Harkisondas Bhagwandas v. Bai Dhanu

Shah, J.:— The question referred to the Full Bench is in these terms:—

Whether when a registered deed of sale (A) of immoveable property worth Rs. 100 or over is passed, and as part of the same transaction and not as an independent transaction, the vendee executes an unregistered agreement (B) to reconvey the property to the vendor on payment of a certain sum of money, the document (B) is inadmissible in evidence for want of registration under section 17(1)(b) and section 49 of the Indian Registration Act either,

(a) where the transaction constitutes a mortgage, or

(b) where it is a bona fide sale with a contract for repurchase.

I do not consider it necessary to examine the facts of the case: but I take the facts as found or assumed for the purposes of the reference by the referring Judges.

I would answer the first part of the question in the affirmative.

In determining the real nature of the transaction, the intention of the parties must be ascertained in each case: and when it is found that the transaction really intended was a mortgage, the second document, viz, the unregistered agreement is intended by the parties to affect the right to immoveable property worth Rs. 100 or over, though in terms it may not purport to do so. Where the transaction is a mortgage, the registered document does not represent the whole of the transaction; the other document, which is not registered, represents, as it is intended to represent, a real limitation upon the right created by an ostensible sale. Such a document is not covered by section 17, subsection (2), clause (v), as it does not give merely a right to get another document but limits the right of the ostensible vendee to the immoveable property in question, and as such requires to be registered under section 17, sub-section (2), clause (b).

When we have such a document as part of the same transaction and not as an independent transaction, it cannot be separated from the deed of ostensible sale with which it is connected and of which it forms a part. The decision in Sayad Mir Gasi v. Miya Ali so far as it conflicts with the above view does not appear to me to be correct. It was a case in which the transaction was found to be a mortgage, and still the Court dealt with the unregistered agreement as entirely separated from the registered ostensible sale deed. In my opinion, the Court could not do so in view of the provisions of section 49 of the Indian Registration Act.

As regards the second part of the question, it presupposes a case of a genuine and real sale and a simultaneous agreement on the part of the vendee to reconvey the property. I do not think that there is any ambiguity about the meaning of the expression “bona fide sale”. On reading the referring judgments, I feel no hesitation in accepting the question as meaning whether tbe agreement to reconvey the property requires to be registered, when the parties really intend to effect an out and out sale and when the vendee executes an agreement in favour of the vendor to reconvey the property on payment of money meaning it to be an agreement to reconvey though the agreement is arrived at simultaneously with and as part of the sale transaction. Now, in my opinion, it is indisputable and it has not been disputed, that such an agreement to reconvey would not require to be registered, if it were an independent or separate transaction apart from the transaction of sale. But it is urged that if it is part of the same transaction and connected with the sale it must be registered. I am unable to accept this contention. Of course, it must depend upon the terms of the particular document and the intention of the parties to the particular transaction: but when the intention is to effect a bona fide sale and where the terms of the document are such as we have in this case, I am of opinion that the document evidencing merely an agreement to reconvey is not compulsorily registrable.

It is not compulsorily registrable in view of the provision of section 17, sub-section (2), clause (v), because it merely creates a right to obtain another document which will, when executed, create an interest in immoveable property; but by itself it creates no right in the immoveable property nor does it limit any right, created by the deed of sale. On principle, I am unable to see any distinction between the case of an agreement subsequently and separately executed apart from the sale and the case of agreement contemplated in the question referred to us where it forms part of the transaction of a bona fide sale between the parties. The intention of the parties in both cases is the same, viz., to separate an agreement, which by itself creates no interest in immoveable property from the sale. There is nothing in law to prevent parties from having separate documents as to terms simultaneously agreed upon, provided the terms really admit of being evidenced by different documents, which are permissible in law or rather which are not prohibited by law.

The real test, in my opinion, is not whether the transaction is the same, but whether the intention of the parties in a given case is to create or limit the right in immoveable property worth Rs. 100 and over by an agreement not registered or to keep strictly within the limits contemplated by clause (v) of section 17 subsection (2). Where there is nothing in the terms of the agreement to show that by itself it creates or limits any right in immoveable property, but merely gives a right to obtain another document, and where the intention of the parties ex hypothesi as contemplated by the quest on is to treat the document as strictly limited by the terms, I do not see any reason why the exemption allowed under the said clause of the section should not take effect with reference to it.

