P L D 1979 Lahore 41 (PLP)

This is a second appeal against the judgment and decree dated 17-11-1964 passed by Khan Muhammad Hamayun Khan, Additional District Judge, Gujrat.

2. The facts are simple. The plaintiff-appellant executed a sale-deed of his property measuring 8 kanals and 15 marlas situated in Village Bola Tehsil and District Gujrat on the 28th of October 1954 for a sum of Rs. 3,281.25 vide registered sale-deed Exh. P.

2. Contemporaneousely on the same date the respondent-purchaser executed an agreement Exh. P. 1 to reconvey this property to the plaintiff-appellant for the same amount of consideration at any time he wished the respondent to return it to him. It was clarified in the agreement that the respondent had purchased this property instead of acquiring it by mortgage since he considered .the mortgage transaction to be sinful.

2. On the 11th of November 1960 a suit was filed by the appellant for possession of this property. It was contended that the transaction was really of mortgage and the plaintiff was, therefore, entitled to redemption. In the alternative the plaintiff prayed for a decree of specific performance of the agreement to sell.

3. The respondent contested this suit on the ground that it was a case of out and out sale and not of mortgage. The agreement to reconvey was alleged to be inadmissible in evidence. Several issues were framed including the issue whether the transaction was actually a mortgage but the issue on which the suit of the plaintiff has been dismissed by the learned trial Court and that decree was maintained by the appellate Court forms the subject-matter of issue No. 2 which is as follows : Whether the defendant executed an agreement dated 28-10-1954, if so with what effect 7

4. During arguments before the learned trial Court the issue about the transaction being that of usufructuary mortgage was given up. It was, therefore, decided against the plaintiff. Except a part of issue No. 2 all other issues were either decided in favour of the plaintiff or against the defendant. The learned trial Court found under issue No. 2 that the execution of the agreement Exh. P. I by which the defendant respondent agreed to reconvey the property in dispute to the plaintiff/appellant was proved beyond any shadow of doubt. In view of Basappa Gurubasappa and another v. Tayawa Virupaxapp and others (A I R 1930 Born. 79), Chaing Kywan C. v. Ma Do and others (A I R 1923 Rang. 52) and Amir, and another v. Indar Singh and others (A I R 1934 Lah. 453) the document was held to be compulsorily registrable on the ground that a sale-deed and contemporaneous agreement to reconvey constitute a single transaction which amounts to a mortgage.

5. As a result of this finding the plaintiff's suit was dismissed on the 5th of December 1961.

6. This finding was maintained in appeal, which was dismissed on the 17th of November 1964. It has already been noticed that the plaintiff had given up the first issue about the transaction having substantially the character of mortgage which means that he agreed with the contention of the respondent that the transaction evidenced by Exh. P. 2 was that of an absolute sale. In these circumstances the learned Courts below bad legally erred in transversing this admitted position and holding the transaction to be that of a mortgage.

7. The learned counsel for the respondent found it difficult to support the finding of the document Exh. P. l being compulsorily registrable, and urged as a last resort that the two documents Exh. P. 1 and Exh. P. 2 were part of the same transaction which was substantially that of a mortgage and as such Exh. P. 1 could not convey any right unless it was registered. This argument is not legally open to the respondent in view of his own pleadings about this transaction being that of an absolute sale and not of mortgage.

8. None of the authorities cited at the bar lay down any such wide proposition that a sale-deed and contemporaneous agreement to reconvey must in substance be construed to be a mortgage. The contemporaneous document in Voman Trimbak Joshi and others v. Chang! Domodar Shimpi and others (A I R 1926 Born. 97) was not considered to be a part of the same transaction, so as to constitute a mortgage and was held to ,be exempt from registration under clause (v) of subsection (2) of section 17 of the Registration Act. In another case reported in the same volume Harkisandas Bhagvandas and others v. Bai Dhanu (A I R 1926 Bom. 497) it was held that when a registered sale-deed of immovable 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 to reconvey the property to the vendor on payment of a certain sum of money, the document where the transaction constitutes a mortgage, is inadmissible in evidence for want of registration under section 17(1)(b) and section 49 of the Registration Act but where the transaction is bona fide sale with a contract for re-purchase, it falls under section 17(2)(v) and not being complusorily registrable is admissible in evidence. It was further observed that in determining the nature of the transaction in each case intention of the parties must be looked to. In this case also the agreement to reconvey was held to be exempt from registration.

9. The learned District Judge has relied upon Basappa Gurubasappa anG another v. Tayawa Virupaxappa and others in which Harkisondas Bhagwandas v. Bai Dhanu is relied upon. It was held that a registered sale-deed with a contemporaneous agreement to reconvey the same land within a certain period would amount to a mortgage; It was, therefore, held that the agreement to reconvey was compulsorily registrable. This case is distinguishable since there was all through a finding that the two documents were part of the same transaction.

