Kuttyal And Others v. P. Sanjiva Rao .

1. This civil miscellaneous second appeal raises an interesting question of law bearing on the provisions of Or. 34 R. 14 of the CPC. The following are the circumstances giving rise to this question. The appellants executed a usufructuary mortgage in favour of one Kodotha Ambu Nair on 7-9-1916 to secure a sum of Rs. 12500. This mortgage amount was made up of Rs. 8000 due in respect of an earlier mortgage in favour of the same mortgagee, Rs. 2000 being the sum in respect of a mortgage deed executed in favour of the mortgagee's elder brother, Rs. 1874 being the arrears of rent due under a lease back in respect of the earlier mortgage and the balance being the cash paid to the mortgagor for his necessities. The period of redemption fixed in the mortgage was 20 years. It was also mentioned therein that in respect of this property the mortgagor had executed a ‘geni chit’ (a lease back) in favour of the mortgagee. But the ‘geni chit’ was actually executed only on the next day and this was for a period of one year. The rent stipulated under the ‘geni chit’ was 772½ ‘paras’ of paddy per year besides paying to the Government the assessment Rs. 168-10-0. The arrears of rent were charged on the property mortgaged. The mortgagor lessee did not pay the rent regularly & allowed it to fall into arrears with the consequence that the mortgagee filed a suit for the recovery of the arrears of rent and obtained a decree for Rs. 2455 inclusive of costs. As this decree was not satisfied, execution of it was sought and the properties, which were the subject matter of the mortgage and the lease, were attached. On notice the judgment debtors raised an objection to the attachment of their properties based on Or. 34 rule 14 of the CPC.

2. The trial court overruled the objection holding that the provisions of Or. 34 rule 14 of the CPC had no application and allowed the execution to proceed. The two grounds, on which he came to this conclusion, were that the mortgage and the lease back were not simultaneous and that both the documents did not cover the same period. The appeal filed by the judgment debtors to the District Judge did not prove successful as the appellate Judge agreed with the opinion of the trial court as regards the applicability of Or. 34 rule 14 to the present case. The judgment debtors who were aggrieved by this decision have preferred the second appeal.

3. In support of this appeal, Mr. Nambiar contended that the view of the courts below that the circumstances that both the documents were not executed on the same date and that the periods fixed in both the documents are not coextensive show that the mortgage and the lease back did not form part and parcel of the same transaction, is erroneous and that neither of these circumstances is an indication that they are two separate and severable transactions. I think I must give effect to this contention. That in order to treat both the documents as one transaction it is not necessary either that both the mortgage and the lease back should have been embodied in one document or that they should have been executed on one and the same date, is clear from a number of rulings. I do not think that proposition can admit of any controversy. One essential condition is that at the time of the execution of the mortgage the lease back should have been in contemplation.

4. With regard to the other consideration namely that the two documents are for varying periods of operation Mr. Nambiar urged that it cannot determine the question whether in substance and in reality they formed one transaction. In support of this contention reliance is placed on the observations of a Bench of Patna High Court in — ‘Umeshwar Prasad Singha v. Dwarika Prasad*’, AIR 1944 Pat 5 where the learned Judges observed that,

“such a transaction may be evidenced by more than one document which may have been executed on different dates with varying periods of their operation and possibly, even in the name of different parties, benami for the real mortgagor and mortgagee.”

5. These observations are based upon a decision of the Judicial Committee of the Privy Council in — ‘Panaganti Ramarayaningar v. Maharaja of Venkatagiri’, 50 Mad 180 (P.C). There a mortgage with possession was executed in favour of the predecessor-in-interest of the first defendant by the predecessor-in-interest of the plaintiff to secure a sum of Rs. 11 lakhs; that contained a personal covenant to pay principal and interest. By a separate document of the same date mortgagee leased back a portion of the mortgaged properties to the mortgagor and the arrears of rent were made a charge on the properties included in the mortgage. As the mortgagor-lessee did not pay any of the instalments of rent payable under the lease, the lessor filed a suit and obtained a decree for the arrears of rent. The question arose whether the mortgagor could redeem the mortgage without paying the arrears of rent most of which matured into a decree.

6. In dealing with this question, their Lordships considered the point whether the two deeds namely the mortgage deed and the lease deed should be treated as forming parts of one transaction and held that the contention of the mortgagee that the mortgage & the lease should be read together as they formed parts of one transaction & that the lease was merely a device for realizing interest should prevail. Although the question did not directly arise and was one coming under Sections 61 and 62 of the Transfer of Property Act, the decision has a bearing on the question arising under Or. 34 rule 14 of the CPC because there the point was considered whether the two documents formed the component parts of the same transaction.

