S.R. Sripathi vs Narayana Kanginaya @ Sundara Rao

Huluvadi G. Ramesh, J.—This appeal is by the Plaintiff against the order of the Principal Civil Judge (Sr.Dn) and JMFC, Srirangapatna in RA. No. 17/2003 dated 20.7.2005 castifirmiiig the judgment and decree of the Civil Judge (Jr.Dn) Srirangapatna, passed in O.S. No. 103/1998 dated 4.12.2002.

For the sake of convenience, the parties are referred to in terms of their status before the trial Court.

As per the plaint averments, the Plaintiff owner of the suit schedule property, was running a hotel in the said suit properly and thereafter; shifted his business to Mandya for letting the suit schedule property to the Defendant on lease along with furniture fixtures, utensils and other hotel equipments worth Rs. 10,000/- with monthly rent of Rs. 60/- and thereafter enhanced to Ra. 200/ - per month. However, for want of legal necessity, the Plaintiff, received a sum of Rs. 20,000/- from the Defendant and invested the same on Hotel business at Mandya and mortgaged the suit schedule property to the Defendant under a registered mortgage deed dated 27,9.1973. Further, the Plaintiff received a sum of Rs. 2,000/- earlier to the mortgage as an advance and agreed to pay the same at the time of redemption of the mortgage. From then onwards, the Defendant continued to be in possession of the suit schedule property as a mortgagee. Though the Plaintiff was ready to tender the mortgage amount, the Defendant neither accepted the mortgage money nor delivered the vacant possession of the suit schedule property with other accessories to the Plaintiff. Hence, the Plaintiff filed the suit.

On notice, the Defendant appeared and resisted the suit by filing written statement contending that the suit is not maintainable as no notice was issued either under House Rent Control Act or under Transfer of Property Act and therefore, the Court has no pecuniary jurisdiction to try the suit and prayed for dismissal of the suit.

Based on the pleadings, the trial Court framed eight issues for its consideration and answered issue Nos. 1 and 2 in the affirmative, issue Nos. 3 to 6 in the negative and partly decreed the suit of the Plaintiff with a direction to the Defendant to redeem the mortgage of the suit schedule premises and, to deliver the possession on receipt of the mortgage amount of Rs. 22,000/- from the Plaintiff and, to return the mortgage deed with due shara and, also to deliver all the articles listed under EXB.PS and P6, Being aggrieved, the Defendant filed an appeal and the same was allowed setting aside the order of the trial Court. Hence, the Plaintiff has filed this appeal.

According to the learned Counsel for the Appellant, when the suit for redemption was filed the Appellant had deposited the mortgage amount of Rs. 22,000/- about 24 years back. Hence, the trial Court had rightly decreed the suit and ordered for possession. But, the lower appellate Court dismissed the suit by allowing the appeal solely on the ground that tenancy rights do not merge with the mortgage and that tenancy rights revive after redemption. Hence, this appeal by the Appellant

Per contra, learned Counsel for the Respondent submitted that, the finding of the lower appellate Court was in view of the ratio laid down by the Apex Court in the case of mortgage i.e., where there is a lease of mortgage and the mortgage is redeemed, lease revives and as such, the Appellant has to file a separate suit for possession for termination of lease, in support of his contentions, he relied on various judgments of the Apex Court which are as under:

Sambangi Applaswamy Naidu and Others Vs. Behara Venkataramanayya Patro and Others,

Nirmal Chandra Vs. Vimal Chand,

1987 (S) SCC 87 - Nand Lal and Ors. v. Sukh Dev and Anr.

Gopalan Krishnankutty Vs. Kunjamma Pillai Sarojini Amma and others,

Narayan Vishnu Hendre and others Vs. Baburao Savalaram Kothawale since deceased by his heir Anant Baburao Kothawale,

Cheriyan Sosamma and others Vs. Sundaressan Pillai Saraswathy Amma and Others,

2004 (2) KCCR 1225 - SRI K.S. Srinivas v. Sri. v. Ramkumar and Ors.

In the fact situation, even according to the learned Counsel for the Respondent, if the lease revives on the mortgage being redeemed, on such redemption, if the Appellant files a suit, the order of the trial Court in redeeming the mortgage cannot foe found fault with. The Apex Court in Gambamgi Appalaswamy Naidu''s case has referred to Sections 60, 62 and 105 of the Transfer of Property Act, which is as under:

Section 60: Right of mortgagor to redeem.

At any time after the principal money has become due, the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee (a) to deliver to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee, (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument} to have registered an acknowledgment in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:

Provided that the right conferred by this section has not been extinguished by act of the parties or by decree of a Court.

The right conferred by this section is allied a right to redeem and a suit to enforce it is called a suit for redemption.

Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.

