Skip to content


Bai Kanku Punamchand Kanjibhai Khristi Vs. Victorbhai Kanjibhai Khristi and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtGujarat High Court
Decided On
Case NumberSecond Appeal No. 504 of 1961
Judge
Reported inAIR1969Guj239; (1969)GLR811
ActsTransfer of Property Act, 1882 - Sections 54 and 58; Code of Civil Procedure (CPC), 1908 - Order 34, Rule 7 and 7(1); Bihar Tenancy Act - Sections 40
AppellantBai Kanku Punamchand Kanjibhai Khristi
RespondentVictorbhai Kanjibhai Khristi and ors.
Appellant Advocate A.M. Joshi, Adv.
Respondent Advocate R.J. Trivedi, Adv. for; G.D. Bhatt, Adv.
Disposition Appeal partly allowed
Cases ReferredVeeravunni Haji v. Koyammu
Excerpt:
property - construction - sections 54 and 58 of transfer of property act, 1882 - deceased owner of house property - passed conditional sale deed in respect of said property to defendants - mortgage deed contained stipulation that said property would pass back to deceased if he pays rs. 800 to defendants within period of five years - appellants demanded redemption of mortgage property - contended that conditional sale deed was in nature of mortgage - whether deed was mortgage by conditional sale or it was sale transaction - no money dealing between parties of this document before execution of document - document did not state that title deed had been handed over to executee which is ordinarily mentioned in sale deed - defendants failed to show that price paid was inadequate - held, deed.....j.m. sheth, j. 1. this is a second appeal filed by the original defendant who was the respondent in civil appeal no. 303 of 1960 of the district court of kaira at nadiad. the present respondents who were the original plaintiffs in civil suit no. 176 of 1960, filed by them in the court of the civil judge (j. d.) at nadiad, are the heirs of the deceased kanjibhai trikambhai khristi. the deceased kanjibhai was the owner of a house, vada and angana appurtenant to it, situated in a moholla known as navavas in mahudha town, district kaira. on 10th january, 1952, he passed the deed in question described as 'a conditional sale-deed' ex. 16 for a consideration of rs. 800/- in respect of the said property to the present appellant-defendant, bai kanku, the wife of khristi punamchand kanjibhai. the.....
Judgment:

J.M. Sheth, J.

1. This is a second appeal filed by the original defendant who was the respondent in Civil Appeal No. 303 of 1960 of the District Court of Kaira at Nadiad. The present respondents who were the original plaintiffs in Civil Suit No. 176 of 1960, filed by them in the Court of the Civil Judge (J. D.) at Nadiad, are the heirs of the deceased Kanjibhai Trikambhai Khristi. The deceased Kanjibhai was the owner of a house, Vada and Angana appurtenant to it, situated in a Moholla known as Navavas in Mahudha town, District Kaira. On 10th January, 1952, he passed the deed in question described as 'a conditional sale-deed' Ex. 16 for a consideration of Rs. 800/- in respect of the said property to the present appellant-defendant, Bai Kanku, the wife of Khristi Punamchand Kanjibhai. The possession of that property was delivered by the executant to the executee on the same day. The document contains a stipulation that the house was to be returned back to the executant if he pays the amount of Rs. 800/- being the consideration paid at the time of the transaction in question, within a period of five years from the date of the document. Kanjibhai, the executant died on 12th June, 1959. The present suit was brought by his heirs on 25th April, 1960 for the redemption of the mortgage on the allegation that though the document was ostensibly a sale-deed, was really in the nature of a mortgage. In the plaint, they had also alternatively stated that in case it was found to be out and out a sale document, they were entitled to the specific performance of the agreement contained in the document. However, no relief was claimed for specific performance. No issue was sought for on that point and in the appeal also, before the District Court, no contention was urged in that respect. The only contention urged was that the transaction in dispute was really a mortgage transaction. The contention raised by the present respondents did not find favour with the learned trial Judge and eventually he dismissed the suit with costs.

2. Against that judgment and decree, the original plaintiffs preferred the aforesaid Civil Appeal in the District Court of Kaira at Nadiad. The learned District Judge Mr. V. R. Shah, as he then was, found that the transaction in question was really a mortgage transaction. It was a mortgage by conditional sale. It was not out and out, a sale transaction with a right to repurchase. In view of that finding of his, he ordered that a usual preliminary decree for redemption be passed in Form No. 7(c) in Appendix 'D' of the Civil Procedure Code. The appellants of that appeal were to get the costs of the appeal and the suit from the respondent who in turn had to bear her own costs in both the Courts.

3. Being dissatisfied with that judgment and decree, the original defendant has preferred the present second appeal to this Court.

4. Mr. A. M. Joshi, the learned Advocate, appearing on behalf of the appellant, made three submissions before me:

The first submission was that the learned District Judge had committed an error in finding that the transaction in question was in the nature of a transaction, i. e. was a mortgage by conditional sale and was not out and out, a sale transaction with a right to repurchase.

The second submission was that the learned District Judge had committed an error in not framing an issue whether the present respondents had a right to redeem.

The third submission was that the learned District Judge had committed an error in directing to draw a preliminary decree in a particular form and the decree that has been ultimately drawn up is not as provided in Order 34, Rule 7(1)(ii)(b) as it should have been, in view of the position that the mortgage was a mortgage by conditional sale.

