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Misri Lal Vs. Debi Charan - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1932All561
AppellantMisri Lal
RespondentDebi Charan
Cases ReferredDhanukdhari Singh v. Suresh Singh
Excerpt:
.....of the mortgagor and there was absence of necessity. to avoid all such extra trouble, expense and risk, a mortgagee may well give up a portion of his mortgage money than insist upon obtaining a paper decree for the full amount. the marginal note in section 11 of the act shows that the section contemplates cases where the sale price entered in the deed has not been fixed in good faith. 400. both the original mortgagor and the vendor were members of joint hindu families, in my judgment the learned munsif was perfectly justified in expressing the opinion that: 400. after pointing out that the property contained a good number of trees and a large area of fallow land it has remarked:.....market value of such property, on the allegation that rs. 1,200, the consideration entered in the sale deed executed by defendants 2 to 7 in favour of defendant 1, does not represent the actual price and has been fictitiously mentioned to deprive the plaintiff of his right of pre-emption. the court of first instance decreed the claim on payment of rs. 400 on a finding that the price entered in the sale deed was not the actual price. the lower appellate court took a contrary view on the question of the price shown in the sale deed being the actual price; and in allowing the plaintiff's claim to pre-emption it made him liable to pay the entire sum of rs. 1,200. the only question in dispute in second appeal is whether the lower appellate court was justified in holding that the sensible.....
Judgment:

Niamatullah, J.

1. This is a plaintiff's appeal arising out of a suit for pre-emption brought by him for recovery of possession of the property in suit on payment of Rs. 400, which is alleged to be the market value of such property, on the allegation that Rs. 1,200, the consideration entered in the sale deed executed by defendants 2 to 7 in favour of defendant 1, does not represent the actual price and has been fictitiously mentioned to deprive the plaintiff of his right of pre-emption. The Court of first instance decreed the claim on payment of Rs. 400 on a finding that the price entered in the sale deed was not the actual price. The lower appellate Court took a contrary view on the question of the price shown in the sale deed being the actual price; and in allowing the plaintiff's claim to pre-emption it made him liable to pay the entire sum of Rs. 1,200. The only question in dispute in second appeal is whether the lower appellate Court was justified in holding that the Sensible consideration was the actual price. Some transactions, anterior to the sale in question, have a material bearing on the controversy and should be noted in chronological order. One and half biswas share of Nagla Balli belonged to Baji Lal and Sughar Bahadur Singh, the share of the former being one biswa and that of the latter half a biswa. Both of them hypothecated their shares under a deed, dated 4th May 1907, to one Chet Ram for Rs. 300. By a deed, dated 13th June 1920, Chet Earn assigned his rights under the hypothecation bond to Debi Charan, defendant 1, for Rs. 350, though a much larger sum was due under the deed. There is little doubt that Chet Earn sold his rights for less than the sum then due to him, because he did not expect to recover all his dues, having regard to the value of the property and the personal remedy against the mortgagor and his other property being barred by limitation.

2. Baji Lal, one of the mortgagors, having died in the meantime, his heirs sold his one biswa share on 29th April 1926. This is the sale in respect of which pre-emption is claimed in the present case. The deed reoites that two-thirds of the mortgage-money then duo was Rs. 1,150 and that a sum of Rs. 50 was paid in cash by the vendee so as to make a total of Rs. 1,200, which was the price agreed on between the parties. It should be mentioned that Debi Charan, who as shown, had become the owner of one biswa, had the remaining half-biawa sold in execution of decree obtained by him on foot of the mortgage and purchased it himself. It is however not known for how much it was sold at the auction. The Munsif's view proceeds on the reasoning that the market valua of the property sold, that is, one. biswa, is not more than Rs. 400 calculating it on the basis of certain transactions he refers to as exemplars, and that therefore prima facie, it could not be the actual price. Starting with that assumption, he threw the burden of proof on the vendee to establish 'that the property in suit is worth Rs. 1,200.' Ho then winds up with the observation that

the defendant vendee was out of pocket for Rs. 400. The market value of the disputed property comes to Rs. 400 or so.

