Karnataka High Court
Sri K N Ramakrishne Gowda vs Sri Javaregowda S/O Rajegowda on 17 August, 2012
Author: C.R.Kumaraswamy
Bench: C.R. Kumaraswamy
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 17TH DAY OF AUGUST, 2012
BEFORE
THE HON'BLE MR. JUSTICE C.R. KUMARASWAMY
REGULAR SECOND APPEAL No.456/2006
BETWEEN:
SRI. K. N. RAMAKRISHNE GOWDA
S/O MANJAPPA @ PUTTASWAMY GOWDA
AGED ABOUT 55 YEARS
R/O KIKKERI, KIKKERI HOBLI
KRISHNARAJAPET TALUK
MANDYA DISTRICT 571 401 ...APPELLANT
(BY SRI. K.V.NARASIMHAN, ADVOCATE)
AND:
SRI. JAVAREGOWDA
S/O RAJEGOWDA
AGED ABOUT 60 YEARS
R/O LAXMIPURA VILLAGE
KIKKERI HOBLI
KRISHNARAJAPET TALUK
MANDYA DISTRICT 571 401 ...RESPONDENT
(BY SRI. B. S. SRIKANTH AND SRI. PURUSHOTHAMA,
ADVOCATES)
THIS REGULAR SECOND APPEAL IS FILED U/S
100 OF CPC AGAINST THE JUDGEMENT AND DECREE
DATED 24.10.2005 PASSED IN R.A.NO.108/2001 ON
THE FILE OF THE ADDL. CIVIL JUDGE (SR.DN.),
SRIRANGAPATNA, ALLOWING THE APPEAL AND
2
SETTING ASIDE THE JUDGMENT AND DECREE
DATED 15.10.2001 PASSED IN O.S.NO.226/1995 ON
THE FILE OF THE CIVIL JUDGE (JR. DN.)
KRISHNARAJAPET.
THIS RSA IS COMING ON FOR PART HEARD IN
HEARING MATTERS, THIS DAY, THE COURT
DELIVERED THE FOLLOWING:
JUDGMENT
This Regular Second Appeal is filed under Section 100 of CPC against the judgment and decree dated 24.10.2005 passed in R.A.No.108/2001 on the file of the Addl. Civil Judge (Sr.Dn.), Srirangapatna, allowing the appeal and setting aside the judgment and decree dated 15.10.2001 passed in O.S.No.226/1995 on the file of the Civil Judge (Jr.Dn.), Krishnarajapet.
2. The plaintiff is a contractor. He was in need of money in the first week of January, 1978. Therefore, he approached the defendant for a loan of Rs.1,500/-. The defendant insisted the plaintiff to execute the registered mortgage by way of a Conditional Sale deed. There was no other alternative. The plaintiff executed a mortgage by way of a Conditional Sale Deed, mortgaging the suit 3 schedule property i.e., garden land comprised of Sy.No.50/17 to the extent of 20 acres situated at Kikkeri Hobli, K.R.Pet Taluk, Mandya District.
3. One of the covenant of the said mortgage by Conditional Sale deed is to redeem the said mortgage property after two years from the date of mortgage. In pursuance of the said mortgage deed, the plaintiff put the defendant in possession of the suit schedule property. On the date of the said mortgage deed, the suit schedule property was worth more than Rs.25,000/-. There were two mango trees, aged about 100 years, one tamarind tree, aged about 60 years, one coconut trees, aged about 70 years and banyan tree etc., were grown in the plaint schedule property. The value of the trees is more than Rs.7,000/-.
4. Inspite of demands and request to receive the mortgage amount and to delivery the suit schedule property along with due discharge shara, the defendant on one pretext or the other delayed the same. Finally, 4 the plaintiff also issued a legal notice dated 05.08.1995. This legal notice was served on the defendant. The defendant did not reply the said legal notice nor deliver the possession of the suit schedule property after receiving the mortgage amount. The plaintiff is entitled to redeem the suit schedule property from the defendant as per law. The defendant is liable to deliver the possession of the suit schedule property in favour of the plaintiff after receiving the mortgage amount. Wherefore, the plaintiff's prays for judgment and decree for redemption of the suit schedule property with a direction to the defendant to take mortgage amount of Rs.1,500/- and to hand over the possession of the suit schedule land.
