A house mortgaged with possession was simultaneously leased back to the mortgagor under a rent note; after the final-decree application became time-barred, the mortgagee's heirs sued for ejectment on unpaid rent. The Court held the rent note conferred independent rights, no merger occurred, and dismissed the mortgagor's appeal.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
MATHURALAL
v.
KESHAR BAI AND ANOTHER
February 20, 1970
[S. M. SIKRI, V. BHARGAVA AND G. K. MITTER, JJ.J:
| Mortgage-Mortgagee given house to mortgagor under rent no |
possession te execut |
ofmortgaged house-Leasing ed simultaneously with mortgage |
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| deed-Preliminarydecree passed | insuit. | for enforcementofmortgage-.- |
| Application for final decree time | barred-S | ubsequent suit for ejectment pf |
| lnortgagor filedbyniortgagee wh whether mergedin preliminary 1908,_s._28. |
etherma decree- |
intainable-Rightsofmortgagee RelevanceofLimitation ACt, |
| OnJuly 29,1945the predecessor-in-interest of the appellant mort- gaged his houseinRatlam to K for a sum ofRs.3,100 with possession. According tothedeed of mortgage interest would run on the said sum at Rs.C>-10-0per cent per annumtillrealisation. The periodelfredemption was two years. Simultaneouslywiththe mortgage a rent note was execut- ed by and between the parties under which the mortgagor was to continue to occupy the premises at a rental ofRs.20/ - per month. The rent note provided_interalia_that if the executant_(i.e._mortgagor) made default in payment oftwomonths' rent the mortgagee wouldbeentitled to get him evicted. The mortgagee was also entitled to increase or decrease the rent and the executantwasto vacate the house whenever asked to do so. Kfiled |
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| a suit onhismortgagein1954 and a preliminary decreewaspassedinhie favour. Onhis deathhislegal representatives were substitutedinhis place on record. For some reasonnoapplication for a final decree for sale of the propertywasmade within the periodfixedunder the Limita- tion Act. The application for this purpose made by the executorstothe estateelf_K_wasdismissed on July 29, 1960 as barred by limitation.On December 27, 1960 the said executorsfileda suit for ejectment of the |
| appellant alleging that the rent for the premises had remained unpaid from September19,1957 till November 28,1960.The trial judge dismissed |
| the suit. In first appeal the plaintiff's claimwasallowedinfull. The High |
| C'.ourtinsecond appeal maintained the decree of the appellate court. |
| Appeal by special leave wasfiledin this Court against the High Court's judgment.Itwascontendedbythe appellants that : (i) The rent note ~~ecutedsimultaneously with the mortgage was a mere device to secure paymentofinterestanddid not represent anindependent transaction. FL!rtherit did not create any relationship of landlord and tenant; (ii) The plaintiffs'' right as mortgagee mergedinthe decreeandexecution thereof being barredbythe Jaws_di_limitation the plaintiffs had lost all their rights; |
| **(iii)The mortgagebeing- extinguishedthemortgagorcould notbringa ** suit for redemption on accountofs.28ofthe Limitation Act, 1908. |
| HELD : The appeal mustbedismissed. |
| (1) The contentsofthe documents executed by the parties showed |
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| that the relationship between the parties was not simply thatofa mortgagee |
| andmortgagor-thecreditor also had therights of a landlord_qua_his |
| tenant besides other rights conferred on him which were greater than |
| those possessedbyan ordinary landlord.[728F] |
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In all such cases the leasing back of the property arises because of the mortgage with possession. It cannot however be held that the mortgagee
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MATHURALAL v. KESHAR BM tMitter, J.)
