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CIVIL APPELLATE JURISDICTION
SECOND APPEAL NO. 112 OF 2004
1. Shri Pundlik Dagu Holgade
Age : 59 years
2. Shri Savliram @ Uttam Dagu Holgade
Age : 56 years
3. Nandu Dagu Holgude
Age : 36 years
4. Laxman Dagu Holgude
Age : 34 years,Sr. No. 1 to 4 R/o. Palkhed
Taluka Niphad, District Nashik
5. Smt. Sajabai Nivrutti More
Age : 45 years,R/o. Pimplas, Tal - Niphad
District - Nashik
6. Smt. Rambhabai Vishwanath Kaire
Age : 40 years,R/o. Dharangaon Veer, Tal – Niphad, District - Nashik
7. Smt. Rajubai Namdeo Shinde
Age : 38 years, R/o. Dawarchwadi
Tal – Niphad, District - Nashik
8. Parvati Dagu Holgade
Age : 75 years,R/o. Palkhed
Tal – Niphad, Dist - Nashik ...Appellants
(Original Defendant Nos.
1 to 8)
(since deceased through legal heirs)
1A. Mr. Ramesh S/o. Pandurang Hire
Age : 52 years, At Post – Santosh Mata
Nagar, Chinchkhed Road, Pimpalgaon
Baswant, Taluka – Niphad, District -
Nashik
1B. Mr. Krishna S/o. Pandurang Hire
Age : 50 years, R/o. Village-Palhed, Taluka – Niphad, Dist-Nashik
1C. Mr. Premendra S/o. Pandurang Hire
Age : 48 years, R/o. At Post-Palkhed, Taluka – Niphad, Dist - Nashik
1D. Smt. Tarabai Madhukar Bhalerao
Age : 60 years, R/o Village-Dindori, Near
Irrigation Office, Taluka – Dindori
Dist - Nashik
1E. Smt. Ratna Bhikaji Gangurde
Age : 40 years, R/o. Village – Bopegaon
Taluka-Dindori, Dist-Nashik
2. Shri Pandit Kashinath Hire
(since deceased through legal heirs)
2A. Smt. Sushilabai Pandit Hire
Age : 69 years, Residing at Ramabai
Zopadpatti Sangh, Siddharth Chawl, D. B.
Chowk, Ghatkopar (E), Mumbai-400 075
2B. Mrs. Surekha Valmik Gunjal
Age : 46 years, Residing at B-Avsar CHS
Ltd, A-Wing, 404, Saki Vihar Road, Tunga
Village, Powai, Mumbai-400 072
2C. Mrs. Lata Rajendra Shejwal
Age :44 years, Ramabai Ambedkar Nagar, Chawl No. 74, Room No. 679, Eastern
Express Highway, Ghatkopar (East), Mumbai 400 075.
2D Mrs, Ujwal Anna Shejwal
Age : 42 years, Gitanjali Co-op Soc. Type
E-7. Room No. 2, Sector-46, Seawood, Navi Mumbai-400 706
2E Jayshree Santosh Jadhav
Age : 40 years, Residing at 133, Nagsen
Nagar, Wadalanaka, Nashik, Dist-Nashik
2F Maya Sainath Jagtap
Age : 38 years, At Post-Kanadgaon, Taluka-Chandwad, Dist-Nashik
2G Sachin Dashrath Mokal
Age : 39 years, 6, A-Wing, Chandradarshan CHS Ltd., Hanuman
Thane.
3. Shri Rangnath Kashinath Hire, Age : 49 years, R/o. Shantinagar, Janta
Bhavan, 4th floor, R. No. 79, Thane
4. Shri Bhimrao Kashinath Hire
Age : 40 years, R/o. Pooja Apartment
Indra Nagar, Pethe Nagar Road, Nashik.
5. Smt. Kamlabai Nana Kedare
Age : 60 years, R/o. Nana Amruta
Gandhinagar, Nashik
6. Smt. Saraswatibai Chagan Bhalerao
Age : 55 years, R/o. C/o. C. K. Bhalerao
Trimbak Road, Milk Dairy, E.No. 32
Trimbak Road, Nashik. ...Respondents
Ms. Rukmini Khairnar i/b. Mr. P. N. Joshi for the Appellants.
