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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION   CIVIL APPEAL NO.2078/2008

RAMVILAS (DEAD) THR. LRS. & ANR.              Appellant(s)                                 VERSUS

KARIM KHAN & ANR.                             Respondent(s)   J U D G M E N T

     R. Banumathi, J.

1. The present appeal arises out of the judgment of the High Court  of  Judicature  of  Madhya  Pradesh,  Jabalpur:  Bench  at Gwalior  in  Second  Appeal  No.374  of  1998  dated  22.06.2005, confirming the findings of the Courts below that the Sale Deed executed  in  favour  of  the  appellants-defendants  was  only  a mortgage as a security for repayment of the loan taken by the 1st respondent-plaintiff.

2. It is not necessary for us to refer to the pleadings of the 1st respondent-plaintiff and the appellants-defendants as they are referred in detail in the judgments of the Courts below.  

3. Challenging the concurrent findings of the Courts below, the learned counsel for the appellants-defendants  Mr. Puneet Jain submitted that whenever a conveyance of the property by a Sale Deed is accompanied by a separate document, it has to be taken as re-conveyance and it was not a mortgage and the Courts below erred in holding that the Sale Deed dated 14.06.1972 in favour of the appellants-defendants was a security for the loan taken

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by  the  1st respondent-plaintiff.   Learned  counsel  further submitted that the Sale Deed was accompanied by an Agreement Exhibit  P/1  dated  14.06.1972  under  which  the  1st

respondent-plaintiff had agreed to pay an amount of Rs.5000/- by 14.06.1973, which the 1st respondent-plaintiff did not comply with, and subsequent Agreement Exhibit P/2 dated 05.06.1974 was executed under which the 1st respondent-plaintiff paid an amount of Rs.6700/-; and after a lapse of about 17 years, the 1st

respondent-plaintiff filed the suit for declaration that the Sale Deed was null and void.  It was further submitted that in the absence of a prayer for cancellation of the Sale Deed dated 14.06.1972, the suit filed by the 1st respondent-plaintiff ought to have been dismissed, more so, when the suit was filed nearly after a gap of 17 years from the date of execution of the Sale Deed i.e  14.06.1972.  In support of his contention, learned counsel placed reliance on a number of judgments of this Court reported as Bishwanath Prasad Singh v. Rajendra Prasad and Anr. - (2006) 4 SCC 432, Raj Kishore (Dead) by LRs. v. Prem Singh and Ors. - (2011) 1 SCC 657 and Gauri Shankar Prasad and Ors. v. Brahma Nand Singh - (2008) 8 SCC 287.

4. On the other hand, taking us through the judgments of the Courts below, learned counsel for the 1st respondent-plaintiff submitted that based on the oral and documentary evidence, the Courts below rightly recorded concurrent findings of fact that Exhibit D/1 Sale Deed dated 14.06.1972 was executed as security for  the  loan  taken  by  the  1st respondent-plaintiff.  Learned

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counsel for the 1st respondent-plaintiff has drawn our attention to  the  finding  of  the  trial  Court  to  submit  that  at  the relevant point of time, the value of the land under the Sale Deed dated 14.06.1972 would have been more than Rs.15000/- and an inadequate consideration of Rs.3000/-, as stated in Exhibit D/1 Sale Deed by itself would show that it was executed only as a security for the loan and it was never the intention of the parties to sell the land.  It was submitted that the concurrent findings  recorded  by  the  Courts  below  do  not  suffer  from infirmity warranting any interference.

5. We  have  carefully  considered  the  rival  submissions  and perused the impugned judgment and the material on record.  In the decision relied upon by the learned counsel for the 1st

respondent-plaintiff reported as  Bhaskar Waman Joshi (D) and Ors. v. Shrinarayan Rambilas Agarwal (D) and Ors. - AIR 1960 SC 301, this Court  has  succinctly considered the question as to whether a transaction ostensibly of a sale may be regarded as a mortgage and held that it is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances.

6. We  can  usefully  refer  to  the  relevant  portion  of  the judgment which reads as under:

“7.The proviso to this clause was added by Act XX of 1929.  Prior to the amendment there was a conflict of decisions  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

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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 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.  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  contemplates  an  ostensible  sale  of  the property.  As pointed out by the Judicial Committee of the  Privy  Council  in  Narasingerji  Gyanagerji  v.  P. Parthasaradhi, 51 Ind App 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 time was of 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

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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  circumstance,  but  evidence  as  to subsequent conduct of the parties is inadmissible.”