7. No doubt their Lordships did not state that the fact that the two documents have varying periods in their operation did not make a difference in determining the question whether they formed part of the same transaction or not. But in view of the fact that though the two documents did not cover the same period yet their Lordships held that they should be treated as one transaction and were meant as a machinery for realizing the collection of rent, the Division Bench of the Patna High Court thought that this ruling is an authority for the proposition that the mere fact that the periods fixed in both the documents are not co-extensive does not indicate that they do not form part of one and the same transaction. I may also observe that these observations in — ‘Umeshwar Prasad Singha v. Dwarika Prasad*’, AIR 1944 Pat 5 quoted above are obiter as in that case both the documents covered the same period. However they are entitled to much weight as the question was dealt with at some length.

8. Mr. Nambiar next maintained that the fact that both the documents were executed almost simultaneously is a sure indication that they were treated not as two separate and severable transactions but as one and the same transaction; and in this context he relies upon the two decisions of the Bombay High Court in — ‘Ibrahim v. Nihalchand’, 44 Bom 366 and — ‘Bhaichand Kirparam v. Ranchhoddas Mancharam’, 45 Bom 174. In — ‘Ibrahim v. Nihalchand’, 44 Bom 366 after citing the following passage of Mr. Justice Piggott in — ‘Kadma Pasin v. Muhammad Ali’, 41 All 399.

“In the case now before us the money for which this decree was obtained represented the usufruct of the mortgaged property to which the mortgagee was entitled as part of his contract of mortgage. His right to receive this money rested upon his position as mortgagee. The mortgagor had become liable to pay the mortgagee this money in consequence of an agreement entered into between the parties subsequent to the mortgage; but it seems to me, in the first place, that the money for which the decree was passed was an essential part of the mortgage money, just as much as arrears of interest, which, if falling due on a contract of simple mortgage, become part of the mortgage money; in the second place it seems to me that it would be doing violence to the plain language of the rule to say that the claim in satisfaction of which this decree was passed was not a claim arising under the original contract of mortgage.”

9. The learned Judges stated that the remarks extracted above applied with greater force to the case before them as the lease back was executed on the same date as the mortgage.

10. This was followed by another Division Bench of the Bombay High Court in — ‘Bhaichand Kirparam v. Ranchhoddas Mancharam’, 45 Bom 174.

11. The same view as in—‘Kadma Pasin v. Muhammad Ali’, 41 All 399 was taken by Harries, J. in — ‘Piyare Lal v. Hasan Ahmed’, AIR 1936 All 708.

12. In addition to the fact that the two documents were simultaneous the other circumstances on which reliance was placed by Mr. Nambiar in support of the contention that the mortgage and lease back are not two distinct transactions and that they should be read as one, are that on an earlier occasion also when the mortgage was created in favour of the same mortgagee the same device was adopted namely creating a mortgage with possession and leasing back the same property to the mortgagor and that secondly for the arrears of rent, a charge was created on the property mortgaged. In my opinion, these two circumstances also furnish an indication as to the nature of the two transactions.

13. Mr. Vittal Rao on behalf of the respondent urged first that a decree for rent cannot be a claim arising under the mortgage within the mischief of Or. 34 rule 14 of the CPC and in support of that proposition cited to me a decision in — ‘Uttam Chandra Daw v. Rajkrishna Dalal’, 47 Cal. 377 (P.B). No doubt this case to some extent lends support to the contention of Mr. Vittal Rao. But I do not think that this proposition can be considered to be sound after the pronouncement of the Privy Council in — ‘Panaganti Ramarayaningar v. Maharaja of Venkatagiri’, 50 Mad 180 (P.C). Apart from this, a Division Bench of Calcutta High Court in — ‘Mahomed Yakub Miah Majumdar v. Namar Ali*’, 55 Cal 104 took the view that a decree for arrears of rent arising under a lease back in favour of the mortgagor by the mortgagee with possession was held to be a claim arising under Or. 34 rule 14 of the CPC which could be only on the basis that the ruling in — ‘Uttamchandra Daw v. Rajkrishna Dalal’, 47 Cal 377 (P.B) can no longer hold good. Further the view of the Allahabad and Bombay High Courts also is that such a claim would be a claim arising under the mortgage within the meaning of Or. 34 rule 14.

