Citation Codes

Equivalent Citations

citation codes

Case Number

Second Appeal No. 309 of 1943

Advocates

Faiyaz Ali for the appellant.
Hyder Husain for the respondents.

Judges

Mr. Ghulam Hasan, J.*

Acts

Section 4, U.P. Encumbered Estates Act,

See more information ...

Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The central dispute concerned the character of a 13 June 1924 deed of transfer (Ex. 1) read with an agreement executed on 12 June 1924 (Ex. A-1): whether the documents constituted a sale with a condition of repurchase or a mortgage by conditional sale.

Bajrangi Singh and others filed an application under Section 4 of the U.P. Encumbered Estates Act on 20 October 1936. Decrees were passed by the Special Judge under Section 14 and sent to the Collector under Section 19 on 21 July 1939.

On 22 April 1940 Mohammad Afzal and Mohammad Yakub filed a claim asserting proprietorship under the deed of 13 June 1924 executed by the applicants in favour of their father Abdullah for Rs. 6,000. The debtors-applicants had listed Abdullah's three sons (Mohammad Amin, Mohammad Yakub and Mohammad Afzal) as mortgagees and had described the 1924 sale deed as a mortgage deed.

It appears the debtors-applicants subsequently conceded that the 1924 deed was a mortgage by conditional sale; the Special Judge granted a decree for two-thirds of the mortgage money accordingly. Mohammad Amin later applied for restoration of proceedings and admission of his claim under Section 11(2), asserting ownership under the 1924 sale deed or alternatively claiming a money decree (Rs. 2,000 plus Rs. 800 costs) if the document were held to be a mortgage. The trial Court framed the issue whether the claimant was a vendee as alleged.

The Special Judge interpreted Ex. 1 and Ex. A-1 as a sale with a condition of repurchase, declared Mohammad Amin owner of one-third of the property and held that this share was not liable to attachment and sale. The District Judge disagreed, holding the transaction to be a mortgage by conditional sale. The matter came on appeal for determination of the true character of the transaction.

Legal Issues Presented

Whether, upon a true construction, the deed of transfer dated 13 June 1924 (Ex. 1) read with the agreement dated 12 June 1924 (Ex. A-1) is (a) a sale with a condition of repurchase, or (b) a mortgage by conditional sale.

Arguments of the Parties

Position supporting characterization as a sale (as accepted by the Special Judge and advocated by the claimant)

Exhibit 1 is throughout described as a sale deed and the consideration of Rs. 6,000 is described as the price.
The deed recites that possession with all rights and powers of a proprietor was given to the transferee, who was to pay Government revenue and appropriate remaining profits for his use.
The deed contains recitals that the vendor had no right or claim left in respect of the property or its price and that the vendor and his heirs would fulfill obligations if any title defects emerged—recitals advanced as indicating divestment of vendor’s rights compatible with an absolute sale.
The agreement (Ex. A-1) stipulated that if the transferor or his heirs paid the entire amount due under the deed in a lump sum out of their own earnings, the property would be returned to the vendor; borrowing to repurchase was expressly excluded. This limitation on sources of repurchase was argued to be consistent with a sale with a right to repurchase rather than a mortgage.
The claimant (Mohammad Amin) asserted ownership of one-third of the property under the sale deed and, as owner, that his share was not liable to attachment and sale in satisfaction of the decree.

