Sale or mortgage by conditional sale.

The plaintiffs in O.S. No. 47 of 1947 on the file of the Court of the Subordinate Judge of Narasapur appeal against the dismissal of their suit for redemption of properties which they along with the fourth defendant conveyed to one Venkataramaraju under a deed of sale dated 20th January, 1932. On the same day as the sale deed there was an agreement to reconvey executed by the vendee under the sale deed. The contention on behalf of the appellants was that tooth these documents embody a single transaction which was either a mortgage by conditional sale or an anomalous mortgage. In this view they claimed redemption of the same. There were also other allegations challenging the validity of the transaction, but the learned Subordinate Judge found against them and we are not concerned with them in this appeal.

The defence to the claim for redemption was twofold. The contesting respondent, namely, first respondent, who is the son of Venkataramaraju, pleaded that it was not open, in view of the Proviso to section 58(c) of the Transfer of Property Act to contend that the transaction should be held to be a mortgage as the agreement to reconvey was not embodied in the document of sale. He also pleaded that even assuming that it was permissible to hold so, it was not the intention of the parties that the transaction should be considered to be a mortgage. The learned Subordinate Judge held in favour of the first respondent on both the points.

In the appeal learned counsel for the appellants tried to get over the hurdle in the way of his success, namely, the Proviso to section 58(c) in two ways. He first contended that as the Proviso was only a Proviso to clause (c) of section 58, it will be open to him to plead that the transaction is another kind of mortgage, that is, a mortgage other than a mortgage by conditional sale. This point is covered by a direct decision of a Bench of this court in Kasturi Venkatasubba Rao v. Bikkina Veeraswami1. The learned Judge there repelled an exactly similar argument thus:

"This argument cannot be accepted. The construction suggested would involve reading into the proviso words which are not there, and it would moreover stultify the new enactment as it would leave the previous state of the law practically unchanged. For it would not make much difference in the legal effect of a sale accompanied by a separate agreement for repurchase to provide that it shall not be deemed to be a mortgage by conditional sale but may be regarded as an anomalous mortgage. We do not think that the proviso was intended to have that effect. Its object evidently was to shut out an enquiry whether a sale with a stipulation for re-transfer is a mortgage where the stipulation is not embodied in the same document."

The learned Judges followed the ruling of the Rangoon High Court in Ma Sein Nyo v. Maung San1. With great respect to the learned Judges we entirely agree with this decision. No authority has been cited to us which takes a different view on this point. The argument of the learned counsel to the contrary proceeded on a misapprehension of the effect of holding a transaction which consisted of an ostensible sale and an agreement to reconvey to be a mortgage. It was evidently an implication underlying his argument that such a transaction could be held to be any of the known kinds of mortgages. In this he erred because if a court came to the conclusion that an ostensible sale taken along with an agreement was not in reality a sale but only a mortgage then it followed that the mortgage was a mortgage by conditional sale. It could not be any other kind of mortgage. This is evidently why the Proviso was inserted as a Proviso to clause (c). The Proviso does not say that such a transaction shall not be deemed to be a mortgage because if it can be deemed to be a mortgage it could be only a mortgage by conditional sale.

The next way in which counsel for the appellants sought to get over the proviso was to contend that "shall