Pandit Chunchun Jha v. Sheikh Ebadat Ali and Another

Judgment

. .Af. K. Gopalan ~!Id Another The State of Madhya Pradesh Jagannadhadas J. April 14. 1'74 [l?55] to issue the necessary. notifiqtjon .. and h~ve ... dle case transferred. In view of that statemep.t, it is unnecessary to. pronounce pn the obje~tion sg raised. . In the result, all the. points .raised on behalf of the petitioners fail, and. this petition must be dismissed. It is desirable to observe that the questions above dealt with appear to have been raised before the High Court at previous stages ·by 'means of appliqtions urider article 226 and decided . against. . No appeals. to this Court have been taken against the orders therein. Nothing that we have said is . intended to be a pronouncement as to ·the correctness or otherwise of those orders, J,10r to encourage the practice ·of direct approach to this Court (except for good reasons) in matters which have been taken \o the High Court and fou.nd. against, without obtaining leave· to appeal ther.efrom. · Petition dismissed.

PANDIT CHUNCHUN JHA tJ. SHEIKH EBADAT ALI AND ANOTHER. [MuKHERJEA, VIV!AN BosE, GHULAM I{AsAN and .VENKATARAMA AvvAR JJ.J Transfer of Property Act (Act IV of 1882)-Section 58(c) as amended by Act XX of .J929-,Document-Whether a mortgage or sale outright-Principles. for determining whether the document is one or the other. The.re is 1?-C? hard and fast" rule for de~ermining )Vhether a given transaction is a mortgage by coh_ditional sale Or sale outright with a con_dition forrepUrchase. :Each case must be dCcided On its own facts. The numerous decisions of the High Courts on the point are of no help because two documents are seldom expressed in identical -terms. The intention of the parties is the determining. factor but the intention must be _gathered from the document itself which has to be construed to find out the legal effect of the word~ used by the parties.

If the . words are express and clear, effe~t must be given to them and any extraneous enquiry into what was thought or inte.nded is ruled <.>ut. If ho¥,rever there is ambiguity. in the language k employedthen it is Permissible to look to the surrouflding circumstances to determine what was inten·ded. j .s~C.R. 'SUPREME COURT.• REPORTS f75 . In view of the provisions of the• amended section 58( c) .of the Transfe{ of. Property .Ac_t, if' the sale _and agreemc::nq to repmchase are .. embodied in separate, doc.um,ents, then ·_the ,tr~nsa\tion cannot be a mortgage whether_· ilie . docijments are. cont~inpor~neously executed or not. But the niete fact that there is ·ohly one document · does not necessarilv' mean that ·it' must ·be ·a 'mortage and cannot be a sale. If, the ·condition of repurchase in:mbodied in . the document that effects or purports · to effect the sale,.. then it . is a matter for construction which was ,meant. Balkishen Das v. Legge .(27 I.A. 58), . Alderson y.: White.

( 44 E.R. <)42 at· 928), Bhagwan. Sahai v. Bflagwan Din (17, I.A. 98 at 102), and/handa Singh v. Wahid-ud-din (43 I.A. 284 a·t 293) referred to. CIVIL APPELLATE No. 98 of 1953. JuRISDICTION : Civil Appeal Appeal by Special Leave . from the .. Judgmen,~ and .Decree dated the 27th day of January, 1949, ,of the .High Court of Judicature at Patna in Appeal .. from Appellate Decree -No •. 690 of. 1947 against the Pecree dated . the 13th January, 1947, of the Court of. the District Judge, Bhagalpur, in Title Appeal No . .161 .of 1946 arising out of the Judgment .and .Decree dated the 25th July, 1946, of the Court of· the lSt .·Additional Subordinate Judge, · Bhagalpur, in Title Suit' No. 80 of 1945; · N. C. Chatterjee, (A. N. Sinha and :S,, P. Verma, with him) for the appellant. . Murtaza Faz/ Ali and Rajinder Narain, for respondent No. 1. 1954. April 14.

