2008 (12) TMI 817 - SC - Indian Laws

Supreme Court: Deed is Absolute Sale, Not Mortgage

The Supreme Court held that the deed dated 27.10.1969 was an absolute sale with a condition of repurchase, not a mortgage by conditional sale. The appeal ... Mortgage by conditional sale - Sale with condition of repurchase (reconveyance/vaibulwafa) - Possession and attornment as indicia of transfer - Intention of parties and construction of instrument - Equity of redemption and clog - Order 41 Rule 33 CPC - power to pass any decree which ought to have been passedMortgage by conditional sale - Sale with condition of repurchase (reconveyance/vaibulwafa) - Possession and attornment as indicia of transfer - Intention of parties and construction of instrument - Nature of the deed dated 27.10.1969 - whether it is a mortgage by conditional sale or an absolute sale subject to a condition of repurchase - HELD THAT: - The Court construed the deed in its entirety, noting that the instrument disclosed source of title, assigned only the vendor's one-half leasehold right, recorded delivery of possession, expressly entitled the transferee to attorn to the landlord and pay rent, and contained an express stipulation that the vendor could repurchase within three years. No evidence established a creditor-debtor relationship or any security-based transaction; the deed used words of sale and relinquishment of vendor's rights and permitted the transferee to enjoy and deal with the property subject to the limited repurchase period. The three-year period was held reasonable and there was no material indicating a clog on the equity of redemption. The fact that the appellant already owned the other half and the parties were related supported the inference of an intended reconveyance/repurchase arrangement rather than a mortgage transaction. Applying the principles embodied in Section 58(c) and relevant precedents, the Court concluded that the instrument is a sale with a condition of repurchase and not a mortgage by conditional sale. [Paras 11, 12, 16, 18]The deed dated 27.10.1969 is a sale with a condition of repurchase (reconveyance) and not a mortgage by conditional sale; the High Court's contrary conclusion is set aside.Order 41 Rule 33 CPC - power to pass any decree which ought to have been passed - Whether the appellant could in this appeal attack findings of the First Appellate Court and invoke Order 41 Rule 33 CPC to support the decree in his favour - HELD THAT: - The Court observed that although the First Appellate Court had found the transaction to be a mortgage by conditional sale, the respondent's appeal was dismissed and the appellant had no separate appeal against that finding. It was nevertheless legally permissible for the appellant to support the decree passed in his favour by attacking the contrary finding of the First Appellate Court. The Court held that Order 41 Rule 33 CPC enabled the appellate court to pass any decree that ought to have been passed and to grant further relief even where the appeal was only against part of the decree, and that this power could be exercised in favour of respondents. [Paras 17]Order 41 Rule 33 CPC was available and could be invoked to support the decree in favour of the appellant by attacking the First Appellate Court's adverse finding.Final Conclusion: Impugned judgment of the High Court is set aside; the deed dated 27.10.1969 is held to be a sale subject to a right of repurchase and not a mortgage by conditional sale, and the appellant's appeal is allowed; no order as to costs. Issues Involved:1. Interpretation of the deed dated 27.10.1969.2. Applicability of Section 58(c) of the Transfer of Property Act, 1882.3. Relationship of creditor and borrower between the parties.4. Applicability of Order 41 Rule 33 of the Code of Civil Procedure.Summary:1. Interpretation of the Deed Dated 27.10.1969:The primary issue in this appeal was whether the deed dated 27.10.1969 constituted an absolute conveyance with a condition of repurchase or a mortgage with conditional sale. The High Court of Kerala, in its judgment dated 1.11.2006, interpreted the deed as a mortgage with conditional sale, thereby allowing the suit for redemption and partition filed by the respondent. The Supreme Court, however, found that the deed should be construed as an absolute sale with a condition of repurchase, considering the possession was delivered, no interest was stipulated, and the appellant was permitted to attorn to the landlord.2. Applicability of Section 58(c) of the Transfer of Property Act, 1882:Section 58(c) defines a mortgage by conditional sale. The Supreme Court noted that one of the ingredients for determining the true nature of the transaction is that the condition of repurchase should be embodied in the document. The Court found that this condition was satisfied in the present case. However, the Court emphasized that a document must be read in its entirety, and the intention of the parties must be gathered from the document itself and the attending circumstances.3. Relationship of Creditor and Borrower Between the Parties:The Supreme Court observed that no evidence was brought on record to establish a relationship of creditor and borrower between the parties. The appellant had been permitted to attorn to the landlord, which indicated that the transaction was not intended to create a mortgage but an absolute sale with a condition of repurchase.4. Applicability of Order 41 Rule 33 of the Code of Civil Procedure:The respondent contended that the appellant should not be permitted to raise certain contentions as no appeal was preferred against the judgment of the First Appellate Court. The Supreme Court clarified that Order 41 Rule 33 allows the appellate court to pass any decree that ought to have been passed by the trial court or grant any further decree as required. The Court held that it was legally permissible for the appellant to support the decree passed in his favor by attacking the findings of the First Appellate Court.Conclusion:The Supreme Court set aside the judgment of the High Court, concluding that the deed dated 27.10.1969 was an absolute sale with a condition of repurchase, not a mortgage by conditional sale. The appeal was allowed, and the impugned judgment was not sustained. No order as to costs was made.