Holding

The sale deed was a nominal sale executed as security, no title passed to the vendee, and the High Court correctly reversed the lower courts' findings.

Summary

The plaintiff, Phagua, executed a sale deed in favour of Mst. Hasrat Bi after obtaining a Rs.400 loan, simultaneously agreeing that the property would be reconveyed if the loan was repaid within three years. The loan was not repaid, Hasrat Bi's name was mutated in revenue records and she sold the land to the appellants (Ramlal, Shyamlal and Pyarelal) for Rs.4,000. Phagua sued for a declaration that the sale deed was merely a nominal transaction serving as security and that he remained the owner. The trial court and the first appellate court dismissed the suit, but the High Court reversed them, holding that the deed was a nominal sale and no title passed to Hasrat Bi or the subsequent purchasers. The appellants appealed to the Supreme Court, contending that the High Court should not have interfered with the lower courts' findings under Section 100 CPC. The Supreme Court held that the deed was indeed a security transaction, no title passed, and that the High Court was justified in overturning the lower courts' erroneous findings. Consequently, the appeal was dismissed and the High Court’s judgment affirmed.

Issues considered

Whether the sale deed dated 01.12.1965 was a genuine conveyance of title or a nominal sale executed as security for a loan.
Whether the High Court could interfere with the concurrent findings of fact of the trial court and the first appellate court under Section 100 of the CPC and Article 136 of the Constitution.
Whether the mutation of the vendee's name in revenue records conferred any title in her favour.

Legislation cited

Subjects

nominal salesuretysale deedreconveyancetitleSection 100 CPCArticle 136property lawloan securitymutation of revenue records

Judgment

RAMLAL AND ANR. A
v.
PHAGUA AND ORS.

OCTOBER 19, 2005

[ARIJIT PASAYAT AND DR. AR. LAKSHMANAN, JJ.] B

Constitution ofIndia-Article 136-Civil Procedure Code, l 908-Section
100-Plaintiff executing a sale deed of suit property in favour of vendee for
obtaining a loan-Simultaneously a reconveyance deed was executed by vendee C
if the loan is repaid by respondent within stipulated period-On failure to
repay loan within the stipulated period, the vendee got her name mutated in
revenue records and sold the suit property to purchasers-Plaintiffs filing a
suit for declaration that the sale deed executed was only a nominal sale-
Trial Court dismissing the suit and First appellate court dismissing the appeal-
High Court allowed the Second Appeal of the respondents-Correctness of- D
Held, the sale deed was a nominal sale and it was executed by plaintiffs by
wiry1 of security which did not confer any right, title or interest in the suit
property to the vendee-Hence the purchasers form the vendee do not get a
better title than the vendee had

Respondents-plaintiffs executed a sale deed of suit land in favour of
E
vendee on obtaining a loan. Simultaneously an agreement of reconveyance
of the suit property was executed by the vendee in favour of the respondent
if the loan is repaid 'within a stipulated period. On failure to repay the
loan in revenue records and sold the property to the appellants-defendants
by a registered sale deed. The respondent filed a suit ·ror declaration that F
the sale deed executed by her in favour of the vendee was only a nominal
sale and she continues to be the owner of the suit land. The trial court
dismissed the suit. The first appeal preferred by the respondent was also
dismissed. The High Court allowed the second appeal of the respondents
holding that the respondent has title over the suit land and on paying the G
loan amount to the vendee, he sha"ll have the right to get back the
possession of the suit land.

In appeal to this court, the appellants contended that the High Court
was not right in interfering with the concurrent findings of facts by the

331
H
332 SUPREME COURT REPORTS [2005] SUPP. 4 S.C.R.

A lower courts under section I 00 CPC; that the respondents failed to institute
a suit for specific performance of the deed of reconveyance against the
vendee; that the sale consideration is not a sole criteria for holding that
the object of the sale deed was not to convey the title in the suit land; that
the High Court has not framed any other substantial question of law at
B the time of hearing except framed at the stage of admission;

The respondents contended that the sale deed executed was by way
of surety which did not pass any right, title or interest in favour of the
vendee; and that by mere mutation of the name of the vendee in the
revenue records, it does not confer any right, title or interest in favour of
C the vendee in the absence of the real transaction of sale.

