Madras High Court
Sait Balumal Dharmdas Firm Bankers vs Gollapudi Venkata Chelapathi Rao And ... on 7 May, 1954
Equivalent citations: AIR1955MAD78, AIR 1955 MADRAS 78, 1967 MADLW 889
JUDGMENT Krishnaswami Nayudu, J.
1. This appeal arises in a suit on a pronote for Rs. 1400 dated 24-7-1942 executed by the defendants in the plaintiffs' favour. The defendants denied liability as they stated that the pronote was brought about in the following circumstances. The second defendant obtained a decree against one Kanakam in O. S. No. 94 of 1938 on the file of the District Munslf's Court, Vijayawada for Rs. 2,000 with a charge on his immoveable properties. On 31-12-1939 the second defendant transferred the decree by a registered document, the arrangement being that the transfer of the decree was a security for monies to be advanced by the plaintiffs from time to time for the purposes of his trade.
It is the defendants' case that a sum of Rs. 600 was paid, which was mentioned as the consideration for the transfer deed, and that as part of the arrangement the second defendant should look after the execution of the decree and recover the amount, though the decree had been transferred to the plaintiffs, that execution proceedings were started in the name of the plaintiffs firm and the property, was brought to sale and that the second defendant was the highest bidder and he paid 25 per cent, of the sale price and, as regards the balance of 75 per cent, amounting to Rs. 1400, the plaintiffs advanced the sum of Rs. 1400 to the second defendant for depositing the same into Court and the suit pronote was then taken, by the plaintiff's for the said amount by way of security and the plaintiffs would not be entitled to enforce it in case the sale was confirmed.
Subsequently the sale was confirmed and the plaintiffs also drew from court the sum of Rs. 1400 deposited, the defendants contending that the pronote is no longer enforceable.
2. The plea that the transfer deed, Ex. D. 3, was only by way of security was not gone into by the trial Court, as oral evidence to ascertain the intention of the parties was held not admissible under Section 92, Evidence Act and the trial court passed a decree as prayed for. An appeal was filed and the learned Subordinate Judge of Bezwada disagreed with the view taken by the trial Court as regards the admissibility of the oral evidence and remanded the suit to the lower Court for findings being given on the agreements pleaded by the defendants. As against the said order of remand, C. M. A, No. 128 of 1948 was filed by the plaintiffs in the High Court, and Raghava Rao J. before whom the appeal came, set aside the order of remand and directed the appeal to be disposed of in the light of his judgment. Raghava Rao J. was of the opinion that "while oral evidence of an intention that a sale-deed should operate as a deed of security is inadmissible, evidence of surrounding circumstances to show in what manner the language of the document is related to existing facts is certainly admissible evidence of circumstances such as the lowness of the amount for which the transfer deed was executed and the fact that the execution was entirely in the hands of the second defendant which are referred to by the learned District Munsif as circumstances which would very greatly weigh with him but for his view that oral evidence of such circumstances is prohibited by law." The learned Judge relied on the rulings in --'Balkishen Das v. W. F. Legge', 22 All 149 (PC) (A) and -- 'Narasinger]i v. Parthasarathi Rayanim Garu', AIR 1924 PC 226 (B).
3. After remand, the learned Subordinate Judge examined the oral evidence as regards the surrounding circumstances, for instance, as to the inadequate consideration and the fact that the execution proceedings were conducted by the second defendant himself and other circumstances and found that Ex. D: 3 was not an absolute transfer deed, but was only executed as and by way of security in the circumstances alleged by the defendants and allowed the appeal and dismissed the action.
4. It is now, urged on behalf of the plaintiffs that the legal effect of the decision in -- '22 All 149 (A)' and AIR 1924 PC 226 (B) was not properly appreciated by the learned Subordinate Judge and he erred in applying the principles laid down in the. said decisions to the facts of the present case and that the oral evidence which was admitted and considered by him was only evidence to prove the intention of the parties that the sale-deed should operate as a deed of security, which, however, was found to be inadmissible even by the order of remand of this Court to C. M. A. NO. 128 Of 1948, (Mad) (C).
5. The present case is sought to be brought within proviso (6) to Section 92, Evidence Act, which prohibits the reception of evidence of any oral agreement or statement to contradict, vary, add to or subtract from the terms of a contract, grant or other disposition of property. The exception in the proviso is that any fact which shows in what manner the language of a document is related to existing facts may be proved by oral evidence. Learned counsel referred to the decision in -- 'Martand Trimbak v. Amritrao Raghojirao', AIR 1925 Bora 501 (D) of Macleod C. J. and; Coyajee J. and to the observations of the learned Chief Justice as to the scope of the applications of Section 92, Evidence Act. The question that arose in that case was as to whether a document which purported to be a sale was intended to operate as a mortgage and evidence of the surrounding circumstances was sought to be adduced to prove the fact that it was really a mortgage, as regards which contention, the learned Chief Justice, after extracting proviso 6 to Section 92, which says:
"Any fact may be proved which shows in what manner the language of a document is related to existing facts", observed as follows at page 503: "The language of the proviso is rather vague. It is true that evidence of the circumstances surrounding a document is admissible; but it is admissible only for the purpose of throwing light on its meaning. It would, we think, not be permissible to consider the surrounding circumstances with a view to holding that a document which on the face of it is a sale-deed was intended to operate as a mortgage. There must be some limit to the suggestion that the surrounding circumstances can always be scrutinised so as to enable the Court to alter or change the nature of a document to something different from what it appears to be. Otherwise there could be no certainty as to the proper construction to be placed on a document which? to all appearance is unambiguous."
