THAKAR SINGH (D) BY LRS. vs. MULA SINGH(DEAD) THR.LR. .

1 (REPORTABLE) IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1740 OF 2007 Dr. Thakar Singh (D) by Lrs.& Anr. ………Appellants Vs. Sh. Mula Singh (D) thr. LR. & Ors. ………Respondents J U D G M E N T R.F. NARIMAN, J. 1. In this Civil Appeal an interesting question arises for decision. JUDGMENT One Nand Singh and Dr. Thakar Singh filed a suit for recovery for possession of various shops cum vacant sites situated in the main Bazar of Moga Town against 14 defendants. The suit property had been mortgaged to one Suba Singh and Saudagar Singh, defendants 1 and 2, for a sum of Rs.26,000/- vide registered th mortgage deed dated 9 March 1942. After taking an additional amount of Rs.3,000/- from the aforesaid Suba Singh and Saudagar Page 1 2 Singh, the plaintiffs executed an additional registered mortgage rd deed dated 3 March 1943. The material terms of the mortgage th deed dated 9 March 1942, with which we are concerned, reads as follows: “Now we the executants while in our full senses and with our free will having mortgaged with possession the aforesaid shops, Ahatas including lane passage together with material (malba) chob kari (wooden shafts) etc., including well together with right to ingress and egress convenience and residence in favour of Suba Singh s/o Mutsada Singh, caste Jat resident of Wara Bhai and Saudagar Singh son of Sh. Rattan Singh caste Jet r/o Jawahar Singh Didar Singh wala in equal share for a sum of Rs.26,000/- (Twenty Six thousand) only half of which comes to Rs.13000/-(Thirteen thousand) only possession of which has been given to them. The present mortgagees shall get the actual possession from the previous mortgagees after paying their mortgage money to them and after getting the land redeemed from them. The mortgagees are competent either to be in occupation themselves or to give on rent to anyone. Whenever the total mortgage money is paid in two lots the half of the mortgage property shall be got redeemed in two lots at the discretion of the mortgagors. The redemption of southern side of the lane shall be deemed to be half and that of the northern side shall be other half, meaning thereby that it will be discretion of the mortgagors to JUDGMENT Page 2 3

th 2. On 25 August 1969, the plaintiffs redeemed the mortgaged properties by depositing a sum of Rs.29,000/- . The cause of action for filing the present suit arose on account of the fact that physical JUDGMENT possession of the suit property was not handed over to the plaintiffs even after the redemption of the mortgaged property. The defendants 1 and 2 are said to have rented out portions of the suit property to defendants 3 to 14. Since the defendants failed to deliver possession, the plaintiffs filed a suit for possession and recovery of damages. In the Trial Court, a number of issues were Page 3 4 struck between the parties. In the present appeal, we are concerned basically with Issue 4, which reads as under:

The Trial Court decided the case on all 11 issues and held that on a true reading of the mortgage deed, the mortgagor had recognized the tenants of the mortgagee whose tenancy therefore did not come to an end with redemption of the mortgage. In First Appeal, the High Court of Punjab and Haryana did not go into any of the other issues including the issue as to whether the tenancies were created before or after the execution of the two mortgage deeds. It held on a reading of a clause in the first mortgage deed that since the JUDGMENT mortgagors would be entitled to future rent after redemption, it is clear that the mortgagors recognized all tenants created by the mortgagees during the subsistence of the mortgage. Issue No.4 was answered accordingly and the suit for vacant possession of the suit property from defendants was held not to be maintainable in law. Page 4 5 3. Learned counsel for the appellants raised a two-fold contention before us. Firstly, a correct reading of the two mortgage deeds would only lead to the conclusion that on redemption all

and would not be binding on the mortgagors. Alternatively, it was also argued that if it were found that on a true construction of the mortgage deed the mortgagors’ right to redeem was in fact clogged such clog would not be countenanced by the courts and full effect of redemption including the right to take back possession of the mortgaged property free from all encumbrances would ensue. Learned counsel for the respondents basically supported the judgment under appeal and argued that it was clear from a reading of the mortgage deed that the mortgagors had in fact recognized JUDGMENT tenancies created by the mortgagees and therefore the present suit would not be maintainable - the mortgagors have to go to a Rent Court to make out some ground of eviction against tenants recognized by them. 4. The right of a mortgagor to redeem is dealt with by Section 60 of the Transfer of Property Act. Section 60 reads as follows: Page 5 6

