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Ram Das Rae and ors. Vs. Brindaban Ram - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1931All113; 129Ind.Cas.719
AppellantRam Das Rae and ors.
RespondentBrindaban Ram
Excerpt:
- - 17 of 1806 does not apply, the interest of a mortgagee under a deed of conditional sale becomes absolute according to the terms of the contract, by the mere failure of the mortgagor to redeem within the stipulated period, has recently been decided by a full bench of the high court of bengal in the case of sarifunnissa v. 12. it is important and interesting to note that the plaintiffs' predecessors-in-title had made a mortgage by conditional sale in favour of the defendant's predecessors under an instrument dated 26th november 1858. the mortgagees instituted foreclosure proceedings under regulation 17 of 1806. the mortgagors had a year's time to redeem. 470-5-0 to kharag ram and chhatar ram, ancestor of ishri ram, as per detail given below, and in lieu of it, we have executed an.....sen, j. 1. this is an appeal by the plaintiff's and arises out of a suit for redemption of an alleged mortgage, dated 22nd august 1864. the case hinges upon the construction of two documents which were executed on the date last mentioned. by the first document ex. a, ram prasad rae and 26 others declared that they had absolutely sold certain property in patti mathura rae to khushi ram, bhagirathi ram, kharag ram and ishri ram for rs. 2,758-5-3. on the same day, a second document was executed by khushi ram, bhagirathi ram, kharag ram and ishri ram whereby they declared that if the vendors paid off the entire amount due by them within 12 years from the date of the execution of the document, the said sale deed should be returned and the property sold be redeemed.2. the present suit was.....
Judgment:

Sen, J.

1. This is an appeal by the plaintiff's and arises out of a suit for redemption of an alleged mortgage, dated 22nd August 1864. The case hinges upon the construction of two documents which were executed on the date last mentioned. By the first document Ex. A, Ram Prasad Rae and 26 others declared that they had absolutely sold certain property in patti Mathura Rae to Khushi Ram, Bhagirathi Ram, Kharag Ram and Ishri Ram for Rs. 2,758-5-3. On the same day, a second document was executed by Khushi Ram, Bhagirathi Ram, Kharag Ram and Ishri Ram whereby they declared that if the vendors paid off the entire amount due by them within 12 years from the date of the execution of the document, the said sale deed should be returned and the property sold be redeemed.

2. The present suit was instituted on 3rd March 1925, on the allegation that the two documents were integral parts of a single transaction and constituted a mortgage by conditional sale.

3. The suit was resisted inter alia on the ground that the transaction in question was not a mortgage by conditional sale, but was an out and out sale with an agreement to repurchase provided that the sale consideration was paid within 12 years of the execution of the document and that the purchase money not having been paid back within the stipulated period, the claim was time barred. The Court of first instance repelled the contentions of the defendants, held that the transaction amounted to a mortgage by conditional sale and decreed the plaintiffs' suit on payment of Rs. 1,588 within six months from the date of the decree. The suit was directed against 29 defendants of whom defendants 1 to 6 were the persons in actual possession of the property in controversy.

4. The lower appellate Court disagreed with the trial Court and held that the transaction was, as contended by the defendants an absolute sale with an option to repurchase within a certain period. It accordingly allowed the appeal and reversed the decision of the trial Court.

5. The main point argued in the appeal is that on a true construction of the document, the parties had intended to create a mortgage by way of conditional sale. Baibilwafa form of mortgage is very common in northern India. It originated from a desire on the part of certain Mahomedans to evade the Musalman ecclesiastical law, which was opposed to the lending of money at interest and to the obtaining of security for the repayment of principal and interest. The Hindus, although they had no conscientious scruples about receiving and paying interest, also adopted this form of mortgage. As was pointed out by Edge, C, J. in Ali Ahmad v. Rahmatullah [1892] 14 All. 195 the mortgage was:

capable of being effected in different ways, as for instance by a dead which purported to assign the property absolutely, but which contained a stipulation for a right of repurchase, or by two contemporaneous deeds, one of which purported to effect an absolute and unconditional sale, and the other of which was an agreement that the apparent vendor should have a right of repurchase, and that, as a rule, the common lump price mentioned in each of such deeds did not represent the actual price paid by the apparent vendee; but represented that price plus interest calculated frequently at a usurious rate, for the period during which it was agreed that the right of repurchase should subsist, an arrangement which could hardly be consistent with such a transaction, being one of an absolute sale and not one in the nature of a mortgage

6. The doctrine of English law with respect to the equity of redemption after default of payment of the mortgage money appears to have been unknown to the ancient law of India. The said rule appears to have been introduced to certain parts of India by the combined effect of Regulation 1 of 1798 and Regulation 17 of 1806. In Pattabhiramier v. Vencatarow Naicken [1870] 13 M.I.A. 560 their Lordships observed, p. 568:

that this form of security has long been common in India is notorious. The fact is stated in the preamble to the Bengal Regulation 1 of 1798. That such contracts were recognized and enforced according to their letter by the ancient Hindu law appears from several passages in Colebrooke's Digest Vol. 1, pp. 183, 187, 188, and 193.. That these were equally recognised and enforced between Mahomedans is shown by Mr. Bailie in his introduction to his learned work on the Mahomedan Law of Sale. If the ancient law of the country has been modified by any later rule having the force of law, that rule must be founded either on positive legislation or on established practice.

