(1) This appeal under Clause 15 of the Letters Patent is directed against the judgment of our learned brother Justice Chandrasekhara Sastry in Second Appeal No. 270 of 1962. The learned Judge while reversing a part of the judgment of the lower appellate Court, granted leave to file this appeal.
(2) This appeal arises out of an action laid by the plaintiff for redemption of a usufructuary mortgage, Ex. B. 1, dated the 20th of November 1957 executed by the 3rd defendant in favour of defendants and 2 and for recovery of possession. By and under this document the subject-matter of this appeal was mortgaged by the 3rd defendant in their favour to secure a sum of Rs. 6000/- advanced by the respondents to the mortgagor on 20th November 1957. This transaction is evidenced by Ex. B. 1. Sometime thereafter, the 3rd defendant sold the property for Rs. 10,000/-, Rs. 6,000/- to be utilised for redeeming the mortgage and Rs. 4,000/- payable to the mortgagor. Thereupon, the plaintiff brought the present suit in the Court of the Subordinate Judge, Srikakulam, for the reliefs mentioned above.
(3) This suit was resisted by the respondents inter alia on the plea that they were protected by the Lease and Rent Control Act of 1960 (hereinafter called the Act) and consequently the plaintiff could not recover possession of the property. The trial Court gave a decree as prayed for, which was affirmed on appeal by the District Judge of Srikakulam.
(4) It is in the second appeal carried by the aggrieved respondent against this judgment, that our learned brother Justice Chandrasekhara Sastry set aside the decree for possession while confirming that bearing on redemption.
(5) The conclusion of the learned Judge concerning the right of the plaintiff to recover possession is impugned before us. It is argued that the respondents could not derive any benefit from the Act having put an end to the tenancy by entering into the transaction covered by Ex. B. 1. On the other hand, it is contended by Shri Narsa Raju appearing for the respondents that such an effect could not be attributed to Ex. B-1 and that the mortgage in question has not terminated the lease.
(6) Before we deal with the merits of these respective contentions, it is profitable to state the circumstances under which this document came into being and the terms thereof. Indisputably, this property originally belonged to the 3rd defendant. In the year 1954, he leased it to the respondents for the purpose of opening a cloth shop on an yearly rental of Rs. 800/-. The rent was enhanced under Ex. B. 1 (as stated by the learned counsel for the appellant and as acquiesced in by the respondent's counsel). As the 3rd defendant was in need of some money, he approached him the respondents and the latter accommodated him with Rs. 6,000/-, for securing which Ex. B. 1 was executed. We will do well to set out in extenso the terms and conditions of the document as they give a clue to the nature of the transaction that falls to be considered by us here :
1. Deed of possessory mortgage of terraced shop executed on 20-11-1957 (Twentieth November One thousand nine hundred and fifty seven) in favour of 1. Kintali Avutaram and (2) Kindtali Viswanathaswamy, two individuals, sons of late Jagan nadha, trader, residents of Bobbili, Town, of Bobili Sub District and Srikakulam District, by Baratam China Satyanarayana, son of late Subbarao, trader, resident of Parvatipuram town of Parvatipuram Sub District and Srikakulam District.
II. As I am in necessity of funds for making investment in my trade, I have mortgaged to you with possession the immovable property consisting of terraced shop belonging to me and which is used by you as a lessee for your cloth shop, the boundaries and other particulars of which are mentioned in the schedule given in the third paragraph herein which is my ancestral property, which is under my rights and enjoyment, which is at present in your possession and used by you as your cloth shop, together with the furniture therein mentioned in the B Schedule given herein and received a sum of Rs. 6000/- from you in the following manner :-
Rs. 3,000/- (three thousand rupees) received at the time of execution of this deed after passing a receipt in your favour. Rs. 3,000/- (three thousand rupees) agreed to be paid to me by you before the Sub Registrar at the time of registration of this deed. I am in receipt of six thousand rupees in all from you as detailed above.
