Patna High Court
Satyadeo Sharma And Ors. vs Ramsarup Sharma And Ors. on 21 November, 1963
Equivalent citations: AIR1964PAT193, AIR 1964 PATNA 193
JUDGMENT Mahapatra, J.
1. The point involved in this appeal is very short though not simple. The nature of the transaction evidenced by a registered instrument of the 5th of January 1954, marked as Ext. A, is in dispute and the findings of the Courts below on that have been variant. The trial Court held that document to be a deed of sale with a condition of repurchase and the first appellate Court took the view that it was a mortgage by conditional sale. The result of this difference in opinion has been that the plaintiffs' suit was dismissed at the first instance but allowed on appeal. The defendants first party have brought this appeal to this Court as their resistance to the plaintiffs' suit for redemption of the mortgage failed.
2. The case of the plaintiffs was that the disputed land belonged to Chandrika Prasad Singh and others, defendants second party. Chandrika executed a deed of mortgage by conditional sale on the 5th of January 1954 in respect of the disputed land for Rs. 250/- in favour of the defendants first party in the name of defendant No. I,. Satyadeo Sharma. Defendants first party came' in possession thereafter as mortgagees. The mortgage money was payable within the month of Jeth 1364 Fasli by the defendants second party and thereupon the transaction evidenced by the mortgage bond was to come te an end and the property was to come back to the possession of the defendants second party.
On the 1st of July 1954 the defendants second party executed a deed of sale in respect of the same property in the name of plaintiff No. 1 for Rs. 575/- out, of which Rs. 2507- was left in deposit with him to redeem the mortgage. The plaintiffs having thus purchased the right of redemption tendered the mortgage money of Rs. 250/-several times in the month of Jeth 1364 but their requests to defendants first party to accept the mortgage money and to return the property to them was not heeded. The money was deposited under Section 83 of the Transfer of Property Act in the Court of the Munsif at Barh; but in answer to the notice defendant No. 1 appeared in that Court and contended that the deed of the 5th, January 1954 was for a sale of the disputed property and not a mortgage by conditional sale. Thereupon the present suit was filed on the 16th November 1957 for a decree for a redemption of the mortgage and for mesne profits for the period between the service of notice under Section 83 of the Transfer of Property Act and the date on which possession of the disputed land will be delivered to the plaintiff.
3. Defendants I and 2, who are son and father, respectively contested the suit although a formal written statement was also filed on behalf of the minor defendants through a pleader guardian. The main defence was that the defendants first party were absolute owners of the property in dispute, they having purchased from the defendants second party by a registered instrument of the 5th of January 1954. The condition of repurchase was agreed to as an act of grace and was available only to defendants second party and not their transferees. They also challenged the transfer by the defendants second party in favour of the plaintiffs as alleged to have taken place on the 1st of July 1954 saying that the transaction was without consideration, and that the vendors (defendants second party) had no title left in them to transfer. Their assertion was that the document marked as Ext. A was not a mortgage by conditional sale as contended by the plaintiffs but a complete deed of absolute sale only with a condition of repurchase within a particular time.
4. On these pleadings the parties went to trial and the first Court held against the plaintiffs and dismissed their suit. The Court of appeal took a different view of the document in question and on an analysis of the terms of the document, it held that the transaction between the defendants second party and the first party as evidenced by Ext. A on the 5th of January 1954 was not a sale with a condition of repurchase but was a mortgage by conditional sale. This finding is now under challenge.
