Holding

The mortgage was a valid usufructuary mortgage, proved by the certified copy of the deed, and the lower courts erred by admitting inadmissible extracts of account books and ignoring vital evidence, so the suit is decreed for redemption.

Summary

The appellant, the legal representative of the mortgagor, filed a suit for redemption of a usufructuary mortgage and possession of a shop. The defendant claimed the mortgage was a sham designed to evade rent‑control law and that the parties were landlord and tenant. The trial court and the first appellate court dismissed the suit, relying on extracts of the defendant’s account books and deeming the mortgage a sham. The High Court dismissed the second appeal without reasoning. The Supreme Court held that the certified copy of the registered mortgage deed proved the execution of a valid mortgage, that the extracts of account books were inadmissible under Section 34 of the Evidence Act, and that the lower courts had ignored vital evidence and relied on inadmissible material. Consequently, the suit was decreed for redemption and possession, subject to the appellant depositing Rs 1,000.

Issues considered

The High Court’s power under Section 100 CPC to interfere with findings of fact when material evidence is omitted or inadmissible evidence is relied upon.
Whether a certified copy of a registered mortgage deed can prove the execution of the mortgage without calling attesting witnesses.
Whether Section 92(1) of the Evidence Act bars the use of oral evidence to show that a deed was a sham.
Whether extracts of account books can be treated as "books of account" under Section 34 of the Evidence Act.
Whether the lower courts omitted vital evidence relating to the mortgage and the parties’ titles.
Whether a usufructuary mortgagee can deny the title of the mortgor or claim adverse possession.
The appropriate relief in a suit for redemption of a usufructuary mortgage.

Legislation cited

Code of Civil Procedure, 1908s. 100, s. 105, s. 115
Indian Evidence Act, 1872s. 34, s. 65, s. 68, s. 92
Registration Act, 1908s. 58
Transfer of Property Act, 1882s. 58, s. 59

Subjects

Usufructuary mortgageRedemption suitSection 100 CPCAdmissibility of evidenceAccount booksSham mortgageRent controlSecondary evidenceSection 34 Evidence Act

Judgment

A ISHWAR DASS JAIN (DEAD) THROUGH L.Rs.
v.
SOHAN LAL (DEAD) BY L.Rs.

NOVEMBER, 29 1999

B [M. JAGANNADHA RAO AND M.B. StIAH, JJ.]

Civil Procedure Code, 1908-Sec. JOO-Suit for redemption by
mortgagor-Claim of mortgagee that mortgage was a sham document to by-
pass tenancy laws-Mortgagee, claiming to be a tenant paying rent-
C Mortgagee also questioning title of the mortgagor-Suit dismissed by Trial
Court-Findings of Trial Court confirmed in first appeal-Second Appeal
dismissed in limine---Without considering vital material-Held, transaction
is one of Mortgage-Suit decreed for redemption-Transfer of Property Act,
1882.
D
Civil Procedure Code, 1908-Section 100-Second Appeal-Findings
of fact of trial court-When can be interfered with-discussed

;: Transfer of Property Act 1882-Proof of execution of mortgage-
Execution not denied by mortgagee-Held, non-Examination of attestors
..
E cannot be fatal to the mortgagor-Evidence Act.

Usufructuary mortgagee-Held, cannot question the title of mortgagor
nor can set up plea of adverse possession unless he re-enters with a different
status-Transfer of Property Act, 1882.

F Civil Procedure Code, 1908-105, 115-0bjection as to admissibility
of accounts rejected by Trial Court-Revision rejected on grounds that it was
not a 'case decided'-Whether the objection as to admissibility can be taken
up in first appeal from the final Judgment-Beld, yes.

Account Books-Extracts from pri.vate entries-Without production of
G original account books-Held, no sanctity can be attached to them and it
cannot be relied upon-Evidence Act.

The Original Plaintiff, who was the mortgagor of the suit property, filed
a suit for redemption of usufructory mortgage and for possession against the ··
Defendant The Plaintiff contended that he mortgaged the entire suit property
H
24

&..
I
l.D. JAIN v. SOHAN LAL 25
/

• viz. a shop and his 5/6th share therein for a sum of Rs. 1000 under a A
registered mortgage, that the interest payable was to be set off towards the

-
profits arising from use of the property by the mortgagee and that when the
plaintiff demanded production of the deed and possession on redemption the
mortgagee failed to give possession. The original defendant contended that
there was no relationship of mortgagor and mortgagee between the parties
but it was one of landlord and tenant, that the shop was in the exclusive B
management of Plaintiff at the time of possession, that a monthly rent of Rs.
80 was being paid by defendant, that the mortgage deed was executed by way
of collateral security in order to guarantee possession on demand and to bye-
pass the provisions of Rent Control Regulation and that it was a sham
transaction which was never intended to be acted upon. The defendant also c
contended that the Plaintiff was a man of means and it was not necessary for
him to mortgage the shop for a petty sum.

