Natwarlal Deochanddas Gujrathi, ... vs Motilal Raoji Bansi, (Deceased ...
2003 Latest Caselaw 365 Bom

JUDGMENT

A.P. Deshpande, J.

1. The appellants were in occupation of premises, owned by the respondents, as tenants. During the subsistence of lease, as the landlords were in need of money, they executed a document of mortgage by conditional sale in favour of the tenants. The controversy in this appeal revolves around the nature of the document. According to the landlords, the said document creates a usufructuary mortgage with a right of redemption, on tender of the amount; whereas according to the tenants, it was contended before the trial Court, that the document is a sale with a right of repurchase. The tenants have given up their case before the first appellate Court, that the document is a sale and had accepted that the document in question is a mortgage, as such, the said issue is resolved before the first appellate Court on concession made by the tenant. Both the Courts below have decreed the suit for redemption of mortgage and for possession of the premises. So far as decree passed by the Courts below for redemption of mortgage, the same has to be confirmed as the said point was conceded before the first appellate Court, so also, before this Court, by the tenant.

2. The substantial question which emerges for consideration and decision in this appeal reads thus :- "Whether on execution of a mortgage in favour of the lessee by the lessor, during the subsistence of lease results into merger of tenancy rights with rights of mortgagee and whether the deed of mortgage dated 11-9-1964 brought about merger of tenancy and mortgage ? "

3. Both the Courts below on consideration of the oral evidence, so also, the terms of mortgage, have held that the rights of the lessee extinguished on execution of the deed of mortgage. It is held that the rights of the lessee and the mortgagee have merged destroying the lessees rights. The learned Counsel appearing for the appellants has attacked the said finding by contending that without there being sufficient material on record to come to the conclusion, in favour of merger of rights, the said finding has been recorded and the same is not sustainable in law. It is also contended that general rule is against merger and merger cannot be readily inferred. He has contended that implied surrender of lease cannot be inferred in the absence of a clear statement or obvious indication in that regard in the deed itself.

4. As against this contention of the appellants, it is submitted by Mr. Mantri, learned Counsel appearing for the respondents, that in the present case, the intention of the parties was to effect merger of rights of lessee with that of the rights of the mortgagee and that there had been surrender of the tenancy when the deed came to be executed. It is submitted that the oral evidence and the terms of the document clearly reveals the intention of the parties that the lessee was to cease to possess the property as a tenant and was to possess the same only in the capacity as a mortgagee.

5. Both the learned Counsel have taken me through the document of mortgage deed. To appreciate the terms of deed of mortgage, I have scrutinized the deed carefully and on scrutiny thereof, I have noticed the following features :

(i) The deed of mortgage is executed by the landlord in favour of the tenant who was in possession of the premises as tenant, during subsistence of lease. As the landlords were in need of money to defend and/or prosecute some litigation pending in the Court, a mortgage deed is executed. On the date of execution of the mortgage, the tenant was in possession of the suit premises under a subsisting lease.

 (ii) The    redemption     of
mortgage    under    the    deed   was

permissible after initial period of 2 years from the date of execution of the deed dated 11-9-1964 and the last date for payment of the amount was before expiry of 7 years i.e. on or before 10-9-1971. In other words, the total period before which redemption could be sought were 7 years with initial 2 years being locking period. It is clear that for initial 2 years, the mortgagee had a right to possess the mortgaged property and was entitled to the usufructs thereof meaning thereby, that the mortgagee / lessee was not to pay rent.

(iii) In the concluding portion of the mortgage deed, a categorical statement is made that on payment of sum of Rs. 5,000/- within the time prescribed, the possession of the property will be restored to the mortgagors / landlords and even after restoration of the property, the mortgagee will continue to possess the premises as tenant, as before, in that capacity.

(iv) The municipal and other taxes in regard to the property were to be paid by the mortgagor; and

(v) The mortgage deed does not make any reference in regard to the payment of interest and/or in regard to payment of rent during the period of mortgage. Both the learned Counsel have stated that, as a matter of fact, neither rent was paid nor was interest paid.

