Burn and Company Ltd. Vs. Its Workmen
 INSC 241 (6 December 1963)
charges-Assessment on insufficient evidence, if binding-Salaries, rates and
taxes for previous years-If proper expenses for year in question-Auditor's
findings-If binding on TribunalDevelopment rebate statutory reserve--Money paid
into-If expenditure on revenue account-Provident Fund, contributionIf can be
added to net profit for calculating gross profitsPreference & ordinary
Dispute arose between the company and its
workmen over the profit bonus for the year 1960. The company was prepared to
pay bonus at 3 1/2 months' wages, but the workmen demanded more. Applying the
principles laid down by this Court, the Tribunal worked out, the net available
surplus after making deductions for income-tax return on working capital and
rehabilitation charges from the gross profit. It appears that the Tribunal
calculated the annual rehabilitation charge mainly on the basis of what had
been decided on the question of rehabilitation charge in the bonus dispute in a
previous year. The evidence adduced by the company, in the present Reference,
on the question of rehabilitation was rejected by the Tribunal. In calculating
the gross profits the 824 Tribunal added back to the net profit in addition to
the sum which the company agreed should be added, the sums paid as salaries for
the previous year rates and taxes in respect of previous years, contribution
for provident fund, the sum paid into the development rebate statutory reserve,
certain expenditure said to have been incurred on purchases and repairs, and
certain expenditure shown under the head Miscellaneous expenses. The Tribunal
awarded 51 months' wages as bonus to the workmen.
Held: (i) That once the question as to what
is necessary for rehabilitation and over how many years it should be spread has
been properly decided by industrial adjudication, the assessment made ought not
to be lightly disturbed if the question comes up again in any future year. It
is necessary for industrial adjudication to project itself into the future and
decide the total rehabilitation charges over the years and the number of years
over which rehabilitation has to be spread. Rehabilitation is, thus rightly
regarded as a long term problem.
But where the decision in one year is more on
the basis of lack of evidence than on investigation of the evidence adduced it
would be unreasonable to treat this as binding for all years to come. In such cases,
if in any future dispute reliable evidence is adduced by the company on the
question of rehabilitation due weight should be given to it and the Tribunal
should not reject it merely on the basis of what has been found in the previous
(ii) The payment of salaries of previous
years as also rates and taxes for previous years cannot be considered proper
expenses for the year in question for the purpose of ascertaining available
surplus. As pointed out by this Court in its previous decisions, the credits
and debits referable to the working of previous years cannot be taken into
consideration for this purpose for the simple reason that the workman concerned
do not remain identical year after year.
(iii) The Tribunal was not bound to accept as
correct whatever had been found correct by the Auditors. The Tribunal was
justified in refusing, in the absence of proper evidence to accept the
company's contention that the expenses shown in the profit and loss account
under various heads of purchases and repairs were all revenue expenditure.
(iv) The money paid into development rebate
statutory reserve cannot properly be considered as an expenditure on revenue
account, for it remained available for the company's use throughout the year.
(v) The payment by way of contribution to the
trustees of the provident fund in accordance with the statute cannot be
properly regarded as a provision to meet a future liability.
This payment should be regarded as payment
made for a demand for liability of the year in question and cannot be added
back to the net profits to ascertain the gross profits.
825 Indian Hume Pipe Co. Ltd. v. Their
workmen,  Supp. 2 S.C.R. 948, referred to.
(vi) The rate of 7% on preference share being
a contractual one should not be diminished and that an increase of 30% was also
allowable under s. 3 (1) of the Preference Shares (Regulation of Dividends)
Act, but such an increase was not admissible in respect of ordinary shares.
CIVIL APPELLATE JURISDICTION : Civil Appeal
Nos. 97 to 99 of 1963.
Appeal by special leave from the Award dated
October 11, 1961, of the 2nd Industrial Tribunal, West Bengal in case No.
VIII-534 of 1960.
A.V. Viswanatha Sastri and D.N. Mukherjee,
for the appellant (in C.A. No. 97/1963) and respondent No. 1 (in C.A. No. 98
and 99 of 1963).
H.N. Sanyal, Solicitor-General and B.P.
Maheshwari, for the appellant (in C.A. No. 99/1963).
D.L. Sen Gupta and B.P. Maheshwari, for the
appellant (in C.A. No. 98/1963) and respondent No. 3 (in C.A. No. 97/1963).
Dipak Datta Chaudhuri, for respondent No. 1
(in C.A. No. 97/1963).
N.C. Chatterjee, Ajit Roy Mukherjee and A.K.
Nag, for respondent no. 4 (in C.A. Nos. 97 and 98 of 1963).
December 6,1963. The Judgment of the Court
was delivered by DAS GUPTA, J.-This dispute between Burn & Company Limited,
(Iron Works), Howrah and its workmen is over the profit bonus for the year
1960. Previous disputes between this Company and its workmen on the question of
bonus for the years 1951-52, 1953-54 and 1955-56 ended with awards of Industrial
Tribunals in West Bengal. The dispute for the bonus payable for the year
1955-56 came up to this Court in appeal and was disposed of by its Judgment
dated March 8, 1960. For the Company's financial year from May 1, 1958 to April
30, 1959, the bonus, if any, would be payable in 1960.
The Company 826 was prepared to pay bonus
equivalent to 3 1/2 months' wages but the workmen demanded much more. It
appears that the Company has already made an advance of three months' wages on
the suggestion of the Deputy Labour Commissioner during negotiations for
settlement. But the talks for settlement ultimately failed. On applying the
principles laid down by this Court in the matter, the Tribunal worked out the
net available surplus out of which the claim for bonus had to be made at Rs.
53.31 lacs. After taking into consideration that the Company had contributed
Rs. 10.74 lacs towards the employees' provident fund and the income-tax rebate
which would be available to the Company in respect of the bonus payment, the
Tribunal was of opinion that a sum of Rs. 35.20 lacs could be fairly
distributed to the workmen as bonus.
It has accordingly awarded bonus to the
extent of 5 1/2 months' wages. It has further directed that the amount of wages
already paid in advance towards the bonus shall be set off against the bonus
now awarded. Both the Company and the workmen have appealed against the award
by special leave.
The main controversy, as it always is in
these cases, is on the computation of the available surplus. Different statements
have been filed by the several Unions by whom the workmen were represented
showing a gross profit at rupees seven crores and thirty-five lacs and
available surplus only a few lacs less than this. The Company's statement
showed the gross profits at Rs. 1,48,891.72. From this prior charges which have
to be deducted in arriving at the available surplus were shown as On account of
income tax ... Rs. 58,92,925 On account of return on paid up capital... Rs.
95,55,300 As return on working capital... Rs. 5,73,326 For rehabilitation
inclusive of Rs. 20,37,103 the normal notional depreciation for the year ...
