Full Judgment Text
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PETITIONER:
SAMBANGI APPLASWAMY NAIDU & OTHERS
Vs.
RESPONDENT:
BEHARA VENKATARAMANAYYA PATRO AND OTHERS
DATE OF JUDGMENT28/08/1984
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
THAKKAR, M.P. (J)
CITATION:
1984 AIR 1728 1985 SCR (1) 651
1984 SCC (4) 382 1984 SCALE (2)261
CITATOR INFO :
F 1991 SC2046 (6)
ACT:
Landlord and tenant relationship-Whether upon
redemption of usufructuary mortgage a tenant mortgage could
be directed to deliver the actual and physical possession of
the mortgaged property to the lessor-Mortgagor-Merger of a
lease and a mortgage in respect of the same property,
whether there can be-Transfer of property Act, 1882 Sections
58, 101 and 105-Interpretation of deeds.
HEADNOTE:
Respondents, predecessor Behara Venkataramanayya Patro
executed two deeds dated 30-8-1939 and 25-8-1942 in favour
of one Sambangi Thavitinaidue, who was then a sitting tenant
of the property. In 1951 the mortgagor filed a suit for
redemption of the mortgages and obtained a preliminary
decree on 31-12-1952. Subsequently, the mortgagor died and
the present respondents were brought on record as his legal
representatives. On 21-10-1963 the respondent filed an
application for passing a final decree by way of
ascertainment of the amount due and for delivery of
possession upon deposit of entire dues so ascertained. The
application was resisted by the appellants on several
grounds. According to them, on redemption, relationship of
landlord and tenant would revive which needed to be
protected and the delivery should be of symbolical
possession only. The learned trial judge allowed the
application but on an appeal preferred, the Additional
District Judge Srikakulam took a contrary view relying upon
Varada Bangar Raju’s case AIR (1965) A.P. 86 The
respondents, therefore, preferred a second appeal and the
learned Single Judge of the A.P. High Court relying upon a
subsequent decision in P. Satyanarayana’s case ILR (1967)
A.P. 1341 set aside the decision of the first Appellate
Court. Letters Patent Appeal preferred by the tenant
mortgagees to the Division Bench of the High Court failed
and hence this appeal by Special Leave to this Court.
Allowing the appeal, the Court
^
HELD:1: 1 There can be no merger of a lease and a
mortgage, even where the two transactions are in respect of
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the same property. [655C]
1:2 It is well-settled that for a merger to arise, it
is necessary that lesser estate and a higher estate should
merge in one person at one and the same time and in the same
right and no interest in the property should remain
652
outstanding. In the case of a lease, the estate that is
outstanding in the lessor is the reversion, in the case of a
mortgage, the estate that is outstanding is the equity of
redemption of the mortgagor. Accordingly, there cannot be a
merger of a lease and a mortgage in respect of the same
property since neither of them is a higher or lesser estate
than the other. Even, if the rights of the lessee and the
rights of the mortgagee in respect of a property were to be
united in one person the reversion in regard to the lease
and the equity of redemption in regard to the mortgage,
would be outstanding in the owner of the property and
accordingly, there would not be a complete fusion of all the
rights of ownership in one person. [655D-F]
Shah Mathurdas Maganial & Co, v. Naogappa Shankarappa &
ors A.I.R 1976 S. C. 1565 followed. Narayana Dogra Shetty
v. Ramchandra Shivram Hingne 65 Bom L.R. 449, approved.
2. Whether upon redemption of usufructuary mortgage a
tenant mortgagee could be directed to deliver actual or
physical possession of the mortgaged property to the lessor
mortgagor and whether the original relationship of landlord
and tenant would revive upon redemption of usufructuary
mortgage by a tenant mortgagee in possession of the
mortgaged property by delivering possession to the lessor
mortgagor, will depend upon whether there was an implied
surrender of the lessee’s right when the usufructuary
mortgage was executed which in turn depends upon what was
the intention of the parties at the time of the execution of
the mortgage deed in favour of the sitting tenant to be
gathered from the terms of and conditions of the mortgage
transaction in light of the surrounding circumstance of the
case. [656C-D 655G-H; 656A]
2:2 In the instant case, the only effect of the
execution of usufractutary mortgage deeds was that the
lessee’s right were kept in abeyance and they revive upon
redemption of the mortgage. [658E]
The mortgage deed does not mention whether on
redemption physical possession is, to be delivered or
symbolical possession is to be delivered to the mortgagor.
[657H]
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 any thing such a term clearly
runs counter to any implied surrender of the lessee’s right.
There is no term fixed for redemption of mortgage property
which mean that it was open to the mortgagor to redeem the
mortgagor at any time that is to say even within a very
short time and if that be so 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 would not give up his right as a lessee no
sooner redemption takes place, 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.
653
JUDGMENT:
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1339 of
1977.
Appeal by Special leave from the Judgment and order
dated the 16th September, 1976 of the Andhra Pradesh High
Court in L.P.A., No. 199 of 1975.