5. The defendant has filed the written statement before the Trial Court below as under:-
The plaintiff sold the suit schedule property to the defendant on 05.01.1978 for a sum of Rs.1,500/-. The document dated 05.01.1978 was a sale deed with a 5 right to re-purchase and it is not a mortgage by conditional sale. There is no relationship of debtor and creditor between the plaintiff and defendant. In pursuance of the sale deed, the khata was changed into the name of defendant and the defendant is in possession and enjoyment of the suit schedule property as owner thereof. The property was worth of Rs.1,500/- when the property was sold to the defendant. The plaintiff did not demand the defendant to recover the property within two years from the date of sale as recited in the sale deed. The claim of the plaintiff is barred by time. The allegations made in the notice are false. The plaintiff has allowed the Revenue Department to change all the record in the name of defendant. The consideration amount paid under the sale deed is fair and correct. Admittedly, the date for re-purchase was of short period and it is indicative of the fact that there was no relationship of the creditor and debtor between the defendant and plaintiff. The defendant did not reply 6 to the notice since the claim of the plaintiff was barred by time.
6. The Trial Court raised the following issues that have arisen from the pleadings:
ISSUES
1. Whether plaintiff proves that he has executed a mortgage deed by conditional sale on 05.01.1978 in favour of the defendant by borrowing Rs.1,500/- from him, with a right to redeem the same after two years from the date of mortgage?
2. Whether defendant proves that the document dated 05.01.1978 is a sale deed in toto under which the plaintiff has sold the suit land, with a right to repurchase?
3. Whether plaintiff further proves that there was relationship of debtor and creditors, between him and the defendant?7
4. Whether defendant proves that the claim of the plaintiff's is barred by time?
5. What order or decree the parties are entitled?
The Trial Court has answered the above mentioned issues as under:-
Issue No.1 : In the affirmative
Issue No.2 : In the negative
Issue No.3 : In the affirmative
Issue No.4 : In the negative
Issue No.5 : As per final order
7. The Trial Court at para 9 of the judgment has mentioned that on perusal of the deed reveals that the same has been described as conditional sale deed with a right to repurchase. The plaintiff has contended that the sale recital in the deed is only an ostensible sale and in reality it is a mortgage by conditional sale deed. The defendant has not adduced any evidence to explain that the deed is an absolute sale deed. When the defendant fails to prove that the deed was absolute sale deed with agreement to repurchase, the Trial Court was constrained to answer issue No.1 in the affirmative and 8 the issue No.2 in the negative. The Trial Court has also held that there was no relationship of creditor and debtor between the parties and that the transfer under the deed was made to secure the loan amount. There was also no relationship between the plaintiff and the defendant as debtor and creditor in view of the earlier transactions. The Trial Court has also observed at para 23 that it is now decided that deed dated 05.01.1978 which is subject matter of the suit as mortgage deed by conditional sale. It being a mortgage is governed by Article 61(a) and as such period of limitation is 30 years for redemption from the date of the deed i.e. Ex.P.1(a)/Ex.D.1. The deed is dated 05.01.1978 and the suit was filed on 21.09.1995. Therefore, the suit has been filed within the time limit. The Trial Court decreed the suit of the plaintiff as prayed.
8. Feeling aggrieved by the same, the defendant preferred the Regular Appeal in R.A.No.108/2001 before 9 the Court of Additional Civil Judge (Sr.Dn.), Srirangapatna.
9. The learned Single Judge (Sr.Dn.) in the course of his judgment raised the following points for his consideration:
1. Whether the defendant proves that the Trial Court has erred in holding that the recitals in the disputed document are in the nature of conditional sale and thereby decreed the suit as urged in the appeal?
2. Whether the defendant proves that the Trial Court has erred in holding that the suit of the plaintiff is not barred by law of limitation as urged in the appeal?
3. Whether he proves that the judgment and decree of the trial court is perverse and erroneous and if so, it calls interference of this court as urged in this appeal?10
4. What order or decree?
The Lower Appellate Court has answered the above mentioned points as under:-
Point No.1 : In the affirmative
Point No.2 : In the affirmative
Point No.3 : In the affirmative
Point No.4 : As per final order
10. The Lower Appellate Court has observed that from the plain reading of the terms and conditions embodied in the disputed document, it is clear that the plaintiff has to pay the sale amount to the defendant within two years and repurchase the schedule property from him by a different sale deed and it is further embodied in the disputed document that in case the plaintiff failed to pay the sale amount within the time and got executed the registered sale deed then the defendant becomes the absolute owner of the schedule property that he can enjoy the schedule 11 property as absolute owner thereof. He and his legal heirs have no right, title or interest in respect of the schedule property. Infact, it is clear that it is a out and out sale with a clause to repurchase the schedule property from the defendant by a separate sale deed. Infact the terms and conditions embodied in the disputed document does not disclose that it is a conditional sale as alleged by the plaintiff. In the instant case, the schedule property is handed over to the defendant and the defendant is in possession and enjoyment of the schedule property. Further, all revenue records are standing in the name of the defendant. In fact when the plaintiff has delivered the possession of the schedule property to the defendant it is not a conditional sale and it is out and out sale. Infact whenever there is a clause to repurchase the schedule property from the defendant within a fixed time that is regarded as an essence of contract and the question of limitation does not arise. If such right is not exercised within a fixed time under the contract there 12 will be discharge of the contract and the seller is not able to enforce the right to repurchase. As a matter of fact, the defendant has become the absolute owner and in possession of the schedule property.