Mr. B. K. Barve a/w. Mr. Sandeep Barve, Ms. Anushka Barve, Mr. Simmy Sebastian a/w. Mr. Dhanesha Shingote i/b. B. K. Barve &
Co. for Respondent Nos. 1A to 1E to 6.
JUDGMENT
1. This second appeal is filed by the original defendants to challenge the judgment and decree passed by the first appellate court. By the impugned decree, the suit for redemption of the mortgage is decreed, and the plaintiff is directed to deposit an amount of Rs. 300/- towards redemption of the mortgage. The second appeal is admitted vide order dated 1st July 2004 on the following substantial question of law: “Whether the Appellate Court committed error by misreading and misinterpreting the document dated 2nd July, 1962 and came to the conclusion that the document is mortgage by a condition of sale ?” FACTS IN BRIEF:
2. The appellants are the original defendants nos. 1 to 8. Respondent No. 1 is the original plaintiff. Respondents Nos. 2 to 6 are the original defendants nos. 9 to 13. It was the plaintiff’s case that the father of the plaintiff and defendants nos. 9 to 13 needed money and therefore approached the father of defendants nos. 1 to 8, who advanced Rs. 300/-, and a document dated 2nd July 1962 was executed, mortgaging the suit property belonging to the plaintiff’s father. Since the father of defendant nos. 1 to 8 did not possess a money-lending licence, the suit property was mortgaged by executing a mortgage by conditional sale. The plaintiff therefore offered to pay the redemption amount, in accordance with the terms and conditions, and prayed for redemption of the mortgage.
3. The suit proceeded ex-parte against defendant nos. 9 to 13. Defendant nos. 1 to 8 (‘defendants’) filed a written statement and denied that the amount was paid as a loan. According to the defendants, the plaintiff’s father executed a registered sale deed subject to the condition that, if he repaid Rs. 300/- within five years, the defendants’ father would execute the sale deed in his favour. Hence, according to the defendants, the transaction was not a mortgage transaction by conditional sale, but it was a document of sale with a condition to repurchase. Since the plaintiff’s father made no payment within the five-year repurchase period, his right was extinguished on expiry of the five-year period from the date of the document, i.e., on 2nd July 1967. Accordingly, the defendants contend that the suit property continued to be held by their father as the absolute owner.
4. The trial court held that the plaintiff failed to prove that the transaction was a mortgage by conditional sale and that he was entitled to redeem the mortgage. The trial court accepted the defendants' contention that the document was a registered sale deed subject to a condition of repurchase. Hence, the trial court dismissed the suit. In an appeal preferred by the original plaintiff, the trial court's findings were reversed, holding that the transaction was a mortgage by conditional sale and that the plaintiff was entitled to redeem the mortgage. The first appellate court, therefore, decreed the suit for redemption of the mortgage and directed the execution of a reconveyance and the delivery of possession.
SUBMISSIONS ON BEHALF OF APPELLANTS:
5. Learned counsel for the appellants submitted that from the plain reading of the terms and conditions of the document, it is clear that the document was a title document of a sale deed with a condition to repurchase if the amount was paid within five years. Hence, the suit property was sold to the defendants’ father, and the absolute title was transferred to him. As per the condition in the document, the ownership was transferred to the defendants’ father with a clarification that he would be entitled to dispose of the property as per his own wish.
6. Learned counsel for the appellants submitted that there was no relationship of debtor and creditor between the plaintiff’s father and the defendants’ father. The document made no reference to any interest payable on the amount paid by the defendants’ father towards consideration. The document required the plaintiff’s father to pay the consideration amount within five years for the reconveyance of the land. However, the plaintiff’s father never called upon the defendants’ father for repurchase. Hence, the title of the suit property stood transferred absolutely in favour of the defendants’ father. Thus, considering the terms and conditions of the document and the circumstances, it was clear that the transaction was a sale with a condition to repurchase. Since the plaintiff’s father failed to call upon the defendants’ father for repurchase within the agreed time, the title to the suit property stood transferred in favour of the defendants’ father absolutely.
