Quda Mir and others vs Moma Bhat and others

S. Murtaza Fazl Ali, C.J.—This is a defendants' appeal in a suit for possession filed by the plaintiffs. According to the plaintiffs three

transactions were entered into between the plaintiffs and the defendants which took the outward form of a sale but in fact were mortgages. One

was a deed dated 9th Chet 2001 (Bikrami) in respect of 8 kanals and 5 marlas which had for its consideration a sum of Rs. 130/-. Another

transaction was dated 10th Baisakh 1998 in respect of 4 kanals and 2 1/2 marlas having for its consideration Rs. 100/-, and the third was dated

9th Poh 1997 (B) in respect of 4 kanals with a consideration of Rs. 260/-. The plaintiffs claimed to be the owners of the land or at least the owners

of the possessory rights in the land and filed a suit for possession by redeeming the mortgages executed by them.

The suit was resisted by the defendants mainly on the ground that the plaintiffs had sold these lands to the appellants and therefore the question

of recovering possession did not arise. According to the defendants the transactions evidenced by the three deeds amounted to an out and out sale

with a condition of re-purchase and therefore the plaintiffs had no right to recover possession.

The trial court decreed the plaintiff's suit and held that he had the right to recover possession, as the transactions were mortgages. The learned

appellate court affirmed the decision of the trial Court but on different grounds. Hence this second appeal.

The main point that has been contended before me by the counsel for the parties was as to whether the transactions mentioned above amounted

to a sale or a mortgage by conditional sale. Counsel for the appellant submitted that the transaction was an out and out sale with a condition of re-

entry and could not be considered to be a mortgage and therefore the plaintiff's suit was clearly not maintainable. On the other hand the plaintiffs

submitted that the transactions were only mortgages by conditional sales though they took the outward form of a sale: the intention of the parties

was to create a mortgage rather than a sale. Thus the sole question to determine in this case is as to whether on the terms and recitals of the

documents the intention of the parties was to create a mortgage or execute a sale. This question came up for decision before the Supreme Court in

Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, where their Lordships pointed out that the question whether a given transaction is a

mortgage by conditional sale or a sale outright with a condition of re-purchase is a vexed one and must be decided on its own facts. Their

Lordships further held that in such cases the intention of the parties was the determining factor. I have therefore perused the three documents

carefully and I find that the intention of the parties could have been to execute a mortgage by conditional sale rather than an out and out sale with a

condition of repurchase. Decided cases have laid down various tests for determining the intention of the parties in such cases. For instance the

quantum of consideration is one test. Where the consideration represents the market value of the property the intention is to treat the transaction as

a sale rather than a mortgage. Where, however, the consideration is much below the market value the intention is to create a mortgage. Similarly

where a short period for re-conveyance is fixed the intention is to execute a sale but where no period for repayment is fixed the intention is to

create a mortgage. Thirdly, where the sale and the agreement to repurchase are embodied in the same document, then the presumption is that the

intention of the parties was to treat the transaction as a mortgage rather than a sale. This is because under the proviso to Section 58 (c) of the

Transfer of Property Act if the sale and the agreement to repurchase are embodied in separate documents then the transaction cannot be a

mortgage. It was for this reason that their Lordships of the Supreme Court in Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, observed

as follows:

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. (Para 8 page 347)

....... ....... .......

In our opinion, this language is not free from difficulty and is ambiguous. The deed purports to be a sale and has the outward form of one but at the

same time it calls itself a 'conditional sale'. It has, however, no clause for retransfer and instead says (clause 6) that if the executants pay the money

within two years the property 'shall come in exclusive possession and occupation of us, the executants.' That is clear about the possession but is

silent about the title. In the context we can only take these words to mean that if there is payment within the specified time, then the title will

continue to reside in the executants; for what else can a right of exclusive possession import in these circumstances?.

(see para 10 page 347)

The observation which their Lordships made in para 10 (Supra) was that where the clause of re-entry is silent about title and mentions only the

restoration of possession, the intention is to treat the document as a mortgage.

The view taken by their Lordships of the Supreme Court in this case has been further endorsed in Bhoju Mandal Vs. Debnath Bhagat, and

1182. A perusal of the document in the instant case reveals the following features:-

1) That having regard to the extent of the land sold the consideration is far below the market value which is usually the case in mortgages.