11. The Lower Appellate Court has mentioned at para 11 of the judgment that it has perused the judgment and decree of the Trial Court carefully. The Trial Court has wrongly construed the case of the defendant. It has discussed unwanted things in the judgment. Considering the said aspect of the matter, the Trial Court has concluded that it is a conditional sale and not a out and out sale. As a matter of fact as it is a conditional sale, the Trial Court has held that the suit of the plaintiff is well in time. The Trial Court have wrongly construed the case in hand as a conditional sale and also held that the suit of the plaintiff is well in time. Infact as it is a out and out sale, the suit of the plaintiff is barred by law of limitation under Section 58(c) of the Transfer of Property Act that the disputed 13 document whether it is a conditional sale or a sale has to be construed on the basis of the terms and conditions and intention of the parties. Therefore, the Lower Appellate Court has allowed the appeal and the judgment and decree of the Trial Court under appeal is set-aside.
12. Feeling aggrieved by the same, the respondent herein i.e. the plaintiff in R.A.No.108/2001 has preferred this Regular Second Appeal.
13. I have heard the learned counsel for the appellant as well as the learned counsel for the respondent. I have perused the Trial Court records as well as the Lower Appellate Court records.
14. The learned counsel for the appellant submits as under:-
The document - Ex.P.1 is a mortgage by conditional sale and Ex.P.1 specifies the requirement of the Section 58(c) of the Transfer of Property Act. There 14 was earlier transaction between the plaintiff and the defendant as a creditor and debtor. It clearly indicates that this document is also a mortgage deed and the relationship between the plaintiff and the defendant is one of the debtor and creditor. Though the value of the property was Rs.25,000/- as on the date of the Ex.P.1 - deed but mortgage money is only Rs.1,500/-. In support of his contentions, the learned counsel for the appellant relies on the decision in the case of B. JAYASHANKARAPPA AND OTHERS VS. D.S.GULWADI reported in ILR 2000 KAR 2173. The attention of this Court is brought to the paras 12, 24, 25, 27, 28 and 29 of the said judgment.
"12. I have applied to my mind to the contentions of the learned counsel for the parties.
It will be profitable at this stage to quote in extensor, as per English Translation furnished by the appellants and agreed by the respondent of the deed i.e. deed dated 25.07.1951, which is subject matter of 15 construction and determination as to whether the said deed amounts to a mortgage by conditional sale or it amount to an out and out sale with an agreement to repurchase. Ex.P.3 dated 25.07.1951 reads as under;-
"On 25th day of July, 1951 Sri B.Siddappan, S/o. Sri Bendikatti Shiddappa, Resident of Shimoga Town, has given in writing in favour of Sri D.S.Gulwadi, Photo Artist, Resident of Shimoga, to the effect that as I had required money for running the cinema business, I had taken Rs.1,000/- loan on 25.6.1951, which deed was registered in Shimoga Sub-Registrar's Office in Book No.1, Volume No.444, page 29 upto 31, No.549. For the discharge of the said loan of Rs.1,000/- and as I required further amount towards future business, the site which was given as security, I having agreed to sell the same for Rs.2,000/-, in lieu of the same, I this day at the time of registration of this deed, in the presence of the Sub-Registrar, as the other Rs.1,000/- is due under the earlier deed is to be adjusted and thereby 16 mortgage being discharged and the same being acknowledged, it would be treated as I have received the entire Rs.2,000/- being the sale consideration. I nor my heirs assigns or representatives would have any right over the property sold. I have this day given the possession of the property to you and you may henceforth enjoy the said property as per your will and wish. However, if I returned the amount of Rs.2,000/- within six months, you should reconvey the property to me at my cost. In the event I fail to keep up my promise of six months, this deed itself should be treated as absolute sale deed. The description of the property sold and the boundaries shall be as described in the aforesaid deed and the details contained. This deed has been executed happily out of my free will."
