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CASE NO.: Appeal (civil)  854 of 2007

PETITIONER: Manjabai Krishna Patil (D) By L.Rs

RESPONDENT: Raghunath Revaji Patil & Anr

DATE OF JUDGMENT: 20/02/2007

BENCH: S.B. Sinha & Markandey Katju

JUDGMENT: J U D G M E N T [Arising out of S.L.P. (Civil) No.24582 of 2004]

S.B. SINHA, J :  

       Leave granted.

       Appellants herein were owners of land bearing Survey No.198/3/2  admeasuring 2 acres at Village Waghad.  They, being in need of money,  approached the respondents.  On negotiations having been held in that behalf  by and between  the parties, a deed of sale was executed by the appellants in  favour of the respondents on 29.11.1966 for a sum of Rs.6,000/-.  However,  the said deed was registered on 17.12.1966.  On the same day an agreement  of reconveyance was also executed in terms whereof the respondents agreed  to convey the property back to the appellants herein after five years on  receipt of the amount of consideration specified therein.  As the respondents  failed and/or neglected to act in terms of the said agreement of  reconveyance, a suit for specific performance was filed by the appellants  herein against the respondents.                    The said suit was decreed.  However, on an appeal preferred  thereagainst by the respondents, the First Appellate Court, inter alia, held  that the appellants herein were not ready and willing to perform their part of  contract.  The First Appellate Court, however, rejected the contention of the  respondents that time was of the essence of contract.  The appeal was  allowed, stating :

       "To sum up, the agreement of reconveyance  (exhibit 31) was the part and parcel of the agreement of  sale evidence by the sale deed (exhibit 30), and for   want of registration the plaintiff No. 2 Pandharinath did  not acquire any right on the basis of the said agreement  of reconveyance. Moreover, the said agreement of  reconveyance is left vague on vital and important points  discussed above.  Respondent No. 3 Vijayabai was not  a party to the said agreement of revonveyance and it  was not signed, by her.  We have also seen above that  the plaintiffs were not ready and willing to perform  their part of contract.  On all these points, the learned  Judge ought to have dismissed the suit for specific  performance.  Relying on all these circumstances  discussed above, I do find that the plaintiffs are not  entitled to claim a decree for specific performance.    Relying on all these circumstances discussed above,  I  do find that the plaintiffs are not entitled to claim a  decree for specific performance of contract."

       In the Second Appeal filed by the appellants herein being aggrieved

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by and dissatisfied with the said judgment, the High Court also opined that  as the document of reconveyance was  part and parcel of the same  transaction and being  compulsorily registerable; for want of registration, the  same was neither admissible in evidence nor enforceable through a court of  law.

       Mr. Chinmoy Khaladkar, the learned counsel appearing on behalf of  the appellants, would submit that keeping in view the fact that the deed of  sale was executed on 29.11.1966, and the agreement of reconveyance was  executed on 17.12.1966, the same was not required to be registered.         

       Mr. S.V. Deshpande, the learned counsel appearing on behalf of the  respondents, on the other hand, submitted that although the sale deed was  executed on 29.11.1966, but having been registered on 17.12.1966 itself on  which date the agreement of reconveyance was executed, the same must be  held to be a part of the same transaction and, thus, was compulsorily  registerable.

       In this connection, our attention was drawn to the agreement of  reconveyance  dated 17.12.1966, the relevant portion whereof  reads as  under :

       "I, above referred vendee write down that you  above referred vendor are selling the land to me for  6,000/- upon the condition that after cultivation for 5  years this particular land would be reconveyed to  Pandrinath Ukhardu Patil as soon as he repays the  amount i.e. 6,000/-

       But within 5 years all the earnings of the land  would be enjoyed by me as an interest."

                        The basic fact of the matter is not in dispute. Two documents were  executed on different dates and at different places.  Whereas the deed of sale  was executed at  Tal. Raver,  the purported agreement of reconveyance was  executed at Waghad  where the registration office was situated.

       By reason of the sale deed dated 29.11.1966, the respondents obtained  possession of the entire suit property.  The property was transferred  absolutely so as  to enable the vendee to use the same till their life time as  also by their legal representatives.  Appellants declared that they would have  no right, title and interest in the said land, nor they would have ownership  right and in case anyone  claimed any such right, the same would be treated  as cancelled.  An easementary right was also conveyed.  It was stipulated  that the land was not encumbered as the mortgage which had been created in  respect of the said land, has been redeemed and in the event "anything is  found", ’they would be responsible for the same’.  

The amount of consideration was received on different dates at  different places.  The said deed must, therefore, be construed to be a deed of  absolute sale.

