judgement:
ppeals Nos.
1457 to 1459 of 1958.
Appeals from the judgment and order dated August 21, 1964 of the Madras High Court in T.C. No. 75 of 1962 (Reference No. 50 of 1962).
M. C. Chagla and T. A. Ramachandran, for the appellant (in all the appeals).
section K. Aiyar add B. D. Sharma, for the respondent (in all the appeals).
The Judgment of the Court was delivered by Shah, J.
Ramanathan Chettiar his son Muthiah Chettiar called hereinafter for the sake of brevity, Muthiah and Ramanathan, Annamalai and Alagappan, sons of Muthiah, constituted a Hindu undivided family.
The family owned a 3/5th share in M.R.M.S. Firm, Seramban in Malaya.
The firm was assessed under the Indian income tax Act, 1922, in the status of a firm resident within the taxable territories.
On September 16, 1950, Muthiah separated from the family taking his 1/5th share in the M.R.M.S. Firm.
On April 13, 1951 the status of the family became completely disrupted and the three sons of Muthiah took in equal shares the remaining 2/5th share the grandfather Ramanathan taking no share in the M.R.M.S. Firm.
For the assessment year 1952 53 Muthiah submitted a return of his income as an individual and stated under the head business income "Kindly ascertain his (assessee 's) share of profit and remittances from the Income tax officer, Second Additional Circle I, Karaikudi, in F. 6098 m/1952 53".
In Part III of the return Muthiah supplied the following information about his partners Name and address of Name of each partner Share the firm including assessee Messrs. R.RM.S. Firm 1.
Assessee (Muthiah Chettiar) 60/303 Seramban, F. M.S. 2.
M. RM.
M. Ramanathan Chettiar (minor).
40/303 3.
M. RM.
M. RM.
M. Alagappan Chettiar (minor).
40/303 4.
M. RM.
M. RM.
M. Annamalai Chettiar (minor) 40/303 6.
M.S.S. 60/303 7.
Charity 3/303 717 For the assessment year 1953 54 in column 3 in section B of the return Muthiah stated : "Kindly ascertain the remittances from the Income tax Officer, Fifth Additional, Karaikudi in F. 6098 m", and at p. 3 of the return in column 3 of Section F it was stated "Assessee has 60/303 share in Messrs. Joint Seramban (Malaya).
Kindly ascertain share of profit or loss from the Income tax Officer, Fifth Additional, Karaikudi in F. 6098.
" In Part III of the return he set out the names of the partners as, were mentioned in the return for 1952 53.
Against the names.
of Ramanathan Chettiar, Alagappan Chettiar and Annamalai Chettiar it was not disclosed that they were minors.
For the assessment year 1954 55 at the foot of page 1 of the return Muthiah stated : "The assessee has a remittance of Rs. 6,188 12 0 from R.R.M.S. Firm, Seramban.
His share of income may be taken from the firm 's file. ', and in Part III the names of seven partners as mentioned in 1952 53 return were set out Ramanathan, Alagappan, were not shown as minors.
Ramanathan, Alagappan and Aannamalai the three minor sons of Muthiah represented by their mother and guardian also filed returns of their respective income for the years 1952 53, 1953 54 and 1954 55 and disclosed therein their shares in the profit from the 2/5th share in the M.RM.S. Firm.
For the assessment years 1952 53, 1953 54 and 1954 55 the Income tax officer completed the assessments separately on the firm, on Muthiah as an individual and on the three minors represented by their mother and guardian.
Muthiah was assessed in respect of his share in the income of the firm and from other sources.
In his returns muthiah had not disclosed the share received by his minor sons and the Income tax officer did not in making the assessments include shares of the minors from the firm under section 16 (3) (a) (ii) of the Indian Income tax Act, 1922.
The Income tax Officer issued notices of reassessment to Muthiah under section 34(1) (a) of the Income tax Act, 1922 for the years 1952 53 and 1953 54 and under section 34(1) (b) for the year 1954 55.
Muthiah, filed returns under protest declaring the same income as originally assessed.
In the view of the Income tax Officer Muthiah had not furnished in Part III clause (c) of the return full facts regarding the other parties and in column 2 he had merely disclosed that Ramanathan, Alagappan and Annamalai were minors: that "information was not full in the sense that he had not stated that L10Sup./69 11 718 they were minors sons" of Muthiah.
Accordingly the Income tax Officer held that the income of the sons of Muthiah which should have been included under section 16 (3) (a) (ii) of the Income tax Act had escaped assessment in Muthiah 's hands and he brought that income to tax.
The Appellate Assistant Commissioner confirmed the order made by the Income tax Officer.
In appeal to the Tribunal it was contended by Muthiah that he had fully and truly disclosed all the particulars he was required to disclose in the returns of his income for the three years in question, and "section 34 (a) (a) had no application to the assessment years 1952 53 and 1953 54 and for 1954 55 the reopening was based only on a change of opinion".
Muthiah also contended that section 40 of the Income tax Act was mandatory and since the Income tax Officer had made separate assessments on the minors represented by their mother, no further ' assessment under section 16(3) could be made, the two sections being mutually exclusive.
The Tribunal observed that for the first two years section 34 (1) (a) applied, that in respect of the year 1954 55 there was no change of opinion but the assessment was made on information received within the meaning of section 34 (1 ) (b) of the Income tax Act and that separate assessment of the minors did not stop the Income tax Officer from assessing the income received by the minor sons in the hands of Muthiah.
The Appellate Tribunal accordingly confirmed the order of the Appellate Assistant Commissioner.
At the instance of Muthiah the following questions were referred to the High Court of Madras : (i) Whether on the facts and in the circumstances of the case, the re assessment made on the assessee under section 34 of the Act is valid in law for 1952 53 to 1954 55 ? (ii)Whether on the facts and in the circumstances of the case, the inclusion of the share income of the minor in the hands of the assessee by invoking the provisions of section 16(3) of the Act is valid in law notwithstanding that an assessment is made on the minor represented by his guardian ?" The answer to the second question must, in view of the recent judgment of this Court in C. R. Nagappa vs The Commissioner of Income tax, Mysore(1), be in the affirmative.
In considering the first question it is necessary to refer to certain provisions of the Income tax Act, 1922.
By section 3 (1) 719 the total income of the previous year of every individual, Hindu undivided family, Company and local authority and of every firm and other association of persons or the partners of the firm or the members of the association individually was charged to tax for that year in accordance with, and subject to the provisions of the act at any rate or rates prescribed by the Finance Act.
"Total income" was defined in section 2(15) as meaning "total amount of income, profits and gains referred to in sub section
(1) of section 4 computed in the manner laid down in this Act." Section 4(1) set out the method of computation of total income : it enacted (1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which (a) are received or are deemed to be received in the taxable territories in such year by or on behalf of such person or (b) if such person is resident in the taxable territories during such year, (i) accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year, or Section 22 by sub section
(1) required the Income tax Officer to give notice by publication in the press in the prescribed manner, requiring every person whose total income during the previous year exceeds the maximum exempt from tax, to furnish a return in the prescribed form setting forth his total income.
Sub sectian (2) authority the Income tax Officer to serve a notice upon a person whose income in the opinion of the Income tax Officer exceeded the minimum free from tax.
Section 23 dealt with the assessment.
It conferred power upon the Income tax Officer to assess the total income of the assessee and to determine the sum payable by him on the basis of such return, submitted by him.
Rule 19 framed under section 59 of the Income tax Act, 1922, required the assessee to make a return in the form prescribed thereunder, and in Form A applicable to an individual or a Hindu undivided family or an association of persons there was no clause which required disclosure of income of Any person other than the income of the assessee, which was liable to be included in his total income.
The Act and the Rules accordingly imposed no obligation upon the assessee to disclose to the Income tax Officer in his return information relating to income of any other person by law taxable in his hands.
720 But s ' 16 sub section
(3) provided that in computing the total income of any individual for the purpose of assessment there shall be included the classes of income mentioned in cls.
(a) and (b).
Sub section (3) (a) (ii) in so far as it is material provided "In computing the total income of any individual for the purpose of assessment, there shall be included: (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly (i) (ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner;" The assessee was bound to disclose under section 22(5) the names and addresses of his partners, if any, engaged in business, profession or vocation together 'with the location and style of the principal place and branches thereof and the extent of the shares of all such partners in the profits of the business, profession or vocation and any branches thereof, but the as was not required in making a return to disclose that any income was received by his wife or minor child admitted to the benefits of partnership of a firm of which he was a partner.
