Bodan Lal and Others vs Banwari Lal and Others

S.C. Malte, J.—This appeal is filed by the original Defendant against the judgment and decree passed in suit for redemption of mortgage. While admitting this appeal on 22-10-1979, it was admitted to consider the limited question, namely, ''whether the transaction between the parties is a mortgage''?

The contentions raised by the Respondent-Plaintiff can be summarized as follows:

The Respondent (Plaintiff) was in need of money. He, therefore, vide a deed dated 21-5-1955 executed a sale-deed of the suit-property in favour of Appellant (original Defendant). According to the Plaintiff, the sale transaction was of simple mortgage for securing a loan of Rs. 2,000/- which was the consideration shown in the said sale-deed. At the same time, by another agreement, the Plaintiff-vendor agreed to pay rent to the vendee (present Appellant) at the rate of Rs. 20/- per month for use and occupation of the suit property. On the same day, another document was also executed whereby it was agreed between the Appellant-vendee and the Respondent-vendor that the vendee shall re-convey the property within four years. It may be mentioned here that the said document is not on record. Therefore, the exact terms of that document could not be ascertained. However, in the course of deposition, the Appellant-vendee has admitted existence of such an agreement to re-convey the mortgage to the original vendor within four years. In this appeal, it was also one of the debatable questions as to whether the said evidence regarding the existence of such document and the terms of the said document can be considered in the absence of the said document. It was contended by the Respondent-vendor that the transaction was not a sale, but was only a mortgage for securing the amount. According to him at the time of transaction, the property was worth Rs. 4,000/- though its value was shown to be Rs. 2,000/-.

It may further be mentioned that after the execution of the documents mentioned above, the Respondent-vendor was in arrears of rent due in respect of the suit property. The Appellant-vendor therefore filed a civil suit for recovery of arrears of rent amounting to Rs. 760/-. In that suit the Respondent/vendor raised the question regarding the nature of documents referred above. In that suit, ultimately, a money decree in respect of rent dues came to be passed. In course of that litigation, the question regarding the nature of the document referred to above, however, was kept open and was to be determined in the suit filed by the vendor for redemption of mortgage. That is how the vendor-responent filed the present suit for redemption of the mortgage.

The Appellant-vendee, on the other hand, contended that the transaction dated 21-5-1955 was out and out sale and there was no question of any redemption of mortgage. The trial Court came to the conclusion that the transaction was a mortgage. It took into consideration the circumstances surrounding the transaction. On facts, he held that in all three documents were admittedly executed on the same day. These were - (i) sale deed, (ii) rent note, and (iii) an agreement entitling vendor to re-purchase the suit property after the lapse of four years from the date of sale deed. The trial Court found as a fact that the vendor continued in possession of the suit property and that he had raised certain construction even after the transaction dated 21-5-1955. He also took into consideration the fact that the vendor had also induced a number of tenant on the suit property from whom he used to recover rent for the period subsequent to 1955. On facts be further held that the value of the suit-property in the year-1955 would range between Rs. 5782/- to Rs. 10,000/- and in the background of that he concluded that the consideration of Rs. 2,000/- shown in the said sale-deed was consistent with the case of mortgage rather than sale. Alongwith these circumstances, he took into consideration, the fact that the vendee while deposing in some other previous suit had admitted that he used to deal in money-lending against the immovable property as security. The rent of Rs. 20/- that was agreed between the vendor and vendee was also found to be equivalent the rate of interest of 1% per month on amount of Rs. 2,000/-. Thus on considering all these circumstances together he decreed the suit by judgment dated 20-8-1973. Against that judgment, the vendee-Appellant took the matter to the District Court. The Additional District Judge by his judgment dated 22-1-1979 dismissed the appeal. Briefly stated the learned Additional District Judge also arrived at the same factual conclusion as had been arrived at by the trial Court; and on the basis of those facts, he concluded that transaction was a mortgage. Against that judgment now this second appeal is preferred.

As mentioned above, the appeal was admitted for determination of a limited question as to whether the transaction was or was not a mortgage.

In this Court on behalf of the Appellant, it was submitted that the transaction was a sale-deed. It was contended that in the absence of the document before the Court, it cannot be said that there was an agreement to re-convey the property within four years. Further, it was submitted that seven if it was held that there was some document by which re-conveyance of the property was agreed upon, no relief can be granted because the document is not before the Court and its terms cannot be ascertained. It was contended that therefore the transaction cannot be treated as sale with the condition to re-purchase.

At the outset, it may be mentioned that the admitted position in this case is that the Transfer of Property Act was not applicable to the suit property, situated at Kutakpur, Tehsil and District Rewari in the Erstwhile State of Punjab in 1955. Obviously, therefore, the provisions of Section 58 of the Transfer of Property Act would not be attracted.

