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Judgment
Beevor, J.—This appeal has been filed by the defendants in a suit in which the plaintiff-respondent has been granted a decree for a declaration of his title to village Chainpur with recovery of possession together with mesne profits. There is a cross-objection by the plaintiff-respondent relating to the period for which mesne profits hate been allowed.
Village Chainpur admittedly belonged at one time to what is known as the Palganj Estate. Appellant 1 is the present holder of that estate, but his estate is managed under the Encumbered Estates Act and he id, therefore, sued through the Manager of the encumbered estates who is himself appellant 2. The Province of Bihar is appellant 3. The previous holder of the Palganj Estate was Raja Bahadur Singh, father of appellant 1, hereinafter referred to as the Raja. On 17-2-1930, village Chainpur was sold in execution of a decree obtained against the Raja by Akshoy Krishna Trigunait and a sum of Rs. 6050 was realised, the property being knocked in the name of Rameshwar Lall. The plaintiff-respondent obtained from Rameshwar Lall a sale deed in respect of the property dated 27-11-1931, for a consideration of Rs. 7250. Further attestations of the executant''s signature on the sale deed were made next day, 28-11-1981, and on the latter date the plaintiff executed an agreement in favour of the Raja whereby he agreed to convey the village to the Raja within three years on certain terms. This document was not registered until 21-3-1932, but meanwhile on 28-114931, the plaintiff had executed a second agreement in favour of the Raja promising to get the agreement for sale executed. It is also undisputed that after the transactions of 27th November 1931 and 28th November 1931, the plaintiff was given possession of the village Chainpur and remained in possession until 10th December 1940, when possession was delivered to the Manager of the encumbered estates in accordance with an order of the Deputy Commissioner of Hazaribagh dated 1-11-1941. The plaintiff-respondent unsuccessfully moved the Board of Revenue to reverse the order of the Deputy Commissioner and then, brought the present suit.
The main case for the defendant-appellants is that Rameshwar Lall was a benamidar for the Raja both at the time of his purchase in execution on 17th February 1930 and at the time he executed the sale deed in favour of the plaintiff-respondent on 27th November 1931; that the sale deed just mentioned, together with the agreement executed by the plaintiff-respondent in favour of the Raja on 28th November 1931 to convey the village to him within three years taken together amounted to a mortgage by conditional sale, and that, therefore, the manager of the encumbered estates had lawfully taken possession of the village and had lawfully removed the plaintiff-respondent as mortgagee or conditional vendee u/s 16, Chota Nagpur Encumbered Estates Act, 1876. It was in accordance with this case of the defendant-appellants that the order of the Deputy Commissioner dated 1st November 1941 was passed and that order was upheld by the Board of Revenue.
In these circumstances the plaintiff in his plaint claimed not merely a formal declaration of his title but a declaration that Rameshwar Lall was not a benamidar of the Raja and that the sale by Rameshwar Lall to the plaintiff dated 27th November 1931 was an out and out sale, and the agreement in favour of the Raja executed next day by the plaintiff was a personal covenant made by the plaintiff and that the two documents together did not constitute a mortgage by conditional sale and that the agreement of 28th November 1931 was no longer enforceable.
The trial Court held that Rameshwar Lall did not get possession of the village but that it was not established that he was a benamidar of the Raja. He also held on the merits that the transactions of 27-11-1931 and 28-11-1931 were not intended to operate as a mortgage, and he further held that the defendants'' claim to have these documents regarded as constituting a mortgage was barred by the proviso to Section 58(c), T.P. Act. He, therefore, decreed the plaintiff''s suit as against defendants 1 and 2 with mesne profits against defendant 1 from 5-3-1942 and dismissed the suit as against defendant 3, the Province of Bihar.
