P.N. Mookerjee, J.@mdashThis appeal arises out of a suit u/s 36 of the Bengal Money-Lenders Act. The suit has been dismissed by the trial court. Hence this appeal by the Plaintiff.
2. The Plaintiff''s case was that on October 7, 1942, he took a loan of Rs. 7,000 from the Defendant No. 1, Manindra Lal Gupta, on the security of his Behala property described in the plaint schedule. It was agreed between the parties that the loan would be repaid in the course of a period of about two years and the stipulated interest for the said period was Rs. 1,150. It was further agreed between the parties that in view of the Bengal Money-Lenders Act the transaction would be made in the form of a kabala or a deed of sale accompanied by a simultaneous but separate agreement for resale or reconveyance. Accordingly, the Plaintiff duly executed and registered a kabala in favour of the Defendant No. 1 in respect of his said Behala property for an ostensible consideration of Rs. 8,000, although he really got from the said Defendant only Rs. 7,000 and that too by way of a loan on terms, stated above, and the Defendant No. 1 simultaneously executed in his turn an unregistered agreement for reconveyance of the said property in favour of the Plaintiff upon the latter''s paying to him the ostensible sum of Rs. 9,150 within the said stipulated period of about two years or within the month of Aswin, 1351 B.S., to be precise. The agreement recited payment and receipt of a sum of Rs. 1,000 as earnest money, which, according to the Plaintiff, was deducted from the ostensible consideration of Rs. 8,000 of the kabala, the Plaintiff actually receiving only Rs. 7,000 on this latter document and that too by way of a loan as aforesaid. Within the stipulated period the Plaintiff offered to pay the stipulated amount of Rs. 8,150 but the Defendant No. 1 avoided contact and made it impossible for the Plaintiff to make the payment and redeem the mortgaged property. Accordingly, the Plaintiff brought the present suit for necessary reliefs u/s 36 of the Bengal Money-Lenders Act.
3. The suit was instituted on December 20, 1944, and during its pendency in the trial court the plaint was amended on February 26, 1946, by adding as Defendant No. 2 a person named Narendra Krishna Mitra to whom, according to the Plaintiff, the suit property has been transferred by Defendant No. 1.
4. The suit was contested by both the Defendants whose main defence was that the transaction in question was not a loan even in substance, and, accordingly, the suit u/s 36 of the Bengal Money-Lenders Act did not lie. Defendant No. 1''s specific case was that the disputed transaction was really a sale followed by an agreement of reconveyance and that the ostensible was the real state of things and, the Plaintiff not having performed his part of the said agreement or contract, he had forfeited his claim to enforce the same. The Plaintiff''s allegations to the contrary were denied by this Defendant. Defendant No. 2 pleaded ignorance of the agreement for reconveyance and contended inter alia that he was a bona fide purchaser for value without notice. There were also the usual defences of limitation and waiver, estoppel and acquiescence". An objection was also taken that the court-fee paid was insufficient, but such objection was clearly untenable if the suit, as framed, namely, u/s 36 of the Bengal Money-Lenders Act, was maintainable.
5. The principal issue between the parties was whether the disputed transaction was a "loan" within the meaning of the Bengal Money-Lenders Act. This was issue No. 2 framed by the trial court. It was clear that if the said issue was answered in the negative, the suit would not be maintainable and the Plaintiff would have no cause of action for the suit, and, accordingly, no other question would arise. The learned Subordinate Judge held against the Plaintiff on the above issue No. 2 and that finding inevitably led to a dismissal of the suit.
6. Naturally, therefore, Mr. Gupta, who has argued the appeal on behalf of the Plaintiff-Appellant, has concentrated his attack on the learned Subordinate Judge''s finding that the transaction between the parties was not a loan even in substance so as to come within the definition of "loan" in the Bengal Money-Lenders Act. On this point as to the nature of the disputed transaction, the primary evidence is furnished by the two documents, namely, the kabala (Ex. 1) and the agreement (Ex. 2) for resale or reconveyance. Some oral evidence was also led by the parties, but all of it, as we shall presently see, would not be relevant or admissible in law.