I have considered the various cases referred to in the course of the arguments before us as also in the referring judgments. As instances of sale with contract to repurchase I may refer to the cases of Bhagwan Sahai v. Bhagwan Din and Jhanda Singh v. Wahid-ud-Din. There was no question of registration involved in either of these cases. On the other hand, there is the case of Narasingerji Gyanagerji v. Panuganti Parthasaradhi in which the transaction was held to be a mortgage by conditional sale. I have also considered the ratio decidendi in Bala v. Sadashiv, Vaman Trimbak v. Changi and Gajanan v. Jivangirji. It may be possible to deal with these decisions as being referable to the particular facts of these cases. But there is undoubtedly some conflict in the ratio decidendi of these cases. Now that the question is referred to the Full Bench it seems to me to be unnecessary to examine these cases in detail. I may, however mention that the decision in Vaman Trimbak v. Changi is in accordance with the view which I now take. The decision in Gajanan v. Jivangiri is apparently based upon the terms of the document in question which limited the interest of the vendee in the property. At any rate, it was not a document which merely gave a right to the vendor to obtain another document in future. It was understood as meaning that the vendees were not to deal with the property as full owners for twenty-one years. In Bala v. Sadashiv, to, which I was a party, the observations are directed to the case of a mortgage. But I am not prepared to extend them to the case of a bona fide sale; and if they are read as applying to such a case, I am not prepared to accept them as correctly stating the position with reference to an agreement to reconvey in the case of bona fide sale.

The question whether a particular agreement satisfies the requirements of clause (v) of section 17, subsection (2), must depend upon the terms of the document. For instance, if the agreement purports to create some right in immoveable property, and also gives a right to obtain another document in future, it would not satisfy the requirements of that clause. But in the present case, the terms of the document do not go beyond the requirements of the clause; and where the intention of the parties as found or assumed in the question is to keep it strictly within the limits of its terms, the mere fact that it is a part of the same transaction and is not an independent transaction is not sufficient to render the said clause inapplicable or to treat the document as anything more than what it purports to be, viz., an agreement by the vendee to reconvey the property to the vendor on payment of money by him.

I would, therefore, answer the second part of the question, which relates to a bona fide sale, in the negative.

It may be desirable to make such an agreement compulsorily registrable when it forms part of the simultaneous transaction of sale. But it is for the Legislature to consider the point. We have to give effect to the law as we find it. In the absence of any provision of law prohibiting such separation of terms in two documents, I think it must be held that it is open to the parties to separate them in two documents, as they have done in this case. So long as the real intention of the parties is in accordance with the terms of the documents, the question whether the agreement requires to be registered must be answered with reference to the provisions of the Indian Registration Act as contained in section 17(2)(v); and it cannot be treated as compulsorily registrable, because it forms part of the transaction of sale and is not an independent transaction.

Coyajee, J.:— In his referring judgment Mr. Justice Fawcett says:

“The main question in this appeal is whether the lower Courts have erred in holding that the document, Exhibit 39, is inadmissible in evidence for want of registration. The sale-deed, Exhibit 38, was passed on the same day, November 1, 1898, and both documents were written by the same writer. One of the attesting witnesses to Exhibit 38 signed Exhibit 39 for the executant, Bai Jivi. It, therefore, seems clear that the two documents evidence one transaction, and that the second document, Exhibit 39, was not an independent transaction arranged, as an afterthought, subsequent to the execution of Exhibit 38. The plaintiffs also treated the two documents as one transaction, by their allegation that they evidenced a mortgage. The lower Court's view that Exhibit 39 cannot be treated as a separate document entirely apart from the sale-deed, Exhibit 38, is, in my opinion, clearly correct. Also I agree with the view of both the lower Courts that the transaction is not shown to have been one of mortgage, as alleged by the plaintiffs.”