6. In so far as oral evidence is concerned, the landlord had deposed that on the date on which the deed of mortgage was executed, the tenant had handed over the possession as a tenant and simultaneously mortgagor had handed over possession to the mortgagee. It is obvious that this so called handing over of possession by the tenant to the landlord and thereafter handing over possession by the mortgagor to the mortgagee is symbolic and not actual. It is also to be noted that this factum of simultaneous handing over of possession does not find place in the mortgage deed. But this piece of evidence is relied upon by the first appellate Court to hold that there had been surrender of the tenancy rights by the tenant on execution of the mortgage deed in his favour. Before I proceed to consider as to whether the findings recorded by the Courts below are correct or otherwise, I proceed to deal with the legal position.

7. Mr. Agrawal, learned Counsel appearing for the appellants, placing reliance on the judgment of the Apex Court , in the case of Nirmal Chandra Vs. Vimal Chand, has contended that as a general rule, there cannot be automatic merger of the mortgage and lease and two operate independent of each other and on redemption of the mortgage lease survives. The Apex Court after having retrospect of earlier decisions touching the question, has held in para 8 of the judgment thus : "From a perusal of the decisions of this Court as indicated above, it clearly emerges that there is no automatic merger of two rights where mortgage is executed in favour of a tenant and on redemption of mortgage, the tenancy rights kept in abeyance would revive and entitle the tenant to continue in possession even after the redemption of the mortgage. On execution of mortgage, tenancy rights would terminate only if it is clear expressly or impliedly by conduct or other related circumstances that the parties had intended so which would be a question of fact. Thus as a normal rule except in intention being to the contrary, mortgage and lease operate independent of each other and on mortgage coming to an end by redemption, tenancy would revive. "

In the said judgment, the Apex Court has also held that relief of possession cannot be granted to the landlord on redemption of the mortgage in the absence of merger of tenancy and mortgage and the landlord has to file an eviction suit under the relevant provisions of the Rent Control Act.

8. The next judgment on which reliance is placed by the learned Counsel for the appellants is , in the case of Narayan Vishnu Hendre and others Vs. Baburao Savalaram Kothawale, since deceased by his heir Anant Baburao Kothawale. While examining the question of determination of lease by implied surrender, the Apex Court has held that implied surrender cannot be readily inferred in the absence of any clear statement or indication in the deed. In the said case, the mortgage deed did not stipulate delivery of possession on redemption. One similar circumstance also finds place in the deed which fell for consideration before the Apex Court and the case in hand i.e. no interest was to be paid by the mortgagor and no rent was payable by the mortgagee. In para 12 of the said judgment, the Court held thus :

"The determination of lease is provided by Section 111 of the Transfer of Property Act (hereinafter referred to as the Act). The trial Court, the first Appellate Court as well as the High Court were of the opinion that the lease stood determined by virtue of the applicability of clause (d) of Section 111 of the Act which provides that a lease of immovable property is determined in case the interest of the lessee and the lessor in the whole of the property becomes vested at the same time in one person in the same right. This proposition has been expressly repelled by this Court in following cases. "

Perusal of the said judgment reveals that on execution of a mortgage, the lessees rights were kept in abeyance and they stood revived upon the redemption of mortgage.

9. The learned Counsel appearing for the appellant has then invited my attention to a judgment , in the case of Nemi Chand Vs. Onkar Lal. In para 6 of the said judgment, the Apex Court has observed thus :

"The decree for redemption only redeemed the mortgage and did not determine the lease. That is a relationship which still subsists and is determinable according to law. See the principle stated by this Court in Nand Lal v. Sukh Dev, 1987 (Supp) SCC 87, Shah Mathuradas Maganlal and Co. v. Nagappa Shankarappa Malage, and Gambangi Applaswamy Naidu v.

Behara Venkataramanayya Patro, . "

10. The perusal of the said judgments leave no room of doubt that the general rule is that there is no merger of tenancy and the mortgage. The general rule is further to the effect that surrender of tenancy is not to be readily inferred. In the light of the legal position, which emerges from the judgments of the Apex Court, I proceed to examine the crucial document to find out, as to what was intended and agreed by the parties. To me, the concluding part of the document squarely clinches the issue inasmuch as, it recites, that on payment of Rs. 5,000/- before the expiry of the period, the possession would be restored to the mortgagor and it further goes to clarify by stating that inspite of the fact that the premises though taken in possession by the mortgagor, still the mortgagee would continue to be in possession as before, as a lessee, even thereafter. A conscious attempt is made to put things beyond doubt that inspite of the redemption of the mortgage, the tenant would continue to possess the property in the capacity as a tenant. If this be so, there cannot be any doubt that the present matter is covered by the general rule and it does not make an exception to the general rule.

