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PETITIONER: MANGALA KUNHIMINA UMMA & ORS.

       Vs.

RESPONDENT: PUTHIVAVEOTTIL PARU AMMA & ORS.

DATE OF JUDGMENT28/01/1971

BENCH: RAY, A.N. BENCH: RAY, A.N. MITTER, G.K.

CITATION:  1971 AIR 1575            1971 SCR  582

ACT: Kerala Land Reforms Act 1964, s. 2(22)-Kanam’-Definition of- Document  purporting to be kanam whether lease or  mortgage- Tests Description in document not sufficient guide.

HEADNOTE:  The  document Ex.  B-6 in so far as it related to  the  suit  lands  purported  to be a kanam executed in  favour  of  the  predecessor-in-interest  of  the present appellants  by  the  predecessors-in-interest  of the present  respondents.   The  document  had a counter-part Ex.  A-1.  The suit  was  filed  for  the redemption of the kanam on payment of the  mortgage  debt.  The appellants contended in defence that Ex.  B-6 was  not a mortgage deed but a lease and, therefore, there was no  right  to  redeem.   One of the incidents of  the  kanam  as  defined in s. 2(22) of the Kerala Land Reforms Act, 1964 was  the  "payment of michavaram or customary dues on renewal  on  the  expiry of any specified period".  Against the  decision  of  the  Kerala  High Court in  favour  of  the  plaintiffs-  respondents, the present appeal was filed by special  leave.  The   only  question  for  consideration  was  whether   the  appellants  were  protected against eviction  by  reason  of  their  contention  that  Ex.  B-6 created  a  tenancy.   The  decision   of  this  question  depended  upon  the   further  consideration whether the provision in Ex.  B-6 for  payment  of land revenue for properties by the appellants amounted in  law to a stipulation as rent or michavaran to the landowner.  HELD  : (1) The mere description of the deed as  kanam  will  not  be  decisive of the essence of  the  transaction.   The  description  of the deed by itself, isolated from the  terms  and  provisions  may  be misleading  or  a  misnomerq.   The  circumstances  and the conduct of the parties are  always  a  very useful guide in ascertaining the true character of  the  transaction.  [587 B-C; E]  (2)  The first and foremost element to be found for a  lease  is  whether there is the intrinsic intention in the  written  document for enjoyment of the property by the transferee  in  lieu  of rent or perquisites.  Secondly the term of  renewal  of  the  enjoyment would indicate the features of  a  lease.  Thirdly  it  has  to  be found  out  whether  there  is  any  provision for payment .of customary dues. [587 R; 588 Al  The  dominant  feature of the mortgage  transaction  on  the

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other  hand will be ascertainment of the ratio of the  value  of land to the amount advanced.  It the ratio of the  amount  advanced bears a substantial proportion to the value of  the  property transferred it would be a strong piece of intention  and  circumstance  to  indicate loan and  a  mortgage.   The  provision  entitling the transferee to ask for a  return  of  money  by  sale of the property would be  a  very  important  feature  to  indicate that the transaction is a loan  and  a  mortgage and not a lease.  The absence of such a  provision,  however  would  not totally repel the transaction  to  be  a  mortgage.   The  execution of counter-part  is  sometimes  a  common feature in the case of possessory mortgage though the  existence of a counter-part by itself will not be conclusive  of the question. [588 B-D]  583  (3)  The High Court correctly held that a mere direction  to  pay  therevenue of the property by the grantee  particularly  when  no payment is stipulated to be made to the grantor  or  when the payment is not directed to be made out of  anything  which is due or payable to the grantor, cannot be considered  as a payment or rent or michavaran to the grantor. [588 G]  (4)  In  the  present case the features which  favoured  the  construction  of the transaction to be a mortgage and not  a  lease  were;  first  there was  no  provision  for  renewal;  secondly  there  was no provision for payment  of  customary  dues;  thirdly  the  property  was  to  be  enjoyed  by  the  defendants.  by  way  of interest  on  their  advance  after  payment  of land tax to the State; fourthly the  payment  of  land  tax  was  not a deduction from  rent  or  perquisites;  fifthly there was a provision for surrendering the  property  with  a registered release at the cost of the transferee  on  the  receipt of the consideration of kanam and  the  balance  amount;  sixthly  when the consideration was paid  back  the  counter-pattam deeds and prior deeds would he returned;, and  finally  there was liability to pay interest on the  advance  and possession and enjoyment of the property  was in lieu of  interest.   The proportion of the amount advanced under  Ex.  B-6 to the value of the property was also, substantial  [589  E-G-, A-C]  Parameswaran  Embranthiri  v.  Narasimha  Nambudri,   [1962]  K.L.T.   404,  Sankunni  Variar  &  Ors.   v.   Neelakandhan  Nambudripad  & Ors., I.L.R. [1944] Mad.  Z54.   Cherumanalil  Lakshmi  &  Ors. v. Mulivil Kunninamkandy Narayani  &  Ors.,  [1967]  S.C.R. 314, Kunhiparan v. V. Naicken & Ors.,  [1967]  K.L.T.  646  and Kunhirama Nambiar v. Pairu  Kutruo,  [1969]  K.L.T. 62, referred to.  Hussain Thangal v. Ali, [1961] K.L.T. 1033, approved.  Patel  Bhuder  Mayji etc. v. Jat Mamdaji  Kalaji  (deceased)  through L.. Rs.  Jat Singh Khan Mamdaji etc. [1969] 3 S.C.R.  690, applied.