The trial Court dismissed the suit and held that though the Defendants
executed a registered mortgage, the real relationship between the parties was
that of landlord and tenant and that the Defendant could not be evicted except D
under the Rent Control Law. The Trial Court relied upon certain accounts
produced by the Defendant to hold that the Defendant was paying various
amounts to Plaintiff towards rent and that the mortgage was a sham

- transaction.

On the first appeal the appellate Court confirmed the order of dismissal
of the Trial Court and held that the plaintiff had only a half share and could
E

not have mortgaged the share of his wife though he was in management. The
appellate Court held that the valuable property could not have been mortgaged
for a petty sum of Rs. 1,000, while the rental value as per municipal records
was assessed at Rs. 824 and the name of Defendant was shown as occupier
F
and held that the mortgage was a sham document and that the Defendant was
in reality a tenant. The Second Appeal was dismissed by the High Court in
limine without reasons.

Allowing the appeal by the Plaintiff, the Court

HELD : 1. It is essential for the High Court to formulate a substantial
G
question of law and it is not permissible to reverse the Judgment of the first
appellate Court without doing sq. There are two situations when the High
Court can interfere under Section 100 CPC with the findings of fact arrived
at by the lower appellate Court. The first one is when material or relevant
...... evidence is not considered which, if considered would have led to an opposite H
26 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A conclusion. The second situation in which interference with findings of fact.
is permissible is where a finding bas been arrived at by the appellate Court
by placing reliance on inadmissible evidence which if it was omitted, an
opposite conclusion was possible. (32-A, B; 33-B-C]

Dilbagrai Punjabi v. Sharad Chandra, [1988) Supp. SCC 710; Jagdish
B Singh v. Nathu Singh, [1992) 1 SCC 647; Sundra Naicla Vadiyar v.
Ramaswami Ayyar, (1995) Supp. 4 SCC 534; Mehrunnisa v. Visham Kumari
[1998) 2 SCC 295 and Sri Chand Gupta v. Guizar Singh, [1992) 1 SCC 143,
referred to.

2. The Defendant in bis evidence as DW2 bas admitted the execution of
C the mortgage. There was no· specific denial of execution. Hence it was !lot
necessary for the Plaintiff to call the attestor into the witness box, this not
being a will. The Plaintiff could therefore not be faulted for not examining
any of the attestors. Hence the mortgage stood proved by the certified copy.
The Courts below were right in accepting that the deed was proved. [34-E-F]
D
3. The plea and evidence of collateral security offered by the Defendant
does not fit into a situation where the Plaintiff has executed the mortgage. If
the Plaintiff wanted to secure something by way of an additional security from
the Defendant, the normal course would have been to ask_ the Defendant to
give such a security and not for the Plaintiff to execute a mortgage. Thus the ..,.
E reason mentioned and evidence given by the Defendant as to why a sham
document was executed falls to the ground. Though evidence is admissible
under Section 92(1) to prove that the mortgage is a sham document, such
evidence is lacking in this case. [36-A-C)

Gangabai v. Chhabubai, [1982] I SCC 4, referred to.
F
4. The Courts below failed to notice that no account book or books were
ever produced by the Defendant in the Court. Exs. D2 to D5 filed into Court
were only' 'extracts' of the defendants' account books. The extracts were filed
two years after the filing of the written statement and one and a half year
G after the settlement of issues, without any explanation for the delay. The
genuineness of the extracts was challenged seriously in the cross-examination
of the Defendant who was examined as DW2. It was specifically contended by , .
the Plaintiff that the "account books were never produced". The Plaintiff's
plea against the admissibility of Ex. D2 and Exs. D3 to 05 in the Trial court
was rejected by th~ said Court and a revision under Section ll5 CPC was
H filed by the Plaintiff in the High Court That was dismissed by the High Court
l.D. JAIN v. SOHAN LAL 27
saying that there was no 'case' decided within the meaning of the word 'case A
decided' in Section 115 CPC. The Plaintiff therefore questioned the
admissibility of Exs. 02 to 05 in the first Appeal. It was permissible for the
Plaintiff to raise the said question in the first appeal in view of Section 105
CPC. In the light of what was stated by the Plaintiff in the memo of first appeal
in the appellate Court, it cannot be said that the 'accounts' produced by B
Defendant were not objected to by the Plaintiff. [36-D, E, F, G)

5. Sanctity is attached in the law of evidence to books of account if the
books are indeed "account books i.e. in original and if they show, on their
face, that they are kept in the "regular course of business". Such sanctity
cannot attach to private extracts of alleged account books where the original C
account are not filed into Court. This is because, from. the extracts, it cannot
be discovered whether the accounts are kept in the regular course of business
or if there are any interpolations or whether the interpolations are in a
different ink or whether the accounts are in the form of a book with continuous
page numbering. Hence, ifthe original books have not been produced, it is
not possible to know whether the entries relating to payment of rent are D
entries made in the regular course of business. [37-F-G]

CB!v. V.C. Shukla, [1998] 3 SCC 410, referred to.

