PUZHAKKAL KUTTAPPU vs. C. BHARGAVI AND OTHERS

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6 PETITIONER: PUZHAKKAL KUTTAPPU Vs. RESPONDENT: C. BHARGAVI AND OTHERS DATE OF JUDGMENT22/09/1976 BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. CHANDRACHUD, Y.V. GUPTA, A.C. CITATION: 1977 AIR 105 1977 SCR (1) 696 1977 SCC (1) 17 ACT: Interpretation--Document whether mortgage or lease deed--Tests for determination of. HEADNOTE: By a registered deed described as "otti deed" the otti right in a piece of land had been transferred in 1894 to the predecessors-in-interest of the appellant and of the re- spondents by the janmi for a period of 72 years for a cer- tain consideration. The document recited various debts in respect of wet lands. the debt owed by the executants and cash received from the transferee on that date. Possession of the land was made over to the transferee giving him the right to enjoy the land. The other terms of the deed were that the transferee was required to appropriate the income of the property to the interest on the amount advanced, to pay land revenue; and a fixed amount to be paid by the transferee to the transferor annually as "purappad", that is, the net produce or net rent payable to the janmi after deducting interest on advances made by the tenant and the Government tax. In 1949 the appellant and the respondents divided the property among themselves by metes and hounds and in 1967 the appellant purchased Janman rights in the entire land from the transferors for a small sum including the otti debt with a view to become the owner and therefore a mortgagor and thus get compensation with respect to the 3/4th share also. When the land was acquired by the Govern- ment the appellant claimed the entire compensation, while the respondents contended that the otti deed wan really a lease deed and that as tenants in possession of the land they would be entitled to the entire compensation under the Kerala Land Reforms Act, 1963. The trial court held that the document was a mortgage while the High Court held it to be a lease. Dismissing the appeal to this Court, HELD: (1)(a) When there are some mixed elements in an instrument disclosing features of mortgage as well as of lease. the Court will have to find out the predominant intention of the parties executing the document viewed from the essential aspect of the reality of the transaction. [701 A] http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6 (b) In construing a document it is always necessary to find the intention of the party executing it. The intention has to be gathered from the recitals and the terms in the entire document and from the surrounding circumstances and how the parties or even their representatives-in-interest treated the deed in question. The nomenclature given to a document by the scribe or even by the parties is not always conclusive. The word ’otti’, used in the document, is not, therefore, of much consequence. [698 F] In the instant case the document taken as a whole lacks the most essential ingredient of a mortgage, namely, that the transfer of the property has to be made as a security for the debt. The document stated that fixed rent was to be paid annually in addition to the Government revenue which the transferee was required to pay. This feature of payment of rent tilts the balance in favour of construing the docu- ment as a lease, coupled with the fact that the essence of a mortgage being the transfer of immovable property as securi- ty for the debt is absent. There is no right to sell the property in ease the debt is not repaid. There is nothing to show that the enjoyment of the usufract was intended to wive out the debt in the long period of occupation. While there was arrangement to pay a fixed annual "purappad" to the transferor, such a sum was not 697 intended to be utilised towards reduction of the principal debt. There is sufficient force in the contention of the respondents that the transferors themselves treated this document as a lease, for else, it could not be explained why they would have parted with their Janmam right of the entire property inclusive of the otti debt if they themselves regarded this document as an instrument of mortgage. (2) The High Court was, however, wrong in holding that where the document was of a composite character disclosing features of both mortgage and lease it must be taken as a lease. [700 H] Later Full Bench decision in Velayudhan Vivekanandan v. Ayyappan Sadasivan, I.L.R. [1975] 1 Kerala 166, approved. JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1815 1975. (Appeal by Special Leave from the Judgment and Order dated 22-8-74 of the Kerala High Court in Appeal Suit No. 165/71). T.C. Raghavan, N. Sudhakaran and K. Rewal Kumar, for the Appellant. T.S. Krishnamurthy Iyer, T. Rajandra Choudhury and Mrs. V.D. Khanna, for the Respondents. The Judgment of the Court was delivered by GOSWAMI, J. This appeal by special leave is directed against the judgment of the Kerala High Court out of a proceeding for opportionment of compensation under the Land Acquisition Act. Certain property measuring 2 acres 21 cents in R.S. 299/1 of Chevayur village was acquired by the Government. The compensation which was awarded was a sum of Rs. 2859.88 including the solatium. There were five claimants clamour- ing for the compensation. While the first claimant (herein- after to be described as the appellant) claimed the entire compensation after making allowance for a small sum of Rs. 437.50 in favour of the claimants 2to 4 (hereinafter to be described as the respondents) the latter, on the other http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6 hand, claimed the entire amount minus a sum of Rs. 350/- which, according to them, was the entitlement of the appel- lant. The acquired property originally belonged in janman (freehold right) to one Vakeri Thannanone Raman Nair. After his death the same was