A. K. Raju Moopan v. Packiam Ammal — 1999 DIGILAW 395 (MAD)

Judgment 1. The plaintiff in O.S.No.270 of 1982 on the file of the District Munsif Court, who had succeeded before the trial court and lost before the first appellate court is the appellant in this second appeal. This second appeal is directed against the judgment and decree of the learned Subordinate Judge, Trichy dated 8th April, 1986 made in A.S.No.268 of 1984 in reversing the judgment and decree made in O.S.No.270 of 1982, dated 24.2.1984. 2. For convenience the parties to this second appeal will be referred as arrayed before the trial court. 3. At the time of admission, this Court framed the following substantial question of law: “Whether Ex.A-1 is a mortgage by conditional sale or a sale with an option to re-purchase.” 4. The plaintiff instituted the suit for redemption of the suit property and directing the defendant to execute a reconveyance on receipt of sum of Rs.999.20. The plaintiff pleaded that the suit property is the ancestral property of the plaintiff and his sons who all constitutes a Hindu undivided joint family, that the plaintiff for himself and as father guardian of his sons-minors, Chandrasekaran, Gunasekaran and Sriram executed a deed of mortgage by conditional sale to secure a loan of Rs.7,000 advanced by the defendant on 29.3.1973 that the said instrument is essentially a mortgage by conditional sale as contemplated by Sec.58(c) of the Transfer of Property Act, that it is not a sale with an agreement to reconvey, that the defendant was inducted into possession as a mortgagee, that the defendant has been in enjoyment of the suit property as a mortgagee, that the sum of Rs.7,000 was advanced by the defendant to discharge the debt due to the local co-operative society, which the defendant even after the undertaking, had failed to discharge and that the mortgage is not supported by consideration to the tune of Rs.2,004. 5. 5. It is further pleaded by the plaintiff that the plaintiff is entitled for redemption, that the plaintiff is an agriculturist entitled to the benefits of the Tamil Nadu Debt Relief Act 8 of 1973 and other enactments that in terms of the debt relief enactments, the plaintiff is entitled to scale down the mortgage debt and only a sum of Rs.999.20 is due, which the plaintiff is ready and willing to deposit, that the defendant is estopped from denying the right of the plaintiff to get the reconveyance under the mortgage and that the plaintiff is entitled to relief as prayed for. 6. The defendant resisted the suit contending that the plaintiff is not entitled to redeem the property that the document dated 29.3.1973 is not a mortgage by conditional sale, but it is a sale in favour of the defendant and that Sec.58(c) of the Transfer of Property Act will have no application. 7. The trial court after considering Exs.A-1, B-1 mortgage deed and the evidence of P.Ws.1 and 2 held that Ex.A-1 is a mortgage, that the plaintiff is entitled to redeem the suit property, that the plaintiff is entitled to the benefits of Debt Relief Act and entitled to scale down the debt, which comes to Rs.732.50 and in the light of the said finding decreed the suit as prayed for. 8. The trial court also found that Ex.A-1 is a mortgage by conditional sale and granted a decree for redemption and consequential reliefs as well. 9. Being aggrieved the defendant preferred A.S.No.268 of 1984 on the file of the Second Additional Sub Court, Trichy. The first appellate Court held that Ex.A-1 is conditional sale and it is not mortgage on condition and held that the plaintiff is not entitled to the decree of specific performance of the agreement to reconvey. In that view of the matter, the first appellate court allowed the appeal and set aside the judgment and decree of the trial court and dismissed the suit in its entirety. 10. Ex.A-1 is the only document, which requires to be considered. Ex.A-1 recites, as if it is an absolute sale. In that view of the matter, the first appellate court allowed the appeal and set aside the judgment and decree of the trial court and dismissed the suit in its entirety. 10. Ex.A-1 is the only document, which requires to be considered. Ex.A-1 recites, as if it is an absolute sale. Out of the sum of Rs.7,000 the purchaser had agreed to pay Rs.2,400 to the Cooperative Society to discharge the loan payable by the plaintiff; Rs.3,000 to discharge the Othi amount payable to one Pitchaimuthu by the plaintiff and an amount of Rs.1,996 had been received. It has been specifically agreed that after the 9th year and during the currency of 10th year, the plaintiff on paying Rs.7,000 and stamp duty of Rs.732.50 the defendant had agreed to execute a deed of reconveyance in favour of the plaintiff. The said Ex.A-1 is dated 29th March, 1973. The 9th year commences on 28.3.1982. However, during September, 1981 itself, the plaintiff demanded compliance of the stipulations, which the defendant had refused. Hence, the suit. 11. The question is whether Ex.A-1 is a sale with an agreement to reconvey or a mortgage by conditional sale. The only question that has been argued before this Court is whether the interpretation placed on Ex.A-1 by the lower appellate court is correct and what is the intention of the parties. 