A does not secure to himself any rights under the deed of lease but must proceed on his mortgage in case the amount secured to him under the deed of lease is not paid. If the security is good and considered to be sufficient by the mortgagee there is no reason why he should be driven .to file a .suit on his mortgage when he can file a suit for realisation of the' moneys due under the rent note. The position of the creditor is strengthened where as in the present case, the interest on the amount of the mortgagee is not the same as the rent fixed. If during the continuance of the security the mortgagee wanted to sue the mortgagor on the basis of the rent note and take possession himsel1 I or to induct some other tenant thereby securing to himself the amount which the mortgagor had covenanted to pay, there could be no legal objection to it. Under the provisions of 0.34 r. 4 of the Code of Civil Procedure he could deprive the mortgagor of his right to redeem excepting by proceeding on his mortgage. It m,ay be (without a final opinion being expressed on the poin.t) that a mortc c gagee who secured decree for payment of rent cannot put the property to sale fO£ realisation of the amount decreed, but there cas be no <>bjretion to his suing for possession. if the rent note entitles him to do so. So long u the; mortgagor has a right to redeem the mortg8ge he can always pay off tbe mortgagee 'and get back pos9e5sion. This position would continue so long as the property is not sold under a :final decree for sale under the provisions of 0. 34 C.P.C. [732 D-G]
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La/chand v. Nenuram, LL.R. 12 ,Rajasthan, 947, approved.
Hari/al Bhagwanii v. Hemshanker, A.l.R. 1958 Bombay 8, Ramnarain v. Sukhi, A.l.R. 1957 Patna 24, Umeshwar Prasad v. Dwarika Prasad, A.I.R. 1944 Patna 5, Ganpat Ruri v. Mad. Asraf Ali, A.I.R. 1961 Patna 133 arid Jankidas v. Laxminarain, I.LR. 7 Rajasthan 268, referred to.
(ii) Since the mortgagee had only lost his right to recover the money by sale of the mortgaged property, his security otherwise remaining intact, E and the mortgagor also continued to have his right to redeem the property, the contention on behalf of the appellant that the rights of the mortgagee merged in the prelimirrary decree could not be accepted. [732 HJ
(iii) If the mortgagee had an independent right on the strength of the rent note which continued to be in force notwithstanding that the period for a final decree for sale had expired; there could be no extinc- tion of .his right to sue for possession because of s. 28 of the Limitation F Act. [733 C]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 774 of 1967.
Appeal by special leave from the judgment and order dated February 6, 1970 of the Madhya Pradesh High Court in Second G Appeal No. 327 of 1963.
D. N. Mukherjee, for the appellant.
Janardan Sharma, for the respondents.
The. Judgment of the Court was delivered by
H
Mitter, J. This is an appeal by special leave fron.i a judgment of the Madhya Pradesh High Court dated 6th February 1967 dismissing a Second Appeal by the appellant before this Court against
[1970) 3 S.C.R.
726
SUPREME COURT REPORTS
a decree passed by the Additional District Judge of Ratlam for ejectment of the appellant from a house mortgaged by the predecessor-in-interest of the appellant to one Kesharimal for Rs. 3,100 and further decreeing a claim for arrears of rent amounting to Rs. 731-35 and mesne profits at the rate of Rs. 20 per month until eviction.
The relevant facts are as follows. On July 29, 1945 Mathuralal, predecessor-in-interest of the appellant, mortgaged his house ,in Ratlam to Kesharimal for a sum of Rs. 3,100 with possession. The deed of mortgage contained the following terms :-
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5. During the period of the mortgage an accol!Jllt of the rent and interest shall be settled after every six months.
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On the same day the mortgagor executed another document in favour of the mortgagee reciting that his house in Ratlam was mortgaged with possession to the creditor who was "having its possession" and the mortgagor had taken the same on rent at Rs. 20 per month on the following terms :-
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MATHURALA_L v. KESHAR BAI (Mitter, J.)
727
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rent.
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the same condition in which he had received it.
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SUPREME COURT REPORTS
[1970] 3 S.C.R.
i '
an independent transaction. Further it did not create any relationship of landlord and tenant.
