S. Dasaradha Rama Reddy, J.
1. These two appeals are connected and hence are disposed of by a common judgment. The main case is LP. A.No. 156 of 1991 filed against C.C.C.A.No. 120 of 1980 confirming me decree in O.S.No. 233 of 1974. The parties are referred as arrayed in O.S.No. 233 of 1974.
2. The partners of the firm Rehnuma-e-Deccan filed suit against the appellant who is the first defendant and her husband, second defendant stating as follows:- The partners of the firm approached the defendants for loan of Rs. 20,000/-. The defendants carry on money lending business without any licence under the Hyderabad Money Lenders Act. The second defendant who looks after the affairs of the first defendant agreed to advance loan of Rs. 20,000/- with interest at 18% per annum on the condition that the plaintiffs must secure immovable property. They accordingly executed a sale deed dated 27-6-1961 in favour of defendant No. 1, who executed an agreement of reconveyance on the same day in favour of the firm, undertaking to reconvey the property within three years on receiving payment of Rs. 20,000/-. The plaintiffs also executed rental deed in favour of defendant No. 1 promising to pay rent at Rs. 300/- per month which represented interest. By mutual consent three years period was extended by three more years by a fresh agreement dated 16-6-1964. The first defendant executed a fresh reconveyance agreement on 13-6-1967 stipulating minimum period of three years and maximum period of seven years. Before the expiry of 7 years, the plaintiffs wanted to pay the money and get the reconveyance deed executed. But the defendants with an ulterior motive evaded to receive the money and avoided execution of the reconveyance deed. Hence the suit is filed for directing them to execute reconveyance deed. They have amended the plaint in February, 1979 seeking relief of declaration that the sale deed dated 27-6-1961 is void.
3. The plea of the defendant is that the documents have nothing to do with the alleged loan transaction, that they have not executed third agreement of reconveyance on 13-6-1967; that it was the plaintiffs who suggested that the property might be reconveyed in favour of Syed Mahmood Waheeduddin, who was not willing to arrange necessary funds and hence the property could not be reconveyed in his favour. The period stipulated under the agreement dated 16-6-1964 having expired, the plaintiffs are not entitled to ask for reconveyance. The relief of declaration that the sale deed is void is barred by time.
4. Meanwhile,, the appellant filed suit against the respondents in the year 1971 on the file of the V Additional Judge, City Civil Court, Hyderabad, later transferred to III Additional Judge City Civil Court, Hyderabad and renumbered as O.S.No. 220 of 1974, for recovery of arrears of rent from April, 1971 to May, 1974. This suit was resisted by the respondents-herein pleading that the first defendant is not the owner of the suit building and that the rent note was obtained nominally in connection with the loan transaction. Both the suits were clubbed together and the trial Court found that the agreement of reconveyance dated 13-6-1967 is not genuine, that the defendants did not execute reconveyance deed extending the period by seven more years, that in substance the transaction is loan and not sale, that the rent which was mentioned in the rental agreement represents interest at the rate of 1 per month, that the value of the suit property as given in the registered sale deed is much less than (he real value of the property and that, admittedly, the possession of the property was not taken by the defendants but remained with the plaintiffs. It was also found by the trial Court mat defendant No. 2 was having even by 1961 large money lending business, which he was doing under the garb of purchasing buildings, that the defendants who had no money lending licence under the Hyderabad Money Lenders Act were acquiring properties by charging interest at a rate higher than what is allowed under the Money Lenders Act, that whenever the defendants advanced loans, instead of taking pronotes they were taking sale deeds and in turn were executing reconveyance deeds collecting interest in the form of rent and mat since, the object of the sale deed is unlawful, the transaction is void Under Section 23 of the Contract Act On the question of limitation, the trial Court found that as the defendants have denied the title of plaintiffs on 10-4-1974, the suit filed on 12-6-1974 is within limitation under Article 58 of the Schedule to the Limitation Act. In the other suit the learned Additional Judge held that in view of the finding that the defendants are not the owners of the suit premises and that the plaintiffs are not tenants, and in view of the finding in O.S.No. 233 of 1974 that the sale deed is void, the defendants are not entitled to claim any amount from the plaintiffs towards rent. Thus the suit filed against the appellant was decreed, while the suit filed by the appellant was dismissed. The appeals by the first defendant were dismissed by the learned Single Judge. Against this common judgment the present Letters Patent Appeals are brought by the first defendant.