K. Ram Kumar for the Appellant.
A. V. Rangam for the Respondent.
The Judgement of the Court was delivered by
TULZAPURKAR, J. The short question involved in this
appeal is whether upon redemption of a usufructuary
mortagage a tenant-mortgagee could be directed to deliver
actual or physical possession of the mortgaged property to
the lessor mortgagor? By reason of the grant of a limited
special leave the appeal has been confined to that question.
Facts relevant to the question may be stated: One
Behara Audinarayana Patro, the original owner of suit
property executed two usufructuary mortgage deeds dated
30.8.1939 and 25.8.1942 in favour of the first defendant
Sambangi Thavitinaidu, who was then a sitting tenant of that
property. In 1951 the mortgagor filed a suit for redemption
of the mortgages and obtained a preliminary decree on
31.12.1952. Subsequently, the mortgagor died and the
respondents were brought on record as his legal
representatives. On 21.10.1963 the respondents filed an
application for passing a final decree by way of
ascertainment of the amount due and for delivery of
possession upon deposit of entire dues so ascertained. The
application was resisted by the first defendant and other
defendants (the appellants before us) on several grounds.
Inter alia the appellants contended that even after
depositing the entire amount found due to them no decree
directing delivery of actual or physical possession in
favour of the respondents should be passed but delivery of
symbolical possession alone should be ordered insomuch as
the appellants’ possession of the suit property as a tenant
or lessee could not be disturbed. In other words, the
appellants contended that on redemption the original
relationship of landlord and tenant would revive which
needed to be protected. The learned District Munsif,
Parvatipuram took the view that the relationship
654
of landlord and tenant had ceased to subsist after the
mortgages came into existence, that the mortgage-bonds did
not provide that the said relationship would be restored or
revived upon redemption and that therefore the respondents
were entitled to delivery of physical possession upon their
depositing the entire dues payable to the appellants. The
tenant-mortagees (the defendants) preferred an appeal
against the order of the learned District Munsif and the
learned Additional District Judge Srikakulam who heard the
appeal took the contrary view relying upon a decision of
Andhra Pradesh High Court in Varada Bangar Raju v. Kirthali
Avatharam & others and held that the defendants-mortgagees
were sitting tenants of the mortgaged property at the time
of the execution of the mortgage deeds, that there was
nothing in those deeds to suggest that their rights as
lessees were extinguished either by merger or implied
surrender, that the landlord-tenant relationship continued
to exist after termination of mortgagor-mortgagee
relationship and therefore the respondents were not entitled
to delivery of physical possession; he, therefore, allowed
the appeal.
The respondents preferred a second appeal to the Andhra
Pradesh High Court and the learned Single Judge relying upon
a subsequent decision in P. Satyanarayana v. Janardhan
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Chetty which had distinguished the earlier decision,
reversed the view of the learned Addl. District Judge and
restored the decree passed by the District Munsif. The
learned Judge took the view that the question whether the
relationship of landlord and tenant would subsist even after
the execution of the usufructuary mortgage depended upon the
intention of the parties to be gathered from the terms of
the mortgage transaction and held that on the terms of
mortgage-deeds there was no doubt that the landlord-tenant
relationship had ceased to exist after the relationship of
mortgagor and mortgagee came into existence and the mortgage
bonds had not specifically provided that the landlord and
tenant relationship would be restored after the redemption
of the mortgages. A Letters Patent Appeal preferred by the
tenant-mortgagees to the Division Bench of the High Court
failed and hence this appeal to this Court.
Counsel for the appellants urged upon us to accept the
view taken by the learned District Judge that the two
transactions
655
namely a lease and a usufructuary mortgage could co-exist
and there was nothing in the two mortgage deeds to suggest
that the appellants’ rights as lessee were extinguished
either by merger or by implied surrender and in that behalf
strong reliance was placed upon the earlier decision of the
Andhra Pradesh High Court in Varada Bangar Raju’s ease
(supra), while counsel for the respondents contended that
the High Court, both in second appeal as well as Letters
Patent Appeal, was right in restoring the learned District
Munsif’s decision by relying upon the later decision in P.
Satyanarayana’s case (supra) and prayed for dismissal of
this appeal.
In our view there can be no merger of a lease and a
mortgage, even where the two transactions are in respect of
the same property. It is well-settled that for a merger to
arise, it is necessary that lesser estate and a higher
estate should merge in one person at one and the same time
and in the same right and no interest in the property should
remain outstanding. In the case of a lease, the estate that
is outstanding in the lessor is the reversion; in the case
of a mortgage, the estate that is outstanding is the equity
of redemption of the mortgagor. Accordingly, there cannot be
a merger of a lease and a mortgage in respect of the same
property since neither of them is a higher or lesser estate
than the other. Even, if the rights of the lessee and the
rights of the mortgagee in respect of a property were to be
united in one person the reversion in regard to the lease
and the equity of redemption in regard to the mortgage,
would be outstanding in the owner of the property and
accordingly, there would not be a complete fusion of all the
rights of ownership in one person. This position in law as
explained by the Bombay High Court in Narayana Dogra Shetty
v. Ramchandra Shivram Hingne, has been fully approved by
this Court in Shah Mathuradas Maganlal & Co. v. Nagappa
Shankarappa & Ors.