12. The trial court held that it is a mortgage by conditional sale, while the appellate court held that it is not a mortgage by conditional sale, but it is an agreement of reconveyance. It is to be pointed out that the price agreed between the parties under Ex.A-1 for reconveyance is the same, besides, the plaintiff has to pay the stamp duty alone. The plaintiff has no right to deal with the property, Ex.A-1, nowhere provides that the defendant is entitled to deal with the property in any manner he likes as an absolute owner and it is found that the relationship between the plaintiff and the defendant is that of a debtor and creditor. 13. The learned counsel for the respondent placed reliance upon a decision in Nadesa Pathar v. Pakkirisamy Pathar Nadesa Pathar v. Pakkirisamy Pathar Nadesa Pathar v. Pakkirisamy Pathar , (1996)1 C.T.C. 337 and contended that Ex.A-1 is not a mortgage by conditional sale. 13. The learned counsel for the respondent placed reliance upon a decision in Nadesa Pathar v. Pakkirisamy Pathar Nadesa Pathar v. Pakkirisamy Pathar Nadesa Pathar v. Pakkirisamy Pathar , (1996)1 C.T.C. 337 and contended that Ex.A-1 is not a mortgage by conditional sale. In the above decision Raju, J. as he then was held thus: “In the light of the above principles of law as also the terms and conditions contained in Ex.A-5, it becomes necessary to adjudicate upon the nature and character of the document as to whether it is a mortgage by conditional sale or a sale with a condition for retransfer. In my view, the reliance placed by the learned counsel for the appellants on the decisions of the Apex Court in Tamboli Ramanlal Motilal v. Ghanchi Chimanlal Tamboli Ramanlal Motilal v. Ghanchi Chimanlal Tamboli Ramanlal Motilal v. Ghanchi Chimanlal, A.I.R. 1992 S.C. 1236 is inappropriate and the said decision has no application to the case on hand for the simple reason that as referred to earlier the document which was considered by their Lordships of the Supreme Court, there was a positive recital entitling the purchaser from the date of purchase to use, enjoy and lease the said house ‘under the ownership right’ unlike the positive stipulation to the contra, in negative terms in the case before me specifically prohibiting the purchaser from encumbering the property in any manner within the period of five years stipulated for repurchase. Taking together their most vital aspect along with the valuation of the property as found by the lower appellate court as a finding of fact and the consideration for Ex.A-5, there can be no difficulty whatsoever in holding that the document in question was only a mortgage by conditional sale and not a sale with a condition for transfer, as rightly, in my view, held by the lower appellate court. Indisputably, the condition for repurchase is found engrafted in the same document. Indisputably, the condition for repurchase is found engrafted in the same document. The fact that in the document under consideration in this case, the condition stipulated is that only on default of payment of the amount, on or before a certain date, the sale shall became confirmed and the specific condition contained in the very document that on the seller repaying the sum of Rs.250 which was the consideration for the document the buyer shall transfer the property to the seller, the character of the document necessarily is to be held as that of a mortgage by conditional sale. The stipulation for transfer within five years from the date of conveyance to the transferor at the expense of the transfer or for the every price mentioned in the deed was held to be indicative of the document being a mortgage by conditional sale in Bhaskar Waman Joshi v. Shivnarayyan , A.I.R. 1960 S.C. 301. In this case also, the same identical situation is reflected in the document. The substantial difference in the valuation of the property was held to be a vital pointer to the document being a mortgage by conditional sale in more than one decision particularly in P.S.Bapusamy v. N.Pattay Gounder P.S.Bapusamy v. N.Pattay Gounder P.S.Bapusamy v. N.Pattay Gounder , A.I.R. 1966 S.C. 902and the document in this case also satisfies the said requirement.“ 14. The learned counsel for the respondent also relied upon a decision of this Court in Venkatammal and others v. Kadhirappa Naidu and others Venkatammal and others v. Kadhirappa Naidu and others Venkatammal and others v. Kadhirappa Naidu and others , (1997)1 C.T.C. 592 wherein S.S.Subramani, J. held thus: ”Before the lower appellate court, an argument was taken that the mortgage by conditional sale can only be under a single document and if two documents are executed as in this case, it can only be treated as a sale with condition to repurchase. In the decision of the Supreme Court (cited supra) the very document contained all these clauses and even the nomenclature was a deed of conditional sale and a period of five years was provided to exercise the option. In spite of all these clauses contained in a single document, the Supreme Court said that we are governed only by the terms of the document and the nomenclature is of no use. In spite of all these clauses contained in a single document, the Supreme Court said that we are governed only by the terms of the document and the nomenclature is of no use. In this case, Ex.A-1 does not refer to any of the clauses either to repurchase or a deed of conditional sale. It stands independent of all document. If that be so, even without considering any of the other decisions cited before the lower appellate court, Ex.A-1 can be treated only as a sale deed simplicitor, The absolute title over the property was conveyed to Gopamma.” 