The most important question for consideration in this second appeal is whether the transaction evidenced by the Deed Ex. 16, dated 10th January, 1952, passed by the deceased Kanjibhai in favour of the present appellant-defendant was a mortgage by conditional sale or was out and out, a sale transaction with a right to repurchase. The learned Advocate Mr. Joshi attacked the finding of the learned District Judge on this point, urging that several important circumstances which will be referred to, at an appropriate stage by me, have been ignored by the learned District Judge. It was also urged by him that the learned District Judge has relied upon a decision of the Supreme Court in the case of Chunchun Jha v. Ebadat Ali : [1955]1SCR174 . But the ratio of that decision has not been followed by the Supreme Court in its later decisions, namely; Bhasker v. Shrinarayan : [1960]2SCR117 and Bhoju Mandal v. Debnath Bhagat : AIR1963SC1906 . He also invited my attention to two decisions of the Bombay High Court, namely; Gurunath Balaji Mutalik v. Vamanava Nalarao Divan : (1911)13BOMLR240 and Kuppa Krishna Hegde v. Mhasti Goli Naik, 33 Bom LR 633 = (AIR 1931 Bom 371).

5. The question of law involved in this second appeal is whether the document Ex. 16 executed by the deceased Kanjibhai in favour of the present appellant Bai Kanku, is in its true effect, a mortgage by conditional sale or a sale with a condition to repurchase, i. e. a sale with a condition to retransfer.

6. By Section 58(c) of the Transfer of Property Act a mortgage by conditional sale is defined as follows:--

'58. (c) Where the mortgagor ostensibly sells the mortgaged property --

on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale.

Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.'

The proviso to this clause was added by Act 20 of 1929. Prior to the amendment there was a conflict of decisions on the question whether the condition contained in a separate deed could be taken into account in ascertaining whether a mortgage was intended by the principal deed. The Legislature resolved this conflict by enacting that a transaction shall not be deemed to be a mortgage unless the condition referred to in the clause is embodied in the document which effects or purports to effect the sate. In the instant case, this condition is embodied in the document Ex. 16 itself.

7. Another relevant section that we have to take into account is Clause (a) of this very Section 58 of the Transfer of Property Act it runs as under:--

'A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan,' an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.'

There is no doubt in my mind that one has to consider both these Clauses 58(a) and 58(c) of the Transfer of Property Act, 1882, for deciding the question involved in this appeal,

8. Another material section that will arise for our consideration is Section 54 of the Transfer of Property Act which defines 'sale'. It runs as under :--

' 'Sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.'

'Sale' is defined as being a transfer of ownership for a price. in a sale there is an absolute transfer of all rights in the property sold. No rights are left in tranferor. It is, therefore, evident that one of the important considerations for deciding the nature of the transaction in dispute would be whether there was a transfer of all the rights and was to come into effect after the price paid at the date of the sale, as contended and the transferor was merely given a right for retransfer, i.e. a right to repurchase. If the title was not to vest immediately in the transferee, t e. by this document, the parties did not intend to transfer the title of the transferor absolutely to the transferee, but the intention was to postpone it and it was intended to be transferred in case the transferor failed to make payment of a consideration received within the stipulated period, it will be a very important circumstance to indicate that the transaction in question was not out and out, a sale transaction with a condition to repurchase, but was in the nature of a mortgage, i. e. a mortgage by conditional sale.

9. Before I refer to the relevant circumstances and set out the relevant clauses of the deed in question, I first propose to refer to several decisions cited at the Bar. I prefer to follow that course as the learned Advocate Mr. Joshi laid emphasis on his argument that the later decisions of the Supreme Court dissented from the view expressed in the decision : [1955]1SCR174 and also referred to the comments made by the learned author Shri Mulla in his book of Transfer of Property, 5th Edition, Page 371. After referring to the following observations made by his Lordship Bose J., speaking for the Court in the aforesaid case of : [1955]1SCR174 :

'The Legislation has made a clear-cut classification and excluded transactions embodied in more than one document from the category of mortgages, therefore, it is reasonable to suppose that persons who, after the amendment, choose not to use two documents, do not intend the transaction to be a sale, unless they displace that presumption by clear and express words; and if the conditions of Section 58(c) are fulfilled, then we are of opinion that the deed should be construed as a mortgage,'

the relevant comments made by the learned Author are as under :--

'In so far as these observations suggest that in all cases where the whole transaction is in one document, there is a presumption that the transaction is a mortgage, and that such a presumption can only be rebutted by express terms, the observations are, it is respectfully submitted, too wide. Prima fade, such a transaction may be regarded as a mortgage, but it would be open to the other side to show that it was intended to be an out and out sale. As the Supreme Court has itself observed in a later case : [1960]2SCR117 , 'the question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of surrounding circumstances.''

It will be significant to note that the learned author also agrees that prima fade, such a transaction may be regarded as a mortgage, but it would be open to the other side to show that it was intended to be an out and out sale.

10. If we now refer to the aforesaid Supreme Court decision, AIR 1954 SC 343, the relevant observations, material for our purposes are as under--

'The Question whether a given transaction is a mortgage by conditional sale or a sale outright with a condition to repurchase is a vexed one and must be decided on its own facts. In such cases, the intention of the parties is the determining factor.

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. In every such case the question is, what upon 8 fair construction is the meaning of the instrument?

The converse also holds good and if, on the face of it, an instrument clearly purports to be a mortgage it cannot be turned into a sale by reference to a host of extraneous and irrelevant considerations. Difficulty only arises in the border-line cases where there is ambiguity.