24. A perusal of the document Ex.P.3 does not per se indicate nor does contain any expression to the effect that by Ex.P.3 B.Siddappa has stated or written that the property in the suit is being herewith transferred with full ownership rights or that 17 the transferor was transferring full ownership rights in the property in favour of the transferee. What has been stated is that earlier B.Siddappa had taken a loan of Rs.1,000/- on 25.6.1951 as he required money to run cinema business and he executed a mortgage deed which was registered with the Sub-Registrar. It has further been stated that for discharge of said loan he required money and as he required further money to run the business, the site which was given in security the transferor, having agreed to sell on the date of registration of Ex.P.3 had received a sum of Rs.1,000/- and that the other sum of Rs.1,000/- was going to be adjusted towards the old mortgage deed and thus he received entire sum of Rs.2,000/- as sale consideration. In the deed it has been stated that possession of the property was given to the transferee and the transferee was free to make use and enjoy the said property in his own way, as he may wish. The deed does not per se state in clear and express terms that the owner of the property B.Siddappa after having agreed to sell, is selling or is 18 transferring the full ownership rights in favour of the transferee for consideration of Rs.2,000/-. No doubt, there is clear expression that the possession was being delivered of the property and the transferee hence forth may enjoy the property as per his wish and will." So the deed exhibits transfer of possession of the property for a sum of Rs.2,000/- out of which Rs.1,000/- was adjusted towards earlier loan of Rs.1,000/-. The deed further provides that if the sum of Rs.2,000/- was returned within six months, the transferee would reconvey the property to the transferor i.e., to B.Siddappa and in the event of failure of Siddappa to keep up the promise and to pay the sum of Rs.2,000/- within six months, the deed shall be treated and be considered to be absolute sale-deed. Having agreed to sell does not mean that by this deed, the owner has done an act to transfer the ownership rights in the property in favour of the transferee. It means actual sale has to take place subsequently by some act of the parties i.e., by transferring of ownership rights by the owner in favour of the transferee. Possession of the property no 19 doubt has been given with a right to enjoy the property and its user in the manner and in the way the transferee desires. When ownership rights were not transferred and only possession appears to have been transferred, the deed even appears to have been transferred, the deed even if may be said to be an ostensible sale, does not pass the yard-stick and test of sale, because sale is a transfer of ownership in the property. The fact is clear that the plaintiff's father has taken a sum of Rs.2,000/- from the defendant - purchaser namely D.S.Gulwadi. The possession of the property, it appears, had been given to the transferee to secure payment of Rs.2,000.00 which the plaintiff had agreed to re-pay within six months and that is why he had agreed that if the present transferor returned the sum of Rs.2,000/- within six months, the property will be given back and reconveyed by the transferee to the transferor. The last clause in the deed further indicates the intention of the parties that for the present the deed is not to operate as the sale-deed because it is very clearly indicated therein that it will start operating as absolute 20 sale-deed and be treated as absolute sale- deed only in case of the present transferor i.e., Siddappa's failing to pay that amount of Rs.2,000.00 within agreed or stipulated six months period.
25. As mentioned earlier, in the case of mortgage there is transfer of some interest and not entire or transfer of an interest only for the purpose of securing payment of money advanced as loan or for the purpose of securing performance of other obligation and in case of sale it is the transfer of ownership in toto which includes every right which the owner possess in the property. So, firstly as mentioned earlier, the tenor of the deed and the terms thereof in absence of any expression indicating that the owner of the property was transferring ownership rights in the property, the transaction cannot be said to be a sale with an agreement to repurchase. Further there is no doubt that prior to execution of this sale-deed, the transferor was indebted to the transferee. He had to take more money and he was in need of more money. The transferee no doubt advanced the money, gave Rs.2,000.00 and that sum is 21 mentioned as sale consideration. But sale means sale or transfer of ownership for consideration. There is nothing in the deed to say that the vendor by this deed Ex.P.3 has transferred ownership rights in favour of the transferee. There is no doubt that possession of the property has been delivered, but there is nothing in the deed, as I mentioned earlier, to say that after having agreed to sell, the transferor was by this deed transferring ownership rights in the property. So for the above mentioned reasons, even if the deed mentions sale consideration or the like, in my opinion, there is no real sale even if there may be an ostensible one. Further the term of the deed, as mentioned earlier, indicates the intention of the parties that deed by itself is not to be taken as immediate sale nor deed to be taken as sale-deed, instead it provides that transaction may be treated as absolute sale and deed as absolute sale-deed only if the transferor fails to pay back the amount of Rs.2,000/-. The later condition further reveals that the intention of the party was to secure the payment of money at the earliest and within six months from the transferor to 22 the transferee. There did exist a relationship of debtor and creditor between the plaintiffs' father and defendant's father namely the transferee, as transferor under the deed was indebted to the tune of Rs.1,000.00. He again wanted to take loan of Rs.2,000.00. the circumstance which has come in evidence that the transferor has not been left with any other property except the property in suit, it could not be assumed that the transferor would have intended