1. In this plaintiff's appeal against a judgment and decree of District Judge, Maharaj Kishore allowing the appeal and remanding the case for trial of other issues the sole point for determination is whether the transaction in dispute amounts to a mortgage by way of conditional sale or an out and out sale. The relationship of the parties is given in the pedigree-table which Is as follows:
SIRI KISHAN DASS
| | | | |
Jaigopal Ram Gopal Ram Parshad Parmanand Girdhari Lal
Pat Ram | |
____________________________|___ Mam Raj Kalu Ram
| | | | ____|____ ____|_______
Matram Makhan Lal Dalip Singh Sant Lal= | | | |
Deft. 1. Deft. 2. Deft. 3. widow Mt. Misri Hans Raj Mani Ram Dhan Ram Dev Raj
Deft. 4. Pltf. Daft. 5. Deft. 6. Deft. 7.
2. Ram Parshad's branch had earned on business under the name of firm Hardwari Mal-Pat Ram and Parma Nand's branch under the name of firm Kalu Ram-Mam Raj. On the 5th August 1930, an award was made in favour of Hardwari Mal-Pat Bam against firm Kalu Ram-Mam Raj for Rs. 4,000/- and a decree followed thereon. Execution was sought and the property was attached and sale was going on. I may here state that by this award the decree money was made a charge on the property which is now in dispute.
3. On the 21st June 1936, two documents were executed. One is Exhibit D-1, which is a sale-deed by which Kalu Ram on behalf of himself and onbehalf of his minor nephews, sons of Mam Raj, sold their share of the haveli which was one-half to the sons of Pat Ram. The sale-deed was in the following terms;
'We, Kalu Ram * * *are the owners of half share of the 'haveli' ** * * We, having sold our share fora sum of Rs. 2,000/- to Mat Ram * * *,have put the vendees in possession of the property in dispute and have removed the possession of myself and of the minors, 'apta wanabaligan mazkur ka oaba oatan tor par jaidadmubaiya se utha lia gia) and the whole of theconsideration has been adjusted in the decreeon the award * * * *by which a charge was created on the propertysold....If there is any other co-shareror if the minors on attaining majority make anykind of claim in regard to the property sold, thenwe shall be responsible for the same in everyway and if any loss is caused to the vendees, weshall be responsible for the payment of the samesnd the vendees will have the power to make goodthat loss from our person and property and fromnow onwards the vendees shall be owners of theproperty sold like us * * *'
Then follows the statement in which Kalu Ramsays that he is the guardian of his minor nephewsand that his sons have given their consent to thistransaction.
4. The other transaction is Exhibit P. 1, which is an agreement by the sons of Pat Ram and it is in the following terms:
'We, Mat Ram * * * *have taken by sale the property for Rs. 2,000/-and have been put in possession * * We make this agreement and say that if KaluRam or the minors or the sons of Kalu Ramwithin a period of one year wish to take backthe property, then on their paying Rs. 1,250/-with interest at -/8/- per cent, per mensem weshall execute a sale-deed in their favour, but weshall not be liable to pay any expenses for thesame and if after the expiry of that one yearbut within five years they pay Rs. 2,000/- without interest but in cash and in one lump sumand all at once we shall give the property to thepersons mentioned and if we do not return, theywill have the right to go to Court and we shallhave no objection. On the expiry of five yearsKalu Ram and his sons and the minors abovementioned will have no right left to get theproperty back themselves or through court.Therefore this agreement is written about thereturn off the property so that it may remainan authority.'
No money was paid. In 1936, Kalu Ram died and no money was paid by his sons or by the minors.
5. On the 26th August 1949, Hans Raj son of Mam Raj brought a suit for redemption alleging that the two documents constituted a mortgage by conditional sale or in the alternative for specific performance of the agreement. The suit was decreed by the trial Court which held that it was a mortgage by way of conditional sale, but on appeal to the learned District Judge the decree was reversed and the learned Judge held that it was an out and out sale and the plaintiff has come up in appeal to this Court.
6. Counsel for the appellant submits that on a true interpretation of the terms of the two documents. Exhibits D-1 and P. 1 and of the surrounding circumstances which have been given above, it should have been held that the case was one of mortgage by way of conditional sale and not a sale. He has relied in the first instance on 'Jagannath v. Gauri Shankar', AIR (13) 1926 All 670 where it was held that in all cases where there is a sale ana there is an agreement to retransfer the property the two transactions must be treated as part and parcel of one and the same transaction and the case is governed by the provisions of the Transfer of Property Act. The transaction must come within the definition of conditional sale as given in that Act. In that particular case the transfer was a consideration for the covenant on the part of the vendee to return one-half of the property on receipt of a sum of money and it was held to be a case of mortgage fay conditional sale and not a sale. As far as I can see that case was decided on its own peculiar facts and I do not think that it lays down any particular rule of law.
7. Counsel next relied on a Judgment of their Lordships of the Privy Council in 'Narsingerji Gyanagarji v. Parthasaradhi, 47 Mad 729 (PC.) In that case two deeds of the same date were so phrased as to be ostensibly a sale with an agreement for a re-sale and re-purchase at a certain date. The conditions of the conveyance 'inter alia' contained the following:
(1) Rents and profits were to be enjoyed by the purchaser but to the vendor were reserved the sole right to minerals and mineral rights.
(2) If the vendor failed to pay the amount mentioned before the 31st August 1914, the purchaser was to lose all his rights of repurchase. The most important conditions were contained in Clause 4 which were to the effect that if the Government were to acquire any portion of the land under the Land Acquisition Act the vendor and the purchaser were to be entitled to proportionate share of the purchase money. Then Lordships found that the amount for which the sale ostensibly took place was Rs. 6,00,000/- which was absurdly inadequate. There was a provision by which the vendor had not only an option of repurchase but he could be required to do so if the purchaser required him so to do. Under the circumstances their Lordships held the transaction to be a mortgage by conditional sale. This case is of no assistance to the appellant because the conditions and circumstances were different.
