Judgement
Civil Original Nos. 37-D and 38-D of 1961 are two applications to this Court under Section 107 of the Trade and Merchandise Marks Act, 1958 (Act No. 43 of 1958) hereinafter co be referred to as the Act, for rectification of two registered trade marks Nos. 161543 and 161544 which were registered on the 2oth of November, 1953 in clause 12 in respect of bells for cycles. The former mark is 50 (numeral) and the, latter Fifty (word per se) which were both registered by respondent No. 1, the Metal Goods Manufacturing Co., (Private) Ltd., Varanasi with the Registrar of Trade Marks, Delhi (respondent No. 2).
2. The petitioner in Civil Original No. 37-D of 1961 is the National Bell Company and in Civil Original No. 38-D of 1961 Messrs. Gupta Industries Corporation, both of Kapurthala in the Punjab. The former, according to the petition, is carrying on business since the year 1957 as manufacturers of cycle bells and has been using various numerals 33, 50, 51 and 140 from time to time on their bells according to the qualities. The latter claims to be carrying on the same business since 1947 and using various numerals such as 20, 50 and 60. Both these petitions are practically identical and have been consolidated, and both will be disposed of in the course of the following order. Respondent No. 2 has stated that he does not propose to submit a statement under Section 112(2) of the Act and accordingly the only contesting respondent is respondent No. 1 which will hereinafter be referred to as the respondent.
3. Both these petitions arise from infringement actions instituted by the respondent against the respective petitioners in the Court of the District Judge, Lucknow. On 24-4-61, that Court, on being approached by the petitioners under Section in of the Act, stayed the proceedings in their suits, and allowed time to the petitioners for filing these rectification petitions and they were so filed in this Court within the time as extended by the District Judge, Lucknow.
4. The petitions are under Sections 46 and 56 of the Act and the grounds, upon which the cancellation of the respondents trade marks is claimed, are sated in paragraph 4 of the petition and are as follows :
(1) That the numeral 50 and word per se Fifty were common to the trade at the time of the registration of the aforesaid marks in favour of the respondents and were, therefore, not distinctive of the goods of the respondents.
(2) The respondents committed fraud upon the Registry in declaring that they were the originators or proprietors of the aforesaid marks and suppressed the real facts in declaring that they were the originators of the trade marks when, in fact, they were not.
"(3) That many other traders in the market are using the numeral 50 and the word per se Fifty on or in relation to bells for cycles and distinctiveness, if any, which the respondent claims, has been lost.
(4) That the respondents did not get the registration of these marks with the bona fide intention of using it as such in relation to their goods and, in fact, there has been no bona fide use of the trade marks in question in relation to the respondents goods before the date of the application.
(5) That the respondents are using different trade marks than the ones registered by them.
5. All these allegations have been contravened by the respondent and the issue which arose for trial, was as follows :
"Whether the Trade Marks Nos. 161543 and 161544 are liable to be cancelled on the grounds mentioned in para No. 4 of the petition ?"
6. So far as grounds Nos. 4 and 5 are concerned, they were not seriously pressed by Mr. Anup Singh, learned counsel for the petitioners. The respondents have put on the record the statements (Exhibits R.2 to R.4) as extracted from their books, of the sales of the cycle bells manufactured by them from 1949-50 up to 1961-62. The correctness of these statements was not challenged in cross-examination. In 1961-62, the sale of the 50 bells of the respondents was over 14 lacs of rupees and it exceeded the sale of the previous year by more than rupees one lac. It is true that the respondents are selling the bells with other marks but the sales of their balls other than 50 bells are comparatively much less. There is thus, no force in grounds Nos. 4 and 5 of the petitions, as stated above.
7. The use of numerals as marks on cycle bells or in relation to the sale of cycle bells was in existence much before the respondents started their business. According to Badri Pershad Aggarwal (R.W. 6), who is the managing director of the respondent company, the company was incorporated in 1946 and before that it had been carried on as a proprietorship concern in the same name since 1944. One of its lines of manufacture was cycle belis and it was in 1950 that the respondents stared selling bells which had the word Fifty on the lever or trigger of the bell. The respondents have their house mark Asia and prior to 1950 they were selling bells with the mark : Asia 47, Asia 48 and Asia 49. It is further amply proved from the oral as well as documentary evidence led on behalf of the petitioners, and it is in fact admitted by R.W. 6 himself, that bells known as 50 bells were in the market even prior to 1950. For instance, Messrs. Lucas Company of England were selling bells known as Lucas 50 bells and also Lucas 30 bells.