In no far as it pertains to the factual position in this case, there is a concurrent finding of the lower Court, Both the Courts have held that in all three documents came into existence on 21-5-1955. These are - (i) the sale-deed (Exhibit D-2); (ii) a rent-note whereby the Vendor agreed to pay Rs. 20/- per month to the vendee by way of rent in consideration of use and occupation of the premises. The rent-note is exhibit D-1; and (iii) third document pertains to the agreement entitling the vendor to re-purchase the property within four years.

In so far as it pertains to the question as to whether the agreement to repurchase the property by the vendor can be taken into consideration by this Court in the absence of the said documents on record, I am of the opinion that in this suit, the question regarding the existence of such document is material only in order to ascertain the nature of the document purporting to be a sale-deed. This is not a case wherein the terms of the agreement to re-purchase the property has been sought to be agitated for getting specific performance of the said agreement. The suit was not for obtaining specific performance of the said agreement. The fact of existence of an agreement to re-convey the property has a limited relevance as a circumstance to assess the real nature of the document purported to be the sale-deed. In my opinion, therefore, the absence of the said document on record by itself is no bar to take into consideration the existence of such documents as a matter of fact. On the basis of admission given by the Appellant-vendee himself in the course of his deposition, both the trial Court have come to the conclusion that at the same time of the transactions in question, the said agreement entitling to vendor to re-purchase the property had also come into existence. As to the effect of such factual position, the matter can be considered in the light of attending circumstances also.

Both the courts below have also come to the conclusion that the vendor continued to be in possession of the suit-property and he had also raised certain construction in the suit property even after the transaction dated 21.5.1955. From the evidence of both the parties, it is quite clear that certain structures were raised on the suit property. The Appellant-vendee claims that said structure was raised by him. The vendor on the other hand claimed that the said structure was raised by him. The trial Court found that the evidence of the Plaintiff was further supported by witness, namely P.W.I Ganga Ram and P.W.7 Muni Lal; Het Ram, the mason, Budha Ram and Prabhu Dayal. As against that there was only self-serving statement of the Appellant-vendee. In his deposition, the Appellant stated that his Munim used to look after the said construction. However, the said Munim was not examined as a witness. On assessing the evidence thus led by the parties, the courts below have come to the concurrent finding that it was Respondent-vender who had raised the construction on the suit-property after the impugned transaction dated 21-5-1955.

It is an admitted position that the Respondent-vendor was occupying the property at the rate of Rs. 20/- per month as the rent. The Appellant-vendee had filed suits for recovery of rent, as referred above. In that suit also, the vendor had raised the contention that the present Appellant-vendee was not the owner of he suit-property and the transaction was a mortgage. As referred above, in that suit, the question regarding adjudication of the nature of the transaction was kept open outside the scope of the rent-suit. In the background of this, it may also be mentioned that on facts and on the basis of evidence of the witnesses, both the courts below have come to the conclusion that the Respondent-vender used to let out portions of the suit-property and recover rent even after the transaction in 1955. The evidence of Respondent-vendor in that respect was found supported by witnesses - P.W.I. Gange Ram, P.W.4 Jammanal, P.W.6 Budduram, P.W.7 Muni Lal an P.W. Prabhu Dayal who were tenants inducted by the Respondent-vendor.

Besides the above factual position, the trial Courts have also taken into consideration the value of the property as one of the factors to find out whether the sale of the said property was for the consideration commensurate to the value then prevailing. It was contended that evidence in that respect was not satisfactory and the lower courts were not justified in basing conclusion on some estimate or guess work regarding the value of the property as stated by some of the witnesses. Though the aspect regarding value of the property is kept out of consideration, the remaining factual position, to which I have made reference above, is required to be considered in totality to find out as to whether the transaction was a mortgage or a sale-deed.

On behalf of the Appellant, my attention was invited to a ruling reported in K. Simrathmull Vs. S. Nanjalingiah Gowder, ,. In that case, the provisions of Section 58 of the Transfer of Property Act thus came to be considered. As mentioned above, the admitted position in the case in hand is that the provisions of the Transfer of Property Act were not applicable to the property situated in the Erstwhile State of Punjab. In the abovementioned reported case, the Court declined to grant specific performance of re-conveyance on the ground that certain terms and conditions of the said agreement had not been abided by. The said ruling is obviously not applicable to the facts of the present case for two reasons, namely - this is not a case of specific performance of an agreement to re-convey, but it is a case of redemption of mortgage on the ground that the real nature of the transaction was a mortgage. Secondly, the provisions of Transfer of Property Act are not applicable to the present case.

