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CASE NO.:

Appeal (civil) 686 of 1987

PETITIONER:

NIRMAL CHANDRA

Vs.

RESPONDENT:

VIMAL CHAND

DATE OF JUDGMENT: 08/05/2001

BENCH:

D.P. Mohapatra & Brijesh Kumar

JUDGMENT:

BRIJESH KUMAR, J.

L...I...T.......T.......T.......T.......T.......T.......T..J

This appeal has been preferred against the judgment and

decree dated August 30, 1996 passed by a learned Single

Judge of Madhya Pradesh High Court, Gwalior Bench allowing

the revision petition preferred by the respondent Vimal

Chand and setting aside the order passed by the trial court

by which the respondent was directed to hand over the

physical possession of the disputed property to Nirmal

Chandra in proceedings under Section 83 of the Transfer of

Property Act.

The controversy involved in this case relates to the

nature of possession of a tenant-mortgagee and the

obligations of the respective parties in the event of

redemption of mortgage in so far as it relates to the

possession of such properties. We have heard learned

counsel appearing for the parties and have also gone through

orders passed by the Courts below.

The respondent Vimal Chand is a tenant of the appellant

Nirmal Chandra in respect of a shop situate at Pared

Chauraha, Bhind, Madhya Pradesh. It is not in dispute that

the tenancy of the said shop had been coming down since

long. The appellant-landlord however executed a mortgage

deed, duly registered, in respect of the shop in question in

favour of the tenant-respondent Nirmal Chandra. The

mortgage was for a sum of Rs.10,000/-. The mortgage deed

was executed on 19.4.1973. According to the appellant he

was handed over the possession of the property. According

to the terms and conditions of the mortgage the appellant

was entitled to get the mortgage redeemed on expiry of ten

years. On completion of ten years the appellant requested

the respondent to receive the mortgage money and redeem the

mortgage and a notice is said to have been served on

6.12.1983 but it brought not results. Hence, he moved a

petition under Section 83 of the Transfer of Property Act in

the Court of a Civil Judge by depositing a sum of

Rs.10,000/- in the Court. The respondent-tenant filed its

reply contesting the case of the petitioner- landlord in

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respect to the possession of the property. The execution of

the mortgage deed was not denied but it was pleaded that he

has been tenant of the accommodation in question since a

long time and according to the conditions of the mortgage

agreement rent and the interest was agreed to be equal. The

delivery of possession on mortgage was only symbolic in

nature and the tenant-respondent namely, the mortgagee

continued to be in possession. This position has not been

disputed before us during the hearing of the case.

Section 83 of the Transfer of Property Act provides as

under:

83. Power to deposit in Court money due on mortgage.

At any time after the principal money [payable in respect

of any mortgage has become due] and before a suit for

redemption of the mortgaged property is barred, the

mortgagor, or any other person entitled to institute such

suit, may deposit, in any court in which he might have

instituted such suit, to the account of the mortgagee, the

amount remaining due on the mortgage.

Right to money deposited by mortgagor:- The Court shall

thereupon cause written notice of the deposit to be served

on the mortgagee, and the mortgagee may, on presenting a

petition (verified in manner prescribed by law for the

verification of plaints) stating the amount then due on the

mortgage, and his willingness to accept the money so

deposited in full discharge of such amount, and on

depositing in the same court the mortgage-deed [and all

documents in his possession or power relating to the

mortgaged property], apply for and receive the money, and

the mortgage-deed , [and all such other documents] so

deposited shall be delivered to the mortgagor or such other

person as aforesaid.

[Where the mortgagee is in possession of the mortgaged

property, the court shall, before paying to him the amount

so deposited, direct him to deliver possession thereof to

the mortgagor and at the cost of the mortgagor either to

re-transfer the mortgaged property to the mortgagor or to

such third person as the mortgagor may direct or to execute

and (where the mortgage has been effected by a registered

instrument) have registered an acknowledgment in writing

that any right in derogation of the mortgagors interest

transferred to the mortgagee has been extinguished.]

For coming to a conclusion that on redemption of a

mortgage, the mortgagor is to be handed over the possession

of the property, learned trial court considered certain

decisions of the Madhya Pradesh High Court referred to in

the order and Shah Mathuradas Maganlal & Co. versus Nagappa

Shankarappa Malage, AIR 1976 S.C. 1565 and observed that

where the mortgagee was in possession and no interest was

agreed to be paid nor any time limit to return the amount,

in such a situation the tenancy rights will come to an end

and on redemption of the mortgage, the possession shall be

handed over to the mortgagor. It was also observed that

intention of the parties was to be taken into account as to

whether the tenancy was liable to be continued or not. The

petition was allowed with a direction to the respondent to

hand over the possession of the property to the

mortgagor-landlord, the appellant in this appeal.

