BHIMRAO RAMCHANDRA KHALATE (DECEASED) THROUGH LRS. vs. NANA DINKAR YADAV (TANPURA)

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 10197 OF 2010 BHIMRAO RAMCHANDRA KHALATE (DECEASED) THROUGH LRS. .....APPELLANT(S) VERSUS NANA DINKAR YADAV (TANPURA) & ANR. .....RESPONDENT(S) J U D G M E N T HEMANT GUPTA, J. 1. The plaintiff is in appeal before this Court aggrieved against the judgment passed by the High Court on 11.8.2006 in second appeal whereby the order passed by the First Appellate Court on 14.1.2000 was affirmed, while dismissing the suit for redemption of the mortgage property. 2. Brief facts leading rise to the present appeal are that the plaintiff 1 was the owner of 20 gunthas of agricultural land situated in Signature Not Verified Village Khunte. The plaintiff was in need of money so he borrowed Digitally signed by Jayant Kumar Arora Date: 2021.08.13 16:44:40 IST Reason: Rs.3,000/- from defendant No. 1 on 22.2.1969 by executing a 1 For short, the ‘suit land’ 1 document titled “conditional sale deed” as a security for the loan amount. The plaintiff requested defendant No. 1 to reconvey the suit land by accepting the loan amount of Rs.3,000/- but defendant No. 1 refused to do so. On 25.2.1989, defendant No. 1 transferred the suit land in favour of his brother (defendant No. 2). The plaintiff filed a suit against the defendants on 5.4.1989 under 2 the Transfer of Property Act, 1882 for redemption of mortgaged property and possession. The claim of the plaintiff is that the transaction dated 22.2.1969 was in the nature of mortgage even though it was titled as the conditional sale. 3. The entire dispute revolves around whether the document dated 22.2.1969 is a document of conditional sale or a mortgage? 4. Before we advert to the nature and terms of the document, certain principles of law need to be stated. Section 58(c) of the Act was amended in the year 1929 when a proviso was inserted that “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”. 3 5. In Pandit Chunchun Jha v. Sheikh Ebadat Ali & Anr. , the plaintiff’s suit for redemption was dismissed by the High Court but appeal allowed by this court reading the deed as mortgage. The question examined was whether a given transaction is a mortgage 2 For short, the ‘Act’ 3 AIR 1954 SC 345 2 by conditional sale or a sale outright with a condition of repurchase. It was held that 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 were stated. The Court found that the document had no clause for retransfer and instead says (clause 6) that if the executants pay the money within two years, the property shall come in exclusive possession and occupation with the transferors. The document had no clause for retransfer. In these circumstances, this Court held as under:

13. We next turn to the Conditions. The ones relevant to the present purpose are contained in clauses (6) and (7). Both are ambiguous, but we have already said that on a fair construction clause (6) means that if the money is paid within the two years then the possession will revert to the executants with the result that the title which is already in 3

6. In a judgment reported as Shri Bhaskar Waman Joshi v. Shri 4 Narayan Rambilas Agarwal , a Bench of this Court has upheld the right of redemption. The argument raised by the transferor was that the property transferred was intended to be mortgage under a deed of conditional sale. The transferees contended that the deed was absolute sale and that the conveyance was subject

ferred to in the clause is embodied in the document which affects 4 AIR 1960 SC 301 4

conditional sale postulates the creation by the transfer of a rela- tion of mortgagor and mortgagee, the price being charged on the property conveyed. The Court held as under:

5

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7. In another judgment reported as P.L. Bapuswami v. N. Pattay 5 Gounder , this Court decreed the suit for redemption though the same was dismissed by the High Court. The High Court held that the transaction was an outright sale and not a mortgage by condi- tional sale. The alternative plea based on the covenant for re-con- veyance, the High Court considered that there was no proof that the plaintiff had tendered the amount within the period stipulated in the document. In appeal, this court held that the distinction be- tween the conditional sale and mortgage is the relationship of debtor and creditor and the transfer being a security for the debt. The Court held as under:

