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Second Appeals Nos. 46 and 77 of 1963, decided on 7th February 1966.
S. 10‑A -S selling his agricultural land to A and B on 3‑2‑1945 for Rs. 1,700‑S, A and B executing agreement on 13‑2‑1945 ; by which A and B agreeing to return land to S after five years on payment of Rs. 1,700‑A and B selling land in 1950 to G--G in turn selling same to N on 4‑10‑1959 for Rs. 3,000‑G becoming evacuee‑Suit for redemption by S in 1961 against A, B and N alleging sale as mortgage‑Transaction, held not mortgage, but sale with condition to repurchase‑‑Tests.
The following tests may be usefully employed to determine whether a transaction is a sale with condition of repurchase or a mortgage:
(i) Whether the relationship of debtor and creditor existed between the parties before or at the time of the alleged sale ;
(ii) Did the intention to create a mortgage precede the alleged sales;
(iii) Was the price paid by the purchaser fair market price ;
(iv) Was the possession of the property transferred to the purchaser;
(v) Is there a covenant for the payment of interest by the purchaser;
(vi) Is the purchaser accountable to the seller for the income of the property.
(vii) Whether agreement of repurchase was made at the time of sale or some time thereafter; (the former evidencing the intention to create mortgage and the latter the intention of repurchase only);
(viii) Whether a short or long period of repayment is stipulated (a short period evidencing the intention to sell and a long period indicating a mortgage).
Bhagwan Sahai v. Bhagman Din and others. (1889‑90) 17 I A 98 ; Alderson v. White 44 E R 924; Jhanda Singh v. Wahid‑ud‑Din and others (1915‑16) 43 I A 289; Chandra Kanta Howaldar and others v. Rama Prasanna Ganguly and others P L D 1954 Dacca 8; Ganu Mia v. Abdul Jabbar and others P L D 1959 Dacca 293; Nathu Lal and others v. Mst. Gomti Kuar and others A I R 1940 P C 160 and Debi Singh and others v. Jagdhh Saran Singh and others A I R 1952 All. 716 ref.
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--- S. 58(c)‑Applies when condition of repurchase is embodied in document of ostensible sale itself‑Rule does not apply to case covered by S. 10‑A, Sind Agriculturists' Relief Act (XVII of 1879)‑Scope of S. 10‑A.
The rule prescribed by the proviso to section 58 (c) of the Transfer of Property Act, as to restriction of the inference to be drawn in favour of a mortgagee only to cases where the condition of repurchase is embodied in the document of ostensible sale will not apply to transactions covered by section 10(A) of the Sind Agriculturists Relief Act.
The second proviso to section 10 (A) specifically states that the section will not apply to a bona fide transferee only if such transferee held land under a registered deed executed more than 12 years before the institution of the suit.
Section 10 (A) of the Sind Agriculturists' Relief Act confers wide powers on the Court to determine the real nature of the transaction and to admit evidence outside the written documents, notwithstanding the provisions of any other law.
The effect of section 10 (A) of the Sind Agriculturists Relief Act is not, however that the inference of mortgage should necessarily be drawn in all cases where the condition of repurchase is embodied in a document executed with or after the sale‑deed.
S. 100‑Finding of lower appellate Court based on interpretation of documents; result of misconstruction of legal effect of document‑Not of binding nature.
Ibrahim Memon for Appellants in S. A. No. 46.
B. J. De'Sa for Appellants in S. A. No. 77.
Percy Ramchandani for Respondent No. 1.
Dates of hearing: 6th and 7th January .1966.
This judgment will dispose of II Appeal No. 46 of 1963 Mst. Noor Jehan v. Sadarangmal and others and II Appeal No. 77 of 1963 Haji Allahando and Gul Muhammad v. Sadarangmal. The appeals are from the judgment dated the 2nd May 1962, of the Additional District Judge, Larkana by which the learned Additional District Judge accepted the appeal of Sadarangmal from the judgment and decree of the Sub‑Judge, Shahdad Kot dated the 28th October 1961. The question which has been raised is whether two documents, a sale‑deed and an agreement of repurchase constitute mortgage or outright sale of agricultural lad.
