Chand Vs. Sagarbai @ Chaiyalibai  Insc 536 (9 May 2007)
S.B. Sinha & P.K. Balasubramanyan
CIVIL APPEAL NO. 2411 2007 [Arising out of S.L.P. (C) No. 13190 of 2006]
S.B. SINHA, J.
1. Leave granted.
2. This appeal is directed against the judgment and decree dated 5.5.2006
passed by the High Court of Madhya Pradesh, Indore Bench at Indore in Second
Appeal No. 474 of 2001 whereby and whereunder the judgment and decree dated
16.8.2001 passed by the District Judge, Jhabua in Civil Regular Appeal No. 4A/1999
arising out of the judgment and decree dated 23.12.1998 passed by Civil Judge,
Class-1 Jhabua in Civil Suit No. 1- A/97, was reversed. Respondent admittedly
is the owner of the premises in suit. Appellant was a tenant under him.
Respondent, however, executed a deed of usfructuary mortgage in favour of the
appellant on or about 1.10.1986, the relevant portions whereof read as under:-
"Therefore, I hereby mortgage with possession (Kabza Girvi) the entire
portion of the ground floor of my aforesaid house for a sum of Rs. 25000/- with
you mortgagee. I the mortgagor have received the mortgage money Rs. 25000/-
from you the mortgagee by cheque as mentioned above and that now no mortgage
money is due or payable and possession of the ground floor of the suit house
has been delivered to you.
As the ground floor of the aforesaid house is in possession of you the
mortgagee no interest would be payable on the aforesaid amount. You may keep on
using the ground floor in lieu of interest and I will have no objection
I shall keep on paying the house tax and other taxes payable in respect of
The period for redemption of the ground floor of the said house has been
settled between the parties for 10 years. Before the expiry of ten years I the
mortgagor shall not be entitled to get the ground floor of the said house
redeemed from the mortgage held by you and the mortgagee.
After ten years on payment of the entire mortgage money you the mortgagee
shall vacate the house and deliver it.
In the event of failure to pay the entire mortgage money within ten years
you the mortgagee shall have the right to get the mortgaged house auctioned
through court and to recover your entire mortgage money due and I shall have no
In case of any accident to the house you the mortgagee shall be entitled to
recover the entire mortgage money from the open land and if the entire mortgage
money is not realized from open land the balance amount may be realized
personally from me or from my other property and I shall have no objection
If any person makes a claim in respect of this house I the mortgagor shall
be responsible for it.
If for any reason you the mortgagee shall be responsible for it. If for any
reason you the mortgagee is deprived of the possession of the said house or any
portion thereof you can recover the money paid by you with expenses personally
from me or from my other property and I shall have no objection thereof.
I the mortgagor need money to purchase this mortgaged house and therefore, I
have obtained money from you by cheque."
3. The said document was an unilateral one. It was, however, preceded by an
agreement of mortgage which is in the following terms:- "2. I Smt.
Sagarbai w/o Narayan Singh Solanki, I am purchasing this house. For this
purpose I am taking Rs. 25,000/- by cheque from Shri Tarachand Gadia towards
mortgage of shop. The registered deed being in my name I shall mortgage the
three rooms of the lower portion in which you are running the shop at present,
with you. I shall not pay any kind of interest on Rs. 25,000/- and shall not
take rent of the shop."
4. The said document was also an unilateral one. Appellant admittedly gave
to the respondent the aforementioned sum of Rs. 25,000/-. It is also not in
dispute that no rent was demanded or paid to the respondent by the appellant
since execution of the said Deed of Mortgage. On expiry of 10 years from the
date of mortgage, a notice was issued for redemption of mortgage and delivery
5. As the demand contained in the said notice was not acceded to, a suit for
redemption of the mortgage was filed by the respondent.
6. The issues framed in the said suit are:- 1 Whether the plaintiff
mortgaged the disputed house on 1.10.86 to the defendant for a period of 10 years
by a registered document? 2.
Whether the plaintiff has right to get the disputed property redeemed from
mortgage? If so what is the effect of the same? 3.
Whether inspite of the fact that plaintiff is ready and wiling to redeem the
mortgage and due to not handing over the possession of disputed house by
defendant whether plaintiff is entitled for damages @ Rs. 1500/- per month? 4
Whether the plaintiff has not impleaded the necessary parties in present suit.
