Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1959 Supreme(SC) 193

SUPREME COURT OF INDIA
3rd November, 1959.
P.B. GAJENDRAGADKAR, K. SUBBA RAO AND. J.C. SHAH, JJ.
Bhaskar Waman Joshi (deceased) and others, Appellants
Versus
Shrinarayan Rambilas Agarwal (deceased) and others, Respondents.
Civil Appeal No. 16 of 1955.
Advocates appeared
Mr. C. B. Agarwal, Senior Advocate, (Mr. A. G. Ratnaparkhi Advocate, with him), for Appellants Nos. 1 (a) to 1 (c); Mr. W. S. Barlingay, Senior Advocate, (M/s. S. N. Andley and Rameshwar Nath, Advocates of M/s. Rajinder Narain and Co. with him), for Respondents Nos. 2-7.

Advocates:
A.G.Ratnaparkhi, C.B.AGARWAL, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY, W.S.Barlingay

Headnote:(1) Transfer of Property Act, 1882 - S.68 (c) - mortgage by conditional sale-deed ostensibly of sale when may he regarded one of mortgage - oral evidence for what purpose admissible - evidence of subsequent conduct not admissible.
       (2) Interpretation of documents - form not material - intention of parties material - matter of proving the intention.
       (3) Evidence Act, 1872 – S. 92 - document whether sale or mortgage by conditional sale-oral evidence to what extent admissible.
       A transaction is not deemed to be a mortgage unless the condition referred to in clause (c) of section 58 of the Transfer of Properly Act is embodied in the document which effects or purports to effect the sale. But it does not follow that if the condition is incorporated in the deed effecting or purporting to effect a sale, a mortgage transaction must of necessity have been intended. The question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances. The circumstance that the condition is incorporated in the sale deed must undoubtedly be taken into account, but the value to be attached thereto must vary with the degree of formality attending upon the transaction. The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and, the mortgagee, the price being charged on the properly conveyed. In a sale coupled with an agreement to reconvey there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to retransfer the properly within the period specified. What distinguishes the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is not decisive. The definition of a mortgage by conditional sale itself contemplates an ostensible sale of the property. The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the deed viewed in the light of surrounding circumstances. If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their true legal effect. If there is ambiguity in the language employed, the intention may be ascertained from the terms of the deed with such extrinsic: evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts. Oral evidence of intention is not admissible in interpreting the covenants of the deed but evidence to explain or even to contradict the recitals as distinguished from the terms of the documents may of course be given. Evidence of contemporaneous conduct is always admissible as a surrounding circumstance; but evidence as to subsequent conduct of the parties is inadmissible. AIR 1954 Nag. 193 CONFIRMED. [Paras 7 & 13]

Judgement Key Points

Key Points: - The real character of Ex. D-1 is to be determined from the deed provisions read with surrounding circumstances, not solely the form of the document. (!) - A mortgage by conditional sale requires a debtor-creditor relationship created by the transfer of property as security, even if the deed is ostensible sale; form is not decisive. (!) (!) - Proviso and legislative approach: a condition must be embodied in the document effecting the sale to constitute a mortgage by conditional sale; but the intention is determined from language and surrounding facts. (!) (!) - Oral evidence of intention is not admissible to interpret covenants, but surrounding circumstances and contemporaneous conduct are admissible; subsequent conduct is inadmissible. (!) (!) - The High Court held the transaction was a mortgage by conditional sale; the Supreme Court affirmed, concluding Ex. D-1 was indeed a mortgage. (!) (!)

What is the true character of Ex. D-1: whether the deed constitutes a mortgage by conditional sale or an absolute sale with a reconveyance condition?

What is the admissibility and role of extrinsic evidence (contemporaneous and subsequent conduct) in interpreting whether a sale deed is a mortgage by conditional sale?

How does the court determine whether a transaction labeled as a sale with a repurchase clause should be classified as a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act and Section 92 of the Evidence Act?

Judgment

SHAH, J.: This is an appeal against the decree of the High Court of Judicature of Nagpur in Civil Appeal No. 10 of 1954 reversing the decree passed by the Second Additional District Judge, Amravati in Civil Appeal No. 5-A of 1954. The High Court has by its decree directed the court of first instance to pass a decree for redemption.

2. The appeal raises a question as to the true effect of a deed dated September 10, 1931, executed by Shri Narayan Rambilas Aggarwal and his two sons Sadan Gopal and Murli Dhar in favouur of two brothers Bhaskar Waman Joshi and Trimbak Waman Joshi. The deed ostensibly conveys an absolute title to certain properties described therein. The transferors under the deed contend that the property transferred by the deed was intended to be mortgaged under a deed of conditional sale. The transferees contend that by the deed an absolute conveyance of the property thereby conveyed was intended and that the conveyance was subject to a condition to repurchase to be exercised within a period of five years from the date of the deed. The court of first instance dismissed the suit holding that the 303 transaction in the deed dated September 10, 1931, was of the ature of an absolute conveyance with a condition of repurchase and the period limited by the deed for recoveyance had expired long before the date of the suit. The High Court held that the transaction was a mortgage by conditional sale and on that view reversed the decree and directed that a redemption decree be passed.

3. The properties in dispute are three in number: (1) a house in Amravati outside the Amba Gate bearing Municipal No. 5/98, (2) a Chawl in Amravati bearing old Municipal Nos. 6/857,. 6/858and 6/859, and (3) a house situated in Dhanraj Lane Amravati bearing old Municipal No. 3/459. By the deed the properties were separately valued. The house at Amba Gate was valued at Rs. 11,500, the Chawl was valued at Rs. 26,000 & the house at Dhanraj Lane was valued at Rs. 2,000. At the date of this transaction the transferors were indebted to the Imperial Bank of India in the sum of Rs. 30,000 and Rs. 9,500 were due to the transferees and their relations and friends, and to satisfy this liability of Rs. 39,500 the deed was executed. Possession of the property transferred was delivered by calling upon the tenants in occupation to attorn to the transferees. The transferees constructed eight shops in the compound of the Amba Gate house in the year 1940-41 and made certain other constructions in the compound of the Chawl, and they sold the Dhanraj Lane house to one Suraj Mal Salig Ram. On August 26, 1943, the transferors served a notice upon Bhaskar Waman Joshi and the representatives in interest of Trimbak Waman Joshi stating that they were willing to redeem the mortgage created by the deed dated September 10, 1931, and called upon the transferees "to render full, true and proper account" of the amount claimable under the deed. By their reply Bhaskar Waman Joshi and the representatives of Trimbak Waman Joshi denied that the transferors had any right to redeem the property conveyed by the deed and asserted that the claim "to treat the sale as a mortgage was an after thought" in view of the abnormal rise in prices which had lately taken place. On September 9, 1943, the three transferors and other members of their joint Hindu family filed suit No. A of 1943 in the Court of the Additional District Judge, Amravati against Bhaskar Waman Joshi and the representatives in interest of Trimbak Waman Joshi and Suraj Mal Salig Ram for a decree for redemption alleging that the transfer incorporated in the deed dated September 10, 1931, was in the nature of a mortgage by conditional sale.

4. Ex. D-1 which is the deed in question recites that the transferors were indebted that they needed Rs. 39,500 to discharge their liability, that Rs. 2,320 were due to the transferees and that amount was set off and the balance of Rs. 37,180 was paid by eight cheques drawn on the Impe

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