7. Again, at p. 569:

That, in cases to which Regn. 17 of 1806 does not apply, the interest of a mortgagee under a deed of conditional sale becomes absolute according to the terms of the contract, by the mere failure of the mortgagor to redeem within the stipulated period, has recently been decided by a Full Bench of the High Court of Bengal in the case of Sarifunnissa v. Sheikh Inayat Hosssin [1863] 5 W.R. 88.

8. Again at p. 571 their Lordships observed:

What is known in the law of England, as ' the equity of redemption' depends on the doctrine established by Courts of equity, that the time stipulated in the mortgage-deed is not the essence of the contract. Such a doctrine was unknown to the ancient law of India; and if it could have been introduced by the decisions of the Courts of the East India Company, their Lordships can find no such course of decision. In fact, the weight of authority seems to be the other way. It must not then be supposed that in allowing this appeal their Lordships design to disturb any rule of property established by judicial decisions so as to form part of the law of the Forum, whereof such may prevail, or to affect any title founded thereon.

9. Much to the same effect their Lordships ruled in the case of Thumbusawmy Moodelly v. Hossain Rowthen [1876] 1 Mad. 1. Their Lordships observed (p. 16) that

the essential characteristic of a mortgage by conditional sale was that, on the breach of the condition, the contract executed itself, and the transaction was closed and become one of absolute sale without any further act of the parties or accountability between them.

10. This state of things created mischief and resulted, in many oases, grave injustice. The result was that in certain parts of the country the legislature had to intervene:

In Bengal, where the possible mischief that might result from leaving mortgages by conditional sale to take effect according to their tenor early became apparent, the legislature proceedel on sound principles to apply a remedy. By Regn. 1 of 1798 it gave the mortgagor means of avoiding any dispute as to tender and of keeping alive his right of redemption by a payment into Court. By Regn. 17 of 1808 it made provision for redemption and judicial foreclosure by the procedure still in use.

11. The documents in dispute which have given rise to the present suit having been executed in 1864, the provisions of the Transfer of Property Act (Act 4 of 1882) are not applicable. As was observed by the Privy Council in the leading case, the T. P. Act, Section 58, defines a mortgage by conditional sale stating the already existing law and practice regarding it. The present case has to be decided independently of the provisions contained in that section. The two regulations of 1798 and 1806, already referred to, had been extended to the Province of Agra.

12. It is important and interesting to note that the plaintiffs' predecessors-in-title had made a mortgage by conditional sale in favour of the defendant's predecessors under an instrument dated 26th November 1858. The mortgagees instituted foreclosure proceedings under Regulation 17 of 1806. The mortgagors had a year's time to redeem. The year of grace was to expire on 3rd September 1864. Before this time had expired, the two documents dated 22nd August 1864 were executed. There can be no doubt that one of these documents is, according to its tenor, an out and out sale-deed. It provides as follows:

Formerly, we the executants had executed a mortgage by conditional sale on 26th November 1858 in respect of patti Mathura Rai purchased by us out of the entire 16 annas of taluka Firozpur, pargana Kopaohit, the ancestral zamindari property owned and possessed by us for Rs. 1,692-4-0 in favour of Khushi Ram, Sheoraj Ram, Dipa Ram, ancestor of Kharag Ram and Chhatar Ram, ancestor of Ishri Ram. On the basis of it, an order for foreclosure has been pissed in the Miscellaneous Department in favour of the creditors-mortgagees by conditional sale. We approached the said mortgagees . and after making-an account of the consideration money entered in the said document took upon overselves the liability for payment of Rs. 2,758-5-3, out of which Rs. 2,283-0-3 are due to Khushi Ram and Sheoraj Ram, heir of Bhagirathi Ram, and Rs. 470-5-0 to Kharag Ram and Chhatar Ram, ancestor of Ishri Ram, as per detail given below, and in lieu of it, we have executed an absolute sale-deed in respect of the entire ancestral property purchased by us and owned and possessed by us, together with high and low lands, water and forest produce, fruit and timber trees, artizan's cess, fish, groves, ponds, said items and all the appurtenances, to Khushi Ram, Bhagirathi Ram, brother and heir of Sheoraj Ram, deceased, Kharag Singh, son of Duniya Ram deceased, Ishri Ram, brother and heir of Chhatar Ram deceased, residents of Firozpur, pargana Kopachit and have put the vendees in possession of the property sold like overselves. The vendees, the said creditors are now at liberty to get their names entered in the revenue papers on the basis of this document in place of those of us and pay the Government revenue and enjoy the profits thereof. They should either keep the sir lands cultivated by us in their possession or may let it out to whomsoever they like. We and our heirs neither have nor shall have any objection to this, and if we do so, it will be invalid. We have therefore executed this document by way of an absolute sale-deed, in order that it may be of use when needed.