Rs. 72,64,579 The figure thus reached for available surplus is Rs. 1,95,932
which would be equivalent to less than 827 10 days' wages for the workmen. The
Tribunal in arriving at the figure of Rs. 53-31 lacs as available surplus has
calculated the gross profits at Rs. 181-82 lacs. From this it has deducted Rs.
71.36 lacs for income-tax, Rs. 7-39 lacs as return on working capital and a
further sum on account of rehabilitation. For rehabilitation it has deducted
Rs. 23.66 lacs as "rehabilitation charges" exclusive of the sum of
Rs. 20.37 lacs under the head Notional Normal Depreciation. As Mr. Sen who
appeared before us for the Company in these appeals, fairly pointed out that
there is an obvious mistake in this calculation inasmuch as the Tribunal having
decided that Rs. 23.66 lacs should be the annual rehabilitation charges should
not have deducted this entire amount after having already deducted Rs. 20.73 for
Notional Normal Depreciation. Mr. Sen admits that if the decision that Rs.
23-66 lacs should be the annual rehabilitation charge, allowable in the year in
question, only an amount of Rs. 3.29 lacs should be deducted as prior charge in
addition to Rs. 20.37 lacs already deducted under the head Notional Normal
Depreciation. If the other figures stood as calculated by the Tribunal this
would result in the increase of the available surplus to Rs. 73.68 lacs. It is
also clear that if the Tribunal's decision that Rs. 23.66 lacs is the proper
rehabilitation charge allowable for the year in question is left undisturbed
the available surplus would remain at about Rs. 51 lacs, even if all the other
figures as computed by the Company in its statement were allowed to stand. For,
as already stated the Company's claim for rehabilitation charges inclusive of
Notional Normal Depreciation is over Rs. 72.64 lacs, i.e., about 49 lacs more
than what the Tribunal has found as allowable.
Mr. Sen's main attempt has therefore been to
persuade us to reject the Tribunal's conclusion or, the question of
rehabilitation charge allowable for the year 1958-59. It appears that the
Tribunal calculated the annual rehabilitation charge at this figure of Rs.
23.66 lacs mainly on the basis of what 828 had been decided on the question of
rehabilitation charges in the bonus dispute for the year 1954-55. It pointed
out that in the said award the annual rehabilitation cost was assessed at Rs.
14.30 lacs for machinery and Rs. 4.00 lacs for buildings, a total of Rs. 18.30
lacs. To this it added an additional charge of Rs. 5.36 lacs in respect of the
period that had elapsed since 1954-55. The evidence that was adduced by the
Company in the present Reference, on this question if rehabilitation was rejected
by the Tribunal.
Mr. Sen's argument is that the Tribunal fell
into error in considering itself bound to proceed in the present reference on
the assessment of the rehabilitation cost in the bonus dispute for the year
1954-55 and that this error was really the basis of his rejection of the
evidence given by the Company in the present case. There can, in our opinion,
be no doubt that once the question as to what is necessary for rehabilitation
and over how many years it should be spread has been decided by industrial
adjudication after proper investigation and careful scrutiny if the evidence
adduced in any one year the assessment thus made ought not to be lightly
disturbed when the question comes up again in any future year in respect of
rehabilitation. The very nature if the problem makes it necessary for
industrial adjudication to project itself into the future and decide the total
rehabilitation charges over the years and the number of years over which
rehabilitation has to be spread.
There is bound to be some amount of unreality
in its conclusions because of the difficulty of ascertaining in the present
what will be necessary in the future. In spite of that however the calculations
thus made give on the whole a firm basis for making deductions for calculating
the available surplus a reasonable sum for rehabilitation of machinery and
buildings and other items of capital as may require rehabilitation. Once
however any particular amount has been found necessary as the total
rehabilitation charge for a number of years and from that an assessment is made
for the particular year in dispute of the amount allowable for that 829 year,
it will be unreasonable and indeed meaningless for the matter to be
re-investigated year after year. Rehabilitation is rightly regarded as a long
term problem and that is why once the matter has been investigated and the
proper figure ascertained, that calculation should ordinarily be adhered to for
Mr. Sen does not seriously contest the
correctness of this proposition. He however contends that where the decision in
one year is more on the basis of lack of evidence than on an investigation of
the evidence adduced it would be unreasonable to treat this as binding for all
the years to come. He pleads that when the question of rehabilitation charges
was raised in the bonus dispute for the year 1954-55 the employer was not in a
position to adduce full evidence and that is how the assessment of Rs. 18-30
lacs as necessary amount for rehabilitation of machinery and building came to
be made. Now that he is in a position to adduce proper evidence he should not
be deprived of the opportunity of convincing the Tribunal of the actual needs
for the purpose. There is, in our opinion, considerable force in this
contention. We have examined the award in the bonus dispute of 1954-55 and are
satisfied that in making the assessment for rehabilitation charges the Tribunal
did not get the benefit of proper evidence in the matter We agree that in these
circumstances it would not be reasonable to treat the assessment made in that
year as binding on the employer in the present dispute also.
We are unable to agree however with Mr. Sen's
contention that the real reason why the Tribunal rejected the evidence adduced
on behalf of the employer was that it considered itself bound by the previous
assessment. On the contrary, it appears to us clear that the evidence that was
adduced was examined fully and carefully by the Tribunal independently of the
assessment for the year 1954-55 and it was when that evidence was found
unreliable that the Tribunal gave the employer the benefit of the previous
assessment. The Tribunal has given clear and cogent 830 reasons for rejecting
the evidence that was adduce and we find nothing that would justify us in re-assessing
the same for ourselves. One of the main reasons which weighed with the Tribunal
was that while q notations were received from Western European countries no
quotations were obtained from Eastern European countries like, East Germany,
Poland, Czechoslovakia and U.S.S.R. etc. Mr. Sen has rightly urged that it must
be left to the Company to decide from which country the new machinery should be
obtained and if it decided that rehabilitation could properly be made by
obtaining replacements of the machinery from Western European countries from
where the original machinery was obtained, it would be unreasonable to ignore
the quotations received from those countries. The Tribunal however points out
that Mr. Mukherjee, the Company's witness has himself admitted that
rehabilitation could be conveniently made by importing from Eastern European
countries. The only reason this witness has given for not obtaining quotations
from those countries was that all kinds of machines would not be available
there at a time. This explanation is obviously beside the point. Because it
will not be ordinarily necessary to replace all the machines at any one time.
In this connection one is bound to take notice, as the Tribunal has done, of
the fact that it is easier to arrange payments for purchase from Eastern
European countries which would accept payments in rupees than for similar
purchases in Western European countries the foreign exchange for which might
not be easily available. The Tribunal also pointed out that Mr. Mukherjee has
produced no records to show the new purchases of machine in recent years which
would have shown how the replacements have been made. There is much force also
in the Tribunal's comment that when Mr. Nadjarian who has given evidence about
the price of buildings says that he got these from records and these records
have not been produced it becomes difficult to accept his testimony.
