1. This appeal was heard by Das, J. & Narasimham J. In view of the four unreported decisions of this Court in Second Appeal No. 10 of 1945, Second Appeal No. 192 of 1946, Second Appeal No. 86 of 1944 & Second Appeal No. 41 of 1946 giving rise to conflicting opinions on some vital aspects of the question as to certain distinctive features of a transaction of 'mortgage by conditional sale' as distinguished from 'a sale out & out', they have referred it to a Full Bench. The divergence of view, that according to them was of a serious character, was regarding the burden of proof, & besides, it also related to the effect of
'(1) the insertion of a penalty clause in such document for return of the consideration money plus interest if the vendee is dispossessed from the lands through defect of title of the vendor or otherwise; & (2) the insertion of an express provision postponing mutation of the name of the vendee in the landlord's sherasta till expiry of the stipulated period.'
2. The conflict of opinion, as to the burden of proof, arose in the following manner: In the unreported decision of a Division Bench of this Court consisting of myself & brother Panigrahi in Second Appeal No. 10 of 1945, it is held that in a case where the distinctive condition of a 'mortgage by conditional sale' is embodied in the document, that effects or purports to effect the sale, the transaction is prima facie a mortgage. A contrary view was given in Second Appeal No. 86 of 1944' in their decision by my learned brothers Das & Narasimham, JJ., to the effect that
'inasmuch as the ex facie import of such a document is that of an out & out sale, the burden is upon the person asserting that it is a mortgage, to make it out to be so.'
For this, it is said, they relied upon the Privy Council decisions, reported in 'Bhagwan Sahai v. Bhagwan Din, (12 All 387; 'Jhanda Singh v. Wahiduddin', (38 All 570), & the Full Bench decision of the Madras High Court in 'Muthuvelu Mudaliar v. Vythilinga Mudaliar', (42 Mad 407). Similarly, in Second Appeal No. 10 of 1945 it was held that
'(1) postponement of vendee's right to record the sale in the landlord's paper & (2) consequent freedom from obligations to pay rent or other public charges on the holding sold, & (3) the covenant for refund of the consideration money with interest at a stipulated rate in the event of the grantee's dispossession not attributable to defect in grantor's title'
are circumstances that impart to it features decisively distinctive of the transaction as a mortgage rather than a sale. On the other hand, in Second Appeal No. 86 of 1944, Das & Narasimham, JJ., have taken the view that both the aforesaid circumstances are inconclusive.
3. In this context, the question that arises for consideration is whether the case of 'Gouri Pradhan v. Bhagaban Pradhan', in Second Appeal No. 10 of 1945 has been correctly decided. The propositions for solution may be formulated as follows: Firstly, whether if 'the condition is embodied in the document which effects or purports to effect sale' as prescribed in the proviso to Schedule 8 (c), T. P. Act, it gives rise to a presumption that the transaction is a mortgage; Secondly, whether the express provision for postponement of mutation of the grantee's name in the landlord's papers till after the time for repayment expires is decisive of the transaction being a mortgage; Thirdly, whether the covenant for refund of the consideration money with interest from the date of grantee's dispossession, if any, either attributable to defects of grantor's title or otherwise, is a circumstance decisive of its character as a mortgage; & Fourthly, in view of Das, J's expression of doubt about the correctness of certain observations of Panigrahi, J., in Second Appeal No. 41 of 1946, with which I did not go to the full length of concurring at the time, the further question that arises for solution is whether in case of ambiguity or doubt, the construction should lean in favour of a mortgage & not of a sale, or, whether, on the other hand, ex facie import of the tenor of the document or documents shall prevail.
4. I have studied carefully a very long catena of decisions, cited at the Bar, bearing on the topic, always bearing in mind to make out, if I could, any general rule of construction out of them. To put it broadly, it will not be far from correct to say that, excepting a few fundamentals that underlie, it is too hazardous to make out any inflexible rule of construction.
5. It should also be noticed that, in the Indian decisions of the earlier ages, the Judges were confused between the English law of equity & the India law, as if then stood (before the T. P. Act), in the matter of determination of the nature of the transactions which had all the appearance of conditional sales or sales subject to the condition of repurchase. Some of the elements of confusion were also due to the tendency in India to make out a rule of general application of the observations of their Lordships of the Judicial Committee occasioned by the particular facts & circumstances of that case.
6. I shall first review the relevant decisions of the Privy Council, that have either been cited at the bar, or otherwise come to my notice, from earliest to the later - they cover the period beginning with December, 1849, & ending with June, 1924. The Indian decisions of different High Courts have been based upon either one or the other of such decisions according as the facts of the case bore resemblance to the facts & circumstances appearing in the cases decided by the Board.
7. I shall, however, allow my review of the Board's decisions on the subject to be preceded by a few introductory remarks collected from the commentaries on mortgage by conditional sale, or sale with a condition of retransfer. In the equity jurisdiction in England, the following tests were applied in distinguishing a mortgage by conditional sale from a sale with a covenant for reconveyance; (i) the existence of a debt; (ii) the long period for repayment; (iii) the continuance of the grantor in possession; (iv) stipulation for interest on repayment; (v) price below the true value; & (vi) contemporaneous deed stipulating for reconveyance. The characteristic feature of a sale with a condition of retransfer (not amounting to a mortgage) was that it was a transfer of all rights in a property reserving only a personal right of repurchase. This distinction was emphasised in the case of 'Alderson v. White', (1850-44 ER 924) - a decision that afforded the foundation for negativing a mortgage & upholding a sale of transactions in large number of cases, both in India & England, including cases decided by their Lordships' Board in the Privy Council. 'Alderson's case', however, was held in England as not in any way interfering with the trend of decisions in the equity jurisdiction in England which granted relief against time being of the essence of the contract & allowed equity of redemption to be exercised. It has almost been unanimously accepted that the Law of mortgage by conditional sale enacted in the T. P. Act was the statutory recognition of the principles of the equity of redemption that obtained in England. This statutory adoption of the law of equity conferring right of redemption upon the mortgagors gave a quietus to the confusion that prevailed in India. The question since then reduces itself to one of construction of the deed or deeds evidencing a transaction of mortgage by conditional sale.
8. The earliest Privy Council case on the point is that of 'Muttyloll Seal v. Annundo Chunder', 5 MIA 72. The question which arose in appeal before the Supreme Court at Fort William in Bengal was whether the dealing with certain real estate (a conveyance of which was made in fee by way of Lease & Release) constituted, under the circumstances, an absolute & unconditional sale, or, whether it was not in the nature of a mortgage transaction, & liable to a defeasance. Sir Lawrence Peel, the Chief Justice of the Supreme Court, relying mainly on the circumstances that the grantor continuing in possession of the property demised agreed to pay as rent reserved under the lease a sum of Rs. 425 per month - a sum equal to the interest as stipulated on the principal sum advanced, subject to reduction according as payment towards principal was made from time to time, & secondly, that the sum advanced was a very inadequate price for the whole property, & thirdly, that the seller stipulated to do expensive repairs & to pay all the costs of the covenant & finding that no other explanation except if the transactions were one of security was afforded of these circumstances, held that the transaction was a security & not a sale. This action had been started on the equity side of the Supreme Court, & was decreed declaring that the transaction was a mortgage, & that on payment of the principal money & the interest due on accounting, the defts. be called upon to reassign & reconvey to the pltf. (the seller) the real estate concerned. Lord Langdale, delivering the judgment of the Privy Council, observed :
'.........our opinion, if given in detail, might not have been altogether in accordance with the decision of the Court below, yet, giving our best consideration to the whole matter, we do not find any reason which appears to us sufficient to alter that decision.'
As it appears very clearly from the report, the consideration of this case was based entirely on the law prevailing in equity jurisdiction in England which evidently was applicable to the circumstances of the case, (b) 1865: The next in point of time' is that of 'Forbes v. Ameeroonissa Begum', 10 MIA 340. This was a case from the High Court at Calcutta. Since the case of 'Muttyloll Seal', several Regulations had come into operation in Bengal, namely, Bengal Regulations Nos. I & XV of 1793 & No. XVII of 1806. The case arose from a proceeding for foreclosure of a mortgage by conditional sale (Bye-bilwuffa). The case related to the respective rights of the parties (mortgagor & mortgagee) in relation to right of redemption, foreclosure & completion of mortgagee's title. The difficulty, such as we are concerned with, did not arise in the case. From this, it is, however, clear, as a matter of history, that anterior to the year 1806, the rights of a holder of a Bye-bil-wuffa were enforceable according to the strict terms of the agreement. Time was of the essence of the contract which executed itself on its expiry. The Regulations, however, conferred upon the debtor the equity of redemption by way of relief against the condition of time, (c) 1870: The case of 'Pattabhiramier v. Vencatarow Naikan', 13 MIA 560, was a case from Madras whereto the Bengal Regulation of 1806 had not been extended. Their Lordships said, that this form of security had long been common in India as stated in the preamble to Bengal Reg. No. I of 1798; that such contracts were recognised & enforced 'according to their letter by the ancient Hindu Law as it appears from several passages' in Colebrooke's Digest Vol. I, pp. 183, 187, 188 & 193; that they were equally recognised & enforced by Mohammedan law is shown by Mr. Baillie in his introduction to the Mohammedan law of sale; that in cases to which Beng. Reg. XVII of 1806 (which allowed a mortgagor who had executed such a security as that now in question to redeem at any time before the mortgagee had finally foreclosed the mortgage by taking the proceedings which the Regulation made essential to foreclosure) 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 & it has been so decided by a Full Bench of the High Court of Bengal in the case of 'Sarifunnisa v. Enayet Hossein', 5 WR 88; that the point so decided is also assumed to be the law in the judgment delivered at their Lordships' Board in the case of 'Forbes v. Ammeroonisa Begum'; that in the absence of any positive legislation or established practice modifying ancient law of the country it was erroneous for the Sadar Court of Madras to lay down that the mortgagee was under the obligation of taking any proceeding in law for foreclosure; that the 'equity of redemption', owed its existence to the doctrine established by the British Courts of Equity that the time stipulated in a mortgage deed is not of the essence of the contract; & that such a doctrine was unknown to the ancient law of India, (d) 1875: The case of 'Thumbasawmy Mudelly v. Mohomed Hossain', 2 IA 241, laid down most emphatically, approving the decision of the Board in the case of 'Pattabhiramier', that mortgages by conditional sales were to take effect strictly according to the letter in Madras & other parts of India where Bengal Regulation XVII of 1806 was not in force, that is, that in default of payment within the time fixed, the mortgagee becomes the absolute owner of the property. But that with regard to the transaction in the case, they held that it was a mortgage usufructuary & not a mortgage by conditional sale, & accordingly, the case stood clear of the decision in 'Pattabhiramier's case'. They, however, made a very important observation, namely, that since 1858, in Madras & 1871 in Bombay, the Judges of Sadar Adawlats were in error in administering the law of India in conformity with the established practice of the Court of Equity in England, thereby recognising in the mortgagor a right of redemption notwithstanding the time for foreclosure may have passed by. In applying this principle in India, their Lordships said, the Judges of the Sadar Court took upon themselves, in contravention of the law of India, to apply to this class of security for the first time the principle which the English Courts of Equity have for centuries applied to mortgages in that country. They concluded their judgment with a recommendation that:
'An Act affirming the right of the mortgagor to redeem until foreclosure by a judicial proceeding, & giving to the mortgagee the means of obtaining such a foreclosure, with a reservation in favour of mortgagees whose titles, the law as understood before 1858, had become absolute before a date to be fixed by the Act, would probably settle the law, without injustice to any party'.
