1. Plaintiffs 2 to 5 in O. S. No. 598 of 1965 in the court of the Principal District Munsif of Erode are the appellants. The suit was one for redemption of Ex. B-2 'mortgage' and for recovery of possession. The case of the plaintiffs was that Ex. B.2 was a mortgage by conditional sale and that, therefore, they were entitled to redeem the mortgage. The case of the defendants was that Ex. B 2 constituted an absolute sale accompanied by an agreement for repurchase and, therefore, the suit for redemption would not lie.
2. The trial Court decreed the suit and the matter was taken on appeal by the defendants. The lower appellate court reversed the judgment of the trial court and the matter came up to this court in S. A. No. 667 of 1969. (Karuppanna Goundar and 3 others v. Thirumalai Gounder and 3 others). By judgment and decree dated 7th Oct. 1971, Ismail, J. (as he then was) allowed the second appeal and remanded the first appeal for fresh disposal. The reason for the remand order was that one of the tests to find out whether a particular transaction was an absolute sale or a mortgage by conditional sale was the adequacy of the price and with reference to that there was some mistake in the judgment of the lower appellate court. By his judgment dated 8th Mar. 1972, the learned Principal Subordinate Judge, Erode, stated, that there was no oral evidence and that in the absence of such evidence, he expressed his difficulties in arriving at the value of the property for the purpose of' considering whether the consideration mentioned in Ex. B. 2 was adequate or inadequate. He, however, recorded a definite finding that Ex. B. 2 was not a mortgage by conditional sale and only an out and out sale and that the plaintiffs were not entitled to maintain the suit for redemption. The suit for redemption was thus dismissed, and the matter was again challenged in the second appeal to this court.
Again the matter came up before Ismail, J. (as he then was) and after considering the rival contentions, the learned Judge pointed out that once the condition for resale was incorporated in the same document, the document was covered by S. 58(c) of the Transfer of Property Act, and that the transaction would be only a mortgage unless the person who asserts that it was not a mortgage was able to prove, either from the language contained in the document or from the attendant circumstances whether the transaction was intended to be an outright sale. By throwing the burden wrongly on the plaintiffs, the learned Subordinate Judge, it was held, committed an error. The view of the learned Subordinate Judge appeared to be based on the conclusion that the plaintiffs had failed to prove that.Ex.B.2 was a mortgage by conditional sale. Such conclusion was found to be erroneous in view of the judgment of the Supreme Court in Chunchun Jha v. Ebadat Ali, . The learned Judge (Ismail, J.) gave an opportunity to the counsel to draw his attention to any term in Ex. B. 2, which would lead to the inference that the transaction was only an outright sale. As the counsel was not able to drew his attention to any express words which would preclude the transaction being a mortgage by conditional sale, the learned Judge pointed out in paragraph 4 of the judgment, which is reported in Karuppanna Gounder v. Thirunialai Gounder, -
"Thus, the recitals contained in Ex. B-2 to show that the transaction was a sale were consistent with the sale being an ostensible one, and, therefore, from those recitals, no inference can be drawn that the transaction was not intended to be a mortgage by conditional sale, but was intended to be only an outright sale.
It is in view of the above position it has to be found now whether there are attendant circumstances which will necessarily lead to the conclusion that the transaction under Ex. B. 2, was an outright sale, as pointed out by the Supreme Court. It is only for this purpose, I am allowing the second appeal and remanding the matter to the lower appellate court to find out whether there were any attendant circumstances which necessarily lead to the conclusion that the transaction under Ex.B.2 was only an outright sale."
3. The matter was again disposed of by the learned Subordinate Judge by his judgment dated 9-11-1976 and is now again in second appeal at the instance of the unsuccessful plaintiffs 2 to 5.
4. The second appeal has been admitted on the following questions of law-
"1. Whether the lower appellate Court has misconstrued Ex. A. 1 in holding that it is an outright sale and not a mortgage by conditional sale?
