Holding

Section 25(ii) does not exclude constructive notice, but the respondents had neither actual nor constructive notice of the 1927 transaction, so they are protected as bona‑fide transferees.

Summary

The appellants claimed that a 1927 transfer of two plots of land, recorded as a sale, was in fact a mortgage, and sought debt adjustment under section 4 of the Bombay Agricultural Debtors Relief Act, 1947. The trial court held the transfer was a mortgage but dismissed the claim, invoking protection for the respondents under section 25(ii). On appeal, the High Court affirmed that the respondents were bona‑fide transferees for value without notice of the true nature of the 1927 transaction and that the notice contemplated in section 25(ii) was not limited to actual notice. The Supreme Court examined whether section 25(ii) excludes constructive notice and held that it does not, but found that the respondents had neither actual nor constructive notice of the mortgage. Consequently, the respondents were entitled to the protection of section 25(ii) and the appeal was dismissed.

Issues considered

Whether the notice required under section 25(ii) of the Bombay Agricultural Debtors Relief Act, 1947 is limited to actual notice or includes constructive notice.
Whether the respondents were bona fide transferees for value without notice of the real nature of the 1927 transaction.
Whether the 1927 transfer was a sale or a mortgage within the meaning of the Act.
Whether the respondents are entitled to protection under section 25(ii) of the Act.

Legislation cited

Bombay Agricultural Debtors Relief Act, 1947s. 24, s. 25(ii), s. 4

Subjects

agricultural debt reliefmortgage vs saleconstructive noticebona fide transfereesection 25(ii)notice requirementland transfer

Judgment

123

A

M. N. DODAMANI & ORS.
v.
U.S. D. WALIKAR (DEAD) BY LEGAL REPRESENTATIVES &
ORS. B
July 29, 1980
[A. C. GUPTA AND P. N. SHINGHAL, JJ.]
Bombay Agricultural Debtors Relief Act, 1947. Sections 4 and 25(il)--Scope
of-Notice-Section if excludes constructive notice.
Section 25(ii) of the Bombay Agricultural Debtors' Relief Act, 1947 pro-
c
vides that nothing in section 24 shall apply to any bona fide transferee for
value without notice of the real nature of such transfer or his representative
where such transferee or representative holds under a registered deed executed
on or before 15th February, 1939.
The predecessors in interest of the appellants transferred two plots of land
in 1927 to one Krishnaji. The document evidencing the transfer of the plots D
was described as a sale' deed and contained a statement that the vendors had
absolutely sold both the said lands to him, that the entire ownership was his
"alone" and that possession had been given to him. In 1932 and 1935 Krishnaji
sold the two plots to the predecessors in interest of the respondents at a price
lower than that paid by him when he purchased the plots. After the coming
into force of the 1947 Act the appellants applied under section 4 of the Act
for adjustment of debts claiming that the transaction of 1927 was really not a E
sale but a mortgage,
Although the trial court came to the conclusion that the transaction was a
mortgage and not a sale it dismissed the application on the ground that the
respondents were entitled to protection under section 25(ii) of the Act. On
appeal the District Judge allowed the application under section 4. In revision,
the High Court recorded a consent order that the transaction was not a sale
but a mortgage and remitted the case to the trial court for a decision whether
F
the purchasers were transferees for value without notice of the real nature
of the transaction and were entitled to protection of section 25(ii).
On remand the trial court dismissed the application under section 4 hold-
ing 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 High Court set aside the order of the appellate court and
restored that of the trial court on the view that the purchasers had no actual
knowledge or notice of the real nature of the transaction of 1927. It also held
• that the notice contemplated by section 25(ii) was actual notice and that con-
structive notice was clearly beyond the contemplation of section 2.5(ii).
Dismissing the appeal,
HELD: Construing the notice referred to in section 25(ii) as actnal notice It
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. Section 25:ii)
does not exclude constructive notice. [126A-B]
9-646 S.C. India/ 80
124 . SUPREME COURT REPORTS [1981] 1 S.C.R•

A' In the instant case, however, the transferees had no notice, actual or con:-
structive, of the real nature of th: trrnsact;oTl ~f 1927~ [126B] ·
The fact that the lands were sold to the respondents f~r a pric, lower
than what they fetchOO in 1927 might have been due to various reasons and
it cannot be said that this ground alone waS sufficient to faise a suspicion that
the transaction was realiy a mortgage. The Act of 1947 could not have been
within the contemplation of any one in 1932 or 1935 ·when the lands were sold.
The lands were fallow and barren. The record of rights does not contain any
indication that the transaction was a mortgage. The transferees were put in
possession of the lands. Therefore there was no occasion or circumstance to
impel the transferees to start an enquiry as to the real nature of the transac-
tion between the seller _and thei predecessors-in-interest Of the appeIIants in
1927. [126F-H, 127A·B]
c OVIL APPELLATE JURJSDICITON : Civil Appeal No. 691 of 1970.
, Appeal by Special Leave from the Judgment and Order dated
12-8-1969 of the Mysore High Court in Civil Revision Petition No.
\'
'
(
1322 of 1967. I