6. Extracts of alleged account books, were wrongly treated as admissible
by the courts below though the original books were not produced for E
comparison nor their non-production was explained nor the person who had
prepared the extracts was examined. Therefore, the private extracts of alleged
account books like Exs. 02 to 05 are not admissible. The principal evidence
relating to the alleged payment of rent disappears and the foundation for the
alternative plea of tenancy crumbles. This is one reason why the finding F
relating to tenancy is vitiated being based on inadmissible evidence. (38-D-E]

7. The Plaintifrs acute need for money is proved by the fact that he
incurred losses in regard to his partnership with the Haryana Woollen Mills.
This aspect is borne out by the reported Judgment of this Court to which
plaintiff was a party. The said judgment referred to as evidence of the Plaintiffs G
losses was not considered by the lower Courts. (39-D-E]

Jshwar Dass v. The Haryana and General Woollen Mills Ltd, AIR (1974)
SC 592, referred to

8. The Defendant admitted in his evidence as DW2 that the mortgage H
28 SUPREME COURT REPORTS (1999] SUPP. 5 S.C.R.

, A deed was executed by him. The endorsement of the Sub-Registrar shows that·
the money of the Rs. 1000 was paid as mortgage money. There is a
presumption of the correctness of the endorsement made by the Sub-Registrar
under Section 58 of the Registration Act; it can be rebutted only by strong
evidence to the contrary. [38-F-G)

B Badyanath Singh v. Jamal Bros, AIR (1924) PC 48, referred to.

9. The appellate Court went wrong in the thinking that the Plaintiff had
only a half share in the property. The Defendant's title was a deriyative title
as mortgagee. Having come into possession of the whole property as a
mortgagee from the Plaintiff, treating Plaintiff as full o,·mer it was not open
C to the Defendant to question the title of the Plaintiff. A usufructuary
mortgagee cannot deny the title of his mortgagor. Nor can he set up adverse
possession unless he actually leaves the holding and re-enters under a
different status. [39-G-H; 40-A-B]

Jainandan v. Umrao, AIR (1929) All. 305; Sriram v. Thakur: AIR (1965)
D All. 223 and Taska v. Mall, 3 My 8 Cr 63 (5 L.J. Ch 321), referred to.

10. The suit is decreed for redemption. The appellants are entitled to
redeem the usufructuary mortgage and get possession of the suit shop from
the defendant, if the Appellants deposit in the Trial Court, within three months · ·
from the date of Judgment, the sum of Rs. 1,000. There is no need to deposit
E any interest inasmuch as according to the deed, the Defendant was to be in
possession and interest was to be set off against the occupation of the shop.
(40-C-D)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 14987of1996
F From the Judgment and Order dated 6.10.86 of the Punjab & Haryana High
Court in R.S.A. No. 797 of 1986.

Ms. Shashi Jain (In-Person) for the appellant D. Mahesh Babu for the
Respondent.

G The Judgment of the Court was delivered by

M. JAGANNADHA RAO, J. The appellants are the legal representatives
of the mortgagor, the original plaintiff in suit No. 388 of 1981 on the file of
the Sub-Judge, 1st Class, Panipat, who sued for redemption of the usufructuary
mortgage dated 15.4.1969 and for possession. The suit was dismissed by the
H Trial Court on 12.2.85, by the first appellate Court (appeal 47/13 of 1985) on
LO. JAIN v. SORAN LAL [M. JAGANNADHA RAO, J.] 29

- 2.11.85 and by the second appellate Court (RSA. NO. 797of1986) on 6.10.86
on the ground that notwithstanding the fact that the defendants executed the
registered mortgage deed on 15.4.1969, the real relationship between the
A

parties was as landlord and tenant and that the defendant could not be
evicted except under the Rent Control law.

The plaintiffs case was that he mortgaged the entire shop and his 51 B
6th share therein and gave possession of the whole shop to the defendant
for Rs. 1,000. Plaintiff sued for redemption and recovery of possession from
the defendant on the above said registered usufructuary mortgage. Interest
payable by the mortgagor was to be set off towards the profits arising from
use of property by the mortgagee. The mortgage deed stated that on C
redemption possession had to be delivered back to the mortgagor. On 1.2.1981
the plaintiff demanded production of the deed and possession on redemption.
The defendant did not comply. Therefore, the present suit was filed.

The defence was that there was no relationship of mortgagor and
mortgagee between the parties but that the relationship was as landlord and D
tenant. Defendant, however, admitted that the shop was in exclusive
management of plaintiff at the time possession was given to him. The plaintiff
allegedly leased to the defendant at Rs. 80 P.M. and plaintiff had been
receiving at that rate. These payments, it was said, were proved by the
accounts of the defendant. The motive for executing the deed was stated as
follows: E
"The plaintiff, further demanded that the defendant will have to execute
the mortgage deed by way of collateral security in order to guarantee
that the shop will be vacated by the defendant whenever demanded
by the plaintiff. In fact, the said mortgage deed was to circumvent and F
to bye pass the provisions of the Rent Control Legislation. The
alleged transaction of mortgage was only a sham transaction executed
only with the aforesaid object. The consideration of Rs. 1000 was only
in nature of collateral security or pagri."

