Akella Jagannadham and Others vs Venuthurupalli Narasimham and Others

Patanjali Sastri, J.—This appeal has been preferred by defendants 1 to 13 who represent the mortgagees under a usufructuary mortgage

executed on 11th November 1893. The mortgagors now represented by respondents l to 3 brought the suit for redemption of the mortgage. The

mortgage was for a sum of Rs. 625 and the document provided that the sum should carry interest at the rate of Re. 0-10-8 per cent. per month. At

this rate which is equivalent to 8 per cent. per annum the annual interest on the mortgage money amounted to Rs. 60. The document recites that a

fixed rent of Rs. 50 per year was settled in respect of the lands some of which had been cultivated and were in the occupation of tenants, the

others being waste lands and then proceeds as follows:

Therefore, towards the interest due on the aforesaid sum principal you shall enjoy the said lands for a period of 60 years, that is, from the current

year Vijaya (1893) to the end of the recurring Vijaya year, viz, 1953, by way of leasing out the said lands etc., and enjoying as you like the

usufruct therein. After the expiry of the stipulated period, that is, after the end of 60 years, on our paying to you at the commencement of Mosham

of any year, the principal amount, you shall immediately deliver possession of the lands and the document to us. As the profit or loss in respect of

the lease etc, relating to the lands is only yours, you shall raise extensive cultivation in the said lands and enjoy the same. You shall not be entitled to

claim (any amount) towards the repairs executed by you in respect of the said lands after the expiry of the stipulated period. Even if we should

offer to pay to you the principal amount within the stipulated period you are not bound to receive the same but shall enjoy the said lands as you

like.

The other provisions of the deed are not material for the purpose of this appeal. Notwithstanding that the period stipulated in the deed has not yet

expired, respondents 1 to 3 claim to redeem the properties on the ground that under the Madras Agriculturists'' Relief Act the whole debt must be

deemed to have been discharged by the mortgagee receiving the profits from the land at the rate of Rs. 50 per year and that therefore the

mortgagee was bound to deliver back possession of the lands.

The suit was resisted mainly on three grounds : first, that the Act was not applicable to the debt in question as the mortgage debt had been

assigned to defendants 12 and 13 who were widows of the mortgagee''s family entitled to maintenance as against the members of the family and

that therefore the debt was exempted u/s 4 (h) of the Act; secondly, that even if the Act was applicable, the debt was not liable to be scaled down

under the provisions thereof as the receipt of the profits by the mortgagees under the terms of the deed could not be regarded as payments by the

mortgagors within the meaning of Section 8 (2) of the Act; and thirdly, that even if such receipts could be regarded as payments and the debt must

be deemed to have been discharged, the provision that the mortgagees should continue in possession of the properties for a fixed period of 60

years would disentitle the mortgagors to claim possession of the properties before the expiry of that period and that the suit was accordingly

premature.

The trial Court dismissed the suit upholding the second of these contentions, namely that there were no payments within the meaning of Section

8 (2) of the Act. It also accepted another contention raised by the defendants, namely, that the debt was not payable at the commencement of the

Act because the time for payment had not yet arrived under the terms of the bond. As this Court has held that the word ""payable"" in Section 7

means only recoverable"" and that it would be sufficient for the purposes of the Act if the liability had been incurred at the commencement thereof,

this contention was not pressed in this Court. The trial Court negatived the contention regarding the assignment of the debt to defendants 12 and

13, holding that the assignment was not valid because the mortgagors were not consenting parties to it. In the result it dismissed the suit. On appeal

by respondents 1 to 3 herein, the learned Subordinate Judge while agreeing with the trial Court as regards the alleged assignment of the debt to

defendants 12 and 13, differed on the question of the liability of the debt to be scaled down under the provisions of the Act. He held that the bond

having provided for a rate of interest, the exemption u/s 10 (2) (i) of the Act did not apply and that the receipt by the mortgagees of the rents and

profits of the property were payments by the debtors within the meaning of Section 8 (2) of the Act. On that footing as admittedly more than Rs.

2000 had been received by the mortgagee''s family, he held that the debt must be deemed to have been discharged and that therefore respondents

1 to 3 herein were entitled to redeem. He accordingly remanded the suit to the trial Court for disposal after determining sundry other issues raised

in the case which were left undetermined by that Court.

This Court had occasion to consider at some length in Manavala v. Mohamed Yoosuf (''43) 30 A.I.R l943 Mad. 100 the question whether the

receipt of the profits by a mortgagee holding possession under a usufructuary mortgage which imposed no obligation on him to account for the

profits of the property and provided for redemption on payment merely of the principal sum. secured could be regarded as payments by the debtor

within the meaning of Section 8 (2) of the Act, and it was pointed out that unless there was something in the nature of a settlement or adjustment

between the debtor and the creditor whereby the rents received were adjusted towards the interest made payable under the bond there would be

no constructive payment in such cases. If the bond for instance, had provided for interest to be paid to the mortgagee at a particular rate

irrespective of the yield which the mortgagee might derive from the property, and the mortgagee on his part had undertaken to adjust the rents

received towards the interest thus made payable to him and to account for the balance if any there would be a case for holding that there was a

constructive payment when the rents were so adjusted towards interest. But that is not the position under the terms of this bond. Though interest at

a particular rate was mentioned, there is no provision in the bond that if the yield of the property was less than the estimated rent of Rs. 50 the

mortgagor was liable to make good the deficiency. Nor on the other hand was it stipulated that if during any year the mortgagee received more

than the estimated rent from the land he was to be accountable to the mortgagor for the excess over such rent. The deed expressly provides that

the mortgagor should be entitled to redeem the property on payment of the principal sum alone. Under these circumstances, as pointed out in

Vasudevan Nambudiri v. Manavikraman AIR 1943 Mad 525 the mention of interest by the parties could only be regarded as made for the

purpose of assessing the return to the mortgagee on the amount invested by him on the basis of the estimated yield. The position here is very

similar, and it follows therefore that the receipt of the profits by the mortgagees could not be regarded as payments by the debtor for the purpose

of Section 8 (2) of the Act. In this view the mortgage debt cannot be deemed to have been discharged under the Act.

Mr. Ramanarasu for the respondents submitted that in view of the long period during which the mortgagee''s family has been in possession he

should be allowed to redeem the'' property on payment of the debt; but it is difficult to see how the mortgagors can be allowed this right before the

expiry of the period stipulated in the mortgage. It has been held in several cases that a stipulation that the mortgagee should continue in possession

for a specified period cannot be regarded as a clog on the mortgagor''s equity of redemption; in fact, the mortgagor''s right to redeem arises only

on the expiry of the period, in such cases, and there can be no question of any clog on such right.

As there will be no scaling down under the Act, it is unnecessary to consider the exemption claimed by defendants 12 and 13 on the footing of

their ownership of the debt.

In the result, the appeal is allowed, the order of remand made by the lower appellate Court is set aside and the decree of the trial Court dated

23rd December 1940 is restored. The appellant will have his costs in this and in the lower appellate Court. Leave to appeal is refused.