JUDGMENT:  CIVIL APPELLATE JURISDICTION : Civil Appeal No. 980 of 1967.  Appeal by special leave from the decree dated the March  29,  1967 of the Kerala High Court in Second Appeal Suit No. 374.  of 1965.  T.   Narayanan   Nambyar  and  A.  V.  V.  Nair,   for   the  appellants.  K.   T. Harindranath and A. S. Nambyar, for respondents Nos.  1    to 4 and 6(1) and 6(2).  The Judgment of the Court was delivered by  Ray, J.-This is an appeal by special leave against the judg-  ment  dated  29  March, 1967 of the, High  Court  of  Kerala

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confirming the decree of the lower appellate Court declaring  that the sum of Rs. 1000/- is due to defendants No. 10 to 17  as legal representatives of defendant No. 2 on the  mortgage  mentioned  in  the  plaint and that  the  plaintiffs  having  deposited  the  said sum of Rs. 1000/- on the  file  of  the  Court of the Munsif, Cannanore, the defendants No. 10 to  17  do surrender quiet and peaceable possession of the  property  described  in  the plaint to the plaintiff No.  7  with  all  documents  relating to the property in their possession  and  further that the defendants No. 10 to 17 do pay to the  584  plaintiff No. 7 half of the mesne profits from 22  December,  1953 till the date of surrender of possession.  The relevant documents are Ex.  B-6 and Ex.  A-1.  Ex.   B-6  is a kanam-kuzhikanam.  Ex.  A-1 is its counter-part.   They  are  both  dated 1 December, 1941.   The  transaction  there  undere is a ,composite one, a kanam in respect of taks I  to  3 of item I which constitute properties in suit and a  kanam  kuzhikanam  in respect of tak 4 of item I and item  2  which  are not the subject matter of this suit.  The kanamdars  are  defendants No. I and 2. In partition under Ex. 3 the  rights  under  Ex.   B-6  have  been  divided  equally  between  the  defendants  No. I and 2 but the properties as such  are  not  divided.  The appellants being the legal representatives  of  ,defendant  No.  2  had  thus an  undivided  moiety  in  the  properties in suit.  The original plaintiff was an  assignee  of the jennii (the land owner) who granted Ex.  B-6.  On the  death  of the original plaintiff, her interest  devolved  on  plaintiffs No. 2 to 6 who assigned the same to plaintiff No.  7. The suit is for redemption of the kanam on the properties  in  suit.   Subsequent  to  the  institution  of  the  suit,  defendants  No.  3 to 9 being the legal  representatives  of  defendant  No. 1 and being respondents No. 7 to 13  in  this  appeal  surrendered  their  moiety in  the  suit  kanam,  to  plaintiffs  No. 2 to 6 and thereafter the suit proceeded  in  regard  to  the  moiety  of  the  kannam  that  belonged  to  defendant  No. 2 and his legal representatives. namely,  the  appellants.  The  only question in this appeal is whether the  appellants  are protected against eviction by reason of their contention  that  Ex.  P-6 created a tenancy or whether the  respondents  were entitled to possession of the properties, by reason  of  their  rival  contention  that  Ex.   B-6  was  a   mortgage  transaction and the respondents were entitled to redeem  the  mortgage on the expiry of the stipulated period.  The  Malabar Tenancy Act, 1929 was in force at the  time  of  the  institution  of the suit but it is common round  that  rights and liabilities of the parties are to be judged under  the  Kerala  Land  Reforms  Act’,  1964  by  reason  of  the  provisions contained in section Kerala Act of 1964     which  defines kanam are as follows :-  "(22) ’kanam’  means the transfer for consideration, in  money or in kind or in both, by a landlord of an interest in  specific  immovable  property  to  another  person  or   the  latter’s  enjoyment,  whether  described  in  the   document  evidencing  the  transaction  as kanam  or  kanapattam,  the  incidents of which transfer include-  (a)........................  (b)  ...............................  585  (c)  payment of michavaram or customary dues, or renewal  on  the expiry of any specified period........"  It is indisputable that a kanam within the above ’definition  involves payment of michavaram or customary dues or  renewal  on the expiry of any specified period. ln Ex.B-6 there is no