It was also alleged that the plaintiff was a man of substance and very rich G
and there was indeed no occasion for him to mortgage the same for a petty
_ sum. The plaintiff is alleged to have "demanded Rs. I 000 by way of security
and asked the defendant to thumb mark some writing to arm the plaintiff with
a right to get the shop vacated according to his sweet will". The defendant
was in dire necessity of the shop and had to agree on the said condition. The
defendant, therefore, paid Rs. l 000 and incurred Rs. 80 towards expenses. The H
30 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A alleged mortgage was not the real transaction but it was a clever devi'?e to
bye-pass the provisions of the Rent Act". The suit of the plaintiff was liable
to be dismissed.

The trial Court considered the question whether the mortgage was
proved. It initially observed that the "plea of the learned counsel for the
B defendant that the plaintiff was a rich man and there is no need to mortgage
the shop, .... , cannot be accepted. Even if the plaintiff is rich person, he can
mortgage the suit property". The plaintiff was not bound to plead that he was
suffering losses but he could lead evidence. Having so observed, the trial
Court stated that the defendant "produced his books of accounf' to show
C that he was paying various amounts to the plaintiff every month, ranging from
Rs. 20 to Rs. 80, "though it is not mentioned as to why the defendant is
paying the said amount to the plaintiff'. On these accounts, the plea of
payment of rent was founqed. The trial Court then made an observation
contrary to what it said earlier, as follows:

D "the learned counsel for the defendant contended that the plaintiff is
awell to do man and no person would mortgage his shop with the
defendant for petty amount of Rs. 1000. I find force in this contention,
and plaintiff is not a poor man."

The Coutt then concluded that the defendant was paying to plaintiff some
E amount every month, towards "rent" at the rate of Rs. 80 and that the
mortgage was a sham transaction. The suit was, therefore, dismissed.

On appeal, th~ appellate Court proceeded on the basis that the mortgage
was proved. It confirmed the decree of the trial Court and observed that the
plaintiff had only a half share and could not have mortgaged the share of his
F wife though plaintiff might have been in management, that the defendant's
"accounts" showed he had been paying Rs. 80 P.M. to plaintiff though no
receipt was issued or obtained. This was for the period 16.4.69 to 12.3.81. The
first entry showed defendant paid Rs. l 000 to plaintiff in cash and Rs. 80 as
rent in advance and Rs. 80 as miscellaneous expenditure. The Court observed
G that the plaintiff "got the mortgage deed... executed from defendant so that he
could get the disputed shop vacated at his sweet will". The Court also
observed: "Needless to say that the disputed shop was mortgaged for a petty
sum of Rs. 1,000 whereas the rent of the disputed property was Rs. 80 per
month". The property was very valuable and could not have been mortgaged
for Rs. I 000. The Municipal Register showed respondent was occupying the
H property. Rental value was assessed at Rs. 824. On the above reasoning, it
l.D. JAIN v. SOHAN LAL [M. JAGANNADHA RAO, J.] 31
was held that the mortgage was a sham document and that the defendant was A
in reality a tenant. The appeal was dismissed.

The High Court dismissed the Second Appeal without reasons. It is
these judgments that are questioned in this appeal.

We have heard the appellants in person and the learned counsel for the B
respondents.

The following points arise for consideration: ( 1) Whether the High
Court can interfere under section 100 CPC (as mentioned in 1976) with the
findings of fact arrived at by the lower appellate Court if vital evidence which
could have led to a different conclusion was omitted or if inadmissible evidence C
was relied upon which if omitted, could have led to a different conclusion?

(2) Whether on the facts of the case, the mortgage was proved by the
plaintiff by production of a certified copy of the deed?

(3) Whether Section 92(1) of the Evidence Act could be a bar for D
proving a document to be a sham document?

(4) Whether the Exs. 02 to 05 were only extracts from accounts books
and could not be treated as account books for purposes of Section 34 of the
Evidence Act and were not admissible?
E
(5) Whether the lower Courts had omitted vital evidence from
consideration?

(6) Whether the mortgagee who got possession of the entire property
under the deed of mortgage could be permitted to deny the title of the
mortgagor either wholly or partly? F
(7) What relief?

POINT I:
Ordinarily, this Court does not go into findings of fact in exercise of its G
jurisdiction under Article 136 of the Constitution of India, particularly in
appeals against judgment in Second Appeals decided by the High Courts
under section 100 of the Code of Civil Procedure. But, in certain exceptional
cases, this Court will not hesitate to interfere, if interference is called for and
if the High court has failed to interfere under section 100. After hearing the
appellants in person and the learned counsel for the respondent, we are of H
32 SUPREME COURT REPORTS [1999) SUPP. 5 S.C.R.