S. S. lavali, M. Veerappa ·and/. R. Das for the Appellant.
D S. C. Javali, P. G. Gokhale and B. R. Agarwa!a for the
Resi\ondents.-.
The Judgment of the Cotirt was delivered by
GUPTA J.-The only question that arises for decision in this
appeal by special leave is whether the respondents before us are entitled
to relief under section 25(h) .of the Bombay Agricultural Debtors Relief
Act, 1947. The question arises on the following facts. On June 1,
)927 the predecessors-in-interest of the appellants transferred to one
Krishnaji two plots of land· bearing survey numbers 125 / l and. 136
measuring respectively 14.5 and 21.31 acres in village Muma!, Bagalkot
Taluk in Bijapur District. The document by which the transfer was
F effected, described as a sale deed, shows that the two items of pro-
perty were sold "absolutely" for a total sum of Rs. 2000/·. In 1932
Krishnaji sold the plot bearing survey No. 136 to one Ramanna, pre-
decessor-in-interest of respondent Nos. 2{a) to 2(e), for Rs. 400/·. In
1935, Krishnaji sold the other plot, survey No. 125/l, for Rs. 1000/·
to Utalsab Dogrisab Walikar, predecessor-in-interest of respondents
G l(a) to l(c). After the 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 tinder section 25(ii)
H 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 consent order that the tran-
M. N. DODAMANI v. u. s. D. WALIKAR (Gupta, J.) 125

:i;action was not a sale but a mortgage and remitted the case to the trial A
-court for a decision on the question whether the purchasers, Ramanna
·and Walikar, were transferees for value without notice of the real
nature of 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 B
the same matter by the High Court on January 31, 1962, which is re-
ported in 1962 Mysore Law Journal 682, that shows that the same
learned Judge had set aside the order of the appellate court and res-
tored 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 c
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
D
:aforesaid order. The trial court on hearing the matter after remand
dismissed the application under section 4 on the finding that the pur- ·
-chasers 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 E
the impugned order set aside the order of the appellate court and res-
tored that of the trial court agreeing with the trial court that the pur-
.i;hasers had no notice of the real nature of the transaction of 1927.
Section 24 of 'the Bombay Agricultural Debtors Relief Act, 1947
empowers the court to declare any transfer of land by a person whose
debts are being adjusted under this Act. purporting to be a sale, to be F
a mortgage if the court was satisfied that the circumstances connected
with the transfer showed it to be in the nature of a mortgage. Section
25(ii) provides that nothing in section 24 shall apply to "any bona fide
transferee for value without notice of the real nature of such transfer
or his representative where such transferee or representative holds under
a registered deed executed on or before the 15th day of February, 1939". G
The document evidencing the transfer of the plots to Krishnaji in
1927 is discribed as a "sale deed" and contains a statement that the
vendors "have absolutely sold both the said lands to Krisl)naji" and
that the "entire ownership" was Krishnaji's "alone". It is also said
that possession of the lands has also been given to Krishnaji. The H
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
126 SUPR~ME COURT' REPORTS [1981] 1 S.C.R.

A 25(ii) was "actual notice .. ""d tb'. "constructive notice was clearly·
beyond the contemplation of section 25(ii)". It seems to us that con-
struing 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 pro-
vide for the relief of agricultural debtors in the province of Bombay.
B 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 transac-
tion 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
c notice. Referring to the provision of section 25(ii) requiring that the
\
I
transferee must hold under a registered deed ·executed on or before
'
(
February 15, 1939 the High Court says:
"It will be seen that the reference is to a period anterior to
r the corning into force of the Act, a period therefore during which
D
f the special provisions of the Act could not have been within the
contemplation of anybody. If those provisions were not in con-
templation 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 per-
E
suade people to start and pursue. further enquiries."
Mr. S. S. Javali appearing for the appellants contends that the fact that
the [ands .in question were transferred for a smaller amount in 1932
and 1935 than the price Krishnaji had paid for them in 1927 was a
F circumstance that should have put the transferees on enquiry and that
" ·,, if reasonable enquiries had been made they would have had knowledg<>
·of the real nature of the transaction of 1927. The· fact that the land.s
__ 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
G ! that this ground alone was sufficient to raise a suspicion that thee
transaction of 1927 was really a mortgage. As pointed out by the
!
· High Court, the Act of 1947 could not have been within the contem-
plation of anyone in 1932 or 1935. Ramappa in his deposition said
that he paid Rs. 400/- for the land as it was "fallow", and that if
H there were no weeds the price would have been Rs. 600 /-. As for the
land sold to Utalsab, be was dead when the matter came up for bear-
ing before the trial court. The record of rights also does not contain
'M, N. DODAMANI v. u. s. D. WALIKAR (Gupta, ].) 1z7

.;any indication that the transaction of 1927 was in the nature of a ·A
mortgage. The .evidence discloses that Krishnappa put the tra~sferees
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 Krishna ji and the pre-
«iecessors-in-interest of the appellants in 1927. B

The appeal is dismissed but in the circumstances of the case with-
.out, any order as to .costs.

N.K.A. Appeal dismissed.
c