Civil Appeal No16 of 1955
Appeal from the judgment and decree dated February 14 1952 of the former Nagpur High Court in First Appeal No 10 of 1945 arising out of the judgment and decree dated September 25 1944 of the Second Additional District Judge Amraoti in Civil Suit No 11 A of 1943 Tr
Civil Suit No5A of 1944
119 C B Agarwal and A G Ratnaparkhi for the appellants
W section Barlingay section N Andley and Rameshwar Nath for respondents Nos
2 7 1959
November 3
The Judgment of the Court was delivered by SHAH J
This is an appeal against the decree of the High Court of Judicature at Nagpur in Civil Appeal No 10 of 1945 reversing the decree passed by the Second Additional District Judge Amraoti in Civil Suit No 5 A of 1944
The High Court has by its decree directed the court of first instance to pass a decree for redemption
The appeal raises a question as to the true effect of a deed dated September 10 1931 executed by Shri Narayan Rambilas Aggarwal and his two sons Sadan Gopal and Murli Dhar in favour of two brothers Bhaskar Waman Joshi and Trimbak Waman Joshi
The deed ostensibly conveys an absolute title to certain properties described therein
The transferors under the deed contend that the property transferred by the deed was intended to be mortgaged under a deed of conditional sale
The transferees contend that by the deed an absolute conveyance of the property thereby conveyed was intended and that the conveyance was subject to a condition of repurchase to be exercised within a period of five years from the date of the deed
The court of first instance dismissed the suit holding that the transaction in the deed dated September 10 1931 was of the nature of an absolute conveyance with a condition of repurchase and the period limited by the deed for reconveyance had expired long before the date of the suit
The High Court held that the transaction was a mortgage by conditional sale and on that view reversed the decree and directed that a redemption decree be passed
The properties in dispute are three in number 1 a house in Amravati outside the Amba Gate bearing Municipal No 598 2 A Chawl in Amravati bearing old Municipal Nos
6857 6858 and 6859 and 3 a house situated in Dhanraj Lane Amravati bearing old 120 Municipal No 3459
By the deed the properties were separately valued
The house at Amba Gate was valued at Rs 11500 the Chawl was valued at Rs 26000 and the house at Dhanraj Lane was valued at Rs 2000
At the date of this transaction the transferors were indebted to the Imperial Bank of India in the sum of Rs 30000 and Rs 9500 were due to the transferees and their relations and friends and to satisfy this liability of Rs 39500 the deed was executed
Possession of the property transferred was delivered by calling upon the tenants in occupation to attorney to the transferees
The transferees constructed eight shops in the compound of the Amba Gate house in the year 1940 1941 and made certain other constructions in the compound of the Chawl and they sold the Dhanraj Lane house to one Suraj Mal Salig Ram
On the August 26 1943 the transferors served a notice upon Bhaskar Waman Joshi and the representatives in interest of Trimbak Waman Joshi stating that they were willing to redeem the mortgage created by the deed dated September 10 1931 and called upon the transferees  to render full true and proper account  of the amount claimable under the deed
By their reply Bhaskar Waman Joshi and the representatives of Trimbak Waman Joshi denied that the transferors had any right to redeem the property conveyed by the deed and asserted that the claim  to treat the sale as a mortgage was an afterthought  in view of the abnormal rise in prices which had lately taken place
On September 9 1943 the three transferors and other members of their joint Hindu family filed suit No 5 A of 1943 in the court of the Additional District Judge Amravati against Bhaskar Waman Joshi and the representatives in interest of Trimbak Waman Joshi and Suraj Mal Salig Ram for a decree for redemption alleging that the transfer incorporated in the deed dated September 10 1931 was in the nature of a mortgage by conditional sale
exhibit D 1 which is the deed in question recites that the transferors were indebted that they needed Rs 39500 to discharge their liability that Rs 2320 were due to the transferees and that amount was set 121 off and the balance of Rs 37180 was paid by eight cheques drawn on the Imperial Bank of India
It was then recited that the immovable properties described in the deed were conveyed in full ownership and that possession was delivered to the transferees
The deed then proceeded to recite the conditions  in respect of this sale    If our heirs or ourselves demand reconveyance of one two or all the three houses of the above estate at any time within 5 five years of this date this time limit shall be followed very strictly it has been finally settled that we will lose this right if one more day expires you or your heirs shall reconvey to us at our expenses the respective houses for their respective prices mentioned in this deed of sale