13. This is an absolute transfer of the plenary rights belonging to the executants without any reservation whatsoever. These recitals are followed by a detail of mortgage money due by the vendors to the vendees which need not be reproduced. The agreement to re-convey was not executed by all the vendees. It was presented for registration by Khushi Ram in whose favour Bhagirathi Ram, Kharag Ram and Ishri Ram had executed a power of attorney. The document is not entirely free from ambiguity. It provides as follows:

(1) If the executants of this Sale-deed, out of the income of the collections made by them in the village, after deducting the Government revenue, road cess, subscription, tax, other village expenses such as patwaris rate, village expenses, pay of karindas and the interest on the amount of consideration of the sale-deed, pay any amount to us, the vendees, the said amount shall be credited towards the principal. (2) If they pay off the entire amount due by them on account of the principal within twelve years from the date of the execution of this document, i. e. up to 1281 F, the said sale-deed shall be returned and the property sold shall be redeemed. (3) If any of the executants of the sale-deed pays off, within the fixed time, the entire amount of consideration of his share, he will be entitled to get his share redeemed. (4) The 5 bighas of land and the two plots of land on which stands the house of us, Khushi Ram and Bhagirathi Ram, which have been sold by these very vendors, this day under another sale-deed, ....can, in no way be redeemed (kisi tarah faq ul rahan nahin ho sakta) and shall be the property of us, Khushi Ram and Bhagirathi Ram for good. (5) If the vendors fail to pay the amount of the aforesaid sale deed within 12 years, the absolute sale deed shall, as heretofore, be upheld and maintained. It shall not be returned, nor can the property be redeemed.

14. I we refer to some of the surrounding circumstances, either attending or following the transaction in dispute the facts which stand out in clear relief are: (1) effect was given to the sale deed as such. (2) Mutation followed. The names of the vendees were substituted in the proprietary column in place of the vendors. (3) In the partition proceedings in the revenue Court, the plaintiffs or their pre-decessors-in-title neither repudiated the title of the defendants as absolute owners nor set up their own title. (4) Settlements followed settlements. Plaintiffs or their predecessors-in-title did not intervene for the correction of the records. Before the institution of the present suit, they do not appear to have put forward the contention that the names of the vendees had been wrongly entered in the proprietary columns of the revenue khewats and that the entries should be correct. (5) In 1868, Kharag Ram and Ishri Ram, two of the vendees, repudiated the agreement dated 22nd August 1864 and claimed to have become the absolute owners of the mortgaged property by force of the foreclosure decree on foot of the mortgage, dated 26th November 1858. Their claim was decreed. (6) The successors in interest of the vendees have been dealing with the property as absolute owners, and indeed one of them, Brindaban Ram, executed a perpetual lease of a portion of the property in dispute on 31st May 1921. (7) In certain partition proceedings of the year 1885, some of the successors in interest of the vendors do not appear to have claimed to be the owners of the zamindari property but appear to have put forward a claim to the timber and fruits of a certain grove. The respondents strongly relied upon the aforesaid circumstances as indicating that the transaction entered into between the parties was one of absolute sale and not of mortgage.

15. The plaintiffs, on the other hand, rely upon the fact that the ancestors of some of them had instituted a suit for redemption in the Court of the Munsif for possession of the property on the allegation that the mortgage debt had been satisfied out of the usufruct. This was suit No. 12S of 1880. The Court held that the transaction amounted to a mortgage, but it dismissed the suit on the ground that the mortgage debt had not been discharged. This judgment is only a piece of evidence and is not conclusive.

16. The point, which calls for determination in this case, has come up before the Judicial Committee and the Courts in a variety of cases. We shall mention some of the typical cases.

17. In Situl Pershad v. Luchmi Pershad [1884] 10 Cal. 30, one Chuk Narain Singh executed a patta on 15th January 1864 in favour of his brother Ram Charan in which he purported to grant in mukarrari on perpetual tenure his two annas share in 52 villages at an annual rental of Rs. 497. On the same date the lessee executed an ikrarnama in favour of the lessor and it was stipulated between the contracting parties that when Babu Chute Narain Singh or his heirs paid off the nazrana money of Rs. 30,000 without interest from their own pockets, without taking money from any other person to Babu Ram Charan Singh or his heirs, then Babu Ram Charan Singh or his heirs would return the patta (perpetual lease) and Babu Chuk Narain should have no claim in respect of the mesne profits for the period of the mukarraridar's possession. Their Lordships held that, looking at the surrounding circumstances, among other things, at the value of the property, which appears to have been fairly ascertained, and at the relations of the parties, the transaction was, in fact, what it purported to be, and that there was no sufficient ground for holding it to be what it did not purport to be, namely a mortgage.

18. In Bhagwan Sahai v. Bhagwan Din [1890] 12 All. 387 two documents were executed on 20th February 1835, a date long before the passing of the Transfer of Property Act. Under the first document, Alam Singh and others declared that they had absolutely sold the entire property to Ganga. Din for Rs. 4,000. The second document was executed by Ganga Din, the vendee, who stipulated that

as a matter of favour, mercy, kindness and indulgence that if the vendor would within a period of ten years from the date of the deed pay in a lump sum and without interest the whole amount specified above, I shall accept the same and cancel this valid sale .... In case the whole of the principal is not paid according to the terms of this document the vendor shall not be able to cancel the sale by payment of the principal.

