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PETITIONER: SAMBANGI APPLASWAMY NAIDU & OTHERS

       Vs.

RESPONDENT: BEHARA VENKATARAMANAYYA PATRO AND OTHERS

DATE OF JUDGMENT28/08/1984

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. THAKKAR, M.P. (J)

CITATION:  1984 AIR 1728            1985 SCR  (1) 651  1984 SCC  (4) 382        1984 SCALE  (2)261  CITATOR INFO :  F          1991 SC2046  (6)

ACT:      Landlord   and    tenant   relationship-Whether    upon redemption of  usufructuary mortgage a tenant mortgage could be directed to deliver the actual and physical possession of the mortgaged  property to  the lessor-Mortgagor-Merger of a lease and  a mortgage  in  respect  of  the  same  property, whether there can be-Transfer of property Act, 1882 Sections 58, 101 and 105-Interpretation of deeds.

HEADNOTE:      Respondents, predecessor  Behara Venkataramanayya Patro executed two  deeds dated  30-8-1939 and 25-8-1942 in favour of one Sambangi Thavitinaidue, who was then a sitting tenant of the  property. In  1951 the  mortgagor filed  a suit  for redemption of  the  mortgages  and  obtained  a  preliminary decree on  31-12-1952. Subsequently,  the mortgagor died and the present  respondents were brought on record as his legal representatives.  On  21-10-1963  the  respondent  filed  an application  for   passing  a   final  decree   by  way   of ascertainment  of   the  amount  due  and  for  delivery  of possession upon  deposit of  entire dues so ascertained. The application  was  resisted  by  the  appellants  on  several grounds. According  to them,  on redemption, relationship of landlord  and   tenant  would  revive  which  needed  to  be protected  and   the  delivery   should  be   of  symbolical possession  only.   The  learned  trial  judge  allowed  the application but  on  an  appeal  preferred,  the  Additional District Judge  Srikakulam took a contrary view relying upon Varada  Bangar   Raju’s  case   AIR  (1965)   A.P.  86   The respondents, therefore,  preferred a  second appeal  and the learned Single  Judge of  the A.P. High Court relying upon a subsequent decision  in P.  Satyanarayana’s case  ILR (1967) A.P. 1341  set aside  the decision  of the  first  Appellate Court.  Letters   Patent  Appeal  preferred  by  the  tenant mortgagees to  the Division  Bench of  the High Court failed and hence this appeal by Special Leave to this Court.      Allowing the appeal, the Court ^      HELD:1: 1  There can  be no  merger of  a lease  and  a mortgage, even  where the two transactions are in respect of

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the same property. [655C]      1:2 It  is well-settled  that for a merger to arise, it is necessary  that 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 652 outstanding. In  the case  of a  lease, the  estate that  is outstanding in the lessor is the reversion, in the case of a mortgage, the  estate that  is outstanding  is the equity of redemption of  the mortgagor. Accordingly, there cannot be a merger of  a lease  and a  mortgage in  respect of  the same property since  neither of them is a higher or lesser estate than the  other. Even,  if the  rights of the lessee and the rights of  the mortgagee in respect of a property were to be united in  one person  the reversion  in regard to the lease and the  equity of  redemption in  regard to  the  mortgage, would be  outstanding in  the  owner  of  the  property  and accordingly, there would not be a complete fusion of all the rights of ownership in one person. [655D-F]      Shah Mathurdas Maganial & Co, v. Naogappa Shankarappa & ors A.I.R   1976  S. C. 1565 followed. Narayana Dogra Shetty v. Ramchandra Shivram Hingne 65 Bom L.R. 449, approved.      2. Whether  upon redemption  of usufructuary mortgage a tenant mortgagee  could be  directed to  deliver  actual  or physical possession  of the mortgaged property to the lessor mortgagor and  whether the original relationship of landlord and tenant  would revive  upon  redemption  of  usufructuary mortgage  by   a  tenant  mortgagee  in  possession  of  the mortgaged property  by delivering  possession to  the lessor mortgagor, will  depend upon  whether there  was an  implied surrender  of  the  lessee’s  right  when  the  usufructuary mortgage was  executed which  in turn  depends upon what was the intention of the parties at the time of the execution of the mortgage  deed in  favour of  the sitting  tenant to  be gathered from  the terms  of and  conditions of the mortgage transaction in  light of the surrounding circumstance of the case. [656C-D 655G-H; 656A]      2:2 In  the  instant  case,  the  only  effect  of  the execution of  usufractutary  mortgage  deeds  was  that  the lessee’s right  were kept  in abeyance  and they revive upon redemption of the mortgage. [658E]      The  mortgage   deed  does   not  mention   whether  on redemption  physical  possession  is,  to  be  delivered  or symbolical possession  is to  be delivered to the mortgagor. [657H]      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 any thing such a term clearly runs counter to any implied surrender of the lessee’s right. There is  no term  fixed for redemption of mortgage property which mean  that it  was open to the mortgagor to redeem the mortgagor at  any time  that is  to say  even within  a very short time  and if  that be  so 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 would  not give  up his  right as  a lessee  no sooner redemption  takes place, 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. 653

