Babulal vs Rameshchandra Sahu and Another

M.K. Mudgal, J.—The appellant/plaintiff has filed the appeal u/s 96 of the CPC being aggrieved by the judgment and decree dated 11.8.05 rendered by the court of II Additional District Judge Ashok Nagar in Civil Suit No. 3A/03 dismissing the suit for redemption of the disputed land, declaration of title of Bhumiswami rights, possession and permanent injunction however the suit was decreed for specific performance of the contract dated 1.6.99 (Ex-P/1) for repurchasing of the property. In this appeal the appellant is referred as "plaintiff" and the respondent as "defendant". The respondent/defendant has not filed any cross appeal against the impugned judgment and decree.

The admitted facts are that the agricultural land bearing survey No. 664 area 1.557 hectare half of which is 0.778 hectares which is under dispute and the owner of the said land was the plaintiff who executed a registered sale deed dated 1.6.99 (Ex-D/1) in favour of the defendant who also executed a document of agreement to sell (Ex-P/1) in favour of the plaintiff on the same date. The plaintiff got the notice dated 29.5.02 issued through his advocate to the defendant who replied it on 1.6.2002 vide Ex-P/5.

The facts of the plaint in brief as alleged are that the plaintiff borrowed Rs. 75,000/- from the defendant Rameshchandra Sahu on 1.6.99. For the security of the said loan the disputed land was mortgaged by the plaintiff in the form of usufructuary mortgage on 1.6.99 however, the defendant got the sale deed executed in his favour from the plaintiff although there was no sale transaction between the parties. The defendant executed the document of agreement to sell Ex-P/1 on the same date in favour of the plaintiff to the effect that he would return the disputed land to the plaintiff within stipulated period of three years after the receipt of the mortgage money Rs. 75,000/- from the plaintiff. Principally, the said transaction was of the nature of mortgage rather than any sale. The plaintiff further pleaded that he had paid the whole mortgage amount to the defendant so the disputed property has already been redeemed of the said mortgage. Resultantly, the plaintiff issued the notice Ex-P/2 to the defendant for the execution of the sale deed but he refused to execute the sale deed and proclaimed himself to be the owner of the disputed property as well as flatly denied the said transaction of the mortgage by sending reply Ex-P/5. Under these circumstances, the plaintiff filed the suit for redemption of the disputed property as well as declaration of the title.

Denying the allegations of the plaint, filing the written statement, the defendant pleaded that the plaintiff had de facto sold the land instead of mortgaging it and on account of this fact, the sale deed was executed by the plaintiff in favour of the defendant. It was also agreed upon between the parties that the plaintiff would repurchase the disputed land from the defendant after paying the consideration of sale Rs. 75,000/- within three years but he did not do. The defendant has further stated that Rs. 75,000/- was not paid by the plaintiff to him.

The learned trial Court after framing eight issues and having recorded evidence of both the parties, decreed the suit for specific performance of the contract (repurchasing of the said land) Ex-P/1 but dismissed the suit for the relief of redemption of the property and declaration of title.

The following questions arise here for consideration:-

(I) Whether or not the plaintiff borrowed Rs. 75,000/- from the defendant and executed the sale deed Ex-D/1 for the security of loan?

(II) Whether or not the plaintiff had returned the said amount on 26.5.02 to the defendant?

(III) Whether or not the disputed property has been redeemed from the alleged mortgage?

The learned counsel for the appellant submitted that the real transaction between both the parties was regarding mortgage and not for sale of the disputed land following which the agreement to return the property (Ex-P/1) to the plaintiff was executed by the defendant on the same date after the payment of Rs. 75,000/- within three years. It is true that the condition of the mortgage was not embodied in the sale deed (Ex-D/1) as the defendant assured the plaintiff of a separate document to be executed in his favour on the same date. The learned trial Court has committed an error here in not considering the transaction as that of mortgage. The learned counsel for the plaintiff further argued that the plaintiff had returned the Rs. 75,000 to the defendant within the stipulated period of three years i.e. on 26.5.02 and produced the evidence in support of it and this too was not taken into account properly by the learned trial Court. Therefore, the findings recorded by the learned trial court being based on improper appreciation of the evidence deserves to the set aside and the suit be decreed in toto in favour of the plaintiff.