5. That Ext A for the most part of it has the form of a sale deed is clear. Both sides agree that in paragraph 7 oi: that document there is a stipulation by which the transferors were entitled to pay back the consideration money to the transferee and get back the possession of the disputed property. The time by which such payment was to be made was also stated in that paragraph The effect of this condition contained in paragraph 7 is crucial. Learned Counsel for the appellants contended that other paragraphs preceding paragraph 7 clearly indicate an absolute transfer of the vended property. He referred to the passages where the executants stated that they "decided to sell a portion of the aforesaid kasht land"; "to execute a deed of sale in favour of the claimant." : "It is requisite that the, claimant should enter into and remain in possession and occupation of the vended property as raiyat kashtkar" : "Now, I, the executant and the aforesaid minors neither have nor shall have any kind of title to the vended property". I have said before that the form of the document for the most part of it is that of a sale. Neither the transferors nor the transferee have been described as mortgagors or mortgagee. The consideration money was stated to be "the fair and proper price of the aforesaid land according to the present market rate". These features would have been decisive but for what was slated in paragraph 7 which I should quote:
"Be it noted that at the request of me, the executant and on taking pity oh the consideration of me, the executant, the claimant agreed to the fact that if T, the executant repay the money in cash in one lump sum in the month of Jeth 1364 Fs, to the claimant, this deed will stand cancelled and the claimant's title to the vended property shall become extinct and this deed will stand cancelled and become inoperative and T, the executant shall enter into possession and occupation thereof. As stipulated in this deed, if I, the executant do not j pay the consideration money within one month i.e. from the 1st Jeth 1364 to 30th Jeth 1364 Fs to the claimant then on expiry of the 30th Jeth 1364 Fs. I this deed of absolute sale shall hold good and remain in force for ever. T. the executant or my heirs and representatives shall have no claim, objection and contention against the claimant and his heirs and representatives. In case the entire consideration money is not repaid within the 30th Jeth 1364 Fs. and the claimant shall have no necessity (for the claimant?) to get another document executed by me, the executant, rather this very deed of sale shall remain intact and in force and T, the executant shall have no title to the vended property."
One thing is clear that no further deed of transfer was in contemplation of the parties when the money was to be repaid to the transferees. The word "repaid" as mentioned in this paragraph is significant and indicates the continuity of the transaction till the time for repayment expires, as in the case of repayment of a loan, If the deed would have been for an absolute sale, that would have been a complete transaction and the other transaction on payment by the vendors would have been a separate and independent one which could be complete only on the execution of a deed of re-transfer 311 favour of the vendors. A condition of repurchase in a deed of absolute sale is only an agreement for the future transaction on certain conditions. On a plain reading of paragraph 7, there is no doubt in my mind that possession and occupation of the disputed land were to return to the vendors if they paid the sum of Rs. 250/- in the month of Jeth 1364 Fs. The last words of that paragraph "I, the executant shall have no title to the vended property" are very indicative. They meant that it was only after the expiry of the month of Jeth 1364 and on failure by the vendors to pay the money in that month the vendors shall have no title to the vended property. Till that time title was to remain with the vendor. A mortgage by conditional sale is transaction by which the transferee becomes entitled to the property as absolute owner if the transferor fails to pay the money within the stipulated period. For that, no other deed of transfer is necessary and the absolute ownership of the transferee does not date from the date of expiry of the stipulated period but from the date of execution of that mortgage bond. In other words, a transaction of mortgage assumed the character of sale by a legal fiction on account of a special condition incorporated in that document the transferor failing to get back the property as the repayment of the money given by the transferee. There can be and ordinarily it should be like that, a document which on the tacc of it will be a deed of mortgage and the condition of reversion of the property to the mortgagor on repayment of the consideration money to the mortgagee at or within a stipulated time may be inserted in that, but there can also be a document in form or appearance a deed of absolute sale with more or less such a condition. The difficulty in ascertaining the real nature of the transaction arises in the latter case, because that may have semblance of a sale with a condition of repurchase as well as a mortgage by conditional sale. A decisive difference between those two kinds of transactions is that in case of sale there is an absolute transference of ownership from the vendor, but in the other case the vendee's title will be absolute only in default of payment at a particular time by the vendor. Even where a condition of repurchase is included in a deed of sale, the vendee's title does not wait to be absolute till the expiry of the time fixed for repurchase. Since in a mortgage by conditional sale there is a postponement of acquisition of absolute title for some time, that acquisition can be prevented by the vendor paying back the money to the vendee. On such payment, the transaction in favour of the vendee becomes void; that is, whatever interest the transferee had in the property becomes inoperative. In case of a sale when the vendor performs his part of the condition by paying back the consideration money to the vendee, the transaction of sale in favour of the vendee does not become void, but only comes to an end. When a transaction is said to be void, it means that the transaction never existed in law and it affects from the beginning of that transaction. These two things are characteristics of a conditional mortgage (mortgage by conditional sale,) the postponement of absolute character of the legal title of the transferee till the expiry of a certain date and voidance of the entire transaction on repayment by the transferor. These two features are inconsistent with a sale and cannot, therefore find place in a deed of actual sale. That is why Clause (c) of Section 58 of the Transfer of Property Act has laid down those two features as appertaining to mortgage by conditional sale irrespective of the form and language of the document. Therefore, if any disputed document is found to have contained one or both of those conditions, it could be taken to be a mortgage by conditional sale and not an outright sale. I have purposely not referred or discussed the third condition mentioned in Section 58(c) as the present document has no relation to that. Ext. A is the deed in controversy In its paragraph 7 which I have already quoted in extenso, it was mentioned:
"If I, the executant repay the money in cash in one lump sum in the month of Jeth 1364 Fs. to the claimant, this deed will stand cancelled and She claimant's title to the vended property shall become extinct and will stand cancelled and become inoperative....."
