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CASE NO.: Appeal (civil)  3861 of 1999

PETITIONER: Chennammal                                               

RESPONDENT: Munimalaiyan & Ors.                                         

DATE OF JUDGMENT: 19/10/2005

BENCH: Arijit Pasayat & Dr. AR. Lakshmanan

JUDGMENT: J U D G M E N T

Dr. AR. Lakshmanan, J.

This appeal is directed against the final judgment and order dated 06.03.1998  passed by the High Court of Madras in Second Appeal No. 1966 of 1984 allowing the  same and reversing the judgment and order dated 15.11.1983 passed in A.S. No. 51  and 1982 by the Additional Subordinate Judge, Dharmapuri at Krishnagiri and restoring  the order and judgment dated 20.11.1981 passed by the District Munsiff, Hosur in O.S.  No. 542 of 1978.  

The short facts of the case are as follows:- The defendant is the appellant in this civil appeal.  One Munimalaiyan (plaintiff)  executed a simple mortgage in favour of the appellant for a sum of Rs.3,000/-.  For  securing the due repayment, 3 items of properties belonging to Munimalaiyan was  given as security.  Munimalaiyan was unable to discharge the simple mortgage and on  the intervention of Panchayatdars, a deed was executed by Munimalaiyan in favour of  the appellant herein (Chennammal).  In and by the said deed, one of the properties  which was given as security for the simple mortgage was sold to the appellant herein  with a right reserved to the said Munimalaiyan to repurchase the same within a period  of 3 years on payment of Rs.3,000/-.  A legal notice was issued by the said  Munimalaiyan to the appellant herein seeking redemption of the property which was the  subject-matter of the deed dated 22.10.1970.  The appellant issued a reply notice  contending that the deed dated 20.10.1970 was a deed of sale and not a mortgage by  conditional sale as sought to be contended by the said Munimalaiyan.  The said Munimalaiyan instituted a suit in O.S. No. 542 of 1978 on the file of the  District Munsiff, Hosur against the appellant herein praying for a decree for redemption.   It was contended that the deed dated 20.10.1970 was a mortgage by conditional sale  and that pursuant to the sale, the appellant was put in possession of the suit property  and that the deed is not a sale deed and that a right to redeem the property within a  period of 3 years was reserved and failing which the appellant herein was entitled to  have the patta transferred in her own name.  As on 20.10.1970, the property was  valued at Rs.12,500/-.  It was further contended that Munimalaiyan was paying the kist  for the suit properties and that the appellant had raised various crops and derived  sufficient income every year and that the mortgaged debt has to be scaled down as per  Section 8 of Act 5 of 1978 and that since the appellant has been in possession for 8  years Rs.2,400/- ought to be deducted and that the appellant herein is entitled only to  Rs.600/- as per law and that the said sum of Rs.600/- has been deposited into Court  and that, therefore, the property has to be re-transferred and possession handed over.   On these allegations the said Munimalaiyan prayed for the aforesaid relief.   Pending the suit, the said Munimalaiyan died and his LRs were brought on  record as his legal representatives and they continued to prosecute the suit.  The appellant herein resisted the suit contending that the deed dated  20.10.1970 was an outright sale and that since Munimalaiyan was unable to discharge  the simple mortgage the deed in question came to be executed and that the sale  consideration under the document was adjusted towards the amounts due under the  simple mortgage deed of the year 1961 and that the said document was executed on  the advise of the Panchayatdars and that half the property is rocky and unfit for

