1. This is a defendants' appeal. On 118-1928, Tawwassul Husain and Mt. Sughra Begam executed a mortgage deed for Rs. 1,45,000 in favour of Sahu Makkban Lal. The deed purported to be a usufructuary mortgage and the mortgagee was to be put in possession of the mortgaged property from the beginning of 1836 Fasli and he was to take the income of the property in lieu of interest. On the same date a stamp paper was purchased on which a lease was executed on 24-S-1928. Under this lease, the mortgaged property was given on lease, by the mortgagee, to Tawwassul Husain, one of the mortgagors, from the beginning of 1336 Fasli and the rent reserved was Rs. 8,700 which was payable in three instalments, on 15th December, 15th February and 15th June each year. It may be mentioned incidentally that if the mortgage amount of Rs. 1,45,000 carried interest at 6 per cent, the amount of interest payable in any year would be Rs. 8,700.
2. Tawwassul Husain, the lessee, made defaults in payment of the lease money, and several suits were brought from time to time in the Court of the Assistant Collector for realisation of the arrears. Some of these decisions came up to this Court, and one of the decisions, is reported in Makhan Lal v. Mahomed Tawassul Husain : AIR1936All628 .
3. The last suit before the present suit, was filed on 19-11-1938, for the lease money due for the years 1342 to 1345 Pasli, and it was decreed by the Assistant Collector on 11-2-1939.
4. The present suit is for Rs. 28,910, being the lease money due for the years 1346 to 1348 pasli with interest thereon. Several defences were raised in the Court below, but the suit was decreed on 28-8-1942. Against that decree the defendants have filed this appeal.
5. Mr. Pathak on behalf of the appellants has raised before us two points. His first contention is that the mortgage and the lease really amount to one transaction and the claim must be deemed to be a claim for interest on the mortgage and the suit court, therefore be filed in the civil Court and not in the revenue Court. When his attention was drawn, however, to Sections 290 and 291, U.P. Tenancy Act, he admitted that the point was not relevant as the appeal, in any case, would be to this Court. The other point raised by Mr. Pathak is that, by reason of the provisions of Section 7, U.P. Encumbered Estates Act, this suit could not proceed to a trial and the lower Court should have stayed the hearing of the suit.
6. Mr. Pathak has urged that the mortgage and the lease must be taken to be parts of the same transaction and the lease could not, therefore, be treated separately of the mortgage. According to him, the amount claimed as rent on the basis of the lease must be taken to be interest on the amount given under the mortgage. He has, for this proposition, relied on several old cases of this Court.
7. The first case relied on by him was a decision of Straight and Tyrrell JJ. in Beghelin v. Mathura Prasad ('82) 4 All. 430. In that case a mortgage had been executed on 16-3-1874, for a period of ten years. Certain village properties were given in mortgage and the mortgage-deed provided that the mortgagee should take the profits of the land in lieu of interest. It went on to provide that the mortgagee should grant a lease of the land to the mortgagor, the mortgagor paying to the former the profits of the land every harvest in lieu of interest, and if the mortgagor failed to pay the mortgagee-the profits of the land by the end of any year, he should pay interest on the principal amount of the mortgage at the rate of 1 per cent, calculated from the date of the mortgage and in such a case the mortgagee should have no claim to the profits. The mortgage-deed gave the mortgagee the option that if the mortgagor: failed to pay the mortgagee the profits by the end of any year, the mortgagee should be at liberty to cancel the lease and enter on the land and collect the rents thereof and apply the same to the payment of interest. In accordance with, the terms of the contract contained in the mortgage-deed the mortgagee executed a lease in favour of the mortgagor on 21-3-1874. The lease provided that the mortgagor should pay Rs. 1,980 annually as profits in lieu of interest. The mortgagor committed default in payment and the mortgagee filed a suit in the civil Court for interest due on the mortgage at the rate of 1 per cent, calculated from the date of the mortgage to the date of the suit, claiming the same by virtue of the provisions of the mortgage, on the ground that he had not been paid any profits. The mortgagor raised an objection that the suit was not cognisable by the civil Court as it was really a claim by a land-holder against his tenant for rent; and it was on those facts that this Court held that the claim was for interest due on the mortgage. On the special terms of the contract contained in the mortgage, there can be no doubt that the amount claimed was interest. In the body of the judgment their Lordships say:
We think that the mortgage and lease transactions must be regarded as one and indivisible, and that the mere use of the term lease in reference to the mortgagor does not alter his real Character or qualify the proprietary rights that continued in him. In fact, in dealing with the questions raised in the case, they can only be decided qua mortgagor and mortgagee.... The transaction between the parties/ appears to have been primarily one of simple mortgage, the mortgagor continuing in possession and paying over the profits in lieu of interest, with the proviso that, if the profits remained unpaid for one year, the mortgagee might enter upon the property mortgaged, and realize then himself. The other alternative was given him of recovering interest from the mortgagor an the whole sum advanced from the date of the mortgage at the rate of one per cent.
