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Puttananjamma and anr. Vs. P.M. Channabasavanna and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKarnataka High Court
Decided On
Case NumberAppeal No. 78 of 1960
Judge
Reported inAIR1967Kant41; AIR1967Mys41
ActsEvidence Act, 1872 - Sections 115; Transfer of Property Act, 1882 - Sections 58, 60, 68, 83 and 105; Code of Civil Procedure (CPC), 1908 - Order 34, Rules 2 and 7; Mysore Money Lenders Act, 1939 - Sections 14; Mysore House Rent and Accommodation Control Act
AppellantPuttananjamma and anr.
RespondentP.M. Channabasavanna and ors.
Appellant AdvocateM.P. Somasekhar Rau, Adv.
Respondent AdvocateK. Swamy Rao, Adv.
Excerpt:
.....possession of lands had been taken much earlier to the issue of preliminary notification. - the lease deed recites that mortgagor shall pay the rents specified in the lease deed punctually and that if in any year there was any default in the payment of rent, possession of the mortgaged property shall be restored to the mortgagee and that the mortgagor shall be liable to make good the losses sustained by the mortgagee on account of the conduct of the mortgagor both personally and from out of his properties. what is also of equal importance is the provision in the lease deed that the mortgagor shall not only be personally liable to make good such reimbursement out that his properties should also contribute to such reimbursement. so the mortgagee who was entitled to the income from the..........1955 and october 30, 1958.2. on the same date on which the mortgage deed was executed, there was a lease deed executed in favour of the mortgagor by the mortgagee. under that lease deed there was a lease back of the mortgaged properties. a sum of rs. 97-8-0 was the rent payable for the house every month. thirty pallas of paddy of the value of rs. 750 constituted the rent payable for the land.3. it is admitted that on january 16, 1954. a sum of rs. 960/- which was payable until that date towards what was described as the rent payable under the lease deed was paid. it is also undisputed that on january 14, 1985, there was another payment of rs. 1,920/- which represented the rent payable until that date. there was thereafter, no payment under the lease deed.4. there were many defences urged.....
Judgment:

Somnath Iyer, J.

1. On June 19, 1953, defendant 1 who is the appellant before us, created a usufruct mortgage in favour of a certain Mallanna. The property mortgaged consisted of two items, a house and a wet land. The principal sum secured by the mortgage was Rs. 16,000. The mortgage deed was Ext. P-2. On October 31, 1958, Mallanna's three sons brought a suit for the recovery of a sum of Rs. 23,280/- which according to them, represented the amount due under the mortgage. This was the aggregate of the principal sum of Rs. 16,000/- and Rs. 7,280/- which represented interest for the period between January 15, 1955 and October 30, 1958.

2. On the same date on which the mortgage deed was executed, there was a lease deed executed in favour of the mortgagor by the mortgagee. Under that lease deed there was a lease back of the mortgaged properties. A sum of Rs. 97-8-0 was the rent payable for the house every month. Thirty pallas of paddy of the value of Rs. 750 constituted the rent payable for the land.

3. It is admitted that on January 16, 1954. a sum of Rs. 960/- which was payable until that date towards what was described as the rent payable under the lease deed was paid. It is also undisputed that on January 14, 1985, there was another payment of Rs. 1,920/- which represented the rent payable until that date. There was thereafter, no payment under the lease deed.

4. There were many defences urged to the suit. Hut the principal defence was that the interest claimed by the plaintiffs was not payable. There was also a contention that Mallanna, the original mortgagee had another son and that he should have also joined in the institution of the suit. Rut that question is no longer now before us and Mr. Somasekhara Rao, the learned Advocate for the appellant does not press it.

5. The District Judge made a decree in favour of the plaintiffs for the principal sum of Rs. 16,000/- and also for interest thereon at 9 per cent a year for the period between January 15, 1955 and October 30, 1958. He declared by his decree that the amount due to the plaintiffs on account of principal, interest and costs calculated up to May 30, 1960, was Rs. 25,362-30 nP.

6. The District Judge, it will therefore be seen, did not grant by way of interest all the mm of Rs. 7,2807- which was claimed by the plaintiffs at 12 per cent per annum but awarded interest at only 9 per cent per annum, presumably under the provisions of Section 14 of the Money-lenders Act.