Counsel for the Commissioner contended that in the forms of returns prescribed in the "Notes of Guidance" for drawing up the return were printed, and thereby the assessee was informed that he had to disclose the income received by his wife and minor children from a firm of which the assessee was a partner.
Counsel has however not placed before the Court the forms of return in vogue in the relevant year of assessment.
In the Income Tax Manual published under the authority of the Central Government in 1945 under cl.
(3) printed at p. 185 theassessee is advised to include the return under the appropriate headcertain classes of income which are liable to be included in theassessment of an individual under section 16, and income liable to betaxed under sections 41D, 44E and 44F.
This instruction was repeated in the Manual Parts II and III at pp. 344 and 345 in the 10th Edition published in 1950.
But in the 11th Edition of the Manual published in 1954 no such instructions were printed.
About the date on which the instructions were deleted Counsel for the Commissioner was unable to give any information.
Assuming that there were instructions printed in the Forms of return in the relevant years ', in the absence of any head under which the income of the wife or minor child of a partner whose wife or a minor child was a partner in the same firm, could be shown, by not showing that income the tax payer cannot be deemed to have failed or omitted to disclose fully and truly all material 721 facts necessary for his assessment.
Section 16(3) imposer, an obligation upon the Income tax Officer to compute the total income of any individual for the purpose of assessment by including the items of income set out in cls.
(a) (i) to (iv) and (b), but thereby no obligation is unposed upon the tax payer to disclose the income liable to be included in his assessment under section 16(3).
For failing or omitting to disclose that income proceedings for reassessment cannot therefore be commenced under section 34 (1) (a) Section 22(5) required the assessee to furnish particulars of the names and shares of his partners, but imposes no obligation to mention or set out the income of the nature mentioned in section 16(3).
In the relevant years there was no head in the form under which income liable to be assessed to tax under section 16(3) (,a) and (b) could be disclosed.
We are in the circumstances unable to agree with the High Court that section 34 imposed an obligation upon the assessee to disclose all income includable in his assessment by reason of section 16(3) (a) (ii).
Section 34(1) (a) sets out the conditions in which the power may be exercised : it did not give, rise to an obligation to disclose information which enabled the Income tax Officer to exercise the power under section 16(3) (a) (ii), nor had the use of the expression "necessary for his assessment" in section 34(1)(a) that effect.
The High Court did not consider the question whether in the year 1954 55 the notice under section 34(1) (b) was properly issued against Muthiah.
The Tribunal in their judgment observed: "There is no basis for the argument that the Income tax Officer had only changed his opinion and reopened the assessment.
" We agree with that view.
The order of re assessment was made well within four years from the date of the last day of the year of assessment 1954 55.
The notice was therefore competently issued by the Income tax Officer.
The order passed by the High Court,, in so far as it relates to the years 1952 53 and 1953 54 is set aside and the answer in the negative is recorded.
For the year 1954 55 the answer recorded by the High Court is confirmed.
There will be no order as to costs throughout.
Y.P. Appeal partly allowed.

summary:
The assessee and his minor sons separately held shares in a resident firm.
For assessment years 1952 53 to 1954 55, the assessee filed returns as an individual and therein stated under the head business income that the profit should be ascertained from the Income tax Officer assessing the firm.
The names of the partners were stated, but it was not stated in the return that some of the parties were his minor sons.
The minors, through their mother as guardian, also filed returns for these assessment years, and they were assessed to tax.
The assessee was also assessed as an individual, in respect of his share in the income of the firm and other sources, but the assessment order did not include the share of the minors from the firm.
The Income tax Officer issued notices of reassessment to the assessee under section 34(1) (a) of the Indian Income tax Act, 1922 for the years 1952 53 and 1953 54 and under section 34(1) (b) for the year 1954 55.
The Income tax Officer took the view that the assessee had not disclosed the fact that his sons were minors and the income of the sons which should have been included under section 16(3) (a) (ii) had escaped assessment in the assessee 's hands and accordingly he brought that income to tax.
The Appellate Assistant Commissioner confirmed this order.
The Appellate Tribunal, in appeal held that for the first two, years section 34(1) (a) applied, that in respect of the third year there was no change of opinion but the assessment was made on information received within the meaning of section 34(1) (b) and that the income of the minors could be assessed in the hands of the assessee 'notwithstanding the separate assessments already made on the minors.
On reference, the High Court answered the questions against the assessee.
In appeal, this Court, HELD : Section 16(3) of the Act imposed an obligation upon the Income tax Officer to compute the total income of any individual for the purpose of assessment by including the items of income set out in cls.
(a)(i) to (iv) and (b), but thereby no obligation was imposed upon the tax payer to disclose the income liable to be included in his assessment under section 16(3).
For failing or omitting to disclose that income proceedings for reassessment could not be commenced under section 34(1) (a).
Section 22(5) required the assessee to furnish particulars of the names of the shares of the partners but imposed no obligation to mention or set out the income of the nature mentioned in section 16(3).
In the relevant years there was no head in the form of return prescribed under the rules under which income liable to be assessed to tax under section 16(3) (a) & (b) could be disclosed.
These assessments under section 34(1) (a) for the years 1952 53 and 1953 54 could not, therefore be upheld.
[721 A] (ii) The income of a minor can be included in the hands of an assessee under section 16(3) of the Act, notwithstanding that an assessment has been made on the minor represented by his guardian.
[718 G H] 716 C.R. Nagappa vs Commissioner of Income tax, Mysore, , followed.
(iii) In respect of the assessment years 1954 55, there was no basis for the argument that the Income tax Officer had only changed his opinion.
The order of re assessment was made well within four years from the date of the last day of that assessment year.
The notice was, therefore, competently issued by the Income tax Officer.
L721 F]


judgement:
Appeals Nos. 845 and 846 of 1963.
Appeals by special leave from the judgment and order dated January 17, 1958 of the Madras High Court in Civil Revision Petitions Nos. 981 and 982 of 1956.
section V. Gupte and R. Thiagarajan, for the appellants (in both the appeals).
Naunit Lal, for the respondents Nos. 1(c) and 17 (in C.A. No. 845 of 1963) and respondents Nos. 1 (c) and 16 (in C.A. No. 846 of 1963).
The Judgment of the Court was delivered by Hegde, J.
These appeals arise from an insolvency proceeding wherein one Ponnayya Konar and his sons were adjudicated as insolvents.
In the said proceeding the petitioning creditor sought to get annulled two mortgages one for Rs. 15,000 (Exh.
A 1) executed by the insolvents in favour of Ayyappa Naicker, the appellant in Civil Appeal No. 845 of 1963 and the other for Rs. 10,000 (Exh.
A 2), the subject matter of Civil Appeal No. 846 of 1963, in favour of one Srinivasa Naicker, the father in law of the aforementioned Ayyappa Naicker.
The said Srinivasa Naicker is dead and the appeal is being prosecuted by his legal representatives.
Both those mortgages are dated November 4, 1950 and they were registered on November 6, 1950.
The Insolvency Court held that those mortgages were not supported by consideration and that they were executed with a view to screen some of the properties of the insolvents from their creditors.
It accordingly annulled those mortgages under section 53 of the (hereinafter referred to as the Act).
In appeal the learned District Judge reversed the findings of the trial court.
He came to the conclusion that those mortgages were fully supported by consideration and that they were genuine transactions.
The High Court acting under the 1st proviso to section 75(1) of the Act reversed the judgment of the learned District Judge and restored that of the Insolvency Court.
These appeals have been brought against the decision of the High Court after obtaining special leave from this Court.
The learned Counsel for the appellants challenged the decision of the High Court primarily on two grounds.
According to him 700 the High Court while acting under the 1st proviso to section 7 5 (1) of the Act had no power to disturb the findings of fact reached by the appellate court.
Next he contended that the conclusions of the High Court are unsustainable on the evidence on record.
The learned Counsel for the contesting respondents supported the decision of the High Court.
The two principal questions that arise for decision in these appeals are (1) was the High Court within its jurisdiction in interfering with the findings of the learned District Judge that the impugned transactions are bona fide transactions and that they were supported by consideration and (2) are the conclusions reached by the High Court correct on the facts and circumstances of the case ? It would be convenient to take up first, the question as to the scope of the powers of the High Court under the 1st proviso to section 75 (1) of the Act.
That section reads : "The debtor, any creditor, the receiver or any other person aggrieved by a decision come to or an order made in the exercise of insolvency jurisdiction by a Court subordinate to a District Court may appeal to the District Court, and the order of the District Court upon such appeal shall be final : Provided that the High Court, for the purpose of satisfying itself that an order made in any appeal decided by the District Court was according to law, may call for the case and pass such order with respect thereto as it thinks fit : Provided further, that any such person aggrieved by a decision of the District Court on appeal from a decision of a subordinate Court under section 4 may appeal to the High Court on any of the grounds mentioned in sub section (1) of section 100 of the Code of Civil Procedure, 1908.