Whether the defendant took possession of the disputed house for 10 years
after paying Rs. 25000/- to Mangilal Solanki in lieu of the rent to be paid? 6.
Relief and cost
7. No issue, thus, was framed in regard to the purported right of the
appellant to continue in the suit premises as a tenant. The learned Trial
Judge, however, dismissed the suit holding that the respondent being a landlord
can obtain possession of the premises in question, only in terms of the
provisions of the M.P. Accommodation Control Act, 1961 (1961 Act).
An appeal preferred thereagainst was dismissed.
8. The High Court, however, by reason of the impugned judgment allowed the
second appeal preferred by the respondent herein.
9. Mr. S.K. Gambhir, learned senior counsel appearing on behalf of the
appellant would submit that the Deed of Mortgage being an unilateral one and
the same not having been signed by the mortgagee, the relationship between the
parties continued to be governed by the 1961 Act. It was submitted that in any
event, only because a deed of mortgage was executed, the same would not amount
to surrender of the tenancy rights. It was furthermore, contended that a merger
of the lease into the mortgage shall not be readily inferred. Learned counsel
submitted that in any view of the matter, the terms and conditions in the
agreement for mortgage as also the deed of mortgage are inconsistent, a suit
for redemption was not maintainable.
10. Mr. K. Radhakrishnan, learned senior counsel appearing on behalf of the
respondent, on the other hand, would submit (i) There being a personal covenant
contained in the deed of mortgage and having regard to Section 59 of the
Transfer of Property Act execution of an unilateral mortgage deed was
permissible in law.
(ii) The Deed of Mortgage read as a whole clearly established that there was
a personal covenant to give up vacant possession on the expiry of the period of
10 years (iii) The termination of tenancy by implied surrender is permissible
in terms of Section 111(f) of the Transfer of Property Act (The said Act).
11. A transaction of mortgage is governed by the provisions of the said Act.
The Deed of Mortgage dated 1.10.1986 was a registered document. In terms of
Section 59 of the said Act, a mortgage can be effected by a registered
instrument signed by the mortgagor and attested by at least two witnesses.
Requirements of Section 59, therefore, stood fulfilled in the instant case.
12. Section 62 of the said Act provides for the right of an usufructuary
mortgagor to recover possession; clause (b) whereof reads as under:-
"Section 62(b) :- Where the mortgagee is authorized to pay himself from
such rents and profits or any part thereof a part only of the mortgage-money,
when the term (if any) prescribed for the payment of the mortgage-money has
expired and the mortgagor pays or tenders to the mortgagee the mortgage-money
or the balance thereof or deposits it in court as hereinafter provided."
13. Indisputably, the relationship of the parties were governed by the
provisions of the 1961 Act. It contains a non-obstante clause protecting the
rights of the tenant. The right of a tenant, however, would be available
provided the tenancy continues. Once, the tenant ceases to be a tenant,
question of applicability of the said Act would not arise.
14. Whether the rights of a tenant would give way to rights of a mortgagor
would essentially depend upon the terms and conditions of the mortgage. If the
tenant surrenders the tenancy either explicitly or by necessary implication,
the terms of the deed of mortgage shall prevail.
Having surrendered the tenancy, it would not lie in the mouth of a mortgagor
to contend that as he had been a tenant, he would be entitled to the rights of
15. The right of a Usufructuary Mortgagor to redeem the mortgage and recover
possession is well known, and with a view to enforce the same, a mortgagor may
file a suit for redemption or may take recourse to the summary process of
deposit and notice under Section 83 of the Transfer of Property Act.
16. A suit for redemption is essentially a suit for recovery of possession.
When a debt is satisfied out of the usufructs of the property or otherwise,
the mortgagor recovers possession on his title.
17. Profits arising out of possession of the mortgage property can be taken
by the mortgagee in lieu of interest.