5. The learned counsel for the appellant, Mr. Y. Sivarama Sastry, has raised the following contentions:-
(i) That the transaction of sale, reconveyance and lease have nothing to do with the loan.
(ii) That even assuming that in substance it is a loan transaction the sale deed dated 27-6-1961 is not void and
(iii) That even otherwise the suit is barred by limitation.
Contention No. (i):-
6. The learned counsel for the appellant submitted that as the two documents were separately executed, under Proviso to Section 58(c) of the Transfer of Property Act, the transaction is not a mortgage. The learned counsel for the respondents, on the other hand, contended that the consistent course of conduct of the defendants 1 and 2 by lending money to the borrowers is to take sale deeds, execute agreements for reconveyance and obtain rental deeds stipulating rent equivalent to interest, in order to circumvent Hyderabad Money Lenders Act. His contention is that even if it is not a mortgage, in substance it is loan.
7. P.W.I, Clerk of the firm of which the plaintiffs are partners, deposed that the defendants, lent money against the immovable property, that whenever they lent money they obtained sale deeds in respect of immovable properties from the debtors that on the same day they execute agreement of reconveyance, that they used to charge 1 to 3% interest per month in lieu of which they used to take rental deeds from the debtors showing the interest as rent, that the suit transaction also is one such and that at the time of suit transaction the market value of the suit house was about Rs. 1,00,000/-. P.W-2, another debtor of the appellant, deposed that he alongwith his father has borrowed a sum of Rs. 4,000/- from the appellant in 1953 agreeing to pay interest at the rate of 1 per month; that the said transaction was reduced into three documents, namely, sale deed executed by him and his father, reconveyance deed executed by the appellant in their favour and the rental deed executed by him and his father in favour of the appellant and that the rent represented interest at the rate of Rs. 60/- per month. He also stated that the second defendant, husband of the appellant, attended to the transaction on her behalf. P. Ws. 4,5,9,11 and 12 have deposed on similar lines. Thus the consistent evidence is that the appellant and her husband were lending money on security of house property, that instead of obtaining mortgage, they were obtaining sale deeds either in the name of the appellant or in her husband's name or their close relations, that they were in turn executing deed of reconveyance and also obtaining rent deeds mentioning interest payable as rent payable by the borrowers. It is also in the evident* that whenever the borrowers committed default in payment of interest, the appellant and her husband got them evicted by initiating rent control proceedings taking advantage of the rental deeds. It is also admitted that the appellant and her husband did not have licence under the Hyderabad Money Landers Act.
8. On her behalf, appellant and her husband were examined. The appellant stated that the object of sale deeds is to see that the money they paid would be returned to them safely. It is also stated that in 15 or 20 cases they have taken sale deeds in her name, in the name of her children and executed reconveyance deeds and also the rental deeds. It is also admitted by the appellant that she has not seen the suit house either before or after the purchase and has not applied for mutation in the records of Municipality. The husband of the appellant, D.W.2 deposed that they might have purchased one hundred houses in this manner and that they did not engage any broker or give advertisement in newspapers.
9. Thus, as found by the trial Court and as confirmed by the learned Single Judge, the consistent method adopted by the appellant and her husband was to give loans and in order to get over the provisions of the Hyderabad Money Lenders Act, obtain sale deeds and rental deeds in their favour or in the names of their children and relations accompanied by agreements for reconveyance executed by them and even in respect of the suit transaction the same procedure was adopted.