" According to Shri section V. Gupte, learned, Counsel for the appellants the jurisdiction of a High Court under the 1st proviso to section 75(1) is a very limited one, the same being not more than that conferred on it by sub section
(1) of section 100 of the Code of Civil Procedure.
In support of his contention he invited our attention to the scheme of section 75(1) of the Act.
He urged ' that sub section
(1) of section 75 prescribes that the decision of the District Court in appeal is final and the finality conferred on the decision of the District Court is subject to a very limited scrutiny by the High Court.
We were further told that the power conferred on the High Court under the 1st proviso to section 75(1) is only a revisional power, which power in its very nature is narrower in compass than an appellate pow&.
According to him the power conferred under the 1st proviso to section 75(1) of the Act is co extensive with that 701 given to the High Court under section 100(1) (a) of the Code 'of Civil Procedure.
On the other hand Mr. Naunit Lal, learned Counsel for the respondent urged that the High Court under the 1st proviso to section 75(1) of the Act has an extensive power and that power is very much wider than the power conferred on it under section 100(1) (a) of the Code of Civil Procedure; the power of the High Court under the 1st proviso to section 75 (1) of the Act to call for the case to satisfy itself that the order made by the District Court was according to law and pass such other order in respect.
thereto as it thinks fit includes within itself the right to examine whether the District Court had taken into consideration all the material evidence and whether it had properly assessed that evidence.
We are of the opinion that the extreme contentions advanced on either side cannot be accepted.
Quite clearly the legislature did not confer on the High Court under the 1st proviso to section 75 (1) of the Act an appellate power nor did it confer on it a jurisdiction to reappreciate the evidence on record.
While exercising that power the High Court, is by and large bound by the findings of fact reached by the District Court.
If the legislature intended to confer power on it to reexamine both questions of law and fact it would have conveyed its intention by appropriate words as has been done under various other statutes.
A wrong decision on facts by a competent court is also a decision according to law.
For these reasons we cannot accept the, contention of Mr. Naunit Lai that the power conferred under the 1st proviso to section 75 ( 1 ) of the Act enables it to de novo examine the findings of fact reached by the District Court.
A decision being "contrary to law" as provided in section 100(1) (a) of the Code of Civil Procedure is not the same thing as a decision being not "according to law" as prescribed in the 1st proviso of section 75(1) of the Act.
The latter expression is wider in ambit than the former.
It is neither desirable nor possible to give an exhaustive definition of the expression "according to law".
The power given to the High Court under the 1st proviso to section 75(1) of the Act is similar to that given to it under section 25 of the Provincial Small Causes Courts Act.
Explaining the scope of the latter provision Beaumont, C.J. (as he then was) in Bell & Co., Ltd. vs Waman Hemraj (1) observed: "The object of section 25 is to enable the High Court to see that there has been no miscarriage of justice, that the decision was given according to law.
The section does not enumerate the cases in which the Court may (1) [1938]40 Bom.
L.R. 125.
L10Sup./69 10 702 interfere in revision, as does section 115 of the Code of Civil Procedure, and I certainly do not propose to attempt any exhaustive definition of the circumstances which may justify such interference; but instances which readily occur to the mind are cases in which the Court which made the order had no jurisdiction or in which the Court has based its decision on evidence which should not have been admitted, or cases where the unsuccessful party has not been given a proper opportunity of being heard, or the burden of proof has been placed on the wrong shoulders.
Wherever the Court comes to the conclusion that the unsuccessful party has not had a proper trial according to law, then the Court can interfere.
But, in my opinion, the Court ought not to interfere merely because it thinks that possibly the Judge who, heard the case may have arrived at a conclusion which the High Court would not have arrived at." The said statement of the law was accepted as correct by this Court in Hari Shankar vs Rao Girdhari Lal Chowdhury(1).
We think the same applies squarely to the 1st proviso to section 7 5 (1) of the Act.
In support of his contention Mr. Gupte placed considerable reliance on the decision of this Court in Official Receiver, Kanpur and Anr.
vs Abdul Shakur and Ors.
(2) wherein this Court held that the High Court in exercise of its power under the 1st proviso to section 75 (1) of the Act is incompetent to disturb the findings of fact reached by the District Court and further the question whether a statutory presumption was rebutted by the rest of the evidence on record was also a question of fact which again was not open to be reviewed by the High Court.
Shah, J. who spoke for the Court observed thus at p. 259.
"The District Court inferred from the facts found that the statutory presumption under section 118 of the Negotiable Instruments Act had been weakened and the burden which lay upon the insolvent was discharged and it was not open to the High Court exercising jurisdiction under section 75(1) proviso 1, nor even under proviso 2 of the to set aside the judgment of the District Court, for it is well settled that the question whether a statutory presumption is rebutted by the rest of the evidence is a question of fact.
" It may be remembered that Shah, J. was also a party to the decision in Hari Shankar 's, case(2), We see no conflict between (1) (1962) 1 Supp.
S.C.R. 933.
(2) ; 703 the two decisions.
The former decision enumerates some of the circumstances under which the High Court can interfere while considering whether the decision under review was made according to law.
All that is laid down in Abdul Shakur 's case(1) is that the High Court is not competent to disturb a finding of fact reached by the District Court even ' if in reaching that finding it was required to take into consideration a statutory presumption.
We shall now proceed to examine the facts of this case bear ing in mind the principles set out above.
We shall first set out the undisputed facts.
The respondent Ponnayya Konar was a well to do person.
He had one rice mill at Kivalur and another at Sirkali.
He also had landed properties in Sirkali and Tuticorin.
He was having money dealings with the family of Sreenivasa Naicker from about the year 1925 Under the original of Exh.
B 1, a registered deed of Othi dated 28th September, 1925, he had borrowed a sum of Rs. 30,000 from Rangappa Naicker, the father of Srinivasa Naicker.
On October 5, 1930 the said deed was renewed by the execution of a simple mortgage deed by Ponnayya Konar and his sons in favour of Rangappa Naicker.
Under the registered mortgage deed dated 13th January, 1942 (Exh.
B 4 is its copy), tile insolvents had borrowed from Ayyappa Naicker Rs. 20,000 out of which he discharged some of the debts due to Rangappa Naicker.
Ayyappa Naicker was himself a rich man.
Under the partition deed entered into in his family on October 30, 1936 (Exh.
B 3) he got a cash of Rs. 52,000 and lands measuring 250 acres.
The debt due to Ayyappa Naicker under the deed dated 13th January 1942 was discharged by payment of Rs. 5,000 and interest on 3rd April, 1948 and Rs. 15,000 and interest on the 28th March, 1949, as can be seen from Exhs.
B 5 and B 6.
The case of the mortgagees is that when Exh.
A 1 and A 2 were executed they were unaware of the fact that the insolvents had got into financial difficulties by then.
The learned District Judge has accepted this plea and the learned Judge of the High Court has not come to a contrary conclusion.
There was no relationship between the insolvents and the mortgagees.
In fact they belong to different communities.
The insolvents are Hindus and the mortgagees are Christians.
They also live at different places.
The insolvents were residing at Sirkali and the mortgagees at Tuticorin, a place which is at a considerable distance from Sirkali.
According to the mortgagees the circumstances under which Exh.
A 1 and A 2 came to be executed are as follows (1) ; 704 In about the beginning of 1950 Ponnayya Konar approached Srinivasa Naicker for a loan of Rs. 30,000.
Srinivasa Naicker told him that he and his son in law Ayyappa Naicker together would lend him a sum of Rs. 25,000 on the mortgage of his properties at Tuticorin.
But as they did not have the entire sum of Rs. 25,000 in their hands at that time, a sum of Rs. 10,000 was paid to Ponnayya Konar on April 28, 1950 and a promissory note was taken for that amount.
A 11).
In the beginning of September, 1950 Ponnayya Konar sent his son Arulappan with the letter (Exh. B 7) to get some more money.
Accordingly another sum of Rs. 5,000 was paid on September 8, 1950 and the pronote (Exh.
A 12) was taken from Arulappan.
They agreed to pay the balance amount promised to be advanced at the time of the execution of the mortgage deeds.
The mortgage deeds were got written up and executed on 4th November 1950.
Therein it was recited that they were executed for cash consideration.