2. Sadarangmal (respondent No. 1 in both the appeals) was owner of agricultural land comprising Survey Nos. 166 and 167 situated in Deh Silra, Taluka Shahdadkot, District Larkana. He had purchased this land from one Muhammad Ismail some years before the transaction in suit for Rs 400. By sale‑deed dated 3‑2‑1945, Sadarangmal sold this land to Haji Allahando and Gul Muhammad (appellants in II Appeal No. 77/63) for Rs. 1,700. On 13‑2‑1945, these three parties executed another agreement by which Haji Allahando and Gul Muhammad agreed to return the land to Sadarangmal after five years .if he returned to them the sum of Rs. 1,700. In 1950, the land was sold by the purchasers to Gulabchand, who in turn sold the land to Mst. Noor Jehan (appellant II Appeal No. 46/63) by sale‑deed registered on 4‑10‑1959 for Rs. 3,000. Gulabchand has migrated to India and is, therefore, an evacuee.
3. In 1961, Sadarangmal brought a suit in the Court of the Sub-Judge, Shahdadkot against Haji Allahando, Gul Muhammad and Mst. Noor Jehan. The suit was for redemption of mortgage of the land in question. The case set up by Sadarangmal wa: that the sale‑deed dated 3‑2‑1945 was in fact a mortgage of the land and the sale price 'of Rs. 1,700 was a loan advanced by Haji Allahando and Gul Muhammad on interest at 6 per cent to be appropriated out of the produce of the land. The defence of Haji Allahando and Gul Muhammad was that the transaction was a sale and not a mortgage. Mst. Noor Jehan also adopted this defence and in addition took the plea that she was a bona fide transferee for value without notice of the real nature of the transaction between Sadarangmal and the purchasers. The trial Court held the transaction to be a sale and not mortgage. On appeal by Sadarangmal, the Additional District Judge, Larkana, came to the conclusion that the transaction was in the nature of mortgage of conditional sale.
4. Mr. B. J. De'Sa, the learned counsel for Haji Allahando and Gul Muhammad and Mr. Ibrahim Memon, the learned counsel for Mst. Noor Jehan, contended (i) that by reason of the proviso to section 58 (c) of the Transfer of Property Act V of 1882) the transaction in question could not be deemed to be a mortgage and (ii) that even otherwise the two documents, that is, the sale‑deed and the agreement of repurchase constituted a sale with a condition of repurchase on the expiry of the period of five years.
5. Under section 58 (e), a transaction is mortgage by conditional sale if it is stipulated that the sale will become absolute if default is made in payment of mortgage money on a certain date, or that the sale will become void or that the buyer shall re‑transfer property to the seller if such payment is made. The Transfer of Property (Amendment) Act, 1929, (XX of 1929) added a 'proviso to section 58 (c) to the effect that no transaction shall be deemed to be a mortgage, unless the conditions as to re‑conveyance of the property to the mortgagor is embodied in the document which effects or purports to effect the sale. The appellants' learned counsel contended that the condition of repurchase in the present case is not embodied in the sale‑deed, but is contained in a separate document which was executed nearly ten days after the sale‑deed, and, therefore, the transaction could not be deemed to be a mortgage by conditional sale. The learned counsel for Sadarangmal, Mr. P. D. Ramchandani, however, repelled this contention by referring to section 10 (A) of the Sind Agriculturists' Relief Act (XVII of 1879) (known before its adaptation in Sind as the Dekkhan Agriculturists' Relief Act). This section, which was added to the main Act by Bombay Act 11 of 1907 (the Dekkhan Agriculturists' Relief (Amendment Act) reads as under‑‑
"10‑A. Whenever it is alleged at any stage of any suit or proceeding to which an agriculturist is a party that any transaction in issue entered into by such agriculturist or the person, if any, through whom he claims was a transaction of such a nature that the rights and liabilities of the parties thereunder are triable wholly or in part under this Chapter, the Court shall, notwithstanding anything contained in section 92 of the Indian Evidence Act, 1872, or in section 49 of the Indian Registration Act, 1908 or in any other law for the time being ,in force, have power to enquire into and determine the real nature of such transaction and decide such suit or proceeding in accordance with such determination and shall be at liberty, notwithstanding anything contained in any law as aforesaid, to admit evidence of any oral agreement or statement or unregistered document with a view to such determination and decision:
Provided that such agriculturist or the person, if any, through whom he claims was an agriculturist at the time of such transaction:
Provided further that nothing in this section shall be deemed to apply to any suit to which a bona fide transferee for value without notice. of the real nature of such transaction or his representative is a party where such transferee or representative holds under a registered deed executed more than twelve years before the institution of such suit."
