Elumalai Padayachi vs District Revenue Officer and Another

V. Ramaswami, J.—In order to appreciate the question of law that is raised in this writ appeal, we may notice a few relevant facts. The

second respondent is the owner of two blocks of land; one measuring an extent of 1.32 acres and comprised in S. Nos. 57/182, 47/4, 56/1 and

55/2 in Siruvanur village, North Arcot Df. The other block is an extent of 2.02 acres and Comprised in S. Nos. 56/2, 56/3, 56/4, 56/6 and 250/2

in the same village. The appellant filed an application u/s 4(2) of the Tamil Nadu Agricultural Land Records of Tenancy Rights Act 10 of 1968,

hereinafter referred to as the Act, for inclusion of his tenancy over these two blocks of lands in the approved records of tenancy rights relating to

Siruvanur village. It was on the ground that under Ex. B10, dated 14.10.1971, the first block of land was leased to the appellant for a cash rent of

Rs. 3,000 for a period of five years, which worked out of Rs. 600 per year and the second block under Ex. P11 for a period of five years, for a

cash rent of Rs. 900 per year. This application was resisted before the Tahsildar on the ground that subsequent to these lease deeds, the landlady

borrowed a sum of Rs. 5,925 from the tenant under a promissory note dated 12.4.1973, and on the same date, she executed what is styled as a

varthamanam document in which it was stated that in lieu of interest payable under the promissory note, the appellant will hold the property under

an oral usufructuary mortgage and enjoy the income from the properties in lieu of the interest payable on the promissory note. By reason of the

execution of the promissory note and the varthamanam document, the relationship of the landlord and the tenant had ceased and the possession of

the parties stood altered as that of mortgagor and mortgage and therefore the appellant was not entitled to get his name recorded as a tenant under

the provisions of the Act. The Tahsildar, Thirukoilur, who was the Record Officer, Tenancy Rights, under the Act, accepting the contention of the

landlady, held that there was no tenancy relationship between the appellant and the second respondent, that therefore he is not a tenant within the

meaning of Sec2(8)(a) of the Act, and in that view, rejected the application. On appeal, the Revenue Divisional Officer, Tirukoilur who is the

apellate authority held that the varthamanam letter was only the counter part for the promissory note dated 12.4.1973 and that the varthamanam

letter did not supersede the tenancy and that therefore, the appellant was a tenant within the provisions of the Act. Accordingly, he allowed the

appeal, set aside the order of the Record Officer and directed the appellant to be registered as a cultivating tenant in respect of both the blocks of

lands. The landlady preferred a revision petition before the District Revenue Officer, South Arcot at Cuddalore, who by his order dated

15.2.1978, referred the order of the Revenue Divisional Officer and held that under Ex. B1 varthamanam letter, the second respondent had

permitted the appellant to enjoy the property in lieu of interest and that changed the relationship between the parties and after the execution of Ex.

B1, he was holding the property only as a mortgagee and not as a tenant. In that view, he allowed the appeal and set aside the order of the

Revenue Divisional Officer. Thereafter the appellant filed W.P. No. 1057 of 1978. The learned single Judge of this Court dismissed the same by

order dated 1.8.1970 holding that though the appellant was inducted into possession by reason of the two lease deeds, on the execution of the

varthamanam letter Ex. B1, as a corollary to the promissory note Ex. P8, the possession of the parties stood altered from that of landlord and

tenant to that of mortgagor and mortgagee. It is this view of the learned Judge that is canvassed in this writ appeal.

Mr. D. Raju, learned Counsel for the appellant, referred to a decision of the Supreme Court and a decision of the Mysore High Court and

contended that normally when a mortgage is executed in favour of the tenant, when the tenant was already in possession, the relationship of

landlord and tenant does not cease, that it will be kept in abeyance during the period when the mortgage is existing and that whether the tenancy

had ceased or not will generally depend on the terms of the documents and as a proposition of law, it could not be stated that in every case, the

tenancy ceases. The Supreme Court had an occasion to consider a similar question in the decision reported in Sambangi Applaswamy Naidu and

