Suleman Appasaheb Mulla. vs Gopal Murari Padiyar Desai and Others

This appeal instituted by Defendant-2 is directed against the judgment and decree dated 2-11-1972, passed by the I Addl. Civil Judge, Belgaum, in R.A. No. 96 of 1972, on his file, confirming the judgment and decree dated 29-3-1972, passed by the principal Munsiff, Belgaum, in O.S. No. 332 of 1969 on his file.

The relevant facts of the case for the purposes of this appeal are these:

One Manohar Mahadev Khannukar was the owner of C.T.S. no.2040/ 1A-1A of Kadolkar Galli in Belgaum. He had let out the said premises to D.W. 1 Manohar Raghunath Urankar. Later, on20-10-1962, Khanukar executed a mortgage deed in favour of D.W. 2 Urankar for Rs. 3,000/-. Thereafter, Khannukar sold his right of redemption to the plaintiffs in the present suit under Ext. P-1 on 11-12-1964, thereafter, on 15-12-1964 Urankar transferred his rights derived under Ext. P-2 to one Noor Mohamad Miyya Hazi under Ext. D-2 and delivered possession to him. On 7-10-1965, the said Hazi transferred his rights derived under Ext. D-1 to the defendants under Exhibit D-2. Subsequently, the plaintiffs filed an application in Misc. A. 83/1967, on the file of the Munsiff, Belgaum, for redemption and possession of the property. The defendants contested the suit on several grounds and as per Ext. P-3, the Petition came to be dismissed on 20-7-1968. Thereafter, Defendant-1 Hazaratbhai relinquished his rights in the partnership in favour of Defendant-2 and thus, Defendant-2 came to be in possession of the property.

The Plaintiffs filed, the suit for redemption on 8-9-1969, claiming possession and future mesne profits. Defendant-2 Mulla contested the suit-He took several contentions, but, the relevant contention for the purpose of deciding this appeal is that according to the defendant, the plaintiffs were not entitled for actual possession of the suit property; Urankar, the original mortgagee, was a tenant of the suit property, after the redemption of the mortgage, it was agreed by the original mortgagor-owner that the tenancy of Urankar should continue. Hence, he submitted that the plaintiffs could not claim actual possession.

The trial Court, after considering the evidence adduced before it decreed the suit of the plaintiffs with costs and against the preliminary decree thus passed, Defendant-2 went up in appeal before the learned Civil Judge. The learned Civil Judge, raised the following points for decision in the appeal:

(1) Is Urankar a necessary party to the present suit?

(2) Is the 2nd defendant entitled to resist a decree for possession in this case? and (3) Was the direction of the trial Court in regard to costs and Government Assessment proper?

On hearing the appeal, the learned Civil Judge answered all the points in the negative and confirmed the judgment and decree passed by the trial Court.

Aggrieved by the said judgment and decree, Defendant-2 has come up in Second Appeal before this Court.

The learned Advocate appearing for the appellant vehemently contended that the Courts below were not justified in awarding actual possession to the plaintiffs while ordering redemption of the mortgage. According to him, the original mortgagee, Urankar, was a tenant in the suit land even prior to the mortgage. It was specifically stipulated in the mortgage deed that Urankar should continue as a tenant not only during the period of mortgage, but, even after the redemption of mortgage. The plaintiffs had purchased only the right of redemption from the original owner, Khannukar. That being so, he submitted that the plaintiffs were not entitled to dispossess the present appellant, who was original Defendant-2 in the suit All that they could redeem was the right of the landlord lessor and not the demise that vested in the tenant.

As against this, the learned Advocate appearing for the respondents submitted that when the tenant took the land on mortgage, there was an implied surrender of tenancy and as such, the demise of the tenancy right did not survive after possessory mortgage in favour of the tenant. He further contended that since the present Defendant-2 was actually put is possession of the suit property by Sri Urankar, the mortgagee, he was liable to hand over possession after redemption of the possessory mortgage. So he justified the judgment and decree of the trial Court confirmed by the First Appellate Court.

The sole point, therefore, that arises for my consideration in this appeal is, whether the courts below were justified in decreeing the actual possession of the suit property in favour of the plaintiffs.

In order to appreciate the contentions raised in this appeal, it is necessary to find out as to what was the subject matter of the mortgage executed by Khannukar in favour of Urankar on 20-10-1962 under Ext. P-2. It is not in dispute that Urankar was a tenant of the suit shop even prior to the execution of the possessory mortgage in his favour. The mortgage deed, Ext. P-2 inter alia reads:

"The property within the above boundaries measures 11 feet in breadth and 55 feet in length towards East and 56 feet towards west and it is mortgaged with possession to you and your possession as tenant is confirmed upto the said period Interest is to be taken in lieu of the income of the property, i.e., rent accrued every year of the property The interest and income are set off against each other. I will repay the principal amount under this deed at the end of five years and take back the deed duly endorsed and take possession of property. If I fail to pay the amount, within the said period, you should enjoy the said property in lieu of interest as per the abovesaid terms. If you do not desire to do so, you should recover the entire amount by sale of the mortgaged property through Court. I will be liable forshort or excess amount. I will pay the Municipal taxes of the said house. Repairs and turning of tiles, etc., are to be done by you. Even after the payment of the amount by me, the property is to remain with you only as tenant at a rental of Rs. 23/- per month.