9. Shortly, after this, the T.P. Act (IV (4) of 1882) was enacted. In conformity with the recommendation of their Lordships of the Privy Council, the Act (S. 2) left undisturbed the previous legal relations constituted before the Act came into force. Schedule (c) provides:
'......But nothing herein contained shall be deemed to affect any right or liability arising out of a legal relation constituted before this Act comes into force, or any relief in respect of any such right or liability:......'
The word 'relief, in this clause, like the words 'right & liability', denotes 'substantive right'. There is a clear distinction between 'a relief' & 'the procedure for obtaining that relief'. A mortgagee, coming into Court after the commencement of the Act to enforce a mortgage, must follow the procedure enjoined by the Act, even though the mortgage be before the Act (See 'Bhobo Sundari v. Rakhal Chunder', 12 Cal 583). The same has also been the view in the High Court of Allahabad & Madras.
10. 1890. (e) The first case that came before the Board after the passing of the T. P. Act was that of 'Bhagwan Sahai v. Bhagawan Din', 12 All 387. The transaction, which gave rise to this case, was effected by two documents, dated, 20-2-1835. The pltfs. in the case, in claiming right of redemption, asserted that the transaction sale (sic.) within Reg. XVII of 1806, which gave the mortgagor a right of redemption. The question, with which their Lordships were concerned, was one of construction. They found that the first document was one of absolute sale. In the second document of the even date, the purchaser asserted that he had purchased the property, but, however, as a matter of favour & mercy, stipulated that if within a period of 10 years, the vendor would pay back in a lump sum & without interest the whole amount, he should accept the same & cancel the valid sale & that during the afore said time he should remain in possession, enjoy the profits & 'be liable for the loss & the vendor should have no concern whatsoever'. In case the principal was not paid (according to the terms of the document), the vendor should not be able to cancel the sale by payment of the principal. Their Lordships of the Privy Council, following the case of 'Alderson v. White', held that it was a case of absolute sale with a covenant for reconveyance & not a security. In 'Alderson's case', the Lord Chancellor observed:
'The rule of law on this subject (whether in view of Court of Equity the transaction ought to be treated as a mortgage) is one dictated by commonsense, that prima facie an absolute conveyance containing nothing to show that the relation of debtor & creditor is to exist between the parties does not cease to be an absolute conveyance & become a mortgage merely because the vendor stipulates 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 instruments?...............I think that the Court after a lapse of 30 years ought to require cogent evidence to induce it to hold that an instrument is not what it purports to be; & I see but little evidence to that effect here.'
The rule of presumption, that the party, asserting that an instrument is not what it purports to be, has the onus on him, owes its authority to this case, as it will be noticed presently. Their Lordships of the Privy Council, in the premises of the case, made no distinction between the law of India & of England, (f) 1899. The next case, that came before the Board, was that of 'Balkishen Das v. Legge', 27 IA 58. Here too, the transaction was anterior to the T. P. Act. Their Lordships, while noticing that, according to the ancient law in India, a mortgage by conditional sale was enforceable according to the letter under which time was of the essence of the contract, on construction of the two deeds before them, came to the conclusion that it was a security. This, they did, firstly, on account of a provision in the second deed (that if the vendee objects to receive money & relinquish the property, the vendor may deposit the amount in the treasury, by virtue of this agreement, & obtain possession over the 'ilaka'), & this provision, according to their Lordships, at once suggested a reference to Regulation I of 1798 as being in the opinion of the parties applicable to the case, it being assumed that there was no other statutory provision or practice by which such deposit could be made; secondly, on account of the condition that the estate was redeemable not only on payment of the stipulated sum, that is_, the price for sale, but also of an amount which should be found due at the time of redemption on account of another loan; & lastly, that the transaction having the character of a mortgage, so far as the loans on the factory accounts were concerned, it may be held to be so entirely. Bhagwan Sahai's case' was distinguished as it was decided on the language of the deeds there in question. Accordingly, their Lordships declared that the pltf. was entitled to redemption. Their Lordships, however, laid down certain propositions which made a departure from the decisions of anterior dates of the Indian High Courts. These propositions are: (i) that it may be assumed that the framers of the T. P. Act, in defining in Cl. (c) of Schedule 8, intended to state the existing law & practice in India; (ii) that the case in the English Court of Chancery had not, in the opinion of their Lordships, any application to the law of India as laid down in the Acts of the Indian Legislature; (iii) that oral evidence, prohibited as it is by Schedule 2, Evidence Act, was inadmissible for the purpose of construing the deeds or ascertaining the intention of the parties unless any such evidence could be brought within the exceptions, contained-in the several provisos to the section; & (iv) finally that the case must, therefore, be decided on a consideration of the contents of the documents themselves, with such extrinsic evidence of surrounding circumstances as may be required to show in what manner the language of the documents is related to existing facts, (g) 1916. Then came the case of 'Jhanda Singh v. Wahiud-Din', 38 All 570. The decision, in this case, is seemingly in conflict with the case of 'Balkishen Das & others', inasmuch as, the provision in the deed of covenant for repurchase (that in the event of vendee's refusal to receive the money, the vendor shall have power to deposit it into the treasury) - a provision exactly similar to the one in the 'Balkishen Das & others' case' - could not persuade their Lordships to hold that the transaction, under their consideration, was one of security. But on close examination, their Lordships did not appear to override the legal effect of that sort of provision as will appear from the observation to the effect that the fact that the machinery provided for deposit under the provisions of Reg. I of 1798 & XVII of 1806, is made applicable to the case 'might disclose to some extent the intention of the parties to create a mortgage'; but that the clause having been extremely ill-drawn & its provision being self-contradictory, their Lordships said 'the clause so obscure & contradictory cannot furnish any true guide to the intention of the parties'. In view of the close resemblance which the case of 'Bhagawan Sahai', 12 All 387, had with the case before their Lordships & relying upon Lord Cranworth's observation in 'Alderson v. White', (that prima facie an absolute covenant containing nothing to show the relation of debtor & creditor does not cease to be an absolute conveyance & become a mortgage merely because the vendor stipulates that he shall have a right to repurchase), they held that the transaction before them was one of security. They also made a reference to the provisions of the deed incorporating covenant for repurchase in 'Bhagawan Sahai's case' in order to show how it was expressly provided that time was of the essence of the contract. Their Lordships laid much stress upon the circumstances that the deed incorporating the covenant for repurchase was not the result of any contemporaneously contemplated or antecedently arrived at agreement of resale or repurchase. On the other hand, they decided that the contract for repurchase was an afterthought. I would quote the passage bearing on it;
'This deed upon its face purports to be an absolute deed of sale. It does not refer to any contemplated or antecedent agreement of resale or repurchase, & does not disclose any intention whatever to treat the disposal of the property mentioned in it as anything other than an absolute transfer on sale for certain definite sum............The recital in the bond is certainly more consistent with the contract for repurchase being an afterthought than the contrary.'
