1999 Supreme(SC) 326

1999(3) Supreme 102
Supreme Court of India
(From Bombay High Court)
S. Saghir Ahmad & D.P. Wadhwa, JJ.
Vidhyadhar -Appellant
versus
Mankikrao & Anr. -Respondents
Civil Appeal No. 1534 of 1999
(Arising out of SLP (C) No. 25143/96)
Decided on 17-3-1999
Counsel for the Parties :
For the Appellant : S.K. Gambhir, Advocate.
For the Respondents : Makrand D. Adkar, S.D. Singh, Vishwajit Singh, Advocates.

Important Points
1. Where a party to the suit does not appear into the witness box and states his own case on oath and does not offer himself to be cross examined by the other side, a presumption would arise that the case set up by him is not correct.
2. It is open even to a stranger to impeach a sale deed as void and invalid in a suit against him by the purchaser of a property.
3. Merely because one of the defendants whose name was not mentioned in the list of witnesses was examined as his witness by the plaintiff, testimony of that witness could not be doubted on ground that he was produced as a witness without being summoned through the Court and without his name being mentioned in the list of witnesses.
4. Actual payment of whole of the price at the time of the execution of sale deed is not a sine qua non to the completion of the sale. Even if the whole of the price is not paid but the document is executed and thereafter registered, if the property is of the value of more than Rs. 100/-, the sale would be complete.
5. For the purpose of determining whether a transaction is mortgage by conditional sale or out and out sale the true test is the intention of parties entering into the transaction; 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 document in the light of surrounding circumstances.

Headnote:(i) Code of Civil Procedure, 1908-Order 34 read with Section 54 of Trans­fer of Property Act, 1882-Suit for redemption-Mort­gagor sold proper­ty-Vendee filed suit for redemption-Mort­gagee’s plea that transfer fictitious as vendee had not paid entire consi­deration - Vendor-mortga­gor support­ed claim of plaintiff-vendee-Mortgagee not witness to sale deed nor had personal knowledge about sale transaction-Vendor mortga­gor alone could have raised plea as to validity - Mortgagee abstained from entering into witness box-Adverse inference arises against case set up by him-Concurrent finding of trial Court and lower appellate Court that sale was gen­uine and vendee entitled to redeem property-High Court not justified in reversing finding.

       Held : It was defendant No. 1 who contended that the sale deed, executed by defendant No. 2 in favour of the plaintiff, was fictitious and the whole transaction was a bogus transaction as only Rs. 500/- were paid as sale consi­deration to defendant No. 2. He further claimed that payment of Rs. 4,500/- to defendant No. 2 at his home before the registration of the deed was wholly incorrect. This plea was not supported by defendant No. 1 as he did not enter into the witness box. He did not state the facts pleaded in the written statement on oath in the trial Court and avoided the witness box so that he may not be cross examined. This, by itself, is enough to reject the claim that the transaction of sale between defendant No. 2 and the plaintiff was a bogus transaction. (Para 14)

       Where a party to the suit does not appear into the witness box and states his own case on oath and does not offer himself to be cross examined by the other side, a presumption would arise that the case set up by him is not correct. (Para 15)

       Defendant No. 1 himself was not a party to the transaction of sale between defendant No. 2 and the plaintiff. He himself had no personal knowledge of the terms settled between defendant No. 2 and the plain­tiff. The transaction was not settled in his presence nor was any payment made in his presence. Nor, for that matter, was he a scribe or marginal witness of that sale deed. Could, in this situation, defendant No. 1 have raised a plea as to the validity of the sale deed on the ground of inadequacy of consideration or part-payment thereof? Defendant No. 2 alone, who was the executant of the sale deed, could have raised an objection as to the validity of the sale deed on the ground that it was without consideration or that the consideration paid to him was highly inadequate. But he, as pointed out earlier, admitted the claim of the plaintiff whose claim in the suit was based on the sale deed, executed by defendant No. 2 in his favour. The property having been transferred to him, the plaintiff became entitled to all the reliefs which could have been claimed by defendant No. 2 against defendant No. 1 including redemption of the mortgaged proper­ty. (Para 16)

