Kondiram vs Gundappa and others

This is an appeal on behalf of the first defendant against the judgment and decree of the District Judge, Bidar, dated 26th Aban 1358F., affirming that of the Munsif, Nilanga, in a suit by respondents Nos. 1 to 3 for cancellation of sale-deed and redemption,

The litigation with its chequered career relates to a house situated in Nilanga. The four respondents before us sold the suit house to Kondiram, the appellant for a sale price of O. S. Rs. 1500/- on 3rd Isfandar 1351F. The said sale gave occasion to one Mudwalappa to file a suit, being suit No. 79 of 1351F., on the file of the Munsif of Nilanga for pre-emption on the ground of vicinage. The vendors and the vendee, who were impleaded as defendants in that suit preferred to remain ex parte throughout. On the evidence led by Mudwalappa alone, though no defence was based on that plea, the trial Judge found that the transaction forming the basis of the suit was in reality a mortgage and on that finding dismissed the suit with costs.

Respondents 1 to 3 on 22nd Meher 1353F. instituted the present suit for cancellation of the sale-deed and for redemption of the suit house on the allegation that initially they intended to effect a mortgage thereof by way of conditional sale to secure payment of Rs. 800/- which they had borrowed from the appellant, but they were misled into executing a sale-deed with an inflated consideration of Rs. 1500/- on his representation that no document embodying a transaction of mortgage by way of conditional sale was feasible and even if such a document were executed and the actual amount borrowed were not paid within the stipulated time of five years and a suit were brought for its recovery, apart from the possibility of its being decreed on instalment basis, the whole process would be highly embarrassing to him and therefore the best course would be to camouflage the whole transaction by reducing it into an out and out sale. It was further alleged that the real nature of the transaction was concluded by the finding in the pre-empt suit. In order to show the real nature of transaction, reliance was also placed upon an agreement dated 3rd Isfandar 1351F., purporting to have been executed by the appellant promising that if the sale price amounting to Rs. 800/- which would carry interest at the rate of Re. 1/- per cent, per annum were repaid within five years, the house would be returned to the erstwhile owner, otherwise in case of default, the sale would become absolute.

The appellant in his written statement, asserted that the facts as disclosed in the statement of claim were pure fabrications. His allegations were that the suit house before it was sold to him was mortgaged with possession with one Mohammed Badshah, Vakil of Nilanga. It was to redeem that mortgage that the respondents secured Rs. 800/- from him on 2nd Isfandar 1351F., and after redeeming the mortgage sold it for Rs. 1500/- of which, apart from Rs. 800/- already paid Rs. 700/- were paid before the Registrar at the time of the registration of the sale-deed on 3rd Isfandar 1351F. The further denied the execution of the ekrarnama and objected to its admissibility for want of requisite stamp and registration.

The learned Munsif, Shri Abdul Allam in the first instance dismissed the suit on the preliminary ground that the ekrarnama, having regard to the agreement embodied therein, was inadmissible in evidence for want of registration and therefore it was not open to the respondents to show that what was apparently a sale was really a mortgage.

On appeal taken by respondents Nos. 1 to 3, Shri Ghulam Dastagir, the then District Judge of Bidar by his judgment dated 31st Amardad 1355F., held that the dismissal of the suit on the aforementioned preliminary ground could not be sustained in view of the fact that in the pre-emption suit, it had been conclusively found that the sale in reality was a mortgage. In his opinion, to hold otherwise in the present suit would amount to a contradictory finding on the same contentious issue which in law could not be allowed to subsist together. He further held that the ekrarnama ought not to have been excluded from consideration for want of registration for the reason that it was covered by proviso 3 to S. 76, Hyderabad Evidence Act, and because it was produced to show the nature of the transaction and intention and conduct of the parties to the transaction. On these grounds, he set aside the judgment of the trial Judge and after framing two additional issues as to the effect of the minority of the second defendant on the date of the so called sale and as to whether the execution of the sale deed was brought about by misrepresentation and fraud, remanded the suit for further evidence and fresh disposal.

The appellant feeling aggrieved by the order of remand and the grounds on which it was based preferred a miscellaneous appeal to the High Court. The High Court, being likewise under the impression that the parties to the present suit were contesting defendants in the pre-emption suit and had in order to defeat that suit pleaded the sale to be in reality a mortgage, dismissed the appeal virtually on the same grounds as were given by the District Judge in support of his order of remand.