Where, as here, we have two documents bearing the same date, one purporting to be an out-and-out sale of certain immoveable property, and the other an agreement to resell the same property, the main difficulty lies in discovering the real character of the documents, that is, whether they constitute a single transaction of mortgage, or whether they operate as a “bona fide sale with a contract for repurchase”. The test in such cases is the intention of the parties; and that intention must be gathered from the language of the documents themselves viewed in the light of the surrounding circumstances: Jhanda Singh v. Wahid-ud-Din.

Where the intention of the parties was to create a single transaction of mortgage, that transaction would necessarily have to be found partly in one document and partly in the other. In such a case, the agreement (B) in the question referred to us would clearly be intended to limit the right, title or interest created by the deed of sale (A). The two documents would then constitute “two connected and interdependent parts of one and the same transaction” (Jhanda Singh v. Wahid-ud-Din) and both would require to be registered [section 59, Transfer of Property Act and section 17(2)(6) of the Indian Registration Act]. In Sayad Mir Gasi v. Miya Ali, the plaintiff executed a registered deed of sale in favour of the defendant. Contemporaneously, the defendant executed an agreement to the plaintiff to reconvey the property for the same consideration when called upon to do so. The learned Judges held that the parties undoubtedly intended to mortgage the property. They, however, held that the second document was admissible in evidence. They said (p. 708):

“Separated entirely from the conveyance of the defendant we can see in this document nothing more than an ordinary agreement to sell, and such agreements are expressly exempted from the operation of section 17, clauses fa) and (6), of Act III of 1877 by clause (h) as it stood in that section and now Exception (v).”

The intention of the parties being to create a mortgage, and the two documents being connected and interdependent parts of one single transaction of mortgage, both the documents came within section 17(2)(6) of the Indian Registration Act. That decision, therefore, with due respect, is not correct.

Where, however, it is clear that the parties intended that the first document should operate as an absolute deed of sale, and the second document merely evidenced a contract for repurchase, the latter document did not need to be registered; for it did not itself create, declare, assign or limit a right, title or interest of the value of one hundred rupees and upwards to or in immoveable property [section 17, sub-section (2), clause (v), Registration Act]. They did not constitute two connected and interdependent parts of one and the same transaction of sale. The deed of sale was there; it was intended to operate as—what upon its face it purported to be—an absolute deed of sale. The agreement to reconvey was expressly saved from registration by section 17, sub-section (2), clause (v). The decision in Gajanan v. Jivangiri to which I was a party is consistent with this view. There, the intention of the parties was that the vendees “should not deal with the property as full owners for a period of twenty one years”. The second document did limit the right and interest of the vendees to and in immoveable property of the value of upwards of one hundred rupees; it did not merely create a right in the vendor to obtain another document which, when executed, would limit such right or interest. I may be permitted to restate what I said there, namely (p. 1469):

“The question whether an agreement to recovery immoveable property exceeding Rs. 99 in value dots or does not require to be registered must, in each case, be decided on a consideration of the contents of the document itself and of such facts as might be proved for the purpose of showing in what manner the language of the document is related to existing facts. Proximity of time, or even the identity of the dates of the two documents, is not the decisive circumstance in all cases.”

I referred to the three cases cited before us, one of which was that of Vaman Trimbak v. Changi, decided by Fawcett and Madgavkar JJ., and said (p. 1470):

“It is sufficient to say that the facts of this case, as set out above, are entirely different. It is true that in each of those three cases, the two documents under consideration bore the same date; and, moreover, in cases (2) and (3) the agreement had not been registered. But in all the three cases, the documents embodied, each a separate and distinct transaction. Whereas, in this case there is but one transaction and it is contained partly in a registered document and partly in an unregistered one.”