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provision for renewal or for payment of customary dues.  The  pre-eminent  question  is whether there is a  provision  for  payment  of michavaram.  Broadly stated, Ex.B-6 executed  by  defendants  No. 1 and 2 stipulated that they would  pay  the  kanam  of Rs. 1400 charged on taks I to 3 of item No.  I  in  the Schedule to Ex.B-6 to the 7 persons Narayani and  others  and  their representatives and redeem the same and hold  the  said  taks I to 3 of item No. I as kanam and tak 4 and  item  No.  2 as kanam-kuzhikanam, paying the land revenue for  the  properties  and  enjoy them for interest on the  kanam,  and  after  the  term of 12 years when the kanam  of  Rs.  2000/-  charged  on  taks  I  to 3 of item No.  1  was  offered  the  defendants  shall receive and surrender the properties  with  basic documents by a registered release at their costs.   No  rent  is  stipulated for the property  in  consideration  of  advance of Rs. 2000/whereof Rs. 1400/- was to be paid to the  prior  mortgagees  on taks I to 3 of item No.  1.  The  suit  properties in Ex.B-6 were to be enjoyed by defendants No.  I  and  2  for interest on their advance after payment  of  the  land tax to the State.  It  therefore  falls  for consideration as  to  whether  the  provision  in  Ex.B-6 for payment of land  revenue  for  the  properties by the appellants amounts in law to a stipulation  as rent or michavaram to the land owner.  Counsel on  behalf  of the appellants relied on the decision of the Kerala  High  Court  in Parameswaan Emranthiri v.  Narasimba  Nambudiri(1)  and  the earlier Bench division of the Madras High Court  in  Sankunni Varriar & Ors. v. Neelakandhan Nambudripad Ors. (2)  in  support of the proposition that payment of land  revenue  would amount to payment of rent, up.  In the Madras Bench dicision in Sankunni’s case (supra)  the  kanam  deed was for 36 years and the deed provided that  the  jenmi  should  receive inter alia an annual rental of  41  1  paras,  4 idangalis and one nazhi of paddy and gingerly  oil  to  the value of six rupees.  The kandamdaras were  required  by  the  deed in Sankunni’s (supra) case to pay out  of  the  gross rent to the Government what became due by way of  land  revenue.   The actual words in the kanam deed were that  the  pattam  (gross rent) of the property demised was 2507  paras  of  paddy and the kanamdars were to hold the  properties  in  their  possession  and enjoyment and pay to jenmi  a  pattam  (rent)  of 411 paras, 4 idangalis, I nazhi of paddy, of  the  money value of Rs. 138/- inclusive of paras vasi (allowance  (1) [1962]K.L.T.404  (2) I.L.R. [1944] Mad. 254  586  for   difference  of  measurement)  duly  dried,   winnowed,  cleaned, .conveyed to the jenmi’s residence and measured out  by their 40 nazhis para, after deduction of the interest due  on the mortgage amount and the assessment on the  properties  due  to  the  Government from the said  rent  together  with  sundry payment of one para, two idanglis of gingelly oil  of  the  value  of  Rs.  6, within the  30th  of  Makaram  (10th  February)  of each year commencing with the year  1069  M.E.  (1893-94) and duly take receipt therefor.  In  Sankunni’s  case  the land revenue was  increased  as  a  result of resettlement.  The question was whether the burden  of  the  increased  revenue fall upon  the  jenmi.   It  was  contended  in Sankunni’s(1) case that inasmuch as there  was  reference  in  the deed to gross yield of the land  and  the  jenmi  was  to  receive  his rent  after  deduction  of  the  interest due on the mortgage and the Government revenue, the  intention  was to fix the kanamiars’ liability on the  basis  of the revenue payable to the Government on the date of  the  kanam.   If the revenue payable was to be increased  it  was

