Case: Bhoju Mandal Vs. Debnath Bhagat

The facts that gave rise; to this appeal may be briefly stated : On February 2, 1924, the appellants 1 & 2, their father late Matooki Mandal and their uncle late Lila Maridal executed a deed purporting to-convey a property of the extent of 12.6 acres in favour of respondents 1 & 2 for a consideration of Rs, 2, 800/- and;put them in possession of the same. In 1950 the appellants instituted title suit No. 73 of 1950 in the Court of the Munsif, 1st Court, Bhagalpur, Bihar for redemption on the ground that the said document was a mortgage by conditional sale. The contesting defendants i. e., respondents 1 & 2 pleaded that the said document was not a mortgage but an out and out sale and therefore the suit for redeemption was not maintainable. The Munsif and on appeal the Subordinate judge, Bhagalpur, accepted the contention of the appellant and decreed the suit but on second appeal the High Court held that the document was a sale and on that finding the appeal was allowed and the suit was dismissed with costs throughout. The appellants by Special cave preferred the present appeal against the decree and judgment of the High Court.

Court's reasoning:
There is a clear legal distinction, between the two concepts-a mortgage by conditional sale and, a sale with a condition of repurchase. The former is a mortgage, the relationship of debtor and creditor subsists and the right to redeem remains with the debtor. The latter is an out and. out sale whereby the owner transfers all his rights in the, property to the, purchaser reserving a personal right of re-purchase. The question, to which category a document belongs presents a real difficulty which can only be solved by ascertaining the intend of the parties on a consideration of the contents of a document and other, relevant circumstances... Decided cases have laid down many tests to ascertain the intentions of the parties but they are only illustrative and not exhaustive. Let us therefore look at the terms of the document extractedthere was any ambiguity in the rest of the document the argument proceeds that the parties clearly expressed their intention by so describing the nature of the document. It is not accurate to say that the suit document was executed only to discharge the mortgage bond dated March 1, 1923. The document itself narrates that the executants were badly in need of money not only for repaying the debt under the said bond but also for repaying the debts of one Sumeri Kapri and for meeting the expenses in connection with cul- tivation, purchase of bullocks and household. It is, therefore, not a document executed in renewal of an earlier mortgage bond but was brought into existence to meet the pressing demands on the appellants. It is also not correct that the document does not contain words of conveyance or re-conveyance. The document says in express terms that the property "was sold and vended, which are certainly words of conveyance, and that after the prescribed period and after the amount was paid the appellants would "take back the vended property from the respondents which are again words of reconveying. Though the words of "conveyance and reconveyance are not expressed in phraseology found in documents prepared by trained draftsmen, they are expressed in words usually adopted by village document writers. The taking over of the liability to pay the rent by the executable for a short period subsequence to the execution of the document may be due to the fact that the rent had become due before the execution of the document or for some other circumstance which is not clear from the document. This is at best a neutral circumstance. The fact that in case of any defect in title the vendees were dispossessed, the consideration amount with interest was charged on the property is nothing more than an indication of the intention to keep alive The mortgagees rights under the earlier document. The said clause only makes explicit what the respondents would be entitled to in law. The translation of the words tamashuk sarti kebala as mortgage by conditional sale does not appear to be correct. The learned Subordinate juage observes that if those words. were literally translated, they would mean a bond by way of con- ditional sale. If that was the meaning the said expression would be consistent both with a mortgage by conditional sale as well as a sale with a right of repurchase. In law Lexicon, P. Ramanatha Iyer gives the following meanings to the word "kebala; Any deed of conveyance or transfer of right or property, any contract of bargain or sale, a bond, a bill sale, title-deeds, and the like. Even accepting the widest meaning given to that word, the expression can only mean a bond or a contract by way. of. conditional sale. So translated the expression is consistent with a mortgage, as well as with a sale and therefore that is a neutral circum- stance. On the other hand the executant describes the transaction as a sale and respondents as vendees. The amount paid is described as consideration for the sale. Usual covenant of title