A the view that this is one of those exceptional cases in which interference· is
called for even within the narrow parameters of section I 00 CPC.

Now under section 100 CPC, after the 1976 amendment, it is essential
for the High Court to formulate a substantial question of law and it is not
permissible to reverse the judgment of the first appellate Court without doing
B so.

There are two situations in which interference with findings of fact is
permissible. The first one is when material or relevant evidence is not
considered which, if considered would have led to an opposite conclusion.
C This principle has been laid down in a series of judgments of this Court in
relation to section 100 CPC after the 1976 amendment. In Dilbagrai Punjabi
v. Sharad Chandra, (1988] Supple. SCC 710], while dealing with a Second
Appeal of 1978 decided by the Madhya Pradesh High Court on 20.8.81, L.M.
Sharma, J.(as he then was) observed that

D "The Court (the first appellate Court) is under a duty to examine the
entire relevant evidence on record and if it refuses to consider important
evidence having direct bearing on the disputed issue and the error
which arises as of a magnitude that it gives birth to a substantial
question of law, the High Court is fully authorised to set aside the
finding. This is the situation in the present case."
E
In that case, an admission by the defendant-tenant in the reply notice ~.n
regard to the plaintiffs title and the description of the plaintiff as 'owner' of
the property signed by the defendant were not considered by the first appellate
Court while holding that the plaintiff had not proved his title. The High Court
F interfered with the finding on the ground of non-consideration of vital evidence
and this Court affirmed the said decision. That was upheld. In Jagdish Singh
v. Nathu Singh, (1992] I SCC 647, with reference to a Second Appeal of 1978
disposed of on 5.4.1991. Venkatachaliah, J. (as he then was) held:

"where the findings by the Court of facts is vitiated by non-
G consideration of relevant evidence or by an essentially erroneous
approach to the matter, the High Court is not precluded from recording
proper findings."

Again in Sundra Naicka Vadiyar v. Ramaswami Ayyar, (1995] Suppl. 4 SCC
534, it was held that where certain vital documents for deciding the question
H of possession were ignored-such as a compromise, an order of the revenue
1.D. JAIN v. SOHAN LAL [M. JAGANNADHA RAO, J.] 33

Court-reliance on oral evidence was unjustified. In yet another case in A
Mehrunissa v. Visham Kumari, [1998] 2 SCC 295 arising out of Second Appeal
1 • of 1988 decided on 15. l .1996, it was held by Venkataswami, J. that a finding

arrived at by ignoring the second notice issued by the landlady and without
noticing that the suit was not based on earlier notices, was vitiated and the
High Court could interfere with such a finding. This was in Second-Appeal B
of 1988 decided on 15.1.1996.

The second situation in which interference with findings of fact is
pennissible is where a finding has been arrived at by the appellate Court by
placing reliance on inadmissible evidence which if it was omitted, an opposite
conclusion was possible. In Sri Chand Gupta v. Guizar Singh, [1992] 1 SCC C
143, it was held that the High Court was right in interfering in Second Appeal
where the lower appellate Court relied upon an admission of a third party
treating it as binding on the defendant. The admission was inadmissible as
against the defendant. This was also a Second Appeal of 1981 disposed of
on 24.9.1985.
D
In either of the above situations, a substantial question of Jaw can arise.
The substantial question of law that arises for consideration in this appeal
is: "whether the courts below had failed to consider vital pieces of evidence
and whether the Courts relied upon inadmissible evidence while arriving at
the conclusion that the mortgage was sham and that there was no relationship E
between the plaintiff and the defendant as mortgagor and mortgagee but the
real relationship was as landlord and tenant? Point I is decided accordingly.

POINT2:

We shall first deal with the proof of the certified copy of the deed of F
mortgage. So far as the mortgage deed is concerned, the plaintiff filed a
certified copy and called upon the defendant to file the original. The defendant
refused to do so. The plaintiff, therefore, proceeded to file the certified copy
as secondary evidence under sub-clause (a) of section 65 of the Evidence
Act. This was certainly pennissible. The mortgage is a document required to G
be attested by two attestors under section 59 of the Transfer of Property Act
and in this case it is atte~ted by two attestors. The mode of proof of documents
required to be attested is contained in sections 68 to 71 of the Evidence AcL
Under section 68, if the execution of a document required to be attested is
to be proved, it will be necessary to call an attesting witness, if alive and
subject to the process of Court and is capable of giving evidence. But in case H
34 SUPREME COURT REPORTS [1999] SUPP. S S.C.R.

