Karnataka High Court
B. Jayashankarappa And Others vs D.S. Gulwadi on 4 January, 2000
Equivalent citations: AIR2000KANT359, ILR2000KAR2173, 2000(4)KARLJ35, AIR 2000 KARNATAKA 359, (2000) ILR (KANT) 2173, (2000) 3 CIVILCOURTC 102, (2000) 4 KANT LJ 35, (2001) 1 CIVLJ 251
ORDER
1. This second appeal arises from the judgment and decree dated 13-7-1984 passed by the Additional Civil Judge, Shimoga, in Regular Appeal No. 43 of 1979 whereby the First Appellate Court allowed the defendant's 1st appeal and set aside the judgment and decree dated 31-1-1979 passed by Principal Munsif in Regular Suit No. 55 of 1974 and dismissed the plaintiffs' suit for redemption.
2. The facts of the case in the nutshell are that, the above mentioned plaintiffs-appellants filed the suit for redemption of mortgage with allegations to the effect that suit scheduled property which was described in the plaint schedule originally belongs to the plaintiffs' father Siddappa who had executed a deed of mortgage on 25-7-1951 Ex. P. 3 in favour of the defendant-respondent for a sum of Rs. 2,000-00 only with a condition that Siddappa, father of the plaintiffs since deceased, was to make payment of the amount of Rs. 2,000-00 borrowed from the defendant-respondent, within six months from the date of deed and the defendant-respondent would be bound to reconvey suit property in favour of Siddappa, the executant of the deed. According to the plaintiffs' case, after Siddappa had sold the southern portion of the site measuring 90' x 30' in favour of the defendants vide sale deed dated 6-11-1950 for a sum of Rs. 3,400-00 and retained the northern portion of the said land measuring 90' x 30'. It was alleged that Siddappa was in need of money, so he borrowed a sum of Rs. 1,000-00 from the defendant by mortgaging the above northern portion of land measuring 90' x 30' vide registered mortgage deed dated 25-6-1951. Later on being in need of more money, Siddappa borrowed a sum of Rs. 2,000-00 on the security of the property in order to discharge the antecedent mortgage deed as well as for processing the necessities, under a mortgage deed dated 25-6-1951. It was further alleged that the defendant was willing to lend the money of Rs. 2,000-00 provided the suit property was put in possession of the defendant as a security and an ostensible sale deed by way of mortgage by conditional sale deed was executed by Siddappa in favour of the defendant and that said amount be repaid within six months from the date of document and the plaintiff pays interest at the rate of 9% p.a. as well as mortgage deed was also paid off within six months and property that was mortgaged was taken back. The plaintiffs further alleged that out of a sum of Rs. 2,000-00 advanced, a sum of Rs. 1,000-00 was adjusted towards the previous mortgage deed under deed dated 25-6-1951 by way of discharge. The plaintiffs' case was that transaction dated 25-7-1951 executed by Ex. P. 3 was the mortgage by conditional sale and was not an out and out sale and as the defendant insisted on the possession, and possession of the land was handed over to the defendant-respondent. The certified copy of the deed dated 25-7-1951 was produced with the plaint. It was alleged that the defendant refused to redeem the mortgage and to deliver the possession of property. So the suit for redemption was filed and it was alleged that it was within time.
3. The defendant contested the suit, filed written statement and asserted that the transaction dated 25-7-1951 was really an out and out sale and it was not a mortgage by conditional sale and deed dated 25-7-1951 was of sale, but with a condition to reconvey the property within six months from the date of execution of the sale deed. The defendant further alleged that Siddappa did not exercise this option to purchase and failed to pay the amount within the period stipulated. So the defendant became full owner of the property and the plaintiffs and any other person on their behalf have no right and suit for redemption was misconceived. The defendant has also taken other pleas of having spent enormous amounts in putting up construction etc., but had denied that value of the site was more than Rs. 5,000-00. The defendant claimed to be in possession and asserted that suit for redemption was misconceived and further that suit was barred by limitation,