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cultivation and that the income therefrom was very meagre and that a right to  repurchase had been reserved under the document within a period of three years failing  which the document stipulated that the appellant would have absolute rights and that  the option to repurchase was not exercised within the stipulated period of three years  and that from the date of the document the appellant has been in possession as  absolute owner and has been paying kist and that patta has also been transferred in  her name and that the appellant had made certain portions of the property cultivable  and the value thereof has increased and in order to get the benefit of the increase in  value the present suit has been laid wrongly alleging that the document is a mortgage  by conditional sale and that the suit is barred by time and that the provisions of Act 40  of 1978 are not applicable to the facts of the case and that the question of scaling down  of the debt does not arise and that court fee paid is incorrect.  On these allegations the  appellant herein prayed for the dismissal of the suit.   The District Munsiff, Hosur who tried the suit held that the document in question  which was marked as Exhibit A1/B1 was only a mortgage by conditional sale and that it  is not a sale deed as contended by the appellant herein and that from the intention of  the parties and the document in question, it was clear that only a mortgage by  conditional sale had been executed and that Munimalaiyan was entitled to the benefits  under Act 40 of 1978 and that, therefore, only Rs.600/- was due and that the question  of mesne profits was relegated to the final decree proceedings.  The trial Court thus  passed a preliminary decree for redemption.   Aggrieved by the preliminary decree, the appellant preferred an appeal on the  file of the Additional Subordinate Judge, Dharmapuri.  The Additional Subordinate  Judge on an interpretation of the document in question held that the document was  only an outright sale and not a mortgage by conditional sale.  In this view of the matter,  the Additional Subordinate Judge allowed the appeal and thereby set aside the  judgment and decree passed by the District Munsiff.  The respondents herein being aggrieved by the appeal being allowed and their  suit being dismissed, preferred S.A. No. 1966 of 1984 on the file of the High Court at  Madras. S. Jagadeesan, J. who heard the second appeal allowed the same and restored  the judgment and decree of the trial Court by setting aside the judgment and decree of  the Appellate Court.  The High Court held that the document in question is only a  mortgage by conditional sale since vesting absolute rights in the property had been  postponed under the document and that since interest had been paid regularly there  was no necessity for a sale deed to be executed by discharging the earlier mortgage  and that there was no necessity for the appellant to agree to re-convey the property  after the period of 3 years and that the value of the property though Rs.12,500/- had  been shown as only Rs.3,000/- and that all these factors could only lead one to  conclude that the document in question is only a mortgage by conditional sale.  On  these findings, the second appeal was allowed.  We have carefully perused the judgment under appeal in the second appeal and  also the judgment and decree passed by the Appellate Court and also of the trial Court  and perused the document conditional deed of sale for Rs.3,000/- dated 22.10.1970.   We have also perused the certified copy of the Tamil version of the document and the  translated English version.  We heard Mr. V. Prabhakar, learned counsel for the appellant/defendant and Mr.  K.K. Mani, learned counsel for the respondents/plaintiffs.   Mr. V. Prabhakar, learned counsel for the appellant, made the following  submissions:- 1)      the recitals in the disputed document Ex.A1/B1 are unambiguous and  clearly refer to an absolute sale and not a mortgage by conditional  sale; 2)      the document in question had been executed due to the inability to  discharge the principal under the simple mortgage and, therefore, the  High Court should have held that the document in question is an  outright sale;  3)      the High Court has overlooked the very fact that the document in  question recites that the property would be reconveyed if the money is  paid within 3 years would clearly show that a right of re-purchase  alone had been reserved while the sale effected was absolute; 4)      the High Court has failed to note that the absence of stipulation as to  payment of interest but containing recitals as to payment of taxes,  handing over of possession and a right to re-purchase the property  coupled with a pointed recital that the sale is being effected would

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clearly establish that the document in question is an outright sale; 5)      that the term "mortgage by conditional sale" referred to in Section  58(c) of the Transfer of Property Act, 1882 could only mean that an  ostensible sale effected with the right to redeem being reserved vide in  instant case an outright sale has been effected with a right to re- purchase alone being reserved which is sufficient in itself to indicate  that the document in question is an outright sale deed; 6)      that the High Court erred in interpreting the document in question as  one of mortgage by conditional sale despite clear recitals therein that  the sale is an absolute sale; 7)      that the respondents having lost the right to re-purchase the property  by not exercising the option as recited in the document within the  period stipulated therein cannot turn around and contend that the  document in question is a mortgage by conditional sale. Mr. Prabhakar, learned counsel for the appellant, has taken us through the  pleadings, judgments and also the Ex.A1/B1.  In support of his contention, he  relied on the following judgments:- 1)      Tamboli Ramanlal Motilal (dead) by L.Rs. vs. Ghanchi Chimanlal  Keshavlal (dead) by L.Rs. and Another, AIR 1992 SC 1236 2)      Chunchun Jha vs. Ebadat Ali and Another, AIR 1954 SC 345 3)      Bhaskar Waman Joshi (deceased) and Others vs. Shrinarayan  Rambilas Agarwal (deceased) and Others, AIR 1960 SC 301              4)      Umabai and Another vs. Nilkanth Dhondiba Chavan (dead) by LRs and  Another, (2005) 6 SCC 243

