M. K. Gopalan nd Another
The State of Madhya Pradesh
Jagannadhadas F.
April 14.
174 SUPREME COURT REPORTS [1955] to issue the necessary. notification..and have.,,the case transferred. In view of that statement, it is unnecessary to.pronounce on the objection so raised. . “
In the result, all the, points raised on behalf of the petitioners fail, and ,this petition must be dismissed.
It is desirable to observe that the questions above dealt with appear to have been raised before the High Court at previous stages ‘by: means of applications under article 226 and decided’ against. _ No appeals to this Court have: been taken against the ordets therein. Nothing that we have said is intended tobe a pronouncement as to the correctness or otherwise of those orders, nor to encourage the practice of direct approach to this Court (except for good reasons) in matters which have been taken to the High Court and found, against, without obtaining leave to appeal therefrom.
Petition dismissed:
PANDIT CHUNCHUN JHA SHEIKH EBADAT ALI AND ANOTHER. [ MuKHERJEA, Vivian Bosz, GHuLAM Hasan and VENKATARAMA Ayyar JJ.]
Transfer of Property Act (Act IV of 1882)—Section 58(c) as amended by Act XX of 1929—Document—Whether a mortgage or sale outright—Principles for determining whether the document is one or the other.
There is no hard and fast rule for determining whether a given transaction is a mortgage by conditional sale or sale outright with a condition for- repurchase.
Each case must be decided 6n its own facts. The numerous decisions of the High Courts on the point are of no help because two documents are seldom expressed in identical -terms.
The intention of the parties is the determining. factor but the intention must be gathered from the document itself which has to be construed to find out the legal effect of the words used by the parties. If the . words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or in- a f tended is ruled out. If however there is ambiguity in the language a4 employed: then it is permissible to look to the surrounding circum- stances to determine what was intended.
.
¥ wa
S.CR. SUPREME COURT REPORTS 175
“In view of thé provisions of the: amended section 58(c) of the Transfer of Property Act, ifthe sale and agreement; to repurchase are. embodied in separate, documents, then ~ the ,transaction cannot be a mortgage whether. the documents are. “contemporancously executed or not. But the miefé fact that there ‘is only one document ‘does not necessarily mean that it must ‘be ‘a ‘mortage 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.
Balkishen Das v. Legge. (27 LA. 58), . Alderson V. White (44 E.R. 942 at’ 928), Bhagwan Sahai v. Bhagwan Din (17,LA. 98 at 102), and Jhanda Singh” v. Wahia- ud- din (43 LA. 284 at 293) referred to.
Civ, APPELLATE " Jurispiction : Civil . Appeal No. 98 of 1953.
_. Appeal by Special Leave from. ‘the Judgment and Decree dated the 27th day. of . January, 1949, ..of the High Court of Judicature at Patna. in Appeal. from Appellate Decree -No. 690 of 1947 against the Decree dated -the, 13th January, 1947, of the Court of . the District Judge, Bhagalpur,.in Title Appeal No. 161 of 1946 arising out of the Judgment and Decree dated ‘the: 25th July, 1946, of the Court ofthe Ist ‘ Additional Subordinate Judge, ‘Bhagalpur, in Title Suit No. 80 of 1945." °
N.C. Chatterjee, (A. N. Sinha and —S., P. ‘Verma, with him) for the appellant.
Murtaza Fazl Ali and Rajinder Narain, for respond: ent No. 1.
- 1954. April 14.. The Judgment of the Court was delivered by
- Bose J—This ‘is a: - plaintif’s appeal’ in a suit for redemption of what the plaintiff calls-a mortgage dated 15th April, 1930. The-only quéstion for determination is whether this is 4 mortgage by conditional sale ‘or a sale out and out with'a condition of repurchase: If the former the plaintiff ‘siegeeds. If the latter he i is out of Court.
