S.R. Kulathu Iyer vs S. Manickavasagam Pillai and Another

Ramaswami, J.—These are two connected second appeals preferred against the decrees and Judgments of the learned Subordinate Judge,

Tuticorin, in A.S. Nos. 76 and 77 of 1951, arising from the orders made by the learned District Munsif of Kovilpatti in O.P. Nos. 19 and 20 of

1950.

The facts are: The respondents'' father had become indebted to the appellant''s vendor. This indebtedness had come to a head in 1932, which,

as the preamble to Act IV of 1938 shows, was a year of great depression. In fact the beneficial Madras Act IV of 1938 and the other statutory

legislation came to relieve the ryots of the overwhelming indebtness under which they were groaning. Therefore, in these circumstances, the

respondents'' father wanted to settle his debts with the vendor of the appellant. The appellant''s vendor, on account apparently of the long

transactions with these people, has taken a sympathetic view and has settled the amounts at much lower rates and has agreed to take the

properties of these respondents'' father in discharge of those debts. The respondents'' father apparently being an agriculturist seems to have also

pressed that if better times came he should be given an opportunity to purchase back the property for the lower amounts for which these debts had

been settled. The appellant''s vendor seems to have agreed to that also and it is in these circumstances that the two documents which are under

consideration came into existence.

The documents are described as "" vayida crayam"" a phrase which I shall explain presently. The substance of these sales is that in discharge of

the debts, of a much higher sum and which had been settled at a lower figure the properties were being fold to the appellants vendor for a round

sum of money and that the vendee was also put in possession of these properties and that if, after a period of nine years, the vendor was able to

pay back the sum for which the sales had been effected, the vendee should retransfer the properties to him. It was stipulated that the vendee

should apply for transfer of the registry after a period of ten years. The documents wound up by saying that if the vendor fails to get the

repurchase, the vendee will enjoy the properties without any further claim from him in the shape of the clause, apparently referring to the clause for

right to repurchase.

In fact, nothing further would have happened on account of the economic depression. But subsequently by the amendment to Act IV of 1938,

usufructuary mortgages have also been brought within the ambit of Act IV of 1938. In other words, it has now become profitable to contend that

these sales with a condition to repurchase are in reality mortgages by conditional sale.

The present applications have been filed on the ground that these are all mortgages with a conditional sale to which the amended Act IV of 1938

applies and which point is disputed by Mr. Bhashyam and which need not be gone into in these proceedings, because I shall dispose of the appeals

on a shorter point, and which may be properly considered in other proceedings. On the other hand, the contention, among other things of these

appellants before me is that they are all sales only with a condition to repurchase. If that contention is found in favour of the appellants, then the

other points need not be gone into.

I shall, therefore, examine whether the two documents under consideration are sales with a right to repurchase, as contended for by the

appellants, or not.

It has been recently pointed out by the Supreme Court in Chunchun Jha v. Sheikh Ebadat Ali (1954) 1 M.L.J. 708 : (1954) S.C.J. 469, that the

question whether a given transaction is a mortgage by conditional sale or a sale outright with a condition of repurchase is a vexed one which

invariably gives rise to trouble and litigation and that there are numerous decisions on the point and much industry has been expended in some of

the High Courts, to which I also, plead guilty, in collating and analysing them, and that this is a fruitless task because two documents are seldom

expressed in identical terms and when it is necessary to consider the attendant circumstances the imponderable variables which that brings in its

train make it impossible to compare one case with another.

But still, as pointed out by the Supreme Court later, there are certain general principles which have got to be considered in connection with these

cases. In regard to this case, the following circumstances clearly show that the documents are sales with a right to repurchase. First of all, these

sale deeds came into existence in discharge of debts owed for a large sum of money being settled for smaller amounts. In other words, if the

documents are mortgages, why should there have been the settlement at lower rates and liquidation of these debts by the sale of the properties ?

Secondly, these documents bear the hybrid name of ""vayida crayam"". I take it that this phrase is used in contradiction to the usual phrase "" suddha

crayam "" The phrase "" vayida crayam "" in the context appears to me nothing more than the fact that the documents are sales with a condition to

repurchase within a fixed period and not sales without any such condition whatsoever. Thirdly the sale price which is given in round figures is also

the price which has to be given by the vendor after a stipulated period in order to repurchase the properties. If these documents were mortgages,

there would be indication by way of interest and there would also be some indication of how the amount has to be recovered. On the other hand,

the same figures for both purchase and repurchase show that this was a concession made by the vendee to the vendor who happened to be his old

debtor that he was given a period during which if he happened to be fortunate and was able to make up the funds, he would be willing to sell back

the properties and that he did not want to keep his properties and make him lose the same. Fourthly, the period fixed is 9 years and it is contended

that this period indicates more a mortgage than a sale. I am unable to subscribe to this proposition in the context in which that period was given.

Ordinarily, a long period would indicate a mortgage and a shorter period would indicate a sale. But it must be remembered that these transactions

came into effect in 1932 when all the ryots were in the doldrums and they had no prospect of being able to make up sufficient amounts to

repurchase the properties. Therefore, obviously a longer period has been fixed by the vendee in order to enable the vendor to repurchase the

property if possible after making up the funds. Fifthly, it is contended that the condition that there would be transfer of patta after a period of ten

years is indicative of the fact that there was no sale but only a mortgage and in support of that a decision in Srinivasaraghavan alias Srinivasa

Chakravarthi and Others Vs. Kalianna Goundan and Others, , was relied on. But the fact that application for transfer of patta was intended to be

given after the expiry of the period of ten years is not very material as regards the passing of interest in the property. In the decision which is

referred to above, the non-transfer of patta was considered to be an important point in the context and the circumstances of that case. There the

transaction which began as a deed of conditional sale dated 25th June, 1934, was preceded by an agreement of 18th June, 1934, which was for

the purpose of executing an othi within a certain time and in default of payment of the amount within a certain period the transaction was to result in

an out and out sale. In deciding whether the transaction between the parties constituted an absolute sale with an option for repurchase or a

mortgage by conditional sale, the learned Judges had regard to the two documents read in the light of the surrounding circumstances, and they

came to the conclusion that the instrument of 25th June, 1934, was entirely in accordance with the agreement of a week before, and it was only in

such circumstances the facts that the stamp-papers for that transaction were purchased by the mortgagors defendants therein, and the patta was

not transferred to the name of the plaintiffs therein were construed as indicating an intention to create only a security for the debt which was held to

be subsisting and not a sale under which the debt was wiped out. The facts in the present case are entirely different, and on account of the fact that

the transferor has been given the right to repurchase after a period of ten years, they must have agreed amongst themselves that only after that

period of grace was over the transfer of registry should be made. In other words, the consensus of circumstances in this case show that they were

sales with a condition to repurchase and not mortgages with a conditional sale.

On this conclusion, it is unnecessary to go into the other points which have been raised in the memorandum of appeal, except the question of

Act IV of 1938 not applying to cases of this nature, because Act IV of 1938 as amended would not apply to sales with a condition for repurchase

and in which there has been no-repurchase as stipulated and the appellants now are in possession of the property as owners under sales.

Therefore, these two appeals have got to be and are hereby allowed and O.P. Nos. 19 and 20 are dismissed with costs throughout. (No

leave)