It was thought that the mortgagees would be able to pay the balance amount before the registration of the documents on November 6, 1950.
But by that time they were not able to get together the entire amount that remained to be paid.
On the date of the registration Ayyappa Naicker paid to the mortgagors only a sum of Rs. 4,500 another sum of Rs. 500 was adjusted towards the interest due on the sum of Rs. 15,000 previously advanced in April and September.
The remaining sum of Rs. 5,000 was paid in two instalments, a sum of Rs. 1700 through Amirthan, the 3rd son of Ponnayya Konar on January 7, 1951 and the remaining sum of Rs. 33,00 again through Amirthan on February 10, 1951.
In the insolvency proceedings on the application of the petitioning creditor, a commissioner to search the house of the insolvents and seize their books of account and other relevant records was appointed.
After search the Commissioner seized from the house of the insolvents several account books (ledgers as well as day books) as well as A 1 1 and A 1 2 which were found punched and defaced.
A 11, A 12 as well as several of the entries in the ledger and day books were marked by consent in the proceedings from which these appeals have arisen.
Hence their genuineness is not open to question.
It is most unlikely that those documents were got up by the insolvents and kept in their house, depending on the off chance of a court commissioner searching their house and seizing them, so that they may serve as corroborating evidence in support of the impugned mortgages.
If Exh.
A 11 and A 12 as well as the entries in the account books were intended to support the claim tinder Exhs.
A 1 and A 2, the most natural course would have been to draw up the mortgage deeds in such a way as to 705 take assistance from them.
In that case the mortgage deeds would not have recited that they were executed for cash consideration.
Further Exhs.
A 11 and A 12 would have been left in the possession of the mortgagees.
We are convinced that the version put forward by the mortgagees is substantially true.
The original agreement between the parties was to take mortgages of the Tuticorin properties for cash consideration. 'The intermediate steps taken were necessitated by the fact that mortgagees were not able to get together in one, lump the required amount.
The promissory notes Exhs.
A 11 and A 12 were taken as stop gap arrangements.
The recitals in the mortgage deeds accord with the original agreement between the parties.
That was likely to be the reason why the promissory notes Exh.
A 11 and A 12 were returned to the parties.
The entries in the account books of the insolvents reflect the transactions as they took place.
If they were bogus entries made to support Exhs.
A 1 and A 2, a receipt of Rs. 25,000 in cash on 4th November 1950 would have been shown therein.
The learned District Judge correctly thought that the account entries in question had a great deal of intrinsic value.
On the other hand the insolvency court and the High Court unnecessarily allowed themselves to be influenced by the apparent contradiction appearing between the recitals in Exhs.
A 1 and A 2 and those in Exhs.
A 11, A 12 and the account entries.
One other circumstance which had weighed with the High Court in holding that Exhs.
A 1 and A 2 do not represent genuine transactions is that in their pleadings the mortgagees have struck to their case that cash consideration passed under Exh.
A 1 and A 2 and this the Court thought was a deliberately false plea.
The learned District Judge had carefully considered this circumstance but was of opinion that the same was of no consequence.
We think that the High Court had attached undue importance to that circumstance.
The issue before the parties at the time of the pleadings was whether the mortgages in question were supported by consideration or not and not the manner in which that consi deration was paid.
In their plea the mortgagees were merely adhering to the tenor of the mortgage deeds.
From the facts stated earlier, it is clear that the mortgagees at all stages proceeded on the basis that Exhs.
A 1 and A 2 were executed for cash consideration, the other steps taken by them being merely incidental.
The last and by far the most important circumstances that appears to have influenced the High Court was the failure of the mortgagees to produce their account books.
This circumstance was carefully considered by the District Judge.
He held that the adverse, inference that could be drawn from that circumstance was rebutted by the other evidence available in the case.
It was open to him to do so.
His finding on this point is also a finding 706 of fact and by no means a wholly unreasonable finding.
The High Court could not have interfered with the same.
From the above discussion it follows that generally speaking we shall come to the details of consideration presently the findings of the District Court as regards the payment of consideration under Exh.
A 1 and A 2 are findings of facts and they were not open to review by the High Court.
This takes us to the various items of consideration said to have passed under Exhs.
A 1 and A 2 and the proof thereof.
The District Court has held that the entire consideration mentioned in those documents has passed.
We have now to see whether its finding in respect of the various items of consideration is supported by legal evidence.
The challenge to the payment of consideration under Exhs.
A 1 and A 2 made by the petitioning creditor includes a challenge to the passing of the various items of consideration said to have passed.
Ordinarily the burden of proving that a document impeached under section 53 of the Act is not supported by consideration is on the party who challenges its validity.
That is so because the party who stands by the document can take advantage of the admission made by the insolvent in the document in question.
, But in this case the mortgagees themselves do not stand by the recitals in the documents as regards the manner in which consideration was paid.
Therefore it is for them to prove the passing of consideration.
Hence we have to see how far they have succeeded in proving the same.
We shall first take up Exh.
A 2, the mortgage deed executed in favour of Srinivasa Naicker.
It is said that the consideration payable under that mortgage was paid in the following manner: Rs. 5,000 under promissory note Exh.
A 11; Rs. 1,700 paid in cash on 7 1 1951 and Rs. 3,300 also paid in cash on 10 2 1951; The receipt of the aforementioned sums is entered in the day book and edger of the insolvents.
The relevant entries amount to an admission on the part of the insolvents of having received the amounts mentioned therein.
We have earlier considered the authenticity of those account books.
The evidence of the mortgagees as regards the payment of consideration is strongly corroborated by the entries in the insolvents ' account books.
It was open to the learned District Judge to rely on them.
Hence his finding as regards the validity of the mortgage under Exh.
A 2 must be held to be final.
So far as the consideration for Exh.
A 1 is concerned it is said to have been made up of (i) a sum of Rs, 10,000 advanced under Exh.
A 11; 707 (ii) Rs. 500 the interest due under Exh.
A 11 and A 12; and (iii) Rs. 4,500 paid on 6 11 1950.
The receipts of the various sums mentioned above excepting the sum of Rs. 4,500 said to have been paid on 6th November 1950, are entered in the day book and the ledger of the insolvents.
Hence to that extent the finding of the learned District Judge is unassailable.
So far as the payment of Rs. 4,500 said to have been made on November 6, 1950 is concerned no corresponding entry in the day book or the ledger had been proved.
This important circumstance was not noticed by the learned District Judge.
He proceeded on the basis that the account entries support the payment of that item as well.
The evidence of Ayyappa Naicker as regards that payment is necessarily interested.
The only other evidence on that point is that of P.W. 2, the Registrar who registered Exhs.
A 1 and A 2.
He is a relation of the insolvents.
He did not endorse that payment in Exh.
A 1, though he knew that he was required to do so under the rules.
We are also surprised how he could have remembered that fact after several years.
Had the learned District Judge 's attention been drawn to the fact that there is no documentary evidence in proof of the payment of that item it is highly doubtful whether he would have held in favour of the mortgagee as regards the payment of that item.
After going through the evidence bearing on the point we are not satisfied that the payment of that amount is satisfactorily proved.
In the result Civil Appeal No. 846 of 1963 is allowed and the judgment and decree of the High Court is set aside and that of the District Court restored.
Civil Appeal No. 845 is allowed in part i.e. the mortgage Exh.
A 1 is held to be valid to the extent of Rs. 10,500 and interest thereon.
In the circumstances of the case we direct the parties to bear their own costs in all the courts.
R.K.P.S, C.A. 845/63 allowed in part.
C.A. 845/63 allowed in part.

dataset_name: IN-Abs

summary:
The petitioning creditor in an insolvency proceeding sought annullment of two mortgages, one for Rs. 15,000/ in favour of the appellant in C.A. 845 and another for Rs. 10,000/ in favour the appellant in C.A. 846.
The mortgages were dated November 4, 1950 and were registered on November 6, 1950.
The insolvency Court held that the mortgages were not supported by consideration and were executed with a view to screening some of the properties of the insolvents 'from their creditors.
It therefore, annulled the mortgages under section 53 of the .
The District Judge, in appeal, reversed the findings of the trial court but the High Court, acting under the first proviso of section 75(1) of the Act, set aside the judgment of the District Judge and restored that of the Insolvency Court.
in an appeal to this Court by special leave, it was contended on behalf of the appellants (i) that the High Court while acting under the first proviso of section 75(1) to satisfy itself "that an order made in any appeal decided by the District Court was according to law" had no power to disturb the findings of fact reached by the appellate court; the jurisdiction of the High Court is a very limited one and not more than that conferred on it by sub section 100(1) C.P.C.; and (ii) that the conclusions of the High Court were unsustainable on the evidence on record.
