http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9  

PETITIONER: SHRI BHASKAR WAMAN JOSHI (deceased)AND OTHERS

       Vs.

RESPONDENT: SHRI NARAYAN RAMBILAS AGARWAL(deceased) AND OTHERS

DATE OF JUDGMENT: 03/11/1959

BENCH: SHAH, J.C. BENCH: SHAH, J.C. GAJENDRAGADKAR, P.B. SUBBARAO, K.

CITATION:  1960 AIR  301            1960 SCR  (2) 117

ACT:        Mortgage-Deed-Construction--Mortgage  by  conditional   sale        -Sale  with  a clause  for  repurchase-Distinction  between-        Intention   of   the   parties-   Contemporaneous   conduct-        -Surrounding  circumstances-Time  fixed  for   reconveyance-        Whether essence of the contract.

HEADNOTE: A  deed dated September 10, 1931, described as a sale  deed, recited  that  the  transferors were indebted  and  that  to discharge the liability three items of immovable properties, described  in the deed and separately valued, were  conveyed in  full ownership and that possession was delivered to  the transferees.  The deed further provided, inter alia (1) that if  the transferors demanded reconveyable of any or  all  of the items of the properties within 5 years, the  transferees shall  reconvey  to  them at their  expense  for  the  price mentioned in the deed, (2) that if within four years and six months  the  transferees  did  not  exercise  the  right  of reconveyance as aforesaid and the transferees did not desire to retain all or any of the properties, they had a right  to get back the amount of consideration of the deed and  return all  the three or any of the properties in the condition  in which  by  vis  major,  Government  action  or  any   reason whatsoever they may be, and                             118 (3)that  if  the  transferors  failed  to  comply  with  the transferees’ request to take back the properties a breach of agreement  of                  reconveyance  rendering   the transferors  liable  to pay damages    shall  be  committed. There  was also a clause that the transferors    shall  lose the  right  of getting a reconveyance after  the  expiry  of the period of 5 years.  On the same date as the deed of sale the       transferors  executed an agreement by  which  they undertook  to pay the difference between the net rent to  be recovered  by  the  transferees  from  the  properties   and interest at the rate of nine per cent on the price till  the date  of  reconveyance.         In  a  suit  for  redemption brought  by  the  transferors on August  26,  1943,  on  the footing that the deed dated September 10, 1931, was A, mort- gage by conditional sale, the transferees contended that  by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9  

the transaction an absolute conveyance of the properties was intended and that the conveyance was subject to a  condition of repurchase to be exercised within a period of five  years from  the  date of the deed.  The evidence showed  that  the price  paid  for the properties under the  deed  was  wholly inadequate. Held, that the question whether a transaction ostensibly  of sale  may be regarded as a mortgage is one of  intention  of the parties which has to be ascertained from the  provisions of  the  deed  viewed  in  the  light  of  the   surrounding circumstances.   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.  In a mortgage by  conditional sale  a  relation  of debtor and creditor  is  created,  the transfer  being a security for the debt.  Oral  evidence  of intention  is not admissible in interpreting the  convenants of  the deed but evidence to explain or even contradict  the recitals as distinguished from the terms of the document may be given.  Evidence of contemporaneous conduct is admissible as a surrounding circumstance, but evidence as to subsequent conduct of the parties is inadmissible. Narasingerji   Gyangerji  v.  Panuganti  Parthasarathi   and Others, (1924) L.R. 51 I.A. 305, relied on. Held,  further,  that in the present case,  the  deed  dated September  10, 1931, on a true construction in the light  of the  surrounding circumstances showed that  the  transaction was  one of mortgage enabling the transferors to redeem  the properties.