Illustration (d) to this section on which Mr. Ramchandani relied is as follows:‑
"An agriculturist sues to redeem property alleged to have been mortgaged by deed in the form of a sale. The Court may admit evidence of the intention of the parties outside the deed in order to determine whether the transaction was a mortgage or a sale, and if satisfied that the transaction was a mortgage may enforce the deed as a mortgage‑deed."
6. Section 10 (A) of the Said Agriculturists' Relief Act thus confers wide powers on the Court to determine the real nature of the transaction and to admit evidence outside the written documents, notwithstanding the provisions of any other law. The rule prescribed by the proviso to section 58 (c) of the Transfer of Property Act, as to restriction of the inference to be drawn in favour of a mortgagee only to cases where the condition of repurchase is embodied in the document of ostensible sale will, therefore, not apply to transactions covered by section 10 (A) of the Sind Agriculturists Relief Act. It being admitted that Sadarangmal is an agriculturist the appellants cannot derive any assistance from the proviso to section 58 (c).
7. Section 10 (A) of the Sind Agriculturists' Relief Act is also the answer to the contention that lust. Noor Jehan is a bona fide transferee for value without notice of the real nature of the transaction in suit. The second proviso to this section specifically states that the section will not apply to a bona fide transferee only if such transferee held land under a registered deed executed more than 12 years before the institution of the suit. Mst. Noor Jehan purchased the land by the sale deed registered on 4‑10‑1959. The suit of Sadarangmal was brought in 1961. Mst. Noor Jehan is, therefore, not covered by the exception laid down in this provision.
8. The effect of section 10 (A) of the Sind Agriculturists' Relief Act is not, however, that the inference of mortgage should necessarily be drawn in all cases where the condition of repurchase is embodied in a document executed with or after the sale‑deed. It remains to be determined whether the sale dated 3‑2‑1945 and the agreement of repurchase of 13‑2‑1945 in the present case operate as a mortgage or a sale with condition of repurchase. This question has come up for consideration in several reported cases. In the Privy Council decision, Bhagwan Sahai v. Bhagwan Din and others ((1889-90) 17 I A 98) by a document dated the 20th February 1835, the sellers purported it) convey absolutely all the property in dispute to the purchasers for Rs. 4.000. On the same day, the parties executed another document by. Which the purchaser agreed to reconvey the property to the sellers if they repaid to him the price of Rs. 4,000 within ten years, during which period the purchaser was to remain in possession of the property and to enjoy its income. Their Lordships held the transfer to be a sale and not a mortgage.
The judgment was given by Sir Barnes Peacock who based the decision on the following observations of. Lord Crawnworth (the Lord Chancellor) in Alderson v. White (44 E R 924):
"These deeds taken together do not on the face of them constitute a mortgage ; and the only question is whether, assuming the transaction to be a legal one, it has been shown to be in truth such as in the view of a Court of Equity ought to be treated as a mortgage. transaction. The rule of law on this subject is one dictated by common sense‑that prima facie an absolute conveyance containing nothing to chew 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 stipulated that he shall have a right to repurchase.
In every such case the question is, what upon a fair construc tion is the meaning of the instruments Here the first instrument was on the face of it an absolute conveyance; the second gave a right to repurchase on payment, not of what should be due, but of the full amount of the purchase money of 4,739."
9. The question was next considered by the Privy Council in Jhanda Singh v. Wahid‑ud‑Din and others ((1915‑16) 43 I A 284). The appellant's predecessor‑in‑interest executed on 29th August 1852 a deed of sale of a village for Rs. 5,500. This document was followed by the execution of an agreement on 5th September 1852, under which the purchasers agreed to resell the village to the sellers if the latter paid back the purchase money to the sellers after 9 to 10 years. The agreement further provided that if the purchasers failed to so resell the property, the sellers would be at liberty to deposit the price in the Court and take necessary legal proceedings for repurchase of the property. This last provision was similar to the power conferred on mortgagors by "bai‑bil‑wafa" mortgages under Bengal Regulations I of 1798 and XVII of 1806. In the proceedings taken by the sellers for redemption, the Privy Council rejected the contention that the two documents constituted a mortgage. Their Lordships observed that a deed of sale and an agreement for re‑sale do not constitute a mortgage unless, firstly, the intention to create mortgage is apparent from the documents, and, secondly, if the deed of sale is of earlier date than the agreement of repurchase, the intention to create mortgage is shown to have existed before the execution of the sale‑deed. Their Lordships also held that the provision in the agreement of repurchase for deposit of the price in the Court, though similar to the power conferred on mortgagers under the Bengal Regulations I and XVII did not necessary show that the parties intended to create a mortgage.
