Ramvilas (Dead) Thr. Lrs. & Anr. versus Karim Khan & Anr.

Mortgage - Mortgage by conditional sale - When not - A transaction, though, ostensibly of sale when can be regarded.as c^mortgage-^{Intention of the parties to be gatheli!dfromthe language} of the deed interpli!ted in the light of surroundi11g circumstances - Whether the sale deed i11 question, I;xhibit D/1 executed i11 favour of appella111s-defendants was 011ly a mortgage as a security for repayment of loa11 taken by respo11dent-plai11tiff and it was 11ever the intelllion of parties to sell the land - Held: I11 Exhibit D/1 Sale D Deed, 110 co11ditfon is incorporated illdicati11g that it would co11Slitute mortgage by co11ditional sale - Exhibit DI 1 Sale Deed was executed only as a security for the loan and it was never the intention of the parties lo convey the suit property - Since ihe 1st respondelllplaintiff paid back the loan amount as is evident from Agreement- E^{Exhibit P/2, Courts below rightly recorded concurrent findingsof} fact that Exhibit D/1 Sale Deed is not binding on the 1st respondentplaintiff - Inadequacy of sale consideration yet another circumstance to indicate that the 1st respondentcplaintiff could not have intended to sell the property to appellants-defendants - Transfer of Properry Act, 1882 - s.58(e).

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F

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Dismissin2 the appeal, the Court

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HELD: 1.1 In Exhibit D/1 Sale Deed, no condition was inc~rporated indicating that it would constitute mortgage by . conditional sale. It was clear that the 1st respondent-plaintiff G^{hadneverintendedto sellthepropertytotheappellants-} defendants. As rightly pointed out by the Courts below, in Exhibit P/1 Agreement dated 14.06.1972, it was clearly stated that if 1st respondent-plaintiff paid back Rs.5000/- by 14.06.1973, then the Sale Deed would be cancelled and 1st respondent-plaintiff would get back the land sold to the appellants-defendants. As held by

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RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & ANR.

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the Courts below, had it been the intention of the parties to sell the property, the parties wouhl not have agreed for return of the land on payment of Rs.5000/- by 14.06.1973. (Para 7)(747-C-E]

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A

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1.2 The Courts below had also recorded a concurrent finding of fact that Exhibit D/1 Sale Deed was executed only as a security for the loan and it was never the intention of the 1st respondentplaintiff to convey the suit property. Since 1st respondent-plaintiff had paid back the loan amount i.e. Rs.6,700/- as is evident from the subsequent Agreement Exhibit P/2 dated 05.06.1974, the Courts below rightly recorded the concurrent findinps of fact that Exhibit D/1 Sale Deed was not binding on the 1 s respondcntplaintiff. Once repayment was made, the 1st respondent-plaintiff was entitled to the declaration as prayed for. [Para 10)(748-E, F]

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1.3 The inadequacy of the sale consideration stated in Exhibit D/1 Sale Deed was yet another circumstance to indicate that the 1st respondent-plaintiff could not have intended to sell the property to the appellants-defendants. (Para 11)(749-A]

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D

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Bhaskar Waman Joshi (D) and Ors. v. Shrinarayan Rambilas Agarwal (DJ and Ors. AIR 1960 SC 301 : 1960 SCR 117 - relied on.

¶31

Bishwanath Prasad Singh i: Rajendra Prasad and Am: (2006) 4 SCC 432 : 2006 (2) SCR 566; Raj Kishore (Dead) by LRs. v. Prem Singh and Ors. (2011) 1 SCC 657 : 2010 (14) SCR 1019; Gauri Shankar Prasad cmd Ors. v. Brahma Nand Singh (2008) 8 SCC 287 : 2008 (10) SCR 839 - referred to.

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Ca	se Law Reference
20Q~(2) SCR 566	referred to	ParaJ
2008 (10) SCR 839	referred to	Para3
1960SCR117 2010 (14) SCR 1019	relied on referred to	Paras Paras	G
CIVILAPPELLATE 2008.	JURISDICTION:Civil A	ppealNo.2078of

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From the Judgment and Order dated 22.06.2005 of the High Court

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744

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·SUPREME COURT REPORTS

[2016] 9 S.C.R.

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A of Madhya Pradesh;-Bench at Gwalior, in Second Appeal No .. 374.of 1998. ., . ,., •. , . . . . ..

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Punet Jain; Manu M'atieshwari, Ms. Chhay Kirti, Abhinav Gupta and Ms. Pratibha, Advs. for the appellants.

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Raj esh, A.dv. for the· respo1ident: · · .. B ''-··-···,•,.--.: -.; ,:,";' !":< - ,.,Th Judgment of the Court.\vas_delivered by . . ...