JUDGMENT:        CIVIL APPELLATE JURISDICTION: Civil Appeal No.16 of 1955.        Appeal from the judgment and decree dated February 14, 1952,        of  the former Nagpur High Court, in First Appeal No. 10  of        1945, arising out of the judgment and decree dated September        25, 1944, of the Second Additional District Judge,  Amraoti,        in  Civil  Suit No. 11-A of 1943, Tr.  Civil Suit  No.5A  of        1944.        119        C.   B. Agarwal and A. G. Ratnaparkhi, for the appellants.        W.   S.  Barlingay,  S. N. Andley and  Rameshwar  Nath,  for        respondents Nos. 2-7.        1959.   November 3. The Judgment of the Court was  delivered        by        SHAH  J.-This  is an appeal against the decree of  the  High        Court of Judicature at Nagpur in Civil Appeal No. 10 of 1945        reversing  the  decree  passed  by  the  Second   Additional        District Judge, Amraoti in Civil Suit No. 5-A of 1944.   The        High  Court  has by its decree directed the court  of  first        instance to pass a decree for redemption.        The appeal raises a question as to the true effect of a deed        dated September 10, 1931, executed by Shri Narayan  Rambilas        Aggarwal  and  his two sons Sadan Gopal and  Murli  Dhar  in        favour of two brothers Bhaskar Waman Joshi and Trimbak Waman        Joshi.   The  deed ostensibly conveys an absolute  title  to        certain properties described therein.  The transferors under        the  deed contend that the property transferred by the  deed        was  intended  to be mortgaged under a deed  of  conditional        sale.  The transferees contend that by the deed an  absolute        conveyance of the property thereby conveyed was intended and        that the conveyance was subject to a condition of repurchase        to be exercised within a period of five years from the  date

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9  

      of the deed.  The court of first instance dismissed the suit        holding that the transaction in the deed dated September 10,        1931,  was  of the nature of an absolute conveyance  with  a        condition  of repurchase and the period limited by the  deed        for  reconveyance  had expired long before the date  of  the        suit.   The  High  Court held that  the  transaction  was  a        mortgage  by conditional sale and on that view reversed  the        decree and directed that a redemption decree be passed.        The  properties in dispute are three in number: (1) a  house        in  Amravati  outside the Amba Gate  bearing  Municipal  No.        5/98,  (2)  A Chawl in Amravati bearing old  Municipal  Nos.        6/857, 6/858 and 6/859, and (3) a house situated in  Dhanraj        Lane Amravati bearing old        120        Municipal  No.  3/459.   By the  deed  the  properties  were        separately valued.  The house at Amba Gate was valued at Rs.        11,500, the Chawl was valued at    Rs. 26,000 and the  house        at Dhanraj Lane was valued      at Rs. 2,000.   At the  date        of this transaction, the      transferors  were indebted  to        the Imperial Bank of India in the sum of Rs. 30,000 and  Rs.        9,500 were due      to  the transferees and their  relations        and friends, and to satisfy this liability of Rs. 39,500 the        deed  was executed.  Possession of the property  transferred        was  delivered by calling upon the tenants in occupation  to        attorney  to the transferees.  The  transferees  constructed        eight  shops in the compound of the Amba Gate house  in  the        year  1940-1941 and made certain other constructions in  the        compound of the Chawl, and they sold the Dhanraj Lane  house        to  one  Suraj Mal Salig Ram.  On the August 26,  1943,  the        transferors served a notice upon Bhaskar Waman Joshi and the        representatives  in interest of Trimbak Waman Joshi  stating        that they were willing to redeem the mortgage created by the        deed   dated  September  10,  1931,  and  called  upon   the        transferees  " to render full, true and proper account "  of        the amount claimable under the deed.  By their reply Bhaskar        Waman  Joshi and the representatives of Trimbak Waman  Joshi        denied  that  the transferors had any right  to  redeem  the        property conveyed by the deed and asserted that the claim  "        to  treat  the sale as a mortgage was an afterthought  "  in        view  of the abnormal rise in prices which had lately  taken        place.   On  September 9, 1943, the  three  transferors  and        other members of their joint Hindu family filed suit No. 5-A        of  1943  in  the court of the  Additional  District  Judge,        Amravati against Bhaskar Waman Joshi and the representatives        in  interest of Trimbak Waman Joshi and Suraj Mal Salig  Ram        for  a  decree  for redemption alleging  that  the  transfer        incorporated  in the deed dated September 10, 1931,  was  in        the nature of a mortgage by conditional sale.        Ex.  D-1  which  is the deed in question  recites  that  the        transferors  were indebted, that they needed Rs.  39,500  to        discharge  their liability, that Rs. 2,320 were due  to  the        transferees and that amount was set                                    121        off and the balance of Rs. 37,180 was paid by eight  cheques        drawn  on the Imperial Bank of India.  It was  then  recited        that  the  immovable properties described in the  deed  were        conveyed in full ownership and that possession was delivered        to  the transferees.  The deed then proceeded to  recite the        conditions " in respect of this sale " :        " If our heirs or ourselves demand reconveyance of one,  two        or  all  the three houses of the above estate  at  any  time        within 5 (five) years of this date (this time limit shall be        followed  very strictly-it has been finally settled that  we        will  lose this right if one more day expires), you or  your        heirs  shall reconvey to us at our expenses  the  respective