10. This question has also been considered by the Dacca High Court. In Chandra Kanta Howaldar and others v. Rama Prasanna Ganguly and others (P L D 1954 Dacca 8) the relevant document purported to be a sale‑deed and contained a provision for recoveyance whenever the vendors or their heirs were able to repay the purchase price. Shahabuddin, C. J. referred to Bhagwan Sahai v. Bhagwan Din and others and Jhanda Singh v. Wahid‑ud‑Din and others and observed that to conclude that the transaction was a mortgage and not a sale the documents should indicate the relationship of creditor land debtor between the parties. The learned Chief Justice further held that the rule laid down in Alderson v. White and the two Privy Council decisions referred to above applied equally to a case of one document of sale with a condition of repurchase as well as to two documents, one of sale and another of repurchase.
11. In Ganu Mia v. Abdul Jabbar and others (P L D 1959 Dacca 293) the documents before the Court contained in the margin the word "a sale‑deed for a period of six years" and a provision in the body of the document to the effect that "after enjoyment of the lands for a period of six years if I or any of my heirs pay up the principal amount mentioned in the Kabala to you or to any of your sons, then they will return the lands and the documents". Both these documents bore the title "Kabala for absolute sale". The documents were held to show sales and not mortgages.
12. The lower Appellate Court, incoming to the conclusion that the two documents in question constitute a mortgage, has relied on the Privy Council decision in Nathu Lal and others v. Mst. Gomti Kuar and others (A I R 1940 P C 160) and the decision of the Allahabad High Court in Debi Singh and others v. Jagdish Saran Singh and others (A I R 1952 All. 716). In the Privy Council case both the sale‑deed as well as the agreement of reconveyance were executed on the same date, that is 25th March 1844. The finding of the three Courts below was that the documents read together constituted a mortgage by conditional sale. Their Lordships accepted this finding with the observation that "this point however was not stressed before their Lordships". The case before the Allahabad High Court related to one document which contained a condition for reconveyance in the following terms:
"I, the executant, keeping in view the fact that the property being the ancestral property of my family, want that if I, at any time within 15 years, am able to pay the entire consideration money to the vendee then he after the receipt of the consideration money, shall execute a sale‑deed in favour of me the executant in respect of the property sold."
"Wherefore, this deed by way of conditional sale‑deed has been executed to serve as an authority and be of use when required"
Applying the proviso to section 58 (c) of the Transfer of property Act, their Lordships held that the document b‑fore them created a mortgage by conditional sale and not an absolute sale. Neither of these decisions is of any assistance in deciding the present case. Before the Privy Council, the sale‑deed and the agreement for reconveyance was of the same date and the point that the two documents constituted a sale and not a mortgage was not stressed at all. In the Allahabad case, the condition for reconveyance was embodied in the sale‑deed and not in a separate document. The transaction itself was described as a deed by way of conditional sale unlike the sale‑deed in the present case which is described as "absolute sale‑deed of an agricultural land for Rs. 1,700".
13. A review of the decisions referred to above and other decided cases (which are numerous and which it is not necessary to refer to) shows that the following tests may be usefully employed to determine whether a transaction is a sale with condition of repurchase or a mortgage:‑
(i) Whether the relationship of debtor, and creditor existed between the parties before or at the time of the alleged sale;
(ii) Did the intention to create a mortgage precede the alleged sale;
(iii) Was the price paid by the purchaser fair market price;
(iv) Was the possession of the property transferred to the purchaser;
(v) Is there a covenant for the payment of interest by the purchaser;
(vi) Is the purchaser accountable to the seller for the income of the property;
(vii) Whether agreement of repurchase was made at the time of sale or some time thereafter; (the former evidencing the intention to create mortgage and the latter the intention of repurchase only);
(viii) Whether a short or long period of repayment is stipulated (a short period evidencing the intention to sell and a long period indicating a mortgage).