Aggrieved by the order passed by the trial court, the

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respondent-tenant preferred a revision which has been

allowed as indicated earlier and set aside the part of the

order directing handing over the possession of the mortgaged

property to the mortgagor-landlord. Considering the terms

and conditions of the mortgage, the revisional court came to

the conclusion that tenancy rights had not been surrendered

and on redemption of the mortgage, the respondent-tenant

would be entitled to continue in possession as tenant of the

premises. It was also found that tenancy rights could only

be brought to an end under the provision as contained in the

Madhya Pradesh Accommodation Control Act. It is against the

said order that this appeal has been preferred.

Before considering the terms and conditions of the

mortgage deed, it may be better to first consider the legal

position on the point. In a case reported in AIR 1984 SC

1728, Gambangi Appalaswamy Naidu and others versus Behara

Venkataramanayya Patro ,this Court held that there can be no

merger of lease and a mortgage, even where the two

transactions are in respect of the same property as for a

merger it is necessary that lesser estate and a higher

estate should merge in one person at one and the same time

and no interest in the property should remain outstanding.

Neither of the two rights are higher or lesser estate than

the other. It is further observed that a tenant mortgagee

could be directed to deliver the possession of the property

at the time of redemption only if at the time of the

mortgage there was surrender of lease rights in favour of

the lessor. It all depends on the intention of the parties

at the time of execution of the mortgage and its terms and

conditions as well as the surrounding circumstances. On

facts it was found that rent was payable by the lessee in

the shape of share in the crop and there was an adjustment

of rent and interest that is to say liability to pay rent

during mortgage was kept alive which runs counter to implied

surrender of lease rights. It was further held that the

mere fact that owner creates a mortgage in favour of a

lessee is not by itself decisive to hold that the prior

lease was surrendered and the possession on the earlier

lease was only that of a mortgagee. The nature of

possession would however be a question of fact in each case.

In Gopalan KRISHNANKUTTY VERSUS Kunjamma Pillai Sarojini

Amma and others AIR 1996 S.C.. 1659, a Bench of Three

Judges of this Court, held that unless there was a surrender

of the lessees rights, at the time of execution of mortgage

deed, mortgagor would not be entitled to obtain delivery of

physical possession on redemption of mortgage. The question

of actual surrender of rights depends upon the intention of

the parties at the time of execution of the mortgage. It

would be a question of fact depending upon evidence. It is

further observed that in absence of proof of surrender of

lease by the defendant, there is no automatic merger of an

interest as lessee with that of the mortgagee when the same

person is lessee as well as mortgagee. On redemption of the

mortgage, the mortgagee is not entitled automatically to

recover possession of the lease. In Narayan Vishnu Hendre

and others versus Baburao Savalaram Kothawale (1995) 6

S.C.C. 608 this Court held that doctrine of merger does not

apply where tenanted premises are mortgaged in favour of the

lessee and such an inference cannot readily be inferred in

the absence of any clear statement or indication in the deed

or conduct of the parties. It has also been observed that

lease of a property is a very valuable right and its implied

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surrender on execution of a mortgage would not be inferred

unless there was a clear statement or indication to that

effect in the document itself. Redemption of mortgage would

revive the tenancy of the mortgagee, the only effect of

mortgage was that the lessees rights were kept in abeyance

and they stood revived by the redemption of the mortgage.

In Nemi Chand versus Onkar Lal AIR 1991 S.C. 2046 in

similar situation it was held that where it was stipulated

that neither interest nor rent was payable as both amounts

were equal, it clearly shows that rent was kept alive and

there was no merger of lease. Lessee was held entitled to

be in possession of the property as lessee despite the

redemption of mortgage. In Nand Lal and others versus Sukh

Dev and another 1987 (Supp) S.C.C. 87 also the same view

was taken that tenancy rights would get revived on

redemption of the mortgage and the lessee mortgagee would

not be liable to be evicted.

From a perusal of the decisions of this Court as

indicated above, it clearly emerges that there is no

automatic merger of two rights where mortgage is executed in

favour of a tenant and on redemption of mortgage, the

tenancy rights kept in abeyance would revive and entitle the

tenant to continue in possession even after the redemption

of the mortgage. On execution of mortgage, tenancy rights

would terminate only if it is clear expressly or impliedly

by conduct or other related circumstances that the parties

had intended so which would be a question of fact. Thus as

a normal rule except in intention being to the contrary,

mortgage and lease operate independent of each other and on

mortgage coming to an end by redemption, tenancy would

revive.