Under the Proviso to Section 58(c), Transfer of Property Act, if the sale and agreement to repurchase are embodied in separate documents, then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not. But the converse does not hold good, that is to say, the mere fact that there is only one document does not necessarily mean that it must be a mortgage and cannot be a sale.'

These observations made by the Supreme Court, clearly indicate that the Supreme Court has not gone to the length of saying that embodying of such a condition in the document itself would necessarily indicate that the transaction is a mortgage transaction and not a sale transaction.

11. The further observations made therein are as under:--

'If the condition of repurchase is embodied in the document that effects or purports to effect the sale, then it is a matter for construction which was meant. The legislature has made a clear-cut classification and excluded transactions embodied in more than one document from the category of mortgages, therefore, it is reasonable to suppose that persons who, after the amendment choose not to use two documents, do not displace that presumption by clear and express words; and if the conditions of Section 58(c) are fulfilled, then the deed should be construed as a mortgage.'

12. In a later decision of the Supreme Court, in the case of AIR 1960 SC 301, the relevant observations are made as Under:--

'The question whether by the incorporation of a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances. The circumstance that the condition is incorporated in the sale-deed must undoubtedly be taken into account, but the value to be attached thereto must vary with the degree of formality attending upon the transaction. The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and the mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to recovery there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to transfer the property within the period specified. What distinguishes the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is not decisive.'

At page 304, after referring to a decision of the Privy Council in Narasingerji Gyanagerji v. P. Parthasardhi 51 Ind App 305 = AIR 1924 PC 226, the following observations have been made:--

'The circumstance that the transaction as phased in the document is ostensibly a sale with a right to repurchase in the vendor, the appearance being laboriously maintained by the words of conveyance needlessly iterating the description of an absolute interest or the right of repurchase bearing the appearance of a right in relation to the exercise of which tune was of the essence is not decisive. The question in each case is one of determination of the real character of the transaction to be ascertained from the provision of the deed viewed in the light of surrounding circumstances. If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their true legal effect. If there is ambiguity in the language employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts. Oral evidence of intention is not admissible in interpreting the covenants of the deed but evidence to explain or even to contradict the recitals as distinguished from the terms of the documents may of course be given. Evidence of contemporaneous conduct is always admissible as the surrounding circumstances; but evidence as to subsequent conduct of the parties is inadmissible.'

This later decision of the Supreme Court also does lay down that embodying of a condition in the document itself is a circumstance to be taken into account.

13. In the case of : AIR1963SC1906 , relied upon by the learned Advocate Mr. Joshi for the appellant, also the same view is taken. The relevant observations made therein are as under :--

'There is a clear legal distinction between the two concepts, a mortgage by conditional sale and a sale with a condition to repurchase. The former is a mortgage, the relationship of debtor and creditor subsists and the right to redeem remains with the debtor. The later is an out and out sale whereby the owner transfers all his rights in the property to the purchaser reserving a personal right to repurchase. The question to which category a document belongs presents a real difficulty which can only be solved by ascertaining the intention of the parties on a consideration of the contents of a document and other relevant circumstances. Decided cases have laid down many tests to ascertain the intentions of the parties but they are only illustrative and not exhaustive. For ascertaining the intention of the parties under one document a decision on a construction of the terms of another document cannot ordinarily afford any guidance unless the terms are exactly similar to each other.'

In that case, a bigger area of the land was mortgaged. Smaller area was conveyed for a higher consideration and that was a clinching circumstance which weighed.

14. At page 1908, the following observations have been made which can be referred to, with advantage at this stage:

'The amount paid is described as consideration for the sale. Usual covenant of title is given and there is a provision of re-conveyance in case of payment of the prescribed amount within the time agreed upon. No doubt these recitals would be found in a document which purports to be an ostensible sale and they in themselves are not decisive of the question raised. But there is one factor which dispels any doubt in regard to the construction of the document. The total area of the land mortgaged in the year 1923 was 13.17 acres and the amount advanced thereunder was Rs. 1,600/-. Only one year thereafter out of the said extent 12,6 acres were transferred by the document in question for a sum of Rs. 2,800/-, that is if the contention of the appellant was correct, a smaller extent of land was mortgaged for a higher amount. It is improbable that a mortgagee would advance an additional amount and take a mortgage of a smaller extent in discharge of an earlier mortgage whereunder a larger extent of land was given as security. Unless there are extraordinary reasons for this conduct, this would be a clinching circumstance in favour of holding that a document was a sale.'

15. At page 1909, after referring to the Judgment of the Supreme Court in : [1955]1SCR174 , the following observations have been made:--

'It may be stated at the outset that for ascertaining the intention of the parties under one document a decision on a construction of the terms of another document cannot ordinarily afford any guidance unless the terms are exactly similar to each other. It is true that some of the terms of the document in that case may be approximated to some of the terms in the present document but the said judgment of this Court really turned upon a crucial circumstance. There is one important recital found in the document in that case which does not appear in the document in question and there is another important recital found here which is not present there. There the document under scrutiny was executed on April 15, 1930. Before the execution of the document the executants initiated commutation proceedings under Section 40 of the Bihar Tenancy Act. Those proceedings continued till February 18, 1931 i. e, for some ten months after the deed. The executants borrowed Rs. 65/6/- to enable them to carry on the commutation proceedings even after they executed the document. His Lordship Bose J. speaking for the Court adverting to the said circumstance observed at page 183:

'This, we think is crucial. Persons who are selling their property would hardly take the trouble to borrow money in order to continue revenue proceedings which could no longer benefit them and could only enure for the good of their transferees.'

