Narayan
Vishnu Hendre & Ors Vs. Baburao Savalaram Kothawale [1995] INSC 559 (13 October 1995)
Kirpal
B.N. (J) Kirpal B.N. (J) Bharucha S.P. (J) Kirpal.J.
CITATION:
1996 AIR 368 1995 SCC (6) 608 JT 1995 (7) 393 1995 SCALE (5)763
ACT:
HEAD NOTE:
This
is an appeal by special leave against the judgment and order of the High Court
of judicature at Bombay, dated 11.12.1987 in Second Appeal No. 643/81 and the
main question which arises for consideration is whether there was an implied
surrender of the tenancy by the appellants- defendants in favour of the
respondent-plaintiff at the time when the respondent-plaintiff executed a
mortgage of the premises in favour of the appellants.
The
father of the appellants-defendants, namely Vishnu Malba Hendre (hereinafter
referred to as 'Vishnu') was a tenant in respect of the front portion of House
No. 115, Rawiwar Path, Phaltan. The said house was owned by Baburao Savalaram Kothawale,
the original plaintiff, now represented by his legal heir. The said house was
mortgaged by the respondent-plaintiff in favour of Vishnu by three different
deeds which were styled as conditional sale-deeds. By the first deed dated
16.4.1952 for a consideration of Rs.2,000/-, the front portion of the house was
transferred and by the other two deeds, possession of the rear and the middle
portions were transferred for Rs.1,200/- and Rs.2,000/- respectively. The
documents, inter-alia, provided that in case the respondent-plaintiff returned
the amounts within six, seven and nine years respetively, then Vishnu was to
re-convey the property and in case the said amounts were not paid within the
stipulated period, then the deeds were to be treated as sale out and out. After
the execution of the third document, Vishnu created a tenancy in favour of the respondent-plaintiff
in respect of the middle portion of the house and a rent note was executed on March 18, 1953.
The
respondent-plaintiff failed to pay the rent and Vishnu filed a suit for
recovery of the said rent and the same was decreed in March, 1956.
In the
year 1957, Vishnu died and thereafter, the apellants, who were his legal heirs,
filed a suit in 1958 against the respondent-plaintiff for recovery of
possession of the middle portion of the said house on the ground of default of
payment of rent. The said suit was decreed in 1959. The result of this was that
the appellants-defendants secured the possession of the entire house consisting
of three different portions.
On
23.12.1959, the respondent-plaintiff served a notice claiming redemption in respect
of front portion of the property only, covered by the first document. The
appellants-defendants sent a reply pointing out that the period of five years
which was fixed by the document for re- payment was over, and, therefore, the
right of the respondent-plaintiff to recover possession stood exhausted.
This
was followed by notice dated 7.3.1962 sent by the appellants -plaintiff that
the time in the three sale deeds having expired, the right to re-conveyance had
come to an end.
After
a lapse of time, the respondent-plaintiff on 17.6.1974 filed a suit for
redemption of the mortgage and recovery of possession. This suit was resisted
by the appellants-defendants by raising various contentions. It was claimed
that the suit was barred by limitation as the right to get back the property
was lost due to the failure of the respondent-plaintiff to re-pay the amount
within the stipulated period set out in the document. It was also claimed that
the appellants-defendants had become owners of the suit property by adverse
possession. Another plea which was raised and with which we are concerned in
this appeal was that the appellants-defendants were tenants in respect of the
front portion of the house and in case it was found that the nature of the
transaction was that of mortgage, then, on redemption, the tenancy would stand
revived and the respondent-plaintiff would not be entitled to actual possession
of the front portion of the house.
The
Trial Court decreed the suit on 3.5.1979 by holding that the suit transactions
were mortgages by conditional sale and not sales with a condition to
repurchase. A preliminary decree for redemption on the respondent- plaintiff
depositing Rs. 5,200/- within six months from the date of decree was,
accordingly passed.
