Full Judgment Text
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CASE NO.:
Appeal (civil) 2411 of 2007
PETITIONER:
Tara Chand
RESPONDENT:
Sagarbai @ Chaiyalibai
DATE OF JUDGMENT: 09/05/2007
BENCH:
S.B. Sinha & P.K. Balasubramanyan
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 2411 2007
[Arising out of S.L.P. (C) No. 13190 of 2006]
S.B. SINHA, J.
1. Leave granted.
2. This appeal is directed against the judgment and decree dated
5.5.2006 passed by the High Court of Madhya Pradesh, Indore Bench at
Indore in Second Appeal No. 474 of 2001 whereby and whereunder the
judgment and decree dated 16.8.2001 passed by the District Judge, Jhabua in
Civil Regular Appeal No. 4A/1999 arising out of the judgment and decree
dated 23.12.1998 passed by Civil Judge, Class-1 Jhabua in Civil Suit No. 1-
A/97, was reversed. Respondent admittedly is the owner of the premises in
suit. Appellant was a tenant under him. Respondent, however, executed a
deed of usfructuary mortgage in favour of the appellant on or about
1.10.1986, the relevant portions whereof read as under:-
"Therefore, I hereby mortgage with possession
(Kabza Girvi) the entire portion of the ground floor
of my aforesaid house for a sum of Rs. 25000/-
with you mortgagee. I the mortgagor have
received the mortgage money Rs. 25000/- from
you the mortgagee by cheque as mentioned above
and that now no mortgage money is due or payable
and possession of the ground floor of the suit
house has been delivered to you.
As the ground floor of the aforesaid house is in
possession of you the mortgagee no interest would
be payable on the aforesaid amount. You may
keep on using the ground floor in lieu of interest
and I will have no objection thereto.
I shall keep on paying the house tax and other
taxes payable in respect of the house.
The period for redemption of the ground floor of
the said house has been settled between the parties
for 10 years. Before the expiry of ten years I the
mortgagor shall not be entitled to get the ground
floor of the said house redeemed from the
mortgage held by you and the mortgagee.
After ten years on payment of the entire mortgage
money you the mortgagee shall vacate the house
and deliver it.
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In the event of failure to pay the entire mortgage
money within ten years you the mortgagee shall
have the right to get the mortgaged house
auctioned through court and to recover your entire
mortgage money due and I shall have no objection
thereto.
In case of any accident to the house you the
mortgagee shall be entitled to recover the entire
mortgage money from the open land and if the
entire mortgage money is not realized from open
land the balance amount may be realized
personally from me or from my other property and
I shall have no objection thereto.
If any person makes a claim in respect of this
house I the mortgagor shall be responsible for it.
If for any reason you the mortgagee shall be
responsible for it. If for any reason you the
mortgagee is deprived of the possession of the said
house or any portion thereof you can recover the
money paid by you with expenses personally from
me or from my other property and I shall have no
objection thereof.
I the mortgagor need money to purchase this
mortgaged house and therefore, I have obtained
money from you by cheque."
3. The said document was an unilateral one. It was, however, preceded
by an agreement of mortgage which is in the following terms:-
"2. I Smt. Sagarbai w/o Narayan Singh Solanki, I
am purchasing this house. For this purpose I am
taking Rs. 25,000/- by cheque from Shri
Tarachand Gadia towards mortgage of shop. The
registered deed being in my name I shall mortgage
the three rooms of the lower portion in which you
are running the shop at present, with you. I shall
not pay any kind of interest on Rs. 25,000/- and
shall not take rent of the shop."
4. The said document was also an unilateral one. Appellant admittedly
gave to the respondent the aforementioned sum of Rs. 25,000/-. It is also not
in dispute that no rent was demanded or paid to the respondent by the
appellant since execution of the said Deed of Mortgage. On expiry of 10
years from the date of mortgage, a notice was issued for redemption of
mortgage and delivery of possession.
5. As the demand contained in the said notice was not acceded to, a suit
for redemption of the mortgage was filed by the respondent.
6. The issues framed in the said suit are:-
1
Whether the plaintiff mortgaged the disputed house on 1.10.86
to the defendant for a period of 10 years by a registered
document?
2.
Whether the plaintiff has right to get the disputed property
redeemed from mortgage? If so what is the effect of the same?
3.
