Holding

The Sale Deed was not a mortgage by conditional sale but a security for the loan, and therefore it was not binding on the respondent after repayment.

Summary

The respondent-plaintiff obtained a loan from the appellants and executed a deed titled a Sale Deed on 14‑06‑1972, which was later alleged to be a mortgage by conditional sale. The parties also signed an agreement that the sale would be cancelled and the land returned if the loan (Rs.5,000) was repaid by 14‑06‑1973; the loan was subsequently repaid (Rs.6,700) under a later agreement dated 05‑06‑1974. The trial court, appellate court and the Supreme Court examined the language of the deed, the inadequate consideration (Rs.3,000 for land worth at least Rs.5,000) and the surrounding circumstances, concluding that the deed was executed solely as security and not as a genuine sale. Consequently, the Sale Deed was held not binding on the respondent after repayment, and the appeal by the appellants was dismissed.

Issues considered

Whether the deed titled a Sale Deed dated 14‑06‑1972 constitutes a mortgage by conditional sale or a genuine sale.
Whether the condition for a mortgage by conditional sale is incorporated in the deed as required by Section 58(e) of the Transfer of Property Act, 1882.
Whether the parties intended to transfer ownership of the land or merely to secure the loan.
Whether the Sale Deed becomes void upon repayment of the loan.

Legislation cited

Transfer of Property Act, 1882s. 58(e)

Subjects

mortgageconditional salesale deedtransfer of property actintention of partiessecurity for loaninadequate considerationproperty law

Judgment

(2016] 9 S.C.R. 742

A RAMVILAS (DEAD) THR. LRS. & ANR.
v.
..
KARIM KHAN & ANR.
(Civil Appeal No. 2078 of2008)
B DECEMBER 01, 2016
(R. K. AGRAWAL AND R. BANUMATIII, JJ.)
Mortgage - Mortgage by conditional sale - When not - A
transaction, though, ostensibly of sale when can be regarded.as
mortgage - Intention of the parties to be gatheli!dfrom the language
c of the deed interpli!ted in the light of surroundi11g circumstances -
Whether the sale deed i11 question, I;xhibit D/1 executed i11 favour
of appella111s-defendants was 011ly a mortgage as a security for
repayment of loa11 taken by respo11dent-plai11tiff and it was 11ever
the intelllion of parties to sell the land - Held: I11 Exhibit D/1 Sale •
D Deed, 110 co11ditfon is incorporated illdicati11g that it would co11Slitute
mortgage by co11ditional sale - Exhibit DI1 Sale Deed was executed
only as a security for the loan and it was never the intention of the
parties lo convey the suit property - Since ihe 1st respondelll-
plaintiff paid back the loan amount as is evident from Agreement-
Exhibit P/2, Courts below rightly recorded concurrent findings of
E
fact that Exhibit D/1 Sale Deed is not binding on the 1st respondent-
plaintiff - Inadequacy of sale consideration yet another
circumstance to indicate that the 1st respondentcplaintiff could not
have intended to sell the property to appellants-defendants -
Transfer of Properry Act, 1882 - s.58(e).
F Dismissin2 the appeal, the Court
HELD: 1.1 In Exhibit D/1 Sale Deed, no condition was
inc~rporated indicating that it would constitute mortgage by
. conditional sale. It was clear that the 1st respondent-plaintiff
had never intended to sell the property to the appellants-
'
G defendants. As rightly pointed out by the Courts below, in Exhibit
P/1 Agreement dated 14.06.1972, it was clearly stated that if 1st
respondent-plaintiff paid back Rs.5000/- by 14.06.1973, then the
Sale Deed would be cancelled and 1st respondent-plaintiff would
get back the land sold to the appellants-defendants. As held by
H
742
RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & 743
ANR.