Page 6 7 Section 62 also recognizes the right of a usufructuary mortgagor to recover possession under certain circumstances. Further, the rights of a mortgagee in possession are dealt with by Section 72 of

tenancies is not one of the rights enumerated in this section. Section 76 (a) deals with a usufructuary mortgagee managing the property as a person of ordinary prudence would manage if it were his own. Section 111(c) of the Transfer of Property Act states: “S. 111 Determination of lease . —A lease of immovable property determines –- (c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event –- by the happening of such event;” JUDGMENT In All Indian Film Corpoation Ltd. & Ors. v. Sri Raja Gyan Nath & Ors. [1969 (3) SCC 79], a similar question arose before this th Court. In the facts of that case, the mortgage was redeemed on 19 April 1958 after which the respondent No.1 filed a suit for possession of the property from the head lessee and his sub- lessees. The sub-lessees claimed the benefit of the East Punjab Urban Restriction Act. In repelling the contention of the sub- Page 7 8 lessees that they were protected tenants as against the mortgagor, this Court stated:

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8. To the above propositions there is, however, one exception. That flows from Section 76(a) which lays down liabilities of a mortgagee in possession. It is provided there that when during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property, he must manage the property as a person of ordinary prudence would manage it if it were his own. From this it is inferred that acts done bona fide and prudently in the ordinary course of management, may bind even after the termination of the title of the mortgagee in possession. This principle applies ordinarily to the management of agricultural lands and has seldom been extended to urban property so as to tie it up in the hands of lessees or to confer on them rights under special statutes. JUDGMENT Page 9 10 To this again there is an exception. The lease will continue to bind the mortgagor or persons deriving interest from him if the mortgagor had concurred to grant it.”

5. In Pomal Kanji Govindji & Ors. v. Vrajlal Karsandas Purohit & Ors. [1989 (1) SCC 458], this Court dealt with the same question and arrived at two basic conclusions. The first is that a clog on the equity of redemption will be disregarded by a Court of law and secondly that a lease created by a mortgagee in possession of an urban immovable property would not be binding on the mortgagor after redemption of a mortgage even assuming such lease is as a prudent owner of property would have granted in the usual course JUDGMENT of management. This Court held: “32. It is a settled law in England and in India that a mortgage cannot be made altogether irredeemable or redemption made illusory. The law must respond and be responsive to the felt and discernible compulsions of circumstances that would be equitable, fair and just, and unless there is anything to the contrary in the Page 10 11

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JUDGMENT 46. We have noted hereinbefore the ratio and the basis of the decision of this Court in Jadavji Purshottam v. Dhami Navnitbhai Amaratlal. Shri Mehta submitted that there was no clear finding as to when the tenants were inducted whether before or after the Rent Restriction Act and therefore, he pleaded that the matter should be referred to the larger Bench. In view of the facts found in this case which were similar to the facts mentioned in Page 15 16

(Emphasis supplied) 6. In Shivdev Singh & Anr. v. Sucha Singh & Anr. [2000 (4) SCC 326], this Court held that a mortgage for a period of 99 years being an unreasonably long period before which redemption could Page 16 17 not take place would be a clog on the equity of redemption and would therefore be disregarded by the Court. On the facts of the th case, the mortgage deed was dated 19 March 1968 and the

years came to an end. It was held that such redemption was possible and the 99 year period was held unenforceable. It was further held that it is a right of the mortgagor on redemption to get back the subject of the mortgage and to hold and enjoy the property in the same manner as he was entitled to hold and enjoy it before the mortgage. If he is prevented from so doing such prevention is bad in law. 7. There is a long line of High Court judgments which hold that a mortgagee continuing in possession as a tenant after redemption is JUDGMENT a clog on redemption and is invalid as it prevents the mortgagor from getting back the property in the same condition as he gave it when the mortgage was executed. In Mahomed Muse v. Jijibhai Bhagvan [(1885) 9 Bom 524 at pg 525], it was held: “The objection to the condition in the mortgage, that if the mortgagor redeemed the land, the mortgage right only should be extinguished, and the lands should remain in the right hands of the mortgagee, he paying a rent of 2 Rupees per bigha, has not been dealt with by the Assistant Page 17 18