       The property which was mortgaged in favour of defendant No. 1 was transferred by defendant No. 2, who was the owner of the property, to plaintiff. This transfer does not, in any way, affect the rights of defendant No. 1 who was the mortgagee and the mortgage in his favour, in spite of the transfer, subsisted. When the present suit for redemption was filed by the plaintiff, defendant No. 2, as pointed out above, admitted the claim of the plaintiff by filing a one-sentence written statement that the claim of the plaintiff was admitted. When the plaintiff entered into the witness box, defendant No. 2 did not cross examine him. He did not put it to the plaintiff that the entire amount of consideration had not been paid by him. Defendant No. 1 alone raised the question of validity of the sale deed in favour of the plaintiff by pleading that it was a fictitious transaction as the sale consideration had not been paid to defendant No. 2 in its entirety. Having pleaded these facts and having raised the question relating to the validity of the sale deed on the ground that the amount of consideration had not been paid, defendant No. 2 did not, in support of his case, enter into the witness box. Instead, he deputed his brother to appear as a witness in the case. He did enter into the witness box but could not prove that the sale consideration had not been paid to defendant No. 2. On a consideration of the entire evidence on record, the trial Court recorded a positive finding of fact that the sale deed, executed by defendant No. 2 in favour of the plaintiff, was a genuine document and the entire amount of sale consideration had been paid. This finding was affirmed by the Lower Appellate Court but the High Court intervened and recorded a finding that although the property which was mentioned to have been sold for a sum of Rs. 5,000/-, the plaintiff had, in fact, paid only Rs. 500/- to defendant No. 2. The amount of Rs. 4,500/- which was indicated in the sale deed to have been paid to defendant No. 2, prior to registration, was not correct. It was for this reason that the High Court while redeeming the property directed that the amount of sale consideration which was paid by the plaintiff to defendant No. 2 shall be returned by defendant No. 2 and the property would revert back to him. (Para 20)

       The findings of fact concurrently recorded by the trial Court as also by the Lower Appellate Court could not have been legally upset by the High Court in a second appeal under Section 100 C.P.C. unless it was shown that the findings were perverse, being based on no evidence or that on the evidence on record, no reasonable person could have come to that conclusion. (Para 21)

       (ii) Indian Evidence Act, 1872-Section 114-Presumption of facts -Adverse inference-Party to suit abstaining from entering witness box-Adverse inference against him would arise that case set up by him is not correct.

       Held : Where a party to the suit does not appear into the witness box and states his own case on oath and does not offer himself to be cross examined by the other side, a presumption would arise that the case set up by him is not correct. (Para 15)

       (iii) Transfer of Property Act, 1882-Section 54-Sale-Validity of transac­tion-Right of stranger to sale deed to question validity-Mortgagor sold property to plaintiff -Suit for redemption-Defendant-mortgagee’s plea that entire consi­deration not paid to vendor by plaintiff vendee and sale was fictitious-Whether plea entertainable? -Yes-Defendant can raise any legi­timate plea available to him under law to defeat suit-This would also include that sale deed by which title was in­tended was void, fictitious or collusive.

       Held : A person in his capacity as a defendant can raise any legitimate plea available to him under law to defeat the suit of the plaintiff. This would also include the plea that the sale deed by which title to the property was intended to be conveyed to plaintiff was void or ficti­tious or, for that matter, collusive and not intended to be acted upon. Thus, the whole question would depend upon the pleadings of the parties, the nature of the suit, the nature of the deed, the evidence led by the parties in the suit and other attending circumstances. For example, in a landlord-tenant matter where the landlord is possessed of many properties and cannot possibly seek eviction of his tenant for bona fide need from one of the properties, the landlord may ostensibly transfer that property to a person who is not possessed of any other property so that that person, namely, the transferee, may institute eviction proceedings on the ground of his genuine need and thus evict the tenant who could not have been otherwise evicted. In this situation, the deed by which the property was intended to be trans­ferred, would be a collusive deed representing a sham transaction which was never intended to be acted upon. It would be open to the tenant in his capacity as defendant to assert, plead and prove that the deed was fictitious and collusive in nature. (Para 19)

       (iv) Code of Civil Procedure, 1908-Order 16, Rules 1(3) and 1A -Production of witness without summons-Plaintiff examined one of the defendants as his witness-Name of witness not incorporated in list of witnesses-Nor application made for examination of the witness-­Wheth­er Testimony of witness can be doubted on ground that he was not summoned through Court-No-Rules 1 and 1A operate in two different areas.

