UNICHIRAKUTTY Vs. KUTTIMALU
LAWS(KER)-1967-1-7
HIGH COURT OF KERALA
Decided on January 25,1967

UNICHIRAKUTTY Appellant
VERSUS
KUTTIMALU Respondents

JUDGEMENT

- (1.) THE Civil Revision Petition arises out of an application filed by the revision petitioner under S. 9 (3) of the Kerala agriculturists Debt Relief Act, 31 of 1958 on the ground that the transaction evidenced by Ext. B-1 a kanom assignment deed dated 131957 executed by the revision petitioner in favour of the predecessor-in-interest of the respondents is a debt payable under Act 31 of 1958. THE contention of the revision petitioner is that Ext. B-1 is only a mortgage by conditional sale. According to the respondents, Ext. Al is a transaction of sale with a condition of repurchase. It has to be mentioned at this stage that there was no attempt by the revision petitioner to take advantage of S. 23 of Act 31 of 1958.
(2.) BOTH the courts below took the view on an interpretation of Ext. B-1 that it is not a mortgage by conditional sale but a sale with a condition to retransfer the property. The revision petition is directed against the concurrent decisions of the courts below. Apart from pleading that Ext. B-1 is a mortgage by conditional sale it was not contended before me that even if Ext. B-1 is not a mortgage by conditional sale it evidences a transaction of debt between the parties. The sole question to be decided in the Civil Revision petition is therefore whether Ext. B-1 is in its true effect a sale with a condition for reconveyance or a mortgage by conditional sale. S. 58 (c) of the transfer of Property Act which defines a "mortgage by conditional sale" is in these terms: "where the mortgagor 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. " The test to find out whether a transaction is a mortgage by conditional sale or a sale with an option to repurchase is to find out the intention of the parties to the document gatherable from the language used therein viewed in the light of the surrounding circumstances. The leading case on the point in India is in Bhagwan Sahai v. Bhagwan Din ILR. 12 All. 387 where their Lordships of the Judicial Committee referred to with approval the following rule enunciated by Lord Cran worth in Alderson v. White (1858) 44 ER. 924 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?" The observations of the Judicial Committee in Jhanda singh v. Wahid-Ud-din AIR. 1916 PC. 49 at p. 54=43 Indian Appeals 284 is to the same effect. In Williams v. Owen 12 Q. Ch. 207, Lord Chancellor said: "that this Court will treat a transaction as a mortgage, although it was made so as to bear the appearance of an absolute sale, if it appears that the parties intended it to be a mortgage, is no doubt true; but it is equally clear, that if the parties intended an absolute sale, a contemporaneous agreement for a repurchase, not acted upon, will not of itself entitle the vendor to redeem. From the case of Barrel v. Sabine, this appears to have been recognised as a well known rule of equity, above 150 years ago. The question always is, was the original transaction a bona fide sale with a contract for re-purchase, or was it a mortgage under the form of a sale?" Their Lordships of the Supreme Court in Chunchun Jha v. Ebadat Ali AIR. 1954 SC. 345 observed thus: "if the sale and agreement to re-purchase are embodied in separate documents then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not. But the converse does not hold good, that is to say the mere fact that there is only one document does not necessarily mean that it must be a mortgage and cannot be a sale. If the condition of re-purchase is embodied in the document that effects or purports to effect the sale, then it is a matter for construction which was meant. " Shah, J. in considering a similar question stated thus in bhaskar v. Shrinarayan AIR. 1960 SC. 301 at 304: 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 a condition of such 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) 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 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. " Subba Rao, J. (as he then was) in Bhoju Mandal v. Debnath bhagat AIR. 1963 SC. 1806 observed that: "the question to which category a document belongs presents a real difficulty which can only be solved by ascertaining the intention of the parties on a consideration of the contents of a document and other relevant circumstances. " In P. L. Banuswami v. N. Pattay AIR. 1966 SC 902 it was again observed thus: "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 distinction between a mortgage by conditional sale and a sale is that in the former case there should be a relationship of debtor and creditor the transfer being a security for the debt and in the latter the absence of any such relationship. It is in the light of the above principles that the question whether Ext. B-1 is a mortgage by conditional sale or a sale with an obligation to repurchase has to be decided. The nomenclature of Ext. B-1 is Imww Xodm[mcw. The consideration for Ext. B-1 is Rs. 1500/-and the necessity for the execution of Ext. B-1 as stated therein is to set aside the court sale of the kanom right conveyed under Ext. B-1 in execution of the decree in O. S. 343 of 1955 on the file of the Principal District Munsiff's Court, kozhikode, obtained against the revision petitioner by a stranger. The material portions in Ext. B-1 which are relevant for deciding the question raised before me are extracted below: The following points were stressed before me by the learned counsel for the revision petitioner to hold that Ext. B-1 is a mortgage by conditional sale: (1) Ext. B-1 was executed to set aside the court sale of the kanom rights in Ext. B-1. (2) The value of the kanom right on the date of ext. B-1 was very much more than the consideration under the document. (3) That absolute right in favour of the executee under Ext. B-1 are created only after the expiry of one year on default of the executant to pay the sum of Rs. 1500/ -. The fact that Ext. B-1 was executed to deposit the sale amount is not a circumstance to show that the parties intended Ext. B-1 merely as a mortgage by conditional sale. pw. 1 deposed that the kanom right was mortgaged for Rs. 1000/-and that the decree in O. S. 341 of 1955 was obtained by the mortgagee for sale of this right and it was in execution of the decree that the kanom right was sold in court auction on 4 21957. pw. 1 further stated that the kanom right on the date of Ext. P-1 would have fetched Rs. 6000/ -. Ext. C-1 is the report filed by the commissioner to prove the value of the property. It was marked Ext. C-1 in the appellate court. Though the commissioner estimated the market value of the property at Rs. 5285/-on the date of Ext. B-1, the learned appellate judge found that in arriving at the net income of the property the commissioner did not deduct the Municipal assessment and that the method adopted by him for valuing the two thatched buildings in the property is erroneous. On a proper calculation the learned judge found that the value of the property on the date of Ext. B-1 was only Rs. 1s15/ -. The learned judge has given adequate and proper reasons to arrive at this finding. I accept the same. If so the consideration for Ext. B-1 is adequate.
(3.) IT is seen from an interpretation of Ext. B-1 that an absolute interest is created in the executee on the date of the document and the vesting of absolute interest is not postponed to take effect on default to pay the amount. But it was argued in view of the clause: in Ext. B-1 there is no vesting of the ownership in the transferee from the date of the document. I do not think that the clause referred to is susceptible of the interpretation contended for by the learned counsel. Thus the three reasons in support of the contention that Ext. B-1 is only a mortgage by conditional sale cannot stand. It is also clear from Ext. B-1 that the consideration is not regarded as a debt so as to create the relationship of debtor and creditor between the parties. There is no interest stipulated for the amount paid under Ext. B-1, and the amount is not charged on the property comprised in ext. B-1. The stipulation in Ext. B-1 is to pay back the exact sum of Rs. 1500/- received by way of purchase money. The transferee was put in possession of the property under Ext. B-1. The transfer of possession is more consistent with a sale than a mortgage by conditional sale. The fixation of a very short period of one year is indicative that the transaction is a sale. The adequacy of the price and vesting of ownership in the transferee from the date of the document are pointers to the conclusion that Ext. B-1 is a sale. Thus the conclusions reached by the courts below are correct and not liable to be interfered with.;


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