2. Whether the lower appellate Court has not understood the scope of the remand order made by this court?"
5. 58 (c) of the Transfer of Property Act runs, to the extent relevant, as follows-
"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 be4;ome 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 XX of 1929. Prior to the amendment there was a conflict of decisions on the question whether the condition contained in a separate deed shall be taken into account in ascertaining whether 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 sale. In Chunchun Jha v. Ebadat Ali, , the
relevant document stated that a sum of Rs. 634, being the principal with interest under a simple mortgage bond dated 6th May 1927, was due by the executants. They wanted a sum of Rs. 65-6-0 more to meet the costs of some proceedings under the Bihar Tenancy Act. They sold the property for a sum of Rs. 700 out of which Rs. 634-10-0 was adjusted towards the amount due under the earlier mortgage. The purchaser was put in possession of the property. The document contained a clause that if the executants shall repay the consideration money to the purchaser 'within 2 years the property sold would become the absolute property of the executants. If they did not pay the same, the purchaser would remain in possession. and occupation thereof, generation, after generation. There were clauses of indemnity in case of dispossession. The amount to be paid at the time of repurchase was to include the loss and damage and also interest at the rate of two per cent from the date of the document till date of payment. The vendors also declared that they would not claim the value, of the produce during the period of possession by the purchaser, On a construction of this document, the Supreme Court held that the deed was a mortgage by conditional sale under Section 58(c) of the T. P. Act. At p. 348, Bose, J. delivering the judgment of the Supreme Court observed in paragraph 14:
"Now, as we have already said, once a transaction is embodied in one document and not two and once its terms are covered by S. 58(e) then it must be taken to be 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."
In Bhoju Mandal v. Debnath Bhagat, , the Supreme Court was concerned with the document to meet pressing demands and not merely to discharge the previous mortgage in favour of the respondent before the Supreme Court. It was provided in that document that in case of defect of title and consequent disposition, the vendors would remain bound to refund the consideration with interest. The total area of the land dealt with by the document was 13.17 acres and the amount advanced was Rupees 1600/-. Only a year thereafter 12.6 acres were transferred to the respondents in that case for Rs. 2,800/-. There was no dispute that the latter amount represented the real value of the land. The Supreme Court held that the cumulative effect of the terms of the document and the surrounding circumstances left no manner of doubt that the document in question was not a mortgage but a sale with the condition of repurchase. In ' the course of the judgment, referring to Chunchun , Jha v. Ebadat Ali, , it was pointed out
that in that case (Chunchun Jha's case), the document was treated to be a mortgage because the persons who were selling the property would hardly take the trouble to borrow money in order to continue revenue proceedings which could no longer benefit them and could only ensure for the benefit of the purchaser. After referring to the terms of the document in the case of Bhoju, Uandal v. Debnath Bhagat, , SubbaRao, J. (as he then. was), delivering the
judgment of the Supreme Court observed at p. 86 (of SCR) : (at p. 190 of AIR) -
"There is a clear legal distinction between the two concepts - a mortgage conditional sale and a sale with a condition of repurchase. The former is a mortgage, the relationship of debtor and creditor subsists and the right to redeem remains with the debtor. The latter is an out and out sale whereby the owner transfers all his rights in the property to the purchaser reserving a personal right of 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."
6. Their Lordships referred in that case to the fact that in 1923, 13.17 acres had been mortgaged for Rs. 1,600/-, and that only one year later 12.6 acres out of the said 13.17 acres had been transferred for a sum of Rs. 2,800/-. It was considered to be improbable that a mortgagee would advance an additional amount (Rs. 1,200/-) and take a mortgage of a small extent (namely 12.6 acres) in discharge of an earlier mortgage whereunder a larger extent of land (namely 13.17 acres) was given as security. Unless there are extraordinary reasons for this conduct, it was held, it would be a clinching circumstance in favour of holding that a document was a sale.
7. In Bapusami v. P. Gounder, , the Supreme Court has held that the form in which the deed is clothed is not decisive and the question has to be determined. on the basis of the provision )f the document viewed in the light of the surrounding circumstances. In that particular case, the circumstances relied on for showing that the documents was a mortgage were (1) condition for repurchase was embodied in the same document, (2) the value of the property was Rs. 8,000/- as against the consideration in the document under consideration for Rs. 4,000/-, (3) the defendant i.e., the transferee had not applied for transfer of patta and (4) the kist for the land was continued to be paid by the transferor. It is in the light of these facts the court came to the conclusion that the document was only a mortgage.
