Abdul Faiz Fakhr and others vs Abdul Hafeez and others

Manohar Pershad, J.—This is the plaintiffs'' first appeal which arises out of a suit filed by them for the redemption of the mortgage and dismissed by the Subordinate Judge, Secunderabad. Plaintiffs'' case is that Abul Masud Faqer, the father of the plaintiffs 1 to 5 and the husband of plaintiff No. 6, was the owner of the suit property; that he had mortgaged the same with the Secunderabad F. C. C. Society and in order to pay the mortgage debt he approached Mohd. Abdul Rahim, the father of defendants 1 and 2 to advance a loan; that the parties were not willing to have the loan on interest in view of the Islamic Law and it was agreed that Rs. 5500/- should be advanced to Abdul Masood Faqer on the mortgage of the suit house, and he should execute a document by way of an English Mortgage. It was also agreed that on repayment of the said amount, Abdul Rahim would reconvey the property to Abdul Masood who would continue as owner and Mohd. Abdul Rahim would get interest in the shape of rent from him (Mohd. Abdul Masood). Accordingly, Abdul Masud executed a sale-deed in favour of Md. Abdul Rahim on 30-11-1933 for a sum of Rs. 5500/- and on that very date, the father of defendants 1 and 2 also executed an agreement to reconvey the property. Abdul Masood further executed a rental deed on that very date. All the three documents form part of one and the same transaction.

The plaintiffs in the month of February 1953 offered the defendants the mortgage amount and asked them to reconvey the property in their favour. But the defendants however refused to accept the amount alleging that the property was sold to them. The plaintiffs do not admit that the intention of the parties was to treat the transaction as a sale. The plaintiffs it is stated have not only been in possession of the property but have been paying the taxes also and therefore are entitled to a decree for redemption.

The defendants in their written statements admitted that Abdul Masood Faqer was the owner of the suit property and that he had mortgaged the same to the F. C. C. Society, Secunderabad, but denied that he was intimate with Abdul Rahim, or that he desired or negotiated for a loan from him on security of the said house or that any agreement or arrangement was entered into between him and Abdul Masood as alleged by the plaintiffs or that any transaction of loan on the mortgage of the suit house was in fact, entered into. They further denied that there was any agreement between them; that Mohd. Adul Masood should continue as owner of the suit house or be in possession as owner or that Abdul Rahim was to get any interest in the shape of rent from Abul Masood. It is averred that due to pressing demands from the Society for payment of the mortgage amount, Abul Masood desired to sell away the house with a view to repay the mortgage amount of the Society, and offered to sell and convey the house absolutely to Mohd. Abdul Rahim, and accordingly executed the sale-deed in his favour. It is also pleaded that even assuming that the plea of the plaintiffs that the said Abdul Rahim agreed to reconvey the house, the agreement gives rise to a separate transaction independent of the sale, and the terms and conditions thereof constitute a separate cause of action. The transaction which is termed by the defendants a mortgage is an out and out sale. A legal objection was also raised that the court had no jurisdiction to try the suit.

On these pleadings the trial court framed the following issues:

(1) Are the plaintiffs entitled in law to prove the allegations?

(a) that the transaction between Abdul Masood and Md. Abdul Rahim evidenced by the sale-deed, rental agreement and agreement to reconvey the same dated 30-11-1938 constitute really an English mortgage payable within six years; and

(b) that the, rent provided in the rental agreement was really interest on the mortgage loan;

(2) If the findings on issue No. 1 be in favour of the plaintiffs are the said allegations true?

(3) Has the court jurisdiction to try the suit?

(4) Is the court-fee paid sufficient?

(5) Can the plaintiffs sue without setting aside the documents?

(6) Have the plaintiffs any cause of action? If so when did it arise and is the suit within time?

(7) To what reliefs are the plaintiffs entitled? The court below after hearing the arguments of the parties relating to issue No. 1 dismissed the suit having come to the conclusion that the transaction in question is an out and out sale.

Aggrieved by this judgment and decree this appeal is preferred on behalf of the plaintiffs. In this appeal Shri Vinayak Rao Vaidya, the learned Advocate for the appellants, urged that the court below has erred in coming to the conclusion that the agreement to reconvey and the sale are not part of the same transaction. He contends that the agreement to reconvey and the sale form part of one and the same transaction. The second contention is that having regard to the fact that Abdul Rahim had agreed to accept a rent to be reduced pro tanto and proportionate to any amount to be paid by Abdul Masood Faqer, there can be no inference other than this, that the intention of the parties was to treat the transaction as a mortgage and not a sale. It is further contended that by the subsequent document the previous document has been altered and the court below has not taken this point into consideration.