the Courts below, had it been the intention of the parties to sell A
the property, the parties wouhl not have agreed for return of the
land on payment of Rs.5000/- by 14.06.1973. (Para 7)(747-C-E]
1.2 The Courts below had also recorded a concurrent finding
of fact that Exhibit D/1 Sale Deed was executed only as a security
for the loan and it was never the intention of the 1st respondent- B
plaintiff to convey the suit property. Since 1st respondent-plaintiff
had paid back the loan amount i.e. Rs.6,700/- as is evident from
the subsequent Agreement Exhibit P/2 dated 05.06.1974, the
Courts below rightly recorded the concurrent findinps of fact that
Exhibit D/1 Sale Deed was not binding on the 1s respondcnt-
plaintiff. Once repayment was made, the 1st respondent-plaintiff c
was entitled to the declaration as prayed for. [Para 10)(748-E, F]
1.3 The inadequacy of the sale consideration stated in
Exhibit D/1 Sale Deed was yet another circumstance to indicate
that the 1st respondent-plaintiff could not have intended to sell
the property to the appellants-defendants. (Para 11)(749-A] D

Bhaskar Waman Joshi (D) and Ors. v. Shrinarayan
Rambilas Agarwal (DJ and Ors. AIR 1960 SC 301 :
1960 SCR 117 - relied on.
Bishwanath Prasad Singh i: Rajendra Prasad and Am: E
(2006) 4 SCC 432 : 2006 (2) SCR 566; Raj Kishore
(Dead) by LRs. v. Prem Singh and Ors. (2011) 1 SCC
657 : 2010 (14) SCR 1019; Gauri Shankar Prasad cmd
Ors. v. Brahma Nand Singh (2008) 8 SCC 287 : 2008
(10) SCR 839 - referred to.
F
Case Law Reference
20Q~ (2) SCR 566 referred to ParaJ
2008 (10) SCR 839 referred to Para3
1960SCR117 relied on Paras
G
2010 (14) SCR 1019 referred to Paras
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2078 of
2008.
From the Judgment and Order dated 22.06.2005 of the High Court
H
744 ·SUPREME COURT REPORTS [2016] 9 S.C.R.

A of Madhya Pradesh;-Bench at Gwalior, in Second Appeal No .. 374.of
1998. ., . ,., •. , . .. . ..
I
l
Pune~t Jain; Manu M'atieshwari, Ms. Chhay~ Kirti, Abhinav Gupta
and Ms. Pratibha, Advs. for the appellants.
Raj esh, A.dv. for the· respo1ident: · ·..
B ''-··-···,•,.--.: -~.;~ ,:,";' !":< ~-

,.,Th~ Judgment of the Court.\vas_delivered by . . ...
• · R. BANUMATHi;.J. I. The present appeal arises· out of the
judgment of the High Court of Judicature of Madhya Prad~sh; Jabalpur:
Bench ai Gwalior in Second Appeal No.374of1998 dated 22.06.2005;
c confirming the' findings of the Courts below that the Sale Deed executed
in favour Ofthe appellants-defendants was only a mortgage as a securiiy
for repayment of the loan taken by the 1~· respondent:plaintiff. · · · ·
·; · 2. It is not necessary for us to refer to the· pleadings of the 1"
respondent-plaintiff and the appellants-defendants as they are referred
in detail in the judgments of the Courts below.
D f ; ,< •.. ' .) •' • - -; .-._ - . ~ .• ,• ':· • . ' - •• ' . .. • - •: .
3. Challenging the concurrent findings of the Courts below, the
learned counsel for the appellants-defendants Mr. Puneet Jain submitted
that whenever a conveyance of the property by a Sale Deed is
accompanied by a separate document, it has to be taken as re-conveyance
E and it was not a mortgage and the Courts below erred in holding that the
Sale Deed dated 14.06, 1972• infavourofthe
, ., st '
appellants-defendants was v •

a security for theJoan taken by the I respondent-plaintiff. Learned
counsei furthe~. submitted .th~t the Sale Deed. was accomganied by an
Agreement Exhibit P/l dated 14.06.1972 under which the 1 respondent-
plaintiffhad agreed to pay an am~unt ofRs,50QO/- by 14:06.J 973, which
F' the 1" respondent-plaintiff did not comply with: and subsequent
A~reement Exhibit P/2 dated 05.06.1974 was executed under which the
1s respondent-plaintiff paid an amount of Rs.6700/-; and afte~ a lapse
of about 17 years, the 1" respondent~plaintiff filed the suit for declaration
that the S~le Deed was null and.void; It was further submitted that in
the absence of a prayer for cancellation of the Sale· Deed dated
G 14.06.1972, the suit filed by the 1". respondent-plaintiff ought to have
been dismiSs~d, more SO, when the suit was filed nearly' after a'gap of j 7
years from the date of execution of the Sale Deed i.e 14.06.1972. In
support of his contention, learned cou11sel placed reliance on a number
of judgmen~s of this Court reported as Bislnrnnatli Prasad Singh v.
H