Others Vs. Behara Venkataramanayya Patro and Others, . In that case, the owner of the property executed two usufructuary mortgages in favour

of a person who was then a sitting tenant of the property. The owner later filed a suit for redemption of the mortgage and obtained a preliminary

decree. When a final decree application was made for ascertainment of the amount due and for delivery of possession on deposit of the entire dues

so ascertained, the mortgagee resisted the suit on the ground that even after depositing the entire amount found due to them no decree directing

delivery of actual or physical possession in favour of the owner-mortgagor should be passed but delivery of symbolical possession should be

ordered inasmuch as the mortgagee''s possession of the suit property as a tenant or lessee could not be disturbed. In other words, the contention

of the mortgagee was that on redemption the original relationship of landlord and tenant would revive which needed to be protected. When the

matter came by way of second appeal before the Andhra Pradesh High Court, it was held that the question whether the relationship of landlord

and tenant would subsist even after the execution of the usufructuary mortgage depended upon the intention of the parties to be gathered from the

terms of the mortgage transaction and held that on the terms of mortgage deeds there was no doubt that the landlord-tenant relationship had

ceased to exist. When the matter came up before the Supreme Court by way of appeal, on the legal position the Supreme Court observed:

In our view, there can be no merger of a lease and a mortgage, even if the two transactions are in respect of the same property. It is well settled

that for a merger to arise, it is necessary that a lesser estate and a higher estate should merge in one person at one and the same time and in the

same right and no interest in the property should remain outstanding. In the case of a lease, the estate that is outstanding in the lesser is the

reversion, in the case of a mortgage, the estate that is outstanding is the equity of redemption of the mortgagor. Accordingly there cannot be merger

of a lease and a mortgage in respect of the same property since neither of them is a higher or lesser estate that the other. Even if the rights of the

lessee and the rights of the mortgagee in respect of a property were to be united in the person the reversion in regard to the lease and the equity of

redemption in regard to the mortgage, would be outstanding in the owner, of the property and accordingly, there would not be a complete fusion of

all the rights of ownership in one person. This position in law as explained by the Bombay High Court in Narayan Dogra Shetty Vs. Ramchandra

Shivram Hingne, , has been fully approved by this Court in Shah Mathuradas Maganlal and Co. Vs. Nagappa Shankarappa Malage and Others, .

In our view, the answer to the question raised in this appeal must depend upon whether there was an implied surrender of the lessee''s rights when

the usufructuary mortgage was executed in his favour by the lessor-mortgagor. And this obviously depends upon what was the intention of the

parties at the time of the execution of the mortgage deed in favour of the sitting tenant to be gathered from the terms and conditions of the mortgage

transaction in the light of the surrounding circumstances of the case.

In the earlier judgment of the Mysore High Court in Malikarajuniah v. Shivappa AIR 1973 Mys. 40, Justice Jaganatha Shetty as he then was after

consideration of the authorities, laid the following principles in determining the question:

Upon these authorities, it seems to me that the following principles are fairly clear:

(1) There cannot be a presumption that a lessee''s right whether durable or otherwise is lost for ever, by implied surrender, merely on his becoming

a possessory mortgagee;

(2) The question whether there was an implied surrender of lessee''s rights on the execution of a usufructuary mortgage must be decided with

reference to the protection afforded to the tenant by legislation, if any.

(3) The question of co-existence of tenancy with the usufructuary mortgage has to be decided by the terms of the deeds of mortgage and lease;

and

(4) The tenancy rights of the possessory mortgagee would remain in abeyance during the period of mortgage and the parties would revert to their

former position after the redemption.

The learned Judge also held that though one person cannot be a tenant and also a mortgagee in possession in respect of a common property, it

would be proper to hold that the lessee''s right like the tenancy rights must be held to have remained in abeyance for the mortgagee''s right to put

an end to. It may be seen from these decisions that though in law there is no merger when a tenant becomes a mortgagee in possession, whether

there was an implied surrender of the tenant''s right when the usufructuary mortgage was executed in his favour would largely depend upon what

was the intention of the parties at the time of execution of the mortgage deed and the actual terms and conditions of the mortgage transaction. In

this case, though Exs. P10 and P11 related to agricultural leases, but not registered, there could be no doubt that on the basis of possession given

to him under the documents, it is admitted that the appellant was inducted into possession under these two lease deeds and he was in possession as

a tenant admits of no doubt. In fact, all the authorities proceed on the basis, including the learned single Judge that there was the relationship of

landlord and tenant originally and continued till the time when the promissory note Ex. P8 and the varthamanam letter Ex. B1 were executed on

12.4.1973. The question for consideration is whether in view of the varthamanam letter which evidences an oral usufructuary mortgage, the

relationship of the parties could be said to have been altered from that of the landlord and tenant to that of mortgagor and mortgagee as held by the

learned single Judge.

