POBBATI OBAYYA Vs. AMILINENI CHINNA VENKATAPPA

JUDGEMENT

(1.) This is a plaintiffs appeal against the judgment and decree in O.S. No. 95 of 1968 on the file of the Court of the Subordinate Judge , Anantapur. The plaintiff filed the suit in forma pauperis for redemption alleging that Ex. B-1 dt. 25-6-1960 is a mortgage by conditional sale executed by the plaintiff in favour of the defendant. On a consideration of the evidence the Court below construed Ex. B-1 as an outright sale with a condition to repurchase. It was held that Ex. B-1 was not a mortgage by conditional sale. So the question in this appeal is whether Ex. B-1 is a mortgage by conditional sale or is a sale deed with a conditional reconveyance.

(2.) The question whether a given document is a mortgage by conditional sale or not has ever been a vexed question. After the amendment of Transfer of Property Act in 1929, in order to constitute a mortgage by conditional sale , under Sec. 58 (c) of the Act unless the conditions provided by that section are embodied in the document, no transaction evidenced by a document shall be deemed to be a mortgage by conditional sale. Having regard to the definition of a mortgage in Section 58 (a) of the Transfer of Property Act, there must be a transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan, an existing or future debt. It is , therefore , manifest that on the date of the transaction the existence of a relationship of a debtor and creditor is of the essence , as otherwise it cannot be called a mortgage at all. In constructing a document whether it is a mortgage by conditional sale or a sale with a condition to repurchase, there are pronouncements of the Supreme Court which indicate certain tests which are by no mens exhaustive. In Chunchun Jha v. Ebadat Ali, AIR 1954 SC 345 , Bose J., considered the question whether the document in that case was a mortgage by conditional sale. The learned Judge observed that it would be a fruitless talk to try to collate and analyse the various decisions bearing on the subject because no two documents are expressed in identical terms. Each case must be decided on its own facts. But nevertheless certain broad principles are there. The first of them is that the intention of the parties at the time of the execution of the document is to be the determining factor. The intention can only be gathered in the first place only from the recitals of the document are clear, effect has to be given to those words and extraneous enquiry should be ruled out. Where the words in the document are clear the legal effect of the document has to be decided on the words used in the document. IF the language employed in the document is ambiguous, then it would be permissible to look into the surrounding circumstances to determine what was intended. It was also pointed out that if an instrument clearly purported to be a mortgage, it should not be turned into a sale by reference to a host of extraneous and irrelevant considerations. Section 58 (c) of the Transfer of Property Act as amended meant a clear cut Classification and excluded transactions embodied in more than one document from the category of mortgages by conditional sale. It was stated by the learned Judge that persons who after the amendment choose not to use two documents , it may be presumed that the parties did not intend the transaction to be a sale. There is thus a presumption that where there is only one document it is a mortgage by conditional sale and that the presumption had to be displaced by clear and express words. If the conditions of Section 58 (c) are fulfilled, then the deed should be construed as a mortgage. It was observed (at page 348 of the report) as follows : "Now , as we have already said once a transaction is embodied in one document and not two and once its terms are covered by Section 58 (c) , then it must be taken to be a mortgage by conditional sale unless there are express words to indicate the contrary, or, in a case of ambiguity , the attendant circumstances necessarily lead to the opposite conclusion." Where the document does not contain express words as to the nature of the transaction and there is ambiguity , the Court has to probe further into the surrounding circumstances.

(3.) In Bhaskar v. Shrinarayan, AIR 1960 SC 301 Shah, J., in delivering the Judgment of the Court did not refer to the above decision in AIR 1954 SC 345 (Supra) but laid down the principles governing a situation such as the present, It was stated thus (at page 304) :- "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 resolved this conflict by enacting that a transaction shall not be deemed to be a mortgage unless the conditions 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 affecting 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 of one 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 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 on the property conveyed , but the sale is subject to an obligation to retransfer the property within the period specified. What distinguishes the two transaction 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 Narsingerji 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 the 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 admissible. In the light of these principles, the real character of the document of Ex. A-1 may be ascertained." The same principles were reiterated by the Supreme Court in P. L. Bapuswami v. N. Pattay, AIR 1966 SC 902.