3. Accordingly, he decreed pre-emption on payment of Rs. 400. There is a palpable error in this treatment of the case. Assuming the plaintiff discharged the initial onus, which undoubtedly lies on him, the vendee is to establish, if he can, the actual price agreed on between the parties to the transaction and not, as the Munsif thinks, that the property is worth the amount entered in the sale deed as the price. The learned Subordinate Judge, on the other hand, took the view that the ostensible consideration mentioned in the sale deed was the actual price and that there was therefore no occasion to ascertain the market value of the property. As I read his finding, it implies that the plaintiff failed to discharge the initial onus, which admittedly lay on him. Unless the finding of the learned Subordinate Judge is vitiated by some error of law or is not supported by any evidence, it must be accepted in second appeal, which must fail on the initial point, namely, that the ostensible price is the actual price. It is however argued, on the authority of Jagat Singh v. Baldeo Prasad A.I.R. 1921 All. 290 that where personal remedy under a mortgage is barred and the mortgage money greatly exceeds the market value of the property sold to the mortgagee himself, who pays a small amount over and above the mortgage money as the price of the property, the price should be deemed to be no more than the market value plus the cash paid. The following passage is relied on:

We agree with the argument raised on behalf of the appellant that the Vendee is entitled to recover from the pre-emptor the full amount that he has in good faith actually paid for the property purchased, but we have to see what the appellant vendee did in the present case actually pay. Ho gave up the debt due on the bond plus Rs. 100 for the property. The value of the debt duo on the bond is clearly limited to the value of the property in question. Nobody would have given to the vendee a price for his mortgage debt greater than the security afforded by the property. Just as a time barred debt is practically of no value, so a mortgage debt where the personal remedy is barred cannot be greater in value than the security itself. No one in the open market would have given the appellant anything more than Rs. 1,250 for his mortgage debt. It therefore is clear that the amount which the appellant paid for the property is not the amount which was due on the face of the mortgage-deed but the amount which was recoverable under the bond from the security. Nothing more than the market value of the property could have been recovered.

4. The ratio decidendi of the above case, which was governed by custom, in the matter of pre-emption, is that the charge should be considered to be a property, and in judging of its worth for the purpose of pre-emption its face value should, be disregarded and its value should be determined with reference to what it was likely to fetch in the open market. This way of looking at it is destiuctive of the right of pre-emption under the Agra Preemption Act, which limits pre-emption to sales; and to treat a charge as a property of unascertained value when given in consideration of a transfer of the land on which it exists is to give to the sale the character of an exchange. If a pre-emptor insists on the charge bring valued and refuses to accept it at its face value as the price of the property sold, he is at once out of Court in cases governed by the Pre-emption Act. The case may be different where pre-emption is claimed in terms of a custom which allows pre-emption in cases of exchange as well. The report of the judgment does not show whether the custom which governed the right of pre-emption in that case entitled the pre-emptor to pre-empt on payment of the actual price agreed on between the parties to the transaction of sale, as in the case under the Agra Pre-emption Act, or on payment of the fair value of the property, regardless of the actual price which, nevertheless, should be taken as indicating the fair value of the property, and whether according to the custom relied on in that case exchange could be the subject of pre-emption.

5. If the custom applicable in that case was substantially the same as the provisions of Section 17, Pre-emption Act, I respectfully dissent from the view and the reasons on which it proceeds. The word 'sale' occurring in the Agra Pre-emption Act is to be taken as defined in Section 54, T.P. Act, vide Section 4(10), Agra Pre-emption Act. The word 'price' occurring in the definition of sale means money only. If charge included in the price be considered to be of fluctuating value according to market rate, it ceases to be money and is to all intents and purposes a commodity given in exchange for the land transferred to the owner of the charge. We are not dealing with a case in which the mortgage money included in the price has been inflated to defeat pre-emptions nor should I be understood as holding that in every case the amount due on paper, if mentioned in the sale deed, must be accepted as the true consideration. No question of bad faith arises in a plain case like the one before us, in which it is not disputed that the sum of Rs. 1,150 was a real charge on the property sold, and the ostensible price cannot be considered to be otherwise than the actual price merely because it greatly exceeds what the property can fetch in the open market. The words 'actual price' in Section 17, Agra Pre-emption Act, means the price which the vendee agreed to offer and the vendor agreed to accept as consideration for the sale. If the mortgage money included on the price was in fact due and both the vendor and the vendee agreed that that amount be made part of the consideration it must be regarded as price in its entirety.

