Krishnamoorthy, J.:— This half-a-century old litigation has a chequered career, and the members of a tarwad are kept out of possession of the property which was mortgaged by their Karnavan to his children for an amount of Rs. 50/-.
2. Defendants 1 and 2 are the appellants. They are entitled to 15/30 and 6/30 shares in the plaint schedule property which consists of two items of properties, item No. 1 being a nilam having an extent of 1-03 acres and item No. 2 a paramba having an extent of 1.34 acres. In a karar in the tarwad evidenced by Ext. A dated 27-6-1091 M.E these two items of properties were set apart to the karnavan Govindan Nair for his enjoyment for life. It was provided in the document that for the medical expenses during his lifetime, he is entitled to raise an amount up to Rs. 50/- either by a possessory mortgage or by a simple mortgage, if the other members do not contribute towards the same. Thereafter the tarwad was partitioned into four branches on 20-7-1095 M.W Under Ext. B possessory mortgage dated 24-8-1101 the karnavan Govindan Nair executed a mortgage in favour of his children for Rs. 50/-. The total rent of the properties was fixed at 30 paras of paddy and Rs. 2/-, out of which 8 paras of paddy and Re. 1/- was to be appropriated towards interest; and the residual rent payable by the mortgagee was 22 paras of paddy and Re. 1/- per annum. Thereafter by an assignment dated 19-12-1119 M.E the 1st defendant obtained the rights of defendants 2 to 21 and he filed a suit O.S No. 85 of 1120 ME before the Irinjalakuda Munsiff's Court for redemption of the mortgage. A decree for redemption was passed on 28-1-1122 ME. That decree was ultimately confirmed by this Court in S.A No. 6 of 1124 and it was held that the plaintiff is entitled to past profits of 22 paras of paddy plus Re. 1/- from 30-7-1112 M.E till the date of suit in 1120 M.E and after the deposit of the mortgage money and the value of improvements, the profits were fixed at 72 paras plus Rs. 40/-. At that juncture the 1st respondent herein the 1st plaintiff got an assignment of the rights of plaintiffs 2 to 7 in the properties and he filed the suit for partition by metes and bounds claiming 16/30 shares for all the plaintiffs together including himself. In the meantime, the 1st plaintiff became the absolute owner of the entire mortgage right as well. The 1st defendant herein also claimed share in the property by virtue of his purchase of the rights of some of the members. On 27-8-1955 a preliminary decree was passed in this suit by which the 1st plaintiff was declared entitled to 9/30 shares, 1st defendant to 15/30 shares and the thavazhi of the 18th defendant to 6/30 shares. It was further provided that the accounting between the parties in regard to the mortgage, 1 profits etc. will be worked out in the decree for redemption in O.S No. 85 of 1120. In the meanwhile, the execution petition filed in O.S 85 of 1120 was held to be barred by limitation and ultimately that finding was confirmed by this Court on 6-2-1962 in S.A No. 125 of 1958. In the light of the above finding, the application for passing a final decree M.P 777/1961 was dismissed by the trial court against which the 1st appellant filed C.R.P No. 914 of 1962 before this Court. By order dated 6-3-1964 this Court held that the rights of parties can be worked out in this suit itself by passing a second preliminary decree. This Court adopted that course in order to avoid multiplicity of suits. Accordingly the dismissal of the final decree application was set aside and the lower court was directed to pass a second preliminary decree as indicated in the order. Thereafter, the matter came up before the trial court and on 21-9-1964 an agreed preliminary decree was passed which provided:
“(1) The partible item will be divided by metes and bounds and the 1st plaintiff will be allotted 9/30 shares, the 1st defendant 15/30 shares and the thavazhi of the 18th defendant 6/30 shares.
(2) Since the mortgage right has become vested in the 1st plaintiff, the portion where the improvements effected by the mortgagee are in a maximum, will, as far as possible, be allotted to the 1st plaintiff. If any improvement effected by the mortgagee is found in the properties allotted to the 1st defendant and the sakha of the 18th defendant, that will be valued and appropriate directions will be given for its payment in the final decree.