HELD: (i) The legislature did not confer on the High Court 'under the first proviso to section 75(1) of the Act an appellate power nor did it confer on if a jurisdiction to reappreciate the evidence on record.
While exercising that power the High Court is by and large bound by the findings of fact reached by the District Court.
If the legislature intended to confer power on it to reexamine both questions of law and fact it would have conveyed its intention by appropriate words as has been done under various other statutes.
A wrong decision on facts by a competent court is also a decision according to law.
[701 D] A decision being "contrary to law" as provided in section 100(1)(a) of the Code of Civil Procedure is not the same thing as a decision being not "according to law" as prescribed in the first proviso of section 75(1) of the Act.
The latter expression is wider in ambit than the former.
It is neither desirable not possible to give an exhaustive definition of the expression "according to law".
The power given to the High Court under the first proviso to section 75(1) of the Act is similar to that given to it under section 25 of the Provincial Small Causes Courts Act.
[701 F] Bell & Co. Ltd. vs Waman Hemraj, ; Hari Shankar vs Rao Girdhari Lai Chowdhury, [1962] 1, supp.
S.C.R. 399; 699 Official Receiver, Kanpur and Anr.
vs Abdul Shakur ; ; referred to and explained.
(ii) On the evidence, the findings of the District Court on the payment of consideration were correct findings of fact and the High Court could not have interfered with the same.
However, one payment in respect of the mortgage in C.A. 845 was not proved and the mortgage was therefore only valid to the extent of Rs. 10,5001 .


judgement:
Civil Appeal No. 98 of 1953.
Appeal by Special Leave from the Judgment and Decree dated the 27th day of January, 1949, of the High Court of Judicature at Patna in Appeal from Appellate Decree No. 690 of 1947 against the Decree dated the 13th January, 1947, of the Court of the District Judge, Bbagalpur, in Title Appeal No. 161 of 1946 arising out of the Judgment and Decree dated the 25th July, 1946, of the Court of the 1st Additional Subordinate Judge, Bhagalpur, in Title Suit No. 80 of 1945.
N.C. Chatterjee, (A. N. Sinha and section P. Verma, ,with him) for the appellant.
Murtaza Fazl Ali and Rajinder Narain, for respondent No. I. 1954.
April 14.
The Judgment of the Court was delivered by BOSE J.
This is a plaintiff 's appeal in a suit for re demption of what the plaintiff calls a mortgage dated 15th April, 1930.
The only question for determination is whether this is a mortgage by conditional sale or a sale out and out with a condition of repurchase.
If the former the plaintiff succeeds.
If the latter he is out of Court.
The property covered by the disputed deed belonged to one Bijai Tanti who died leaving a widow Mst.
Phaguni and two sons Siban Tanti and Chander Tanti.
On 25th May, 1922, Siban Tanti alone executed a 176 simple mortgage in favour of the second defendant for Rs. 25.
Then on 6th May, 1927, Siban Tanti, Chander Tanti and Mst.
Phaguni mortgaged the same property to the first defendant for Rs. 250.
This was also a simple mortgage.
After this came the transaction in suit dated 15th April, 1930.
The same three persons executed the disputed deed.
This was in favour of the first defendant.
The consideration mentioned in the deed is Rs. 634 10 0 due on the second mortgage and Rs. 65 6 0 taken in cash to enable the executants to meet the expenses of certain commutation proceedings under section 40 of the Bihar Tenancy Act in respect of this very land.
The second defendant sued on his mortgage of 1922 but did: not join the subsequent mortgagee, the first defendant.
He obtained a decree against the mortgagors alone and executed it in 1940.
He himself purchased the property in dispute and took possession on 20th March, 1943.
Shortly after, on 19th August, 1943, he sold this land to the plaintiff for Rs. 400.
The plaintiff 's title is derived from the second defendant who stepped into the shoes of the mortgagors because of his suit against the mortgagors in 1940.
The plaintiff 's case is that the transaction of 15th April, 1930, is a mortgage and, as the subsequent mortgagee was not joined as a party to the earlier suit, the plaintiff is entitled to redeem.
The first defendant 's case is that the transaction of 15th April, 1930, was not a mortgage but an out and out sale with a covenant for repurchase which became infructuous because no attempt was made to act on the covenant within the time specified.
The learned trial Judge and the lower appellate Court both held that the document was a mortgage and so decreed the plaintiff 's claim.
The High Court on second appeal reversed these findings and held it was a sale.
Consequently the learned Judges dismissed the plaintiff 's suit.
The plaintiff appeals here.
The question whether a given transaction is a mortgage by conditional sale or a sale outright with a condition of repurchase is a vexed one which invariably gives rise to trouble and litigation.
There are numerous 177 decisions on the point and much industry has been expended in some of the High Courts in collating and analysing them.
We think that is a fruitless task because two documents are seldom expressed in identical terms and when it is necessary to consider the attendant circumstances the imponderable variables which that brings in its train make it impossible to compare one case with another.
Each must be decided on its own facts.
But certain broad principles remain.
The first is that the intention of the parties is the determining factor: see Balkishen Das V. Legge (1).
But there is nothing special about that in this class of cases and here, as in every other case where a document has to be construed the intention must be gathered, in the first place, from the document itself.
If the words are express and clear.
, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out.
the real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used.
If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended.
As Lord Cranworth said in A Aderson vs White (2) : "The rule of law on this subject is one dictated by commonsense; that prima facie an absolute conveyance, containing nothing to show that the relation of debtor and creditor is to exist between the parties, does not cease to be an absolute conveyance and become a mortgage merely because the vendor stipulates that he shall have a right to repurchase. . .
In every such case the question is, what, upon a fair construction, is the meaning of the instruments? Their Lord ships of the Privy Council applied this rule to India in Bhagwan Sahai vs Bhagwan Din (3) and in Jhanda Singh vs Wahid ud din (4).
The converse also holds good and if, on the face of it, an instrument clearly purports to be a mortgage it cannot be turned into a sale by reference to a host of (1) 27 I.A. 58.
(3) 17 I.A. 98 at 102.
(2) ; at 928.
(4) 43 I.A. 284 at 293.
23 178 extraneous and irrelevant considerations.
Difficulty only arises in the border line cases where there is ambiguity.
Unfortunately, they form the bulk of this kind of transaction.
Because of the welter of confusion caused by a multitude of conflicting decisions the Legislature stepped in and amended section 58(c) of the Transfer of Property Act.
Unfortunately that brought in its train a further conflict of authority.
But this much is now clear.
If the sale and agreement to repurchase are embodied in separate documents, then the transaction cannot be a mortgage whether the documents are, contemporaneously executed or not.
But the converse does not hold good, that is to say, the mere fact that there is only one document does not necessarily mean that it must be a mortgage and cannot be a sale.
If the condition of repurchase is embodied in the document that effects or purports to effect the sale, then it is a matter for construction which was meant.
The Legislature has made a clear cut classification and excluded transactions embodied in more than one document from the category of mortgages, therefore it is reasonable to suppose that persons who, after the amendment, choose not to use two documents, do not intend the transaction to be a sale, unless they displace that presumption by clear and express words; and if the conditions of section 58(c) are fulfilled, then we are of opinion that the deed should be construed as a mortgage.
The document with which we are concerned, Exhibit A, is in the following terms and our first duty is to construe the language used and see whether it is ambiguous.
(We have paragraphed the document for convenience of construction and have omitted unnecessary words).
(1)" Rs. 634 principal with interest under a registered rehan bond " (simple mortgage) " dated the 6th May, 1927, is justly due. . by us the executants.
Now we further require Rs. 65 6 0 more to meet costs of the suit under section 40." (Bihar Tenancy Act).
(2)(I; and at present there is no other way in view rather it seems impossible and difficult to arrange for 179 the money without selling the property let out in rehan " (simple mortgage) " under the above mentioned bond." (3) " Therefore, we the executants declare. that we sold and vended the properties,detailed below on condition (given below) for a fair and just price of Rs. 700 " (4) "That we set off Rs. 634 10 0 against the consideration money " (torn) " payable under the aforesaid bond in favour of the said vendee and received Rs. 65 6 0 in cash from the said vendee.
In this way the entire consideration money was realised from the said vendee." (5) " and we put the said vendee in possession and occupation of the vended property detailed below and made him an absolute proprietor in our places." (6) " If we, the executants, shall repay the consideration money to the said vendee within two years. . the property vended under this deed of conditional sale attached shall come in exclusive possession and occupation of us the executants." (7) " If we do not pay the same, the said vendee shall remain in possession and occupation thereof, generation after generation, and he shall appropriate the produce thereof." (8) " We, the executants, neither have nor shall have any objection whatsoever in respect of the vended property and the consideration money.