My attention was also invited to another ruling reported in Soshil Kumar and Others Vs. Seth Madan Gopal and Another, , . In that case, the Division Bench of this Court was considering the question as to whether the transaction was a ''mortgage'' by conditional sale. In that case on facts, it was found that the sale-deed was registered on 5-1-1942. Subsequently, on 10-1-1942, two more documents were executed between the same parties. One of these documents pertain to agreement to re-convey the property to the original vendor within five years, on payment of consideration of the sale deed, namely Rs. 23,000/- and other dues. The said document was not registered. The second document was a lease for five years in favour of the vendor at monthly rate of rent of Rs. 143/12/-. In view of that factual position, it was held that the deed purported to be the sale-deed was absolute sale and subsequent deed pertaining to agreement to re-convey required registration and was to be got enforced within the period mentioned therein. On these findings, the suit for seeking declaration that the sale was without legal necessity, was dismissed, and in the High Court also, the matter stood dismissed. The said ruling obviously does not apply to the present set of facts.

In another case reported in P.L. Bapuswami Vs. N. Pattay Gounder, , their Lordships of the Supreme Court took into consideration following factors to arrive at the conclusion as to the true nature of the transaction. These are (i) condition for re-purchase was embodied in the same document; (ii) consideration for the transaction was Rs. 4000/- while value of the property was Rs. 8,000/-; (iii) the patta was not transferred even after the execution of the document; (iv) the ksit for the land continued to be paid by the vendor; and (v) the consideration for the re-conveyance was Rs. 4,000/- which was the same amount as the consideration of those transactions. It was contended that since the condition to re-transfer the property was not embodied in the same document, the transaction cannot be deemed to be mortgage by conditional sale by invoking the provisions of Section 58(c), proviso. In that respect, I would say that since admittedly the provisions of Transfer of Property Act were not applicable in this case, those legal provisions cannot be invoked in this case. While assessing the true nature of the transaction and the intention of the parties, the totality of the circumstances should be taken into consideration.

On behalf of the Respondent, my attention was invited to the case reported in the (1960) 62 P.L.R. 586, (Lal Chand v. Atma Ram and others), . In this case the Division Bench of this Court was construing a similar question. In that case also, in all three documents were executed on the same day. These were- (i) a sale deed for Rs. 8,000/-; (ii) an agreement to re-convey the property for Rs. 8,000/- within two years on the condition that the vendor paid rent every quarter and within a period of 15 days, after the lapse of three months, as per the rent-note executed on the same day; (iii) the rent-note as referred above. Their Lordships considered the various rulings, including the above referred ruling reported in Bhaskar Waman Joshi (deceased) and Others Vs. Shrinarayan Rambilas Agarwal (deceased) and Others, . In para 35 of the judgment, their Lordships observed as follows:

Where the transaction is essentially a mortgage, or as absolute sale with a condition to for re-purchase, the Court try to find out the intention of the parties at the inception of the transaction. The original intention and meaning determine the nature of the transaction. If the real purpose of the transaction is to secure a debt, it will be deemed a mortgage rather than a conditional sale. As the line of demarcation between a mortgage and a sale with a right to repurchase, is obscure, it usually is a matter of considerable perplexity to determine to which category the given transaction, very often nebulous, belongs. In so far as the intention of both the parties at the execution of the deed is a determining factor, the Courts have formulated certain tests, the Courts have formulated certain tests, by no means inflexible or conclusive, to help in arriving at the truth.

After having laid down the guidelines, their Lordships proceeded to observe that the intention of the parties can be ascertained by looking more to the substance than to the form of the transaction. In such cases, the parties are not estopped from showing the true nature of the seeming sale and the form of the deed is not in itself conclusive as often the form is used as a cover, designed to veil the reality. Their Lordships took into consideration the totality of circumstances, such as contemporaneous execution of three documents, as referred above, coupled with gross inadequacy of the purchase money and the condition that covers liability of interest. Their Lordships further observed that where the evidence and the circumstances were equally balanced, and do not clearly indicate whether the transaction was the sale or only a mortgage, the presence of the very slight evidence will suffice to persuade the Courts to treat it as mortgage.

In the light of above mentioned guidelines laid down by various rulings, now the circumstances in this case may be taken into consideration. Both the courts below have taken into consideration the various circumstances to which I have already made reference in the earlier part of this judgment. It would be only a repetition now to refer those circumstances. The factual position thus arrived at by the two courts below does not suffer from any illegality.

Moreover, on consideration of the material on record, it can be said that the factual position arrived at by the two courts below was quite correct. The inevitable result, therefore, would be that the transaction in this case was rightly held as mortgage by the two courts below. I find no good reason to interfere in the findings and the conclusions arrived at by the two courts below. In the result, the appeal stands dismissed. Under the circumstances, no order as to costs of this appeal.