IMPORTANT POINT
Transaction shall not be held to be mortgage by conditional sale unless a condition is embodied in document which effects or purports to effect the sale.

Headnote:Transfer of Property Act, 1882 — Section 58(c) — Mortgage by way of conditional sale — Transaction shall not be held to be unless a condition is embodied in the document which effects or purports to effect the sale — Where two documents are executed, transaction in question would not amount to a mortgage by conditional sale — Appellants executed sale deed in favour of respondents on 29-11-1966 for a sum of Rs. 600/- — Sale deed was registered on 17-12-1966 and on same day an agreement of reconveyance was executed whereby respondents agreed to convey property back to appellant after five years on receipt of amount of consideration — Suit for specific performance by appellants as respondents neglected to act in terms of said agreement — Suit was decreed — First appellate Court set aside decree holding that appellants were not ready and willing to perform their part of contract — In second appeal High Court opined that document of reconveyance was part and parcel of same transaction and being compulsory registerable, same was not admissible in evidence for want of registration — Appeal — Deed executed by appellant in favour of respondent was a deed of absolute sale — Purported agreement of reconveyance was executed by only one of the two vendees — Matter needed to be remitted to First Appellate Court for consideration afresh on said question.
       Held : By reason of the sale deed dated 29.11.1966, the respondents obtained possession of the entire suit property. The property was transferred absolutely so as to enable the vendee to use the same till their life time as also by their legal representatives. Appellants declared that they would have no right, title and interest in the said land, nor they would have ownership right and in case anyone claimed any such right, the same would be treated as cancelled. An easementary right was also conveyed. It was stipulated that the land was not encumbered as the mortgage which had been created in respect of the said land, has been redeemed and in the event “anything is found”, ‘they would be responsible for the same’. (Para 9)
       Proviso to Section 58(c) is clear and unambiguous. A legal fiction is created thereby that the transaction shall not be held to be a mortgage by conditional sale, unless a condition is embodied in the document which effects or purports to effect the sale. Where two documents are executed, the transaction in question would not amount to a mortgage by way of conditional sale. In a case of this nature, ordinarily the same would be considered to be a deed of sale coupled with an agreement of reconveyance. (Para 12)
       In the instant case, no relationship of debtor or creditor came into being. No security was created and in fact conveyance of the title of the property by the respondent to the appellant was final and absolute. (Para 17)
       It has further been brought to our notice that whereas the Deed of Sale was executed in favour of two persons; the purported agreement of reconveyance has been executed by only one of the vendees, namely, Raghunath Revaji Patil, who has been described as ‘Benami’; but the same has not been proved. The High Court did not go into the aforementioned question stating :
       “20. Once, this issue is answered in the negative, the issue, whether execution by Defendant No. 1 alone (Defendant No. 2 has not signed the reconveyance deed) would obstruct the court from granting a decree for specific performance of reconveyance, is not required to be considered since, a finding favourable to appellant on that issue is not going to make any favourable impact on the conclusion of the appeal.” (Para 20)
       We, therefore, are of the opinion that the interest of justice will be subserved if the matter is remitted to the First Appellate Court for consideration of the matter afresh on the said question. The impugned judgments cannot be sustained and are set aside accordingly. The Appeal is allowed and the matter is remitted to the First Appellate Court for consideration of the matter afresh. (Para 21)

JUDGMENT

S.B. Sinha, J. — Leave granted.

2. Appellants herein were owners of land bearing Survey No.198/3/2 admeasuring 2 acres at Village Waghad. They, being in need of money, approached the respondents. On negotiations having been held in that behalf by and between the parties, a deed of sale was executed by the appellants in favour of the respondents on 29.11.1966 for a sum of Rs.6,000/-. However, the said deed was registered on 17.12.1966. On the same day an agreement of reconveyance was also executed in terms whereof the respondents agreed to convey the property back to the appellants herein after five years on receipt of the amount of consideration specified therein. As the respondents failed and/or neglected to act in terms of the said agreement of reconveyance, a suit for specific performance was filed by the appellants herein against the respondents.

3. The said suit was decreed. However, on an appeal preferred thereagainst by the respondents, the First Appellate Court, inter alia, held that the appellants herein were not ready and willing to perform their part of contract. The First Appellate Court, however, rejected the contention of the respondents that time was of the essence of contract. The appeal was allowed, stating :

“To sum up, the agreement of reconveyance (exhibit 31) was the part and parcel of the agreement of sale evidence by the sale deed (exhibit 30), and for want of registration the plaintiff No. 2 Pandharinath did not acquire any right on the basis of the said agreement of reconveyance. Moreover, the said agreement of reconveyance is left vague on vital and important points discussed above. Respondent No. 3 Vijayabai was not a party to the said agreement of reconveyance and it was not signed, by her. We have also seen above that the plaintiffs were not ready and willing to perform their part of contract. On all these points, the learned Judge ought to have dismissed the suit for specific performance. Relying on all these circumstances discussed above, I do find that the plaintiffs are not entitled to claim a decree for specific performance. Relying on all these circumstances discussed above, I do find that the plaintiffs are not entitled to claim a decree for specific performance of contract.”

4. In the Second Appeal filed by the appellants herein being aggrieved by and dissatisfied with the said judgment, the High Court also opined that as the document of reconveyance was part and parcel of the same transaction and being compulsorily registerable; for want of registration, the same was neither admissible in evidence nor enforceable through a court of law.

5. Mr. Chinmoy Khaladkar, the learned counsel appearing on behalf of the appellants, would submit that keeping in view the fact that the deed of sale was executed on 29.11.1966, and the agreement of reconveyance was executed on 17.12.1966, the same was not required to be registered.

6. Mr. S.V. Deshpande, the learned counsel appearing on behalf of the respondents, on the other hand, submitted that although the sale deed was executed on 29.11.1966, but having been registered on 17.12.1966 itself on which date the agreement of reconveyance was executed, the same must be held to be a part of the same transaction and, thus, was compulsorily registerable.

7. In this connection, our attention was drawn to the agreement of reconveyance dated 17.12.1966, the relevant portion whereof reads as under :

“I, above referred vendee write down that you above referred vendor are selling the land to me for 6,000/- upon the condition that after cultivation for 5 years this particular land would be reconveyed to Pandrinath Ukhardu Patil as soon as he repays the amount i.e. 6,000/-

But within 5 years all the earnings of the land would be enjoyed by me as an interest.”

8. The basic fact of the matter is not in dispute. Two documents were executed on different dates and at different places. Whereas the deed of sale was executed at Tal. Raver, the purported

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2007 Supreme(SC) 201

IMPORTANT POINTTransaction shall not be held to be mortgage by conditional sale unless a condition is embodied in document which effects or purports to effect the sale.

Cases Referred (4)

IMPORTANT POINT
Transaction shall not be held to be mortgage by conditional sale unless a condition is embodied in document which effects or purports to effect the sale.