Perchance if we do so it shall be deemed null and void in Court." "and we declare also that the vended property is flawless in every way and that if in future any kind of defect whatsoever be found on account of which the said vendee be dispossessed of a portion or the entire property vended under this deed of conditional sale and will have to pay the loss or damage, in that event we, the executants, (a) shall be liable to be prosecuted under the criminal procedure, and (b) we shall pay the entire consideration money together with loss and damage and interest at the rate of Rs. 2 per mensem per hundred rupees from the date 180 of the execution of this deed till the date of realisation from our person and other properties (c)and we shall not claim the produce of the vended property for the period of vendee 's possession against the said vendee or his heirs and representatives.
" (10) " Therefore we, the executants. . have executed this deed of conditional sale so that it may be of use in future.
" In our opinion, this language is not free from difficulty and is ambiguous.
The deed purports to be a sale and has the outward form of one but at the same time it calls itself a"conditional sale.
" It has,however, no clause for retransfer and instead says (clause 6) that if the executants pay the money within two yeas, the property " shall come in exclusive possession and occupation of us, the executants.
" That is clear about the possession but is silent about the title.
In the context we can only take these words to mean that if there is payment within the specified time, then the title will continue to reside in the executants; for what else can a right of exclusive possession import in these circumstances ? It is relevant to note in passing that this silence about title would be proper in a mortgage for there the owner 's title remains in him all the while and so a reconveyance is unnecessary.
But if there is an out and out sale the title could not revert to the original owner without a proper reconveyance.
Clause (7) appears to underline this because it couples the transferee 's; right to remain in possession and occupation and to appropriate the produce " generation after generation " with the non payment of the money within the time set out.
It is true the words of conveyance in the earlier part Of the deed (clause 5) would pass an absolute title if they stood alone but the document must be read as a whole and it must also be remembered that it was executed by ignorant justice and scribed by a man whose knowledge of conveyancing was, on the face of it, rudimentary and defective.
The deed lacks the precision of a practised hand and that probably accounts.
for its ambiguities: that there is ambiguity is patent from what we have said.
181 The next step is to see whether the document is covered by section 58(c) of the Transfer of Property Act, for if it is not, then it cannot be a mortgage by conditional sale.
The first point there is to see whether there is an " ostensible sale.
" That means a transaction which takes the outward form of a sale, for the essence of a mortgage by conditional sale is that though in substance it is a mortgage it is couched in the form of a sale with certain conditions attached.
The executable clearly purported to sell the property in clause (5) because they say so, therefore, if the transaction is not in substance a mortgage, it is unquestionably a sale: an actual sale and not merely an ostensible one.
But if it is a mortgage, then the condition about an " ostensible sale " is fulfilled.
We next turn to the conditions.
The ones relevant to the present purpose are contained in clauses (6) and (7).
Both are ambiguous, but we have already said that on a fair construction clause (6) means that if the money is paid within the two years then the possession will revert to the executants with the result that the title which is already in them will continue to reside there.
The necessary consequence of that is that the ostensible sale becomes void.
Similarly, clause (7), though clumsily worded, can only mean that if the money is not paid, then the sale shall become absolute.
Those are not the actual words used but, in our opinion, that is a fair construction of their meaning when the document is read as a whole.
If that is what they mean, as we hold they do, then the matter falls squarely within the ambit of section 58(c).
Now, as we have already said, once a transaction is embodied in One document and not two and once its terms are covered by section 58(c) then it must be taken to be a mortgage by conditional sale unless there are express words to indicate the contrary, or, in a case of ambiguity, the attendant circumstances necessarily lead to the opposite conclusion.
There are no express words here which say that this is not a mortgage but there is ambiguity, so we must probe further.
The respondents, who claim that this 182 is a sale and not a mortgage, rely on the following circumstances.
They are all culled from the deed itself First, they point to clause (5) which says that the transferee has been made the absolute proprietor in place of the executants.
Those, they say, are the operative words and point to an out and out transfer of title.
Next, they point to clause (2) where the executants say that they have no other Means of raising the money they want except by selling the property.
The respondents argue that the word " sale " could not have been used inadvertently because it is contrasted with a mortgage in the very same sentence.
The word " mortgage "is also used in clause (1), therefore it is clear that when a mortgage is intended the word " mortgage is used.
It must follow that when the word " sale is used, a sale must have been meant.
The only weakness in this argument is that when a mortgage is by conditional sale this is the form it has to take, because section 58(c) postulates that there must be an " ostensible sale " and if a sale is ostensible it must necessarily contain all the outward indicate of a real sale.
The question we are considering can only arise when the word " sale " is used and, of course, a sale imports a transfer of title.
The use of the words It absolute proprietor in our places " carries the matter no further because the essence of every sale is to make the vendee the absolute proprietor of what is sold.
The question here is not whether the words purport to make the transferee, an absolute proprietor, for of course they must under section 58(c), but whether that is done " ostensibly " and whether conditions of a certain kind are attached.
The learned counsel for the respondents next relied on the fact that clause (3) says that the price paid was a "fair and just? ' one and that the Courts below have found that the consideration was not inadequate.
, He also relies on the fact that no interest was charged, that the transferee was placed in possession of the property and was Dot to account for the usufruct also on the fact that a short term, namely two years, was fixed for repayment.
183 But on the other side, there is the very significant fact that Rs. 65 6 0 was borrowed to enable the executants to carry on commutation proceedings under section 40 of the Bihar Tenancy Act (that is, for substitution of a cash rent instead of one in kind) in respect of this very property: (clause 1).
It was admitted before us, and the lower Courts so find, that the commutation proceedings related to this very land.
The learned High Court Judges discount this by saying that there is no evidence to show that the proceedings, which were started in 1929, continued after the deed.
But that is a mistake apparently due to the fact that the copy of the entry in the Rent Schedule, produced before the learned Judges, inadvertently omitted the date.
Mr. N. C. Chatterjee produced a certified copy of the revenue record here and that gives the missing date.
From that it is clear that the proceedings continued till 18th February, 1931, that is to say, for some ten months after the deed.
This, we think, is crucial.
Persons who are selling their property would hardly take the trouble to borrow money in order to continue revenue proceedings which could no longer benefit them and could only enure for the good of their transferees.
There is another point in favour of the appellant, and that is that the surrounding circumstances show that there was a relationship of debtor and creditor between the. parties existing at the date of the suit transaction.
The bulk of the consideration went in satisfaction of the mortgage of 6th May, 1927.
In those circumstances, seeing that the deed takes the form of a mortgage by conditional sale under section 58(c) of the Transfer of Property Act, it is legitimate to infer, in the absence of clear indications to the contrary, that the relationship of debtor and creditor was intended to continue.
The point made on behalf of the respondents about the adequacy of the consideration and the absence of interest can be explained.
The transferee was to take possession of the property and would thus get the produce and it is evident to us from the tenor of the document that he was not to be accountable for it.
184 We say this because the indemnity clause (clause 9) says in sub clause (b) that in the event of the transferee 's possession being disturbed the executants would among other things, pay him, in addition to damages, the entire consideration together with interest at 2 per cent.
per month from the date of the deed and would not require the transferee to account for the usufruct.
It is true this can also be read the other way but considering these very drastic provisions as also the threat of a criminal prosecution in sub clause (a), we think the transferee was out to exact more than his pound of flesh from the unfortunate rustics with whom he was dealing and that he would not have agreed to account for the profits: indeed that is his own case, for he says that this was a sale out and out.
In these circumstances, there would be no need to keep a reasonable margin between the debt and the value of the property as is ordinarily done in the case of a mortgage.
Taking everything into consideration, we are of opinion that the deed is a mortgage by conditional sale under section 58(c) of the Transfer of Property Act.
The appeal is allowed.
The decree of the High Court is set aside and that of the lower appellate Court is restored except as to costs.
The original owners of the property have lost it.
The value of the property was put at over Rs. 10,000 in the special leave petition.
The second defendant oust,.
,, the original owners by getting a mortgage decree for Rs. 130 in his favour on a mortgage of only Rs. 25 and purchasing it at the auction himself.
He is no longer in the picture as he sold it to the plaintiff for Rs. 400.
The plaintiff has accordingly obtained property which on his own showing is worth more than Rs. 10,000 for only Rs. 400.
