# AND OTHERS v. SHRI NARAYAN RAMBILAS AGARWAL

- **Citation:** [1960] 2 S.C.R. 117
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Criminal Appeals Nos. 100 to 105of1954
- **Bench:** P. B. Gajendragadkar, K. SuBBA RAO, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/and-others-v-shri-narayan-rambilas-agarwal-1850
- **Pages:** 14

## Headnote

M ortgage-Deed-Constr-ucti:on--Mortgage by conditional sale
-Sale with a claitse jo'r repurchase-Distinction between-Intention
of the parties-Contemporaneous conduct- -Su.rrounding circumstances-Time fixed for reconveyance-Whether essrnce of the
contract.
A deed dated September ro, r93r, described as a sale ,deed,
recited that the transferors were indebted and that to discharge
the liability. three items of immoveable properties, described in
the deed and separately valued, were conveyed in full ownership
and that possession was delivered to the transferees. The deed
further provided, inter alia (r) that if the transferors demanded
reconveyance of any or all of the items of the properties within
5 years, the transferees shall reconvey to them at their expense
, ,
for the price mentioned in the deed, (2) that if within four years
and six months the transferees dig not exercise ·the right of
reconveyance as aforesaid and the transferees did not desire to
retain all or any of the properties, they had a right to get back
the amount of consideration of the deed and return all the three
or any of the properties in the condition. in, which by vis major,
Go~el'nment action or any reason whatsoever they may be, and
I959
Satwant Singh
v.
The State of
Punjab
Kapur].
I959
November 3
ils
SUPRE:vIE COURT REPOR.TS [1960 (2)]
I959
(3) that if the transferors failed to comply with the transferees'
request to take back the properties a breach of agreement of
Bhaskar rvanian reconveyance rendering the transferors liable to pay damages
Joshi
shall be committed. There was also a clause that the transferors
v.
shall lose the right of getting a reconveyance after the expiry of
l'larayan Ranibilas the period of 5 years. On the same date as the deed of sale the
Agarwal
transferors executed an agreement by \Vhich they undertook to
pay the difference between the net rent to be recovered by the
transferees from the properties and interest at the rate of nine
per cent. on the price till the date of reconveyance.
In a .suit for
redemption brought by the transferors on August 26, r943, on
the footing that the deed dated September ro, 193 r, was a mortgage by conditional sale, the transferees contended that by the
transaction an absolute conveyance of the properties \Vas intended
and that the conveyance was subject to a condition of repurchase
to be exercised \vithin a period of five years from the date of the
deed.
The evidence showed that the price paid for the properties under the deed was wholly inadequate.
Held, that the question whether a transaction ostensibly of
sale n1ay be regarded as a mortgage is one of intention of the
parties \vhich has to be ascertained fro1n the provisions of the
deed vie\ved in the light of the surrounding circun1stances. In a
sale coupled \vith an agreen1ent to rcconvey there is no relation
of debtor and creditor nor is the price charged upon the property
conveyed, but the sale is subject fo an obligation to retransfer
the property within the period specified. In a mortgage by
conditional sale a relation of debtor and creditor is created, the
transfer being a security for the debt. Oral evidence of intention
is not admissible in interpreting the convenants of the deed but
evidence to explain or even contradict the recitals as distinguished
from the terms of the document may be given. Evidence of
contemporaneous conduct is admissible as a surrounding circumstance, but evidence as to subsequent conduct of the parties is
inadmissible.
Narasingerji Gyangerji v. Panuganti Parthasarathi and Others,
(1924) L.R. 51 I.A. 305, relied on.
Held, further, that in the present case, the deed dated
Septernber IO, 193r, on a true construction in the light of the
surrounding circumstances sho\ved that the transaction \Vas one
of mortgage enabling the transferors to redeem the properties.

## Text

s.c.:R.
SUPREM:ffi COURT REPORfS
provisions is different.