According to Mr. K.K. Mani, learned counsel for the respondents, the document  in question was  a)      a mortgage by conditional sale;  b)      pursuant to the sale, the appellant was put in possession of the suit  property;  c)      right to redeem the property within a period of 3 years was reserved  failing which the appellant was entitled to have the patta transferred in  her own name;  d)      though the value of the property as on 22.10.1970 was Rs.12,500/-  but the deed was executed for Rs.3,000/-;  e)      since Munimalaiyan was unable to discharge the simple mortgage, he  executed the document in favour of the appellant herein;  f)      one of the property which was given as security for the simple  mortgage was sold to the appellant with a right reserved to  Munimalaiyan to re-purchase the same within a period of 3 years on  payment of Rs.3,000/-.   He also invited our attention to the very same Ex.A1/B1 and placed strong  reliance on the judgment of this Court in P.L. Bapuswami vs. N. Pattay Gounder, AIR  1966 SC 902 In the above factual background, the only question for determination is whether  the document in question is a mortgage by conditional sale as contended by  plaintiff/respondent herein or a sale out and out with a condition of re-purchase as  alleged by the defendants.  If the former, the plaintiff/respondent succeeds.  If the latter   appellant/defendant are out of Court.  Therefore, the entire case is based on the  construction of the document.   Before proceeding to consider the rival submissions, we feel it is beneficial to  reproduce the conditional deed of sale for Rs.3,000/- i.e. Ex.A1/B1 document "Conditional Deed of Sale executed on 22.10.1970 (Twenty  Second Day of October, Nineteen Seventy) by Munimayan,  S/O Ariyan, Harijan, Cultivation residing at No. 252, Odyanda  Halli, Kuruppu, Odayanda  Halli Village, Denkanikottai Taluk, in  favour of Chennammal, W/O Govindachami, residing at the  said village, in respect of the properties mentioned hereunder in  the presence of the Panchayatadar mentioned hereunder is as  follows:

The Punja Land described hereunder is belonging to me  as self acquired property and in my possession and enjoyment  and registered as Document No. 4625/1961 dated 20.12.1961.  

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(1 Book 867 Volume Pages 63 to 70).  As per the advice of the  Panchayatdar I have executed this Deed of Sale in respect of  the said Punja Lands (inclusive of the same properties) in  favour of you for consideration of Rs.3,000/- (Rupees three  thousand only).  Since I could not pay the principle amount of  Rs.3,000/- found in the document, I have handed over the  possession of the undermentioned property to you today in the  presence of the witnesses signed hereunder.  Since I have  received the sale consideration by way of returning the  document dated 20.12.1961.  I shall purchase the said property  from you within the period of three years, at my cost.  Till then,  you shall pay the kist to the Government from Fasli 1380.  In  case of failure on my part to purchase the property from you  within the period of three years, you and your heirs shall hold  and enjoy the property with absolute rights, from the next day  onwards.  I undertake that neither my heirs nor myself and  would give any trouble by indulging in civil and criminal  proceedings, in respect of the said property.  If it is so, it has no  proof.  My heirs and myself shall stand surety for the said sale  consideration of Rs.3,000/-.  You shall apply for transfer of  patta for the property on the next day of the expiry of the three  years period.  I shall not raise any objection, then.  This  property is situated within the limits of Kelamangalam  Panchayat Union, Rayalkottai, Panchayat. SCHEDULE OF PROPERTY                 Dharmapuri Dist. \026 Rayakottai Sub-Registration  District \026 Denkarikottai Taluk \026 256 No. Oadayanda Halli Group  \026 Thinu Halli Village, West of the land belonging to Manthedu  Gounder, East of the land belonging to Kalan and Pathiran;  South of the Onipuram Pathway; comprised within these limits,  Punja AC.8.05 in Re-survey No. 80/1 Kist is 9.02.  The said  extent of the land is the subject matter of this conditional sale.   Present value Rs.12,500/-.