7. In arriving at his finding that the disputed transaction was not a "loan" within the meaning of the Bengal Money-Lenders Act, the learned Subordinate Judge made two different approaches leading to the same result. In the earlier part of his judgment he expressed the view that "if the transaction be a loan then it "must be a mortgage by conditional sale"; and further that "the "transaction cannot be a loan without being also a mortgage by "conditional sale". As it was clear that in view of the proviso to Section 58(c) of the Transfer of Property Act the transaction could not be a mortgage by conditional sale, the "condition" or the agreement of repurchase or retransfer being admittedly not "embodied" or contained in the deed of sale but in a separate document, the learned Subordinate Judge held that the disputed transaction was not a mortgage by conditional sale, and, accordingly, in view of his opinion, quoted above, he decided that the transaction was not a loan or, in other words, that "there" was no loan". The learned Judge then proceeded to observe that "as there was no loan at all there remains no scope for "finding that there was a loan within the meaning of the Bengal "Money-Lenders Act of 1940" and he concluded this part of his judgment as follows:
Under the Bengal Money-Lenders Act or any other law a transaction which does not create the relationship of creditor and debtor between the parties cannot be a loan at all and since by reason of the aforesaid proviso to Clause (c) of Section 58 of the Transfer of Property Act there cannot be any relationship of creditor and debtor between the parties unless the condition for resale is embodied in the sale deed, the transaction cannot by any means be deemed to be a loan. I find thus that there was no loan within the meaning of the Bengal Money-Lenders Act or any other law.
8. The above reasoning of the learned Subordinate Judge was subjected to severe criticism by Mr. Gupta. He pointed that, under the definition of Section 2(12) of the Bengal Money-lenders. Act, "loan" includes any transaction which is "in substance a "loan". This obviously implied, so ran his argument, that a transaction, which by reason of some technical provision, of law could not be regarded as a loan under the general law, might still be a loan within the meaning of the said special statute if it was "in substance a loan". On this question, arising under the Bengal Money-Lenders Act, the substance, argued Mr. Gupta, must prevail over the form, even though such form was mandatory, under some other provision of law. It was, accordingly, contended that the technical provisions or requirements of Section 58(c), proviso of the Transfer of Property Act as to the form of a mortgage by conditional sale would not prevent a transaction from being a loan within the meaning of the Bengal Money-Lenders Act if it was so "in substance". Mr. Gupta even went further and; contended that a transaction which was in substance a mortgage by conditional sale though wanting in requirements as to form as prescribed in the proviso to Section 58(c) of the Transfer of Property Act would be not only a "loan" under the Bengal Money-Lenders Act but also a secured loan so as to attract Clause (e) of Section 36(1) of the said Act, if the other conditions for its application were satisfied.
9. As at present advised, we are inclined to accept the first part of Mr. Gupta''s argument, though not the second. It seems to us that in view of the express language of the definition of'' Section 2(12) a "transaction which is in substance a loan", though not so in form, would be a "loan" within the meaning of that statute and that, accordingly, a "transaction which is a loan in ''substance", though purporting to be in the form of a sale with condition of retransfer or repurchase, not complying with the proviso to Section 58(c) of the Transfer of Propety Act, and thus not being in law a mortgage by conditional sale, would still be a "loan" within the meaning of the Bengal Money-Lenders Act. In that view of the matter, we do not agree with the learned subordinate Judge that merely because the disputed transaction is hit by the proviso to Section 58(c) of the Transfer of Property Act, it must be held not to be a "loan" within the meaning of the Bengal Money-Lenders Act. That, however, would not be of any assistance to Mr. Gupta''s client unless it be shown further that the disputed transaction "is in substance a loan", or, in other words, that it was intended to create a mortgage and failed o n its effect only because of the proviso to Section 58(c) of the Transfer Property Act. We are also of the opinion that a transaction a the form of a sale with a condition of resale or repurchase, if i t does not comply with the requirements of the proviso to Section 58(c) of the Transfer of Property Act, namely, as to the "condition" being contained or "embodied" in the sale deed and not in separate document, cannot be held to be a mortgage by conditional sale and cannot also in law operate as a mortgage or as a secured loan.
