Karuppanna Gounder and Another vs Thirumalsi Gounder and Others

Ismail, J.—It is unfortunate that this matter has to be remanded again to the lower appellate Court, and a suit which was instituted in 1965

has yet to be kept pending. The plaintiffs in O. S. No. 598 of 1965 on the file of the Court of the District Munsif, Erode are the appellant herein.

The suit was one for redemption of Ext. B-2 mortgage and for recovery of possession. The case of the appellants was that Ext. B-2 was a

mortgage by conditional sale and therefore they were entitled to redeem the mortgage. As against this, the case of the respondents was that Ext. B-

2 constituted an absolute sale accompanied by an agreement for re-purchase and therefore, the suit for redemption would not lie. The trial Court

decreed the suit. On appeal preferred by the defendants in the suit, the lower appellate Court, on an earlier occasion reversed the conclusion of the

learned Principal District Munsif who decreed the suit. The matter came up to this court in Second Appeal No. 667 of 1960. By judgment and

decree dated 7th Oct., 1971, I allowed the second appeal and remanded the first appeal for fresh disposal. The reason for my remand order was

that one of the tests to find out whether a particular transaction was an absolute sale or a mortgage by conditional sale is the adequacy of the price

having regard to the value of the property and with reference to that, the learned Subordinate Judge had made a mistake which would have

influenced him in coming to the conclusion as to whether the price was adequate or not. After the remand, the matter was disposed of by the

learned Principal Subordinate Judge, Erode on 8th March, 1972, In this case, there was no oral evidence at all. In the absence of oral evidence,

the learned Subordinate Judge expressed his difficulties in arriving at the value of the property for the purpose of showing that the consideration

mentioned in Ext. B-2 was adequate or inadequate, on the basis that the transaction was a sale. However, he recorded a definite finding that Ex.

B-2 was not a mortgage by conditional sale and that it was an out-and-out sale and that the plaintiffs were not entitled to maintain the suit for

redemption treating Ex. B-2 as a mortgage by conditional sale. The result was, the learned Subordinate Judge dismissed the suit for redemption

instituted by the appellants herein. It is this dismissal that is being challenged in the present Second Appeal.

The learned counsel for the appellants contends that the language or Exhibit B-2 fulfills the requirements of Section 58(c) of the T. P. Act and

consequently, the transaction under Ex. B-2 must be construed to be only a mortgage by conditional sale unless there are express words in the

document or other attendant circumstances to establish that the parties intended to treat the transaction as an absolute sale accompanied by an

agreement for reconveyance. I am of opinion that this contention is well-founded. Section 58(c) of the T. P. Act states:

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 a 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 conditional sale is embodied in the document which effects or

purports to effect the sale.

The proviso was introduced, for the first time, by the amending Act XX of 1929. Prior to that, there was no stipulation as to whether the condition

for re-purchase should be embodied in the same document or not.

It is not in dispute that Ex. B-2 prima facie satisfies the requirements of Section 58(c) of the T. P. Act, because the document ostensibly is a

transaction of sale and contains all the terms which will be contained in a document of sale. Ex. B-2 contains a condition that on the executants of

the document paying the sum of Rs. 1,000/- which was the consideration for the transaction within two years from the date of Ex. B-2, the

vendees should reconvey the property to the executants of the document.

With reference to such a situation, the Supreme Court, in Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, , has observed, at page

347.

The legislature has made a clear cut classification and excluded transactions embodied in more than one document from the category of

mortgages; therefore it is reasonable to suppose that persons who, after the amendment, choose not to use two documents, do not intend the

transaction to be a sale, unless they displace that presumption by clear and express words, and if the conditions of Section 58(c) are fulfilled, then

we are of opinion that the deed should be construed as a mortgage"".

The Supreme Court further observed, at page 348:

Now, as we have already said, once a transaction is embodied in one document and not two and once its terms are covered by Section 58(c)

then it must be taken to be a mortgage by conditional sale unless there are express words to indicate the contrary, or, in a case of ambiguity, the

attendant circumstances necessarily lead to the opposite conclusion"". As I pointed out already, the condition is embodied in the same document

and it is not embodied in a separate document. The terms of Ex. B-2 are covered by Section 58(c) of the T. P. Act. Therefore, according to the

observation of the Supreme Court referred to above, the transaction under Ex. B-2 must be taken to be a mortgage by conditional sale unless

there are express words to indicate the contrary, or in the case of ambiguity, the attendant circumstances necessarily lead to the opposite

conclusion. In this case, the learned Subordinate Judge has unfortunately committed a mistake. In para. 6 of his judgment he has stated ""The

plaintiffs have to prove that Exhibit B-2 is a mortgage by conditional sale and not an outright sale"". This statement of the learned Subordinate

Judge, on the face of it, is erroneous and runs counter to the law laid down by the Supreme Court. From the law laid down by the Supreme Court

it will follow that once the condition is incorporated in the same document and the terms of the document are covered by Section 58(c) of the T. P.