In the light of the law on the point indicated above we

may now advert to the terms and conditions of the mortgage

deed in hand. The Condition No.1 of the mortgage deed lays

down that the interest of the mortgage money and the rent of

the shop would be equal. The Condition No.4 which is also

relevant and as quoted, on being translated into English, in

the order of the High Court, is as follows:

After the expiry of the period of ten years when I get

the shop redeemed, I would use it for my own purpose for at

least three years. After getting it redeemed, I would

neither give it on rent nor keep any partner with me. In

case it is given to someone on rent, the mortgagee shall

have right to take back possession of the shop in his

capacity as a tenant.

It is to be noticed that under Condition No.1 the

payment of rent is kept alive. It is sought to be adjusted

by the amount of interest payable by the mortgagor-lessor to

the lessee. Thus it is quite clear that element of tenancy

and payment of rent operated throughout the period of

mortgage. It is not denied before us that during all this

period, the tenant remained in actual possession. His

status as a tenant never ceased as amount of interest to

which he was entitled to on Rs.10,000/- advanced to

mortgagor was adjusted towards rent payable by him as a

tenant of the accommodation to the landlord. In similar

circumstances we have already seen that in the cases of

Gambangi Appalaswamy Naidu as well as Nemi Cchand (Supra)

this Court held that where rent is kept alive, it runs

contrary to the intention or conduct of the parties leading

to any inference of surrender of lease. In our view this

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fact alone is enough to hold that there was no merger of two

rights nor surrender of tenancy could be inferred on the

facts and circumstances or on the basis of the terms and

conditions of the mortgage. As a matter of fact, Condition

No.4 on which much reliance has been placed by the learned

counsel for the appellant does not help him very much. It

is no doubt initially indicated on expiry of ten years on

redemption of mortgage the lessor would use the shop for his

own purpose for at least three years. It would neither be

given on rent nor he shall have any partner with him. It is

further provided that in case it is given to some one on

rent, the mortgagee shall have the right to take back

possession in his capacity as tenant (emphasis supplied by

us). This condition no where speaks of surrender of tenancy

by the lessee. It only provides that for at least three

years shop will be in personal use of the landlord failing

which there would be revival of the mortgagees capacity as

tenant. Such a condition cannot be said to be a clear

intention of surrendering the lease rights in the property.

Whatever little effect Condition No.4 if at all may have, is

negated by Condition No.1 which kept the rent alive and the

element of tenancy pervading throughout the period of

mortgage.

Next, we also find that the High Court has rightly

observed that in view of Section 12 of the M.P.

Accommodation Control Act it was not possible to grant

relief of possession of the tenanted premises to the

landlord-lessor. The relevant parts of Section 12 are

quoted below:

Sec.12 Restriction on eviction of tenants.-(1)

Notwithstanding anything to the contrary contained in any

other law or contract, no suit shall be filed in any Civil

Court against a tenant for his eviction from any

accommodation except on one or more of the following grounds

only namely:-

(a)----------------------------------------------------

(b) ------------------------------------------------

(d)------------------------------------------------------

(e)------------------------------------------------------

(f) that the accommodation let for non-residential

purposes is required bona-fide by the landlord for the

purpose of continuing or starting his business or that any

of his major sons or unmarried daughters if he is the owner

thereof or for any person for whose benefit the

accommodation is held and that the landlord or such person

has no other reasonable suitable non-residential

accommodation of his own in his occupation in the city or

town concerned.

In the case in hand it can best be said that the

accommodation was needed by the landlord for his own use

more particularly in view of the fact that earlier he had

also filed a suit for eviction of the respondent- tenant on

the ground of his bona fide requirement, in the civil court

which was pending at the time of execution of the mortgage.

The Madhya Pradesh Accommodation Control Act 1961 is a

special Act dealing with the subject of eviction of the

tenants and as provided under Section 12 of the Act,

notwithstanding any rule to the contrary contained in any

other law or contract, no suit shall be filed in any civil

court against a tenant for his eviction on the grounds

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enumerated therein. In this light of the matter if the

tenant consented to hand over the possession and acts upon

such consent, it would entirely be a different matter and

whichever provisions of Madhya Pradesh Accommodation Control

Act, 1961 may then be applicable shall become operative but

in case the possession is not handed over there is no other

way except to file a suit under Section 12 of the Madhya

Pradesh Accommodation Control Act to bring about

determination of the tenancy by a decree of the Court on the

grounds permissible under the provision. This we find yet

another hurdle in the way of the appellant in making a

request for decree for possession of the property in

question. One more case was brought to our notice reported

in (1973) 3 SCC 198, M/s.Sachamal Parasram versus Smt.

Ratnabai and others. In that case the mortgagee in

possession had admitted one tenant who was sought to be

evicted on the redemption of the mortgage. The tenant of

the mortgagee sought benefit of rent control laws. It was

held that he was not entitled to that benefit. This case

has no application to the facts and point of law involved is

this case.

In view of the discussion held above, there is no merit

in the appeal and it is accordingly dismissed. Costs easy.