11. Even the concluding part of the deed, which speaks of putting the mortgagors in possession of property on redemption of mortgage, also postulates symbolic possession or notional possession and not the actual possession. The actual possession was that of the tenant prior to the execution of mortgage deed, and during the subsistence of the mortgage the rights of the tenant remained eclipsed and the same revived after the redemption of mortgage.

12. The Courts below have relied upon the conduct of the defendants as one of the grounds to infer surrender of tenancy. The Courts below have held that the defendants did not try or even attempt to assume any character other than that of the owner of the property.

What is relevant to note is that alternative plea were raised. No doubt, in the first place, the defendants claimed that the document is sale and hence, the defendant is the owner of the property. But at the same time, alternatively it was contended that if it is found that the defendants are not the owners, then they are in possession of the property as a tenant, as the tenancy rights revived on the redemption of mortgage. There is nothing wrong with the alternative pleas raised. The alternative plea has not been considered in its proper perspective and the same is rejected by holding that the defendants claimed the ownership. The said approach of the Courts below, not being in tune with the settled legal principles, needs to be rejected.

13. In my opinion, both the Courts below have erred in law in holding that tenancy rights were surrendered by the mortgagee on execution of the mortgage deed. The said view taken by the Courts below run counter to the law laid down by the Apex Court and hence is not sustainable.

14. Mr. Mantri, learned Counsel appearing for the respondents, has heavily relied upon the judgment , in the case of Shah Mathuradas Maganlal and Co. Vs. Nagappa Shankarappa Malaga and others. In the facts of the said case, the Apex Court has held that there was surrender of tenancy on execution of the mortgage. The said finding recorded by the Apex Court was in the light of the peculiar features surfacing in the said matter. In the said case, the Court held that the mortgage deed establishes beyond doubt that the effect of the deed was inconsistent with the continuance or subsistence of the lease because the parties themselves stipulated that the lease was to exist only upto 6th November 1953. On redemption of the mortgage the respondent had a right to recover possession both on the terms of the mortgage deed and under Section 62 of the Transfer of Property Act. The clear and most important feature, which was noticed in the mortgage deed was, that the mortgagee was given power to sublet and the provision enabling subletting shows that the character of the tenant is lost because under the Bombay Rent Act, tenant was not competent to sublet the premises.

15. It would depend on the facts of each case and the language used in each deed as to whether there occasiones a merger or whether the two rights subsist, independent of one another.

16. Mr. Mantri, learned Counsel appearing for the respondents, has then prayed for remand of the matter to the trial Court with a view to permit the respondent / plaintiff to lead evidence for making a claim for possession under the Rent Act. He submitted that the plaintiff had attempted before the trial Court by moving an application for framing of necessary issues under the Rent Act, but as the said application was rejected, the plaintiff was precluded from making out a case for possession under the Rent Act. The order passed by the trial Court was not called in question. There are no issues framed and no evidence led and there is no consideration of this point by the Courts below and hence, I do not feel it necessary to remand the case to the trial Court. It shall be very much open for the plaintiff to institute a fresh suit for obtaining possession from the tenant under the Rent Act, by making out a case thereunder.

17. From the discussion made herein above, it is clear that the judgment and decree passed by the Courts below granting redemption of mortgage has to be confirmed and the judgment and decree to the extent, it relates to delivery of possession, the same is required to be quashed and set aside. It is made clear that the possession of the Appellants would be in the capacity of Tenant and it shall be open for the Respondents to file a suit for recovery of possession under the relevant Rent legislation, if they so choose.

18. In the result, appeal is party allowed. The operative part of the order passed by the learned Civil Judge (Junior Division), Erandol, dated 31-8-1984, in Regular Civil Suit No. 175/1979, contained in para 2(ii), is modified. The bracketed portion viz. (......deliver up to the Plaintiff quiet and peaceful possession of the said property.), be and is hereby deleted and at its place, substitute the following : " ......deliver to the Plaintiff symbolic possession of the property under the mortgage. "

In the facts and circumstances of the case, there shall be no order as to costs.