Kalavati vs Chandrakant

N. Ananda, J.—The appellants were defendants in O.S. No. 208/1988 filed by respondents (plaintiffs) for redemption of Usufructuary mortgage dated 25.02.1979.

The trial court on appreciation of evidence has held that, plaintiffs are entitled to redeem the mortgaged properties by paying Rs. 3,000/- (mortgage consideration) along with municipal taxes paid by the first defendant amounting to Rs. 4,177.75; the defendants shall be evicted from the mortgaged properties with due process of law as per the Karnataka Rent Act, 1999. Aggrieved by the second part of decree, the plaintiffs were before the I-appellate court.

The learned judge of I-appellate court following the judgment of this court in ILR 1987(4) KAR 3867 (in the case of Krishnamurty -vs.- Puttappajiah) has held, on lessee becoming mortgagee in possession, leasehold interest merges in superior interest of possessory mortgagee, that would be implied surrender of leasehold right. The relationship of landlord and tenant ceases with the commencement of mortgage transaction. The relationship between the parties would be mortgagor and mortgagee.

The learned judge of the I-appellate court modified the decree of trial court by holding that appellants (plaintiffs) are entitled to redeem the mortgaged property from respondents (defendants) and respondents (defendants) are directed to hand over the suit schedule property within a month from the date of the order. Therefore, the defendants are before this court.

I have heard learned counsel for parties.

On hearing learned counsel for parties and after going through the impugned judgment, I am of the opinion that following substantial questions of law would arise for consideration:

1) Whether the original defendant continued to be a tenant under the vendor of plaintiffs notwithstanding the execution of registered Usufructuary mortgage deed dated 25.02.1969?

2) Whether the learned judge of I-appellate court was justified in holding that leasehold rights being inferior rights would merge with the rights of mortgagee (superior rights) and relationship between the parties as Landlord and tenant would come to an end after the parties entered into Usufructuary mortgage transaction in relation to suit property?

The finding of the trial court that plaintiffs are entitled to redeem the mortgaged property from the original defendant by paying mortgage consideration of Rs. 3,000/- along with municipal tax of Rs. 4,177.75 has attained finality because the original defendant had not challenged the said finding.

The learned trial judge has proceeded on the assumption that mortgage rights had merged with the tenancy rights. In my considered opinion, this finding of learned trial judge is contrary to the provisions of the Transfer of Property Act, 1882 and settled principles of law. It is needless to state that leasehold rights are inferior to the rights of Usufructuary mortgagee.

The learned judge of the I-appellate court after noticing this infirmity in the judgment of the trial court and following the judgment of this court in ILR 1987(4) KAR 3867 (in the case of Krishnamurty -vs.- Puttappajiah) has held that, lessee becoming mortgagee in possession, leasehold interest merges in superior interest of possessory mortgage and there would be implied surrender of leasehold right. The relationship between the parties as landlord and tenant gets converted into relationship of mortgagor and mortgagee more particularly, in case of Usufructuary mortgage.

The learned trial judge having held that plaintiffs have right to redeem the mortgaged property by exercising the rights as mortgagors should not have directed the plaintiffs to seek possession of suit schedule property by invoking the provisions of the Karnataka Rent Act, 1999 as there was no relationship of Landlord and tenant and also in view of finding recorded by the trial court that plaintiffs are entitled to redeem the suit schedule property under Usufructuary Mortgage Deed dated 25.02.1979.

The learned counsel for appellants relying on the judgment of the Supreme Court reported in Nemi Chand Vs. Onkar Lal, would submit that, even after redemption of mortgage, the lease was not determined. Therefore, the learned trial Judge was justified in holding that plaintiffs can redeem the mortgage property from the respondents (defendants) and plaintiffs had to take recourse to provisions of the Karnataka Rent Act, 1999 to take possession of property from defendants.

In a judgment reported in Nemi Chand Vs. Onkar Lal, , the lessee in possession of suit schedule property lent certain amount to the landlord on the security of suit property, which was mortgaged to him by the landlord. It was recited in the document of mortgage that during the period of mortgage, which was to last 5 years, neither interest nor rent was payable by the parties, both amounts being equal. These recitals demonstrate that the rent was kept alive and it was to be adjusted against the interest. There was adjustment of one liability against the other. In other words, the relationship between the parties as Lessor and Lessee subsisted. Capture underline for this matter. (underlining supplied by me).

In the case on hand, it is not the case of original defendant that he had lent money to the vendor of plaintiff and the vendor of plaintiff had agreed to adjust the rent towards interest payable to him. On the other hand, first defendant had all along contended that there was no mortgage transaction between the first defendant and the plaintiffs and the first defendant was a tenant under the vendor of plaintiffs. In view of this, what has been held in the aforestated judgment is not applicable to the facts of the instant case.

The learned judge of the I-appellate court was justified in holding that plaintiffs are entitled to recover possession of the suit schedule property from the defendants on redemption of usufructuary mortgage deed in terms of the judgment passed by the trial court.

In view of above discussion, I answer first substantial question of law in negative and second substantial question of law in the affirmative and pass the following:

ORDER

The appeal is dismissed. Parties to bear their costs.