With a view that both sides should have equal rights in respect of this condition it has been agreed between us that if our heirs or ourselves do not exercise this right of reconveyance in respect of all the three houses or any one of them within four and a half years of this day and if for any reasons you or your heirs do not deem it proper to retain anyone or all these houses hereafter you and your heirs have a right to take back from us or our heirs the amount of consideration of this deed of sale and to return all the three houses or any of them in the condition in which the same may be at that time and if you or your heirs express such a desire and if we or our heirs fail to comply with it shall be tantamount to our breaking the agreement of reconveyance and we and our heirs will be liable to pay damages
It has been further agreed between us that in the event of such a reconveyance our heirs and ourselves will pay full prices as mentioned in this deed of sale of the estate in the condition in which it may be at that time that is in the condition in which it may be on account of heavenly mishap or Government action on account of any reason whatsoever or on account of fall in prices
 The courts below differed in their interpretation of the true effect of these conditions
In the view of the learned Trial Judge the intention of the parties was to effect an absolute sale and not a mortgage
The High Court did not agree with that view
16 122 By cl
c of section 58 of the Transfer of Property Actmortgage by conditional sale is defined 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 safe
 The proviso to this clause was added by Act XX of 1929
Prior to the amendment there was a conflict of decisions on the question whether the condition contained in a separate deed could be taken into account in ascertaining whether a mortgage was intended by the principal deed
The Legislature resolved this conflict by enacting that a transaction shall not be deemed to be a mortgage unless the condition referred to in the clause is embodied in the document which effects or purports to effect the sale
But it does not follow that if the condition is incorporated in the deed effecting or purporting to effect a sale a mortgage transaction must of necessity have been intended
The question whether by the incorporation of such a condition a transaction ostensibly of sale may be regarded as a mortgage is one of intention of the parties to be gathered from the language of the deed interpreted in the light of the surrounding circumstances
The circumstance that the condition is incorporated in the sale deed must undoubtedly be taken into account but the value to be attached thereto must vary with the degree of formality attending upon the transaction
The definition of a mortgage by conditional sale 123 postulates the creation by the transfer of a relation of mortgagor and mortgagee the price being charged on the property conveyed
In a sale coupled with an agreement to reconvey there is no relation of debtor and creditor nor is the price charged upon the property conveyed but the sale is subject to an obligation to retransfer the property within the period specified
What distinguishes the two transactions is the relationship of debtor and creditor and the transfer being a security for the debt
The form in which the deed is clothed is not decisive
The definition of a mortgage by conditional sale itself contemplates an ostensible sale of the property
As pointed out by the Judicial Committee of the Privy Council in Narasingerji Gyanagerji vs Panuganti Parthasarathi and Others 1 the circumstance that the transaction as phrased in the document is ostensibly a sale with a right of repurchase in the vendor the appearance being laboriously maintained by the words of conveyance needlessly reiterating the description of an absolute interest or the right of repurchase bearing the appearance of a right in relation to the exercise of which time was of the essence is not decisive
The question in each case is one of determination of the real character of the transaction to be ascertained from the provisions of the deed viewed in the light of surrounding circumstances
If the words are plain and unambiguous they must in the light of the evidence of surrounding circumstances be given their true legal effect
It there is ambiguity in the language employed the intention may be ascertained from the contents of the deed with such extrinsic evidence as may by law be permitted to be adduced to show in what manner the language of the deed was related to existing facts
Oral evidence of intention is not admissible in interpreting the covenants of the deed but evidence to explain or even to contradict the recitals as distinguished from the terms of the documents may of course be given
Evidence of contem poraneous conduct is always admissible as a surrounding circumstance but evidence as to subsequent conduct of the parties is inadmissible
1 1924 LR 51 IA 305
124 In the light of these principles the real character of the document exhibit D 1 may be ascertained
The conditions of reconveyance may be analysed 1 that the transferees shall reconvey the proper within five years from the date of the conveyance to the transferor at the expense of the transferors for the price mentioned in the deed 2 that if within four years and six months from the date of the conveyance the right of reconveyance in respect of the three houses or any of them is not  exercised by the transferors and if the transferees do not desire to retain all or any of the houses they have the right to recall from the transferors the amount of the consideration and to return all or any of the three houses in the condition in which they may be 3 that in the event of failure on the part of the transferors to comply with the request to take back the houses a breach of agreement of reconveyance rendering the transferors liable to pay damages shall be committed 4 that in the event of reconveyance the transferors shall pay the full price set out in the sale deed and take back the houses in the condition in which by vis major Government action or any reason whatsoever they may be
