Important point
Where registered sale deed was executed after obtaining loan and evidence and circumstances indicated that deed was executed only as security for loan, title and interest will not pass and will remain with owner/vendor, who could repossess the property on repayment of loan.

Headnote:Transfer of Property Act—Plaintiff-respondent executed sale deed in favour of Respondent No. 8 after obtaining a loan of Rs. 400/—An agreement was also executed between parties that if loan amount was repaid within three years, property shall be reconveyed—Respondent failed to repay loan within three years and Respondent No. 8 got her name recorded in Revenue and sold the property to appellants by registered deed—Respondent filed suit for declaration that sale deed executed by him was only a nominal and he continued to be owner of suit land—Trial Court and 1st appellate Court dismissed the suit—High Court in second appeal decreed the suit holding that plaintiff-respondent had title over suit land and on his paying Rs. 400 to respondent No. 8 he shall have right to get possession of suit land—Appeal—High Court rightly concluded that sale deed in question was not in fact a real sale deed but was by way of surety and did not pass title on interest—Evidence on record justified conclusion that sale deed in question was executed only as security for loan—Agreement to reconvey the property will not ipso facto lead to conclusion that sale was not nominal—Findings arrived by High Court called for no interference.
       Held : In our opinion, the High Court has rightly come to the conclusion that the sale deed in question was not in fact a real sale deed but was by way of surety and thus did not pass any right, title or interest in favour of the vendee which is clear from the admission of the vendee/defendant No. 8. We have already extracted the contents of the written statement in paragraphs (supra). We have also perused the document executed by the plaintiffs/respondents herein in favour of Mst. Hasrat Bi. It did not pass any right, title or interest in her favour and in all probabilities the transaction was only by way of loan and the so called sale deed executed by the respondent/plaintiff in favour of Mst. Hasrat Bi was nothing but by way of surety. (Para 12)
       The plaintiff has examined himself as P.W.1. He was severely cross-examined by the counsel appearing for the respective defendants. Nothing could be elicited from P.W. 1 to dislodge his suit claim. From the evidence on record, it is apparent that the respondent’s/plaintiff’s stand is that he has taken Rs. 400/- as loan from defendant No. 8 and the said fact had been admitted by her. Further, it is evident that the respondent and defendant No. 8 agreed that the latter (defendant No. 8) shall re-convey the property to the former on payment of Rs. 800/-. According to the appellant/defendant, the outer time limit for such re-conveyance is 3 years whereas the plaintiff has not stated anything in this regard in the plaint but admitted in his cross-examination that the amount was to be paid within 3 years. From the evidence on record, we are of the opinion that the sale deed in question has been executed only as a security for loan. There is no dispute about the fact that in the year 1958 property was sold to Jagdish for Rs. 400/- and the respondent/plaintiff purchased the said property in the year 1964 for Rs. 700/- and, therefore, sold to defendant No. 8 for a sum of Rs. 400/- on 01.12.1965 is unimaginable. In our opinion, agreement to re-convey the property will not ipso facto will lead to the conclusion that the sale is not nominal and in view of the stand of defendant No. 8 as also of the fact that the property worth Rs. 700/- has been purportedly sold for Rs. 400/-. We are of the considered opinion that the sale deed dated 01.12.1965 did not convey any title to defendant No. 8. It is well settled by catena of decisions that vendor cannot convey to the vendee better title than she herself has. (Paras 17 and 18)

Judgment

Dr. AR. Lakshmanan, J.—The above appeal was filed by the unsuccessful defendants against the final judgment and order dated 06.08.1998 passed by the High Court of Madhya Pradesh at Jabalpur in Second Appeal No. 500 of 1989 whereby the High Court allowed the Second Appeal filed by the respondents/Plaintiff.

2. The short facts of the case are as follows:-

The respondent/plaintiff executed a sale deed in favour of Mst. Hasrat Bi after obtaining a loan of Rs. 400/- and also executed an agreement stating therein that in case she returns Rs. 400/- to Mst. Hasrat Bi within 3 years, property shall be reconveyed to him. The respondent failed to repay the loan within the stipulated period of 3 years. Therefore, Mst. Hasrat Bi got her name recorded in the revenue and sold the property to the appellant Ramlal Shyamlal and one Pyarelal by a registered sale deed for a sum of Rs. 4,000/-. According to the appellants, they came in possession of the property and are cultivating since then.

3. Respondent No. 1 - Phagua filed a suit for declaration that the sale deed dated 01.12.1965 executed by her in favour of Mst. Hasrat Bi was only a nominal sale and she continues to be the owner of the suit land. She also prayed for possession of the suit land. The trial Court held that the registered sale deed dated 01.12.1965 has not been executed nominally and accordingly the trial Court dismissed the suit. The plaintiff/respondent herein filed first appeal before the District Judge who also dismissed the appeal. The respondent filed second appeal before the High Court contending that the Courts below have failed to consider an admission by respondent No. 8/defendant No. 8 - Mst. Hasrat Bi that what was given was a loan committed an error in treating the document dated 01.12.1965 as a sale and not a nominal sale. It was submitted that the conclusion arrived at by both the Courts below are erroneous in law and facts and deserve to be set aside.

4. The High Court admitted the appeal and framed the following substantial question of law:-

“Whether the Court below was right in holding that the sale deed dated 01.12.1965 conveyed the title to respondent No. 8”

5. The learned single Judge of the High Court allowed the appeal and set aside the judgment and order of the courts below and held that the respondent has title over the suit land and on his paying a sum of Rs. 400/- to Mst. Hasrat Bi he shall have right to get possession of the suit land.

6. Being aggrieved by the above judgment and decree passed by the High Court, the above civil appeal was filed by the defendants.

7. We heard Mr. Manoj Swarup, learned counsel for the appellants/defendants and Mr. S.K. Dubey, learned senior counsel for respondent No. 1/plaintiff.

8. Mr. Manoj Swarup, learned counsel for the appellants/defendants submitted as follows:-

a) the High Court was not right in interfering with the concurrent findings of fact under Section 100 CPC;

b) the vendor failed to institute any suit for specific performance in pursuance of a deed of reconveying of the property to him by the vendee;

c) sale-consideration is not alone sufficient ground for interfering by the High Court in the second appeal and for holding that the object of the sale deed dated 01.12.1965 was not to convey the title in the property. He also invited our attention to the relevant pleadings and the evidence on record and also relied on the following decisions and also referred to the provisions of Section 53 of the Transfer of Property Act, 1882:-

1) Mohan Lal vs. Nihal Singh, AIR 2001 SC 2942

2) Thiagarajan and Others vs. Sri Venugopalaswamy B. Koil and Others, (2004) 5 SCC 762

3) Manikkoth Narayani Amma and Others vs. P.C. Kalliani Amma and Others, (2003) 9 SCC 245

4) Makhan Lal vs. Ashrafi Lal and Others, (1997) 9 SCC 604

9. Per contra, Mr. S.K. Dubey, learned senior counsel for respondent No. 1/plaintiff submitted that the High Court has rightly come to the conclusion that the sale deed in question was not in fact a real sale deed

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2005 Supreme(SC) 1364

Important pointWhere registered sale deed was executed after obtaining loan and evidence and circumstances indicated that deed was executed only as security for loan, title and interest will not pass and will remain with owner/vendor, who could repossess the property on repayment of loan.

Cases Referred (2)

Important point
Where registered sale deed was executed after obtaining loan and evidence and circumstances indicated that deed was executed only as security for loan, title and interest will not pass and will remain with owner/vendor, who could repossess the property on repayment of loan.