So you shall adjust the monthly rent of the terraced shop delivered possession of to you towards the monthly interest due on this deed by 20th of each month directly without my concern and shall pay me every month at the rate of Rs. 15/- by 20th towards the balance. You shall make use etc., of the said ship in lieu of interest in this manner for three years. Thereafter, if at any time I intend to get the house redeemed, I shall inform you three months in advance and shall pay you the principal sum of Rs. 6,000/- (six thousand rupees) in one instalment and you shall receive the same, endorse the payment of this deed and leave the shop to me along with this deed, or , after you enjoy the property for a period of three years towards interest, if you ask me to redeem the shop, I shall repay the principal sum of this deed Rs. 6,000/- (six thousand rupees) in full in one instalment within the period not exceeding three months, get the payment endorsed by you on this deed and then you shall deliver the shop to me along with this deed. It is agreed that the amount of expenditure to be incurred on account of repairs to the said ship during the period of the mortgage in your favour shall be met by you upto Rs. 15/- and by me if it exceeds Rs. 15/- I myself shall pay the house taxes to the Panchayat Board. If I fail to get the respective works done in time and you get them done, you shall deduct the said amount out of the balance of the amount payable to me. Having assured you that this usufructuarily mortgaged property has not been subjected to any other alienations by way of mortgages, court decrees and other liabilities, gifts, sales etc., except this debt and that this is the first mortgage, this deed of possessory mortgage is executed in your favour. If I make you any payment at not less than Rs. 3,000/- (rupees three thousand) at any time towards the said principal sum of Rs. 6,000/- (six thousand) you shall receive the same, endorse the payment on the reverse of the said deed and pay me interest on the amount paid from the date of payment at the rate of Re. 1/- per cent per mensem.
III. 'A' schedule.
(7) The question that arises for consideration is whether this mortgage has put an end to the lease of the property granted to the respondents in the year 1954. The property does not seem to have been leased out for a definite period. But under the provisions of the Act, the tenant had a right to continue in possession of the property until evicted in due course of time under the provisions of the Act. Notwithstanding the benefits that accrued to the tenants under the Act, the respondents are said to have deprived themselves of the advantage of the Act by entering into the transaction evidenced by Ex. B 1 under which they agreed to relinquish possession at the end of three years. It is contended on behalf of the appellant that the moment the respondents accepted the usufructuary mortgage from the 3rd defendant, the lease was extinguished and that the respondents were obliged to surrender possession at the end of three years by reason of the rights and obligations created by this document.
(8) In support of the contention that the acceptance of the mortgage implies the extinguishment of the lease Shri Kuppuswamy cites to us the decision of a Division Bench of this Court in Venkayya v. Venkata Subba Rao, 956 Andh W R 1093 : (AIR 1757 Andh Pra 619), in which the primary question that called for decision was whether the earlier lease survived the execution of a subsequent lease. Under the first lease the plaintiff was a lessee of half share in the mill for a period fifteen years with a liability to pay an annual rent of Rs. 2,000/- to the lessor his father. Under the subsequent lease the plaintiff's father was entitled to recover a rent of Rs. 7,656-4-0 for his ten annas share from the new lessee, the 2nd defendant. In respect of the 0-8-0 share, the rent payable would be Rs. 6,125/- Under the latter document, the father as well as the son were the lessors and the lessee was a third party. It was in those circumstances that the learned Judges opined that the first lease was superseded by the second one.
(9) Said Justice Viswanatha Sastry of the new tenant, the rent was increased, the lessor and lessee under Exhibit B. 8 became joint lessors under Exhibit B 12, and the previous relationship was determined. After the execution of Ex. B. 12 the plaintiff was no longer bound to pay his father any rent under Ex. B. 8 or perform the other covenants contained therein and the father could not enforce the terms of Ex. B. 8 against the plaintiff.'
(10) The learned Judge dealing with the observations of Ramesam. J. in Manavedan Thirumalpad v. Parry and Co., 49 Mad L J 390 : (AIR 1925 Mad 1277), deprecating the importation of the English doctrine of surrender by operation of law into India, observed :-
'Implied surrender is, however, recognised and provided for by section 111, clause (f) of the Transfer of Property Act and the illustration thereto, which refers to a lessee accepting from his lessor a new lease of the property leased, to take effect during the continuance of an existing lease. The illustration is obviously not exhaustive of cases of implied surrender.'
(11) We are not persuaded that the principle enunciated by the learned Judges there would govern the instant case. The situation is altogether dissimilar here. In the case under citation, in the nature of things, the two leases could not co-exist. Under Ex. 8 referred to in the above case, while the plaintiff was the lessee, under the second lease the plaintiff and his father became lessors and the liability of the plaintiff to pay any rent came to an end. That is not the position here. We do not find any obstacle in the way of co-existence of both the lease and the mortgage. This is not a case where the two documents are inconsistent, and irreconcilable with each other, whereas in the case under citation, they were incompatible with each other.