Evidently the transferors bave under the deed a right to call upon the transferees to reconvey the properties within five years from the date of the conveyance but after the expiry of four years and six months the transferees are given the option to call upon the transferors to take back all or any of the properties for the prices mentioned in the deed  and if such right was exercised the transferors were bound to take back the properties and return the price even if on account of vis major or action of the public authorities the property was prejudicially affected
The deed does not set out the period within which this right is to be exercised by the transferees
Granting that the option of reconveying the properties against the price mentioned in the deed was to be exercised by the transferors before the expiry of five years from the date of the deed the covenant that damage to property even on account of circumstances over which the transferees had no control was in the 125 event of reconveyance to be borne by the transferors is strongly indicative of a mortgage
By this covenant the transferees were invested with the right to call upon the transferors to  take back  all or any of the houses and to return the price therefor indicating thereby that the price paid is in truth charged upon the property By calling upon the tenants to attorn to the transferees possession of the property transferred was delivered and pursuant to the transfer it was mutated in the names of the transferees
By an express covenant the period of five years was also made of the essence of the contract but as observed in Narasingerjis case 1 the description of the document as one of an absolute sale and the right of repurchase bearing the appearance of a right in relation to the exercise of which time is of the essence are not decisive of the true nature of the transaction
The circumstances surrounding the deed at the date of the execution of the deed also support the view that the transaction incorporated in exhibit D 1 was intended to be a mortgage
Before the execution of the deed exhibit D 1 a draft sale deed was prepared
By the draft sale deed exhibit P 13 only two properties the Amba Gate house valued at Rs 10000 and the Chawl valued at Rs 25000 were to be conveyed
By the final sale deed the Dhanraj Lane house was also agreed to be conveyed and that house was valued at Rs 3500
The transferors were evidently in straitened circumstances and immediately needed Rs 30000 to discharge their liability to the Imperial Bank and the liability to the transferees and their relations and friends amounted to Rs 9500
It is for this amount of Rs 39500 that the properties were conveyed
On the date on which the deed was executed also an agreement exhibit D 3 was executed by the three transferors
That agreement recited that the sale deed was to be executed for past debts and for paying off the debts cheques were taken from the transferees and the transferees were put in possession of the houses sold
A request was then made that the transferees should not get the deed registered for two months or at least for eight to fifteen days because the transferees had 1 126 to make arrangements for payments to the creditors and in the event of the deed being registered other creditors may make demands for their dues
It was then stated  you want that you should get an income of nine per cent per annum from these houses till reconveyance but it is evident that after meeting repairing or insurance charges thereof there will not remain so much profit in balance
Therefore we have already agreed before that the agreement of reconveys mentioned in the deed of sale shall be brought into effect only when ourselves or our heirs pay to you all the expenses incurred by you as found due according to your account books and complete your nine per cent This agreement and the sale deed were executed on the same day
Evidently by this agreement the transferors undertook to pay the difference between the net rent to be recovered and interest at the rate of nine per cent on the price till the date of reconveyance and that the right of reconveyance was to be enforceable only when the difference between the interest at nine per cent on the price and the rent recovered less repairs insurance charges according to the books of account of the transferees was paid
Prima facie this is a personal covenant whereby the transferors agreed to pay interest at the rate of nine per cent on the price paid till the date of reconveyance
This agreement strongly indicates that the parties regarded the arrangement incorporated in the deed dated September 10 1931 as a mortgage
The contention raised by the transferees that by this covenant they were to erect additional structures at their own expense upon the land and collect rent which may be equivalent to interest at the rate of nine per cent on the price paid and the amounts spent by them is on the language used in the deed unwarranted
