This is an appeal by the defendant from the substantially concurrent judgments of the two lower Courts, decreeing the plaintiff's suit for recovery of actual physical possession over a house, on redemption of the usufructuary mortgage created by the plaintiff in favour of the defendant, notwithstanding the fact that at the time the mortgage was created, the defendant was already the lessee of the house from the plaintiff. The questions are, first, whether there was an implied surrender of the lease by the lessee at the time he took the mortgage, either (a) by implication of the terms of the mortgage deed itself, or (b) by operation of law; secondly, looking at it in another way, -whether, the lessee's interest merged into the mortgagee-interest, which in its turn could be redeemed without the lease being revived.
2. The fasts are simple and for the moat part, admitted, at least at the later stages of the litigation. The plaintiffs are the owners of the house in question about the identity of which there is no dispute. The defendant alleged that he had been a tenant on a monthly basis for a long time. At the first instance, the plaintiffs did not directly admit it, but argued that-
"even on the assumption that the defendant had been a tenant, it would not affect the plaintiffs' right to get actual physical possession."
But later on, and in this Court particularly, they admit that as a fact, the defendant had been a lessee, till the date of the usufructuary mortgage, on a monthly basis though neither party has brought out what exactly was the rent reserved.
3. On 18-12-1952, during the pendency of the lease the plaintiffs mortgaged the property with possession for a sum of Rs. 1,725 for two years. Till redemption of the mortgage, the mortgagee was not to pay any rent, and the mortgagor for his part, was not to pay any interest. The following recitals are relevant for our purposes:
"I am giving this house in usufructuary mortgage (rehan-bil-kabz) to Motilalji, and I am giving up my possession and putting him in possession of the house. .......when I redeem this mortgage, I shall take this house back from the possession of the mortgagee........
In other words, the mortgagor gave his possession to the mortgagee on the date of the mortgage and the mortgagee in his turn, agreed to give back the possession after redemption. The crucial point is, whether "possession" in this context was, by intention of the parties or operation of the law, meant actual physical possession or symbolic possession of the reversioner of the lease. In time, the suit for redemption was brought and a preliminary decree obtained. Naturally, the mortgagor was anxious to get physical possession and not merely the lessor's right to reversion, and the mortgagee for his part, wanted the status quo ante to be restored, in other words, the actual possession remaining with him and the symbolic possession going to the lessor-reversioner. Where the house is situated, the accommodation control act is in force and the lessee cannot be ejected except on one of the grounds mentioned in it.
4. Merger-It is to be remembered that merger as such is essentially different from surrender of any right, though in practice the result might be the same whether the mortgagee has surrendered the lease, or it has merged into the mortgage. The general proposition is that a derivative right automatically merges into the parent right, if the holder of the former happens at any subsequent period to acquire the latter. It will also merge if a person holding the residue of the parent right (or let us say, reversion to the derivative right) acquires the latter. Obvious examples are where the lessee acquires the landlord's reversion, or the landlord holding the reversion acquires the lease, or where the mortgagee acquires the right of redemption or the mortgagor redeems the mortgage. This is because the parent and derivative rights are by their very nature mutually repugnant and incapable of co-existence. It is better to avoid the equivocal terms "superior" and "inferior" as sometimes these are used, not only in the sense of parent or derivative, but the more valuable and less valuable, in terms of money. At all events, the most important requirement is that there should be a derivative relationship, and the rights should belong to the same genus. That is why the reversion eats up the lessee's right as a person cannot be at the same time the full owner as well as a lessee. But there is no reason why a person cannot be simultaneously a lessee as well as a mortgagee-in-possession which is something less than the full owner.
5. The rulings relied upon by the mortgagor-Velu v, Lokshmi, AIR 1958 T C 584 and Meenakshi Amma v. Kizhakke Valath Naraymni, (2) AIR 1957 Mad, 212 while enunciating with perfect correctness the general principle that two incompatible rights cannot co-exist, in my respectful opinion, follow it up with a fallacy that mortgagee's right, unlike that of the full owner, cannot co-exist with that of the lessee. In the Travancore ruling it is held -
"The principle underlying clause (f) of section 111 is that whenever a certain relationship exists between two parties in respect of a subject-matter and a new relationship arises as regards the identical subject-matter if the two sets of relationships cannot co-exist as being inconsistent and incompatible, that is to say, if the latter can come into effect only on termination of the earlier that would be deemed to have been terminated in order to enable the latter to operate."