The first question for decision in this appeal is whether it is legally open to the appellants to urge that the transactions of 27-11-1931 and 28-11-1931 constituted a mortgage. The second question is whether those transactions did in fact constitute a mortgage. This involves a third question which, though subsidiary, is important, namely, whether Rameshwar Lall was a benamidar of the Raja. On behalf of the appellants further questions were raised: first, whether the plaintiff-respondent was entitled to agitate the matter in the civil Court, and secondly whether the manager of the encumbered estates was entitled to possession of the village even if the transactions did not amount to a mortgage by conditional sale, in the event of it being found that Rameshwar Lall was a benamidar for the Raja.
I will deal first with the question whether the appellants'' contentions are barred by the proviso to Section 58(c), T.P. Act. Section 58(c) runs as follows:
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 a 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.
The proviso was added by Amending Act No. 20 [XX] of 1929. I think that the wording of this proviso shows clearly that if the condition is not embodied in the document which effects or purports to effect the sale, then it is not open to the Court to treat the transaction as a mortgage. The appellants relied on a decision of the Bombay High Court in Bom. 371 Krishna Hegde v. Goli Naik AIR 1931 18 Reliance was placed on one sentence in the judgment;
In case a mortgagor passes in favour of a mortgagee an ostensible sale deed and the intention of the parties is to be arrived at by the construction of the document, the proviso says that the right of repurchase must be embodied in the same document, and that if it is embodied in more than one document, the inference of a mortgage would not necessarily arise, and that no transaction should be deemed to be a mortgage by conditional sale unless the condition is embodied in the document of the ostensible sale: but the Sub-section and the proviso do not dispense with the condition that it must be a transaction between the creditor and the debtor.
The difficulty is created by the word "necessarily" in this sentence. It is important, I think, to notice that in the case before the learned Judges of the Bombay High Court the condition was embodied in the sale deed. The remarks regarding the effect of two separate documents were, therefore, obiter. Moreover, the learned Judges were dealing with a transaction of the year 1910 and Section 63 of the Amending Act, 20 [XX] of 1929, expressly enacts that the amendments in Section 58 shall not have retrospective effect. If this sentence, however, is to be taken as the considered view of the Bombay High Court, I must respectfully dissent from it. I agree with the view of the section taken by Mosely J. of the Rangoon High Court in Ma Sein Nyo v. Maung San Pe AIR 1935 Rang. 212. I hold, therefore, that in this case as the document of sale dated 27th November 1931 does not embody the condition for sale or resale to the Raja,-the transaction cannot be treated as a mortgage by reason of the proviso to Section 58(c), T.P. Act.
The finding just reached would be sufficient to dispose of this appeal, but I think it is desirable that I should consider what the position would have been in the absence of the proviso to Section 58(c). Clearly the appellants'' claim must fail unless they can establish that Rameshwar Lall was a benamidar of the Raja. In order to decide whether Rameshwar Lall was a benamidar and, to some extent, also for the purpose of deciding whether the transaction of 27-11-1931 and 28-11-1931 was a mortgage or not, it is necessary to keep in mind the surrounding circumstances and the relation in which the parties stood to one another. [His Lordship after considering the evidence, proceeded.] Considering all the circumstances I am fully convinced that Rameshwar Lall was the benamidar of the Raja. There remains the question whether the transaction was a mortgage or conditional sale.
It was urged for the plaintiff-respondent that the Raja and his successors-in-interest were estopped by reason of the part that the Raja took in getting the document executed in favour of the plaintiff-respondent by Rameshwar Lall. In this connection we were referred to the decisions of the Privy Council in Sarat Chunder v. Gopal Chander (93) 20 Cal. 296 and Bhagwan Singh v. Ujagar Singh AIR 1928 P.C. 20 and the decision of this Court in Firm Jankiram-Sital Ram and Others Vs. Chota Nagpur Banking Association, Ltd. and Others, as to the circumstances in which attestation of a document may operate as an estoppel against the person attesting. It is clear that although attestation by itself does not necessarily operate as an estoppel, it may in certain circumstances estop the person attesting from denying the authority of the executant to execute the document. This principle, however, has no application in the present case because the appellants as successors of the Raja are not-attempting to deny the authority of Rameshwar Lall to execute the document in favour of the plaintiff-respondent. If the executant himself would not be estopped from urging that the real nature of the transaction was that of a mortgage, the Raja could be in no worse position than the executant himself in this respect.