The execution of the deed of sale was, in my opinion, one transaction, and that of the contract for re-purchase a separate transaction. I am aware that in Vaman Trimbak's case Mr. Justice Fawcett regarded the contemporaneous agreement to reconvey the property as forming part of the actual transaction by which the vendee acquired, title. Mr. Justice Madgavkar (as he points out in his referring judgment) regarded the agreement to reconvey as separable from the sale-deed and, therefore, not compulsorily registrable. In my opinion, however, the real test is not whether the transaction is the same, but whether the parties intended by the second, document to create, declare or limit a right, title or interest of the statutory value, to or in immoveable property, or merely to create a right to obtain another document which would, when executed, create, declare or limit such right, title or interest For, two documents of this nature, executed contemporaneously, might, upon the language of those documents viewed in the light of the surrounding circumstances, constitute a mortgage, as in Balkishen Das v. Legge; or they might, upon a true construction operate as a bona fide sale with a contract for repurchase, as in Bhagwan Sahai Bhagwan Din.

I would, for these reasons, answer the first part of the question in the affirmative, and the second part in the negative.

Answered accordingly.

J.G.R

[After the Full Bench decision, the appeal was heard by a Divisional Bench consisting of Fawcett and Madgavkar JJ. and the following judgment was delivered on June 10, 1926:]

Madgavkar, J.:— The answers of the Full Bench to the reference have been given, and we have now to apply the law as laid down by the Full Bench to the facts. The law, as I understand it has now been left by the decision of the Full Bench, is as follows: The case is one of a registered sale deed with an unregistered agreement giving the vendor an option to repurchase. The Full Bench has now decided that, if the transaction which assumes this form above is really one of mortgage, then the second deed is inadmissible for want of registration, the opposite view taken in Sayad Mir Gasi v. Miya Ali being overruled, and the view in Bala v. Sadashiv being affirmed in the cases where the transaction is one of mortgage.

Where, however, the transaction is not one of mortgage then the second document, it is held, does not need registration, even if it is a part of the same transaction as the sale; in other words, even if it is an essential condition of the sale, so long as it is embodied in a separate document from the sale deed itself. The view that it may be taken to be an essential condition of the sale, and therefore to be compulsorily registrable, has not found favour with the majority of the Full Bench. And we must therefore take it now to be the settled law in this Presidency that, so long as the transaction is not one of mortgage, the second document, even though an essential condition of the sale and part therefore of the same transaction, is not compulsorily registrable. The decision in Vaman Trimbak v. Changi is approved. The decision in Gajanan v. Jivangiri is apparently not over-ruled but is reconciled with the Full Bench ruling on the ground that in the former case the document in question, although the transaction was not a mortgage, limited the interest of the vendee in the property.

In the present case I agree with my learned brother that the transaction is not proved to be a mortgage. The agreement to re-convey (Exhibit 39) is not, therefore, on the authority of the Full Bench ruling, compulsorily registrable, and is admissible in evidence and not, as was held by the lower appellate Court on the strength of the observations of Macleod C.J in Bala v. Sadashiv, inadmissible.

The other question is whether this agreement is void as offending against the rule of perpetuity. As I said, while there is much to be said on equitable principles for the view that the agreement is void as in Maharaj Bahadur Singh v. Balchand, on the other hand the language of sections 14, 40 and 54 of the Transfer of Property Act, strictly construed, is sufficient to validate the document. On the whole, therefore, I see no sufficient reason to differ from the view of Sulaiman J. in Basdeo Rai v. Jhagru Rai and the conclusion of my learned Brother that the document cannot be held to be void on this ground.

The suit of the plaintiff-appellant was, however, on the basis of a mortgage, so that, on the pleadings as they stand, the suit would have to be dismissed. But in the lower Court (Exhibit 23 in appeal) he asked in the alternative for relief for specific performance of the same document. The fact that until the decision of the Full Bench over-ruling Sayad Mir Gazi v. Miya Ali, this last decision stood and was binding on the subordinate Courts is some excuse for his not pleading in the alternative from the outset. We are, therefore, of opinion that the amendment of the plaint, now sought, although at a late stage, ought to be allowed, subject to an appropriate order as to costs.

The appeal is, therefore, allowed, the order of the lower Courts dismissing the suit set aside, the plaintiff allowed to amend the plaint as above, and the suit remanded to the trial Court for a decision on the merits, after opportunity to the defendant to reply to the amended plaint and to raise new issues, and to the parties to adduce fresh evidence, if necessary, on them. Each party to pay its own costs throughout up to date.

J.G.R