Supreme Court of India
MUSHIR MOHAMMED KHAN (DEAD) BY LRS.versusSMT. SAJEDA BANO AND ORS.
- Citation
- 2000 INSC 116
- Decided
- 2 March 2000
- Disposal
- Disposed off
- Bench
- S SAGHIR AHMAD
Holding
The transaction does not constitute a mortgage (neither by conditional sale nor usufructuary) because the condition of reconveyance is not in the sale deed and an agreement of reconveyance is not part of a usufructuary mortgage.
Summary
The plaintiff, who had bought a house for Rs 3,000, sold it to the defendant for Rs 1,000 by a sale deed, and shortly thereafter executed an agreement to reconvey the property on repayment of Rs 1,000 within two years, also executing a rent note to pay rent to the defendant. The plaintiff sued for redemption, claiming the arrangement was a mortgage. The Supreme Court examined the three contemporaneous documents – sale deed, agreement of reconveyance and rent note – and held that they do not create a mortgage by conditional sale because the condition of reconveyance is not contained in the sale deed, as required by the proviso to Section 58(c) of the Transfer of Property Act. The Court further held that the documents do not constitute a usufructuary mortgage, since an agreement of reconveyance is not part of such a mortgage. Consequently, the transaction cannot be treated as a mortgage of any kind. The Court set aside the High Court’s decree and ordered the defendant to pay Rs 2 lakhs (forgoing rent arrears) within three months, otherwise the appeal would be dismissed with costs.
Issues considered
- The nature of the transaction: whether it amounts to a mortgage by conditional sale under Section 58(c) of the Transfer of Property Act, 1882.
- Whether the transaction can be characterised as a usufructuary mortgage under Section 58(d).
- Whether the three documents taken together indicate a sale or a mortgage.
- Whether the plaintiff is entitled to redemption.
Legislation cited
- Code of Civil Procedure, 1908s. Order 34 Rule 5
- Transfer of Property Act, 1882s. 58(c), s. 58(d)
Subjects
Transfer of Property Actmortgageconditional saleusufructuary mortgageredemptionsale deedagreement of reconveyancerent noteproperty lawsettlement
Judgment
)
MUSHIR MOHAMMED KHAN (DEAD) BY LRS. A
v.
SMT. SAJEDA BANO AND ORS.
MARCH 2, 2000
[S. SAGHIR AHMAD AND Y.K. SABHARWAL, JJ.] B
Transfer of Property Act, 1882-Section 58(c) proviso and (d)-Mort-
gage by conditional sale and usufructuary mortgage-Parties executed three
documents-Sale deed, agreement of re-conveyance and a rent note-By sale
deed property sold by plaintiff in favour of defendant-By agreement of. c
re conveyance ofproperty by defendant in favour ofplaintiffproperty reconveyed
--- on payment of sale price within stipulated time-In tenns of rent note plaintiff
paying rent of the property to defendant-True nature of transaction to be
ascertained having regard to all documents-Held, the transaction is not a
m011gage by conditional sale as the condition of reconveyance is not con-
tained in the documents by which the property was sold-Further; an agree- D
ment of reconveyance does not constitute part of the transaction by which
usufructuary mortgage is created.
Plaintiff-respondents sold the property for a price less than its origi-
nal price to the defendant-appellants by executing a sale deed. Property
E
....,,.. was further reconveyed on payment of sale price within stipulated time by
executing agreement of reconveyance by the defendant in favour of the
plaintiff. In terms of the rent note, plaintiff had to pay rent to the defend-
ant. Plaintiff filed suit for redemption treating the transaction as mort-
gage. Both the trial court and the lower appellate court dismissed the suit.
High Court held the transaction between the parties as mortgage and not F
sale of the property. Hence this appeal.
