@JUDGMENTTAG-ORDER
K. Govindarajan, J.@mdashThe first appellant, on his behalf and on behalf of his deceased wife Kaliammal and his children, the appellants 2 to 6,
executed an usufructuary mortgage on 7.9.1964 in favour of one Rakkia Gounder. The respondents 1 to 5 and 7 to 9 are the children and the sixth
respondent is the wife of the said Rakkiya Gounder. To redeem the said mortgage, the appellants filed O.P.No.l of 1981 on the file of the district
Munsif Court, Tiruppur, stating that in view of the provisions of the Act 40 of 1979 the mortgage had become discharged and so the respondents
have to deliver possession of the said mortgaged property to the appellants. The said petition was resisted by the respondents. The lower Court
rejected the petition holding that the appellants are not entitled to the benefit of the said Act and that the said mortgage dated 7.9.1964 marked as
Ex.A-1 is a sale deed and not mortgage deed as claimed by the appellants. The lower appellate court on Appeal filed by the Appellants herein in
C.M.A.No.l of 1987, on the file of the Sub-Court, Tiruppur, concurred with the finding of the lower court and dismissed the appeal. Aggrieved
against the same, the appellants have filed the above appeal.
2. The only question that arises for consideration in this appeal is whether Ex.A-1 is a mortgage by conditional sale or a sale outright with a
condition.
3. To appreciate the scope of the admission it is necessary to extract the relevant recitals in the said document, which are as follows:-
4. In the said document it is directed to pay the mortgagee a total sum of Rs. 2,823 towards the debts, the details of which are given in the said
document, and the balance of Rs. 2,172 said to have been received in cash. It is also specifically stated that for the said amount no interest would
be changed.
5. On the basis of the said recitals of Ex.A-1 the learned counsel appearing for the appellants has submitted that it should be considered only as a
mortgage deed and the conditions mentioned in the document that ''if the amount is not paid immediately after the seventh year, the property vests
with the mortgagee'' is only a clause for redemption and so the appellants are entitled to redeem the mortgage. She has also submitted that in view
of the Act 40 of 1979, the mortgage has been discharged and so the appellants need not pay any amount to redeem the same. The learned counsel
took me to relevant provisions of the Transfer of Property Act,
6. Section 58 of the Transfer of Property Act deals with mortgage of immovable property and charges. Section 58(c) deals with the mortgage by
conditional sale, which reads as follows:-
Where the mortgage ostensibly sells the mortgaged property - on condition that on default of payment of the mortgage- 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 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"".
7. Relying on the said provision, the learned counsel appearing for the appellants has submitted that the recital in the document is very clear and it is
only stated as (usufructuary mortgage). According to her, since it is not a sale with the condition of repurchase, Ex.A-1 cannot be construed other
than mortgage deed.
8. The learned counsel appearing for the respondents has submitted that merely because the document has been described as it cannot be said that
it is a mortgage deed and the other features arise out of the said document will clearly prove that it is nothing but a sale with condition to
repurchase and a mortgage for conditional sale.
9. In such circumstances, the intention must be gathered, in the first place, from the document itself and, if the words are express and clear, effect
must be given to them, and, any extraneous enquiry into what was thought or intended cannot be done. The real question in such a case is not what
the parties intended or meant but what is are legal effect of the words which they used; if there is ambiguity in the language employed, then it is
permissible to look to the surrounding circumstances to determine what was intended.
10. Before dealing with the issue in the Appeal, namely, the character of the document Ex.A-1 and the character by the transaction comprised
therein, it would be appropriate to advert to some of the decisions of the High Courts and the Supreme Court on the issue.
11. In Bhaskar Waman Joshi (deceased) and Others Vs. Shrinarayan Rambilas Agarwal (deceased) and Others, , the Apex Court had an
occasion to lay down the test for deciding the question as to whether a particular document is a sale or mortgage by conditional sale. The nature of
exercise to be undertaken as stated by the Apex Court is as follows:-
(7) The proviso to this clause was added by Act of 1929. Prior to the amendment, there was a conflict of decision on the question whether the
condition 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.