In the result, this case reiterates the proposition laid down in 'Bhagwan Sahai's case', viz., that, in distinguishing security from an absolute sale with a condition of repurchase, the intention of the parties was the real test & the same must be gathered from the language of the documents themselves viewed in the light of the surrounding circumstances, (h) 1917: The next case is that of 'Maung Kyin v. Ma Shwe La', 44 I A 236. This case is not so much in point for our purpose. It decides that a third party can adduce oral evidence of intention of the parties to a document, Schedule 2, Evidence Act notwithstanding, as the ban is confined to the parties only. To this extent, Bhagawan Sahai's case' is distinguished, (i) 1924: The last case of the series is that of 'Narasingerji Jyanagerji v. Parathasaradhi Rayanim Garu', 47 Mad 729. This decision is of very far reaching importance. This was a case from Madras. The learned Chief Justice of the Madras High Court had held that though the findings of fact, in the case before him, would support the inference that the covenant was originally intended as a security for money & must be treated as a mortgage, he was not at liberty to hold that it was so on account of certain dicta of the Privy Council, viz., that the equitable decisions of England are inapplicable in India ('Balkishen Das v. Legge', 27 IA 58), that the case must be decided on the consideration of the contents of the documents themselves with such extrinsic & surrounding circumstances as may be required to show in what manner the language of the documents is related to the existing facts & that no evidence is admissible under the proviso (of Schedule 2, Evidence Act) for the purpose of contradicting the terms of the documents (vide 27 IA 58 , 38 All 570 & 44 IA 236). He regretted that strict application of this rule (that the extrinsic evidence admissible for construction of the document should be of a limited character as laid down by the Privy Council) may have the effect of excluding most of these transactions from the class of mortgages by conditional sale. To such a feeling of disappointment expressed by the learned Chief Justice, their Lordships replied:
'They would only observe before parting with it that, as at present advised, they must not be taken to subscribe to the view that there has been introduced into the law of India such a radical change in the laws of evidence as is suggested by the learned Chief Justice, a change which would have the effect of excluding from the class of mortgages by conditional sale many transactions which before the Evidence Act would have been held to be within that class.'
Their Lordships, at the outset, made it clear that in disposing of the case they made no reference to the oral evidence (as to the intention) other than that of surrounding circumstances, such as, in Lord Davey's words '27 I A 58', may be required to show in what manner the language of the document is related to the existing facts. What their Lordships decided may be thus summarised: Notwithstanding that the appearance of an absolute sale & a right of repurchase within the time limit is laboriously maintained in the document, the surrounding circumstances & necessary implication from the provisions of the deed should be closely examined to reveal the real nature of the transactions. Such implications & circumstances were, according to their Lordships, indicated by (i) inadequacy of price, (ii) absence of any bargaining as to the price, (iii) the vendor indemnifying the vendee against loss for entering into the transaction, (iv) the vendee's right to enforce the covenant for repurchase, & (v) reservation of certain rights in the covenant itself, namely, reserving of minerals & other restrictions on the vendee's usufructuary privileges, inconsistent & almost unintelligible provision as to the time limit for the exercise of the vendor's right of repurchase.
11. Amongst other cases of the Indian High Courts to be noticed presently, the case of 'Muthuvely Mudaliar v. Vythilinga Mudaliar', 42 Mad 407, is of the greatest practical significance. The question, referred to the Full Bench, was
'whether where in one & the same transaction, land is sold absolutely but with right of repurchase to be exercised before a certain date, the transaction necessarily becomes by virtue of Schedule 8, T. P. Act, a mortgage by conditional sale, whatever the intention of the parties might have been...............'
Occasion for this reference arose from difference of views between Sadasiv Aiyar, J. & Napier J., the former having pronounced in 'Palaniappan v. Subbaraya Goundan', 1 MLW 80, that after the passing of the T. P. Act whatever the intention of the parties was, if there was a single settlement out of which arose either one or two documents both connected & interdependent in which there was a sale with a condition of repurchase, the transaction must be that of a mortgage. The Full Bench overruled this decision & Allis C. J. observed :
'There is, in my opinion, nothing in the definition in Schedule 8 (c) which favours the view that, wherever the sale deed & the agreement to reconvey from one transaction, it must necessarily be a mortgage & not a sale.'
The learned Chief Justice further said, with reference to the decision of the Privy Council,
'It is true that all these cases dealt with transactions before the passing of the T. P. Act, but I do not think that Act made any difference in the law on the subject in the part of India. In 'Balkishen Das v. Legge', 22 All 149, their Lordships observed that it might be assumed that the framers of the T. P. Act intended in Schedule 8 to state the existing law & practice in India.'
Seshagiri Ayyar, J. summarised the position in the following words:
'All that was said in 38 All 570 was that an essential requisite for construing such document as a mortgage is that they should be dependent upon a single arrangement & not that such a test is a conclusive criterion of the transaction being a mortgage.'
He further said:
'A party who wishes the document to be understood as being different from what the words suggest should show the form in which the language is clothed does not express the real intention of the parties & that, in substance, the parties intended that there should be a transaction different from what the language imports.'
12. I shall pause here for a moment & try to put in a nut-shell the result of the decisions, already referred to. In my view, they represent, as between themselves, all the various & varied aspects from which the question, at issue, may be approached. Besides, my attention has been drawn to a considerable number of decisions of various High Courts in India, which I have closely examined, & I do not think that I 'shall be justified in dealing with them all except a very few which bear upon the special features of the present case, or demonstrate the practical application of the general & fundamental rules laid down by the Privy Council from time to time. The ancient law of India, both in the Hindu & Mohammedan jurisprudence, recognised the conditional sale as a kind of mortgage. The transaction of this kind of mortgage passed by various names, viz., Bye-bil-wuffa, GahanLahan, Kut-kabala, Kut-Bandhak, Sarti-Kabala, & Sarti-Bikraya-Kabala. The equitable doctrines prevailing in the equity jurisdiction of England that evolved out of the decisions of the Chancery Courts, in granting relief against forfeiture of penalties or defeasance clauses, in order to relieve the debtors against the oppressing & grasping creditors, had no application to these mortgages prevailing in India where equity of redemption, suits, or proceedings for foreclosure, or the like were unknown. The contracts of mortgage by conditional sale by whatever designation known used to execute themselves by their very letter, or, in other words, time was of the essence of the contract. Before this was quite apparent to the English Judges, they fell into error, both in India as well as in England, to bring the equitable rules of relief against forfeiture of penal clauses to apply to Indian mortgages by conditional sales. Such cases, however, were very few in the jurisdiction of the Supreme Court & its successor, the High Court of Judicature at Calcutta.
13. The Legislature stepped in & introduced legislation conferring equity of redemption on the mortgagors & setting up machinery for enabling them to enforce it. They thus were relieved against time as of the essence of the contract, & the creditors were required to have to take recourse to foreclosure proceedings for completion of their title by various Regulations commencing with one of the year 1793 & later supplemented by Regulations of 1798 & 1806. The Regulation XVII of 1806 achieved the culmination by full statutory recognition of the rules of equity of the Chancery jurisdiction of England. This Regulation took a long time before its several sections were extended by piecemeal legislation to other parts of British India. In Madras & Bombay jurisdictions, as I have already pointed out, the Judges of the Supreme Courts & the High Courts applied the doctrines obtaining in equity jurisdiction of England to transactions of conditional sales in their respective Presidencies until the decisions were held to be erroneous being, as they were, in violation of the law of the forum in India. In the year 1875, in the case of 'Thumbaswamy Mudely', 2 IA 241, their Lordships' Board suggested legislation to be undertaken for the purpose of affirming the right of mortgagor to redeem until foreclosure & giving to the mortgagee the means of obtaining such foreclosure. The T. P. Act took its place in the statute book of India in this historical background. It was assumed in the case of 'Balkishen Das v. Legge', 27 IA 58. that the framers of the T. P. Act, in Schedule 8 (c), intended to state the existing law & practice of India. This section gives an exhaustive definition of 'mortgage by conditional sale'. According to the definition, the transaction - in reality a mortgage - has to be expressed in terms of a conditional sale. The conditions laid down in the section are: that (i) on default of payment of the mortgage money on a certain date, the sale shall become absolute; (ii) or (in the alternative) on such payment (payment of mortgage money being made) the sale shall become void; (iii) or, on such payment being made the buyer shall transfer the property to the seller. So far as the third alternative is concerned, its incorporation in one document, or in more contemporaneous documents of sale (ostensible), gives the transaction a close resemblance to a transaction of an absolute sale with a covenant of resale or repurchase, as the case may be. In cases of the latter kind, the difficulty of construction, in order to discriminate a mortgage from a sale, presented itself from time to time. Almost the entire body of decisions, making up the case law on the subject, owe their existence to this difficulty. Various tests, borrowed from the decisions in the equity jurisdiction of England, have been laid down as applicable to cases arising in India involving determination of the question, while a particular transaction, evidenced by a deed which contains either the first or the second condition, presents in my judgment no difficulty whatsoever. Such a transaction, answering strictly to the definition, must be one of mortgage. By its very terms, it is made clear that the sale is not a completed & absolute one from the beginning but has the contingency of either becoming final & absolute or becoming void. Through the courtesy & kindness of my learned brother Narasimham, J., my attention has been drawn to at least two decisions which, it is said, stand out of the general run of the cases & indicate that even in cases where the condition, on which the mortgagor ostensibly sells the mortgage properties, is either
'that on default of payment of the mortgage money on a certain date the sale shall become absolute, or that on such payment being made the sale shall become void,'
the Court should have to apply the same consideration as would apply to transactions of ostensible sales on condition of repurchase by the seller from the buyer. The cases are 'Narayan Eamakrishna v. Vigneswar', AIR (3) 1916 Bom 215 & 'Shambhu Singh v. Jagadish Baksh', AIR (28) 1941 Oudh 582. I have carefully read the two decisions, & in my opinion they do not strictly conflict with my view. The documents in either of the cases are not without the condition of being repurchased. I would quote passages from the judgments of the aforesaid cases to show that one of the conditions, if not sale, was that on payment being made, the buyer shall transfer the property to the seller. In the 'Bombay case', at p. 215, Col. (ii), the passage that makes this position clear reads:
'After referring to the terms providing for the condition to repurchase the property after the lapse of twenty years, the Judge says:',
and at page 217 Cal. (i), the concluding portion of the judgment runs
'I am of opinion that in this particular case upon these particular documents it is impossible to avoid the conclusion that the transaction must be accepted as being in reality that which in the plainest language both parties declared it to be, viz., a transaction of sale with 'an option to the plaintiffs to repurchase'.'
