1992 PLP 417 (SCMR)

SHAFIUR RAHMAN, J.

Leave to appeal was granted to the appellant to examine whether the agreement dated 16-5-1974 was an agreement to sell or as held by the first and the second appellate Courts a mortgage by way of conditional sale.

2. Muhammad Siddique, the predecessor-in-interest of the respondents was transferred the house in dispute in Nankana Sahib, District Sheikhupura, vide P.T.D. dated 21-12-1973. Prior to it, on 20-12-1972, Muhammad Siddique had mortgaged this house for Rs.17,000 and handed over its possession to the appellant. On 16-5-1974 he entered into another agreement in respect of this very property. It was an agreement to sell. The important and operative part of this agreement to sell was as hereunder:

3. In this background, on 26-5-1975, the appellant instituted a civil suit seeking specific performance of the agreement to sell. His defence was inter alia that he had after the mortgage taken further loan, without any undertaking to sell. Further, that the house in dispute was worth one and a half lac of rupees and could not be sold at such a low price. The following issues were framed:

"(1) Whether this Court lacks jurisdiction to try this suit? OPD. (2) Whether suit property has been transferred to the defendants and whether its P.T.D, has been issued in his name? If not, its effect? OPP. (3) Whether the defendant had agreed to sell the suit property to the plaintiff, and whether he had executed agreement decd dated 16-5-1974, in his favour, after receiving Rs.3,000 as earnest money? OPP. (4) Whether the defendant had returned Rs.3,000 to the plaintiff within the stipulated period and whether the plaintiff had executed receipt dated 12-3-1975, in this respect? OPD. (5) Whether the plaintiff is entitled to the specific performance of contract of sale dated 16-5-1974. If so on what terms and conditions? OPP. (6) Relief."

4. The trial Court decided all the issues in favour of the appellant and decreed the suit.

5. The District Judge, on first appeal, reversed the findings holding that unless settlement fee (Rs.59) and public dues (Rs.667) were paid, the transferee could not enter into any agreement to sell. These dues were paid on 19-9-1975. For this reason, agreement to sell executed on 16-5-1974 was void and unexecutable. The District Judge further held as hereunder:

"The above-quoted lines of the agreement establish that in fact the said sum of Rs.3,000 was paid as a loan and the agreement was executed only for the purposes of security of refund of loan. Instead of making the agreement a simple conditional sale the mortgagee preferred to pay further loan and to secure it through the said agreement. Definition of mortgage given under section 58 of the Transfer of Property Act shows that any such secured loan against an interest in an immovable property constitutes mortgage. Clause (c) of section 58 of the said Act further makes the position clear that where a mortgagor ostensibly sells immovable property on the condition that on payment of such sum the sale shall become void, the transaction will be called a `mortgage by conditional sale'. Clause 1(g) of the said section also includes such like transactions within the purview of an `anomalous mortgage'. There was no occasion for such condition and concession if it was a simple agreement to sell. I am, therefore, convinced that the said stipulation mentioned in agreement Exh.P2, constitutes a mortgage by conditional sale and that the said sym of Rs.3,000 was in fact a secured loan and thus mortgage money. This mortgage was in continuation of previous mortgage amounting to Rs.17,

000. It is well settled that `once a mortgage always a mortgage' and that no restriction or clog could be placed- upon equity of redemption. I, therefore, reverse the findings on issue No.3 and hold that Exh.P.2, was though executed by the mortgagor yet it did not constitute an agreement to sell and that the payment of Rs.3,000, was only a continuation of previous mortgage and it was not a part of earnest money. I further hold that agreement to sell Exh.P.2 is unexecutable for purposes of sale, being a clog on equity of redemption." On these findings, the appeal was accepted and the specific performance of the agreement refused.

6. In second appeal, the High Court, by the impugned judgment, upheld the finding of the District Judge that the agreement to sell was in fact a clog on equity of redemption and could not be specifically enforced as an agreement to sell.

