caselaws
Supreme Court of India
Srinivasaiah vs H.R.Channabasappa (D) Tr.Lrs.& … on 25 April, 2017Author: A M Sapre
Bench: R.K. Agrawal, Abhay Manohar Sapre
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos.5576-5577 OF 2017
(ARISING OUT OF SLP (C) Nos.9582-9583/2013)
Sri Srinivasaiah …Appellant(s)
VERSUS
H.R. Channabasappa
(since dead) by his LRs
and Ors. ….Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1) Leave granted.
2) These appeals are filed by defendant No.2 against the order dated
18.04.2012 passed by the High Court of Karnataka at Bangalore in R.P. No.
387 of 2011 and the final judgment and order dated 25.07.2011 in R.S.A.
No.1253 of 2005 by which the High Court allowed the appeal filed by the
respondents herein and set aside the judgment and decree dated 18.02.2005
passed by the Additional Civil Judge (Sr.Division), Ramnagaram in R.A.
No.35 of 2000 and restored the judgment and decree dated 30.06.2000 passed
by the Civil Judge (Jr.Division) Kanakapura in O.S. No.152 of 1987.
3) We herein set out the facts, in brief, to appreciate the issues
involved in these appeals.
4) The appellant is defendant No.2 whereas respondent Nos. 1 to 5 are
the legal representatives of original plaintiff and respondent Nos. 6 to 11
are the legal representatives of original defendant No. 1 in the civil suit
out of which these appeals arise.
5) The original plaintiff – M.N. Channabasappa was the owner of the suit
land (described in detail in schedule to the plaint). He fell in need of
money in 1969. He, therefore, approached the original defendant No.1 – B.M.
Narayana Shetty and requested him to give some money to overcome the
financial crisis faced by him during that time. Defendant No.1 agreed and
accordingly gave Rs.1500/- to the plaintiff by way of loan. In order to
secure the repayment, the plaintiff on request made by defendant No.1
executed a document on 28.07.1969 (Ex-P-1) in favour of defendant No.1 and
got the same registered with the sub-Registrar, Kanakpura. Defendant No.1
was also placed in possession of the suit property pursuant to the
document.
6) On 30.06.1987, the plaintiff sent a legal notice to defendant No.1
and offered to repay Rs.1500/- to him with a further request to redeem the
suit land in his favour in terms of the conditions of Ex. P-1. The
plaintiff contended that the Ex.P-1 was essentially a mortgage deed
executed by him in favour of defendant No.1 by way of security for
repayment of the loan given to him by defendant No.1. The plaintiff
contended that in terms of the conditions of Ex.P-1, he delivered
possession of the suit land to defendant No.1 for a period of 5 years to
enable defendant No.1 to reap the fruits of the suit land and on repaying
Rs.1500/- within five years, restore the possession of the suit land by
redeeming the mortgage.
7) Defendant No.1 sent a reply to the notice on 13.08.1987. He denied
the plaintiff’s offer and contended therein that the document dated
28.07.1969 (Ex.P-1) is not a “mortgage deed” as described by the plaintiff
in the notice but it is in substance a “sale deed” out and out in relation
to the suit land executed by the plaintiff in his favour for Rs.1500/-
pursuant to which defendant No.1 was also placed in possession of the suit
land as owner. It was contended that defendant No.1, in the meantime, on
25.09.1986 sold the suit land to the appellant herein (defendant No.2) by
executing the deed of sale for consideration.
8) This gave rise to filing of the Civil Suit by the plaintiff on
19.09.1987 against the original defendant No.1 and the appellant herein
who, as mentioned above, is the purchaser of the suit land. The suit was
filed in the Court of Civil Judge (Jr. Division) at Kanakapura for claiming
reliefs namely- (1) redemption of the mortgage of the suit land in
plaintiff’s favour (2) for a declaration that the sale made by defendant
No.1 of the suit land in favour of defendant No. 2 vide sale deed dated
25.09.1986 is bad in law and not binding on the plaintiff and (3) for
recovery of possession of the suit land from the defendants.