A the document is registered-then except in the case of a will-it is not necessary
to call an attesting witness, unless the execution has been specifically denied.
by the person by whom it purports to have been executed. This is clear from
section 68 of the Evidence Act. It reads as follows:

"Section 68: If a document is required by law to be attested, it shall
B not be used as evidence until one attesting witness atleast has been
called for the purpose of proving its execution, if there be an attesting
witness alive, and subject to the process of the Court and capable of
giving evidence:

Provided that it shall not be necessary to call an attesting witness
c in proof of the execution of any document, not being a will, which has
been registered in accordance with the provisions of the Indian
Registration Act, 1908, unless its execution by the person by whom
it purports to have been executed is specifically denied."

In the present case, though it was stated in the written statement that there
D was no relationship between the parties as mortgagor and mortgagee, the
defendant admitted in his additional pleas in the same written statement that
the mortgage deed was executed but he contended that it was executed to
circumvent the Rent Control legislation. In fact, in his evidence as DW2 the
defendant admitted the execution of the mortgage. It must therefore be taken
E that there was no specific denial of execution. Hence it was not necessary for
the plaintiff to call the attestor into the witness box, this not being a will. The
plaintiff could therefore not be faulted for not examining any of the attestors.
Hence the mortgage stood proved by the certified copy. The Courts below
were right in accepting that the deed was proved. Point 2 is decided in favour
of plaintiffs-appellants.
F
POINT 3:

The point here is whether oral evidence is admissible under Section
92( I) of the Evidence Act to prove that a document though executed was a
G sham document and whether that would amount to varying or contradicting
the terms of the document. The plea of the defendant in the written statement
was that mortgage deed though true was a sham document not intended to
be acted upon and that it was executed only as a collateral security. It was
pleaded that the plaintiff demanded that a mortgage deed be executed by
defendant as "collateral security in order to guarantee that the shop will be
H vacated by the defendant whenever demanded by the plaintiff' and that this •
1.D. JAIN v. SOHAN LAL [M. JAGANNADHA RAO, J.] 35
was done to circumvent the rent control law. It was said that the alleged A
transaction of mortgage was a sham transaction, executed only with aforesaid
object. The consideration of Rs. 1000 "was only in the nature of a collateral
security or 'pagri' ." The plaintiff was and is a rich man and there was no
occasion for him to mortgage his property. It was further pleaded.

"The plaintiff thus demanded Rs. 1000 from the defendant by way B
of security and asked the defendant to thumbmark some writing to arm
the plaintiff with a right to get the shop vacated according to his
sweet will. The defendant who was in dire necessity of the shop, had
to agree on the said condition put forward by the plaintiff'.

This Court has held in Gangabai v. Chhabubai, [1982] 1 SCC 4 that C
in spite of Section 92( 1) of the Evidence Act, it is permissible for a party to
a deed to contend that the deed was not intended to be acted upon but was
only a sham document. The bar arises only when the document is relied upon
and its terms are sought to be varied and contradicted. In the above case,
it was observed by D.A. Desai J as follows: D
"the bar imposed by Section 92( I) applies only when a party
seeks to rely upon the document embodying the terms of the
transaction and not when the case of a party is that the transaction
recorded in the document was never intended to be acted upon at all
between the parties and that the document is a sham. Such a question E
arises when the party asserts that there was a different transaction
altogether and what is recorded in the document was intended to be
of no consequence whatever. For that purpose, oral evidence is
admissible to show that the document executed was never intended
to operate as an agreement but that some other agreement altogether,
not recorded in the document, was entered into between the parties". F
But the question is whether on the facts of this case, the reason given
by the defendant in his evidence for treating the mortgage as a sham
document, can be accepted.
G
The reason given by the defendant appears to us rather curious. One
can understand a debtor. incurring a debt and executing a deed as collateral
security. There is no such situation here. Further, if it is a deed of collateral
security by defendant, then the defendant would have had to execute a deed
in favour of the plaintiff and not vice-versa. Here the plaintiff-owner has
mortgaged his shop to the defendant, as security. The plea and evidence of H
36 SUPREME COURT REPORTS (1999) SUPP. 5 S.C.R.

A collateral security offered by the defendant appears to us not to fit into a ...._
situation where the plaintiff has executed the mortgage. Obviously, if the
plaintiff wanted to secure something by way of an additional security from
the defendant, the normal course would have been to ask the defendant to
give such a security and not for the plaintiff to execute a mortgage. Thus the
reason mentioned and evidence given by the defendant as to why a sham
B document was executed falls to the ground.

Under Point 3 we therefore hold that though evidence is admissible
under Section 92(1) to prove that the mortgage is a sham document, such
evidence is lacking in this case. Point 3 is decided against the defendant.
"
,
c Points 4 & 5:
To accept the plea of lease set up by the defendant, the trial court and
the first appellate Court, relied upon the entries Ex. D2 and Exs. D3 to D5
:relating to the payment of "rents" by defendant as recorded in the 'account
D books' allegedly maintained by the defendant in the regular course of business.