JUDGMENT:

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    CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1339 of 1977.      Appeal by  Special leave  from the  Judgment and  order dated the  16th September,  1976 of  the Andhra Pradesh High Court in L.P.A., No. 199 of 1975.      K. Ram Kumar for the Appellant.      A. V. Rangam for the Respondent.      The Judgement of the Court was delivered by      TULZAPURKAR, J.  The short  question involved  in  this appeal  is   whether  upon   redemption  of  a  usufructuary mortagage a  tenant-mortgagee could  be directed  to deliver actual or  physical possession  of the mortgaged property to the lessor  mortgagor? By  reason of  the grant of a limited special leave the appeal has been confined to that question.      Facts relevant  to the  question  may  be  stated:  One Behara  Audinarayana  Patro,  the  original  owner  of  suit property executed  two  usufructuary  mortgage  deeds  dated 30.8.1939 and  25.8.1942 in  favour of  the first  defendant Sambangi Thavitinaidu, who was then a sitting tenant of that property. In  1951 the mortgagor filed a suit for redemption of the  mortgages  and  obtained  a  preliminary  decree  on 31.12.1952.  Subsequently,   the  mortgagor   died  and  the respondents  were   brought   on   record   as   his   legal representatives. On  21.10.1963  the  respondents  filed  an application  for   passing  a   final  decree   by  way   of ascertainment  of   the  amount  due  and  for  delivery  of possession upon  deposit of  entire dues so ascertained. The application was  resisted by  the first  defendant and other defendants (the  appellants before  us) on  several grounds. Inter  alia   the  appellants   contended  that  even  after depositing the  entire amount  found due  to them  no decree directing delivery  of  actual  or  physical  possession  in favour of  the respondents  should be passed but delivery of symbolical possession  alone should  be ordered  insomuch as the appellants’  possession of the suit property as a tenant or lessee  could not  be  disturbed.  In  other  words,  the appellants  contended   that  on   redemption  the  original relationship of  landlord  and  tenant  would  revive  which needed  to   be  protected.  The  learned  District  Munsif, Parvatipuram took the view that the relationship 654 of landlord  and tenant  had ceased  to  subsist  after  the mortgages came  into existence,  that the mortgage-bonds did not provide  that the said relationship would be restored or revived upon  redemption and  that therefore the respondents were entitled  to delivery of physical possession upon their depositing the  entire dues  payable to  the appellants. The tenant-mortagees  (the   defendants)  preferred   an  appeal against the  order of  the learned  District Munsif  and the learned Additional  District Judge  Srikakulam who heard the appeal took  the contrary  view relying  upon a  decision of Andhra Pradesh  High Court in Varada Bangar Raju v. Kirthali Avatharam &  others and  held that the defendants-mortgagees were sitting  tenants of  the mortgaged property at the time of the  execution of  the mortgage  deeds,  that  there  was nothing in  those deeds  to suggest  that  their  rights  as lessees  were  extinguished  either  by  merger  or  implied surrender, that  the landlord-tenant  relationship continued to   exist    after   termination   of   mortgagor-mortgagee relationship and therefore the respondents were not entitled to delivery  of physical  possession; he, therefore, allowed the appeal.      The respondents preferred a second appeal to the Andhra Pradesh High Court and the learned Single Judge relying upon a subsequent  decision  in  P.  Satyanarayana  v.  Janardhan