4. The Trial Court framed the following issues.-
1. Whether plaintiff 5 is a man of unsound mind?
2. Whether the suit property is perfectly described in the plaint?
3. Whether plaintiffs prove that the transaction evidenced by a document dated 25-7-1951 is a mortgage?
4. If so, are they entitled to redeem the mortgage?
5. Whether this claim is in time?
6. Are they entitled for actual possession of the suit site?
7. Are they entitled for future mesne profits?
8. Whether defendant proves that the said transaction is an out and out sale?
9. Whether he also proves plaintiffs or their predecessors in title lost the right of repurchase?
10. Whether he proves that he perfected his title over the suit site by virtue of adverse possession?
11. Whether he also proves that he has erected a building on it and he need not be evicted?
12. Whether plaintiff has properly valued the suit property and paid the correct Court fees thereon?
13. What decree or order?
5. The Trial Court, by its judgment and decree dated 31-1-1979, decreed the plaintiffs' suit and directed that defendant shall receive a sum of Rs. 4,000/- only which is already deposited in Court towards mortgage amount under Ex. P-3 and redeem mortgage deed dated 25-7-1951 marked as Ex. P-3 and deliver vacant possession of the suit schedule property in favour of the plaintiffs. As regards the mesne profits, there shall be a separate enquiry under Order 20, Rule 12, Civil Procedure Code since plaintiffs are entitled to mesne profits from the date of suit till the date of actual possession of the suit property. The Trial Court directed the preliminary decree to be drawn. The Trial Court held as under:-
The Trial Court answered issues 1 to 7 in favour of the plaintiff. It held that the plaintiffs have proved that the transaction evidenced by Ex. P-3 document dated 25-7-1951 is and has been a mortgage with conditional sale and that the plaintiffs are entitled to redeem the mortgage. It also held that the plaintiffs' suit to be within time and that plaintiffs are entitled to decree for actual possession and mesne profits. It held that the defendant failed to prove the transaction Ex. P-3 dated 25-7-1951 was an out and out sale. It held that the defendant failed to prove that he perfected the title by adverse possession or that the plaintiffs had lost their right to repurchase. The Trial Court after having found that the defendant had erected a bui'ding and construction, the value of which may come to Rs. 12.000/- and odd, as evidenced by the valuation slip furnished by the Engineer, it held that the plaintiffs are entitled to get the decree for possession. Having recorded these findings, the Trial Court, as mentioned earlier, decreed the plaintiffs' suit.
6. The defendant-respondent having felt aggrieved from the judgment and decree of the Trial Court, preferred a Regular First Appeal No. 43 of 1979 in the Court of Principal Civil Judge, Shimoga. The learned lower Appellate Court reversed the finding and judgment and decree of the Trial Court vide judgment dated 13-7-1984 having taken a view that the document Ex. P-3 dated 25-7-1951 is not a mortgage by conditional sale, instead is an out and out sale with a condition to repurchase and that the defendant, after having purchased the suit property, has effected improvements and put additional construction spending a sum of Rs. 12,700-00 and odd. It further found that as the plaintiffs failed to establish that transaction Ex. P-3 is a mortgage with conditional sale and as it has been found that Ex. P-3 is an out and out sale with a condition to repurchase, the suit for reconveyance or repurchase, as such, is barred by time as it has been filed beyond three years. The lower Appellate Court held that the learned Munsiff has committed error in holding the Ex. P-3 to be a mortgage with conditional sale. After recording these findings, as mentioned earlier, the lower Appellate Court allowed the defendant's appeal and set aside the Trial Court's judgment and decree and dismissed the plaintiffs'/appellants' suit for redemption on grounds mentioned above. Feeling aggrieved from the above judgment and decree of the lower Appellate Court, the plaintiffs have come up before this Court by way of second appeal under Section 100 of the Civil Procedure Code.
7. This Court vide order dated 16-11-1984 admitted the appeal on the following substantial question of law, which reads as under:-
"Whether the first Appellate Court has erred in construing Ex. P-3 as a sale deed with a condition to repurchase, but not a mortgage by conditional sale and thereby dismissing the plaintiffs' suit?"
