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Judgment
Rajamannar, C.J.—The plaintiffs in O. S. No. 47 of 1947 on the file of the Court of the Subordinate Judge of Narasapur appeal against the
dismissal of their suit for redemption of properties which they along with the fourth defendant conveyed to one Venkataramaraju under a deed of
sale dated 20-1-1932. On the same day as the sale deed, there was an agreement to reconvey executed by the vendee under the sale deed. The
contention on behalf of the appellants was that both these documents embody a single transaction which was either a mortgage by conditional sale
or an anomalous mortgage. In this view they claimed redemption of the same. There were also other allegations challenging the validity of the
transaction, but the learned Subordinate Judge found against them and we are not concerned with them in this appeal.
The defence to the claim for redemption was twofold. The contesting respondent, namely, first respondent, who is the son of Venkataramaraju,
pleaded that it was not open, in view of the proviso to Section 58(c), Transfer of Property Act, to contend that the transaction should be held to
be a mortgage as the agreement to re-convey was not embodied in the document of sale. He also pleaded that even assuming that it was
permissible to hold so, it was not the intention of the parties that the transaction should be considered to be a mortgage. The learned Subordinate
Judge held in favour off the first respondent on both the points.
In the appeal learned counsel for the appellants tried to get over the hurdle in the way of his success, namely, the proviso to Section 58(c) in two
ways. He first contended that as-the proviso was only a proviso to Clause (c) of Section 58, it will be open to him to plead that the transaction is
another kind of mortgage, that is, a mortgage other than a mortgage by conditional sale. This point is covered by a direct decision of a Bench of
this Court in -- '' Venkatasubba Reddy Vs. Ramadoss Reddy, . The learned Judge there repelled an exactly similar argument thus: ""This argument
cannot be accepted. The construction suggested would involve reading into the proviso words which are not there, & it would moreover stultify the
new enactment as it would leave the previous state of the law practically unchanged. For it would net 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 anomalous mortgage. We do not think that the proviso was intended to have that effect. Its object evidently was to shut out an
enquiry whether a sale with a stipulation for retransfer is a mortgage where the stipulation is not embodied in the same document."" The learned
Judges followed the ruling of the Rangoon High Court in -- ''Ma Sein Nyo v. Maung San Pe'', AIR 1935 Rang 212 (B). With great respect to the
learned Judges we entirely agree with this decision. No authority has been cited to us which takes a different view on this point. The argument of
the learned counsel to the contrary proceeded on a misapprehension of the effect of holding a transaction which consisted of an ostensible sale and
an agreement to reconvey to be a mortgage. It was evidently an implication underlying his argument that such a transaction could be held to be any
of the known kinds of mortgages. In this he erred because if a Court came to the conclusion that an ostensible sale taken along with an agreement
was not in reality a sale but only a mortgage then it followed that the mortgage was a mortgage by conditional sale.
It could not be any other kind of mortgage. This is evidently why the proviso was inserted as a proviso to Clause (c). The proviso does not say
that such a transaction shall not be deemed to be a mortgage because if it can be deemed to be a mortgage it could be only a mortgage by
conditional sale.
The next way in which counsel for the appellant sought to get over the proviso was to contend that ""shall be deemed to be"" is an expression
which does not necessarily prohibit a court from corning to the conclusion that even if the transaction is contained in more than one document it
nevertheless is a mortgage. The argument was that if the condition to reconvey was not embodied in the document of sale the court will not
presume that it was a mortgage, but in a proper case nothing prevented the court from coming to that conclusion and giving effect to it. In support
of this contention he relied not upon any decided cases, but on observations in cases decided by other High Courts. He first relied upon a passage
in --''Kuppa Krishna v. Mhasti Goli'', AIR 1931 Bom 371 (C) where Patkar J. made the following observations:
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.
These observations were not necessary to dispose of the case before the learned Judges which arose out of a document executed long before the
proviso was inserted in the Act. Indeed there was only one document of sale in which the condition to reconvey was embodied. We do not think
that the learned Judges were construing seriously the effect of the proviso. But wo must say that so far as it goes we are unable to accept this
construction as sound. Reliance was placed on these observations in --'' Jaggarnath Singh and Others Vs. Butto Krishto Ray, . But the learned
Judges with respect dissented from them (see p. 346). In that decision, the learned Judges held that the proviso shows clearly that if the condition
is not embodied in the document which purports to effect the sale, then it is not open to the court to treat the transaction as a mortgage. They also
followed the ruling in -- AIR 1935 Rang 212 (B), which was followed by the Bench of this Court in -- Venkatasubba Reddy Vs. Ramadoss
Reddy, .
Learned counsel for the appellants then relied upon certain observations in -- AIR 1934 18 (Nagpur) . Niyogi A. J. C. said in that case:--""That
proviso cannot be interpreted as laying down any rigid rule that if the agreement to sell and the covenant of repurchase are embodied in more than
one document the inference of a mortgage would not necessarily arise, or that when the condition of repurchase is embodied in the document of
sale the transaction should necessarily be regarded as one of mortgage."" So far as the latter portion of the sentence is concerned, we need not say
anything because in this case the condition of repurchase is embodied in a separate document. But we must respectfully dissent from the learned
Judge''s observations contained in the first part of the sentence which implies that in spite of the proviso even if the agreement to sell and the
covenant to repurchase are embodied in more than one document, a court could hold that the transaction amounted to a mortgage.
In a later decision of the Nagpur High Court reported in -- ''Samsher Khan v. Vithal-das'', AIR 1946 Nag 264 (F) these very observations of
Niyogi A. J. C, were not approved. The learned Judges said:
In AIR 1934 18 (Nagpur) which was one of these cases, Niyogi J. suggested that the proviso to Section 58(c) could not be interpreted as laying
down any rigid rule that if the agreement to sell and the covenant of repurchase were embodied in more than one document the inference of a
mortgage would not. necessarily arise. That point was not one that arose for consideration in that case and with the greatest respect we think that
the only meaning that can be put upon the proviso is that where the condition for retransfer is not embodied in the document that effects or
purports to effect a sate, the transaction shall not be treated as a mortgage"".
It was held in that case that the rule laid down in the proviso is rigid and where the condition-for retransfer was not embodied in the document of
sale the transaction shall not be treated as a mortgage.
The decision of a single Judge In -- AIR 1940 84 (Nagpur) was also cited to us and a passage in the judgment dealing with the proviso was
relied upon. But it has no bearing whatever on the question which falls for decision in this case as_ the learned Judge was dealing with a case in
which the agreement to reconvey was embodied in the same document.
Learned counsel for the appellants relied upon the meaning of the word ""deemed"" as given in law lexicons. ""Deemed"" is a word with which we
are sufficiently familiar. It has been evidently used because ostensibly the transaction is only a sale. When the condition of reconveyance is
embodied in the same document it is open to the Court to hold that what purports to be a sale is really a mortgage. Then it can be said that the sale
is ""deemed"" to be a mortgage. What the proviso says is that when the condition is not embodied in the same document in no case shall a sale be
deemed to be a mortgage. We see no substance in any of the contentions raised on behalf of the appellants.
We may mention that even on the merits the learned Subordinate Judge has held that the transaction was not a mortgage. The appeal fails and is
dismissed with costs of the first respondent. As the appeal was filed ''in forma pauperis'' the appellants shall pay to the Government the court-fee
payable on the memorandum of appeal.