Respondents' Arguments

The respondents contended that the transaction was in reality a mortgage cloaked in the form of a sale.
They relied on the use of the phrase "khali fasl Jeth" for the taking back of the property, arguing that this phrase is associated with redemption of a mortgage and thus discloses the parties' real intention.
They placed reliance on decisions such as Mahabir v. Kunj Bihari and Mehdi Husain v. Mohammad Jawad to support the proposition that "khali fasl Jeth" is a date appropriate to redemption of a mortgage.
There was also an argument (referred to by the court) that the transaction might have been cloaked because of Abdullah's scruples as a Mahomedan, i.e., that a mortgage was dressed up as a sale for religious reasons.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Alderson v. While (1858) 44 E.R. 924	The principle that prima facie an absolute conveyance containing nothing to show that the relation of debtor and creditor is to exist does not become a mortgage merely because the vendor reserves a right to repurchase.	The court relied on this rule to support the view that the documents, on their face, could be an absolute transfer (sale) despite a repurchase stipulation; it formed part of the basis for concluding the transaction was an out-and-out sale.
Bhagwan Sahai v. Bhagwan Din and Ors, 17 I.A. 98	Approval by the Privy Council of the principle stated in Alderson v. While.	The court noted that the Privy Council approved the Alderson principle, reinforcing the legal rule that a right to repurchase does not automatically convert an apparent sale into a mortgage.
Jhanda Singh v. Wahid-ud-din, A.I.R. (3) 1916 P.C. 49	Quoted the Alderson principle with approval and held that a stipulation requiring transferors to repay out of their own pocket was inconsistent with a mortgage; such a clause could even encroach on the mortgagor's right to redeem.	The court invoked Jhanda Singh to support the conclusion that the clause excluding borrowed funds for repurchase was more consistent with a sale with repurchase rights than with a mortgage by conditional sale.
Munshi Bishan Lal v. Lala Banwari Lal and Ors, A.I.R. (26) 1939 ALL. 713	A similar construction: terms in the deed were consistent only with an intention to sell absolutely and to reserve a right to repurchase within one year (especially where property was sold to pay prior encumbrances).	The court relied on this decision (following Jhanda Singh) to reinforce the interpretation that the documents evidenced an absolute sale with a right to repurchase, not a mortgage.
Ahmad Husain Rizwi v. Azhar Ali, A.I.R. (31) 1944 Oudh 305	Head-note enunciating that where a transaction appears to be a sale, the onus lies on the party contending it is a mortgage; form is not the only test but an apparent absolute conveyance prima facie remains a sale; no presumption that Mahomedans cloak mortgages as sales; vendor's conduct is important.	The court cited this principle to place the onus on those alleging the transaction to be a mortgage and to reject the presumption that Muslim parties habitually cloak mortgages as sales; this supported the court's conclusion that the transaction was a sale.
Mahabir v. Kunj Bihari, A.I.R. (11) 1924 Oudh 417	Observation by the Judicial Commissioner of Oudh that "khali fasl Jeth" is generally a date associated with redemption of a mortgage.	The court acknowledged the decision and the respondents' reliance on it but found that the date "khali fasl Jeth" is a convenient time for transfer generally and was not decisive to show a mortgage in this case.
Mehdi Husain v. Mohammad Jawad, A.I.R. (28) 1941 Oudh 479	Observation that "khali fasl Jeth" is the most convenient time of the year for effecting transfer of ownership (and had been associated with redemption transfers).	The court considered the authority but held that the use of "khali fasl Jeth" was not conclusive; it could be appropriate for reconveyance under a sale with repurchase as well as for redemption of a mortgage.

Court's Reasoning and Analysis

The court examined the sale deed (Ex. 1) and the antecedent agreement (Ex. A-1), noting both were registered on 13 June 1924 (the agreement was executed on 12 June 1924 in anticipation of the transfer).

Key factual/contractual observations the court relied on:

Exhibit 1 is throughout described as a sale deed and the consideration is expressly called the "price" of Rs. 6,000.
The deed recites transfer of possession to the transferee with all rights and powers of a proprietor; the transferee was to pay Government revenue and appropriate the remaining profits to his own use.
The deed contains recitals that the vendor had "no right or claim whatever left" in respect of the property or its price and obligations to make good defects of title—recitals emphasizing divestiture.
The agreement (Ex. A-1) stipulated that the transferor or his heirs could get the property returned only if they paid the entire amount due in a lump sum out of their own earnings; money borrowed from a creditor for repurchase was excluded.

From these terms the court reasoned as follows:

There is nothing in the deed to show that a debtor-creditor relation was intended between the parties; the documents indicate an out-and-out transfer.
The absence of any stipulation that the parties were accountable to each other for interest or profits weighs against treating the transaction as a mortgage.
The recital that the transferee shall appropriate the balance of profits after paying revenue is a common stipulation in sale deeds and does not negate the sale character.
The broad recital that the vendor had divested all rights is more compatible with a sale than a mortgage.
The condition that the vendor must pay only out of his own earnings (and not by borrowing) to effect repurchase is consistent with a sale with a reserved repurchase right and, following authorities (e.g., Jhanda Singh), is inconsistent with the relationship of mortgagor and mortgagee.
The court applied established authorities (Alderson, Bhagwan Sahai, Jhanda Singh, Munshi Bishan Lal, Ahmad Husain Rizwi) to place the onus on those who assert the transaction to be a mortgage, and to hold that an apparent absolute conveyance with repurchase stipulation remains prima facie a sale.
In addressing the respondents' reliance on the timing phrase "khali fasl Jeth," the court observed that the term is a convenient period for transfer of possession generally; it is not decisive to show the transaction's being a mortgage. The court also noted that there was no evidence led in the case about adequacy or reasonableness of the price, so no finding could be made on that point.

Based on these considerations, the court concluded the overall tenor and terms of the two documents showed an out-and-out sale with a condition of repurchase rather than a mortgage by conditional sale.

Holding and Implications

Core Ruling: Appeal Allowed; Decree of the District Judge Set Aside; Decree of the Special Judge Restored.

Direct consequences for the parties (as stated in the opinion):

The court restored the Special Judge’s declaration that Mohammad Amin is owner of one-third of the property.
The Special Judge's finding that this one-third share was not liable to attachment and sale in satisfaction of the decree was restored.
The court directed costs to be awarded throughout in favour of the successful party (i.e., costs throughout were granted with the restoration).

