1. We have four appeals before us. All these four appeals arise out of proceedings under the U. P. Encumbered Estates Act. First Appeal No. 494 of 1943 is connected with First Appeal No. 51 of 1944. These are cross appeals. First Appeal No. 494 of 1943 is filed by the creditors and First Appeal No. 51 of 1944 is filed by the landlords. Both these appeals arise out of Encumbered Estates Act case No. 89 of 1936. The two other appeals are First Appeal No. 493 of 1943 and First Appeal No. 535 of 1943. Both of them are Connected appeals. They arise out of Encumbered Estate Act Case No. 88 of 1936. Both these, appeals have been filed on behalf of the creditors. First Appeal No. 51 of 1944 which is a cross appeal by the landlords, was not pressed before us and is dismissed with costs. The remaining three appeals by the creditors involve two questions.
2. The first question is whether the documents of transfer on the basis of which the landlords claimed relief, on a proper interpretation, constitute a transaction of conditional sale or an absolute sale with condition to repurchase. The second question that was agreed before us was that if it was construed to be a document of mortgage by conditional sale then whether the claim of the landlords, based on these documents was barred by time under Article 134, Limitation Act.
3. In Encumbered Estates Act Case No. 88 of 1936, the deeds of transfer in question are dated 3-3-1904, and 9-3-1904. In Encumbered Estates Act Case No. 89 of 1936, the deed of transfer in question is dated 12-3-1904. All the three deeds were executed by the predecessor-in-interest of the landlords in favour of one Abdul Hameed. The relevant terms of all these deeds are more or less identical. Hence in dealing with the question of interpretation, it will not be necessary to refer to them separately.
4. On behalf of the appellants, it has been contended that the deeds in question constitute a document of absolute sale with a condition to repurchase. On the other hand, on behalf of the landlords respondents, it has been argued that on a proper interpretation, they embody merely a transaction of mortgage by conditional sale. For the purpose of arriving at a conclusion on this point, the Court has to determine the real intention of the parties. The mere form in which the documents are couched is immaterial.
The intention of the parties has to be gathered from the terms of the documents themselves, and from such of the surrounding circumstances as are required to show in what manner the language of the documents is related to the existing facts. So far as the surrounding circumstances are concerned, it is important to notice that on the same date on which the said deeds or transfer were executed by the landlords the transferee contemporaneously executed an agreement undertaking to re-convey the property. The fact that the agreement to reconvey the property was a contemporaneous or a simultaneous act could go to support the contention that the transactions embodied in the two documents constituted a single transaction, and were intended by the parties to stand as a whole.
5. In Kirpal Singh v. Sheo Amber Singh : AIR1930All283 and Prag Datt v. Hari Bhadur 1947 All LJ 271: (AIR 1947 All 334) (B) the fact that the deeds of transfer and the agreement to reconvey were executed at the same time was considered to be a factor in support of the interpretation that the documents in question embodied a transaction of mortgage by conditional sale. This fact by itself, however, is not conclusive of the matter. In the present case, there is inherent evidence provided by the contents of the deeds which indicate that the transaction was intended by the parties to be one of mortgage by conditional sale.
The most important term of the deeds In this connection is the one which relates to the return of the property to the vendors. In the present, case it is significant that it is laid down in these deeds that the vendors will not be entitled to repurchase the property for a period of two years and four months after the execution of the deed of transfer, but that after the said period fixed in the deed had expired, if was open to the vendors to re-purchase the property by payment of the purchase price in any year in the month of Jeth. The fact that the time provided in favour of the transferor to enable him to purchase the property is an unlimited one, shows that time was not of the essence of contract.
This fact by itself would be a strong factor in support of the view that the transaction in question was one of mortgage and not of sale. Reference in this connection might be made to Dhanarajagirji v. Parthasaradhi AIR 1924 PC 226 (C), where it was held that the fact that time fixed for repurchase was not of the essence of contract is one of the points in favour of the view that the transaction is mortgage. The other terms of the deed and circumstances of the case point In the same direction.
The expenses of the execution in the present case were to be borne by the transferor. Further, It was Provided in the deed that if there was a Partition or settlement, the expenses of the same were to be borne by the proprietors. The transferors were also made liable for any increase in the land revenue or cesses (abwab) or for any reduction in the property transferred. Further, taking into consideration the land revenue of the property, the value of the property appears to be in excess of the amount borrowed.