(12) At the outset, it may be pertinent to state that the dominant intention of the parties was to secure Rs. 6,000/-, advanced by the lessee under Ex. B-1, whatever might be the description of the document. It is further noteworthy that possession was not given to the respondents under the document. On the other hand, it is specifically stated that the mortgagee was in possession of the property under a lease that came into being earlier. Admittedly, the rent was enhanced from Rs. 800/- to Rs. 900/-. Learned counsel for the appellant now wants us to say that the rent was enhanced simultaneously with the execution of the document. We do not think that it makes any difference for the ultimate result of this appeal.
(13) Learned counsel for the appellant relies on the following recital in the document and urges that though the rent was traceable to the lease, the interest payable under the mortgage was to be adjusted towards the rent.
'So you shall adjust the monthly rent of the terraced shop delivered possession of to you towards the monthly interest due on this deed by the 20th of each month directly without my concern and shall pay me every month at the rate of Rs. 15/- by 20th towards the balance.'
We fail to see how this recital lends any colour to the theory propounded on behalf of the appellants. Instead, it establishes that the two transactions were kept distinct. Here again, a reference is made to the rent payable under the lease. Moreover, only Rs. 720/- representing interest was to be adjusted out of the rent of Rs. 900/- and the balance was to be paid to the mortgagor. Surely, it would not have been the position if the relationship of landlord and tenant had ceases the moment Ex. B-1 came into existence. There is also the stipulation that the tenant was to bear the repairing charges not exceeding Rs. 15/-. If the relationship of landlord and tenant no longer existed and after the execution of Ex. B-1 the relationship was only that of mortgagor and mortgagee, one fails to understand why the mortgagee would be required to pay the repairing charges. We are aware of the position of a tenant under the Act. But it is not unusual for tenants to agree to bear a portion of the repairing charges taking into account the fact that some concession is shown in the matter of rent. But it is quite unusual for a mortgagee to agree to bear the repairing charges.
(14) Another circumstance that has to be taken into account is that in this case, the lessor was to be paid enhanced rent and out of that interest was to be deducted and the balance to be paid to the mortgagor-lessor. The counsel for the respondents also relies on the recital that as and when the mortgagor would make a payment of not less than Rs. 3,000/- towards principal of Rs. 6,000/- he would be entitled to counter interest at which he agreed to pay under the mortgage. It is urged that this emphasises the capacity in which the respondents were to continue in possession . Whatever might be the force of this argument, we are firmly of the view that there is no scope for the application of the doctrine of implied surrender in the instant case, having regard to the numerous references in the document to the lease, tenant and payment of rent etc. In such a situation, it is difficult to posit that the lease was impliedly extinguished and there was an implied surrender. We are unable to find any of the postulates of the extinguishment of the lease or of implied surrender.
(15) We do not feel that either the case of Velu v. Lekshmi, AIR 1953 Trav-Co 584, or other cases to be referred to presently, called in aid by the learned counsel for the appellant, render any assistance to him.
(16) In AIR 1953 Trav-Co 584, the mortgage executed in favour of the erstwhile lessee contained terms which indicated that the parties contemplated the extinguishment of the lease. The relevant conditions and terms of the document are set out in the judgment at page 587, para 6, as follows :
'The mortgagee undertakes the liability to give two bunches bananas and one anna annually to the mortgagor. These are items of obligation introduced in the mortgage document for the first time which were not among the terms of the lease. The introduction of these new terms cannot be explained as being enhancement of rent, because the landlord is not during the subsistence of the lease entitled to enhance the rent except on an agreement and there is no case set up or suggested anywhere in the pleadings or evidence regarding any enhancement of rent. The amount payable as puravaka including Sirkar tax is only Rs. 2-8-10 under the lease. It is enhanced to Rs. 3-8-0 under the mortgage. This increase in the amount may perhaps be accounted for by the enhancement of land revenue at the Survey and Settlement which were at about the time of the mortgage though the proceedings do not appear to have been completed as the mortgage deed does not give the Survey number of the items mortgaged as does the puramkadam of the year 1902. Here also there is no explanation offered as to why the amount was enhanced.'