Referring to the definitions of mortgage by conditional sale, English Mortgage and Usufructuary Mortgage in S. 58, Transfer of Property Act, it is contended that if the document in question is not a mortgage by conditional sale there is no reason why the same should not be treated as an English Mortgage or a Usufructuary Mortgage. Reliance was placed on the cases of -- '' Mohini Mohan Misra and Others Vs. Srimati Sarat Sundari Debi and Another, - David Elias Duek Cohen Vs. Baidyanath Mukerji and Others, ; - Fozmal Bhutaji Vs. Shridhar Vithal, and -- A. Rajagopala Aiyar and Others Vs. S. Ramachandra Aiyar,

Shri Venkatachar the learned advocate for the respondent, relying on the case of -- Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, , contended that as the agreement to repurchase and the sale are embodied in separate documents, the transaction can never be treated to be a mortgage whether the documents are contemporaneously executed or not. It is further submitted that the agreement to reconvey and the sale are not part of the same transaction but are independent transactions though they are executed on the same date. With regard to the contention that the document in question should be treated as an English Mortgage or a Usufructuary Mortgage, it is contended that the document in question cannot be treated as an English Mortgage as there is no obligation on the part of the mortgagor to repay and it cannot also be a Usufructuary Mortgage, as it is admitted by the plaintiffs that they are in possession. Reliance was placed on the cases reported in -- ''Narayana Iyer v. Venkatramana Iyer'', ILR 25 Mad 220 (F); -- Venkatasubba Reddy Vs. Ramadoss Reddy, -- ''Samsherkhan v. Vithal Das'', AIR 1946 Nag 264 (H); -- '' Jaggarnath Singh and Others Vs. Butto Krishto Ray, and -- Rechuri Suryaprakasa Rao and Others Vs. Gottumukkala Venkatraju and Others,

7 Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, their Lordships of the Supreme Court have no doubt held that if the agreement to repurchase and the sale are embodied in separate documents the transactions cannot be treated as a mortgage, but he contends that this decision was based on the proviso to S. 58(c) , Transfer of Property Act, whereas there is no such provision in S. 58(e) or (d) and if that was the intention of the Legislature, a similar provision would have been found in the definition of an "English Mortgage" or a "Usufructuary Mortgage".

To appreciate the relevancy of the rulings cited we have to analyse the present transaction. The transaction is embodied in two documents accompanied by a third document (the rental deed), all dated 30-11-1933 as already stated above, One document purports to be an out and out sale of the property, the other provides that the property shall be reconveyed on repayment of price and the third is the rental agreement. The contention of the appellants is that all the three documents taken together evidence and constitute a mortgage by conditional sale, or an English Mortgage or a Usufructuary Mortgage and attempted to show by the recital in the document itself and by reference to the surrounding circumstances, the real nature of the transaction according to the intention of the parties. The court below refused to go into that question holding that it is an out and out sale. The question in dispute is whether the transaction was a mortgage by conditional sale or an English Mortgage or a Usufructuary Mortgage as defined in S. 58(c) , (e) and (d) of the Transfer of Property Act; or whether it was, as it appears to be on the very face of it an out and out sale. The point to be considered is whether the question is concluded by the proviso to S. 58(c) of the Transfer of Property Act which runs thus:

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 language of the proviso is perfectly clear and unambiguous and its effect is that an ostensible sale with a stipulation for repurchase shall not be regarded as a mortgage unless this stipulation is contained in the same document which effects the sale.

In the case reported in Pandit Chunchun Jha Vs. Sheikh Ebadat Ali and Another, their Lordships of the Supreme Court have held that:

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.

Shri Vinayak Rao Vaidya conceded that in view of the decision of the Supreme Court the contention that the transaction in question is a mortgage by conditional sale does not hold good, but he contends that as the new proviso has been introduced into Cl. (c) which defines a mortgage by conditional sale, it should not be understood as having a wider scope than the clause itself, and should not be taken to limit or qualify in any way Cl. (a) which defines the mortgage. In other words it is contended that the proviso should be read as providing only that such a transaction shall not be deemed to be a mortgage by conditional sale with the consequence that it can still be regarded as a mortgage falling under S. 58 clauses (d) or (e) if it is established that the intention of the parties was that the transaction should operate as a mortgage and not as an out and out sale with the condition of retransfer.

Shri Venkatachar on behalf of the respondent contends that the recent decision of the Supreme Court is quite clear that if the transaction is embodied in separate documents it cannot be treated as a mortgage at all. We cannot accept the construction suggested by the learned advocate for the appellants for it would involve reading into the proviso the words which are not there, and it would, moreover, stultify the new enactment as it would leave the previous state of law practically unchanged. It is, however, contended that if that was the intention of the Legislature, it could have made similar provision in the other kinds of mortgage also.

We do not agree. For it would not make much difference in the legal effect of a sale accompanied by a separate agreement for repurchase to provide that it shall not be deemed to be a mortgage by conditional sale but may be regarded as an English or a Usufructuary Mortgage. We do not think that the proviso was intended to have that effect. Its object evidently was to shut out an inquiry whether a sale with a stipulation of re-transfer is a mortgage where the stipulation is not embodied in the same document. Further the document cannot either be accepted to be a usufructuary or an English mortgage for in the format case the mortgagor binds himself to deliver possession and authorize the mortgagee to retain such possession until repayment of the mortgage money, and to receive the rents and profits accruing from the property in lieu of interest and in the latter case he binds himself to repay the mortgage money and none of these conditions exist in the transaction in question.

Three other cases have been cited before us one of the Calcutta and the other of the Bombay and Madras High Courts, namely David Elias Duek Cohen Vs. Baidyanath Mukerji and Others, ; -- J.M. D''souza Vs. The Reserve Bank of India, These are cases where the transaction was not embodied in two separate documents and therefore they do not help the contention of the appellants.

Of course in the last case relied upon by the appellants reported in Mohini Mohan Misra and Others Vs. Srimati Sarat Sundari Debi and Another, ) the transaction has been embodied in separate documents but that was a case prior to the amendment of 1929 and cannot help the contention of the appellants.

In the result we see no force in this appeal. It is, therefore, dismissed. Having regard to the facts of the case, we do not wish to pass any order regarding the costs of this Court.