to sell this remaining property. The law as then operating in 1951 i.e., since after 1929, whereunder, to minimise the litigations and to resolve conflicting views as to a transaction to be taken as sale and agreement of sale or a transaction should be taken as a mortgage with conditional sale, the Legislature very clearly provided that a transaction of the nature which may be ostensibly a sale with a condition of the nature specified in Section 58(c), if the two transactions are contained in one document and not more than one document, then only the deeming clause may apply and that transaction may be deemed to be a mortgage. But, unless such a 23 transaction satisfying other requirements of Section 58 is contained in one document, the transaction is not to be deemed to be a mortgage. In other words, if a transaction of the nature as mentioned in Section 58(c) i.e., ostensible sale with either of the conditions enumerated in Section 58(c) is contained in two or more documents, then it is not to be deemed to be and considered as a mortgage. In the case of DEBI SINGH & OTHERS vs JAGDISH SARAN SINGH AND OTHERS such a question did arise before the Full Bench of Allahabad High court. Hon'ble Mr. Justice Chandiramani and Hon'ble Mr. Justice Agarwala in that case referred to the report of a special committee to suggest that in order to avoid defects indicated above, they thought it is desirable to lay down a statutory test by which intention is to be covered. His Lordship Hon'ble Chandiramani J observed in paragraphs 14 to 16 as under:-
"This is what the Special committee stated:
'Section 58(c) contains the definition of a mortgage by conditional sale. 'It is with the greatest difficulty in many cases 24 that such mortgages can be distinguished from sales with a condition for repurchase. As clause (c) of Section 58 indicates, the real point of difference between the two kinds of transactions is that, in the case of a mortgage by conditional sale, the sale is only ostensible, whereas in the case of an out and out sale, it is real. The ostensible or real nature of transaction can, however, be only determined by finding out the intention of the parties.' In order to escape the liability of accounting for the profits of the property and other liabilities imposed on the mortgagee, and also to escape the provisions of some of the local laws enacted for the benefit of agriculturists, creditor resort to the mode of having a mortgage which is in form an out and out sale. Since the decision of the Privy Council in BALKISHEN DAS vs LEGGE, 22 All 149 (PC), it has been a well-settled rule that it is not open to Courts to allow any extraneous evidence in order to find out the intention of the parties. Such intention must, therefore, 25 be gathered from the document itself which purports to effect the transaction. These transactions have given rise to a great deal of litigation and Courts are compelled to enumerate and consider all the various criteria which have been laid down for the purpose of determining whether a transaction is a mortgage or an out and out sale. 'In order to avoid the difficulties indicated above, we think it desirable to lay down a statutory test by which the intention' is to be gathered.
We, therefore, propose that no transaction should be deemed to be a mortgage by conditional sale unless the conditions is embodied in the document which operates or purports to effect the sale.' (15) It will be seen that the intention is to avoid the application of different criteria and to lay down one clear statutory test to distinguish between a sale and a mortgage. It must be emphasized that the question of distinction arises only when one transaction is capable of being treated 26 either as a sale or as a mortgage, and if the test eliminates a sale, it necessarily leaves behind a mortgage and vice versa.
Thus in my opinion the test shows not only what is not a mortgage by conditional sale but also shows what is such a mortgage. The proviso therefore in my opinion lays down the positive test for what is a mortgage by conditional sale. The cases already referred to which say that only a negative test has been laid down by the proviso 'KUPPA KRISHNA HEGDE vs MHASTI GOLI NAIK (AIR 1931 Bombay 371), BISHAN LAL vs BANWARI LAL (AIR 1937 All 724) SHAMBHU SINGH vs JAGDISH BAKSH SINGH (AIR 1941 Oudh 582) etc, have if I may say so with all respect, clearly lost sight of the positive aspect of effect of the proviso.
(16) For the reasons given above I agree with my learned brother Agarwala J, that after the amendment of Section 58(c) by the addition of the proviso, if a sale and one of the conditions mentioned in Section 58(c) are embodied in one 27 document, the transaction is necessarily a mortgage by conditional sale.
Accordingly I answer the question in the affirmative.
Justice Chandiramani concluded by agreeing with Justice Agarwala that by addition of the proviso, if a sale and one of the conditions mentioned in Section 58(c) are embodied in one document, the transaction is to be necessarily taken to be a mortgage by conditional sale.
27. Even if that may be taken as a test, not as a sole test or a conclusive test, but as a test, when the law provided that where two transactions are contained in two separate documents, i.e., to sell and agreement to reconvey or repurchase etc., it will not be deemed to be a mortgage. If the parties intended or the transferor and the transferee intended that there should be an absolute sale, why they did not adopt the mode of executing two separate deed when it was open to them and when they did not adopt that mode, it is to be taken that they did not intended the execution of the deed to be as of absolute sale as laid down in the case of 28 Pandit Chunchun Jha, where their Lordships have observed in clear terms, as quoted above as well, namely:-
"The Legislature has made a clear cut classification and excluded transactions embodied in more than one document from the category of mortgages, therefore it is reasonable to suppose that persons who, after the amendment, choose not to use two documents, do not intend the transaction to be a sale, unless they displace that presumption by clear and express words; and if the conditions of Section 58(c) are fulfilled, then we are of opinion that the deed should be construed as a mortgage."