Whether inspite of the fact that plaintiff is ready and wiling to
redeem the mortgage and due to not handing over the
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possession of disputed house by defendant whether plaintiff is
entitled for damages @ Rs. 1500/- per month?
4
Whether the plaintiff has not impleaded the necessary parties
in present suit.
5.
Whether the defendant took possession of the disputed house
for 10 years after paying Rs. 25000/- to Mangilal Solanki in
lieu of the rent to be paid?
6.
Relief and cost
7. No issue, thus, was framed in regard to the purported right of the
appellant to continue in the suit premises as a tenant. The learned Trial
Judge, however, dismissed the suit holding that the respondent being a
landlord can obtain possession of the premises in question, only in terms of
the provisions of the M.P. Accommodation Control Act, 1961 (1961 Act).
An appeal preferred thereagainst was dismissed.
8. The High Court, however, by reason of the impugned judgment
allowed the second appeal preferred by the respondent herein.
9. Mr. S.K. Gambhir, learned senior counsel appearing on behalf of the
appellant would submit that the Deed of Mortgage being an unilateral one
and the same not having been signed by the mortgagee, the relationship
between the parties continued to be governed by the 1961 Act. It was
submitted that in any event, only because a deed of mortgage was executed,
the same would not amount to surrender of the tenancy rights. It was
furthermore, contended that a merger of the lease into the mortgage shall not
be readily inferred. Learned counsel submitted that in any view of the
matter, the terms and conditions in the agreement for mortgage as also the
deed of mortgage are inconsistent, a suit for redemption was not
maintainable.
10. Mr. K. Radhakrishnan, learned senior counsel appearing on behalf of
the respondent, on the other hand, would submit
(i) There being a personal covenant contained in the deed of mortgage
and having regard to Section 59 of the Transfer of Property Act execution of
an unilateral mortgage deed was permissible in law.
(ii) The Deed of Mortgage read as a whole clearly established that there was
a personal covenant to give up vacant possession on the expiry of the period
of 10 years
(iii) The termination of tenancy by implied surrender is permissible in terms
of Section 111(f) of the Transfer of Property Act (The said Act).
11. A transaction of mortgage is governed by the provisions of the said
Act. The Deed of Mortgage dated 1.10.1986 was a registered document. In
terms of Section 59 of the said Act, a mortgage can be effected by a
registered instrument signed by the mortgagor and attested by at least two
witnesses. Requirements of Section 59, therefore, stood fulfilled in the
instant case.
12. Section 62 of the said Act provides for the right of an usufructuary
mortgagor to recover possession; clause (b) whereof reads as under:-
"Section 62(b) :- Where the mortgagee is authorized to
pay himself from such rents and profits or any part
thereof a part only of the mortgage-money, when the
term (if any) prescribed for the payment of the
mortgage-money has expired and the mortgagor pays or
tenders to the mortgagee the mortgage-money or the
balance thereof or deposits it in court as hereinafter
provided."
13. Indisputably, the relationship of the parties were governed by the
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provisions of the 1961 Act. It contains a non-obstante clause protecting the
rights of the tenant. The right of a tenant, however, would be available
provided the tenancy continues. Once, the tenant ceases to be a tenant,
question of applicability of the said Act would not arise.
14. Whether the rights of a tenant would give way to rights of a
mortgagor would essentially depend upon the terms and conditions of the
mortgage. If the tenant surrenders the tenancy either explicitly or by
necessary implication, the terms of the deed of mortgage shall prevail.
Having surrendered the tenancy, it would not lie in the mouth of a mortgagor
to contend that as he had been a tenant, he would be entitled to the rights of
a tenant.
15. The right of a Usufructuary Mortgagor to redeem the mortgage and
recover possession is well known, and with a view to enforce the same, a
mortgagor may file a suit for redemption or may take recourse to the
summary process of deposit and notice under Section 83 of the Transfer of
Property Act.
16. A suit for redemption is essentially a suit for recovery of possession.
When a debt is satisfied out of the usufructs of the property or otherwise, the
mortgagor recovers possession on his title.
17. Profits arising out of possession of the mortgage property can be taken
by the mortgagee in lieu of interest.