10. On the last question, stated above, Mr. Gupta argued that in view of the proviso to Section 58(c) of the Transfer of Property Act such transaction would not in law be a mortgage by conditional sale but it might still well be an anomalous mortgage u/s 58(g) the Act. It is to be remembered, however, that to come within the definition or description of an anomalous mortgage, or a mortgage of any type whatsoever, the transaction must in law be a mortgage. Unless it is first held to be a mortgage the question of its classification under any of the clauses of Section 58 of the Act does not arise. To constitute a mortgage (where the principal money involved is one hundred rupees or upwards as in the present case) it must be done by a registered instrument (vide 59) except, of course, where it is a mortgage by deposit of title feeds as defined in Section 58(f) which is not the case here and which cannot be the case in the type of transaction, contemplated above, which at least means that if the transaction is effected by several instruments all and each of such several instruments must be duly registered under the law. That is the statutory requirement and it cannot be whittled down or overridden by the rule of substance. Just as the transaction cannot be held to be a mortgage by conditional sale if it contravenes the proviso to Section 58(c) of the Act, similarly it cannot amount to a mortgage in law if is hit by Section 59. There is, however, no such statutory requirement in the matter of a loan and there the rule of substance prevails over form and a transaction which is in form not a. loan-for example, a purported sale with an agreement of resale or reconveyance as in the case before us- but is so in substance will be held to be a loan and would certainly come within the definition of "loan" as contained in Section 2(12) of the Bengal Money-Lenders Act. We reject, therefore Mr. Gupta''s extreme argument that the transaction in the present case was an anomalous mortgage or, for the matter of that, any mortgage at all and we proceed to consider whether it is a loan in substance so as to come within the definition of "loan'''' a contained in the Bengal Money-Lenders Act.
11. The point thus requiring consideration is whether the disputed transaction is a loan in substance. On this point too-which was the second line of approach in the judgment of the learned Subordinate Judge-the decision of the trial court is against the Plaintiff-Appellant. The learned Judge has reached his conclusion on a construction of the two documents-the kabala (Ex. 1.) and the agreement for resale (Ex. 2) and he has held that the kabala (Ex. 1) shows that the agreement (Ex. 2) was a separate transaction and he has held further that it was "impossible to construe the "deed of agreement as a stipulation for repayment with interest "the amount due from Defendant No. 1 under the sale deed (Ex. 1)". In his opinion "the language of the deed of agreement make "such construction impossible" and his net finding on this part of the case is that
In view of the clear terms in the two documents it must be held that be the deed of sale (Ex. 1) the Plaintiff made an out-and-out sale of the property to the Defendant No. 1 and there was no relationship of lender and borrowed between the parties.
12. The learned Subordinate Judge has made no reference to any other evidence or circumstances on the question of the nature of the disputed transaction possibly because he was not satisfied that the same or any item thereof would be admissible in law for that purpose. The Appellant has invited us to hold that this branch of the discussion of the learned Subordinate Judge suffers from incompleteness and basic misconceptions and it cannot be sustained and to that argument we shall now turn our attention.
13. The direct oral evidence (vide P.W. 1., P.W. 3 and P.W. 4 that the said transaction was intended to be a loan or mortgage clearly inadmissible u/s 92 of the Indian Evidence Act. The does not come within any of the exceptions to that section and in plainly excluded by the authority of the leading case
14. The documents to be examined are the kabala or the sale deed (Ex. 1), on the face of it appears to be an out-and-out sale and the agreement, (Ex. 2), also apparently looks like nothing more than a pure agreement for resale of reconveyance. It is to be seen, however, whether this apparent was the real state of things in the light of considerations, permissible in law, as stated above. For that purpose we shall examine first the relevant internal evidence, if any, contained in the documents themselves and we shall turn then to the admissible extraneous evidence throwing light on the point at issue.
15. In the kabala (Ex. 1) there is apparently nothing which would support the Appellant''s contention that the disputed transaction was a loan. The kabala, on the other hand, appears to contain all the essential terms of a pure deed of sale including terms as to the delivery of possession to the transferee and also authorising him (the transferee) to pay the future rents and taxes and also a covenant of further assurance. It also expressly entitles the transferee to have name mutated in the landlord''s sherista and the municipality. It recites delivery of possession to the transferee of that part of the property which was then in the khas possession of the transferor with a stipulation that the latter would recover khas possession of the rest of the property at his own cost and make over such possession to the transferee. The internal evidence contained in the kabala is thus fully consistent with its character of an absolute deed of sale and is apparently inconsistent with its being a loan.