The Judgment· of the Court was delivered by BosE J.-This is a plaintiff's appeal in a suit for redemption of what the plaintiff calls a mortgage . dated 15th April, 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. The property • covered by· the disputed deed belonged to one Bijai Tanti who died leaving a widow Mst. Phaguni and two sons Siban Tanfr and Chander •Tanti. On 25th May, • · 1922, · Siban ;

Tanti • :\:lone executed · a Pandit Chunchun ]ha Sheikh Ebadat Ali · and Another 1 s.c.R. .::;UPREl\IE COURT REPORTS I954 decisions on tlie point and much industry has been expended in some of the High Courts in collating and Pandit analysing them. \Ve think that is a fruitless task Chunchun Jha because two documents are seldom expressed in identiv. , cal terms and-when it is necessary to consider theSheiHEbaaatAli attendant circumstances the imponderable variables and Another. which that brings Jn -its train make it impossible to compare one case with another. Each must be decided on its own facts. But certain broad principles remain. The first is that the intention of the parties is the determining factor: see Balkishen Das v. Legge('). But there is nothing spedal 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("): "The rule oflaw on this subject is one dictated by commonsense; that prima facie an absolute con-,, veyance, 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 Din(') and in Jhanda Singh v. Wahid-ud-din ('). The converse also holds good and if, on, the face of it, an instrument elearly purports to be a mortgage , it cannot be turned into a sale by reference to a host of (t) 271.A. sS. (2) 44 E.R. 92.tat 928. 23 (3) 17 I.A. 98 at 102. (4) 43 I.A. 284 at 293: Bose J. S.CR. SUPREME EOU~T REPORTS 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 ..

The first is that the intention of the parties · is the determining factor : see Balkishen Das v. Legge( 1 )., 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, howeV'.er, 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 ( 1 ) :

"The rule · of law on this subject is one dictated by commonsense; that prim a f acie 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 c:;ise 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 Din(8) and in /handtJ: Singh v. Wahid:ud-din('). The converse. also · holds good and if,. on the face of it, an instrument .. clearly' A purports .to be ·a mortgage it cannot be. turned into• a 'sale by reference. to a .. host' of . (S.) 17 I. A. 98 at 102. ' (4) 43 'I. A. 284 at 293 .. ,i, . - . ·-· 1'954 Pandit Chunchun ]ha Siuikh Ehodat Ali and Another.

Pandit Chunchun ]ha SllLikh Ebadat Ali · ·and .A.nothtr. Bose J. [1955] extraneous and• : .1 jrrelevant · .: considerations. Bifficulty only arises· in 'the .. ·bdrder~ line.,: cases where' there. is ambiguity.' Unfortunately, 'they form the· .bulkof this kind of transaction. Because of the weltfr"of confusion· caused bv a multitude of conflicting .decisions the Legisl~ti.Jre · stepped ' in and ·amended section 58(c) of ihe' Transfer of Property Act. Unfortunately that ·brought in its train a further conflict of authority. But this. much is · now dear.' If the sale · and agreement tl>' repurchase ' are embodied in separate documents, then the' transaction . cannot be· a mortgage whether ·the· : documents are- · contemporiineously .. executed or not. But the converse· does· not hold good, that i's to say, the mere fact that there ·is only one document does not nei:essariiy·· 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 mea'nt. ·The 'Legislature has made a clear cutclassification · and· excluded tran5actions embodied in more . than :one · document from · · the category of mortgages, therefore· it' is · reasonable to suppose that' persons who, · after the .. ·amendm~nt, ··choose not to use two documents,: do not ihtend"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.

The document· with which are "coricerried, Exhibit A, is in the following terms and our first duty is to construe th.e language . used. and see· whether it' is' ambiguous. · (Wt · have ·paragraphed the · document for convenience of construction· and have · · omitted unnecessary words).· · ( 1) "Rs. '(534 pri,;_cipal with' iriter~st under a' registered rehan bond" (sirripJe· mortgage) ."dated the·· 6th May; '1927, is justly due.:•;:; .. ""~ i'.by ·us· the ex'ecutahts. Now we,.further· require··R~~ 165-6-0 mote-to meet costs of the ·suit under• section 40." (Bihar Tenancy Act). ·· (2) '. ''.i!na· ~t ,present there is no .other way :in view rather it seems impossible and dif!icult to arrange . for i S.C.R. the ·money without selling the property' lei:' out in rehan" (simple mortgage) . "under . the above mentioned bond." (3)