But as I have said above the
evidence to support the plea under s. 197 and to establish the requisite nexus between the act done. by
Henderson and the scope and extent of his dutie.s is
lacking and therefore the applicability of s. 197 to the
facts of the present case cannot be held to have been
proved.
In my opinion the foundation has not been laid for
holding that sanction under s. 197 was necessary in
the instant case. I therefore agree that the appeals
be dismissed.
By court.-The petitioner's Criminal
Appeals
Nos. 100 to 105of1954 having been dismissed and the
conviction of the petitioner having been upheld, this
petition is dismissed.
SHRI BHASKAR WAMAN JOSHI (deceased)
AND OTHERS
v.
SHRI NARAYAN RAMBILAS AGARWAL
(deceased) AND OTHERS
(P. B. GAJENDRAGADKAR and K. SuBBA RAO and
J. c. SHAH, JJ.)
M ortgage-Deed-Constr-ucti:on--Mortgage by conditional sale
-Sale with a claitse jo'r repurchase-Distinction between-Intention
of the parties-Contemporaneous conduct- -Su.rrounding circumstances-Time fixed for reconveyance-Whether essrnce of the
contract.
A deed dated September ro, r93r, described as a sale ,deed,
recited that the transferors were indebted and that to discharge
the liability. three items of immoveable properties, described in
the deed and separately valued, were conveyed in full ownership
and that possession was delivered to the transferees. The deed
further provided, inter alia (r) that if the transferors demanded
reconveyance of any or all of the items of the properties within
5 years, the transferees shall reconvey to them at their expense
, ,
for the price mentioned in the deed, (2) that if within four years
and six months the transferees dig not exercise ·the right of
reconveyance as aforesaid and the transferees did not desire to
retain all or any of the properties, they had a right to get back
the amount of consideration of the deed and return all the three
or any of the properties in the condition. in, which by vis major,
Go~el'nment action or any reason whatsoever they may be, and
I959
Satwant Singh
v.
The State of
Punjab
Kapur].
I959
November 3
ils
SUPRE:vIE COURT REPOR.TS [1960 (2)]
I959
(3) that if the transferors failed to comply with the transferees'
request to take back the properties a breach of agreement of
Bhaskar rvanian reconveyance rendering the transferors liable to pay damages
Joshi
shall be committed. There was also a clause that the transferors
v.
shall lose the right of getting a reconveyance after the expiry of
l'larayan Ranibilas the period of 5 years. On the same date as the deed of sale the
Agarwal
transferors executed an agreement by \Vhich they undertook to
pay the difference between the net rent to be recovered by the
transferees from the properties and interest at the rate of nine
per cent. on the price till the date of reconveyance.
In a .suit for
redemption brought by the transferors on August 26, r943, on
the footing that the deed dated September ro, 193 r, was a mortgage by conditional sale, the transferees contended that by the
transaction an absolute conveyance of the properties \Vas intended
and that the conveyance was subject to a condition of repurchase
to be exercised \vithin a period of five years from the date of the
deed.
The evidence showed that the price paid for the properties under the deed was wholly inadequate.
Held, that the question whether a transaction ostensibly of
sale n1ay be regarded as a mortgage is one of intention of the
parties \vhich has to be ascertained fro1n the provisions of the
deed vie\ved in the light of the surrounding circun1stances. In a
sale coupled \vith an agreen1ent to rcconvey there is no relation
of debtor and creditor nor is the price charged upon the property
conveyed, but the sale is subject fo an obligation to retransfer
the property within the period specified. In a mortgage by
conditional sale a relation of debtor and creditor is created, the
transfer being a security for the debt. Oral evidence of intention
is not admissible in interpreting the convenants of the deed but
evidence to explain or even contradict the recitals as distinguished
from the terms of the document may be given. Evidence of
contemporaneous conduct is admissible as a surrounding circumstance, but evidence as to subsequent conduct of the parties is
inadmissible.