0
RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & 745
ANR. [R. BANUMATHI, J.]

Rajendra Prasad and Am: - (2006) 4 SCC 432, Raj Ki.shore (Dead) A
by LR~. " Prem Singh and Ors. - (2011) I SCC 657 and Gauri Shankar
Prasad and Ors. v. Brahma Nand Singh - (2008) 8 SCC 287 ..
4. On the other haiid, taking us through the judgments of the Courts
below, learned counsel for the I SI respondent-plaintiff submitted that based
on the oral and documentary evidence, the Courts below rightly recorded B
concurrent findings of fact, that Exhibit D/J Sale Deed
SI
dated 14.06.1972
was executed as security for the loan taken by the I respondent-plaintiff.
Learned counsel for the I SI respondent-plaintiff has drawn our attention
to the finding of the trial Court to submit that at the relevant pofnt of
time, the value of the land under the Sale Deed dated 14.06.1972 would
have been more than Rs.15000/- ai1d an inadequate consideration of c
Rs.3000/-, as stated in Exhibit D/J Sale Deed by itself would show that
it was executed only as a security for the loan and it was never the
intention of the parties to sell the land. It was subri1itted that the
concurrent findings recorded by the Courts below do not suffer from
infirmity warranting any interference. D
5. We have carefully considered the rival submissions and perused
the impugned judgment and the material on record. In the decision relied
upon by the learned counsel for the I" respondent-plaintiff re.ported as
Bhaskar Waman Joshi (D) and. Ors. v. Shrinarayan Ram bi/as
Aganval (D) and Ors. - AIR 1960 SC 301, this Court has succinctly E
considered the question as to whether a transaction ostensibly of a sale
may be regarded as a mortgage and held that it is one of intention of the
parties to be gathered from the language of the deed interpreted in the
light of the surrounding circumstances.
6. We can usefully refer to the relevant portion of the judgment F
which reads as under:
"7.The proviso to this clause was added by Act XX of 1929.
Prior to the amendment there was a conflict of decisions
on the question whether the condition contained in a
separate deed co.uld be taken into account in ascertaining
G
whether a mortgage was intended by the principal deed.
The Legislature resolved this conflict by enacting that a ·
transaction shall not be deemed to be a mortgage unless
the condition referred to in the clause is embodied in the
document which effects or purports to effect the sale. But
H
746 SUPREME COURT REPORTS [2016) 9 S.C.R.

A it does not follow that ifthe 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 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
B
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 must undoubtedly
be taken into account, but the value to be attached thereto
must vary with the degree of formality attending upon the
c transaction. The definition ofa 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 creditor nor is
the price charged upon the property conveyed, but the sale
D
is subject to an obi igation to retransfer the property with in
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. The definition of a mortgage by
E conditional sale itself contemplates an ostensible sale of
the property. As pointed out by the Judicial Committee of
the Privy Council in Narasingerji Gyanagerji v. P.
Parthasaradhi, 51 Ind App 305: (AIR 1924 PC 226), the
circumstance that the transaction as phrased in the
document is ostensibly a sale with a right of repurchase in
F the vendor, the appearance being laboriously maintained by
the words of conveyance needlessly iterating the description
of an absolute interest or the right of repurchase bearing
the appearance ofa right in relation to the exercise of which
time was of the essence is not decisive. The question in
G each case is one of determination of the real character of
the transaction to tie ascertained from the provisions of the
deed viewed in the light of surrounding circumstances. If
the words are plain and unambiguous they must in the light
of the evidence of surrounding circumstances be given their
true legal effect. If there is ambiguity in the language
H
RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & 747
ANR. [R. BANUMATHI, J.]