18. Clause (d) of Section 58 of the said Act reads as under:-
"58(d) Usufructuary mortgage. \026 Where the
mortgagor delivers possession or expressly or by
implication binds himself to deliver possession of
the mortgaged property to the mortgagee, and
authorizes him to retain such possession until
payment of the mortgage-money, and to receive
the rents and profits accruing from the property or
any part of such rents and profits and to
appropriate the same in lieu of interest, or in
payment of the mortgage-money, or partly in lieu
of interest or partly in payment of the mortgage-
money, the transaction is called an usufructuary
mortgage and the mortgagee an usufructuary
mortgagee."
19. The case at hand comes within the purview of the said clause.
20. The Deed of Mortgage might have been preceded by an agreement,
but, when the terms are altered by a later document which is registered, the
latter would prevail. We have noticed hereinbefore the effect of Section 59
of the said Act. It is immaterial for the purpose of admissibility of the
document or otherwise, whether the mortgagee was a signatory to the Deed
of Mortgage or not. Indisputably, the deed of mortgage has been acted
upon. Appellant himself purchased the stamp paper for its execution. He
knew the terms thereof. The parties proceeded on the basis that the said
terms were binding on them. It, therefore, does not lie in the mouth of the
appellant now at this stage to contend, particularly when no such contention
had been raised before the courts below, that the same cannot be given effect
to.
21. Appellant has been allowed to use the ground floor of the premises in
question in lieu of interest, Respondent as owner of the property was to pay
the house tax and other taxes, The deed clearly stipulates the period on the
expiry whereof, the right of redemption would vest in the mortgagor. Prior
to the expiry of the said period, the respondent could not claim recovery of
possession. He could not have filed a suit for eviction under the 1961 Act
even if one of the other conditions laid down therefor were fulfilled. The
terms of tenancy was fixed. The mortgagee was to vacate the house and
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possession thereof after 10 years on payment of the entire mortgage money.
The stipulations contained in the deed do not stop there. It conferred a right
upon the mortgagee to get the house auctioned and to recover the entire
mortgage amount in the event, the amount advanced is not paid back. Other
covenants contained also clearly show the right of the appellant as a
mortgagee and not as a tenant. The stipulations contained in the mortgage
deed, therefore, are such that they would lead to an inference that the
tenancy was impliedly surrendered by the appellant.
22. Section 111(f) of the Transfer of Property Act provides for
termination of tenancy by implied surrender.
23. Such implied surrender may be either:-
(i) by creation of a new relationship or
(ii) by relinquishment of possession.
24. When the parties altered their position knowing fully well their mutual
rights and obligations under an agreement thereto existing, the rule of
estoppel shall apply. Appellant, was, thus estopped from disputing the
contents of the mortgage or the relation arising thereunder. As surrender is
founded upon estoppel, the intention of the parties may not be of much
significance.
25. Mr. Gambhir has placed strong reliance on a decision of this Court in
Nemi Chand v Onkar Lal [(1991) 3 SCC 464]. Therein the conduct of the
parties were such, which led to an inference that the right to recover rent was
kept alive by the landlord and it was only to be adjusted against interest. In
the said fact situation, this Court opined that the defendant therein continued
both as a mortgagee as also a lessee. Although the said decision is
distinguishable on facts, we may notice that therein the court failed to notice
an earlier binding precedent in Shah Mathuradas Maganlal & Co. v Nagappa
Shankarappa Malage and Others [(1976) 3 SCC 660], wherein the law was
stated in the following terms:-
"11. The deed of mortgage shows these features
indicating that there was surrender of tenancy and
the appellant was only a mortgagee. The High
Court found that there was a surrender of tenancy
right. No particular form of words is essential to
make a valid surrender. A surrender may be oral. A
surrender may be express although delivery of
possession is necessary for surrender in the facts and
circumstances of a given case. In the present case,
delivery of possession was immediately followed by
a redelivery of possession of the appellant as
mortgagee. The mortgage deed establishes beyond
doubt that the effect of the deed was inconsistent
with the continuance or subsistence of the lease
because the parties themselves stipulated that the
lease was to exist only upto November 6, 1953. On
the redemption of the mortgage the respondent had a
right to recover possession both on the terms of the
mortgage deed and under Section 62 of the Transfer
of Property Act."
26. Although technically a tenant may continue to occupy the premises,
once the nature of possession changes resulting in change in his status,
which he accepts, the same may amount to virtual taking of possession.