Narasingerji Gyangerji v. Panuganti Parthasarathi and Others,
(1924) L.R. 51 I.A. 305, relied on.
Held, further, that in the present case, the deed dated
Septernber IO, 193r, on a true construction in the light of the
surrounding circumstances sho\ved that the transaction \Vas one
of mortgage enabling the transferors to redeem the properties.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
16 of 1955.
Appeal from the judgment and decree dated February 14, 1952, of the former Nagpur High Court, in
First Appeal No. 10 of 1945, arising out of the judgment and decree dated September 25, 1944, of the
Second Additional District Judge, Amraoti, in Civil
Suit No, 11-A of 1943, Tr. Civil Suit No.5A of 1944.
'
)
S.C.R.
SUPREME COURT REPORTt:l
119
0. B. Agarwal and A.G. Ratnaparkhi, for the appelr959
lants.
W. S. Barlingay, S. N. Andley and Rarneshwar Nath,
Bhaskar Waman
Joshi
v.
for respondents Nos. 2-7.
1959. November 3.
The Judgment
f th C
·t Narayan Rambilas
0
e
·OUI
Agarwal
was delivered by
SHAH J.-This is an appeal against the decree of
of the High Court of Judicature at Nagpur in Civil
Appeal No. 10of1945 reversing the decree passed by
the Second Additional District Judge, Amraoti in Civil
Suit No. 5-A of 1944. The High Court has b'y its
decree directed the court of first instance to pass a
decree for redemption.
The appeal raises a question as to the true effect of
a deed dated September 10, 1931, executed by Shri
Narayan Rambilas Aggarwal and his two sons Sadan
Gopal and Murli Dhar· in favour of two brothers
Bhaskar 'Vaman Joshi and Trimbak W aman Joshi.
The deed ostensibly conveys an absolute title to certain
properties described thel'ein. The transferors under
the deed contend tpat the prope!'ty transferred by the
deed was intended to be mortgaged under a deed of
conditional sale.
The transferees contend that by the
deed an absolute conveyance of the property thereby
conveyed was intended and that the conveyance was
subject to a condition of repurchase to be exercised
within a priod of five years from the date of the deed.
The court of first instance dismissed the suit holding
that the transaction in the deed dated September 10,
1931, was of the nature of an absolute-conveyance
with a condition of repurchase and the period limited
by the deed for recortveyance hac]. expired long before
the date of the suit. The High Court held that the
transaction was a mortgage by conditional sale and on
that view reversed the decree arid directed that a
redemption decree be passed.
The properties in dispute are three in number: (I)
a house in Amravati outside the Aruba Gate bearing
Municipal No. 5/98, (2) A Chawl in Amravati bearing
old Municipal Nos. 6/857, 6/858 and 6/859, and (3) a
houE)e situated in Dh&nraj Lane Amravat~ bearing old
Shah].
•
120
SUPREJ'\IE COURT REPORTS [1960 (2)]
'959
Municipal No. 3/459. By the deed the properties were
Bha•ka' Waman separately valued.· The house at Amba Gate was
Joshi
va.!ued at
l'ts. 11,500, the Chaw] was valued at
v.
Rs. 26,000 and the house at Dhanraj Lane was valued
Na>ayan Rambilas at l'ts. 2,000.
At the date of this transaction, the
Aga,wal
transferors were in®bted to the Imperial Bank of
Shah j.