(3) The value of improvements, mesne profits, purappad and all other items of accounting between the sharers, co-sharers and as mortgagor and mortgagee, will be settled at the time of the final decree.
(4) Any of the sharers may move this Court for the issue of a commission to effect the division in the manner indicated above.
(5) All other questions, if any, remaining for adjudication, will be considered at the time of the final decree.”
Thereafter, on 31-3-1965, I.A No. 101 of 1965 was filed by the 1st defendant to pass a final decree in terms of the supplementary preliminary decree dated 21-9-1964. On 15-7-1965 an objection was filed by the plaintiff wherein there was no objection for partitioning the properties. A commission was sent from the court to divide the properties and accordingly the commissioner has submitted his report and accounts. While the matter was thus pending, the 1st plaintiff filed I.A 161/1970 claiming that he is a deemed tenant under S. 5 of the Kerala Land Reforms Act and praying that a final decree be passed reserving the tenancy right in his favour. The 1st defendant in the suit filed an objection contending that the 1st plaintiff has become a part-owner of the properties as well, that the mortgage was not subsisting on the date of commencement of Act I of 1964 and that a consent decree was passed after 1-4-1964 agreeing for a partition by metes and bounds and accordingly the 1st plaintiff is not entitled to the benefits under S. 5 of the Kerala Land Reforms Act. By order dated 28th August, 1970, the trial court held that the mortgage in question comes within the ambit of S. 5 of Act I of 1964 as amended by Act 35 of 1969 and accordingly the equity of redemption alone can be divided in the final decree proceedings as the 1st plaintiff is having fixity of tenure on the basis that he is a deemed tenant. It was further directed that a final decree will be passed in accordance with this order. Accordingly on 21st August, 1976 a final decree was passed in terms thereof. The appellants filed this appeal challenging the final decree passed in the case including the question as to whether the 1st plaintiff is entitled to the benefit of S. 5 of Act I of 1964. By judgment dated 24th October, 1984 a learned single Judge of this Court dismissed the appeal against which the appellants filed A.F.A No. 1 of 1985. The Division Bench by judgment dated 28th May, 1991 set aside the judgment of the learned single Judge and remanded the matter to the single Bench for considering the two questions mentioned in the judgment. When it came before a learned single Judge after remand, it was felt that important questions are arising for decision in the case and the learned single Judge referred the matter to a Division Bench and it was accordingly heard by us.
3. Counsel for the appellants contended that the view taken by the court below that the 1st plaintiff is entitled to fixity of tenure being a deemed tenant under S. 5 of the Kerala Land Reforms Act is erroneous. He further contended that in order to attract S. 5 of the Kerala Land Reforms Act a person must be in possession of a property as a mortgagee as on 1-4-1964 on which date the Act came into force and in the facts and circumstances of the case the 1st plaintiff was not a mortgagee in possession as on that date. In support of his contention he raised the following four points for consideration:—
1)The 1st plaintiff who represented the entirety of the mortgage right became part-owner of the equity of redemption to the extent of 9/30 shares and thereupon the mortgage became disintegrated and the provision contained in S. 5 cannot apply to such truncated mortgages.
2) As on 1-4-1964 the mortgage debt due to the mortgagee had become extinguished by mutual adjustment of the purappad payable by the mortgagee towards the mortgage money and his possession as on 1-4-1964 was not that of a mortgagee.
3) A preliminary decree was passed in the case on 21-9-1964 by consent of parties and the 1st plaintiff having agreed to pass such a consent decree after 1-4-1964 is barred from raising the contention that he is entitled to the benefits of S. 5 of the Kerala Land Reforms Act at a later stage of the same suit.
4) The mortgage which is to be deemed as a lease being by a person with limited interest, it is exempted from Chapter II of the Kerala Land Reforms Act by S. 3(1)(vi).
We shall consider these points one by one.