Badri Pershad Aggarwal (R.W. 6) admitted that up to the end of 1951 Lucas 50 bells were being quoted and sold in the market and Lucas 30 was being quoted in the market in the year 1953. The respondents, in the applications made by them for the registration of the trade marks in dispute, had themselves filed with, the Registrar of Trade Marks pricelists and cycle market reports according to which there were quotations of the prices of Lucas 30 Lucas 50 and Republic 50 bells. On behalf of the petitioners, several witnesses, who have been dealing in cycles and accessories for a number of years, were produced. (After discussing the evidence in para 7, the judgment proceeds).
8. Mr. Savaksha, learned counsel for the respondents, faced with this overwhelming evidence, maintained that the numerals and in particular 50 were merely catalogue numbers and not actually inscribed by the Lucas Company Ltd., on the bells. He referred to clause (a) of Sub-Section (2) of Section 2 of the Act, according to which any reference to the use of a mark shall be construed as a reference to the use of a printed or other visual representation of the mark. Clause (b), however, provides that any reference to the use of a mark in relation to goods shall be construed as a reference to the use of the mark upon, or in any physical or in any other relation whatsoever, to such goods.
Apart from the catalogues and the price lists, there is positive oral evidence as to the numeral 50 having been inscribed on the arms of Lucas 50 bells. (After discussing the evidence in para 8 the judgment proceeds) : In Louise and Co. Ltd-v. Gainsborough, (1902) 20 RPC 61, it was held that in order to show the a mark was not distinctive of certain goods, it was sufficient to show that for some years before registration of the mark it had been commonly used in that particular trade on trade cards and labels and in catalogues etc. In the instant case, apart from the use in the catalogues and price lists, there is, at least with regard to Lucas Company bells, positive evidence that the numeral 50 was being used on and on relation to the cycle bells manufactured by them. In the instant case, the registrations of the disputed trade marks had been actually in force for more than seven years before the institution of the petitions.
The statute on the subject is Section 32 of the Act which is as follows :
"32. Registration to be conclusive as to validity after seven years. Subject to the provisions of Section 35 and Section 46, in all legal proceedings relating to a trade mark registered in Part A of the register (including applications under S. 56), after the expiration of seven years from the date of such registration, be taken to be valid in all respects unless it is proved :
(a) that the original registration was obtained by fraud; or
(b) that the trade mark was registered in contravention of the provisions of Section II or offends against the provisions of that Section on the date of commencement of the proceedings; or
(c) that the trade mark was not, at the commencement of the proceedings, distinctive of the goods of the registered proprietor."
The validity of the registration of the impugned trade marks is questioned on behalf of the petitioners on each of the three grounds (a), (b) and (c). So far as (a) is concerned, there is hardly any evidence of fraud having been practised by the respondent. All that is pointed out is that the respondents, who are in the bicycle trade, were getting price lists and catalogues of bicycle parts including bells in which price of Lucas 30 was also being quoted and they could not, therefore, have bona fide believed themselves the originators of this mark. The story given by Badri Pershad Aggarwal (R.W. 6) in this connection is that the proprietorship concern was putting on the market bicycle bells with the marks. Asia 47, Asia 48 and Asia 49 in the years 1947, 1948 and 1949 respectively, and that as a result, of continued research they improved the quality and design of the bells. In 1950, they placed on the market the Fifty bells with improved quality and higher price. I do not, however, consider that the designation on the bell had any connection with the year 1950 because, as admitted by the witness in cross-examination, the manufacture, of Asia 30 and Asia 40 was not started in that years 1930 or 1940. The more likely explanation is that bells with the numeral 50 were already in the market and the numeral indicated a certain standard of quality.
But even so, it is difficult to infer that the, respondents intention in obtaining the registration of the disputed marks was fraudulent. If such was the case, they would not have filed along with their applications for registration copies of price lists containing quotations for Lucas 50 bells. Mr. Anup Singh in this connection, referred to the case cited as Gynomin Trade Mark, 1961 RFC 408. The crucial circumstance from which a fraudulent intention was inferred in that case was that the party which obtained the registration of the trade mark had been the agent of the proprietor of the mark and thus stood in a fiduciary capacity to him. There are no such allegations in the present case and I am, therefore, unable to hold that the original registration was fraudulently obtained by the respondents.