This is altogether unexceptionable as a principle, in so far as the Madras ruling cites this principle, there is also no difficulty. But to follow it up with the assumption that the lessee's right is a derivative of the mortgagee's right, and then conclude that they cannot co-exist, is not correct. This is because the lessee's right and the mortgagee's right are not mutually inter-related, but derived by independent routes from the right of proprietorship. Certainly, neither of them can co-exist with the proprietor's right, and merge into it if either of them rests in a person who has already got the reversion. But they do not swallow each other because they are not mutually derivative. If one can visualize property right as consisting of packets of different colours, it is obvious that while the full proprietary right includes all the colours and as such, will swallow up whichever packet is thrown into it, the mortgagee's right and the lessee's right are packets of different colour and do not exclude each other.
6. The same fallacy was noted in the old single Bench judgment which went up in the Letters Patent Appeal reported in Kallu v. Diwan, ILR 24 All. 487. Earlier still, there was a single Bench judgment reported in Second Appeal No. 122 of 1898 of that High Court which is quoted in the judgment of the Letters Patent Appeal. There, a permanent occupancy tenant on agricultural land had acquired the usufructuary mortgage on the same property. The lower Courts had held that there was merger, and his tenancy right had been swallowed up and at the time of redemption he should vacate the property. The High Court remarked that this was "a novel and extraordinary doctrine of merger," and accordingly dissented from it, decided that there was no merger; it granted on redemption only the right to receive the rent, in other words, reverted to the status quo. The single Bench in the latter case was dealing with a tenancy, on immovable property more precarious than the tenancy in the older case. It distinguished the two and held that in case of a precarious tenancy or lease, there will be merger while in case of a permanent tenancy there may be no merger. The majority Judges held, however, that the same principle of no merger would apply whatever the term of the lease as long as the lessee acquires only the mortgagee's light and not the full proprietorship or reversion to the property.
"In owe opinion the effect of the mortgage was not to destroy the tenancy, but only to suspend the obligation of the tenant to pay rent to the landlord while the mortgage subsisted........the possession to which the plaintiff (mortgagor) is entitled is the possession subject to the subsisting tenancy. He will have the right to receive the rent, but will not enter into physical possession ontil such time as the tenancy has been determined according to law."
7. It is pointed out on behalf of the mortgagor that the usufructuary mortgagee is the owner for the time being, and it would be illogical to bold that while the tenancy right would merge into the right of the proprietor if it is acquired by the tenant, it would not so merge if the tenant acquires only the mortgagee's right. I find no such illogicality. When the tenant acquires the full proprietary right, there is nothing more to be done and there is no possibility of a subsequent transaction in which the right he has acquired will come back to the proprietor. If one can apply the simple of packets, whereas the person acquiring the full proprietary right gets all the packets and is under no obligation to keep them separate, the person who acquires mortgagee rights has necessarily to keep the packet of his rights separate to be passed on to the mortgagor at the time of redemption. That is why there can be no merger of the tenancy right into the right of the mortgagee.
8. In the Nagpur ruling reported in Kashi v. Durga, 12 IC 734, the same question came up. A person had taken a lease of certain lands and also the mortgage of the proprietary rights. It was held-
"A tenant-right is not permanently affected by the mortgage. It merely remains dormant or in suspension so long as the transaction of mortgage remains good. As soon as there is redemption or the mortgage transaction is otherwise set aside, the parties revert to their position as lessor and lessee. There is in such a case no merger of the tenant-right in the mortgage-right."