(17) The terms of the document we are called upon to consider have no analogy to those there. It is not necessary for us once again to point out the distinguishing features. As we have already stated, far from there being in the case on hand any intention to put an end to the lease under Ex. B-1, the intention to keep alive the lease is quite apparent. We, therefore, do not think that this case is of any use to the appellant.
(18) In the same trend of though is the judgment of Justice Ramaswami in Meenakshi Amma v. Narayani, : AIR1957Mad212 . The controversy there was whether a Verumpattamdar in Malabar, who was in the position of a lessee and who accepted a possessory mortgage of his lease-hold land from the lessor, would be deemed to have impliedly surrendered the lease with the acceptance of possessory mortgage. The learned Judge held that the execution of the possessory mortgage had that result for the reasons that the Verumpattamdar who was in the position of an ordinary lessee, should be considered to have given up his lease when he accepted the usufructuary mortgage. The learned Judge thought that the possession of the Verumpattamdar in the case before him was similar to that of the lessee in the Kerala case (Velu v. Lekshmi). Adverting to the principle adumbrated by a Division Bench of the Allahabad High Court in Kallu v. Diwan, ILR 24 All 487, which in its turn relied upon a judgment of Justice Burkitt in an unreported judgment, the learned Judge observed :
'I could understand his reasoning if it relates to an occupancy tenancy because in such a case the mortgage could suspend the operation of the occupancy tenancy itself and after the mortgage debt is extinguished, the man would be relegated to the previous unextinguished vested non-evictable position of an occupancy tenant whose fixity of tenure can only be terminated by relinquishment or by sale of the holding for arrears of rent (to mention two instances).'
The learned Judge expressed his assent to the proposition contained in the unreported judgment of Justice Burkitt, but he was rather doubtful as to the soundness of the rule laid down by the Division Bench consisting of Aikman and Blair J J . , having regard to the fact that the lessee in the Allahabad case (Kallu v. Diwan) was not an occupancy tenant. But that distinction does not make any difference so far as our case is concerned, because, under the Lease and Rent Control Act of 1949, there is a statutory extension, and unless any default is committed by the tenant as contemplated by the Act, he cannot be evicted so long as the Act remains on the statute book. Therefore, this case is easily distinguishable and its doctrine is inapplicable to the instant case.
(19) The judgment of the Calcutta High Court in Sailabala Dassee v. H. A. Tappassier, : AIR1952Cal455 , is not of any help to the appellant. There, the Government served a requisition order on the plaintiff-landlord by which the plaintiff was asked to place the premises at the disposal of and under the control of the First Land Acquisition Collector from a particular date and thereafter the concerned land acquisition officer took formal possession from the defendant and then again put him back formally in possession thereof. Subsequently, the defendant had ceased to have any relations with the plaintiff and he was in fact paying the rent to the Government. It was in such a situation that Justice Das Gupta ruled that by accepting possession formally from the Government, the defendant put an end to the relationship of landlord and tenant between the plaintiff and himself and relinquished his character as a tenant of the plaintiff and continued to hold the premises under the Government. That being the position, we do not think, any reliance could be placed by the appellant on this ruling. Nor is the decision in Turner v. Watts, (1928) 138 LT 680 at p. 682, of any avail to the appellants. The situation that obtained there was, that a lessee of premises entered into an agreement to purchase that very property and thereafter took possession of the property as the vendee and was subsequently paying the rates, taxes and insurance etc. from that date onwards. Such a position does not prevail here. So, the principle underlying that rule is inapplicable to the case on hand.
(20) Further, as already pointed out, although the term of the lease entered into between the parties is for a particular duration, by reason of the provisions of the enactment it continue so long as no default is committed by the tenant and so long as the statute is alive. We cannot assume that the tenant was not aware of the rights he had under the enactment. If so, there is no reason why he should have thought of giving up his rights under the document. As already pointed out, the intention of the parties before us appears to have been that the mortgagee should be in a position to set off the rent payable by him against the interest and pay only the balance to the landlord. The statute having been enacted solely for the benefit of the tenants who having regard to the lack of adequate accommodation were at the mercy of the landlords it was not open to the tenant to contract himself out the rights conferred on him by the enactment. This proposition is not contested by the counsel for the appellants. so, it is (not) necessary to make any citation in this behalf.