The Courts below, in our view, failed to notice that no account book or
books were ever produced by the defendant in the Court. Exs. D2 to D5 filed
into Court were only 'extracts' of the defendants' account books. The extracts
were filed two years after the filing of the written statement and one and a·
E half year after the settlement of issues, without any explanation for the delay.
The genuineness of the extracts was challenged seriously in the cross-
examination of the defendant who was examined as DW 2. It was specifically
contended by the plaintiff (see p.13 of the appellant's notes of arguments in
the appellate court) that the "account books were never produced". The .
plaintiff's plea against the admissibility of Ex. D2 and Exs. D3 to D5 in the
F trial Court was rejected by the said Court and a revision under Section 115
• CPC was filed by plaintiff in the High Court. That was dismissed by the High
Court saying that there was no "case" decided within the meaning of the ·,'-
word 'case decided' in Section 115 CPC. The plaintiff therefore questioned the
admissibility of Exs.D2 to D5 in the first Appeal. In our opinion, it was
G permissible for him to raise the said question in the first appeal in view of
Section 105 C.P.C. In the light of what was stated by the plaintiff in the memo
of first appeal in the appellate Court, it cannot be said that the 'accounts"
produced by defendant were not objected to by the plaintiff.

--
Ex. D2 is an extract of accounts. So are Exs. D3 to D5. This is clear from
H para 21 of the judgment of the trial Court. That para reads'as follows:

. I
1.D. JAIN v. SOHAN LAL [M. JAGANNADHA RAO, J.] 37
"The plaintiff made the contention that the defendant relied upon A
his account books to prove that he is a tenant of the shop in dispute
under the plaintiff. He made the statement that the payment of the rent
to the plaintiff is entered in his regular kept account book but strange
enough, he had not produced at any stage of the proceedings an
extract of account books which are Ex.D 3 to D 5 and this is wrong B
to state that the defendant has not produced the account books to
show that he has 'not' been paying the rent to the plaintiff. The
plaintiff also contended that Ex.02 extract of the account books has
been produced and which could not be liable to be accepted.
Whatsoever, the document has been admitted without objection. It is
.' liable to be considered while deciding issues". C
Unfortunately, in a latter passage, the trial Court referred to these extracts as
'account books' and applied Section 34 of the Evidence Act. The Court forgot
that these were extracts of alleged accounts.
Now under Section 34 of the Evidence Act, entries in "account books" D
regularly kept in the course of business are admissible though they by
themselves cannot create any liability. Section 34 reads as follows:
"Section 34: Entries in books of account when relevant-Entries
in books of account, ·regularly kept' in the course of business, are
relevant whenever they refer to a matter into which the Court has to E
inquire, but such statements shall not alone be sufficient evidence to
charge any person with liability".

It will be noticed that sanctity is attached in the law of evidence to books
of account if the books are indeed "account books i.e. in original and if they
show, on their face, that they are kept in the "regular course of business". F
Such sanctity, in our opinion; cannot attach to private extracts of alleged
account books where the original accounts are not filed into Court. This is
because, from ~he extracts, it cannot be discovered whether the accounts are
kept in the regular course of business or if there are any interpolations or
whether the interpolations are in a different ink or whether the accounts are
in the form of a book with continuous page-numbering. Hence, if the original G
books have not been produced~ it is not possible to know wh.ether the entries
relating to payment of rent are entries made in the regular course of business.

It is only in the case of Bankers' Books Evidence Act, 1891 that certified

-
copies are a\\owed or the case must come under Section 65(f) or (g) of the
Evidence Act. Private extracts of account$ in other cases can only be secondary H
38 SUPREME COURT REPORTS (1999) SUPP. 5 S.C.R.

A evidence and unless a proper foundation is laid for adducing such secondary
evidence under Section 65 or other provisions of the Evidence Act, the
privately handwritten copies of alleged account books cannot by themselves
be treated as secondary evidence.

In the recent judgment of this Court in Central Bureau of Investigation
B v. v.c. Shukla, [1998) 3 sec 410, it has been laid down that for purposes of
Section 34, 'Book' or.Pinarily means a collection of sheets of paper or other
material, blank, written or printed, fastened or bound together so as to form
a material whole. Loose sheets of paper or scraps of paper cannot be termed
a~ 'book' for they can be easily detached and replaced. It has also been held
C that the rationale behind admissibility of parties' books of account as evidence ./ -
is that the regularity of habit, the difficulty of falsification and the fair certainty
of ultimate detection give them in a sufficient degree, a probability of
trustworthiness." When that is the legal position, extracts of alleged account
books, in our view, were wrongly treated as admissible by the courts below
though the original books were not produced for comparison nor their non-
D production was explained nor the person who had prepared the extracts was
examined.

Therefore, the private extracts of alleged account books like Exs.D2 to ·
D5 are not admissible. The principal evidence relating to the alleged payment
of rent disappears and the foundation for the alternative plea of tenancy
E crumbles. This is one reason why the finding relating to tenancy is vitiated
being based on inadmissible evidence.