It is, therefore, obvious that this circumstance clinched the case in favour of the executants. The crucial circumstance in the present case, namely, that a smaller extent was sold for a higher amount in discharge of an earlier mortgage of a larger extent for a smaller amount was not present in that case. The said crucial circumstance makes the two cases entirely dissimilar and therefore the said judgment of this Court is not of any help in construing the document in question. On a consideration of the cumulative effect of the terms of the document in the context of the surrounding circumstances we hold that the document in question is not a mortgage but a sale with the condition of repurchase.'

On consideration of both these later decisions of the Supreme Court, I find that the argument advanced by the learned Advocate Mr. Joshi that the view expressed by the Supreme Court in its earlier decision : [1955]1SCR174 , has been dissented from, is not well founded. As seen earlier, that decision has been distinguished in view of the facts of that case. It thus clearly appears from all these decisions of the Supreme Court that embodying of a condition to repurchase in the document is a circumstance that has got to be taken into account.

16. Before I advert to other authorities cited at the Bar, I first propose to refer to the contents of the document Ex. 16 with which we are concerned in this appeal,

17. In the beginning, the description of the property which is the subject-matter of this document is given. Its boundaries and dimensions are given. It is thereafter stated as to how the executant got the title over that property. He had purchased it from Daudbhai Hiralal Khristi by a registered sale-deed, dated 28-3-1950 and from the date of that purchase, he was the owner of it and was in possession and enjoyment of it. It is thereafter recited that that property had been given in sale for a consideration of Rs. 800/- on the conditions mentioned thereafter. The first condition mentioned therein is 'On my giving back this sale consideration of Rs. 800/- within a period of 5 years from today, you return the house to me. In case I do not pay that amount within the stipulated period and that period expires, the executee is to become an independent owner and the executant and his heirs will have no right whatsoever. Till the executant takes back the house by paying the amount within the stipulated period, the executee has a right to stay in this property or let somebody to stay therein. If the executant does not pay the amount as per the terms of this conditional sale and the period expires, the executee will have a right to deal with and use the property in any manner he likes.' Thereafter, about certain rights of way and discharge of water, there is a reference. Thereafter, it is stated that in regard to this conditional sale of the house, and as per the terms, moneys are not paid and the period expires, if anybody raises any objection or obstruction in regard to the sale, the executant and his heirs will be answerable to it. It is an indemnity clause. This consideration of Rs. 800/- has been taken for repurchasing land and after executing this conditional sale-deed the possession of this property has been given over to the executee. These are the material terms of this document which are to be interpreted.

18. It will be significant to note that in this document, the usual term that is found in a sale-document about conveyance of absolute title from the date of the execution of the deed is absent. The matter does not rest there only. On the contrary, it has been stated therein that on paving the amount of consideration of Rs. 800/-, received by the executant, within a period of five years, the executee has to return the house to the executant. In case the executant does not pay that amount accordingly and the stipulated period expires, the executee is to be an independent owner of this property. It, by a necessary implication, indicates that absolute title was to vest or to pass, in/or to the executee in case the executant does not make payment within the stipulated period; till then, the title was not to pass and further (sic) is confirmed by a recital that in that event, he and his heirs will have no right of interest therein. It means, till the happening of that event, the interest of the executant and his heirs remains. The further recital is that till the executant makes payment within the stipulated period, the executee was given a right to stay or let somebody to stay in that house during that period. It means that right was given merely to enjoy that property by staying or allowing somebody to stay. It will be significant to note that during that period of five years, till the payment was made and there had been no default as the period had not expired, the executee was not authorised to deal with the property in any manner. What he could do during that period was only to stay therein or let somebody to stay therein. That is another circumstance indicative of the fact that the parties did not intend to transfer the title to the property from the moment this deed was executed. It was to pass only in the event of the executant not making the payment of the consideration amount received within a period of five years. It will be significant to note that the further recital indicates that in case the executant did not make this payment within the stipulated period and time had expired, the executee was given a right to deal with the property in any manner he likes. Reading these clauses together, there remains no doubt in my mind that the parties did not intend to pass an absolute title in favour of the executee from the date of the execution of the deed. What was intended to be passed during that period was merely a right to possess. Minus that right, all other rights were kept intact and they remained with the executant. In regard to the indemnity clause also, there is a mention that in case the executant does not pay the amount and the stipulated period has expired and if anybody raises any objection regarding the sale and an obstruction is made, the executant and his heirs will be answerable for it. That also indicates that the executee is intended to indemnify in regard to the sale only after the expiry of a period of five years, in case the executant does not pay back the amount agreed upon. There is a clear distinction made regarding the conditional sale, by user of those words in the beginning followed by a conjunction 'and' as in the latter clause the word used is the word 'sale' (Vechan). It means that in these two clauses joined by a conjunction 'and', a distinction has been made by the user of the words 'Sharti Vechan' in the first clause and the word 'Vechan' in the second clause. If really the parties intended that this document was to be a document of an out and out a sale transaction with a right to repurchase and was not to be a document of a mortgage by conditional sale, such terms could not have been ordinarily expected to be mentioned in this deed. No importance can be attached that this document is described to be a document of a conditional sale and not a mortgage document by conditional sale. Ostensibly a deed would be a sale-deed. There would be ostensibly indicia of a sale-deed. That nomenclature cannot be decisive.