On a consideration of the reasons given by
the Tribunal we are convinced that it has not acted 831 arbitrarily in treating
the evidence adduced by the Company as unreliable.
Having rejected the Company's evidence the
Tribunal might have felt inclined to refuse any amount for rehabilitation
charge for the year 1958-59. But rightly resisting that inclination the
Tribunal gave the Company the benefit of the. assessment made for the year
1954-55. It is therefore not possible for us to disturb the Tribunal's findings
on the question of rehabilitation charge.
We think it proper however to add that if in
any future dispute reliable evidence is adduced by the Company on the question
of rehabilitation due weight should be given to it in coming to a conclusion
and the Tribunal should not reject it merely on the basis of what has been
found in the previous dispute of 1954-55 or in the present Reference.
As has been already pointed out the
consequence of leaving the Tribunal's findings on the question of
rehabilitation undisturbed is that the available surplus would be about Rs.
51 lacs, even if all other figures as
computed by the Company are accepted. On that figure of available surplus it
would not be reasonable to disturb the Tribunal's award of 5 1/2 months' wages
as bonus to the workmen. This is sufficient to dispose of the Company's appeal.
In order however to decide whether the workmen's
claim for bonus of more than what has been allowed by the Tribunal is justified
or not it is necessary to examine some of the other figures in the calculation
of the available surplus.
In calculating the gross profits at Rs.
181.82 lacs the Tribunal has added back to the net profit, in addition to the
sum which the Company agreed should be added, the sum of Rs. 2,87,342 paid as
salaries for the previous years, Rs. 10,74,523 paid as contribution for
provident fund, Rs. 2,07,322 paid into the development rebate statutory
reserves, Rs. 13,48,403 out of certain expenditure said to have been incurred
on purchases of raw and other materials, stores and spare parts, repairs 832 to
buildings and repairs to machinery; Rs. 3,27,856 out of the expenditure shown
under the head Miscellaneous Expenses;
and Rs. 50,871 paid as rates and taxes in
respect of previous years. The Tribunal is clearly correct in thinking that
payment of salaries of previous years as also rates and taxes for previous
years cannot be considered proper expenses for the year 1958-59 for the purpose
of ascertaining the available surplus. For, as pointed out in previous
decisions of this Court, the credits and debits referable to the working of
previous years cannot be taken into consideration for this purpose for the
simple reason that the workmen concerned do not remain identical year after
It is equally clear that the Tribunal was
justified in refusing, in the absence of proper evidence to accept the
Company's contention that the expenses shown in the profit and loss account
under the head of purchases of (1) raw and other materials, (2) stores and
spare parts consumed, (3) repairs to buildings, (4) repairs to machinery, were
all revenue expenditure. Mr. Sen has pointed out that the annual accounts of
the Company show the expenditure incurred for capital expenditure separately.
He contends that entries in the profit and loss account on the items mentioned
above having been accepted by the Auditors as properly shown as revenue
expenditure, the correctness of that view should not have been doubted. We are
unable to agree however that the Tribunal was bound to accept as correct
whatever had been found to be correct by the Auditors. A controversy had
already been raised whether or not these items had been entirely spent as
revenue expenditure. It was up to the Company to adduce further evidence in
support of what had been shown in the profit and loss account. That was not
done. No fault can be found therefore with the Tribunal in proceeding to
calculate 2 1/2% of the total figure of these four items as representing
The Tribunal was in our opinion also right in
adding back the amount paid into the development 833 rebate statutory reserve.
Money paid into this reserve cannot properly be considered as an expenditure on
revenue account. For, it remained available for the Company's use throughout
We think however that the Tribunal has fallen
into error in adding back Rs. 10,74,523 which was paid during the year by the Company
to the trustees of the provident fund. In adding back this amount the Tribunal
apparently, relied on an observation of this Court in Indian HUme PiPe Co.,
Ltd., v. Their Workmen(1) At page 954 of the Report Bhagwati J.
speaking for the Court said:
"It is well-settled that the actual
income-tax payable by the Company on the basis of the full statutory
depreciation allowed by the income tax authorities for the relevant accounting
year should be taken into account as a prior charge irrespective of any set off
allowed by the Income-Tax authorities for prior charges or any other
considerations such as building up of income tax reserves for payment of
enhanced liabilities of income-tax accruing in future. It is also well-settled
that the calculations of the surplus available for distribution should be made
having regard to the working of the industrial concern in the relevant
accounting year without taking into consideration the credits and debits which
are preferable to the working of the previous years, e.g., the refund of excess
profits tax paid in the past or loss of previous years carried forward but
written off in the accounting year as also future liabilities, e.g., redemption
of debenture stock, or provision for Provident Fund and Gratuity and other benefits,
etc., which, however, necessary they may be cannot be included in the category
of prior charges."' The reference in this statement to provision for
provident fund as one to meet future liability was clearly made on the
assumption that the money was being kept apart by the employer himself so (1)
 Supp. 2 S.C.R. 948.
1/SCI/64-53 834 that he would be able to make
payment in a future year when the payment would become due. This can have no
application to a case where the contribution to provident fund has to be made
to somebody else. Indeed, it would be wrong to treat this as payment to meet a
future liability inasmuch as the liability to make the payment to the trustees
arose under the Act itself. This is not a case where the Company was laying by
money for a future liability but was able to use it if it liked. That would be
a proper case of provision to meet a future liability. The payment by way of
contribution to the trustees of the fund in accordance with the statute cannot
be, however, properly regarded as a provision to meet a future liability. This
payment should therefore be regarded as payment made for a demand for liability
of the year in question, viz., 1958-59 and cannot be added back to the net
profits to ascertain the gross profits.
As regards the sum of Rs. 3,27,856 which has
been added back out of the expenditure on Miscellaneous Expenses a mistake has
clearly been made in respect of Rs. 2,83,156 out of it. the break up in Ex. F
for the Miscellaneous Expenses showed inter alia Rs. 6,52,230 as spent for
freight, customs duty etc., The Tribunal thinks that as Rs. 2,83,156 has been
separately shown in the profit and loss account as freight and shipping charges
it is not unlikely that this amount has been again included in Rs. 6,56,230 shown
under the head freight, customs duty etc. Mi. Sen contends that it would be
unreasonable to think that the same vouchers had been accepted by the Auditors
in support of entries of expenditure under two different heads and that it
would be proper to think that Rs. 2,83,156 shown as freight and shipping
charges was independent and separate from the freight and customs duty etc
included under the head Miscellaneous Expenses.