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Chetty  which   had  distinguished   the  earlier  decision, reversed the  view of  the learned  Addl. District Judge and restored the  decree passed  by  the  District  Munsif.  The learned Judge  took the  view that  the question whether the relationship of landlord and tenant would subsist even after the execution of the usufructuary mortgage depended upon the intention of  the parties  to be  gathered from the terms of the mortgage  transaction and  held that  on  the  terms  of mortgage-deeds there  was no  doubt that the landlord-tenant relationship had  ceased to  exist after the relationship of mortgagor and mortgagee came into existence and the mortgage bonds had  not specifically  provided that  the landlord and tenant relationship  would be  restored after the redemption of the  mortgages. A  Letters Patent Appeal preferred by the tenant-mortgagees to  the Division  Bench of  the High Court failed and hence this appeal to this Court.      Counsel for  the appellants urged upon us to accept the view taken  by the  learned  District  Judge  that  the  two transactions 655 namely a  lease and  a usufructuary  mortgage could co-exist and there  was nothing  in the two mortgage deeds to suggest that the  appellants’ rights  as  lessee  were  extinguished either by  merger or by implied surrender and in that behalf strong reliance  was placed upon the earlier decision of the Andhra Pradesh  High Court  in  Varada  Bangar  Raju’s  ease (supra), while  counsel for  the respondents  contended that the High  Court, both  in second  appeal as  well as Letters Patent Appeal,  was right  in restoring the learned District Munsif’s decision  by relying  upon the later decision in P. Satyanarayana’s case  (supra) and  prayed for  dismissal  of this appeal.      In our  view there  can be  no merger  of a lease and a mortgage, even  where the two transactions are in respect of the same  property. It  is well-settled that for a merger to arise, it  is necessary  that 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 outstanding.  In the case of a lease, the estate that is outstanding  in the  lessor is the reversion; in the case of a  mortgage, the estate that is outstanding is the equity of redemption of the mortgagor. Accordingly, there cannot be a merger  of a  lease and  a mortgage in respect of the same property since  neither of them is a higher or lesser estate than the  other. Even,  if the  rights of the lessee and the rights of  the mortgagee in respect of a property were to be united in  one person  the reversion  in regard to the lease and the  equity of  redemption in  regard to  the  mortgage, would be  outstanding in  the  owner  of  the  property  and accordingly, there would not be a complete fusion of all the rights of  ownership in  one person. This position in law as explained by  the Bombay High Court in Narayana Dogra Shetty v. Ramchandra  Shivram Hingne,  has been  fully approved  by this Court  in Shah  Mathuradas Maganlal  & Co.  v.  Nagappa Shankarappa & Ors.      In our  view the  answer to the question raised in this appeal  must  depend  upon  whether  there  was  an  implied surrender of  the  lessee’s  rights  when  the  usufructuary mortgage was executed in his favour by the lessor-mortgagor. And this  obviously depends  upon what  was the intention of the parties at the time of the execution 656 of the  mortgage deed  in favour of the sitting tenant to be gathered from  the terms  and  conditions  of  the  mortgage transaction in light of the surrounding circumstances of the