5 AIR 1966 SC 902 6

8. In view of the Judgments referred to above, now we examine the facts of present case. The deed in question is Ex. 68. The docu- ment reads as under: “I, above Executant, given in writing that I am executing this conditional sale deed in your favour in front of Sub-Reg- istrar, Phaltan as I am taking Rs.3,000/- (three thousand) in cash from you for my household expenses in respect of land which is in my possession owned by me and enjoyed by me absolutely on this date. The description of the land located within limits of town Khunte, Division Satara, Tq. Phaltan, ir- rigated by Government Canal. Its boundaries and other particulars are – xx xx xx The above land owned and enjoyed by me along with all materials standing on it including trees, stones, mud etc. is being handed over to you by me for your possession on the condition that you are giving back its possession to me any- time within one year from t he date of this sale deed when I repay the above amount to you while re-transferring the above land to my name. In case non-payment by me of the said amount within the stipulated period, this sale deed will be taken as a permanent one and you will enjoy the posses- sion of the land as your own. Any future disputes in respect of the said land will be dealt by me if they arise. nd I sign this sale deed today on 22 February, 1969.” 7 9. A perusal of the aforesaid document would show that: (i) The plaintiff has borrowed a sum of Rs.3,000/- from the de- fendant for his household expenses in respect of the land which was in his possession. (ii) The possession of land was handed over to the defendant on the condition that the possession will be given back to him within one year from the date of conditional sale deed. (iii) The defendant is bound to retransfer the land to the plaintiff when he repays the amount of Rs.3,000/-. (iv) If the amount is not paid within the stipulated period, the conditional sale deed may be taken as a permanent one. 10. A complete reading of the document would show that a sum of Rs.3,000/- was taken as a loan from the defendant for household expenses. The same was to be returned and the defendant was bound to retransfer the land. The condition that if the plaintiff is not able to pay the loan amount within one year, the document will be taken as a permanent sale deed is the contentious clause between the parties. 11. In view of the judgments mentioned above, the intention of the parties has to be seen when the document is executed. It is not in dispute that the condition of retransfer is a part of the same docu- ment (Ex. 68). Such is the condition inserted by an amendment in the year 1929 expressed by the proviso of Section 58(c) of the Act. As held in Pandit Chunchun Jha , a transaction which takes the 8 outward form of a sale but in essence the documents are of a mortgage, though it is couched in the form of a sale. This Court held that it is impossible to compare one case with another. Each case must be decided on its own facts and circumstances. The document has to read as a whole and if any word is ambiguous, then to find out the intention of the parties when such document was executed. 12. Therefore, a reading of the document would show that the docu- ment was executed for the reason that the plaintiff has borrowed a sum of Rs.3,000/- for his household expenses and the defendant is bound to retransfer the land if the amount is paid within one year. The advance of loan and return thereof are part of the same docu- ment which creates a relationship of debtor and creditor. Thus, it would be covered by proviso in Section 58(c) of the Act. Now, some of the later judgments of this Court interpreting the proviso in Section 58(c) of the Act need to be considered. 13. This Court in Umabai & Anr. v. Nilkanth Dhondiba Chavan 6 (Dead) by LRs & Anr. was examining contemporaneous docu- ments executed on 30.12.1970 whereby the plaintiff had agreed to sell the property for consideration of Rs.45,000/-. A sale deed was executed as well. Another agreement to sale was executed be- tween the parties on the same date where the defendants agreed to reconvey the property on receipt of Rs.45,000/-. It was, thus, 6 (2005) 6 SCC 243 9 held that the benefit of Section 58(c) of the Act would not be appli- cable to the plaintiff as the document of reconveying the property was not part of the same document. This Court held as under:

7 14. In Tulsi & Ors. v. Chandrika Prasad & Ors. , this Court held that a distinction exists between a mortgage by way of conditional sale and a sale with condition to repurchase. In the former the debt subsists and a right to redeem remains with the debtor but in

served. The circumstances which weighed with the High Court holding are that the transaction in question was mortgaged by way of sale, it reads thus: “9. The following circumstances weighed with the learned trial court as well as the High Court in arriving at the finding that the transaction in question was a mortgage by way of a conditional sale: 7 (2006) 8 SCC 322 10 (i) The husband of Appellant 1 was a tenant in respect of the property and he continued to occupy the same in the same capacity. (ii) The appellants bore the costs of stamp duty which is not the normal practice in a case of absolute sale. (iii) The transaction essentially was a Baibulwafa viz. mortgage by conditional sale. (iv) The land was required to be kept in the existing condition. (v) The transferor had an option to repay the entire consideration in one instalment whereupon a deed of reconveyance was to be executed by the transferor in her favour. For the said purpose a specific date was fixed viz. 30-12-1971 and on obtaining such amount the transferee was to restore possession of the land to the plaintiff and only in the event of default on her part to repay the same was the sale to become absolute and perfect. (vi) In the margin of the deed, the transferor categorically stated that he had executed a deed of Baibulwafa in respect of two parts of the shop. (vii) The amount has been received by the transferor in the presence of the husband of the transferee.” In view of the factors mentioned in para 9, the defendants appeal was dismissed and, the decree for redemption was main- tained. 15. In Vithal Tukaram Kadam & Anr. v. Vamanrao Sawalaram 8 Bhosale & Ors. , the suit for redemption was decreed by setting aside the judgment of the High Court. It was held as under: 8 (2018) 11 SCC 172 11

16. In another judgment reported as Ganpati Babji Alamwar (Dead) by LRs Ramlu & Ors. v. Digambarrao Venkatrao 9 Bhadke & Ors. , the decree in a suit for redemption was main- tained by the High Court. The Court held as under:

9 (2019) 8 SCC 651 12

17. On the other hand, learned counsel for the defendants relied upon Vanchalabai Raghunath Ithape (Dead) by LR v. Shankarrao 10 Baburao Bhilare (Dead) by LRs & Ors. . It was a case where the suit for redemption filed by plaintiff-appellant was maintained. However, the judgment of this Court reported in Umabai and Tulsi were not brought to the notice of this Court. In the absence of consideration of such judgments, we find that the judgment of this Court in Vanchalabai Raghunath Ithape will not lay down a binding precedent. 18. In Dharmaji Shankar Shinde & Ors. v. Rajaram Shripad Joshi 11 (Dead) through LRs & Ors. , the defendants appeal was al- lowed by this court and the suit for redemption was dismissed. It was, inter alia, held that if the sale and agreement to repurchase

not be a “mortgage by conditional sale” irrespective of whether

verse does not hold good. This Court held as under: 10 (2013) 7 SCC 173 11 (2019) 8 SCC 401 13

19. A perusal of the above judgment shows that the plaintiff has bor- rowed a sum of Rs.7000/- for the marriage of his daughter eight days prior to execution of the document. While executing docu- ment on 28.7.1967, the plaintiff borrowed an additional amount and a document titled as “mortgage by conditional sale” was exe- cuted for a consideration of Rs.2500/-, but the plaintiff received Rs.1800/- only. This Court held that the intention of the parties in putting an end to the debtor creditor relationship with respect to the sum of Rs.700/- is clear from the recitals of the document. It was held that clauses in the document are consistent with the in- tention of the parties making the transaction of a conditional sale with an option to repurchase. The Court held that there are no recitals in the document to establish creditor debtor relationship, nor does it contain the right of foreclosure, payment of interest etc. which are essential requirements in a mortgage deed. The Court held that undetermined mortgage amount for which the in- terest in the immovable property was created as security, indi- 14 cates that the parties have never intended to create a mortgage deed. 20. The said judgment does not help the argument raised by the de- fendants, as the document in the present case clearly stipulates the amount of Rs.3000/- was borrowed by the plaintiff and on re- turn of such amount, a mandate to defendant No. 1 to execute re- conveyance of suit land was asked for which was refused by de- fendant no.1. 21. Another judgment referred to by the learned counsel for the defen- 12 dants is Sopan (Dead) through his LR v. Syed Nabi but that was a case where the registered sale deed was executed on 10.12.1968 and on the same date, a separate agreement was exe- cuted whereby the plaintiff has agreed to repay the amount and secure reconveyance of the property. Since the two separate doc- uments were executed, this Court has rightly found that it is not a document of mortgage but of conditional sale which is not covered by the proviso to Section 58(c) of the Act. 22. Learned counsel for the defendants has also referred to the fact that the suit for redemption was filed after twenty years of the document being executed and, in the meantime, defendants have made improvements over the land. Thus, the plaintiff would not be entitled to seek redemption. Section 63 of the Act contem- 12 (2019) 7 SCC 635 15 plates that any accession by the mortgagee, during the continu- ance of the mortgage, the mortgagor shall on redemption be enti- tled to such accession in the absence of a contract to the contrary. Under Section 63(a) of the Act, the liability of mortgagor to pay for improvement will arise if the mortgagee had to incur the costs to preserve the property from destruction or deterioration or was necessary to prevent the security from becoming insufficient or being made in compliance with the lawful order of any public ser- vant or public authority. None of the eventualities arose in the present case compelling the mortgagor to pay for the improve- ments if any carried out by the mortgagee. A mortgagee spends such money as is necessary for the preservation of the mortgaged property for destruction, forfeiture or sale; for supporting the mort- gagor’s title to the property; for making his own title thereto good against the mortgagor; and when the mortgaged property is a re- newable lease-hold, for the renewal of the lease, such expenditure incurred by the mortgagee can be added to the cost of improve- ments in the principal amount due. However, in the absence of any positive evidence of any improvement and the cost incurred, the defendants are not entitled to recover anything more than the mortgage amount. Since the possession was given to the mort- gagee, he has enjoyed usufruct from the mortgage property which compensates not only of the user of the land but also improve- 16 ments made by him. The improvements were to enjoy the usufruct of the property mortgaged. 23. The argument that plaintiff has filed suit for redemption after 20 years of execution of the document is not tenable as the suit for redemption can be filed within 30 years from the date fixed for re- demption. The period of 30 years would commence on 22.2.1969 and the suit was filed in the year 1989, which is within the period of limitation. 24. In view thereof, we find the order of the First Appellate Court ac- cepting the appeal of the defendants and dismissing the suit for redemption is not sustainable in law, so as the order passed by the High Court. Consequently, the judgment and decree passed by the First Appellate Court and that of the High Court are set aside and the suit is decreed. The plaintiff may pay or deposit the mort- gage amount within three months of the receipt of copy of the or- der. The appeal is allowed with no order as to costs. .............................................J. (HEMANT GUPTA) .............................................J. (A.S. BOPANNA) NEW DELHI; AUGUST 13, 2021. 17