28. In view of this clear cut proposition of law and in absence of any explanation from the defendants/respondents as to why they did not choose to adopt or use the method of using two documents, the document has to be construed as a deed of mortgage with conditional sale. In view of the above circumstances and in view of absence of any expression, in the deed, of transfer of ownership and title in the property in present 29 by delivery of possession of the property in lieu of a sum of Rs.2,000.00 to a person by one who was a debtor, from earlier, the circumstances indicate clearly that the main purpose was to secure the repayment of the amount of Rs.2,000.00, with a note of caution that if the person fails to pay the amount within the stipulated period of six months, the deed would become operative as absolute sale-deed therefrom.
29. In this view of the matter, in my opinion, the deed Ex.P.3 dated 25.07.1951 cannot be said to be a sale deed or absolute sale deed with agreement to repurchase. But it is a deed of mortgage by conditional sale. The evidence of subsequent conduct of the parties is not admissible in the matter of considering the question whether the deed is a deed of sale or it is a deed of mortgage by conditional sale. The decision in the case of PADMASHREE S.N. SWAMY vs SMT.
GOWRAMMA which was relied and referred by the learned Counsel for the respondents is distinguishable and the deed involved in that case firstly is described as conditional sale- 30 deed. Thereafter in the deed it is mentioned that, "We have sold the house described in the schedule for a sum of Rs.16,000-00." Then the deed further mentions in that case, "Out of the sale price, you shall pay of the mortgage amount of Rs.8,000.00 to Smt. Leelavathi and got a necessary endorsement on the mortgage document and remain in possession of the documents evidence of title and you are also conferred with the mortgagees right of subrogation."
The deed in above noted case further mentions that from the date the entire sale price has been paid, the transferee will enjoy that property from generation after generation and the property was free from any encumbrance or alienation. If any encumbrance is found, then the vendor will, at his own cost, discharge the encumbrance, failing which the vendor in that case agree that the loss that may be caused to the vendee shall be recovered from other 31 moveable and immoveable properties and personally from the vendor."
15. The learned counsel for the respondent submits as under:-
The learned counsel for the respondent supports the judgment of the first Appellate court. He further submits that the Ex.D.1 is an absolute sale deed. The consideration amount was Rs.1,500/-. Even the property was delivered to the purchaser and the purchaser has also got mutated the revenue entries after he purchased the same from the seller. The suit filed before the Trial Court is barred by limitation and there is no relationship between the creditor and debtor as per the Ex.P.1 - deed, even there is no evidence adduced by the plaintiff to show that the property was valued at Rs.25,000/- on the date of Ex.P.1. He further submits that the trees were not yielding and therefore, he was not able to enjoy the advantages of the property belonging to the defendant. The learned counsel for the respondent relies on the following decisions:- 32
- TAMBOLI RAMANLAL MOTILAL (DEAD) BY L.Rs., vs. GHANCHI CHIMANLAL KESHAVLAL (DEAD) BY L.Rs., AND ANOTHER reported in AIR 1992 SC 1236:
"Transfer of property Act (1882), Ss.58, 41 - Mortgage deed - Interpretation - Clauses of Deed consistent with express intention of making the transaction a conditional sale with option to repurchase - Held, the document was not a mortgage by conditional sale."
- C.CHERIATHAN vs. P. NARAYANAN EMBRANTHIRI reported in AIR 2009 SC 1502:
"(A) Transfer of Property Act (4 of 1882) S.8 - Construction of agreement - Heading of agreement - Not conclusive of its character -
Intention of parties must be gathered from document by reading document in its entirety."
- NANJAMMA vs. R.T.SUBBEGOWDA AND OTHERS reported in ILR 2006 KAR 493:
"CIVIL LAW - REDEMPION SUIT -
Contention taken that the suit schedule 33 properties are mortgaged properties - plaintiff not exercising her right to get back the properties before the expiry of 10 years - Trial Court dismissing the suit as time barred - HELD-Even assuming that the suit schedule properties were mortgaged, plaintiff should have redeemed the mortgage within the period provided in law. She has not chosen to do so. Therefore, plaintiff lost her right to get back the properties. When she has no right over the suit schedule properties, she is not entitled to any relief. Therefore, the Trial court was justified in dismissing the suit of the plaintiff. It is pertinent to note that even after she came to know that first defendant sold the suit schedule properties in favour of defendant Nos. 2 and 3, the plaintiff has not sought for setting aside those sale deeds. She even failed to plead that those sale deeds are not binding on her. As long as the said sale deeds in favour of defendant Nos.2 and 3 are in force and not declared either null and void or set aside, the right, title and interest acquired by defendant Nos.2 and 3 over the suit schedule properties cannot be taken 34 away. Viewed from this point also, the plaintiff is not entitled to any relief."