These two passages make it clear to my mind that the third of the conditions enumerated in Schedule 8 (c), T. P. Act, was the condition subject to which the ostensible sale had been made. Batchelor, J., however, quotes a passage from the judgment of the lower Court which indicates that the condition that in the eventuality of payment the sale shall become void was also inserted in the sale deed. The passage is
'...............the Judge says:'But for the addition of these terms the deed (Ex. 25) would have been a sale. But with the addition of the terms the deed becomes a mortgage by conditional sale, because there is a condition in Ex. 25 that the sale should become void on payment of Rs. 13,000 by instalments, or in a lump sum within twenty years'.'
The document was, therefore, of a heterogeneous character. The conditions of different kinds were mixed up together. If I were asked to follow this decision, I would, with respect, differ from it. This very reasoning will apply 'mutatis mutandis' to the Oudh case. I would place certain passages quoted from the judgment of the Court side by side to illustrate my point. At p. 583, Col. (ii):
'Towards the end of the deed, it was added that it had 'also' been agreed upon between the executant & the vendees that after the expiry of nine years, that is from the beginning of the tenth year up to its end, if he paid the entire consideration money to the vendees the sale would become null & void: otherwise it would take absolute effect as a sale deed.'
This may be contrasted with the following passages from p. 584 Col. (ii) & p. 585 Col. (i) :
'There is, however, one distinguishing feature of some importance between the Allahabad case & the case we have under consideration. We have referred to the period during which the property might be repurchased as one of the tests laid down in that case. In that case however the period for re-purchase was one year only & with regard to this it was said:
'If the period of time given to the vendor during which he can repurchase is a short one, it does suggest that it is an out & out sale with a right to repurchase, but on the other hand where a long period of time is given to the vendor to repurchase it does suggest that there is no out & out sale at all, but merely a transfer of the property as a security'.
In the case under consideration 'the transferor is allowed to repurchase' at any time during the tenth, year, while in 'Bishanlal v. Banwarilal', AIR. (26) 1939 All 713, the executant could repurchase within a year after the execution of the deed.'
The document that was propounded in this case too was of a heterogeneous character in relation to the sale conditions. The above decisions do not, therefore, conflict with the view that I am inclined to take. But however, at present advised, I will leave it as an opinion of mine. This aspect of the question particularly does not pointedly arise for decision within the scope of this reference. I would accordingly confine my answer to the first question proposed to a transaction in which the sale has been subjected to the condition of repurchase within the meaning of the third of the three conditions enumerated in Schedule 8 (c). It is not necessary that the deed itself will contain the words 'mortgagor, mortgagee & mortgage money or security for the loan'. If such words were expressly entered in the deed, the transaction would hardly be an ostensible sale (See 'Jagannath v. Gauri Shankar', AIR (13) 1926 All 670). The case, however, is different where the sale is subjected to a condition of resale on account of the fact, as I have said, that it bears resemblance to a case in which the sale & the condition of resale are otherwise independent of each other. It has been authoritatively laid down by the Privy Council & has never been departed from in any of the decisions bearing on the subject, either in India or in England, that in order to constitute a mortgage, the covenant for sale & repurchase must have been thought of contemporaneously as a single arrangement. Whatever might happen to the applicability or otherwise of various other tests none of which can be said to be conclusive, it is that particular test which is not only fundamental but also implicit & essential in a mortgage as distinguished from a sale. This is sufficiently borne out from the Privy Council decision '38 All 570' already referred to, as has all along been followed in the Courts in India. Whenever a transaction has been accomplished to two deeds, it cannot constitute a mortgage, if the second deed incorporating the condition of repurchase is not interdependent with the first & the terms do not form integral parts of one single contract or arrangement. In order to achieve this clarity & to simplify litigation, the Legislature came forward with an amendment to the Schedule 8 (c) by insertion of a proviso. After the amendment, wherever & whenever it occurs that the sale is effected or purports to be effected by one document, & the covenant of repurchase or resale, as the case may be, is embodied in another, the relation between the parties can no longer be said to be that of mortgagor or mortgagee. Notwithstanding the amendment, however, the question still remains that though the sale & the condition are both embodied in one document it may be intended to be a sale out & out with an agreement for resale on conditions incorporated therein. But for the very feet that the parties have decided to evidence the transaction by one document rather than by two, they shall be presumed to have done so by way of compliance with the proviso, & thereby may have apparently intended to create a mortgage. The onus, in such cases, should always be on one who wants to prove that it is a sale out & out. In order; to be a mortgage, the transaction should have the statutory appearance of being expressed in one document. The general principle of law that one who asserts that the apparent is not the real has to prove it would not apply. No doubt, cases may arise in which the language used in a single document may lend support to the appearance of an out & out sale followed by an agreement for reconveyance; but the statute-enjoined-appearance & the necessary prima facie legal implications attached thereto ought to have more weight than the appearance created otherwise in the deed, particularly so, because this statutory appearance always ensures that the sale & covenant for resale were simultaneously & interdependently agreed upon - a circumstance which is inherent in & inseparable for, the transaction of mortgage. This is basically the reason, why incorporation of all the terms & conditions in one single document gives rise to a presumption.
14. My answers to the first question are:
(i) Where the mortgagor ostensibly sells the mortgage property on condition that on such payment being made the buyer shall transfer the property to the seller & the condition is embodied in the document which effects or purports to effect the' sale in accordance with the proviso added to the section by the T. P. Amendment Act, 1929, it is to be presumed a mortgage, & the party, who asserts to the contrary, must have to prove it. This proof will consist of the provisions of the document, the necessary legal implications thereof, & such surrounding circumstances as are admissible to prove how the language of the deed is related to the existence of real facts. This rule of admissibility of evidence is subject to the exception that, only in case of fraud, the oral evidence of real intention may be admissible - vide '44 IA 236; &
(ii) The conditional sales, effected by one or more documents prior to the 1929 amendment of the T. P. Act in which the condition embodied is condition of transfer by the buyer to the seller may be classified as belonging to another group. In this class of cases, there is no presumption either way. Their nature & character are to be determined irrespective of the form according as the parties intended. This intention has to be ascertained by construing the provisions of the deed, interpreting the language thereof in the light of the surrounding circumstances bearing upon it & their necessary implications with reference to either forthright conveyance of absolute rights to the buyer or their postponement by withholding from him, till expiry of the time for fulfilment of the condition, various rights, privileges & interests inherent in the absoluteness of proprietary rights or by imposing timely restrictions upon such privileges & the like.
15. The answers to the other questions posed proceed as corollaries from the premises aforesaid. The answer to the second question would be in the affirmative. Postponement of the rights to mutate his name in substitution for that of the seller is denial, for the time being, of a proprietary privilege. This denial carries with it the continuance, in the vendor, of the obligations of payment of rent and public charges of the property. Loss, if any, on account of non-payment is assumed to fall on the vendor. There is implied predication of his subsisting ownership. Failure or omission to mutate attributable to an economical device is one thing, but absence of the right to mutate is another. Different considerations, however, will arise in cases of transfer of occupancy holdings before they were made freely transferable by the Orissa Tenancy Amendment Act, 1938, inasmuch as either the transferee had no right to claim mutation or the same was expensive & uneconomical in view of the fact that on payment of the consideration money the transferee will have to abandon the land & the transferor may unnecessarily have to pay more than the mortgage money by way of compensating the former. In those cases, postponement of mutation is rather inconclusive & the nature of the transaction will have to be decided on construction of the deed in the light of the surrounding circumstances. I answer the question accordingly. The third question - In the case of a mortgage with possession, the mortgagor is bound to guarantee quiet possession during the subsistence of mortgage as it is in lieu of interest, while in the case of sale, the purchaser is to suffer the loss without any guarantee of indemnification provided he has been delivered possession along with completion of sale & the disturbance of possession is not attributable to the defect of title in the vendor. The vendor contracting for warranty of title undertakes to refund the consideration money with interest if his title is found defective & there is consequent loss of possession. In the case of mortgage, mere disturbance of possession will entail the loss upon the mortgagor (vendor) & the mortgagee is not bound to seek for possession though in certain circumstances he may have the right. My answer, therefore, is that covenant for refund, on dispossession or disturbance of possession of the grantee not attributable to grantor's defective title is inconclusive. My answer to the fourth question is wholly covered by the answer proposed to the first question, that is in case of ambiguity or doubt, ex facie import of the tenor of the document effecting the transaction shall prevail. The ambiguity or the doubt must, in each case, be inherent in the provisions of the deed & not dissoluble by reference to the surrounding circumstances.
16. Before proceeding to examine the merits of the Second Appeal, placed before us for decision, the trend of the authorities of this Court, which stand unaffected by the decision of the Full Bench, has to be kept in view.
17. In' Second Appeal No. 192- of 1946, my learned brother Narasimham, J., addressing himself to the question whether a transaction was a mortgage by conditional sale or a sale out & out, observes:
'The very definition of a mortgage by conditional sale as given in Cl. (c) of Schedule 8, T. P. Act shows that the transaction is ostensibly a sale. Therefore, the use in the deed of such expressions as 'Kabala', 'buyer & seller' & similar expressions usually found in a deed of absolute sale, cannot in itself be a valuable guide. Even a mortgage by conditional sale may have all the appearance of a sale & the Court should not be guided by mere appearance but should scrutinise the terms of the document and ascertain the true intention of the parties.'
Two circumstances, appearing in the document, under consideration, in that case, namely, that (i) the document confers on the executant (the vendor) right to deposit, under Schedule 3, T. P. Act, money in Court if there is a refusal by the deft, (vendee) to accept the sum when tendered; & (ii) the money to be paid was described as 'asule asal' which means 'principal' indicating that the parties thought of the sum as a 'loan' & not as a 'price', were held decisive of the transaction being a mortgage. I am a party to this decision by which I am bound & I still adhere to the view expressed therein.