7. In this appeal preferred by defendant 1, the only challenge made to the decree of the District Judge is to that part of it by which a sum of Rs. 5,460/- was awarded by way of Interest. The argument placed before us vita that since there was a lease back to the mortgagor, the mortgagee could not claim any Interest but could institute a suit for the recovery of rent due under the lease deed, and, that even the rent so payable by the mortgagor was not a charge on the mortgaged property and could not be recovered in a mortgage suit as if it formed part of the mortgage money due to the mortgagee.

8. The view taken by the District Judge was that the lease and the mortgage were not two distinct transactions but that in effect, the lease was only an arrangement or a device for securing payment of interest due on the mortgage money. The District Judge was also of the view that on the principle that a mortgagee with possession to whom possession was not delivered by the mortgagor of the mortgaged Property, is entitled to interest during the period e was kept out of possession of the mortgaged property, the plaintiffs in this case were also entitled to recover interest for the period during which they claimed interest.

9. It is seen that the mortgage deed and the lease deed were executed on one and the same day. They were also registered simultaneously. The lease deed recites that mortgagor shall pay the rents specified in the lease deed punctually and that if in any year there was any default in the payment of rent, possession of the mortgaged property shall be restored to the mortgagee and that the mortgagor shall be liable to make good the losses sustained by the mortgagee on account of the conduct of the mortgagor both personally and from out of his properties.

10. It is a firmly established rule that the question whether a usufructuary mortgage and a lease back by the mortgagee to the mortgagor form two distinct transaction, or, whether they form part of one and the same transaction, is one on which a decision should rest upon the facts and circumstances of the case. If those circumstances reveal that in leasing the property back to the mortgagor the mortgagee Intended no more than to resort to a device or arrangement to secure the payment of interest by the mortgagor on the mortgage money, the conclusion is that the lease is not a separate transaction but is really part of the mortgage transaction.

11. The mortgagee in possession is entitled to the income from the property which is mortgaged, and that income which he derives during the period he Is In possession of the property is really part of the mortgage money to which he is entitled. So, in a given case, having regard to the sequence of events and other relevant factors, if it would be legitimate to say that in leasing the property to the mortgagor, the mortgagee intended to secure for himself the income from the mortgaged properly to which he would have been undoubtedly entitled if he had been In possession of the property, in the form of what is described as me rent payable by the mortgagor to tie mortgagee, it would be reasonable to say that what was payable by the mortgagor to the mortgagee really and in substance represented the interest which the mortgagor agreed to pay and the mortgagee wished to receive from the mortgagor during the period the mortgagor is in possession of the property.

12. There are many tests by the application of which the question whether the transactions are distinct and separate or whether they form part of one and the same transaction Is decided- The fact that the transactions were simultaneous as also the fact that the registration was also simultaneous are some of the factors which are relevant in that context. In addition, we have hi the case before us, stipulations in the lease deed which make it clear that the lease was only an arrangement for securing the payment of interest. The rent reserved under the lease deed if exactly 12 per cent of the mortgage amount. Then again, there is a covenant that If the mortgagor does not pay the rent regularly and he commits default during any one year, he shall restore possession of the property to the mortgagee and become liable for reimbursing the mortgagee to the extent of the losses sustained by him in consequence of the default. What is also of equal importance Is the provision in the lease deed that the mortgagor shall not only be personally liable to make good such reimbursement out that his properties should also contribute to such reimbursement. All these circumstances taken together justify in my opinion, the inference that the lease deed was really an arrangement entered into between the mortgagor and the mortgagee for securing to the mortgagee the payment of interest periodically amounting to 12 per cent of the mortgage amount.

13. That this is the proper Inference in the case before us Is also demonstrated by what the mortgagee and the mortgagor themselves stated In the course of an antecedent proceeding under the Mysore House Rent & Accommodation Control Act. That was a proceeding in which the mortgagee sought a decree for eviction, and, In his application he asserted that what was payable under the lease deed was really rent. This assertion made by the mortgagee was not repudiated by the mortgagor, who, on the contrary, affirmed it. His assertion was also to the effect that there was no independent lease and that the lease was a concomitant part of the mortgage transaction for assuring to the mortgagee the payment of the interest to which he would reasonably be entitled during the period he was out of possession of the mortgaged property. The decision in that proceeding by the Munsif was that there was no lease and that what was payable was only interest. So, an order for eviction was refused.

14. It is surely not possible for the mortgagor to change her front and contend in the suit instituted by the mortgagees' legal representatives that they should institute a separate suit for the recovery of rent and that they could not claim interest on the principal sum due under the mortgage. They cannot be allowed to approbate and reprobate in that way. Having secured an order in their favour that there could be no order for their eviction in the proceedings order the House Rent & Accommodation Control Act, they could not turn round In the suit by the plaintiffs and put forward a contention at variance with that which earned for them an order in their favour under the House Rent & Accommodation Control Act.