The learned Munsif on receipt of the record gave an opportunity to the parties to address him on the merits of the case. On the legal points, he felt himself bound by the decision of the District Judge and affirmed by the High Court. Consequently, he held that the finding in the pre-emption suit as to the true nature of the transaction between the parties operated as res judicata and that the ekrarnama though unregistered could, with the help of the oral evidence, be looked into, to find out as to what the parties intended to transact. On the factual side, he found that as a result of the transaction, the respondents only received Rs. 800/- from the appellant which was applied by them in redeeming the suit house from Muhammed Badshah, Vakil, P. W. 2 and that there was no reliable proof of the remaining amount of Rs. 700/- having been paid to the respondents. Mainly in the light of this circumstance, he evaluated the testimony of the respondents'' witnesses and found them reliable in coming to the conclusion that it was on the misrepresentation and fraudulent inducement of the appellant the intended mortgage took the form of an ostensible sale. As the appellant had demolished certain portion of the house with a view to renovate it, the learned Munsiff assessed the damages for demolition at Rs. 400/- and deducting that amount from the principal and interest due under the terms of ekrarnama passed a preliminary decree in favour of the respondents directing them to pay Rs. 589/- to the appellant within one month.

The learned District Judge, Shri Abdul Aziz to whom the appellant took the matter in appeal concurred with the trial court in its conclusions of law and fact with this difference that according to him the judgment in the pre-emption suit did not operate as res judicata but created an estoppel by record.

The learned Advocate for the appellant began his arguments by urging that the finding in the pre-emption suit as to the character of the transaction giving rise to that suit did neither operate as res judicata nor create any estoppel by record and he relied on -- ''Tangawwa v. Mahadevappa'', 32 Deccan LR 576 (A). On the other hand, the learned advocate for the respondents relied upon -- AIR 1931 114 (Privy Council) ; - AIR 1932 161 (Privy Council) -- ''Ma Shin v. Maung Han'', AIR 1929 Rang 162 (D); -- ''Ma To v. Maung E Byu'', AIR 1940 Rang 136 (E) and -- ''Sukh Dayal v. Bhopi'', AIR 1923 Lah 186 (F). The Rangoon and the Lahore cases need not be elaborately discussed in view of the Privy Council decisions on that point. In ''Munni Bibi v. Tirloki Nath (B)'' and later in ''Mating Sein Done v. Ma Pan Nyun (C)'', their Lordships of the Judicial Committee have held:

that there may be res judicata as between co-defendants has been recognised by the English Courts and by a long course of Indian decisions. The conditions under which this branch of the doctrine should be applied are thus stated by Wigram V. C. in -- ''Cottingham v. Earl of Shrewsbury'', (1843) 3 Hare 627 (G), "if a plaintiff cannot get at his rights without trying and deciding a case between the co-defendants, the court will try and decide that case, and the defendants will he hound, but if the relief given to the plaintiff does not require or involve a decision of any case between co-defendants, the co-defendants will not he bound as between each other by any proceeding which may be necessary only to the decree the plaintiff obtains."........ In such a case therefore three conditions are requisite :(1) there must be a conflict of interest between the defendants concerned; (2) it must be necessary to decide this conflict in order to give the plaintiff the relief he claims : and (3) the question between the defendants must have been finally decided.

That same rule has been approvingly reiterated by the Privy Council in the recent case of - AIR 1950 17 (Privy Council) with the further observation that the doctrine may apply even though the party against whom it is sought to enforce it, did not in the previous suit think fit to enter an appearance and contest the question. But to this the qualification must be added that, if such a party is to be bound by a previous judgment, it must be proved that he had or must be deemed to have had notice that the relevant question was in issue and would have to be decided.

The series of errors in the present case with respect to the application of the doctrine of res judicata arose from the inadvertent assumption that the appellant and the respondents had put in appearance in the pre-emption suit and resisted it on the ground that the sale giving rise to the claim for pre-emption was in reality a mortgage. The judgment in the previous litigation on the other hand shows that no such thing happened with the result that no issue on the point under determination was framed and put down for proof. Judging by the test laid down by the Privy Council, it is difficult to see how the appellant can be said to have or must be deemed to have had notice that the relevant question was in issue and would have to be decided or there would be a conflict of interest between the co-defendants to be resolved before any relief was given to the pre-emptor. The appellant could not be expected, while remaining ex parte, to anticipate that the court would allow and accept evidence in variation of the terms of an instrument which embodied a contract of sale. The respondents, in our opinion, have failed to show that the conditions were satisfied upon which alone the principle of res judicata can be applied.