Disposing of the appeal, the Court
HELD : 1.1. Where the parties executed three documents-the sale
deed, agreement of reconveyance and rent note almost contemporane- G
ously, all the three documents have to be taken into consideration to find
out the true nature of the transaction. [74-C]
1.2. The three documents being sale deed, agreement of reconveyance
and rent note read together would not constitute a mortgage by operation
of proviso to section 58(c) of the Transfer of Property Act, as the condition H
65
66 SUPREME COURT REPORTS [2000] 2 S.C.R.
A of re-purchase is not contained in the documents by which the property
was sold and the transaction between the parties cannot be held to' be a
''mortgage by conditional sale." [73-C-D]
Chunchun Iha v. Ebadat Ali & Am:, [1955) 1 SCR 174; Bhaskar Waman
Joshi (D) & Ors. v. Shrinarayan Rambilas Agarwal (D) & Ors., [1960) 2 SCR
B 117; P.L Bapuswami v. N. Pattay Gounder, Am (1966) SC 902 and Vidhyadh~r
v. Mankikrao & Am:, [1999) 3 SCC 573, relied on.
Narasingerji Gyanagerji v. P. Parthasaradhi, Am (1924) PC 226; and
Balkishan Das v. Legge, (1899) 27 Ind. Appl. 58, cited.
c 1.3. If the ~ocuments cannot be treated as creating a mortgage on
account of the prohibition contained in proviso to section 58(c) these
documents would not create a mortgage of another kind. Though in a
usufructuary mortgage, the possession has necessarily to be delivered to
the mortgagee, an agreement for reconveyance is 'not obtained from him.
An agreement of reconveyance does not normally constitute part of the
D transaction by which unufructuary mortgage is created. [73-G; 74-A.C]
Smt. Indira Kaur & Ors. v. Shri Sheo Lal Kapoor, Am (1988) SC 1074,
distinguished.
Govind Prasad Chaturvedi v. Hari Dutt Shastri,[1977] 2 SCR 877,
E cited.
2.1. The property was ostensibly transferred to the defendant for a
price less than the market value which must have considerably appreci-
ated when the property was purchased by the plaintiff when it was sold by
him to the defendant. Even though the defendant knew that within two
F years the value of the property would further escalate, he agreed on a
reconveyance on the original price for which it was sold to him. [76-B-D]
Smt. Indira Kaur & Ors. v. Shri Sheo Lal Kapoor, AIR (1988) SC 1074,
relied on.
G 2.2. Having regard to the circumstances of the case, parties were
allowed time to negotiate a settlement, but they have failed to arrive at a
compromise. Therefore, defendants are directed to pay a sum of Rs. Two
lakhs forgoing the arrears of rent up-to-date within three months from the
date of the judgment failing which the appeal shall stand dismissed with
H costs. [77-C; EJ
M.M. KHAN v. SMT. SAJEDA BANO (S. SAGHIR AHMAD, J.] 67
U. Nilan v. Kannayyan (Dead) through Lrs., JT (1999) 7 SC 621, relied A
on.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9 of 1988.
From the Judgment and Order dated 27.8.87 of the Madhya Pradesh
High Court in S.A. No. 107 of 1983. B
S.K. Gambhir, Anil K. Sharma, Awanish Sinha and Vivek Gambhir for
the Appellant.
Dr. R.B. Masodkar and K.L. Taneja for the Respondents.
The Judgment of the Court. was delivered by c
S. SAGHIR. AHMAD, J. Habibur Rehman, who is since dead and is
represented by the present respondents, was the owner of a house situated in
Gali Masjid Peerji in lbrahimpura, Bhopal, which he had purchased for a sum
of Rs.3,000 through a registered sale deed dated 24.2.1949. On 28.12.1955,
he executed a sale deed in respect of this house in favour of the appellant, D
Mushir Mohammed Khan, who also is dead and is represented by the present
appellant, for a sum of Rs.1,000 only. A few days later, namely, on 3rd
January, 1956, Mushir Mohammed Khan executed an agreement in favour of
Habibur Rehman agreeing to re-convey the said house if the amount of
Rs.1,000 was paid back to him within a period of two years. Habibur Rehman E
also executed a rent note in favour of Mushir Mohammed Khan on the same
day. Both the documents, nam~ly, the sale deed dated 28.12.1955 and the
agreement for re-conveyance, executed on 3rd January, 1956, were registered
on 5th January, 1956. In terms of the rent note, Habibur Rehman started
paying Rs.20 as rent for the house in question to Mushir Mohammed Khan.