8. I have heard the learned Counsel for the appellants Sri Basava Prabhu S, Patil, and Sri G.S. Visweswara assisted by Sri B.S. Ravindra who after some time continued to hold brief for Sri G.S. Visweswara.
9. As the suit had been dismissed by the Appellate Court taking the view that Ex. P-3 is not a mortgage deed by conditional sale, but is an out and out sale and so suit is misconceived as well as being beyond three years, suit is liable to be dismissed. Under this head, it has to be considered whether deed Ex. P-3, dated 25-7-1951 is a deed of mortgage by conditional sale and is not an out and out sale? And if so, whether the lower Appellate Court illegally dismissed the suit taking the view that suit was barred by time?
10. On behalf of the appellants it was contended that the lower Appellate Court committed substantial error of law by misconstruing the deed Ex. P-3, dated 25-7-1951 as an out and out sale and in dismissing the suit on that ground as misconceived and barred by limitation.
11. The learned Counsel for the respondent contended that the lower Appellate Court rightly held the deed to be an out and out sale with an agreement to repurchase.
12.I have applied my mind to the contentions of the learned Counsels for the parties.
It will be profitable at this stage to quote in extenso, as per English translation furnished by the appellants and agreed by the respondent of the deed i.e., deed dated 25-7-1951, which is subject-matter of construction and determination as to whether the said deed amounts to a mortgage by conditional sale or it amounts to an out and out sale with an agreement to repurchase. Ex. P-3, dated 25-7-1951 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. I, Volume 444, pagea 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, / 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 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 therein. This deed has been executed happily out of my free will".
13. Before proceeding further with the matter, it appears appropriate to have an idea of what is meant by sale and what are its ingredients and what is the idea or concept behind the mortgage as defined by Section 58 of the Transfer of Property Act and what is a mortgage by conditional sale. Section 54 of the Transfer of Property Act defines sale of immovable property. It reads as under:-
"Section 54. Sale.-Sale is a transfer of ownership in exchange for a price paid or promised or part paid or part promised".
14. Section 55 deals with the rights of the seller and the buyer. Section 55(4) provides that the seller is entitled, where the ownership of the property has passed to the buyer before the payment of whole of the purchase money, to a charge upon the property in the hands of the buyer, any transferee without consideration or any transferee with notice of the non-payment, for the amount of the purchase money or any part thereof remaining unpaid, and for interest on such amount or part from the date of which possession has been delivered. A sale is thus transfer of ownership. This transfer of ownership is in exchange of the price which may be paid or which may be promised to be paid or which may be partly paid or partly promised to be paid. Once the ownership has passed on the execution of the registered sale deed, if any part of the purchase money has not been paid, the seller may hold a charge upon the property for unpaid purchase money and may be entitled to interest on that part of the amount. But unless any express provision is there in the deed putting a restraint on passing of title, the sale is transfer of ownership in the property. So, in case of a sale deed or in case of a sale it is necessary that it must indicate the transfer of ownership. The ownership includes all rights of owner including right to transfer and enjoy such property in the manner whatsoever the owner likes as well as to dispose of that property. So when a person sells a property in exchange of price paid or promised or partly paid or partly promised, he transfers the ownership in the property. So, one of the elements to be considered is whether by document in question, alleged vendor has made a transfer o) ownership or not?
15. Section 58 of the Transfer of the Property Act defines mortgage, mortgagor, mortgagee, mortgage money and mortgage deed. Clause (a) of Section 58 reads as under:-
"Section 58(a).-A mortgage is the transfer of 'an' interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
The transferor is called a mortgagor, the transferee is a mortgagee; the principal money and interest of which payment is secured for the time being are called mortgage money and the instrument (if any) by which the transfer is effected is called a mortgage deed".