19. Their Lordships founded their decision upon the rule laid down by Lord Chancellor Cranworth in the case of Alderson v. White [1858] 2 De. G. & J. 97, and came to the conclusion that the case was not illustration of a relation between the mortgagor and the mortgagee but was one of an absolute sale with a right to repurchase within a period of ten years. The passage in the judgment of the Lord Chancellor would bear quotation:

These deeds taken together do not on the face of them constitute a mortgage and the only question is whether, assuming the transaction to be a legal one, it has been shown to be in truth such as in the view of a Court of equity ought to be treated as a mortgage transaction. The rule of law on this subject is one dictated by common sense, that prima facie an absolute conveyance containing nothing to show that the relation of debtor and creditor is to exist between the parties does not cease to be an absolute conveyance and become a mortgage merely because the vendor's stipulation that he shall have a right to repurchase...In every such case, the question is: What upon a fair construction is the meaning of the instrument? .... I think that the Court after the lapse of 30 years ought to require cogent evidence to induce it to hold that an instrument is not what it purports to be and I see but little evidence to that effect here.

20. The principal English cases bearing upon the point are on similar lines. These have been collected in Rochefoucauld v. Boustead [1897] 1 Ch. 196, and need not be noticed in detail.

21. In Bal Kishan Das v. Legge [1900] 22 All. 149, Legge purported to sell his estate to his former creditors, namely Balkishan Das and another, for Rs. 1,50,000. Part of the sale consideration . was paid by wiping off a previous mortgage debt in favour of the vendees, dated 8th April 1872. The balance was retained by the vendees for financing expenses of conducting certain factories. The vendees executed a second document in favour of the vendor, where-fey they agreed to resell the property to him, if he paid a sum of Rs. 1,65,000 on 1st March 1876. It was further stipulated that if the estimate of the expenses on the indigo factories should be altered from year to year by the concurrence of the parties, the vendor should be liable to pay, along with the sum specified above, whatever sum may be found due at this time. The High Court held that the transaction amounted to a mortgage by conditional sale. The judgment is reported in Bal Kishan Das v. Legge [1897] 19 All. 434. The Privy Council affirmed the decision except in one particular. It was held by the Privy Council that the case had to be decided on a consideration of the documents themselves with only such extrinsic evidence of circumstances as might be required to show the relation of the written language to existing facts-oral evidence for the purpose of ascertaining the intention of the parties to the deeds being inadmissible under Section 92, Evidence Act, and that there were contained in the deeds indications that the parties intended to effect a mortgage by conditional sale. The ratio for the decision has been explained in Jhanda Singh v. Wahiduddin A.I.R. 1916 P.C. 49:

The real ground of the decision appears to have been this that the real effect of the deeds was to consolidate the debt due on the factory account with the principal sum mentioned in the first deed and thus to give the bankers a security on the taluk for the debt due on the factory accounts. This, as Lord Davey delivering the judgment of the Board said, gives the transaction the character of a mortgage so far as the factory accounts are concerned. And if it is to some extent a mortgage, it may well be held to be so entirely.

22. Jhanda Singh v. Wahiduddin A.I.R. 1916 P.C. 49 was an appeal to the Privy Council from a Full Bench decision of this Court reported in I.L.R. 33 All. 585. A document purporting to be an out and out sale deed was executed on a certain date, and seven days later, a second document was executed by the vendee, whereby ha covenanted to reconvey the property if the vendors paid back the purchase money after the lapse of nine or ten years from the date of that sale deed. The two deeds were separately stamped and were registered on different dates. On a first appeal being preferred to the High Court, there was a difference of opinion between Stanley, C. J., and Banerji, J., the former holding that the transaction was one of sale with an agreement to repurchase and did not amount to a mortgage by conditional sale. On an appeal being preferred under a section of the Letters Patent, the case eventually came up before a Bench of three Judges. The learned Judges upheld the decision of Stanley, G. J., and came to the conclusion that the transaction did not amount to a mortgage. We are not prepared to endorse the following proposition enunciated by Richards, J.:

There can, in my opinion, be no doubt that if the two deeds were of even date an almost irresistible presumption would arise in favour of the transaction being a mortgage.

23. The intention is to be inferred from the terms of the document and from the surrounding circumstances. The intervening period between the execution of the two documents may in some cases have a relevancy but there can be no irresistible presumption in favour of a mortgage from the mere fact that the two documents were executed on one and the same date. Indeed Lord Atkinson observes:

If no such agreement was made before the deed of sale was executed and the latter deed was an after-thought, only suggesting itself after the sale deed had been executed and delivered, it would not suffice. The execution of the deed of sale and of the contract of repurchase would then form two separate and independent transactions, not two connected and interdependent parts of one and the same transaction.

24. Their Lordships came to the conclusion that the transaction was an out and out sale and not a mortgage by conditional sale. In Narasingerji Gyanagerji v. Parthasaradhi A.I.R. 1924 P.C. 226 two instruments were executed by the Raja of Kalahasti on 4th August 1908. Under one of these documents, the Raja agreed to convey by a private sale certain villages belonging to him for rupees six lacs to the appellant and the villages were conveyed to him subject to certain conditions. The second document was an agreement for a reconveyance of the villages to the Raja and provided that 'the vendor agrees to sell and the purchaser to purchase the villages mentioned in the conveyance for rupees six lacs the said sum to be paid by the purchaser to the vendor on 31st August 19;3 or 31st August 1914 and not earlier.'

25. An important fact noticed in the case was that the price named which was an amount immediately required to prevent a Court sale had been settled without bargaining; it was absurdly low, less even than what the property would have realized upon a public sale. Their Lordships, without reference to the oral evidence other than such as was held admissible in Bal Kishan Das's case considered the nature of the transaction having regard to the documents in controversy and the surrounding circumstances. They came to the conclusion that the transaction was a mortgage by conditional sale.