F
Treating the above documents as mortgage, Habibur Rehman, who shall
hereinafter be referred to as plaintiff, filed a suit for redemption which was
dismissed by the trial court on 5th of July, 1979. The appeal filed thereafter
was also dismissed by the Vth Addi. District Judge, Bhopal on 21.12.1982.
But the second appeal filed by the plaintiff was allowed by the Madhya
G
Pradesh High Court by the impugned judgment dated 27.8.1987.
Learned counsel appearing on behalf of the appellant [hereinafter
referred to as 'defendant'] has contended that the High Court was in error in
treating the transaction between the plaintiff and the defendant as mo1tgage.
He contended that since the condition of re-conveyance was not contained in H
68 SUPREME COURT REPORTS [2000) 2 S.C.R.
A the same document by which the property was sold by the plaintiff to the
defendant, the document coukl not be treated to be a deed of mortgage. It is
contended that the agreement by which the defendant agreed to re-convey the
property in question to the plaintiff was an entirely separate transaction
between the parties and even if that document was read along with the sale
deed executed earlier, the cumulative effect of both the transactions would not
B
result in a "mortgage" and they will remain two separate transactions, namely,
a sale deed by which the property was transferred to the defendant and an
agreement by which the defendant agreed to re~convey the property to the
plaintiff.
c Learned ·counsel for the plaintiff, on the contrary, contended that the
judgment passed by the High Court, in the circumstances of the case, was
wholly justified inasmuch as the property which was purchased by the
plaintiff himself for a sum of Rs.3,000 was transferred to the defendant for
a sum of Rs.1,000 only which was far less than the real value of the property
which, with the lapse of time, escalates specially in big cities like Bhopal
D where the property in question is situate and, therefore, the transaction cannot
be treated as an out and out sale but a mortgage which was executed by the
plaintiff to secure the loan of Rs.1,000 advanced by the defendant. He also
contended that the plaintiff who has remained in possession throughout, has
already invested huge amount of money in the improvement of the house and
E has made additional room on the first floor which the plaintiff would not have
done if he had sold the property absolutely in favour of the defendant. He
contended that the conduct of the plaintiff in selling the property for a lower
price than its actual value and investing huge amount even after the sale
transaction indicated that the plaintiff knew and believed that he was still the
owner of that property, which he would redeem one day. The transaction, by
F conduct, was, therefore, a mortgage and not a sale.
Let us first analyse the High Court judgment on this question before
proceeding to consider the respective contentions of the parties' counsel.
The High Court took into consideration both the documents together,
G namely, the Sale Deed [Exh. P-2) executed by the plaintiff in favour of the
defendant and the Agreement of Re-conveyance [Exh. P-3) in the light of the
so-called surrounding circumstances and came to the conclusion that the
transaction ·between the parties was a mortgage and not an absolute sale of
the property in question in favour of the defendant. After having come to the
H conclusion that the transaction was a mortgage and not a Sale Deed, the High
),
M.M. KHAN v. SMT. SAJEDA BANO [S. SAGHIR AHMAD, J.] 69
Court attempted to find out the nature of the mortgage. On account of the A
Proviso to Clause (c) of Section 58 of the Transfer of Property Act, it came
to the conclusion that since the condition for re-conveyance of the property
in favour of the plaintiff was not contained in the Sale Deed [Exh. P-2], the
transaction could not be treated as a "mortgage by conditional sale". The High
Court, thereafter, came to the conclusion that the prohibition contained in the
B
above Proviso would operate only in respect of "mo1tgage by conditional
sale", but not in respect of any other mortgage as the Proviso was appended
to Clause (c) of Section 58 only. The High Court then proceeded to consider
the ingredients of Clause (d) and recorded a finding that the transaction
between the parties was a usufructuary mortgage. Having thus found the
transaction to be a mortgage, the High Court, while reversing the judgment c
passed by the trial court and the lower appellate court, decreed the suit of the
plaintiff.