As regards the principles to be adopted in determining whether the transaction was a lease or a conditional sale, we have been referred to several authorities. The leading case is the decision of the Privy Council in Balkishen Das v. W.F. Legge. (1900) 22 All. 149, where it was held that oral evidence of the intention of the parties was not admissible for the purpose of construing deeds or ascertaining the intention of the parties, and it was held that the; case must be decided on a consideration of the documents themselves with such extrinsic evidence of surrounding circumstances as might be required to show in what manner the language of the document was related to existing facts. Other cases cited before us show that particular circumstances have been held in different instances as having a bearing on the construction of the documents in this connection, and some guidance as to particular circumstances may be afforded by such authorities, but it is clear that the final decision must be reached in each case on a consideration of the terms of the documents themselves with reference to the circumstances of the individual case. Thus it has been held in certain cases that a stipulation for payment of interest is one circumstance favouring the inference that a transaction is a mortgage, but the decision in Madhu Sudan Das v. Rhidoy Moni Baistabi 6 C.W.N. 192 shows that this circumstance is not conclusive. Inadequacy of price and absence of bargaining to settle the price were circumstances referred to by the Judicial Committee in Narasingerji Jyanagerji v. Panuganti Parthasaradhi Rayanim Garu AIR 1924 P.C. 226 in coming to the conclusion that a certain transaction was a mortgage and not a sale.
Now as regards the value of the property, the learned Subordinate Judge came to the conclusion that the property was worth only Rs. 5,400. I cannot think that his conclusion is correct. Quite apart from the fact that there is evidence that Haru Naik was accepting a mukarrari of this village on a salami of Rs. 28,000, there is a good deal of evidence to show that the village Chainpur is worth considerably more than as found by the Subordinate Judge. The plaintiff''s witnesses have proved that in one way or another he has spent nearly Rs. 16,000 on the village. It is true that this may be interpreted as indicating that the plaintiff knew that he would have to spend considerably more money than Rs. 7250 specified in Ex. 1/c before he got & clear title and effective possession over the whole village, but I do not think this is a full explanation. During the course of argument an offer was made by the learned Government Advocate on behalf of the estate to repurchase the village for Rs. 20,000 in addition to a fair price for improvements made by the plaintiff, and I am satisfied that the village was, even at the time of Ex. 1/c, worth considerably more than the sale price mentioned therein.
Now according to the evidence of Rammoy Roy (P.W. 3) it was Rameshwar Lall who came and negotiated with the plaintiff for the sale on his own behalf. This cannot be true in view of the finding that Rameshwar Lall was merely a benamidar. It thus remains that there were no negotiations between the plaintiff respondent and the Raja regarding the amount of consideration for Ex. 1/c and the connected document for repurchase (EX. 1). The evidence of Jai Narain Prasad, Pleader (D.W. 8) that he was instructed to prepare a mortgage by conditional sale in two documents is inadmissible in view of the decisions of the Privy Council above cited, but his evidence that both parties told him that Rameshwar was the farzidar or benamidar of the Raja is admissible, and I am inclined to think that his evidence that instructions for the two documents were given at the same time is admissible, and I am fully satisfied that this witness was a witness of truth. All the circumstances support his version that the documents (Ex. 1/c and I) were part of one transaction even though they were not actually executed on the same day. I say they were one transaction in the sense that they were both executed in order to carry out a single agreement which the parties had reached and recognised as an indivisible whole, one document forming part at least of the consideration for the other.