7. Ch. Khalilur Rahman, Senior Advocate, the learned counsel for the appellant has contended that the finding of the two appellate Courts is against the pleading of the respondents, is not borne out from the evidence on record and is not legally sound or tenable. By reference to Note 28 in the Commentary of Sh. Shaukat Mahmood on section 58 of the Transfer of Property Act, the learned counsel has contended that an outright sale and for that matter an agreement to sell is permissible in law and the agreement to sell was fully protected on the basis of precedent law. The consideration for sale was the fair market value of the property.

8. Syed Munir Hussain, Advocate, the learned counsel for the respondents has relied mainly on the language of clause (c) of section 58 of the Transfer of Property Act and a decision from Indian jurisdiction Pomal Kanji Govindji and others v. Vrajlal Karsandas Purohit and others 1990 Pakistan Supreme Court Cases 852--Supreme Court of India and a decision of the Lahore High Court Muhammad Kazam through Legal Heirs v. Mst. Janat Bibi PLD 1985 Lah. 637 for establishing that the condition contained in the agreement to sell gave it the character of a mortagage.

9. The relevant portion of section 58 of the Transfer of Property Act is reproduced hereunder:

"58. "Mortgage". "mortgagor", "mortgagee". "mortgage-money" and "mortgage-deed" defined. (a)

Simple mortgage. (b)

Mortgage by conditional sale. (c) Where the mortgagor ostensibly sells the mortgaged property-- on condition that on default of payment, of the mortgage-money on a certain, date the sale shall become absolute, or on condition that on. such payment being made the sale shall become void, or' 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: 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; (d) (e) ................. (f) .................. (g)

10. Sulaiman, J. has in Mathura Kurmi v. Jagdeo Singh and others AIR 1927 Allahabad 321 enunciated the principle governing the interpretation and application of this provision as hereunder:

"The Transfer of Property Act of 1882 has, however, codified the law and defined what a mortgage by conditional sale is. That definition is both exhaustive and conclusive. A transaction cannot amount to a mortgage by conditional sale unless it fulfils the conditions of section 58(c). Nor can a transaction be not a mortgage by conditional sale if it comes within that section. The ascertainment of the true intention used to be a matter of considerable difficulty. The legislature has come to the rescue of the Courts and laid down certain conditions. which, if fulfilled, would make the sale a mortgage. If the mortgagor ostensibly sells the mortgaged property on condition (a) that on default of payment of the mortgage money on certain date the sale shall become absolute, or (b) that on such payment being made the sale shall become void, or (c) that on such payment being made the buyer shall transfer the property to the seller, the transaction, though in the garb of a sale, is, in the eye of the law, a mortgage by conditional sale. Sales with an independent covenant for repurchase have a resemblance to the third class of ostensible sales mentioned above. The section provides that where a mortgagor has ostensibly sold his property on condition that on payment of the mortgage money the buyer shall transfer the property to the seller, the transaction is a mortgage by conditional sale. I take it that this would be so even though the language of the document itself does not use the words `mortgagor,' `mortgaged property' or `mortgage money.' The conveyance may ostensibly be a deed of sale, that is to say, with all the phraseology employed in drafting sale-deeds, but if that sale is in reality subject to a condition of a retransfer on payment of the amount the law regards it as a mortgage by conditional sale. If it were necessary that the document itself should contain the words that it was a mortgage, in many cases the transaction would not look an ostensible sale. In my opinion the presence in the deed of such words as literally imply a mortgage is not absolutely necessary. The cardinal point is whether the sale is subject to a condition of re-purchase on payment," It holds good and is a sound view of the law. On that view, the agreement to sell will acquire the character of a mortgage rather than a sale.

11. The only other question that requires consideration in this case before us is whether the agreement to sell in the absence of sale as such makes any difference to the transaction or to the application of the law. Where the agreement to sell itself is made revocable on payment of the amount advanced within the stipulated time, and such a condition falls within the category enumerated in law the agreement gets assimilated to sale though legally short of it. The word "sale" has been used here in the generic sense to include all steps, including an agreement to sell, necessary for completing a sale. On that view of the matter, the view taken by the two appellate Courts is correct. The pleadings of the parties do not control or govern the application of correct law to established or proved facts. The appeal is, therefore, without merit and dismissed with costs. AA./A-906/S Appeal dismissed.