The
appellants-defendants challanged the decree and contended that they had become
owners of the said property by adverse possession; there was in any event a
revival of tenancy in respect of the front portion of the house and, lastly,
they were entitled to claim the value of the improvements which had been made
in the house while they were in possession. The lower appellate court, however,
turned down all the contentions and dismissed the appeal.
Second
appeal was filed before the Bombay High Court wherein the aforesaid contentions
were reiterated. While dismissing the appeal, the High Court held that the
transactions in question were mortgages and that the right of the
appellants-defendants as lessee of the front portion had merged in the right of
the mortgage in possession and, therefore, the tenancy rights did not survive
when the lesseee obtained possesory mortgage from the landlord. It was,
therefore, held that on redemption of the mortgage, the appellants-defendants
could not resist delivery of possession in respect of the front portion of the
house.
As the
present appeal arises on the grant of special leave against the aforesaid
judgment of the High Court, the leave so granted was confined only to the
question of front portion of the premises in question.
It was
submitted by Mr. V.M. Tarkunde, learned Senior Counsel for the
appellants-defendants than on the facts of the present case, the Doctrine of
Merger did not apply. He submitted that the High Court was wrong in concluding
that by virtue of ratio of decision of this Court in the case of & Ors.,
(1976) 3 S.C.R. 789, the tenancy rights could not survive when the lessee
obtained possessory mortgage from the landlord. Proceeding on the basis that
the document in question was a mortgage-deed, as held by the courts below, Mr. Tarkunde,
learned Senior Counsel contended that no express or implied surrender of
tenancy of the front portion of the house could be inferred from the same and,
as held in Shah Mathuradas's case (supra), there could be no automatic merger
of the lease and mortgage in respect of the same property. He, therefore,
submitted that with the redemption of mortgage, the tenancy rights stood
revived.
Mr. Raju
Ramachandran, learned Counsel for the respondent-plaintiff, while supporting
the judgment of the High Court very fairly submitted that he could not support
the theory of automatic merger when a tenanted premises is mortgaged in favour
of the lessee. He, however, submitted that the three documents should be read
together and in the present case, there was a implied surrender of tenancy.
The
determination of lease is provided by Section 111 of the Transfer of Property
Act (hereinafter referred to as 'the Act'). The Trial Court, the first
Appellate Court as well as the High Court were of the opinion that the lease
stood determined by virtue of the applicability of clause (d) of Section 111 of
the Act which provides that a lease of immovable property is determined in case
the interest of the lessee and the lessor in the whole of the property becomes
vested at the same time in one person in the same right.
This
proposition has been expressly repelled by this Court in following cases.
In the
case of Shah Mathuradas's case (supra), the appellant was a mortgagee in
possession of the property by virtue of a deed of mortgage. No interest was to
be paid but instead, possession of the property was agreed to remain with the
mortgagee. Though, the mortgage deed was dated 21.5.1953, the period for
redeeming the mortgage was fixed for ten years from 7.11.1953. The mortgagor
issued a notice after ten years to the effect that he was ready and willing to
redeem the mortgage. But, the appellant, inter alia, claimed that even after
redemption, he was entitled to retain the possession because his previous
tenancy right subsisted. While the Trial Court held that the tenancy of the
appellant would revive on redemption of the mortgage, the District Judge, on
appeal, came to the conclusion that under the mortgage deed, the appellant had
ceased to be tenant with effect from 7.11.1963 and, thereafter, he was in
possession only as a possessory mortgagee and not as a tenant. The High Court
dismissed the second appeal. The question with regard to the revival of the
tenancy was again raised in this Court. Referring to clause (d) of Section 111
of the Act, it was observed as follows:
"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 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."
On the facts of that case, however, this Court came to the conclusion upholding
the findings of High Court and first Appellate Court that the mortgage deed
showed that the appellant had surrendered the tenancy from 7.11.1953 and,
therefore, the mortgagor was entitled to the dilivery of possession of the
property.