9. Clause (b) of Section 32 of the Act makes a reference to the provisions of section 11 which is as follows :
"II. Prohibition of registration of certain marks. A mark :
(a) the use of which would be likely to deceiver or cause confusion; or
(b) the use of which would bf contrary to any law for the time being in force; or
(c) which comprises or contains scandalous or obscene matter; or
(d) which comprises or contains any matter likely to hurt the religious susceptibilities of any-class or Section of the citizens of India; or
(e) which would otherwise be disentitled for protection in a Court; shall not be registered as a trade, mark".
Mr. Anup Singh, on behalf of the petitioners, has relied on clauses (a) and (e) of Section 11. So far as clause (a) of Section n is concerned, it is clear that for about a year before the applications for registration were made by the respondents, the imports of Lucas Bells and other foreign makes of cycle bells had been stopped. It is also not asserted anywhere that Messrs. Lucas Company had obtained the registration of either the word Fifty or the numeral 50 in relation to the cycle bells and, in the circumstances, I do not think that clause (a) would be attracted. The emphasis by Mr. Anup Singh is on clause (e) of section 11 and it is pointed out that under Sub-Section (1) of Section 9 of the Act, a trade mark shall not be registered in Part A of the register unless it contains or consists of at least one of the five specified essential particulars. Neither the word nor the numeral 50 falls within clauses (a) to (d) of Sub-Section (1) of Section 9 and the only clause, which can plausibly be applied, is as follows :
"(e) any other distinctive mark."
It would not, however, be correct to say that a mark, which is not registrable under S. 9(1)(e) on account of not being distinctive, is necessarily disentitled to protection in a Court under clause (e) of section 11. The leading case in this respect is Imperial Tobacco Co. of Great Britain and Ireland Ld. v. De Pasquali and Co., (1918) 35 RFC 185, and according to the principle laid down there it was held that where the allegation is that a mark is common to the trade and hence not distinctive, it may be unregistrable under Section 9 but that would not necessarily mean that it is disentitled to protection under clause (e) of section 11. In the case cited, Swinfen Eady M.R. observed at page 204 with reference to the word otherwise that it would extend to and include a matter which intrinsically from its nature a Court of Justice would not protect. That may be not only by reason of its being calculated to deceive but by reason of the nature of the matter itself, as if it were blasphemous, obscene, indecent or seditious.
Mr. Anup Singh, on behalf of the petitioners, maintained that inasmuch as the respondents had intentionally and, therefore deceitfully copied the 50 mark of the Lucas Company, they were disentitled to protection and in this connection he referred to Brown Shoe Co. Inc.s Application, In re, 1959 RFC 29. That was an application for rectification of the register by expunging the mark Naturlizet in regard to shoes and other articles on the ground that the petitioners mark Naturalizer was so well known at the date of application for registration that the respondents were not in truth proprietors of the mark Naturlizet. The appellate Court in that case ordered the register to be rectified. In the present case, as already shown above, the numeral 50 was even before the respondents applications for registration not the exclusive mark of any particular company, and no element of dishonesty can be inferred from the circumstances in which the applications for registration were made. I am not therefore, satisfied that clause (e) of section 11 can be invoked by the petitioners in this case and ipso facto the objection on the basis of clause (b) of Section 32 would also not be valid.
10. There remains clause (c) of Section 32. The crux of the matter is that the impugned trade marks were not, either at the time of the registration or at any rare at the commencement of the proceedings, distinctive of the goods of the respondents. Sub-Section (3) of Section 9 defines, for the purpose of the Act, the expression distinctive and it lays down that this expression in relation to the goods in respect of which a trade mark is proposed to be registered, means adapted to distinguish goods with which the proprietor of the trade mark is or may be connected in the course of trade from goods in the case of which no such connection subsists.
The word distinctive of the goods in clause (c) of Section 32 is to be interpreted in the same sense. Now, it has already been shown that even before the applications for registration by the respondents, the numeral 50 was so extensively used in relation to the cycle bells that it could not be considered distinctive of the cycle bells manufactured by the respondents. Indeed, so far as numerals are concerned, they have not been treated as being prima facie distinctive of the goods other than textile goods.