8. The above observations must be confined to the peculiar facts of that case and there is no doubt that, applied to those facts, there can fee no exception taken to those observations. Their Lordships never purported to lay down that if a mortgagee executes a lease in favour of any of the mortgagors and this arrangement is agreed upon at the time when the mortgage transaction is entered into then the mortgage must be deemed to be a simple mortgage.
9. Reliance is placed on similar observations of Banerji and Aikman JJ. in Altaf Ali Khan v. Lalta Prasad ('97) 19 All. 469. Dealing with the question whether, if the mortgagee in possession has granted a lease in favour of his mortgagors, the character of the mortgage 13 changed, their Lordships themselves say that each case must be decided with reference to its own peculiar circumstances.
10. In considering this point, we must bear in mind that, there is nothing illegal in a usufructuary mortgagee executing a lease of the property mortgaged to him and there is no bar to his mortgaging the same in favour of the mortgagor. The mere fact that at the time of the execution of the mortgage it is agreed upon between the mortgagor and the mortgagee that the mortgagor shall be allowed to continue in possession on behalf of the mortgagee, as his lessee, would not necessarily effect a change in the character of the mortgage. For a simple mortgage, it is necessary that the mortgagor should bind himself personally to pay the mortgage money and he should further agree that, in the event of his failing to pay, according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold. This is the definition of a simple mortgage in Section 58(b), T.P. Act. If in the mortgage we find no covenant which binds the mortgagor personally to pay the mortgage money, or gives the mortgagee the right to cause the mortgaged property to be sold, the mere fact that the mortgagee in possession has executed a lease in favour of the mortgagor will not make the mortgage a simple mortgage, nor will it be possible to say that a claim for the rent reserved under the lease is a claim for interest due on the mortgage.
11. I, am therefore, of the opinion that there is nothing in law which would invalidate either the mortgage or the lease that is before us and both are, therefore, perfectly valid and binding documents. I am further of the opinion that the amount claimed in this suit is the amount of rent reserved under the lease. I am supported in this view by the observations of Mukerji J. in Mahomed Karamat Ali Khan v. Ganeshi Lal : AIR1927All552 and by the decision of their Lordships of the Judicial Committee in Mian Feroz Shajh v. sobhat Khan . Their Lordships said:
It is not suggested that there is anything in the Act of 1900, before referred, to which would invalidate a possessory mortgage accompanied by a lease back to the mortgagor, nor do their Lordships think that there is anything in itself suspicious about such an arrangement, The mortgagee may well have preferred to leave the cultivation of the land in the hands of the mortgagor, being entitled to take possession at any time if the provisions of the lease were not adhered to.
12. Section 7(b), United Provinces Encumbered Estates Act (No. xxv of 1934), however; provides:
No fresh suit or other proceedings.... or a process for ejectment for arrears of rent shall, except as hereinafter provided, be instituted in any civil or revenue Court in the United Provinces in respect of any debts incurred before the passing of the said order ; but if for any reason whatsoever such a such a suit or proceeding has been instituted, it shall deemed to be a proceeding pending at the date of the said order within the meaning of Clause (a):
Provided that when a landlord has executed an usufructuary mortgage in respect of any of his land and is in possession of that land as a thekadar of the mortgagee, no fresh process shall issue for his ejectment from that land for arrears of the theka rent.