India in the snm of Rs. 30,000 and Rs. 9,500 were due
to the transferees and their relations and friends, and
to satisfy this liability of Rs. 39,500 the deed was
executed. Possession of the property transferred was
delivered by calling upon the tenants in occupation to
attorn to the transferees. The transferees constructed
eight shops in the compound of the Amba Gate house
in the year 1940-1941 and made certain other constructions in the compound of the Chaw!, and they sold the
Dhanraj Lane house to one Suraj Mal Salig Ram. On
the August 26, 1943, the trarisferors served a notice
upon Bhaskar Waman Joshi and the representatives
in interest of'frimbak WamanJoshi stating that they
were willing to redeem the mortgage created by the
deed dated September 10, 1931, and called upon the
transferees " to rendei: full, true and proper account"
of the amount claimable under the deed. By their
reply Bhaskar Waman Joshi and the representatives
of Trimbak Waman Joshi denied that the transferors
had any right to redeem the property conveyed by the
deed and asserted that the claim "to treat the sale as
a mortgage was an afterthought " in view of the
abnormal rise in prices which had lately taken place.
On September 9, 1943, the three transferors and other
members of their joint Hindu family filed suit No. 5-A
of 1943 in the court of the Additional District Judge,
Amravati against Bhaskar vVaman Joshi and the
representatives in jnterest of Trimbak Waman Joshi
and Suraj Mal Salig Ram for a decree for redemption
alleging that the transfer incorporated in the deed
dated September 10, 1931, was in the nature of a
mortgage by conditional sale.
Ex. D-1 which is the deed in question recites that
the transferors were indebted, that they needed
Rs. 39,500 to discharge their liability, that Rs. 2,320
were due to the transferees and thll>t amount was set
S.C.R.
SUPREME COURT REPORTS
121
r959
off and the balance of Rs. 37,180 was paid by eight
cheques drawn on the Imperial Bank of India. It
h
d
h
h
bl
Bhaskar Waman
was t en recite
t at t e immova e properties
Joshi
described in the deed were conveyed in full ownership
v.
and that possession was delivered to the transferees. Narayan Rambila?
The deed then proceeded to recite the conditions " in
Agarwal
respect of this sale'' :
" If our heirs or ourselves demand reconveyance of
one, two or all the three houses of the above estate at
any time wi~hin 5 (five) years of this date (this time
limit 'shall be followed very strictly-it has been finally
settled that we will lose this right if one more day
expires), you or your heirs shall reconvey to us at our
expenses the respective houses for their respective
prices mentioned in this deed of sale. With a view
that both sides should have equal rights in respect of
this condition, it has been agreed between us that if
our heirs or ourselves do not exercise this right of reconveyance in respect of all the three houses or any
one of them within four and a half years of this day
and if for any reasons you or your heirs do not deem it
proper to retain anyone or all these houses hereafter,
you and· your heirs have a right to take back from us
or our heirs the amount of consideration of this deed
of sale. and to return all the three houses or any of
them in the condition in which the same may be at
that time and if you or your heirs express such a desire
and if we or our heirs fail to comply wit.h it, it shall be
tantamount to our breaking the agreement of reconveyance and we and our heirs. will be liable to pay
damages. It has been (further) agreed between us that
in the event of such a reconveyance, our heirs and ourselves will pay full prices (as mentioned in this deed of
sale) of the estate in the condition in which it may be at
that time, that is, in the condition in which it may be
on accbunt 9f heavenly mishap or Government action, .
on account of any reason whatsoever or on account of
fall in prices."
The courts below differed in their interpretation of
the true effect of these conditions. In the view of the
learned Trial Judge, the intention of .the parties was
to effect an absolute sale and not a mortgage. The
High Court did not agree with that view.
Shah],
I<J59
Bhaskar Waman
Joshi
v.
122
SUPREME COURT REPORTS [1960 (2))
By cl. (c) of s. 58 of the Transfer of Property Act,
mortgage by conditional sale is defined as follows :
" Where the mortgagor ostensibly sells the mortgaged propertyNarayan Rambilas
Agarwal
on condition that on default of payment of the
mortgage ·money on a certain dat_e the sale shall
become absolute, or
Shah].
on condition that onsuch 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 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."
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 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
effect a sale a mortgage transaction must of neces-
•
sity 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 intehtion 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
'
•
•
-
I
S.C.it.