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9  

      houses for their respective prices mentioned in this deed of        sale.  With a view that both sides should have equal  rights        in respect of this condition, it has been agreed between  us        that if our heirs or ourselves do not exercise this right of        reconveyance  in respect of all the three houses or any  one        of them within four and a half years of this day and if  for        any  reasons  you  or your heirs do not deem  it  proper  to        retain  anyone or all these houses hereafter, you  and  your        heirs  have  a right to take back from us or our  heirs  the        amount  of consideration of this deed of sale and to  return        all  the  three houses or any of them in  the  condition  in        which the same may be at that time and if you or your  heirs        express such a desire and if we or our heirs fail to  comply        with it shall be tantamount to our breaking the agreement of        reconveyance  and  we and our heirs will be  liable  to  pay        damages.   It has been (further) agreed between us  that  in        the  event of such a reconveyance, our heirs  and  ourselves        will pay full prices (as mentioned in this deed of sale)  of        the estate in the condition in which it may be at that time,        that  is, in the condition in which it may be on account  of        heavenly  mishap  or Government action, on  account  of  any        reason whatsoever or on account of fall in prices."        The  courts  below differed in their interpretation  of  the        true effect of these conditions.  In the view of the learned        Trial  Judge, the intention of the parties was to effect  an        absolute  sale and not a mortgage.  The High Court  did  not        agree with that view.        16        122             By  cl.  (c)  of  s. 58 of  the  Transfer  of  Property        Act,mortgage by conditional sale is defined 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 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 safe."        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  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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9  

      sale                                    123        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.  As pointed  out  by  the        Judicial  Committee  of the Privy  Council  in  Narasingerji        Gyanagerji  v. Panuganti Parthasarathi and Others  (1),  the        circumstance that the transaction as phrased in the document        is  ostensibly  a  sale with a right of  repurchase  in  the        vendor,  the appearance being laboriously maintained by  the        words  of conveyance needlessly reiterating the  description        of  an absolute interest or the right of repurchase  bearing        the  appearance  of a right in relation to the  exercise  of        which time was of the essence 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  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.  It 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.   Oral        evidence of intention is not admissible in interpreting  the        covenants  of  the deed but evidence to explain or  even  to        contradict  the recitals as distinguished from the terms  of        -the documents may of course be given.  Evidence of  contem-        poraneous  conduct  is always admissible  as  a  surrounding        circumstance;  but evidence as to subsequent conduct of  the        parties is inadmissible.        (1)  (1924) L.R. 51 I.A. 305.                                    124        In  the light of these principles the real character of  the        document    Ex.     D-1    may    be    ascertained.     The        conditions of reconveyance may be analysed:          (1)  that  the  transferees  shall  reconvey  the   proper        within five years from the date of the conveyance      to        the transferor at the expense of the transferors for      the        price  mentioned in the deed; (2) that if within four  years        and six months from the date of the conveyance, the right of        reconveyance  in respect of the three houses or any of  them        is not’ exercised by the transferors and if the  transferees        do not desire to retain all or any of the houses, they  have        the  right to recall from the transferors the amount of  the        consideration  and to return all or any of the three  houses        in the condition in which they may be; (3) that in the event        of failure on the part of the transferors to comply with the        request  to take back the houses, a breach of  agreement  of        reconveyance rendering the transferors liable to pay damages        shall  be committed; (4) that in the  event-of  reconveyance        the transferors shall pay the full price set out in the sale        deed  and take back the houses in the condition in which  by        vis  major, Government action or any reason whatsoever  they        may  be.   Evidently the transferors bave under the  deed  a        right   to  call  upon  the  transferees  to  reconvey   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9  