Section 58(c) defines mortgage by conditional sale. It reads as under:-
"Section 58(c).-Mortgage by conditional sale.-
Where, the mortgagor ostensibly sells the mortgaged property.-
on condition that on default of payment of the mortgage money on a certain date the sale shall become absolute; or on condition that on such payment being made the sale shall become void; or on condition that on such payment being made the buyer shall transfer the property to the seller;
the transaction is called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale:
Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale".
16. A reading of Section 58 per se shows that a mortgage no doubt is a transfer, but not the transfer of ownership rights and in this respect, it differs from sale. A mortgage is said to be transfer of 'an' interest in a specific immoveable property. The purpose of mortgage is said to secure the payment of money advanced as loan, an existing or future debt. In a sale, all rights of ownership, the transferor is possessed of, in the property, pass on by transfer to the transferee. In a mortgage some right is transferred to the mortgagee while some others remain with the mortgagor. This is one of the basic difference between a sale and a mortgage. A reading of clause (c) of Section 58 further reveals that in case of mortgage by conditional sale there is an ostensible sale and it is conditional. A reading of these two provisions leads to the conclusion that if a document prima facie does not show and express any transfer of ownership but only indicates transfer of certain interests for securing the money, it may not be said to be sale. The proviso to Section 58(c) further reveals that a transaction ostensibly of sale with either or any of the conditions as enumerated in clause (c) is not to be considered as a mortgage by conditional sale, unless and until the conditions concerned as to recon-vey etc., is embodied in the document itself which effects or purports to effect the sale. It means that if in case of a transaction of ostensible sale the condition to repurchase or reconveyance for the price or the like is imposed by a deed other than the deed of ostensible sale, then a contract of that nature is not to be considered or deemed to be mortgage by conditional sale, instead it has always to be deemed and considered to be an out and out sale with an agreement to repurchase.
17. It will be appropriate, at this juncture, to refer to certain leading decisions of the Supreme Court and the High Court. The first leading decision of the Supreme Court is Pandit Chunchun Jha v Sheikh Ebadat Ali and Another. Having referred to the case of Alderson v White, their Lordships of the Privy Council in the case of Bhagwan Sahai v Bhagwan Din , at page 391 laid it down as under:
The rule of law on this subject is one dictated by common sense; that 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".
Their Lordships referring to that above mentioned case of Alderson, observed, "The Lord Chancellor proceeded.-
In every such case the question is, what, upon a fair construction, is the meaning of the instruments?"
It may be mentioned here that m the Bhagwan Sahai's case, supra, there were two documents namely deed dated February 20, 1835 whereby the proprietor of the property involved in the case declared that they had on their own accord absolutely sold the entire property and thereafter on the same day another document was executed whereunder it was provided that, as a matter of favour, mercy, kindness and indulgence, executed this deed whereby it was stipulated that if the vendors will, within a period of ten years from the date of this deed, pay in lumpsum an amount of Rs. 4,000-00 without interest, then the vendee will accept that amount and cancel the valid sale deed. So there were two documents and the Court below in that case held that document to be absolute sale with an agreement to sell.
18. Proviso to Section 58(c) had been added by Amending Act No. 20 of 1929 to Section 58(c) which provides that no transaction of sale shall be deemed to be a mortgage or be considered to be a mortgage unless the condition referred to above in Section 58(c) is embodied in the document which effects or purports to effect the sale. Thus this section purports to divide in two classes such transactions where there is an ostensible sale or purported or ostensible sale and one of the conditions mentioned in Section 58(c) is also there. That if any of the conditions as referred in Section 58(c) is not contained in the document of sale and that there is a separate deed or documents creating or putting that condition to the ostensible sale, then in those cases, the transactions will never be considered to be a mortgage. But it may be considered to be a mortgage if the condition referred to in Section 58(c) is embodied in the document which effects or purports to effect the sale in view of language of the proviso which makes use of two negatives therein. When I so observe, I find support for my view from the decision of their Lordships of the Supreme Court in the case of Pandit Chunchun Jha, supra. This introduction of proviso in the year 1929 definitely made a change in the law. In Pandit Chunchun Jha's case, supra, their Lordships laid down as under:
"But there is nothing special about that in this class of cases and here, as in every other case where a document has to be construed, the intention must be gathered, in the first place, from the document itself. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended".
