In the above issue was once again discussed and the decision of the Hon'ble Supreme Court in Chunchun Jha vs. Ebadat Ali and Another, AIR 1954 SC 345 was upheld. In Chunchun Jha’s case (supra), this Court examined this very question as to what constitutes “a mortgage by conditional sale or a sale out and out with a condition of repurchase“.
23) The learned Judge, Vivian Bose J., in his distinctive style of writing speaking for the Bench posed the question as under:
“This is a plaintiff’s appeal in a suit for redemption of what the plaintiff calls a mortgage dated 15-4-1930. The only question for determination is whether this is a mortgage by conditional sale or a sale out and out with a condition of repurchase. If the former the plaintiff succeeds. If the latter he is out of Court.”
24) His Lordship then examined the question in the context of several leading English authorities on the subject and Section 58(c) of the T.P. Act and laid down the following test for deciding the true nature of the document. This is what His Lordship held:
“5. The question whether a given transaction is a mortgage by conditional sale or a sale outright with a condition of repurchase is a vexed one which invariably gives rise to trouble and litigation. There are numerous decisions on the point and much industry has been expended in some of the High Courts in collating and analysing them. We think that is a fruitless task because two documents are seldom expressed in identical terms and when it is necessary to consider the attendant circumstances the imponderable variables which that brings in its train make it impossible to compare one case with another. Each must be decided on its own facts. But certain broad principles remain.
6. The first is that the intention of the parties is the determining factor: see
# Balkishen Das v. Legge. 22 Ind. App.58 (P.C.) (A)
But there is nothing special about that in this class of cases and here, as in every other case where a document has to be construed, the intention must be gathered, in the first place, from the document itself. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended.
As Lord Cranworth said in
# Alderson v. White (1858) 44 E.R.924
at p. 928 (B)-
“The rule of law on this subject is one dictated by commonsense; that prima facie an absolute conveyance, containing nothing to show that the relation of debtor and creditor is to exist between the parties, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase…. In every such case the question is, what, upon a fair construction, is the meaning of the instruments?” Their Lordships of the Privy Council applied this rule to India in Bhagwan Sahai v. Bhagwan Din3 and in
# Jhanda Singh v. Wahid-ud-din, AIR 1916 PC 49
at p.54 (D).
7. The converse also holds good and if, on the face of it, an instrument clearly purports to be a mortgage it cannot be turned into a sale by reference to a host of extraneous and irrelevant considerations. Difficulty only arises in the border line cases where there is ambiguity. Unfortunately, they form the bulk of this kind of transaction.
8. Because of the welter of confusion caused by a multitude of conflicting decisions the legislature stepped in and amended Section 58(c) of the Transfer of Property Act.
Unfortunately that brought in its train a further conflict of authority. But this much is now clear. If the sale and agreement to repurchase are embodied in separate documents, then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not. But the converse does not hold good, that is to say, the mere fact that there is only one document does not necessarily mean that it must be a mortgage and cannot be a sale. If the condition of repurchase is embodied in the document that effects or purports to effect the sale, then it is a matter for construction which was meant. The legislature has made a clear cut classification and excluded transactions embodied in more than one document from the category of mortgages, therefore it is reasonable to suppose that persons who, after the amendment, choose not to use two documents, do not intend the transaction to be a sale, unless they displace that presumption by clear and express words; and if the conditions of Section 58(c) are fulfilled, then we are of opinion that the deed should be construed as a mortgage.”
23) The learned Judge, Vivian Bose J., in his distinctive style of writing speaking for the Bench posed the question as under:
“This is a plaintiff’s appeal in a suit for redemption of what the plaintiff calls a mortgage dated 15-4-1930. The only question for determination is whether this is a mortgage by conditional sale or a sale out and out with a condition of repurchase. If the former the plaintiff succeeds. If the latter he is out of Court.”
24) His Lordship then examined the question in the context of several leading English authorities on the subject and Section 58(c) of the T.P. Act and laid down the following test for deciding the true nature of the document. This is what His Lordship held:
“5. The question whether a given transaction is a mortgage by conditional sale or a sale outright with a condition of repurchase is a vexed one which invariably gives rise to trouble and litigation. There are numerous decisions on the point and much industry has been expended in some of the High Courts in collating and analysing them. We think that is a fruitless task because two documents are seldom expressed in identical terms and when it is necessary to consider the attendant circumstances the imponderable variables which that brings in its train make it impossible to compare one case with another. Each must be decided on its own facts. But certain broad principles remain.
6. The first is that the intention of the parties is the determining factor: see
# Balkishen Das v. Legge. 22 Ind. App.58 (P.C.) (A)
But there is nothing special about that in this class of cases and here, as in every other case where a document has to be construed, the intention must be gathered, in the first place, from the document itself. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended.
As Lord Cranworth said in
# Alderson v. White (1858) 44 E.R.924
at p. 928 (B)-
“The rule of law on this subject is one dictated by commonsense; that prima facie an absolute conveyance, containing nothing to show that the relation of debtor and creditor is to exist between the parties, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase…. In every such case the question is, what, upon a fair construction, is the meaning of the instruments?” Their Lordships of the Privy Council applied this rule to India in Bhagwan Sahai v. Bhagwan Din3 and in
# Jhanda Singh v. Wahid-ud-din, AIR 1916 PC 49
at p.54 (D).
7. The converse also holds good and if, on the face of it, an instrument clearly purports to be a mortgage it cannot be turned into a sale by reference to a host of extraneous and irrelevant considerations. Difficulty only arises in the border line cases where there is ambiguity. Unfortunately, they form the bulk of this kind of transaction.
8. Because of the welter of confusion caused by a multitude of conflicting decisions the legislature stepped in and amended Section 58(c) of the Transfer of Property Act.
Unfortunately that brought in its train a further conflict of authority. But this much is now clear. If the sale and agreement to repurchase are embodied in separate documents, then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not. But the converse does not hold good, that is to say, the mere fact that there is only one document does not necessarily mean that it must be a mortgage and cannot be a sale. If the condition of repurchase is embodied in the document that effects or purports to effect the sale, then it is a matter for construction which was meant. The legislature has made a clear cut classification and excluded transactions embodied in more than one document from the category of mortgages, therefore it is reasonable to suppose that persons who, after the amendment, choose not to use two documents, do not intend the transaction to be a sale, unless they displace that presumption by clear and express words; and if the conditions of Section 58(c) are fulfilled, then we are of opinion that the deed should be construed as a mortgage.”
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