8. In an earlier case in Bhaskar Waman Joshi v. Shri Narayan Rambilas Agarwal, , the Supreme Court held that in a mortgage by conditional sale there was a. relationship of a debtor and a creditor while in the sale with condition of repurchase such relationship did not exist. It was further added that the oral evidence of intention is not admissible but evidence to contradict the recitals as distinguished from the terms of the documents were held to be admissible. Evidence of contemporaneous conduct was always admissible as a surrounding circumstance, but evidence as to subsequent conduct of the parties was held to be inadmissible. There are other decisions of this court considering the document in the light of particular facts. It is not necessary to refer to them.
9. The principles deducible from the above cases may be summarised as follows The form of the document is inconclusive. The question whether there is a mortgage or sale is one of intention. If the condition for repurchase is embodied in the same document, there is a presumption that the document is a mortgage by conditional sale. It is for the party challenging this presumption to establish that there is la' sale and not a mortgage. In order to find out whether the intention was to execute a mortgage or an out and out sale, it would be possible to refer to the surrounding circumstances for which oral evidence can be let in, but subsequent, conduct would be inadmissible in evidence.
10. In the present the question has to be considered in the light of the above principles. There was an earlier mortgage under Ex. B. 1, 1932 dated 7-1-1932. The principal amount advance under, that mortgage case, was Rs. 1,000/-. Only a part of the property was covered by Ex. B. 2 dated 10-6-1936 which was for a consideration of Rs. 1,000/-. Thus while there was admittedly a mortgage for the principal sum of Rs. 1,000/With reference to the properties covering a larger extent executed on 7-1-1932, there is no reason why a person, who, had already a mortgage for the same amount with a larger area should take again a mortgage for the same sum, but with reference to a smaller area under Ex. B. 2. As pointed out by Subba Rao, J. in Bhoju Mandal v. Debnath Bhagat, , this is a very crucial and clinching
circumstance in favour of, holding that the document wins a sale and not a mortgage. The stamp papers had been purchased in the name of the mortgagor in Ex. B 1, dated 7-1-1932, but the stamp papers in respect of Ex. B. 2 (registration copy being Ex. A. 1) were purchased in the name of the purchaser. This aspect has been considered to be material by a decision of the Division Bench of this Court in Prakasam v, Rajambal, - . In Ex. B. 2, there is a specific recital of transfer of possession along with its being an absolute sale and Ex. B. 2 has been executed by all the cosharers in the property, while Ex. B. 1, had been executed only by a few of the co-sharers.
Unfortunately, there is no evidence of the adequacy of the price of Rs. 1,000/- with reference to the property conveyed under Ex. B. 2, but it. is necessary to remember that only part of the properties covered by Ex. B. 1, were transferred under Ex. B. 2, and, therefore, there is nothing improbable in the purchaser taking an absolute sale of a smaller extent with a condition of repurchase. There is also one' factor presented by Ex. B. 4 dated 21-2-1941. That was a document of conveyance of one third in the suit properties for Rupees 300/-. The other two third was the subject matter of the document Ex. B. 2. Taking the price of the third share, the two-third share would be of the value of Rs. 600,and the actual price paid five years earlier was Rs. 1,000/-. These circumstances probabilise the case of the defendants that there was an out and out sale. In Ex. B. 4 there are recitals to confirm the title of the purchaser with reference to the two-third share. It must be remembered that this document of 1941, came into existence after the two years provided for repurchase in Ex. B. 2. If the document was only a mortgage, then there was no need to affirm the title of the defendants with reference to the two third share. Taking into account all these surrounding circumstances, the court below rightly held that there was an out and out sale and not a mortgage by conditional sale.
There is also one other circumstance, namely, that patta was transferred in favour of the purchaser. The learned counsel for the, opponents contended that Ex. B. 3 is dated 20-3-1965 and that it related only to fails 1374, corresponding to 1964-65. Ex. B. 3 does not .9 purport to be any proceeding for transfer of patta in that year, but merely evidences the existence of the patta in the name of the defendants. If really the patta stood till then in the name of the plaintiffs, they could have very well produced the kits receipts which must be in hear possession. In the absence of production of such documents, it has to be taken that patta was transferred at any rate prior to the present proceedings. There is no suggestion that patta was actually transferred only because of and after the dispute between the parties arose. The appellants have not shown how the scope of the remand order has been misunderstood by the court below. Thus, having regard to all the features, I do not find any merit in the second appeal and it is, accordingly, dismissed. There will be no order as to costs. -
11. Appeal dismissed.