10. The learned counsel for the appellant, Sri Y. Sivarama Sastry, has contended that if the sale and agreement to reconvey are embodied in separate documents, under the Proviso to Section 58(c) of the Transfer of Property Act, the transaction cannot be a mortgage whether the documents are contemporaneously executed or not. In support of his contention he relied on the decisions reported in Chunchun Jha v. Ebadat Ali, : [1955]1SCR174 and Simrathmull v. Nanjalingaiah, : AIR1963SC1182 . In the first case it was held that to determine whether a given transaction is mortgage by conditional sale or sale outright with the condition of repurchase, what is relevant is not what the parties intended but what is the legal effect of the words which they used. There, it was a converse case of one document having been executed. The Supreme Court held that if the sale and agreement to repurchase are embodied in separate documents, the transaction cannot be mortgage whether the documents are contemporaneously executed or not and that the converse does not hold good, namely, merely from the fact that there is only one document does not necessarily mean that it must be a mortgage and that the surrounding circumstances must be kept in view. On the facts of that case it was found that there was relationship of debtor and creditor between the parties existing at the date of suit transaction and accordingly the transaction was held to be mortgage by conditional sale. We fail to see how this helps the appellant.
11. The next case is Simrathmull v. Nanja Lingaiah, : AIR1963SC1182 . There, the plaintiff borrowed certain amount from the defendant and executed a deed of conveyance of land with a house thereon in favour of the defendant. On the same day an agreement for reconveyance was executed by the defendant There was also a rent note executed to the effect that the rent arrears must not exceed six months at any time. The plaintiff was in rent arrears for more than six months whereupon the defendant refused to reconvey the property. The Supreme Court held that these deeds are parts of the same transaction and as they are contained in separate documents, the plaintiff is debarred from proving that the transaction was in the nature of a mortgage by conditional sale. This apparently supports the learned counsel for the appellant. But, on a close scrutiny it is distinguishable. As contended by Mr. J.V. Suryanarayana Rao, learned senior counsel for the respondents, the Calcutta High Court in Banku Behari v. Kalyani Debi, : AIR1967Cal351 explained these two decisions of the Supreme Court and held that a transaction intended to be mortgage, but evidenced, by a sale deed and a separate agreement to reconvey, though cannot, in law, be a mortgage in view of Proviso to Section 58(c) of the Transfer of Property Act, still amounts to 'loan', within the meaning of Section 2(12) of the Bengal Money Lenders Act. Section 2(12) of the Bengal Money Lenders Act defines loan as including any transaction which is in substance a loan. The learned Single Judge of the Calcutta High Court has distinguished the two Supreme Court cases and held that the decision of the Division Bench of the Calcutta High Court in Mahindra Nath Bose v. Mahendra Krishna Mitra, ILR (1956) 1 Cal. 59, which was also a case arising under the Bengal Money Lenders Act, still holds good even after the decision of the Supreme Court in Chunchun jha v. Ebadat Ali (1 supra) and Simrathmull v. Nanjalingaiah (2 supra). The Division Bench of the Calcutta High Court in Mahindra Nath Bose v. Narendra Krishna Mitra 4held mat the transaction though purporting to be in the form of sale with a condition of retransfer but not falling within the meaning of mortgage, in view of Proviso to Section 58(c) of the Transfer of Property Act can still be a loan, within the meaning of Section 2(12) of the Bengal Money Lenders Act, if in substance it is a loan. On evidence, the Division Bench found that the transaction was in substance a loan. Incidentally, the definition of loan in Hyderabad Money Lenders Act in Section 2(4) is also the same as in the Bengal Money Lenders Act, reading as follows:-
'2(4): 'loan' means a loan secured or unsecured, advanced on interest in cash or in kind, and shall include every transaction which is in substance a loan, but shall not include the following:-
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12. In similar circumstances in an unreported decision of this Court in C.CC. A. No. 163 of 19- dated 22-4-1977, Justice B.P. Jeevan Reddy (as he then was), following the decision of the Calcutta High Court, held that the transaction therein in substance amounts to loan within the meaning of Section 2(4) of the Hyderabad Money Lenders Act. We respectfully endorse the view of Justice B.P. Jeevan Reddy, and the decision of the Calcutta High Court in Banku Behari's case (3 supra) and hold that the suit transaction in substance amounts to loan within the meaning of Section 2(4) of the Hyderabad Money Lenders Act. Accordingly we reject the first contention of the appellant.