19. The learned Advocate Mr. Joshi for the appellant invited my attention to the following circumstances which in his opinion, indicate that the transaction in question was an out and out a sale transaction with a condition to repurchase and was not a mortgage by conditional sales

1. Form and substance of a document;

2. Absence of any previous debt;

3. No evidence that this amount was paid as a loan;

4. Absolute title was with the vendor;

5. Purchaser to be in possession;

6. Price adequate. At any rate it was not proved that the price paid was not adequate;

7. No provision for costs of reconveyance;

8. Absence of provisions for interest or rent, out-goings and expenses which may have to be incurred by the purchaser, as there was no such provision made for the reimbursement;

9. Period of five years should be considered to be a very short period. At any rate not a long period;

10. Conditions about the repurchase should be construed strictly against the vendor; and

11. Personal right of the vendor which be did not exercise till his death.

As seen earlier, in such cases, the description of the document is not very material. Outwardly, a document would be shown to be a document of a sale. Ostensibly, it will be a sale-deed. Its substance has got to be seen and on examination of the material terms of the document, it is found to be a document intended to be a document of a mortgage by conditional sale. It is an admitted position that there is no oral evidence led on behalf of the plaintiff that this amount was paid as a loan. The deceased-executant had died to the year, 1959. The suit has been brought by his heirs thereafter. Whether this amount represented the loan or represented the sale price is to be deduced from the surrounding circumstances and the terms of the document. The document Ex. 16 does show that at the time of the execution of the document in question, there was an absolute title to the property vested in the vendor. That circumstance is an innocuous circumstance. The executant being the owner of it, could deal with it either by way of a mortgage as well as by way of a sale. The purchaser to be in possession of it.

That circumstance is also an innocuous circumstance. It could be in both cases. Admittedly, there were no money-dealings between the parties of this document prior to the execution of this document and subsequent to it is no doubt, an important circumstance to be taken into Account. At the same time, that circum-stance is not a conclusive circumstance. It is one of the important circumstances to be taken into account. Even if it is the first and the last transaction, it could be a mortgage transaction as urged by the learned Advocate Mr. Trivedi for the respondents. At the same time, one has to bear in mind that though there was no previous debt, in the deed itself, the need for money by the executant has been mentioned. The executant wanted to purchase another land and for that purchase he required the amount and for that purpose he had taken this amount of Rs. 800/- in cash as stated in the deed. It means that the executant was in the need of that amount on the date of this document. That circumstance has also to be taken into account

20. The learned Advocate Mr. Joshi urged that the respondents had not made a clear averment in the plaint that the price paid was inadequate. They had also not led any evidence to show that the price paid was inadequate. The only fact brought out in the evidence of Victorbhai Kanjibhai, Ex. 13, one of the plaintiff-respondents was that at the present the value of the suit house was Rs. 1,500/- to 1,800/-. That deposition of his is recorded on 5-10-1960. The document in question was passed in the year, 1952. It was, therefore, contended that the respondents had not led any evidence to show that the price paid was not a market price. On the contrary, Punamchand Kanjibhai, Ex. 15, the husband of the present appellant has stated in his evidence that the market price was Rs. 800/- and that part of his evidence has not been challenged. He, therefore, urged that it should be taken for granted that the price paid was adequate. To that the learned Advocate Mr. Trivedi for the respondents urged that an application Ex. 11 was given on the day the evidence of this Punamchand was recorded by the trial Court. The respondents' Advocate could not come from Ahmedabad and so adjournment was sought and it was not granted and in those circumstances, no cross-examination could be done as the local Advocate had given a Pursis of retirement Ex. 12. In short, he tried to explain why this evidence has remained unchallenged. No doubt the evidence of Punamchand is evidence of an interested person, he being the husband of the appellant. There is no evidence of any land expert in regard to the valuation. But I feel that I need not enter into that question. I will assume that there is no evidence led to establish the fact that the price paid was inadequate. That circumstance will be taken into account, and the learned District Judge has taken that circumstance into account Absence of provisions for interest or rent or about the reimbursement regarding the out-goings is in my opinion, not very material. The possession was to be handed over and was handed over to the executee by the respondents on the very day of the document As the executee may have to enjoy the property in lieu of the interest, no question would survive for making any provisions for interest or rent. During the period of five years, the executee was authorised to stay or let somebody to stay in the house in question. This circumstance, therefore, is not in any way indicative of the fact that the parties intended not to create a relationship of a debtor and creditor. A period of 5 years cannot be said to be a short period. It is a pretty long period. In several cases to which I will make a reference at an appropriate stage, that period was considered to be a pretty long period. Absence of a provision for costs of reconveyance is also, in my opinion, not a very material circumstance. There is nothing in the document to indicate that a personal right was given to the executant only to repurchase the property and his heirs could not do it in the present case, we are not also concerned with the consideration of that subject. If that document is a document of mortgage by conditional sale, the heirs of the mortgagor will have a right to redeem the property in question. The fact that this executant did not exercise his right till his death is, therefore, also not material, even though five years had expired prior to his death. If the document was found to be an out and out a sale transaction with a condition to repurchase, the said question would have been a material question. It is true that there is no provision for costs of reconveyance. It will be significant to note that the document does not speak at all of reconveyance. What the document speaks of, is that on payment of this amount within the stipulated period, the executee had to return the house in question. In my opinion, the absence of any such provision might plausibly indicate that the parties understood this document to be a mortgage document and eventually they never thought of any reconveyance deed and that may be the reason why there was absence of any provision for the costs of the reconveyance deed,