Their Lordships further laid it down it page 178 of SCR as under:
"Because of the welter of confusion caused by a multitude of conflicting decisions the legislature stepped in and amended Section 58(c) of the Transfer of Property Act. Unfortunately that brought in its train a further conflict of authority. But this much is now clear. If the sale and agreement to repurchase are embodied in separate documents, then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not. But the converse does not hold good, that is to say, the mere fact that there is only one document does not necessarily mean that it must be a mortgage and cannot be a sale. If the condition of repurchase is embodied in the document that effects or purports to effect the sale, then it is a matter for construction which was meant. 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".
19. The above paragraphs reveal that in view of clear-cut division being made or classification being made and exclusion of transaction embodied in more than one document from the category of mortgages has been done by law, a rebuttable presumption arises of intention that the persons who after the amendment of Section 58(c) and introduction of the proviso thereunder choose not to use two documents, they do not intend the transaction to be sale and if the conditions of Section 58(c) are fulfilled and that there is ostensible sale or purported sale with a condition to repurchase or reconveyance or that other conditions mentioned in Section 58 being incorporated in that very document of ostensible sale, then the deed has to be construed as a mortgage deed. Their Lordships have also laid it down with reference to the document involved thereunder that, "It is relevant to note in passing that this silence about title would be proper in a mortgage, for there the owner's title remains in him all the while and so a reconveyance is unnecessary, But if there is an out and out sale the title could not revert to the original owner without a proper reconveyance".
20. In the case of P.L. Bapuswami v N. Pattay Gounder , their Lordships of the Supreme Court considered Section 58 and the effect of proviso and observed as under:
"The proviso to this clause was adopted by Act 20 of 1929. Prior to the amendment there was a conflict of decisions on the question whether the condition contained in a separate deed could be taken into account in ascertaining whether a mortgage was intended by the principal deed. The Legislature resolved this conflict by enacting that a transaction shall not be deemed to be a mortgage unless the condition referred to in the clause is embodied in the document which effects or purports to effect the sale. But it does not follow that if the condition is incorporated in the deed effecting or purporting to effect a sale a mortgage transaction must of neces-
sity have been intended. The question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances. The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to reconvey there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to retransfer the property within the period specified. The distinction between the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is not decisive. The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the document viewed in the light of surrounding circumstances. If the language is plain and unambiguous it must in the light of the evidence of surrounding circumstances be given its true legal effect. If there is ambiguity in the language employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts".
21. The decision in the case of Pandit Chunchun Jha, supra, has been referred in the case of Tamboli Ramanlal Motilal (dead) by L.Rs v Ghan-chi Chimanlal Keskavlal (dead) by L.Rs and Another. In that case the document purported proceeds to state, 'Therefore, you and your heirs and legal representatives are hereafter entitled to use, enjoy and lease the said houses under the ownership right".
Their Lordships further observed that the document per se reveals that as a result of that document, a right was given to the transferee that he shall ejyoy the property with full ownership rights and therefore that was the sale.
22. In the case of Vidhyadhar v Mankikrao and Another , in paragraph 36, their Lordships laid down that the definition of sale indicates that, "In order to constitute a sale, there must be a transfer of ownership from one person to another i.e., transfer of all rights and interests in the properties which are possessed by that person are transferred by him to another person. The transferor cannot retain any part of his interest or right in that property or else it would not be a sale. The definition further says that the transfer of ownership has to be for a "price paid or promised or part-paid and part-promised".
Price thus constitutes an essential ingredient of the transaction of sale".
In paragraph 38, their Lordships further observe as under:
"38. The real test is the intention of the parties. In order to constitute a "sale", the parties must intend to transfer the ownership of the property and they must also intend that the price would be paid either in person or in future. The intention is to be gathered from the recital in the sale deed, the conduct of the parties and the evidence on record".
