Rameshwar Narain Singh vs Pani Ram Modi and Others

Wort, J.—The question which we have to determine in this case is whether the plaintiff is a lessee under the proprietor of the Sikri Estate or whether he is, as the defendant-appellant contends, a usufructuary mortgagee. Early in 1925 the proprietor of the Sikri Estate (who has been sued in this action through the manager) appointed under the Encumbered Estates Act (Act 6 of 1876) was indebted to the plaintiffs-respondents in a sum of Rs. 88,000 by reason of two mortgages, one dated 25th July 1918 and the other 10th January 1922. In those circumstances the plaintiff, the mortgagee, approached the proprietor, and, according to the plaintiff''s own evidence:

demanded his dues and proposed to the proprietor that a grant should be made of certain villages in thika.

As a result on 25th January 1925, the proprietor issued a "parwana" addressed to the plaintiff. The parwana referred to the application to the thika of the mauzas and stated that the thika would be granted on certain terms, being that the ten years nakdi rent less 10 per cent, should be deposited in advance, and that the advance rent should be set off against the dues payable under the mortgage bond, principal and interest.

One of the conditions was that the receipt acknowledging the entire rent, that is for the term for which the thika pattah was to be granted should be endorsed on the bond. On 1st February an endorsement was made on one of the mortgage bonds showing the full receipt of the dues. On the same day an account sheet was prepared, the substance of which was that the dues under the mortgage bonds were set out, interest was calculated and then credit was given against this total sum of principal and interest from the date of the account year by year to the last year of thika lease, which was to be granted. This was for a period of 18 years and the rent less 10 per cent retained by the lessee as his profit was fixed at Rs. 7,811-8-0. According to the account which is Ex. C in this case, at the end of the lease period which being 1999 Sambat, a sum of Rs. 6,102-11-0 remained as the balance. This balance was cancelled. Then on 5th February a so-called thika pattah was executed. The pattah was in the ordinary form with perhaps the exception of the provision relating to the rent. It recited what had already been arranged, namely, that the rent was taken to be Rs. 8,679-6-0 which less 10 per cent profit to the lessee fixed the rent at Rs. 7,811-8-0.

This thika lease was of 15 villages, the particulars of which however are quite irrelevant for the purposes of this case. Then on 14th February 1925 the endorsement was made on the other bond showing full satisfaction of the sums due under both the bonds, one of 1918 and the other of 1922. On 23rd February 1925, an "Ekrarnamah" was executed by the defendant proprietor. It recited that the two sums due under the two mortgage bonds "are duly found payable by me." It then recited that certain mauzas were taken from the proprietor at a rental fixed, and mentioned that the rent should be set off against the dues and in that way the debts under the mortgage bonds should be liquidated. Then there comes the declaration:

Hence I execute this ekrarnama with the stipulations laid down below and do declare that until the expiry of the term of the said thika I shall not be able to dispossess the said thikadara from the thika property.

It then recites:

Should they be dispossessed, I the declarant shall put them in possession and occupation of the thika property for such period over and above the term of the thika as they will remain out of possession. Should I fail to put them in possession, I the declarant am and shall be liable to pay to the said creditors such amount of their dues as will be left payable from the date of dispossession till the term of the thika after the set-off of the rent of the thika property for the period it had been in possession together with interest at 12 annas per hundred rupees per mensem. Besides this if the said creditors have to incur an expenditure in any suit or case for recovery of possession, I the declarant shall be liable to pay the same to the extent of its proper improved (sic). In such circumstances the dues of the said creditors shall continue to be a ''charge'' kefalat upon the properties entered in Schedule ka. The said creditors or their heirs and representatives are and shall be at liberty to recover the same by instituting a suit and by sale of the mauzas specified in Schedule ka and other properties, moveable and immovable, nami and benami of me the declarant.

On 26th March 1930, the Government made a vesting order vesting the estate in the manager under the Encumbered Estates Act. Thereafter a notice was issued u/s 5 of the Act calling upon the creditors to make their claims on the estate and amongst them were the plaintiffs. The plaintiff made his claim as a creditor, which was allowed on terms which it is unnecessary to mention. Certain proceedings u/s 16 of the Act were taken by the manager. The plaintiff fearing that the possession of the villages was in jeopardy brought an action for confirmation of his possession which claim subsequently was amended claiming possession, alleging that he had been wrongly dispossessed by the manager. The manager acted on the assumption that the transaction the details of which I have narrated was a usufructuary mortgage, took possession as he would be entitled to do under such circumstances under the powers given him by the Act.

The plaintiff in his action contended that he was lessee and not a usufructuary mortgagee and that contention has been upheld by the Subordinate Judge in the Court below. It is against that decision that the manager who is the person who represents the estate in these proceedings appeals.