27. In any event, virtual taking of possession is not a sine quo non for
implied surrender as the same can be created by a new relationship also. In
Nemi Chand (supra) this aspect of the matter has not been considered.
28. In Nirmal Chandra v Vimal Chand [(2001) 5 SCC 51], whereupon
again Mr. Gambhir placed strong reliance, this Court proceeded on the basis
that where the right to receive rent is kept alive, the same would run contrary
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to the intention or conduct of the parties leading to an inference of surrender
of lease. It was held that condition No. 4 contained in the deed of mortgage
was contrary to condition No. 1 thereof and in that situation it was opined;
"9. ..... This condition nowhere speaks of surrender of
tenancy by the lessee. It only provides that for at
least three years the shop will be in personal use of the
landlord failing which there would be revival of the
mortgagee’s capacity as a tenant. Such a condition
cannot be said to be a clear intention of surrendering
the lease rights in the property. Whatever little effect
Condition 4 if at all may have, is negated by
Condition 1 which kept the rent alive and the element
of tenancy pervading throughout the period of
mortgage."
29. We may, however, notice that in Gambangi Applaswamy Naidu and
Others v Behara Venkataramanayya Patro and Others [(1984) 4 SCC 382],
an implied surrender was not inferred in the fact situation obtaining therein.
30. On the terms and conditions of the lease deed, in question, which was
noticed by this Court, it was observed;
"....It may be noted that the last portion of the document
is equivocal in that it does not mention whether on
redemption physical possession is to be delivered or
symbolical possession is to be delivered to the
mortgagor. But under the terms of the deed one thing is
clear that during the currency of the mortgage the
liability to pay rent to the lessor-mortgagor (albeit to be
discharged by adjustment) is kept alive. If anything
such a term clearly runs counter to any implied
surrender of the lessee’s rights. Secondly, there is no
term fixed for redemption of mortgage property which
means that it was open to the mortgagor to redeem the
mortgage at any time that is to say even within a very
short time and if that be so, would a sitting tenant
cultivating the lands under a lease, who has obliged his
lessor by advancing monies to him to tide over his
financial difficulties give up his rights as a lessee no
sooner redemption takes place? In our view, it does
not stand to reason that he would do so. This
circumstance coupled with a fact that the mortgage
deed keeps alive the lessee’s liability to pay rent during
the currency of the mortgage clearly suggests that no
implied surrender was intended by the parties."
31. In a case, therefore, where the term is fixed for redemption of
mortgaged property, if the lessee’s liability to pay rent is not kept alive, a
contrary inference is permissible to be drawn.
32. The matter appears to be now covered in Polammarasetti Varana
Venka Satyanarayana v Suddha Apparao Naidu (Dead) and Others [(1997)
9 SCC 244], wherein law has been laid down in the following terms;
"4. We have taken into consideration the mortgage
deed executed in 1946. In our view, a clear
intention of only retaining the mortgagee’s interest
is to be inferred in view of the specific statement
that on redemption, the mortgagee should deliver
possession to the mortgagor. We may indicate that
the expression to that effect used in the mortgage
deed has been noted by the courts below. We may
also indicate that there is no indication in the
mortgage deed as to how the rent payable by the
mortgagee qua lessee was to be adjusted between
the parties. The absence of any mode of adjustment
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of leasehold rent implies that it was not intended that
despite the said mortgage, parties intended that the
leasehold interest was to continue. It may also be
indicated here that leasehold interest was to expire
in 1948. In the absence of any payment of rent for
such leasehold interest and acceptance of such
payment after expiring of the period of lease it
cannot also be contended that there was a case of
holding over by the lessee. In the aforesaid
circumstances, the finding by the courts below that
the leasehold interest had come to an end and the
plaintiff was entitled to the redemption of the
mortgage and to take delivery of the properties
under this mortgage deed cannot be held to be unjust
or improper. We, therefore, do not find any reason
to interfere with the impugned judgment of the High
Court. The appeal, therefore, fails and is dismissed.
No costs."
33. In this case also, there is a clear intention on the part of the mortgagee
only to retain his interest in that capacity and not as a tenant. The parties
altered their position, A new relationship was created. It was acted upon and
in that view of the matter, we are of the opinion that the High Court was
correct in its view. There is, thus, no merit in this appeal which is dismissed
accordingly with costs. Counsel fee assessed at Rs. 10,000/-.