The question for consideration is, whether, in view of these; recitals it could be said, as contended by the learned Advocate for the respondents, that there is an implied surrender of tenancy at the time the tenant took the property as a possessory mortgagee.

Before I proceed to consider this aspect, it is necessary to dispose of one more argument advanced by the learned Counsel for the respondents, that when once the tenant takes the property on possessory mortgage there is a merger of tenancy in the mortgage. The law in this behalf is settled by a pronouncement of the Supreme Court of India in the case of Shah Mathuradas Maganlal and Co., vs Nagappa Shankarappa Malaga, AIR 1976 SC 1565. In para 16 of the Judgment, their Lordships of the Supreme Court have in no uncertain terms stated that there cannot be a merger of the right of reversion of the landlord with the right of the tenant when the tenant takes the property on mortgage. This is what is stated in the said para:

"16. The contention of the appellant was that there was no surrender and there was merger of the interest of the mortgagee and the tenant. Ordinarily, the doctrine of merger applies to extinction of mortgage security. This occurs by the merger of a lower m a higher security and the merger of a lesser estate in a greater estate. Where the capacity in which a person in possession of the mortgagee''s rights is something quite different from the capacity in which he is in possession of the equity of redemption, the mere fact that the two capacities are united in the same physical person cannot result in a merger,

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 outside. In the case of a lease, the estate that is in the lesser is a reversion. In the case of a mortgage, the estate that is outstanding is the equity of redemption of the mortgagor. Therefore, there cannot be a merger of lease and mortgage in respect of the same property since neither of them is a higher Or lesser estate than the other. The view expressed in Narayan v. Ramachandra (1963) 65 Bom. LR. 449 is correct."

Thus, the submission that when the tenant takes the reversion vested in the landlord on mortgage, there is a merger of the two rights, cannot be upheld and has to be rejected and I reject the same.

Adverting now to the contention of the learned Counsel for the respondents that there was surrender of the demise by the tenant in favour the mortgagor, the landlord, before he took or at the time when he took the property on mortgage, has to be considered on the facts of the case. I have culled out above the relevant paragraph of the mortgage deed Ext. P-2. That clearly shows that the landlord has made it clear that the rights of the mortgagee as a tenant which existed even prior to the mortgage is confirmed upto the end of the mortgage. Not merely that, it is further made clear in the deed itself that after the mortgage is redeemed, the tenant shall continue as a tenant on a rental of Rs. 23 per month. Further, it is stipulated that the interest is to be set off against the rents that accrue on the property. All these things taken, together would certainly establish that the tenant never surrendered his right as a tenant and that during the period of mortgage, both the leasehold rights and the mortgage rights continue to co-exist.

The learned Counsel for the appellant on that basis submitted that the present plaintiffs who stepped into the shoes of the original mortgagor, landlord Khannukar, were not entitled to take actual possession of the suit property on redemption. But, that they were entitled to get back the reversion that was vested in the landlord and that was mortgaged to the tenant Urankar.

This submission of the learned Counsel for the appellant was met by the learned Counsel appearing for the respondents by submitting that though Urankar did not surrender his tenancy at the time when he entered into the possessory mortgage under Ext. P-2, he did surrender by implication his right as a tenant when he sold his rights in favour of the 2nd defendant-appellant under Ext. D-2 on 15-2-1964.

As against that, the learned Counsel appearing for the appellant submitted that Urankar did not surrender his tenancy by implication. But, he actually transferred his rights as a tenant in favour of the presen plaintiffs when he sold his rights under Ext. D-2 on 15-12-1964.

To appreciate the rival contentions, it is necessary to read Exts. D-1 and D-2. As stated above, Urankar transferred his rights in favour of Noor Mohamad Miyya Hazi under Ext. D-2 on 15-12-1964. In that deed, Urankar has stated thus:

"The owner of this property Sri Manohar Mahadevrao Khannukar had executed a possessory mortgage deed in my favour on 20-12-1962 for the above property for Rs. 3,000 and for a period of five years and it is registered in Book No. I, Volume No. 542 on pages from 144 to 149 at 9. No. 1657 on 3-5-1963 and he has received from me Rs. 3,00 and he has delivered the possession of the property to me as a possessory mortgagee. Whatever rights are acquired by me under the said possessory mortgage deed dated 20-12-1962 including the right to recover the amount spent for repairs, I have transferred to you for Rs. 3,000 and according to the assignment deed, i.e., transfer deed, I have handed over the possession of the property to you. You should enjoy the property of the deed dated 20-12-1962. For this, I have given you the deed in my favour for your record."

