Pandit Chunchun Jha v Sheikh Ebadat Ali

• In 1930 the owners executed a deed in favour of the first defendant, who already held a simple mortgage over the land. The consideration was the sum due on that mortgage plus a small cash advance for commutation proceedings over the same land.
• The deed said the property was "sold" for Rs. 700, put the transferee in possession, and provided that if the executants repaid the money within two years the property would be returned.
• The plaintiff, who derived title from an earlier mortgagee's auction purchase, sued to redeem, claiming the 1930 deed was a mortgage. The trial court and the first appellate court agreed. The Patna High Court held it was a sale.

1. Was the 1930 deed a mortgage by conditional sale, which could be redeemed, or an out and out sale with a condition of repurchase?

• There is no hard and fast rule. Each case turns on its own facts, and the many High Court decisions are of little help because no two deeds are alike.
• The intention of the parties is the determining factor (Balkishen Das v Legge). It must be gathered first from the document. If the words are clear, effect is given to them; surrounding circumstances are looked at only if the language is ambiguous.
• After the 1929 amendment to S.58(c), a sale and an agreement to repurchase in separate documents can never be a mortgage. A single document is not automatically a mortgage, but parties who use one document are presumed not to intend a sale unless clear words displace that presumption.
• Read as a whole, the deed secured an existing debt and was a mortgage by conditional sale. The appeal was allowed and the plaintiff could redeem.

Substance, not the label "sale", decides the character of the transaction. Where the sale and the condition of reconveyance are in one deed and the conditions of S.58(c) are met, the deed is construed as a mortgage unless clear words show an out and out sale.