There is much force in this contention and we
think it reasonable to believe that the sum of Rs.2,83,156 shown in the profit
and loss account under the head freight and shipping charges was not included
835 under the head Miscellaneous Expenses. The Tribunal was therefore wrong in
adding back this sum of Rs. 2,83,156. As regards the other items which,
together with this Rs.
2,83,156 made up the total of Rs. 3,27,856
that have been added back by the Tribunal we see no reason to disturb its
We see no reason also to disturb the
Tribunal's findings that the rate of 7% on preference shares being a
contractual one should not be diminished and that an increase of 30% was also
allowable under s. 3(1) of the Preference Shares (Regulation of Dividends) Act
of 1960. We are of opinion that the Tribunal was also right in holding that such
an increase was not admissible in respect of the ordinary shares.
On behalf of the workmen an objection was
raised to the Tribunal's findings as to the amount of working capital used. It
was said that the evidence did not clearly show the periods during which the
amounts were used. In this connection the Tribunal has after consideration of
the evidence of Mr. Ghose and Mr. Dutt accepted their evidence and the mere
fact that it mentioned some weakness in respect of some minute details does not
affect the finality of the Tribunal's conclusion.
The result of not adding back the sums
mentioned above, viz., Rs. 10,74,523 and Rs. 2,83,156 is that the gross profits
became Rs. 168-25 lacs. The Income-Tax on this after making the allowances for
statutory depreciation and the development rebate, i.e., a total sum of Rs.
17,86,583 is Rs. 67-67 lacs. The calculations for the available surplus
therefore stand thus:(Rupees in lacs) Gross Profits 168.25 Less Normal Notional
Depreciation 20.37 Less Income-tax 67.67 Less Return on Paid-up Capital 7.39
Less Return on Working Capital 5.73 Less Rehabilitation Charges 3.29 (23-66
minus 20.37) Available surplus 63.80 836 The award of bonus at 5 1/2 months'
wages appears to be reasonable and proper on this figure of the available
surplus. The employers' plea for reduction of the bonus and the workmen's claim
for increase of it appear to us equally injustified.
All the appeals are accordingly dismissed.
There will be no order as to costs.
C. BEEPATHUMMA & ORS.
V.S. KADAMBOLITHAYA & ORS.
(K. SUBBA RAO, M. HIDAYATULLAH AND J.C. SHAH,
JJ.) Mortgage-Suit for redemption-Mortgagee enjoying benefits under a deed-If
must also accept the obligations thereunderDoctrine of election.
The properties in plaint Schedules A, B &
C were mortgaged to one Kunjamu and others. By a partition in the Mortgagees'
family Kunjamu go 4th shares of the interests in these properties. Subsequent
to the death of Kunjamu the mortgagors and mortgagees entered into an agreement
evidenced by Ex. P-2 and P-2(a) in which the original mortgage deed Exp. was
referred but it released certain properties shown in C Schedule. The mortgagors
agreed that the mortgagees would enjoy the remaining properties shown in A and
B Schedules for a period of forty years and it was agreed that on the expiry of
this period the mortgagors would have an option to redeem the mortgage land on
payment of the amount due. At the time of the execution of Exp. 2 and P-2(a)
Kunj Pakki the grandfather of the third respondent in this appeal was a minor
(son of Kunjamu). His mother signed for herself but did not sign Ex. P-2 and P2(a)
on his behalf and no legal guardian signed it either.
The first respondent purchased Schedule A
& B properties and filed a suit for redemption. He claimed that since under
Ex. P-2 the mortgagors were entitled to remain in possession for 40 years from
1862 the right of redemption accrued in 1902 and the suit filed in 1944 was
within sixty years as contemplated by Art. 148 of the Limitation Act.
The defence was that so far as 837 the share
of Kunjamu was concerned Kunhi Pakki who inherited it was not bound by Ex.
P-2(a) since he was a minor and he was not a signatory to it nor was it signed
by any legally constituted guardian on his behalf. Therefore it was contended
the Kunhammu's share inherited by Kunhi Pakki and subsequently by third
respondent was hit by limitation and was not liable to be redeemed.
The trial court held that since Kunhi Pakki
had taken benefit under Exp. 2 and P-2(a) his successors could not avoid them
and therefore the suit was not barred by limitation and the properties were
liable to be redeemed.
The High Court upheld the decision of the
lower court on the main question. The present appeal was filed by certificate
granted by the High Court.
Held: (i) Kunhi Pakki was not directly bound
by Ex. P-2 and P-2(a) since he was a minor and no legal guardian signed these
documents on his behalf. Ex. P-2(a) cannot be used to show either an
acknowledgment by him or an extension of the terms of the original usufructuary
(ii) The evidence in the present case shows
that Kunhi Pakki accepted benefit under Ex. P-2 and therefore neither he nor
his successors could be heard to say that the mortgage in Ex. P-1 was independent
of Ex. P-2 and that the limitation ran out on the lapse of 60 years from 1842.
The doctrine of election was properly applied in respect of his 1/4th share now
in possession of the present appellants. That doctrine is that a person who
accepts a benefit under a deed or will or other instrument must adopt the whole
contents of the instrument, must conform to all its provisions and renounce all
rights that are inconsistent with it, in other words a person cannot approbate
and reprobate the same transaction.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 446 of 1960.
Appeal from the judgment and decree dated
November 3, 1955, of the Madras High Court in A.S. No. 138 of 1957.
S.T. Desai, M.S.Narasimhan and M.S.K.
Sastri,for the appellants.
C.B. Agarwala, K. Jayaramand and R. Ganapathy
Iyer, for the respondents.
December 6, 1963. The Judgment of the Court
was delivered by HIDAYATULLAH, J.-This is an appeal by certificate granted by
the High Court of Madras against its common judgment and decree dated November
3, 838 1955 in A.S.Nos. 88 and 138 of 1947. The appellants are 7 of the
original 139 defendants and the respondents are the two plaintiffs and the
original defendant No. 1. The appeal arises from a suit for redemption of a
usufructuary mortgage dated April 26, 1862 and for delivery of possession of
properties described in schedules A and B of the plaint together with mesne
profits from the date of redemption till delivery of possession. The mortgaged
property had passed into the hands of several persons and this is why so many
defendants were joined. We shall now give the facts which go back for an
incredibly long period.
The plaint incorporates three schedules
distinguished as A, B and C Schedules and they describe properties which
belonged to the Alyasantana family of the second respondent.