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said  in that case that the jenmi was to be responsible  for  the payment of the additional amount.  The  entire ratio in Sankunni’s(1) case was first  that  the  liability of the jenmi was for the revenue and secondly, the  kanamdar  was  to deduct from the rent the interest  on  the  mortgage amount and the assessment on the properties due  to  the Government.  The decision of the learned Single Judge of  the  Kerala  High Court in Parameswaran’s(2) case  was  that  recital  in  the  deed  that the  defendant  was  to  be  in  possession of the properties and was to pay the revenue  out  of  the income and appropriate the balance towards  interest  on  the amount of the advance amounted to a stipulation  for  payment of revenue as michavaran or rent.  In  Sankunni’s(1)  case  the  direction to pay revenue out of the rent  of  the  property which was due to the landlord was justifiably  held  to  be a payment on behalf of the landlord because it was  a  part  of the michavaram.  That reasoning could not apply  to  Parames  waran’s(2)  case  because in that  case  there  was  neither any fixation of rent nor any stipulation for payment  of rent or michavaram to the landlord.  This  Court in Cherumanalil Lakshmi & Ors v.  Mlilivil  Kum-  njnamkandy  Narayani  &  Ors.(3) considered  as  to  when  a  transaction   would   be   kanam-kuzhikanam   and   when   a  usufractuary  mortgage.  In each case it manifestly  depends  entirely on the terms of the transaction.  In Lakshmi’s case  there  was a demise of land with fruit bearing trees for  24  years.   The  transfer ",as for the enjoyment of  land  with  trees.  The kanam amount was  (1) I.L.R. [1944] Mad. 254.  (2) [1962] K.L.T. 404.  (3)  [1967] 1 S.C.R. 314  587  Rs.  50001-  in one case and Rs. 600/- in  the  other.   The  transferees  were entitled to appropriate the income of  the  land in lieu of interest on the kanam amount and to hold the  land even after the expiry of 24 years until the payment  of  the kanam amount and the value of the trees planted by them.  It  was therefore found that all the ingredients  of  kanam-  kuzhikanam  were  satisfied.   The test  to  be  applied  is  whether  the purpose of the transaction is enjoyment of  the  property  by  the transferee or whether it  is  intended  to  secure the repayment of debt by transfer of interest in  the  property.  The  mere description of the deed as  kanam-kuzhikanam  will  not  be  decisive of the essence of  the  transaction.   The  description  of deed by itself isolated from the  terms  and  provisions may be misleading or a misnomer.  Counsel for the respondents relied on the Bench decision  of  tile Kerala High Court in Kunhiparan v. V. Naicken & Ors(1).  in  support  of the proposition that payment  of  perquisite  would  indicate that the relationship was that of  land-lord  and  tenant  and  the  name of the  document  would  not  be  sufficient to displace the real terms.  In Kunhiparan’s case  the  transaction was described as a kudiyiruppu to have  the  flavour of a mortgage but the court found the transaction by  the  terms, provisions and intention of the parties to be  a  lease and not a mortgage.  The circumstances and the conduct of the parties are  always  a  very useful guide in ascertaining the true character  and  content  of  the transaction.  Counsel for  the  respondents  relied  on the Full Bench decision of the Kerala High  Court  in Kunhirama Nambiar v.Pairu Kurup(2) where the document was  a kanayadharam and in spite of its nomenclature it was  held  to  be a mortgage and not a kanam.  The elements  which  are  usually considered relevant to find out the intention of the