Dismissing the appeal, the Court

HELD:LI. The sale deed is not a real sale deed but was by way of
surety. It did not pass any right, title or interest in favour of the vendee
D which is clear from the admission of the vendee. In addition to the sale
deed executed, an agreement was also entered into between the parties
simultaneously for execution of the re-conveyance deed in favour of the.
1,
respondents. Therefore, by the said sale deed, no right, title or interest
ever pass in favour of the vendee and that mer,e mutation of the name of
E the vendee in the revenue records does not confer any right, title or interest
in her favour in the absence of the real transaction of the property. Since
. the vendee had no right, title or interest over the suit property she was
not competent to execute the sale deed in favour of the appellants for any
consideration and if the vendee executed the sale deed in favour of the
appellants it never conferred any right, title or interest in favour of the
F subsequent purchasers i.e. the appellants. 1336-E; 337-A, B, CJ
1.2. The trial Court dismissed the suit on the wrong premises holding
that the respondents have failed to prove that the loan amount was taken
from the husband ofvendee by way of loan. The first Appellate Court has
G not given any finding in respect of the issues framed by the trial court.
The Appellate Court also did not give any finding whether the vendee was
competent to transfer the property to the appellants or not. Therefore,
there is not concurrent findings of facts by the courts below and the High
Court was absolutely justified in reversing the judgment and decree passed
by the courts below. Both the lower courts have concurrently erred in not
H appreciating the oral and documentary evidence properly and, therefore,
RAMLAL v. PHAGUA [LAKSHMANAN, J.) 333
the High Court is at liberty to re-appreciate the evidence and record its A
own conclusion for reversing the orders passed by the lower Courts. The
High Court has rightly exercised its right and discharged its duty to
reverse the error and removed the injustice done by the Courts below.
The High Court is right in exercising its duty, rightly so in interfering with
an unreasonable and unjust findings by both the Courts below. The
findings arrived at by the High Court does not call for any interference B
under Article 136 of the Constitution of India.
(337-E, F, G; 338-G, H; 340-B, Cj

Mohan Lal v. Nihal Singh, AIR (2001) SC 2942; Manikkoth Narayani
Amma and Ors. v. P.C. Kalliani Amma and Ors., (2003) 9 SCC 245; Makhan C
Lal v. Asharfi Lal and Ors., (1997) 9 SCC 604 and Smt. Indira Kaur and
Ors. v. Shea Lal Kapoor, (1998] 2 SCC 488, referred to.

1.3. On perusal of the High Court records, no attempt was ever made
by counsel for the appellants to formulate any other questions of law at
the time of hearing. (340-Cj D
Thiagarajan and Ors. v. Sri. Venugopalaswamy B. Kail and Ors., (2004)
5 sec 762, distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1421of1999.

From the Judgment and Order dated 6.8.98 of the Madhya Pradesh E
High Court in Second Appeal No. 500 of 1989.

Manoj Swarup, Ms. Lalita Kohli, Anubhav Kumar, Ms. Mona Rajvanshi,
J.S. Rathore and Ms. Happy Saxena for the Mis. Manoj Swarup & Co. for
the Appellants.
F
S.K. Dubey, Chandra Mohan Anisetty and Shiv Sagar Tiwari for the
Respondents.

The Judgment of the Court was delivered by

DR. AR. LAKSHMANAN, J. The above appeal was filed by the G
unsuccessful defendants against the final judgment and order dated 06.08.1998
passed by the High Court of Madhya Pradesh at Jabalpur in Second Appeal
No. 500 of I 989 whereby the High Court allowed the Second Appeal filed
by the respondent/Plaintiff.

The short facts of the case are as follows:- H
334 SUPREME COURT REPORTS [2005) SUPP. 4 S.C.R.

A The respondent/plaintiff executed a sale deed in favour of Mst. Hasrat
Bi after obtaining a loan of Rs.400 and also executed an agreement stating
therein that in case she returns Rs.400 to Mst. Hasrat Bi within 3 years,
property shall be reconveyed to him. The respondent failed to repay the loan
within the stipulated period of 3 years. Therefore, Mst. Hasrat Bi got her
name recorded in the revenue and sold the property to the appellant Ramlal
B Shyamlal and one Pyarelal by a registered sale deed for a sum of Rs. 4,000.
According to the appellants, they came in possession of the property and are
cultivating since then.

Respondent No. 1 - Phagua filed a suit for declaration that the sale deed
C dated 01.12.1965 executed by her in favour of Mst. Hasrat Bi was only a
nominal sale and she continues to be the owner of the suit land. She also
prayed for possession of the suit land. The trial Court held that the registered
sale deed dated 01.12.1965 has not been executed nominally and accordingly
the trial Court dismissed the suit. The plaintiff/respondent herein filed first
appeal before the District Judge who also dismissed the appeal. The respondent
D filed second appeal before the High Court contending that the Courts below
have failed to consider an admission by respondent No. 8/defendant No. 8 -
Mst. Hasrat Bi that what was given was a loan committed an error in treating
the document dated 01.12.1965 a:; a sale and not a nominal sale; It was
submitted that the conclusion arrived at by both the Courts below are erroneous
E in law and facts and deserve to be set aside.