16. It seems to us further that in the ultimate analysis, the agreement for reconveyance (Ex. 2) also, considered by itself or taken along with the kabala (Ex. 1) without more, is not of much assistance to the Appellant. The agreement (Ex. 2) recites that the property has been absolutely sold to the Respondent No. 1. It recites further payment of an earnest money of Rs. 1,000. It fixes a time, namely end of Aswin 1351 B.S., for the completion of the purchase and provides that the vendee''s default to complete the purchase within the stipulated time would entail forfeiture of the earnest money or, at the vendor''s option, specific performance at his (the vendor''s) instance. It also provides for specific performance at the instance of the vendee if due to the vendor''s default the purchase be not completed within the stipulated period. It then goes on to state that on the expiry of the month of Aswin, 1351 B.S., the vendee would have no right to keep the "agreement for sale" in force.
17. Reading the document (Ex. 2) by itself, it seems to us that it was apparently nothing more than an agreement for resale or reconveyance. Mr. Gupta argued that under, the document, the vendor could compel the vendee to make the purchase at any time and there was no time-limit fixed in the document in that behalf. In this connection he drew our attention to the corresponding term in favour of the vendee and sought to urge that under it the vendee''s right was of a limited character and he could not, after the expiry of Aswin, 1351 B.S., require the vendor to reconvey the property to him. We do not, however, think that any such distinction is borne out by the document. In our opinion, a fair reading of the document amply shows that a time for performance was fixed and in case of default on the part of either party the other was entitled to enforce specific performance in accordance with law including also the relevant law of limitation which fixed the same outer limit of time in either case. We cannot, therefore, accept Mr. Gupta''s argument, noted above. It was also pointed out by Mr. Gupta that although in the document (Ex. 2) there was provision for forfeiture of the earnest money in case of default on the vendee''s part there was no corresponding provision for refund of the same if the contract was broken by the vendor. We do not, however, think that this is of much significance. In case of breach on the vendor''s part the vendee would be entitled under the law to a return of the benefit, that is, refund of the earnest money, taken or received by the vendor and the absence of a specific provision in that behalf in the agreement or contract of sale, resale in the present case would not, in our opinion, affect this right of the vendee and would thus be of little moment. Mr. Gupta also pointed out that under the document (Ex. 2) the stipulated period for getting the reconveyance was only a little over two years and his submission was that this was rather short or unusual for a contract of resale and was more in consonance with the transaction being a loan. This submission is not wholly without force but we are unable to hold that the circumstance on which it is founded is of any overriding importance in the present case. It is not also altogether free from ambiguity. The agreement (Ex. 2) apparently shows thai the Respondent No. 1 was not agreeable to a larger period and so the Appellant had to be content with that period of a little over two years. We cannot, therefore, persuade ourselves to accept this submission of Mr. Gupta and hold from the agreement (Ex. 2), read by itself or along with the kabala (Ex. 1) that the disputed transaction was a loan. It follows then that the internal evidence furnished by the two documents (exs. 1 and 2) is of little help to the Appellant and the learned Subordinate Judge was right in his reading of the two documents simpliciter and neither the agreement (Ex. 2) by itself nor read in the light of the kabala (Ex. 1) without more can possibly, lead to a different result.
18. We turn next to the extraneous evidence to which reference is permissible under the law. That, in the present case, obviously consists of evidence to show how or "in what manner" the disputed transaction or "the language of the documents" (exs. 1 and 2) was related to existing facts, and we proceed now examine the effect of that evidence.
19. The agreement (Ex. 2) recites payment of an earnest money if Rs. 1,000. This payment is apparently borne out by the evidence of the Appellant himself when he says:
I received Rs. 8,000 but out of this amount Rs. 1,000 in one currency note as taken from me as earnest money on the deed of agreement for resale. Vide p. 21, Pt. 1 of the Paper-Book).
20. The recital and the evidence, however, do not necessarily go against the Appellant''s case of a loan of Rs. 7,000. The extra payment of Rs. 1,000 might well have been to keep up the show that was the arrangement between the parties. The learned subordinate Judge obviously placed too much reliance on this payment of Rs. 8,000 instead of Rs. 7,000 to find definitely that the parties intended the kabala and the deed of agreement to be two separate transactions.