There is in the deed no reference to any additional amount to be spent by the transferees for erecting buildings upon the land conveyed and the books of the transferees are referred to in the agreement only to make the accounts maintained by them binding upon the transferors
Counsel for the transferees urged that this agreement not being registered was inadmissible 127 in evidence
Ex facie the document does not purport to create declare limit or extinguish any right title or interest in immovable property it incorporates a mere personal covenant and it is difficult to appreciate the plea that the document wholly inadmissible for want of registration
This agreement indisputably contains a condition relating to reconveyance incorporated in a registered instrument and may not be admissible in the absence of registration as evidencing any alteration of the terms of reconveyance
But this agreement in so far as it evidences a personal covenant to pay interest at the rate specified is admissible
It is a somewhat singular circumstance that before the High Court when counsel for the contending parties were were invited by the court to argue whether the document was by law required to be registered counsel urged that the document was admissible in evidence without registration and insisted upon arguing the case on that footing
The question whether the price paid was adequate may also be adverted to
The court of first instance held that the consideration for the properties was not inadequate but in the view of the High Court the consideration was wholly inadequate
Counsel for the transferees contended that the monthly rent received from the tenants occupying the properties was Rs 270 and deducting therefrom Rs 48 for municipal taxes and an amount equal to rent for two months as properly chargeable for repairs insurance and collection charges there remained only a balance of Rs 186 per month available to the transferees and capitalizing the net rent at 6 the value of the property conveyed could not exceed Rs 30000 and even capitalising the net rent at 5 counsel contended that the value of the property may be approximately equal to the consideration paid
There is however no clear evidence as to what municipal taxes were payable in respect of the houses and whether the taxes were payable by the tenants or by the landlord
Dr Trimbak Joshi one of the transferees in his evidence in Suit No 112 of 1932 deposed  that the tax came to Rs 48 on the date of purchase  but he did not state that this amount was 128 payable monthly
There is again evidence of witness Balkrishna examined by the transferees that the water tax was paid by the tenants
In their written statement the transferees had set out a statement of income and expenditure for the years 1931 40 and in that statement for the year 1933 the expenses debited against income were Rs 426 11 0 for 1934 Rs 346 15 6 and for 1935 Rs 542 2 6 for 1936 Rs 1666 7 0 for 1937 Rs 1160 1 3 for 1938 Rs 529 2 3 for 1939 Rs 570 11 3 and for 1940 Rs 46 2 0
If Rs 48 were payable as municipal tax every month the liability on account of taxes alone far exceeded the expenses debited against the rent received
This statement of account abundantly shows that the municipal taxes were borne by the tenants and not by the landlords
The High Court in para
34 of its judgment proceeded to estimate the rental of the properties at Rs 245 per month and capitalised the same at 5
The High Court is not shown to be in error in accepting the net monthly rental at Rs 245 per month
The area of the land of the Amba Gate house is 9037 square feet the area of the land at Chawl is 23805 square feet and the area of land of Dhanraj Lane house is 817 square feet There is no clear evidence on the record about the precise area of the lands covered by the structures but it is conceded that the structures stood on an area less than one half of the total area of the land
From the evidence especially of the valuation reports it appears that of the Amba Gate house 5800 square feet of land were open and of the Chawl 12000 square feet of land were open Valuation of building land with structures by capitalising the rental may yield a reliable basis for ascertaining the value of the land together with the structures only if the land is developed to its full capacity by erection of structures
If the land is not fully developed by raising structures valuation of houses together with lands by capitalising the rent received may not furnish reliable data for assessing the market value
By aggregating the value of the land and the value of the structure separately estimated a scientifically 129 accurate value of the land with the structure may not be obtained
But where the land is relatively valuable and the structures are old and comparatively of small value this method may afford a rough basis in the absence of other reliable data for ascertaining the value of the land and the structure
D 52 and D 53 are the reports prepared by a valuer of the market value of the Chawl and the Amba Gate house
According to the report exhibit D 52 the value of the superstructure of the Chawl was Rs 31708
Out of this amount the valuer sought to deduct 20  as per Superintending Engineer s letter dated the 21st August 1931
On what basis that deduction has been made has not been explained
He again proceeded to deduct 20 as depreciation on the cost of the building and estimated at Rs 20293 the value of the superstructure