The true translation of the varthamanam letter Ex. B1 reads as follows:

This 12th (twelfth) day of April 1975, counter varthamanam receipt in respect of the promissory note executed and delivered to Kamalammal wife

of Govindasami Naidu, residing in Siruvanur village, Tirukoilur taluk by Elumalai Padayachi son of Narayana Padayachi, residing in the aforesaid

village-

In lieu of Interest for the amount due under the promissory note executed and delivered by you in my favour for Rs. 5925 (As five thousand nine

hundred and twenty five) on 12.4.1973, I shall cultivate the lands mentioned hereunder belonging to you, under oral usufructuary mortgage, pay the

Circar kist and give credit of the usufruct (mahasal) towards interest and clear off the interest. I shall give credit to interest to this, year after year

and obtain receipt from you. On payment of the aforesaid principal sum by you immediately, I shall receive the same and leave the land in your

possession in the Adi season. Thus, to this effect, I with consent, execute and deliver the counter varthamanam receipt in respect of promissory

note.

It may be seen from this that the document was executed simultaneously with the execution of the promissory note, and the tenant was asked to

enjoy the income from the property in lieu of the interest payable on the promissory note. The document further states that every year, the payment

of interest by enjoyment of the property is to be endorsed in the promissory note itself and that on the payment of the principal amount, possession

will have to be handed over. There is no reference in this document as to the surrender of possession as a tenant on the cessation of the tenancy

relationship between the landlord and the tenant. Though the appellant was stated in the document as to enjoy the income from the property as an

usufructuary mortgagee paying the Government kists, there is no reference to the earlier relationship of landlord and tenant ceasing and as and from

the date of varthamanam letter, the appellant held the property as an usufuctuary mortgagee. There is nothing in the document, in our opinion,

which imply surrender of the lessee''s right. There is also no terms fixed for redemption of the mortgaged property which means that it was open to

the mortgagee to redeem the property at any time. The document considered by the Supreme Court in the decision in Sambangi Applaswamy

Naidu and Others Vs. Behara Venkataramanayya Patro and Others, , also was somewhat similar though the document was not in the form of

varthamanam letter, but as a regular mortgage deed. The deed did not however contain any term for redemption. The Supreme Court observed-

Secondly, there is no term fixed for redemption of mortgaged property which means that it was open to the mortgagee to redeem the mortgage at

any time that is to say even within a very short time and if that be so, would a sitting tenant cultivating the lands under a lease, who has obliged his

lessor by advancing moneys to him to tide over his financial difficulties give up his rights as a lessee no sooner redemption takes place? In our view,

it does not stand to reason that he would do so"". This circumstance along with the fact that the earlier lease was for a cash rent and the rent

payable was to be adjusted and the directions to adjust the income towards interest payable on the promissory note which was also to be paid in

terms of cash, in our opinion show that there is no intention or implied term in the document showing cessation of earlier interest on the coming into

existence of the relation of mortgagor and mortgagee. We are therefore of the view that the learned Judge was not right in holding that on the

execution of the promissory note and the varthamanam letter, the relationship of the parties stood altered from that of landlord and tenant to that of

mortgagor and mortgagee. In fact Ex. B1, varthamanam letter itself is not a mortgage deed; but it only refers to an oral Othi and the terms of that

oral Othis. Since the usufructuary mortgage itself is not by a registered document, we are unable to go into the terms of that deed to find out the

intention of the parties. The intention we have tried to gather from the varthamanam letter is with reference to the oral othi and the terms of that oral

othis as noted in the varthamanam letter.

In the view as stated above, it is not necessary for us to go into the other question whether Ex. B1 Varthamanam letter is admissible in evidence

and whether even if there was an alteration of the relationship of landlord and tenant by reason of Ex. B1, it could relate to only the second block

of property measuring 2.02 acres referred to above as that alone was the subject matter of oral usufructuary mortgage or othi which is referred to

in the varthamanam letter.

In the result, the order of the learned Judge is set aside and the writ petition is allowed and the rule nisi in made absolute. But there will be no

order as to costs.