The intention of the parties, as evidenced by the language of the document and surrounding circumstances, is crucial in determining whether a transaction is a mortgage or a sale.

1. This is a defendants' appeal from the decree of the learned Subordinate Judge, Tirur, affirming the decree of the trial court in O. S. No. 353 of 1966.

2. The suit was for redemption of what according to the plaintiff was a mortgage by conditional sale. The defendants contested the suit on the ground that the transaction in question was not a mortgage, but an out and out sale with a right of repurchase in the vendor. It was contended that the suit for redemption was not maintainable in respect of the suit property.

3. The property in question is about 98-2/3 cents in Valavannur amsom in Ponnani Taluk. Ext. Al dated 10-9-1955 is the document whereby the defendants have come into possession of the suit property.

4. The plaintiff is the widow of Seythali who executed Ext. Al in favour of the defendants. Seythali transferred his remaining rights under Ext. Al in favour of his wife by Ext. A2 dated 13-11-1962. The fundamental question for consideration is whether the transaction evidenced by Ext. Al is a mortgage by conditional sale or whether it is an outright sale with a right of repurchase in the vendor. If it is the former, Ext. Al falls within the ambit of S.58(c) of the Transfer of Property Act and the plaintiff's claim for redemption would be perfectly valid; but if it is the latter, the suit for redemption would have to be dismissed.

5. Certain principles are well-settled in regard to the construction of a document such as Ext. Al. The test to be applied in determining whether a transaction is a mortgage or a sale is to find out the intention of the parties to the instrument. Their intention has to be gathered from the language of the document itself viewed in the light of the surrounding circumstances: Jhanda Singh v. Sheikh Wahid-ud-din, (1916) 36 I.C. 38). For the purpose of ascertaining their intention, oral evidence, other than that of surrounding circumstances, is not admissible, as it is excluded by S, 92 of the Indian Evidence Act. The case has therefore to be decided on a consideration of the contents of the document itself "with such extrinsic evidence of surrounding circumstances as may be required to show in what manner the language of the document is related to existing facts": Balkishen Das v. W. F. Legge (1899) ILR. 22 Allahabad 149 PC.; Raja Bahadur Narasingerji Gyanagerji v. Raja Panuganti Parthasaradhi Rayanim Garu (AIR. 1924 PC. 226).

6. Lord Chancellor Cran worth stated in Alderson v. White (2 De Gex and J. 105) [cited in Bhagwan Sahai v. Bhagwan Din ILR. 12 Allahabad 387 (PC) at 391] as follows:

"The rule of law on this subject is one dictated by common sense; that prima facie an absolute conveyance containing nothing to show that the relation of debtor and creditor is to exist between the parties does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase."

7. To be effective as a mortgage, the document has to disclose a prior intention or agreement to mortgage the property and to accomplish that object by means of an ostensible deed of sale with a contract of repurchase. The question in all such cases is therefore whether it was the intention of the parties to place themselves in the relation of debtor and creditor; or whether they intended to effect an out and out sale, albeit, with a right of repurchase in the vendor.

8. The relevant part of S.58 (c) of the Transfer of Property, Act reads as follows:

"Where the mortgagor ostensibly sells the mortgaged property on condition that on such payment being made the buyer shall transfer the property to the seller.

the transaction is called a mortgage by conditional sale and the mortgagee a mortgagee by conditional sale:

Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale."

9. The proviso to the sub-section was inserted by the Amendment. Act 20 of 1929. Before the