The opinion does not state any broader legal precedent newly established; the court applied and followed existing authorities to reach its conclusion. The decision's effect is to resolve the character of the particular transaction before the court and to reinstate the Special Judge's order in this case.

Show full summary ...

Mohammad Amin v. Bajeangi Singh

1. The only question that arises-in this appeal is whether upon a true construction, the deed of transfer (Ex. 1) read with the agreement (Ex. A-1) is a sale with a condition of repurchase or a mortgage by conditional sale. The matter arises in this way.

2. Bajrangi Singh and others filed an application under Section 4, U.P. Encumbered Estates Act, on 20th October 1936. Decrees were passed in due course by the Special Judge under Section 14 and they were sent to the Collector under Section 19 on 21st July 1939. On 22nd April 1940 two per-sons Mohammad Afzal and Mohammad Yakub, sons of one Abdullah, filed a claim alleging that they are proprietors of certain plots under the deed of 13th June 1924, executed by the applicants in favour of their father Abdullah for :as. 6,000. The debtors-applicants had shown the three sons of Abdullah Mohammad Amin, Mohammad Yakub and Mohammad Afzal as the mortgagees of the property and the sale deed of 13th June 1924, as a mortgage deed. It appears that they subsequently conceded that the deed of 1924 was a mortgage by conditional sale whereupon the Special Judge granted them a decree for two-thirds of the mortgage money. On 21st September 1940, Mohammad Amin who was away in Burma having returned made an application on and January 1941, praying for restoration of the proceedings under the Encumbered Estates Act and the admission of his claim under Section 11 (2) of the Act. Mohammad Amin had apparently satisfied the Court that he was prevented by sufficient cause from filing the claim earlier and his claim was, therefore, admitted. His claim was that he was the owner of the property by virtue of the sale deed of 1924 but in case it was held a mortgage he claimed a money decree for Rs. 2,000 plus Rs. 800 costs of two wells constructed by him on the mortgaged property that is Rs. 2,800. in all. The issue framed by the trial Court was whether the claimant is a vendee of the property In suit as alleged.

3. The learned Special Judge interpreted the sale (Ex. 1) dated 13th June 1924, and the agreement (Ex. A-1) executed on the previous date, as embodying a transaction of sale with a condition of repurchase. Accordingly he allowed the claim and declared Mohammad Amin to be owner of one-third of the property. He decreed that this share was not liable to attachment and sale in satisfaction of the decree.

4. The learned District Judge differed from this view and held that it was a mortgage by conditional sale.

5. I have examined the sale as well as the agreement. It appears that the agreement was executed on 12th June 1924, in anticipation of the transfer of the property but the deed of transfer and the agreement were both registered on 13th June 1924. Exhibit 1 is throughout described as the sale deed and the consideration of Rs. 6,000 as the price. The property covered by the deed is 31 bighas and odd. It was recited in the deed that possession over the property sold with all rights and powers of a proprietor was given to the transferee. The transferee was to pay the Government revenue assessed on the land, was to appropriate the remaining profits to his use for ever generation by generation, significant words following this recital are:

The vendor bad no right or claim whatever left respect of the property sold or its price and if any claim was put forward by the vendor or any of his heirs in respect of the property or its price, then that claim was to be treated as false and untenable. If any deft in title was discovered, then the responsibility for meeting that claim would lie upon the vendor and if any portion of the property went out of the possession the transferee upon the claim of any person, the transferor would be bound in that case to give him other land according to his liking and the transferor and his heirs will have no objection to fulfilling this condition of the deed. If the land did not meet with the appro1 of the transferee, then he will be entitled to recover the entire claim along with damages from the movable and immovable property of the transferor.

6. Under the agreement (Ex. A-1) it was stipulated that whenever in any Jeth the transferor or his heirs paid in a lump sum the entire amount due under the deed of transfer out off his own earnings, the property transferred will be returned to the vendor. It was, however, agreed that money borrowed from a creditor for the return of the property was not to be accepted

7. These are the only material terms of the two deeds.

8. A careful consideration of the terms and conditions of the two deeds leaves no doubt that the parties entered into an out and out transfer. There is nothing in the deed to show that the relation of a creditor and a debtor was created between the parties. The property had to be returned to the vendor upon repayment of the consideration advanced and there was nothing to suggest that the parties were accountable to each other for interest or profits. The mere fact that the deed recited that the transferee shall after paying the Government revenue appropriate the balance of the profits to his own use cannot take away the character of the sale-deed. That is a stipulation which is not uncommonly to be found in sale-deeds. The learned District Judge considered that it was unusual in a sale-deed for the vendor to say that whatever rights he had in the land in preasenti or it might accrue in future were transferred to the transferee without any exception. I do not agree. This is a recital which is introduced into deeds with a view to emphasising that the vendor has divested himself of every vestige of right in the property transferred. This recital is more compatible with the existence of a sale-deed than a mortgage-deed. The condition that the vendor as a condition precedent to the return of the property to him shall pay only out of his own earning and not by borrowing is also consistent with a sale-deed rather than with a deed of mortgage.