15. The learned counsel for the respondent also relied upon the decision of the Apex Court reported in Tamboli Ramanlal Motilal by L.Rs. v. Ghanchi Chimanlal Keshavlal Tamboli Ramanlal Motilal by L.Rs. v. Ghanchi Chimanlal Keshavlal Tamboli Ramanlal Motilal by L.Rs. v. Ghanchi Chimanlal Keshavlal , A.I.R. 1992 S.C. 1236 wherein the Apex Court held that on the facts of the said case, that the document which was under consideration was not a mortgage by conditional sale. 16. However, it has to be pointed out that the Apex Court held that the attendant circumstances could be looked into only to gather the intention and if such an intention is expressly clear, there is no scope for looking into the attendant circumstances. It has been further held that if there is no relationship of debtor and the creditor the question of it being a mortgage by conditional sale does not arise. The Apex Court held thus: “Secondly, the High Court was wrong in concluding that the accounts between the parties had been completely settled ignoring the fact that there was Ex-39, the accounts evidencing that such a relationship continued. The next submission of the learned counsel is that merely because of the rights including the right to passage and the right to discharge water are conveyed, that does not militate against the transaction being a mortgage. It follows when it is a case of mortgage by conditional sale possession should be delivered, having regard to the fact that it is an ostensible sale. The important clause in the document that in the event of the executant failing to repay the full amount, he shall have no right to take back the property is consistent with the transaction being a mortgage. The important clause in the document that in the event of the executant failing to repay the full amount, he shall have no right to take back the property is consistent with the transaction being a mortgage. The learned counsel urged that this squarely falls under Sec.58(c) of the Transfer of Property Act, 1882 and condition No.(1) as stipulated for a mortgage by conditional sale. In support of these submissions reliance is placed on Pandit Chunchun Jha v. Sheikh Ebadat Ali , (1955)1 S.C.R. 174 :A.I.R. 1954 S.C. 345. The document in the reported case contained identical clauses. Therefore, if such a document could be construed as a mortgage by conditional sale, all the more so, in the present case. The learned counsel for the respondents would urge that there is nothing to indicate by reading a document that there is any relationship of the debtor and the creditor. What the executant of the document did was in discharge of the prior debts he sold the property for a sum of Rs.5,000. The fact that there was a previous relationship of the debtor and the creditor will have no bearing in construing the document. The attendant circumstances could be looked into only to gather the intention. Such an intention, if explicity expressed in the document itself, there is no scope for looking at the attendant circumstances, if therefore, there is no relationship of the debtor and the creditor, the question of it being a mortgage by conditional sale does not arise.” 17. The attendant circumstances could be looked into only to gather the intention. Such an intention, if explicity expressed in the document itself, there is no scope for looking at the attendant circumstances, if therefore, there is no relationship of the debtor and the creditor, the question of it being a mortgage by conditional sale does not arise.” 17. The learned counsel for the appellant also relied upon a decision of the Apex Court reported in P.L.Bapuswami v. N.Pattay Gounder P.L.Bapuswami v. N.Pattay Gounder P.L.Bapuswami v. N.Pattay Gounder , A.I.R. 1966 S.C. 902 wherein their Lordships of the Apex Court laid the tests with respect to Sec.58(c) of the Transfer of Property Act and held thus: (5) By Sec.58(c) of Transfer of Property Act a mortgage by conditional sale is defined as follows: “58 (c) where the mortgagor ostensibly sells the mortgaged property-- on condition that on default of payment of the mortgaged 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 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 condition is embodied in the document which effects or purports to effect the sale.” The proviso to this clause was added by Act 20 of 1929. Prior to the amendment there was a conflict of decision contained in a separate deed could be taken into account in ascertaining whether a mortgage was intended by the principal deed. The Legislature resolved this conflict by enacting that a transaction shall not be deemed to be a mortgage