SUPREME COURT REPORTS
123
postulates the creation by the transfer of a relation
x959
of mortgagor and mortgagee, the price being charged Bhaskar Waman
on the property conveyed. In a. sale coupled with
Josh} •
an agreement to reconvey there is no relation of debtor
v.
and creditor nor is the price charged upon the pro- Narayan Rambilas
perty conveyed, but the sale is subject to an obligaAgarwal
tion 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. As pointed out by
the Judicial Committee · of the Privy Council i~
Narasingerji Gyanagerji v: · Panuganti Parthasaiathi
and Others (1 ), the circumstance that the transaction as
-phrased in the document is pstensibly a sale with a
right of repurchase in the vendor, the appearance
being laboriously maintained by the words of con'-
veyance needlessly reiterating 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
f;r()m the provisions of the deed viewed in the light of
s~gounding circumstances. If the words ar~ plain
arid unambiguous they must in the light of the evid-
. ence of surrounding circumstances be given their true
legal. effect. It there is ambiguity in the language
employed, the intention may be ascertained from the
contents of the deed with such extrinsic evidence as
inay by law be permitted to be· addU:ced··t,o .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 contradict the
recitals as distinguished from the terms of the docume~ts inay of course be given. Evidence of contem~
poraneous conduct is always admissible as a surrounding circumstance ; but evidern;e as to subsequent
conduct of the parties is inadmissible.
·
(1) {1924) L.R. 51 I.A. 305.
Shah].
I
124
SUPREME COtrR't REPOR'tS [1960(2)]
In the light of these principles the real character of
the document Ex. D-1 may be ascertained.
The
Bhhskar Waman conditions of reconveyance may be analysed:
Joshi
1959
v.
(1) that the transferees shall reconvey the proper.
Narayan Rambilasties within five years from the date of the conveyance
Agarwal
to the transferor at the expense of the transferors for
Shah].
the price mentioned in the deed ; (2) that if within
four years and six months from the date of the conveyance, the right of reconveyance in respect of the three
houses or any of them is not exercised by the transferors and if the transferees do not desire to retain all
or any of the houses, they have the right to recall
from the transferors the amount of the consideration
and to return all or any of the three houses in the
condition in which they may be; (3) that in the event
of failure on the part of the transferors to comply
with the request to take back the houses, a breach of
agreement of reconveyance rendering the transferors
liable to pay damages shall be committed; (4) that in
the event of reconveyance the transferors shall pay
the full price set out in the sale deed and take back
the houses in the condition in which by vis major,
Government action or any reason whatsoever they
may be.
Evidently the transferors have under the
deed a right to call upon the tranferees to reconvey
the properties within five years from the date of the
conveyance; but after the expiry of four years and six
months the transferees are given the option to call
upon the transferors to take back all or any of the
properties for the prices mentioned in the deed ; and
if such right was exercised the transferors were bound
to take hack the properties and return the price even
if on account of vis major or action of the public
authorities the property was prejudicially affected.
The deed does not set out the period within which
this right is to be exercised by the transferees.
Granting that the option of reconveying the properties against the price mentioned in the deed was to be
exercised by the transferors before the expiry of five
years from the date of the deed, the covenant that
damage to property even on account of circumstances
over which t.he transferees had no control was in the
•
•
r;
S.C.R.
SUPREME COURT REPORTS
125
' event of reconveyance to be borne by the transferors,
· J959
is strongly indicative of a mortgage. By this covenant Bhaskar Waman
the transferees were invested with the right to call
Joshi
upon the transferors to "take back " all or any of the
v,
houses and to return the price therefor, indicating Narayan Rambilas
thereby that the price paid is in truth charged upon
Agarwal
the property, By calling upon the tenants to attorn
Shah J .
to the transferees, possession of the property transferred was delivered and pursuant to the transfer, it was
mutated in the names of the transferees. By an
t'lxpress covenant the period of five years was also
made of the essencl;l,. of the contract but as .observed
in Narasingerjis case (1) the. description of the document as one of an absolute sale and the right of
repurchase bearing the appearance of a right in relation to the exercise of which time is of the essence are
not decisive of the true nature of the transaction.