The words "cancelled", "extinct" and "inoperative" mean that the deed will be taken not to have been in existence at all. This is not different from what is conveyed by the word "void". Besides, by saying that the claimant's title to the vended property shall become extinct if the vendor repaid the money to the vendee, it was clearly meant that the transferee in that case would not be taken to have obtained any title by the disputed document. In other words, that conform to the second condition under Clause (c) of Section 58, "on condition that on such payment being made the sale shall become void. It' the transaction was really intended to be a sale out and out, there would have been no question of the vendee's title becoming extinct merely on repayment of the money to him. His title would have come to an end only if he reconvened his titile to the other party as envisaged in Section 54 of the Transfer of Property Act. When mere repayment was intended to extinguish the transferee's title automatically, it was nothing but like the second condition of Section 58(c).
Learned counsel for the appellants argued that previous to this statement in paragraph 7, the transferee had clearly stipulated that all their title to the vended property were to be acquired by the transferee. That is only consistent with the form of a sale; but the form is not the substance and the usual significance of that form is stoutly contradicted by what was stated in the succeeding paragraph. Furthermore, it was also mentioned that the transferors on repayment shall enter into possession and occupation of the same property. The deed is silent about reconveyance of title to the transferors. If they could enter into possession and occupation of the property only on repayment, that was only consistent with the position in which they retained their titie or some part of their interest in that immoveable property in spite of the transaction in favour of the transferee as evidenced by that document. "Mortgage" as defined in Section 58(a) is the transfer of an interest in specific immoveable property, whereas "sale" defined in Section 54 is a transfer of ownership, that is, all the interests in the property.
6. In paragraph 7, it was also stated that if the transferors did not pay the consideration money by the 30th Jeth 1364 Fs. to the transferee, that "Weed of absolute sale shall hold good and remain in force for ever" and the transferors shall have to title to the vended property. In my view, this statement tantamounted to say that on default of payment on certain date, the sale shall become absolute. If Ext. A was intended to be a sale deed out and out, then it was not necessary to say in that document that that deed was to hold good and was to remain in force in case of default in payment by the transferor on a certain date. A condition of repurchase in a deed of sale only enables the seller to buy the property back from the purchaser. But the purchaser remains a purchaser of absolute ownership of the same from the date of the transaction and does not depend for his ownership on the failure of the seller to buy hack the property. This stipulation in Ext. A is another conformity with the first condition stated in Clause (c) of Section 58: "On condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute". In view of the presence of two of the conditions which are inconsistent with the transaction of sale as given in Clause (c) of Section 58 in the document under examination in this case, there cannot be any doubt that the transaction evidenced by that document was a mortgage by conditional sale although the form of the document was like that of an absolute sale.
7. Learned counsel for the appellant contended that Clause (c) of Section 58 speaks of a mortgagor who ostensibly sells a mortgaged property, and while speaking of payment, the Legislature used the expression -- "payment of the mortgage money on a certain date" and, therefore, the document before it can be said to be a mortgage by conditional sale must appear to have been executed by a mortgagor to a mortgagee for mortgage of some immoveable property. If it were so, then the Legislature would not have used the expression 'ostensibly sells' in Clause (c).
