Pulloor Kuttikat Manakkal Vasudevan Nambudiri's son, Karnavari and Manager vs Kappil Nallannampra Puthiya Kovilakath Manavikraman alias Valia Thirumalpad and Others

Wadsworth, J.—This appeal arises out of an application made under the rules framed under Madras Act IV of 1938 to fix the amount

payable in respect of a mortgage document. The appellant here is the creditor. The mortgage in question is one of September, 1917, and its terms

were embodied both in a mortgage document and in a counter-part executed by the mortgagee which is Ex. B. The argument has proceeded on

the basis of the recitals in Ex. B. The document is very long and involved but the essential recitals are as follows:

And it is further agreed that I should pay 230 paras of paddy therefor valued at Rs. 143-12-0 and Rs. 10 out of the total pattam of 1,560 paras of

paddy and Rs. 20 deducting therefrom 1,200 paras of paddy as interest for the Kanom amount of Rs. 10,000 (rupees ten thousand) at the rate of

12 paras of paddy per hundred paras and the sum of Rs. 65-0-5 which has been agreed to be paid as assessment and for which 130 paras of

paddy has been allowed to be appropriated making a total of 1,330 paras in all, and also a sum of Rs. 10 allowed for the protection and upkeep

of the items 23 and 24.

The document also stipulates for the redemption of the property after receiving "" the mortgage amount "" and it contains a clause whereby the

mortgagor agrees to pay any enhanced assessment that may be imposed and if he defaults and the mortgagee has to pay it, this is to be adjusted

towards the purappad payable to the mortgagor and, if that : is found insufficient, added to the mortgage amount payable. The lower Court has

treated this as a contract under which a rate of interest is stipulated as due to the mortgagee so as to take it out of the exception in Section 10 (2)

(i) of Madras Act IV of 1938 and has also treated the amounts received by the mortgagee according to the calculations in the document as

payments made by the mortgagor and has scaled down the mortgage applying Section 8 (2) and (3) of the Act.

Ignoring for the present the detailed criticisms of the lower Court''s order, we have first to consider whether this contract is one under which a

rate of interest is stipulated as due to the mortgagee and whether in fact anything at all has been paid to the mortgagee for interest or principal so as

to make applicable the provisions of Section 8 (2) and (3) of the Act. For the respondents our attention has been drawn to a decision of the Full

Bench of the Allahabad High Court, Mohammad Ishaq Khan and Another Vs. Rup Narain Singh and Others as authority for the proposition that

where the income from the mortgaged property is allocated on the basis of an estimated yield, a certain portion thereof being allowed towards

interest and the balance disposed of in various ways, the mortgagee will necessarily be accountable for any surplus income derived owing to an

increase of the yield over the estimate adopted on the calculations. We do not read this decision as laying down any general rule to that effect. On

the facts of that case, there was a clear stipulation by the mortgagor to pay a fixed amount as interest. It was originally to be met out of a certain

portion of the income and as to the balance by means of a cash payment. When the yield increased, the cash payment was dropped by tacit

agreement of parties. The learned Judges applied Section 76 (h) of the Transfer of Property Act and held that Section 77 would not apply because

there was no contract, express or implied, between the mortgagee and the mortgagor that the receipts of the mortgaged property should be taken

in lieu of interest. The document with which we deal is a very different document from that which was before the learned Judges of the Allahabad

High Court. It seems to us that the rather involved language in which the amount of purappad payable by the mortgagee is stipulated, is intended to

do no more than set forth the way in which this purappad has been calculated, and we do not think that from the language of this document, it can

be inferred that the mortgagor was to be liable to pay any rate of interest or that the mortgagee was to account for any surplus over the interest in

calculation in the passage just referred to. Such recitals are very common in documents from Malabar. It is the normal practice in drawing up such

documents to take an estimated yield, adjust it in various ways and arrive at a balance to be payable as purappad or surplus produce by the

mortgagee to the mortgagor. The only peculiarity of the present document is that instead of saying that so much shall be taken by the mortgagee as

interest or profits, it works out this amount on the basis of an expressed rate. Clearly, however, there was no intention to make the mortgagor

liable to pay this rate of interest; nor was there any intention to limit the profits of the mortgagees to this rate of interest. Had there been such an

intention the passage relating to the payment of excess land revenue could not have been drafted in the form given to it. The stipulation that any

excess land revenue which the mortgagee may have to pay shall be adjusted against the purappad or, if that is found insufficient, shall be added to

the mortgage amount, clearly indicates that the mortgagee was not ""to be accountable for any surplus which he might realise owing to fluctuations in

the yield. Nor was the mortgagor to be accountable for any deficiency in the rate of interest owing to bad seasons. We are, therefore, of opinion

that this document although it recites a rate of interest, as part of the calculation of the rate of purappad is not a document which stipulates a rate of

interest as due to the mortgagee; nor is the realisation of the produce by the mortgagee under the terms of this document a payment of interest by

the mortgagor such as might be taken into account u/s 8 (a) and (3) of Madras Act IV.

In the result, therefore, we set aside the order of the lower Court and dismiss the application with costs here and in the Court below.