9) It was alleged that the Ex.P-1 is a mortgage deed pursuant to which
plaintiff had delivered the possession of the suit land to defendant No.1
for a period of 5 years on taking loan of Rs.1500/- from defendant No.1.
It was alleged that the mortgage was created by the plaintiff of his suit
land in favour of defendant No.1 only by way of security to secure payment
of loan amount and in terms of condition of the deed, defendant No.1 was to
enjoy the fruits of suit land for a period of 5 years and within the said
period, the plaintiff was to return Rs.1500/- to defendant No.1 and, in
turn, defendant No.1 was to redeem the mortgage to the plaintiff. It was
alleged that the plaintiff offered Rs.1500/- to defendant No.1 but he
declined and on the other hand asserted his right of ownership over the
suit land and hence need to file the civil suit arose and seek
aforementioned reliefs against the defendants in relation to the suit land.
10) Defendant No.1 filed the written statement and denied the plaintiff’s
claim. He reiterated his stand taken by him in reply to legal notice. It
was alleged that document in question (Ex.P-1) is not a mortgage deed but
in substance a sale deed on the strength of which he has become the
exclusive owner. It was alleged that since the plaintiff failed to come
forward to pay the loan amount to defendant No.1 on the expiry of 5 years,
he lost the right to get the suit land restored in his name. It was alleged
that defendant No.1 has already sold the suit land to defendant No.2 on
25.09.1986 by sale deed for consideration. A plea of suit to be barred by
limitation was also raised.
11) The Trial Court framed issues on the basis of pleadings. The parties
adduced evidence. During the pendency of the suit, both plaintiff and
defendant No.1 died and, therefore, their respective legal representatives
were brought on record to continue the lis.
12) The Trial Court by its judgment/decree dated 30.06.2000 decreed the
plaintiff’s suit. It was held that the document dated 28.07.1969(Ex.P-1) is
a mortgage by conditional sale and not a sale deed. It was held that the
plaintiff is entitled to claim redemption of the mortgage by paying the
mortgage money to defendant No.1 and seek restoration of the suit land from
the defendants.
13) The defendants felt aggrieved, filed first appeal before the
Additional Civil Judge (Sr.Division) being R.A. 35/2000. By judgment/decree
dated 18.02.2005, the first Appellate Court allowed the appeal and set
aside the judgment/decree of the Trial Court. It was held that the document
dated 28.07.1969 (Ex.P-1) is not a mortgage deed but it is in the nature of
a conditional sale deed. It was also held that the suit is barred by
limitation. In the light of these findings, the plaintiff’s suit stood
dismissed.
14) Felt aggrieved, the plaintiff filed Second Appeal before the High
Court out of which this appeal arises. The High Court admitted the appeal
on the following substantial questions of law:-
“(i) Whether the interpretation placed by the first Appellate Court as the
suit document to hold that it is not a mortgage by conditional sale is
proper?
(ii) Whether the finding of the first Appellate Court that even if it is
construed as a mortgage by conditional sale that the suit is barred by law
of limitation is false?”
15) By impugned order, the High Court allowed the appeal, set aside the
judgment/decree of the first Appellate Court and restored the
judgment/decree of the Trial Court. The High Court held that the document
dated 28.07.1969 is a mortgage by way of conditional sale and not a sale
out and out. It was held that the suit was filed within time. It is
governed by Article 61(a) of the Limitation Act which prescribes limitation
of 30 years when right to redeem accrues. In this case, it was accrued on
27.07.1974 whereas the suit was filed on 19.09.1987.
16) Against the judgment in second appeal, defendant No.2 filed review
petition before the High Court. By order dated 18.04.2012, the review
petition was dismissed.
17) Against the order in review petition and the judgment in second
appeal, defendant No.2 filed these appeals by way of special leave
petitions before this Court.
18) Heard Mr. Shailesh Madiyal, learned counsel for the appellant and Mr.