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• · R. BANUMATHi;.J. I. The present appeal arises· out of the judgment of the High Court of Judicature of Madhya Prad~sh; Jabalpur: Bench ai Gwalior in Second Appeal No.374of1998 dated 22.06.2005; c confirming the' findings of the Courts below that the Sale Deed executed in favour Of the appellants-defendants was only a mortgage as a securiiy for repayment of the loan taken by the 1 ~· respondent:plaintiff. · · · ·

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·; · 2. It is not necessary for us to refer to the· pleadings of the 1" respondent-plaintiff and the appellants-defendants as they are referred in detail in the judgments of the Courts below. D

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f ; ,< •.. ' .) • ' • - -; .-._ - . ~ .• ,• ':· • . ' - •• ' . .. • - • : .

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Challenging the concurrent findings of the Courts below, the learned counsel for the appellants-defendants Mr. Puneet Jain submitted that whenever a conveyance of the property by a Sale Deed is accompanied by a separate document, it has to be taken as re-conveyance E and it was not a mortgage and the Courts below erred in holding that the Sale Deed dated 14.06, 1972 • , infavourofthe ., st ' appellants-defendants was v • a security for theJoan taken by the I respondent-plaintiff. Learned counsei furthe~. submitted .tht the Sale Deed. was accomganied by an Agreement Exhibit P/l dated 14.06.1972 under which the 1 respondentplaintiffhad agreed to pay an amunt ofRs,50QO/- by 14:06.J 973, which F' the 1" respondent-plaintiff did not comply with: and subsequent Areement Exhibit P/2 dated 05.06.1974 was executed under which the 1 s respondent-plaintiff paid an amount of Rs.6700/-; and afte a lapse of about 17 years, the 1" respondentplaintiff filed the suit for declaration that the Sle Deed was null and.void; It was further submitted that in the absence of a prayer for cancellation of the Sale· Deed dated G 14.06.1972, the suit filed by the 1". respondent-plaintiff ought to have been dismiSsd, more SO, when the suit was filed nearly' after a'gap of j 7 years from the date of execution of the Sale Deed i.e 14.06.1972. In support of his contention, learned cou11sel placed reliance on a number of judgmens of this Court reported as Bislnrnnatli Prasad Singh v.

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RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & 745 ANR. [R. BANUMATHI, J.]

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Rajendra Prasad and Am: - (2006) 4 SCC 432, Raj Ki.shore (Dead) by LR~. " Prem Singh and Ors. - (2011) I SCC 657 and Gauri Shankar Prasad and Ors. v. Brahma Nand Singh - (2008) 8 SCC 287 ..

¶51

On the other haiid, taking us through the judgments of the Courts below, learned counsel for the I SI respondent-plaintiff submitted that based on the oral and documentary evidence, the Courts below rightly recorded was executed as security for the loan taken concurrent findings of fact that Exhibit D/J Sale Deed dated 14.06.1972 , by the I respondent-plaintiff. SI Learned counsel for the I SI respondent-plaintiff has drawn our attention to the finding of the trial Court to submit that at the relevant pofnt of time, the value of the land under the Sale Deed dated 14.06.1972 would have been more than Rs.15000/- ai1d an inadequate consideration of Rs.3000/-, as stated in Exhibit D/J Sale Deed by itself would show that it was executed only as a security for the loan and it was never the intention of the parties to sell the land. It was subri1itted that the concurrent findings recorded by the Courts below do not suffer from infirmity warranting any interference.

¶52

We have carefully considered the rival submissions and perused the impugned judgment and the material on record. In the decision relied upon by the learned counsel for the I" respondent-plaintiff re.ported as Bhaskar Waman Joshi (D) and. Ors. v. Shrinarayan Ram bi/as Aganval (D) and Ors. - AIR 1960 SC 301, this Court has succinctly considered the question as to whether a transaction ostensibly of a sale may be regarded as a mortgage and held that it is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances.

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We can usefully refer to the relevant portion of the judgment which reads as under:

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"7.The proviso to this clause was added by Act XX of 1929. Prior to the amendment there was a conflict of decisions on the question whether the condition contained in a separate deed co.uld 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

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[2016) 9 S.C.R.

SUPREME COURT REPORTS

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A it does not follow that ifthe condition is incorporated in the deed effecting or purporting to effect a sale a mortgage transaction must of necessity have been intended. The question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered B from the language of the deed interpreted in the light of the surrounding circumstances. The circumstance that the condition is incorporated in the sale deed must undoubtedly be taken into account, but the value to be attached thereto must vary with the degree of formality attending upon the c transaction. The definition ofa mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and the 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 D is subject to an obi igation to retransfer the property with in 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 E conditional sale itself contemplates an ostensible sale of the property. As pointed out by the Judicial Committee of the Privy Council in Narasingerji Gyanagerji v. P. Parthasaradhi, 51 Ind App 305: (AIR 1924 PC 226), the circumstance that the transaction as phrased in the document is ostensibly a sale with a right of repurchase in F the vendor, the appearance being laboriously maintained by the words of conveyance needlessly iterating the description of an absolute interest or the right of repurchase bearing the appearance ofa right in relation to the exercise of which time was of the essence is not decisive. The question in G each case is one of determination of the real character of the transaction to tie ascertained from the provisions of the deed viewed in the light of surrounding circumstances. If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their true legal effect. If there is ambiguity in the language

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RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & 747 ANR. [R. BANUMATHI, J.]