inherited by his heirs and legal representatives. They assigned their Janmam right on Janu- ary 14, 1967. in favour of the appellant. Based on such a right the appellant is now claiming the aforementioned compensation. The earlier history of the property shows that the ’otti’ right in the land had been transferred to the Prede- cessors-in-interest of the appellant and to those of the respondents by the daughter of Vakeri Thannanone Raman Nair and other heirs by a registered document of December 30, 1894, for a consideration of Rs. 650/-. The document is marked as Ex. A-2. The entire controversy between 698 the parties will turn on the construction of the above deed (Ex. A-2) as to whether it is a mortgage fir a lease. Although, prior to the assignment of the Janman right in favour of the appellant the parties, naturally, would have been sailing on the same boat as to theft status under’ the deed, the acquisition of Janmam right by the appellant in 1967 gave, him an opportunity to part company with the respondents and to claim almost the entire compensation to the deprivation of the respondents on the acquisition of the larger estate into which the lesser estate had merged. The respondents, therefore, threw down their gauntlet taking the position that the document Ex. A-2 evidenced a transaction of lease and they acquired tenant rights in the land. If they succeed in this: plea, they will be entitled to almost the entire amount of compensation under the Kerala Land Reforms Act 1963 (Act 1 of 1964) and the appellant even with the Janmam right will only get a pittance. It may be noted that the appellant, had already got his 14th share of the otti right by partition some time in 1936 and there was a partition suit in 1949 when the appellant and the respondents divided this property by metes and bounds in the course of execution of a partition decree in O.S. 32 of 1949. We are required to construe the deed executed in the year 1894. The deed was not drafted by a lawyer conversant with the legal implications of a mortgage or a lease but by a bond-writer as perhaps was the usual practice in the fall of the last century and continuing even upto the present times. The deed was written in Malayalam and we have an agreed translation of the document before us. The learned Judge of the High Court being conversant with the language was natu- rally in a better position to appreciate the significance in the original document placed side by side with the translat- ed exhibit. In construing a document like the one before us it is always necessary to find the intention of the party execut- ing it. The intention has to be gathered from the recitals and the terms in the entire document and from the surround- ing circumstances. How the parties or even their represen- tatives-in-interest treated the deed in question may also be relevant. It is also well settled that the nomenclature given to a document by the scribe or even by the parties is not always conclusive. The word "otti", as such, used in the document, is not, therefore, of much consequence. Before we proceed further we may turn to the contents in the document. The deed is described as an "otti deed" executed by Nani Amma, Janmam holder and manager and several other co-sharers in favour of Kesavan http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6 Nambudiri. Next the document recites the various debts including the kanom of Rs. 100/- in respect of seven items of nilams (wet lands). The debt owed by the executants on that date was Rs. 650/- covering all the outstanding dues upto that date and Rs. 8910 cash received on that date from the transferee. Having recited the consideration in the deed as above the document concludes as follows :- The "Mambakkad paramba (dry land). described in the Schedule under, belonging to us in jenm (absolute) 699 right, with all the improvements therein has been demised and given to your possession for a period of 72 years, you may enjoy the paramba (dry land) with all the improvements on otti right and after adjusting the interest on otti consideration pay the purappad Rs. 3155 fixed to be paid annually and also pay the revenue in our jema and obtain receipt therefor. On the expiry of the said period, when the otti amount is paid and the otti is redeemed, we shall pay the value of improvements then found and fixed. We hereby assure you that to our knowledge and belief there is no other charge or liability on this property". Apart from the document neither party adduced any evidence before the court. From the contents of the docu- ment it is clear that the consideration was predominantly past debt and only a small sum of cash was received on the date of its execution. Possession of the land was made over to the transferee giving him the right to "enjoy" the land. The transferee was required to appropriate the income of the property to the interest on the amount ad- vanced. The transferee was also to pay the land revenue to the credit of the transferor. A fixed amount of Rs. 3155 was to be paid by the transfered to the transferor annually as "purappad". This word "purappad" means "the net produce or net rent payable to the janmi after deducting interest on advances made by the tenant and the Government tax*". The debt of Rs. 650/- will remain unpaid even after the expiry of 72 years when the said otti amount has to be repaid. There is also an indication in the recitals that the proper- ty will return to the transferor who "shall pay the value of improvements then found and fixed". The is nothing in the recitals to show that the land was given as security for the amount of loan. There is no right of sale of the land delivered to the transferee in case the debt is not dis- charged. On the other hand, there is a clear recital about the payment of annual rent by the transferee to the trans- feror. The trial court held the document to be a mortgage whereas the High Court held it