REPORABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   7400        OF 2008 (Arising out of SLP (C) No.2227 of 2007)

C. Cheriathan … Appellant

Versus

P. Narayanan Embranthiri & Ors. … Respondent

J U D G M  E N T

S.B. Sinha, J.

1. Leave granted.

2. Interpretation of a deed dated 27.10.1969 as to whether the same is

one of absolute conveyance with a condition of repurchase or a mortgage

with conditional sale, is the question involved in this appeal which arises

out of a judgment and order dated 1.11.2006 passed by the High Court of

Kerala  in  Second  Appeal  No.290  of  2003  setting  aside  a  judgment  and

decree dated 28.11.1988 passed by the Munsif’s Court, Manjeri in Original

Suit No.458 of 1984.

3. Respondent herein was owner of the land in question.  He took the

said land on lease with one Cheriathan jointly from one Gopalan Nair by

reason  of  a  deed  of  conveyance  dated  21.12.1967.   They  made

improvements.   They constructed  buildings  thereupon.   Half  of  the  said

leasehold rights was sought to be conveyed in favour of the appellant by

reason of the said deed.  Indisputably, the first respondent executed a deed

of assignment in favour of the V. Devaki Amma in respect of his half share

for a consideration to repurchase the same by a document dated 27.10.1969.

She, by a deed of assignment dated 2.3.1976, transferred her right, title and

interest being half of the property to the appellant and, thus, according to

him, he became the full owner thereof.   

Indisputably again, the appellant  was granted a purchase certificate

under the Kerala Land Reforms Act in respect of the entire property in the

year 1978.   First  Respondent  did  not  take any step to  set  aside  the said

certificate  for  a  long  time.   Only  in  the  year  1984,  he  filed  a  suit  for

redemption  of  mortgage  and  partition  in  respect  of  his  half  share  in  the

property alleging  that  the said deed dated 27.10.1969 represented only a

loan transaction.  Appellant herein, however, took the usual stand that the

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said  deed  is  in  effect  and  substance  a  deed  of  sale  with  a  condition  to

repurchase.   

In view of the pleadings of the parties, several issues were framed;

issue No.4 being :

“4. Whether  the  transaction  involved  in document No.276/1970 is a mortgage?”

3. On construction of the document in question, the learned Trial Judge

opined that the transaction represented a sale.  On an appeal having been

preferred thereagainst by the respondent, the First Appellate Court held that

the transaction was a mortgage by conditional sale and as the respondent did

not exercise his option to repurchase the property within a period of three

years, the said sale has become absolute.   

Respondent  filed  a second appeal  before the  High Court  which by

reason of  the impugned judgment  has  been allowed interpreting  the  said

document to be a deed of mortgage and consequently holding that the suit

for partition and redemption was maintainable.

4. Mr. Krishnamoorthy, learned senior counsel appearing on behalf of

the appellant, would submit that the High Court committed a serious error in

passing  the  impugned  judgment  in  so  far  as  it  failed  to  construe  the

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provisions  of  Section  58  of  the  Transfer  of  Property  Act  in  its  proper

perspective.   It  was  urged that  apart  from the  fact  that  the  value  of  the

property could not have been assessed at Rs.6,800/-, the High Court ignored

that only half share thereof was transferred.  It furthermore failed to take

into consideration that no evidence had been brought on record to establish

the relationship of creditor and borrower between the parties.  Possession

having  been  delivered,  permission  to  attorn  having  been  given  and  no

interest  having  been stipulated,  it  was  submitted,  the  High  Court  should

have construed the document to be one of absolute sale with a condition of

repurchase.

5. Learned counsel appearing on behalf of the respondent No.1, on the

other  hand,  would  contend  that  as  appellant  did  not  prefer  any  appeal

against  the  judgment  and order  passed  by the  First  Appellate  Court,  the

contentions raised before us should not be permitted to be raised.  For the

said purpose, it was contended, even the provisions of Order 41 Rule 33 of

the Code of Civil Procedure would not be applicable.