Controverting the submissions made on behalf of the appellant/plaintiff, the respondent/defendant counsel submitted that for the purpose of mortgaging the property u/s 58(c) of the T.P. Act it is mandatory that the condition of mortgage must be embodied in the document itself. If the document lacks the term and conditions of mortgage it cannot be treated as transaction of mortgage in principle. In the instant case, no such condition was laid down in the Ex-D/1. On account of this fact, the learned trial Court has made no mistake in holding that the said transaction was not that of a mortgage but rather it was that of a de facto sale. The counsel further urged that no payment was made by the plaintiff to the defendant as alleged in the plaint. Hence, the learned trial court did not make any error in admitting the fact that the payment of Rs. 75,000/- was not made by the plaintiff.

Heard the arguments of both the parties and perused the record.

Indisputably, no condition regarding mortgage of the disputed property has been embodied in the document Ex-D/1 dated 1.6.99 executed by the plaintiff in favour of the defendant. On perusal of the Ex-D/1, it is evident that the contents of the document reflect outrightly sale of the property instead of mortgage. The plaintiff Babulal (PW/3) has admitted in para 15 of his statement that the document of sale was executed by him in favour of the defendant Rameshchandra in the presence of the witnesses Kalekhan and Jagram Singh.

In para 16 of his statement the plaintiff deposed that it was agreed that he would return Rs. 75,000/- to the defendant within three years and get the land back from the defendant. He has also admitted the fact that he had not written the term and conditions of restoring the land in the sale deed. He further added that a separate document was prepared for the same. In para 18 of the statement the plaintiff has further conceded that he made an agreement for getting the land back by 31.5.02 after the payment of Rs. 75,000/- to the defendant Rameshchandra. Both the documents were executed at the same time. Thus it becomes clear from the statement of the plaintiff Babulal (PW/3) as well as Ex-D/1 and Ex-P/1 that the transaction which was entered into by the plaintiff and the defendant was not of mortgage but of sale and resale indeed. These facts have been well endorsed by the statements of the attesting witnesses of the Ex-D/1 Kale Khan (DW/2), Jagram (DW/4) as well as the defendant Ramesh Chandra (DW/1). All the three witnesses have unequivocally stated in their statements that there was no contract of any mortgage but the disputed property was stated to have been sold by the plaintiff. The document of sale deed Ex-D/1 and the agreement to repurchase Ex-P/1 fully corroborate the statements of the said witnesses. Nothing contradictory has come on record in the statement of the witnesses that they would be disbelieved. The learned trial court having considered the recorded evidence elaborately in para 10 to 15 of the impugned judgment has held that the plaintiff had sold the disputed land to the defendant by executing the sale deed Ex-D/1 and the separate contract agreed upon between the parties is related to repurchase of the said property.

The issue of similar nature has been comprehensively considered by this court in the judgment of the case of Parasram Dubey Vs. Santosh Kumar and other, 2013(2) MPHT 511. In the aforesaid judgment the court has held after having considered several judgments that if the specific terms and conditions of the mortgage are not embodied in the document itself it cannot be treated the transaction of mortgage. The court has opined in para 14 and 15 of the judgment as under:-

Indeed the case of the plaintiff rests upon Section 58(c) of the T.P. Act, which speaks about mortgage by conditional sale. It would be consigned to reproduce the said provision, which read thus: -

(c). Mortgage by conditional sale: -

Where the mortgagor ostensibly sells the mortgaged property-

on condition that on default of payment of the mortgage money on a certain date the sale shall become absolute, or

on condition that on such payment being made the sale shall become void, or

on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called 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.

Indeed the proviso stipulated to the section was not enacted when the T.P. Act was originally enforced and has been added by Section 19 of Act 20 of 1929. Before I deal with the rival contentions of parties as well as pleadings and evidence placed on record, it shall be fruitful to put emphasis on the law to this provision. On bare perusal of the proviso, I find that whatever the nature of transaction has taken place and the documents have been executed, the transaction shall be deemed to be a mortgage only when the condition is embodied in the document itself which effects or purports to effect the same. Thus, according to me embodying such a condition is an essential ingredient to invoke this provision and to ascertain whether the transaction is mortgage by conditional sale. According to me, the proviso was introduced in this clause only to set at rest the controversy of nature of the document because earlier there were controversies in regard to interpretation of document whether it is a sale or mortgage. After the insertion of the proviso the things are clear as like noon day that a document will never be treated as mortgage unless and until a condition of reproduce is contained in the same document and this has been specifically held by the Supreme Court in the landmark decision Chunchun Jha (supra).