6. The charge gives to the charge holder a whip hand in the matter of making a purchase of the property in competition with others, and its value cannot be judged solely with reference to the amount which can be recovered by sale of the property in open market. Much will depend upon the extent to which there is keen competition amongst the intending purchasers. If there is such competition, the mortgagee being one of the bidders, no one can purchase unless he is willing to pay more than the encumbrance. If the mortgagee obtains a decree for sale and the property is put to auction, he can offer the whole encumbrance as his bid; and if no one offers more and the property is consequently sold to him, he is entitled to have the encumbrance set off against the price. If a co-sharer were to exercise his right, of pre-emption under Order 21, Rule 88, Civil P.C. there is no doubt he has to pay the whole of the encumbrance included in the price for which the property had been knocked down to the mortgagee. I fail to see why the position should be-different if he does exactly the same thing in taking a sale directly from the mortgagor out of Court. Again, if the mortgagee purchases from the mortgagor only the equity of redemption, instead of the^ property free from encumbrance the pre-emptor, if he takes the equity of redemption will have to pay the entire charge. Can it make any difference if the mortgagor and the mortgagee take an account of what is due under the mortgage and fix the price with reference to the charge and an agreed cash payment?

7. It was said in the course of arguments that ordinarily a great disparity between the market value of the property sold and the ostensible price should suffice for the Court to form an 'opinion that the ostensible price was not the actual price' and that on proof of such disparity the Court should call upon the vendee to prove what the actual price was. This may be true where nothing else appears in the evidence to rebut the inference arising from the disparity between the ostensible price and the market value. But where it is equally clear, for instance, that the vendee had reason to offer a fancy price or that the price included mortgage money Charged on the property and to be in fact due but not recoverable otherwise than out of the sale proceeds, the fact that the ostensible price is more than the market value of the property will, in general, not be enough to throw the burden on the vendee; for, if the onus be shifted, the vendee can prove no more than what is admitted or proved, namely, that the vendee's special requirement induced him to pay a fancy price, or that the price included money charged on the property and not otherwise recoverable. It will be a highly objectionable mode of dealing with the evidence if we seize on only the disparity between the ostensible price [and the market value, ignoring other circumstances simultaneously appearing and explaining the disparity, and to reserve consideration of them for the next step in the case, namely, to find whether the vendee has succeeded in discharging the onus laid on him by proof of the market value. The evidence should be taken as a whole and if it does not suffice to prove prima facie that the ostensible price is not the actual price, the issue is answered against the pre-emptor.

8. In my opinion there is nothing objectionable in the vendor and the vendee including in the price the whole of the mortgage money if in fact due, though they are conscious of the prohibitive effect the price fixed would have on the right of pre-emption. Such a result is inevitable if we accept the existence and the validity of the charge. There is no fraudulent device in such a transaction, which should be distinguished from a class of cases in which the element of fraud is present. For instance, where the transaction settled between the parties is one of sale but to defeat pre-emption, first a mortgage deed containing stipulations calculated to raise the amount of mortgage money in a few years is executed and afterwards a sale deed is executed in consideration of the accumulated mortgage money which greatly exceeds the market value of the property. In such cases the deeds are part of a fraudulent device to conceal the transaction of sale which had been completed long before the sale deed, indeed, even before the mortgage deed came into existence. Again, if the vendor and the vendee misrepresent in the sale deed the amount due under the mortgage deed by adopting a wrong method of calculation or otherwise and thus inflate the price a different consideration will arise. Nothing in the nature of a fraudulent device can be suggested in the present case. The vendee was an assignee of the mortgage which had taken place 19 years before the sale and, as already mentioned, it is not suggested that Rs. 1,150 was not due in respect of two-thirds of the mortgage.