Trideep Pais, learned counsel for respondents.
19) The only question involved in this appeal is what is the true nature
of the document dated 28.07.1969 (Ex.P-1). Is it a “mortgage by conditional
sale” or a “sale out and out with a condition to repurchase”?
20) This question needs to be answered keeping in view the requirement of
Section 58(c) of the Transfer of Property Act,1882 (hereinafter referred to
as “the T.P. Act”) and the law laid down by this Court in Chunchun Jha vs.
Ebadat Ali and Another, AIR 1954 SC 345.
21) Section 58(c) of the Act reads as under:
“58. “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mortgage-
deed” defined.—
(c) Mortgage by conditional sale.—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 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.”
22) In Chunchun Jha’s case (supra), this Court examined this very
question as to what constitutes “a mortgage by conditional sale or a sale
out and out with a condition of repurchase”.
23) The learned Judge, Vivian Bose J., in his distinctive style of
writing speaking for the Bench posed the question as under:
“This is a plaintiff’s appeal in a suit for redemption of what the
plaintiff calls a mortgage dated 15-4-1930. The only question for
determination is whether this is a mortgage by conditional sale or a sale
out and out with a condition of repurchase. If the former the plaintiff
succeeds. If the latter he is out of Court.”
24) His Lordship then examined the question in the context of several
leading English authorities on the subject and Section 58(c) of the T.P.
Act and laid down the following test for deciding the true nature of the
document. This is what His Lordship held:
“5. The question whether a given transaction is a mortgage by conditional
sale or a sale outright with a condition of repurchase is a vexed one which
invariably gives rise to trouble and litigation. There are numerous
decisions on the point and much industry has been expended in some of the
High Courts in collating and analysing them. We think that is a fruitless
task because two documents are seldom expressed in identical terms and when
it is necessary to consider the attendant circumstances the imponderable
variables which that brings in its train make it impossible to compare one
case with another. Each must be decided on its own facts. But certain broad
principles remain.
6. The first is that the intention of the parties is the determining
factor: see Balkishen Das v. Legge. 22 Ind. App.58 (P.C.) (A). But there
is nothing special about that in this class of cases and here, as in every
other case where a document has to be construed, the intention must be
gathered, in the first place, from the document itself. If the words are
express and clear, effect must be given to them and any extraneous enquiry
into what was thought or intended is ruled out. The real question in such a
case is not what the parties intended or meant but what is the legal effect
of the words which they used. If, however, there is ambiguity in the
language employed, then it is permissible to look to the surrounding
circumstances to determine what was intended.
As Lord Cranworth said in Alderson v. White (1858) 44 E.R.924 at p. 928 (B)-
“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?”
Their Lordships of the Privy Council applied this rule to India in Bhagwan
Sahai v. Bhagwan Din3 and in Jhanda Singh v. Wahid-ud-din, AIR 1916 P.C. 49
at p.54 (D).
7. The converse also holds good and if, on the face of it, an instrument
clearly purports to be a mortgage it cannot be turned into a sale by
reference to a host of extraneous and irrelevant considerations. Difficulty
only arises in the border line cases where there is ambiguity.
Unfortunately, they form the bulk of this kind of transaction.
8. Because of the welter of confusion caused by a multitude of conflicting
decisions the legislature stepped in and amended Section 58(c) of the
Transfer of Property Act. Unfortunately that brought in its train a further
conflict of authority. But this much is now clear. If the sale and
agreement to repurchase 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 repurchase is embodied in the document that effects or
purports to effect the sale, then it is a matter for construction which was
meant. The legislature has made a clear cut classification and excluded
transactions embodied in more than one document from the category of
mortgages, therefore it is reasonable to suppose that persons who, after
the amendment, choose not to use two documents, do not intend the
transaction to be a sale, unless they displace that presumption by clear
and express words; and if the conditions of Section 58(c) are fulfilled,
then we are of opinion that the deed should be construed as a mortgage.”