6. Before embarking upon the rival contentions raised before us, we may

notice the relevant portions of the deed in question which are (as translated

by the parties) as under :

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“The scheduled property was outstanding (sic) on lease with Gopalan Nair from whom by Document No.2034 of 1967 myself  and Cheriyathan jointly got  an  assignment  of  lease  hold  right  and  are enjoying the same by effecting improvements and buildings and I humbly (sic) conditionally assign my  one  half  right  over  the  property  with possession  and  with  the  improvements  thereon with a stipulation that within a period of 3 years from  today,  I  shall  repurchase  the  same  at  my expense.  I have received the sale consideration of Rs.2,000/-  in  cash  from  you  and  I  hereby relinquish  all  my  ½  right  over  the  scheduled property and hence by this assignment from today till the period is over you are entitled to enjoy the schedule property as a sale by efflux of time and thereafter as an absolute sale.  You will be entitled to  directly  attorn  to  the  landlord  by  paying  rent and hereafter I will have no right to deal with the property in any manner.

Original  sale  deed  is  not  handed  over  as  it  is  a joint document and I hereby assure you that there are no encumbrances created in respect of my half share.”

7. Whether a document is a mortgage by conditional sale or a sale with a

condition of repurchase is a vexed question.   

Section 58(c) of the Transfer of Property Act, 1882 reads thus :

“Section  58  -  ”Mortgage”,  “mortgagor”, “mortgagee”,  “mortgage-money”  and  “mortgage- deed” defined –

(a)  …

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(b) …

(c) Mortgage by  conditional  sale.-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.”

8. One of the ingredients for determining the true nature of transaction,

therefore,  is  that  the  condition  of  repurchase  should  be embodied  in  the

document which effects or purports to effect the sale.  Indisputably, the said

condition is satisfied in the present case.

9. A document, as is well known, must be read in its entirety.  When

character of a document is in question, although the heading thereof would

not be conclusive, it plays a significant role.  Intention of the parties must be

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gathered  from  the  document  itself  but  therefor  circumstances  attending

thereto would also be relevant; particularly when the relationship between

the parties is in question.  For the said purpose, it is essential that all parts of

the deed should be read in their entirety. [See  P.S. Ramakrishna Reddy v.

M.K. Bhagyalakshmi & Anr. [(2007) 10 SCC 231].

10. In State Bank of India & Anr. v. Mula Sahakari Sakhar Karkhana Ltd.

[(2006) 6 SCC 293], it was held :

“22. A  document,  as  is  well  known,  must primarily be construed on the basis of the  terms and  conditions  contained  therein.  It  is  also  trite that  while construing a document  the court shall not supply any words which the author thereof did not use.”

11. The deed in question is said to be a deed of sale.  The source of title

has  been  disclosed.   What  was  sought  to  be  conveyed  thereby  was  the

leasehold interest.  Assignment was in respect of the vendor’s one half share

in  the property.   Possession  of  the properties  had been handed over.   A

stipulation was made therein that the vendor shall repurchase the same at his

expenses within a period of three years from the date of execution thereof.

He acknowledged receipt of sale consideration of Rs.2,000/- in cash.  The

vendor relinquished all his right over the scheduled property.  However, the

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nature of assignment was sought to be clarified as the words “till the period

is over” and “efflux of time and thereafter as an absolute sale” are used.   

It is significant that thereby the vendee in terms of the said instrument

became entitled to attorn to the landlord by paying stipulated rent evidently

as a tenant and not as a mortgagee.  The vendor accepted that he would have

no  right  to  deal  with  the  property  in  any manner.   The  reason  why the

original  deed  of  sale  had  not  been  handed  over  was  also  explained.

Declaration  has  been  made  that  no  encumbrances  had  been  created  in

respect of the vendor’s share in the property.  

12. The High Court in its judgment proceeded on the basis that the value

of  the  property  was  Rs.6,800/-  and,  thus,  consideration  of  Rs.2,000/-  ex

facie was insufficient.  What was not noticed was that by reason of the said

deed only half of the right of the vendor was sought to be assigned.  It is

also not in dispute that the appellant had already acquired the right, title and

interest  in  respect  of  the  other  half  of  the  property.   As  the  word

‘repurchase’  has  been  used,  the  respondent  was  aware  that  he  has  to

repurchase the transferred property.  What would be the consideration for

repurchase  has  not  been  stated.   Ordinarily,  in  a  case  where  deed  of

mortgage  is  executed  with  a  condition  of  repurchase,  the  amount  of

consideration remains the same.   