18. Another decision was that of Second Appeal No. 32 of 1948. Three circumstances appearing in that case were considered decisive of the transaction being one of mortgage. The circumstances were: that (i) there was no mention of reconveyance but of delivering back the lands t6 the pltfs. (vendors) on payment of the consideration within the stipulated period; (ii) the right of the defts. (vendees) to get their names mutated in the landlord's sherasta & 'to possess the lands as they like' were expressly mentioned in the document to arise only on the pltfs' failure to repay the consideration within the stipulated period. Postponement of the right to mutation, according to , Narasimham, J., who delivered the leading judgment, was an unmistakable indication that the pltfs' (vendors') liability to pay rent would continue ' until the end of the stipulated period. This was described by the learned Judge as inconsistent with an out and. out sale which should always (sic.) in extinguishment of the pltfs' interests in the property, & (iii) the consideration for the transaction was a sum of Rs. 240 as against its minimum price of Rs. 500 in the year of the transaction. I was a party to this decision too & find no reason to change the view I then took.
19. The only other decision was one in Second Appeal No. 41 of 1946. The document, in question, in that case, was described as Sarti-Kabala. Panigrahi, J. observed that the term literally translated means 'conditional agreement'. The learned Judge, relying upon the case of 'Singaram Chettiyar v. Kalyanasundaram Pillai', 26 IC 1 (Mad), laid down a general rule of construction that in case of ambiguity or doubt, the construction would lean in favour of a mortgage & not of a sale. This is directly against ex facie import theory of presuming the apparent until it is proved to be unreal. This has formed the question No. 4 above & will be no longer a good law. The main theme of the decision was that the document was described as a Sarti-Kabala which it was conceded at the Bar meant nothing more nor less than what was popularly known as Kantakabala & on reference to this, the learned Judge observed:
'It may be that in a particular case, a document purporting to be a Kantakabala may really be an absolute sale with a condition of repurchase, but without anything more the description by itself would indicate that the. transaction between the parties was intended to be a loan rather than an absolute sale.'
Contrary view, expressed in relation to the aforesaid features in the deed in S. A. 88/44 was distinctively dissented from by Panigrahi, J., but myself, as a concurring party to the decision, did so qualifiedly dissented from by Panigrahi, J., but myself, as a concurring party to the decision, did so qualifiedly observing that Second Appeal No. 86 of 1944 had been correctly decided & that it was always some dominating features that determine the real character of the transaction. The two theories thus expressed rather broadly were, however, not decisive as there were two circumstances affording dominating features lending support to the conclusion arrived at, viz., (i) (to put in the language employed by Panigrahi, J.) that the registration of the deft, as an absolute proprietor was to follow the expiry of the period fixed for payment, & that the clause relating to the warranty of title would come into operation only after such registration as proprietor; & (ii) that the document, in question, was by way of renewal of a previous transaction evidenced by the document of 1935 couched in identical terms & the possession had also been with him under the said document & that notwithstanding this the vendees agreed to the recital in the said document to the effect that the title was with the vendor.
20. Now I shall proceed to deal with the merits of the Second Appeal placed before us for decision in the light of the conclusions reached above. ,
21. The appeal arises in a suit for redemption of mortgage by conditional sale executed in favour of the defts. for a consideration of Rs. 186 said to have been borrowed by the late father of pltfs. 1 & 2 & the late father of pltfs. 3 & 4 from the late husband of deft. 1, on 25-6-1917. The pltfs' claim is contested by the defts. They contend that the transaction, in question, was not a mortgage, but a sale out & out, with a condition of repurchase, a contract of which time was of the essence. On this basis, it is claimed that the condition not having been fulfilled within the appointed time, the right of repurchase has been defeated. The defts. further contend that in case the transaction is held to be a mortgage, the pltfs. will be liable to pay, besides the principal advanced, a sum of Rs. 57/14 as mutation fee, & Rs. 120 being the rent paid by them (the defts.) during their occupation, as condition precedent to redemption.
22. The learned Munsif dismissed the suit holding that the document was an out & out sale with a condition of repurchase. The learned lower appellate Court reversed the decree of the learned Munsif holding that the document was, in substance & reality, a mortgage. As this is of a date prior to T. P. Amendment Act, 1929, there will be no presumption in favour of its character as a mortgage. As observed before, the question shall not be approached with any leaning to either view.
23. In the judgment of the learned lower appellate Court, this is a translation of the text of the document. Its correctness has not been challenged at the Bar. The document can be divided into three parts: (i) the first part comprises the terms of ostensible sale; (ii) the second part contains provision relating to condition within the meaning of Schedule 8 (c), T. P. Act, & (iii) the last part contains the terms & conditions to follow in the eventuality of default of the stipulated condition.
24. The condition embodied here is not a condition of 'transfer by the buyer to the seller' in default of payment, or, in other words, 'condition of repurchase'. The condition is expressed in the following terms:
'...............But upon condition, namely, that in case we repay the consideration money given by you in one instalment, at the end of Magh 1327 next, you will return to us the aforesaid land together with the kabala therefor.........'
This tantamounts to, in the language of the section, a condition that on such payment being made, the sale shall become void (vide 'Madhab Charan Das v. Rajani Mohan', 64 IC 583 (Cal). The agreement that the lands & the Kabala therefor will be returned is not consistent with the hypothesis that the title to the lands had absolutely become vested in the buyer; &, in such a case, that the seller will get his property back, it will have to be effected only by an act of transfer required under the law by the buyer to the seller. Mere return without any other formality will not effectuate it. This document does not bear any resemblance to the document incorporating the terms of a sale & a covenant for reconveyance. Therefore, the well known difficulty of construction does not present itself for solution. Even if the question of construction would arise, it is clear from what follows that the transaction accords only with a mortgage & not at all with a sale. The other condition enumerated in Schedule 8 (c) of the Act, namely, that in default of payment, the sale shall become absolute, has also been embodied in the document. The condition is expressed in the following words:
'.................., Should We fail to repay the consideration money in one instalment within the time fixed as above, you shall possess & enjoy as before or your sons & heirs shall possess & enjoy from generation to generation till the sun & the moon endure & after making payment of the jama(rent) in the sherista of zamindars of the mouza from year to year & getting your name duly mutated in their sherista on cancellation of Krushna Padhan's name in respect of the property sold, you yourself 'can use the land in any way you like'.........'
These provisions expressing the full & absolute character of the proprietary right & enjoyment to accrue to the vendee after & only after default of repayment should bear contrast with their earlier counterpart. The earlier provisions, appropriate to the status anterior to the stipulated time, are expressed as:
'...............After having counted & received the full consideration money in cash, we divest ourselves, our heirs & successors of all our rights & interests in the property sold & make you owner & possessor of our rights & interests, but upon the condition............'
It will be noticed that the terms aforesaid are conspicuous by the absence of the following, viz.,
'(i) the right to possess & enjoy till the sun & the moon last; (ii) the devolution of such rights on the sons & heirs of the vendee from generation to generation; (iii) the right to mutate in the landlords' sherista on cancellation of the name of Krushna Padhan (admittedly the predecessor-in-interest of the sellers); (iv) the right to pay rents to the landlords from year to year; & particularly (v) the right to use the land in any such manner as he or his successor likes to do.'
These are invitably the attributes of an absolute proprietary right. They have been withheld from the vendee till after the condition fails. The most significant of all the aforesaid conditions is the one that centres round withholding from the vendee the right of using the land in any such manner as he desires to do. These, according to the Privy Council, are restrictions upon the usufructuary & proprietary privileges, &, as such, are decisive of his being a mortgagee. With regard to the postponement of the right of mutation, I will refer to the decision of the Calcutta High Court in the case of 'Ali Sheik v. Imam Ali', 35 IC 102 (Cal). There the vendor's agreement to have the vendee's name mutated on the execution of the deed of Kut-Kabala, & his liability to pay arrears of rent arising immediately thereafter were held conclusive of the transaction being one of sale. In the case of 'Maung Shwe Min v. Mang San Syun', 22 IC 806 (LB), it was found that the buyer did not apply for mutation of names in the Revenue Register till two years after the transaction. It was considered as a compelling circumstance to hold that the intention of the parties was to create a mortgage. The weight of authorities is also in favour of this construction.
25. It has been strenuously contended by Mr. H. Mohapatra, the learned counsel for the pltfs., that the words
'we divest ourselves, our heirs & successors of all rights & interests in the property sold & make you owner & possessor of our rights & interests. You do become the owners of the rights & interests'
in the first part of the document are themselves sufficient to effect an absolute sale, & the further provisions, in the latter part of the document, are either mere repetitions or sur-plusages. This argument overlooks that, according to the definition, the document must be one of ostensible sale, that is, the appearance of a sale shall be maintained. But the contrast between the description of his status before time for fulfilment of the conditions arrives, & after the time expires is distinction to prove that the sale becomes absolute only after the stipulated time. In the case of 'Balkishen Das v. Legge', their Lordships have very expressly pointed out that the appearance of a sale having been laboriously maintained throughout in the document, it does not affect its character as a mortgage in case such an intention is clear from its provisions considered as a whole.
26. Mr. Mohapatra further argues that in view of its being stated in the document, in its latter part, that '..................from today we or our heirs shall have no right or interest whatever in the aforesaid land sold...............' it is not permissible to hold that it was not intended to convey absolute proprietorship immediately on execution of the document. The words 'from today' must, in the context, mean 'with effect from today', that is to say, in case the condition of repayment is not fulfilled, the absolute proprietary right of the buyer shall be deemed to have accrued not from the date of default but from the date of execution of the document.