Sir Sultan Ahmed, on behalf of the appellant manager, contends that the documents, that is to say the so-called lease dated 5th February and the so-called ekrarnama dated 23rd February which were both registered on 27th February 1925, must be read together with the other documents in the case that they cannot be construed or considered apart and that if they are taken together and the substance of the transaction looked at rather than the form, the relationship between the proprietor and the plaintiff disclosed will be that of mortgagor and mortgagee and not landlord and tenant as the plaintiff contends.

It is important In this connection to note that the documents, although bearing different dates were registered on the same day and that possession was not given to the plaintiff until some seven months afterwards, that is, in September of the same year 1925. The case put forward by the plaintiff is that his position was that of a thikadar, that the ekrarnama at the most gave a future charge in certain contingencies. In support of this contention reference is made to certain provisions of the documents, particularly to those in the ekararnama. Another form of the same contention is that the transaction was nothing more than a thika lease which amounted to a demise of the villages the rent which was payable in advance being set off against the mortgage dues.

It was faintly argued that one of the important facts to be taken into consideration was that it was the plaintiff who approached the proprietor with regard to this lease and it was not a case of the proprietor approaching his creditor for the purpose of entering into some) arrangement by which his debts would be liquidated. This seems to me to be quite immaterial, but if it has any relevance it would rather indicate, having regard to the statement of the plaintiff himself, that he was concerned with the payment of the debts and, that whatever the transaction actually was it was nothing more than a method by which those debts could be secured.

Mr. P.R. Das further argues that the ekrarnama was nothing more than an assignment of the rent by the lessor back to the lessee as security for the mortgage. Although not disputing that the two documents must be read together he seeks to distinguish the transaction from a usufructuary mortgage by contending that in the case of usufructuary mortgage the mortgaged property remains in possession so long as the debts are not completely paid off. That he contends is the essence of a usufructuary mortgage but in this case it is shown that under the ekrarnama the plaintiff was entitled to remain in possession for the full term of the so called lease. So far as the provision relating to the charge is concerned he contends that it was not a present charge or mortgage but a future charge based on a mere possibility, the possibility being the circumstances set out in the passage immediately preceding the charging clause.

Again even if it is a present charge or mortgage it does not do away with the plaintiff''s position under the thika which remains intact although the plaintiff may have recovered his dues by proving his claim before the Manager as he in fact has done. A number of authorities have been relied upon by both the appellant and the respondent most of them relating to transactions which were alleged to be either sales outright or a mortgage by conditional sale. It seems to me that very little assistance can be got from the decided cases in which documents were construed under the peculiar circumstances of those cases.

But a passage may be referred to in the opinion delivered by Lord Davey in the case of Balkishen Das v. Legge (1900) 22 All 149 wherein he referred to certain authorities which had been cited at the Bar and then proceeded to make this statement:

The case must therefore be decided on a consideration of the contents of the documents themselves, with such extrinsic evidence of surrounding circumstances as may be required to shew in what manner the language of the document is related to existing facts.

And if I may say so with respect, it seems to me that this is the principle upon which this transaction has to be analysed. It is abundantly clear that the substance of this transaction was the plaintiff going into possession of these villages for the purpose of securing payment of the debts owing to him by the proprietor of the estate. There is no suggestion here that he was first in possession as a thikadar and subsequently changed his position into a mortgagee. The possession of these villages was specifically related to this transaction as a whole; in other words he went into possession of this property as security for the debts then owing by the proprietor. If that be the true position it comes within the definition of a mortgage given by Section 58, T.P. Act, and the particular class to which this mortgage seems to belong is defined by Sub-clause (d) of that section.

During the argument it has been suggested that this transaction was a method of limiting the plaintiff''s liability to Income Tax. On the other hand it is suggested that this is nothing more than a device to prevent the manager under the Encumbered Estates Act from exercising his rights as regards these villages. These considerations, in my judgment, are immaterial. Incidentally reference is made to the provision in the lease of the payment to the landlord of the produce of the bakasht lands as a liability on the part of the so called lessee inconsistent with the position of a usufructuary mortgagee. This seems immaterial for reasons given with regard to the assessment of rent to which I shall in a moment refer. The substance of this transaction being, in my judgment, a usufructuary mortgage it is to be seen whether any support for this view can be got from the documents referred to or whether in those documents there is anything to show that the legal transaction is different from the apparent.