15. Therefore, in my opinion, we should say that what was payable under the lease deed was interest and that the plaintiffs were therefore entitled to recover such interest.

16. Although in the Court below the mortgagor contended that she had tendered the mortgage money in the year 1955 and several times thereafter, there was a finding by this District Judge against her; that finding is not challenged before us. The mortgagor again stated that she had deposited the entire mortgage amount on August 29, 1957, under Section 83 of the Transfer of Property Act. But it is not disputed that that amount did not include interest due until that date and which was payable by the mortgagor and legally recoverable by the plaintiffs. What was deposited was only the principal sum of money. It is also not denied that from January 14, 1955 until the date of the institution of the suit, the mortgagor paid no interest even in the form of rent under the lease deed. The District Judge was therefore disposed to say that for that period of three years and nine-and-half months, the plaintiffs were entitled to interest at 9 per cent a year and not at 12 per cent, as provided by Section 14 of the Money-Lenders Act.

17. The conclusion reached by the District Judge, is, in my opinion, open to very little criticism. It receives support also from the principle that during the period a mortgagee is kept out of possession of the mortgaged property, 'the is liable to pay him interest. Now, in this case, under the terms of the lease deed, on commission of the default by the mortgagor after January 14, 1955, in the payment of rent due by her, she had to restore possession of the mortgaged properties to the mortgagee. So the mortgagee who was entitled to the income from the mortgaged property from that date was clearly entitle to recover interest on the principal sum of money from the mortgagor, as pointed out by this Court in M. S. Revanna v. Sauna Setty, AIR 1958 Mys 32.

18. In any event, the view taken by the District Judge that the mortgagee was entitled to interest cannot be challenged as unsupport-able. Bnl Mr. Somasekhara Rao contended that the question whether a mortgagee is or is not entitled to interest on the mortgage money secured by a usufructuary mortgage, has really no relevance in a suit brought by the mortgagor for redemption. I do not agree. Whether it is a suit for redemption by the mortgagor, or, whether it is a suit for the enforcement or the mortgage by the mortgagee, what should be done in both proceedings in the first instance is the quantification of the amount due to the mortgagee. Even in a suit for redemption brought by a mortgagor, the preliminary decree should declare the amount due by the mortgagor to the mortgagee. That declaration is surely not possible unless the Court proceeds to decide whether the mortgagee is entitled to interest and if so, how much. So, the liability to pay interest cannot be avoided by the mortgagor on the ground that she forestalled the mortgagee by the institution of a suit for redemption when admittedly if the mortgagee had instituted a suit for the recovery of the mortgage amount he would undoubtedly have been entitled to recover from the mortgagor the interest which he claimed.

19. Mr. Somasekhara Rao's next contention was that if we understand the lease deed as a mere arrangement for securing to the mortgagee the payment of periodical interest, there should be an abatement in regard to the interest awarded by the District Judge, since, for the period antecedent to January 14, 1955, the mortgagee has been paid interest at 12 per cent per annum whereas the maximum interest which could be awarded under the provisions of the Money-Lenders Act is 9 per cent per annum in the case of a secured creditor. The answer to this contention is that we are no! concerned In a suit brought by the mortgagee for the recovery of the mortgage amount, with the payment of interest which has already been made by the mortgagor, at a rate in excess of the rate permitted of Section 14 of the Money-Lenders Act. That Section has relevance only to a decree which is sought by a mortgagee, and, all that section provides is that that decree shall not award interest at a rate exceeding per cent per annum in the case of a secured creditor. The provisions of that Section do not authorise an investigation into old payments made by the mortgagor and the adjustment of the interest paid in excess of that specified by Section 14 of the Money-Lenders Act towards future interest.

20. This appeal, which In my opinion, hap therefore, no substance, should be dismissed with costs.

21. There are cross-objections taken to the decree by the plaintiffs. Their complaint is that interest should have been awarded at 12 per cent per annum instead of at 9 per cent per annum. It is obvious that in awarding interest only at 9 per cent per annum, there was, on the part of this District Judge, a proper application of the provisions of Section 14 of the Money-Lenders Act. That being the position, the cross-objections should be dismissed with costs.

Chandrashekhah, J.

22. I agree.

23. Appeal and cross objections dismissed.


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