7. Learned counsel for the appellants submitted that the first appellate court erred in misreading and misinterpreting the terms and conditions of the document for arriving at a conclusion that it was a mortgage by conditional sale. None of the conditions in the document contemplated any mortgage of the suit property. To support her submissions, learned counsel for the appellants relied on the decisions of the Hon’ble Apex Court in the case of Pandit Chunchun Jha vs. Sheikh Ebadat Ali and Another 1 and Dharmaji Shankar Shinde and Others vs. Rajaram Shripad Joshi (Dead) through Legal representatives and Others[2]. She also relied on the decision of this court in the case of Nana Tukaram Jaikar vs. Sonabai and Others[3]. Learned counsel for the appellants submits that the reading of the terms and conditions clearly makes out a transfer of absolute right, title and interest in favour of the defendants’ father. None of the conditions in the document reveals the parties' intention to execute the mortgage. Hence, the reasons recorded by the first appellate court would amount to misinterpreting the terms and conditions of the document. Hence, the question of law must be answered in favour of the appellants, and the impugned decree must be set aside.
SUBMISSIONS ON BEHALF OF RESPONDENTS:
8. Learned counsel for the respondents supports the impugned decree. He relied upon the relevant findings of the first appellate court in paragraph 28 of the impugned judgment. He points out that the surrounding circumstances brought on record as evidence have been rightly relied upon by the learned District Judge in interpreting the terms and conditions of the contract. As held by the learned District Judge in the impugned judgment, a stipulation for transfer within five years from the date of conveyance to the transferor at the expense of the transferor for the same price mentioned in the deed is rightly held as an indication that the document was a mortgage by conditional sale. He submits that there is no basis to interpret the document as a document of sale with a condition to repurchase. The title of the plaintiff’s father is admitted, and thus, from the facts of the case, the condition to repurchase embodied in the document was only by way of a facility to the vendor to repurchase the property. Hence, the transaction in question was correctly held to be a mortgage by conditional sale, and not a sale with a condition to repurchase.
9. Learned counsel for the respondents, therefore, submitted that the intention of the parties and valuation of the property are important factors to be considered for deciding the nature of the transaction. If the party intended to execute an absolute sale with a condition to repurchase, there was no reason to agree to the consideration amount as mentioned in the document. The recital in the agreement clearly indicates that the parties never intended to transfer the absolute right, title and interest in favour of the defendants’ father, as the consideration of Rs. 300/-, was much less than the prevailing market value in 1962-67; thus, the document was purely a mortgage, and the amount mentioned in the agreement was the loan amount. From the evidence brought on record, the first appellate court has rightly held that the consideration amount mentioned in the agreement does not quantify the real value of the suit property as prevailing at the time of execution of the document. Hence, the amount of consideration mentioned in the agreement is the loan amount and therefore, a clause is provided in the agreement to repay the amount within five years and reconvey the property in the name of the plaintiff’s father.
10. To support his submissions that a grossly inadequate amount mentioned in the document would itself show that it is a document of mortgage, learned counsel for the respondents relied upon the decision of the Hon’ble Apex Court in the case of Bhaskar Waman Joshi (deceased) and Others vs. Shrinarayan Rambilas Agarwal (deceased) and Others[4], Bhimrao Ramchandra Khalate v., Patel Ravjibhai Bhulabhai v. Rahemanbhai M. Shaikh[6], and the decision in the case of Mushuir Khan vs. Smt..
11. Learned counsel for the respondents, therefore, submits that the reasons recorded by the first appellate court to hold that the document was not of absolute ownership and it was a document of mortgage with a condition to sell are correct, and no interference is called for as it does not raise any question of law.
