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PETITIONER: P.   L. BAPUSWAMI

       Vs.

RESPONDENT: N.   PATTAY GOUNDER

DATE OF JUDGMENT: 07/12/1965

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SIKRI, S.M. SUBBARAO, K. SHAH, J.C. SIKRI, S.M. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. SATYANARAYANARAJU, P.

CITATION:  1966 AIR  902            1966 SCR  (2) 918

ACT: Transfer of Property Act, 1882, s. 58(c)-Distinction between Mortgage  by conditional sale and a sale with a  clause  for repurchase.

HEADNOTE: M  executed a document Ex.  B-1 on May 28, 1946, in  respect of  his  half  share  in certain  lands  in  favour  of  the defendant for a consideration of Rs. 4,000/-.  The  document was  in  the  form  of  a  sale  deed  but  it  contained  a stipulation that the defendant should reconvey the  property to  M on his repaying the amount of Rs. 4,000/-  after  five years  and  before the end of the seventh year.   After  M’s death his sons executed an assignment deed in favour of  the plaintiff in August 1950 for a sum of Rs. 1,600/- and on the basis  of  this  deed, the plaintiff filed a  suit  for  re- demption of the disputed property.  He claimed, inter  alia, that  Ex.   B-1 must be deemed in law to be  a  mortgage  by conditional  sale and that he was entitled to redeem as  the assignee of the equity of redemption; or alternatively, that Ex.   B-1 was a sale with a condition to repurchase and  the defendant  was  bound  to reconvey the property  to  him  on payment  of  Rs. 4,000/- and that although this  amount  had been  tendered several times, the defendant had  refused  to accept it.  On the other hand the defendant denied that  Ex. B-1 was a mortgage by conditional sale and contended that it was  an outright sale with a covenant for repurchase and  as the  plaintiff  did not tender the amount  within  the  time stipulated in the document, the suit was barred by time. The  trial  court  held  that Ex.  B-1  was  a  mortgage  by conditional  sale and granted a preliminary decree; but  the High Court, in appeal, reversed this decision.  On appeal to this Court, HELD : Ex.  B-1 was a transaction of mortgage by conditional sale and not a sale with a condition for retransfer. The  question whether by the incorporation of a condition  a

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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 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.   The distinction between the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt. [921 C-F] In  the present case the following  circumstances  indicated that the transaction was a mortgage by conditional sale :-               (i)  As required by the proviso to  s.  58(c).               the  condition for repurchase was embodied  in               the same document;               (ii)  the  consideration for Ex.  B-1 was  Rs.               4,000/.  while the real value of the  property               was Rs. 8,000/-;                                    919               (iii)the  patta  was not  transferred  to  the               defendant  after the execution of Ex.  B-1  by               M;               (iv)  M,  and  after  his  death,  his   sons,               continued to pay kist for the land; and               (v)   the  consideration for reconveyance  was               the  same amount as the consideration for  Ex.               B-1, i.e. Rs. 4,000/-. [923 B-G]

JUDGMENT:               CIVIL   APPELLATE JURISDICTION:  Civil  Appeal               No. 798 of 1963.               Appeal by Special Leave from the judgment  and               Order  dated  the  19th August,  1960  of  the               Madras High Court in Second Appeal No. 871  of               1958.               R.    Ganapathy lyer, for the appellant.               C.    B.  Agarwala and R. Gopalakrishnan,  for               the respondent.               The Judgment of the Court was delivered by               Ranmswami,  J.  This  appeal  is  brought,  by               special leave, on behalf of the plaintiff from               the judgment of the High Court of Madras dated               August  19, 1960 in Second Appeal no.  871  of               1958.               The  disputed property consisted of  16  acres               and  27 cents of land in Sokkanur  village  of               Coimbatore   district  of  which  half   share               belonged  to Palani Moopan and the other  half               to  his  daughter  Palani  Mooppachi.   Palani               Moopan  executed  the document-Ex.   B-1  with               regard to his share of the property in  favour               of  the 1st defendant for a  consideration  of               Rs.  4,000/on  May  28,  1946.   Out  of   the               consideration, a sum of Rs. 2,000/was reserved               with the vendee to pay off an earlier mortgage               and the balance of Rs. 2,000/- was paid to the               vendor   in   cash.    The   first   defendant               discharged the earlier mortgage in  accordance               with   the  directions  in  Ex.    B-1.    The