8. He next relied on another judgment of their Lordships of the Privy Council in 'Nathu Lal v. Mt. Gomti kuar', ILR (1940) All 625. In that case their Lordships approved of the view taken in 'Narsingerji Gyanagerji v. Parthasa-Radhi', 47 Mad 729, and therefore this case can be of no assistance.
9. Reliance was next placed on 'Mahabir-Singh v. Bigan Sahun', AIR (36) 1949 Pat 508. There the documents contained the following four provisions:
(1) The vendor could, if he wanted, by arranging money from his private fund repurchase the property sold;
(2) If the vendee raised any objection the moneycould be deposited in Government treasuryand after notice to the vendee from the Courtthe vendor could take possession;
(3) The vendee was not entitled to enter intoany transaction in regard to the propertysold nor transfer nor encumber the same;
(4) If the money was not paid by the stipulateddate the vendee was to have full rights. It was in these circumstances that it was held to be a mortgage by conditional sale and not an out and out sale with condition of repurchase. This case also was decided on its own facts and does not support any general proposition of law.
10. Counsel for the respondent in the first place submitted that the finding of the learned DistrictJudge that the transaction was a sale and not a mortgage was a pure question of intention and that being a question of fact could, not be challenged in second appeal. I do not think that it is not open in second appeal to go into the terms of the two documents and to discover therefrom whether in law such transactions constitute a sale with a condition of repurchase or a mortgage by conditional sale. In order to discover what is the real nature of the transaction certain tests have been laid down which are given in Mulla's Transfer of Property Act at p. 356:
(1) The existence of a debt;
(2) The period of repayment, a short period being indicative of a sale and a long period of a mortgage;
(3) The continuance of the grantor in possessionindicates a mortgage;
(4) A stipulation for interest on repayment indicates a mortgage.
(5) A price below the true value indicates amortgage;
(6) A contemporaneous deed stipulating for reconveyance indicates a mortgage, but one executed after a lapse of time points to a sale.
In applying these tests the Courts put the onus on the party alleging that an ostensible sale-deed was a mortgage; and in a case of ambiguity lean to the construction of a mortgage. It has been suggested that the test is whether the agreement to reconvey was part of the consideration of the transfer.
11. In 'Bhagwan Sahai v. Bhagwan Din', 17 Ind App 98 (PC), their Lordships of the Privy Council quoted with approval the following passage from 'Alderson v. White', (1858) 2 De G & J 97:
'The rule of law on this subject is one dictated by common sense that 'prima facie' an absolute conveyance containing nothing to show that the relation of debtor and creditor is to exist between the parties does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase.'
12. Prom a perusal of the conditions of the sale and the agreement I am unable to hold that the relation of debtor and creditor continues to exist between the parties and therefore merely because there was a stipulation by which the vendor could repurchase the property would not turn the sale evidenced by Exhibit D-1, into a mortgage. Applying the test which I have given above, there is no doubt that there was a debt in existence be-fore the transaction was entered into, but the period of repayment was a short one and was more indicative of sale than of a mortgage. The possession was transferred to the vendees and after the first year there was no stipulation of interest and there is no evidence that the price mentioned in the sale-deed was in any way less than the true value of the property. The onus, as Mr. Tek Chand submitted, was on the plaintiff to show that the ostensible sale was really a mortgage, nor am I able to find any kind of ambiguity which would lean to the construction of the terms as a mortgage and if the test is that the agreement to reconvey was a part of the consideration of the transfer, then I must hold that the plaintiffs' case does not come within this test. Mr. Tek Chand referred to several judgments, but I will quote only two which in my opinion are important.
13. In 'Jhanda Singh v. Wahid-Ud-Din', 38 All 570 (PC), there were two instruments, one a sale-deed and the other an agreement for repurchase. They provided that if within 9 or 10 yearsthe vendor without mortgaging or selling the property in dispute paid the money to the vendee, toe latter would execute a deed of resale. It was in these circumstances that the instruments were held to be an out and out sale. But here also, as was pointed out by Mr. Paqir Chand Mital, there was a provision that the vendor had to pay out of his own pocket without mortgaging or selling the property to anybody else. There was a provision in these two instruments with regard to the power of the vendor to deposit the money in Court but in spite of this their Lordships held the transaction to be one of sale out and out and not a mortgage by conditional sale.
14. Reference may next be made to 'Ahmed Hussain Rizvi v. Azhar Ali', AIR (31) 1944 Oudh 305. The document there was described as a sale-deed and the executant was throughout referred to in the body of the document as the vendor and the other person as the vendee. The deed of sale further contained two indemnity clauses. There was a provision for redemption within 5 years after which the rights of the executants were to be extinguished. Mutation was entered in the name of the vendee. Under these circumstances this was held to be a sale and not a mortgage.
15. After considering all these cases I am of the opinion that the transaction which is now before me is a sale with a stipulation for repurchase and not a mortgage by conditional sale. Apart from the fact that in Exhibit D-1, Kalu Ram and others are described as vendors and Mat Ram and others as vendees, possession was given to the defendants and there was an indemnity clause. There is one other very significant fact and that is that there could not have been any necessity for creating a mortgage because by the award itself a charge had been created of the decretal amount on the property in dispute. Taking all these circumstances into consideration, in my opinion, the District Judge rightly held the transaction to be a sale and not a mortgage.
16. I, therefore, dismiss this appeal and affirm the judgment and decree of the District Judge. Costs will abide the result. Parties have been directed to appear in the Court of the Subordinate Judge on the 15th October 1951.