      properties   within  five  years  from  the  date   of   the        conveyance;  but  after  the expiry of four  years  and  six        months the transferees are given the option to call upon the        transferors  to take back all or any of the  properties  for        the  prices  mentioned in the deed ; and if such  right  was        exercised  the  transferors  were bound  to  take  back  the        properties  and return the price even if on account  of  vis        major  or action of the public authorities the property  was        prejudicially  affected.   The  deed does not  set  out  the        period  within  which this right is to be exercised  by  the        transferees.   Granting that the option of reconveying  -the        properties against the price mentioned in the deed was to be        exercised by the transferors before the expiry of five years        from  the  date  of the deed, the covenant  that  damage  to        property  even  on account of circumstances over  which  the        transferees had no control was in the                                       125        event  of  reconveyance to be borne by the  transferors,  is        strongly  indicative  of a mortgage.  By this  covenant  the        transferees  were invested with the right to call  upon  the        transferors to " take back " all or any of the houses and to        return  the  price therefor, indicating    thereby  that the        price paid is in truth charged upon the property, By calling        upon the tenants to attorn to the transferees, possession of        the  property transferred was delivered and pursuant to  the        transfer,  it was mutated in the names of  the  transferees.        By  an  express covenant the period of five years  was  also        made  of  the essence of the contract, but  as  observed  in        Narasingerjis  case (1) the description of the  document  as        one of an absolute sale and the right of repurchase  bearing        the  appearance  of a right in relation to the  exercise  of        which  time is of the essence are not decisive of  the  true        nature of the transaction.        The  circumstances surrounding the deed at the date  of  the        execution  of  the  deed  also support  the  view  that  the        transaction  incorporated in Ex.  D-1 was intended to  be  a        mortgage.  Before the execution of the deed Ex.  D-1 a draft        sale  deed was prepared.  By the draft sale deed Ex.   P-13,        only  two  properties,  the Amba Gate house  valued  at  Rs.        10,000  and  the  Chawl  valued at Rs.  25,000  were  to  be        conveyed.   By the final sale deed, the Dhanraj  Lane  house        was also agreed to be conveyed and that house was valued  at        Rs.  3,500.   The transferors were evidently  in  straitened        circumstances and immediately needed Rs. 30,000 to discharge        their  liability to the Imperial Bank; and the liability  to        the transferees and their relations and ,friends amounted to        Rs.  9,500.   It is for this amount of Rs. 39,500  that  the        properties were conveyed.  On the date on which the deed was        executed,  also  an agreement Ex.  D-3 was executed  by  the        three  transferors.   That agreement recited that  the  sale        deed  was to be executed for past debts and for  paying  off        the  debts cheques were taken from the transferees  and  the        transferees  were put in possession of the houses  sold.   A        request  was then made that the transferees should  not  get        the deed registered for two months or at least for eight  to        fifteen days, because the transferees had        (1)  (1924) L.R. 51 E.A. 305.                                    126        to  make arrangements for payments to the creditors  and  in        the   event   of   the   deed   being   registered,    other        creditors  may  make demands for their dues.   It  was  then        stated,   "  you  want  that  you  should  get   an   income        of   nine  per  cent  per  annum  from  these  houses   till        reconveyance but it is evident that after meeting  repairing        or insurance charges thereof, there will not      remain  so