Venkataramanayya
Patro and others, 1985 (1) SCR 651, while following the ratio of decision in
Shah Mathuradas's case (supra) to the effect that there could be no merger of
lease and a mortgage, even where the two transactions are in respect of the
same property, it was held that the question whether upon redemption of usufructuary
mortgage, a tenant mortgagee could be directed to deliver actual or physical
possession of the mortgaged property would depend upon whether there was an
implied surrender of the lessee's right when the mortgage was executed in his favour
by the lessor mortgagor. In order to find an answer to this question, this
Court observed that the intention of the parties at the time of execution of
the mortgage deed in favour of the sitting tenant had to be gathered 'from the
terms and conditions of the mortgage transaction in the light of the
surrounding circumstances of the case". After seeing the terms of the
terms of the mortgage deed and the other circumstances of the case, it was
concluded that the effect of the mortgage deed in that case was that the
lessee's rights were kept in abeyance and they revived upon the redemption of
the mortgage because there was no implied surrender of the tenancy.
1987 (Supl.)
SCC 87, where there was an merger in favour of the lessee, this Court after
perusing the mortgage deed came to the conclusion that there was nothing to
warrant an inference of relingushment of the rights of the tenants by Onkar Lal,
AIR 1991 SC 2046, this Court construed the mortgage deed and concluded that
there was no implied surrender of the lease in favour of the
landlord-mortgagor.
In the
present case, the mortgage deed dated 16.4.1952 recited that in order to
discharge the debts for the construction of the house, the respondent-plaintiff
had received and had executed the conditional sale deed. It was further stated
in the said deed that:
"I
have sold the said property by this conditional sale-deed and delivered possession
thereof to you (the purchaser). The period of this sale deed is five years and
thereafter I will get released the said property for Rs.2,000/- according to
this deed. In the event I fail to pay the said amount within the said period,
this sale-deed shall be presumed and treated as perpetual property and make vahiwat
thereof without interruption. That I will remove the objection if any in
respect of the said property if taken without sustaining any loss to you."
It is not in dispute that the second and the third mortgage deeds were
similarly worded.
It was
submitted by Mr. Ramachandran, learned Counsel that by stating that the
mortgagor had "delivered possession thereof to you (the purchaser)"
clearly showed that there was an implied surrender of the tenancy. We find it
difficult to accept this submission. The mortgage deed makes no mention with
regard to the delivery of the possession of the mortgagor in the event of his
redeeming the mortgage.
Secondly,
the principal amount which was taken by the mortgagor was Rs. 2,000/- and the
deed did not provide for payment of interest and the property could be and was
redeemed on the re-payment of the principal amount of Rs.2,000/- itself. With
the execution of the mortgage deed, no rent was paid for the front portion of
the house and the mortgagee did not charge any interest on the mortgaged amount
of Rs.2.000/-. Redemption of the mortgage for paying at the same amount of Rs.2,000/-
showed that the parties had agreed that during the subsistence of the mortgage,
neither any rent would be payable nor interest would be charged. Thirdly, it is
difficult to imagine that the tenant who had a valid tenancy since the year
1942, would agree to surrender his tenancy right on the mortgage deed having
executed while being conscious of the fact that the mortgagor had a right to
redeem the mortgage. Lease of a property is a very valuable right and it's
implied surrender would not be readily inferred. Had the parties wanted to
terminate their earlier relationship of landlord and tenant on the execution of
a mortgage, then one would expect a clear statement or an indication to that
effect in the document itself. Neither the conduct of the parties nor the said
document in the present case indicates that Vishnu intended to surrender his
tenancy rights. This being so, the redemption of the mortgage would revive the
tenancy of the appellants-defendants.
Accordingly,
we are of the opinion that the only effect of the mortgage was that the
lessee's rights were kept in abeyance and they stood revived upon the
redemption of the mortgage. We, therefore, allow the appeal, set-aside the
impugned judgments of the High Court and the courts below and we hold that the
respondent-plaintiff is not entitled to delivery or physical possession of the
front portion of the house in question. There will be, however, no order as to
costs.
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