-The property:: covered by the disputed deed belonged to one Bijai Fanti .who died leaving a. widow Mst. Phaguni and two sons: Siban Tanti:and-Chander «Tanti. On 25th. May, :-1922, ‘Siban ‘ Tanti:alone executed «a
I 1954 Pati ss Chunchun
Sheikh Ebadet Alt and Another
| .
® OMT Sera BL pares
S..R. UPREME COURT REPORTS — 177 decisions on the point and much industry has been 1954 expended in some of the High Courts in collating and ; analysing them. We think that is a fruitless task Cn the ‘because two documents are seldom expressed in identi- v.
eal terms and-when it is necessary: to consider the Sheikh Ebadat Ali. attendant circumstances the imponderable variables 4 Another. which that brings .in-its.train make it impossible to Bow J compare one case with another. Each must be decided *°"“" on its own facts. But certain broad principles remain.
- The first is that the intention of the parties is the determining factor: see Balkishen Das v. Legge('). 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. As Lord Cranworth said in Alderson v. White (?):
“The rule of law on this subject is one dictated by commonsense; that prima facie an absolute con-:. veyance, 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 bécome — a mortgage merely because the vendor stipulates that ; he shall have a right to repurchase............ .-Inevery: >. | , such case the question is, what, upon a fair construc. : tion, is the meaning of the instruments ? ” -
Their Lordships of the Privy Council applied this rule to India in Bhagwan Sahai v. Bhagwan Din(*) and in. Jhanda Singh v. Wahid-ud-din (*). -
The converse also holds good and if, on. the face of it, an instrument elearly purports to be a mortgage it cannot be turned into a sale by reference to a host of
(1) 27 LA. 58, (3) 17 LA. 98 at toz. {2) 44 E.R. g24 at 928. (4) 43 LA. 284 at 293. 23 —
S.C.R. SUPREME COURT REPORTS 177 decisions. on the point and much ‘industry has ~been expended in some . of the.High Courts in- collating and analysing them. We think that is a fruitless. task because two documents are seldom expressed. in-identical terms and when it is necessary to ‘consider the attendant circumstances the _ imponderable . variables which. that brings in its. train make it. impossible to compare one case with another. Each must be decided on its own facts.. But certain broad principles remain. The first is that the intention of the parties - is the determining factor : see Balkishen Das v. Legge(* )., 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. As . Lord .Cranworth said in Alderson v. White (* )+
“The rule-of law on this subject is one dictated by commonsense; 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......... -. In every such case the question is, what, upon a fair ,construction,., is the meaning of the instruments ?” Their Lordships of the Privy Council applied this rule to. India in Bhagwan Sahai v. Bhagwan Din ) and in Jhanda Singh v. Wahid-ud-din(‘). The-converse also - holds good and if,. on. ‘the face of it, an instrument..clearly «purports to bea mortgage: it cannot be. turned into-a‘sale by reference. to a-host: of
(1) 27 A58.. » oe tev (3) 17.1. A. 98 at 102. > 0) #4 BR: 924 at 928. Lone. 1, 43 T, A, 284 at 293.
_ Pandit Chunchun Fha v. Sheikh Ebadat Ali and Another.
Bose-F.
Pandit Chunchvun Sha
Sheikh Ehbadat Ali and Another.
Bose F.
178 SUPREME COURT REPORTS [1955]
extraneous and’ :.. irrelevant : ‘considerations. - Difficulty only arises’ in : the’.‘border.: line! cases wheré’ there‘ is ambiguity. Unfortunately, ‘they form the -bulk- of this kind of transaction. ~~. ‘+ cet yt
Because of the welter’ of confusion’ caused by: ‘a multi tude of ‘conflicting ‘decisioris ‘the Legislature’ stepped ‘i and ‘amended section 58(¢) of thé’ 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 -carinot be a mortgage whether ‘the ‘documents are’ contemporaneously: executed or ‘not. But the converse‘ does not hold good, that is to say, the meré 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 éffect 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 mot: 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.