In this connection, reference may be made to Part 3 of the Trade and Merchandise Marks Rules, 1959 which makes special provision for registration of numerals for textile goods. There is thus a great deal of force in the contention on behalf of the petitioners that the mark 50 was publici juris or common to the trade. There is furthermore evidence to show that the numeral 50 as well as the word Fifty are being commonly used on cycle bells subsequent to the registration of the impugned marks. (After discussing the evidence in para 10 the judgment proceeds) :
11. From all this evidence, it is clear that the numeral 50 cannot be regarded to nave been distinctive of the respondents goods at the commencement of the proceedings and it is, therefore, hit by clause (c) of Section 32 of the Act. So far as the word Fifty per se is concerned, there is no evidence that it was used by other parties in relation to the cycle bells either prior to or after the registration of this mark at the instance of the respondents. It has to be remembered that more than years have elapsed since the original registration of this trade mark. It may be that under Sub-Section (2) of Section 31 of the Act this trade mark may have been capable of challenge before the expiry of the period of seven years from the date of the registration on the ground that it was not a distinctive mark under clause (e) of Sub-Section (1) of Section 9, but for the reasons already given, that is not enough to justify cancellation of the mark under Section 32 of the Act.
12. The result, therefore, is that both the petitions are partly allowed but only to the extent that the registration of the respondents mark No. 161543 be cancelled and that it be expunged from the register kept by respondent No. 2 and a notice shall be served upon the Registrar in the prescribed manner.
13. In view of the divided success of the parties, I leave them to bear their own costs in this Court.
Petitions partly allowed. AIR 1964 PUNJAB 81 (Vol. 51, C. 18) "Sita Ram v. Bashesnar Dayal"
PUNJAB HIGH COURT
Coram : 2 S. S. DULAT AND A. N. GROVER, JJ. ( Division Bench )
Sita Ram s/o Ram Chander, Appellant v. Bashesnar Dayal and others, Respondents.
Patent Appeal No. 492 of 1958, D/- 31 -5 -1963., from decree of Mehar Singh, J. in R. S. A. No. 756 of 1954, D/- 5 -9 -1958.
Transfer of Property Act (4 of 1882), S.58(c), Proviso - MORTGAGE - APPLICABILITY OF AN ACT - SALE - DOCUMENTS - Applicability to Punjab - Sale or mortgage - Distinction - Sale with a condition to reconvey - Determination of real nature - Admissibility of oral evidence - Tests indicating a mortgage - Transaction in suit held a mortgage and not a sale.
Evidence Act (1 of 1872), S.91, S.8.
RSA No. 756 of 1954, D/-05-09-1958 (Punj), Reversed.
The proviso to S.58(c), T. P. Act which requires the condition to reconvey to be incorporated in the deed itself is not applicable in the Punjab. 48 Pun LR 517, Ref. (Para 5)
The question whether by the incorporation of a condition to reconvey 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. (Para 5)
What distinguishes the two transactions is the relationship of debtor and creditor, the transfer being a security for the debt. The form in which the deed is clothed is not decisive. If the words are plain and unambiguous, they must in the light of the evidence and the surrounding circumstances be given their true legal effect. (Para 5)
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 documents may of course be given. Evidence of contemporaneous conduct is always admissible as a surrounding circumstance; but evidence as to subsequent conduct of the parties is inadmissible. AIR 1960 SC 301, Rel. on. (Para 5)
The tests which are generally applied to determine the nature of such transactions and which are indicative of a mortgage and not a sale, are : (1) the existence of a debt; (2) the long period of repayment, (3) the continuance of the grantor in possession, (4) a stipulation for interest on repayment, (5) a price below the true value and (6) a contemporaneous deed stipulating for reconveyance. AIR 1931 Bom 371, Ref. to. (Para 6)
In applying these tests the Courts put the onus on the party alleging that an ostensible sale deed was a mortgage and in case of ambiguity leant to the construction of a mortgage. (Para 6)
Held on facts that in view of the fact that the price paid was wholly inadequate and that possession remained with the transferor, it was clear that transaction in question was not one of complete sale but what was intended was to create a mortgage by way of conditional sale. RSA No. 756 of 1954 D/-05-09-1958 (Punj) Reversed. (Para 6)
Cases Referred : Courtwise Chronological Paras
(60) AIR 1960 SC 301 (V 47) : (1960) 2 SCR 117, Bhaskar Waman v. Shrinarayan Rambilas 5, 6
(30) AIR 1930 Bom 79 (V 17) : ILR 54 Bom 30, Basappa Gurubasappa v. T. Virupaxappa 6
(31) AIR 1931 Bom 371 (V 18) : 134 Ind Cas 337, Kuppa Krishna v. Mhasti Goli Naik 6
(63) AIR 1963 Ker 18 (V 50) : ILR (1962) 2 Ker 65, Abdul Majeed v. Bhargavan 5
(34) AIR 1934 Lah 453 (V 21) : 35 Pun LR 337, Amir v. Inder Singh 6
(46) 48 Pun LR 517, Raghubar Dial v. Ch. Zahur Ahmad 5
(61) AIR 1961 Mad 301 (V 48) : (1961) 2 Mad LJ 72, Ahmed Ali v. Bhageerathi Ammal 6
(53) AIR 1953 Punj 292 (V 40) : 55 Pun LR 41, Soshil Kumar v. Madan Gopal 6
(60) AIR 1960 Punj 444 (V 47) : 62 Pun LR 586, Lalchand v. Atma Ram 6
D.N. Aggarwal and R.N. Aggarwal, Appellants; K.N. Tewari, Respondent.