25) Keeping in mind the requirement of Section 58(c) of the T.P. Act and
the test laid down in Chunchun Jha’s case (supra), let us examine the
nature of Ex.P-1 which reads as under:
“This Deed of Conditional Sale is made on this Twenty eighth day of July,
Year-Nineteen Sixty nine, by M.N. Channabasavaiah, s/o Patel Nanjappa,
resident of Kasaba Maralwadi village, Maraiwadi Hobli, Kanakapura Taluk to
B.M. Narayan Shetty s/o Bhoopalam Munirama Shetty at Kasaba Maralwadi
Village, maralwadi Hobli, Kanakapura Taluk. Witnesseth, to meet my
financial necessities such as agricultural expenses, to clear loans and to
meet domestic family expenses, today I am selling the schedule property for
a sale consideration of Rs.1,500/- (Rupees one thousand five hundred)
received in cash. The possession of the schedule property of this
Conditional sale has been delivered to you today only. From now onwards
you shall pay to the Government all taxes and other payments and shall
peacefully enjoy the schedule property of this Conditional sale according
to your wish. In the presence of the witnesses, this Conditional sale
deed, I have received the entire sale price and no arrears are pending
payable to me in this regard. The schedule property of this Conditional
sale has not been alienated earlier to anyone in any manner either by my
ancestors or by myself. In the event of any such litigation arises, I will
clear the same at my own expenses. There is no attachment of any minor
claims or any charge for maintenance exists on the schedule property of
this Conditional sale deed.
Within five years from the aforesaid date of this Conditional sale
deed, I will repay the entire conditional sale price of Rs.1,500/- (Rupees
one thousand five hundred) to you and get executed a sale deed from you.
In the event of default, after the said period of five years mentioned in
this Conditional sale deed, then together with all the privileges,
easements, advantages and appurtenances whatsoever in or to the schedule
property and every part thereof belonging to or to the said schedule
property or hereinto before held, used, occupied or enjoyed or known as
part and parcel thereof or appurtenant thereto shall belong to you and your
legal heirs forever, free from all encumbrances, charges, liens whatsoever.
Myself and my legal heirs shall have no manner of right, claim, interest
or title whatsoever in or upon or in respect of the schedule property.
SCHEDULE
All that piece and parcel of the land measuring Twenty Eight Guntas in
Sy.No. 168 (One hundred and sixty eight) situated at kasaba Maralwadi
village, Maralwadi Hobli, Kanakapura Taluk, which is my ancestral property
acquired by me by way of partition entered amongst myself and my brothers.
The schedule land is bounded on:
East by : Land belonging to Narasegowda;
West by : Lane and water channel;
North by : Thothi Inamthi land;
South by : Garden land belonging to Vendor;”
When we examine the nature of document in question (Ex.P-1), we are of the
opinion that the document (Ex.P-1) is a mortgage with conditional sale as
defined under Section 58 (c) of the T.P. Act. This we say for following
reasons:
26) First, it is not in dispute that the plaintiff was the owner of the
suit land. Second, the parties concluded the transaction in question by
executing one document (Ex.P-1). Third, the document (Ex.P-1) is styled as
a “Deed of Conditional Sale”. Fourth, it contains a condition that
defendant No.1 will be allowed to remain in possession of the suit property
for 5 years and enjoy the fruits of the land and that during this period,
the plaintiff will be entitled to get the suit property re-conveyed in his
name on paying Rs.1500/- by getting the sale deed executed in his name and
obtain possession of the suit land from defendant No.1. Fifth, the
plaintiff offered to pay Rs.1500/- to defendant No.1 with a request to
resale the land to him.
27) In our considered opinion, the aforesaid five reasons satisfies the
third condition of Section 58(c) of the T.P. Act, namely, “on condition
that such payment being made, the buyer shall transfer the property to the
seller”. It also satisfies the tests laid down by this Court in Chunchun
Jha’ case (supra), namely, First, the transaction is concluded in one
document; Second, the document styled as a “Deed of Conditional Sale”
itself contains the condition of repurchase on offering the sale money
without interest for the reason that defendant No.1 was allowed to use the
land till the money is not paid back to him by the seller (plaintiff); and
Third, parties’ intention as per terms of Ex.P-1 is also supported by the
evidence which was accepted by the two Courts – Trial Court and the High
Court.