But neither of the decisions of the Privy Council, viz., 22 All 149 (PC) (A) and AIR 1924 PC 226 (B) appear to have been placed before the learned Judges and if the learned Judges had before them the principle governing such cases as laid down by the Privy Council, it was not likely that they would have taken a strict and narrow view of the scope of the proviso 6 to Section 92, Evidence Act.
6. The leading case on the subject is 22 All 149 (PC) (A), where two documents, a deed of sale of land for value accompanied by a deed of agreement for re-purchase were relied upon to constitute a mortgage by conditional sale and oral evidence was sought to be adduced to prove that a mortgage by conditional sale was intended by both the documents. It was held that oral evidence for the purpose of ascertaining the intention of the parties to the deeds was not admissible, being excluded by the enactment in Section 92, Evidence Act and the case had to be decided on a consideration of the documents themselves, with only such extrinsic evidence of circumstances as might be required to show the relation of the written language to existing facts and there contained in the deed indications that the parties Intended to effect a mortgage by conditional sale. Oral evidence was therefore admitted only to the extent of the surrounding circumstances- as was required to show in what manner the language of the document was related to existing facts.
7. In AIR 1924 PC 326 (B), the question again arose as to the reception of oral evidence to show that two documents, a sale and an agreement to repurchase, brought about on the same date amounted to a mortgage. The dictum laid down in 32 All 149 (PC) (A) was followed and applied to the case and Lord Blanesburgh, after examining the surrounding circumstances of which oral evidence was admitted as regards the value of the villages that were sold for much more than the amount of the consideration mentioned in the sale-deed and other evidence, observed at page 228:
"Thus informed of the circumstances surrounding the execution of X and U, their Lordships are now in a position to examine these documents so as to ascertain from their provisions and necessary implications the real nature of the transaction to which they give effect."
and further observed at page 229:
"Their Lordships do not conceal from themselves the fact that the transaction as phrased in these documents is ostensibly a sale, with a right of repurchase in the vendor. This appearance, indeed, is laboriously maintained. The words of conveyance needlessly iterate the descriptlon of an absolute interest, and the rights of repurchase bear the appearance of rights in relation to the exercise of which time is of the essence.
But a closer examination of the document discloses their real character."
Oral evidence is inadmissible to ascertain the intention of the parties contrary to the terms of the agreement. But oral evidence of the circumstances under which the document came to be executed would be admissible to ascertain the real import or the nature of the transaction. If the contention of the learned counsel, viz., that the oral evidence of the surrounding circumstances must be with a view to explain any recitals in the document, but not to contradict them, then under no circumstances could it be established that the real import of the documents is not what it appears 'ex facie'. The view of Macleod C. J. that when the terms of the document are unambiguous, no evidence even of the surrounding circumstances could be admissible, since such evidence would be admissible only to 'explain the manner of the document, would be nullifying the very object with which proviso (8) to Section 92 was enacted. What was prohibited "under Section 92. Evidence Act is that evidence of any oral agreement or statement shall not be admitted so as to contradict, vary, add to or subtract from its terms. Proviso (6) is one of the exceptions to this prohibition, under which it would be permissible for one to establish by oral evidence that the language of the document is not what it purports to be, as it is unrelated to and contrary to existing facts of which oral evidence can be given under the proviso. The, evidence of the surrounding circumstances under which the document was brought about may be given to show that the transaction is not what it appears to be and that the apparent tenor is not its real character.
The evidence of the surrounding circumstances may be by way of showing that the sum of Rs. 600 mentioned in Ex. B. 3 is so low as not to constitute the sale price to support an absolute transfer, as in this case the decree was for Rs. 2000 and also charged on immoveable properties and there was the certainty of the entire amount being realised. Again, oral evidence as to execution proceedings having been conducted in the name of the plaintiffs' firm would show that the second defendant had an interest in the decree, while otherwise his taking part in the execution proceedings is really unexplainable.
The evidence of existing facts is therefore admissible in order to show in what manner the language of the document is related to such facts and if such evidence, discloses that the language of the document cannot be given the meaning and the effect which it requires, then the real nature of the document would become established. It would not be permissible to have oral evidence of the parties or the attesting witnesses or the scribe to show that, at the time of the execution of the document, the parties agreed as between themselves that a document will not be a transfer, deed as it purports to be, but only a document of security. But the same result, namely, to show that the transfer was only given as security and did not constitute an absolute transfer, may be shown by evidence both from the document and 'de hors' the document by other facts. That appears, in my view, to be the scope and effect of proviso (6) to Section 92, and it is not possible, therefore, from the terms of the proviso and more especially in view of the decisions of the Privy Council referred to, to accept the view taken by the learned Chief Justice in AIR 1925 Bom 601 (D).
8. In the result, the appeal fails and is dismissed with costs. Leave granted.