed, he might have at first refused to sign it. But the elders, who knew better, about such transactions had asked him to sign in Ex. B-1 and he had signed. The fact that the plaintiff had admitted, that the contents on Ex. B-1 are correct and that they were made according to the agreement between him and the defendant and that he executed Ex. B-1 after understanding its contents merely show that he is not disputing Ex. B-1 . What we are concerned with is the true legal effect of the transaction with all its recitals. I do not understand the plaintiff as admitting that what was executed was only a document merely with an agreement to repurchase and not a mortgage according to true legal understanding.
15. For all these reasons, I am of the view that Ex. B-1 is a mortgage by conditional sale. That being so, the judgment of the Court below has to be set aside and the appeal should be allowed.
16. The matter relating to Court-fee has now to be considered. The plaintiff filed the suit in forma pauperis and also was permitted to prefer the appeal as a pauper. The principal amount as per Ex. B-1 is Rs. 10,000/- . But the plaintiff had valued the suit and the appeal at Rs. 8720/- on the allegation that the defendant had received a sum of Rs. 1280/- from the Marketing Society. There is absolutely no evidence worthy of acceptance that the defendance worthy of acceptance that the defendant had received the sum of Rs. 1280/- from the Marketing society. I , therefore, find that the plaintiff should have valused the suit claim and the appeal at Rs. 10,000/- . The 1st proviso to Section 31(8) of the Court-fees Act, states that where the amount due on the mortgage is found to be more than the amount on which fee has been paid by the plaintiff, no decree shall be passed , until the deficit fee is paid. The proviso is not applicable , as this is not a case where Court-fee has been paid by the plaintiff who is a pauper.
17. Under Order 33, Rule 10, Civil Procedure Code, where the plaintiff succeeds in the suit, the Court should calculate the amount of Court-fee which should have been paid by the plaintiff if he had not been permitted to sue as a pauper and such amount shall be recoverable by the State Government from any party ordered by the decree to pay the same. The amount of Court-fee payable in the suit and on the Memorandum of Appeal is Rs. 786/- . As the plaintiff's appeal is allowed, I direct that the Court-fee payable on the plaint and on the Memorandum of Appeal be recovered by the State Government from the defendant. As the plaintiff has falsely claimed that the defendant had received a sum of Rs. 1280/- from the Marketing Society, I disallow the costs. (other than the Court-fee, which I have directed the defendant to pay,) to the plaintiff in both Courts .
18. In the result, the judgment of the lower Court is set aside, the appeal is allowed and the suit decreed. There will be a preliminary decree for redemption under Order 34 , Rule 7 , C. P. C. for taking accounts. Time for redemption ; Three months. The Court-fee payable both on the plaint and on the Memorandum of Appeal shall be recoverable by the State Government from the defendant i.e., Rs. 786/- on the Memorandum of Appeal. The appellant will not be entitled to any other costs here in the Court below.
19. After I have pronounced the judgment and before signing it is pointed out to me that the appellant-plaintiff died on 7-1-1974 after I reserved the judgment, But the fact of the death of the appellant since the reservation of the judgment is of no consequence having regard to O. 22 , R. 6 , C. P. C.,
20. Appeal allowed .