The question whether there was a transaction of mortgage or sale
between the parties is to be decided, not only in the light of the recitals made D
in the deed, but also in the light of other circumstances which are established
on record. It is true that there is a difference between a "mortgage by
conditional sale" and a "sale with a condition to re-purchase"; the basic fact
remains that the form of transaction is not always the final test and the true
test is the intention of the parties in entering into the transaction.
- "Mortgage by conditional sale" is defined in the Clause (c) of Section
58 which provides as under :
E
"(c) Mortgage by conditional sale.
F
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 G
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 sale." H
70 SUPREME C6URT REPORTS (2000] 2 S.C.R.
A Proviso to this Clause was added by Act XX of 1929 so as to set at
rest the conflict of decisions on the question whether the conditions, specially
the condition relating to reconveyance contained in a separate document
could be taken into consideration in finding out whether a mortgage was
intended to be created by the principal deed. The Legislature enacted that a
transaction shall not be deemed to be a mortgage unless the condition for re-
B
conveyance is contained in the document whiCh purports to effect the sale.
This Proviso was considered in Chunchun Iha v. Ebadat Ali & Am:,
AIR (1954) SC 345 = (1955] 1 SCR 174, and came to be considered again
in Bhaskar Waman Joshi (D) & Ors. v. Shrinarayan Rambilas Agarwal (D)
c & Ors., AIR 1960 SC 301 = 1960 (2) SCR 117, in which it was explained
as under:
"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
D
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 mustundoubtedly be taken into account,
E but the value to be attached thereto must vary with the degree of
formality attending upon the transaction."
The Court further considered the distinction between "mortgage by
conditional sale" and a "sale with a condition of re-purchase" an<l observed
p as under:
"The definition of a mortgage by conditional sale postulates the
creation by the transfer of a relation of mortgagor and the 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
G c_reditor 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.
H The definition of a mortgage by conditional sale itself contemplates
M.M. KHAN v. SMT. SAJEDA BANO [S. SAGHIR AHMAD, J.] 71
an ostensible sale of the property. As pointed out by the Judicial A
Committee of the Privy Council in Narasingerji Gyanagerji v. P.
Pa11hasaradhi, 51 Ind. App. 305 [AIR 1924 PC 226], the circum-
stance 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 iter-
B
ating 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 C
they must in the light of the evidence of surrounding circumstances
be given their true legal effect. 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 wanelated D
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 contemporaneous
conduct is always admissible as a surrounding circumstance, but
evidence as to subsequent conduct of the parties is inadmissible." E
The view expressed by this Court in Bhaskar's case (supra) was
repeated in the same words in P.L Bapuswami v. N. Pattay Gounder, AIR
(1966) SC 902 :
- "The question whether by the incorporation of such a condition a
transaction ostensibly of sale may be regarded as a mortgage is one
pf intention of the parties to be gathered from the language of the deed
F
interpreted in the light of the surrounding circmnstances. The defini-
tion of a mortgage by conditional sale postulates the creation by the
transfer of a relation of mortgagor and the mortgagee, the price being
G
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. The distinction between the two transactions is the relation-
ship of debtor and creditor and the transfer being a security for the H
\
)
l
A
72 SUPREME COURT REPORTS [2000] 2 S.C.R.
debt. The form in which the deed is clothed is not decisive. The
question in each case is one of determination of the real character of
-
~
I
the transaction to be ascertained from the provisions of the documents
viewed in the light of surrounding circumstances. If the language is
plain and unambiguous it must in the light of the evidence of
surrounding circumstances be given its true legal effect. If there is
B
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."