                                               L.T.I. of Munimayan WITNESSES 1)      Venkatappan s/o Thayappan @ Venkatan, Oadayanda Halli 2)      M.M. Ramaiah, s/o M. Munivenkatan, Royakottai 3)      L.T.I. of Narayana Gounder, s/o Thimmu Gounder,  Oadayanda Halli Scribed by :  R.V. Venkataraman." A careful perusal of the document would clearly show that the document has  been couched in a simple Tamil language.  The recitals are clear and unambiguous.  It  is seen from the document that Munimalaiyan was unable to discharge the simple  mortgage.  Panchayatdars intervene and amicably settled the matter.  A deed was  executed thereupon by Munimalaiyan in favour of the appellant herein and in and by  the said deed one of the properties which was given as security for the simple  mortgage was sold to the appellant with a right reserved to the said Munimalaiyan to re- purchase the same within a period of 3 years on payment of Rs.3,000/-.  The right to  redeem the property within a period of 3 years was specifically reserved.  The recitals,  in our opinion, would only show that the deed in question is not a deed of sale but a  mortgage by conditional sale.  Section 58(c) of the Transfer of Property Act, 1882 deals with mortgage by  conditional sale.  The said section reads thus: "58(c) Mortgage by conditional sale \026 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,

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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."    

A mortgage by conditional sale takes the form of an ostensible sale of the  property with the condition superadded that it shall become an absolute sale on default  of payment on a certain date or subject to the proviso that the sale shall be treated as  void and the property re-transferred on payment being made.  We shall now consider the judgments cited; 1) Tamboli Ramanlal Motilal (dead) by L.Rs. vs. Ghanchi Chimanlal  Keshavlal (dead) by L.Rs. and Another, AIR 1992 SC 1236 This Court, in this case, held as under: "13.  The attendant circumstances could be looked into  only to gather the intention.  Such an intention, if explicitly  expressed in the document itself, there is no scope for looking  at the attendant circumstances.  If, therefore, there is no  relationship of the debtor and the creditor, the question of it  being a mortgage by conditional sale does not arise.

16.  In order to appreciate the respective contentions, it  is necessary for us to analyse Ex.26 dated 11.12.1950.  Before  that, it is necessary to utter a word of caution.  Having regard to  the nice distinctions between a mortgage by conditional sale  and a sale with an option to repurchase, one should be guided  by the terms of the document alone without much help from the  case law.  Of course, cases could be referred for the purposes  of interpreting a particular clause to gather the intention.  Then  again, it is also settled law that nomenclature of the document  is hardly conclusive and much importance cannot be attached  to the nomenclature alone since it is the real intention which  requires to be gathered.  It is from this angle we propose to  analyse the document.  No doubt the document is styled as a  deed of conditional sale, but as we have just now observed,  that is not conclusive of the matter."   

2) Chunchun Jha vs. Ebadat Ali and Another, AIR 1954 SC 345 We have perused the above judgment.  The judgment explains as to how a  document has to be construed.  The judgment says that the intention must be gathered  from the document itself and if the words are express and clear, effect must be given to  them and any extraneous enquiry into what was thought or intended is ruled out.  The  real question in such a case is not what the parties intended or meant but what is the  legal effect of the words which they used and if there is ambiguity in the language  employed, then it is permissible to look to the surrounding circumstances to determine  what was intended.  3)  Bhaskar Waman Joshi (deceased) and Others vs. Shrinarayan Rambilas  Agarwal (deceased) and Others, AIR 1960 SC 301              This Court, in this case, has explained the circumstance that the condition  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 the mortgagee, the price being charged on  the property conveyed.  This Court further held that in a sale coupled with an  agreement to re-convey 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 specified period.  This Court also held that the  question in each case is one of determination of the real character of the transaction to  be ascertained from the provisions of the deed viewed in the light of surrounding  circumstances.  If the words are plain and unambiguous they must in the light of the  evidence of surrounding circumstances be given their true legal effect.  If there is  ambiguity in the language employed, the intention may be ascertained from the  contents of the deed with such extrinsic evidence as may by law be permitted to be  adduced to show in what manner the language of the deed was relating to existing

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facts. 4) Umabai and Another vs. Nilkanth Dhondiba Chavan (dead) by LRs and  Another, (2005) 6 SCC 243 Paras 19 & 21 of the above judgment was relied on by counsel for the appellant  which reads thus: "19.  It may be true that level of a document is not  decisive.  The true nature of transaction must be determined  having regard to the intention of the parties as well as the  circumstances attributing thereto as also the wordings used in  the document in question.