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 circumstance that the
condition is incorporated in the sale deed must undoubtedly be taken into account, but the value to be attached thereto must vary with the degree
of formality attending upon the transaction. The definition of a mortgage by conditional sale postulates the creation by the transfer of a relation of
mortgagor and the mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to recovery 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 transfer the property
within the period specified. What distinguishes 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 definition of a mortgage by conditional sale itself contemplate an ostensible sale
of the property. As pointed out by the Judicial committee of the Privy Council in Narasingerji Gyanagerji v. F. Parthasarathi 51 IA .305: AIR 1924
PC 226 the circumstance that the transaction as phrased in the document is ostensibly a sale with a right of repurchase in the vendor, the
appearance being laboriously maintained by the words of conveyance needlessly iterating the description of an absolute interest or the right of
repurchase bearing the appearance of a right in relation to the exercise of which lime was the essence 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 deed viewed in the light of surrounding
circumstances. If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their 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. Oral evidence of intention
is not admissible in interpreting the covenants of the deed but evidence to explain or even to contradict the recitals as distinguished from the terms
of the documents may of course be given. Evidence of contemporaneous conduct is always admissible as a surrounding circumstances; but
evidence as to subsequent conduct of the parties is inadmissible.
8. In the light of these principles the real character of the document Ex.D-1 may be ascertained. The conditions of reconveyance may be analysed:-
(1) that the transaction shall reconvey the properties within five years from the date of the conveyance to the transferor for the price mentioned in
the deed; (2) that if within four years and six months from the date of the conveyance, the right of reconveyance in respect of the three houses or
any of them is not exercised by the transferors and if the transferees do not desire to retain all or any of the houses, they have the right to recall
from the transferors the amount of the consideration and to return all or any of the three houses in the condition which they may be; (3) that in the
event of failure on the part of the transferors to comply with the request to take back the houses, a breach of agreement of reconveyance rendering
the transferors liable to pay damages shall be committed; (4) that in the event of reconveyance the transferors shall pay the full price set out in the
sale deed and take back the houses in the condition in which by vis-major, Government action or any reason whatsoever they may be. Evidently
the transferors have under the deed a right to call upon the transferees to reconvey the properties within five years from the date of the conveyance
but after the expiry of four years and six months the transferees are given the option to call upon the transferors to take back all or any or the
properties for the prices mentioned in the deed; and if such right was exercised the transferors were bound to take back the properties and return
the price even if on account of vis-major or action of the public authorities the property was prejudicially affected. The deed does not set out the
period within which this right is to be exercised by the transferees. Granting that the option of reconveying the properties against the price
mentioned in the deed was to be exercised by the transferors before the expiry of five years from the date of the deed, the covenant that damage
to property even on account of circumstances over which the transferees had no control was in the event or reconveyance to be borne by the
transferors, is strongly indicative of a mortgage. By this covenant the transferees were invested with the right to call upon the transferors to ''take
back'' all or any or the houses and to return the price therefore, indicating thereby that the price paid is in truth charged upon the property. By
calling upon the tenants to attorn to the transferees, possession of the property transferred was delivered and pursuant to the transfer, it was
mutated in the names of the transferees. By an express convenient the period of five years was also made of the essence of the contract but as
observed in Narasingerji''s case 51 I.A 305: AIR 1924 PC 226 the description of the document as one of an absolute sale and the right of
repurchase bearing the appearance of a right in relation to the exercise of which time is of the essence are not decisive of the true nature of the
transaction"".
12. While considering the right of the mortgagor who had not paid the money within the stipulated period, a Bench of this Court in Perayya v.
