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CASE NO.:

Appeal (civil) 854 of 2007

PETITIONER:

Manjabai Krishna Patil (D) By L.Rs

RESPONDENT:

Raghunath Revaji Patil & Anr

DATE OF JUDGMENT: 20/02/2007

BENCH:

S.B. Sinha & Markandey Katju

JUDGMENT:

J U D G M E N T

[Arising out of S.L.P. (Civil) No.24582 of 2004]

S.B. SINHA, J :

Leave granted.

Appellants herein were owners of land bearing Survey No.198/3/2

admeasuring 2 acres at Village Waghad. They, being in need of money,

approached the respondents. On negotiations having been held in that behalf

by and between the parties, a deed of sale was executed by the appellants in

favour of the respondents on 29.11.1966 for a sum of Rs.6,000/-. However,

the said deed was registered on 17.12.1966. On the same day an agreement

of reconveyance was also executed in terms whereof the respondents agreed

to convey the property back to the appellants herein after five years on

receipt of the amount of consideration specified therein. As the respondents

failed and/or neglected to act in terms of the said agreement of

reconveyance, a suit for specific performance was filed by the appellants

herein against the respondents.

The said suit was decreed. However, on an appeal preferred

thereagainst by the respondents, the First Appellate Court, inter alia, held

that the appellants herein were not ready and willing to perform their part of

contract. The First Appellate Court, however, rejected the contention of the

respondents that time was of the essence of contract. The appeal was

allowed, stating :

"To sum up, the agreement of reconveyance

(exhibit 31) was the part and parcel of the agreement of

sale evidence by the sale deed (exhibit 30), and for

want of registration the plaintiff No. 2 Pandharinath did

not acquire any right on the basis of the said agreement

of reconveyance. Moreover, the said agreement of

reconveyance is left vague on vital and important points

discussed above. Respondent No. 3 Vijayabai was not

a party to the said agreement of revonveyance and it

was not signed, by her. We have also seen above that

the plaintiffs were not ready and willing to perform

their part of contract. On all these points, the learned

Judge ought to have dismissed the suit for specific

performance. Relying on all these circumstances

discussed above, I do find that the plaintiffs are not

entitled to claim a decree for specific performance.

Relying on all these circumstances discussed above, I

do find that the plaintiffs are not entitled to claim a

decree for specific performance of contract."

In the Second Appeal filed by the appellants herein being aggrieved

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by and dissatisfied with the said judgment, the High Court also opined that

as the document of reconveyance was part and parcel of the same

transaction and being compulsorily registerable; for want of registration, the

same was neither admissible in evidence nor enforceable through a court of

law.

Mr. Chinmoy Khaladkar, the learned counsel appearing on behalf of

the appellants, would submit that keeping in view the fact that the deed of

sale was executed on 29.11.1966, and the agreement of reconveyance was

executed on 17.12.1966, the same was not required to be registered.

Mr. S.V. Deshpande, the learned counsel appearing on behalf of the

respondents, on the other hand, submitted that although the sale deed was

executed on 29.11.1966, but having been registered on 17.12.1966 itself on

which date the agreement of reconveyance was executed, the same must be

held to be a part of the same transaction and, thus, was compulsorily

registerable.

In this connection, our attention was drawn to the agreement of

reconveyance dated 17.12.1966, the relevant portion whereof reads as

under :

"I, above referred vendee write down that you

above referred vendor are selling the land to me for

6,000/- upon the condition that after cultivation for 5

years this particular land would be reconveyed to

Pandrinath Ukhardu Patil as soon as he repays the

amount i.e. 6,000/-

But within 5 years all the earnings of the land

would be enjoyed by me as an interest."

The basic fact of the matter is not in dispute. Two documents were

executed on different dates and at different places. Whereas the deed of sale

was executed at Tal. Raver, the purported agreement of reconveyance was

executed at Waghad where the registration office was situated.

By reason of the sale deed dated 29.11.1966, the respondents obtained

possession of the entire suit property. The property was transferred

absolutely so as to enable the vendee to use the same till their life time as

also by their legal representatives. Appellants declared that they would have

no right, title and interest in the said land, nor they would have ownership

right and in case anyone claimed any such right, the same would be treated

as cancelled. An easementary right was also conveyed. It was stipulated

that the land was not encumbered as the mortgage which had been created in

respect of the said land, has been redeemed and in the event "anything is

found", 'they would be responsible for the same'.

The amount of consideration was received on different dates at

different places. The said deed must, therefore, be construed to be a deed of

absolute sale.