27. For the reason aforesaid, I am definitely of opinion that this is a case of mortgage. No doubt, there has been long delay in the pltfs' coming into Court for enforcement of the equity of redemption. This, it has been argued, is a circumstance indicative of subsequent conduct of the vendors consistent with the transaction being one of sale. This delay, however, has been sufficiently explained by the pltfs in their evidence that they could not afford to come to Court earlier for want of means & having learnt that a new law has been enacted which would absolve them from making any payment whatsoever for redeeming the mortgage, they were encouraged to sue for getting back the property. On the other hand, the conduct of the buyer in not getting his name mutated till long after the transaction indicates the contrary. Delay in launching the suit, will not make the transaction a sale which from its very inception was a mortgage, whatever other equitable considerations might arise therefrom. Once a mortgage is always a mortgage.
28. I would, therefore, uphold the decree passed by the learned lower appellate Court. The pltfs., however, must, on account of the delay, lose their costs of the suit throughout, that is each party should bear his own costs throughout. The time, fixed for payment of the sum due, according to the decree of the learned lower appellate Court, will be extended to six months from the date of the decree of this Court.
29. This reference arose on account of the difference of opinions reflected in the judgment of the two cases of this Court in S. A. No. 10 of 1945 & S. A. No. 86 of 1944. The divergence of views was with reference to certain points usually arising in the determination of the question whether a document by way of conditional sale is a sale or a mortgage. The specific points which are the subject matter of the reference are the following: (1) Whether such a document is to be taken prima facie as a mortgage by conditional sale, the burden of proof lying on the opposite party to show that it represents an out and out sale or whether the ex facie import of such a document which is that of a sale is to be presumed to be true the burden being upon the person asserting it to be a mortgage to make it out to be so. (2) Whether the insertion of an express provision postponing mutation of the name of the vendee in the landlord's sherista till expiry of the stipulated period is an indication of its being a mortgage & not a sale. (3) Whether the insertion of a penalty clause in such a document for the return of the consideration money plus interest, in case the vendee is dispossessed from the lands either through defect of title of the vendor, or otherwise, is an indication of its being a mortgage & not a sale.
30. I have had the advantage of reading the judgment of my Lord the Chief Justice in this case furnishing answers to the reference.
31. As regards question No. 3 above, I agree with my Lord in thinking that a covenant for refund, on dispossession or disturbance of possession of the grantee not attributable to grantor's defective title is a fair indication of the transaction being a mortgage rather than a sale. I agree also that such a covenant in case of dispossession due only to grantor's defective title is inconclusive. But it may be some indication of its being intended to be a sale.
32. As regards question No. 2 above, I agree that a condition postponing the right to mutation is an indication of the transaction being a mortgage & not a sale. This answer is con-, fined to transactions relating to classes of property which were at the date of the transaction freely transferable, such as occupancy holdings of raiyats subsequent to Orissa Act VIII (8) of 1936. In other cases, the postponement of right of mutation is no indication either way, because in such cases there was normally no right to transfer without the landlord's consent & hence no right of mutation. Accordingly the consent of the landlord for mutation was sometimes to be obtained only at exorbitant price. That may itself therefore furnish, in respect of such transaction, a good reason for postponing mutation. Question No. 1 above formulated is the more general & important question that has been raised on this reference & that question, in substance, is whether there is any presumption arising from the ex facie import of a disputed transaction in favour of its being a sale or whether on the contrary there is a presumption in such cases of the transaction being a mortgage when there is a doubt.
33. As regards the existence of a presumption in favour of a transaction of this kind being a mortgage, there is, no doubt, the authority of Doctor Ghose, the reputed Author of Tagore's Law Lectures on mortgages, in his work, Edn. 5, p. 92. He cites two cases in support of the proposition - an English case 'Longuet v. Scawen', (1749) 1 Ves Sen 402: 27 ER 1106 & an American case 'Trucks v. Lindsey', 18 Iowa p. 504. This is also in consonance with what has been stated in Coote on mortgages, Vol. I, p. 31 citing the same English case above quoted. This rule has been adopted by my learned brother Justice Panigrahi on the strength of a casual expression of opinion without discussion in '26 IC 1: AIR (2) 1915 Mad 656. But I have been able to find no other Indian authority for this of the High Courts or the Privy Council where this question has been raised & decided & none has been brought to my notice in the course of the argument. It would therefore appear that the only basis for this presumption is the case in '(1749) 27 ER p. 1106. But the facts in that case indicate that it was a case which arose in exercise of the equity jurisdiction of the English Courts. A passage at page 41 of Coote on Mortgages, Vol. I also shows that the actual decision in the case on the facts thereof is rather out of date. It is to be noticed also that it is an old decision of the year 1749-50. The importation of principles of equity with regard to such transactions has been disapproved by the Privy Council as early as in 'Pattabhiramier's case', 13 MIA 560, & it seems to me that it is not open to us now to import any presumption based on equitable considerations into such transactions excepting in so far as they have been definitely embodied into the statutory provisions of the T. P. Act.
34. On the other hand, the case in 'Alderson v. White', (1850) 44 ER 924, decided in 1850 i.e. about a century later than that in 'Geerish v. Donaccon', (1740) 27 ER 706, clearly lays down the presumption arising from the ex facie import of a transaction as being applicable in such cases & this has been specifically followed by the Privy Council in '12 All 387' & '38 All 570'. It appears to me, therefore, that in all cases of doubt, it is this presumption of the correctness of the ex facie import of the document that must ultimately weigh in favour of a disputed transaction otherwise ambiguous being a sale rather than a mortgage. Some attempt has been made to distinguish the above Privy Council cases & other cases following them on the ground that in those cases the transaction in question was to be gathered from two separate documents & it was urged that the same presumption would not apply if the whole transaction was to be found in a single document. I have examined all the cases bearing on the point that have been cited at the Bar & it is not necessary to notice them at length. It is enough to say that a close examination of those cases does not appear to me to support any such distinction on principle. The only relevant matter that was adverted to in all such cases was whether or not it was a single transaction. If the sale & the condition do not form a single transaction, no question at all would arise because a subsequent & independent condition cannot have effect of converting a sale into a mortgage. It is only when the sale and the condition are found to form one transaction that any doubt arises & any question for construction presents itself. It appears to me to make no difference at all for the application of the principle laid down by the Privy Council in '12 All 387' & '38 All 570', that the transaction is embodied in one document rather than many. I therefore agree with the view expressed by my Lord that in cases of ambiguity or doubt there is no presumption in favour of such a document being a mortgage but that the presumption in favour of the ex facie import of the document by which the transaction is effectuated should arise. The ambiguity or the doubt however must in each case, as stated by my Lord, be inherent in the provisions of the deed & not resolvable by .reference to the surrounding circumstances.
35. This answer, however, may require to be modified to some extent in respect of transactions entered into subsequent to the amendment of Schedule 8, T. P. Act, in 1929. That amendment has provided that no such transaction shall be deemed to be a mortgage unless the condition is embodied in the document which affects or purports to affect the sale. From that date therefore whenever the sale & the condition are in two separate documents, such a transaction must necessarily be taken to be an out & out sale with the condition attached, & cannot be treated as mortgage. This is irrespective of the question whether the sale & the condition constitute inter-dependent or independent transactions. Of course, this amendment does not imply the contrary, that is to say, it has not the effect of legislating that wherever the sale & the condition are embodied in one document, it must necessarily be taken to be a mortgage. That is still a matter to be decided on the determination of the intention of the parties in the light of the contents of the document & the surrounding circumstances. But while this may be so, so far as the legal aspect is concerned, it is reasonable to suppose that after 1929 when parties to a conditional sale intend it to be in fact a sale & not a mortgage, they are much more likely than before to embody the transaction in two separate documents, one for the sale & the other for the condition. The vendee in such circumstances may be expected not to take the risk of the transaction being construed to be a mortgage by agreeing to the condition being incorporated into the same document as the sale. I therefore, entirely agree with my Lord the Chief Justice in his view that in respect of documents executed after the amendment in 1929 containing both a sale & a condition, there is a greater likelihood of the transaction embodied in the single document being a mortgage. Therefore to that extent the presumption in favour of the ex facie import would be weakened & a presumption would arise in favour of its being a mortgage.
36. The question has been debated before us that in case of conditional sale deeds which contain the first or second conditions in Cl. (c) of Schedule 8, T. P. Act, i.e., a condition, that on default of payment within stipulated time the sale shall become absolute, or that on such payment the sale shall become void, (sic.) such distinction between the condition for resale & other two conditions, as has been assumed by my Lord the Chief Justice in his answers to the reference in this respect. But that distinction may, for the present, be kept aside in considering the question whether Schedule 8, Sub-section (c) is in the nature of a definition, in the sense in which it is sought to be used. Having gone through a large catena of cases cited at the Bar, bearing on the matter, I find that only two learned Judges of other High Courts specifically put forward this view & held that a sale subject to a condition falling under one or other of the three categories specified in Schedule 8, Sub-section (c) is ipso facto a mortgage without any further investigation of the intention of the parties. They are Justice Sulaiman of the Allahabad High Court & Justice Sadasiva Aiyar of the Madras High Court. Justice Sulaiman gave expression to this view in 'Raja Mohindramansingh v. Maharaj Singh', AIR (10) 1923 All 48; 'Mathura Kurmi v. Jagdeo Singh', AIR (14) 1927 All 321; 'Man Singh v. Guman Singh', AIR (16) 1929 All 619 & 'Ramdhani Ram v. Ram Rikh Singh', AIR (18) 1931 All 548, but the other Judges who were also parties to the above decisions do not appear to have gone the length to which His Lordship was prepared to go. This view of Justice Sulaiman, (however, appears to have been throughout contested in that very Court from 1923 itself.. In 'Bishambar Nath v. Md. Ubaidullah Khan', AIR (10) 1923 All 586, a Bench consisting of Ryves & Daniels JJ. specifically criticised the view adumbrated in 'AIR (10) 1923 All 48', in the following terms at page 587.