The circumstances surrounding the deed at . the
date of the execution of the deed also support the
view that the transaction incorporated in Ex. D-1 was
intended to be a mortgage. Before the execution of the
deed Ex. D-1 a draft sale deed was prepared. By the
draft sale deed Ex. P-13, only two properties, the Amba
Gate house valued at Rs. 10,000 and the Chaw! valued
at Rs. 25,000 were to be conveyed. By the final sale
deed, the Dhanraj Lane house was also agreed to be
conveyed and that house was valued at Rs~ 3,500.
The transferors were evidently in straitened circumstances and immediately needed Rs. 30,000 to discharge their liability to the Imperial Bank ; and the
liability to the transferees and their relations and
friends amounted to Rs. 9,500. It is fQr.this amount
of Rs. 39,500 that the properties were conveyed. On
the date on which the deed was executed, also an
agreement Ex. D-3 was executed by the three transferors. That agreement recited that the sale deed was
to be executed for past debts and for paying off the
debts cheques were taken from the transferees and the
transferees were put in possession of the houses sold.
A request was then made that the transferees should
not get the deed registered for two months or at least
for eight to fifteen days, because the transferees had
(1) (1924) L.R. 51 E.A. 305.
12ti
SUPREME COURT REPORTS [1960(2)]
to make arrangements for payments to the creditors
and in the event of the deed being registered, other
Bhaskar Waman
Joshi
creditors may make demands for their dues. It was
I959
v.
then stated, "you want that you should get an income
Narayan Rambilas of nine per cent. per annum from these houses till
Agarwal
reconveyance but it is evident that after meeting
Shah Jrepairing or insurance charges thereof, there will not
remain so much profit in balance. Therefore, we hav"'
already agreed before that the agreement of reconveyance mentioned in the deed of sale shall be brought
into effect only when ourselves or our heirs pay to
you all the expenses incurred by_you as found due
according to your account books and c_omplete your
(nine) per cent." This agreement and the sale deed
were executed on the same day. Evidently by this
agreement the transferors undertook to pay the
difference between the net rent to be recovered and
interest at the rate of nine per cent. on the price till
the date of reconveyance, and that the right ofreconveyance was to be enforceable oply when the difference
between the interest at nine per cent. on the price and
the rent recovered less repairs, insurance charges
according to the books of account of the transferees
was paid.
Prima f acie this is a personal covenant
whereby the transferors agreed to pay interest at the
rate of nine per cent. on the price paid till the date of
reconveyance. This agreement strongly indicates that
the parties regarded· the arrangement incorporated ·
in the deed dated September 10, 1931, as a mortgage.
The contention raised by the transferees that by this
convenant they were to erect additional structures at
their own expense upon the land and collect rent
which may be equivalent to interest at the rate of nine
per cent. on the price paid and the amounts spent by
them is on the language used in the deed unwarranted.
There is in the deed no reference to any additional
amount to be spent by the transferees for erecting
buildings upon the fand conveyed; and the books of
the transferees are referred to in the agreement only
to make the accounts maintained by them binding upon
the transferors. Counsel for the t.ransferees urged that
this agreement not being registered was inadmissible
/
' -
(#'
S.C.R.
SUPREME COURT REPORTS
127
in evidence.
Ex f acie the document does
not
I959
purport to create, declare, limit or extinguish any Bhaskar Waman
right, title or interest in immovable property; it
Joshi
incorporates a mere personal covenant and it is
v.
difficult to appreciate the plea that the document is Narayan Rambilar
wholly inadmissible for want of registration. This
Agarwal
agreement indisputably contains a condition relating
Shah J.
to reconveyance incorporated in a registered instrument and may not be admissible in the absence of
·registration as evidencing any alteration of the terms
of reconveyance. But this agreement in so far as it
evidences a personal covenant to pay interest at the
rate specified, is admissible. It is a somewhat singular
circumstance that before the High Court, when
counsel for the contending parties were were invited
by the court to argue whether the document was by
law required to be registered counsel urged that the
document was admissible in evidence without registration and insisted upon arguing the case on that footing.