Venkata I.L.R 11 Mad 403 has held as follows:-
According to this argument the stipulation in the mortgage instrument, that if the money is not paid within the date fixed, the instrument shall itself
be considered as an absolute sale-deed, coupled with the fact of failure to pay within the time fixed, must be deemed to be an act of the parties
extinguishing the right of redemption. In our judgment this is not a tenable position, and the act of parties, a phrase used here and elsewhere in the
Act in contradiction to ''operation of law'', must denote a release or other such transaction standing apart from the mortgage transaction under
which the right of redemption comes into existence. There is no extinguishment of the right by act of parties when, by virtue of a stipulation
contained in the very contract under which the right is created, that right ceases to exit"".
13. The above decision is followed in Angammal and Another Vs. Punnammal and Others, wherein the learned Judges have held as follows:-
Therefore the provision in the mortgage deed that the first defendant should be regarded as the absolute owner of the property at the end of two
years should the mortgagor fail to redeem the mortgage within that period was absolutely void; and here there has been no subsequent agreement
which would bring the case within Vsman Khan v. Dasanna or Kandaswami Pillai v. Chinnabha. The principle, once a mortgage always a
mortgage, applies and Kesavan''s heirs have sixty years in which to redeed. That period has not expired and therefore the first defendant and those
who stand in his shoes can only be regarded as mortgagees
14. In Murugan Vs. Jayarama Pillai and Others, a Division Bench of this Court has held as follows:- .
The circumstances that the reconveyance was for the same amount as the consideration for the ostensible sale, that the condition regarding the
reconveyance was embodied in the very same document, that the document described itself as a sale which was to take effect after a particular
time limit, that the consideration was for an odd amount (Rs. 3826.50) were held to be clearly indicative of the fact that the document was a
mortgage by conditional sale and not an outright sale with a right to repurchase. An omission to mention interest on the sum would not make it an
outright sale in view of the fact that the defendant immediately after execution of document was put into possession and was to enjoy property in
lieu of interest
15. In Natesa Pathar (died) and others Vs. Pakkirisamy Pathar and others, , after considering the various decisions of the Supreme Court and
other High Courts, in which it was laid down the test for deciding the question as to whether a particular document is a sale or a mortgage by
conditional sale, has held, with respect to the document in that case, as follows:-
taking together their most vital aspect along with the valuation of the property and substantial difference between the actual value 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 retransfer, as rightly, in my view, held by the
lower Appellate Court. 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
become confirmed and the specific stipulation 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 has to be held as that of
a mortgage by conditional sale. The stipulation for retransfer within five years from the date of conveyance to the transferor at the expense of the
transferor for the very price mentioned in the deed was held to be indicative of the document being a mortgage by conditional sale in Bhaskar
Waman Joshi (deceased) and Others Vs. Shrinarayan Rambilas Agarwal (deceased) and Others, . 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.L. Bapuswami Vs. N. Pattay Gounder, and the document in this case also
satisfied the said requirement
16. In the present case, the salient features of the document are:-
(a) Ex.A-1 (B-4) has been executed as a mortgage on 7.9.1964 for a sum of Rs. 5,000;
(b) In more than one place it has been mentioned as mortgage( )
(c) the mortgagee is entitled to enjoy the property during the said period;
(d) the very same document contains a condition and recital that on the mortgagor repaying the amount of Rs. 5,000, he will get back the property;
(e) there is no recital in the document enabling the mortgagee to encumber the property in any manner;
(f) if the mortgagor does not pay the amount at the end of the seventh year, the mortgagee will become the owner of the property;
(g) from the consideration mentioned in the document a sum of Rs. 2,172 had already been received, and the balance amount is directed to be
paid towards the debts;
(h) the property is said to be a land with tiled house;
(i) no interest need be paid by the mortgagor.
