1. The facts of this case are set out in details in the judgment of my learned brother. He has fully dealt with the various points urged by learned counsel.
2. After a possessory mortgage deed is executed the mortgagee may be in actual occupation of the mortgaged property or the property may be in the possession of tenants. Where a mortgagee is himself in occupation of the property the question arises as to how his income from it is to be calculated. Once a mortgagee took possession of the mortgaged property equity treated the mortgagee much as if he was a trustee. He had to render intelligible accounts; he was liable to account not merely for the profits which he in fact received, but for those which he might have received but for his own wilful default; he was liable for any damage to the property resulting from his bad management; he had to apply, if necessary, any surplus income, after paying the current interest on the mortgage debt, of keeping the mortgaged premises in repair, he was not to waste etc., and where he occupied any of the mortgaged property for his own use he had in his account to give credit in the profits for a full occupation rent. Jessel M.R. in Shepard v. Jones (1882) 21 Ch. D. 469 at p. 475 says : 'I have always understood that occupation rent is only charged against a mortgagee who occupies.' That being the English law, when the framers of the Transfer of Property Act came to deal with the liabilities of a mortgagee in possession they said in Section 76(h)
his receipts from the mortgaged property, or where such property is personally occupied by him, a fair occupation rent in respect thereof, shall, after deducting the expenses properly incurred for the management of the property and the collection of rents and profits and the other expenses mentioned in Clauses (c) and (d) and interest thereon, be debited against him in reduction of the amount, if any, from time to time due to him on account of interest etc
3. Mr. C.S. Saran on behalf of the mortgagee has urged that Section 9, U.P. Debt Redemption Act, does not make any change in the law, and the mortgagee in possession is liable to pay only a fair occupation rent as that is supposed to be the profit that he has made. He has urged that the mortgagor could not have complained if the mortgagee had let out the premises at a fair occupation-rent and if the mortgagee instead of letting out the premises to a tenant occupies it himself he cannot be put in a worse position, and all that the mortgagor should expect is the occupation rent as provided for in Section 76(h), T.P. Act. As a matter of general principle I can see much force in the submissions made by learned counsel. In Sarju Prasad Singh v. Randhir Singh Civil Revn. No. 325 of 1944, I said:
To my mind, the fair mode of calculation, if it is not possible to find the actual value of the produce, would be to find at what rate the land in possession of the mortgagees could be let out to non-occupancy tenants. It must be remembered that a tenant not only provides seeds and manure but gives a lot of his time and labour in ploughing and watering the field and in sowing the crops, and he also takes the risk of the possible failure of crops.
It would be noticed that under the English law a mortgagee in possession is liable not merely for the profits which he in fact received but for those which he may have received but for his wilful default : see Mayer v. Murray (1878) 8 Ch. D. 424. Even though a mortgagee is liable to account in the footing of wilful default, yet if he is in actual occupation of the property he is to pay only the-fair occupation rent and not to account for the entire profits that he may have made. The reason for this is obvious. A fair occupation rent is deemed to be a fair measure of the profits which a mortgagor is entitled to claim in an account on the mortgage.
4. Section 9, Debt Redemption Act, provides that:
Notwithstanding anything to the contrary in any law, decree or contract or in any agreement purporting to close past transactions, the Court shall determine the principal and take into account all sums paid by or on behalf of the debtor and in the case of a mortgage with possession, the net profits realized by the mortgagee or which with the exercise of ordinary diligence might have been realised by him, and shall determine the amount, if any, due by the debtor in accordance with the provisions of the following sub-sections....
The question raised by Mr. C.S. Saran is that the section does not alter the law and there is no specific provision in this section about a mortgagee in occupation of the property, and that being so the mortgagee is liable to pay the fair occupation-rent in accordance with the provisions of Section 76(h), T.P. Act.
5. The wordings of this section are, however, very similar to the wordings of Section 2(12), Civil P.C. (Act V of 1908) where 'mesne profits' has been defined as profits which the person in wrongful possession of such property actually received or might with ordinary diligenoe have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession. The only difference being that while in this section the mortgagee in possession is said to be liable to account for net profits, in the definition of 'mesne profits' the word 'net' has been omitted though 'profits' in the absence of anything to the contrary mean 'net profits' and not 'gross profits.'
6. In Sant Ram v. Ram Bilas : AIR1944All283 a Bench of this iCourt held that the mortgagee in possession has ito account for all the net profits received by him under Section 9, Debt Eedemption Act. That ruling is binding on us. Moreover, the point raised by Mr. C.S. Saran was not raised in the Court below, with the result that we have no materials from which to find what would be the fair occupation rent. Under the circumstances I agree with my learned brother that these appeals must fail and they are dismissed with costs.