Furthermore, Section 58 (c) of the Transfer of Property Act, 1882 (for

short, "the Act") provides for satisfaction of the conditions for mortgage by

way of conditional sale providing :

"(c) Mortgage by conditional sale.- Where, the

mortgagor ostensibly sells the mortgaged property \026

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

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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 mortgage by conditional

sale 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."

Proviso appended to Section 58(c) is clear and unambiguous. A legal

fiction is created thereby that the transaction shall not be held to be a

mortgage by conditional sale, unless a condition is embodied in the

document which effects or purports to effect the sale. Where two documents

are executed, the transaction in question would not amount to a mortgage by

way of conditional sale. In a case of this nature, ordinarily the same would

be considered to be a deed of sale coupled with an agreement of

reconveyance.

This aspect of the matter has been considered by this Court in

Bishwanath Prasad Singh v. Rajendra Prasad and Another [(2006) 4 SCC

432], wherein it was held :

"A bare perusal of the said provision clearly shows

that a mortgage by conditional sale must be evidenced by

one document whereas a sale with a condition of

retransfer may be evidenced by more than one document.

A sale with a condition of retransfer, is not mortgage. It

is not a partial transfer. By reason of such a transfer all

rights have been transferred reserving only a personal

right to the purchaser (sic seller), and such a personal

right would be lost, unless the same is exercised within

the stipulated time."

In Mushir Mohammed Khan (Dead) By L.Rs. v. Sajeda Bano (Smt.)

and Others [(2000) 3 SCC 536], this Court referring to a well-known

decision of Pandit Chunchun Jha v. Sk. Ebadat Ali and Another [(1955)

SCR 174: AIR 1954 SC 345] held :

"14. Applying the principles laid down above, the

two documents read together would not constitute a

mortgage as the condition of repurchase is not contained

in the same documents by which the property was sold.

The proviso to clause (c) of Section 58 would operate in

the instant case also and the transaction between the

parties cannot be held to be a "mortgage by conditional

sale.""

In Shri Bhaskar Waman Joshi (deceased) and Others v. Shri Narayan

Rambilas Agarwal (deceased) and Others [(1960) 2 SCR 117], it was

observed :

"The proviso to this clause was added by Act 20 of

1929. Prior to the amendment there was a conflict of

decisions on the question whether the condition

contained in a separate deed could be taken into account

in ascertaining 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 it does not follow that if the condition

is incorporated in the deed effecting or purporting to

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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 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

transaction. The definition of a mortgage by conditional

sale postulates the creation by the transfer of a relation of

mortgagor and 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 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. The definition

of a mortgage by conditional sale itself contemplates an

ostensible sale of the property\005."

In Tulsi and Others v. Chandrika Prasad and Others [(2006) 8 SCC

322], it was held:

"A distinction exists between a mortgage by way

of conditional sale and a sale with condition of purchase.

In the former the debt subsists and a right to redeem

remains with the debtor but in case of the latter the

transaction does not evidence an arrangement of lending

and borrowing and, thus, right to redeem is not reserved

thereby."

In the instant case, no relationship of debtor or creditor came into

being. No security was created and in fact conveyance of the title of the

property by the respondent to the appellant was final and absolute.

Reliance has been placed by the High Court on a Full Bench decision

of the Bombay High Court in Harkisandas Bhagvandas and Others v. Bai

Dhanu [AIR 1926 Bombay 497] wherein, it was held that if the transaction

is really one of mortgage then the second deed would be inadmissible for

want of registration; but where the transaction is not one of mortgage, the

second document would not need registration, even if it is a part of the same

transaction of sale.

In this case also the transaction is a mortgage by conditional sale and

having regard to the provisions of Section 17 of the Indian Registration Act,

the agreement of sale was not compulsorily registerable.

It has further been brought to our notice that whereas the Deed of Sale

was executed in favour of two persons; the purported agreement of

reconveyance has been executed by only one of the vendees, namely,

Raghunath Revaji Patil, who has been described as 'Benami'; but the same

has not been proved. The High Court did not go into the aforementioned

question stating :

"20. Once, this issue is answered in the negative, the

issue, whether execution by Defendant No. 1 alone

(Defendant No. 2 has not signed the reconveyance deed)

would obstruct the court from granting a decree for

specific performance of reconveyance, is not required to

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be considered since, a finding favourable to appellant on

that issue is not going to make any favourable impact on

the conclusion of the appeal."

We, therefore, are of the opinion that the interest of justice will be

subserved if the matter is remitted to the First Appellate Court for

consideration of the matter afresh on the said question. The impugned

judgments cannot be sustained and are set aside accordingly. The Appeal is

allowed and the matter is remitted to the First Appellate Court for

consideration of the matter afresh .

In the facts and circumstances of this case, there is no order as to

costs.