In taking the documents in their order it is suggested by the appellant that the calculation of rent in the pattah showing the 10 per cent profit to the lessee is a provision not usual in a thika lease. This is a significant fact although the provision is not entirely inconsistent with the usual terms of a thika lease. Again the fact that the plaintiff was to remain in possession for 18 years was one which made the transaction entirely different from a usufructuary mortgage and was consistent only with his client being a lessee. But in a usufructuary mortgage there is nothing to prevent parties estimating in advance what period it would take to pay off the mortgage debt and thus fixing the minimum period in which the mortgagee should have possession. This element of speculation on which it is argued on behalf of the respondent entered into this transaction and which was against the interests of the mortgagor (the possibility being that the mortgagee might receive more than his dues) was against the view that this was a usufructuary mortgage, but as was said in the case of Tukaram Mairal v. Ramchand Malukchand (1902) 26 Bom 252 by Crowe, J:

That no doubt is so (there is no mention of any fixed term in Section 58, Clause (b), T.P. Act), but the law contemplates the property remaining in the possession of the mortgagee, who is authorized to retain it until payment of the mortgage money and to appropriate the rents and profits in lieu of interest or in payment of principal or both, and the nature of the contract is not altered by the fact that the calculation is made beforehand of the period for which the rents and profits will be sufficient to pay off both principal and interest.

Some doubt was cast upon this authority in argument, but it is to be noted that the decision was subsequently relied upon in the case of Muhammad Muse Umarji v. Bagass Amanji Umar (1908) 32 Bom 569. Coming to the most important of the documents, the ekrarnama, there are one or two points which must be noted. In the first place the translation was found to be faulty (it is in Hindi) and corrections were found to be necessary. In the sentence beginning, "In such circumstances" the actual translation is ''In such circumstances (or equally consistent with the original "in those events") the dues of the said creditors shall continue to be a "charge" or kefalat upon the properties entered in schedule ka.

In the original the English word "charge" is used and then the disjunctive and then the word Kefalat. "Kefalat" means incumbrance, pledge, security, the root-word meaning "something to stand upon." ''Kefalat" is not customarily used in documents of this class but is a variation of a word in general use. The draftsman uses the English word "charge" which be appears to consider as synonymous with "kefalat." "Kefalat" used by itself would certainly (and this is not denied) be apt for expressing a mortgage. But the argument on behalf of the respondent is based upon the words as they originally appear in the translation, that is "In such circumstances the dues shall be a charge" expressing, as it is contended, nothing more than a future charge in certain contingencies.

If we are to construe the documents by placing the exact and literal meaning on each word according to the scientific method of an English conveyancer some support might be given to the argument of the respondent although a difficulty would immediately arise. If the introductory words of the passage which indicate a contingency are to be taken at their face value, the remainder of the passage becomes somewhat ungrammatical. The introductory words indicate a contingency but the later words of the corrected translation are "shall continue to be a charge," the passage translated becomes ambiguous indicating a present charge or mortgage. Documents drafted as they are in India cannot be construed by these methods the substance of the transaction must be looked to.

There can be, in my judgment, no serious doubt that the parties to this transaction intended by the provision of this ekrarnama which I have examined to create a charge on the property for security of the sums due by the proprietor of the estate. It is not disputed that if what is intended by this transaction was a mere charge and not a mortgage the plaintiff should succeed. But there are a number of considerations which, in my judgment, indicate that what was intended was not a mere charge u/s 100, T.P. Act. The circumstances are first that the plaintiff went into possession of this property to secure the debt owned him by the defendant. The second is that words were used in the ekrarnama which would charge the property as security for the debt, and thirdly there was the power of sale granted by the document.

The learned Judge in the Court below has relied upon the case of Nidha Sah v. Murlidhar (1903) 25 All 115 in support of the contention that the position of the plaintiff here was that of a lessee and not of a mortgagee. In that case the document purported to grant a mortgage with possession for a period of 14 years after which time the mortgagor was to recover possession of the mortgaged village. Their Lordships of the Judicial Committee of the Privy Council came to the conclusion that the document although described as a mortgage was nothing more than a grant of land for a fixed term free of rent in consideration of the sum made up of past and present advances. This it is said is exactly what the present transaction is, but it is to be noted that their Lordships of the Privy Council based their conclusion mainly on the ground that it was not a security for the payment of money; there is no provision for redemption express or implied. From the reports it does not appear whether there was any mortgage, charge or transfer of interest in the property other than giving possession for 14 years although it does appear that the instrument purported to be a mortgage.

In my judgment; there is a material difference between the present transaction and the one in the case cited. In the case before us the substance of the transaction is that the plaintiff was to go into possession of the villages as security for the debts owing to him; the ekrarnama purported to create a charge or mortgage on the property in question and in addition there was the power of sale. In my judgment the transaction amounted to a usufructuary mortgage of the villages and in that view of the matter I am of the opinion that the decision of the Subordinate Judge was wrong, the appeal should be allowed and the plaintiff''s suit dismissed with costs throughout.

Mohamad Noor, J.

I agree.