'Dr. Sen in one portion of his very able argument on behalf of the appellant took the position that any deed which professes to be a sale-deed with a condition allowing the vendor to repurchase, came within the definition of a mortgage by conditional sale contained in Schedule 8 (c), T. P. Act & must be presumed to be such unless the surrounding circumstances were such as absolutely to exclude the possibility of a mortgage having been intended. This idea is supposed to derive some support from the decision in 'AIR (10) 1923 All 48'. A reference to Schedule 8 (c) is sufficient to show that this is a misreading of the law.........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 definition of a mortgage is given in Cl. (a) of the section & the subsequent clauses are merely particular cases of this definition. The neglect to this obvious fact has in some cases led to serious confusion. The view suggested by Dr. Sen was rejected by a Full Bench of the Madras High Court in 'Muthuvelu Mudaliar v. Vythilinga Mudaliar', 42 Mad 407.'
37. Later decisions of the Allahabad High Court, also do not appear to have followed the view of Justice Sulaiman. In 'AIR (24) 1937 All 724', Harries J. referred to the case in 'AIR (14) 1927 All 321', & pointed out that in that case one of the two Judges of the Bench, Justice Lindsay, did not appear to agree with the view taken by Justice Sulaiman & held that the case in 'AIR (14) 1927 All 321', did not compel him to decide that the particular transaction in question before him was a mortgage by conditional sale merely because there was in the same document a sale with a covenant for resale on payment. His Lordship preferred to follow the view of the Bench in 'AIR (10) 1923 All 586', which held that in all such cases the matter has to be determined by ascertaining the intention of the parties as one of construction of a document with the surrounding circumstances. In 'AIR (26) 1939 All 713', it was ruled that whether a deed is a mortgage by conditional sale within the meaning of Schedule 8 (c), T. P. Act, or an out & out sale is a question which falls to be determined on a consideration of the terms of the deed itself & of the surrounding circumstances. It was pointed out that the amendment of Schedule 8 (c) in 1929 did not provide that if a transaction is embodied in one document, it must, of necessity, be regarded as a mortgage by conditional sale & not as an out & out sale, & that therefore the Court is thrown back on the principle that the intention of the parties to a document must be decided having regard to the terms of the document & from the surrounding circumstances. Again in 'Thakrasingh v. Sheonath Singh', AIR (27) 1940 All 227, the case in 'AIR (10) 1923 All 586', which expresses a view contrary to that taken by Justice Sulaiman was cited in extenso & approved. As recently as in 'Bidha Ram y. Chhidda', AIR (37) 1950 All 430 the proposition was accepted that the mere language of such a document does not settle the matter & it was in every case a question of intention to be gathered from the document & the surrounding circumstances. So far as the Madras High Court is concerned, Justice Sadasiva Aiyar specifically put forward the same view as that later on propounded by Justice Sulaiman, in a case reported in 'AIR (1) 1914 Mad 37', & again in the referring' judgment which gave rise to the Full Bench decision reported in 'AIR (6) UJ19 Mad 1'. The learned Judges in the Full Bench case expressly overruled the view taken by Justice Sadasiva Aiyar in 'AIR (1) 1914 Mad 37', & stated it to be bad law. The opposite point of view was clearly & succinctly explained by Justice Napier in his judgment in 'Maruthai Goundan v. Dasappa Goundan', AIR (4) 1917 Mad 368 & in his referring judgment in 'A I R (6) 1919 Mad 1'. The same view has been taken in Bombay in 'Kasturchand Lakhamji v. Jakhia', A I R (2) 1915 Bom 229 and in 'AIR (3) 1916 Bom 215'. In the latter case Justice Batchelor explains the position very succinctly in the following passage.
'It seems to me clear that the question, whether Ex. 25 effects a mortgage or a sale is not to be answered by mere reference to the Cl. (c), Schedule 8, T. P. Act. And if I am not mistaken, to decide the point upon this view is to assume what is really in dispute. Schedule 8 T. P. Act, defines what a mortgage is & Cl. (c) of the section describes one method of effecting. a mortgage, viz., the method of mortgage by conditional sale, but the words of Cl. (c) are to be read not in an isolated manner, but in reference to para 1 of the section, & when they are so read, it will be manifest that Cl. (c) comes into play only when there is a mortgage, as that term has been defined.'
The same is the view adopted in 'Kuppa Krishna v. Mhasti Goli Naik,' AIR (18) 1931 Bom 371. The argument that a sale with a covenant to repurchase embodied in one document would be a mortgage by conditional sale within the meaning of Schedule 8 (c) especially where it is one document after the 1929 amendment has been specifically noticed & negatived. There are similar decisions in the Calcutta High Court. In 'Azizar Rahman v. Rabatannessa', 21 IC 19 (Cal), a document of sale with a condition of repurchase though embodied in the same document was held not necessarily to be a mortgage by conditional sale, but that the question would depend on the construction of the terms of the document taken with the surrounding circumstances & in the particular case on such construction it was held to be not a mortgage but a sale out-right. In a very recent case of 'Mahabir Singh v. Bigan Sabun', AIR (36) 1949 Pat 508, Justice Manoharlal held the particular document before him as being a mortgage on a construction of the terms of the document & the circumstances. His Lordship did not view it as a matter to be settled by treating Schedule 8, Sub-section (c), as a mere definition. Justice Mahabir Prasad however was in clined to think that the transaction fell within the definition itself. That the matter is one of intention, not of definition was also held in the only Privy Council case dealing with this question with reference to a document of a date subsequent to the T. P. Act in 'AIR (11) 1924 P C 226'. The Privy Council in that case proceeded to determine the question not on the view that the sale subject to a condition was ipso facto a mortgage by conditional sale but proceeded to determine the question on a consideration of the surrounding circumstances. That, no doubt, was a case where the sale & the condition were in two separate documents. But this cannot make any difference on principle since it was definitely found that they constituted one transaction. In fact in that case, though the details of the condition are in a separate document, the sale-deed itself expressly states that the sale was subject to reservation of conditions embodied in another document. The Privy Council refers to this reservation as only one of the relevant circumstances to reinforce the view they were inclined to take on a consideration of the rest of the document & other circumstances. At any rate, the settled view of all the High Courts excepting for some isolated views to the contrary in a few cases, is to the effect that questions relating to transactions covered by Schedule 8, Sub-section (c) T. P. Act are to be treated not merely as a matter falling under a definition but as a matter of intention to be gathered from the language & the surrounding circumstances. In 'AIR (6) 1919 Mad 1', Chief Justice Wallis delivering the judgment in a Full Bench went so far as to say:
'It is in my opinion, 'not open to us' to answer the question referred to us in the affirmative consistently with the decisions in the Privy Council'
& refers to a number of Privy Council decisions & concludes that all these decisions lay down that transactions of this kind are to take effect according to their tenor, unless it appears from the terms of the instrument or the surrounding circumstances, excluding oral evidence of intention ad (sic) inadmissible, that the intention was to effect a mortgage.
The very question which was answered in the negative in that Full Bench reference was, whether where in one & the same transaction land is sold absolutely but with a right of repurchase to be exercised before a certain date, the transaction necessarily becomes by virtue of Schedule 8 T. P. Act, a mortgage by conditional sale, whatever the intention of the parties might have been.
38. It appears to be, therefore, that the weight of authority is absolutely clear against treating Schedule 8, Sub-section (c) as a mere definition clause & as excluding investigation of intention to be gathered from the terms of the document & the surrounding circumstances. Indeed I would venture to say that even treating it as a definition, the result is the same. If Cl. (c) of Schedule 8 is a definition of a mortgage by conditional sale, it is essential for that definition that the sale indicated by the transaction should be made out to be an 'ostensible' sale, that is, that it is a cloak for what in fact is a mortgage. To say that a document which ex facie is a sale is an 'ostensible' sale in the sense that the form is a cloak & not a reality is with great respect begging the question & in the words of Justice Batchelor in 'AIR (3) 1916 Bom 215 is 'to assume what has to be proved'. It appears to me, therefore, quite clear that the language of Schedule 8, Cl. (c) cannot be treated as mere definition-dispensing with an independent consideration of the intention of the parties to be gathered on a comprehensive view of the terms of the transaction & of the surrounding circumstances.
39. It is true that most of the cases that have been noticed above & particularly the Privy Council case in 'AIR (11) 1924 PC 226, are cases where the condition was a condition of repurchase & not any of the other two conditions specified in Schedule 8, Sub-section (c). But the discussion in all the cases where the matter has been specifically adverted to is perfectly general & is applicable to the entire Sub-section (c) of Schedule 8 & is not restricted to any particular portion thereof &*as already stated in some of the cases conditions (1) & (2) in Schedule 8 (c) are referred to as condition of resale. Nor can I see any reason for the distinction sought to be made between the effect of one kind of condition & another with regard to its constituting a mortgage by conditional sale when incorporated with a transaction of sale. In the course of the arguments at the hearing of this reference, it was suggested that there is a difference on principle. It was said that in a transaction which was by way of a sale subject to a condition of repurchase, there was a completed sale by itself with a personal covenant for resale attaching thereto' & that it may, therefore, in fact, be either a mortgage or an out & out sale, but that where the transaction is a sale with a condition that on repayment of the price within a stipulated period the sale must become void or where the transaction is a sale with a stipulation that in default of repayment within a stipulated period the sale must become absolute, there is by the very terms of the transaction a deduction from the quality of the sale itself & that therefore it ceases to be a sale having regard to the definition of a transaction of sale in Schedule 4, T. P. Act. With great respect, I am unable to appreciate the suggested distinction. 'Sale' is defined as 'a transfer of ownership in exchange for a price'. A sale which becomes defeasible on the happening of a condition or a sale which becomes absolute on the happening of a condition is as much a sale as a sale subject to a covenant for repurchase. In each one of these cases it is the full ownership as distinguished from the mere interest therein (as for instance, in the case of a mortgage or lease) that is transferred. What is required to constitute a sale is not the absolute or unconditional transfer of ownership but only the transfer of 'full' ownership. I am aware of no principle which enables one to think that the fact of a sale being subject to any of the three conditions specified in Schedule 8, Sub-section (c) detracts from the concept of full 'ownership' whose transfer is required to constitute a sale under Schedule 4, T. P. Act.