CONSIDERATION OF SUBMISSIONS:
12. To examine the rival submissions made on behalf of the parties, I have carefully perused the terms and conditions of the document. The parties had agreed that the consideration amount of Rs. 300/- was paid for the transfer of the suit property in favour of the defendants’ father. The terms and conditions of the document further provided that the defendants’ father would be entitled to deal with the property and create third-party rights in respect of the same. This condition in the document clearly indicates the intention of the parties to transfer the absolute right, title, and interest in favour of the purchaser. To ascertain whether the parties intended to create a mortgage, the document must set out the essential terms and conditions contemplated under Section 58 of the Transfer of Property Act, 1882 (“TP Act”).
13. If the parties intended to execute a mortgage by way of conditional sale, there was no need to include the term in the document, which conferred on the purchaser an absolute right to deal with the property, including the creation of third-party rights as he wished. The document is dated 2nd July 1962, with a condition that the amount may be returned within five years for repurchase. The five-year period ended on 1st July 1967. Nothing is produced on record to show that the plaintiff’s father, during his lifetime, called upon the defendant’s father for repayment of the amount. The suit was filed on 6th August 1994, i.e., almost 27 years after the expiry of the five-year period.
14. The first appellate court held that the suit was within the limitation as it was filed within 30 years for the redemption of the mortgage. The suit, even if held to be within limitation as it was filed on the ground that the document is a mortgage document with a condition of sale, the conduct of the plaintiff of applying for redemption of the mortgage only after expiry of the original owner, i.e. plaintiff’s father, speaks volumes about the intention of the parties. If the parties intended to create a mortgage, the term in the agreement that enabled the predecessor, i.e., the defendants’ father, to deal with the property would convey no meaning.
15. Evidence brought on record indicating that the property's value was substantially higher than the consideration stated in the agreement cannot be the sole basis for interpreting the document as a mortgage. Section 58 of the TP Act defines a mortgage to mean a transfer of an interest in the property to secure the payment of money advanced as a loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability. The definition further explains that the principal money and interest for which payment is secured is called the mortgage money, and that the transferor is called the mortgagor and the transferee is called the mortgagee. A mortgage by conditional sale is defined in clause (c) of Section 58 to mean that the mortgagor ostensibly sells the mortgaged property on a condition that the sale becomes absolute in default of payment of the mortgage money, or becomes void on payment of the money. Thus, the real nature of a document can be determined from its terms and conditions and the relevant factors, such as creation of a debt, the debtor-creditor relationship, mortgage money that includes principal money and interest, the duration for reconveyance and the consequences on default of making payment of mortgage money or payment of the mortgage money within the time stipulated in the terms and conditions creating the mortgage.
LEGAL POSITION:
16. The legal principles for determining the real nature of the transaction are explained by the Hon’ble Apex Court in the case of Dharmaji Shankar Shinde. The Apex Court explained the definition of mortgage by conditional sale as under: “10. Section 58(c) of the Transfer of Property Act contains the definition of “mortgage by conditional sale”. In a “mortgage by conditional sale”, the transfer is made as a security to a loan taken by the mortgagor-owner; whereas in a “sale with a condition to repurchase”, the sale is made by the vendor-owner reserving with himself a right to repurchase it within a stipulated time. A sale with a condition of retransfer is not a mortgage since the relationship of debtor and creditor does not exist and there is no debt for which the transfer is made as a security. Whether the document is a “mortgage by conditional sale” or “sale with a condition to repurchase” is to be ascertained from the intention of the parties. It is trite law that the intention of the parties should be gathered from the recitals of the document itself. emphasis applied by me
17. In the case of Dharmaji Shankar Shinde, the Hon’ble Apex Court referred to and relied upon the decisions in Pandit Chunchun Jha and Bhaskar Waman Joshi and held that the question in each case for the determination of the real character of the transaction needs to be ascertained from the conditions in the document viewed in the light of the surrounding circumstances. It is held that, from a reading of the document, if the words are plain and unambiguous, then, in the light of the evidence of the surrounding circumstances, they must be given their true effect. If there is any ambiguity in the language employed, the intention is to be ascertained from the contents and the language of the document.