An ostensible sale indicates that the deed of transfer will appear on the face of it as a deed of sale though really, according to the intention of the parties, the transfer was not a sale. I cannot imagine that a document which would be in appearance a sale deed can describe the executant as a mortgagor or the transferee as a mortgagee or the consideration as the mortgage money. If those expressions are used, they would certainly not make out an ostensible sale deed. As I have already said, there can be a clear and apparent deed of mortgage by conditional sale without taking recourse to an ostensible form of a sale deed. But where the document of transfer taken the form of a sale it will be futile to expect any expressions like mortgagor, mortgagee, mortgage money in that document. The opening words of Clause (c) of Section 58 only implies that there must be in reality a mortgage, and that the sale must be merely a cloak. It is well known that in order to escape the liability of accounting for the profits of the property and other liability imposed upon a mortgagee and to escape the provisions of local Jaws enacted for the benefit of agriculturists, creditors used to record to the mode of having a mortgage which was in form an out and out sale.
When the Transfer of Property Act was enacted, it only stated in Section 58 the existing law as practised in India and did not introduce any new legal provision. This was also the remark given by the Judicial Committee in Balkishen Das v W. H. Legge, ILR 22 All 149 (P C). The Report of the Special Committee on Section 58(c) stated that it was thought desirable to lay down statutory test by which the intention of the parties was to be gathered, and, therefore, it was proposed that no transaction should be deemed to be a mortgage by conditional sale unless the condition was embodied in the document which effected or purported to cilcct a sale. The proviso that was introduced by way of amendment to Clause (c) said:
"Provided that no such transaction shall bo deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale."
After this amendment, what is necessary to find in the document evidencing a transaction of disputed nature is whether any of the conditions given in Clause (c) is embodied in that document, and it is then alone that the document though effecting or purporting to effect a sale will be taken as evidencing a transaction of mortgage. Applying that test, 1 find that Ext. A was a mortgage by conditional sale.
8. Learned counsel further contended that a mere embodiment of any of the conditions of Clause (c) of Section 58 will not necessarily make the transaction a mortgage unless the relationship of mortgagor and mortgagee or debtor and creditor is brought out from the recitals of the document. He, however, later conceded that such relationship may also be gathered from the surrounding circumstances.
As far as the first two conditions given in Clause (c) arc concerned, I do not think that if one or both of those conditions are found embodied in a disputed document, it will be further necessary to gather proof of a relationship of debtor and creditor between the parties. That necessity may be there when the document only has the third condition enumerated in Clause (c). I am aware of the observations made by their Lordships of the Supreme Court in some cases to which I shall refer later about such relationship to be gathered from the document and the surrounding circumstances. But they were on the facts of those cases where the first two conditions of Clause (c) of Section 58 did not appear as clearly embodied in the disputed documents. However, a surrounding circumstance in the present case is clearly noticeable to show that the conditions (sic) money for which the transaction was entered was less than half of the market value of the properly involved. That is the findiny of the lower appellate court on consideration d the evidence including two sale deeds appertaining to the suit property. That finding being one of fact cannot be disturbed in second appeal as that is supported by legal evidence. Learned counsl urged that the evidence, specially the documents relied upon by the court below in support of that finding should not have been taken into account. That those document" were admissible cannot he questioned and if the lower court relied upon them there was no error.
9. In the case of Narsingerji Gyanagerji v. Parthasaradhi Rayanim Gam. AIR 1924 PC 226 a transaction ostensibly a sale with a right of repurchase in the vendor came to be examined and one of the considerations on winch that transaction was held to be a mortgage by conditional sale was that the price for which that transaction was entered was (extremely inadequate. The property worth about 16 lakhs was sought to be transferred for 6 lakhs to avoid a court sale of that property in a proceeding of execution in a mortgage decree. There were other circumstances in that case no doubt, such as, there was no time fixed for repurchase so that time was not the essence of the contract and that the vendor's rights in underground mines were not transferred. Their Lordships observed:
"Their Lordships do not conceal from them selves 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 description of at absolute interest, and the rights of repurchase bean the appearance of rights in relation to the exercise of which time is of the essence."