But the learned advocate for the respondents contended that the issue as to the real nature of the transaction had now become final by reason of the fact that the High Court had affirmed the order of remand passed by Shri Ghulam Dastagir in which he had expressly decided that the finding in the pre-emption suit operated as res judicata. In our opinion, the doctrine of finality of an issue does not apply in the circumstances of this case.

In -- ''Balvant Ramchandra v. Secretary of State for India'', 32 Bom 432 (I), which was a case where a previous decision of a Bench of the Bombay High Court when issues were remitted, was before another Bench, the learned Judges said:

That judgment is, no doubt, binding upon us quoad all points which are therein specifically decided beyond possibility of revision. But it would, we think, be otherwise in regard to any part of the judgment which can be shown to be grounded on such mistake or error as it would have been the duty of that Bench to correct, if it had been brought to notice when the judgment was delivered. In so far as any part of the judgment is based upon an assumption or hypothesis which is now ascertained to be erroneous, it is, we think, competent to us -- or rather, it is incumbent on us -- to disregard it, and to reopen that portion of the case affected by the error.

In -- ''Lachman Prasad v. Jamna Prasad'', 10 All 162 (J), it was held that the court, after the return of findings on issues remitted, was entitled to reconsider the whole case de novo and in fact, in that case the Bench which finally passed the decree disagreed with the opinions of the Bench expressed at the time when issues were remitted. The same view was taken in -- ''Mubarak Husain v. Bihari'', 16 All 306 (K) and in -- Musammat Masihunnissa and Others Vs. Musammat Kaniz Sughra, and also in -- '' Gopal Nath Shukul Vs. Sat Narain Shukul Relying on these authorities, a Full Bench of the Allahabad High Court in the case of - Mt. Chauli alias Subhadra Devi Vs. Mt. Meghoo and Others, has laid down that where a Division Bench hearing an appeal records its findings on some of the issues and remits other issues to lower court to record its findings thereon and on return of those findings, the appeal comes before another Bench, the position of the second Bench is exactly the same as would have been the position of the first Bench if the appeal had come up before the same Judges again when findings on the issues were submitted by the trial Court. The second Bench which is hearing the appeal is not bound by the findings at which the former Bench had arrived but it is entitled, in its discretion if it so desires, not to reconsider the findings.

We have already shown that the High Court in its judgment of 30th Amardad 1356F., proceeded on an assumption not supported by any evidence that the appellant and the respondents as defendants in the pre-emption suit had appeared and contested the suit on the plea that the sale was really a mortgage. But we find from the judgment in that suit there was neither an issue on that question nor did all the defendants appear in that case. There is also no proof before us as to who was the defendant who put in appearance, if any, in that suit and what was his pleading. The only document in the previous suit that has been made available in the present proceedings is the copy of the judgment which is wanting in details of necessary materials so as to attract the doctrine of res judicata. On these grounds, we are not prepared to accede to the argument that the issue as to the nature of the transaction was concluded by the judgment in the pre-emption suit or by the judgment of the High Court referred to above.

The next question to be considered is whether the ekrarnama which according to the respondents gave them a right to redeem was admissible in evidence without its being registered. The learned Munsif, Shri Abdul Allam relying on -- ''Sesha Aiyar v. Kuppachar'', AIR 1919 Mad 711 (O); -- Meenakshisundaram Pillai Vs. S.T. Chenchu Mudaliar and Another, had held that the document was not admissible in evidence for want of registration. In the former case, it has been held that where a document purports to be an absolute sale a contemporaneous unregistered agreement by the vendee to reconvey is inadmissible to prove that the deed of sale is in reality a mortgage by conditional sale. Wills C. J. observed that a mortgage by conditional sale consists of an out and out sale and a defeasance clause and an unregistered agreement to reconvey cannot be tendered as evidence of a defeasance clause affecting immovable property under S. 49 of the Registration Act.

