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M. Swaminatha Aiyar Vs. Appasami Aiyar and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1915Mad651; (1914)27MLJ686
AppellantM. Swaminatha Aiyar
RespondentAppasami Aiyar and ors.
Cases ReferredBalakishen Das v. W.F. Legge
Excerpt:
- - and to see whether the ostensible sale referred to in the section when taken with the agreement for reconveyance was intended to operate as a mortgage by conditional sale, it is well settled that the surrounding circumstances have to be looked to as ruled by their lordships of the judicial committee in situl purshad v. here we have a strong indication that what was intended was an out and out conveyance in the fact that the defendant had taken steps to file a: it has been held in several cases that the fact that only a short period such as this is given a very strong indication that it was not the intention to create or perpetuate the relation of mortgagor and mortgagee. another point which has also to be considered is whether the price paid was inadequate or not, because, when it..........which (exhibit b.) is in terms of a deed of absolute sale and the other exhibit a an agreement to reconvey executed ten days later by the vendee under the previous document constitute a mortgage by conditional sale. section 58 of the transfer of property act, clause (c) says that where the mortgagor ostensibly sells the mortgaged property on condition that on payment of the mortgage money the buyer shall transfer the property to the seller, the transaction is called a mortgage by conditional sale. and to see whether the ostensible sale referred to in the section when taken with the agreement for reconveyance was intended to operate as a mortgage by conditional sale, it is well settled that the surrounding circumstances have to be looked to as ruled by their lordships of the judicial.....
Judgment:

1. This case has been argued yesterday and to-day with great ability by Mr. Krishnaswami Aiyar, but he has not persuaded us that the Subordinate Judge was wrong. The question is whether two documents one of which (Exhibit B.) is in terms of a deed of absolute sale and the other Exhibit A an agreement to reconvey executed ten days later by the vendee under the previous document constitute a mortgage by conditional sale. Section 58 of the Transfer of Property Act, Clause (c) says that where the mortgagor ostensibly sells the mortgaged property on condition that on payment of the mortgage money the buyer shall transfer the property to the seller, the transaction is called a mortgage by conditional sale. And to see whether the ostensible sale referred to in the section when taken with the agreement for reconveyance was intended to operate as a mortgage by conditional sale, it is well settled that the surrounding circumstances have to be looked to as ruled by their Lordships of the judicial Committee in Situl Purshad v. Luchmi Purshad (1883) I.L.R. 10 C. 30 (P.C.). That does not mean that evidence is to be admitted to contradict the terrns of the documents in which the parties have embodied their intentions, namely, the deed of sale and the agreement to reconvey. That we think, was all that was intended by the; decision of the Judicial Commitee in Balakishen Das v. W.F. Legge (1889) I.L.R. 22 A. 149 (P.C.). Applying these principles to the present case we have to deal with certain property including a mortgage interest which was acquired by the mortgagor between the years 1891 and 1898 for nearly Rs. 48,000. The mortgagor who was carrying on business on a large scale had executed mortgages on this property to the extent of Rs, 45,000 and he had paid no interest on the mortgages and a little over Rs. 48,000 was due on the date of the transaction, that is to say, a little more than what had been paid for the suit properties by the mortgagor. It is quite clear that the mortgagee, the defendant, was dissatisfied with this state of things and thought the time had come for him to realize his security. Accordingly he expended a sum of over Rs. 13,000 in the purchase of Court-fee stamp paper with the view of suing on his mortgage. Thereupon both parties sought the advice of the pleaders. This was on the 20th January and on that day the plaintiff, the mortgagor, undoubtedly entered into an agreement to sell the suit property to the mortgagee, the defendant; and it is alleged for the plaintiff though denied for the defendant, that on the same day the mortgagee undertook to execute an agreement to reconvey. We have come to the conclusion in the plaintiff's favour that on that date the mortgagee did sign an undertaking to execute a proper agreement for reconveyance in the mortgagee's favour. The next thing that happened was that the mortgagor executed an absolute sale deed Exhibit B, in favour of the defendant on the 25th. Some difficulty appears to have arisen at this stage and the plaintiff was not willing to register the sale deed executed by him until he got the agreement to reconvey executed by the mortgagee; and the mortgagee apparently was not very ready tp execute this agreement and the matter would appear to have been referred to a vakil, Panchapakesa Sastri with certain instructions contained in Exhibit C. This document speaks of a draft (by which appears to be meant the draft of an agreement prepared in pursuance of the mortgagee's undertaking to execute an agreement to reconvey) as having been handed to this vakil. There was also given him on the same day, i.e., the 27th, a letter by the brother-in-law of the mortgagee undertaking that the mortgagee would execute an agreement for reconveyance. The sale deed was then registered on the 28th and on the 5th of ' February the mortgagee executed an agreement to reconvey, but subsequently refused to register it and registration had to be effected compulsorily. We do not think that these difficulties which arose1 in carrying out the original bargain of the 20th January really make much difference. We think they show a certain reluctance to carry out the terms at first agreed upon; but we think the case must properly be dealt with, as contended for by the plaintiff, as if in fact these two documents had been agreed to be executed on the 20th.

2. Then what we have got to do is to look to the surrounding circumstances to see whether what was intended was a mortgage or a sale. That is a question to be decided in each case on the particular facts of the case. Here we have a strong indication that what was intended was an out and out conveyance in the fact that the defendant had taken steps to file a: suit for the purpose of realizing his security and put an end to the relation of mortgagor and mortgagee; and we have the further fact that in Exhibit A a very short term of 18 months is fixed within which the plaintiff was to have the right to reconveyance on payment of the mortgage money. It has been held in several cases that the fact that only a short period such as this is given a very strong indication that it was not the intention to create or perpetuate the relation of mortgagor and mortgagee. The fact here rather suggested that this agreement to reconvey was merely meant as a concession made by the mortgagee to the mortgagor to induce him to save the trouble and expense of litigation. There is a further small indication, pointing the same way, and it is this: though in fact the agreement to make, a reconveyance was arrived at on the 20th January, yet in the agreement Exhibit A which was executed several days afterwards a request to execute this reconveyance is said to have been made by the mortgagor 'this day', which day was then ten days after the deed of absolute sale ; and the deed was executed in this form without objection by the plaintiff. Another point which has also to be considered is whether the price paid was inadequate or not, because, when it is shown that the price was clearly inadequate, that raises a strong presumption that what was intended was a mortgage. In this case the price was Rs. 2,000 more than the property had cost in the course of its acquisition between 1891 and 1898. The evidence that it is now worth very much more was treated by the Subordinate Judge as unreliable, and we think that it has not been shown that this was an inadequate price ; at any rate to such an extent as to afford an indication that what was intended was a mortgage rather than a sale. On the whole we think that on the facts of this case the inference is that the mortgagee was never prepared to consent to more than a mere agreement to reconvey and that the transaction only amounted to an absolute sale with an agreement to reconvey and not to a mortgage by conditional sale. The conclusion arrived at by the Subordinate Judge is, therefore, right and the appeal must be dismissed with costs. Under Order XXXIII Rule 11 the appellant1 must pay the Court-fee to the Government.


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