Now turning to the terms of the documents themselves Ex. 1/e is drafted as a deed of absolute sale and there is nothing in this document by itself to indicate anything else. Exhibit I starts with the preamble which keeps up the pretence that Rameshwar Lall was the real purchaser and then states that the plaintiff had agreed to sell the village to the Raja for Rs. 7260. The next clause provided for the conveyance to be executed by the plaintiff in favour of the Raja if the latter within three years from the date of agreement paid to the plaintiff Rs. 7000 (that is, Rs. 7250 less Rs. 250 paid in advance) with interest at 12 per cent. per annum together with any amount not exceeding Rs. 3000 actually spent by the plaintiff on improvements in the village together with all rents found due from the tenants up to the date of conveyance. The next clause provided that if the plaintiff had redeemed the mortgage of one Wahid Ali amounting to Rs. 1000 the Raja would have to pay this sum also before he could claim a conveyance. The next clause provided that the plaintiff should not settle any zerat, bakast or gairmazrua lands in village within three years, and the next clause dealt with the forest and ran as follows:
The first party (i.e. the plaintiff) shall not settle the forest or sell the woods of the forest in the village but can make use of all woods of the forest in the village for construction of his own house or bhandar in the village and for no other purpose.
The next clause provided that the Raja should have no claim to conveyance or to recover the sum of Rs. 250 after the expiry of three years and the time should be considered essential. The last clause provided that the heirs and representatives of the parties should be bound.
When viewed in the light of the surrounding circumstances, there are several terms in this document which, to my mind, indicate that the parties contemplated a mortgage and not an out and out sale. First, there is the provision for] interest which, though by itself not conclusive, is certainly in favour of the view that a mortgage was contemplated; secondly there is the restriction imposed on the plaintiff as to the amount he might spend in improving the village within three years; thirdly there was the restriction on the settlement of zerat, bakast and gair mazrua lands. I should not have paid much attention to this restriction had it been confined to bakast and zerat lands because this might be a natural clause even in an agreement for purchase, but the inclusion of gairmazrua land in this clause is, to my mind, significant. Then the restriction regarding forest produce is, in my opinion, very important. The restriction imposed is very severe. In fact I think that it is more severe than would normally be imposed on a lessee of the village for a term of years, and if the parties contemplated that the plaintiff was to be the real owner, I think it is impossible that such restrictions would have been imposed on him. I, therefore, should come to the conclusion, but for the proviso to Section 58(c), T.P. Act, that the transaction was a mortgage and not merely a conditional sale.
Two subsidiary points were urged on behalf of the appellants: first, that even if the transaction amounted to a conditional sale the manager of the encumbered estates was entitled to take possession u/s 16, Encumbered Estates Act, and secondly that the remedy, if any, of the plaintiff lay before the revenue authorities and not in the civil Court.
Part 1 of Section 16, Chota Nagpur Encumbered Estates Act, provides that the Manager shall for the purpose of realising and recovering the rents and profits of the Immovable property of the estate have the same powers as the holder of the property would have had for such purpose if the Act had not been passed. The Second portion of the section runs as follows:
Power to remove mortgagee or conditional vendee in possession__And if such property, or any part thereof, be in the possession of any mortgagee or conditional vendee the Manager may apply to the Court of the Deputy Commissioner within whose jurisdiction the property is situate and such Court shall cause the same to be delivered to the Manager as if a decree therefore had been made in his favour, but without prejudice to the mortgagee or vendee preferring his claim under the provisions hereinbefore contained.
The provisions for settlement of claims are contained in Section 5 and subsequent sections. Now if it had been held that, the plaintiff was a mortgagee, Section 16 of this Act would certainly have been applicable and would have been good defence to the suit. If the manager had proceeded to take possession within three years of the transaction in question, then even if the transaction amounted to a conditional sale, Section 16 would have afforded a defence as the plaintiff would have been a conditional vendee. The learned Government Advocate for the appellants, however, conceded that he could not on the evidence support the view that if the transaction was a conditional sale and not a mortgage, the condition was still capable of performance. I am satisfied, therefore, that at the time the manager took possession the plaintiff-respondent was no longer a conditional vendee but was an absolute vendee as the right to enforce the claim for a reconveyance had lapsed.