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We would, however, assume that the intention of the parties was that

amount of consideration would remain the same.  The time for repurchase,

however, has been specified, namely, three years.  No evidence has been

brought on record to show that any relationship of creditor and borrower

had  come  into  being.   As  indicated  hereinbefore,  appellant  had  been

permitted to attorn to the landlord.   

13. So  as  to  enable  us  to  determine  the  vexed  question,  it  may  be

profitable to notice a few decisions of this Court on some of which the High

Court relied upon.   

In Seth Gangadhar v. Shankar Lal & Ors. [1959 SCR 509] whereupon

reliance  has  been  placed  by  the  High  Court,  it  was  admitted  that  the

transaction  was  that  of  a  mortgage  and  Section  60  of  the  Transfer  of

Property Act was applicable.  It is in that view of the matter, this Court held

that the right of redemption could not have been taken away.  The Court

held that therein the term of mortgage was 85 years and there existed no

stipulation entitling the mortgagor to redeem during that term which had not

expired.  The document in question was held by this Court to be containing

a stipulation creating a clog on the equity of redemption which was found to

be illegal.  Such is not the case here.

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In Pomal Kanji Govindji & Ors. v. Vrajlal Karsandas Purohit & Ors.

[(1989)  1  SCC  458],  this  Court  held  that  whether  a  clause  used  in  a

transaction of mortgage amounted to clog on the equity of redemption is a

mixed question of law and fact.  In that case, there existed a provision for

payment of interest at the rate of half  per cent per annum payable on the

principal  amount  at  the  end  of  the  long  period  which  led  this  Court  to

conclude that there was a clog on equity on redemption.   Furthermore, in

that case, materials were brought on record to show that the transaction was

entered into by way of security for the loan obtained

In Shivdev Singh & Anr. v. Sucha Singh & Anr. [(2000) 4 SCC 326],

this Court was dealing with a case of  anomalous mortgage.   Therein the

mortgage was to remain operative for a period of 99 years.  It was in that

situation,  this  Court  opined that  the  original  owner  having been in  great

financial  difficulty,  the  mortgagees  took  advantage  of  the  said  fact  and

incorporated  a  99  year’s  term which  constituted  a  clog  on  the equity  of

redemption.   

In this  case,  the  term is  only for  a  period  of  three years  which  is

reasonable.

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We may notice that in Bishwanath Prasad Singh v. Rajendra Prasad &

Anr. [(2006) 4 SCC 432], upon taking notice of a large number of decisions,

this  Court  observing  that  therein  no  stipulation  had  been  made  that  the

vendee could not transfer the property and his name was mutated, held :

“18. We have noticed hereinbefore that the nature of  deed  was  stated  to  be  an  agreement (ekrarnama), the nature of the document was not stated  to  be  “bai-ul-wafa”,  the  relevant  clause whereof reads as under:

“Because the vendor today of this date has sold the property of this deed to the vendee through  registered  agreement  on  the vaibulwafa condition and during this period the  vendor  and  the  vendee  have  already agreed  that  this  case  will  remain  as vaibulwafa  and  as  per  the  said  sarait,  the vendor of this  deed agrees that the vendee of  this  deed  or  his  successors  or  heirs whenever will pay the consideration amount of  this  deed  amount  to  Rs.3000  (three thousand) within 23 months from today i.e. up  to  the  month  of  June  1978  after harvesting  of  the  crops  i.e.  paddy or  rabi, then I the vendor  or my legal  heirs or my successors  after  receiving  the  said consideration  amount  of  Rs.3000  will execute  the  sale  deed  pertaining  to  the property mentioned in column 5 of this deed in favour of the vendee or his legal heirs or successor.”

19. It is of some significance to note that therein the  expressions  “vendor”,  “vendee”,  “sold”  and “consideration”  have  been  used.  These expressions  together  with  the  fact  that  the  sale

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deed  was  to  be  executed  within  a  period  of  23 months  i.e.  up  to  June  1978,  evidently  the expression  “vaibulwafa”  as  a  condition  was loosely used.