The High Court admitted the appeal and framed the following substantial
question of law:-

"Whether the Court below was right in holding that the sale deed
dated 01.12.1965 conveyed the title to respondent No. 8"
F
The learned single Judge of the High Court allowed the appeal and set
aside the judgment and order of the courts below and held that the respondent
has title over the suit land and on his paying a sum of Rs.400 to Mst. Hasrat
Bi he shall have right to get possession of the suit land.
G Being aggrieved by the above judgment and decree passed by the High
Court, the above civil appeal was filed by the defendants.

We heard Mr. Manoj Swarup, learned counsel for the appellants/
defendants and Mr. S.K. Dubey, learned senior counsel for respondent No. I/
H plaintiff.
RAMLAL v. PHAGUA (LAKSHMANAN, J.] 335
Mr. Manoj Swarup, learned counsel for the appellants/defendants A
submitted as follows:-

(a) the High Court was not right in interfering with the concurrent
findings of fact under Section I 00 CPC;
(b) the vendor failed to institute any suit for specific performance in B
pursuance of a deed of reconveying of the property to him by the
vendee;
(c) sale-consideration is not alone sufficient ground for interfering
by the High Court in the second appeal and for holding that the
object of the sale deed dated 01.12.1965 was not to convey the C
title in the property.

He also invited our attention to the relevant pleadings and the evidence on
record and also relied on the following decisions and also referred to the
provisions of Section 53 of the Transfer of Property Act, 1882:-

(I) Mohan Lal v. Nihal Singh, AIR (2001) SC 2942 D
(2) Thiagarajan and Ors. v. Sri Venugopalaswarny B. Kail and Ors.,
(20041 5 sec 762
(3) Manikkoth Narayani Arnrna and Ors. v. P.C.Kalliani Arnrna and
Ors.. (2003] 9 SCC 245
E
(4) Makhan Lal v. Asharfi Lal and Ors, (1997) 9 SCC 604

Per contra, Mr. S.K. Dubey, learned senior counsel for respondent
No. I/plaintiff submitted that the High Court has rightly come to the conclusion
that the sale deed in question was. not in fact a real sale deed, but was by way
of surety and thus did not pass any right, title or interest in favour of the F
vendee which is clear from the admission of the vendee/defendant No.8 from
para 8 of the impugned judgment under challenge in this civil appeal. He also
invited our attention to the written statement filed by defendant No.8 whereby
in para 2 (b) and (c) it is cfoarly admitted that the husband of vendee/
defendant No.8 Mst. Hasrat Bi agreed to advance the loan and the nominal G
sale deed was executed in her name instead of in the name of her husband.
He would further submit that from the sub-para (d) it is also admitted that an
agreement was entered intr between the vendor and the vendee that after
repayment of the amount within 3 years, re-conveyance deed will be executed
-. in favour of the plaintiff. He also invited our attention to the oral evidence
ofD.W.I Mehboob Khan and the admission made by him in the witness box H
336 SUPREME COURT REPORTS [2005] SUPP. 4 S.C.R.

A which reads as follows:-
"Plaintiff took a loan of Rs. 400 from me and that was to be repaid
within three years and the same was not repaid even after three years .
.Had he repaid the loan within three years, then I would have executed
a re-conveyance deed in his favour."
B
Simultaneously, an agreement was also entered into between the parties
for execution of the re-conveyance deed, in favour of the plaintiff as is
admitted at page B of the list of dates and events by the appellants. Therefore,
learned senior counsel submitted that by the said sale deed no right, title or
interest ever passed in favour of Mst. Hasrat Bi and that mere mutation of the
C name of Mst. Ha5rat Bi in the revenue records does not confer any right, title
or interest in her favour in the absence of the real transaction of the property.
Learned senior counsel also invited our attention to annexures RI series filed
along with the counter filed on behalf of the contesting respondent No. I.
Learned senior counsel cited the case of Smt. Indira Kaur and Ors. v. Shea
D Lal Kapoor, [1988] 2 sec 488 in support of his contention.

We have carefully perused the pleadings and judgments passed by both
the courts below and of the High Court and also the annexures filed by both
the parties in this appeal.