On April 14, 1842, one Madana, who was then
the Ejaman of the family, usufructuarily mortgaged the A, B and C schedule
properties in favour of one Kunhammu Hajar for 1250 varahas or pagodas (equal
to Rs 5,000) under Ex. P-1. This deed did not contain any provision for
repayment of the amount or for the usufructuary mortgage to be worked off. It,
contained a clause to the following effect:
"At the end of the cultivation season,
whenever you state that the said land is not required, the said one thousand,
two hundred and fifty varahas due to you and also the value of improvements
shall be paid to you in one lump-sum and the said land, house, cattleshed,
out-house, etc. shall be obtained back from you, and this document as well as
the previous documents shall be got redeemed." Though the mortgage deed
was taken ostensibly in his own name by Kunhammu Hajar, he did so on behalf of
his brothers, sisters, nephews and nieces etc. The mortgaged property was
described as land bearing a beriz of 44 1/2 pagodas (equal to Rs. 227-10-8)
situated in Warg No. 34 of Kumbadaje village, Netanige Magne. Bekal taluk (the
whole Warg bore a beriz of 56 1/2 pagodas), comprising 37 fields which 839 were
described by their names without boundaries. The mortgagees who were given
possession of lands were also placed in possession of some heads of cattle and
other movables and for the redemption of the movables there was a separate term
in the deed.
In 1857, the family of the mortgagees effected
a partition by registered documents which are marked collectively as Ex. P-6
series. This partition was not by metes and bounds or by the allotment of whole
fields but a division of lands with reference to the fraction of the beriz
payable. We are concerned in this appeal only with the share which went to
Kunhammu Hajar whose share was 1/4th. In Ex. P-6 which is the partition deed
concerning him, his share was described as follows:
"Further, out of Belinjada land bearing
a beriz of Rs. 227-10-10 and entered in No. 34 maindana Kuntamma Varg of
Kunvadaji village Nettanige Magne, the one-fourth portion bearing a beriz of
Rs. 56-14-8 and consisting of land and Bavaities including border trees, soil
and field attached thereto.
Other members of the family received shares
according to their own right, mentioned in separate documents. The earliest
such document was of April 3, 1857 and the last of April 30, 1857. Kunhammu
Hajar died after this partition and on April 26, 1862, the mortgagors and
mortgagees entered into an agreement evidenced by Exs. P-2 and P-2(a) by which
Ex. P-1 was re-affirmed; the mortgagees, however, released from Ex. P-1 certain
properties which are now shown in schedule C to the plaint. The mortgagors on
their part agreed that the remaining properties (which are now shown in
schedules A and B to the plaint) would be enjoyed by the mortgagees for a
period of 40 years from the date of the document together with improvements
made thereon. The mortgagors covenanted that if after the expiry of the
stipulated period this land was required by them and if at the time of the
cultivation season of that year the mortgage amount of the usufructuary
mortgage (Ex. P-1) 840 together with the amounts of two other deeds creating a
charge and. Rs. 100 taken at the execution of 'Ex. P-2 together with the
amounts relating to improvements were paid in one lump-sum, the land and the
bond would stand redeemed.
Ex. P-2 was executed by the mortgagors and a,
counterpart (Ex. P-2(a))was executed among others, by Aliamma, the widow of
Kunhammu Hajar, who signed for herself but not on behalf of Kunhi Pakki her
minor son by Kunhammu Hajar.
Kumhi Pakki's share in the mortagaeg was thus
not represented in Exs. p-2 and P-2(a). KunhiPaki died in 1934 and the first
defendant, also Kunhi Pakki who is the third respondent in this appeal is his
grand-son. It may be mentioned that the two deedes which created a charge and
which were to be dischrged along with Ex. P-1 and P-2 have been held by the
High Court and the Court below to be fr the principal amount of Rs. 2,000.We
may now omitt for the time being a refrence to the further devolution of the
share of Kunhi Pakki son of Kunhamm Hajar, in respect of whose share in Ex. P-1
the main dispute in the case has arisen. We shall mention those details later.
The present suit was filed for redemption of
Ex. P-2 by the first and the seconorespondents. The first respondent purchased
schedule A properties in July 1941 by Ex. P-83 and undertook to redeem the
mortgaged properties described in schedules A and B and to hand over possession
of schedule B properties to the legal representative in the family of Madana.
Respondent No. 2 the then Elaiiianthi is that representative. This suit was
filed on April 20, 1944 and it would clearly be barred under Art. 148 of the
Indian Limitation Act unless Exs. P-2 and P-2(a) and the term of 40 years for
which the mortgagees were to remain in possession from 1862 were taken into
consideration and saved limitation. The plaintiffs in their suit stated that
the claim was within time, because under Ex. P-2 the mortgagees were entitled
to remain in possession for 40 years from April 26, 1862 and the right of
redemption thus 841 accrued for the first time on April 27, 1902 and the claim
made in 1944 was within 60 years of that date as required by Art. 148. The
defence was that in so far as the share of Kunhammu Hajar was concerned, Kunhi
Pakki, who inherited it was not bound by Ex. P-2(a) because he was neither a
signatory to it being a minor, nor had any legal guardian executed, Ex. P-2(a)
on his behalf. It was pleaded that there was no doctrine of representation in
Mohammedan Law, and the mother, even if she had signed Ex. P-2(a), would have
been a fazuli, that is to say, an unauthorised person.
It was further pleaded that in respect of
Kunhi Pakki's share Exs. P-2 and P-2(a) could not save limitation and 1/4th
share of Kunhammu Hajar was not liable to be redeemed.
It was also claimed that the plaintiffs must
pay for improvements.
The trial Judge held that suit to be within
time applying to the 1/4th share of Kunhammu Hajar than owned by C. Mahamood
deft. 8, the equitable doctrine of election on the ground that Kunhi Pakki had
approved and adopted Exs. P-2 and P2(a) and taken benefit under them and his
successors could not therefore avoid them. With regard to improvements, the
trial Judge found that an amount of Rs. 4.089-2-0 was due.
The trial Judge accordingly passed a decree
inter alia for the redemption of the share of C. Mahamood on payment of the
price of redemption and improvements together with interest thereon. From this
judgment, A. S. 138 of 1947 was filed by defendants 3, 5, 8, 9, 49, 50, 525 67,
68 and 121 and A.S.
88 of 1947 was filed by defendant 58. The
plaintiffs also cross-objected. The judgment of the High Court modified the
decree in the matter of the amounts due for improvements but on the main
question, it endorsed the views of the trial Judge with regard to limitation
and the 'application of the equitable doctrine of election to Kunhi Pakki in
respect of documents Ex. P-2 and P-2(a).
In this appeal, it is contended that the
conclusions of the High Court with regard to limitation and the 842 doctrine of
election were erroneous and further that the High Court was in error in
awarding mesne profits from the date fixed in the preliminary decree for
redemption, in view of the fact that the High Court found an increased amount
in respect of improvements and the amount of improvements had to be paid for in
full before redemption could be claimed.
Before we deal with these points, we must
narrate more facts.