"It is also of interest to note that the basic difference in this regard between the mortgage-right and the full ownership right has been visualized in the Nagpur ruling reported in Balkrishna Gopol v. Rangnath Hanmant, 1951 NLJ 188-AIR 1951 Nag. 171. The case itself involved other questions but this passage is instructive:
"When there is a mortgage, the full rights of ownership are split up into two. The mortgagee obtains under the mortgage ft transfer of an interest, namely, the mortgagee's rights. The mortgagor retains the right to redeem. On foreclosure the balance of the right to redeem is extinguished."
As for the lessee's right, it is immaterial for the purpose under consideration, whether it is a precarious right, that is to say, the right of a temporary tenancy or a permanent right, that is, the right of a permanent tenancy. It is not the size of the packet we are concerned with, but the kind of that right or its colour and the manner in which it is derived from the ownership right. For establishing merger, it is not sufficient to show that the two rights are derived from a common third right. It should be established that one is directly derived from the other. If B and C are derived from A by different routes, then they can coexist and do not merge though, neither B nor C can co-exist with A. But it may happen, the colours mark one another and the obligation under one is in view of the nature of the other, suspended for the time, while the parties definitely intend that it should be revived when a specific event happens. Here, for example, the right to receive house-rent was in abeyance as long as the tenant himself was the usufractuary mortgagee of the landlord's reversion; but the moment that usufructuary mortgage was redeemed, the right to receive rent revived to the mortgagor. I would, therefore, follow the Allahabad and the earlier Nagpur view, and disagree with the Travancore-Madras view, not on account of the principle, but on account of the manner of its application.
9. Implied surrender by operation of law - Different in theory but of the same effect in practice is the doctrine of surrender. Under the law, surrender can be by contract or by operation of law. Here, there is no surrender by the operation of law which only happens where the lessee acquires a right or begins to occupy a new status fundamentally incompatible with that of the lessee. The examples given in English law are those of a servant, licensee, caretaker and the like. A man cannot, at the same time, be a licensee by permission and a lessee on rent reserved. So, if one chooses to make himself a licensee, he is deemed to have surrendered the licence. But for reasons already pointed out, there is no impossibility in a person being a mortgagee in possession and the lessee at the same time. For the period he would save the payment of rent; but that is only a temporary phase. Thus, there was no surrender by operation of law.
10. Implied surrender by contract - On behalf of the mortgagor, special emphasis was placed on what he describes as surrender by agreement, the agreement being tacit or implied.
"When you redeem the mortgage, I shall give up possession."
From this, it is argued that having entered into this agreement, the lessee was bound on the redemption of the mortgage to give up physical possession. But a closer examination shows that the case is not so strong as it appears. To begin with, the word "possession" has in such contest two possible meanings. The first, actual physical possession, and the other, the symbolic possession, that is, the right to receive the rent. Broadly speaking, the landlord holding the right of reversion is also in possession; the difference is that the possession of the lessee in physical while that of the reversioner is symbolic. Therefore, one has to study the entire instrument to ascertain whether at the time of executing the agreement the parties meant that on redemption the lessee should put the mortgagor in physical possession or should only give symbolic possession which he originally had. Earlier in the deed, the mortgagor himself asserts that
"he was in possession and he was putting the mortgagee into the same." Now, it is admitted that at that time the mortgagor's possession was not physical, but symbolic. It would, therefore, be just and proper to hold that the word possession need in two places in the deed means, in the absence of any qualifying epithets in either context, exactly the same thing. In other words, it was intended that on redemption the mortgagee should give back to the mortgagor exactly the same possession as the mortgagor himself was giving him at the time of the mortgage and this, admittedly, was the symbolic possession. There is nothing in the deed which shows that the parties intended that while the mortgagor was giving the mortgagee one kind of possession, the latter should on redemption give another kind of possession.
11. Thus, looked at any way, it is not possible for this Court to support the direction of the lower Courts that upon redemption the mortgagee should give up physical possession thereby surrendering his lease.
12. In the result, the appeal is allowed and the lower Court's judgment and decree are modified to the effect that on deposit of the mortgage money, the position should revert exactly to what it was in 1952 that is to say, the defendant-appellant becoming the tenant under the plaintiff-respondent subject to all the terms and incidents that were in force at that time. Costs and pleader's fee throughout to the defendant-appellant.
Appeal allowed.