28) In the light of foregoing discussion, we are of the considered
opinion that the Trial Court and the High Court was right in decreeing the
plaintiff’s suit whereas the first Appellate Court was not right in
dismissing the suit.
29) In other words, the reasoning and the conclusion arrived at by the
Trial Court and the High Court while holding that Ex.P-1 is a “mortgage
deed by conditional sale” as defined under Section 58(c) of the T.P. Act is
just and proper and hence it deserves to be upheld by this Court.
30) We also note that the High Court rightly took note of the law laid
down in the case of Chunchun Jha (supra) and the requirements of Section
58(c) of the T.P. Act and keeping the same in mind interpreted Ex.P-1 and
came to a right conclusion.
31) Learned Counsel for the appellant, however, placed reliance on the
decision in Vanchalabai Raghunath Ithape vs. Shankarrao Baburao Bhilare,
(2013) 7 SCC 173 and contended that the law laid down therein supports his
contention that the Ex.P-1 is a sale out and out.
32) We have perused the decision in Vanchalabai Raghunath Ithape’s case
(supra). First, we note therein that it did not take note of law laid down
by this Court in the case of Chunchun Jha (supra), which is a decision of
larger Bench (4 Judge Bench); Second, we further find that there the High
Court had affirmed the findings of fact recorded by the Courts below in
paras 19, 20, 25, 26 and 29 which are reproduced in para 9 of the decision
at pages 176 and 177 wherein it is mentioned in para 26 of the first
appellate order “Admittedly there was no relationship of debtor and
creditor between the parties”. This finding of fact was affirmed by the
High Court, which, in turn, was upheld by this Court; Third, such is not
the case here because in the case at hand, the plaintiff came out with a
case that he took loan of Rs.1500/- from defendant No.1 and to secure the
payment of loan, a conditional sale deed was executed in the form of
mortgage deed. It was not so in the case of Vanchalabai Raghunath Ithape
(supra).
33) It is for these three reasons, we prefer to rely upon the law laid
down by the earlier larger Bench in the case of Chunchun Jha (supra) which
continues to hold the field to guide us as to how to examine the true
nature of the document such as the one involved in the case (Ex. P-1).
34) This takes us to the next question as to whether the High Court was
justified in holding that the suit was filed within limitation? In our
opinion, the High Court was right. The case at hand would be governed by
Article 61(a) of the Limitation Act which provides a limitation of 30 years
when the right to redeem or to recover possession accrues to the mortgagor.
Ex.P-1 is of dated 28.07.1969. In terms of the conditions, five years
expired on 27.07.1974. The plaintiff filed a suit on 19.09.1987. It was
thus filed within 30 years.
35) Now coming to another question though not pressed in service by the
parties but, in our view, does arise in the case as a result of the
plaintiff’s suit having been decreed against the defendants by the Trial
Court and affirmed by the High Court and lastly, by this Court.
36) The question arises in this way. The effect of the decree passed in
this case is that the original plaintiff, now represented by his legal
representatives (respondent Nos.1 to 5) are required to return Rs.1500/- to
the original defendant No. 1, now represented by his legal representatives
(Respondent Nos.6-11) and in turn, defendant No. 1 (respondent Nos.6-11)
are required to execute the sale deed by retransferring the suit land to
the plaintiff(respondent Nos.1-5) and restore them the possession of the
suit land. Since during the pendency of the litigation, original defendant
No. 1 transferred the suit land to the appellant (defendant No. 2) for
Rs.30,000/-, therefore, he, as a subsequent transferee of the suit land,
has now steped into the shoes of original defendant No. 1(respondent Nos.6-
11).