40. Apart however from any consideration of the question based on the notions of a sale or a mortgage there is abundant authority for saying that even in a case where the condition in a transaction was not a condition for repurchase the question has to be determined on a consideration of the intention to be gathered from the document & the surrounding circumstances.
41. In '12 All 387', the condition was that on payment within a stipulated period the vendees will 'cancel' the sale. There was no specific stipulation to 'retransfer'. The principle of ex facie import was applied & the transaction was held to be a sale & not a mortgage. The condition was no doubt in a separate document executed on the same day, but it was held to constitute along with the sale a single transaction. In 'Situl Purshad v. Luchmi Purshad', 10 Cal 30, there were two documents executed at the same time, one a mokurari patta in acquittance of a pre-existing debt & at the same time an ekrarnama with the stipulation that if the grantor or his heirs (sic.) the amount of the original debt without interest the patta should be 'returned', the grantor having no claim to mesne profits during the possession of the mokuraridar (See page 35 of the report). There was no stipulation for a re-conveyance or a regrant of the mokorari patta. It was held by the Privy Council that having regard to the terms of the instruments & the circumstances relating thereto, the transaction was not a contract of mortgage but was evidence of a sale in acquittance of a debt. In 'Kinuram Mandal v. Nityechunder', 6 C L J 208, the stipulation was 'on your giving me back the sum of Rs. 375/- within seven years, I shall return the holding'. There was no stipulation for reconveyance. It was held on construction that it was an out & out sale. In 'AIR (4) 1917 Cal 565', a kot-kabala was construed on its terms & other circumstances to be a sale. Similarly In '21 IC p. 19 (Cal)', there was a stipulation in the same document that if the transferor can pay the consideration money within one year the transferee shall be bound to release the property. It was held on a construction that it was a sale. In 'Altapali Khan v. Uzirali Khan', AIR (20) 1933 Cal 381, (there was?) an ex facie sale with the stipulation in the same document that 'if the said principal amount & equal amount of profit be paid to you within the period of 8 years then you shall return back the said lands with the kabala. Under these terms, I execute this absolute sale-deed.' It was held on a construction of the terms that it was an out & out sale & not a mortgage. An argument was raised in the case to the effect that since there was no express stipulation for conveyance, the actual condition to which the transaction was subject imported a mortgage. But this was negatived relying on 'Ayyavayyar v. Rahimansa', 14 Mad 170.
42. In '14 Mad 170', an ex facie sale with a stipulation that if the amount be repaid in cash on 27-5-1875, the vendee shall put the vendor in possession & return the sale deed & that in default the sale deed shall become permanent, was held as a matter of construction to be a sale & not a mortgage. It was expressly ruled therein that the absence of a clause for reconveyance was not material. In 'AIR (28) 1941 Oudh 582', there was an ex facie sale with a stipulation in the same document that after expiry of 9 years & during the 10th year if the vendor paid the entire consideration, the sale deed would become null & void & that otherwise it would take absolute effect as a sale deed. It was held as a matter of construction of the document & on consideration of the circumstances that it was a sale. The proposition that such a transaction was a mortgage by virtue of the definition on the basis of an annotation to that effect in Mukherji's T. P. Act citing 'AIR (24) 1937 All 724', as authority therefor (sic), was expressly an ex facie sale with the following recital :
'The sale has become absolute & final. The contracting parties have no right to cancel the sale & to demand restitution of the consideration money. The vendor has no right to any share in the property.'
But it contained a further stipulation whereby the vendee gave a right to the vendor to take back the property if within the period of 10 years they should pay the amount. The above stipulations taken together meant that the vendee had no right to cancel the sale & call for the payment of money at any time, but that the vendor had the right to pay within 10 years & cancel the sale, There was no express stipulation for reconveyance. The transaction on a consideration of all the circumstances was said to be an out-right sale. In 'Ahmed Hussain v. Azhar Ali', AIR (31) 1944 Oudh 305, there was an ex facie sale with a clause in the same document which gave a light to the executant to take back the sold property from the vendee within five years after paying in the month of October in a lump sum the entire consideration money plus some other incidental items with a further stipulation that if the said money was not so paid within the time fixed & if the executant did not take back the property the deed shall be deemed to be absolute & the right of the executant shall be extinguished. The Court went into the evidence of intention & held that the document was a sale & not a mortgage. In most of the above cases the sale & the condition were embodied in a single document & in some of these cases the conditions which merely stipulated for cancellation of the sale on payment of money or for return of the deed on payment of money have been merely referred to 'as a condition of repurchase' treating them to be such though not in terms so. There are a number of other cases of the various High Courts where the transaction or the document contained stipulations of the nature specified in Schedule 8, Sub-section (c), conditions (1) & (2) but the question at issue was determined as one of the construction & intention & not of definition & the particular transaction in question was held to be a mortgage. To notice all the cases in detail will unnecessarily lengthen this judgment. It is sufficient to say that my attention has been drawn to no decided case wherein a transaction by way of an ex facie sale which contains also a stipulation, rendering the sale absolute in default of payment or avoiding the sale on payment, has been ipso facto held to be a mortgage without any consideration of the intention to be gathered from the other terms of the document & of the surrounding circumstances.
43. My answer on this part of the case would be that in the cases of all transactions subsequent to the amendment of 1929 by way of a conditional sale incorporated in a single document, there may arise a presumption in favour of its being a mortgage, but that in the case of transactions prior to 1929 whether by means of one document or more than one document, constituting s single transaction, there is no such presumption but that on the other hand there is a presumption in favour of the ex facie import of the document as a sale.
44. Before closing I would like to add a word of caution. We have dealt, in this case, with only a few out of the variety of circumstances or stipulations arising in cases of this kind. But the judgment is not to be understood as laying down that the particular presumptions or stipulations that we have dealt with, are of over-riding importance, when there are other stipulations & circumstances to enable a Court to come to a fair & reasonable conclusion. The one & the only crucial criterion in all such cases is the intention of the parties. That intention is to be judged from a full consideration of the contents of the document & the surrounding circumstances. Every other rule that has been laid down in the decided cases are (sic.) only aids to such consideration. Even the rulings regarding the presumptions arising in such cases are not to be treated as in the category of rules relating to onus of proof. Rules relating to onus of proof enable the Court to say that a person who has not discharged the burden of proof on a particular issue must fall on that issue. But the presumptions dealt with as regards construction of documents of this kind are only aids to such constructions. The Court may use all available material including the presumptions, but must arrive at a definite conclusion whether in its view the transaction in question is a mortgage or a sale. It cannot merely absolve itself of its function of construction by saying that a particular party must fail because he has not discharged the onus.
45. I would also add that the delay in seeking redemption is a circumstance which must call for scrutiny in such cases. Unexplained delay must receive its due weight as one of the relevant circumstances, by way of conduct where such conduct is admissible - See 'Alderson v. White' & '38 All 570'.
46. On the merits of the appeal before us, I am not prepared to differ from the decision of my Lord the Chief Justice that the suit document is a mortgage & not a sale, though at first inclined the other way on account of the long delay.
47. Apart from the ex facie import of the document, there are no outstanding circumstances showing it to be a sale. There is no clear & positive evidence that the consideration was substantially fair & adequate as price. The finding of the trial Court in this behalf is rather negative & halting. The styling of the document as Sharti Bikraya Kabala is, if any, a weak aid to the construction. There was undoubtedly very considerable delay of about 24 years in the pltf. coming forward with this claim for redemption & that may be indicative of the consciousness of the parties about the absence of the right of redemption & it is this that has caused hesitation in my mind. But there are terms in the document which seem to indicate that the document was meant to be a mortgage. There is the provision for paying back the money with interest on disturbance of possession - not necessarily due to defect in vendor's title. There is the fact that though the vendee could have obtained mutation, even on the terms of the document, in 1920 under Schedule 1, Orissa Tenancy Act, he did not choose to assert his position as a vendor & obtain mutation till 1927. What however is the significant & turning factor in this case is, as stated by my Lord, the marked difference in the operative words of conveyance of ownership used in the earlier portion & later portion of the document implying thereby that in the consciousness of the parties there was detraction from full ownership prior to' the stipulated time. For the above reasons I agree with the order proposed by my Lord, as regards the disposal off the appeal on its merits.
48. I respectfully agree with my Lord the Chief Justice regarding the answers to the four questions, referred for decision to the Full Bench. I also agree with the order which he intends passing in Second Appeal No. 162 of 1946. My learned brother Justice Das also agrees with my Lord the Chief! Justice regarding the said answers & the order proposed to be passed in S. A. No. 162 of 1946 It is thus clear that there is complete unanimity on all the points that have arisen for decisions, before this Full Bench.
49. My Lord the Chief Justice & my learned brother Justice Das have however differed in respect of the construction of conditions 1 & 2 of Cl. (c) of Schedule 8, T. P. Act. My Lord has taken the view that if a document contains either the first or the second of the said conditions the transaction evidenced by the document must conclusively be held to be one of mortgage by conditional sale & not a out & out sale. My learned brother Justice Das however seems to think that such a document executed after 1929 may raise a presumption ins favour of a mortgage but that to ascertain its true nature the intention of the parties would: be found out. Both of them have however recognised that this point does not directly arise for decision in this reference. I would therefore reserve my opinion on that question.