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1964 Supreme(AP) 15
Andhra Pradesh High Court
Judges : KUMARAYYA, P.CHANDRA REDDY
Duddu Koteswara Rao - Appellant
Versus
Motumarru Sambiah - Respondent
Decided On : 01-25-64
The intention of the parties, as gathered from the language of the documents themselves, is the primary factor in determining whether a transaction is a mortgage by conditional sale or an outright sale with an option to repurchase.
Headnote:
MORTGAGE BY CONDITIONAL SALE - INTERPRETATION OF DOCUMENTS - SALE WITH OPTION TO REPURCHASE - DISTINCTION - INTENTION OF PARTIES - ADEQUACY OF CONSIDERATION - TIME FOR EXERCISE OF OPTION - ESSENCE OF CONTRACT - INDICIA OF SALE - CONSTRUCTION OF DOCUMENTS.
Fact of the Case:
The dispute arose from the interpretation of two documents, Exhibits A-1 and B-1, which were executed in 1925. Exhibit B-1 was a sale deed, while Exhibit A-1 was an agreement to reconvey the property if the purchase price was repaid with interest within a specified period. The plaintiff, who was the transferor under Exhibit B-1, claimed that the transaction was a mortgage by conditional sale, while the defendants, who were the transferees and their alienees, contended that it was an outright sale with an option to repurchase.
Finding of the Court:
The court held that the transaction was an outright sale with an option to repurchase, and not a mortgage by conditional sale. The court found that the documents, when read together, established that the parties intended to create a sale, and that the option to repurchase was not the primary purpose of the transaction.
Issues: 1. Whether the transaction evidenced by Exhibits A-1 and B-1 was a mortgage by conditional sale or an outright purchase. 2. Whether the plaintiff was entitled to redeem the mortgage.
Ratio Decidendi: The court applied the principles of law governing the interpretation of documents and the distinction between a mortgage by conditional sale and an outright sale with an option to repurchase. The court held that the following factors indicated that the transaction was an outright sale: (a) The documents were described as a sale deed and an agreement to reconvey, and the parties were referred to as vendor and vendee. (b) The consideration for the sale was paid in full at the time of the execution of Exhibit B-1, except for a small amount of Rs. 4. (c) The vendees were given immediate possession of the property. (d) The option to repurchase was given to the transferor for a short period of one year and five months, and time was made the essence of the contract. (e) The vendees had no obligation to repay the purchase price to the transferor, and the transferor was only entitled to get back the amounts paid by him to the vendees. (f) The agreement to pay interest on the purchase price was not indicative of a mortgage by conditional sale, as it was not a debt due to the vendees as creditors or mortgagees.
Final Decision: The court dismissed the plaintiff's suit for redemption, holding that the transaction was an outright sale and not a mortgage by conditional sale.
( 1 ) THE proper interpretation of Exhibits A-1 and B-1 is the subject-matter of this appeal. The question that poses for consideration is whether the transactions evidenced by these two documents is a mortgage by conditional sale or an outright purchase.
( 2 ) THE property in dispute is a house site and terraced rooms situate therein. The agreement to sell this property appears to have been entered into on i6th july, 1923 for a sum of Rs. 3,400 and the whole of the consideration paid at about the time ; but the document of sale was not executed till the and of August, 1925. On the same day, the transferees executed an instrument agreeing to reconvey the property if the sum of Rs. 3,400 paid to the transferor was repaid to him with interest at 1 percent. permensem. Under this document the option to repurchase was to be exercised between 2nd February, 1926 and 30th July, 1927. The transferor did not avail himself of this right within the stipulated period. Nothing was done by him in this behalf till the 7th of February, 1950 when he called upon, the transferees to retransfer the property to him on receipt of such amounts as might be found due on taking of accounts. The transferees refused to comply with this demand and sold the property in their turn on the 12th July, 1950 for a sum of Rs. 20. 000 to a firm of which Chebrolu Audinarayana, Chebrolu Chenchu subbiah, Vura Venkateswarlu and Kurapati Raghavulu were the partners. Notwithstanding this, no action was taken by him till the 29th of January, 1953, when the present action was initiated by him.
( 3 ) THE basis of the suit is that, under Exhibit B-1 only a mortgage by conditional sale was created and that he was, therefore, entitled to redeem the mortgage. This suit was opposed by the transferees and their alienees, D. 1 to D. 7, on the plea that the transaction in question was not a mortgage by conditional sale, but it was an ordinary sale with an option to repurchase it within the specified time and the option not having been exercised within that time, the plaintiff could not get any relief. This defence did not prevail with the Subordinate Judge, Tenali, who was of the opinion that Exhibits A-1 and B-1 read together established that the transaction amounted to a mortgage by conditional sale and hence the plaintiff could redeem it.
( 4 ) ON appeal by the aggrieved defendants, Justice Bhimasankaram came to at different conclusion and directed the dismissal of the suit. This view of the learned judge is impugned by Shri K. V. Rangachari, learned Counsel for the appellant. It is argued by him that this is not a case of an outright sale, as there are indicia of a mortgage in these two documents. To appreciate this submission, it is necessary- to advert to the relevant terms and conditions of Exhibit B-1, the sale deed. The document begins with a recital that the property was sold to the transferee for a sum of Rs. 3,400 on the 16th of July, 1923, and the price was received by the transferor in the following manner : The transferees undertook to discharge a debt of Rs. 1,300 due to a Marwari called Tharaji Chendu Siremal, who was having a shop at Tenali and another debt of Rs. 996 due by the transferor to another marwari Hiraji Silemal. In addition, a sum of Rs. 500 was paid into the hands of the transferor to enable him to discharge other debts. Only Rs. 4 was given to the transferor by way of cash on the date of the sale. The fact that has to be emphasised here is that, barring Rs. 4, the other items of consideration were received on the 16th of July, 1923 on which date it was settled that the property should be sold.
( 5 ) THIS property at the time of the execution of Exhibit B-1 was in the possession and enjoyment of one Mahommed Jaffer Baig Saheb under a lease for two years (1st March. 1925 to 1st March, 1927) on a rental of Rs. 20 per mensem: It was recited in the document that the vendors had delivered possession of the property to the vendees that