Judgement
A. N. GROVER, J. :- This is an appeal under clause 10 of the Letters Patent against the judgment of a learned Single Judge who affirmed the decisions of the Courts below decreeing the suit. In order to determine the points that have been raised, the facts may be shortly stated.
2. On 5th September 1948 Lachhmi Narain executed a registered sale deed, Exhibit P-3, in respect of his share in the property in dispute which consists of a haveli in Rewari town in favour of Amar Chand for a consideration of Rs. 300/-. On the same day he executed a registered rent deed, Exhibit D-2, taking on rent the same property from Amar Chand. Yet a third document was executed on that very day between Lachhmi Narain and Amar Chand, according to which the latter agreed to reconvey the property to the former, if he paid back the consideration of sale as well as the amount of rent due within two years from the date of the agreement. Before the expiry of that period, however, on 6th April 1950 Sita Ram defendant obtained from Lachhmi Narain whatever rights the latter had in the property. Out of the sale consideration a sum of Rs. 300/- was left with the vendee for payment of what was stated to be the preexisting mortgage in favour of Amar Chand. Sita Ram did not exercise his right to repurchase the property from Amar Chand within a period of two years from 5th September 1948. On 30th September 1950 Amar Chand executed a registered sale deed, Exhibit P-4, conveying the title in that property to Sita Ram for Rs. 400/-. In this sale deed, Amar Chand described himself as a complete owner of the property. In October 1951 Basheshar Dayal and Rajinder Kumar, the two sons of Amar Chand, and his wife Rukmani Devi instituted the usual suit for possession of the property on the ground that they formed a joint Hindu family with Amar Chand who was impleaded as defendant No. 3 in the suit and that he had purchased the property with the funds of the joint Hindu family and that he was not entitled to alienate the same without the consent of the other members of the family. It was pleaded that Amar Chand was given to drinking and immoral habits and that the sale had been effected without any necessity or benefit to the family, Sita Ram contested the suit.
3. On the issues which had been framed, the subordinate Judge as also the Additional District Judge decided that the property in suit was joint Hindu family property and Amar Chand had no right to alienate the same. It was found that the alienation was not for illegal or immoral purposes, nor was it an act of good management. As the sale was without any necessity, the suit was decreed.
4. Before the learned Single Judge, two questions were principally raised, the first being whether the alienation made on 5th September, 1948 amounted to a mortgage by conditional sale or was an outright sale and the second being whether the property in suit belonged to the joint Hindu family consisting of Amar Chand and his sons. The learned Single Judge held that the agreement for reconveyance made on 5th September 1948 required registration and, therefore, could not be looked at for the purpose of deciding the nature of the transaction evidenced by the sale deed, Exhibit P-3. For that reason he felt that there was hardly anything in the plea raised By Sita Ram that the transaction in reality was one of mortgage by way of conditional sale. The finding with regard to the property having been acquired from the assets of the joint Hindu family being one of fact, was not disturbed. The present appeal against the judgment of the learned Single Judge was at first heard by a Bench consisting of my learned brother Dulat, J., and Capoor, J. and by means of a judgment dated 1st May 1961 the appeal was allowed and the suit of the plaintiff-respondents was ordered to be dismissed. Basheshar Dayal, one of the plaintiff-respondents, later on filed an application for setting aside the decree of the dismissal of the suit, the ground being that he was not represented at the hearing of the appeal and that the matter had been decided ex parte against him. On 28th March 1963 the Bench made an order that the aforesaid party should be allowed to have his full say, with the result that the ex parte decree was set aside and it was directed that the appeal be reheard in the presence of the parties subject to payment of Rs. 100/- as costs to Sita Ram. That having been done, the appeal has been fixed for hearing before us.