10. A similar question of the difference beetween the consideration money under a document and the value of the property was taken into account by the Supreme Court in the case off Chunchun Jha v. Ebadat AH, AIR 1954 SC 345 where the disputed transaction was held to be a mortgage by conditional sale. Their Lordships observed that there was no need if it were really a case of sale, to keep a reasonable margin between the debt and the value of the property as is ordinarily done in the case of a mortgage. When the property covered by Ext. A was worth more than Rs. 500/- why should the transform part with it for Rs. 250/- if he was disposing of that property once for all and absolutely to the transferee . Usually the creditor advances about 50 par cent of the market price of the mortgaged property The fact that only Rs. 250/- was taken, under Ext. A is also indicative of the intention of the parties that they were entering into a transaction not of an absolute transfer but of a mortgage witth a condition that if the mortgagor did not repay that amount on a certain date, the transaction would be an absolute sale in favour of that transferee
11. I shall now deal with the cases that were placed on behalf of the appellants to press their point that on consideration of the terras of the document, the intention of the parties about the transaction could not but, be only a sale outright, that is, transfer of complete ownership, it was also urged that the right of repurchase in the vendor was a personal right and that could not be transferred or assigned to the plaintiff. The deposit made by the plaintiff under Section 83 of the Transfer of Property Act was misconceived and did not amount to fulfil the requisites of the conditions of repurchase as stipulated in Ext A it will not be necessary to examine the second part of the argument if the finding of the lower appellate court about the transaction being a mortgage by conditional sale is upheld. I have given my reasons for confirming that view. What now remains is to examine the cases from which the appellants, wasted to draw support.
12. Learned Counsel first relied upon the case of Bhagwan Sahai v. Rhagwan Din, 17 Ind App 98 (P. C.). There were two documents in that trasasaction, one a deed of sale by the vendor and another by the vendee saying that on payment by the vendors within a period of 10 years from the date of the deed in a lump sum, he shall accept the same and cancel the vaild sale. The do currents were executed in February 1835 and the suit bout the nature of the transaction was commenced in 1884. 50 years after, in which the plaintiffs sought lo redeem the property upon payment of Rs. 4000/- which was the consideration of the sale deed. The vendors thus in that case did not pay or offer the money within 10 years. On construction of the two documents their Lordships of the Judicial Committee said that the vendors did not stipulate that they should have a rights to repurchase, but the vendee gave the right to the vendors to take back the property if within the period of 10 vears they should pay the same amount namely, Rs. 4000/-.
The decision in the case of Alderson v White (1858) 2 De, G and J 97 (105) was invoked and the principle mat prima facie an absolute conveyance containing nothing to show that the relation of debtor and creditor is to exist between the parties does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase was applied. I may also mention the view that their Lordships of the Judicial Committee took of the action brought 50 years after that transaction:
"It does seem contrary to all principles of equity and good conscience that when it was stipulated that the money should be repaid within the period of 10 years from 1835 the representatives of the vendors could lie by until the year 1884 and then claim that they had a right which was not barred by limitation to redeem that which they call a mortgage at any time within the period of 60 years. That this was not a mortgage, at any rate according to English law, seems clear from the decision of Lord Chancellor Cranworth in the case of (1858) 2 De G and J 97 (105)-"
In that case the Judicial Committee did not consider about a mortgage by conditional sale. The plaintiffs' case was that the transaction was only a mortgage redeemable in 60 years. The Court was to find if it was so or a sale. The condition or repurchase, having not been bargained by the vendors in their document, was taken as not a part of their transaction and even that condition as embodied in the vendees' document stated:
"I shall accept the same and cancel this valid sale...... In case the whole of the principal is not paid according to the terms of this document the vendors shall not be able to cancel the sale by payment of the principal."
Thus the cancellation of the sale was to be done by the vendee and not by the vendors on their payment. There is nothing in this reported decision that will support any of the contention of the appellant.
13. The next case was Jhanda Singh v. Waidud-din, AIR 1916 PC 49. There a deed dated the 29th August 1852 purporting to be an absolute deed of sale without reference to any contemplated of antecedent agreement of resale or repurchase was followed up by another registered agreement of the 5th September 1952 reserving to the vendors a right to repurchase the property sold, on payment of the original purchase money after 9 to 10 years. The vendors did not avail themselves of the condition of repurchase, who brought a suit in 1907 for redemption on the basis that the aforesaid documents constituted a mortgage by way of conditional sale. A general view that was taken in that decision was that a Court after the lapse of 30 years ought to require cogent evidence to induce it to hold that the instrument is not what it purports to be.