26. In Ghulam Nabi Khan v. Niazannissa [1911] 33 All. 337, an instrument purporting to be an out and out sale in favour of the respondent was executed on 12th August 1894. On the same day, a second document was executed between the parties which provided that if the purchase money were paid within five years, the transferee would reconvey the property to the vendor. Reliance was placed upon Section 58, T. P. Act. Their Lordships held that the sale deed represented and was intended to be an oat and out sale. Following Bhagwan Sahai v. Bhagwan Din [1890] 12 All. 387 they held that a stipulation for repurchase would not of itself convert a case of sale into one of mortgage and that to make a mortgage there must be a debt as held in Vasdeo v. Bhau [1897] 21 Bom. 528.

27. In Balbhaddhr Rai v. Brijraj Bai [1911] 10 I.C. 630 there was a single document which purported to be a sale but it contained a, clause to the effect that if within six years from the date of the transaction, the amount secured was paid back the sale would become void. It was held by Richards, C. J. and Banerji, J., that the document exactly fulfilled the requirements of the definition of a mortgage by conditional sale given in Section 59, Clause (c), T. P. Act. The document in question was dated 23rd March 1871. Reference was made to the observation of the Privy Council in Bal Kishan's case:

It may be assumed that the framers of its (the Transfer of Property Act) in this section intend to state the existing law and practice of India.

28. In Mahomed Hamiduddin v. Faqir Chand [l920] 42 All. 437 two documents were executed on 21st July 1883, one of which was a sale deed in favour of Lala Faqir Chand and Lala Baldeo Sahai for Rs. 6,125 and the other was an agreement in favour of the vendors. The vendees stipulated that the vendors could, on payment of Rs. 6,125 within five years from the date of the execution of the agreement get back the property. A suit for redemption was instituted by the heir of one of the vendors on 12th September 1916. It was held that having regard to the terms of the instruments, the transaction amounted to a mortgage by conditional sale. It was further held that the terms, that the parties were at the time of the demand for reconveyance to go through the accounts of the realization of rents by the vendees, and the vendors were to get ten annas per cant per month interest on the consideration money, and a price for reconveyance was to be determined after casting of accounts, showed clearly that the relation of creditor and debtor existed between the parties; and that the two documents taken together showed that the transaction which the parties entered into was a baibulwafa or a mortgage by conditional sale.

29. In Mohindra Man Singh v. Maharaj Singh A.I.R. 1923 All. 48 plaintiff had executed an out and out sale dead on 30th January 1918 in favour of a third party whereby he transferred all his interests in mahal Girwar Singh of village Salehdi. The document contained a provision that if the vendor within six years in the month of Jeth paid the amount of sale consideration, namely Rs. 3,000, and also the arrears of rent which might then be due against the tenants, the vendee should reconvey the vended property to him but otherwise the property should not be reconveyed. In the body of the document' the consideration for the dead of transfer was described as mortgage money. A number of facts ware taken into consideration to justify the conclusion that the transaction amounted to a mortgage by conditional sale. But reliance was chiefly placed upon the definition of such mortgage as given in the Transfer of Property Act. This appears to have been a very special case and does not lay down any general rule of law.

30. In Jagannath v. Gauri Shanker : AIR1926All670 there was a single instrument executed on 15th April 1879, in favour of Gauri Shanker for Rs. 504-4-0. The document purported to be a sale deed which contained an agreement that if and when the executant handed over half the price namely, a sum of Rs. 252-2-0, to Gauri Shankar he would return that portion of the property to the executant. It was held that the transaction amounted to a mortgage by conditional sale. We are not prepared to endorse the following proposition in its unrestricted form:

In all cases where there is a sale and there is an agreement to retransfer the property, the two transactions must be treated as part and parcel of one and the same transaction.

31. We are of opinion that whether or not the two transactions are integral parts of the same transaction connected and interdependent or whether they are disconnected and dissociated is in each case a question of fact which has to be ascertained from the evidence produced in the case. No question of legal presumption is involved in the case as is abundantly clear from the pronouncement of the Privy Council in Jhanda Singh's case which we have already adverted to (I.L.R. 38 Allahabad 570 at p. 575).

32. In Lalta Pershad v. Jagdish Narain : AIR1927All137 three documents were executed in the 24th July 1920. One of these documents, upon its face value, was an out and out sale deed. The second was an agreement to reconvey provided that the purchase money was repaid on the expiration of three years with interest or without interest in the event of the buyer having received interest in full in the shape of rent. The third deed was a lease by the buyer to the seller of the property, dealt with in the first two deeds. There was no evidence to show what was the intrinsic value of the property at the date of the execution of the documents. ' It was held that the three documents formed part of one and the same transaction and amounted to a mortgage by conditional sale. Kanhaiya Lal, J., was particularly impressed by the fact that there was a stipulation about charging interest on the purchase money:

There could hardly have been any question about charging interest on the purchase money, if the transaction had been an out and out sale, much less for allowing the vendors to remain in possession of the house, subject to the payment of that interest half-yearly in the shape of rent or for requiring them to execute all repairs and be responsible for its value, if it fell into ruins, or by reason of any unforeseen accident or any other cause.

