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Polammarasetti Varana Venka Satyanarayana v. Suddha Apparao Naidu (Dead) And Others
Factual and Procedural Background
The plaintiff, Bheemarasetti Adinarayana Naidu, filed OS No. 55 of 1967 (later renumbered OS No. 260 of 1969) in the Court of the Principal District Munsif, Yellamanchili, seeking redemption of a usufructuary mortgage created on 11-12-1946 (Exh. A-1). The plaintiff’s standing derived from a sale deed dated 19-9-1960 (Exh. A-2) that conveyed the mortgaged property “with a right to redeem.”
The present appellant was the second defendant. He had been a lessee of the property before the mortgage, with the lease scheduled to expire in 1948. He contended that his tenancy survived the mortgage and conferred a non-evictable right immune from redemption proceedings.
The trial court rejected the appellant’s defence and decreed redemption. The first appellate court affirmed. The Andhra Pradesh High Court, in Second Appeal No. 308 of 1981, dismissed the appellant’s second appeal on 16-4-1987. The appellant then approached the Supreme Court, whose order is summarised here.
Legal Issues Presented
- Whether a lessee’s tenancy rights survive the execution of a subsequent usufructuary mortgage, thereby preventing the mortgagor from obtaining possession upon redemption.
- Whether, on the facts and language of the 1946 mortgage deed, the appellant had surrendered or otherwise lost his leasehold interest so that the plaintiff could receive possession on redemption.
Arguments of the Parties
Appellant's Arguments
- The mere execution of a usufructuary mortgage does not terminate an existing lease unless termination or surrender of the leasehold can be established expressly or by necessary implication.
- No “automatic merger” occurs between the interests of a lessee and a usufructuary mortgagee; therefore, the appellant’s tenancy continued independently.
- Reliance was placed on Gopalan Krishnankutty v. Kunjamma Pillai Sarojini Amma (1996) 3 SCC 424, along with earlier authorities, to assert that surrender of tenancy cannot be inferred solely from the act of mortgaging.
The opinion does not contain a detailed account of the respondent’s legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Gopalan Krishnankutty v. Kunjamma Pillai Sarojini Amma, (1996) 3 SCC 424 | Surrender of tenancy cannot be presumed merely from execution of a usufructuary mortgage; continuance of lease is a fact-specific inquiry. | Appellant relied on it; the Court acknowledged the principle but found, on the specific deed language and surrounding facts, that tenancy had ended. |
| Narayan Vishnu Hendre v. Baburao Savalaram Kothawale, (1995) 6 SCC 608 | Considerations in determining whether leasehold rights merge or survive after creation of a mortgage. | Referenced within Gopalan Krishnankutty; same distinction applied—facts did not support continuance of lease. |
| Gambangi Applaswamy Naidu v. Behara Venkataramanayya Patro, (1984) 4 SCC 382 | Factors relevant to infer surrender or continuance of tenancy upon mortgage transactions. | Cited indirectly via Gopalan Krishnankutty; Court held those factors absent here. |
| Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage, (1976) 3 SCC 660 | No automatic merger of interests; surrender must be proved. | Considered but distinguished; specific deed provisions and expiry of lease led to finding of surrender. |
Court's Reasoning and Analysis
The Supreme Court scrutinised the 1946 mortgage deed. It contained an explicit covenant that the mortgagee would “deliver possession to the mortgagor upon redemption,” signalling an intention inconsistent with continuance of the pre-existing lease.
No clause addressed payment or adjustment of rent by the mortgagee qua lessee after 1946. The Court treated this silence as indicative that the parties no longer intended the lease to subsist.
The original lease was to expire in 1948. There was no evidence of rent paid or accepted after that time, eliminating any claim of statutory “holding over.”
Applying the principles cited, the Court concluded that, although a lease does not automatically merge with a mortgage in law, the facts and deed language here demonstrated surrender or extinction of the leasehold interest. Consequently, the plaintiff’s right to redeem and recover possession stood affirmed.
Holding and Implications
APPEAL DISMISSED. The judgment of the Andhra Pradesh High Court upholding redemption and delivery of possession to the plaintiff is affirmed; parties to bear their own costs.