The present appeal has been filed by
Beepathumma the legal representative of deft. 8-C. Mahamood son of Abdul
Rahiman Haji, who died during the pendency of the appeal in the High Court and
by the daughter (deft. 9) and the sons (defts. 52, 67 and 68) of C. Mahamood;
the other appellants are Abdulla (deft. 49) son and Bipathumma (deft. 50)
daughter of Mammachumma (deft. 48). This Mammachumma was the sister of Kunhi
Pakki son of Kunhama Hajar. These names have to be borne in mind, because they
are connected with the 1/4th share which on partition went to Kunhamu Hajar by
Ex. P-6, and will figure in the narrative which follows. It must also be
remembered that Warg No. 34 was also called "Belinja Mainda-Kinhana".
After the partition, Kunhammu Hajar executed
a usufructuary mortgage (Ex. P-16) in favour of his elder sister Cheriamma in
respect of his 1/4th share on September 23, 1857.
Cheriamma had received 1/8th share (beriz of
Rs. 28-7-4) at the partition vide Ex. P-6(c). In the mortgage deed (Ex. P-16)
it was stated that Kunhamu Hajar would redeem the property whenever he wanted
it. Ex. P-2 and P-2(a) then came into existence. Cheriamma was not a signatory
P-2(a), because she had died earlier. After
cheriamma's death, her share of 1/8th and the mortgagee rights were divided
between Mammachumma and Aisumma by Exs. P-17 and P17(a) on October 6, 1861.
Each of these two sisters was allotted property of the beriz of Rs. 28-7-4 from
the 1/4th share mortgaged by Kunhammu Hajar and of Rs. 14-3-8 from the share
proper of Cheriamma. Mammachumma and 843 Aisumma thereafter held properties of
a total beriz of Rs.
42-11-0 each and each share was 3/16th of the
entire mortgaged property.
After Kunhammu Hajar's death, his son Kunhi
Pakki ignored the usufructuary mortgage in favour of Cheriamma (Ex. P16). On
July 10, 1884, he took a sale deed (Ex. P-59) from Hammadekunhi son of
Mammachumma. The property was described as of beriz of Rs. 28-7-4 in Warg No.
34 and of the beriz of Rs. 14-3-8. In other words, though the property was
shown in two lots, he obtained the 3/16th share of Cheriamma. No boundaries
were mentioned in the deed because it was stated that Kunhi Pakki was in
possession of a portion of the properties in the same Warg. In this way, Kunhi
Pakki obtained properties of a total beriz of Rs. 42-1 1-0, which had belonged
Kunhi Pakki then executed a simple mortgage
(Ex. P-60) in favour of one Laxmana Bhakta on January 18, 1887 for Rs. 5,500.
The property was said to be of Belinja Mainda Kinhana (Warg No. 34) and to be
in two lots, one lot bearing a beriz of Rs. 28-7-4 and the other a beriz of Rs.
This showed that Kunhi Pakki was mortgaging
the above 3/16th share acquired by him by Ex. P-59. This conclusion is
reinforced by the fact that the boundaries in Ex. P-60 are said to be as
mentioned in Ex. P-59. The right of Kunhi Pakki in this property was said to be
"Avadhi-Ilidarwar" (usufructuary mortgage for a fixed term in lieu of
interest ) (Ex. P-1 read with Ex. P-2). Later, Kunhi Pakki executed a simple
mortgage Ex. P-61 for Rs. 2,000 on February 11, 1892 in favour of one Anantha
Kini. The property, this time, was said to be of the beriz of Rs. 56 odd and
also property of the beriz of Rs. 28-7-4 and Rs. 14-3-8. In other words, he was
mortgaging the entire 7/16th share (1/4th plus 3/16th). No boundaries were
given but it was stated that the boundaries were the same as in the mortgage
deed of January 18, 1887 in favour of Laxmana Bhakta. This document recited
that no other documents were handed 844 over, but the mortgagor undertook to
send them latter. On September 29, 1902, Kunhi Pakki, his wife Beepathumma and
his son Kunhammu executed a usufructuary mortgage (Exs. P62) for Rs. 32,000 in
favour of one Vaikunta Bhakta.
Several lots of properties were included an
item 18 referred to property of the beriz of Rs. 98-11-0 in Belinjada Maindana
Kinyana (Warg No. 34). This showed that he was mortgaging his 1/4th share and
3/16th share of Cheriamma. A recital showed that all "Vola-documents"
were handed over and evidence has established that Ex. P-2 was one of them.
Vaikunta Bhakta transferred the mortgagee rights under Ex. P-62 to Abdul
Rahiman and Korgappa by Ex.
P-64 dated April 10, 1913; item 18 in Ex.
P-64 is land of Warg No. 34 of the beriz of Rs. 98-11-0 and the boundaries are
said to be as shown in the Ilidarwar (Ex. P-1 and P-2).
Kunhi Pakki also executed on August 26,1924,
a document (Ex. P-65) creating a charge on the same properties in favour of the
assignees. These properties were again said to be those that had been
usufructuarily mortgaged under the Ilidarwar of September 29, 1902 in favour of
Vaikunta Bhakta by Ex. P-62.
On January 23, 1930, the heirs of Abdul Rahiman
and the heirs of Koragappa executed a partition dated (Ex. D-54) and at that
partition, the Kumbadaje properties which were the subject-matter of the
mortgages and charge fell to the share of Abdul Rahiman's heirs. It is stated
in Ex-D-54 that all the documents were handed over to the heirs of Abdul
Rahiman. C. Mahamood was the son of Abdul Rahiman and on September 23, 1930, he
obtained a release of the shares of his mother, brother and sister by Ex. P-66.
In Ex. P
66. there is a mention that the properties of
Kumbadaje village had been obtained by an assignment from Vaikunta Bhakta and
were being enjoyed as a usufructuary mortgage with a term. It also mentioned
the charge created by Kunhi Pakki for Rs. 9,500 on August 26, 1924. If was also
mentioned that all the documents relat845 ing to properties in Kumbadaje
village bad been handed over to C. Mahamood son of Abdul Rahiman. The total
beriz of the Kumbadaje prperties was shown to be Rs. 198-8-0 because it
included certain sub-divisions other than those inccluded in Exs. P-64 and
P-65. In this manner, the 8th defendant acquired the 7/16th share of Kunhi
We have now to see three other documents
which were executed either by Kunhi Pakki or were in his favour. The most
important of these is Ex. P-3 dated September 4, 1871.
This was a mortgage by the original
mortgagors in favour of Kunhi Pakki. It will be recalled that schedule C
properties were released at the time when Ex. P-1, which was without any time
limit, was converted into a mortgage with a time limit by Ex. P-2 in 1862.