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Before examining the contentions urged we propose to note the substance of the two documents and what the parties sought to achieve thereby. It is clear that the mortgage was with possession of the house and that the mortgagee wanted to make sure of Rs. 20 per month irrespective of the fact as to whether the mortgagor or some other person occupied the house and notwithstanding any vacancy during the period of the mortgage. The sum of Rs. 20 per mcinth which the mortgagee wanted to ensure payment of every month exceeded the interest stipulated for by Rs. 0-10-0 per month. There was to be no decrease in this amount even if the mortgagor were to repay a portion of the principal. The mortgagee had further the right to increase or decrease the rent and the mortgagor covenanted to vacate the property whenever the mortgagee asked for possession. In other words if the mortgagee chose to go into possession himself, the mortgagor would be entitled to have Rs. 20 p.m. credited towards the dues on the mortgage so long as he continued in possession. Even during the period of redemption when the mortgagee could not have sued for the mortgage money he still had a right to evict the mortgagor in case the latter defaulted in_ payment of Rs. 20 a month for two months.
It would appear that the relationship between the parties was not simply that of a mortgagee and mortgagor : the creditor also had the rights of a landlord qua his tenant besides other rights conferred on him which were greater than those possessed by an ordinary landlord. There can be no doubt that by leasing the property back to the mortgagor in the way mentioned above the mortgagee tried to e,nsure the regular payment of interest but his rights were not limited to that alone. In case he decided to go into possession himself the only remedy left to the mortgagor was to sue for redemption. This right under the Limitation Act of 1908 was to enure for 60 years from the date of the mortgage and the mortgagor had not lost his right to redeem notwithstanding the passing of the preliminary decree in the mortg'age suit. The mortgage security cQlltinued even after the passing of the said decree : if the mortgagee had continued in possession of the property after the passing of the preliminary decree and did not apply for a final decree, he would only lose his right to recover the mortgage money
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MATHURALAL v. KESHAR BAI (Mitter, ].)
729
A by sale of the property unless he applied for that purpose within the period of limitation fixed by the Limitation Act. After the mortgagee had lost his right to apply for a final decree for sale, he did not lose his status as a mortgagee : he only lost his remedy to recover the mortgage money by sale. The mortgagor did not lose his right to redeem.
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We may now examine the authorities which were cited at the Bar i.n aid of the respective contentions. In aid of his first proposition Mr. Mukherjee relied principally on the decisions of the Bombay High Court in Bari/a/ Bhagwanji v. Hemshanker(') and Ramnarai11 v. Sukhi('). The facts of the Bombay ·case were as c follows. The defendant-appellant mortgaged with possession the house in suit for Rs. 7 ,500/- on August 23, 1952. Under the deed of mortgage the principal amount was to carry interest at 9% and both principal and interest were charged on the mortgaged property. A portion of the house was already in the occupation of the plaintiff as the defendant's tenant on a monthly rental of Rs. 15 and D another portioo was let out to one Mansukhlal at the rate of Rs. 17 p.m., the defendant himself occupying the remaining part of the house. Simultaneously with the mortgage a rent note was executed on thip same day in respect of the portion of the house in the defendant's occupation which was leased back to him by the plaintiff for a term of six months at the rate of Rs. 24-4-0 per month. The plaintiff sued the defendant for possession of the said portion E and for arrears of rent on the strength of the rent note. The defence was that the rent note was a nominal document executed for securing payment of interest and that no relationship of landlord and tenant was created. It was contended that the principal money and interest were to be realised from the mortgaged property and a suit for rent alone which was in reality interest would not lie. It F was held by the High Court that the fact that the two documents had varying periods of operation would not make ·acy difference in the determination of the question as to whether they formed part of the same transaction or not. Further the rent to be realised from the tenant Mansukhlal was to be credited towards interest and the significant circumstance was that the rent payable by the defendant G under the rent note was fixed with a viw to making up the interest on the mortgage sum at 9%. Although the mortgage deed recited that the plaintiff could let out the property to anyone he liked but as the property was already wh9lly occupied, the High Court took the view that the question of leasing it out to another tenant was not \n contemplation of the parties. As a result of the above findings the court held that the rent note was a mere device for securing H payment of interest. Reliance was placed on Rflmnarain v. Sukhi(') and it was held that although the decree for eviction of (1) A. I. R. 1958 Bombay 8. (2) A.l.R.1957 Patna 24. LIOSupCI(NP) '70-
SUPREME COURT REPORTS
[1970] 3 S.C.R.