The question whether the price paid was adequate
may also be adverted to. The court of first instance
held that the consideration for the prQperties was not
inadequate; but in the view of the High Court the
consideration was wholly inadequate. Counsel for the .
transferees contended that the monthly rent received
from the tenants occupying the properties was Rs. 270
and dedJlcting therefrom Rs. 48 for municipal taxes
and an amount equal to rent for two months as properly chargeable for repairs, insurance and collection
charges, there remained only a balance of Rs. 186 per
month available to the transferees and capitalising the
net rent at 6% the value of the property conveyed
could not exceed Rs. 30,000, and even capitalising the
net rent at 5% counsel contended that the value of the
property may be approximately equal to the consideration paid. There is, however, no clear evidence as to
what municipal taxes were payable in respect of the
houses, and whether the taxes were payable by the
tenants or by the landlord. Dr. Trimbak Joshi one of
the transferees in his evidence in Suit No. 112 of 1932
deposed "that the tax came to Rs. 48 on the date of
purchase ", but he did not state tbi1>t this a.mount- wa.s
128
SUPREME COURT REPORTS [1960(2)]
'959
payable monthly. There is again evidence of witness
Bhaskar Waman Balkrishn.a examined by the transferees that the water
Joshi
tax was paid by the tenants. In their written statev.
ment, the transferees had set out a statement of
Narayan Rambilasincome and expenditure for the years 1931-40 and in
~f"~wj1
that statement for the year 1933 the expenses debited
0
•
against
income
were
Rs.
426-11-0, for
1934
Rs. 346-15-6 and for 1935 Rs. 542-2-6, for 1936
Rs. 1,666-7-0, · for
1937 Rs. 1,160-1-3, for
1938
Rs. 529-2-3, for 1939 Rs. 570-11-3 and for 1940
Rs. 46-2-0. If Rs. 48 were payable as municipal tax
every month, the liability on account of taxes alone
far exceeded the expenses debited against the rent
received. This statement of account abundantly shows
that the municipal taxes were borne by the tenants
and not by the landlords. The High Court in para. 34
of its judgment proceeded to estimate the rental of
the properties at Rs. 245 per month and capitalised
the same at 5%.
The High Court is not shown to be
in error in accepting the net monthly rental at Rs. 245
per month.
The area of the land of the Amba Gate house is
9,037 square feet, the area of the land a't Chaw! is
23,805 square feet, and the area of land of Dhanraj
Lane house is 817 square feet,
There is no clear
evidence on the record about the precise area of the
lands covered by the structures, but it is conce.ded that
the structures stood on an area less than one-half of
the total area of the land. From the evidence especially
of the valuation reports, it appears that of the Amba
Gate house 5,800 square feet of land were open and of
the Chaw! 12,000 square feet ofland were open, Valuation of building land with structures by capitalising
the rental may yield a reliable basis for ascertaining
the value of the land together with the structures only
if the land is developed to its full capacity by erection
of structures. If the land is not fully developed by
raising structures, valuation of houses together with
lands by capitalising the rent received may not furniRh
reliable data for assessing the market value. By
aggregating the value of the land and the value
of the structnre separately estimated, a scientifically
,
...
'
'
S.C.R.
SUPREME COURT REPORTS
129
accurate value of the land with the structure
r959
may ·not be obtained. But where ·· the land is Bhaskar Waman
relatively valuable and the structures are old and
Joshi
comparatively of small value, this method may afford
v.
a rough basis in the absence of other reliable data for Narayan Rambilas
ascertaining the value of the land and the structure.