The ‘document: with which are “concerned, ‘Exhibit A,-is inthe following -terms and our first duty ‘is to construe the language used ‘and see’ whether’ it’ is’ ambiguous. - (We: have" paragraphed the document for ‘¢onvenience of construction’ and Have” omitted “unnecessary words).: boa Pre ng ‘
(1) “Rs. 634” principal ‘with’ interést under a’ registered rehan bond” (siniple" mortgage) “dated the’ 6th May; * 1927, is justly’ dues, .'2 ivby us: the” -executants. Now wefurther: require: Rs. 65-60 mofe-to meet ‘costs of the:suit under'section 40.” (Bihar Tenaricy Act). |
(2): “and! at (present there is no other way :in view rather it seems impossible and difficult to arrange for aA
S.C.R. SUPREME COURT REPORTS 179 the ‘money without selling the property let’ out in rehan” (simple mortgage) “under the above mentioned bond.” Sa 7
(3) “Therefore, we the executants.........declare vesseessess that wé.,....sold and vended the ‘properties -detailed below on condition (given below) for a fair and just price of Rs. 700..........
(4) “That we set off Rs. 634-10-0 against the -consideration money” (torn) “payable under the aforesaid bond in favour of the said vendee ‘and received Rs. 65-6-0 in cash from the said vendee. In this way ‘the entire consideration money was realised from the said vendee.”
(5) “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.”
(6) “If we, the executants, shall repay the con- ‘sideration money to the said vendee within two years beeeeeeeee ...the property vended under this deed of condi- ‘tional 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 possession and occupation thereof, generation after generation, and -he shall appropriate ‘the produce thereof.” oo,
(8) “We, the executants, neither have nor shall have any objection whatsoever in respect of the vended property and the consideration money. Perchance if ‘we do so it shall be deemed null and void in Court.”.
(9) “and we declare also that the vended - ‘property is flawless in every way and that if in future any. kind -of defect whatsoever be found on account of which the said vendee be dispossessed of a portion or the entire property vended under this deed of conditional sale and will have to pay the loss or damage, in that event -we, the executants;
’ (a) shall ‘be liable to be prosecuted under “the -criminal procedure, and
(b) we shall pay the ‘entire conéideration money ‘together with loss and damage and interest’ at the rate -of Rs. 2 per mensem per hundred rupees ‘from the ‘date
Pandit Chunchun Jha
Vv. Sheikh Ebadat Ali and Another.
Bose F.
Pandit Chunchun. F},a- v. ‘Sheikh Ebadat Ali and Another Bose 5.
180 SUPREME COURT REPORTS [A955]
of the execution. of this, deed,-till the date of ‘tealisation from:.our, person. and other properties... - bee (c) and we shall not claim the produce’ of the vended property for the period of vendee’s, , _ Possession against’ ‘the said vendee or his’ heirs and representatives.” (10): “Therefore we,, the executants..../...... -have executed this deed of conditional ‘sale so that’ it _ may be of v use in future.” _ In’ our’ ‘opinion. this Tanguage. i is not free from .difficulty , and is ambiguous.. The deed. purports to be .a sale and, has the outward form of.one but at the . same.