730
the defendant from the suit property could not stand, that awarding . arrears of rent was to be maintained.
In Ramnarain v. Sukhi(') an application was made by the defendant for setting aside the decree of the Small Causes court evicting him. The defend~t had executed a usufructuary mortgage in favour of the plaintiff and by a kerayanama executed on the same day had taken back the house on a rent of Rs. 6 per month from the plaintiff. He had not paid any rent for over three years and the suit was brought for recovery of arrears of rent for the said period. It was his contention that the agreemCU!t between the parties WllS not for execution of a usufructuary mortgage but one of a simple mortgage. It was further contended on his behalf that the mortgage and the kerayanama were one and the same transaction and no relationship of la.ndlord and tenant was created and the ijara term having expired the plaintiff's remedy to recover the house rent which represented the interest the mortgage money could only lie under s. 68 of the Transfer of Property Act. The High Court referred to several decisions and came to the conclusion that the intention of the parties was that the mortgagee would not get possession of the mortgaged property but would only get interest on the amount advanced in the shape of rent so long as the lease continued and the amount payable under the kerayanama was interest on the mortgage money and not rent for use and occupation of the mortgaged property. The mortgage bond and the kerayanama being part of the same transaction the mortgagee in execution of his decree for mqney obtained in respect of the so:-called rent of the house against the mortgagor would not be entitled to execute the decree for arrears of rent by sale of the property, as such a case would be governed by 0. 34 R. 14 Civil Procedure Code. In the result the claim of the creditor in excess of 9% p.a. was rejected but as the defendant had been in occupation of the house, although under an invalid lease, he was directed to pay compensation to the plaintiff for use and occupation of the house for the period of his occupation.
Reference may also be made to the case of Umeslnvar Prasad v. Dwarika Prasad("). In this case the mortgagor executed a usufructuary mortgage of certain properties for Rs. 14,400 for a period of seven years. Soon there~fter the mortgagee leased back the entire property to the mortgagor for a period of about seven years at the annual rent of Rs. 432 which was equal to the interest on the sum advanced. It was held by the Patna High Court that the mortgage bond and the lease deed were parts of the same trMsaction and the fact that the periods of the two deeds were not identical was immaterial and the case was governed by 0. 34 r. 14 (l) A.I.R. 1957 Patna 24. (2) A.I.R. 1944 Patna 5.
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MATHURALAL v. KESHAR BAI (Mitter, J.)
731
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In Ganpat Ruri v. Md. Asraf Ali(') the plaintiff had filed a suit claiming arrears of rent at the rate of Rs. 20 per mo.nth in respect of a house which had been given to him by the defendant in B usufructuary mortgage by a registered document, the property being let out to the defendant on lease on the same day at the monthly rent of Rs. 20. Applying the test as to whether on a reasQ!lable construction of the two documents the property given in security was not only for the principal amount secured under the bond but also for the interest accruing thereupon, the court held that the transactions were two different transactions and for this reliance c was placed on the fact that no rate ol interest was prescribed in the bond and Rs. 20 p.m; could not possibly be treated as interest due on the principal amount of Rs. 500.
G In La/chand v. Nenuram(8 ) the defendants had executed a mortgalle iin favour of the plaintiffs agreeing to pay interest at 8 % p.a: which came. to Rs. 27-8-0 per month. The mortgagors had del!red possesSJOn to th mortgagees and a registered qabuliat rec11in~ that they were takmg on lease the property described at a monthly rental of Rs. 27-8-0. The lower courts took the view that the mortgage deed was a rent note and part and parcel of the same H transaction and the plaintiffs were not qn1itled to get a decree for
(I) A.l.R. 1961 Patna 133. (2) I.L.R. 7 Rajasthan :68. (3) I.L.R. 12 Rajasthan ,947;
[1970) 3 S.C.R.