33. Ashworth, J., relied upon the language of Section 58 (c), T. P. Act:

In India, unless we can find that the promise to resell was in consideration of the sale, that promise will be deemed to be without consideration and unneforceable. There is a strong presumption that parties to a document intend their covenants to be enforceable . . . Accordingly I hold that since the passing of the Transfer of Property Act, the teat to be applied in such cases is merely whether the parties, from the language of the deed, are to be deemed to have intended that the covenant to resell should form a part along with the purchase money of the consideration for the execution of the ostensible sale. The language of the deed will be irrelevant for any other purpose.

34. With great respect, we find it difficult to follow this reasoning. An agreement to reconvey the property cannot be ignored as nudam pacturn and as such void of any legal effect. The reciprocity between the parties is evidence of consideration. An agreement of this description is not without consideration and is capable of being specifically enforced.

35. In Bishambhar Nath v. Muhammad Ubedullah Khan A.I.R. 1923 All. 586, there was a single document which, on the face of it, was a sale deed but contained a provision that if the purchase money and any arrears of rent, which happened to remain due at the time of repayment were repaid to the vendee on the last date of Jeth, 16 years after the purchase, the vendors would be entitled to get back the property. No right of repurchase was reserved to the vendors except upon the fulfilment of the condition that the payment was to be made on a particular date. It was held that the transaction was a sale with a condition of repurchase and not a mortgage by conditional sale.

36. It was not suggested in this case that the price paid under the deed was in any way inadequate to the value of the property at the time when the sale was executed. The case is not dissimilar to that of Jagannath v. Gauri Shanker : AIR1926All670 and Mohindri Man Singh v. Maharaj Singh A.I.R. 1923 All. 48. It was contended that the terms of the instrument satisfied the requirements of Section 58 (c), T. P Act. This contention was overruled with the following observations:

A reference to Section 58 (c) is sufficient to show that this is a misreading of the law. A mortgage by conditional sale is there defined as a mortgage in which the mortgagor ostensibly sells the property on condition that on default of payment of the mortgage money on a certain date, the sale shall become absolute, or on condition that on such-payment, (i.e., payment of the mortgage money) being made, the sale shall become void, or on condition that on such payment (again referring back to the payment of the mortgage money) being made, the buyer shall transfer the property to the seller...

The repetition of the terms 'payment of the mortgage money' or 'such payment' in each clause of the definition makes it clear that before a document can be a mortgage by conditional sale it must first be a mortgage, i. e., the property must be transferred as security for a debt The definitions of a mortgage in Clause (a) of the section and the subsequent clauses are merely particular cases of this definition. The neglect of this obvious fact has, in some cases, led to serious confusion.

37. Reference is then made to a Full Bench decision of the Madras High Court in Muthuvelu Mudaliar v. Vythilinga Mudaliar [1919] 42 Mad. 407.

38. We are not quite sure that a correct interpretation has not been put upon Section 58 (c). The argument set out above is on one of substance; but this aspect of the case has not been considered in Lalta Pershad v. Jagdish Narain : AIR1927All137 , Jagannath v. Gauri Shankar : AIR1926All670 , Mohindra Man Singh v. Maharaj Singh A.I.R. 1923 All. 48 and Ramcharan Lal v. Dharam Singh A.I.R. 1924 All, 444. In order to bring a case within the definition, there ought to be a stipulation that on default of the payment of the mortgage money on a certain date the sale shall become absolute. If the condition be there, it necessarily follows that primarily the consideration for the document is mortgage money,' an expression which connotes the existence of a debt as also of a security.

39. Ram Charan Lal v. Dharam Singh A.I.R. 1924 All, 444 was decided by Lindsay and Sulaiman, JJ., on the same lines as the cases of Mahindra Man Singh v. Maharaj Singh A.I.R. 1923 All. 48 and Jagannath v. Gauri Shanker : AIR1926All670 . The decision in Kirpal Singh v. Sheoambar Singh : AIR1930All283 and Mathura Kurma v. Jagdeo Singh : AIR1927All321 are also on the same lines and founded upon much the same reasoning.

40. In Modhu Sudan Das v. Rhidoy Moni Baistabi [1902] 6 C.W.N. 192 the plaintiff had executed a sale deed in favour of the defendant of a certain plot of land on 27th January 1886, and on the same date the defendant had executed an agreement protnising to reconvey the land to the plaintiff if the amount of the purchase money, together with interest at 12 per cent per annum, was paid within the period of three years. It was held that the transaction was one of sale and not of mortgage and that the stipulation as to the payment of interest did not conclusively indicate that the transaction was not an absolute sale, but amounted to a mortgage. Certain criteria enumerated by the trial Court were approved:

(1) That the price paid was a fair and proper price for the land. (2) That the defendant was let into immediate possession. (3) That the defendant received the entire profits for her own benefit. (4) That the cost of preparing the deed was borne by the defendant. (5) That there was no provision in the deed giving the defendant power to recover the sum named as the price for the repurchase and (6) That the period stipulated for a repayment was a short one, viz , three years.