On consideration of the language of the two documents viewed in the light of the surrounding circumstances, the Privy Council held that the transaction was an out and out sale with a contract of repurchase and not a mortgage or a mortgage by conditional sale. The parties were Muhatnmadans. The principle on which the case of Alderson v. White, (1858) 2 De G and J 97 was decided by Lord Cranworth was though inapplicable to a case between the Muhammadans, yet their Lordships construed the transaction as a sale mostly for the reason that the clause about the reversion of the property to the vendor was found to be "obscure and contradictory and therefore did not furnish any true guide to the intention of the parties". Since the vendors' document was an out and out sale without any condition of postponement of the vendee's absolute title or the transaction being void on repayment, it could not have been brought under a mortgage by conditional sale; even the document of the vendee did not show any such condition. In their document they stated:
".....If the vendors after the lapse of from nine to ten years from the date of the execution of the deed pay to the executants the purchase money mentioned in the sale deed. i.e. the sum of 5,500 rupees, out of their own pocket without mortgaging or selling this property to other person, the executants shall forthwith execute a 'fresh resale deed' on receipt of this sum of 5,500 rupees and get mutation of names in the revenue papers." (The underlining (here into ' ') is mine).
This stipulation was taken by the Judicial Committee to be wholly inconsistent with the relationship of mortgagor and mortgagee. The fact that the vendors were not allowed the right to sell or mortgage the same property for purposes of payment to the vendee indicated a complete deprivation of the of the vendors after the disputed transaction. I have already indicated the obvious features of the document in the present case which can very well distinguish the facts of the reported case.
14. In the case of Chandi Charan v. Nabin Chandra, 67 Ind Cas 113 (Cal) the disputed deed was executed in 1899 having the form of a sale deed with a condition that if the principal amount be paid up within three years, the vendee would release the deed of sale and the lands, and if the money could not be paid within the time as limited above, then the deed of sale haying been regarded as deed of absolute sale the Kharida Maliki (Proprietary rights) of the vendee would accrue upon the lands. No money was paid within three years and an action was commenced for redemption of the mortgage in 1916. The Calcutta High Court negatived the finding of the trial court that the transaction was a mortgage by conditional sale and held that to be an outright sale. The reasons that influenced the court were that the title deeds were delivered to the vendee at the time of the execution of the disputed document and that a fair price was received by the transferor at that time from the transferee as was stated in the document itself. The principle laid down in that case was stated in the following words:
"The question whether a transaction was a sale or a mortgage must be determined with reference to the intention of the parties as gathered from the document and surrounding circumstances. Necessarily, therefore, each case must turn upon the terms of the documents and particular circumstances."
This indeed is the cardinal principle for guidance of Courts in a dispute of this nature and I have already referred to the terms of the document and one of the main surrounding circumstances in regard to the market value of the land and the consideration paid at the time of the transaction. The Calcutta High Court in that reported decision observed that neither the document nor the circumstances could show that there was a relationship of debtor and creditor between the parties and on that basis they held that there could be no mortgage. With great respect to the learned Judges who decided that case, I should, say that the conditions in that document were not compared to the conditions given in Clause (c) of Section 58 and that aspect was not placed before their Lordships. Secondly, the conditions did not conform to the first two conditions of Clause (c). One of them provided for the release of the deed of sale and the land which was akin to the third condition in Clause (c).
The other condition mentioned that in default of payment the deed of sale having been regarded as a deed of absolute sale the proprietary rights will accrue to the transferee. That showed that the parties regarded that document from the be-.ginning as a deed of absolute sale. . This is an expression of words which is contradictory to a mortgage. Not only the document was in the form of a sale deed but expressions were used in the condition of repayment to indicate the intention of the parties about the nature of that transaction as sale. In. that view that case is distinguishable from the facts of the present case.
