The agreement’s terms and consideration flow established an outright sale, not security for a loan.

Mohan Gandhi & Company (“the firm”) sued Punjab National Bank (“PNB”) for a declaration that an indenture dated 5 July 1982 concerning the firm’s flat was executed as security for a loan to Argee Textiles Pvt. Ltd., and was not binding as an agreement for sale.

PNB separately sued for specific performance of that indenture.

PNB maintained that the flat was sold for Rs. 15 lakhs, of which Rs. 14 lakhs was credited to Argee Textiles’ loan account, with Rs. 1 lakh payable on completion.

The firm asserted that the document was a security arrangement and that it was entitled to regain possession on repayment of Rs. 14 lakhs.

The trial court decreed the firm’s suit and dismissed PNB’s suit; PNB appealed in both matters.

Whether the indenture dated 5 July 1982 recorded a sale of the flat or was executed as security for Argee Textiles’ loan.

Whether crediting Rs. 14 lakhs to Argee Textiles’ loan account constituted payment of part of the sale consideration to the firm.

If the indenture was an agreement for sale, whether it was invalid because of the minors’ interests, the manner of execution, or the alleged lack of authority of a partner.

Sections 91 and 92 of the Indian Evidence Act, 1872 require the terms of a written contract to be proved by the document and generally bar oral evidence that contradicts, varies, adds to, or subtracts from those terms; they do not bar evidence on whether the parties agreed to contract on the document’s stated terms.

Under Section 36 of the Stamp Act, once an instrument is admitted in evidence, its admission cannot be challenged later in the same proceedings on the ground that it was insufficiently stamped.

Section 14 of the Partnership Act, 1932 concerns property of the firm; a partner cannot treat or deal with partnership property as exclusively their own, but the court found no statutory bar to alienation with the consent of all partners.

Section 30(2) recognises a minor admitted to partnership benefits’ share in the firm’s property and profits.

The court also relied on *Addanki Narayanappa v. Bhaskara Krishnappa* for the principle that, during the subsistence of a partnership, a partner cannot deal with a portion of partnership property as their own.

Reading the indenture as a whole, the court found that its provisions for a stated sale price, transfer of possession, completion of sale, society membership and transfer formalities, and PNB’s option to seek specific performance were consistent with a sale, not a security arrangement.

The bank records, voucher, and DRT proceedings showed that the Rs. 14 lakhs was credited to Argee Textiles after the agreement and reduced its loan liability; the firm neither effectively disputed the endorsement nor established that the adjustment was unauthorised.

The firm’s account of an oral arrangement for return of the flat upon repayment was unsupported by reliable personal-knowledge evidence and was inconsistent with the written agreement and contemporaneous correspondence.

The court further found that the agreement was signed on behalf of the firm, including by the minors’ guardian, and that the firm had not established that the alienation was invalid or prohibited.

It allowed both appeals, set aside the trial court’s common judgment, dismissed the firm’s suit, and decreed PNB’s specific-performance suit, directing PNB to pay the balance Rs. 1 lakh with interest at 12% per annum from 30 June 1987 within four weeks.

The interim applications were disposed of as no longer surviving.