In paragraphs 47 and 48, their Lordships further observed, "47. The proviso to this clause was added by Section 19 of the Transfer of Property (Amendment) Act, 1929 (20 of 1929). The proviso was introduced in this clause only to set at rest the controversy about the nature of the document, whether the transaction would be a sale or a mortgage. It has been specifically provided by the amendment that the document would not be treated as a mortgage unless the condition of repurchase was contained in the same document.
48. The basic principle is that the form of transaction is not the final test and the true test is the intention of the parties in entering into the transaction. If the intention of the parties was that the transfer was by way of security, it would be a mortgage. The Privy Council as early as in Balkishen Das v Legge, had laid down that, as between the parties to the document, the intention to treat the transaction as an out and out sale or as a mortgage has to be found out on a consideration of the contents of the document in the light of surrounding circumstances. The decisions of this Court in Bhaskar Woman Joshi v Shrinarayan Rambilas Agarwal and P.L. Bapuswami's case, supra, are also to the same effect".
23. The consideration of above cases reveals the following basic principles:-
(a) That the sale is a transfer of ownership and to constitute a sale there must be transfer of ownership from one person to another i.e., all rights and interests of the owner as owner of property are transferred by transferor to another person.
In case of a mortgage, that is not so. It is only a transfer of 'an' interest in the immoveable property concerned. It is not the transfer of full ownership rights therein, instead some interest is retained by the owner when making the transfer. The transfer of an/the interest under mortgage is for the purpose of securing the payment of money advanced as loan.
(b) That a document ol ostensible sale ana the agreement to reconvey or agreement agreeing to either of the conditions referred to in clause (c) of Section 58 if the two are contained in two separate documents, they cannot be considered and cannot be deemed to be mortgage.
(c) That if there is an ostensible sale or a purported sale and transaction of ostensible sale or purported sale is made subject to either of the conditions mentioned in Section 58(c) such as agreement to reconvey or agreement to hand over i.e., return the possession or the like and the two i.e., ostensible sale and the condition concerned are contained in one document that may be a circumstance showing or exhibiting the intention of parties not to intend the transaction to he a sale and in the words of their Lordship of the Supreme Court as observed in Pandit Chunchun Jha's case, supra, "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", No doubt, if the condition of repurchase is embodied in the document which effects or purports to effect the sale, then that is a matter of construction. The intention to treat the transaction as an out and out sale or as a mortgage has to be found out on consideration of the contents of the deed in the light of the surrounding circumstances.
(d) The oral evidence of intention is not admissible in interpreting the contents of the deed, but evidence to explain or even to contradict the recitals as distinct from the terms of the document may be given. The evidence of contemporaneous conduct is admissible as surrounding circumstances, but evidence as to subsequent conduct of parties is inadmissible vide Bhaskar Woman Joshi's case, supra.
(e) If the words are plain and unambiguous, they must, in the light of the evidence of surrounding circumstances, be given their true legal effect. If there is ambiguity in the language employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as by law be permitted to be adduced to show in what manner the language of the deed is related to existing facts.
24. A perusal of the document Ex. P-3 does not per se indicate nor does it 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 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 ofRs. 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 transferring the full ownership rights in favour of the transferee for consideration of Rs. 2,000/-. No doubt, there is the clear expression "that the possession was being delivered of the property and the transferee henceforth 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 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 transfer deed, the deed even if may be said to be an ostensible sale, does not pass the yardstick and test of sale, because sale is a transfer of ownership in the property. The fact is clear that the plaintiffs father has taken a sum of Rs. 2,000/- from the defendant-purchaser namely D.S. Gulwadi. The possession of the property, it appears, was given to the transferee to secure payment of Rs. 2,000-00 which the plaintiff had agreed to repay 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 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 obligations 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 mentioned as sale consideration. But sale means 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 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 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 and Others v Jagdish Saran Singh and Others, such a question did arise before the Full Bench of the 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 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 a mortgagee, and also to escape the provisions of some of the local laws enacted for the benefit of agriculturists, creditors 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 case, supra, 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, 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 condition 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 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 v Mhasti Goli Naik, Bishan Lal v Banwari Lal, Shambhu Singh v Jagdish Bakhsh Singh, 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 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.