13. We have, therefore, to consider whether, even if the amount claimed is rent and not interest, it is a claim in respect of any debts incurred before the passing of the said order. The-claim in this case is for the rent due for the years 1346 to 1348 Fasli, that is, for the years 1939 to 1941. If, therefore, reliance is placed only on the lease as, at one time, had been done in the course of arguments Section 7 will only apply if the claim is in respect of debts incurred before the passing of the order under Section 6, Encumbered Estates Act, which order was, in this case, passed on 20th June 1935. Mr. Pathak had, therefore, to fall back on the mortgage and be has urged that even though we may be of the opinion that the mortgage and the lease are both valid and the claim is for rent on the basis of the lease, the lease and the mortgage are, in this case, not so unconnected that it can be said that this is not a claim in respect of a debt, the debt being incurred before the passing of the order under Section 6 and being the amount borrowed under the mortgage. He has urged that the words 'in respect of any debts' must be given a wide interpretation as was done in various decisions of this Court.
14. In this connection he has cited before us the case in Kanhya Lal v. Maheshwar Narain : AIR1938All479 where a suit for specific performance of a contract for the sale of a village, the greater part of the consideration of the sale being for payment of previous debts, was held to be a suit in respect of a debt.
15. In Mukat Behari Lal v. Manmohan Lal : AIR1938All165 a suit for ejectment on the ground that a forfeiture had been incurred by reason of the non-payment of house rent so that the plaintiff lessor had become entitled to eject the defendants lessee under the terms of the lease was held to be a suit in respect of a debt and therefore barred by Section 7(b), Encumbered Estates Act.
16. In Souti Raghubar Dayal v. Amba Prasad : AIR1938All390 a Bench of this Court held that proceedings for the confirmation of sale of property in the hands of a transferee was a proceeding in respect of a debt and had, therefore, to be stayed.
17. From the proviso to Section 7(b), Encumbered Estates Act, it appears that the Legislature had in mind a case where a landlord has executed a usufructuary mortgage in respect of any of his land and is in possession of that land as the thekadar of the mortgagee. Although the subsection exempts a process for ejectment for arrears of rent, which is, therefore, not to be stayed, yet a landlord who has executed a usufructuary mortgage and is in possession of that land as a thekadar of the mortgagee cannot be ejected under this proviso. It is, therefore, clear that the Legislature wanted to give the benefit of this sub-section to the landlord mortgagor who had taken a lease of the property from the mortgagee. Though I am of the opinion that the transaction dated 11th August 1928, amounts to a usufructuary mortgage and the transaction dated 24th August 1928, by which one of the two mortgagors was put in possession of the property as a lessee, was a good lease, yet I have no doubt that both these transactions cannot be said to be unconnected, the lease being executed because of the debt that had been borrowed. This Court has always given the words 'in respect of any debts' a wide significance, and in view of the proviso I am inclined to think that this was justified. I am, therefore, of the opinion that this is a claim in respect of a debt and should have been stayed under Section 7(b), Encumbered Estates Act.
18. Mr. Kartar Narain Agarwala on behalf of the respondent has urged that in the previous Suit, No. 2 of 1938, instituted on 19th November 1938 in the revenue Court at Bijnor, no such objection was taken on behalf of the present appellants, and it is urged that such an objection not having been taken it is not open to the appellants to take that objection now. Learned Counsel has relied on Expln. IV to Section 11, Civil P.C. which says:
Any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit.
Even if that be so, the matter which would be deemed to have been directly and substantially in issue in the previous suit was whether that suit should be stayed. No general or common question was raised that all such suits should proceed in spite of the provisions of Section 7, Encumbered Estates Act, and I, therefore, fail to see how Expln. IV to Section 11, Civil P.C., can bar the suit, even if it were possible to urge this point in view of the mandatory provisions of Section 7, Encumbered Estates Act, which imposes a duty on the Court to stay all suits in respect of debts incurred previous to the date when the order under Section 6 of the Act is passed by the Collector. I am, therefore, of the opinion that the appeal should be allowed, the decree of the lower Court should be set aside and the hearing of the suit should remain stayed under Section 7(b), Encumbered Estates Act. In view of the fact that this point was not clearly taken in the Court below or in the grounds of appeal, I would direct that the parties shall bear their own costs.
19. I agree with my learned brother that, on a correct interpretation of Section 7(b), Encumbered Estates Act, the appeal should be allowed. On the other points, I am not in complete agreement with him and do not express any opinion.
20. The appeal is allowed and the decree of the lower Court is set aside. The hearing of the suit shall remain stayed under Section 7(b), Encumbered Estates Act. The parties shall bear their own costs.