21. Another important circumstance to be borne in mind is that though the previous title deed on the strength of which the executant has become the owner of this property is mentioned, in this document, it is not stated that the title deed has been handed over to the executee. Ordinarily, in a document of sale, we find such a mention. I do not attach much importance to the absence of that recital. But the consideration of the material terms of the document to which I have already made reference and two other circumstances, namely; (1) embodying of the condition to Ret back the house in the sale deed; and (2) condition of returning the house on payment of the same amount which had been received and non-mention of payment of any other amount, are clearly indicative of the fact that the parties intended to create a relationship of the debtor and creditor between the parties and for the amount advanced by way of a loan, the property was given in security. By this document only a right to possession was transferred. Minus that right, other rights were reserved in the transferor and that appears to be the reason why there is a specific mention that it is only in case the executant does not pay the amount received by him within the period of five years and that period has expired, the transferee is to become the independent owner and the executant and his heirs will have no interest whatsoever in the property conveyed. During the period of five years, the executee is given only a limited right, namely, the right to stay in the house or let somebody to stay in the house. During that period, he has not been given a right to deal with that property in any manner he likes. After the period expires and if monies are not paid as per the terms of this conditional sale, he has been given a right to deal with the property in any manner he likes. Similar is the position in regard to the indemnity clause. All these circumstances are very outweighing circumstances. In my opinion, they are the clinching circumstances of this document which throw a flood of light on the question involved. No doubt, along with those circumstances, one has to take into account that there was no previous relationship of a creditor and debtor between the parties. There was no such relationship also subsequent to it and there is no positive evidence led by the respondents to show that the price paid was inadequate. The learned Advocate Mr. Joshi has brought to my notice that in the year 1950, the deceased Kanjibhai had purchased this property for Rs. 491/-. It is an admitted position. Within period of 22 months, this property has been transferred by the document in question. Ex. 16 for a sum of Rs. 800/-. I have, therefore, assumed that the respondents have not proved that the price paid was inadequate. These three circumstances have, therefore, to be borne in mind. I have taken them into account. But even taking those circumstances into account the aforesaid circumstances referred to, by me are clinching circumstances and they are outweighing the aforesaid three circumstances which are important circumstances also. In my opinion, on taking into account the material words and conditions of this document and the surrounding circumstances, the learned District Judge was quite justified in raising an inference in law that this document was a document of a mortgage by conditional sale. The transaction entered into by the parties was really a transaction of a mortgage by conditional sale and was not an out and out a sale transaction with a right to repurchase. The learned District Judge has taken into account these relevant circumstances in his judgment in paras 12 to 17. I need not reiterate them as I have broadly considered those circumstances.

22. The learned Advocate Mr. Joshi has invited my attention to the case of : (1911)13BOMLR240 . It has been observed therein as under :--

'A covenant to repurchase in a deed of sale of land is purely personal and does not bind the heirs of the original vendee.'

In the instant case, we are not concerned with that question at all. The learned Advocate Mr. Joshi urged that in the body of the judgment, the following reference was made :--

'We agree both with the lower Courts in holding that the document, Exhibit 9, which is a subject of consideration, is not mortgage, for no debt existed between the parties to it. It is a sale with an option of repurchase. . . .'

Those observations have been made as the document was found to be a document of a sale and not of a mortgage.

23. Another case relied upon by Mr. Joshi was a decision in the case of 33 Bom LR 633 = (AIR 1931 Bom 371). On the construction of the document and the surrounding circumstances, it was held that the deed was not a mortgage but a sale with a condition of repurchase. The relevant observations made therein are as under :--

'Section 58(a) governs Section 58(c) of the Transfer of Property Act, 1882.

Some of the tests to determine whether a transaction is a sale or a mortgage are, first, whether there is a debt and the relation of a creditor and debtor subsists between the parties or in other words whether the money which was obtained as purchase money was a loan and was intended to be repaid with or without interest. The second test is whether the ostensible price is adequate. Another important question is as to the possession of the property involved. The transfer of possession is more consistent with a sale whereas retention of possession by the transferor is an indication of a mortgage.'

In my opinion, these are not conclusive tests. They are illustrative. In case of a mortgage where the property is to be enjoyed by the mortgagee in lieu of interest, there may not be any necessity to mention about the stipulated rate of interest. In case the party has first time entered into such a transaction, there would not be ordinarily a relationship of a debtor and creditor between the parties prior to the transaction in question. Whether the property was given in security for a loan under the deed in question, it is to be found out from the contents of the document and the surrounding circumstances.

24. At page 636 (of Bom LR) = (at p. 372 of AIR) also, in that decision, the following observations have been made after referring to the proviso in question which was added by the Act No. XX of 1929:--

'That proviso has been added to restrict the inference to be drawn in favour of a mortgage only when the condition of repurchase is embodied in one document which effects or purports to effect the sale. It is a matter of common knowledge that when documents are passed in favour of creditor the mortgagee in order to avoid the accounting of the profits of the property generally prefers to have the document passed in the form of a sale-deed. In case a mortgagor passes in favour of a mortgagee an ostensible sale-deed and the intention of the parties is to be arrived at by the construction of the document, the proviso says that the right of repurchase must be embodied in the same document, and that if it is embodied in more than one document the inference of a mortgage would not necessarily arise, and that no transaction should be deemed to be a mortgage by conditional sale unless the condition is embodied in the document of the ostensible sale; but the sub-section and the proviso do not dispense with the condition that it must be a transaction between the creditor and the debtor.'