tume it’ calls itself a “conditional sale”, . It, has, however, no clause’ for retransfer and instead says (clause 6) that if the executants, pay the money within two years, the property “shall come in exclusive possession, and occupation of us, the executants”. ' That is clear about _ the possession but is silent about the title. In the context we can’ only take these words to, mean that if there is payment within ‘the ‘specified time, then the title will continue to ‘reside in the’ executants; ‘for what else can’ a ‘right’ of exclusive” possession import in ‘these circumstances r
Tt is’ relevant to note in passing © that this silence about’ title” would ‘be proper in a mortgage, for there: thé “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 reconveyanice.” Clause (7) ‘appears’: to underline: this because’ it couples: the transferee’s “right to remaiii'.’in possession ‘and occupation and to” appropriate :the' produce: “generation after generation”’ with the ‘non-payment of the-money: within the time set: out. Tt.is' true the’ words of conveyance ‘in the. earlier part of the deed -(clause'5) would pass: an- absolute title if they stood ‘alone but the document-must be -read’ as -a whole and: it -must.‘also be. remembered that “it was executed by ignorant rustics and scribed by a: man whose. knowledge-., of, conveyaneing-: was, on the face of it, rudimentary and defective. The deed lacks. the precision, of. a, practised . hand .and. that: probably .. accounts for. its: ambiguities : “that. therp ” is ambiguity 7 AS™ "patent from -what.we have. said... ae os of’
“-S.G:R. SUPREME COURT REPORTS ist
"The next step is to see whether the document is 1954
, covered. by section 58(c) of the Transfer of Property —
- Act, for, if it is not, then it cannot be a mortgage by Ch Pandit Jha conditional sale. The first point there is to see whether uy
' there is an ‘‘ ostensible sale.”’ That means a transaction sheikh Ebadat Ali which takes the outward form of asale,for the essence and Another. of.a mortgage by -conditional sale is that though in substance it is a mortgage it is couched in the form of asale with certain conditions attached. The executants clearly purported to sell the property in clause (5) because they say so, therefore, if the transaction is not in substance a mortgage, it is unquestionably a sale: an actual sale and not merely an ostensible one. But... if it is a mortgage, then the condition about an “‘osten- __ sible sale ”’ is fulfilled.
We next turn to the conditions. The ones " relevant to the present purpose are contained in ¢Glauses (6) and (7). Bothare ambiguous, but we have already said that on a fair construction clause (6) means that if the money is paid within the two years then the possession will revert to the executants with the result that the title which is already in them will continue to reside there. The necessary consequence of that is that the ostensible sale becomes void. Similarly, clause (7), though clumsily worded, can only mean that if the money is not paid, then the sale shall become absolute.. Those are not the actual words used but, in our opinion, that is a fair construction of their meaning when the document is read asa whole. Ifthatis what they mean, « as we hold they do, then the matter falls squarely ; within the ambit of section 58(c). - f
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.
There are no express words here which say that this is not a mortgage but there is ambiguity, so we must probe further. The respondents, who claim that this
Bose J.
Pandit Chunchun Sha v. Sheikh Ebadat Ali and Another. Bose 9.
182 SUPREME COURT REPORTS ['1955} is a.sale.-and not .a .mortgage,, rely on- the following circumstances, They are val. ‘culled from the. -deed itself.: « , 4, nt 7
7 First, ‘they poirit to » clase 6) which: says: hat’ the transferee has bee miaile the ‘absolute proprietor’ in place of ‘the executants. "Those, they ~ say, ‘are «the ‘operative’ words and: point’ to aii out and _ out”: transfer of title. Next, they point to clause (2) whére’ the ‘executants -say that-they have no other:means of raising ‘ the money“they want except by selling the ‘ property. The respondents argue that the word “sale” could’ ‘not: have been used inadvertently because -it-‘‘is’ contrasted - with a mortgage in ‘the ' very: ‘same ‘sentence. The‘ word “mortgage” ‘is also’-'used in clause (1);- therefore’ it is clear that when a mortgage is intended’ the - word “mortgage” is -used. Jt'must follow that -. when ‘the word “sale”. is-. used,--a sale must have been meant. The only weakness in-this argument is- that- when a mortgage is by conditional sale this is the form it has to take,.-because section 58(c) postulates. that there must be an: “ostensible sale” -.and-if.a sale. is -ostensible it must: necessarily :contain all the outward -indicia «of a real sale. The. question.: we are considering can only atise when the word “sale” ‘is used and, . of course; a sale imports a transfer of title. “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. , oS
The learned, counsel for the respondents. next relied on the. fact that clause : (3). says that the price paid was a “fair and just” one.and that the ..Courts below, have found that the consideration was. not inadequate. . He also relies on the fact that . no interest was, -charged, that the transferee was . placed in possession of the propetty and ‘was not''to‘account ‘for the’ usifruct ; ‘also on the ‘fact’ that ‘a short® term," “namely two. years, § was fixed fof’ repayment: ~ vie.
