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Chappalli China Satyalingam Vs. Kalidindi China Venkataratnam and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported in(1947)2MLJ385
AppellantChappalli China Satyalingam
RespondentKalidindi China Venkataratnam and ors.
Excerpt:
.....the property so that he could enjoy the property for the amount of principal and interest due on an antecedent debt and though the document recited what was the rent of the property there was no covenant whereunder the so-called lessee should pay that rent. the rent is not even equal to the initial instalment due on the mortgage, so that quite clearly there is a liability under the mortgage to pay interest apart from the credit to be made under the lease......due is to be cancelled, there would be out of those annual payments a sum not exceeding 7 times rs. 79, that is to say, rs. 553 available to go in discharge of the principal, the rest of these annual payments having necessarily to be absorbed by interest according to the terms of the contract. thereafter the annual rent will have to be adjusted firstly towards interest at the scaled down rate of 61/4 per cent. and any balance towards the principal. this is what has been done by the lower appellate court with the result that the mortgage debt is discharged. i agree with the view of the lower appellate court and dismiss the appeal with costs.
Judgment:

Wadsworth, J.

1. This appeal arises out of a petition under the rules framed under Madras Act IV of 1938, praying the Court to scale down the debt due on a mortgage bond dated the 1st February, 1930. The appellant here is the creditor. The debtors borrowed Rs. 1,500 under the mortgage Ex. P-1 on the security of a house site and a house covenanting to pay interest at 12 per cent. The mortgage stipulated that the debt should be repayable in 18 annual instalments consisting of a sum of Rs. 79 towards the principal together with the interest due. In case of default compound interest was to be payable at 12 per cent. On the same date under Ex. P-2, a registered document which is described as a cowl, the mortgagors demised their inam land to the mortgagee for & period of 19 years, the lessee undertaking to pay a rent of Rs. 210 on the 1st of February each year which is the same date as the date on which the instalments were due under the mortgage and get the payments endorsed on the contemporaneous registered mortgage. The lessee also makes himself liable for interest on any arrears of rent and undertakes to pay the taxes due to the Government.

2. It is contended in this Court for the creditor that the mortgage debt is exempt from the operation of Madras Act IV of 1938 by reason of Section 10(2)(i) which exempts any mortgage by virtue of which the mortgagee is in possession of the property mortgaged where no rate of interest is stipulated as due to the mortgagee. It is difficult to see the force of this contention. Firstly, the mortgage quite clearly stipulates a rate of interest as due to the mortgagee. Secondly, it seems to me to be impossible to read the lease and the mortgage as a single transaction making up an usufructuary mortgage whereby the property is put into the possession of the mortgagee. Even if the lease could be treated as creating an usufructuary mortgage by way of additional security for the simple mortgage, it does not put all the property mortgaged into the possession of the mortgagee, for admittedly the house and site which are the properties expressly forming the security for the loan were not handed over to the possession of the mortgagee. Nor is there anything in the lease to indicate that the leasehold property wass to be security for the debt. This is quite different from the case dealt with by the Full Bench in Reference under Stamp Act, Section 46(1). The document in that case, though described as a lease, expressly put the lessee in possession of the property so that he could enjoy the property for the amount of principal and interest due on an antecedent debt and though the document recited what was the rent of the property there was no covenant whereunder the so-called lessee should pay that rent. The lease now under consideration is not only contemporaneous with the mortgage but it contains no recital that the lessee shall hold the property as security for the repayment of the debt. It does contain a covenant that the lessee shall pay a stipulated rent for the property and the only connection between the lease deed and the mortgage is that the rent, year by year, is to be credited towards the mortgage. The rent is not even equal to the initial instalment due on the mortgage, so that quite clearly there is a liability under the mortgage to pay interest apart from the credit to be made under the lease. I have no hesitation in agreeing with the view of the Courts below that the lease deed operates as a separate demise and does not create a mortgage in respect of the leasehold property. Even if it did, the case would not fall under Section 10(2)(i) of the Act for the house and site were not handed over to the mortgagee and it is settled that Section 10(2)(i) has no application unless the whole of the property mortgaged has been handed over to the possession of the mortgagee.

3. It remains to be considered whether the Courts below have correctly adjusted the payments to be made towards the mortgage in the light of the provisions of Act IV of 1938. It seems to me that the position is plain. The mortgage stipulates that each year the interest shall be discharged and a sum of Rs. 79 paid towards principal. The annual interest would amount to Rs. 180 gradually diminishing as the principal is paid off. The document does not stipulate how a payment should be appropriated if it is less than the amount of the annual instalment of principal and interest. The first year's rent under the lease deed would be Rs. 49 less than the amount of the annual instalment. Since the precise appropriation of this payment is thus not settled by the contract and since there was no express appropriation effected by act of parties before Madras Act IV of 1938 came into force, it follows that this payment and the succeeding payments by adjustment of rent must be treated as open payments subject to the limitation that no more than Rs. 79 can be adjusted of each to the principal without discharging the outstanding interest. It follows therefore that on 1st October, 1937, with all interest remaining due is to be cancelled, there would be out of those annual payments a sum not exceeding 7 times Rs. 79, that is to say, Rs. 553 available to go in discharge of the principal, the rest of these annual payments having necessarily to be absorbed by interest according to the terms of the contract. Thereafter the annual rent will have to be adjusted firstly towards interest at the scaled down rate of 61/4 per cent. and any balance towards the principal. This is what has been done by the lower appellate Court with the result that the mortgage debt is discharged. I agree with the view of the lower appellate Court and dismiss the appeal with costs.


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