C These decisions were considered again in Vidhyadhar v. Mankikrao &
Am:, AIR (1999) SC (1st) Supp. 1441 = [1999] 3 SCC 573 and it was
observed as under :
"47. The basic principle is that the form of transaction is not the final
test and the true test is the intention of the parties in entering into the
D transaction. If the intention of the parties was that the transfer was by
way of security, it would be a mortgage. The Privy Council as early
as in Balkishen Das v. Legge, (1899) 27 Ind. Appl 58, had laid down
that, as between the parties to the document, the intention to treat the
transaction as an out and out sale or as a mortgage has to be found
E out on a consideration of the contents of docwnent in the light of
surrounding circumstances. The decision of this Court in Bhaskar
Waman Joshi v. Shrinarayan Rambilas Agarwal, AIR (1960) SC 301:
[1960] 2 SCR 117 and P.L Bapuswami v. N Pattay Gounder; AIR
(1960) SC 902 : [1966] 2 SCR 918, are also to the same effect.
F 48. The contents of the document have already been considered above
which indicate that defendant No. 2 had executed a mortgage by
conditional sale in favour of defendant No. 1. He had promised to pay
back Rs.1500 to him by a particular date failing which the document
was to be treated as a sale deed. The intention of the parties is
reflected in the contents of the document which is described as a
G mortgage by conditional sale. In the body of the docllinent, the
mortgage money has also been specified. Having regard to the
circumstances of this case as also the fact that the condition of
repurchase is contained in the same document by which the mortgage
was created in favour of defendant No.I, the deed in question cannot
H but be treated as a mortgage by conditional sale. This is also the
' M.M. KHAN v. SMT. SAJEDJ\ BANO (S. SAGHIR AHMAD, J.] 73
finding of the courts below." A
Applying the principles laid down above, the two documents read
together would not constitute a. 'mortgage' as the condition of re-purchase is
not contained in the same documents by which the property was sold. Proviso
to Clause (c) of Section 58 would operate in the instant case also and the
transaction between the parties <.;annot be held to be a "mortgage by-condi- B
tional sale."
The High Court, after recording a finding that th~ transaction cannot be
treated as a "mortgage by conditional sale", in view of the Proviso to Clause
(c) of Section 58, proceeded to consider the circumstances of the case and
came to the conclusion that althoµgh the transaction was not a "mortgage by
c
conditional sale", it would definitely be a usufructuary mortgage. The High
Court was of the opinion that all the ingredients which go to constitute a
usufructuary mortgage were present in the instant case inasmuch as the
property was given away to the defendant for a price which was less than its
original price or the market value on the date on which the sale was executed D
in favour of the defendant. The High Court also found that possession of the
property in question was symbolically delivered to the defendant and the
plaintiff also executed a rent note in favour of the defendant promising to pay
rent in resi>ect of the premises in question to the defendant every month.
We are unable to accept the reasoning of the High Court. We have E
already seen above that the three documents read together do not constitute
a mortgage or mortgage by conditional sale inasmuch as the condition to
repurchase was not contained in the sale deed.itself. If the documents cannot
be treated as creating a mortgage on account of the prohibition contained in
the Proviso to Clause (c) of Section 58, it is difficult to accept that these F
documents would create a mortgage of another kind. The basic fact which has
been ignored by the High Court is that though in a usufructuary mortgage,
the possession has necessarily to be delivered to the mortgagee, an agreement
for reconveyance is not obtained from him. While recording a finding on the
question of usufructuary mortgage, the High Court did not take into consid-
G
eration the second document which represented an agreement between the
parties that if the amount in question, namely, the price money for which the
sale was executed by the plaintiff in favour of the defendant was returned
within the time stipulated by that agreement, the defendant would reconvey
the property to the plaintiff. An agreement of reconveyance does not nonnally
constitute part of the transaction by which usufructuary m01tgage is created. H
i.