9. No part of the mortgage money being fictitious and the mortgagor and the mortgagee (vendor and vendee) having agreed that it was due it is not conceivable why the vendee should have omitted to include part of it in the price, for, if he did, he must have either relinquished it gratuitously which is not a permissible assumption, or he allowed part of it to stand, which is ordinarily an impossible position. At least some plausible suggestion of fraud ought to be forthcoming before the good faith of the transaction can be doubted. It is clear that in Jagat Singh v. Baldeo Prasad A.I.R. 1921 All. 290, already referred to, no want of good faith was imputed to the vendee. On the other hand, it was clearly accepted that he gave up the debt' and the decision was made to rest on the value of the debt determined with reference to the value of the property on which it was charged. As I have already said, this is virtually treating the transaction as an exchange. In a later case, Chunmun Kunwar v. Jagat Bali : AIR1927All540 (Second Appeal No. 1504 of 1925), decided by a Division Bench of this Court on 24th February 1927, in which however no reference was made to Jagat Singh v. Baldeo Prasad A.I.R. 1921 All. 290, it was held that, as the vendees held a mortgage decree against the vendors

for a sum in excess of Rs. 1,500 and that the decree-holders were willing to take over the property in suit at a valuation of Rs, 1,500 in satisfaction or, at any rate, reduction of the decretal debt, we are not prepared to say that Jagat Bali and his co-plaintiffs are entitled to have this property at Rs. 1,000, although as a matter of fact it may be the case that the property is not worth more than Rs. 1,000. Any person who wants to take the property from the vendees must satisfy the decree of the vendees to the same extent as the vendees were prepared to treat the sale as satisfied, and so we hold that the proper consideration is Rs. 1,500.

10. This is, in my opinion, a correct view, though it may not be in accord with what was said in Jagat Singh v. Baldeo Prasad A.I.R. 1921 All. 290. I would dismiss the appeal with costs.

Sulaiman, J.

11. The only point that is pressed in appeal relates to the sale consideration. The claim was governed by the Agra Pre-emption Act, 1922, and the question has to be decided in accordance with the provisions of Section 17 of the Act. Principles deducible from previous rulings under the Customary law need not be re-examined. An interpretation of Section 17 was given in the recent case of Dhanukdari Singh v. Suresh Singh : AIR1930All363 . I do not understand that my learned brother in any way doubts the correctness of that ruling. Prima facie the ostensible price mentioned in the sale deed is to be taken as the real price. In the absence of other circumstances it is to be presumed to represent the real sale consideration. The burden lies on the plaintiff to give prima facie evidence to rebut this presumption. In my opinion it would be quite incorrect to lay down as a matter of law what quantum of evidence is necessary to shift this burden of proof. The question is one of weighing evidence and circumstances and its decision primarily rests on the Gourt which is the judge of facts.

12. The sale deed in this case recites that the consideration was Us. 50 paid in cash and Rs. 1,150 given credit under a previous mortgage deed dated 4th May 1907. I am unable to agree that if the existence of the amount due on paper under this mortgage deed is not disputed, it absolutely concludes the question and the Court is bound to find that the full amount due under it was a real part; of the sale consideration. To argue that both the parties must have of necessity agreed upon this figure, because it was open to the mortgagee to go through a possibly lengthy litigation, incur the necessary costs, obtain a decree on his mortgage, and bid against all possible bidders up to the maximum amount of his mortgage decree, has an element of considerable speculation in it. The finding is to be recorded not on mere assumptions of possibilities. If assumptions were to be taken into account then one can conceive of another set of possibilities. It may well be that the mortgage suit would be resisted on various grounds. Even an ostensible good mortgage may prove worth nothing if the property was joint family property of the mortgagor and there was absence of necessity. The mortgagee may be put to considerable inconvenience in procuring evidence to prove legal necessity. The Court may even out down the rate of interest. The amount of costs incurred may be considerable and may not be recoverable at all if the security is not sufficient to pay even the mortgage money.

13. There is a possibility that the mortgagee may not happen to be present at the auction sale and an equally remote possibility that the Court may not give him permission to bid. To avoid all such extra trouble, expense and risk, a mortgagee may well give up a portion of his mortgage money than insist upon obtaining a paper decree for the full amount. On the other hand, the fact that the mortgagee has already gone through the lengthy procedure and obtained his decree may be a circumstance in favour of the vendee. The recital of the price in the sale deed may be intentionally inflated by collusion. The marginal note in Section 11 of the Act shows that the section contemplates cases where the sale price entered in the deed has not been fixed in good faith. A recital in the sale deed is not absolutely binding on a pre-emptor, who is not a party to the deed. It is impossible to lay down as a matter of law that in every case the amount due on paper, if mentioned in the sale deed, must be accepted as the true consideration. According to the learned Munsif, the plaintiff had shown that, although the ostensible price was Rs. 1,200, the real value of the property transferred was only Rs. 400, that the vendee had himself purchased the mortgage debt which had been set off in the deed for Rs. 350 shortly before the transfer and that the personal remedy on the mortgage had long since become barred and if the mortgagee wanted to realize cash he would ordinarily not have recovered more than Rs. 400. Both the original mortgagor and the vendor were members of joint Hindu families, In my judgment the learned Munsif was perfectly justified in expressing the opinion that:

the plaintiff's prima facie evidence is sufficient to throw the burden of proof on the defendant vendee.