21. The discussion so far made is predominantly in the Respondents'' favour but even then it seems to us that no final conclusion ought be made against the Appellant on this part of the case without all and proper examination of certain other aspects of the matter which we shall now indicate below.
22. In the circumstances of this case the true value of the poverty at the time of the proposed sale on October 7, 1942, and the question of possession, immediately after that date, appear to to be of considerable importance and we do not think that they can or ought to be lightly brushed aside. We feel strongly at without an investigation into those two questions it is hardly proper to express any definite opinion on the real nature the disputed transaction. We are supported in this view by authority of this Court in the case of Shazadi Bibi v. Sheikh mal and Ors. (1913) 17 C.W.N. 1053, and plainly also, it well accords with the decisions of the Judicial Committee, already cited, namely,
23. The kabalas (exs. 1(a) and 1(b)) clearly show that 15,000 was paid for the disputed property in 1939-40. The other kabala (Ex. E) shows that it was sold to Respondent No. by Respondent No. 1 for Rs. 11,000 in 1944. The circumstance of this sale, however, are apparently open to some comment and although they do not throw any doubt on the genuineness of the transfer, it is not quite clear whether the property sold was really worth Rs. 11,000 or more at the date of that sale. In the kabala (Ex. 1), however, the consideration money is stated be only Rs. 8,000. On these materials it is at least proper hold that a case has arisen for an enquiry as to whether the said figure of Rs. 8,000 represented the value of the property something else, or to put it in another way, as to whether the was any sufficient contrast between the value of the property and the consideration that passed under the kabala (Ex. 1) to after the ostensible nature of the disputed transaction.
24. On the question of possession too the position is hardly satisfactory. There is no clear evidence on the present record the Respondent No. 1 got possession after the kabala (Ex. 1) as recite therein. The evidence that is there of possession since the of that kabala is extremely meagre and even that is high conflicting in material particulars. It is true that the kabala (Ex. 1) recites that the vendee was given khas possession of part of the disputed property. But the important thing consider is whether the recital was true. Our attention was draw to the Appellant''s evidence in cross-examination that after to kabala (Ex. 1) he made no payment of rents or taxes. From the however, it does not necessarily follow that the Appellant had further interest or possession in the disputed property. It see to us, therefore, that this question of possession also will have be properly investigated and for that purpose much full evidence will be necessary.
25. We, accordingly, propose to remand the case to the court for a consideration of the above two questions of possess and value and for a final decision of the suit in accordance we law in the light of its ultimate findings on those two question and other relevant circumstances. We are not unmindful of fact that the two questions, to which reference has been made above, were not very clearly raised in the pleadings, where possibly accounts for the unsatisfactory state of the evidence the said points. We feel, however, that the justice of the demands consideration of those questions and we do not, the fore, hesitate to direct a remand, as proposed above. I parties will be entitled to adduce further evidence on the (sic) on which the case now goes back to the trial court.
26. We direct further that the re-hearing will be only as between the Plaintiff and the Defendant No. 1. The subsequent transferee-Defendant No. 2 is undoubtedly a real purchaser for valal though he may or may not strictly satisfy the tests of a bona fide purchaser without notice. This latter fact, however, when there is no evidence of any fraud or collusion on his (Defendant 10. 2''s) part, is hardly material so far as he is concerned, in view of our finding that the disputed transaction cannot in law be a mortgage. That is enough for the purpose of holding that Defendant No. 2 (who is Respondent No. 2 in this Court) will not be affected by the disputed transaction. He will, therefore, be discharged from the suit which will now be re-heard, with only the Plaintiff and Defendant No. 1 on the record, in accordance with law and in the light of the directions given above and the observations, made in this judgment, and the court, if it ultimately finds that the disputed transaction was a "loan" within the meaning of the Bengal Money-Lenders Act, will give such relief to the Plaintiff as is available to him against Defendant No. 1 u/s 36 of the said Act.
27. The appeal is allowed in part as above but we direct that, in the circumstances of this case, the parties will bear their own costs in all the courts up till this stage. Future costs will be in the discretion of the learned Subordinate Judge who will eventually dispose of the suit in pursuance of this judgment.
Mookerjee, J.
28. I agree.
