1. This appeal has been fully argued before me by the learned Advocates for both the parties. The facts which are necessary to be set out for understanding the position of this appeal may be shortly stated as follows:
2. The suit was a suit for redemption of a mortgage. The mortgage in question came into existence sometime in the year 1894. One of the points in dispute between the parties before me is whether or not the said mortgage on its true construction, is a simple mortgage or a usufructuary mortgage. Before the said mortgage was executed the mortgagees were already in possession of the property in question by virtue of a lease executed by the mortgagors in their favour.
The mortgage deed in question was executed during the continuance of the said lease and by the terms of the said mortgage deed the mortgagees were entitled to appropriate the rent which was payable to the mortgagors under the said lease towards interest due on the said mortgage. The lease thereafter came to an end. I should mention that on this point namely, whether or not the lease came to an end, there is some dispute amongst the parties before me in this appeal.
However, both the Courts below proceeded on the footing that the lease had come to an end. In spite of the fact that the lease had come to an end the mortgagees continued to be in possession of the mortgaged property. The present suit has been filed by the mortgagors -- rather the representatives of the original mortgagors -- for redemption of the mortgage. The suit was filed on the basis that the mortgagors were entitled to redemption of the mortgage and get back the possession of the mortgaged property.
The first Court passed a decree for redemption but not for possession. The lower Appellate Court reversed the said decision and held that the plaintiffs were entitled also to possession of the mortgaged property. The present appeal has been filed by the mortgagees against the said decision of the lower Appellate Court.
3. Sri Krishnamurthi, appearing on behalf of the Appellant raised several grounds in support of this appeal. In the first place, he contended -- this perhaps was his principal contention in this appeal -- that the mortgage in question was nothing more than a simple mortgage and not a usufructuary mortgage. If that is so, then according to him the plain-tin's were only entitled to a decree for redemption and not entitled to a decree for possession.
He argued before me, and I must confess that there is considerable force in that argument, that the possession which the mortgagees retained even after the termination of the lease cannot be said to be a possession as contemplated in Section 58 of the Transfer of Property Act, that is to say, it cannot be said to be the possession of a usufructuary mortgagee. In other words, he contended that in spite of the fact that the mortgagees retained possession of the property in question, they cannot be said to be usufructuary mortgagees.
The learned Advocate urged before me that delivery of possession in order to be construed as a usufructuary mortgage must be part of the mortgage transaction itself. In other words, such delivery must be given as an incident to the transaction of mortgage. If, therefore, according to him, the mortgagee comes in possession of the property not at the time of the mortgage and not as an incident of the mortgage, such possession cannot make the mortgage a usufructuary mortgage. In the' premises, Sri Krishnamurthi urged before me that only a decree for redemption, as is usually passed in the case of a simple mortgage, can be passed in this suit and not a decree for possession as well.
4. In answer to the said contention, the learned Advocate for the Respondents urged, in the first place, that the mortgage in question was a usufructuary mortgage. In support of that contention, he relied on the instrument of mortgage itself and, in particular, on the clause in the said mortgage deed which provides that rent payable has to be adjusted towards the aforesaid interest.
He also relied on the subsequent conduct of the mortgagees for purposes of determining whether or not the mortgage in question was a usufructuary mortgage or a simple mortgage. He referred me to the admissions made by the mortgagees in certain suits filed in the year 1917-18 against their tenants in which they described themselves to be in possession by virtue of a mortgage. The learned Advocate, in the circumstances, urged before me that I should hold that the mortgage in question was a usufructuary mortgage.
5. I am not prepared to agree with this part of the contention of the learned Advocatefor the Respondents. It does not seem to me on the construction of the document in question that it was a usufructuary mortgage. The mere fact that there is a provision in the mortgage deed to the effect that the rent payable by the mortgagees as lessees will be adjusted towards interest payable on the mortgage does not make the document a usufructuary mortgage.
According to the definition of a usufructuary mortgage, there must be either delivery of possession or a promise to deliver such possession. None of these things can be found from the terms of the document itself. In other words, the document does not show either that possession in fact had been delivered to the mortgagees or that there was any promise of such delivery. As for the conduct of the mortgagees to which the learned Advocate referred, I am also not prepared to hold on those materials that the mortgage in question was a usufructuary mortgage.