74 SUPREME COURT REPORTS [2000] 2 S.C.R.
A Where the parties executed three documents almost contemporaneously, all
the three documents have to be taken into consideration to find out the true
nature of the transaction.
Learned counsel for the plaintiff referred to the decision of this Court
in Smt. Indira Kaur and others v. Shri Shea Lal Kapoor; AIR (1988) SC 1074,
B
and contended that in that case too, the property was sold and a separate
agreement of reconveyance was executed by which the purchaser had prom- ..,---...
I
ised to reconvey the property to the seller, on return of the consideration
money for which the sale deed was executed. The seller had also executed
a rent note in favour of the purchaser and thus continued to occupy the
c property as tenant. The Court held, on consideration of all the circumstances,
the transaction to be a mortgage and not an out and out sale in favour of the
purchaser. It is con'.tentled that since in the instant case also the property was
sold and a deed of reconveyance was executed by the defendant in favour of
the p~aintiff and possession was delivered to the defendant only symbolicaily
inasmuch as the plaintiff had executed a rent note under which he had
D
promised to pay rent every month to the defendant, the transaction should
also be treated as mortgage. It is no doubt true that this Court in Smt. Indira
Kaur & Ors. v. Shri Shea Lal Kapoor (supra) had held, on considering
the facts of that case, the transaction to be a mortgage. The Court had also
relied upon its earlier' decision in Govind Prasad Chaturvedi v. Hari Dutt
E Shastri, [1977] 2 SCR 877=AIR (1977) SC 1005, in which the facts were
almost similar and in which too, it was held that the transaction was a
mortgage. But the learned counsel did not notice the relevant observations
which are reprodµced below:-
F "These factors clearly spell out the real intention of the parties that
it was a transaction of mortgage to secure the sum of Rs.7000 at
approximately 13Yz% interest. But then it is not necessary to examine
this dimension of the matter inasmuch as the plaintiff has not prayed
for redemption though in the plaint an averment has been made that
the real intention of the parties was to create a mortgage. As the
G plaint stands, and as the plaintiff himself has preferred to enforce the
agreement for specific performance, it is not necessary to examine the
question as to whether or not the real nature of the transaction was
mortgage though it was given an appearance of a transaction of a
sale. For the same reason we need not examine the question as to
H whether or not S.58(c) of the Transfer of Property Act would have
M.M. KHAN v. SMT. SAJEDA BANO [S. SAGHIR AHMAD, J.] 75
disabled the plaintiff from claiming the relief of redemption on the A
basis that the real intention of the parties was to create a mortgage
and not an absolute sale coupled with an agreement of re conveyance.
This question will have to be dealt with at appropriate time having
regard to the fact that there is an increasing tendency in recent years
to enter into such trans,ctions in order to deprive the debtor. of his B
right of redemption within the prescribed period of limitation. In fact
very often the mortgagee in place of getting a mortgage deed executed
in lieu of a loan obtains an agreement to sell in his favour from the
mortgagor so as to bring pressure on the mortgagor by seeking to
enforce specific performance to enable the mortgagee to obtain
possession of the property for an aniount smaller than the real value C
of the property. We need not however probe the matter any further
for the purpose of disposing of the present appeal for the reasons
stated earlier."
.ti
[Emphasis supplied]
D
Thus, the Court did not consider the effect of the Proviso to Section
58(c) of the Transfer of Property Act and did not examine the matter from
that angle as the plaintiff, in that case, had not prayed for redemption but had
prayed for specific performance of the agreement of reconveyance. This
decision is, therefore, of no use to the plaintiff.