employed, the intention may be ascertained from the A
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. Oral
evidence of intention is not admissible in interpreting the
covenants of the deed but evidence to explain or even to
B
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."
7. In the light of the above well settled principles, we may now c
consider Exhibit D/1 Sale Deed and Exhibit P/1 Agreement both dated
14.06.1972. In Exhibit D/1 Sale Deed no condition is incorporated
indicating that it would constitute mortgage by that conditional sale. It is
clear that the I SI respondent-plaintiff had never intended to sell the
property to the appellants-defendants. As rightly pointed out by the Courts D
below, in Exhibit P/1 Agreement dated 14.06.1972, it is clearly stated
that if 1SI respondent-plaintiff pay back Rs.5000/- by 14.06.1973, then
the Sale Deed would be cancelled and I" respondent-plaintiff would get
back the land sold to the appellants-defendants. As held by the Courts
below, had it been the intention of the parties to sell the property, the
parties would not have agreed for return of the land on payment of E
Rs.5000/- by I 4.06.1973.
8. The judgments cited by learned counsel for the appellants hold
that for a transaction to constitute mortgage by conditional sale, it is
necessary that the condition is embodied in the document that purports
to effect the sale deed. In Raj Kishore (Dead) by LRs. v. Prem F
Singh and Ors. - (2011) I SCC 657, it was held as under:
"15. A bare reading of the above would show that for a
transaction to constitute mortgage by conditional sale it is
necessary that the condition is embodied in the document
that purports to effect the sale. That requirement is stipulated G
by the proviso which admits of no exceptions.

H
748 SUPREME COURT REPORTS [2016) 9 S.C.R.

A 18. This Comt in K. Simrathmull case observed: (AIR
p.1183, para 4)
"4. The sale deed, the deed of reconveyance Ext.A- I
and the rent note Ext.B-1 were undoubtedly parts of the
same transaction. The plea of the plaintiff that the sale
B deed Ext.A- I constituted a transaction of mortgage by
conditional sale is inadmissible, because the sale deed
and the covenant for reconveyance are contained in
separate documents."
19. The finding of the High Court as to the legal effect of
the transaction of sale followed by an agreement for
c retransfer of the property is not, therefore, legally sound."
9. As pointed out earlier, Exhibit Oil Sale Deed executed by the
I st respondent-plaintiff in the instant case does not embody any condition
as stipulated in Section 58 (e) of the Transfer of Property Act, 1882. On
facts and evidence, Courts below rightly held that Exhibit D/1 Sale Deed
.D would not constitute a mortgage by conditional sale.
10. On the basis of oral and documentary evidence, the Courts
below recorded that Exhibit D/1 Sale Deed dated 14.06.1972 and Exhibit
P/I Agreement dated 14.06.1972 having been executed on the same
day and both ought to be read together. The Courts below have also
E recorded a concurrent finding of fact that Exhibit D/I Sale Deed was
executed only as a security for the loan and it was never the intention of
the I st respondent-plaintiff to convey the suit property. Since I SI
respondent-plaintiff has paid back the loan amount i.e. Rs.6,700/- as is
evident from the subsequent Agreement Exhibit P/2 dated 05.06.1974,
F the Courts below rightly recorded the concurrent findings of fact that
Exhibit DI I Sale Deed is not binding on the I" respondent-plaintiff. Once
repayment was made, the I SI respondent-plaintiff was entitled to the
declaration as prayed for.
11. Yet another reason could be pointed out for affirming the
impugned judgment of the High Court. It has been held by the trial
G Court that at the time of selling the suit property the extent was more
than 10 Bighas i.e. l!J'ct share of 1" respondent-plaintiff in 2.856 hectares
of the total land. Referring to the oral and documentary evidence of I"
respondent-plaintiff's witness Ajay Singh, the trial Court recorded a
finding that at the time of sale of the land in 1972, the market value of
H the land in Padariya was Rs.2000/- per Bigha and at the time of the sale,
RAMVILAS (DEAD) THR. LRS. & ANR. v. KARIM KHAN & 749
ANR. [R. BANUMATHI, J.]

the value of the property'would have bee'n not less than Rs. I 5000/-. The A
inadequacy of the sale consideration stated in Exhibit Oil Sale Deed is
yet another circumstance to indicate that the .1" respondent-plaintiff could
not have intended to sell the property to the appellants-defendants.
12. Having regard to the concurrent findings of the Courts below,
we do not find any reason to interfere with the impugned judgment. B
'13. Accordingly/the appeal is dis1'nissed.: The p'arties shall bear
their own costs. ·
Divya. Pandey Appeal dismissed.