Act, the transaction will be considered to be a mortgage only unless the person who asserts it is not a mortgage is able to prove, either from the

language contained in the document or from the attendant circumstances, that the transaction was intended to be an outright sale. By throwing the

burden wrongly on the appellants herein, the learned Subordinate Judge has committed an error and as a matter of fact, the conclusion of the

learned Subordinate Judge would appear to be based upon his view that the appellants had failed to prove that Ex. B-2 was a mortgage by

conditional sale. On the face of it, such a conclusion is erroneous. Therefore, I have no alternative but to set aside the judgment and decree of the

learned Subordinate Judge and remand the matter for fresh disposal again by the lower appellate Court by finding out whether the respondents

herein had shown that the transaction under Ex. B-2 is not a mortgage by conditional sale, but an outright sale. As a matter of fact, from the extract

from the judgment of the Supreme Court referred to already by me, it will be clear that the same can be shown by two means: one, by establishing

that there are express words in the document itself which will be indicative of the character of the document not as a mortgage by conditional sale

and establish it to be an outright sale; and secondly, by establishing the attendant circumstances which will necessarily lead to the inference that the

transaction was meant to be an outright sale only. If, in the document itself, express words are to be found to show that the transaction was

intended to be only an outright sale, there would be no need for me to remand the matter and therefore, I gave an opportunity to Mr. T. R.

Rajagopalan, learned counsel for the respondents, to draw my attention to any term in Exhibit B-2 which will lead to the inference that the

transactions under Ex. B-2 was only an outright sale. Apart from referring to certain statements and words contained in the document showing that

the transaction was a sale, the learned counsel was not able to draw my attention to any express words which will preclude the transactions being a

mortgage by conditional sale and establish that the same is only an outright sale. As a matter of fact, with regard to the reliance on the recitals and

words contained in Ex. B-2 as showing the transaction as a sale, the Supreme Court itself, in the judgment referred to already, has given an

answer. The Supreme Court pointed out at page 348 as follows:

The only weakness in this argument is that when a mortgage is by conditional sale, this is the form it has to take, because Section 58(c) postulates

that there must be an ''ostensible sale'' and if a sale is ostensible it must necessarily contain all the outward indicia of a real sale. The question we

are considering can only arise when the word ''sale'' is used and, of course, a sale imports a transfer of title. The use of the words ""absolute

proprietor in our places"" carries the matter no further because the essence of every sale is to make the vendee the absolute proprietor of what is

sold. The question here is not whether the words purport to make the transferee an absolute proprietor, for, of course, they must u/s 58(c), but

whether that is done ''ostensibly'' and whether conditions of a certain kind are attached"".

Thus, the recitals contained in Ex. B-2 to show that the transaction was a sale were consistent with the sale being an ostensible one, and therefore,

from those recitals, no inference can be drawn that the transaction was not intended to be a mortgage by conditional sale, but was intended to be

only an outright sale.

It is in view of the above position it has to be found now whether there are attendant circumstances which will necessarily lead to the conclusion

that the transaction under Ex. B-2 was an outright sale as pointed out by the Supreme Court. It is only for this purpose I am allowing the second

appeal and remanding the matter to the lower appellate Court to find out whether there were any attendant circumstances which necessarily lead to

the conclusion that the transaction under Ex. B-2 was only an outright sale.

Accordingly, the second appeal is allowed, the judgment and decree of the learned Subordinate Judge are set aside and the appeal, A. S. No.

232 of 1966, is itself remanded to him for fresh disposal in the light of this judgment Since the matter has been pending for a very long time, the

learned Subordinate Judge is directed to dispose of the appeal within a period of three months from this date. The appellants will be entitled to

refund of the court-fee paid on the memorandum of second appeal. There will be no order as to costs in the second appeal. We leave.