15. There are two decisions of the Supreme Court which are helpful on the point under consideration. In the case of AIR 1954 SC 345 the document evidencing the transaction which came under consideration purported to be a sale and had the outward form of that, and at one place described that to be a conidtional sale. There was no clause for retransfer but instead in Clause 6 of that document it was said that "if the executants pay the money within two years, the property shall come in exclusive possession and occupation of us the executants." That expression was similar to the expression used in paragraph 7 of the document in the instant case where the transferor said: "if I, the Executant repay the money in cash in one lump sum in the month of Jeth 1364 Fs. to the claimant.....I, the executant shall enter into possession and occupation thereof". On consideration of such expression their Lordships of the Supreme Court thought that was clear about possession but was silent about title and those words were taken to mean that if there was repayment within the specified time, then the title would continue to reside in the executants. In other words, the condition as couched in that expression does not provide for reconveyance of title but re-entrance into possession and occupation of the land by the transferor on repayment. Then clauses of the document in the case before the Supreme Court have been mentioned in the judgment of which the first five clauses were clearly terms of an outright sale, Condition No. 5 stated; "And we put the said vendee in possession and occupation of the vended property detailed below and made him an absolute proprietor in our places". Clauses 6 and 7 of that document were important and they read:
"(6) If we, the executants, shall repay the consideration money to the said vendee within two years ...... the property vended under this deed of conditional sale attached shall come in exclusive possession and occupation of us, the executants.
(7) If we do not pay the same, the said vendee shall remain in posscsion and occupation thereof, generation after generation, and he shall appropriate the produce thereof."
The silence in those two conditions about the reconveyance of title on repayment, to the transferor was in the opinion of their Lordships consistent with mortgage and negative of a sale for the owners title remained in him all the while and so a reconveyance was unnecessary. Their Lordships observed that if the transaction was an out and out sale, the title could not revert to the owner without proper reconveyance. Dealing with Clause 5 their Lordships said that they would pass an absolute title if they stood alone but as the document was to be read as a whole and it was to be remembered that it was executed by ignorant rustics and scribed by a man whose knowledge of conveyancing was on the face of it rudimentary and defective, ambiguity was patent from other clauses. Proceeding to examine the real import of Clauses (6) and (7) which I have already reproduced, their Lordships held that Clause (6) meant on a proper construction that if the consideration money was paid within two years, then the possession would revert to the executants with-the result that the title which was already in them would continue to reside there and its necessary consequence was that the ostensible sale would become void. Similarly, Clause (7) was taken to mean that if the money was not paid, then the sale should become absolute. In that view those two conditions were equated with the first two conditions given in Clause (c) of Section 58. I have followed the same rule in dealing with paragraph 7 of Ext. A in the present case. What in my view is important to observe in the decision of the Supreme Court has been expressed as follows:
"Now, as we have already said, once a transaction is embodied in one document and not two and once its terms are covered by Section 58(c) then it must be taken to be a mortgage by conditional sale unless there are express words to indicate the contrary, or in a case of ambiguity, the attendant circumstances necessarily lead to the opposite conclusion".
Dealing with the phraseologies of sale used in Clauses (1) to (5), their Lordships observed:
"The use of the words 'absolute proprietor in our places' carries the matter no further because the essence of every sale is to make the vendee the absolute proprietor of what is sold. The question here is not whether the words purport to make the transferee an absolute proprietor, for of course they must under Section 58(c), but whether that is done 'ostensibly' and whether conditions of a certain kind are attached."
There were, no doubt, two other circumstances in that case. One was that a small part of the consideration (Rs. 65/6/-) was received in cash to meet the expenses of commutation in connection with the land under transfer and the balance of the consideration was adjusted towards the satisfaction of a previous mortgage on the land with the transferees.
From the past relationship between the parties, the Court inferred the continuance of that, because the deed of transfer was in the form of a mortgage by conditional sale under Section 58(c). This approach, in my view, is very important to remember. Once the disputed document is found to conform to the description given in Section 58(c) the inference will be in favour of a mortgage and the relationship between the parties will be of debtor and creditor. The document before the Supreme Court only showed that the parties were in the past in that relationship. Similar past relationship could very well exist even in a case of outright sale where the transfer is made in satisfaction of the part liabilities of the transferor. The antecedent relationship of that kind does not, therefore, ensure by itself continuance of such future relationship, yet, because the document itself answered the description in Clause (c) of Section 58, the Supreme Court inferred thereafter a relationship of mortgagor and mortgagee. I will do well to quote the significant observation from the judgment:
"There was a relationship of debtor and creditor between the parties existing at the date of the suit transaction. The bulk of the consideration went in satisfaction of the mortgage of 6-5-1927. In those circumstances, seeing that the deed takes the form ot; a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act, 'it is legitimate to infer', in the absence of clear indications to the contrary, that the relationship of debtor and creditor was intended to continue." (The underlining (here into ' , ') is mine).