unless the condition referred to in the clause is embodied in the document which effects or purports to effect the sale. But it does not follow that if the condition is incorporated in the deed effecting or purporting to effect a sale a mortgage transaction must of necessity have been intended. But it does not follow that if the condition is incorporated in the deed effecting or purporting to effect a sale a mortgage transaction must of necessity have been intended. The question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances. The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of mortgagor and mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to reconvey there is no relation of debtor and creditor nor is the price charged upon the property conveyed, but the sale is subject to an obligation to retransfer the property within the period specified. The distinction between the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt. The form in which the deed is clothed is not decisive. The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the document viewed in the light of surrounding circumstances. If the language is plain and unambiguous it must in the light of the evidence of surrounding circumstances be given its true legal effect. If there is ambiguity in the language employed the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts. If there is ambiguity in the language employed the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts. In the present case, the document Ex.B-1 reads as follows: I have settled to sell to you on this day for a sum of Rs.4,000 the undermentioned immovable properties and have received the consideration of rupees four thousand only as detailed below; In the matter of my having directed you yourself to pay the sum of Rs.2,000, being my half share payable towards the usufructuary mortgage-deed executed on 7th September, 1994, in respect of the share of properties detailed below and in respect of some other share of properties, jointly by me and Palani Moopachi, wife of one Palani Moopan of the aforesaid place in favour of M.Maniyam P.V.Ramaswami Gounder, son of Venkatachala Gounder, residing in Pottampalayam village cusba, Palladam taluk, for a sum of Rs.4,000 and registered as Document No.1122 of 1944, Book 1, Volume 210, pages 415 and 416 in the Office of the Sub-Registrar of Kunnathur, to the aforesaid usufructuary mortgagee, get release of the properties mentioned her in and take possession of the same, the amount received by me is Rs.2,000. The amount which I have received in cash on this day is Rs.2,000. As, in all, I have received the sale consideration of Rs.4,000 as detailed above, you yourself shall, in future, hold and enjoy absolutely neither myself nor my heirs shall have any these properties. There is no other encumbrance whatever, except the encumbrance mentioned above, in respect of these properties. In case anything is left out, I am bound to get the same discharged from and out of my other properties. Whereof, in all these, and in the well in good condition, situate in Government Survey No.93/1 and in the coconut palmyrah tamarind and wood-apple trees and in the fruit bearing and timber trees, which are in the aforesaid fields, the half share in common. In future I have neither share nor right, whatever, in the aforesaid fields. The aforesaid Palani Moopachi shall discharge the above mentioned balance usufructuary mortgage amount of Rs.2,000 from and out of the balance of the usufructuary of mortgage properties. In future I have neither share nor right, whatever, in the aforesaid fields. The aforesaid Palani Moopachi shall discharge the above mentioned balance usufructuary mortgage amount of Rs.2,000 from and out of the balance of the usufructuary of mortgage properties. Should I pay in cash the aforesaid sale consideration of rupees four thousand after a period of five years within a period of seven years from the date of the execution of the deed, during the date of expiry of the said deed of any year (the said properties) should be reconveyed for the very same amount to me. This condition is not valid after the aforesaid period.” 18. The learned counsel for the appellant further relied upon a decision of the Apex Court in Chunchun Jha v. Ebadat Ali and another Chunchun Jha v. Ebadat Ali and another Chunchun Jha v. Ebadat Ali and another , A.I.R. 1954 S.C. 345 and their Lordships held thus: “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. There are numerous decisions on the point and much industry has been expended in some of the High Courts in collating and analysing them. We think that 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. Each must be decided on its own facts. But certain broad principles remain. The first is that the intention of the parties is the determining factor; See Balakishen Das v. Legge Balakishen Das v. Legge Balakishen Das v. Legge , 22 I.A. 58 (P.C.) (A). But there is nothing special about that in this class of cases and here, as in every other case, where a document has to be construed, the intention must be gathered, in the first place, from the document itself. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If however, it is permissible to look to the surrounding circumstances to determine what was intended. As Lord Cranworth said in Alderson v. While, (1858)44 E.R. 924 (B)at 928- The rule of law on this subject is one dictated by Commonsense; that prima facie an absolute conveyance, containing nothing to show that the relation of debtor and creditor is to exist between the parties, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase. In every such case, the question is, what, upon a fair construction, is the meaning of the instruments.“ Their Lordships of the Privy Council applied this rule to India in - Bhagwan Sahai v. Bhagwan Din , 17 I.A. 98at 102 (P.C.) (C) and in Jhanda Singh 19. Sec.58(c) of the Transfer of Property Act defines the expression ‘mortgage by conditional sale’. The above expression was the subject-matter of consideration in various pronouncements. The mortgage by conditional sale is a mortgage in which the ostensible sale is conditional and intended as a security for the debt and in case of payment at the time fixed condition was that the sale becomes void or that the mortgagee executed a reconveyance. The distinction between a mortgage by conditional sale and a sale with a condition of repurchase is a vexed question. 20. On the facts of the present case and as seen from Ex.A-1 the trial court was well founded in holding that the transaction in question is a mortgage as on the date of Ex.A-1, there was the relation of creditor and debtor between the parties and part of the loan amount was utilised for the discharge of existing mortgage debt. On the facts of the present case and as seen from Ex.A-1 the trial court was well founded in holding that the transaction in question is a mortgage as on the date of Ex.A-1, there was the relation of creditor and debtor between the parties and part of the loan amount was utilised for the discharge of existing mortgage debt. Though the earlier portion of Ex.A-1 would show that the defendant is entitled to suit property absolutely with all rights, the later portion specifically provides that in the event of mortgagor repaying the consideration of Rs.7,000 during the particular period with the stamp duty expenses incurred, the defendant would execute the deed of reconveyance in favour of the plaintiff. 21. As there existed a relationship of debtor and creditor, as the amount agreed to be paid for reconveyance is the same consideration even after a period of 9/10 years and as the mortgagor had to bear the stamp duty amount of Rs.732.50, it is clear that Ex.A-1 is a mortgage by conditional sale and it is obviously a transaction to secure repayment of amount advanced and charged over the suit property as security. 22. In the light of the pronouncement of the Apex Court in Chunchan Jha v. Ebadat Ali and another Chunchan Jha v. Ebadat Ali and another Chunchan Jha v. Ebadat Ali and another, A.I.R. 1954 S.C. 345 and the attendant circumstances, this Court holds that the judgment of the first appellate court has to be interfered and that of the trial court has to be restored. 23. On the facts of the case and as seen from Ex.A-1 and as deposed by P.W.1 and D.W.1, the attendant circumstances, the nature of the transaction being one between the debtor and creditor, the price being same and the stamp duty for Ex.A-1 is to be borne by the mortgagor, this Court finds that Ex.A-1 is a mortgage by conditional sale, falling within the definition of Sec.58(c) of the Transfer of Property Act. 24. Though the recital is that the mortgagee under Ex.A-1 is the absolute owner entitled to deal with the property, the latter portion of the said instrument provides that for the very same consideration and on payment of the stamp duty spent for Ex.A-1, namely Rs.732.50 the defendant had agreed to reconvey the very same property for the same price after a period of 9 long years. 25. The intention of the parties is to secure repayment of the debt and the attendant circumstances clearly prove that the suit transaction is a mortgage by conditional sale and not a sale with a condition to repurchase. The view taken by the first appellate court cannot be sustained in law. 26. It has to be pointed out that after Ex.A-1, there had been no mutation of patta in favour of the defendant/purchaser and the defendant had not product any document to show that the permanent land register in respect of the land has been transferred in favour of the defendant. The view taken by the first appellate court cannot be sustain in law and it has mis-directed itself in holding that Ex.A-1 is a sale deed with a condition to repurchase. 27. In the light of the above discussions, this Court holds that Exs.A-1, B-1 is a mortgage by conditional sale and the plaintiff is entitled to redeem the suit property after paying the scaled down debt. The contra view taken by the lower appellate court cannot be sustained. 28. In the circumstances, the second appeal is allowed, the judgment and decree of the first appellate court are set aside and that of the trial court are restored, and the plaintiff will be entitled to the relief to redemption as well as other consequential reliefs prayed for, but without costs.