Kunhi Pakki now obtained a mortagage of the released properties with a term of
32 years' enjoyment, thus putting all the three properties described in
schedules A, B and C in the plaint and mentioned in Ex. P-1 on the same
footing. The significance of 32 years' term is quite clear. This mortgage was
to run for the same period for which the other mortgage deed was to run. It was
stated in this document that Kunhi Pakki was already enjoying the other
property out of property bearing a beriz of Rs. 227-10-10 of Waag No. 34 under
a usufructuary mortgage with a time limit by virtue of a registered document of
1862 executed by Kunhi Pakki's mother Aliamma.
Certain recitals of that document may be
" Out of the property enjoyed by you
previously under usufructuary mortgage with time-limit i.e., out of the
property bearing a beriz of Rs. 227-10-10 and entered in Muli No. 34 our
ancestor, Maindana Kinhanna varg in Kumbadaje village, the said Nettanige magne
attached to the sub-district of Kasaragod, South Kanara district, in respect of
which property the entire tirve is paid by yourself, the particulars of the
propertv enjoyed by us without payment of tirve tinder the registered Karar
(Agreement) deed executed. on the 846 14th of Chitra Bahula of Dundubhi (1862)
year (27th April 1862) by your mother Alima Hajumma and others in favour of
ourselves and others are as follows:
x x x x x "All this entire property is
mortgaged to you with a time-limit of thirty-two years from this Prajothpathi
year onwards; and the one said Karar document obtained by us and mentioned
above is given to you;
x x x x x "If the principal amount and
interest fall into arrears, that arrears of interest also shall be paid, after
the due date, at that time only when the mortgage amount relating to your Avadh
Ilida Arwar (usufructuary mortgage with time-limit) is paid and when the
property and the documents are redeemed; and., the property, this document, and
the documents mentioned herein and also to be got redeemed by you from the said
Hammada Kunhi Beaty shall be got redeemed by us. " The consideration of
this mortgage was to go to pay off the dues of Hammada Kunhi and others
amounting in all to Rs. 565-8-0. The mortgagors also acknowledged receipt of an
amount of Rs. 234-8-0. By this document, Kunhi Pakki placed all the properties
on the same footing and neutralised so to speak the effect of the release of
properties by Ex. P2(a). Kunhi Pakki appears not to have paid these amounts
himself, because on September 21, 1872, he executed a simple mortgage in favour
of Hammada Kunhi for an amount of Rs. 800 (Ex. P-3(a)). He stated in that deed
that the property was Mortgages without possession and was still in the
enjoyment of the original proprietors.
The last document to be mentioned is Ex. P-4,
which was a usufructuary mortgage by the original mortgagors in favour of
Hammada Kunhi dated May 29, 1877. This document makes a reference 847 to the
earlier documents of Kunhi Pakki in respect of the released properties. It
refers specially to Ex. P-2 and states that that property was now being held on
a usufructuary mortgage with a time-limit.
It was contended in this case on behalf of
the mortgagees that the 1/4th share of Kunhi Pakki, on which time-limit was not
imposed, because Kunhi Pakki was a minor when Ex. P-2 and P-2(a.) were
executed, could not be redeemed by the plaintiff as the suit in respect of them
To understand this contention, it is
necessary to give a short history of the Law of Limitation between the years
1842 and 1902. In 1842 when Ex. P-1 was executed, there was no law prescribing
a period of limitation for the redemption of a usufructuary mortgage. Such
limit came in 1859 for the first time and a period of 60 years from the date of
the mortgage was prescribed. It is this statute which seems to have been the
cause for the execution of Exs.
P-2 and P-2(a); the mortgagees were perhaps
afraid that the mortgage could be redeemed at any time within 60 years from the
date of the mortgage of 1842. The last date for redemption thus was 1902. By
getting the term certain for 40 years, the date for redemption was shifted by
them to 1902 and redemption could not take place till that year.
The mortgagors also benefited, because they
obtained a release of some properties and received Rs. 100 in cash.
The period of 60 years was repeated in the
Act of 1871; but it contained a rider that if during the period of 60 years,
there was an acknowledgment then the period would run from the date of that
acknowledgment. Art. 148 of the Limitation Act as it stands today was
introduced by the Act of 1877.
It makes the 60 years' period run from the
time when redemption is due. The mortgagors contend that they have the benefit
of the present Act read with Exs. P-2 and P-2(a) and the time for redemption
will expire at the end of 60 years from the date on which redemption became due
under Exs. P-2 and P-2(a), that is to say 1902. There is no doubt that the Law
of Limitation 848 is a procedural law and the provisions existing on the date
of the suit apply to it. This suit was filed in 1944 and the Act of 1877
governs it. The only dispute is when did the mortgage become due for
redemption. According to the mortgages, tape rate from the date of the mortgage
under the Act of 1859 and did not stop in respect of the share of Kunhi Pakki,
because he was not bound by Ex. P-2 and P2(a). The mortgagors, on the other
hand contend that Kunhi Pakki had accepted Exs. P-2 and P-2(a) as his own
documents and had obtained benefit under them in various ways and the
appellants are either estopped from contending the contrary or having approved
and adopted those documents and taken benefit, cannot repudiate them. In other
words, they seek to apply the equitable doctrine of election to kunhi Pakki and
thus to deft. 8 who derived title from Kunhi Pakki.
This plea of the mortgagors was accepted by
the High Court and the Court below. It is contended that these courts
erroneously applied the doctrine to the present case.
Mr. S.T. Desai learned counsel for the
appellants admits that the mortgagors had not Iost their right to the
properties comprised in Ex. P-2 and that Ex. P-2 incorporated Ex. P-1. Exs.
P-63 and P-63(a) were filed to establish the connection which, in view of the
admission, it is not necessary to set forth here. He also admits that he cannot
make out a case under Art. 134 of the Indian Limitation Act. He contends that
the doctrine of election is but a species of estopped and there can be no
estopped against law especially against the Limitation Act, because of s. 3 of
that Act. He relies upon a decision of the Madras High Court reported in
Sitarama Chetty and Anr. v. Krishnaswami Chetty(1) where White C. J. quoting a
passage from Mr. Mitra's book on the Law of Limitation, observes that an
agreement by a person against whom a cause of action has arisen, that he would
not take advantage of the statute, cannot affect its operation on the original
cause of action, unless (1)  I.L.R. Mad., 38 374.
849 such agreement amounts to an
acknowledgment of liability which the statute recognises as an exception to the
Mr. Desai also relies upon Govardhan Das v.
Dau Dayal(1) for the proposition that no one can contract himself out of the
statute of limitation, nor can estoppel be pleaded against a statutory bar of
limitation. Some other cases cited by him are not in point and need not be
mentioned. On the basis of these cases, Mr. Desai contends that unless Exs. P-2
and P2(a) can be pleaded as an acknowledgment limitation cannot be saved in
respect of Kunhi Pakki's share and the suit itself must be dismissed under s. 3
of the Limitation Act.