5. The main question which has been argued before us relates to the true nature of the transaction embodied in the sale deed, Exhibit P-3, executed on 5th September, 1948 by Lachhmi Narain in favour of Amar Chand. It is common ground that if it embodied a transaction of a mortgage by way of conditional sale, then the suit must fail. There can be little doubt that if the sale deed, Exhibit P-3, is to be considered by itself, the transaction would amount to an outright sale. There is no such recital, term or condition in the document itself, which would show that Lachhmi Narain, the vendor was reserving any right in the property for himself. The definition of mortgage by conditional sale is given in Section 58(c) of the Transfer of Property Act, 1882, which contains a proviso that no such transaction shall be deemed to be a mortgage unless a condition is embodied in the document which effects or purports to effect the sale. That proviso, however, would admittedly not apply to the present case vide Raghubar Dial v. Ch. Zahur Ahmad, 1946-48 Pun LR 517. In Bhaskar Waman v. Shrinarayan Rambilas Agarwal, AIR 1960 SC 301 it has been laid down that 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.
In a safe coupled with an agreement to reconvey there is no relationship of debtor and creditor nor is the price charged upon the property conveyed but the sale is subject to an obligation to retransfer the properly within the period specified. What distinguishes the two transactions is the relationship of debtor and creditor, the transfer being a security for the debt. The form in which the deed is clothed is not decisive. If the words are plain and unambiguous, they must in the light of the evidence and the surrounding circumstances be given their true legal effect. 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 documents may of course be given. Evidence of contemporaneous conduct is always admissible as a surrounding circumstance; out evidence as to subsequent conduct of the parties is inadmissible. In that case it was found that the circumstances surrounding the deed at the date of its execution supported the view that the transaction was intended to be a mortgage. The agreement for reconveyance as also the sale deed were executed on the same day. The agreement strongly indicated that the parties regarded the arrangement in the deed as a mortgage. It was also found that the price paid was not adequate. In the matter of determining the market value apart from the other evidence their Lordships capitalised the rent at Rs. 5/- per cent in order to test what the market value amounted to.
6. Now, in the present case all the Courts have out the admissibility of the agreement which was made on the same day when the sale deed, Exhibit P-3, was executed and which was one for reconveyance of the property which had been sold by Lachhmi Narain to Amar Chand. Mr. Aggarwal who appears for the appellant, maintains that the agreement in question was admissible as an agreement to sell and it was not compulsorily registrable under the provisions contained in Section 17 of the Indian Registration Act, 1908, as it did not purport to vary or modify the terms of the registered sale deed, Exhibit P-3, or to limit the right of Amar Chand in the immovable property, the value of which was over Rs. 100/-. On the other hand, Mr. Tewari, who appears for Basheshar Dayal respondent, has relied on certain decisions namely, Basappa Gurubasappa v. T. Virupaxappa, AIR 1930 Bom 79, Amir v. Indar Singh, AIR 1934 Lah 453 and Soshil Kumar v. Madan Gopal, AIR 1953 Punj 292 for the purpose of showing that such an agreement has always been held to be compulsorily registrable and it is submitted that since in the present case the agreement was not registered, it could not be looked at for the purpose of determining whether the transaction embodied in Exhibit P-3 was one of mortgage by way of conditional sale. The last decision is of a Bench of this Court in which it was observed at page 293 as follows :
"Further, the sale deed undoubtedly required registration under
Section 17, Registration Act, and if it was sought to modify in the terms of the sale deed by later agreement the document embodying those terms would also require registration of course it was possible for Biri Mal or his sons to rely upon the unregistered agreement of 10-1-1942 as what it purported to be an agreement to sell which of itself did not require registration but they are not attempting to do this, and the five-year period in which they could see for its enforcement expired before the present suit was filed."