10. Another case relied upon by the Courts below is Amir and another v. Indar Singh and others. This is a short judgment. In this case A I R 1930 Bombay 79 was relied upon since the lower appellate Court had found the two documents to constitute a single transaction. The case, is therefore, distinguishable. The dictum in this case, however, cannot be relied upon since it proceeds on the assumption that the Bombay High Court in the above-cited case had held that whenever there were two such documents, they amount to a mortgage. Although the fact is that in the latter Bombay case also the Full Bench case of Bombay High Court, Harkison Bhagwandas v. Bai Dhanu was relied upon which laid down a proposition to the contrary that in order to find out whether an agreement to reconvey in such circumstances is compulsorily registrable, the Court is to determine whether the two documents are the part of the same transaction constituting a mortgage or the agreement is merely an agreement to reconvey the property.

11. The Lahore High Court did not lay down the correct law in view of a Privy Council case, Bhagwan Sahai v. Bhagwan Din and others (12 All. 387) in which it was held that a document purporting to be one of sale though accompanied by a contract reserving to the vendor a right to repurchase the property sold on repaying the purchase money within a certain time is not on that account to be construed as if it was a mortgage.

12. The question whether two separate contemporaneous documents can be considered to be part of the same transaction so as to constitute a mortgage by conditional sale is no longer left in doubt by the addition of a proviso to clause (c) of section 58 of Transfer of Property Act by Act 20 of 1929. Clause (c) deals with the definition of mortgage by conditional sale and provides that "where the mortgager ostensibly sells the mortgaged property: ??????????????????????????.. on condition that on such. payment being made the buyer shall transfer the property to the seller; the transaction is called a mortgage by conditional sale and the mortgagee, a mortgagee by conditional sale."

13. A proviso added in the year 1929 to this definition reads: "Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale."

14. This definition now leaves no scope for holding that two contemporaneous documents, one for sale and the other an agreement to reconvey can be held to evidence transaction of mortgage.

15. There is an observation in Nabin Chandra Moral and others v. Lalit Mohan Das and another (P L D 1967 Dacca 243) that the proviso is applicable only to mortgage by conditional sale or to mortgage of similar nature but it is not applicable to mortgage of any other kind, namely, a usufructuary mortgage. With utmost respect for the Chief Justice who was the author of that judgment I cannot agree with this proposition since section 58(c) confers the name of mortgage by conditional sale wherever inter alia there is a mortgage with condition of repurchase.

16. But even in cases where the condition is embodied in the same document which effects or purports to effect the sale the Court has to find out the intention whether it is a transaction of sale' or a transaction of mortgage. For this purpose the intention of the parties is to be gathered. Reference may be made to Mst..Janat; etc. v. Pir Bux (P L D 1972 Kar. 336) and Hay i Allahanda and another versus Sardarangmal, etc. (P L D 1967 Kar. 859). In Hoji Allahanda and another v. Sadarangmal and another following eight tests were laid down as being useful for determination of this question: (i) Whether the relationship of debtor and creditor existed between the parties before or at the time of the alleged sale; (ii) Did the intention to create a mortgage precede the alleged sales; (iii) Was the price paid by the purchaser fair market price; (iv) Was the possession of the property transferred to the purchaser; (v) Is there a covenant for the payment of interest by the purchaser; (vi) Is the purchaser accountable to the seller for the income of the property. (vii) Whether agreement of repurchase was made at the time of sale or some time thereafter; (the former evidencing the intention to create mortgage and the latter the intention of repurchase only); (viii) Whether a short or long period of repayment is stipulated (a short period evidencing the intention to sell and a long period indicating a mortgage). These tests were approved in Mst. Janat and 9 others v. Plr Bux by a Division Bench of the High Court of Sindh & Baluchistan.

17. In view of these authorities also no reliance can be placed by the Courts below on the dictum laid down in A I R 1934 Lab. 453.

18. The argument of the learned counsel for the respondent that it is a mortgage is not only contrary to the case of the respondent but is also against his intention to avoid entering into a transaction of repurchase not being a part of the deed Exh. P.

2. It cannot therefore be treated to be a mortgage. The document Exh. P. 1 is only an agreement to reconvey the property.

19. Section 17 (2)(v) of the Registration Act exempts such agreement to, reconvey from registration. It is beyond doubt that such an agreement is not", compulsorily registrable. Ch. Muhammad Saleem v. Muhammad Akram and? others (P L D 1971 S C 516) The Pakistan Employees Co-Operative Housing Society Ltd, Karachi versus Mst. Anwar Sultana and others (P L D 1962 Kar. 474), Muhammad Akram and others v. Ch. Muhammad Saleem (P L D 1964 Lah. 490) and Malik Banaras v. Syed Farman Shah (P L D 1963 Pesh. 128). I, therefore, set aside the finding of the learned Courts below on issue No. 2 about Exh. P. 1- being compulsorily registrable and hold that it is exempt from registration under section 17(2)(v) of the Registration Act.

20. This being the only question involved in the case as also the sole point, on which the learned counsel for the parties addressed the arguments and all other relevant issues on the question of specific performance of the contract having been decided in favour of the plaintiff-appellant, this is a fit case for passing a decree in his favour for specific performance of the contract of reconveyance of the above property.

21. I, therefore, allow this appeal with costs, set aside the decrees of the learned Courts below and pass a decree in favour of the plaintiff for specific performance of the contract subject to the appellant's depositing in the Court by the 30th of November 1978 a sum of Rs. 3,281.25. In case of failure of the appellant to comply with the said condition, his suit shall stand dismissed with costs. s. Q.???? Appeal accordingly.