17. The learned counsel appearing for the respondents has relied on the decision in Tamboli Ramanlal Motilal (dead) by L.Rs. Vs. Ghanchi
Chimanlal Keshavlal (dead) by L.Rs. and another, , wherein it has been held as follows:-
The further clause in the document is to the effect that the executant shall repay the amount within a period of five years and in case he fails to
repay neither he nor his heirs or legal representatives will have any right to take back the said properties. Here only the right of the transferor is
emphasised, while the right of the transferee to foreclose the mortgage is not spoken to. That would be so, if the document were to be a mortgage
by conditional sale, only in such a case the first condition spoken to u/s 58(c) will come into play. It is well settled in law that the right of
redemption and foreclosure are coextensive. The absence of such a right of the mortgagee could only mean that is a conditional sale
On a reading of the abovesaid decision, it will be clear from the document in question that the mortgagee and his legal representatives are entitled
only to enjoy the property under ownership right. In view of the said specific recital in the document, the Apex Court has come to such a
conclusion. In my view, the stand by the learned counsel on the basis of these abovesaid decision is inappropriate and has no application to the
facts of the case on hand. As held by the Apex Court in various decisions, the intention should be carved out only from the document in question
and there cannot be any rigid rule to come to the conclusion whether the particular document is a mortgage for conditional sale or for a sale with
condition of repurchase.
18. In the light of the abovesaid principles of law and also the terms and conditions mentioned in Ex.A-1, there cannot be any difficulty to come to
the conclusion that Ex.A-1 is only mortgage for conditional sale and not a sale with condition of repurchase.
19. In the document in question, in more than one place, it is specifically stated that the same is a mortgage. It is specifically mentioned therein only
the enjoyment right and not the absolute right. As held in Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, and Murugan Vs. Jayarama
Pillai and Others, , stated supra, merely because it is stated that no interest need be paid, it would not made the document as an absolute sale, in
view of the fact that the mortgagee, immediately after execution of the document was put in possession to enjoy the property. Since the document
specifically says that the mortgagee is entitled to enjoy the property for a specific period, and in the absence of any clause permitting the mortgagee
to encumber the property in any manner, it has to be construed that the mortgagee cannot deal with the property as a owner, till the specific period
mentioned in the document. Moreover, in the document nothing is stated to the effect that the appellants had transferred the right or title in the
property under the said documents in favour of the respondents. On the basis of Ex.B-9, it cannot be construed that the mortgage can deal with
the property as a owner, and get patta. It is the specific case of the appellants that they have no knowledge about the issue of patta in favour of the
respondents.
20. The vesting of title and right in the property under Ex.A-1 is only after seven years. The very fact that this statement has been incorporated in
the document itself is an indication of the relationship of the mortgagor and the mortgagee. If the mortgagee is said to have purchased the property
why should he agree to keep the matter wide open for seven years. Nothing has been mentioned in the document about the transfer of title to the
mortgagee before the said period of seven years, except permitting him to be in enjoyment of the property. It is not a transaction of purchase of the
property but a transaction of investing money by way of mortgage by conditional sale. The cumulative effect of all the abovesaid circumstances
leave no room for doubt that the transaction in question is one of mortgage by conditional sale and not a transaction of outright sale with
contemporary agreement to that effect.
21. The lower Appellate Court did not apply its mind at all with respect to the abovesaid principles, as held by the Apex Court and the various
High Courts, before deciding the question, whether the document is a mortgage for conditional sale of it is a sale with condition of repurchase. The
lower Appellate Court merely relied on Ex.B-5 agreement executed on 29.7.1964 by the first appellant in the said O.P. On the basis of the said
finding, it came to the conclusion that since the appellants have not exercised their right to repurchase the property within the stipulated period, they
had lost their right in the property.
22. For the reasons stated above, in my view, the interpretation placed by the Courts below to arrive at the findings, cannot be sustained in law.
Accordingly, the orders of the Courts below are set aside and this C.M.S.A. is allowed and the matter is remitted back to the lower Court, with a
direction to decide whether the appellants are otherwise entitled to the benefit of Act 40 of 1979, and pass orders in accordance with law. No
costs.