At page 637 (of Bom LR) = (at pp. 372, 373 of AIR) it has been observed as under--

'Though the document may be ostensibly a sale-deed the question for consideration is whether the sale-deed, is a pretence or a reality, and that question is to be determined by the construction of the document and the surrounding circumstances.'

It thus clearly appears that a Division Bench of the Bombay High Court also had laid down the same ratio which has been laid down by the Supreme Court in the decisions referred to above,

25. At page 640 (of Bom LR) = (at p. 374 of AIR) the following recitals of the document in question in that case have been referred to and the following observations have been made:--

'On the other hand, reliance has been placed on the words in the document Ex. 14, 'Hence neither I nor my Varasdars nor Uttaradhikaris etc. have any right or interest in these plots of land any longer'. This recital is more consistent with the divesting of the owner of any interest in the land and is more consistent with the document being a sale rather than a mortgage.'

Another circumstance was that a right of repurchase in that case was restricted to the vendor and the persons specified in the document. Another important circumstance was that simultaneously a permanent lease was taken by the executant. These were the outweighing circumstances along with other circumstances for holding that it was an out and out a sale transaction.

26. In the case of Assya Umma v. K. Kunhoyi : AIR1960Ker198 , the following observations have been made by a single Judge Vaidialingam J., as he then was :--

'A document styled as Kana Theeradharam, after stating that a consideration of Rs. 400/- had been received provided that from that day onwards the executee is to take possession of the property and from that day onwards he is to pay the michavaram due to the Jenmi and also revenue and other payments. It was further stated that if the amount of Rs. 400/- is paid within three years from that date, the schedule mentioned properties are to be returned.

Till the expiry of the period of three years, the executee is to have no right to deal with the property in any manner or to encumber it in any way whatsoever. Then it was specifically provided that after the expiry of three years alone the executee will have full kanom rights in respect of the property and have direct dealings with the Jenmi and he will have also the rights of alienation etc., from that day onwards. It was in evidence that on the date of execution of the deed the executant had the necessity to borrow Rs. 400/-and that the property in question was worth Rs. 800/-.

It was held that the document taken by itself leads only to one conclusion, namely, that it is a mortgage by conditional sale and cannot be considered to be a sale with an option to repurchase.'

In my opinion, the learned Judge in that case had to deal with a document, the contents of which were very similar to the contents of the present document. With respect, I am in agreement with the conclusion reached by him. In the instant case the same conclusion can be arrived at on referring to the contents of this document Ex. 16. It is significant to note that at page 199 in para 9, the following observations have been made:--

'No doubt one of the circumstances considered by the Supreme Court to find out the nature of the document under such circumstances is the existence or otherwise of a debtor-creditor relationship. The learned Advocate General is perfectly correct when he contended that at any rate on the date of Ex. B-1 there was no debtor-creditor relationship as such. But in my opinion, that is only one of the circumstances considered by the Supreme Court in arriving at a conclusion as to the nature of the document before their Lordships .....'

'No doubt, the learned Advocate General is justified is his criticism that the adequacy of the value of the property has not been given due importance by both the subordinate courts. In my opinion, that by itself does not in any way vitiate the conclusion by both the courts, because I am also otherwise satisfied that the document taken by itself leads only to one conclusion, namely, that it is a mortgage by conditional sale and cannot be considered to be a sale with an option to repurchase. As I mentioned earlier. the document styles itself as a kanatheeradhararn but one would expect after the recital that it is a kanatheeradharam to have a further recital to the effect that the executant parts with all the rights in the property. But that is not what one finds in this document.

What is transferred is only the right to have possession of the property for a period of three years when the amount covered by this transaction will be given back. Then again, if it is really a reconveyance as understood in law that is contemplated at the end of three years on payment of the sum of Rs. 400/-, the suitable expressions to convey that idea are absolutely wanting in this document. The document shows that on the payment of a sum of Rs. 400/- the properties will be given back to the executant himself. Taken along with this there is the other clause that it is only after the expiry of the period of three years, that the executee will have full rights over the property and also he will have rights for effecting sales and also all other acts of ownership. Taken along with all these, the expressions '(words in Malayalam script omitted)' clearly show it is only a giving back or surrender of possession that has been intended by this document. Considering the document as a whole, in my opinion, the conclusions arrived at by both the subordinate Courts are correct.'

It is thus evident that the learned single Judge found that even in absence of the fact that the price paid was inadequate, that conclusion was justified. In the instant case, we are also concerned with a document which is similarly worded and furthermore, there are stronger circumstances than the circumstances mentioned therein, in the deed itself which indicate that this document was in relation to a transaction of a mortgage by conditional sale and was not in relation to an out and out sale transaction with a condition of repurchase.