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parties, are first, the proportion of the amount advanced to  the  value of the security; secondly, the rate  of  interest  payable  on  the  sum advanced; thirdly, the  absence  of  a  provision  for making improvements   and the  proportion  of  the   rent   or  ’purapad’  to  the  income   reserved   for  appropriation   towards   interest;   and   fourthly,    the  surrounding  circumstances at the time of  the  transaction,  namely, that the tarward was at the time of the execution of  the  document  in dire need of money to discharge  debts  to  indicate that the transaction was intended to be a  mortgage  and not a lease.  It will always be a significant feature in  a  document as to whether the jenmom right of the tarwad  in  the properties has been secured for the kanartham by way  of  mortgage.  The  first and foremost element to be found for a  lease  is  whether  there  is the intrinsic intention  in  the  written  document for en-  (1) [1967] K.L.T. 646.        (2) [1969] K.L.T. 62.  588  joyment of the property by the transferee in lieu of rent or  perquisites.  Secondly, the term of renewal of the enjoyment  would  indicate the feature of a lease.  Thirdly, it has  to  be  found out whether there is any provision for payment  of  customary dues.  Ile learned Single Judge in the decision of  the  Kerala High Court in Hussain Thangal v. Ali(1)  rightly  said  that  the use of words like ’pattam’  meaning  profits  would  be  a strong indication of the transaction  to  be  a  lease and not a mortgage.  The dominant features of a mortgage transaction on the other  hand would be the ascertainment of the ratio of the value of  land  to  the amount advanced.  If the ratio of  the  amount  advanced bears a substantial proportion to the value of  the  property transferred it would be a strong piece of intention  and  circumstance  to  indicate  loan  and  a  mortgage.   A  provision  entitling the transferee to ask for a  return  of  money  by  sale of the property would be  a  very  important  feature  to  indicate  that  transaction is  a  loan  and  a  mortgage and not a lease.  The absence of such a  provision,  however,  would  not totally repel the transaction to  be  a  mortgage.   The  execution of counter part  is  sometime  as  common feature in the case of possessory mortgage though the  existence of a counterpart by itself will not be  conclusive  of the question.  The deed understood in the light of the surrounding  circum-  stances   will   provide  the  answer  in  the   facts   and  circumstances  of each case.  In the present case,  emphasis  was  placed by counsel for the appellants on the payment  of  Government  revenue by the transferee.  This Court in  Patel  Bhunder Mayji etc. v. Jat Mamdaji Kalaji (deceased)  through  L. Rs.  Jai Saheb Khan Mamdaji(2) etc. .,aid that payment of  revenue  and other dues to the State, would not  clothe  the  occupants  with  the  right  of  the  tenants.   Ordinarily,  mortgagees  under section 76(c) of the Transfer of  Property  Act in the absence of a contract to the contrary pay out  of  the  income of the property the Government revenue  and  all  other charges of a public nature during their possession  of  such  land.   The High Court in the present  case  correctly  said  that stipulation in the deed of payment of  Government  revenue  by the transferee was "that by virtue of the  grant  the  liability to pay revenue is transferred to the  grantee  and  the  grantee  who  had  accepted  the  grant  and   the  liability,  when  he pays the revenue, pays it  on  his  own  behalf".   The  High Court also correctly held that  a  mere  direction to pay the revenue of the property by the grantee,  particularly when no ment is not directed to be made out  of

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anything  which is due or payable to the grantor, cannot  be  construed as a payment or rent or michavaram to the grantor.  The proportion between the amount advanced and the value  of  the property is one of the important tests to be taken  into  con-  (1) [1961]K.L.T.1033.  (2) [1969] 3 S.C.R.690.  589  sideration in deciding the nature of the transaction.  Where  the  amount advanced bears a substantial proportion  to  the  value of the property it is an important element  indication  that the intention was the creation of a mortgage and not  a  tenancy.   In  the present case, the amount  for  which  the  properties  included  in  Ex.B-6  were  sold  to  the  first  plaintiff  under  Ex.A.2  was Rs. 5000/- out  of  which  Rs.  2500/-  was to go in discharge of the amount  under  Ex.B-6.  The advance, therefore, bore a substantial proportion to the  value  of the property.  This feature when considered  along  with  the fact that the document did not provide payment  of  any annual purapped to the jenmi and that the annual  amount  was  directed  to be paid as revenue of the  property  which  came  to  Rs. 10-4-0, a paltry recurring  annual  liability,  would  be an additional reason to support the  intention  of  the  parties that the transaction was a mortgage and  not  a  tenancy.  It  is  significant  that  after  the  execution  of  Ex.B-6  defendants ,No.  I and 2 entered into a partition  agreement  evidenced   by  Ex.   A-3.   The  partition  deed   included  transactions  called  kanam  other  than  the  disputed  one  forming  the subject matter of the suit.  In almost all  the  properties held under kanam there was division by metes  and  bounds,  but  with regard to Ex.B-6 and the  amount  of  Rs.  2000/-  there  was no division by metes  and  bounds.   This  would also point to the conclusion that the defendants No. 1  and 2 never treated Ex.B-6 as creating a tenancy.  In   the  present  case  the  features  which   favour   the  construction  of the transaction to be a mortgage and not  a  lease  are : first, that there is no provision for  renewal;  secondly,  there  is no provision for payment  of  customary  dues;  thirdly,  the  property  was to  be  enjoyed  by  the  defendants by way of interest on their advance after payment  of land tax to the State, fourthly, the payment of land  tax  is not a deduction from rent or perquisites; fifthly, there  is  a  provision  for  surrendering  the  property  with   a  registered  release  at the cost of the transferees  on  the  receipt  of  the  consideration of  kanam  and  the  balance  amount;  sixthly,  when the consideration is paid  back  the  counter-pattam deeds and prior deeds would be returned;  and  finally,  there is liability to pay interest on the  advance  and  possession and enjoyment of profits of the property  is  in lieu of interest.  For these reasons we are of opinion that the High Court  was  correct   in  its  conclusion  as  to  the  nature  of   the  transaction  being a mortgage and not a lease.   The  appeal  fails and is dismissed with costs.  G. C.                                                 Appeal  dismissed  590