# P. L. BAPUSWAMI v. N. PATIAY GOUNDER

- **Citation:** [1966] 2 S.C.R. 918
- **Court:** Supreme Court of India
- **Decided:** 1965-12-01
- **Case number:** Civil Appeal No. 798 of 1963
- **Bench:** ii) consideration for Ex. B-1 was Rs. 4, 000/- while real value of property was Rs. 8, 000/ -; · BAPUSWAMI v. P. GOUNDER (Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/p-l-bapuswami-v-n-patiay-gounder-3766
- **Pages:** 7

## Headnote

919'
A
(iii) the patta was not transferred to the
defendant after the
execution of Ex. B-1 by M;
(iv) M, and after his death, his sons, continued to pay kist for the
land; and
( v) the consideration for reconveyance was the same amount as
the consideration for Ex. B-1, i.e. Rs. 4,000/-. [923 B-G]
B

## Text

P. L. BAPUSWAMI
v.
N. PATIAY GOUNDER
December 1, 1965
[P. B. GAJENDRAGADKAR,
C.J.,
K. N. WANCHOO, V. RAMASWAMI
AND P. SATYANARAYANA RAJU, JJ.)
Transfer of Property Act, 1882, s. 58(c)-Distinction between mortgage by conditional sale and a sale with a clause for repurchase.
A
B
M executed a document Ex. B-1 on May 28, 1946, in respect of his
C
half share in certain lands in favour of the defendant for a consideration
of Rs. 4,000/-. The document was in the form of a sale deed but it
contained a stipulation that the defendant should reconvey the property to
M on his repaying the amount of Rs. 4,000/ - after five years and before
the end of the, seventh year. After M's death his sons executed an assignment deed in favour of the
plaintiff in August 1950 for a sum of
Rs. 1,600/- and on the basis of this deed, the plaintiff filed a suit for redemption of the disputed property. He claimed, inter alia, that Ex. B-1
D
must be deemed in law to be a mortgage by conditional sale and that he
was entitled to redeem as the assignee of the equity of redemption; or
alternatively, that Ex. B-1 was a sale with a condition to repurchase and
the defendant was bound to reconvcy the property to him on payment of
Rs. 4,000/ - and that although this amount had been tendered several
times, the defendant had refused to accept it.
On the other hand the
defendant denied that Ex. B-1 was a mortgage by conditional sale and
contended that it was an outright sale with a covenant for
repurchase
E
find as the plaintiff did not tender the amount within the time stipulated
in the document, the suit was barred by time.
The trial court held that Ex. B-1 was a mortgage by conditional sale
and granted a preliminary decree; but the High Court, in appeal, reversed this decision.
On appeal to this Court,
HELD : Ex. B-1 was a transaction of mortgage by conditional sale
and not a sale with a condition for retranofer.
F
The question whether by the incorporation of 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 definition of a mor<tgage by conditional sale postulates the creation by the transfer of a rela..
tion of mortgagor and mortgagee, the price being charged on the property conveyed. In a sale coupled with an agreement to reconvey there
ls. no relation of debtor and creditor nor is the price charged upon
the
G
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 relationship of debtor and creditor and the transfer
being a security for the debt. [921 C-F]
In the present case the following
circumstances indicated that the
transaction was a mortgage by conditional sale :-
(i) As required by the proviso to s. 58(c)., the condition for reH
purchase was embodied in the same document;
(ii) the consideration for Ex. B-1 was Rs. 4,000/- while the real
value of the property was Rs. 8,000/ -; ·
BAPUSWAMI v. P. GOUNDER (Ramaswami, J.)
919'
A
(iii) the patta was not transferred to the
defendant after the
execution of Ex. B-1 by M;
(iv) M, and after his death, his sons, continued to pay kist for the
land; and
( v) the consideration for reconveyance was the same amount as
the consideration for Ex. B-1, i.e. Rs. 4,000/-. [923 B-G]
B
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 798 of
1963.
Appeal by Special Leave from the judgment and Order dated
.Oi.
the 19th August, 1960 of the Madras High Court in Second·
Appeal No. 871 of 1958.
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R. Ganapathy Iyer, for the appellant.
C. B. Agarwala and R. Gopalakrishnan, for the respondent..
The Judgment of the Court was delivered by
Ramaswami, J.
This appeal is brought, by special leave, on
behalf of the plaintiff from the judgment of the High Court of
D
Madras dated August 19, 1960 in Second Appeal no. 871 of
1958.
The disputed property consisted of 16 acres and 27 cents of
land in Sokkanur village of Coimbatore district of which half
share belonged to Palani Moopan and the other half to his
E daughter Palani Mooppachi.
Palani Moopan executed the
document-Ex. B-1 with regard to his share of the property in
favour of the 1st defendant for a consideration of Rs. 4,000/-
on May 28, 1946. Out of the consideration, a sum of Rs. 2,000/-
was reserved with the vendee to pay off an earlier mortgage and