41. In Kinuran Mondol v. Nitye Chand Sirdar [1907] 6 C.L.J. 208 two documents were executed by the parties on the same day, under the first of which the property was declared to have been sold for Rs. 375 which was alleged to be the proper value of the property. The purchasers were to Be entitled to all the rights of the vendors and to possess and enjoy the property with their heirs, sons and grandsons, etc. The second deed provided that if the sum of Rs. 375, together with costs, was paid to the vendee within 7 years, the vendee should return the holding to the vendor. It was held by Maclean, C. J. and Holmwood, J. that the two documents together did not constitute a mortgage. It was held inter alia that 'a certain date of payment' was an essential element of a mortgage by conditional sale within the meaning of Sub-section (c), Section 58, T.P. Act. We doubt the correctness of this proposition in the form in which it has been enunciated.

42. In Abdul Gaffur v. Sheikh Jamal [1913] 21 I.C. 90 the question in controversy was the interpretation of a kobala dated 30th June 1876. the terms of which are set out at p. 1053. The 'plaintiffs contended that the document was a mortgage by conditional sale. The case was initially heard by Digamber Chatterji, J., who held that the transaction amounted to a mortgage by conditional sale and not an out and out sale. Stress was laid upon the fact that the consideration was not adequate and also upon the fact that

one of the tests applied by Mahomedan lawyers for determining whether the document is a kobala, or a baibilwafa is that a short term indicates a kobala and a long term a security.

43. This judgment was upheld in appeal under the Letters Patent. In Mahomed Muzaffar Ali v. Asraf Ali [1914] 25 I.C. 93 there were three contemporaneous documents, namely a kobala, a kabuliyat and an ikrarnama. It was contended that the cumulative effect of these documents was to create a mortgage by conditional sale. This contention was accepted in view of the facts that the money advanced was considerably lower than the true value of the property and that the plaintiff hid remained in possession of the property although under a lease,

44. In Ganesh Mudaliar v. Ganansikhamani Mudaliar : AIR1925Mad37 , the property in dispute was conveyed for its full value on 14th July 1902. Part of the consideration was applied in discharge of a pre-existing mortgage in favour of the vendee. On the same date, the vendee agreed to reconvey the property to the vendor on payment of the consideration recited in the sale deed within eight years. It was held that the transaction did not amount to a mortgage by conditional sale because there were no indications either in the documents or in the surrounding circumstances to show that there were to be a relation of debtor and creditor between the parties or that the property was to be held as security for the debt.

That there is no presumption in favour of a mortgage by conditional sale is clearly laid down in the Full Bench case in Muthuvelu Mudaliar v. Vythilinga Mudaliar. It is not the form of the document but the intention of the parties which is the deciding factor, and it rather lies on the party who contends that a document prima facie connoting an absolute sale is really a mortgage to prove his contention.

45. In Bapu v. Bhavani [1898] 22 Bom. 245 there was a single instrument, dated 30th June 1886, which recited that the property which was already held in mortgage by the so called vendees was sold in consideration of Rs. 2,500 and that the vendees were entitled to enjoy the property for ten years in any manner they liked. If the expiration of that term, the vendors paid Rs. 2,590 they were entitled to get back the property. The suit was instituted in 1893 for redemption. It was held that the transaction amounted to a mortgage:

The transaction is in the body of the instrument styled a sale, but that though a circumstance to be taken into consideration is not conclusive. The test is whether after its execution there continued to be a debt from the so-called vendors to the vendee or whether the pre-existing debt became extinguished on the execution of the instrument.

46. It is to be remarked that the vendees in their account books had entered the Rs. 2,500 as a debt due from the so-called vendors.

47. In Maruti v. Balaji [1900] 2 Bom. L.R. 1058 two documents were executed on 27th April 1885. The first document purported to be a sale deed for Rs. 450. Under the second document the defendant agreed to relinquish his claim at the end of ten years on the debt being paid off. The exact terms of this instrument are set out in the judgment of Sir Lawrence Jenkins at p. 1061. The material portion of the agreement may be reproduced:

It is agreed between us in this matter that in the event of your repaying the money without interest after the season and at the end of a year any time after five and within ten years, I should accept it and return the land to you. I therefore execute this deed of agreement that if you three according to the said agreement repay me the loan without interest the said Rs. 450 in one sum after five years from this year and within ten years from this date I shall sell you the said land according to the boundaries described above. After ten years there will remain no connexion between us under this agreement.

48. It was held by Jenkins, C.J., that Rs. 108 out of the sale consideration represented interest and not rent;

But it is a self evident proposition that there could not have been interest from the first unless there was a debt therefore the finding that the Rs. 108 was interest involves the conclusion that the Rs. 450 on which it was interest was a debt'....The fact that it was a debt excludes the idea that the transaction was at its inception an out and out sale so that there is no alternative but to treat it as a mortgage.

49. Ranade, J. held that where the apparent purchaser treats the consideration money as a continuing debt or where the deed gives him a right to recover the money with interest or where the sum paid falls far short of the value of the property there are indications which determine the transaction to be a mortgage though it may be described as a sale.

50. In Madhavrao Keshavarao v. Sahehrao Ganpatrao [1915] 39 Bom. 119 there were two documents of even date, namely 7th November 1922. The first document purported to be an out and out sale of the land in dispute for Rs. 300. Under second document the vendee agreed that if the defendant vendors repaid Rs. 300 in five years he would resell the land to them. Three years later the defendants took possession of the land as tenants of the plaintiffs and continued to pay them Rs. 18 annually as rent. In 1910 the plaintiffs who were the ostensible vendees brought a suit for ejectment. The defendants pleaded that the land was held by the plaintiffs as mortgagees and that the defendants were entitled to redeem. This contention was upheld. The Court took into consideration the fact that the name of the vendor (defendant 1) continued to be recorded in the revenue papers presumably in the proprietary column and that there was evidence to show that Rs. 300 was a wholly inadequate price for the land.