to be a lease. It is enough to point out that the trial court was wrong in holding that the transferee was to utilise the amount of Rs. 3-15-5 for paying the land revenue. On the other hand, the document stated that this amount of fixed rent was to be paid annual- ly in addition to the Government revenue which the transfer- ee was required to pay. This feature of payment of rent, in this case, flits the balance in favour of construing the document as a lease, coupled with the fact that the essence of a mortgage being the transfer of immovable property as security for the debt is conspicuous by its absence in the detailed enumeration of the terms. Further, as stated earli- er, there is no right to sell the property in case the debt is not repaid. There is also nothing to show that the enjoyment of the usufruct was intended to wipe out the debt in the long period of occupation. We find that after the expiry of the period of 72 years mentioned in the document the appellant purchased the Janmam http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6 right of the * Aiyar’s Law Lexicon of British India, 1940, page 1050. 13-- 1234SCI/76 700 entire property in 1967 for a sum of Rs. 1000/- which in- cluded the sum of Rs. 650/- which was the consideration in Ex. A-2. The Kerala Land Reforms Act, 1963 (Act 1 of 1964) had already been passed, by then. It would, therefore, appear crystal clear that whoever be the janmi would be able to get only an infinitesimal sum of compensation for the property acquired and the major share, would go to the tenants in possession under the aforesaid Act. It is not disputed that the appellant got his 1/4th share of compensa- tion of the acquired property in terms of the earlier parti- tion to which we have already adverted. It was therefore, a clever act1 on the’ part of the appellant to manage to the Janmam right of the transferor in the year 1967, when per- haps the proposal for acquisition of the land had already been in the air, in order that he was able to claim the remaining 3/4th share of compensation to which he would otherwise be not entitled except to an insignificant extent. The transferors, themselves, would be in no better position after the Kerala Land Reforms Act. When, therefore, the appellant offered to the transferors some money which the latter would not otherwise have obtained, in view of the provisions of law, the assignment of the Japnam right was made in favour of the appellant. The transferors thus walked out of the field leaving the future contest amongst the transferees out of whom the appellant came to be the Janmi. It is apparent that after the partition the appel- lant would not stand to gain with regard to the 3/4th share of the property, which is in dispute, by accepting the document ,rs a lease since the respondents are the transfer- ees in possession of this particular property. The appel- lant, therefore had cast his lot in a gamble by purchasing the Janmam right from the transferors in 1967. There is sufficient force in the contention of the respondents that the transferors themselves treated this document as a lease for else it cannot be explained why they would have parted with their Janmam right of the entire property for Rs.1000/-, inclusive of the otti debt, if they themselves had regarded this document as an instrument of mortgage. There is another significant feature that while there was arrangement to pay a fixed annual "purappad" to the transferor, such a sum was not intended to be utilised towards reduction of the principal debt. It is, therefore, not possible to say that the High Court is wrong in holding that the consideration of Rs. 650/- in the deed was intended as a premium for the lease. There is also no evidence whatsoever to indicate as to what the price of the land was to determine the proportion between the amount advanced and the value of the property. The document taken as a whole lacks the most essential ingredient of a mortgage, namely, that the transfer of the property has to be made as a secu- rity for the debt. The High Court has also noted that since the document was of a composite character disclosing features of both mortgage and lease it must be taken as a lease. We do not think that the High Court is correct in this view. Indeed the High Court in a later Full Bench. decision has not accepted this view. (See Velayudhan Vivekanandan v. Ayyap- pan Sadasivan). (1) (1) I.L.R. [1975] 1 Kerala 166. 701 We are of opinion that when there are some mixed ele- http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6 ments in an instrument disclosing features of mortgage as well as of lease, the court will have to find out the pre- dominant intention of the parties executing the document viewed from the essential aspect of the reality of the transaction. Human transactions cannot be tied to textual defini- tions. They have to respond to variable requirements under different situations and often to the dictates of the party at an advantage in the bargain. Mortgages are not always simple, English, or usufructuary or such other types as defined in the Transfer of Property Act. They are anomalous too and sometimes more anomalous than what is defined in the said Act. Even so, there is one most essential feature in a mortgage which is absent in a lease, that is, that the property transferred is a security for the repayment of debt in a mortgage whereas in a lease it is a transfer of a right to enjoy the property. We have seen that this essential feature of a mortgage is missing in the document in ques- tion. We are, therefore, unable to come to the conclusion that it is a mortgage and not a lease. In view of the foregoing discussion, we are not able to hold that the High Court is not right in holding that the document in question is a lease and not a mortgage. In the result the appeal is dismissed. We will, however, make no order as to costs. P.B.R. Appeal dis- missed. 702