the balance of Rs. 2,000/- was paid to the vendor in cash. The
F first defendant discharged the earlier mortgage in accordance
with the directions in Ex. B-1. The document, B-1 was in the
form of a sale deed but it contained a stipulation that the 1st
defendant should reconvey the property to Palani Moopan on his
repaying the amount of Rs. 4,000/- after 5 years and before the
end of the 7th year.
After the death of Palani Moopan his sons
G
executed an assignment deed in favour of the plaintiff, Ex. A-1
dated August 10, 1950 for a sum of Rs. 1,600/-. On the basis
of Ex. A,1 the plaintiff has brought the present suit for redemption of the disputed property. The case of the plaintiff was that
Ex. B-1 must be deemed in law to be a mortgage by conditional.
sale and that he was entitled to redeem as the assignee of the
H
equity of redemption. The plaintiff further claimed that being an
agriculturist, he was entitled to the benefits of Madras Act IV
of 1938 as amended. The plaintiff pleaded alternatively that if
U!Sup.Cl/66-12
920
SUPREME COURT REPORTS
[1966) 2 S.C.R.
Ex. B-1 was held to be an out right sale with a condition to
A
repurchase, the first defendant was bound to reconvey the property to him on payment of the amount of Rs. 4,000/-. The
plaintiff alleged that he tendered the amount to the first defendant several times but the latter refused to accept the same. The
suit was contested by the 1st defendant who denied that Ex. B-1
was a mortgage by conditional sale.
It was alleged that Ex. B-1
B
was an out right sale with a covenant to repurchase and as no
tender was made by the plaintiff within the time stipulated in the
document, the suit was barred by time.
Upon these rival contentions the trial court held that Ex. B-1
was a mortgage by conditional sale and accordingly granted a c
preliminary decree to the plaintiff for redemption under 0. 34.
r. 7 of the Civil Procedure Code. The first defendant took the
matter in appeal to the Subordinate Judge of Coimbatore but
the appeal was dismissed.
The 1st defendant preferred second
appeal in the Madras High Court which set aside the decrees
of the lower Courts and ordered that the suit should be dismissed,
D
holding that the transaction was an out right sale and not a
mortgage by conditional sale.
As regards the alternative plea
based on the covenant for reconveyance, the High Court considered that there was no proof that the plaintiff had tendered
the amount within the period stipulated in the document.
The question of law involved in this appeal is whether the
document, Ex. B-1 executed by Palani Moopan in favour of the
1st defendant is, in its true effect, a mortgage by conditional sale
or a sale with a condition for retransfer.
Bys. 58(c) of the Transfer of Property Act a mortgage
by conditional sale is defined as follows :
"58. (c) Where the mortgagor ostensibly sells the
mortgaged propertyon condition that on default of payment of the
mortgaged-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 and the mortgagee a mortgagee by conditional
sale:
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BAPUSWAMI v. P. GOUNDER (Ramaswami, J.)
921
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 20 of 1929. Prior
B 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.
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
C 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 necessity have been intended. The question whether by
the incorporation of such a condition a transaction oi.tensibly of
sale may be regarded as a mortgage is one of intention of the
D parties to be gathered from the language of the deed interpreted
in the light of the surrounding circumstances.
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
E 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 relationship of debtor and creditor and the transfer
being a security for the debt.
The form in which the deed is
r
clothed 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 document 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 ambiguity
G 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. In the present
case, the document Ex. B-1 reads as follows :
H
.. ................................
I have settled to sell to you on this day for a smt
of Rs. 4,000-0-0 the undermentioned immovable pro-
922
SUPREME COURT
REPORTS
[1966] 2 S.C.R.
perties and have received the consideration of rupees
four thousand only, as detailed below :-
In the matter of my having directed you yourself
to pay the sum of Rs. 2,000/-, being my half share
payable towards the usufructuary mortgage deed executed on 7th September 1944, in respect of the share
of properties detailed below and in respect of some
other share of properties, jointly by me and Palani
Mooppachi, wife of one Palani Mooppan of the aforesaid place in favour of M. Maniyam P. V. Ramaswami
Goundar, son of Venkatachala Goundar, residing in
Pattampalayam village cusba, Palladam
taluk, for a
sum of Rs. 4,000/- and registered as Document no.