is given and there is a provision of re-conveyance in case of payment of the prescribed amount within the time agreed upon. No doubt these recitals would be found in a document which purports to be an ostensible sale and they do not in themselves are decisive of the question raised but there is one factor which dispels any doubt in regard to the construction of the document. The total area of the land mortgage in the year 1923 was 13.17 acres and the amount advanced thereunder was Rs. 1, 600/-. Only one year thereafter out of the said extent 12.6 acres was transferred by the document in question for a sum of Rs. 2, 800/-, that is if the contention of the appellant was correct, a smaller extent of land was mortgaged for higher amount. It is improbable that a mortgagee would advance an additional amount and take a mortgage. of a smaller extent in discharge of an earlier mortgage wherounder a larger extent of land was given as security. Unless there are extraordinary reasons for this conduct, this would be a clinchina circumstance in favour of holding that a document was a sale. The learned counsel for the appellant realizing the importance of this: circumstance at tempted to explain it away by a suggestion that under the earlier document the respondents were not put in possession of the land and that the reduction of the extent of the mortgaged property under the subsequent document was-due to the fact that they secured possession of the lands mortgaged thereunder. This was not put either to the witnesses or suggested in any of the three courts below. We cannot therefore accept this argument advanced for the first time before us, for there may have been many e explanations for the respondents in respect of this suggestion. What is more, it is not disputed that the sum of Rs. 2, 800/- represents the real value of the 1 and sold to the respondents and it is high improbable to say the least that a person would aydvance the amount equivalent to the value of the. land mortgaged without keeping a reasonable margin for realizing his amount. This is sought to be explained by throwing a suggestion that as the respondents were put in possession, they would be getting the interest and therefore there was no chance of the debt exceeding the value of the property. Even so a mortgagee in lending mounies would insist upon a reasonable margin in the value of the property to provide against the possible contingency of the pro- perties going down in value and the amount due to him swelling by the addition of cost, damage, etc., in the event of his filing a suit to recover the name. in our view whatever ambiguity there may be in the document, the fact that only a portion of the land already mortgaged was sold for a proper and adequate consideration is a circumstance which stamps the document as an out, and out sale.Reliance:is placed by the learned counsel for the appellants on a judgment of this court in "Pandit Chunohun Jha v. Sheikh Ebadat Ali (1(1955) 1.S.R. 174.). It may be stated at, the outset that for ascertaining the intention of the, parties under one document- a decision on a construction of the terms of another document cannot ordinarily afford any guidance unless the terms are exactly similar to each other. It is true that, some of the terms of the document in that case may be approximated to some of the terms in the present document but the judgment of this Court really turned upon a crucial circumstance. There is one important recital found in the document in that case which does not appear in the document in- question and there is another important recital found here which is not present there. There the document under scrutiny was executed on April 15, 1930. Before the execution of the document the- executants initiated commutation proceedings under s. 40 of the Bihar Tenancy Act. Those proceedings continued till February 18, 1931 i.e. for some ten months after the deed. The executants borrowed Rs. 65/6/- to enable them to carry on the commutation proceedings even after they executed the document. Bose.1., speaking for the court adverting to the said circumstance observed at page 183: "This we think, is crucial. Persons who are selling their property would hardly take the trouble to, borrow money in order to continue revenue proceedings. which could no longer benefit them an could only ensure for the good of their transferees." It is, therefore, obvious that this circumstance clinched the case in favour of the executants. The crucial circumstance in the present case, namely that a smaller extent was- sold for a higher amount in discharge of an earlier mortgage of a larger extent for a smaller amount was not present in that case. The said crucial circumstances make the two cases entirely dissimilar and therefore the said judgment of this court is not of any help in construing the document in question. On a consideration of the cumulative effect of the terms of the document in the context of the surrounding circumstances we hold that the document in question is not a mortgage but a sale with the condition of repurchase.