V. Venkatarama Iyer vs K. Ranganathan Pillai and others

Ramakrishnan, J.—The short question for determination in this second appeal is whether the document Exhibit B-1 was an out right sale

with an agreement to reconvey, or a mortgage by conditional sale as defined in S. 58(c) of the Transfer of Property Act. The view of the Courts

below was that it was a mortgage by conditional sale; hence the defendant, the aggrieved party, has filed this second appeal. The plaintiffs'' case

was briefly, the following : The suit properties are situated within the Municipal limits of Tanjore, and belonged to one Kaliaperumal Pillai, the

undivided father of the plaintiffs, and his younger brother Krishnaswami. They borrowed amounts from one Janaki Ammal and in settlement of

these debts, the suit document, Exhibit B-1 dated 18th April, 1939, was executed, ostensibly as a sale deed, but, in essence, it was only a

mortgage. Janakiammal died shortly before the suit, and before her death, she appointed the defendant as her executor, to manage her estate, and

the defendant is in management of the suit properties. The plaintiffs'' father died fifteen years ago, and the plaintiffs have succeeded to his estate by

survivorship. The plaintiffs filed the suit for redemption of the mortgage, Exhibit B-1. The defendants pleaded that the document was an out-right

sale with a covenant for repurchase. They also denied the plaintiffs'' right to the benefits of S. 9-A of Act IV of 1938.

The document is in Tamil and can be rendered thus in English:-

We have today executed the sale deed in your favour of the under-mentioned property and the consideration therefore of Rs. 2550 is made up in

the following manner�(1) by discharge of a prior simple mortgage dated 20th July, 1924 for Rs. 2000 over item No. 1�amount received Rs.

1850; (2) by discharge of a mortgage dated 12th July, 1937 for Rs. 600 over item No. 2 and other items after scaling down the interest under Act

IV of 1938�Rs. 450; (3) amount due towards principal and interest on a promissory note dated 12th July, 1937 for Rs. 250; total Rs. 2250.

We have given you the above said property with absolute rights to it. Excepting the two mortgages aforementioned, there are no other

encumbrances on this property. Out of the consideration of Rs. 2550 for this sale deed, if we pay you Rs. 2050 within 3 years from today, you

shall reconvey the properties to us. Subject to this condition this deed of sale is executed.

The main circumstances to be borne in mind in regard to this transaction are the following: For the entire amount of consideration of Rs. 2550 no

amount by way of cash was paid. The entire amount represented prior debts under two simple mortgages and a promissory note. An effort was

made deliberately to show in the document that the amount of consideration represented the amount of the prior debts after adjusting amounts

already paid or after scaling down amounts by way of interest under Act IV of 1938. A conscious intention to show that the relationship of debtor

and creditor subsisted between the two parties upto the time of the execution of the document is thus apparent. In 1934 Item No. 1 property was

capable of raising Rs. 2,000 by way of simple mortgage. In 1929 Item No. 1 property supplemented by three more items, which include four mahs

or 1-1/3 acres of cultivable land, a garden land containing topes and gardens and another garden land, containing bamboo clusters, were all sold

for Rs. 2,550. No attempt was made in the lower Courts to show how the price of the property varied in the locality between 1924 and 1939,

whether there was an upward trend or a downward trend. The lower appellate Court, however, was prepared to consider that from the recitals of

the document alone, it would appear that the property covered by Ex. B-1, wag worth on the date of Ex. B-1 much more than Rs. 2550. This is a

finding of fact and I am not prepared to interfere with it, though it would have been better if the lower appellate Court had supplemented its

observation, by reference as to how the trend of the prices of property had varied from 1924 to 1939.

A further point is that the consideration for the reconveyance of Rs. 2050, is Rs. 500 less than the consideration for the sale. This must be

viewed as a very unusual feature in such a transaction. Learned Counsel, Sri R. Gopalaswami Iyengar, appearing for the appellant, urged that this

should be taken as a crucial test to show that the transaction was a sale rather than a mortgage. On the other hand, Learned Counsel for the

respondents Sri K.S. Desikan urged that the reason for the reduction of Rs. 500, was that the parties still sought to maintain the relationship of

creditors and debtors, that they expected that the enjoyment of the property by the creditors for three years from 1939, would give them by way

of profits, much more than the interest which would accrue on the debts during that period and that it was to provide for this circumstance, that

they gave a reduction of Rs. 500 in the amount stipulated for obtaining a reconveyance. It does seem very unusual that a person buying property in

1939 would have anticipated that three years later the property would be worth Rs. 500 less. Even assuming that there was a retrograde trend in

prices upto 1939, no reasonable person would anticipate a further fall, and try to provide for it by fixing a lesser amount for obtaining a

reconveyance three years later. In the above circumstances, the explanation given by the Learned Counsel for the respondents appears to be more

reasonable, for the deliberate reduction in the amount fixed for the reconveyance of the property three years later.

One other circumstance appears to be of relevancy. At the conclusion of the document the parties specifically described the term for

reconveyance as a condition of the sale. Therefore they intended that the term for reconveyance should be a condition attached to the original

transfer of the property, this a circumstance more consistent with a mortgage than a sale.

Several decisions were cited before me by both sides. In Ramachandrayya Vs. Laxminarayana Rao, Krishnaswami Nayudu, J., observed:

Where it is found that there was a prior relationship of debtor and creditor between the parties, that the stamp papers for the document were

purchased in the name of the transferor, that the price fixed was not the result of bargaining, but represented the exact amount of the pre-existing

debt due by the vendor to the vendee, and the price too was not a fair or proper price, there can be no room for any doubt that the transaction is

and intended to be only a mortgage by conditional sale.

In 1956 Ramaswami, J., had to consider two different types of cases. In the decision reported in S.R. Kulathu Iyer Vs. S. Manickavasagam

Pillai and Another, there was evidence to show that the amount at which the price was settled was much lower than the amount due under the

earlier debts. The parties described the document as ""vayida crayam"" in contradiction to the usual phrase ""sudha crayam"". The sale price given in

round figures was also the price to be given by the vendor after a stipulated period. There was nothing to show that any interest was payable. But,

as mentioned already, in this case, the document recites that the amount of the sale price was the amount arrived at after calculation, of the amount

due under the prior debts less adjustment for repayment or scaling down and the price for the reconveyance is less than the price for the sale. In

B.A. Khan alias Bahadur Ali Khan Vs. Nawaz Khan and Others, the learned Judge had to consider a different type of transaction, where he

catalogued five tests to be applied in similar cases. But it appears to me that the facts of each case have to be considered independently and that

any prescription off standardised tests may not be sufficient to meet all situations. In Bhaskar Waman Joshi v. Srinarayan Rambilas Agarwal

(1960) 1 M.L.J. S.C. (sic) the Supreme Court observed that

the question in each case was one of determination of the real character of the transaction, to be ascertained from the contents of the deed, viewed

in the light of surrounding circumstances. The circumstance that the condition (of reconveyance) is indicated in the sale deed has undoubtedly to be

taken into account, but the value to be attached thereto must vary with the degree of formality attending upon the transaction.

In my opinion, the circumstances of this case are more consistent with the transaction being one of a mortgage by conditional sale, than an outright

sale, with an agreement for reconveyance. In this view, I confirm the decision of the lower appellate Court, and dismiss the second appeal. There

shall be no order as to costs in the second appeal. No leave.