4. Point No. 1:— Admittedly as could be seen from the preliminary decree passed in the case on 21-9-1964 the entire mortgage right has become vested in the 1st plaintiff. That he is entitled to 9/30 shares in the equity of redemption is also declared by the preliminary decree. Thus, here is a case where the mortgagee has acquired a portion of the equity of redemption. The question to be considered is as to whether in such circumstances S. 5 of the Kerala Land Reforms Act will be applicable or not. S. 5 of the Kerala Land Reforms Act as amended by Act 35 of 1969 is to the following effect:—
“5. Certain mortgagees with possession to be deemed tenants.—(1) Notwithstanding anything to the contrary contained in any law or in any contract, custom or usage, or in any judgment, decree or order of court, a mortgagee with possession of immocable property situate in Cochin shall be deemed to be a tenant, if—
(a) the property comprised in the mortgage consists of agricultural land other than land planted with rubber, coffee, tea or cashew; and
(b) the interest on the mortgage amount is less than forty per cent of the total rent fixed in the mortgage document.”
From a reading of the above Section it is clear that in order to get the benefit of that Section, the person must be in possession as a mortgagee. It was contended by counsel for the appellants that the 1st plaintiff-mortgagee having acquired 9/30 shares in the equity of redemption as well, the mortgage is disintegrated and to such a truncated mortgage the provisions of S. 5 cannot apply. In this connection he also relied on a decision of the Travancore-Cochin High Court reported in Kunjan Pillai v. Ouseph 1952 Ker LT 207 : (AIR 1952 Trav Co. 292) wherein it was held that if the person occupies the position of both creditor and debtor, there will be a fusion of both and the debt will become extinguished. There cannot be any dispute to that proposition. But the question to be considered is as to whether when a mortgagee acquires a portion of the equity of redemption, there is a complete extinguishment of the mortgage or not. We think it is not so. There can be only a pro tanto extinguishment of the mortgage right to the extent of the mortgagee acquiring the mortgagor's interest and so far as the other sharer of the equity of redemption is concerned, the mortgage will subsist. In other words, in this case the 1st plaintiff being a mortgagee as also a part-owner of the equity of redemption to the extent of 9/30 shares, the mortgage shall be deemed to have been extinguished to that extent and regarding the balance 21/30 shares the mortgage will subsist. The 1st paragraph of S. 60 of the Transfer of Property Act which allows partial redemption is also indicative of this fact. The last paragraph of S. 60 provides for the only contingency in which a partial redemption of a mortgage can be effected. That paragraph provides that a person interested in a share only of the mortgaged property will be entitled to redeem his share alone in cases where the mortgagee or if there are more mortgagees than one, all such mortgagees has or have acquited in whole or in part the share of a mortgagor. In other words, it is provided that when the mortgagee acquires a right in part of the equity of redemption of the mortgaged property, the other sharers of the equity of redemption will be entitled to redeem their part alone. This provision also indicates that by the mortgagee acquiring a portion of the equity of redemption there is no extinguishment of the mortgage right in full but theft will only be a pro tanto extinguishment of the mortgage to the extent of the mortgagee acquiring the share of the mortgagor. If that be so, the mortgage subsists so far as the other sharers are concerned and it cannot be said that the mortgage has come to an end. In that view of the matter, we are not inclined to accept the contention of counsel for the appellants and point No. 1 is found against the appellants.
5. Point No. 2:— It is contended by counsel for the appellants that in order to attract S. 5 of the Kerala Land Reforms Act it is necessary that the person claiming the benefit must be in possession of the property as a mortgagee as on 1-4-1964. It is further contended by him that under Ext. B possessory mortgage dated 24-1-1101 the mortgage money was Rs. 50/- and the total rent of the properties was fixed at 30 paras of paddy and Re. 2/-, out of which 8 paras of paddy and Re. 1/- was to be appropriated towards interest and the residual rent payable by the mortgagee to the mortgagor was 22 paras of paddy and Re. 1/- per annum. There cannot be any dispute on this fact as in the previous proceedings it has been held so and a reading of the document also makes it clear. It is contended by counsel for the appellants that the residual rent payable by the mortgagee is in arrears for a long number of years and that by setting off the same towards the mortgage money the mortgage debt became automatically discharged long before 1-4-1964 and thereafter the possession of the 1st plaintiff is not at any rate as a mortgagee.