Agarwal
Exs. D-52 and D-53 are the reports prepared by a
valuer, of the market value of the Chawl and the
Amba Gate house.
According. to the report Ex. D-52,
the value of the super-structure of the Chawl was
Rs. 31, 708.
Out of this amount the valuer sought to
deduct 20% "as per Superintending Engineer's letter
dated the 21st August, 1931". On what basis that
deduction has been made has not been explained. He
again proceeded to deduct 20% as depreciation on the
cost of the buiiding and estimated at Rs. 20,293 the
value· of the super-structure. It is evident that a
deliberate attempt was made by the valuer to depreciate the value of the super-structure by making at
least one deduction of 20% for which there is no
warrant. Even assuming that this va.luation of
Rs. '20,293 is accurate, the value of the Cbawl together
with the land considerably exceeds Rs. 26,000. The
valuer has valued the site at 4 as. per square foot, but
no reliable evidence has been led to support that estimate. Similarly for the Amba Gate house the valuer
estimated the value at Rs. 18,556 for the super-structure and he deducted 20% ''with effect from the ,
22nd ·August, 1931 according to the Superintending
Engineer's letter dated the 21st August 1931 " and
25% as depreciation charges on building and arrived
at the figure of Rs. 11,134 and added thereto the value
of the .land at the rate of 4 as. per square foot.
The
evidence on the record does not warrant the assumption that the land was worth only annas four per
square foot.
As pointed out by the High Court in
view of the sale deeds Exs. P-9 and P-21 the price of
the land fluctuated between Re. l ·and Rs. 2-4 as. per
square foot.
Even if the lower of the two rates be
adopted, the value of the Chawl i].t the Amba Gate
house will considerably exceed the price embodied in
the sale deed.
17
Shah ].
\.
'959
130
SUPREME COURT REPORTS [1960(2)]
The house in Dhanraj Lane was valued in the draft
sale deed at Rs. 3,500 and in the sale deed at Rs. 2,ooo:
Bhashar Wainan
Joshi
No explanation has been given for this disparity
v.
between the prices mentioned in the draft and the
Narayan Rambilas sale deed and there is substance in the contention
Agarwal
s£rongly pressed by counsel for the transferors that the
Shah].
'959
November 6.
value of Rs. 2,000 for a house with a ground floor and
two stories is artificial. The evidence discloses that the
house was let out on a monthly rent of Rs. 20 and
capitalising that rent at 5% on the assumption that by
the construction the land was folly developed, the price
thereof was more than double the price set out in the
deed. It is clear that this house was included in the
deed to make up the total value of Rs. 39,500, the
amount required by the transferors to tide over their
immediate difficulties.
Counsel for the transferees sought to· rely upon the
evidence of subsequent conduct of the transferors as
indicative of the character of the transaction as a sale,
but as already observed, that evidence is inadmissible.
In our view, the High Court was right in holding
that the real transaction incorporated in Ex. D-1 was
a mortgage and not a sale. The appeal therefore fails
and is dismissed with costs.
Appeal dismissed.
SHRINIV ASA REDDY AND OTHERS
v.
THE STATE 0]' MYSORE AND OTHERS
(B. P. SINHA, c. J., JAFER IMAM, J. L. KAPUR,
K. N. WANCHOO and K. C. DAS GUPTA, JJ.)
Motor V ehicles-l>l ationalisation of transport services-Scheme
-If must be capable of hfing implemented all at once-Application
for permit by State Transport Undertaking-Procedure- Motor
Vehicles Act, I939 (4 of r939), as amended by the Motor Vehicles
(Amendment) Act, r956 (roo of r956), ss. 68C, 68F(z), 57(2).
The stage carriage permits of the petitioners, who were also
the petitioners in Writ Petition No. 75 of 1959, previously
reported, were expiring on 31st March, 1958, and were rene\ved
up to March 31, 1959·
A fresh scheme of nationalisation having
,