2) There is no specific condition in the document which provides for a reconveyance of the property to the vendors on the happening of a

particular contingency so as to re-transfer title to the vendor by the vendee. All that is provided is that whenever the vendor desires to get back the

property he will pay the amount of consideration to the tenant and take back possession of the land. Such a recital is therefore fully consistent with

the intention of the parties, being to create a mortgage rather than to execute a sale deed. If the intention of the parties was to execute a sale rather

than a mortgage, then we should have expected a specific clause authorizing the vendee to re-transfer the property to the vendor rather than take

back possession. In a mortgage the title resides in the mortgagor and only possession is parted to the mortgagee. If the recital is that on payment of

the consideration money the owner will take back possession then it clearly shows that the intention of the executant was to create a mortgage and

not a sale.

The two circumstances mentioned above were also present in Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, . In similar

circumstances in P.L. Bapuswami Vs. N. Pattay Gounder, it was held that the transaction was a mortgage rather than a sale.

Another important circumstance to show that the transaction is a mortgage and not a sale is that in the documents dated 10th Baisakh 1998 and

9th Poh 1997 (Bikrami) the consideration is described as Zar-i-Rahan (Mortgage money) which completely excludes the fact that the intention of

the parties could have been to execute a sale deed. For these reasons, therefore I am satisfied that in the instant case the transaction amounted to a

mortgage and therefore the plaintiffs' suit for recovery of possession of the properties was legally maintainable.

Another point that was argued by the counsel for the appellant was that since the mortgage was upto the value of Rs. 100/- or above in each

case and none of the documents was registered, the possession of the mortgagee became adverse from the date of the execution of the documents

and the defendants therefore acquired title by adverse possession. It is true that normally a person in possession of the property under an invalid

transfer starts prescribing from the date of the execution of the transfer, but at the same time it is well settled that a person cannot prescribe a

higher title than what is transferred to him. In the case of a mortgage only possession is transferred to the mortgagee whereas title resides in the

mortgagor. Thus even though the mortgage may be invalid under Sec. 59 of the T. P. Act, the mortgagee by being in possession for over 12 years

will acquire by prescription only the rights of a mortgagee, unless there is evidence to show that he asserted a hostile title to the knowledge of the

mortgagor from the inception of the mortgage. In other words by virtue of 12 years' possession by the mortgagee, the transaction will become a

legally operative mortgage. I am fortified in my view by a large catena of authorities in Maha Mangal Rai and Others Vs. Kishun Kandu , Lallu

Singh Vs. Ram Nandan and Others . Collector of Bombay Vs. Municipal Corporation of The City of Bombay and Others, . Janki Koeri Vs.

Jamuna Koeri, . Mst. Nilabati Padhiani and Others Vs. Pirabati Padhiani and Others, . Sukra Oraon and Another Vs. Jagat Mohan Singh and

Others, and AIR 1960 Rai 1 (SB).

In Maha Mangal Rai and Others Vs. Kishun Kandu . at p. 314, Iqbal Ahmad J. observed as follows:

A mortgage of an occupancy holding is no doubt not permitted by law. but by entering into possession as mortgagees of the holding in dispute and

by continuing in such possession for more than 12 years, the defendants could only prescribe a title for the limited interest of a usufructuary

mortgagee.

In the Collector of Bombay Vs. Municipal Corporation of The City of Bombay and Others, although the Corporation was proved to be in

possession of Government land for more than 70 years, the Supreme Court held that the Corporation could only acquire a limited title, that is to

say, the right to hold the land in perpetuity free from rent.

In Sukra Oraon and Another Vs. Jagat Mohan Singh and Others, . 247 a Division Bench of the Patna High Court observed as follows:-

The learned judges have failed to notice that the possession of a mortgagee under a void mortgage is permissive so far as the absolute title is

concerned and adverse only in so far as the limited interest is concerned.

On a parity of reasoning therefore, in the instant case even if the defendant was in possession of the property in suit for more than 12 years he has

at the most acquired the right of a mortgagee by prescription.

It was suggested that the land was actually Government land in possession of the plaintiff for a long time before he mortgaged it to the

defendants. The Government is not a party to the suit and it is therefore not necessary to decide the question of title as between the plaintiff and the

Government. It is, however, admitted on all hands that the plaintiff being in possession of the land for a long time had no doubt acquired a

possessory title which he could transfer.

For the reasons given above, both the contentions raised by the counsel for the appellant fail. The appeal is accordingly dismissed but in the

circumstances without any order as to costs.

Appeal dismissed.