E In our c>pinion, the High Court has rightly come to the conclusion that •.
the sale deed in question was not in fact a real sale deed but was by way of
surety and thus did not pass any right, title or interest in favour of the vendee
which is clear from the admission of the vendee/defendant No.8. We have
already extracted the co.ntents of the written statement in paragraphs (supra).
We have also perused the document executed by the plaintiffs/respondents
F herein in favour of Mst. Hasrat Bi. It did not pass any right, title or interest
in her favour and in all probabilities the transaction was only by way of loan
and the so called sale deed executed by the respondent/plaintiff in favour of
Mst. Hasrat Bi was nothing but by way of surety.

D.W.I Mehboob Khan, the husband of defendant No.8 has clearly
G admitted in his evidence as follows:-

"it is true that Phagua took the amount from me as loan. Phagua is
resident of Village Mangla and he has his house and immovable
property there."
H
RAMLAL v. PHAGUA [LAKSHMANAN, J.] 337
In the instant case, in addition to the sale deed executed on 01.12. I 965 A
an agreement was also entered into between the parties simultaneously for
execution of the re-conveyance deed in favour of the respondent/plaintiff as
is admitted by the appellant herein. Therefore, by the said sale deed, no right,
title or interest ever pass in favour of Mst. Hasrat Bi and that mere mutation
of the name of Mst. Hasrat Bi in the revenue records does not confer any B
right, title or interest in her favour in the absence of the real transaction of
the property. It is seen from the records that since the respondent/plaintiff
failed to repay the loan within the stipulated period of 3 years, Mst. Hasrat
Bi got her name recorded in the revenue records and sold the property to the
appellants herein by a registered sale deed for a sum of Rs.4,000. In our
view, since Mst. Hasrat Bi had no right, title or interest over the suit property C
she was not competent to execute the sale deed in favour of Ramlal Shyamlal
and Pyarelal for any consideration and if Mst. Hasrat Bi executed the sale
deed in favour of the appellants it never conferred any right, title or interest
in favour of the subsequent purchasers i.e. the appellants. Therefore, the
respondent filed a suit for declaration that the sale deed dated 01.12.1965
executed by him in favour of Mst. Hasrat Bi was only a nominal sale and he D
continues to be the owner of the suit land and also prayed for possession of
the suit land as he was forcibly dispossessed by the appellant after purchasing
the land from Mst. Hasrat Bi. A copy of the Plaint has been filed and marked
as Annexure-R3 .
.·
E
The trial Court dismissed the suit on the wrong premises holding that
the respondent/plaintiff has failed to prove that amount of Rs.400 was taken
from Mehboob Khan, husband of Mst. Hasrat Bi by way of loan.

The respondent/plaintiff has clearly stated that he has repaid the entire
loan by paying the cash amount to Mehboob Khan. The first Appellate Court F
has not given any finding in respect of the issues framed by the trial Court~
The Appellate Court disposed of the appeal in a very casual manner without
discussing the evidence and the document available on record held that the
respondent/plaintiff did not repay the loan to Mst. Hasrat Bi. The Appellate
Court also did not give any finding whether Mst. Hasrat Bee was competent
to transfer the property to the appellants or not. Therefore, there is no G
concurrent finding by the courts below and the High Court was absolutely
justified in reversing the judgment and decree passed by the courts below.
The respondent, as already noticed, has filed relevant documents in support
of the findings arrived at by the High Court as Annexures Rl-R4.
H
338 SUPREME COURT REPORTS [2005] SUPP. 4 S.C.R.

A The plaintiff has examined himself as P.W.1. He was severely cross-
examined by the counsel appearing for the respective defendants. Nothing
could be elicited from P. W.1 to dislodge his suit claim. From the evidence
on record, it is apparent that the respondent's/plaintiffs stand is that he has
taken Rs.400 as loan from defendant No.8 and the said fact had been admitted
B by her. Further, it is evident that the respondent and defendant No.8 agreed
that the latter (defendant No.8) shall re-convey the property to the former on
payment of Rs.800. According to the appellant/defendant, the outer time
limit for such re-conveyance is 3 years whereas the plaintiff has not stated
anything in this regard in the plaint but admitted in his cross-examination
that the amount was to be paid within 3 years. From the evidence on record,
C we are of the opinion that the sale deed in question has been executed only
as a security for loan. There is no dispute about the fact that in the year 1958
property was sold to Jagdish for Rs.400 and the respondent/plaintiff purchased
the said property in the year 1964 for Rs.700 and, therefore, sold to defendant
No.8 for a sum of Rs.400 on 01.12.1965 is unimaginable.