26. Mr. Justice Agarwala also after referring to the Law Commissioner's report to the Legislature, observed as under:
"The Legislature, therefore, intended to lay down a statutory test by which intention is to be gathered in order to suppress the prevailing mischief. In the amendment two negatives are used. They have not merely the negative effect of declaring that if the condition is embodied in a separate document, the transaction is not a mortgage by conditional sale, but also have the positive effect of saying by necessary implication that a transaction shall be a mortgage by conditional sale if the condition is embodied in the same document which effects or purports to effect the sale".
In paragraph 50 Mr. Justice Agarwala further observed that, The expression of a positive by the use of two negatives is a very common mode of expression. It has the advantage of laying down both the negative as well as the positive in a short sentence".
In paragraph 52, Mr. Justice Agarwala further observed, "(52) To construe the proviso as referring merely to the negative aspect would be to remedy the mischief in part and not in whole. There would still be left open the question whether a transaction in which the condition is embodied in the document which effects or purports to effect the sale is a mortgage by conditional sale or not. There could be no point in the Legislature suppressing the part of the mischief and not the whole and in not laying down a statutory test of intention when the transaction was evidenced by one document. The intention of the legislation is to protect helpless debtors, because creditors require no protection. The limited interpretation sought to be given to the proviso would turn out to be for the benefit of the creditor and of no benefit to the debtor, because while a transaction of conditional sale evidenced by two documents would be construed as a sale, in the case of one document only, it would still be open to the creditor to show that the intention was not to effect a mortgage by conditional sale but a sale out and out with a condition of repurchase".
Mr. Justice Agarwala further observed in paragraph 54 as under:
"A transaction of sale with a condition of repurchase embodied in one document must always be treated as a mortgage by conditional sale".
Hon'ble Nasirullah Beg, J., as he then was, in his minority judgment observes, after referring to Select Committee's report as under:
"In order to avoid the difficulties indicated above, we think it is desirable to lay down a statutory test by which the intention is to be gathered.
It is, therefore, evident that as they themselves say, their intention was to provide 'a' test not 'the' test nor do they anywhere say that it was intended to provide 'the sole test or a conclusive test'. Moreover, they do not say that their object was to lay down the test for determining the nature of transaction. On the other hand, they themselves say that the object was to lay down a test for gathering the intention", Hon'ble Nasirullah Beg, J., observes, after quoting the observations of Sir Dinshaw Mulla, as under:
"According to this view, therefore, the effect of the proviso would be merely to shift the burden of proof in cases where the transaction is embodied in one document".
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 deeds 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 Pandit Chunchun Jha, supra, 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 presently 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 25-7-1951 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 v 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 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 mortgagee's 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 the 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 moveable and immoveable properties and personally from the vendor.
30. In this view of the matter and in view of these terms of Ex. P-l in Padmashree S.N. Swamy's case, supra, this Court held Ex. P-l of the case to be sale deed. So, this Padmashree S.N. Swamy's case, supra, on facts, is distinguishable and as such, it is not of any help to the present appellants.
31. Thus having considered the deed Ex. P-3 to be a deed of mortgage by conditional sale and it being a mortgage, the suit is governed by Article 61(a). When I come to the conclusion that the deed is a deed of mortgage, then the present suit filed by the plaintiff/mortgagor for redemption cannot be said to be barred by limitation. Article 61(a) of the Limitation Act provides a limitation of 30 years for a suit of redemption, and to recover possession of mortgage. The suit in the present case for redemption having been filed in January 1974 that is well-within 30 years even from the date of Ex. P. 3 i.e., mortgage deed and the Trial Court, as such, rightly held the suit to be within time and rightly decreed the suit.
The second appeal, as such, is hereby allowed. The lower Appellate Court's decree is set aside and the decree passed by the Trial Court decreeing the plaintiff-appellants' suit is maintained and affirmed. The suit is decreed with costs throughout.