       Held : Rules 1 and 1A of Order 16 read together clearly indicate that it is open to a party to summon the witnesses to the Court or may, without applying for summons, bring the witnesses to give evidence or to produce documents. Sub-rule (3) of Rule 1 provides that although the name of a witness may not find place in the list of witnesses filed by a party in the Court, it may allow the party to produce a witness though he may not have been summoned through the Court. Rule 1A which was introduced by the Code of Civil Procedure (Amendment) Act, 1976 with effect from 1.2.1977 has placed the matter beyond doubt by providing in clear and specific terms that any party to the suit may bring any witness to give evidence or to produce documents. Since this Rule is subject to the provisions of Sub-rule (3) of Rule 1, all that can be contended is that before proceeding to examine any witness who might have been brought by a party for that purpose, the leave of the Court may be necessary but this by itself will not mean that Rule 1A was in derogation of Sub-rule (3) of Rule 1. Sub-rule (3) of Rule 1 and, Rule 1A operate in two different areas and cater two different situations. In view of the above, even though the name of Defendant No. 2 was not mentioned in the list of witnesses furnished by the plaintiff, he was properly examined as a witness and his testimony was not open to any criticism on the ground that he was produced as a witness without being summoned through the Court and without his name being mentioned in the list of witnesses. (Paras 27 & 28)

       (v) Transfer of Property Act, 1882 -Section 58(c)-Mortgage by conditional sale-Mortgage or out and out sale-Test-Form of tran­saction is not final test-True test is intention of parties entering into transaction-Intention has to be found out on consideration of con­tents of documents in the light of surrounding circumstances.

       Held : The Proviso to Section 58(c) 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. (Para 43)

       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. 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 document in the light of surrounding circumstances. (Para 44)

       In the instant case, the document is headed as MORTGAGE BY CONDI­TIONAL SALE (KARAR­KHAREDI). It is mentioned in this deed that the immovable property which was described in areas and boundaries was being mortgaged by conditional sale in favour of defendant No. 1 for a sum of Rs. 1500/- out of which Rs. 700/- were paid at home while Rs. 800/- were paid before the Sub-Registrar. The further stipulation in the deed is that the aforesaid amount of Rs. 1500/- would be returned to defendant No. 1 on or before 15th March, 1973 and the property would be reconvenyed to defendant No. 2. The contents of the document have already been considered above which indicate that defendant No. 2 had executed a mortgage by conditional sale in favour of defendant No. 1. He had promised to pay back Rs. 1500/- to him by a particular date failing which the document was to be treated as a sale deed. The intention of the parties is reflected in the contents of the document which is described as a mortgage by conditional sale. In the body of the document, the mortgage money has also been specified. Having regard to the circumstances of this case as also the fact that the condition of repurchase is contained in the same document by which the mortgage was created in favour of defendant No. 1, the deed in question cannot but be treated as a mortgage by conditional sale. (Paras 41 & 45)

       (vi) Transfer of Property Act, 1882-Section 54 read with Section 55(4)(b) - Sale - Validity of-Mortgagor selling property for Rs. 1500-Vendee filing suit for redemption-Mortgagee’s plea that only Rs. 500 paid to vendor by vendee and sale was bogus-Vendor admitted sale to vendee-Sale valid-Actual payment of whole of price at time of execution is not sine qua non to completion of sale-Further Sec­tion 55(4)(b) would take care of such a situation.

       Held : The definition of sale in Section 54 of T.P. Act 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. The words “price paid or promised or part-paid and part-promised” indicate that actual payment of whole of the price at the time of the execution of sale deed is not a sine qua non to the completion of the sale. Even if the whole of the price is not paid but the document is executed and thereafter registered, if the property is of the value of more than Rs. 100/-, the sale would be complete. (Para 32)

       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 presentii or in future. The intention is to be gathered from the recital in the sale deed, conduct of the parties and the evidence on record. (Para 34)

       Applying these principles to the instant case, it will be seen that defendant No. 2 executed a sale deed in favour of the plaintiff, presented it for registration, admitted its execution before the Sub-Registrar before whom remaining part of the sale consideration was paid and, thereafter, the document was registered. The additional circumstances are that when the plaintiff instituted a suit on the basis of his title based on the aforesaid sale deed, defendant No. 2, who was the vendor, admitted in his written statement, the whole case set out by the plaintiff and further admitted in the witness box that he had executed a sale deed in favour of the plaintiff and had also received full amount of consideration. These facts clearly establish that a complete and formidable sale deed was executed by defendant No. 2 in favour of the plaintiff and the title in the property passed to plaintiff. (Para 35)

       Further Section 55(4)(b) obviously applies to a situation where the ownership in the property has passed to the buyer before the whole of the purpose money was paid to the seller or the vendor. Since the title in the property had already passed, even if the balance amount of sale price was not paid, the sale would not become invalid. The property sold would stand transferred to the buyer subject to the statutory charge for the unpaid part of the sale price. (Paras 38 & 39)