- M/S.LATIF ESTATE LINE INDIA LTD. v. MRS.HADEEJA AMMAL & ORS. reported in AIR 2011 MADRAS 66:
"(B) Transfer of Property Act (4 of 1882), S.54 - 'Sale' - Transfer of property by way of sale - Once vendor is divested himself of his ownership of property - He retains no control or right over said property.
(C) Transfer of Property Act (4 of 1882), S.54 - Registration Act (16 of 1908), Ss.17, 32
- Specific Relief Act (47 of 1963), S.31 - 'Sale'
- Transfer by way of sale - Made absolutely by transfer of property from vendor to purchaser - Such transfer cannot be annulled as cancelled unilaterally by vendor by executing deed of cancellation - Deed of cancellation cannot be accepted for registration - Cancellation of sale deed can be ordered only under S.31 of Specific Relief Act."
35
- BHAGWAN SAHAI v. BHAGWAN DIN AND OTHERS reported in ILR 1889 VOL.XIL - ALLAHABAD SERIES:
"A document purporting to be one of sale, though it is accompanied by a contract reserving to the vendor a right to repurchase the property sold, on repaying the purchase- money within a certain time, is not on that account to be construed as if it were a mortgage."
16. This Court on 28.09.2010 while admitting this Regular Second Appeal has framed the following substantial question of law:-
"Whether the Appellate Court was
justified in interpreting the document
conditional sale as a sale deed?"
17. The first requirement that, to make a document a mortgage by conditional sale, there should be an ostensible sale of the property by the mortgagor, was wanting. If the conditions of Section 58(c) are fulfilled then the deed should be construed as a mortgage. The attendant circumstances can be looked 36 into only to gather the intention. While determining if a document is a mortgage by conditional sale or sale with condition of repurchase deed intention of parties, surrounding circumstances and recitals in the deed must be taken into account. Where the condition of repurchase was contained in the same document, the first and foremost consideration was fulfilled. The transferee was put in possession of the property immediately on the execution of document and was to enjoy the property in lieu of interest. The transaction was held to be mortgage by conditional sale. The purchaser had no right to mutate property in his name but in case of refusal for retransfer land the vendor was entitled to get sale deed executed through Court.
18. The very definition of a mortgage by conditional sale postulates an element of sale. The Court must pierce through the form and reach the real intention of the parties. Where having regard to the extent of land sold the consideration was far below the 37 market-value which was usually the case in mortgagees. Where transferor took loan from the transferee for running his business and executed a mortgage deed, later on further sum was taken with the delivery of possession stating that if transferor failed to repay the amount within stipulated period, the deed would be treated as absolute sale deed, it was held to be a mortgage by conditional sale rather than sale deed. In a mortgage, the debt subsists and a right to redeem remains with the debtor but a sale does not evidence a lending and borrowing arrangement, no debt subsists and no right to redeem result by the debtor but only a personal right to repurchase. Each case has therefore, to be decided on its own facts. But the principle remains the same, and may serve as useful, though by no means an unfailing guide to come to correct conclusion. The right of redemption is an essential and inseparable attribute of every mortgage. For ascertaining the intention of the parties, the Court should look more to the substance than to the form of the transaction. The 38 character of the transaction has to be fixed according to the intention of the parties at the time when they entered into it. Where the evidence and the circumstances are equally balanced and do not clearly indicate whether the transaction is a sale or only a mortgage, the presence of slight evidence will suffice to persuade the Court to treat it as a mortgage. The reason is, that, in doubtful cases, Courts lean in favour of a mortgage, as it is in consonance with equitable principles that harshness of forfeiture should be avoided and the grantor's right to redeem should not be taken away. The gross inadequacy of the purchase-money:
The price fixed far below the real value of the property is a circumstance to show that a transaction is a mortgage and not a sale, though in form a sale. The existence of indebtedness between the parties, at the time of the transaction, prima facie, indicates the transaction to be a mortgage rather than a conditional sale. Financial embarrassment of the transferor at the time of the execution of the deed is sometimes considered as a 39 circumstance showing that the transaction was intended as a mortgage.