18. Thus, for the purpose of deciding whether the essential ingredients are of a mortgage by conditional sale, the agreement needs to be qualified as an ostensible sale for ownership and possession, but containing a clause for reconveyance as contemplated under Section 58(c) of the said Act, and there must exist a debtor and creditor relationship. As to the valuation of the property and the transaction value, along with the duration of reconveyance, these are also important considerations in determining the nature of the agreement. Hence, a cumulative consideration of the factors, together with the recitals of the agreement, would indicate the parties' intention. However, when the recitals in the agreement are clear and unambiguous, it is not necessary to delve into the surrounding circumstances to ascertain the real intention of the parties by ignoring the clear language of the document.
19. Both the learned counsels relied on the decision of the Apex Court in the case of P. L. Bapuswami vs. N. Pattay Gounder 8 on the aspect of valuation of the property. In the dispute regarding the question of valuation of the property, the Hon’ble Apex Court held that the language of the document was not decisive and there were several circumstances to indicate that the document was a transaction of mortgage by conditional sale and not a sale with a condition of retransfer. In the facts of the said case, the condition of repurchase was embodied in the document, and the consideration was lower than the real value of the property. Thus, based on the terms and conditions of the document, the Apex Court held that the document was a transaction of mortgage by way of conditional sale.
20. The interpretation of the terms of conditional sale by way of mortgage or sale with the condition of repurchase is explained by the Hon’ble Apex Court in the case of Pandit Chunchun Jha, holding that the intention of the parties would be a determining factor; however, the intention must be gathered from the document itself. When the language of the document is clear, it must be given effect to. Only in the event there is ambiguity in the language of the document, it would be permissible to look at the surrounding circumstances to determine the intention of the parties.
21. On a similar proposition regarding the language of the document, learned counsel for the appellants rightly relied upon the decision of the Apex Court in the case of Dharmaji Shankar Shinde. The Apex Court held that, in each case, the question would be the determination of the real character of the transaction, to be ascertained from the provisions of the deed, viewed in the light of the surrounding circumstances. It is further held that if the words are plain and unambiguous in the light of evidence of surrounding circumstances, they must be given the true legal effect based on the nature of the document.
22. The decision in Mushir Mohd. Khan, relied upon by the learned counsel for the respondents, the Apex Court held that the two documents read together would not constitute a “mortgage” because the condition of repurchase is not contained in the same documents by which the property was sold. It was held that the proviso to clause (c) of Section 58 operated in the said case, and the transaction between the parties cannot be held to be a mortgage by conditional sale. In Bhimrao Ramchandra Khalate, the Apex Court relied upon the decisions in Pandit Chunchun Jha, Bhaskar Waman Joshi and Dharmaji Shinde. It is held in the facts of the said case that reading of the document would show that the document was executed for the reason that the plaintiff had borrowed a sum of Rs 3000 for his household expenses, and the defendant was bound to retransfer the land if the amount is paid within one year. The advances of loan and return thereof were part of the same document, which creates a relationship of debtor and creditor. Thus, it was held to be covered by the proviso in Section 58(c) of the Act.
23. In Patel Ravjibhai Bhulabhai, the document in question contained a condition that the amount of Rs 10,000/- paid as a loan, if paid back within five years, the purchaser shall give back the property with possession, and the vendor shall have no right to ask back the same after expiry of the time limit. Hence, it was held that the actual transaction between the parties was a loan, that a debtor-creditor relationship existed, and that the deed in question was a mortgage by way of conditional sale.
24. In the decision of Bhaskar Waman Joshi, the mortgage by conditional sale contemplated under Section 68(c) was accepted based on oral evidence and the parties' subsequent conduct. It was thus held that the interpretation of the document, whether it was a sale or a mortgage by conditional sale, was based on evidence on record in the said case. Since the document granted the option to reconvey the property for the price specified in the deed, and the transferees had no control over the property, it was held that the terms and conditions strongly indicated the parties' intention to create a mortgage. In Nana Tukaram Jaikar, this Court held that in a sale coupled with an agreement to reconvey there was no relation of debtor and creditor nor was the price charged upon the property conveyed, but the sale was subject to an obligation to retransfer the property within the period specified. Hence, the deed indicated that it was a sale with a condition to repurchase and not a mortgage with condition to sell.