Bind Basni Prasad, J.
7. This appeal and F.A. No. 320 of 1943 arise out of a proceeding under Section 12, U.P. Agriculturists' Belief Act, 1934, for the redemption of a usufructuary mortgage dated 11-10-1922. The property mortgaged consists of the zamindari in the village of gamera Chandrauli and 10'97 acres of sir and khudkasht. The mortgage money was Rs. 17,000. The mortgagee duly entered into possession of the property after the execution of the mortgage deed. In their applications for the redemption of the mortgage, the mortgagors contended that, the entire mortgage money had been paid up from the usufruct of thec property. They accordingly claimed the possession of the mortgaged property by redemption witLout the payment of any sum of money.
8. The mortgagees contested the application for redemption on various grounds. In the two appeals we are concerned only with one ground of defence, namely that no part of the mortgage money has been satisfied from the usufruct of the property.
9. The learned Civil Judge held that the usufruct from the property satisfied the entire interest on the mortgage money and a sum of Rs. 4,450 of the principal amount. In the result, he decreed the claim for redemption on payment of Rs. 12,560 within six months from the date of hia order.
10. First Appeal No. 320 of 1944 has been brought by Baghunandan Khagi, one of the mortgagors. The other appeal has been brought by Kashi Prasad Dichhit, mortgagee.
11. On the one hand, the mortgagors' contention in this Court is that the learned lower Court has under-estimated the profits of the mortgaged property; while, on behalf of the mortgagee, it is contended that the Court below has over-estimated the profits of the property. Hence the only point for determination by us is whether or not the profits of the mortgaged pro-perty have been correctly determined by the learned Civil Judge.
12. According to Sub-section (2) of Section 9, U.P. Debt Bedemption Act, 1940, the mortgagee is entitled to interest at ii per cent, per annum notwithstanding anything to the contrary in the contract. The total interest to which the mortgagee in in this case is thus entitled is Rs. 765 per annum.
13. Sub-section (1) of Section 9 of the said Act provides as follows:
In a suit to which this Act appliesthe Court shall, notwithstanding anything to the contrary in any law, decree or contract, or in any agreement purporting to close past transactions, determine the principal and take into account all sums paid by or on behalf of the debtor, and in the case of a mortgage with possession, the net profits realised by the mortgagee or which with the exeroise of ordinary diligence might have been realised by him and shall determine the amount, if any, due by the debtor in accordance with the provisions of the following sub-seotions.
14. The learned Civil Judge held that the annual income from the mortgaged property was Rs. 985-12-11, as detailed below:
Rs. as. p.
(A) rental ... ... ... 853 12 11
(B) from 1 bigha under sugaroane 70 0 0
(C) from 16J bighaa under other crops.495 0 0
(D) from grove ... ... 35 0 0
(K) from bonds ... ... 20 0 0
(F) from charas ... ... 12 0 0
Total Rs. 985-12-11.
15. Of the six items given above, the parties dispute only items Nos. (B) and (C). The other items are not disputed.
16. The evideree which the parties produced consisted of four witnesses by the mortgagors and four by the mortgagee, and, as ususal, there was a wide divergence between these two sets of witnesses as regards the income from the above two sources. Dalsingar, mortgagor, stated that the annual income from the land under sugarcane was Rs. 376 and that from the land under other crops was Rs. 200 per annum. On the other band, Binda Prasad, one of the witnesses produced by the mortgagee, stated that the income from the land under sugarcane was Rs. 30 only, and that from the land under other crops was Rs. 10 only per annum. The learned Civil Judge, on a consideration of the evidence and having regard to the quality of the land and in view of his own experience, fixed the annual profits as above.
17. The first point which has been argued on behalf of the mortgagee is that the very basis adopted by the learned Civil Judge in determining the 'net profits' is erroneous. Keliance is placed upon Clause (h) of Section 76, T.P. Act,' and it is argued that a 'fair occupation rent' was the correct basis for the determination of the profits of the mortgaged property. It is argued that Section 9, Debt Redemption Act does not make Clause (h) of Section 76, T.P. Act, inapplicable to a case of this nature. I disagree with this contention. Section 9, Debt Redemption Act applied 'notwithstanding anything to the contrary in any law.' There is contrariety between the provisions Section 9, Debt, Redemption Act and those of Section 76(h), T.P. Act. According to the former, the 'net profits' realised by the mortgagee or which with the exercise of ordinary diligence might have been realised by him are to be debited against him. While, according to Section 76(h), T.P. Act, it is the 'fair occupation rent' of the mortgaged property after deducting the expenses properly incurred for the management of the property and the collection of rents and profits and other expenses which can be debited against him. There is a great difference between the 'net profits' of a property and its 'fair occupation rent.' 'Net profits' are always larger than the 'fair occupation rent.' A tenant who takes any land on 'fair occupation rent' will always do so for some profit. This profit element cannot be debited against the mortgagee according to Section 76(h), T.P. Act, but under Section 9, U.P. Debt Redemption Act it has to be debited against the mortgagee.
