JUDGMENT Sulaiman, J.
1. This is a defendants' appeal arising out of a suit for pre-emption. The plaintiffs claimed to pre-empt property transferred under a deed which ostensibly was a simple mortgage-deed under the following circumstances:
2. A one-anna four-pies share had been originally mortgaged with possession by the transferrer to the plaintiff himself for Rs. 1,100. Subsequently the transferrer executed the document in question transferring two-thirds out of one-anna four-pies share and leaving the entire amount of the first mortgage in the hands of the transferee for payment to the plaintiff. The profits of the property transferred admittedly amounted to Rs. 30. Even calculating consideration at the rate of 2 per cent, per mensem (i.e., 50 years' purchase) the value of the property could not exceed Rs. 1,500 which was the ostensible mortgage-money. The document, however, made it clear that the money could be recovered from the property and there was no personal undertaking by the transferrer to pay the amount. The time fixed for payment was seven years, within which the mortgagor could not redeem the property. After the lapse of the fixed period the principal and interest would amount to at least Rs. 4,000 and it would be impossible for the mortgagor to redeem the property on payment of that amount. As time passed the mortgage debt would increase still more. There was in addition to this some oral evidence also adduced by the parties. Having regard to all these circumstances and the terms of the mortgage-deed the learned District
3. Judge has come to the conclusion that the transaction though clothed in the garb of a mortgage was in reality a sale, and that the intention of the parties was that the transferee would by redeeming the first mortgage enter into effective possession of the property without any risk of redemption.
4. The learned Advocate for the appellant contends that it was not open to the lower appellate Court to find that this transaction was a sale when on the terms of the deed itself it was short of an out and oat sale. But the learned District Judge has pointed out that the plaintiff pre-emptor is not bound by the terms of the deed and is entitled to show that the real transaction between the parties was that of a sale, though it was clothed in the garb of a simple mortgage, the object being to defeat his claim. There can be no doubt that it was open to the plaintiff to show from circumstantial or oral evidence that the oral transaction was one of a sale and not a mortgage. Once that is satisfactorily proved, the transfer becomes liable to pre-emption though the document, as it stands, may ostensibly appear to be a mere simple mortgage. The findings of the learned District Judge on this point, therefore, must be accepted.
5. The learned Advocate for the appellant relies on two cases of the Oudh Court, namely, Majida Bibi v. Malik Fazl Karim [1913] 16 O.C. 9 and Sahmshad Ali Khan v. Dharam Singh A.I.R. 1927 Oudh 40. In both these cases, however the findings were that the transactions in question were not in reality sales but were mortgage transactions. It was then held that the transactions falling short of sales were not liable to preemption. In the first mentioned case at page 15 (16 O.C.) it was pointed out that the plaintiff's allegation that the two respondents had really entered into a transaction of sale fraudulently in order to defeat her right of pre-emption had not been proved. On failure to prove this it was further argued on behalf of the appellant that the mortgage was liable to pre-emption. Such a contention, of course, could not be accepted. Similarly in the last mentioned case the trial Court had disbelieved the plaintiff's evidence that the transactions were really sales and the appellate Court accepted that finding. The case was then argued on the supposition that the transaction was a mortgage-deed and it was then held that the transaction being short of a sale there could be no right to preempt, even though the chances of redemption were very remote. These cases, therefore, are clearly distinguishable. Reliance is further placed on behalf of the appellant on the case of Tameshar Tiwari v. Mahadeo Dube (First Appeal from Order No. 173 of 1921 decided on the 23rd of March 1922). The learned Judges who decided that case thought that the finding of the District Judge that the transaction was a sale was not binding on them because he had relied on the evidence of a witness named Satnarain who had merely expressed his opinion. Furthermore, it is not clear from the judgment in what way the simple mortgagee was to obtain possession of the property otherwise than by purchase of the property at auction in execution of his own decree. On the other hand in the case of Mohammad Husain v. Sheikh Abdul Fateh (Second Appeal No. 485 of 1925), the finding of the District Judge that the transaction though in the form of a mortgage was in reality a sale, was upheld and it was pointed but that the plaintiff not being a party to the transaction and the transaction being intended to defraud him, was not bound by the terms of the document and was entitled to challenge it and show that it was really a sale transaction.
6. I would accordingly dismiss the appeal.
Mukerji, J.
7. In view of the importance of the question raised I would like to add a few words to the judgment of my learned brother, with which I agree. The plaintiff respondent is a usufructuary mortgagee of one-anna four-pies. The mortgagor executed a simple mortgage in respect of 2/3rds share out of this property in favour of the appellants and left a part of the consideration money with the appellants to pay off the plaintiff. The defendants appellants were strangers to the village. The plaintiff thereupon brought the suit, out of which this appeal has arisen, on the allegation that the mortgagor and the appellants virtually decided upon the sale of the 2/3rds share and did effect it though in the form of a mortgage. From the circumstances attending the transaction the Court below came to the conclusion that the mortgagor and the appellants had agreed that the sale should be effected of the 2/3rds share. The lower appellate Court differing from the Court of first instance remanded the suit for the re-trial of the remaining issues.
8. In this Court it has been contended that it was not open to the lower appellate Court to treat a deed of mortgage as a deed of sale. The plaintiff not being a party to the transaction it was open to him to show the real nature of the transaction. It is a question of pure fact whether the transaction into which certain parties entered was to be one of sale or to be one of mortgage. It has nothing to do with the form in which the transaction was clothed. It was open to the plaintiff to point out the real nature of the transaction (whatever the ostensible form of it might be) and it was open to the Court to find out if that allegation of the plaintiff was right. The learned Judge in the Court below has pointed out the circumstances under which he found that the transaction between the mortgagor and the appellants was one of sale. These circumstances, in my opinion, perfectly justify the learned Judge in arriving at the conclusion. That being so, the question is whether Section 16 of the Pre-emption Act applies or not. In my opinion the rule of law must apply because it has been held that the transaction was one of sale.
9. The learned Counsel for the appellants has relied on two Oudh cases which have been referred to in the judgment of my learned brother. It is sufficient to point out that in both the cases the finding was that the transaction was not one of sale but one of a mortgage although the parties wanted to defeat a right of preemption. All that was said in these cases was that where the transaction does fall short of a sale it could not be defeated by an intending pre-emptor by saying that the parties wanted to defeat his right of pre-emption. The finding in this case is that the transaction was meant to be and was in effect a sale, although its form was something different. In my opinion this circumstance differentiates those two cases.
10. An unreported case of this Court has again been shown and it has been dealt with by my learned brother. There this Court did not accept the finding of the learned appellate Judge because it was based on the opinion of a witness. We do not know what the learned Judge would have said if they could have accepted the finding as a good finding of fact.
11. I agree, therefore, that the appeal should be dismissed.