(21) What is argued is, despite the provisions of the Lease and Rent Control Act of 1960, the tenant had accepted a new position under the lease and thereby gave up the rights which he had acquired under the document. We cannot assent to this proposition. If this were possible, as pointed out by Justice Venkatramana Rao in Ramudu v. Sanyasi Naidu, 1940-2 Mad LJ 668 : (AIR 1941 Mad 97) 'the landlord and tenant have only to resort to the device of having a mortgage executed by which at the end of a particular period the tenant undertakes to give up possession to render the statute futile.' If we may say so with respect, the learned Judge has succinctly summed up the law which is applicable to the case of a tenant under this enactment as well.
(22) Apart from this legal position, we have indicated on a reference to the several recitals in the document that the tenant had not given up the benefits flowing from the Lease and Rent Control Act of 1960.
(23) Even assuming that the mortgage and the lease could not co-exist, the lease which was dormant would spring into active life on the mortgage being redeemed, since it is not shown that the lease was either expressly or impliedly extinguished. This proposition is vouched by a judgment of the Allahabad High Court ILR 24 All 487, already referred to. It was decided by the Division Bench that the fact of a tenant's taking a mortgage of land comprised in his holding from his landlord does not by itself put an end to the tenancy by merging the rights of the tenant in those of the mortgagee. The impact of such a mortgage on the tenant's rights would be merely it would be in abeyance and when the landlord redeemed the mortgage, the parties would revert to their former position, with the consequence that the landlord would not be entitled to get possession of the land, except by ejecting the tenant in due course of law. In support of their conclusions, they referred to the judgment of Justice Burkitt in an unreported decision, which is set out at the foot-note and is in the following words :
'In my opinion the decision of the Additional Judge in this case cannot be supported. I entirely dissent from the novel and extraordinary doctrine laid down by the Additional Judge that, if an occupancy tenant lends money to his landlord and takes from his landlord a mortgage of an area of land, which includes his own occupancy holding, he thereupon ceases to be an occupancy tenant under some novel doctrine of merger, apparently invented for this case. If this doctrine were affirmed, the result would be that the occupancy tenant referred to would be that the occupancy tenant referred to would be in a much worse position after his possession as mortgagee had ceased than before. For according to the Addl. Judge he would have ceased to be an occupancy tenant . I cannot assent to this doctrine. I see no reason why in such a case the occupancy tenure should be forfeited, and it is the first time I have heard such a doctrine mooted.
As to the fact that the defendant was an occupancy tenant, there can be no doubt. It is admitted that a suit for his ejectment was dismissed by the Revenue Court on the ground that he was an occupancy tenant. The Additional Judge says he was not. That, however, is not a matter within his cognizance to decide. It is for the rent Court - and the Court alone - to decide the nature of tendency. The rent Court in this case has held that the defendant is an occupancy tenant.
The Courts below have given the plaintiff a decree for redemption on payment of one hundred and thirty rupees. As far as it goes, that decree is right. But there must be this added to it, viz. , that as the defendant is an occupancy tenant, the plaintiff on redemption will not be entitled to physical possession by ouster of the defendant .
I allow this appeal as stated above with costs.' The principle so enunciated by the learned Judge in relation to an occupancy tenancy, was tended 'to a tenancy of a less durable character than an occupancy right.'
(24) We have already referred to the fact that this rule has found favour with Ramaswami, J. in : AIR1957Mad212 . We are not shown any ruling which is inconsistent with this.
(25) The judgment of Justice Venkataramana Rao in (1940) 2 Mad LJ 668 : (AIR 1941 Mad 97) referred to supra, also lends support to our view. In that case, an occupancy tenant obtained an usufructuary mortgage from the land-holder. The mortgage contained a condition that on redemption the mortgagee had to surrender possession to the mortgagor. When the land-holder-mortgagor sought to enforce this clause, viz. , surrender of possession after the redemption, the tenant pleaded Section 187 of the Estate Land Act in defence to that action. This defence ultimately found acceptance with Justice Venkataramana Rao, when the matter came up before him in second appeal. The learned Judge observed that Section 187 (g) of the Madras Estates Land Act was applicable to the case of a mortgage as well and that this stipulation was of no consequence by reason of the mandatory terms of that section. The position of a tenant under the Lease and Rent Control Act is in a way similar to that envisaged in Section 187 of the Madras Estates Land Act.
(26) For these reasons, we are satisfied that our learned brother rightly negatived the relief of possession to the appellants.
(27) It follows that this appeal should be dismissed with costs.
(28) Appeal dismissed.