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             document,  B-1 was in the form of a sale  deed               but  it contained a stipulation that  the  1st               defendant  should  reconvey  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.  After the death  of  Palani               Moopan his sons executed an assignment deed in               favour of the plaintiff, Ex.  A-1 dated August               10,  1950  for a sum of Rs. 1,600/-.   On  the               basis  of Ex.  A-1 the plaintiff  has  brought               the   present  suit  for  redemption  of   the               disputed property.  The case of the  plaintiff               was that Ex. B-1 must be deemed in law to be a               mortgage  by conditional sale and that he  was               entitled  to  redeem as the  assignee  of  the               equity  of redemption.  The plaintiff  further               claimed  that being an agriculturist,  he  was               entitled  to the benefits of Madras Act TV  of               1938   as  amended.   The  plaintiff   pleaded               alternatively that if               Sup.Cl/66 12.               920               Ex. B-1 was held to be an out right sale  with               a condition to repurchase, the first defendant               was  bound to reconvey the property to him  on               payment  of  the amount of Rs.  4,000/-.   The               plaintiff alleged that he tendered the  amount               to  the first defendant several times but  the               latter  refused to accept the same.  The  suit               was contested by the 1st defendant who  denied               that  Ex.  B-1 was a mortgage  by  conditional               sale.  It was alleged that Ex.  B-1 was an out               right  sale with a covenant to repurchase  and               as no tender was made by the plaintiff  within               the time stipulated in the document, the  suit               was barred by time.               Upon  these rival contentions the trial  court               held   that  Ex.   B-1  was  a   mortgage   by               conditional  sale  and accordingly  granted  a               preliminary   decree  to  the  plaintiff   for               redemption  under  O. 34. r. 7  of  the  Civil               Procedure Code.  The first defendant took  the               matter  in appeal to the Subordinate Judge  of               Coimbatore but the appeal was dismissed.   The               1st  defendant preferred second appeal in  the               Madras High Court which set aside the  decrees               of the lower Courts and ordered that the  suit               should   be   dismissed,  holding   that   the                             transaction  was an out right sale and   not  a               mortgage by conditional sale.  As regards  the               alternative  plea  based on the  covenant  for               reconveyance,  the High Court considered  that               there  was  no proof that  the  plaintiff  had               tendered   the   amount  within   the   period               stipulated in the document.               The question of law involved in this appeal is               whether  the  document, Ex.  B-1  executed  by               Palani  Moopan in favour of the 1st  defendant               is,   in  its  true  effect,  a  mortgage   by               conditional  sale or a sale with  a  condition               for retransfer.               By s. 58(c) of the Transfer of Property Act  a               mortgage  by  conditional sale is  defined  as               follows :

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             "58. (c) Where the mortgagor ostensibly  sells               the mortgaged property-               on condition that on default of payment of the               mortgaged-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:                                    921               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  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.   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 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 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.  The distinction between 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 question in each  case  is one   of  determination  of  the  real  character   of   the transaction  to  be ascertained from the provisions  of  the document  viewed in the light of surrounding  circumstances. If  the  language is plain and unambiguous it  must  in  the light of the evidence of surrounding circumstances be  given its  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 related to existing facts.  In  the present case, the document Ex.  B-1 reads as follows               "................................               I have settled to sell to you on this day  for               a suit               of Rs. 4,000-0-0 the undermentioned  immovable               pro-               922               perties and have received the consideration of               rupees  four thousand only, as detailed  below               :-