The first defendant spent only Rs. 250 plus Rs. 65 6 0 on it: Rs. 315 6 0 and the consideration of the disputed deed is only Rs. 700.
it is evident that both sides are speculators.
In the circumstances we direct that each party bear its own costs.

summary:
There is no hard and fast rule for determining whether a given transaction is a mortgage by conditional sale or sale outright with a condition for repurchase.
Each case must be decided on its own facts.
The numerous decisions of the High Courts on the point are of no help because two documents are seldom expressed in identical terms.
The intention of the parties is the determining factor but the intention must be gathered from the document itself which has to be construed to find out the legal effect of the words used by the parties.
If the words are express and clear, effect must 'be given to them and any extraneous enquiry into what was thought or in.
tended is ruled out.
If however there is ambiguity in the language employed then it is permissible to look to the surrounding circumstances to determine what was intended.
175 In view of the provisions of the amended section 58(c) of the Transfer of Property Act, if the sale and agreement to repurchase are embodied in separate documents, then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not.
But the mere fact that there is only one document does not necessarily mean that it must be a mortgage and, cannot be a sale.
If the condition of repurchase is embodied in the document that effects or purports to affect the sale, then it is a matter for construction which was meant.
Balkishen Das vs Legge (27 I.A. 58), Alderson vs White ; at 928), Bhagwan Sahai vs Bhagwan Din (17 I.A. 98 at 102), and Thanda Singh vs Wahid ud din (43 I.A. 284 at 293) referred to.


judgement:
Appeals Nos. 123 and 124 of 1966.
Appeals by special leave from the judgments and orders dated April 28, 1965 of the Gujarat High Court in Civil Revision Applications Nos. 88 and 93 of 1961.
P. B. Patwari, K. L. Hathi, section K. Bagga and Sureshta Bagga, for the appellants.
P. M. Rawal and P. C. Bhartari, for the respondents.
The Judgment of the Court was delivered by Mitter, J.
These are two appeals by special leave from judg ments of the Gujarat High Court dated April 28, 1965 in Civil Revision Applications No. 88 and 93 of 1961.
As the questions involved in both the applications were the same, the High Court delivered the main judgment in Civil Revision Application No. 88/1961 and referred to the same in its judgment in Civil Revision Application No. 93 of 1961.
The two applications in the High Court arose out of certain proceedings under the Saurashtra Agricultural Debtors Relief Act.
The applicants before the High Court and the appellants before this Court were mortgagees in possession of certain lands belonging to the debtors who are now represented by the respondents.
The main question before the High Court was and before us is, whether the debtors had lost all their interest in the lands mortgaged by reason of the operation of the Saurashtra Land Reforms Act, XXV of 1951 and as such were not competent to make an application under the Saurashtra Agricultural Debtors Relief Act, 1954.
Hereinafter the two Acts will be referred to as the Land Reforms Act and the Debtors Relief Act.
It is not necessary to deal separately with the facts in the two appeals as the course of proceedings in both cases were similar giving rise to common questions of law.
We therefore propose to take note of the facts in Civil Revision Application No. 88 of 1961.
The creditors, appellants before us, were in possession of the properties the subject matter of litigation, under two mortgage deeds of Samvat years 1997 and 1999.
The first mortgage was for Rs. 991 and the second for Rs, 1,011 The mortgagees were with possession and the mortgagee have been appropriating the income of the usufruct thereof for the last 50 years.
There is nothing to show whether they were under a liability under the documents of mortgage to pay the revenue and other dues to the State but there is no dispute that they have 692 been doing so for many years past.
The lands were situate in Bajana State with its own peculiar land tenure system known as the Girasdari system.
The Land Reforms Act which came into force on July 23, 1951 purported to effect important and far reaching changes in the said system.
The preamble to the Act shows that its object was "the improvement of land revenue administration and for ultimately putting an end to the Girasdari system" and the regulation of the relationship between the Girasdars and their tenants, to enable the latter to become occupants of the land held by them and to provide for the payment of compensation to the Girasdars for the extinguishment of their rights.
It will be noted at once that the Act aimed at regulating the relationship of persons in the position of landholders and their tenants and to enable the tenants to become the real owners of the soil under direct tenancy from the State.
It was not meant to extinguish or affect the rights of the landholders as mortgagors unless the persons in occupation had become tenants either by contract or by operation of law.
The Act came into force in the whole of Saurashtra area of the State of Gujarat.
Under section 2(15) 'Girasdar ' meant any talukdar, bhagdar, bhayat, cadet or mul girasia, etc.
Under section 2(13) 'estate ' meant all land of whatever description held by a Girasdar including uncultivable waste whether used for the purpose of agriculture or not and 'Gharkhed ' meant any land reserved by or allotted to a Girasdar before the 20th May 1950 or for being cultivated personally and in his personal cultivation.
A tenant under section 2(30) meant an agriculturist who held land on lease from a Girasdar or a person claiming through ' him and included a person who was deemed to be a tenant under the provisions of the Act.
Under section 3 the provisions of the Act were to have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
Section 4 Provided that "all land of whatever description held by Girasdar is and shall continue to be liable to the payment of land revenue to the State of Gujarat.
" Section 5 classified Girasdars according to the measure of their holding and under cl.
(c) thereof a Girasdar was to belong to class C if the total area of agricultural land comprised in his estate did not exceed Act.
120 00 Section 6(1) of the Act laid down that any person who was lawfully cultivating any land belonging to a Girasdar was to be deemed for the purposes of the Act to be the tenant if he was not a member of the Girasdars family or a servant on wages payable in cash or in kind etc.
or a mortgagee in, possession.
The Explanation to the sub section however shows that a person who was otherwise, deemed to be a tenant was not to cease to be such only on the 693 ground that he was a mortgagee in possession.
Under section 19 it was open to any Girasdar to apply to the Mamlatdar for the allotment to him of land for personal cultivation within a certain fixed time.
Such application had to be made in a specified form giving the prescribed particulars.
The applicant had to show inter alia, the area and location of the land in respect of which the allotment was prayed for, the right under which he claimed the land and full particulars of his estate as also the area of khalsa land, if any, in his possession.
Under section 20 of the Act it was for the Mamlatdar to issue notice to the tenant or tenants concerned on receipt of an application under section 19 and make an enquiry in the prescribed manner after giving the parties an opportunity of being heard.
After such inquiry the Mamlatdar was required to pass an order making an allotment to the Girasdar of such land as may be specified in the order and this was to be followed by the issue of an occupancy certificate to a Girasdar in respect of his Gharkhed and the land, if any, allotted to him under the section.
Under sub section (4) no Girasdar was to obtain possession of any land held by a tenant except in accordance with the order under the section.
Section 24 laid down the total area of the holding which a C class Girasdar could be allotted for personal cultivation.
Sub section
(2) of the section provided that a C class Girasdar could not be allotted any khalsa land if it was held by a tenant.
Chapter V containing sections 31 to 41 provided for acquisition of occupancy rights by tenants and section 31 laid down the consequences which were to issue in the wake of grant of occupancy certificates.
A tenant who was granted such a certificate was to be free of all relations and obligations as tenant to the Girasdar.
The Girasdar in his turn was to be entitled to receive and be paid compensation as provided in the Act.
Under section 36 the right.
tide and interest of the Girasdar in respect of an occupancy holding were to be deemed to have been extinguished on the payment by the Government of the last instalment of compensation.
The functions of a Mamlatdar are laid down in section 46 of the Act.
It was for him to decide inter alia what land should be allotted to a Girasdar for personal cultivation and to make such allotment, to decide whether a person was or was not tenant, to determine whether a tenancy shall be termi nated under section 12 and many other matters.
Under s.51.
an appeal lay to the Collector against any order of the Mamlatdar.
The above analysis of the relevant provisions of the Land Reforms Act amply demonstrates the manner in which a change was to be brought about in the relationship between the Girasdar and his tenants and the rights which they were respectively to acquire under the orders of the Special Mamlatdar.
The said Officer had no jurisdiction to terminate any rights under mortgage, 694 The full text of the order of the Mamlatdar on the application of the Girasdars (the respondents to the appeal) is not before us.
The copy of the order on the respondents ' application marked exhibit 8/1 bearing date 16th January 1954 was handed over to us.
It appears therefrom that the Girasdar was allowed to keep as Gharkhed certain lands by paying six times the assessment in the treasury but with regard to section Nos.
684 arid 685 (the lands given to the mortgagees) the same were held by the Mamlatdar to be khalsa and full assessment thereof was ordered to be taken.
The Mamlatdar further noted that there was no need to grant any occupancy rights.