It is clear from paragraph 6 of the judgment itself that these observations were made obiter but there seems to be force in the argument that when a party seeks to use an unregistered agreement for showing that the registered sale deed, though obstensibly embodying a transaction of sale, merely created a mortgage by way of conditional sale, it seeks to modify or limit the terms and conditions of the registered document which is not permissible under the law of Registration. It is, however, unnecessary to decide this matter finally in the present case as even if the unregistered agreement is to be excluded from consideration, the circumstances surrounding the execution of the sale deed dated 5th September 1948 establish that the transaction was one of mortgage by way of conditional sale. One of the most important tests which has been adverted to even by their Lordships in Bhaskar Waman Joshis case, AIR 1960 SC 301 (supra) is whether the price which was paid was adequate. The whole basis of this test essentially is that if comparatively much less consideration had been paid than the actual value of the property, the intention must be not to sell the property outright. There is hardly any cogent evidence about the market value of the property in September 1948 but it is known and not disputed that the rent which was agreed to be paid by the transferor to the transferee was Rs. 4/4/- per month and capitalised at 5 per cent in the way it was done in the Bhaskar Waman Joshis case, AIR 1960 SC 301 the value of the property in dispute would come to Rs. 800/-. It is noteworthy that when later on Lachhmi Narain sold his rights to Sita Ram on 6th April 1950, that was also for a sum of Rs. 800/-. It may be, as has been suggested by Mr. Tewari, that between 5th September 1948 and 6th April 1950 there had been some rise in price but event if a conservative figure is to be taken, the price could not be less than Rs. 600/- at the time when the transaction embodied by the sale deed, Exhibit P-3, took place. The consideration which was paid, therefore, was only half of the price of the property.
The other circumstance which is of material importance is that the possession remained with the transferor though it was stated to be by virtue of the rent note executed in favour of the transferee, in Mullas Transfer of Property Act, 4th Edition, the tests which have generally been applied for determining the nature of such transactions and which are based on a passage in Butlers Preface to Coke on Littleton are set out at page 339 and are as follows :
"(1) the existence of a debt;
(2) the period of repayment, a short period being indicative of a sale and a long period of a mortgage;
(3) the continuance of the grantor in possession indicates a mortgage;
(4) a stipulation for interest on repayment indicates a mortgage;
(5) a price below the true value indicates a mortgage;
(6) a contemporaneous deed stipulating for reconveyance indicates a mortgage."
In applying these tests the Courts put the onus on the party alleging that an ostensible sale deed was a mortgage and in case of ambiguity leant to the construction of a mortgage. In this connection our attention has also been invited to a decision of the Bombay High Court in the matter of Neem Chand Daga, 134 Ind Cas 931*In which these tests have been discussed.
* This reference is not correct. Apparently the reference is intended to the decision of the Bombay High Court in Kuppa Krishna v. Mhasti Goli Naik, 134 Ind Cas 337 : (AIR 1931 Bom 371).
Mr. Tewari has relied on a Bench decision of this Court in Lal Chand v. Atma Ram, (1960-62) Pun LR 586 : (AIR 1960 Punj 444) from which it is sought to be established that the transaction in the present, case was one of outright sale. It is needless to point out that cases of this nature cannot be decided except by reference to their own facts, the tests being well known. Lal Chands case, 1960-62 Pun LR 586 : (AIR 1960 Punj 444) is distinguishable on facts and it is unnecessary to discuss it in detail. Similarly the other cases which Mr. Tewari pressed into support, e.g., Sayyad Ahmed Ali v. Bhageerathi Ammal, AIR 1961 Mad 301 and Abdul Majeed v. Bhargavan, AIR 1963 Kerala 18 can hardly afford much assistance in deciding whether on the facts which have been proved the transaction embodied in Exhibit P-3 was one of outright sale or mortgage by way of conditional sale. In view of the fact that the price paid was wholly inadequate and that possession remained with the transferor, we are satisfied that the transaction was not one of complete sale but what was intended was to create a mortgage by way of conditional sale.
7. In this view of the matter the appeal must be allowed and the decision of the learned Single Judge as also of the Courts below set aside. The suit filed by the plaintiffs shall stand dismissed.
8. Owing to the nature of the points involved, there will be no order as to costs.
9. S. S. DULAT, J. :- I agree.
Appeal allowed.