He contends that the equitable doctrine of
election does not apply to the present case, because the documents on which
reliance is placed refer not to the 1/4th share of Kunhi Pakki but to the
3/16th share of Cheriamma which Kunhi Pakki subsequently obtained. He states
that the latter conclusion is inescapable if Exs. P-59, P-60 and P-61 are read
together. He submits that in these documents Kunnhi Pakki no doubt connected
the 3/16th share with Exs. P-2 and P2(a) but treated his own 1/4th share
There is no doubt that Kunhi Pakki was not
directly bound by Exs. P-2 and P-2(a). Mr. Desai is right in contending that as
Kunhi Pakki was a minor and no guardian signed on his behalf, Ex. P-2(a) cannot
be used to show either an acknowledgment by him or an extension of the term of
the original usufructuary mortgage. The only question thus is whether by reason
of the later documents and the conduct of Kunhi Pakki it can be said that Kunhi
Pakki had obtained the benefit of Ex. P-2(a) which bound him to accept Exs. P-2
and P-2(a) in their entirety. In binding Kunhi Pakki in this way, no question
of extending the period of limitation or of acknowledgment arises, and section
3 of the Limitation Act is not in the way because time would run, only from
1902. This result follows because the mortgagors could not redeem the property
including the share of Kunhi Pakki for 40 years from 1862.
(1)  I.L.R. 54 All. 573.
1 SCI/64-54 850 The doctrine of election
which has been applied in this case is well-settled and may be stated in the
classic words of Maitland "That he who accepts a benefit under a deed or
will or other instrument must adopt the whole contents of that instrument, must
conform to all its provisions and renounce all rights that are inconsistent
with it." (see Maitland's Lectures on Equity, Lecture 18) The same
principle is stated in White and Tudor's Leading Cases in Equity Vol. 18th Edn.
at p. 444 as follows:
"Election is the obligation imposed upon
a party by Courts of, equity to choose between two inconsistent or alternative
rights or claims in cases where there is clear intention of the person from
whom he derives one that he should not enjoy both................... That he
who accepts a benefit under a deed or will must adopt the whole contents of the
instrument." The Indian Courts have applied this doctrine in several cases
and a reference to all of them is hardly necessary.
We may, however, refer to a decision of the
Madras High Court in Ramakottayya v. Viraraghavayya (1) where after referring
to these passage quoted by us from White and Tudor, Coutts Trotter, C.J.
observed that the principle is often put in another form that a person cannot
approbate and reprobate the same transaction and he referred to the decision of
the Judicial Committee in Rangaswami Gounden v. Nachiappa Gounden (2).
Recently, this Court has also considered the doctrine in Bhau Ram v. Baij Nath
Singh and others (3).
The short question is whether, in the words
of the Scottish lawyers Kunhi Pakki can be said to have approbated Ex. P-2 and
P-2(a) and therefore his successors in title cannot now reprobate them. In this
connection, Ex. P-3 and P-4 quite clearly show that Kunhi Pakki considered that
he was bound by Ex. P-2(a) and the mortgagors were bound by (1)  L.R. 52
Mad. 556(F.B.) (2)  I.L.R. 42 Mad.
(3)  1 S.C.R. 358.
851 Ex. P-2. His taking of the mortgage of the
released properties clearly indicated that he accepted that the mortgagors were
released from the obligations of Ex. P-1.
In Ex. P-3, he took the mortgage of the
released properties for a period of 32 years which made the two mortgages run
for an identical term, and that document referred to the earlier transaction as
one under an Avadhi Illida Arwar (usufructuary mortgage with a time limit)
which indicated that the time limit imposed by Exs. P-2 and P-2(a) was in his
contemplation. In all subsequent documents, reference is to be found to the
Illida Arwar and the reference is not only to the 3/16th share of Cheriamma but
to the entire 7/16th share of Kunhi Pakki, that is to say, his original share
of 1/4th obtained by him through his father by Ex. P6 and 3/16th share which he
obtained later. In view of the fact that in this way, Kunhi Pakki obtained the
enjoyment of the mortgage in respect of his 1/4th share for a period of 40
years certain, he must be taken to have elected to apply to his own 1/4th share
the terms of Ex. P-2. Having in this way accepted benefit and thus approbated
that document, neither he nor his successors could be heard to say that the
mortgage in Ex. P-1 was independent of Ex. P-2 and that the limitation ran out
on the lapse of 60 years from 1842.
In our opinion, the doctrine of election was
properly applied in respect of Kunhi Pakki's 1/4th share now in the possession
of the present appellants through defendant 8.
The next point that was urged was that the
High Court and the Court below should not have awarded mesne profits against
the appellants till they were paid the full price of redemption including the
compensation for improvements. The trial court had found that an amount of Rs.
4,089-2-0 was due to defendant No. 8. This amount was increased by the High
Court to Rs. 6,625-7-0. This was a substantial increase and even though the
plaintiffs had earlier deposited the entire amount for redemption including the
sum of Rs. 4,089-2-0, they cannot be said to have fulfilled the condition on
which redemption was to be allowed to them. Under Ex. P-1, from which we have
quoted the relevant passage earlier it was agreed that the sum of 1250 varahas
and the value of improvements would be paid in one lump sum. In the subsequent
documents also the same term was included. The respondents contend that
interest on the extra amount of compensation for improvements has been awarded
by the High Court and this makes it equitable that the appellants should pay
mesne profits for the period of their possession after the deposit of the
amount found by the trial Judge in court. No question of equity really a-rises,
because the mortgage had to be redeemed according to its own terms. The
mortgagors undertook that they would redeem the properties by paying the
principal of the mortgage amount and the compensation for improvements in a
lump sum and cannot complain if the mortgagees are not compelled to hand over
the property or to pay mesne profits till the mortgagors have paid the full
amount. Both sides referred to certain cases which are really not in point
because the facts were entirely different. It is not necessary to refer to
them, because no principle can be gathered from them. In the present case,
April 15, 1946 was fixed for redemption and the mortgagors put into court a sum
of about Rs. 17,000. The appellate decree was passed on November 3, 1955 and
possession was delivered in 1957. We were informed that a sum of Rs. 11,800 per
year was deposited in court by way of mesne profits.
Now the mortgagees cannot claim to hold the
lands and use the amount paid as price of redemption. Even if they were not
required to hand over possession till the amount together with the compensation
for improvements was paid in full to them, they could not have the use of the
money as well. In our opinion, the mortgagees must pay interest on the amount
paid by the mortgagors from the date of withdrawal of the amount till
possession was delivered to the mortgagors at 6 % per annum simple. The extra
amount due to the mortgagees by way of com853 sensation will be deductible and
accounts shall be adjusted between the parties accordingly.
The appeal is thus partly allowed as
indicated above. In view of the failure on the main point, the appellants must
pay the costs of the appeal to the respondents.
Appeal partly allowed.