As observed in some of the authorities to which my attention was drawn (that) the mortgagees might have thoroughly misunderstood their position and not knowing what their true legal position was, described themselves as usufructuary mortgagees. But what is to be ascertained is the real character of the mortgage and not what the mortgagees themselves say about it. That being so, this part of the contention of the learned Advocate, in my opinion, should fail.
6. The learned Advocate for the Respondents then contended before me that in view of the provisions of Section 76 and Section 60 of the Transfer of Property Act and in the events that have happened in this case, the mortgagees have become mortgagees in possession and in a suit for redemption they are bound to re-deliver the possession of the mortgaged property. In order to appreciate this contention it would be necessary to set out the relevant provisions of Section 76 and Section 60 of the Transfer of Property Act. Section 76 inter alia provides, that 'when, during the continuance of the mortgage the mortgagee takes possession of the mortgaged property', he must perform certain obligations in respect of the property, as are mentioned in the said section. Section 60, inter alia provides as follows:
'At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place of the mortgage money, to require the mortgagee (a) to deliver to the mortgagor the mortgage deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost o the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgment in writing that any right in derogationof his interest transferred to the mortgagee has been extinguished.'
The learned Advocate for the Respondents contended before me that when during the continuance of the mortgage the mortgagee takes possession of the mortgaged property he becomes a mortgagee in possession o the mortgaged property and as such becomes liable to the obligations mentioned in Section 60 and Section 76 of the Transfer of Property Act. If that is so, then in a suit for redemption such a mortgagee is bound in view of the provisions of Section 60 of the Transfer of Property Act to deliver possession of the said property to the mortgagor.
In support of that contention he relied on a decision of the Madras High Court reported In Vengubai Ammal v. Ramaswami Iyer : AIR1927Mad964 , and on a decision of this High Court reported in Veerannachari v. Ramachandra Sastry, 8 Mys LJ 290 (B). The learned Advocate also drew my attention to a passage in Ghosh's 'Law of mortgage in India.' 5th Edition, page 555.
7. In my opinion, this contention of the learned Advocate for the Respondents is sound and should be accepted. I am proceeding on the basis that the lease had come to an end but the mortgagees still continued in possession. In such a case, in my opinion, the mortgagees must be held to be in possession of the mortgaged property as mortgagees. The mortgagees, therefore, must for the purposes of a suit for redemption be held to be mortgagees in possession of the mortgaged property. I shall illustrate the position by reference to a case where there is a separate person as a lessee.
If, for example, the mortgagor grants a lease in favour of 'X' as lessee and thereafter mortgages the property to 'Y' and if after the termination of the lease in favour of 'X', 'Y' comes to be in possession of the mortgaged property then the mortgagee must be held to have during the continuance of the mortgage obtained possession of the mortgaged property as contemplated in Section 76 of the Transfer of Property Act. He is therefore a mortgagee who is in possession of the mortgaged property and is bound under Section 60 of the Transfer of Property Act to deliver possession thereof to the mortgagor.
The mere fact that the mortgagee also happens to be a lessee would not alter the situation. He has really two capacities; one, that of a lessee and the other that of a mortgagee. So long as the lease subsists he holds it in the capacity of a lessee. But the moment the lease comes to an end, he holds it in the capacity of a mortgagee. In this connection I shall refer to the passage in Ghosh's 'Law of Mortgages in India' to which my attention was drawn by the learned Advocate for the Respondent. It reads as follows :
'Similarly a mortgagee cannot be charged as in possession if he enters as lessee of the property. But if a mortgagee originally in possession as a tenant continues in occupationafter the expiration of the term of his tenancy, he will be treated as a mortgagee in possession and not as a tenant holding over after the determination of the tenancy.'