At this juncture, I would be failing in my duty if I do not quote the report of Special Committee on the basis of which the aforesaid proviso has been added to Section 58(c) of the T.P. Act. In 10th Edition of Transfer of Property Act of Mulla at Page 589 the report has been quoted and in order to understand why and for what reason the said proviso has been added, I would like to quote the said Committee''s report, which reads thus: -

Section 58(c) contains the definition of a mortgage by conditional sale. It is with the greatest difficulty in many cases that such mortgages can be distinguished, from sale with a condition for repurchase. As clause (c) of Section 58 indicates, the real point of difference between the two kinds of transactions is that, in the case of a mortgage by conditional sale, the sale is only ostensible, whereas in the case of an out and out sale, it is real. The ostensible or real nature of transaction can, however, be only determined by finding out the intention of the parties. In order to escape the liability of accounting for the profits of the property and other liabilities imposed on a mortgagee, and also to escape the provisions of some of the local laws enacted for the benefit of agriculturists, creditors resort to the mode of having a mortgage which is in form of an out and out sale. Since the decision of the Privy Council in Balkishan Das Vs. Legge, it has been a well-settled rule that it is once open to Courts to allow any extraneous evidence in order to find out the intention of the parties, Such intention must, therefore, be gathered from the document itself which purports to effect the transaction. These transactions have given rise to a great deal of litigation and Courts are compelled to enumerate and consider all the various criteria which have been laid down for the purpose of determining whether a transaction is a mortgage or an out and out sale. In order to avoid the difficulties indicated above, we think it desirable to lay down a statutory test by which the intention is to be gathered. We, therefore, propose that no transaction should be deemed to be a mortgage by conditional sale unless the condition is embodied in the document which operates or purports to effect the sale.

Thus, it is luminously clear that unless and until the condition of transfer is not embodied in the document which effects and purports to effect the sale, the transaction cannot be said to be a mortgage and in another words it shall amount to a deed of sale only. Apart from the decision in Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, , there are several other landmark decisions of the Apex Court, they are Bhaskar Waman Joshi (deceased) and Others Vs. Shrinarayan Rambilas Agarwal (deceased) and Others, and K. Simrathmull Vs. S. Nanjalingiah Gowder, . I may further add that if a document purports to be a deed of sale and there is no stipulation for treating the sale as mortgage, merely a separate document of re-conveyance cannot convert it into a mortgage. To put in simple words at the cost of repetition it would be fruitful to say that a document whatever it has been named would never be a mortgage deed by conditional sale if the clause or re-sale has not been embodied in the same document. According to me, if the said condition is laid down by executing a separate document (whatever the said document may be named), the transaction cannot be said to be a mortgage transaction in any manner.

Having considered all the facts and circumstances of the case and the aforesaid cited judgment this court draws the conclusion that the learned trial court has not committed an error in holding that the said transaction was out of a sale and not any kind of mortgage and the findings given by the learned trial court that it was agreed between the parties vide Ex-P/1 for repurchasing the disputed property.

The stand taken by the plaintiff in para 7 of his pleadings that he had given Rs. 75,000/- to the defendant on 26.5.02 at village Amkheda in the presence of the witness Munshilal (PW/2) and Munnalal (PW/1) is also not credible as the said payment was neither paid by cheque or bank draft nor any receipt of the said payment was obtained from the defendant. The said story of the payment is based on only oral evidence and no documentary evidence has been produced on record in its support. As alleged the said payment was made at village Amkheda whereas both the witnesses PW/1 and PW/2 do not belong to the said village so their presence does not appear to be credible. If any payment had been made to the defendant the receipt of the said payment would have been obtained easily in the Ex-P.1 but no proper explanation has been tendered by the plaintiff in this regard. On the contrary the defendant Rameshchandra (DW/3) has denied to have received the said amount from the plaintiff. Nothing has come out in the cross-examination of the said witnesses to disbelieve him. Having considered the recorded evidence meticulously in para 17 to 20 in the judgment the findings recorded by the learned trial court to this effect that the plaintiff has utterly failed to prove the payment of Rs. 75,000/- to the defendant are justified and rational. Having taken into account all the related details of the case, this court comes to the conclusion that the findings of the learned trial court are flawless and based on proper appreciation of the recorded evidence. Therefore, affirming the findings of the learned trial court the appeal filed by the plaintiff being devoid of merit and substance is hereby dismissed. The appellant shall bear the cost of the respondent of this appeal.

Decree be drawn up accordingly.