Case: M. N. Dodamani &amp; Ors Vs. U. S. D. Walikar (Dead) By Legal Representatives &amp;Ors

The question arises on the following facts. On June 1, 1927 the predecessors-in-interest of the appellants transferred to one Krishnaji two plots of land bearing survey numbers 125/1 and 136 measuring respectively 14.5 and 21.31 acres in village Murnal, Bagalkot Taluk in Bijapur District. The document by which the transfer was effected, described as a sale deed, shows that the two items of property were sold "absolutely" for a total sum of Rs. 2000/-. In 1932 Krishnaji sold the plot bearing survey No. 136 to one Ramanna, predecessor-in-interest of respondent Nos. 2(a) to 2(e). for Rs. 400/-. In 1935, Krishnaji sold the other plot, survey No. 125/1, for Rs. 1000/ to Utalsab Dogrisab. Walikar, predecessor-in-interest of respondents 1(a) to 1(c). Afterthe Bombay Agricultural Debtors Relief Act, 1947 came into force, the appellants applied under section 4 of the Act for adjustment of debts claiming that the transaction in 1927 was really not a sale but a mortgage. The trial court held that the transaction was a mortgage and not a sale but dismissed the application on the view that the respondents were entitled to protection under section 25(ii) of the Act. The District Judge reversed the decision and allowed the application under section 4. The matter was taken to the High Court in revision and the High Court recorded a con sent order that the transaction was not a sale but a mortgage and remitted the case to the trial court for a decision on the question whether the purchasers, Ramanna and Walikar, were transferees for value without notice of the real nature o f the transaction between the appellants predecessors and Krishnaji and as such entitled to the protection of section 25(ii). This order of the High Court was made on January 25, 1963. At this stage we may mention that our attention was drawn to an order made in the same matter by the High Court on January 31, 1962, which is reported in 1962 Mysore Law Journal 682, that shows that the same learned Judge had set aside the order of the appellate court and restored that of the trial court. Counsel for both sides appeared to think that the order made by the High Court in 1962 must have been set aside later on review though neither of them was able to produce the order by which the 1962 order had been set aside. However both learned counsel agreed that for the purpose of this appeal it is the order of the High Court made on January 25, 1963 that need be considered. That the 1963 order held the field would be apparent from the fact that the case was reconsidered by the trial court as directed by the aforesaid order. The trial court on hearing the matter after remand dismissed the application under section 4 on the finding that the purchasers were bona fide transferees for value without notice of the real nature of the original transaction. The lower appellate court reversed this decision. The purchasers then moved the High Court in revision from the order passed by the appellate court. The High Court by the impugned order set aside the order of the appellate court and restored that of the trial court agreeing with the trial court that the purchasers had no notice of the real nature of the transaction of 1927.

Court's reasoning:
The High Court found that the purchasers from Krishnaji had no "actual knowledge or notice" of the real nature of the transaction in 1927. But the High Court also held that the notice contemplated in section 25(ii) was "actual notice" and that "constructive notice was clearly beyond the contemplation of section 25(ii)". It seems to us that construing the notice referred to in section 25(ii) as actual notice only is likely to defeat the purpose of the statute which was enacted to provide for the relief of agricultural debtors in the province of Bombay. We are of the view that section 25(ii) does not exclude constructive notice. However on the facts of the case it appears that the transferees had no notice, actual or constructive, of the real nature of the transaction of 1927. It has been found that they had no actual notice; the High Court appears to have also found that they had no constructive notice. Referring to the provision of section 25(ii) requiring that the transferee must hold under a registered deed executed on or before February 15, 1939 the High Courtwill be seen that the reference is to a period anterior to the coming into force of the Act, a period therefore during which the special provisions of the Act could not have been within the contemplation of anybody. If those provisions were not in contemplation it is impossible to postulate a situation where any given circumstance could be regarded as sufficient to excite suspicion that the transaction might be hit by the statute and therefore persuade people to start and pursue furtherfact that the lands were sold to the respondents for a price lower than what they fetched in 1927 might have been due to various reasons and it cannot be said that this ground alone was sufficient to raise a suspicion that the trans action of 1927 was really a mortgage. As pointed out by the High Court, the Act of 1947 could not have been within the contemplation of anyone in 1932 or 1935. Ramappa in his deposition said that he paid Rs.400/- for the land as it was "fallow", and th at if there were no weeds the price would have been Rs. 600/-. As for the land sold to Utalsab, he was dead when the matter came up for hearing before the trial court. The record of rights also does not contain any indication that the transaction of 1927 was in the nature of a mortgage. The evidence discloses that Krishnappa put the transferees in possession of the lands in question. There was therefore, no such occasion or circumstance to impel the transferees to start an enquiry as to the real nature of the transaction between Krishnaji and the predecessors-in-interest of the appellants in 1927.