18. Clause (d) of Section 58 of the said Act reads as under:- "58(d)
Usufructuary mortgage. Where the mortgagor delivers possession or expressly or
by implication binds himself to deliver possession of the mortgaged property to
the mortgagee, and authorizes him to retain such possession until payment of
the mortgage-money, and to receive the rents and profits accruing from the
property or any part of such rents and profits and to appropriate the same in
lieu of interest, or in payment of the mortgage-money, or partly in lieu of
interest or partly in payment of the mortgage- money, the transaction is called
an usufructuary mortgage and the mortgagee an usufructuary mortgagee."
19. The case at hand comes within the purview of the said clause.
20. The Deed of Mortgage might have been preceded by an agreement, but, when
the terms are altered by a later document which is registered, the latter would
prevail. We have noticed hereinbefore the effect of Section 59 of the said Act.
It is immaterial for the purpose of admissibility of the document or otherwise,
whether the mortgagee was a signatory to the Deed of Mortgage or not.
Indisputably, the deed of mortgage has been acted upon. Appellant himself
purchased the stamp paper for its execution. He knew the terms thereof. The
parties proceeded on the basis that the said terms were binding on them. It,
therefore, does not lie in the mouth of the appellant now at this stage to
contend, particularly when no such contention had been raised before the courts
below, that the same cannot be given effect to.
21. Appellant has been allowed to use the ground floor of the premises in
question in lieu of interest, Respondent as owner of the property was to pay
the house tax and other taxes, The deed clearly stipulates the period on the
expiry whereof, the right of redemption would vest in the mortgagor. Prior to
the expiry of the said period, the respondent could not claim recovery of
possession. He could not have filed a suit for eviction under the 1961 Act even
if one of the other conditions laid down therefor were fulfilled. The terms of
tenancy was fixed. The mortgagee was to vacate the house and possession thereof
after 10 years on payment of the entire mortgage money.
The stipulations contained in the deed do not stop there. It conferred a
right upon the mortgagee to get the house auctioned and to recover the entire
mortgage amount in the event, the amount advanced is not paid back. Other
covenants contained also clearly show the right of the appellant as a mortgagee
and not as a tenant. The stipulations contained in the mortgage deed,
therefore, are such that they would lead to an inference that the tenancy was
impliedly surrendered by the appellant.
22. Section 111(f) of the Transfer of Property Act provides for termination of
tenancy by implied surrender.
23. Such implied surrender may be either:- (i) by creation of a new
relationship or (ii) by relinquishment of possession.
24. When the parties altered their position knowing fully well their mutual
rights and obligations under an agreement thereto existing, the rule of
estoppel shall apply. Appellant, was, thus estopped from disputing the contents
of the mortgage or the relation arising thereunder. As surrender is founded
upon estoppel, the intention of the parties may not be of much significance.
25. Mr. Gambhir has placed strong reliance on a decision of this Court in
Nemi Chand v Onkar Lal [(1991) 3 SCC 464]. Therein the conduct of the parties
were such, which led to an inference that the right to recover rent was kept alive
by the landlord and it was only to be adjusted against interest. In the said
fact situation, this Court opined that the defendant therein continued both as
a mortgagee as also a lessee. Although the said decision is distinguishable on
facts, we may notice that therein the court failed to notice an earlier binding
precedent in Shah Mathuradas Maganlal & Co. v Nagappa Shankarappa Malage
and Others [(1976) 3 SCC 660], wherein the law was stated in the following
terms:- "11. The deed of mortgage shows these features indicating that
there was surrender of tenancy and the appellant was only a mortgagee. The High
Court found that there was a surrender of tenancy right. No particular form of
words is essential to make a valid surrender. A surrender may be oral. A
surrender may be express although delivery of possession is necessary for
surrender in the facts and circumstances of a given case. In the present case,
delivery of possession was immediately followed by a redelivery of possession
of the appellant as mortgagee. The mortgage deed establishes beyond doubt that
the effect of the deed was inconsistent with the continuance or subsistence of
the lease because the parties themselves stipulated that the lease was to exist
only upto November 6, 1953. On the redemption of the mortgage the respondent
had a right to recover possession both on the terms of the mortgage deed and
under Section 62 of the Transfer of Property Act."
26. Although technically a tenant may continue to occupy the premises, once
the nature of possession changes resulting in change in his status, which he
accepts, the same may amount to virtual taking of possession.