SUPREME COURT REPORTS
732
ejectment on the basis of the rent note. Rejecting this the Rajasthan High Court observed at p. 952 :
"Whether the two documents represent one transaction or two different trainsactions, a court of law should be anxious to give effect to the terms in both the documents instead of being unduly critical about them. . . . Having secured the possession of the mortgage, the mortgagee is further entitled to lease it out even to the mortgagor. It is in the interest of the mortgagor that the property is leased out to him as he can better look after it. There is nothing objectio,nable in this, nor is ttiere any statutory prohibition for such transactions. '\ow if the parties do this by executing proper documents, it is the duty of the court of Jaw to give effect to them."
The reasoning of the Rajasthan judgmerit seems to be logical and commends itself to us. In all such cases the leasing back of the property arises because of the mortgage with possession but we find ourselves unable to hold that the mortgagee does not secure to himself any rights under the deed of lease but must proceed on his mortgage in case the· amount secured to him under the deed of lease is not paid. If the security is good and considered to be sufficient by the mortgagee 'there is no reason why he should be driven to file a suit on his mortgage when he can file a suit for realisation of the moneys due under the rent note. The position of the creditor is strengthened where as in this case the interest on the amount of the mortgage is not the same as the rental fixed. If during the continuance of the security the mortgagee wants to sue the mortgagor on the basis of the rent note aind take possession himself or to induct some other tenant thereby securing to himself the am,,unt which the mortgagor had covenanted to pay, there can be no iegal objection to it. Under the provisions of 0. 34 r. 4 he cannot deprive the mortgagor of his right to redeem excepting by proceeding on his mortgage. Although we express no final opinion on this point it may be that a mortgagee who secures a decree for payment of arrears of rent cannot put the t>roperty to sale for realisation of the amount decreed but there can be no objection to hi.> suing for possession if the rent note entitles him to do so. So long as the mortgagor had a right to redeem the mortgage he can always pay off the mortgagee and get back possession. This position would continue so Jong as the property is not sold under a final decree for sale under the provisions of 0. 34 C.P.C.
In our opinion the second contention put forward on behalf of the appellant has no force. The rights of a mortgagee do not meroe in his rights under the preliminary decree for sale. As alre~dy mentioned, the mortgagee Jost his right to recover the money
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MATHURALAL v. KESHAR BAI (Mitter, J.) 733
A by sale of the mortgaged property; otherwise his security remained iintact and the mortgagor continued to have his right to redeem the property.
As regards the third point the only statutory provision to which a reference was made was section 28 of the Limitation Act of 1908 B which provided that :
"At the determination oi the period hereby limited to any person for instituting a suit for possession of any property, his right to such property shall be extinguished."
In the result the appeal fails and is dismissed with costs.
G.C.
Appeal dismissed.
3 issues framed by the court
Whether a rent note executed simultaneously with a mortgage creates an independent tenancy or is a mere device to secure interest.
Whether the mortgagee's rights merge in the preliminary decree when application for final decree is barred by limitation.
Whether section 28 of the Limitation Act extinguishes the mortgagee's right to sue for possession on the rent note.
Colour shows how this judgement treated each authority
Lalachand v. NenuramReferred
I.L.R. 12 Rajasthan, 947
Harilal Bhagwanji v. HemshankerReferred
A.I.R. 1958 Bombay 8 · Who else cites this
Ramnarain v. SukhiReferred
A.I.R. 1957 Patna 24 · Who else cites this
Umeshwar Prasad v. Dwarika PrasadReferred
A.I.R. 1944 Patna 5 · Who else cites this
Ganpat Ruri v. Md. Asraf AliReferred
A.I.R. 1961 Patna 133 · Who else cites this
Jankidas v. LaxminarainReferred
I.L.R. 7 Rajasthan 268
3 provisions across 3 enactments
Mathuralal
Keshar Bai
Second respondent (legal representatives of Kesharimal)
S. M. Sikri
V. Bhargava
G. K. Mitter
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