51. In Kastur Chand Lakhmaji v. Jahhia Padia Patil [1916] 40 Bom. 74 three documents were contemporaneously executed. The first was a sale deed for Rs. 2500. The bulk of the sale consideration consisted of old bond debts. Under the second document the defendant vendees agreed to reconvey the lands to the plaintiffs, if they fulfilled certain conditions. These conditions are set out in detail at p. 81 of the report. The third document was a rent note. There are two terms in the agreement to reconvey which arrest our attention:

(1) The right which you have obtained from us in virtue of this writing of purchasing the above property is given by us to yourself alone. '2) With respect to the above property if we are obliged by any means to spend any sum upon it or if you hereafter borrow money from us we shall receive all these amounts with interest first and then only we shall pass to you a sale deed of the above property.

52. The Court came to the conclusion that the transaction amounted to a mortgage by conditional sale. Although the mere agreement to reconvey did not necessarily signify that the transaction was a mortgage, the factors which had to be taken into account were firstly, the notorious reluctance of Indian peasants to sell their lands and secondly, the terms of the document that the repayment of Rs. 2,500 and the repayment of any fresh advances were to be on the one and the same footing showing thereby that the relation of debtor and creditor was continued and lastly that the assessment due to Government on the land continued to be paid by the plaintiffs as well after as before this transaction of ostensible sale.

53. In Ganpat Rao Appaji v. Bapu Tukaram [1920] 44 Bom. 710 it was held by Macleod, C.J., and Crump, J., that on general principles it would be extremely undesirable after the document had stood more than 50 years to allow evidence to be led to show that the document was not what it appeared on the face of it. It was further held:

that where a document itself is a perfectly plain, straightforward document no extrinsic evidence is required to show in what manner the language of the document is related to existing facts.

54. The trend of authorities indubitably leads to the following conclusions as settled propositions of law:

(1) Where there is a controversy as to whether the transaction is a sale or a mortgage by conditional sale, the matter has primarily to be determined upon a construction of the document or documents concerned.

(2) Oral evidence as to the intention of the parties to the deeds is not admissible except within the limits imposed by Section 92, Evidence Act.

(3) Evidence aliunde or intrinsic evidence of circumstances as might be required to show the relation of the written language to the existing facts may be admissible.

(4) Where the document itself is free from ambiguity and is a perfectly plain and straightforward document, the necessity of any extrinsic evidence to explain the relation of the written lauguage to existing facts does not and cannot arise.

(5) Where a document is ostensibly a sale deed and has held its ground as such for a long course of years the onus of establishing that the transaction is not what it purports to be lies upon the party who disputes its nature and character.

(6) An absolute sale-deed does not cease to be so merely because the vendor stipulates that he shall have a right to repurchase. If a dead of sale and a contract of repurchase be two separate and independent transactions and not two connected and interdependent parts of one and the same transaction they do not amount to a mortgage by conditional sale and do not satisfy the conditions of Section 58 (c), T. P. Act.

(7) It is permissible to appeal to some of the surrounding circumstances for determining the real nature of the transaction. If the ostensible vendee out of courtesy and kindness agrees to convey the property this will be an important circumstance to indicate that the transaction was a sale and not a mortgage. In order to constitute a mortgage, there must be a debt and there must be a security. A stipulation to pay interest on the amount of the purchase money may be an indication of the fact that the transaction is a mortgage. If the entire transaction shows an accountability on the part of the ostensible vendee this would warrant an inference in favour of a mortgage. It may also be an important factor as to whether the sale} consideration represents the actual value of the property. These and other cognate tests may be reasonably applied for determining the question in issue between the parties.

55. We have already noticed that the first document Ex. A is an out and out sale deed. The agreement Ex. 2 is an extremely obscure and ambiguous document. We are of opinion that the words 'wapsi' and 'infiqaq' used in this instrument are convertible terms and we are not inclined to attach much significance to the use of the word 'infiqaq' in Clauses 2 and 3 of the agreement. If the transaction was intended to be a mortgage we do not understand why the mortgagees are to be allowed to remain in possession of five bighas of land and two other plots of land on which were located the houses of Khusi Ram and Bhagirathi Ram, in spite of the redemption of the mortgage.

56. The plaintiffs' predecessors-in-title had executed a mortgage by conditional sale of the property in dispute on 26th November 1858 in favour of the defendants. What could have been the object of executing two documents instead of one with a view to create a mortgage by conditional sale over the same property in favour of the same mortgagees or their successors in interest? We have already seen that the plaintiffs or their predecessors-in-title except once in the year 1880, never repudiated the title of the defendants as the absolute owners of this property. The vendees and their successors were recorded in the revenue papers as full owners. The plaintiff or at any rate, some of them took a perpetual lease of a portion of the vended property from the defendants. In view of the clear tenor of the two documents and of the surrounding circumstances we are clearly of opinion that the transaction in question was one of absolute sale and not of mortgage, We therefore dismiss this appeal with costs including in this Court fees on the higher scale.


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