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9  

      much  profit in balance.  Therefore, we have already  agreed        before that the agreement of reconveys mentioned in the deed        of sale shall be brought into effect only when ourselves  or        our  heirs  pay to you all the expenses incurred by  you  as        found due according to your account books and complete  your        (nine)  per  cent." This agreement and the  sale  deed  were        executed  on the same day.  Evidently by this agreement  the        transferors undertook to pay the difference between the  net        rent  to be recovered and interest at the rate of  nine  per        cent,  on the price till the date of reconveyance, and  that        the  right of reconveyance was to be enforceable  only  when        the difference between the interest at nine per cent on  the        price and the rent recovered less repairs, insurance charges        according  to  the books of account of the  transferees  was        paid.   Prima facie this is a personal covenant whereby  the        transferors  agreed to pay interest at the rate of nine  per        cent, on the price paid till the date of reconveyance.  This        agreement  strongly indicates that the parties regarded  the        arrangement   incorporated in the deed dated  September  10,        1931,   as  a  mortgage.  The  contention  raised   by   the        transferees  that  by  this  covenant  they  were  to  erect        additional structures at their own expense upon the land and        collect rent which may be equivalent to interest at the rate        of nine per cent, on the price paid and the amounts spent by        them is on the language used in the deed unwarranted.  There        is  in the deed no reference to any additional amount to  be        spent  by  the transferees for erecting buildings  upon  the        land conveyed; and the books of the transferees are referred        to in the agreement only to make the accounts maintained  by        them   binding  upon  the  transferors.   Counsel  for   the        transferees  urged that this agreement not being  registered        was inadmissible                                    127        in  evidence.  Ex  facie the document does  not  purport  to        create,  declare,  limit or extinguish any right,  title  or        interest  in  immovable  property; it  incorporates  a  mere        personal covenant and it is difficult to appreciate the plea        that   the  document    wholly  inadmissible   for   want of        registration.    This  agreement  indisputably  contains   a        condition   relating  to  reconveyance  incorporated  in   a        registered  instrument  and  may not be  admissible  in  the        absence of registration as evidencing any alteration of  the        terms  of reconveyance.  But this agreement in so far as  it        evidences  a personal covenant to pay interest at  the  rate        specified,  is  admissible.   It  is  a  somewhat   singular        circumstance  that before the High Court, when  counsel  for        the  contending  parties were were invited by the  court  to        argue  whether  the  document  was by  law  required  to  be        registered counsel urged that the document was admissible in        evidence without registration and insisted upon arguing  the        case on that footing.        The question whether the price paid was adequate may also be        adverted  to.   The court of first instance  held  that  the        consideration for the properties was not inadequate; but  in        the  view  of the High Court the  consideration  was  wholly        inadequate.  Counsel for the transferees contended that  the        monthly  rent  received  from  the  tenants  occupying   the        properties  was Rs. 270 and deducting therefrom Rs.  48  for        municipal  taxes and an amount equal to rent for two  months        as properly chargeable for repairs, insurance and collection        charges, there remained only a balance of Rs. 186 per  month        available  to the transferees and capitalizing the net  rent        at  6% the value of the, property conveyed could not  exceed        Rs. 30,000, and even capitalising the net rent at 5% counsel        contended   that   the  value  of  the   property   may   be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9  

