1999 Supreme(SC) 327

SUPREME COURT OF INDIA
VIDHYADHAR
Versus
Mankikrao
Decided on : March 17, 1999

The intention of the parties is the basic principle in determining whether a transaction is a sale or a mortgage. If the intention of the parties was that the transfer was by way of security, it would be a mortgage. The form of transaction is not the final test in determining whether a transaction is a sale or a mortgage. The true test is the intention of the parties in entering into the transaction. A sale deed is not invalid on account of non-payment of the whole of the price at the time of the execution of the deed. 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. 100.00, the sale would be complete. Where the ownership of the property has passed to the buyer before payment of the whole of the purchase money, the vendor is entitled to a charge upon the property in the hands of the buyer, any transferee without consideration or any transferee with notice of 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 on which possession has been delivered.

Headnote:

TRANSFER OF PROPERTY ACT - SECTION 54, 55(4)(B), 58(C) - MORTGAGE BY CONDITIONAL SALE - SALE DEED - VALIDITY - CONSIDERATION - PAYMENT - PART PAYMENT - INTENTION OF PARTIES - STATUTORY CHARGE - REDEMPTION SUIT - FINDINGS OF FACT - INTERFERENCE BY HIGH COURT IN SECOND APPEAL. The High Court erred in setting aside the concurrent findings of fact recorded by the trial court and the lower appellate court on the question of the validity of the sale deed executed by defendant No. 2 in favor of the plaintiff, on the ground that the full amount of consideration was not paid by the plaintiff to defendant No. 2. The findings of fact recorded by the lower courts were based on evidence on record and were not perverse or based on no evidence. The High Court could not have legally upset the findings of fact in a second appeal under Section 100 of the Code of Civil Procedure (CPC) 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.

Fact of the Case:

Defendant No. 2 executed a document styled as "kararkharedi" in favor of defendant No. 1 for a sum of Rs. 1500.00 and delivered possession thereof to the latter. There was a stipulation in the document that if the entire amount of Rs. 1500.00 was returned to defendant No. 1 before 15th of March, 1973, the property would be given back to defendant No. 2. This land was subsequently transferred by defendant No. 2 in favor of the plaintiff for a sum of Rs. 5,000.00 by a registered sale deed dated 19-6-1973. After having obtained the sale deed, the plaintiff filed a suit for redemption of the mortgage by conditional sale or in the alternative for a decree for specific performance of the contract for repurchase which was decreed by the trial Court on 29-4-1975. The decree was upheld by the Lower Appellate Court by its judgment dated 28-9-1976 but the High Court, by the impugned judgment dated 3-5-1991, set aside both the judgments and passed a unique order to which a reference shall be made presently in this judgment. The plaintiff is in appeal before us.

Finding of the Court:

1. The document executed by defendant No. 2 in favor of defendant No. 1 was a mortgage by conditional sale and not an out and out sale. 2. The sale deed executed by defendant No. 2 in favor of the plaintiff was a valid sale deed which properly conveyed the title of the property in question to the plaintiff. 3. The plaintiff had paid the entire amount of sale consideration to defendant No. 2. 4. Defendant No. 1 was not entitled to raise the plea relating to inadequacy or non-payment of consideration money as he was a stranger to the sale deed.

Issues: 1. Whether the document executed by defendant No. 2 in favor of defendant No. 1 was a mortgage by conditional sale or an out and out sale? 2. Whether the sale deed executed by defendant No. 2 in favor of the plaintiff was a valid sale deed? 3. Whether the plaintiff had paid the entire amount of sale consideration to defendant No. 2? 4. Whether defendant No. 1 was entitled to raise the plea relating to inadequacy or non-payment of consideration money?

Ratio Decidendi: 1. The intention of the parties is the basic principle in determining whether a transaction is a sale or a mortgage. If the intention of the parties was that the transfer was by way of security, it would be a mortgage. 2. The form of transaction is not the final test in determining whether a transaction is a sale or a mortgage. The true test is the intention of the parties in entering into the transaction. 3. A sale deed is not invalid on account of non-payment of the whole of the price at the time of the execution of the deed. 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. 100.00, the sale would be complete. 4. Where the ownership of the property has passed to the buyer before payment of the whole of the purchase money, the vendor is entitled to a charge upon the property in the hands of the buyer, any transferee without consideration or any transferee with notice of 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 on which possession has been delivered.

Final Decision: Appeal allowed. The impugned judgment passed by the High Court is set aside. The judgment and decree passed by the trial Court as upheld by the Lower Appellate Court are restored but without any order as to costs.