21.     There exists a distinction between mortgage by  conditional sale and a sale with a condition of repurchase.  In a  mortgage, the debt subsists and a right to redeem remains with  the debtor; but a sale with a condition of repurchase is not a  lending and borrowing arrangement.  There does not exist any  debt and no right to redeem is reserved thereby.  An agreement  to sell confers merely a personal right which can be enforced  strictly according to the terms of the deed and at the time  agreed upon.  Proviso appended to Section 58(c), however,  states that if the condition for retransfer is not embodied in the  document which effects or purports to effect a sale, the  transaction will not be regarded as a mortgage.  (See Pandit  Chunchun Jha vs. Sk. Ebadat Ali, (1955) 1 SCR 174, Bhaskar  Waman Joshi v. Narayan Ramblidas Agarwal, (1960) 2 SCR  117, K. Simrathmull v. S. Nanjalingiah Gowder, 1962 Supp (3)  SCR 476, Mushir Mohammed Khan v. Sajeda Bano, (2000) 3  SCC 536 and Tamboli Ramanlal Motilal v. Ghanchi Chimanlal  Keshavlal,1993 Supp (1) SCC 295."         5) P.L. Bapuswami vs. N. Pattay Gounder, AIR 1966 SC 902 (Four Judges)   was cited by  Mr. K.K. Mani, learned counsel appearing for the respondent. In this case, one Palani Moopan executed a document in favour of the  defendant for a consideration of Rs.4,000/- on May 28, 1946.  The document was in the  form of a sale-deed but it contained a stipulation that the first defendant should re- convey the property to Palani Moopan on his repaying the amount of Rs.4,000/- after 5  years and before the end of the 7th year.  This Court held as under: "that there were several circumstances to indicate that the document was a  transaction of mortgage by conditional sale and not a sale with a condition  for retransfer.  In the first place, the condition for repurchase was embodied  in the same document.  In the second place, the consideration for the  transaction was Rs.4,000/- while the real value of the property was  Rs.8,000/-.  In the third place, the patta was not transferred to the 1st  defendant after the execution of the document by Palani Moopan.  The kist  for the land was also continued to be paid by Palani Moopan and after his  death, by his sons.  Lastly, the consideration for reconveyance was  Rs.4,000/-, the same amount as the consideration for the original  transaction.  The plaintiff was entitled to preliminary decree for redemption  under O.34, R.7, Civil Procedure Code, for taking accounts and for  declaration of the amounts due to the 1st defendant under the document."   The above judgment, in our opinion, squarely applies to the facts and  circumstances of the case on hand.  They are: 1)      the transaction in question is a mortgage by conditional sale; 2)      the condition for re-purchase of 3 years was embodied in the same  document; 3)      the consideration for the transaction was Rs.3,000/- while the real value of  the property was Rs.12,500/-; 4)      patta was not transferred to the defendant after the execution of the  document; 5)      as per the evidence available on record, the kist for the land was continued  to be paid by the plaintiff \026 Munimalaiyan; 6)      the consideration for re-conveyance was only for Rs.3,000/-; 7)      the appellant was given liberty to have the patta transferred and also to enjoy  the property absolutely after the period of 3 years expired;

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8)      the trial Court granted a preliminary decree which was reversed by the lower  Appellate court and again interfered with by the High Court.  

We have considered all the attendant circumstances to cover the intention of the  parties.  The intention is explicitly expressed in the document itself.  There is, therefore ,  no scope for looking at the attendant circumstances. There is no relationship of the  debtor and the creditor.  This Court also in Tamboli Ramanlal Motilal (dead) by L.Rs.  vs. Ghanchi Chimanlal Keshavlal (dead) by L.Rs. and Another, AIR 1992 SC 1236  has pointed out that the Court should be guided by the terms of the document alone  without much help from the case law.  Viewed from any angle, we are of the opinion  that the document in question is a mortgage by conditional sale.

In the result, the appeal stands dismissed and the judgment and decree of the  High Court is affirmed.  However, we order no costs.