6. We have already quoted S. 5 of the Kerala Land Reforms Act while considering point No. 1. From a reading of the above Section it is clear that only a mortgagee with possession of immovable property situate in Cochin shall be deemed to be a tenant if the other conditions mentioned in the section are satisfied. On a reading of the Section it is absolutely clear that in order to claim the benefit of the Section the person claiming the benefit must be in possession of the property as a mortgagee as on 1-4-1964 when that Section came into effect. It is well-settled that when the mortgage money is paid by the mortgagor to the mortgagee, there is no debt due to the mortgagee and the mortgage comes to an end. In Prithi Nath v. Suraj Ahir, AIR 1963 SC 1041 it was held (at p. 1042 of AIR):—
“when the mortgage money is paid by the mortgagor to the mortgagee, there does not remain any debt due from the mortgagor to the mortgagee, and therefore, the mortgage can no longer continue after the mortgage, money has been paid. Further, the definition of usufructuary mortgage itself leads to the conclusion that the authority given to the mortgagee to remain in possession of the mortgaged property ceases when the mortgage money has been paid up.”
This decision was followed by their Lordships of the Supreme Court in a recent decision reported in Parameshwaran Govindan v. Krishnan Bhaskaran (1992) 1 Ker 577 : (AIR 1992 SC 1135). In that case the question involved was as to whether a mortgagee who is continuing in possession by virtue of the provisions contained in the compensation for Tenants Improvements Act, 1958 is entitled to claim the benefits of S. 4A of the Kerala Land Reforms Act. S. 4A provides, among other things, that a mortgagee in possession of the property for more than 50 years as on 1-1-1970 shall be deemed to be a tenant. In that case the mortgage money together with the value of improvements as decreed by the court was deposited on 21-6-1961. Thereafter, in 1975 on a revaluation of the improvements, the court held that the mortgagee is entitled to an additional amount of Rs. 4149.66 as value of improvements. The question that was considered was as to whether the mortgage will come to, an end by the deposit of the mortgage money or whether the mortgagor has to deposit the value of improvements as well. After elaborately considering the matter the Supreme Court held that the mortgage will come to an end on the deposit or payment of the mortgage money. It was further held that a mortgagee entitled to be paid compensation under S. 5(3) of the Tenants Improvements Act will not continue as a statutory mortgagee until actual eviction and that such mortgagees are not entitled to claim benefits under S. 4A of the Kerala Land Reforms Act. From the above decision it is clear that if the mortgage money had been paid to the mortgagee, the mortgage comes to an end and the fact that he continues in possession by virtue of the provisions of the Compensation for Tenants Improvements Act will not confer on him the status of a deemed tenant. The wording of S. 5 is similar to that of S. 4A of the Kerala Land Reforms Act and only a person who is in possession as a mortgagee as on 1-4-1964 will be entitled to claim protection under the above Section as a deemed tenant.