In Parmanand Pandit v. Mata Din Rai [ (1925) 47 All 582 at pg 584], it was held: “As to the first point, it seems to me that the condition that even after redemption the mortgagees would hold on the land, was a clog on the equity of redemption. Conditions which prevent or impede the right of redemption even after redemption, if such conditions are entered into at the same time when the mortgage is made, must be taken to be a clog on the equity of redemption. On the other hand, a subsequent contract which modifies the right of redemption may not be such a clog. Although the principle underlying the rule of a clog on redemption is very old yet it still prevails and will not permit any device or contrivance, being part of the mortgage transaction or contemporaneous with it, to prevent or impede redemption. It follows that any covenant under which some right to retain possession is reserved to the mortgagee even after the property is redeemed is a clog on redemption as it both prevents and impedes redemption. That such a clause amounts to a clog on redemption is covered by authority. In the case of Mahomed Muse v. Jijibhai Bhagvan, which was followed JUDGMENT Page 18 19

To the same effect the following judgments have also held that a mortgagee remaining in possession as a tenant post-redemption is invalid as a clog on redemption: Sheo Singh v. Birbahadar Singh, (1910) 6 IC 707 (All) at pg 708, JUDGMENT 709; Aukinidu v. Subbiah, (1912) 35 Mad 744 at pg 749; Daolal Rai v. Sheikh Chand, (1915) 31 IC 869 (Nag) at pg 870 ; Ram Narain Pathak v. Surathnath, (1920) 57 IC 327 (Pat) at pg 338; Bhimrao v. Sakharam, AIR 1922 Bom 277 at pg 278 ; Satyavatamma v. Padmanabhan, AIR 1957 AP 30 at para 19; Page 19 20 Gobind Ram v. Rajphul Singh, AIR 1973 P & H 94 at para 11, and Maina Devi v. Thakur Mansingh & Ors., AIR 1986 Raj 44 at para 30.

were entitled to create tenancies by virtue of the mortgage deed th dated 9 March 1942. However, there is nothing in the language of the mortgage deed to indicate clearly that the tenancies created by the mortgagees would be binding on the mortgagors. At the highest, after redemption, and after possession is taken, the mortgagor or mortgagors will also be entitled to receive rent in future. It will be seen that the mortgagor’s right to get back possession is expressly recognised by the mortgage deed without any clear and unambiguous language entitling tenants created by JUDGMENT the mortgagees to become tenants of the mortgagors. The entitlement to receive rent in future can by no stretch be held to create a tenancy between the mortgagor and the tenants of the mortgagees. This phrase has to be reconciled with the expression immediately preceding it namely “on taking possession”. It is clear that taking of possession from the mortgagees and his tenants is Page 20 21 completely antithetical to recognizing the mortgagees’ tenants as the mortgagors’ tenants. If the clause is to be read in the manner that the High Court has read it, the mortgagors would not be able

serious interference with their right to redeem the property inasmuch as the mortgagors would have to evict such tenants after making out a ground for eviction under the Rent Act. Such ground can only be bonafide requirement of the landlord or some ground based on a fault committed by the tenant such as non-payment of rent or unlawful subletting etc. Further, such ground may never become available to the mortgagor/landlord or may become available only after many years. It has already been seen that a mortgagee continuing in possession after redemption as tenant of JUDGMENT the mortgagor is regarded as a clog on redemption. The position is not different if the mortgagee’s tenants continue in possession after redemption. This would necessarily have to be disregarded as a clog on redemption as the right to redeem would in substance be rendered illusory. In the circumstances, the judgment of the st Punjab and Haryana High Court dated 31 March 2004 is set aside. All other issues are left open and can be agitated before the High Page 21 22 Court. It will be open to all parties to raise such pleas as are available to them in law. Considering that the cause of action in the suit arose in 1969, the High Court is requested to take up RFA

preferably within six months from the date of delivery of this judgment. ………………………………J. (Dipak Misra) …….……………………….J. (R.F. Nariman) New Delhi, October 14, 2014. JUDGMENT Page 22