14. It is to be considered whether the above tests apply to the present case. I have examined the two documents in question. I do not find therein any indication that there was a relationship of debtor and creditor between Sadarangmal and Haji Allahando and Gul Muhammad before or at the time the first document was executed. The possession of the land in dispute was transferred to the purchasers. The agreement of repurchase stipulated a short period of five years on the expiry of which Sadarangmal could repurchase the land. The repurchase price was to be Rs. 1,700 only, the same price which was the consideration in the sale‑deed. There is no stipulation for payment of interest or that purchasers will be accountable to the seller for the income from the property. It is not alleged that the purchase price of Rs. 1,700 was not the correct value of the land. Considering Sadarangmal had purchased this land for Rs. 400 only, it cannot be said that the price received by him from Haji Allahando and Gul Muhammad was not true market price. All these circumstances and the fact the agreement of repurchase was executed ten days after the sale would show that the transaction was one of sale with a condition of repurchase and not mortgage.
15. Mr. Ramchandani, the learned counsel for Sadarangmal took his stand on the evidence in the trial Court of Sadarangmal and his brother Sujan Mal for establishing that the transaction was a mortgage. But Sujan Mal admitted that be was not present during the negotiations between the seller and the purchasers. He was present only at the time of the execution of the sale‑deed. Sadarangmal stated that he bad approached the purchasers for a loan of Rs. 1,700 against mortgage of the land in question; that he agreed to pay interest at the rate of 2 per cent; that the purchasers had cleverly induced him to execute a sale‑deed instead of a deed of mortgage and that he had been continuously demanding from the purchasers settlement of accounts. It is not possible to believe Sadarangmal. In the document Exh. 30, by which he purchased the land in question from Muhammad Ismail, Sadarangmal is described as "Zamindar, Sahukar and Merchant'. A man of this status could not have been deceived into executing a sale‑deed when he intended to create a mortgage only. Before the trial Court, Sadarangmal stated that he had agreed to pay interest at the rate of 2 per cent. But in the plaint the averment is that the loan was obtained on interest at the rate of six per cent. According to him the annual income from tile property is between Rs. 500 and Rs. 600. No explanation has been given by him as to why he should have agreed that the purchasers should enjoy this annual income when the agreed rate of interest was only six per cent. or 2 per cent. No written demand was made by Sadarangmal on Haji Allahando and Gul Muhammad for settlement of accounts. The disputed land was sold by Haji Allahando and Gut Muhammad by a registered document to one Gulabchand in 1950 who, in turn, conveyed the land again by a registered instrument, to Mst. Noor Jehan in 1959. Sadarangmal must have been aware of these two transactions, but he did not take any action right upto 1961 when be filed the suit from which these appeals arise. I am, therefore, of the view that the evidence of the documents themselves and the conduct of Sadarangmal go to show clearly that the transaction between him and Haji Allahando and Gul Muhammad was not intended to be a mortgage.
16. Mr. Ramchandani then urged that the intention to create mortgage and not sale is evidenced by the stipulation in the agreement of repurchase that the seller would have no objection if the purchasers maintain boundary walls and ridges on the land sold to them. I cannot accept this stipulation as amounting to restriction on the use or enjoyment of the land.
17. Mr. Ramchandani lastly contended that the finding, of the learned Additional District Judge that the transaction is in nature of a mortgage is a finding of fact that this Court cannot disturb this finding. I am unable to agree with him. The finding of the lower Appellate Court is based on the interpretation of the sale‑deed and the agreement of repurchase. In my opinion, the learned Additional District Judge misconstrued the legal effect of these documents, and his finding in this behalf cannot be said to be finding of fact only.
18. For the reasons discussed above. I allow the two appeals and hold that the sale‑deed dated 3‑2‑1945 and the agreement of repurchase dated 3‑2‑1945 (Exhs. 32 and 33) do not constitute a mortgage but are in the nature of a sale with a condition of repurchase. The judgment dated 2‑5‑1962 of the Additional District Judge, Larkana is set aside. The respondent Sadarangmal will pay to the appellants in each of the two appeals costs of the proceedings in this Court and the lower appellate Court.
K.M.A.
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