D In .our opinion, agreement to re-convey the property will not ipso facto
lead to the conclusion that the sale is not nominal and in view of the stand
of defendant No.8 as also of the fact that the property worth Rs. 700 has been
purportedly sold for Rs.400. We are of the considered opinion that the sale
deed dated 01.12.1965 did not convey any title to defendant No.8. It is well
E settled by catena of decisions that vendor cannot convey to the vendee better
title than she herself has.

(1) Mohan Lal v. Nihal Singh, AIR (2001) SC 2942

In the instant case, the trial Court dismissed the suit for the reasons
recorded therein 'on the basis of the record and oral evidence. The lower
F Appellate Court, as noticed earlier, has not considered oral and documentary
evidence properly. The lower Appellate Court which is the final Court of fact
mechanically confirmed the findings of the trial Court and upheld the judgment
of the trial Court dismissing the suit. The High Court for the cogent and
convincing reasons recorded in the judgment has rightly interfered with the
G concurrent findings of both the Courts. In our view, both the lower courts
have concurrently erred in not appreciating the oral and documentary evidence
properly and, therefore, the High Court is at liberty to re-appreciate the
evidence and record its own conclusion for reversing the orders passed by the
lower Court. The judgment of this Court in the case of Mohan Lal v. Nihal
H Singh (Supra) cited ·by the learned counsel for the appellant will not be of any
RAMLALv. PHAGUA [LAKSHMANAN. J.] 339
assistance to the appellant herein. A
(2) Thiagarajan and Ors. v. Sri Venugopalaswamy B. Kail and Ors.,
[2004] 5 sec 762.

In the instant case, the High Court has framed a substantial question of
law as extracted in paragraphs (supra). Learned counsel for the appellants B
submitted that the High Court has not framed any other substantial question
of law at the time of hearing except framed at the stage of admission. Sub-
section 5 of Section I 00 says that the appeal shall be heard on the question
so formulated and the respondent shall at the hearing of the appeal be allowed
to argue that the case does not involve such a question. The proviso states C
that nothing in this sub-section shall be deemed to take away or abridge the
power of the Court to hear for reasons to be recorded, the appeal on any
other substantial question of law not formulated by it, if it is specified that
the case involves such question. As could be seen from the High Court
records, no attempt was ever made by counsel for the appellants to formulate
any other substantial question of law at the time of hearing. Therefore, the D
case of Thiagarajan and Ors. v. Sri Venugopalaswamy B. Kail and Ors.,
(supra) is not applicable to the case on hand and is distinguishable on facts
and law.

(3) Manikkoth Narayani Amma and Ors. v. P.C.Kalliani Ammo and
Ors., [2003) 9 sec 245 E
(4) Makhan Lal v. Asharji Lal and Ors., [1997) 9 SCC 604

In view of our foregoing discussions, on facts and on law, we are of
the opinion that these two judgments will not be of any aid or assistance to
the appellant.
F
(5) Smt. Indira Kaur and Ors. v. Shea Lal Kapoor, [1988) 2 SCC 488

The above judgment was cited by the learned senior counsel appearing
for respondent No. I in regard to the scope of Article 136. In the above
judgment, this Court in para 7 held that Article 136 does not expressly forge G
any fetters on the power of this Court to interfere with the concurrent findings
of fact. Though, this power has to be exercised sparingly but if and when the
Court is satisfied that grave injustice has been done it is not only the right
but also the duty of the Court to reverse the error and the injustice and to
upset the finding notwithstanding the fact that it has been affirmed earlier.
This Court also held that it is not the number of times that a finding has been H
340 SUPREME COURT REPORTS [2005] SUPP. 4 S.C.R.

A reiterated that matters. What really matters is whether the findings is manifestly
unreasonable and unjust one in the context of evidence on record. This
judgment squarely applies to the case on hand. In the instant case, the High
Court has rightly exercised its right and discharged its duty to reverse the
error and removed the injustice done by the courts below. The High Court
is right in exercising its duty, rightly so in interfering with an unreasonable
B and unjust findings by both the Courts below.

On a careful perusal of the materials on record, it will be clear that both
the courts below did not appreciate the evidence on record both oral and
documentary and, therefore, the findings arrived at by the High Court, in our
C opinion, does not call for any interference under Article 136 of the Constitution
of India and the civil appeal deserves to be dismissed.

In the result, the appeal stands dismissed and the judgment and decree
of the High Court is affirmed and of the lower courts are set aside. However,
we order no costs.
D
B.S. Appeal dismissed.

..