E
Though we, on the facts of this case, cannot hold the transaction to
constitute a mortgage with a condition of repurchase, we also cannot hold the
transaction to be a usufmctuary mortgage as held by the High Court which,
in our opinion,' was in error in recording that finding by excluding from its
consideration the agreement of reconveyance. F
But we also cannot lose sight of a number of relevant factors for doing
complete justice between the parties. These factors are that though the
property was purchased by the plaintiff for a sum of Rs.3000 in 1949, it was
sold to the defendant for a smaller sum of Rs.1,000 on 28.12.1955. This
indicates that the property was ostensibly transferred to the defendant not for G
its real value but for a price which was far less than the market value which
must have considerably appreciated from 1949 when the property was
purchased by the plaintiff till 1955 when it was sold by him to the defendant.
The other circumstance was that the defendant executed a contemporaneous
document in favour of the plaintiff. by which he agreed to reconvey the H
76 SUPREME COURT REPORTS (2000] 2 S.C.R.
A property to the plaintiff if the sum of Rs. I 000 was returned to him within two
years. That is to say, even though the defendant knew that within two years,
the value of the property would further escalate, he agreed on a reconveyance ,>
for the original price of Rs.1,000 for which it was sold to him.
It is in these circumstances that the observations of this Court in Smt.
B
Indira Kaur and others v. Shri Shea Lal Kapoor (supra), which are repeated
below, become relevant :-
" ........ there is an increasing tendency in recent years to enter into such
transactions in order to deprive the debtor of his right of redemption
c within the prescribed period of limitation. In fact very often the
mongagee in place of getting a m011gage deed executed in lieu of a
loan obtains an agreement to sell in his favour from the mongagor
so as to bring pressure on the mongagor by seeking to enforce
, specific perfomzance to enable the mortgagee to obtain possession of
the property for an amount smaller than the real value of the
D
property....... " I
t
This might have happened in the instant case also and instead of (
executing a Mortgage deed in respect of the property in question, the plaintiff
was persuaded to execute a sale deed in favour of the defendant who executed
E an agreement of reconveyance in favour of the plaintiff.
In U. Nilan v. Kannayyan (Dead) Through LRs., IT (1999) 7 SC 621
=(1999] 8 SCC 511, this Court observed as under :
F "Adversity of a person is not a boon for others. If a person in stringent
financial conditions had taken the loan and placed his properties as
security therefor, the situation cannot be exploited by the person who
had advanced the loan. The Court seeks to protect the person affected
by adverse circumstances from being a victim of exploitation. It is this
philosophy which is followed by the Court in allowing that person to
G redeem his properties by making the deposit under Order 34 Rule 5
C.P.C."
Having regard to the circumstances of the case, parties were allowed
time to negotiate a settlement, but they have failed to arrive at a compromise.
H Although the plaintiff offered a sum of Rs. 1 lakh to be paid within six months
M.M. KHAN v. SMT. SAJEDA BANO [S. SAGHIR AHMAD, J.] 77
to the defendant, the defendant made a counter offer of Rs.1.5 lakh, forgoing A
also the arrears of rent, to the plaintiff, but the plaintiff is not prepared to give
up the title in the property as indicated by the letters written by the respective
counsel to the Registrar of this Court, which were placed before us. This.
tussk, however, does indicate that the amount of Rs. 1,000 for which the
property was sold by the piaintiff in favour of the defendant, does not
B
represent the true market value of the property, neither on the date on which
the sale deed was executed in favour of the defendant nor does it represent
the true value of the property today. We, therefore, dispose of this appeal by
providing that if the defendant pays a sum of Rs.2 lakhs [forgoing also the
arrears of rent uptodate] within three months from today, the judgment passed
by the High Court shall stand set aside and those of the trial court and the c
lower appellate court shall stand restored. In case, however, the amount is not
paid within the aforesaid period, the appeal shall stand dismissed with costs.
N.J. Appeals disposed.
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