"Therefore, we. the executants .. : .... : .. declare . . . . . . . . . . . . that we ...... sold and vended the properties -detailed below on cohdition (given below)· for. a fair and just price of Rs. 700 .......... " ( 4) "That we set off Rs. 634-10-0 against the consideration· money" (torn) "payable under the aforesaid bond in favour · of the said vendee and received Rs. 65-6-0 in cash from the said vendee. In this' way ·the entire consideration money was realised· from. the said vendee." (5) "and we put the said vendee in possession and ·occupation of the vended property detailed below and made him an absolute proprietor in our places." ( 6) "If we, the executants, shall repay the consideration money to the said vendee within two years ............ the property vended under this deed of conditional sale attached shall come in exclusive possession :and occupation of us, the executants." (7)

"If we do not pay the same, the said vendee shall remain in possession and occupation .thereof, _generation after generation. and · he shall appropriate the produce thereof." (8) "We, the executants, neither have nor shall have any. objection whatsoev.er in respect of the vended property and the consideration money. Perchance if ·we do so it shall be deemed null and void in Court." (9) "and we declare also that the vended · 'property is flawless ·in every way and that if in future any kind ·of defect whatsoever be found on account of which the. said vendee be dispossessed of a portion or the entire property vended under this deed of conditional sale and will have to pay the loss or damage, in that event we, the executants, (a) shall be liable to be prosecuted und~r the -criminal procedure, and (b) we shall pay the 'entire consideration money ·together with loss and damage and interest at the r'ate ·of Rs. 2 per mensem per hundred rupees ·from :the 'date Pandit Chunchun J ha Shtikh Ebadat Ali and Another • Bose J. -'95f ·Pandit ChU!"Chuh.

Jhd· -Sheikh Eblul•t .A.If and Another ·180 SUPREME ·couRT REPORTS p955J pf '41! e}'.ecution., o~ thi~: deed, till t~' ,,d'lty ot . realisation from; .Ol\r, ,person. a11d other .properties .. , , , . ( c) and we shall not claim the produce · of the yend~d property for the period of vendee'~, : ,possession agai'rist ·the· said veridee :or his' heirs and representatives." · .' (io)' "°f,herefor~, ·we,, . the'. e.xsc,utan,ts ... ,;.: ...... have executed this deed of conditional ·sale so that· it , may be of use in future." " • ~ri qµ~ ''opini\i'.1~ thi~ ,fang~age is not .fi:ee ~qm giffi- Cl!lW . ~nd . is ambiguous. The deed ,purports to be . ·" s~le a11d. has the .outward forin of.one b,ut at the same time j(plls itself a '.'conditional sale"., It, has, however, rio .clause· for retransfrr and instead says ( claus~ 6) that if the executants pay the money within two years, the p~~perfr . ".shail . CO,tlle i)1 excl~siy~ p~ssessJOn. and %CU- pation of us, the executants".

That is dear about . the possession but is silent about the title. · In the context we cati' only pike these words to, mean that if there is paymen't' -Within the ·specified time, then the title· will coritiinie to rtside in the· exectitarits'; for what else cari' a' ' right of exclusive'. possession import ' ih 'these circumstances ? · It' is relevant to note iri passing · that this silence afoul' title· ~ould be proper in a mortgage,· for there the 6wrier's title'remains in him all the while and' "so· a reconveyance is unnecessary. But if there is an· out and 6ui sak the title could not revert' fo the' original ciwner without·~· proper reconveyance. Clause (7)' appears" to underline' this because' it couples the tpnsfetee's tight to rernairt' 3 in possession ·and ·occupation and to · appropciate "the' produce "generation after · generation'" with the .'non•payment of the .. rrioney• within the time· set out.

It is' true the· words of conveyance ·in the. earlier part of. the deed (clause· 5) would pass an absolute title if they stood·' alone but the . document must be 'read' as ·a whole and: it .must ·also be. remembered that ''it· was executed by ignorant rustics and scribed by. a' man whose .knowledge·., 0£ conveyancing.: was; on the face of it, rudimentary and defective. The deed lacks . the precision, of,. ;i, p~actised . hand . and . that i probably .. accounts f~r, it~:iawbiguities : · that,.,.ther~ ·is ambiguity 1 is··· patent fro;m,vyhat.we hav~.:saicL.·i· . . 1 . S.0'.°R. 1Si . The next step is to see whether the document is · cover. ed by section 58( c) of the Transfer of Property Pandil Act, for, if it is not, then it cannot be a mortgage by Chunchun J•a conditional sale. The first point there is to see whether there is an " ostensible sale."