9. In Alderson v. While (1858) 44 E.R. 924 Lord Cranworth laid down the principle applicable to such a case in the following words:

The rule of law on this subject is one dictated by common sense that prima facie an absolute conveyance containing nothing to show that the relation of debtor and creditor is to exist between the partie3 does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase.

This statement of the law was approved by their Lordships of the Privy Council in Bhagwan Sahai v. Bhagwan Din and Ors. 17 I.A. 98.

10. In Jhanda Singh v. Wahid-ud-din A.I.R. (3) 1916 P.C. 49 the aforesaid observation was also quoted with approval. That was a case in which there was also the condition that the transferors would pay the original sum advanced out of their own pocket without mortgaging or selling the property to other persons. This condition was urged by counsel to be more consistent with the transaction being a mortgage than a sale. Their Lordships repelled the contention and held that the stipulation is wholly inconsistent with the relation of mortgagor and mortgagee. Indeed they doubted whether the condition was not illegal as amounting to an encroachment on the right of the mortgagor to redeem the mortgage from whatever funds he chose to do so.

11. A similar construction upon the right of the transferor to pay the money out of his own pocket was contained in the deed which fell for consideration in Munshi Bishan Lal v. Lala Banwari Lal and Ors. A.I.R. (26) 1939 ALL. 713. In that case the property was subject to prior encumbrances and it was proper to sell the said property and pay off the debt. Under these circumstances, it was held, following Jhanda Singh's case A.I.R. (3) 1916 P.C. 49, that the terms of the document were consistent only with an intention on the part of the executant to sell the property absolutely to the vendee and to retain the right to repurchase it within one year.

12. The head-note of the decision in Ahmad Husain Rizwi v. Azhar Ali A.I.R. (31) 1944 Oudh 305 to which I was a party in my opinion enunciates the principle correctly:

To determine whether a transaction is a sale or a mortgage by conditional sale, the form in which the transaction is clothed is certainly not the only or the final test but where a transaction is apparently a sale, the onus of showing that it is a mortgage lies on the person who contends against the tenor of the deed. Prima facie, an absolute conveyance containing nothing to show that the relation of debtor and creditor is to exist between the parties does not cease to be an absolute conveyance merely because the vendor stipulates that he shall have a right to repurchase. There is no prevailing tendency in the province of Oudh for Mahomedans to conceal the real nature of the transaction and clothe a mortgage in the garb of an out and out sale, and the fact that the parties are Mahomedans raises no presumption that what appears to be a sale is really a concealed mortgage. The conduct of the vendor pursuant to the deed is also an important factor to be taken into consideration.

The contention on behalf of the respondents that the real nature of the transaction being a mortgage it was cloaked in the form of a sale on account of the scruples which Abdullah had as a Mahomedan is also satisfactorily met in this case.

13. On behalf of the respondents it was contended that the use of the words "khali fasl Jeth" for the taking back of the property is associated with redemption of a mortgage and discloses the real intention of the parties. Reliance was placed on a decision of the Judicial Commissioner of Oudh in Mahabir v. Kunj Bihari A.I.R. (11) 1924 Oudh 417 in support of the fact that this date is generally a date more appropriate to redemption of a mortgage than to a reconveyance of the property by sale. A similar observation was made in Mehdi Husain v. Mohammad Jawad A.I.R. (28) 1941 Oudh 479 where it was said that "khali fasl Jeth" is the most convenient time of the year for effecting the transfer of ownership. I scarcely think that if the intention of the parties is reconveyance of the property in a transaction of sale, any other time for transferring the ownership of the property would be more appropriate. It seems to me that "khali fasl Jeth" is the most convenient time for transfer of the possession of property, whether it is as a result of the mortgage with conditional sale or a sale with a condition of repurchase. One of the important factors in transactions of this kind is the question of price, i.e., whether the price mentioned in the deed is adequate or reasonable. Unfortunately no evidence has been given on either side in this case and it is impossible to come to any conclusion one way or the other.

14. Upon a consideration of all the terms of the two deeds I am of opinion that the transaction entered into by the parties is one of an out and out sale.

15. The result is that I allow the appeal, set aside the decree of the District Judge and restore that of the Special Judge with the costs throughout.

Mohammad Amin v. Bajeangi Singh

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Position supporting characterization as a sale (as accepted by the Special Judge and advocated by the claimant)

Respondents' Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Mohammad Amin v. Bajeangi Singh

Comments