In the latter case, Srinivasa Ayyangar J. observed that a document by which property is absolutely conveyed by one party to another either with the reservation of the right in the vendor to redeem the property or the grant by the purchaser to the vendor of such right, must be regarded as a transaction affecting immovable property and a contract by which such right is either reserved or transferred must, if it is of the value of more than Rs. 100/- according to law, be by a registered instrument. In our opinion, Shri Abdul Anam was perfectly right in his view of the law. That view is amply supported by a judgment of the Privy Council in the case of -- ''Haji Mohammed Eusop v. Mohammed Hasan'', AIR 1919 PC 256 (Q). In that case lands were conveyed in consideration of a debt by a registered deed of sale and the purchaser executed an unregistered agreement to convey back the land if the debt was repaid to him within a specified time. It was held by their Lordships that even though this transaction be taken as a conveyance in security instead of pactum de re-trovendo the unregistered agreement is invalid as a transfer or a burdening instrument.

The learned advocate for the respondents was not in a position to cite any provision of law or any authority to the contrary. He, however, maintained that the ekrarnama can be collaterally looked at as a relevant piece of conduct on the part of the appellant only consistent with the true nature of the transaction having been one of mortgage. To support his contention, he relied on -- ''Eknath v. Mehtaji'', 13 Deccan LR 341 (R). We do not think that the authority cited helps the argument in the form in which it has been addressed to us. That case has only laid down that oral evidence of the acts and conduct of the parties is admissible to prove that the deed of sale was intended to operate as a mortgage and not that a document though requiring registration for its admissibility in evidence can be used so as a piece of conduct to establish the true nature of transaction. In order that a transaction may be considered a collateral transaction and so admissible in evidence, it must firstly be independent of or divisible from the transaction to effect which the law required registration, and secondly it must be a transaction not itself required to be effected by a registered document as one creating etc., any right, title or interest in immovable property. We have shown above that the ekrarnama in order to convert the sale into mortgage was compulsorily registerable therefore, no question of its being accepted as representing collateral transaction can possibly arise in this case.

Lastly it was argued that apart from the ekrarnama there was oral evidence of the conduct of the parties which should be taken into consideration in arriving at a finding as to the true nature of the transaction. No doubt, the Full Bench case of 13 Dec LR 341 (R), supports the learned advocate for the respondent in the contention advanced by him.. It seems difficult to concede to this contention, firstly because there is no evidence on the record of conduct, such as evidence of the repayment of the money, the return of the deed and the exercise of the acts of possession by the vendors as were contemplated in -- ''Preonath Saha v. Madhusudan Bhuiya'', 25 Cal 603 (FB) (S); -- ''Khankar Abdur Rahman v. Ali Hafaz'', 28 Cal 256 (T), which had held that oral evidence of such and the like conduct was admissible and was not precluded by the provisions of S. 92, Evidence Act corresponding to Sec. 76, Hyderabad Evidence Act. Secondly, even assuming that there was evidence of that nature on record, we would not be justified in using it for the simple reason that the above two Calcutta cases have been expressly disapproved and overruled by the Privy Council in the case of -- ''Maung Kyin v. Ma Shwe Law'', AIR 1917 PC 207 (U). It was therein held that oral evidence is not admissible for the purpose of ascertaining the intention of parties to written documents and though attempts have been made to engraft an exception on this rule in favour of evidence relating to the acts and conduct of the parties, it is now settled that such evidence is inadmissible. Their Lordships have, in the course of the judgment, approved the decision of the Madras High Court in -- ''Achutaramaraju v. Subbaraju'', 25 Mad 7 (V). In this case the facts were that on 23rd September 1876, defendant wrote to the plaintiff, inviting him to execute a sale deed of certain land in favour of defendant and promising that if the plaintiff did so, the defendant would discharge plaintiff''s debt out of the income derived from the land, and would after the debt had been discharged, or before, if so requested restore the land to the plaintiff, upon payment by plaintiff of a sum of money that had been advanced to him by the defendant. This document was not registered. On 29-9-1876 plaintiff executed a deed of sale of the land in defendant''s favour, which was unconditional in its terms and which was duly registered. Plaintiff subsequently brought a suit for redemption against the deed of 29th September, 1876, and he contended that though that deed was in its terms, an absolute conveyance, he was entitled to adduce evidence of the subsequent conduct of himself and defendant, to show that the transaction was, in fact, not a sale but a mortgage. The learned Judges Benson and Bhashyam Ayyangar held that evidence to be inadmissible.

For these reasons, we find force in this appeal. Therefore, we allow the same with the costs of all the courts and dismiss the suit.