8. Sri Krishnamurthi contended before me that not much reliance can be placed on that passage for the reason that it refers to a passage in 'Jones on Mortgages' but in a later Edition of 'Jones on Mortgages', i.e. 8th Edition, 1928, something else has been said. He, however, stated that he does not want to contend that an eminent jurist like Sir Rashbehary Ghose misunderstood what was said in Jones on Mortgages, but it may be that the law which was in 1922 had undergone a change by 1928 when the 8th Edition of Jones on Mortgages had come into existence. The particular passage on which Sri Krishnamurthi relied as appearing in 'Jones on Mortgages reads as follows: (1429)
'A mortgagee in possession after default is presumed to be in possession in his character of mortgagee, and as such to be liable to account for rents and profits; and such is the presumption although he first occupied as a tenant for a fixed term, and while so occupying purchased the mortgage, and remained in possession after the expiration of his term; he is presumed to be in occupation as a mortgagee, and not as a tenant holding over.'
Though at first sight it may seem that what the learned author was saying was different from what was said in Ghose on Law of Mortgages' on closer scrutiny it would be found that there is no difference between the propositions laid down by the said authors in their respective treatises. What Jones on Mortgages says is that though a person has occupied the property as a tenant for a fixed term, and while so occupying purchased the mortgage, and remained in possession after the expiration of the term he is presumed to be in occupation as a mortgagee, and not as a tenant holding over.
I see no difference between the position where a tenant purchases a mortgage and thereby becomes a mortgagee and where the tenant becomes a mortgagee by virtue of a mortgage created by the mortgagor in his favour. The position in both the cases is the same. It is the same proposition which has been laid down by both the learned Authors in their respective treatises. That being so I am of opinion that the mortgagee, after the termination of the lease, if he continues in possession does so as a mortgagee and is thus a mortgagee who is in possession of the mortgaged property and is bound in a suit for redemption to deliver the property under Section 60 ox the Transfer of Property Act.
Sri Krishnamurthi referred to a case in support of his contention reported in Gulab Chand Prasad v. Ram Kumar, AIR 1941 Pat 296 (C). The facts of that case are clearly distinguishable and in my opinion that case does not touch the point in question in this case. The possession in that case was clearly as that of a lessee and not of a mortgagee.
As observed by Their Lordships in that case : 'There can be no question that the lessees remained in possession purely as tenants'. That being so, this case in my opinion does not help the learned Advocate for the Appellant in his present contention.
9. Sri Krishnamurthi strenuously argued before me that when during the continuance of the tenancy a mortgage is created in favour of the tenant the tenancy does not come to an end or merge with the mortgage itself, but it remains in a dormant stage and would revive after the mortgage has been redeemed.
10. I have no quarrel with that proposition which Sri Krishnamurthi wants to propound before me. The question is not whether the tenancy tight comes to an end as a result of the mortgage having been created. But the question is whether or not after the tenancy has come to an end and the mortgagee, if he continues in possession, will be treated as mortgagee in possession.
In my opinion, in such a case, the tenancy right, as also the right of a mortgagee, both co-exist and it is on the termination of the one that the other right continues. That being so, on the termination of his interests of a tenant his right as a mortgagee continues and if he continues in possession of the mortgaged property he continues not as a tenant holding over but as a mortgagee in possession. That Is what is laid down in 'Ghose on the Law of Mortgages in India' and with that proposition of law I respectfully agree.
11. In the result, therefore, I hold that the contention of the Appellant before me must fail.
12. There is one matter to which I should refer before I conclude my Judgment. That relates to the question of compensation, which the lower Appellate Court has directed to be paid by the mortgagor before he can redeem the mortgaged property. On that point, the Respondents have filed a cross-objection. In my opinion, the view taken by the learned Judge on this point is wholly erroneous.
If the Appellant was the mortgagee and he continued in possession as such he can no doubt repair the property and keep the property in good condition, but he has no right to effect constructions thereon and if he does so that must be at his own risk and the mortgagors cannot be held liable to pay for the same. In that view of the matter, I am ox opinion, that the- cross-objection should succeed.
13. The result is that the appeal fails and is dismissed with costs. The cross-objection succeeds and the order of the lower Appellate Court directing the compensation to be paid is set aside. There will be a decree in favour of the Respondents in terms of the prayer in the plaint. There will be one set of costs both in the appeal and in the cross-abjections.
14. Appeal dismissed.