7. The further question to be decided is as to whether actual payment of the mortgage money is necessary for extinguishing the mortgage or whether the mortgage debt can be extinguished by adjustment of the residual rent due to the mortgagor from the mortgagee. The identical question came up for consideration before a Division Bench of this Court in the decision reported in Karthiyayani Amma…* v. Karthiyayani & Others… ILR (1970) 1 Ker 10 : (AIR 1970 Kerala 289). In that case some of the co-mortgagors filed a suit for redemption of the mortgage. Under the mortgage certain amount was payable as michavaram (residual rent) to the mortgagors. In the suit it was alleged that the mortgagee had not paid any amount towards michavaram at any time after execution of the mortgage and after setting off the michavaram against the mortgage money, not only no amount was due to the mortgagee but arrears of michavaram was due to the mortgagors. Consequently some of the co-mortgagors prayed for a decree for redemption and for the balance michavaram. By the decree in the suit the arrears of michavaram was set off against the mortgage amount and the plaintiffs were allowed to recover he property as also 240 fanams as the balance of michavaram due to them. In execution of the decree in that case the plaintiffs therein obtained delivery of possession of the mortgaged property. The suits which are the subject-matter of the reported decision were thereafter filed by the non-redeeming co-mortgagors for partition and recovery of their share of the property in the mortgaged properties. The main question that was raised was one of limitation and the question that arose for consideration was as to whether the earlier suit was one for redemption or only for recovery of possession and consequently whether Art. 136 of the Travancore Limitation Act corresponding to Art. 148 of the Indian Limitation Act, 1908 would apply or not one of the learned Judges of the Division Bench, Narayana Pillai J., came to the conclusion that even in such circumstances the possession of the redeeming co-mortgagor as against the non-redeeming co-mortgagors in respect of their shares in the property is only as mortgagee under the original mortgage. But the other learned Judge, Isaac J. held:—
“If discharge of the mortgage debt is disputed, whether it was effected by payment in cash or kind or by set off of amounts due to the mortgagor, adjudication by court becomes necessary. In the case of discharge of mortgage debt by payment, the mortgage becomes extinguished, when the payment is made; and in the case of discharge by set off, When the set off is made. It makes no difference whether the payment or set off, as the case may be, is disputed or not, except that in the event of a dispute, it becomes settled only by adjudication.”
8. As the two learned Judges differed in their conclusion, the matter was referred to a third Judge, Eradi J. Mainly following a Division Bench decision of the Madras High Court in Seshayya v. Lekshminarasimha Rao, AIR 1930 Madras 160 Eradi J. held that the mortgage debt would become discharged by adjusting the arrears of michavaram towards the mortgage amount due. It was further held that it is not always necessary that mortgage money shall be paid or deposited. But when there are reciprocal obligations on the mortgagor and the mortgagee and if any amount is payable by the mortgagee to the mortgagor that can certainly be set off against the mortgage money and if by that process the mortgage debt is wiped off, the mortgage comes to an end. It is thus clear that when the mortgagee has obtained payment of his debt the security is done with and the mortgage comes to an end. In the light of the above proposition it has to be held that if the arrears of michavaram due to the mortgagor in this case was sufficient to discharge the mortgage debt, the mortgage will come to an end and thereafter the possession of the 1st plaintiff would be not as a mortgagee to whom no part of the mortgage debt was still due.
9. We shall now consider the question as to whether the mortgage debt was wiped off by adjustment of the arrears of michavaram due. Admittedly, under the mortgage deed, 22 paras of paddy and Re. 1/- was payable as michavaram. The proportionate amount of michavaram is payable by the 1st plaintiff as well. In the first application for passing a final decree, M.P 777 of 1961 filed by the 1st defendant, a statement of account was also attached and after adjusting the michavaram the balance amount due to the mortgagor was stated to be Rs. 459 and 9 annas and six paise. Though a detailed objection was filed by the 1st plaintiff, the statement attached to the above application was as such not disputed. It was only contended that the redemption decree having become barred, the 1st defendant is not entitled to recover any amount. From the above it is clear that even before 1961 the mortgage debt had been completely wiped off by adjustment of the arrears of michavaram due. Along with I.A No. 101 of 1965, the present application for passing a final decree, a statement has been filed by the 1st defendant which also would indicate that the mortgage debt had been wiped off by adjustment of arrears of michavaram prior to 1964. Counsel for the 1st respondent was not in a position to make out that the statement attached to the final decree application in 1965 is in any way wrong. It is thus clear that the mortgage debt had already been wiped off long before 1-4-1964 and accordingly the mortgage had come to an end. We have already held that in order to attract the provisions contained in S. 5 of the Kerala Land Reforms Act it is necessary that the person claiming the benefit must be a mortgagee as on 1-4-1964. From what is stated above, it is absolutely clear that the mortgage debt due to the 1st plaintiff (in whom the mortgage right has completely vested now) is completely discharged and the mortgage has come to an end long before 1-4-1964. Accordingly his possession as on 1-4-1964 is not as a mortgagee and he is not entitled to claim any benefit under S. 5 of the Kerala Land Reforms Act, Act I of 1964. Point No. 2 is accordingly found in favour of the appellants.