Lastly, there is a term in the deed which states that until the sale became final, the transferee would not create any charge in derogation of the rights of the vendor. All the above factors seem to indicate that the transaction in question was intended by the parties to be one of mortgage, and not one of sale. The mere fact that the parties chose to use the terms 'vendor and vendee' or the word 'sale' in connection with the transaction will not convert what is really a transaction of mortgage into one of sale.
It is the substance of the transaction which has got to be seen, and not the form in which the transaction is clothed, or the words used by the Parties in the deed. Reference in this connection might be made to Man Singh v. Guman Singh : AIR1929All619 . Taking into consideration the entire circumstances of the case, we are of opinion that the transaction in question is one of mortgage by conditional sale and not one of out and out sale.
6. The next point argued on behalf of the appellants was that the claim of the respondent is barred under Article 134, Limitation Act. Having considered this argument, we are of opinion that it has substance, and should be given effect to. Article 134 prescribes the period of limitation for a suit to recover possession of immovable Property conveyed or bequeathed in trust or mortgage, and afterwards transferred by the trustee or mortgagee for a valuable consideration.
The period of limitation prescribed for a suit under this article is twelve years. Under the present Act as amended in the year 1929 the period of limitation begins to run from the date 'when the transfer becomes known to the plaintiff'. There being no evidence of knowledge in the present case, the respondents' case would not have been affected by the plea of limitation, had the case been governed by the present Limitation Act.
The Amendment under the present Act was brought about by the Indian Limitation (Amendment) Act. 1929 (Act I of 1929), Section 3. Prior to that date, the words in the third column were 'the date of the transfer'. In the present case Abdul Hameed, the mortgagee, is alleged to have transferred the property in question on 4-5-1907 in favour of Najmul Huda, vide Exts. 5 and A-25. The present case would, therefore, be governed by the provision of the Limitation Act as it stood unamended before the Indian Limitation ('Amendment) Act 1929 (I of 1929) came into force.
The date of transfer relied on in the present case is 4-5-1907. If limitation began to run on that date, then the suit to recover possession of the immovable property would be barred after 12 years that is, on 4-5-1919. The rights of the landlord having been extinguished prior to 1929, any subsequent amendment of, the Act cannot revive the rights which had already become extinct prior to that.
A perusal of the above-mentioned deeds of transfer made by Abdul Hameed in favour of Najmul Huda would indicate that by those deeds he transferred not his mortgage interest but the property itself. Further, he purported to transfer the property to his transferee as owner of the property transferred. No doubt in those deeds there are recitals referring to the terms of the agreements of March 3, and March 9, 1904. The reference to the previous agreements would however, only indicate that the transferee was aware of the obligations undertaken by Abdul Hameed under those agreements, and was not a bona fide transferee of the proprietary rights.
The expressions 'bona fide' and 'in good faith' were used in the Limitation Acts of 1859 and 1871 respectively. Therefore in cases arising under those Acts, it was rightly held that if the transferee was aware of the real nature of his transferor's interest, he could not claim the benefit of the article Of the Limitation Act corresponding to Article 134 of the present Act. In the present Act, however, these words have been omitted. The omission of these words is not without significance.
The Lahore, Madras and Bombay High Courts have held that the omission of these words has not made any difference and the ingredient of good faith is still necessary, vide Mehanga v. Zaman Ali Shah, AIR 193l Lah. 464 (E). Tholasinga Mudali v. Nagalinga Chetty, AIR 1917 Mad 996 (F) and Shivaji Sheshgir v. Channava, AIR 1930 Bom 292 (G). The previous cases of the Allahabad High Court were also to the same effect, vide for example Dirgpal Singh v. Kallu, AIR 1915 All 425 (H).
The latest Full Bench case of the Allahabad High Court reported in Mt. Chunai v. Ram Prasad. : AIR1951All167 has, however, overruled the previous view of the Allahabad High Court, and has definitely taken the view that the omission of the said words has the effect of making good faith on the part of the transferee immaterial under this article. The view of the Calcutta and Nagpur High Courts also is in line with the Full Bench view of the Allahabad High Court, Vide Baikunth Nath Roy v. Ahmedulla : AIR1931Cal113 and Daulat v. Baliram, AIR 1929 Nag 267 (K).
The view expressed in the Pull Bench case of the Allahabad High Court appears to us to toe more reasonable as it takes into account the amendment made in the Act. We are, therefore, of opinion that the claim of the landlords in the present case would be barred by limitation.
7. The net result of the above findings is that First Appeals Nos. 493, 494 and 535 of 1943 are allowed with costs, and First Appeal No. 51 of 1944 is dismissed with costs.