ANALYSIS AND CONCLUSIONS:
25. In the present case, the trial court has examined the parties’ intention by interpreting the document's terms and conditions. The plaintiff's father died in 1991. According to the document, the fiveyear period for reconveyance expired sometime in 1967. After the death of the plaintiff’s father, the plaintiff applied for redemption of the mortgage after about 29 years. The trial court, therefore, held that, if the parties intended to create a mortgage transaction, the plaintiff's father would have taken steps during his lifetime to redeem it. The title of the document, styled as a sale deed with a condition to repurchase within five years, is an important factor in determining the parties' intention. The condition of repurchase within five years, coupled with the term that enabled the purchaser to deal with the property, including the creation of third-party rights, is accepted as a sufficient indication or decisive factor of the nature of the document.
26. Thus, in the absence of terms and conditions that would qualify the document as a mortgage, the trial court refused to grant the plaintiff’s prayer for redemption. In view of the clear terms and conditions of the document, the trial court correctly held that, on expiry of the five-year period from the date of the agreement, the right to repurchase was extinguished in 1967. Hence, after 27 years, the plaintiff would not be entitled to seek repurchase under the guise of redemption of the mortgage.
27. In the present case, neither a creditor-debtor relationship exists between the parties nor is there any creation of debt. Thus, in view of the well-settled legal principles on the interpretation of the document based on the clear and unambiguous language of the document, there was no reason for the first appellate court to interpret the document by referring to the surrounding circumstances on the valuation of the property. When the language of the document is clear, the surrounding circumstances cannot be relied upon to indicate a different intention of the parties.
28. In the decision of the Hon’ble Apex Court in the case of P. L. Bapuswami, the Hon’ble Apex Court held that if the language is plain and unambiguous, it must be in the light of the evidence of the surrounding circumstances to give its true legal effect. It is held that if 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 the existing facts. Thus, even in the decision relied upon by the learned counsel for the respondents, it is a well-settled legal principle that if the document is clear and unambiguous, the surrounding circumstances brought on record cannot be interpreted to give a different meaning than what is intended in the document itself. In view of the different facts of the present case, as discussed above, the decisions relied upon by the learned counsel for the respondents would not be of any assistance to the respondents.
29. Hence, in the present case, the reasons recorded by the first appellate court, referring to the surrounding circumstances brought on record by way of oral evidence, would not be sustainable in view of the clear and unambiguous language of the deed itself. Hence, the findings recorded by the first appellate court to reverse the trial court’s findings are not based on a correct interpretation of the terms and conditions of the document. The impugned judgment and decree would therefore require interference in this second appeal.
30. In view of the terms and conditions of the document as discussed in the preceding paragraphs, in my opinion, the first appellate court committed an error by misinterpreting the document to arrive at a conclusion that the document is a mortgage by condition of sale. Hence, for the reasons recorded above, the question of law framed in the second appeal is answered in favour of the appellants by holding that the document dated 2nd July 1962 is a document of sale with a condition to repurchase. Since the vendor failed to take steps within the time provided in the agreement for repurchase, the right to repurchase was extinguished on expiry of the five-year period provided in the document. Hence, the plaintiff, who is the son of the original vendor, is not entitled to seek redemption of the mortgage by contending that the document is a mortgage by way of conditional sale.
31. For the reasons recorded above, the second appeal is allowed by passing the following order:
(i) The judgment and decree dated 21st October 2002 passed by the learned II Additional District Judge, Nashik, in Civil Appeal No. 390 of 1998 is quashed and set aside.
(ii) Civil Appeal No. 390 of 1998 is dismissed.
(iii) The judgment and decree dated 11th September 1998 passed by the Civil Judge Junior Division, Pimpalgaon (B) dismissing the Regular Civil Suit No. 175 of 1994 is confirmed. [GAURI GODSE, J.]