14. Coming to our court both in — ‘Lakshmi kutti Ammal v. Mariathummal’, 47 Mad L.J 798 and — ‘Chinnapayan v. Narayana Pattar’, 1940-1-Mad L.J 143 it was held that a decree for rent under circumstances mentioned above is a claim arising under a mortgage so as to attract the provisions of Or. 34 R. 14 of the CPC. On these rulings the point sought to be made by Mr. Vittal Rao has no force and has to be rejected. As already pointed out by me, the circumstances that the lease back was executed a day after the execution of the mortgage does not make any difference in the consideration of the question whether they formed part of the same transaction or not. Furthermore in this case it is clear from the recitals in the mortgage deed that the lease back was in contemplation of the parties at the time when the mortgage was executed.

15. Another point urged by Mr. Vittal Rao in opposition to the appeal is that the fact that the two documents do not cover the same period should be held to be decisive against the contention of the appellants that they form part of the same transaction & in support of it he relied upon the two decisions of our court in —‘Lakshmikutti Ammal v. Mariathummal’ 47 Mad L.J 798 and —‘Chinnapayan v. Narayana Pattar’, 1940-1-Mad L.J 143. In — ‘Lakshmikutti Ammal v. Mariathummal, 47 Mad L.J 798 although the period both for redemption of the mortgage and for the lease was coextensive, the learned Judge who decided that case did not rely on this as a circumstance in coming to the conclusion that the transaction is governed by the provisions of Or. 34 rule 14. He thought that the fact that the two documents could be read as one was sufficient to come to that conclusion. In — ‘Chinnapayan v. Narayana Pattar’, 1940-1-Mad L.J 143 all that Wadsworth, J. observed is that the fact that the lease is expressed as ending on the same date as the date on which the right of redemption begins-is a clear indication that both the deeds form part of one and the same transaction. It is not stated therein that this is a crucial test. Therefore in my opinion neither of the two decisions affords any assistance to the respondent.

16. Reliance was also placed by Mr. Vittal Rao on the observations in—‘Khuda Baksh v. Alimunnissa’, 27 All 313. There the learned Judges were dealing with the applicability of Sections 61 and 62 of the Transfer of Property Act to the case before them. In considering whether the lease could be regarded as part of the mortgage transaction or not, Banerji, J. one of the members of the Bench remarked thus:

“The two documents were not registered at one and the same time, as they would have been had they formed one transaction. What is more important is that two documents do not cover the same period.”

17. It is seen that the learned Judge thought that the fact that both the documents did not cover the same period is one of the important considerations although he did not treat it as the sole consideration. I think too much stress cannot be laid on this.

18. In my opinion it should be one of the several circumstances that should be borne in mind in deciding the question whether the lease back is a part of the mortgage transaction or not, especially in view of the observations in— ‘Umeshwar Prasad Singha v. Dwarika Prasad*’. AIR 1944 Pat 5 and the Judicial Committee in — ‘Panaganti Ramarayaningar v. Maharaja of Venkatagiri’. 50 Mad 180 (P.C). There can be no single crucial test in determining whether the mortgage and the lease back form part and parcel of the same transaction; nor can any hard and fast rule be laid down for this purpose. My view is the circumstance that at the time of the execution of the mortgage the parties had in contemplation the leasing back of the properties to the mortgagor plays an important part in the decision of the question whether the two documents are parts of the same transaction.

19. Now reading the two documents together and bearing in mind the facts that they are simultaneous, that on an earlier occasion there was a mortgage with possession by the same mortgagor in favour of the same mortgagee and a lease back in favour of the mortgagor and the arrears of rent in respect of that lease formed part of the consideration for the present mortgage, that the properties which are the subject-matter of the mortgage and the lease back are identical and lastly that a charge was created for arrears of rent under the lease back on the properties which are the subject-matter of the mortgage and the lease back, I arrive at the conclusion that the decree for rent in this case is a claim arising under the mortgage and that O. 34 R. 14 of the CPC is a bar to bringing the mortgaged properties to sale.

20. Under O. 34 R. 14 a mortgagee cannot bring the properties to sale in enforcement of a claim arising under a mortgage except by instituting a suit for sale in enforcement of the mortgage. The provision was enacted by the Legislature for the benefit of the mortgagor so that the mortgagee may not purchase the equity of redemption in enforcement of a money decree which he may obtain against the I mortgagor, in respect of a claim arising under; the mortgage. The intention of the Legislature seems to be that all claims arising under the mortgage should be adjudicated by the court either at the time of the redemption of the mortgage or when the mortgagee brings a suit on his mortgage. In this view, I must hold that the decision of the courts below cannot be sustained and should be set aside and that the objection of the judgment-debtors would prevail. In the result, the second appeal is allowed but in the circumstances of the case I direct the parties to bear their costs throughout. No leave.

A/V.R.B

21. Appeal allowed.