      approximately  equal to the consideration paid.   There  is,        however,  no clear evidence as to what municipal taxes  were        payable in respect of the houses, and whether the taxes were        payable  by  the tenants or by the  landlord.   Dr.  Trimbak        Joshi one of the transferees in his evidence in Suit No. 112        of 1932 deposed " that the tax came to Rs. 48 on the date  -        of purchase ", but he did not state that this amount was        128             payable  monthly.  There is again evidence  of  witness        Balkrishna examined by the transferees that the water    tax        was  paid by the tenants.  In their written  statement,  the        transferees  had  set  out a statement  of        income and        expenditure for the years 1931-40 and in     that  statement        for the year 1933 the expenses debited       against  income        were  Rs. 426-11-0, for 1934 Rs. 346-15-6 and for  1935  Rs.        542-2-6, for 1936 Rs. 1,666-7-0, for 1937 Rs. 1,160-1-3, for        1938 Rs. 529-2-3, for 1939 Rs. 570-11-3 and for 1940 Rs. 46-        2-0.   If Rs. 48 were payable as municipal tax every  month,        the  liability  on account of taxes alone far  exceeded  the        expenses debited against the rent received.  This  statement        of  account abundantly shows that the municipal  taxes  were        borne  by  the tenants and not by the landlords.   The  High        Court in para. 34 of its judgment proceeded to estimate  the        rental   of  the  properties  at  Rs.  245  per  month   and        capitalised the same at 5%.  The High Court is not shown  to        be  in error in accepting the net monthly rental at Rs.  245        per month.        The area of the land of the Amba Gate house is 9,037  square        feet,  the area of the land at Chawl is 23,805 square  feet,        and  the  area of land of Dhanraj Lane house is  817  square        feet,  There  is no clear evidence on the record  about  the        precise area of the lands covered by the structures, but  it        is  conceded that the structures stood on an area less  than        one-half  of the total area of the land.  From the  evidence        especially of the valuation reports, it appears that of  the        Amba  Gate house 5,800 square feet of land were open and  of        the Chawl 12,000 square feet of land were open, Valuation of        building land with structures by capitalising the rental may        yield  a  reliable basis for ascertaining the value  of  the        land  together  with  the structures only  if  the  land  is        developed  to its full capacity by erection  of  structures.        If  the land is not fully developed by  raising  structures,        valuation of houses together with lands by capitalising  the        rent  received may not furnish reliable data  for  assessing        the market value.  By aggregating the value of the land  and        the   value  of  the  structure  separately   estimated,   a        scientifically                                    129        accurate  value  of the land with the structure may  not  be        obtained.  But where the land is relatively valuable and the        structures  are old and‘ comparatively of small value,  this        method  may  afford a rough basis in the  absence  of  other        reliable data for ascertaining the value of the land and the        structure.  Exs.  D-52 and D-53 are the reports prepared  by        a valuer, of the market value of the Chawl and the Amba Gate        house.  According to the report Ex.  D-52, the value of  the        superstructure  of  the Chawl was Rs. 31,708.  Out  of  this        amount   the   valuer  sought  to  deduct  20%  "   as   per        Superintending  Engineer’s  letter dated  the  21st  August,        1931".   On what basis that deduction has been made has  not        been  explained.   He  again  proceeded  to  deduct  20%  as        depreciation  on the cost of the building and  estimated  at        Rs.  20,293 the value of the superstructure.  It is  evident        that a deliberate attempt was made by the valuer to depreci-        ate the value of the super-structure by making at least  one

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9  

      deduction  of  20%  for which there  is  no  warrant.   Even        assuming that this valuation of Rs. 20,293 is accurate,  the        value  of  the  Chawl together with  the  land  considerably        exceeds Rs. 26,000.  The valuer has valued the site at 4  as        per  square foot, but no reliable evidence has been  led  to        support  that estimate.  Similarly for the Amba  Gate  house        the valuer estimated the value at Rs. 18,556 for the  super-        structure  and he deducted 20% " with effect from  the  22nd        August,  1931  according to  the  Superintending  Engineer’s        letter dated the 21st August 1931 " and 25% as  depreciation        charges on building and arrived at the figure of Rs.  11,134        and added thereto the value of the land at the rate of 4 as.        per  square  foot.   The evidence on  the  record  does  not        warrant  the assumption that the land was worth  only  annas        four  per square foot.  As pointed out by the High Court  in        view  of the sale deeds Exs.  P-9 and P-21 the price of  the        land  fluctuated  between Rs.  1 and Rs. 2-4 as  per  square        foot.   Even if the lower of the two rates be  adopted,  the        value of the Chawl at the Amba Gate house will  considerably        exceed the price embodied in the sale deed.        17                                    130           The  house  in  Dhanraj  Lane was  valued  in  the  draft        sale  deed at Rs. 3,500 and in the sale deed at  Rs.  2,000.        No explanation has been given for this disparity between the        prices  mentioned  in the draft and the deed  and  there  is        substance in the contention strongly pressed by counsel  for        the transferors that the      value of Rs. 2,000 for a house        with  a  ground floor and two stories  is  artificial.   The        evidence  discloses that the house was let out on a  monthly        rent  of  Rs.  20 and capitalising that rent at  5%  on  the        assumption  that  by  the construction the  land  was  fully        developed, the price thereof was more than double the  price        set  out  in  the deed.  It is clear  that  this  house  was        included  in  the  deed to make up the total  value  of  Rs.        39,500, the amount required by the transferors to tide  over        their immediate difficulties.        Counsel for the transferees sought to rely upon the evidence        of  subsequent conduct of the transferors as  indicative  of        the  character of the transaction as a sale, but as  already        observed,  that evidence is inadmissible.  In our view,  the        High  Court was right in holding that the  real  transaction        incorporated in Ex.  D-1 was a mortgage and not a sale.  The        appeal therefore fails and is dismissed with costs.        Appeal dismissed.