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2000 Supreme(Cal) 637
High Court Of Calcutta
GIRISH CHANDRA GUPTA
SANTOSH KUMAR SARDAR - Appellant
Versus
NIL RATAN SARDAR - Respondent
S. A. 333 Of 1989
Decided On : 12/15/2000
The legal tests for determining whether a transaction is a loan in substance or an outright sale include the adequacy of consideration, possession after the sale, and the presence of a pre-existing debt.
Headnote:
LAND SALE - LOAN - MORTGAGE - BENGAL MONEY LENDERS ACT - SALE DEED - RECONVEYANCE AGREEMENT - INTERPRETATION - FACTUAL FINDINGS - APPELLATE REVIEW - EVIDENCE - LEGAL TESTS - LOAN SUBSTANCE - OUTRIGHT SALE - FAIR PRICE - POSSESSION - INTEREST - PRE-EXISTING DEBT - DISPOSSESSION - AMENDMENT OF PLAINT - RATIO DECIDENDI.
Fact of the Case:
The plaintiff alleged that two deeds of conveyance executed in favor of the defendant were in substance a loan transaction and not a sale, with agreements for reconveyance upon repayment of the loan amount. The defendant denied the allegations and claimed that the transactions were outright sales, with no connection to any loan.
Finding of the Court:
Both the trial court and the appellate court found that the transactions were outright sales, not loans in substance. They held that the consideration mentioned in the deeds of conveyance was fair, there was no agreement to pay interest, there was no pre-existing debt, and the plaintiff's claim of dispossession during the pendency of the suit was not supported by evidence.
Issues: 1. Whether the transactions in question were loans in substance or outright sales. 2. Whether the consideration mentioned in the deeds of conveyance was fair. 3. Whether there was an agreement to pay interest. 4. Whether there was a pre-existing debt. 5. Whether the plaintiff was dispossessed during the pendency of the suit.
Ratio Decidendi: 1. The court applied the legal tests established in previous case law to determine the nature of the transactions. These tests included the adequacy of consideration, possession after the sale, and the presence of a pre-existing debt. 2. The court found that the consideration mentioned in the deeds of conveyance was fair, based on evidence of instances of sale in the area at the relevant time. 3. The court found that there was no agreement to pay interest, as there was no mention of interest in the deeds of conveyance or in the evidence presented. 4. The court found that there was no pre-existing debt, as there was no evidence to support the plaintiff's claim. 5. The court found that the plaintiff's claim of dispossession during the pendency of the suit was not supported by evidence, as the plaintiff's own evidence indicated that he was dispossessed prior to the filing of the suit.
Final Decision: The appeal was dismissed, and the findings of the lower courts were upheld.
( 1 ) THIS appeal at the instance of the plaintiff is directed against an order dated 28-1-1987 passed by the learned 12th Court of the Additional District Judge, 24-Parganas in appeal affirming the judgment dated 12-7-1985 passed by the learned trial Court dismissing the suit. For convenience the appellant shall herein after be referred to as the plaintiff and the respondent as the defendant.
( 2 ) BRIEFLY stated the facts of the case are that by a deed of conveyance, Ext. A (6), dated 30-5-1978 the plaintiff absolutely conveyed 69 decimal of land at a sum of Rs. 10,000/- to the defendant. By an agreement dated 30-5-1978, Ext. 4 (B), the defendant, after recording that the plaintiff had sold the aforesaid land and had made over possession thereof, agreed to reconvey the land to the plaintiff provided the plaintiff paid the sum of Rs. 10,000/- within 30th Ashar, 1386 B. S. Both the deed of conveyance and the said agreement were executed on 15th Jaistha, 1385 B. S. which is equivalent to 30-5-1978. It is clear that a period of 13 months was granted by the defendant to the plaintiff to pay the said sum of Rs. 10,000/- whereupon the defendant undertook to reconvey the land without any let or hindrance to the plaintiff.
( 3 ) SIMILARLY by another deed of conveyance, Ext. A (5), dated 18th Jaistha, 1385 which is equivalent to 2-6-1978 the plaintiff absolutely conveyed 26 decimal of land to the defendant at a consideration of a sum of Rs. 4,500/ -. By an agreement executed on the same day the defendant, after recording that the plaintiff had sold the aforesaid land at a sum of Rs. 4,500/- and had made over possession therefore, agreed to recovey the said piece of land to the plaintiff provided the plaintiff paid the sum of Rs. 4,500/- on account of consideration and a sum of Rs. 733/- on account of costs within the period of 30th Ashar, 1386 without any let or hindrance. It appears that in this case also roughly a period of 13 months was granted by the defendant to the plaintiff for making payment of the said sum as a condition precedent for reconveyance of the land.
( 4 ) BOTH the deeds of conveyance executed by the plaintiff in favour of the defendant contained inter alia that the land is sold at the highest prevailing price and that possession has been given.
( 5 ) IN the backdrop of the aforesaid facts and circumstances the plaintiff instituted Title Suit No. 98/1979 alleging that the aforesaid transaction between the parties was in substance a transaction of loan and not sale. He has further alleged that being in urgent need of money for maintaining his family and other necessities he approached the defendant for loan. The defendant wanted to avoid the provisions of law regarding the money lending business and he wanted to lend and advance money to the plaintiff on the basis of an ostensible deed of sale in his favour instead of a regular mortgage deed. He further alleged that he received only a sum of Rs. 10,000/- whereas the consideration shown according to the two deeds of conveyance is Rs. 14,500/ -. He alleged that he is in possession of the land. His further case is that he requested the defendant times without number to reconvey the land by executing appropriate deeds of conveyance upon receiving a sum of Rs. 10,000/ -. According to him, the transaction is a simple loan transaction in which the plaintiff is the borrower and the defendant is the lender and the two deeds of sale are security for repayment of the sum of Rs. 10,000/ -. On the aforesaid basis the plaintiff claimed relief under sections 36, 37, 37a and 38 of the Bengal Money Lenders Act and prayed for a decree for taking accounts and fixing liability of the plaintiff etc. The suit appears to have been filed on 4-7-1979.
( 6 ) ON or about 27-5-1981 the plaintiff appears to have moved an application for amendment of the plaint for bringing on record that the consideration shown in the deeds of conveyance is Rs. 14,500/- whereas he actually