1122 of 1944, Book 1, Volume 210, pages 415 and
416 in the Office of the Sub-Registrar of Kunnathur
to the aforesaid usufructuary mortgagee, get release of
the properties mentioned herein and take possession of
the same, the amount received by me is Rs. 2,000/-.
The amount which I have received in cash on this day
is Rs. 2,000/-.
As, in all, I have received the sale
consideration of Rs.
4,000/- as detailed above, you
yourself shall, in future, hold and enjoy absolutely the
undermentioned properties.
In future, neither myself
nor my heirs shall have any right or future claim,
whatever, in respect of these properties. There is no
other encumbrance, whatever, except the encumbrance
mentioned above, in respect of these properties.
In
case anything is left out, I am bound to get the same
discharged from and out of my other properties.
............................................
Whereof, in all these, and in the well
in good
condition, situate in Government Survey no. 93/1 and
in the cocoanut, palmyrah, tamarind and wood-apple
trees and in the fruit bearing and timber trees, which
are in the aforesaid fields, the half-share in common.
In future I have neither share nor right, whatever, in
the aforesaid fields.
The aforesaid Palani Mooppachi
shall discharge the above mentioned balance usufructuary mortgage amount of Rs. 2,000/- from and out of
the balance of the usufructuary of mortgage properties.
Should I pay in cash the aforesaid sale consideration of rupees four thousand after a period of five
years within a period of seven years from the date of
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BAPUSWAMI v. P. GOUNDER (Ramaswami, !.)
923
the execution of the deed, during the date of expiry
of the said deed of any year (the said properties)
should be reconveyed for the very same amount to me.
This condition is not valid after the aforesaid period."
We consider that in the present case there are several circumstances to indicate that Ex. B-1 was a transaction of mortB gage by conditional sale and not a sale with a condition for retransfer.
In the first place, there is the important circumstance
that the condition for repurchase is embodied in the same document.
In the second place, there is the significant fact that the
consideration for Ex. B-1 was Rs. 4,000/-, while the real value
c of the property was, according to the Munsif and the Subordinate
Judge, Rs. 8,000/-. The High Court has dealt with this question and reached the finding that the value of the property was
Rs. 5,500/-, but it is submitted by Mr. Ganapathi Iyer on behalf
of the appellant that the question of valuation was one of fact and
the High Court was not entitled to go into the question in the
n second appeal.
The criticism of learned Counsel for the appellant is justified and we must proceed on the basis that the valuation of the property was Rs. 8,000/- and since the consideration
for Ex. B-1 was only Rs. 4,000/- it was a strong circumstance
suggesting that the transaction was a mortgage and not an out
right sale.
In the third place, there is the circumstance that
E the patta was not transferred to the 1st defendant after the execution of Ex. B-1 by Palani Moopan.
It appears that defendant
no. 1 did not apply for the transfer of patta and the patta admittedly continued in the name of Palani Moopan even after the
execution of Ex. B-1.
Exhibits A-6 and A-7 are certified copies
of thandal extract of patta for the years 1945-54 and they prove
F this fact.
These exhibits also show that the plaintiff had obtained
patta for the land on the basis of Ex. A-2.
The registered deed
of transfer of patta was executed by the sons of Palani Moopan
in favour of the plaintiff.
There is also the circumstance that
the kist for the land was continued to be paid by Palani Moopan
and after his death, by the sons of Palani Moopan.
Lastly, there
G is the important circumstance that the consideration for reconveyance was Rs. 4,000/-, the same amount as the consideration
for Ex. B-1.
Having regard to the language of the document,
Ex. B-1 and examining it in the light of these circumstances we
are of the opinion that the transaction under Ex. B-1 was mortg~ge by conditional sale and the view taken by the High Court
H with regard to the legal effect of the transaction must be reversed.
It follows, therefor~, that the plaintiff is entitled to a preliminary
decree for redemptmn under 0. 34. r. 7, Civil Procedure Code,
924
SUPREME COURT .REPORTS
[1966] 2 S.C.R.
for taldng accounts and for declaration of the amounts due to tho
A
1st defendant under Ex. B-1.
For these reasons we set aside the judgment and decree of
the High Court and restore the judgment and decree of the Subordinate Judge of Coimbatore granting the plaintiff a preliminary
decree for redemption of the mortgage. A period of six months
B
is granted for payment of the amount under tho preliminary
decree.
The appeal is accordingly allowed with costs.
Appeal allowed.
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