It is evident that a deliberate attempt was made by the valuer to depreci ate the value of the super structure by making at least one deduction of 20 for which there is no warrant
Even assuming that this valuation of Rs 20293 is accurate the value of the Chawl together with the land considerably exceeds Rs 26000
The valuer has valued the site at 4 as per square foot but no reliable evidence has been led to support that estimate
Similarly for the Amba Gate house the valuer estimated the value at Rs 18556 for the super structure and he deducted 20  with effect from the 22nd August 1931 according to the Superintending Engineer s letter dated the 21st August 1931  and 25 as depreciation charges on building and arrived at the figure of Rs 11134 and added thereto the value of the land at the rate of 4 as
per square foot
The evidence on the record does not warrant the assumption that the land was worth only annas four per square foot
As pointed out by the High Court in view of the sale deeds Exs
P 9 and P 21 the price of the land fluctuated between Rs 1 and Rs 2 4 as per square foot
Even if the lower of the two rates be adopted the value of the Chawl at the Amba Gate house will considerably exceed the price embodied in the sale deed
17 130 The house in Dhanraj Lane was valued in the draft sale deed at Rs 3500 and in the sale deed at Rs 2000
No explanation has been given for this disparity between the prices mentioned in the draft and the deed and there is substance in the contention strongly pressed by counsel for the transferors that the value of Rs 2000 for a house with a ground floor and two stories is artificial
The evidence discloses that the house was let out on a monthly rent of Rs 20 and capitalising that rent at 5 on the assumption that by the construction the land was fully developed the price thereof was more than double the price set out in the deed
It is clear that this house was included in the deed to make up the total value of Rs 39500 the amount required by the transferors to tide over their immediate difficulties
Counsel for the transferees sought to rely upon the evidence of subsequent conduct of the transferors as indicative of the character of the transaction as a sale but as already observed that evidence is inadmissible
In our view the High Court was right in holding that the real transaction incorporated in exhibit D 1 was a mortgage and not a sale
The appeal therefore fails and is dismissed with costs
Appeal dismissed


Summary:
The appellant held an office under the Government and was dismissed from service on January 24 1956 for a reason other than corruption or disloyalty to the State
He filed his nomination paper for election to Parliament which did not disclose any disqualifications
No objection was taken to the nomination and it was accepted without making any enquiry
After the poll the appellant was declared duly elected
The respondent filed an election petition challenging the election of the appellant on the ground inter alia that the nomination of the appellant had been improperly accepted as he was dismissed from Government service and he had failed to obtain a certificate from the Election Commission that he had not been dismissed for corruption or disloyalty to the State
After limitation for filing the petition had expired the respondent applied to the Election Tribunal for amendment of the petition seeking to add to this ground the statement that the nomination paper was not accompanied by the prescribed certificate
The Tribunal disallowed the amendment on the ground that the amendment sought to introduce a 290 new ground after the period of limitation and then dismissed the election petition holding that the appellant was qualified to stand for the election and his nomination was not improperly accepted
On appeal the High Court held that the amendment should have been allowed as it merely asked for a clarification and not the introduction of a new ground and consequently it set aside tile order of the Tribunal and directed a retrial of the issue involving
The appellant obtained special leave and appealed
Held that the amendment could not be allowed as it sought to introduce a new ground in the petition after the period of limitation
The ground taken in the petition was that there was an improper acceptance of the nomination covered by section 1001d1 of the Representation of the People Act 1951
But there was no improper acceptance of the nomination for the nomination paper ex facie did not disclose any defect or disqualification
There being no subsisting prayer seeking to raise the ground under section 1001div for non compliance with the Provisions of section 333 of the Act the amendment was foreign to the scope of the enquiry under the ground covered by section 1001d1
Durga Shankar Mehta vs Thakur Raghuraj Singh 1955 1 SCR 267 and Harish Chandra Bajpai vs Triloki Singh   followed
Veluswami vs Raja Nainay   referred to
There was no jurisdiction in the High Court to interfere with the discretion of the Election Tribunal refusing to allow the amendment after the entire petition had been disposed of
It is undesirable for an appellate Court to interfere with the order of a subordinate Tribunal made in the exercise of its discretion without exceeding the limits of its powers unless it has acted perversely or has taken a view which is clearly wrong