In our view the answer to the question raised in this
appeal must depend upon whether there was an implied
surrender of the lessee’s rights when the usufructuary
mortgage was executed in his favour by the lessor-mortgagor.
And this obviously depends upon what was the intention of
the parties at the time of the execution
656
of the mortgage deed in favour of the sitting tenant to be
gathered from the terms and conditions of the mortgage
transaction in light of the surrounding circumstances of the
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case. It may be stated that in both the decisions of the
Andhra Pradesh High Court on which reliance was placed by
the respective counsel of the parties in support of his own
contention the question was ultimately decided on proper
construction of the terms and conditions of the mortgage
transactions; in the earlier decision the court took the
view that there was nothing in the mortgage deed to suggest
that there was an implied surrender of the lessee’s rights
while in the later case the court held that the terms of the
mortgage deed showed that the lessee had impliedly
surrendered his rights. In other words, it all depends upon
whether by executing a possessory or usufructuary mortgage
in favour of a sitting tenant the parties intended that
there should be a surrender of lessee’s rights or not, and
only if an implied surrender of lessee’s rights could be
inferred then the mortgagor would be entitled to have
delivery of physical possession upon redemption but not
otherwise.
In the instant case the earlier usufructuary mortgage
deed of 1939 is not on record before us but the parties have
produced a copy of Exhibit A-3 which is the later
usufructuary mortgage deed dated 23.8.1942, the terms
thereof are required to be construed. It runs thus:
Exhibit A-3
"Deed of mortgage of land accompanied by delivery
of possession of land for Rs. 250 (in words two hundred
and fifty rupees) executed on 23rd August, 1942 in
favour of Sambangi Taviti Naidu, son of late Jogi
Naidu’ of Koppula Velama Caste, living by cultivation,
resident of Dathivalasa village, hamlet of
Tummalavalasa of Parvatipuram Sub District by Behara
Adinarayana Patro, son of late Behera Narayana Patro
Sista Karnam, Inamdar resident of Markonduputti village
of the same Sub District.
The amount of principal and interest due on the
promissory note executed by me in your favour
previously on 24th April, 1940 for my necessity, the
amount paid by you on my behalf to the Estate towards
the cist etc., due on this land and the amounts
borrowed from you by
657
me in instalments subsequent thereto-all those amounts
are found to be Rs. 200 and I have found due to you in
this sum. The amount borrowed now for paying the cist
to the Estate and for my own maintenance is Rs. 50. In
all, Rs. 250 (in words two hundred and fifty rupees). I
shall pay interest at the rate of Rs. 0-4-0 (four anna)
per cent per mensum and shall discharge the principal
and interest. For this, the produce of all kinds of
crops raised on the half share of the lands previously
being cultivated by you as my sub-tenant on condition
of paying 1/4 (?) share out of the Jarayathi dry and
wet lands bearing No. 1 and know as "Tummulamanu Polam"
which passed to me as my self-acquired property, which
has been in my possession and enjoyment till this day,
which is situate in Tummalavalasa village and the
boundaries etc. of which are given hereunder, shall be
utilised for paying interest due on this deed and the
interest due on the deed executed previously on 30th
August, 1939 and get registered in the office of the
Sub Registrar of Parvatipuram as No. 1148/39 and for
paying the cist due to the Govt. on my behalf and
obtaining receipt in my name. The remaining amount
shall be paid to me by 15th January of every year and
the receipt obtained from me. When the above mentioned
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principal and interest are paid to you in full, payment
shall be endorsed on this deed and this deed shall be
returned and the land mentioned herein shall be
delivered possession of to me."
Three or four things become amply clear on a fair
reading of the aforesaid document (1) that though the deed
commences by reciting that possession of the land has been
delivered thereunder it refers to the fact that the original
mortgage (Ist defendant) was actually cultivating the lands
as a tenant of the mortgagor on crop share basis; that is to
say the rental was payable by the tenant in the shape of a
crop share; (2) that the mortgagor had agreed to pay
interest at the specified rate on the total loan of Rs. 250
and had undertaken to discharge the principal and interest;
(3) that the rental of the land payable by the Ist defendant
was to be adjusted against the interest payable by the
mortgagor under this deed as well as the earlier deed and
the cist payable by him to the Government; and excess, if
any, to be paid to mortgagor; (4) that when the principal
and interest are fully repaid such payment was to be
endorsed on this deed and the deed as also the land shall be
"delivered to the
658
possession of mortgagor". 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.
In the result, we are of the view that the only effect
of the execution of usufructuary mortgage deeds in this case
was that the lessee’s rights were kept in abeyance and they
revived upon the redemption of mortgage. We therefore, allow
the appeal, set aside the impugned judgments of the High
Court and restore the direction given by the learned
Additional District Judge that the respondents are not
entitled to delivery of physical possession. Respondents
will pay the cost of the appeal to the appellants.
S.R. Appeal allowed.
659