Contention No. (ii):-
13. The second contention of the appellant is that even assuming that in substance the transaction is a loan, the sale deed dated 27-6-1961 is not void. The trial Court as well as the learned Single Judge held that the consideration or the object of the loan being forbidden by law, namely, the Hyderabad Money Lenders Act, the transaction is hit by Section 23 of the Contract Act and accordingly the sale deed is void. The contention of the learned counsel for the appellant, Sri Sivarama Sastry, is that under the Hyderabad Money Lenders Act, if any one lends money without obtaining licence in that behalf, he may be convicted by a Criminal Court Under Section 3(5)(b) and the suit filed by him may be dismissed Under Section 9(2) and that from this it does not follow that indulging in money lending business without having licence is forbidden by law. We see no force in this contention. As observed in Pollock & Mulla's Indian Contract and Specific Relief Acts, tenth edition, at page-288, 'If by enforcing a contract contrary to an enactment the consequences will be the enforcement of an illegality and infraction of a statutory provision which cannot be condoned by any conduct or agreement of the parties, the contract will not be enforced by Courts.'
14. A Full Bench of Hyderabad High Court in Mohd. Salem v. Umaji, AIR 1955 Hyderabad 113 (F.B.), held that the object of the Hyderabad Money Lenders Act was to serve a public purpose, namely, to protect the borrowers from unscrupulous and usurious money-lenders by prohibiting them from lending monies without obtaining licences on pain of imprisonment as well as by empowering Courts to dismiss suits of such money lenders.
15. In Jaffer Meher Ali v. Budge-Budge Jute Mills Co, ILR (1907) 34 Cal. 289, it was held that Under Section 6(h) of the Transfer of Property Act read with Section 23 of the Contract Act, where the object of an assignment is fraudulent, the assignment is void and inoperative.
16. In Sreenvasa Rao v. Rama Mohana Rao, : AIR1952Mad579 , money was lent to a person to celebrate marriage of a minor child, which was prohibited under the Child Marriage Restraint Act, 1929. It was held by Justice Subba Rao, (as he then was) mat the object of the loan if permitted will defeat the provisions of the Child Marriage Restraint Act and will also be against the public policy and hence borrowing is unlawful within the meaning of Section 23 of the Contract Act In view. I of these decisions, we have no hesitation in rejecting the second contention of the learned counsel for the appellant and hold that the sale deed dated 27-6-1961 is void.
Contention No. (iii):-
17. The suit was filed on 12-6-1974 and I.A.No. 71 of 1979 for amendment of the plaint was filed on 15-2-1979 and was ordered on 2-3-1979. The contention of the learned counsel for the appellant is that by the date of filing of the amendment petition for seeking relief that the sale deed Ex. B-14 void the suit is barred by limitation. The suit was filed originally on 12-6-1974 and the relief asked for was for a direction to the defendants to reconvey the property in favour of the plaintiff by means of registered sale deeds. The amendment made in LA.No. 71 of 1979, was to declare the sale deed Ex.B-14 as void. As the relief asked for is only alternative and not additional and no relief is sought for against any new party, the amendment relates back to the date of filing of the suit. Under Article 58 of the Schedule to the Limitation Act, the period of limitation is three years from the date when the right to sue accrues.. The learned councel for the respondents, submits that the limitation runs from the date on which the appellant and the second defendant sent their replies, Ex. A-3 and Ex, A-4 dated 3-6-1974 and 7-6-1974 respectively, wherein it is mentioned that the respondents failed to have reconveyance deed executed as desired by them in Ex.B-19 dated 24-1-1967 and that thereafter they have not approached for extension of time. He also contended that until recently there was no dispute between the parties, and thus the limitation under Article 58 starts from 3-6-1974 and the suit filed on 12-6-1974 is within time. We agree with the contention of the learned counsel for the respondents.
18. For the above reasons, we see no infirmity in the order of the learned Single Judge and accordingly dismiss L.P.A.No. 156 of 1991 with costs. Consequently, the other L.P.A.No. 155 of 1991 is also dismissed with costs.