Section 62 - Right of usufructuary mortgagor to recover possession

In the case of a usufructuary mortgage, the mortgagor has a right to recover possession of the property together with the mortgage-deed and all documents, relating to the mortgaged property which are in the possession or power of the mortgagee:

(a) where the mortgagee is authorised to pay himself the mortgage-money from the rents and profits of the property - when such money is paid,

(b) where the mortgagee is authorised to pay himself from such rents and profits or any part thereof a part only of the mortgage-money, when the term, if any, prescribed for the payment of the mortgage-money has expired and the mortgagor pays or tenders to the mortgagee the mortgage-money or the balance thereof or deposits it in Court as hereinafter provided.

Section 105 - Lease defined

A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined

The transferor is called lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.

The trial Court while referring to Ex.P1 - the mortgage deed has opined that, the intention of the parties ia that the base hold rights were impliedly surrendered as on the date of the mortgage deed and the same has not been rebutted or contradicted by the Defendant in the cross-examination nor any independent witness has been examined nor any evidence is putforth in this regard. Further, it has noticed, no condition is stipulated in the recitals of Ex.P1 with reference to the possession and if at all there is an intention to keep the rents alive, then the inierestion the mortgage money and the rent payable would be equal. The trial Court relying on one of the judgments of this Court reported in ILR 2001 KAR 1580 P. Tejraj Sharma v. Hasthimal And Sons and Ors. wherein it is held that if there is any condition, permitting retention of possession by the mortgagee as a tenant after redemption, is a clog on the right of Redemption and as such void has opined that the Defendant is a mortgagee in possession but not as a tenant even after the redemption of the mortgage. The trial Court has also relied on the Apex Court decision reported in Shah Mathuradas Maganlal and Co. Vs. Nagappa Shankarappa Malage and Others, wherein the premises in possession of a tenant was mortgaged arid no interest on the mortgage amount was paid and the period of redemption was fixed for 10 years, the Apex Court has held that and the tenancy right got extinguished and on redemption, the owner-mortgager is entitled to possession. Accordingly, ordered for redemption of mortgage and deliver of possession in favour of the landlord.

At the out set, learned Counsel for the Respondent referred to the decision reported in Nirmal Chandra Vs. Vimal Chand, wherein it is clearly stated that if the tenant-mortgagee surrendered tenancy, then mortgage deed stipulating the interest on mortgage money and rent payable would be equal. Mortgage thus keeps rent alive and surrender of tenancy cannot be inferred and the mortgagee would not lose possession on redemption and relief of possession cannot also be granted to mortgagor in view of the provisions of the Rent Act. Further, the Apex Court has held that if the tenant has surrendered the tenancy rights, Clause in mortgage deed stipulating that the mortgagor-landlord on redemption would himself use mortgaged property for three years and in the event, it is given on rent the mortgagee shall have a right to take back possession in his capacity as tenant and he would not lose possession on redemption.

In Gambangi Appalaswamy Naidu''s case cited supra, it is observed, there is no merger of a lease and a mortgage even where the two transactions are in respect of the same property. It is well settled law that for a merger to arise, it is necessary that lesser estate and a higher estate should merge in one person at once at the same time and in the same right and no interest in the property should remain outstanding. In the case of lease, the estate that is outstanding in the lessor is the reversion; in the case of mortgage, the estate that is outstanding is the equity of redemption of the mortgagor. Further, in the case of usufructuary mortgage, a tenant-mortgage can be directed to deliver actual or physical possession of the mortgaged property to the lessor-mortgagor depending upon whether there is an implied surrender of the lessee''s rights wrheu the usufructuary mortgage was executed in his favour by the mortgagor.

The above ratio provides for surrendering of lease hold rights that merges with the mortgage. In the case on hand, since the Respondent/tenant did not opt for any revival of the lease hold rights in respect of Ex.P1-mortgage deed, the trial Court has rightly ordered for delivery of physical possession upon redemption.

Even taking the stand of the Respondent into consideration, since there was a lease earlier to the mortgage, lease revives on redemption cannot be accepted on the ground of conduct of the Respondent himself. He never made prompt attempt to make payment of the rentals to the Plaintiff, The lower appellate Court having misread and without understanding the implications of the redetnpnbn of mortgage, has allowed the appeal by setting aside the order of the trial Court opining that lease hold rights of the Plaintiff do not automatically get vanished after mortgage and has given a finding that the lease hold rights of Plaintiff get revived after the redemption of the mortgage.

While answering the substantial questions of law in favour of the Appellant, the order passed by the lower appellate Court is set aside. The mortgage amount in deposit by the Appellant is ordered to he paid to the Respondent towards the rental arrears. As a matter of equity, the Respondent to surrender possession of the property in favour of the Appellant within one month from the date of receipt of copy of the order.

With the above observations and direction, the appeal is allowed.

Parties to bear their own costs.