That means a transaction Sheikh Ebadat AH which takes the outward form of a sale;for the essence and Another. of. a mortgage by conditional sale is that though in substance it is a mortgage it is couched in the form of a sale with certain conditions attached. The exec a tan ts clearly purported to sell the property in clause (5) because they say so, therefore, if the. transaction is not in substance a mortgage, it is unquestionably a sale : an actual sale and not merely an ostensible one. But if it is a mortgage, then the condition about an" ostensible sale " is fulfilled. We next turn to the conditions. The ones relevant to the present purpose are contained in clauses (6) and (7). Both are ambiguous, but we have already said that on a fair construction clause (6) means that if the money is paid within the two years then the possession will revert to the executants with the result that the title which is already in them will continue to reside there.

The necessary consequence of that is that the ostensible sale becomes void. Similarly, clause (7), though clumsily worded, can only mean that if the money is not paid, then the sale shall become absolute. Those are not the actual words used but, in pur opinion, that is a fair construction of their meaning when the document is read as a whole. Ifthatis what they mean, as we hold they do, then the matter falls squarely . within the ambit of section 58(c). Now, as we have already said, once a transaction is embodied in one document and not two and once its terms are covered bysection58(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. There are no express words here which say that this is not 3. mortgage but there is ambiguity, so we must probe further. The respondents, who claim that this Bose J. Pandit Chunthun ]ha Sheikh Ehadat Ali and Anolh~r.

BoseJ. 1'82 [1955] is a.sale..·and not ·a .mortgage,. rely on· the .following circumstances. .They · are ·all· ·culled from ·the ·deed itself.·•.> First, ·they point to cl~use (5} :which says •that' the transferee has been made the absolute proprietor · in plate of · the exec'utarits. 'Those, they say, are · the :operative· words and· point to at\ out ··and . our·· transfer of title. Next, they point to ·clause (2) where the· executants say that they have no other · ineans of raising · the inoney'·they want except by selling the ' property. The respondents argue that the word "sale" could · not have been used 'inadverten'tly because -it-· 'is·· contrasted ·with a mortgage in 'the · very· ·same · seritehce. The' word "mortgage" is alsc>' ·used in clause (l);_ therefor~· it. is clear that when a mortgage is intended' the word ".mortgage" is ·used. .Jt: must follow that ·.when-,. the word "sale''. is· used,· ·a sale must have ·been meant.

The only weakness in this argument is· that· when ·a mortgage is by conditional sale this is the form it has to take, ·because section 58( c) posmlates that there must be an "ostensible ,ale"· .and •ifa sale is ·Ostensible it must necessarily contain all the outward -indioia· '-Of a real sale. The. question • we are considering can only arise when the word "sale' is used and, of course;· a sale imports a ·transfer of title. ·The use ·of · the words "absolute proprietor in our -places" carries the · matter no furtherbecause 'the· essence of every. sale ·is to make the vendee the absolute proprietor of what is sold. The question here . is · not whether the words purport . to make the transferee an absolute · proprietor,• for. of course they must under. section:

58(c), but· whether that is done "ostensibly" . and whether conditions .of a certain kirid are attached.· The lear~ed counsel for the resp;ndents nex't relied on the. fact that dause · (3). says that the ,price paid was a "fair_ and. just" one .and th~t the .. Courts below. have found that the .. consid~rarion was . not inadequate. , He also relies on the fact that ,. no_.-interest .Vl'.aS, ·charged, that the transferee was , placed in possession of the property an'd 1was Iiot'' to· account 1fqr the'.. usilfruct ; 'also on the" 'fact' that 'a sqi:ii't tetm;' ·namdy ; two years, ,, was fixed f6f repiyrrtent 1 S.C.R .. But on the other side, there is the very significant fact that Rs. 65-6-0 was borrowed to enable the executants to carry on commutation proceedings under section 40 of the Bihar Tenancy Act (that is, for substitution of a cash rent instead of one in kind) · in respect of this very property : (clause 1).