19. In this background, I intend to examine Ex.P.1(a) - conditional sale deed. The consideration amount was Rs.1,500/-. On careful perusal of the evidence, it is clear that the value of the property is less than the market value of the property. The possession of the property was delivered to the purchaser on the date of the execution of the deed. It is also indicated in the deed that after return of Rs.1,500/-, the purchaser will re-convey the suit schedule property after execution of the necessary deed. In case, if the seller fails to return the mortgage money, the sale will become absolute. Apparently, the deed reveals that it is sale. There is an inadequate consideration amount. The plaintiff is a contractor. There was a paucity of funds for carrying out on the business of doing the contract work. Therefore, he has borrowed a sum of Rs.1,500/- and executed Ex.P.1(a) - conditional sale deed. On perusal 40 of Ex.P.1(a), the consideration amount is only Rs.1,500/- whereas there is a positive evidence to the effect that the mortgage property fetches about Rs.25,000/-. There is also a clause in the sale deed to take possession of the mortgage property. In case, there is a default in payment of mortgage money, the plaintiff has right to redeem the property after payment of Rs.1,500/- within two years.
20. Ex.P.2 is the legal notice issued to Javaregowda- the defendant by K.N.Ramakrishnegowda
- the plaintiff. In the legal notice, it is mentioned that the suit schedule property is ancestral property. It is a garden land, wherein two mango trees, aged about 100 years, one tamarind tree, aged about 60 years, one coconut tree, aged about 70 years, one banyan tree are grown. It also indicated in the legal notice that the plaintiff was a contractor, was hard pressed for money during first week of January, 1978. Therefore, he approached the defendant for a loan of Rs.1,500/-. At 41 that time, the Debt Relief Act was in force. So, the defendant wanted the plaintiff to execute a Registered Mortgage by conditional sale deed and assured that he will reconvey the property after two years, when the plaintiff repay the amount of Rs.1,500/-. The stamp papers for the execution of the aforesaid deed was purchased by the plaintiff. The schedule land was worth more than Rs.25,000/- as on 05.01.1978 and the trees standing thereon worth more than Rs.7,000/-. It is also indicated at para 4 of Ex.P.2 that the defendant has realised more than the mortgage money and interest from the usufructs of the trees and crops raised on the schedule land. When the plaintiff asked the defendant to reconvey the land after redeeming the mortgage, but he has refused to do so, on the ground that the mortgage should have been redeemed within two years and he has no right after two years to redeem. The agreement indicated that he can get returns from the land and any use and advantages of the land for a period of two years. This legal notice was received by 42 the defendant and the defendant has affixed the signature on Ex.P.3 - acknowledgment. The defendant has not replied to this legal notice. P.W.1 - evidence is same as that of the averment made in the legal notice and in his cross-examination also nothing worthwhile has been elicited. P.W.2 is one of the witness for Ex.P.1, P.W.2 states in his evidence that schedule land is mortgaged for a sum of Rs.1,500/- and the period of mortgage is for two years. Nothing is elicited in his cross-examination to disbelieve his evidence. The defendant was examined as D.W.1. He has deposed that on 05.01.1978, the conditional sale deed was executed in his favour. He further states that within two years if the defendant is unable to pay Rs.1,500/- , it can be treated as an absolute sale deed. During his cross-examination, he states that till today Rs.1,500/- was not repaid to the defendant by the plaintiff. Though this witness was cross-examined, he has denied all the suggestion put to him. He admits his signature on the acknowledgment for having sent the legal notice. He 43 also states that in the schedule land crops like horsegram, raagi etc. were grown.
21. In the instant case, Ex.P.1 has executed for the mortgage money of Rs.1,500/- and the possession was delivered. There is a clause in the deed to reconvey the suit schedule property after repayment of Rs.1,500/-. There is also evidence to the effect that the value of the suit land was about Rs.25,000/- whereas the plaintiff was the Contractor, was hard pressed for money. Therefore, he has executed Ex.P.1(a) conditional sale deed wherein the mortgage money was a sum of Rs.1,500/- which is of a very less value than the market value as on the date of execution of the deed. One of the contention that was raised by the learned counsel for the respondent was that the suit was barred by time. But, under Article 61(a) to redeem and recover the possession of immovable property mortgaged is 30 years - when the right to redeem or to recover possession accrues.
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22. From this, it is clear that the suit filed by the plaintiff is well within the time. For the reasons stated above and also since the mortgage money of Rs.1,500/- which is very less value than the market value of the property as on the date of the deed - Ex.P.1(a), after carefully considering the nature of transaction, I opine that the document i.e. Ex.P.1 is mortgage by conditional sale deed and it is not an absolute sale deed. The Appellate court was unjustified in interpreting the document as a sale deed though it was not so. Accordingly, the substantial question of law is answered.
23. In view of the above discussion, I pass the following order:-
1. This Regular Second Appeal is allowed.
2. The judgment of the Lower Appellate Court in R.A.No.108/2001 dated 24.10.2005 is hereby set-
aside.
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3. The judgment and decree of the Trial Court is restored.
The parties to bear their own costs.
SD/-
JUDGE LB