7. In the light of the above well settled principles, we may now consider Exhibit D/1 Sale Deed and Exhibit P/1 Agreement both dated 14.06.1972.  In Exhibit D/1 Sale Deed no condition is incorporated indicating that it would constitute mortgage by that  conditional  sale.  It  is  clear  that  the  1st

respondent-plaintiff had never intended to sell the property to the appellants-defendants. As rightly pointed out by the Courts below, in Exhibit P/1 Agreement dated 14.06.1972, it is clearly stated that if 1st respondent-plaintiff pay back Rs.5000/- by 14.06.1973,  then  the  Sale  Deed  would  be  cancelled  and  1st

respondent-plaintiff  would  get  back  the  land  sold  to  the appellants-defendants.  As held by the Courts below, had it been the intention of the parties to sell the property, the parties would not have agreed for return of the land on payment of Rs.5000/- by 14.06.1973.

8. The judgments cited by learned counsel for the appellants hold  that  for  a  transaction  to  constitute  mortgage  by conditional  sale,  it  is  necessary  that  the  condition  is embodied in the document that purports to effect the sale deed. In  Raj Kishore (Dead) by LRs. v. Prem Singh and Ors. - (2011) 1 SCC 657, it was held as under:

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“15. A bare reading of the above would show that for a transaction to constitute mortgage by conditional sale it is necessary that the condition is embodied in the document that purports to effect the sale. That requirement is stipulated by the proviso which admits of no exceptions.

...…............... ….................. 18.  This  Court  in  K.  Simrathmull  case observed:  (AIR p.1183, para 4)

“4.  The  sale  deed,  the  deed  of  reconveyance Ext.A-1  and  the  rent  note  Ext.B-1  were undoubtedly parts of the same transaction. The plea of the plaintiff that the sale deed Ext.A-1 constituted  a  transaction  of  mortgage  by conditional  sale  is  inadmissible,  because  the sale deed and the covenant for reconveyance are contained in separate documents.”

19. The finding of the High Court as to the legal effect of the transaction of sale followed by an agreement for retransfer  of  the  property  is  not,  therefore,  legally sound.”

9. As pointed out earlier, Exhibit D/1 Sale Deed executed by the  1st respondent-plaintiff  in  the  instant  case  does  not embody any condition as stipulated in Section 58 (e) of the Transfer of Property Act, 1882.  On facts and evidence, Courts below  rightly  held  that  Exhibit  D/1  Sale  Deed  would  not constitute a mortgage by conditional sale.

10. On the basis of oral and documentary evidence, the Courts below recorded that Exhibit D/1 Sale Deed dated 14.06.1972 and Exhibit P/1 Agreement dated 14.06.1972 having been executed on the same day and both ought to be read together.  The Courts below have also recorded a concurrent finding of fact that Exhibit D/1 Sale Deed was executed only as a security for the

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loan  and  it  was  never  the  intention  of  the  1st

respondent-plaintiff  to  convey  the  suit  property.  Since  1st

respondent-plaintiff  has  paid  back  the  loan  amount  i.e. Rs.6,700/- as is evident from the subsequent Agreement Exhibit P/2 dated 05.06.1974, the Courts below rightly recorded the concurrent findings of fact that Exhibit D/1 Sale Deed is not binding  on  the  1st respondent-plaintiff.  Once  repayment  was made,  the  1st respondent-plaintiff  was  entitled  to  the declaration as prayed for.   

11. Yet another reason could be pointed out for affirming the impugned judgment of the High Court.  It has been held by the trial Court that at the time of selling the suit property the extent  was  more  than  10  Bighas  i.e.  1/3rd share  of  1st

respondent-plaintiff  in  2.856  hectares  of  the  total  land. Referring  to  the  oral  and  documentary  evidence  of  1st

respondent-plaintiff's  witness  Ajay  Singh,  the  trial  Court recorded a finding that at the time of sale of the land in 1972, the market value of the land in Padariya was Rs.2000/- per  Bigha  and  at  the  time  of  the  sale,  the  value  of  the property  would  have  been  not  less  than  Rs.15000/-.  The inadequacy of the sale consideration stated in Exhibit D/1 Sale Deed  is  yet  another  circumstance  to  indicate  that  the  1st

respondent-plaintiff  could  not  have  intended  to  sell  the property to the appellants-defendants.  

12. Having regard to the concurrent findings of the Courts below, we do not find any reason to interfere with the impugned

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judgment.   

13. Accordingly, the appeal is dismissed.  The parties shall bear their own costs.

…...............J. [R.K. AGRAWAL]

…...............J. [R. BANUMATHI]

 December 01, 2016;   New Delhi.