It was · admitted before us, and the lower Courts so find, that the commutation proceedings related to this very land. The learned High Court Judges discount this by saying that there is no evidence to show that the proceedings, which were started in 1929, .continued after the deed. But that is a mistake apparently due to the fact that the copy of the entry in the Rent Schedule, produced before the learned Judges; inadvertently omitted the date. Mr. N. C. Chatterjee produced a certified copy of the revenue record here and that gives the missing date. From that it is clear that the proceedings continued till 18th February, 1931, that is to say, for some ten months after the deed. This, we think, is crucial. Persons who are selling their property would hardly take the trouble to borrow money in order to continue revenue proceedings which could no longer benefit them and could only enure. for the good of their transferees.

There is another point in favour of the appellant, and that is that the surrounding circumstances show that there was a relationship of debtor and· creditor between the parties existing at the date of the suit transaction. The bulk of the consideration went in satisfaction of the mortgage of 6th May,. 1927. In those circumstances, seeing that the deed takes the form of a mortgage by conditional sale under section 58 ( c) of the Transfer of Property Act, it is legitimate to infer, in the absence of clear indications to the contrary, that the relationship of debtor and creditor was intended to continue. The point made on behalf of the respondents about the adequacy of the consideration and the absence of interest can be explained. The transferee was to take possession of the property and would thus get the produce and it is evident to us from the tenor of the document that he was not to be accountable for it. Pandit Chunchun ]ha Sheikh Ebadat Ali and Another. Bose]. Pandii .

Chunchun Jha v. . Shtikh Ebadat Ali "a"nd.Atiother' Bosej; 184. SUPREMB CG>URT' REPORTS' [.f955J We··say ·this·· because ~he .-,Jndemhity•·.;Clause 1 (clause 9) says in isub-clause' (b) ., that in. the . event 'of the transferee's possession. being 'disturbed the executants. ::would among ·.othen things, · pay· him; : in· ·addition to damages, the :··entire : cconsideration·" together·" with· interest "'at'.2 per cent. per month f~om the date of·the deed•an<l''Would not ·require the· transferee . to account : for the usufruct.

It .is true this • can also be· read · the other . way but considering these·. very. drastic provisions ·as also ... the' threat of a criminal. prosecution ·'in sub-clause·· (a),.· we ·"think the transferee was out to' exact 'more than his·· p·ourid•of flesh from the unfortunate .rustics ·with. ·whom·,· h'e was dealing .. and that he would not ·have : agreed · to :a.ccount for the profits : · indeed that is· his own case,· for• he 'says that this· ·was a sale .. out and .mfo. In these' 'i:ircumstances; there would be no:need·to·keep a•· reasonable margin· .between the ·debt .and :the vah1e of the· .property as is ordinarily done in' the case of a· mor\gage.: Taking everythin'g into consideration, we ,.are of" 1 opinion th:at the· deed is.,a .mortgage.• by ·conditional sale· "'liridei·. ·section.58(c) of.the. Transfer-of.Property Act.' .

The appear'is allowetL The decrN~·of the'High'Coiirt is setaside ·and ... that '·of thi: ' lower" appellate · · Cou'rt 'is restored except as to "osts. · The original owners· of· the property have fost 'i[ .·'The v~lue of the property was p\it · at : over Rs. " 10;oqo "in the ·. special' leave . petition. 'The second defendant· oust~a tlie original owners by gehing ~ .'. mortgage decree for R'.i. · 130 ih':his ·favour on a mortgage ·of only"' 'Rs.' 25 and purchasing it ~t the auciio!1 himself. ' He · is ''no foi:iger in : the picture as he sold'· 'it to the' plilintiff 'fiir Rs. 400. · THe pbintiff · · has' accordi:itgly" obtained prO- peity which. on his. own showing 'is worth 'more . ili~n Rs. )0,000 .'for· only Rs. 400.' The· first defend~nt .. , sptrit ci'nly · Rs. 250 plu~ 'Rs. 65'6.:0' ori'' it :

Rs.''315-6-0' · ·~n'd the ~onsideration of the disputed deed 'is· bnly' 'R.(706'. n . is. evident that both. sides. are : speculators:· Iri . the circumstances 'we': direct that" each party bear.!' its "owh co·sts. ··i·, t. 1 , Appeal,allow,~d., 1