If the terms of a document conform to the requisites (given in Clause (c) of Section 58, it has to be taken to be a mortgage by conditional sale. If there is any ambiguity in the terms, then they have to be properly construed reading the document as a whole and taking the attendant circumstances into consideration. After doing so if the provisions of Clause (c) are found to h ave been satisfied, the transaction is to be held to be mortgage.
16. In another case, Bhaskar Waman Joshi v. Shrinarayan Rambilas Agarwal, AIR 1960 SC 301 the Supreme Court took into consideration the price mentioned in the disputed deed of transfer as compared with the price of the property covered by that. The inadequacy of the consideration money was one of the Considerations which led to the finding in support of the transaction of mortgage although the document purported to be a deed of sale and there was a condition of repurchase. Some of the terms of the deed were different. That the transferees shall reconvey the properties within five years to the transferors at the expense of the transferors for the price mentioned in the deed; that if the right of reconveyance is not exercised by the transferors within four years and six months 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; that in the event of default on the part of the transferors to take back the houses, a breach of agreement of reconveyance rendering the transferors to pay damages shall be committed; that in the event of reconveyance the transferors shall take back the houses in the condition in which by vis major, Government action or any reason whatsoever they may be. The Supreme Court took the view that by this covenant the transferees were invested with the right to call upon the transferors to take back all or any of the houses or to return the price therefor indicating thereby that the price paid was in truth charged upon the property. Terms and circumstances of one case are bound to differ from another. Before proceeding to examine the document their Lordships of the Supreme Court laid down the principles by which the real character of a transaction is to be ascertained. After stating the provisions of Clause (c) of Section 58 of the Transfer of Property Act, their Lordships observed:
"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 undqubtedly be taken into account, but the value to be attached thereto must vary with the degree of formality Attending upon the? transaction. The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and the mortgagee, the price being charg ed on the property conveyed. In a sale coupled with an agreement to recovery 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".
Their Lordships relied upon the observation in. AIR 1924 PC 226 to the effect that the question in each case is one of determination of real character of the transaction to be ascertained from the provisions of the deed viewed in the light of the surrounding circumstances. It is to be borne in mind that in the document before their Lordships-there was nothing to directly convey the intention of the parties about the postponement of the absolute character of the interests of the transferee, or making the transaction void on repayment of the consideration money to the transferee. There was a condition of right of reconveyance in the vendor but that was coupled with the right in the transferees to call upon the transferors to pay back the consideration money and take back the properties. It was in that context that their Lordships made: the above observation. What was stated in the case, of AIR 1954 SC 345 to which I have referred at length was not set at nought by the later decision. The observations in both the cases are, therefore, to be taken in the light of the terms of the documents and surrounding circumstances of the two cases.
17. Learned counsel for the appellant very much stressed on an agreement that a relation of mortgagor and mortgagee and the price being a charge on the property are to be established in a, case before a transaction can be held to be a mortgage by conditional sale. I have already shown that when the consideration was less than half the market price of the land covered by the deed of transfer, it was legitimate to infer that (sic) that consideration was intended to be only a charge on the property.
18. Learned counsel also stressed upon the fact that the transferee in the present case got his name mutated and obtained rent receipts like Exts. B and B-l. We do not have the date of mutation but the rent receipts are of the 31st March 1958 and the 31st March 1957. respectively. The former was after the suit and the latter about three years after the transaction. The conduct of the parties subsequent to the transaction is irrelevant and inadmissible. This was also held in the case of AIR 1960 SC 301. Only surrounding circumstances at the time of transfer are to be taken into account.
19. For the reasons stated aboved Dam of the view that Ext. A evidenced a transaction of mortgage by conditional sale. Accordingly, the judgment and dercee of the court of appeal below are confirmed and the appeal is dismissed. Since the controversy between the parties was mostly dueto tbe ambiguous nature of the terms of the document, I direct that the parties will bear their own costs throughout.
Tarkeshwar Nath, J.
20. I agree.