The central legal point established in the judgment is that the determining factor in differentiating between an out-and-out sale and a mortgage by conditional sale is the intention of the parties, and there is no presumption in favor of the latter.

Wallace, J.

1. The question in this case is whether Exhibits I and C, both dated 14th July, 1902, Exhibit I being ostensibly a deed of absolute sale and Exhibit C an agreement by the vendee to reconvey the property at any time within eight years on payment of the consideration recited in Exhibit I, constitute an out-and out sale and an agreement for re-conveyance or a mortgage by conditional sale. Both the lower Courts have held to the former view and it is urged that they are wrong.

2. That such a question is not a pure question of fact is clear from the numerous cases in which it has been allowed to be fully argued in second appeals before this Court.

3. The first defendant, vendee, under Exhibit I, was already holding an equitable mortgage on the property. The mortgagor, one C. Velayudha Mudali, was the owner of the property. He sold it to his mother in law under Exhibit B, evidently with a view to avoiding creditors. The first defendant was pressing for payment and the mother-in-law, 8 or 9 months after Exhibit B, executed this ostensible sale deed, Exhibit I, and the first defendant executed the counterpart agreement, Exhibit C, both being executed on the same day. The crucial question is What was the intention of the parties?

4. The plaintiffs argued that the fact that Velayudha Mudali sold the property first to his mother-in-law indicated his and her strong desire to keep the property in the family and that therefore it is likely that the lady did not intend to carry through an absolute sale, which would involve a total loss of the property to the family. But the sale was eight months after she had purchased from Velayudha Mudali and her and his desires are really no indication of what was the intention of the vendee, the first defendant, on the date of Exhibits I and C. It is also pointed out that the first defendant says that he executed Exhibit C because the lady insisted on it, but I cannot hold that that necessarily indicates that she did not intend to sell. The 1st defendant may, as he implies, have given way to her importunity so far as to give her a chance of repurchase within a reasonable time. It is further pointed out that the consideration set out in Exhibit I is not described as the market value of the land, but as the amount of the debt owing, to discharge which the sale was carried through, a point which I shall deal with later. On the other hand, both the lower Courts find that the amount of consideration was an adequate market value for the land. In Exhibit C there is no hint that the consideration for re-conveyance was to be any amount calculated on the footing of the mortgage, and it contains no provision for interest on the mortgage amount. The expenses of the re conveyance were to be paid by the vendor and not by the vendee. It is also pointed out that the first defendant already held an equitable mortgage over the land and that there was little point in his changing one form of mortgage for another. It is also significant that the heirs of the ostensible vendor did not choose to challenge the nature of this sale until sixteen years later, eight years after the period fixed in Exhibit C for reconveyance.

5. Numerous cases have been cited to me laying down the principles by which the Court should be guided in a case like the present. That there is no presumption in favour of a mortgage by conditional sale is clearly laid down in the Full Bench case in Muthuvelu Mudaliar v. Vaithilinga Mudaliar (1919) 42 Mad. 407. It is not the form of the document but the intention of the parties which is the deciding factor, and it rather lies on the party who contends that a document prima facie connoting absolute sale is really a mortgage to prove his contention. I shall not go through the cases in detail but one or two remark maybe made. An uncommon state of circumstances, for which there is no counterpart in this case, influenced the decision in Muthukaruppa Pillai v. Marudachalam Chetti (1914) 27 I.C. 436 an