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case. It  may be  stated that  in both  the decisions of the Andhra Pradesh  High Court  on which  reliance was placed by the respective  counsel of the parties in support of his own contention the  question was  ultimately decided  on  proper construction of  the terms  and conditions  of the  mortgage transactions; in  the earlier  decision the  court took  the view that  there was nothing in the mortgage deed to suggest that there  was an  implied surrender of the lessee’s rights while in the later case the court held that the terms of the mortgage  deed   showed  that   the  lessee   had  impliedly surrendered his  rights. In other words, it all depends upon whether by  executing a  possessory or usufructuary mortgage in favour  of a  sitting tenant  the parties  intended  that there should  be a  surrender of lessee’s rights or not, and only if  an implied  surrender of  lessee’s rights  could be inferred then  the  mortgagor  would  be  entitled  to  have delivery of  physical possession  upon  redemption  but  not otherwise.      In the  instant case  the earlier usufructuary mortgage deed of 1939 is not on record before us but the parties have produced  a   copy  of   Exhibit  A-3  which  is  the  later usufructuary  mortgage   deed  dated  23.8.1942,  the  terms thereof are required to be construed. It runs thus:                         Exhibit A-3           "Deed of  mortgage of land accompanied by delivery      of possession of land for Rs. 250 (in words two hundred      and fifty  rupees) executed  on 23rd  August,  1942  in      favour of  Sambangi Taviti  Naidu,  son  of  late  Jogi      Naidu’ of  Koppula Velama Caste, living by cultivation,      resident   of    Dathivalasa   village,    hamlet    of      Tummalavalasa of  Parvatipuram Sub  District by  Behara      Adinarayana Patro,  son of  late Behera  Narayana Patro      Sista Karnam, Inamdar resident of Markonduputti village      of the same Sub District.           The amount  of principal  and interest  due on the      promissory  note   executed  by   me  in   your  favour      previously on  24th April,  1940 for  my necessity, the      amount paid  by you  on my behalf to the Estate towards      the cist  etc.,  due  on  this  land  and  the  amounts      borrowed from you by 657      me in  instalments subsequent thereto-all those amounts      are found  to be Rs. 200 and I have found due to you in      this sum.  The amount  borrowed now for paying the cist      to the  Estate and for my own maintenance is Rs. 50. In      all, Rs. 250 (in words two hundred and fifty rupees). I      shall pay interest at the rate of Rs. 0-4-0 (four anna)      per cent  per mensum  and shall discharge the principal      and interest.  For this,  the produce  of all  kinds of      crops raised  on the half share of the lands previously      being cultivated  by you  as my sub-tenant on condition      of paying  1/4 (?)  share out  of the Jarayathi dry and      wet lands bearing No. 1 and know as "Tummulamanu Polam"      which passed  to me as my self-acquired property, which      has been  in my possession and enjoyment till this day,      which is  situate  in  Tummalavalasa  village  and  the      boundaries etc.  of which are given hereunder, shall be      utilised for  paying interest  due on this deed and the      interest due  on the  deed executed  previously on 30th      August, 1939  and get  registered in  the office of the      Sub Registrar  of Parvatipuram  as No.  1148/39 and for      paying the  cist due  to the  Govt. on  my  behalf  and      obtaining receipt  in my  name.  The  remaining  amount      shall be  paid to  me by 15th January of every year and      the receipt  obtained from me. When the above mentioned

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    principal and interest are paid to you in full, payment      shall be  endorsed on  this deed and this deed shall be      returned  and   the  land  mentioned  herein  shall  be      delivered possession of to me."      Three or  four things  become amply  clear  on  a  fair reading of  the aforesaid  document (1) that though the deed commences by  reciting that  possession of the land has been delivered thereunder it refers to the fact that the original mortgage (Ist  defendant) was actually cultivating the lands as a tenant of the mortgagor on crop share basis; that is to say the  rental was  payable by the tenant in the shape of a crop share;  (2)  that  the  mortgagor  had  agreed  to  pay interest at  the specified rate on the total loan of Rs. 250 and had  undertaken to discharge the principal and interest; (3) that the rental of the land payable by the Ist defendant was to  be adjusted  against the  interest  payable  by  the mortgagor under  this deed  as well  as the earlier deed and the cist  payable by  him to  the Government; and excess, if any, to  be paid  to mortgagor;  (4) that when the principal and interest  are  fully  repaid  such  payment  was  to  be endorsed on this deed and the deed as also the land shall be "delivered to the 658 possession of  mortgagor". 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.      In the  result, we are of the view that the only effect of the execution of usufructuary mortgage deeds in this case was that  the lessee’s rights were kept in abeyance and they revived upon the redemption of mortgage. We therefore, allow the appeal,  set aside  the impugned  judgments of  the High Court  and  restore  the  direction  given  by  the  learned Additional District  Judge  that  the  respondents  are  not entitled to  delivery of  physical  possession.  Respondents will pay the cost of the appeal to the appellants. S.R. Appeal allowed. 659