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1954 Supreme(Cal) 33
High Court Of Calcutta
RAMA PRASAD MUKERJEE, P. N. MUKHERJEE
MANINDRA NATH BOSE - Appellant
Versus
NARENDRA KRISHNA MITRA - Respondent
Appeal From Original Decree No. 67 of 1948
Decided On : 02/01/1954
A.C.GUPTA, JYOTISH CHANDRA PAL, KRISHNA PRASAD, MANINDRANATH GHOSH, PRAMATH NATH MITRA, Purnendu Sekhar Basu
A transaction which is in substance a loan, even though not so in form, would be a "loan" within the meaning of the Bengal Money-Lenders Act.
Headnote:
BENGAL MONEY-LENDERS ACT - LOAN - SUBSTANCE OVER FORM - MORTGAGE BY CONDITIONAL SALE - ANOMALOUS MORTGAGE - INTERPRETATION OF DOCUMENTS - EXTRINSIC EVIDENCE - REMAND FOR FURTHER EVIDENCE ON VALUE AND POSSESSION - DISCHARGE OF SUBSEQUENT TRANSFEREE FROM SUIT.
Fact of the Case:
The plaintiff filed a suit under Section 36 of the Bengal Money-Lenders Act, alleging that he had taken a loan of Rs. 7,000 from the defendant No. 1 on the security of his property, and that the transaction was evidenced by a kobala (deed of sale) and a simultaneous agreement for resale or reconveyance. The defendant No. 1 contested the suit, contending that the transaction was a sale followed by an agreement of reconveyance, and that the plaintiff had forfeited his claim to enforce the same by not performing his part of the agreement. The defendant No. 2, who was a subsequent transferee of the property, pleaded ignorance of the agreement for reconveyance and claimed to be a bona fide purchaser for value without notice.
Finding of the Court:
The trial court dismissed the suit, holding that the transaction was not a loan within the meaning of the Bengal Money-Lenders Act, and that the plaintiff had no cause of action. On appeal, the High Court held that the transaction was a loan in substance, even though it was not a mortgage by conditional sale due to the technical requirements of Section 58(c) of the Transfer of Property Act. However, the court found that the internal evidence furnished by the two documents (kobala and agreement for resale) was not sufficient to establish that the transaction was a loan, and that further evidence was necessary to determine the true value of the property and the question of possession.
Issues: 1. Whether the disputed transaction was a "loan" within the meaning of the Bengal Money-Lenders Act. 2. Whether the transaction was a mortgage by conditional sale or an anomalous mortgage. 3. Whether extrinsic evidence was admissible to determine the nature of the transaction. 4. Whether the subsequent transferee was a bona fide purchaser for value without notice.
Ratio Decidendi: 1. The court held that a transaction which is in substance a loan, even though not so in form, would be a "loan" within the meaning of the Bengal Money-Lenders Act. 2. The court held that the transaction in question could not be a mortgage by conditional sale due to the technical requirements of Section 58(c) of the Transfer of Property Act, and that it could not be an anomalous mortgage because it was not a mortgage in law. 3. The court held that extrinsic evidence was admissible to determine the nature of the transaction, including evidence to show how the transaction or the language of the documents was related to existing facts. 4. The court held that the subsequent transferee was a bona fide purchaser for value without notice, and that he would not be affected by the disputed transaction.
Final Decision: The court allowed the appeal in part, and remanded the case to the trial court for further evidence on the value of the property and the question of possession. The court directed that the re-hearing would be only between the plaintiff and the defendant No. 1, and that the subsequent transferee would be discharged from the suit. The court also directed that the parties would bear their own costs in all the courts up till that stage, and that further costs would be in the discretion of the trial court.
( 1 ) THIS appeal arises out of a suit under S. 36 of the Bengal Money-Lenders Act. The suit has been dismissed by the trial court. Hence this appeal by the plaintiff.
( 2 ) THE plaintiff's case was that on October 7, 1942, he took a loan of Rs. 7,000 from the defendant no. 1, Manindra Lal Gupta, on the security of his Behala Property described in the plaint schedule. It was agreed between the parties that the loan would be repaid in the course of a period of about two years and the stipulated interest for the said period was Rs. 1,150. It was further agreed between the parties that in view of the Bengal Money-Lenders Act the transaction would be made in the form of a kobala or a deed of sale accompanied by a simultaneous but separate agreement for resale or reconveyance. Accordingly, the plaintiff duly executed and registered a kobala in favour of defendant no. 1 in respect of his said Behala property for an ostensible consideration of Rs. 8,000, although he really got from the said defendant only Rs. 7,000 and that too by way of a loan on terms, stated above, and the defendant no. 1 simultaneously executed in his turn an unregistered agreement for reconveyance of the said property in favour of the plaintiff upon the latter's paying to him the ostensible sum of Rs. 9,150 within the said stipulated period of about two years or within the month or Aswin, 1351 B. S. , to be precise. The agreement recited payment and receipt of a sum of Rs. 1,000 as earnest money, which, according to the plaintiff, was deducted from the ostensible consideration of Rs. 8,000 of the kobala, the plaintiff actually receiving only Rs. 7,000 on this latter document and that too by way of a loan as aforesaid. Within the stipulated period the plaintiff offered to pay the stipulated amount of Rs. 8,150 but the defendant no. 1 avoided contact and made it impossible for the plaintiff to make the payment and re-deem the mortgage property. Accordingly, the plaintiff brought the present suit for necessary reliefs under S. 36 of the Bengal Money-Lenders Act.
( 3 ) THE suit was instituted on December 20, 1944, and during the pendency in the trial court the plaint was amended on February 26, 1946, by adding as defendant no. 2 as person named Narendra Krishna Mitra to whom, according to the plaintiff, the suit property has been transferred by defendant no. 1.
( 4 ) THE suit was contested by both the defendants whose main defence was that the transaction in question was not a loan even in substance, and, accordingly, the suit under S. 36 of the Bengal Money-Lenders Act did not lie. Defendant no. 1's specific case was that the disputed transaction was really a sale followed by an agreement of reconveyance and that the ostensible was the real state of things and, the plaintiff not having performed his part of the said agreement or contract, he had forfeited his claim to enforce the same. The plaintiff's allegations to the contrary were denied by this defendant. Defendant No. 2 pleaded ignorance of the agreement for reconveyance and contended, inter alia, that he was a bonafide purchaser for value without notice. There were also the usual defences of limitation and "waiver, estoppel and acquiescence". An objection was also taken that the court-fee paid was insufficient, but such objection was clearly untenable if the suit, as framed, namely, under S. 36 of the Bengal Money-Lenders Act, was maintainable.
( 5 ) THE principal issue between the parties was whether the disputed transaction was a "loan" within the meaning of the Bengal Money-Lenders Act. This was issue no. 2 framed by the trial court. It was clear that if the said issue was answered in the negative, the suit would not be maintainable and the plaintiff would have no cause of action for the suit, and accordingly, no other question would arise. The learned Subordinate Judge held against the plaintiff on the above issue no. 2 and that finding inevitably led to a dismiss