Noor Mohamad Miya Hazi has in turn sold under Ext. D-1, the rights acquired by him to the present contending defendant and the relevant portion of that deed reads:

"The mortgage rights acquired by me on 15-12-1964 under the said transfer deed are transferred and assigned to you for Rs. 3,000 and by this transfer deed, I have given possession of the property to you. So as per the terms of the said deed dated 20-12-1962, you should enjoy the property. As per the said deed, whatever amount, due and the amount spent for repairs are not recovered by me. You may recover the same in compromise or through Court." This deed is executed on 7-10-1965. Thus, prima facie, itbecomes clear from the recitals in Ext. D-2, that the original mortgagee Urankar has transferred under that deed in favour of Hazi whatever rights he acquired under the original possessory mortgage deed dated 20-12-1962 and, Hazi has transferred the said rights under Ext. D-1 in favour of the present contending defendant. But, as rightly pointed by the learned Counsel for the respondents, the recitals in Ext. D-2 would not merely state that whatever rights the transferor acquired under Ext. D-2 are transferred, but it further states "and according to the assignment deed, i.e., transfer deed, I have handed over the possession of the property to you." If really, it were the intention of Urankar to transfer only the rights of the lessor i.e. reversion under the deed, there was no question of handing over possession, of the property, viz., the suit shop, in favour of the transferee under the deed. In the instant case, he has actually handed over possession of the shop in favour of the transferee and there is no dispute on that point. That is also the evidence of Urankar, examined as D.W. 2, in the suit. This is what he has staled:

"I vacated the premises on 15-12-1964 the date of Ext. D-2."

If that is so, it becomes obvious that what was transferred by Urankar, in terms of Ext. P-2, was the actual possession of the suit shop. In other words, at the time of transfer, Urankar relinquished the possession of the suit shop. Urankar, at that time, was in possession of the reversionary rights also as a mortgagee. The point that arises for my consideration is, whether that amounted to an implied surrender of tenancy.

The Supreme Court of India in the afore mentioned case- Shah Mathuradas Maganlal and Co.1 in para 19 of the judgment, laying down the law on surrender of tenancy has stated thus:

"A surrender under clauses (e) and (f) of S. 111 of the Transfer of Property Act, is an yielding up of the term of the lessee''s interest to him who has the immediate reversion of the lesser''s interest it takes effect like a contract by mutual consent on the lessor''s acceptance of the act of the lessee. The lessee cannot, therefore surrender unless the term is vested in him; and the surrender must be to a person in whom the immediate reversion expectant oh the term is vested Implied surrender by operation of law occurs by the creation of a new relationship or by relinquishment of possession. ............ There must be a taking of possession, not necessarily a physical taking, but something amounting to a virtual taking of possession. Whether this has occurred is a question of fact."

I have shown above that Urankar was vested with the rights of reversion also by virtue of mortgage. He was himself the tenant. Therefore, he could, at any time, impliedly surrender his rights as a tenant by relinquishing possession and on his own showing in Ext. D-2, has has relinquished possession and made over the entire suit shop in favour of Hazi as a possessory mortgagee, for in the whole of Ext. D-2, there is no whisper that Urankar assigned his rights as a tenant in favour of Hazi, though it is stated in no uncertain terms that actual possession of the suit shop is handed over to Hazi. That being so, it becomes obvious that Hazi became a possessory mortgagee and the tenancy rights of Urankar were impliedly surrendered by relinquishment when he executed Ext. D-2. In that view, it is manifest that the tenancy rights of Urankar no longer existed and what the present defendant got by transfer under Ext. D-1, is the mortgagee''s right from Hazi. This inference of mine gets strengthened by the fact that in the entire written statement filed by the contending Defendant-2 in the suit, there is no whisper that the tenancy rights of Urankar were transferred in favour of Hazi and Hazi, in his turn, transferred the tenancy rights in favour of the contending Defendant-2. It is true that in the original mortgage deed Ext. P-2, it was mentioned that Urankar should continue as a tenant after the redemption of the mortgage. But, that was obviously on the assumption that Urankar did not relinquish his rights and surrender impliedly his rights of tenancy in the meanwhile. In the instant case, I have shown that Urankar has transferred his rights in favour of Hazi. Under Ext. D-2, he impliedly surrendered his rights as tenant by relinquishing possession as tenant and making over the entire suit shop in favour of Hazi as a possessory mortgagee.

In that view, the further question as to the effect of transfer of tenancy contrary to the terms of S. 23 of the Karnataka Rent Control Act, 1961, does not arise for consideration.

The reasoning of the learned Civil Judge that Urankar could not transfer, in Law, his rights as a tenant and, therefore, possession of the present mortgagee, Defendant-2, becomes unlawful and that if at all, after the plaintiffs take over actual possession of the property, Urankar can claim his rights as a tenant, is obviously not correct. The reasoning of the learned Civil Judge is unwarranted, as shown above, as Urankar impliedly surrendered his tenancy rights when he relinquished his possession as a tenant before handing over the actual possession of the house in favour of Hazi as a possessory mortgagee. That being so, though on a different reasoning, I hold that the final decree passed by the Courts below that the plaintiffs are entitled to physical possession of the property is just and legal.

In the result, therefore, I hold that the appeal is devoid of merits and is liable to be dismissed. I dismiss the same. Appellant is granted three months to vacate and deliver up possession. No costs.