27. In any event, virtual taking of possession is not a sine quo non for
implied surrender as the same can be created by a new relationship also. In
Nemi Chand (supra) this aspect of the matter has not been considered.
28. In Nirmal Chandra v Vimal Chand [(2001) 5 SCC 51], whereupon again Mr.
Gambhir placed strong reliance, this Court proceeded on the basis that where
the right to receive rent is kept alive, the same would run contrary to the
intention or conduct of the parties leading to an inference of surrender of
lease. It was held that condition No. 4 contained in the deed of mortgage was
contrary to condition No. 1 thereof and in that situation it was opined;
"9. ..... This condition nowhere speaks of surrender of tenancy by the
lessee. It only provides that for at least three years the shop will be in
personal use of the landlord failing which there would be revival of the mortgagee's
capacity as a tenant. Such a condition cannot be said to be a clear intention
of surrendering the lease rights in the property. Whatever little effect
Condition 4 if at all may have, is negated by Condition 1 which kept the rent
alive and the element of tenancy pervading throughout the period of
29. We may, however, notice that in Gambangi Applaswamy Naidu and Others v
Behara Venkataramanayya Patro and Others [(1984) 4 SCC 382], an implied
surrender was not inferred in the fact situation obtaining therein.
30. On the terms and conditions of the lease deed, in question, which was
noticed by this Court, it was observed;
"....It may be noted that the last portion of the document is equivocal
in that it does not mention whether on redemption physical possession is to be
delivered or symbolical possession is to be delivered to the mortgagor. But
under the terms of the deed one thing is clear that during the currency of the
mortgage the liability to pay rent to the lessor-mortgagor (albeit to be
discharged by adjustment) is kept alive. If anything such a term clearly runs
counter to any implied surrender of the lessee's rights. Secondly, there is no
term fixed for redemption of mortgage property which means that it was open to
the mortgagor to redeem the mortgage at any time that is to say even within a
very short time and if that be so, would a sitting tenant cultivating the lands
under a lease, who has obliged his lessor by advancing monies to him to tide
over his financial difficulties give up his rights as a lessee no sooner
redemption takes place? In our view, it does not stand to reason that he would
do so. This circumstance coupled with a fact that the mortgage deed keeps alive
the lessee's liability to pay rent during the currency of the mortgage clearly
suggests that no implied surrender was intended by the parties."
31. In a case, therefore, where the term is fixed for redemption of
mortgaged property, if the lessee's liability to pay rent is not kept alive, a
contrary inference is permissible to be drawn.
32. The matter appears to be now covered in Polammarasetti Varana Venka
Satyanarayana v Suddha Apparao Naidu (Dead) and Others [(1997) 9 SCC 244],
wherein law has been laid down in the following terms;
"4. We have taken into consideration the mortgage deed executed in
1946. In our view, a clear intention of only retaining the mortgagee's interest
is to be inferred in view of the specific statement that on redemption, the
mortgagee should deliver possession to the mortgagor. We may indicate that the
expression to that effect used in the mortgage deed has been noted by the
courts below. We may also indicate that there is no indication in the mortgage
deed as to how the rent payable by the mortgagee qua lessee was to be adjusted
between the parties. The absence of any mode of adjustment of leasehold rent
implies that it was not intended that despite the said mortgage, parties
intended that the leasehold interest was to continue. It may also be indicated
here that leasehold interest was to expire in 1948. In the absence of any
payment of rent for such leasehold interest and acceptance of such payment
after expiring of the period of lease it cannot also be contended that there
was a case of holding over by the lessee. In the aforesaid circumstances, the
finding by the courts below that the leasehold interest had come to an end and
the plaintiff was entitled to the redemption of the mortgage and to take
delivery of the properties under this mortgage deed cannot be held to be unjust
or improper. We, therefore, do not find any reason to interfere with the
impugned judgment of the High Court. The appeal, therefore, fails and is
33. In this case also, there is a clear intention on the part of the
mortgagee only to retain his interest in that capacity and not as a tenant. The
parties altered their position, A new relationship was created. It was acted
upon and in that view of the matter, we are of the opinion that the High Court
was correct in its view. There is, thus, no merit in this appeal which is
dismissed accordingly with costs. Counsel fee assessed at Rs. 10,000/-.
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