27. In the case of Veeravunni Haji v. Koyammu, AIR 1957 Ker 169, relied upon by the learned Advocate Mr. Trivedi for the respondents, the following important observations have been made:--

'The question whether a given transaction is an out-right sale with a condition of repurchase or a mortgage by conditional sale is a vexed one and must be decided on its own facts. Broadly speaking it depends on the intention of the parties to be gathered from the contents of the document and the surrounding circumstances, as to whether an absolute right in the property is to vest forthwith in the transferee subject only to the condition regarding transferor or on the other hand a sale is to come into effect on a future date. If the transferee becomes entitled to all the rights of the transferor on the date of the execution of the document the document will be regarded as a sale. But if the absolute transfer of rights is intended to be postponed so as to take effect only on a future date the transaction will be held to be one by way of mortgage. In the former case the ownership vests in the transferee from the date of the document and there is no question of any debt coming into existence after the date of the transaction, while in the latter case the debt subsists and the right to redeem remains with the debtor.

Again as a matter of construction, the fact that a transaction is embodied in one document and not two and its terms are covered by Section 58(c) may give rise to the inference that it is a mortgage by conditional sale unless there are express words to indicate the contrary or in a case of ambiguity the attendant circumstances necessarily lead to the opposite conclusion.'

28. On a consideration of all these decisions and the contents of the document and surrounding circumstances, I find that the learned District Judge, in my opinion, has correctly recorded a finding that this document Ex. 16 was a deed of mortgage by conditional sale and was not out and out a sale transaction with a condition of repurchase. The conclusion drawn by him is justified in law. I, therefore, hold that the first contention raised by the learned Advocate Mr. Joshi fails,

29. His second submission was that the learned District Judge had erred in not framing any issue as to whether the respondent had a right to redeem. The decision of that question depended upon a decision whether the transaction in question was a mortgage by conditional sale or whether it was an out and out a sale transaction with a mere right of repurchase. The fact that the respondents are the heirs of the deceased-executant is not challenged and was not challenged.

They have, therefore, a right to redeem. The learned District Judge was, therefore quite justified in passing a preliminary decree for redemption in their favour. The second submission, therefore, fails.

30. It was submitted by the learned Advocate Mr. Joshi that the learned District Judge had committed a mistake obviously in directing that the decree be passed for redemption in Form No. 7(c) in Appendix 'D' and there had been a mistake in the decree that came to be drawn up by the appellate Court in pursuance of this direction. On perusing that decree which has been drawn up, it clearly appears that it has been drawn in Form No. 7(c) in Appendix 'D'. In Mulla's Book on the Code of Civil Procedure, Volume II, 1967 Edition Page 1745 that form prescribed for drawing up a preliminary decree for redemption where on default of payment by a mortgagor, a decree for sale is passed, is given. In that very book at page 1744, a prescribed form No. 7(b) is given which relates to a preliminary decree for redemption where on default of payment by a mortgagor a decree for foreclosure is passed. It will be pertinent to note that the document in question, Ex. 16 is found to be a deed of a mortgage by conditional sale. Order 34, Rule 7 of the Civil Procedure Code deals with a question regarding a preliminary decree to be passed in redemption suit. One of the provisions of it shows that in a suit for redemption, if the plaintiff succeeds, the Court has to pass a preliminary decree declaring the amount so due at that date. In the instant case, it is found that the debt due is Rs. 800/-. Thereafter, certain directions have to be given as mentioned in Clause (c)(1) of Order 34. Rule 7(1) of the Civil Procedure Code. That has been done. We are merely concerned with part (ii) of that Clause (c) That part runs as under :--

'That, if payment of the amount found or declared due under or by the preliminary decree is not made on or before the date so fixed, or the plaintiff fails to pay within such time as the Court may fix, the amount adjudged due in respect of subsequent costs, charges, expenses and interest, the defendant shall be entitled to apply for a final decree --

(a) in the case of a mortgage other than a usufructuary mortgage, a mortgage by conditional sale, or any anomalous mortgage the term of which provides for foreclosure only and not for sale, that the mortgaged property be sold, or

(b) in the case of a mortgage by conditional sale or such an anomalous mortgage as aforesaid, that the plaintiff be debarred from all right to redeem the property.'

The present case being a case of a mortgage by conditional sale, that Sub-clause (b) will govern the case and not the Sub-clause (a), meaning thereby that the decree should be for foreclosure and not a decree for sale. The learned District Judge has, therefore, clearly committed an error in drawing up the decree in form No. 7(c). It should have been really drawn in Form No. 7(b) which is given at page 1744 in the aforesaid book of Civil Procedure Code of Mulla. A preliminary decree shall have to be drawn accordingly.

31. One another point that would have required consideration was that the suit being a suit for redemption, ordinarily, a mortgagor has to pay the costs of the suit. In the instant case, the learned District Judge has directed the appellant to pay the costs of the appeal and of the suit It may be noted that though the appellant has taken up a point in the memo of appeal, that order regarding costs passed is erroneous, he has not paid separate Court fees for the same. It is not necessary to examine this question further as the Advocates appearing on both sides are agreed that an order be passed that parties should bear their own costs throughout.

32. The result is that the appeal substantially fails. It succeeds to the extent that the decree to be drawn up is to be drawn up in Form 7(b) in Appendix 'D' and an order in regard to costs is modified.

33. The appeal is partly allowed. The order passed by the learned District Judge about passing a usual preliminary decree for redemption is maintained. It is directed that a usual preliminary decree for redemption in Form No. 7(b) in Appendix 'D' of the Civil Procedure Code is to be drawn up. The decree passed by the Appellate Court is modified accordingly. Each party is ordered to bear its costs throughout. To that extent the decree passed by the learned District Judge is modified,

34. Oral request for the grant of a certificate for filing a Letters Patent appeal is turned down.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //