Alfred Henry Lionel Leach, C.J.
1. The question in this appeal is whether a transaction entered into on the 25th June, 1934, constituted an absolute sale or a mortage by conditional sale.
2. In O.S. No. 380 of 1935 of the Court of the District Munsiff of Namakkal the first defendant in the present suit obtained a money decree against the defendants 2 to 4 and in execution proceedings he attached the property in suit, 2.58 acres of agricultural land. The plaintiffs entered an objection. They claimed by virtue of the deed of the 25th June, 1934, to be the absolute owners of the property. By an order dated the 11th June. 1941, their petition was dismissed on the ground that it was belated. Thereupon they filed a suit under the provisions of Order XXI, Rule 63 of the Code of Civil Procedure. They asked for a decree setting aside the order dismissing the claim petition and an injunction restraining the first defendant from proceeding in execution. This suit was originally filed in the Court of the District Munsiff, but as the value of the property exceeded the pecuniary limits of that Court's jurisdiction, the plaint was returned for presentation in the Court of the Subordinate Judge of Salem. The suit was tried by the Subordinate Judge, who held that the deed constituted a mortgage by conditional sale. This decision was upheld by the Additional District Judge of Salem on appeal. The plaintiffs then appealed to this Court. The appeal was heard by Chandrasekhara Aiyar, J., who disagreed with the Courts below. He was of the opinion that the transaction amounted to an absolute sale with a condition for re-purchase. The appeal is by defendants 2 to 4 under Clause 15 of the Letters Patent.
3. The instrument of the 25th June, 1934, must be read with an agreement, dated the 18th June, 1934. This agreement was entered into with the plaintiffs by the third defendant as the manager of the joint family consisting of himself and his sons, the second and fourth defendants. It reads as follows:
We have stipulated these conditions that I shall within two weeks' time execute a deed of usufructuary mortgage in your favour in respect of the land belonging to me and described hereunder for Rs. 7,000 .... stipulating a period of five years, that, at the expiry of the period of five years aforesaid, I shall pay to you the aforesaid usufructuary mortgage amount of Rs. 7,000 and redeem the same and that in default of payment as aforesaid you shall take the land described hereunder for the aforesaid sum of Rs. 7,000 itself by way of absolute sale and therefore I have agreed that I would within the two weeks aforesaid execute the deed giving all the particulars, get the same registered and hand over the same to you and out of the said amount I have received from you on this date a sum of Rs. 500 in cash and as regards the balance remaining, I shall adjust the same towards the debts to be quoted in the deed when the document is executed, execute the document, get the same registered and deliver it to you; and I shall also deliver possession of the land to you; I shall deliver -possession of the property described hereunder free of all encumbrances. This itself shall be the receipt for the payment of the said sum of Rupees five hundred.
It will be observed that there is no agreement here for an absolute conveyance to the plaintiffs. The agreement is for the execution of a usufructuary mortgage with the condition that if the mortgage amount was not repaid within five years, the mortgagees should then have the right to retain the property as vendees.
4. The deed of the 25th June, 1934 was executed as the result of this agreement. It is described as a ' conditional deed of sale for Rs. 7,000' and opens with this statement:
Deed of conditional sale executed on the 25th day of June, 1934, corresponding to Tamil 11th Ani of Bhava, by us three namely.
Then follow the names of defendants 2 to 4 and the names of the plaintiffs in whose favour the deed was to be executed. The document proceeds:
In order to discharge our family debt claims we have executed a conditional sale in your favour of the undermentioned nanja land, which belongs to individual No. 1 out of us by virtue of adoption, for a sum of Rs. 7,000.
After an acknowledgment of the receipt of Rs. 500 paid on the 18th June, 1934, and the receipt of the balance of the consideration there is this statement:
As the total sum of Rs. 7,000 has, in the aforesaid manner, been received by us from you, in accordance with our request to you and in accordance with the conditional (arrangement) come to after discussion by us, both the parties, (that is), we have all jointly agreed to the condition that, if we, with our own moneys, make payment to you in cash of the aforesaid sale consideration of Rs. 7,000 on the 25th June, 1939, the date of completion of five years from this date, you should execute in our favour a deed of resale reconveying the undermentioned nanja land at our cost.
The words 'in accordance with the conditional arrangement' mean in accordance with the agreement of the 18th June, 1934.
5. There are then these provisions:
If we failed to pay you the said amount of Rs. 7,000 before the expiry of the aforesaid period of five years, you shall from 26th June, 1939, hold and enjoy the undermentioned property with absolute rights, hereditarily from father to son, grandson and so on, with rights of gift, exchange, sale, etc. After the period of five years neither we nor our heirs shall have any right or subsequent claim in respect of the undermentioned land.
In deciding whether the transaction between the parties constitutes an absolute sale with an option to re-purchase or a mortgage by conditional sale, the Court can only have regard to the two documents quoted, read in the light of the surrounding circumstances. See Jhanda Singh v. Wahid-ud-din (1916) 31 M.L.J. 750 : 43 I.A. 284 : 38 All. 705.. We have no hesitation in holding that these two documents should be read as constituting a mortgage by conditional sale. In the first place, the agreement of the 18th June, 1934, expressly stated that the transaction was to be a usufructuary mortgage with the right of redemption at the end of five years. The fact that it proceeds to state that if the defendants do not redeem at the end of that period, the plaintiffs shall hold the property as owners cannot be construed as a conveyance to them before the expiry of the period fixed for redemption. In the second place the instrument of the 25th June, 1934, is entirely in accordance with the agreement of the week before. In the third place, the later document emphasises the fact that it is a deed of conditional sale. The plaintiffs were not to have the rights of ownership until there had been a failure to redeem. In the meantime the defendants were to retain an interest in the property. The words ' After the period of five years neither we nor our heirs shall have any right or subsequent claim in respect of the undermentioned land ' can only imply that until the five years had expired, they retained an interest in the land. What interest could they have Only the interest of mortgagors.
6. We will now look at the surrounding circumstances. The stamp paper for the deed of the 25th June, 1934, was bought by the second defendant and not by the plaintiffs. If it had been intended to give an absolute title to the plaintiffs, theirs would have been the obligation to provide the stamp paper and defray the cost of the conveyance. If the transaction amounted to a mortgage, the stamp paper would have to be bought by the mortgagors, and it was bought by them. The patta was not transferred to the names of the plaintiffs. It stands to this day in the name of the third defendant.
7. The learned Advocate-General has laid emphasis on the fact that the deed stipulates that the defendants should only have the right of resale if they produced the Rs. 7,000 out of their own pocket. In Jhanda Singh v. Wahid-ud-din (1916) 31 M.L.J. 750 : 43 I.A. 114 : 38 All. 570., there was a similar stipulation, and in the course of the judgment which was delivered by Lord Atkinson their Lordships said:
The stipulation is wholly inconsistent with the relation of mortgagor and mortgagee.
But this observation cannot be isolated from what was said before. Their Lordships were considering what was the effect of a stipulation in a later document. By a deed dated the 29th August, 1852, there was an absolute sale of certain property. On the 5th September, 1852, another instrument was executed under which the vendees agreed to resell the property at the end of nine or ten years if the vendors, paid the amount of the purchase consideration out of their own pocket without mortgaging cr selling the property to other persons. The later document expressly stated that the vendees were entering into it in order to help the vendors and out of kindness towards them. It was in this connection that their Lordships observed that the stipulation was wholly inconsistent with the relation of mortgagor and mortgagee. That their Lordships did not intend to imply that such a stipulation was conclusive is obvious from what they said later. They concluded their remarks on this portion of the case by saying that the provision made against the appellant's contention rather than in favour of it.
8. We do not regard the stipulation in the present case that the redemption should be out of the private funds of the defendants as altering the character of the deed of the 25th June, 1934. The two documents must be read as a whole and when this is done, we can see no other conclusion open than that the transaction was a mortgage by conditional sale.
9. The learned Advocate-General has also referred to the fact that the document concludes with this statement:
By whomsoever out of us the said amount is paid on the due date, the resale shall be made in his favour.
He suggests that this is inconsistent with the right of redemption and merely gives the option to one of the defendants. We do not agree. It is merely a provision that the amount could be paid by any one of the defendants; and in this event the reconveyance would be to him.
10. For these reasons we allow the appeal with costs in this Court and before Chandrasekhara Aiyar, J.