14. In many cases a striking disproportion between the ostensible price and the market price has alone been held to justify the opinion that the ostensible price is not the actual pries, and therefore shift i the burden on to the vendee under Section 17(1) of the Act. The existence of the previous mortgage does not raise an irrebuttable presumption as to its validity. Nor is there any absolute presumption that the total based on an arithmetical calculation of the principal and interest is in fact due, and that no part of it has been previously paid. The question in each case is entirely one of weighing evidence and circumstances. It is for the Court to decide whether having regard to all the circumstances the plaintiff had or had not made out a prima facie case for shifting the burden, I think the learned Munsif was right in holding that the initial burden of proof had been shifted in this case.

15. It will be noticed that in the case of Jagat Singh v. Baldeo Prasad A.I.R. 1921 All. 290 the Bench of which I was a member accepted the finding of the lower appellate Court on the question of consideration. The appellant's argument that the finding of fact of the lower appellate Court was vitiated because the amount on paper ought to be accepted as the real consideration was repelled. I do not think that Tudball, J., was at all considering whether the charge should be considered as a property. The reasons for the decision were reproduced in order to show that the finding of the lower appellate Court was not in any way vitiated. A finding of fact could be interfere; with only if there was a legal flaw in it. In the unreported case of Chunmun Kuari v. Jagat Bali A.I.R. 1927 All. 240, S.A. No. 1504 of 1925 decided on 24th February 1927, there was no finding at all by the lower appellate Court on the question of consideration. Lindsay, J., and I had to record a finding of our own on the point. The mortgagee had already obtained his decree for the full amount and in the circumstances of that case we did not agree with the view of the Court of first instance and held that the ostensible consideration was the real consideration.

16. I still adhere to the same view and cannot agree that in every case the Court has no option but to hold that the money due on paper, if recited in the sale deed, must be accepted as the real price agreed upon between the parties. Indeed, in cases where the mortgage is a charge on property other than that sold, it would most probably be not the real consideration, but the measure of that consideration would be the value of this other property. I do not think it is correct to say that if the onus be shifted, the vendee can prove no more than what ,is already admitted. The vendee can always give other evidence to show that the parties actually accepted a particular figure as representing the true consideration for the sale. He will certainly be at liberty to produce evidence, in addition to the recital, showing the real contract price agreed upon. Under Section 17 (2) the onus is on the vendee to prove what the actual price agreed upon was. The recital cannot be conclusive. Sufficiency of evidence is a matter for the Court to decide. The question whether he has discharged his burden is one purely of fact and not of law. In the present case the lower appellate Court has not agreed with the first Court that the market price of the property was Rs. 400. After pointing out that the property contained a good number of trees and a large area of fallow land it has remarked:

So on the evidence on the record the plaintiff's allegation as to Rs. 400 being the market price of the property is not made out.

17. As regards the actual agreed price there was the evidence of several witnesses for the defendant. Its finding on the questions of consideration is in the following words:

So the evidence adduced by the defendant-vendee in this case satisfactorily proved that Rs. 1,200 was the actual price paid by him.

18. The Court has not said that the burden of proof had not shifted. It was pointed out in Dhanukdhari Singh v. Suresh Singh : AIR1930All363 that if on a consideration of evidence of both the parties the Court can come to a definite conclusion as to the actual amount of the sale consideration its duty is to decree the claim for that amount, and it is only when it is unable to make up its mind, and cannot come to a definite conclusion as to the exact sale price that it should proceed to ascertain the market value, The lower appellate Court in this case has recorded a finding on the actual price paid. That finding must be accepted in second appeal. On this last mentioned ground I concur in the order dismissing the appeal.

19. The appeal is dismissed with costs.


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