As regards the second point, although 8.22 provides that no suit or other proceeding shall be maintained against any person in respect of anything done by him bona fide pursuant to this Act, this clearly will not bar the present suit which is not for personal relief against the manager but brought to establish the plaintiff''s right to property. The provisions for settling claims which are embodied in Sections 5 to 9 allow an appeal to the Deputy Commissioner and in turn to the Commissioner u/s 10, but it is clear to my mind that such claims relate to debts and not claims regarding title to property which cannot be determined by the revenue authorities.
Coming now to the cross-objection, the judgment and decree under appeal granted the plaintiff mesne profits from 5-8-1942. The passage in the judgment dealing with this matter is as follows:
He will also be entitled to means profits from the date of his dispossession viz., 5-3-42 on which date the Board of Revenue finally disposed of the objection of plaintiff up to the date of recovery of possession the amount thereof (sic) will be ascertained on plaintiff''s application.
It looks as if the learned Subordinate Judge was under the impression that possession had not been delivered to the manager of the encumbered estates until the Board of Revenue disposed of that objection. It seems that what purported to be an order of stay was issued by the Board of Revenue, but that had no effect as possession had actually been delivered to the manager for defendant, appellant 1 on 10-12-1940 and clearly it is from the latter date that the plaintiff-respondent is entitled to mesne profits.
For the reasons given above I would dismiss this appeal and allow the cross-objection and direct that the decree of the lower Court be modified by substituting the date 10.12-1940 for the date 5-3-1942 in the decree as the date from which the plaintiff is allowed mesne profits. As the plaintiff-respondent has succeeded only by reason of the technical bar imposed by the proviso to Section 58(c), T.P. Act, while the appellants have succeeded on the substantial question relating to the question of benami and the real intention of the parties to the transactions of November 1931, I would leave the parties to bear their own costs in this Court.
Meredith, J.
I agree. Two circumstances have particularly influenced me in coming to the conclusion that Rameshwar Lall was merely a benamidar of the Raja. The evidence makes it clear beyond doubt that Chainpur was a favourit village with the Raja, as he was doing everything he could to save it for the estate. If Rameshwar Lall was a genuine purchaser at the auction sale and subsequently was struggling with the Raja to obtain possession, it is possible to suppose that the Raja would help him in any way to establish his possession or to create evidence thereof. Yet we find that when Rameshwar Lall gives a raiyati patta to one Rameshwar Prasad, in respect of lands in Chainpur, on 28-10-1931, by the document, Ex. I, far from the Raja''s men trying to prevent this we find the Raja''s manager, Mahadeo Ray, attesting the document, and the Raja''s Forester identifying the executant before the Sub-Registrar. The inference is, to my mind, irresistible that this settlement was really made by the estate in the name of Rameshwar Lall. The second circumstance is that, when Rameshwar Lall purports to sell Chainpur to a third party, the Raja takes a personal interest in the transaction, has the sale deed read over to him, and attests it. This conduct, having regard to the Raja''s attitude towards Chainpur, seems to me to show that the Raja was not opposed to that sale. Had Rameshwar Lall not been his benamidar, and had that been a genuine out and out sale, that is, I feel sure, the very last thing the Raja would have done. The position is, in my view, that a mortgage by conditional sale was intended, but by reason of the bar imposed by the proviso to S.''58(c), T.P. Act, we cannot deem the transaction to be a mortgage. It must, therefore, be regarded as a sale with a condition attached. Regarded as such, upon the terms of the documents, time was of the essence of the contract. When the manager took possession, three years had expired, the condition had lapsed and Butto Krishto Ray''s title was no longer conditional but absolute. The property, therefore, in no sense remained part of the estate, and the manager was not entitled to take possession u/s 16, Encumbered Estates Act.