       Furthermore, Section 58 (c)  of the Transfer of Property Act, 1882 (for  short, "the Act") provides for satisfaction of the conditions for mortgage by  way of conditional sale providing :

       "(c) Mortgage by conditional sale.- Where, the  mortgagor ostensibly sells the mortgaged property \026

       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

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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 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."     

       Proviso appended to Section 58(c) is clear and unambiguous.  A legal  fiction is created thereby that the transaction shall not be held to be a  mortgage by conditional sale, unless a condition is embodied in the  document which effects or purports to effect the sale.  Where two documents  are executed, the transaction in question would not amount to a mortgage by  way of conditional sale.  In a case of this nature, ordinarily the same would  be considered to be a deed of sale coupled with an agreement of  reconveyance.            

       This aspect of the matter has been considered by this Court in  Bishwanath Prasad Singh v. Rajendra Prasad and Another  [(2006) 4 SCC  432], wherein it was held :         "A bare perusal of the said provision clearly shows  that a mortgage by conditional sale must be evidenced by  one document whereas a sale with a condition of  retransfer may be evidenced by more than one document.  A sale with a condition of retransfer, is not mortgage. It  is not a partial transfer. By reason of such a transfer all  rights have been transferred reserving only a personal  right to the purchaser (sic seller), and such a personal  right would be lost, unless the same is exercised within  the stipulated time."

In Mushir Mohammed Khan (Dead) By L.Rs. v. Sajeda Bano (Smt.)  and Others [(2000) 3 SCC 536], this Court referring to a well-known  decision of Pandit Chunchun Jha v. Sk. Ebadat Ali and Another [(1955)   SCR 174: AIR 1954 SC 345] held :         "14. Applying the principles laid down above, the  two documents read together would not constitute a  mortgage as the condition of repurchase is not contained  in the same documents by which the property was sold.  The proviso to clause (c) of Section 58 would operate in  the instant case also and the transaction between the  parties cannot be held to be a "mortgage by conditional  sale.""                                  In Shri Bhaskar Waman Joshi (deceased) and Others v. Shri Narayan   Rambilas Agarwal (deceased) and Others  [(1960) 2 SCR 117], it was  observed :          "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 sale. But it does not follow that if the condition  is incorporated in the deed effecting or purporting to

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effect a sale a mortgage transaction must of necessity  have been intended. 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 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 mortgagee, the price being charged on the  property conveyed. In a sale coupled with an agreement  to reconvey 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 retransfer 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. The definition  of a mortgage by conditional sale itself contemplates an  ostensible sale of the property\005."  

       In Tulsi and Others v. Chandrika Prasad and Others [(2006) 8 SCC  322], it was held:                   "A distinction exists between a mortgage by way  of conditional sale and a sale with condition of purchase.   In the former the debt subsists and a right to redeem  remains with the debtor but in case of the latter the  transaction does not evidence an arrangement of lending  and borrowing and, thus, right to redeem is not reserved  thereby."   

       In the instant case, no relationship of debtor or creditor came into  being.  No security was created and in fact conveyance of the title of the  property by the respondent to the appellant  was final and absolute.   

       Reliance has been placed by the High Court on a Full Bench decision  of the Bombay High Court in Harkisandas Bhagvandas and Others v. Bai  Dhanu [AIR 1926 Bombay 497] wherein, it was held that if the transaction  is really one of mortgage then the second deed would be inadmissible for  want of registration; but where the transaction is not one of mortgage, the  second document would not need registration, even if it is a part of the same  transaction of sale.

       In this case also the transaction is a mortgage by conditional sale and  having regard to the provisions of Section 17 of the Indian Registration Act,  the agreement of sale was not compulsorily registerable.

       It has further been brought to our notice that whereas the Deed of Sale  was executed in favour of two persons; the purported agreement of  reconveyance  has been executed by  only one of the vendees, namely,  Raghunath Revaji Patil, who  has been described as ’Benami’; but the same  has not been proved.  The High Court did not go into the aforementioned  question stating :

"20.   Once, this issue is answered in the negative, the  issue, whether execution by Defendant No. 1 alone  (Defendant No. 2 has not signed the reconveyance deed)  would obstruct the court from granting a decree for  specific performance of reconveyance, is not required to

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be considered since, a finding favourable to appellant on  that issue is not going to make any favourable impact on  the conclusion of the appeal."

       We, therefore, are of the opinion that the interest of justice will be  subserved  if the matter is remitted to the First Appellate Court for  consideration of the matter afresh on the said question. The impugned  judgments cannot be sustained and are set aside accordingly.  The Appeal is  allowed and the matter is remitted to the First Appellate Court for  consideration of the matter  afresh .                  In the facts and circumstances of this case, there is no order as to  costs.