18. Learned Counsel for the mortgagee relies upon pages 316 and 317 of 'Treatise on Statute Law by Craies' in support of his contention that Section 9, Debt Redemption Act does not abrogate Section 76(h), T.P. Act. I am of opinion that the princeples of interpretation laid down there do not lead to this conclusion. The author observes:
When two statues, although both are expressed in affirmative language, are contrary in the matter, the latter abrogates the former.
It is true that repeal by implication should not be favoured; but where the language leaves no room for doubt that the provisions of a former statute are inconsistent with those of the later one, the former should be deemed to have been abrogated by implication. As already shown above, the provisions of Section 9, Debt Redemption Act in respect of the amount to which a mortgagee should be debited are quite different from those contained in Section 76(h), T. P Act, hence the provisions of Clause (h) of Section 76, T.P. Act, will not apply to the present case.
19. Learned Counsel for the mortgagee has also contended that apart from the provisions of Clause (h) of Section 76, T.P. Act, the 'fair occupation rent' is the proper basis for the determination of the 'net profits,' and, in this connection, he ielies on para. 1122 at p. 747 of 'Law of Mort-gagee' by Jones, Edn. 7, and on pp. 48 and 49 of 'Mortgages' by Strahan, Edn. 8, where it has been laid down that the mortgagee is liable only for a 'full occupation rent.' These principles cannot apply in the face., of the clear statutory provision in Section 9, Debt Redemption Act, that the 'net profits' are to be debited against the mortgagee.
20. The law prescribes that the 'net profits' realised by the mortgagee or which with the exercise of ordinary diligence might have been realised by him, shall be determined by the Court. No method of calculation of this amount has been provided for in Section 9, U.P. Debt Redemption Act. The determination of this amount is a question of fact, and, like all other questions of fact, the Court has to determine it on the basis of the materials placed before it. No hard and fast rule as to the method of determination of this amount can be laid down. Where a mortgagee has maintained regular accounts of income from land and of cost of production the best method would be to ascertain the 'net profits' from such accounts. Unfortunately, it is very rare that such aocounts are maintained by mortgagees. A usufructuary mortgagee may be in possession of land in two ways (i) through tenants and (ii) by his own cultivation. In the case of the property in occupation of the tenants, it is not at all difficult tO ascertain the income because there usually exist documentary evidence of the rental demand. The difficulty always arises in the ease of land in the cultivation of mortgagees. There being no acoounts, the question arises as to what 'net profits' were actually made by the mortgagee from such land. The oral evidence adduced by the parties is usually very divergent. In some cases parties confine themselves to such oral evidence. In some eases parties give an indica-tion of the 'net profits' by filing certified copies of rent rates. Those rent rates give one a fairly good idea of the 'net profits' of agricultural land. Prom Section 63, U.P. Land Eevenue Act, 1901, it will be seen that when any local area is brought under settlement, the Settlement Officer inspects every village in the local area, divides it into soil classes and assessment circles and then, in accordance with the provisions of Sections 110 and ill, U.P. Tenancy Act, 1939, selects rent rates, publishes them, and then submits them to the Board of Revenue which, after considering any objections which may be made, sanction the rent rates. These rent rates form the basis of assessment of land revenue. It will be seen from Section 110, Tenancy Act, 1939, that all relevant factors are taken into consideration in fixing the rent rates. Section 110 provides as follows:
(1) The rates proposed by the rent-rate officer for hereditary tenants shall be such as will result in rents payable without hardship over a series of years by cultivating hereditary tenants with substantial holdings and shall be based on genuine and stable rents paid by such tenants.
(2) In considering whether the genuine and stable rents paid by such tenants are payable without hardship over a series of years the rent-rate officer shall have regard to and compare (a) the level of rents paid by tenants who held or were admitted to land at different times and in particular the level of rents agreed to by tenants who were admitted to holdings in or between the years 1309 Fasli and 1313 Fash; (b) the prices of agricultural produce prevailing at suoh times; (c) changes in the crops grown and in the amount of the produce; (d) the value of the produce with a view to seeing that the valuation of the holdings of hereditary tenants at the proposed rates does not exceed one-fifth of suoh value; (e) the expenses of cultivation, and the cost to the cultivator of maintaining himself and his family.