Implications: The decision finally secures possession for the plaintiff and rejects the appellant’s claim of non-evictable tenancy. The Court applied existing precedent without creating new doctrine, limiting the ruling’s significance to the particular deed language and factual circumstances of the case.
Order
1. This appeal is directed against the judgment of the Andhra Pradesh High Court dated 16-4-1987, passed in Second Appeal No. 308 of 1981. By the impugned judgment, the High Court has dismissed the Second Appeal preferred by the appellant. One Bheemarasetti Adinarayana Naidu was the plaintiff in Suit No. OS No. 55 of 1967 in the Court of District Munsif, Anakapalli which was renumbered as OS No. 260 of 1969 in the Court of Principal District Munsif, Yellamanchili. Such suit was instituted by the plaintiff for redemption of usufructuary mortgage created by deed dated 11-12-1946 (Ext. A-1) on the basis of the sale deed dated 19-9-1960 (Ext. A-2) under which the said plaintiff purchased the property with a right to redeem. The appellant was the second defendant in the said suit. There is no dispute that at the time of creating such usufructuary mortgage in 1946, the appellant was continuing as a lessee and the lease was to expire in 1948. The appellant contended that his right as lessee continued despite the said usufructuary mortgage and in view of such right continuing, he had acquired non-evictable right and, therefore, there was no question of taking over possession of the property from him by redemption of mortgage. Such contention has not been accepted either by the court below or by the High Court.
2. Mr K. Ram Kumar, learned counsel appearing for the appellant, has contended that simply on execution of usufructuary mortgage, the right of the lessee does not come to an end unless and until it can be established that such leasehold interest had been terminated or the leasehold interest had been surrendered either by express conduct of the parties or by necessary implication flowing from the deed of mortgage. Save as aforesaid, it must be held that the leasehold interest continues notwithstanding creation of usufructuary mortgage. In support of such contention, reliance has been made to the decision of this Court in Gopalan Krishnankutty v. Kunjamma Pillai Sarojini Amma (1996) 3 SCC 424. After taking into consideration the decisions of this Court in Narayan Vishnu Hendre v. Baburao Savalaram Kothawale (1995) 6 SCC 608 and in Gambangi Applaswamy Naidu v. Behara Venkataramanayya Patro (1984) 4 SCC 382 and in Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage (1976) 3 SCC 660 it has been held in Gopalan Krishnankutty case (1996) 3 SCC 424 that simply on the execution of the usufructuary mortgage deed, surrender of tenancy right cannot be inferred but the question of continuance of leasehold interest upon execution of usufructuary mortgage is required to be decided on the fact situation of the case.
3. Mr Ram Kumar has submitted that there is no automatic merger of interest of the lessee with that of the mortgagee and in the absence of proof of surrender by the defendant of his leasehold interest and to hold only the right of mortgagee, the plaintiff is not entitled to automatically claim possession of the leasehold premises by redeeming the mortgage.
4. We have taken into consideration the mortgage deed executed in 1946. In our view, a clear intention of only retaining the mortgagee's interest is to be inferred in view of the specific statement that on redemption, the mortgagee should deliver possession to the mortgagor. We may indicate that the expression to that effect used in the mortgage deed has been noted by the courts below. We may also indicate that there is no indication in the mortgage deed as to how the rent payable by the mortgagee qua lessee was to be adjusted between the parties. The absence of any mode of adjustment of leasehold rent implies that it was not intended that despite the said mortgage, parties intended that the leasehold interest was to continue. It may also be indicated here that leasehold interest was to expire in 1948. In the absence of any payment of rent for such leasehold interest and acceptance of such payment after expiring of the period of lease it cannot also be contended that there was a case of holding over by the lessee. In the aforesaid circumstances, the finding by the courts below that the leasehold interest had come to an end and the plaintiff was entitled to the redemption of the mortgage and to take delivery of the properties under this mortgage deed cannot be held to be unjust or improper. We, therefore, do not find any reason to interfere with the impugned judgment of the High Court. The appeal, therefore, fails and is dismissed. No costs.
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