aA
S.C.R.. SUPREME COURT REPORTS 183
But on the other side, there is the very significant fact that Rs. 65-46-0 was borrowed to enable the executants to carry on commutation. proceedings under section 40 of the Bihar Tenancy Act (that is, for substitution of a cash rent instead of one in kind) - in respect of this very property: (clause 1). It was- admitted before us, and the lower Courts so find, that the commutation proceedings related to this very land. The learned High Court Judges discount this by saying that there is no evidence to show that the proceedings, which were started in 1929, continued after the deed. But that is a mistake apparently due to the fact that the copy of the entry in the Rent Schedule, produced before the learned Judges, inadvertently omitted the date. Mr. N. C. Chatterjee produced a certified copy of the revenue record here and that gives the missing date. From that it is clear that the proceedings continued till 18th February, 1931, that is to say, for some ten months after the deed. This, we think, is crucial. Persons who are selling their property would hardly take the trouble to borrow money in order to continue revenue proceedings which could no_ longer benefit them and could only enure for the good of their transferees.
There is another point in favour of the appellant, and that is that the surrounding circumstances show that 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 6th May,. 1927. In those circumstances, seeing that the deed takes the form of 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 point made on behalf of the respondents about the adequacy of the consideration and the absence of interest can be explained. The transferee was to take possession of the property and would thus get the produce and it is evident to us from the tenor of the document that he was not to be accountable for it.
Pandit Chunchun Fha v.
Sheikh Ebadat Ali and Another.
Bose .
Pandit . Chunchum Fha
Sheikh Ebadét Ali and. Another’
Bose 3:
184. SUPREME COURT: REPORTS: [1955]
We: say this. because the. ‘indemhity". “clause! (clause 9) says in ‘sub-clause’ (b)+ that inthe - event ‘of the transferee’s possession. being ‘disturbed. the executants - would among other: things, * pay him, ‘in--addition to damages, the .-entire ; consideration’ together.": with’ interest «'at’.2 per cent. per month from the date of the deed and:would not require the- transferee to account :for-the usufruct. It is true this .can also be- read’ the othér - way but considering these. very.drastic provisions -as also... the threat of a‘ criminal. prosecution in .sub-clause « (a), - we-:think the transferee was out to: exact “more than -his’ pound:of flesh from the unfortunate ..rustics -with. whom he was dealing::and that he would not ‘have :agreed ‘to ‘account for the profits :-indeed that is: his own case, for: he-says that this: -was a sale. out and -out. In these’ circumstances; there would be no:need'to:keep a’ reasonable margin: .between the debt ..and:ithe value of the: property as.is ordinarily done in’ the case -of a mortgage: Taking everything into consideration, werare of-opinion that the: deed :is'.a -:mortgage..: by conditional sale..~under ‘- “'section. 58(c) © of the. Transfer: of. Property Act. 84 0° " . The appeal'is allowed: The decrte-of the’ High’ ‘Court is set-aside ‘and “that “‘of the’ lower’ appellate * ‘Court i is restored except as to costs. ~ The original owners of thé Property have lost it., The valine of the property was put at "over Rs. ' 10 ,000 the" special leave petition. ‘The second defendani’ ousted the’ original owners by géttitig a’ mortgage décree for Rs." 130 ‘ih ‘his ‘favour on a mortgage ‘of only Ry 25 and purchasing it at the auction himself. * He ‘is “no longer iti ‘the pictute as’ he sold“ it to the’ plaintit ’ for Rs. 400. The Plaintiff has accordingly’ obtained propetty which” of his: own showing is’ worth ‘more . than ‘Rs. 10,000 for’ only Rs. 400. The’ first, defendant ‘spent only Rs. 250 plus ‘Rs. 65:60 off" it: | Rs, 345.60 ‘and the consideration of the disputed deed is’ only" ‘Rs, “700. It ‘is evident that both sides’ are " speculators.". Ta’ the circumstances * ‘wei: direct that’ cach party bgar “its “own Costs.
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