10. Point No. 3:— The question to be decided is as to whether the claim of the 1st plaintiff that he is entitled to the benefit of S. 5 of the Kerala Land Reforms Act is barred by his agreeing to pass a preliminary decree for partition of the properties by metes and bounds. It is evident that the second preliminary decree was passed on 21-9-1964 on consent of parties for partitioning the properties by metes and bounds. S. 5 of the Kerala Land Reforms Act came into force on 1-4-1964 and it was only thereafter that the preliminary decree was passed. The 1st plaintiff never raised a defence on the basis of S. 5 of the Act which he could have evidently made at the time when the second preliminary decree was passed. It is no doubt true that S. 5 was amended by Act 35 of 1969 which came into force on 1-1-1970. By that amendment, only sub-sec. (2) of S. 5 was omitted which only dealt with as to how the mortgage money has to be apportioned in such cases. The substantive provision contained in sub-sec. (1) remained the same even after the amendment. The above provision was available even on 21-9-1964 when the second preliminary decree was passed by the court. Moreover, S. 4(1)(b) of Proclamation 6 of 1124 Cochin also contained a similar provision to that of S. 5. The failure of the 1st plaintiff to claim the benefit under the Cochin Proclamation or under S. 5 of the Kerala Land Reforms Act before the second preliminary decreed was passed is fatal and he is precluded from raising the very same contention in the proceeding for passing a final decree. He having failed to raise a defence which was available to him at the time of passing of the preliminary decree, is precluded by the principles of constructive res judicata from raising the same defence in the final decree proceedings. We are supported in this view by the decision of this Court in Madhavan v. Bhavani 1980 Ker LT 315 and in 1976 Ker LT (Sh. Notes) 66. Accordingly we hold that the 1st plaintiff is precluded from raising a defence under S. 5 of the Kerala Land Reforms Act by the principles of constructive res judicata and we answer point No. 3 also in favour of the appellants.
11. Point No. 4:— It was contended by counsel for the appellants that the mortgage in question which the 1st plaintiff wants to be treated as a deemed tenancy is one created by a person with a limited interest and accordingly it is exempted from the provisions of Chapter II of the Kerala Land Reforms Act in view of the provisions contained in S. 3(1)(vi) of the Kerala Land Reforms Act. It was contended by counsel for the 1st respondent that the above exemption will not apply to deemed tenancies and relied on the decisions of this Court reported in Rajeevi R. Hegde v. Thyampanna Shetty 1984 Ker LT 536 : (AIR 1984 Kerala 222), Travancore Devaswom Board v. Krishnan 1980 Ker LT 787 and Veerankutty v. Sankaran (1990) 1 Ker LT 47. It was further contended by him that even assuming that the mortgagor had only a limited interest over the property, he had full authority to execute the mortgage. Nobody has challenged the mortgage as not effective after the death of the limited owner and in such circumstances also the exemption contained in S. 3(1)(vi) will not be applicable. But as we have already found points Nos. 2 and 3 in favour of the appellants, it is not necessary for us to express a final opinion on this question and accordingly we leave open the question.
12. In view of what is stated above, the final decree passed by the lower court and the order of the lower court in I.A No. 161 of 1970, dated 28-8-1970, are liable to be set aside.
13. In the result, we allow the appeal, set aside the final decree passed by the lower court as also the order dated 28-8-1970 in I.A No. 161 of 1970, and dismiss I.A No. 161 of 1970. The case is remitted to the lower court for passing a final decree in accordance with the second preliminary decree dated 21-9-1964. The parties will appear before the lower court on 15-11-1993. The case being an old one, the trial court will give an expeditious disposal to the final decree application, if necessary by having a day-to-day trial and shall pass a final decree as far as possible before the end of January, 1994. The appellants will be entitled to realise their costs from the 1st respondent in this appeal.
Appeal allowed.