37) Yet another effect of the decree is that the transaction of sale of
suit land between defendant No. 1 and defendant No. 2 vide sale deed dated
25.09.1986 is declared bad in law and stands nullified. As a consequence
thereof, defendant No. 2 (appellant herein), who had paid a sum of Rs.
30,000/- towards sale consideration to defendant No. 1 for purchase of the
suit land has become entitled to receive back the entire sum from defendant
No. 1 in the absence of any contract to the contrary in this behalf between
the parties. The reason being that once the sale is declared bad, the
transaction of sale fails and, therefore, the seller (defendant No. 1) has
no right to retain the sale consideration to himself and has to refund the
sale consideration to the buyer (defendant No. 2)[See Section 65 of the
Indian Contract Act].
38) The question arose before this Court in the case of Durga Prasad &
Anr. vs Deep Chand & Ors., AIR 1954 SC 75 as to what form of decree should
be passed in the case of specific performance of contract where the suit
property is sold by the defendant, i.e., the owner of the suit property to
another person and later he suffers a decree for specific performance of
contract directing him to transfer the suit property to the plaintiff in
term of contract.
39) The learned Judge-Vivian Bose, J. examined this issue and speaking
for the Bench in his inimitable style of writing, held as under:
“Where there is a sale of the same property in favour of a prior and
subsequent transferee and the subsequent transferee has, under the
conveyance outstanding in his favour, paid the purchase-money to the
vendor, then in a suit for specific performance brought by the prior
transferee, in case he succeeds, the question arises as to the proper form
of decree in such a case. The practice of the Courts in India has not been
uniform and three distinct lines of thought emerge. According to one point
of view, the proper form of decree is to declare the subsequent purchase
void as against the prior transferee and direct conveyance by the vendor
alone. A second considers that both vendor and vendee should join, while a
third would limit execution of the conveyance to the subsequent purchaser
alone. According to the Supreme Court, the proper form of decree is to
direct specific performance of the contract between the vendor and the
prior transferee and direct the subsequent transferee to join in the
conveyance so as to pass on the title which resides in him to the prior
transferee. He does not join in any special covenants made between the
prior transferee and his vendor; all he does is to pass on his title to the
prior transferee.”
40) We, therefore, consider it just and proper and with a view to end
this litigation between the parties which is pending since 1969 and also to
balance the equities amongst the parties that defendant No. 1 through his
legal representatives (Respondent Nos.1-5) would return a sum of Rs.30,000/-
to defendant No. 2 (appellant herein). This direction we give by taking
recourse to our powers under Article 142 of the Constitution of India to do
complete justice between the parties to the lis because we do not want
another round of litigation to go on for years in future between the
defendants inter se for recovery of this amount.
41) In the light of foregoing discussion, the appeals are disposed of by
modifying the judgment and decree as under:
1. The plaintiff (respondent Nos.1-5) Shall deposit a sum of
Rs.1500/- in the executing Court for being paid to the defendant
(Respondent Nos.6-11) within 3 months as an outer limit.
2. Defendant No.1 (Respondent nos.6-11) shall deposit in the
executing Court a sum of Rs.30,000/- for being paid to the appellant
(defendant No. 2) within 3 months as an outer limit
3. Defendant No.1(Respondent Nos.6-11) and the appellant(Defendant
No.2) will jointly execute the sale deed in plaintiffs’ (respondent Nos.1-
5) favour and hand over the possession of the suit land to the plaintiffs
(Respondent Nos.1-5) simultaneously and then will withdraw the money
deposited for them in Court.
42) The executing Court will ensure completion of proceedings within the
time fixed and will record due satisfaction of the decree in accordance
with law. In case of any default, the parties will be entitled to put the
decree in execution for enforcement of the terms of the decree of this
Court amongst the defaulting parties.
43) In view of foregoing discussion, the appeals stand disposed of.
……………………………………..J.
[R.K. AGRAWAL]
……………………………………….J.
[ABHAY MANOHAR SAPRE] New Delhi;
April 25, 2017
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