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             In  the  matter  of  my  having  directed  you               yourself to pay the sum of Rs. 2,000/-,  being               my half share payable towards the usufructuary               mortgage deed executed on 7th September  1944,               in respect of the share of properties detailed               below  and in respect of some other  share  of               properties,   jointly   by   me   and   Palani               Mooppachi,  wife of one Palani Mooppan of  the               aforesaid place in favour of M. Maniyam P.  V.               Ramaswami   Goundar,   son   of   Venkatachala               Goundar,  residing  in  Pattampalayam  village               cusba,  Palladam  taluk,  for  a  sum  of  Rs.               4,000/- and registered as Document no. 1122 of               1944, Book 1, Volume 210, pages 415 and 416 in               the  Office of the Sub-Registrar of  Kunnathur               to  the aforesaid usufructuary mortgagee,  get               release of the properties mentioned herein and               take  possession  of  the  same,  the   amount               received  by  me is Rs. 2,000/-.   The  amount               which  I have received in cash on this day  is               Rs. 2,000/-.  As, in all, I have received  the               sale consideration of Rs. 4,000/- as  detailed               above, you yourself shall, in future, hold and               enjoy     absolutely    the     undermentioned               properties.  In future, neither myself nor  my               heirs  shall have any right or  future  claim,               whatever,  in  respect  of  these  properties.               There  is  no  other  encumbrance,   whatever,               except  the  encumbrance mentioned  above,  in               respect of these properties.  In case anything               is  left  out,  I am bound  to  get  the  same               discharged   from   and  out   of   my   other               properties.               Whereof, in all these, and in the well in good               condition,  situate in Government  Survey  no.               93/1  and in the cocoanut, palmyrah,  tamarind               and wood-apple trees and in the fruit  bearing               and  timber trees, which are in the  aforesaid               fields, the half-share in common.  In future I               have neither share nor right, whatever, in the               aforesaid   fields.   The   aforesaid   Palani               Mooppachi shall discharge the above  mentioned               balance  usufructuary mortgage amount  of  Rs.               2,000/-  from  and out of the balance  of  the               usufructuary of mortgage properties.  Should I               pay  in cash the aforesaid sale  consideration               of rupees four thousand after a period of five               years within a period of seven years from  the               date of                923                the execution of the deed, during the date of               expiry of the said deed of any year (the  said               properties) should be reconveyed for the  very               same  amount  to me.  This  condition  is  not               valid after the aforesaid period." We consider that in the present case there are several  cir- cumstances  to indicate that Ex.  B-1 was a  transaction  of mortgage by conditional sale and not a sale with a condition for, retransfer.  In the first place, there is the important circumstance  that the condition for repurchase is  embodied in  the same, document.  In the second place, there  is  the significant fact that the consideration for Ex.  B-1 was Rs. 4,000/-, while the real value of the property was, according to  the Munsif and the Subordinate Judge, Rs. 8,000/-.   The High  Court  has dealt with this question  and  reached  the

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finding that the value of the property was Rs. 5,5001-,  but it  is  submitted  by Mr. Ganapathi lyer on  behalf  of  the appellant that the question of valuation was one of fact and the  High Court was not entitled to go into the question  in the second appeal.  The criticism of learned Counsel for the appellant is justified and we must proceed on the basis that the valuation of the property was Rs. 8,000/- and since  the consideration  for  Ex.  B-1 was only Rs. 4,000/- it  was  a strong  circumstance suggesting that the transaction  was  a mortgage  and  not an out right sale.  In the  third  place, there is the circumstance that the patta was not transferred to  the  1st defendant after the execution of  Ex.   B-1  by Palani  Moopan.   It appears that defendant no.  I  did  not apply  for  the transfer of patta and the  patta  admittedly continued  in  the  name of Palani  Moopan  even  after  the execution  of Ex.  B-1.  Exhibits A-6 and A-7 are  certified copies of thandal extract of patta for the years 1945-54 and they  prove  this fact.  These exhibits also show  that  the plaintiff  had obtained patta for the land on the  basis  of Ex.   A-2.   The registered deed of transfer  of  patta  was executed  by  the  sons of Palani Moopan in  favour  of  the plaintiff.   There is also the circumstance that  the,  kist for  the land was continued to be paid by Palani Moopan  and after  his  death, by the sons of  Palani  Moopan.   Lastly, there  is the important circumstance that the  consideration for  reconveyance  was Rs. 4,000/-, the same amount  as  the consideration  for Ex.  B-1.  Having regard to the  language of  the document, Ex. B-1 and examining it in the  light  of these   circumstances  we  are  of  the  opinion  that   the transaction under Ex.  B-1 was mortgage by conditional  sale and  the  view taken by the High Court with  regard  to  the legal  effect  of  the transaction  must  be  reversed.   It follows,  therefore,  that the plaintiff is  entitled  to  a preliminary  decree for redemption under 0. 34. r. 7,  Civil Procedure Code, 924 for  taking accounts and for declaration of the amounts  due to the 1st defendant under Ex.  B-1. For  these reasons we set aside the judgment and  decree  of the  High Court and. restore the judgment and decree of  the Subordinate  Judge  of Coimbatore granting the  plaintiff  a preliminary decree for redemption of the mortgage.  A period of six months is granted for payment of the amount under the preliminary decree. The appeal is accordingly allowed with costs. Appeal allowed. 925