¶69

employed, the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed ·was related to existing facts. Oral evidence of intention is not admissible in interpreting the covenants of the deed but evidence to explain or even to contradict the recitals as distinguished from the terms of the documents may of course be given. Evidence of contemporaneous conduct is always admissible as a surrounding circumstance, but evidence as to subsequent conduct of the parties is inadmissible."

¶70

In the light of the above well settled principles, we may now consider Exhibit D/1 Sale Deed and Exhibit P/1 Agreement both dated 14.06.1972. In Exhibit D/1 Sale Deed no condition is incorporated indicating that it would constitute mortgage by that conditional sale. It is clear that the I SI respondent-plaintiff had never intended to sell the property to the appellants-defendants. As rightly pointed out by the Courts below, in Exhibit P/1 Agreement dated 14.06.1972, it is clearly stated that if 1 SI respondent-plaintiff pay back Rs.5000/- by 14.06.1973, then the Sale Deed would be cancelled and I" respondent-plaintiff would get back the land sold to the appellants-defendants. As held by the Courts below, had it been the intention of the parties to sell the property, the parties would not have agreed for return of the land on payment of Rs.5000/- by I 4.06.1973.

¶71

The judgments cited by learned counsel for the appellants hold that for a transaction to constitute mortgage by conditional sale, it is necessary that the condition is embodied in the document that purports to effect the sale deed. In Raj Kishore (Dead) by LRs. v. Prem Singh and Ors. - (2011) I SCC 657, it was held as under:

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"15. A bare reading of the above would show that for a transaction to constitute mortgage by conditional sale it is necessary that the condition is embodied in the document that purports to effect the sale. That requirement is stipulated by the proviso which admits of no exceptions.

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[2016) 9 S.C.R.

748

SUPREME COURT REPORTS

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This Comt in K. Simrathmull case observed: (AIR p.1183, para 4)

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"4. The sale deed, the deed of reconveyance Ext.A- I and the rent note Ext.B-1 were undoubtedly parts of the same transaction. The plea of the plaintiff that the sale B deed Ext.A-I constituted a transaction of mortgage by conditional sale is inadmissible, because the sale deed and the covenant for reconveyance are contained in separate documents."

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The finding of the High Court as to the legal effect of the transaction of sale followed by an agreement for retransfer of the property is not, therefore, legally sound."

¶89

As pointed out earlier, Exhibit Oil Sale Deed executed by the I st respondent-plaintiff in the instant case does not embody any condition as stipulated in Section 58 (e) of the Transfer of Property Act, 1882. On facts and evidence, Courts below rightly held that Exhibit D/1 Sale Deed .D would not constitute a mortgage by conditional sale.

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On the basis of oral and documentary evidence, the Courts below recorded that Exhibit D/1 Sale Deed dated 14.06.1972 and Exhibit P/I Agreement dated 14.06.1972 having been executed on the same day and both ought to be read together. The Courts below have also E recorded a concurrent finding of fact that Exhibit D/I Sale Deed was executed only as a security for the loan and it was never the intention of the I st respondent-plaintiff to convey the suit property. Since I SI respondent-plaintiff has paid back the loan amount i.e. Rs.6,700/- as is evident from the subsequent Agreement Exhibit P/2 dated 05.06.1974, F the Courts below rightly recorded the concurrent findings of fact that Exhibit DI I Sale Deed is not binding on the I" respondent-plaintiff. Once repayment was made, the I SI respondent-plaintiff was entitled to the declaration as prayed for.

¶91

Yet another reason could be pointed out for affirming the impugned judgment of the High Court. It has been held by the trial G Court that at the time of selling the suit property the extent was more than 10 Bighas i.e. l!J'ct share of 1" respondent-plaintiff in 2.856 hectares of the total land. Referring to the oral and documentary evidence of I" respondent-plaintiff's witness Ajay Singh, the trial Court recorded a finding that at the time of sale of the land in 1972, the market value of H the land in Padariya was Rs.2000/- per Bigha and at the time of the sale,

749

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RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & ANR. [R. BANUMATHI, J.]

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the value of the property'would have bee'n not less than Rs. I 5000/-. The inadequacy of the sale consideration stated in Exhibit Oil Sale Deed is yet another circumstance to indicate that the .1" respondent-plaintiff could not have intended to sell the property to the appellants-defendants.

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Having regard to the concurrent findings of the Courts below, we do not find any reason to interfere with the impugned judgment.

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'13. Accordingly/the appeal is dis1'nissed.: The p'arties shall bear their own costs. ·

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Divya. Pandey

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Appeal dismissed.

Ramvilas (Dead) Thr. Lrs. & Anr. v. Karim Khan & Anr.

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Ramvilas (Dead) Thr. Lrs. & Anr. v. Karim Khan & Anr.

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