We shall next refer to the vital evidence or facts relating to the mortgage
which have not been considered by the Courts below. The defendant admitted
in his evidence as DW2 that the mortgage deed was executed by him. The
F endorsement of the Sub-Registrar shows that the money of Rs. 1000 was paid
as mortgage money. There is a presumption of the correctness of the
endorsement made by the Sub-Registrar under Section 58 of the Registration
Act (vide Baidyanath Singh v. Jamal Bros., AIR (1924) PC 48), it can be
rebutted only by strong evidence to the contrary.
G
Another important aspect is that in the copy of the Municipal House
Tax Register Ex.DI, the defendant, Sohan Lal was shown as 'occupier' of a
shop just as certain others like Ganpat, Omprakash Niranjan were also shown
as occupiers. Description as occupiers does not necessarily imply occupation
only as tenants. According to DW 3, the rent paid by Om Prakash was Rs.40
H p.m. and by Niranjan was Rs. 22.50. The plaintiff submitted in the first
l.D. JAIN v. SOHAN LAL [M. JAGANNADHA RAO, J.] 39

appellate Court that the annual value of both thus comes to Rs. 40 + Rs. 22.50 A
= (Rs. 62.50) x l2=Rs. 750. The total annual value of the shop having been
fixed at Rs. 824 in Ex. DI, that leaves only a balance of Rs. 74 (i.e. Rs. 824-
Rs. 750). The plaintiff submitted in his memo of arguments before the appellate
Court that the balance of annual rental value of Rs. 74 could not relate to the
occupation of Sohanlal as tenant in this shop, for according to the defendant, B
the monthly rent was Rs. 80. The plaintiff submitted that the balance of Rs. 74
could be attributed only to the occupation of Ganpat. The above aspect was
also not kept in view by the lower Courts.

One other important point is that the term of the mortgage deed is that
the defendant is to be in possession and the interest payable by the plaintiff C
as mortgagor is to be set off against the 'profit' realised by the mortgagor's
occupation of the shop. There is no recital that it is to be set off against any
"rent" payable by the defendant.

We have already pointed out that in regard to whether the plaintiff was
rich enough so as not to be in need to go in for a mortgage, there are D
conflicting findings by the trial Court. The plaintiffs acute need for money
is proved by the fact that he incurred losses in regard to his partnership with
the Haryana Woollen Mills. This aspect, according to the plaintiff (as stated
in his written submissions) is borne out by the reported judgment of this
Court in L. lswar Dass v. The Haryana and General Woollen Mills Ltd, AIR
(1974) SC 592 to which plaintiff was a party. The said judgment was referred E
to as evidence of the plaintiffs losses. This aspect was also not considered
by the lower Courts.

In the result, we hold that the extracts from accounts are not "account
books" falling within Section 34 of the Evidence Act and are inadmissible. We F
also hold that vital material was omitted from consideration by the Courts.
Thus, the finding in regard to tenancy is liable to be set aside. Points 4 and
5 are held in favour of the plaintiff.

POJNT6:

The appellate Court, in our view, went wrong in thinking that the
G
plaintiff had only a half share in the property. The defendant's title was a
derivative title as mortgagee. Having came into possession of the whole
property as a mortgagee from the plaintiff, treating plaintiff as full owner it
\VM not open to the defendant to question the title of the plaintiff. In Tasker
v. Mall, (3 My. 8 Cr. 63 ( 5 L.J. Ch 321), Lord Cottenham said: "To him H
40 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A -(mortgagee) it is immaterial, upon repayment of the money, whether the
mortgagor's ~itle was good or bad. He is not at liberty to dispute it any more
than a tenant is at liberty to dispute his landlord's title". A usufructuary
mortgagee cannot deny the title of his mortgagor. Nor can he set up adverse
possession unless he actually leaves the holding and re-enters under a
B different status (Jainandan v. Umrao, AIR (1929) All.305) and (Sriram v.
Thakur, AIR 1965 All. 223)

J>.OINT7:

The judgments of all the three courts therefore are set aside. The suit
C is decreed for redemption as follows. The appellants are entitled to redeem
the usufructuary mortgage and get possession of the suit shop from the
defendant, if the appellants deposit in the trial Court, within three months
from today, the sum of Rs. 1000. There is no need to deposit any interest
inasmuch as according to the deed, the defendant was to be in possession
and interest was to be set off against the occupation of the shop. We direct
D that on such deposit of Rs. l 000, the defendant will produce the mortgage
deed into Court for cancellation. In case he does not produce the deed, within
the said period, it will be deemed that the mortgage is cancelled. On such
deposit of Rs. 1000 as aforesaid, the defendant shall restore possession to
the appellants. On such restoration of possession, defendant shall be entitled
E to withdraw the sum of Rs. 1000. In case the defendant does not surrender
possession as aforesaid, it will be open to the appellants to seek possession
by way of execution. ·

The appeal is allowed. Costs of appellants are quantified at Rs. 5,000.

V.M. Appeal allowed.

...
'·

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