On May 2, 1955 the respondents applied for adjustment of their debt to the Civil Judge exercising jurisdiction under the Debtors Relief Act.
The creditors relied on the order of the Special Mamlatdar declaring the lands as Khalsa as fortified by the decision of the Bhayati court of Bajana State.
It was contended that the lands having been declared khalsa the debtors had lost their rights therein.
Reliance was also placed on Forms 7 and 8 by counsel for the appellants to show that his clients had acquired proprietary rights in the said khalsa lands.
According to the Civil Judge the judgment of the Bhayati court had merely decided that the Bajana State had 'no title or interest in the land in question and that the Jats Mul Girasdars were independent proprietors thereof.
The Judge however remarked that it was not for the Special Mamlatdar to decide any question as to title and he had merely ordered recovery of full assessment from the persons in actual possession and this in no way vested any title in the creditors.
In the result the Civil Judge directed the restoration of the lands to the debtors subject to certain limitations and conditions.
The creditors went up in appeal to the Assistant Judge, Surendranagar.
There it was contended on their behalf that the mortgages had been extinguished by the title of the paramount power and on the date of the application under the Debtors Relief Act there was no subsisting mortgage between them and the respondents.
Reliance was placed on the decision of the Special Mamlatdar declaring the land to be khalsa land as extinguishing the mortgages by forfeiture of the land to the State.
The Assistant Judge dealt with the question at some length and came to the conclusion that the mortgages bad not been extinguished and not being tenants within the meaning of section 6 the creditors could not have got an occupancy certificate in respect of the lands in their possession.
He further stressed on the decision of the Special Mamlatdar to show that only the liability for the full assessment of the lands was indicated without any disturbance to the rights inter se.
between the mortgagor and the mortgagees.
Dealing, with the question of the advances made and the amounts 695 still due to the creditors, it was ordered that the debtors should pay Rs. 1,698/ in twelve yearly instalments and the award was directed to be modified accordingly.
The matter was then taken up by way of Civil Revision to the High Court of Gujarat.
The High Court arrived at the following conclusions : (a) The decision of the Bhayati court merely declared that the State was entitled to recover taxes of various kinds from the lands in possession of tenants or mortgagees.
There was no decision that the lands in possession of the mortgagees were confiscated to the State.
(b) The Special Mamlatdar rejected the application of the debtors and directed the lands in possession of the different creditors to be treated as Government lands as according to him the decision of the Bhayati court amounted to a forfeiture of the lands by the Bajana State.
(c) It was not necessary to test the correctness of the decision of the Special Mamlatdar as in view of the provisions in the Debtors Relief Act which was an Act subsequent to the Land Reforms Act the provisions of the latter Act were to prevail.
In the result the High Court affirmed the order of the Assistant Judge in appeal directing possession to be handed over to the debtors.
Before us great stress was laid on the decision of the Special Mamlatdar and it was argued that subject to any appeal from his order his decision was binding on the parties and not having gone up in appeal from the order of the Special Mamlatdar the debtors could not be allowed to agitate their rights to the land ignoring the said order.
We have not before us the full text of the order of the Special Mamlatdar relied on by the appellants nor are we satisfied from copies of form 7 prescribed under Rule 81 of the Rules promulgated under the Land Reforms Act that there was any adjudication of the rights of the debtors and the creditors inter se.
In our view all that the Special Mamlatdar decided and had jurisdiction to decide under the Act was, whether the debtors could be given occupancy certificates or allotted any land Gharkhed and the Special Mamlatdar merely ordered that the lands being khalsa full assesment had to 'be, taken in respect of them and there was no need to grant occupancy rights.
In order to get such occupancy rights the creditors had to show that they had 696 become tenants which Obviously they could not be under the provisions of section 6 of the Land Reforms Act.
The fact that they had all along paid the revenue and other dues to the State, if any, would not clothe them with the right of the tenants.
Under section 76(c) of the Transfer of Property Act a mortgagee in possession must, in the absence of a contract to the contrary out of the income of the property, pay the Government revenue, all other charges of a public nature and all rent accruing due in respect thereof during such possession.
We do not know whether there was a contract to the contrary and whether the mortgagors had covenanted to pay the rent and the revenue.
But even if they could not meet the revenue and other State dues out of the income and paid the same out of their own pockets in order to save the security, the mortgagees were only entitled under section 72(b) of the Transfer of Property Act to add the amount to the mortgage money.
They could not by paying such rent or revenue acquire a title in derogation of the rights of the mortgagors and the payments, if any, are to be taken into account when the mortgagors seek to redeem the property.
That apart, it has not been shown to us that the debtors were awarded any compensation in respect of the khalsa lands given in mortgage to the appellants.
The occupancy certificates, if any, given by the Special Mamlatdar to the appellants cannot under the provisions of the Land Reforms Act extinguish the title of the mortgagors.
Whether the: mortgagors as C class Girasdars can be allowed to retain land in excess of the limits specified in the Act and whether as a result of the restoration of the lands to them by the award such limit will be exceeded in this case, are not questions for us to consider.
The right of the mortgagors not being extinguished under any provision of law to which our attention was drawn, no, fault can be found, with the award is finally modified by the judgment of the Assistant Judge and effect must be given thereto.
In our view, it is not necessary to consider the point canvassed at length before the High Court and dealt with in the judgment of the said court as to whether the Provisions of the Debtors Relief Act over ride those in the Land Reforms Act.
The object of the two Acts are different.
The object of the Land Reforms Act.
as already noted, is the improvement of the land revenue administration and outline an end to the Girasdari system and granting of occupancy rights to the, Girasdars and /or their, tenants, whereas the Debtors Relief Act governs the rights of the debtors and creditors inter se inter alia by scaling down the debits and providing for restoration of their Pr to debtors.
In our view, the right of the debtors in this case were not extinguished under the Land Reforms Act and it was open to the court exercising jurisdiction under the Debtors Relief Act to scale down tile debt and provide for resto 697 ration of the land in possession of the mortgagees to the mortgagors on taking fresh accounts between the parties and directing payments by one party to the other as has been done in this case.
The appeals therefore fail and are dismissed with costs.
Y.P. Appeal dismissed.

summary:
The Respondent Girasdars in the State of Saurashtra mortgaged their lands with possession with the appellants, who paid the land revenue and other dues.
By the Saurashtra Land Reforms Act (25 of 1951), the, rights of the Girasdars were extinguished, and the tenants of Girasdars became occupants of land held by them.
The Land Reforms Act provided for the Mamlatdar to allot land to a Girasdar for personal cultivation.
The special Mamlatdar declared the lands in dispute to be Khalsa and full assessment had to; be taken, and that there was no need to grant 'any occupancy rights.
The Saurashtra Agricultural Debtors Relief Act, 1954 was enacted scaling down the debts and for providing for rest oration of their property, to the debtors.
Thereupon the respondents applied.for adjustment of their debt to the Court having jurisdiction under the Debtors Relief article The ' appellants relied on the order of the Special Mamlatdar declaring the lands as Khalsa and contended that the lands having been declared as Kholsa, the respondents had lost their rights therein.
HELD : The rights of the respondents Girasdars in this case were not extinguished under the Land Reforms Act and it was open to the court exercising jurisdiction under the Debtors Relief Act to scale down the debt and provide the restoration of the land in possession of the mortgagees to, the mortgagors on taking fresh account between the parties and directing.
payments by one party to the other.
The Saurashtra Land Reforms Act aimed at regulating the relationship of persons in position of Landholders and their tenants, and to enable the tenants to become the real owners of the soil under direct tenancy from the State.
It was not meant to extinguish or affect the rights of Landholders as mortgagors unless the persons in occupation had become tenants either by contract or by operation of law.
No adjudication of the rights of the debtors and creditors inter se was done.
All that the Special Mamlatdar decided and had jurisdiction to decide under the Land Reforms Act was whether the respondents could be given occupancy certificates or allotted any land Gharkhed and the Special Mamlatdar merely ordered that the lands being Khalsa full assessment had to be taken in respect of them and there was no need to grant occupancy rights.
In order to get such occupancy rights the appellants had to show that they had become tenants which they could not be under the provisions of section 6 of the Land Reforms Act.
The fact that they had all along paid the revenue and other dues to the State, if any, would not clothe them with tenancy rights.
That apart, it has not been shown that the respondents were awarded any compensation in respect of the 691 Khalsa lands given in mortgage to the appellants.
The occupancy certificates, if any, given by the Special Mamlatdar to the appellants could not under the provisions of the Land Reforms Act extinguish the title of the respondents.
[695 H; 696 H]