20. Furthermore, the agreement was also executed for a fixed period. The other terms and conditions of the said agreement (ekrarnama) also clearly go to show that the parties understood the same to be a  deed  of  reconveyance  and  not  mortgage  or  a conditional sale.”

15. Bishwanath  Pratap  Singh,  it  must  be  placed  on  record,  was

distinguished on facts in Tulsi & Ors. v. Chandrika Prasad & Ors. [(2006) 8

SCC 322], stating :

“18. In the instant case, the scribe of the document was examined. His categorical statement was that he had been asked by the parties to scribe a deed of mortgage and not a deed of sale. Respondent 1, as  noticed  hereinbefore,  in  the  document  itself categorically stated that he was executing a deed of  mortgage.  Indisputably,  the  amount  of  stamp duty was also paid by him. In a case of deed of sale, ordinarily the transferee pays the stamp duty. Why such  a  deviation  from the  normal  practice was made has not been explained by the appellant.

19. We have noticed hereinbefore that the nature of  the  deed  described  that  the  document  is ambiguous  as  both  the  terms viz.  “Kewala”  and “Baibulwafa”,  were  mentioned.  The  transaction, however, categorically states that Appellant 1 was to maintain the property in its  present  condition. Of  course,  permission  for  reconstruction  of  the structure was granted. But, if the intention of the parties was to transfer the property absolutely, no

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such stipulation was required to be made at all. In a  case  of  absolute  transfer,  the  vendee  has  an absolute  right  to  deal  with  his  property  in  any manner  he likes.  It  was  clearly  stipulated  in  the deed that  in  the event  the executant  repayed the entire consideration by 30-12-1971, the purchaser would  reconvey  the  property  and  furthermore deliver possession thereof. The sale was to become absolute only when the transferee failed to pay the said  amount  within  the  stipulated  period.  The courts  below have  also  taken  into  consideration the  contemporaneous  conduct  of  the  parties  in treating the transaction to be one of mortgage and not of sale. We are, therefore, of the opinion that the parties intended to enter into a transaction of mortgage and not sale.”

16. In Manjabai Krishna Patil (D) by LRs. v.  Raghunath Revaji Patil &

Anr. [2007 (3) SCALE 331], this Court opined that no relationship of debtor

and creditor having come into being and no security had been created, the

instrument in question was a deed of sale with a condition of repurchase.   

17. Another important factor which must be borne in mind in construing

the instrument in question is that appellant was already the owner in respect

of  half  of  the property.   As the  parties  were related  to  each  other,  it  is

difficult to conceive that the other half of the property would be subject to

mortgage and not a sale.  The intention of appellant that by reason of the

said transaction dated 27.10.1969, he would become the owner of the entire

property was obvious.

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18. Submission of the learned counsel that contentions raised before us

on behalf of the appellant were not available as the finding of the learned

First  Appellate  Court  to  the  effect  that  the  transaction  evidenced  on

mortgage with conditional sale does not appeal to us.  Despite arriving at

the said finding, the appeal of respondent was dismissed and in that view of

the matter,  it  was  not  open to  appellant  to  prefer  an  independent  appeal

thereagainst.  Order 41 Rule 22 of the Code of Civil Procedure, therefore,

had no  application.   It  is  in  the  aforementioned  situation,  it  was  legally

permissible for the appellant to support the decree passed in his favour by

attacking the finding of the First Appellant Court which were made against

him.   Order  41  Rule  33  of  the  Code  of  Civil  Procedure,  therefore,  was

available in this case.  In S. Nazeer Ahmed v. State Bank of Mysore & Ors.

[(2007 (11) SCC 75], this Court held :

“Order 41 Rule 33 enables the appellate court to pass any decree that ought to have been passed by the trial  court  or  grant  any further  decree as the case may require and the power could be exercised notwithstanding that the appeal was only against a part of the decree and could even be exercised in favour of the respondents, though the respondents might  not  have  filed  any  appeal  or  objection against what has been decreed.”

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19. For the  reasons  aforementioned,  the impugned judgment  cannot  be

sustained.  It is set aside accordingly.  The appeal is allowed.  In the facts

and circumstances of the case, however, there shall be no order as to costs.

……………………………….J. [S.B. Sinha]

..…………………………..…J. [Cyriac Joseph]

New Delhi; December 18, 2008

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