21. From Clause (d) of Sub-section (2) it will be seen that value of the holdings of hereditary tenants at the proposed rates does not exceed one-fifth of such value. Hence five times the rent-rate of the land in question would give the profits, and if we deduct from it a certain percentage for cost of cultivation the 'net profits' can be arrived at. It is to be noted that the expenses of cultivation and the cost to the cultivator of maintaining himself and his family are already taken into consideration in fixing the 'rentates.'
22. In, the present case, however, the parties adduced no documentary evidence as regards the soil classification or rent-rate. Hence the method just mentioned for the determination of profits cannot be adopted.
23. At this stage I may refer to certain decided cases of this Court on the question of the determination of profits of mortgaged property. In Sant Ram v. Ram Bilas : AIR1944All283 a Division Bench of this Court held that if it is known or there is a method of knowing the precise amount which the mortgagee has realised out of the land in his possession then those profits must form the basis of calculation under Section 9, Debt Redemption Act. It was further held that a sound basis of calculation was to ascertain the usufruct and deduct therefrom the cost of production. This authority is against the contention advanced on behalf of the mortgagee in the present case. The trial Court in that case had adopted the letting value of the plots as the basis for calculation of profits. On appeal, the learned District Judge dissented from that principle and he held that the true basis of calculation was 'usufruct minus the costs of production.' This Court upheld the District Judge's finding.
24. In second Appeal No. Ram Adhar Misir v. Rup Narain Misir S.A. No. 2282 of 1943, a learned Single Judge of this Court held that the rental basis was the correct basis for the calculation of profits.
25. In Sarju Prasad Singh v. Randhir Singh Civil Revn. No. 325 of 1944, the principle adopted in Ram Adhar Misir v. Rup Narain Misir S.A. No. 2282 of 1943 was applied by a learned Single Judge of this Court.
26. It will be seen that in neither of the two last mentioned cases, the attention of the Court was invited to the Division Bench ruling in Sant Ram v. Ram Bilas : AIR1944All283 .
27. I have also been referred to the case in Pran Dei Kunwari v. Ganga Prasad : AIR1948All54 . This case, however, is no authority for the point under consideration because it was held in it that the provisions of the Debt Redemption Act were not applicable to that case.
28. Another argument on behalf of the mortgagee is that from the word 'realised,' occurring in Sub-section (1) of Section 9, U.P. Debt Redemption Act, 1940, it must be taken that the rental basis was in the mind of the Legislature for the calculation of the net profits. It is argued that profits can only be realised from a person. I do not agree with this. Profits may be realised from properties also. If this argument is accepted, it would lead us to the absurd position that no profits made by a mortgagee from the property in his actual possession can be debited to him as they were not realised from any person, but were made by the mortgagee himself.
29. Thus, as already stated no hard and fast rule can be laid down for the method to be adopted for the determination of the 'net profits' of mortgaged property under Section 9, U.P. Debt Redemption Act. The same should be determined on the basis of the evidence adduced by the parties.
30. From the mortgage-deed it will be seen that if the possession of the mortgaged property was handed over to the mortgagee then the mortgagors would have no claim in respect of mesne profits and the mortgagees would have no claim for interest. It was further provided that if on account of any defect in title or for any other reason the mortgagee fails to get possession of the village or sir and khudkasht lands, then the mortgagee would have the right to recover the mortgage money with interest at the rate of two per cent, per mensem. The latter provision was probably a penal clause.
31. The learned Civil Judge has put down the annual profits of the property at Rs. 985-12-11 which works out at about Rs. 5-10-0 per cent, per annum. This is not a rate which can be said to be unusual in that part of the Province to which this transaction relates. Usufructuary mortgages are made so as to bring an yield of about six per cent, per annum. Hence, tested from this point of view, the figure arrived at by the learned Civil Judge appears to be reasonable.
32. The net profit of Rs. 70 per bigha from the land under sugarcane and of Rs. 30 per bigha from the land under other crops, adopted by the learned Civil Judge, appears to be a fair conclusion on the basis of the evidence adduced by the parties.
33. I find no valid reason to differ from the conclusion reached by the learned Civil Judge. I would, therefore, dismiss both the appeals with costs.
34. Both the appeals are dismissed with costs. The time for depositing the mortgage amount is extended by a period of three months from this date.