1. This second appeal arises from a suit to recover by sale of the mortgaged property and from the 1st defendant personally Rs. 747-10-4, made up of Rs. 600, the principal due on a mortgage and Rs. 147-10-4, arrears of rent with interest thereon due under a contemporaneous counterpart of a lease (marupat) both executed by the 1st defendant to the plaintiffs' predecessor-in-title. The defendants' chief contentions were : (1) that the personal remedy was barred by limitation, which both the Lower Courts upheld and which is no longer in question, and (2) that the claim is barred by Order 2, Rule 2 of the Code of Civil Procedure, which both Courts overruled and which the defendants press again in this second appeal.
2. The mortgage, Ex. A, is a usufructuary mortgage, dated 6th March, 1915, for Rs. 600 of the mortgagor's kanom kuzhikanom interest in three gardens held under a jenmi. It provided for three years' possession by the mortgagee during which he was to pay the jenmi's michavaram and obtain receipts and appropriate the balance of the income in lieu of interest at six per cent, on die principal. After the period of three years the mortgagee was to receive Rs. 600 and surrender the property. If the mortgagor failed to redeem at the end of the period, the mortgagee could continue in possession till he was paid off, paying the jenmi's michavaram and appropriating the balance for interest on the principal amount. If the mortgagee was unwilling to continue in possession as above, he was given the right to realise the mortgage amount by bringing to sale the mortgagor's rights over the property and the mortgagor bound himself to personally pay any balance left unrealised by the sale.
3. It will be noticed that there is no covenant by the mortgagor to pay interest as such either during the period of three years or after. The only method by which the mortgagee could get any interest is by taking possession and appropriating the balance of the income after payment of the jenmi's michavaram. By an arrangement very common in Malabar, where the cultivator especially of cocoanut gardens clings with great attachment to possession so as to keep the trees he has planted under his own eye and not hand them over to another whose interest in them is only temporary and mercenary, the mortgagor on the same day as the mortgage, 6th March, 1915, took back the possession given under the mortgage by Ex. B called a 'marupat' which means counterpart of a lease. Ex. B states that the mortgagor has taken back the possession of the property to be held on pattom (lease) for three years. The lessee binds himself to hold this property for three years at an annual rent of Rs. 64 out of which he agreed to pay Rs. 28 to the jenmi as michavaram and hand over the receipts to the lessor and also pay the remainder of Rs. 36 to the lessor as interest on the mortgage amount and obtain the lessor's receipts for the payments. Ex. B also provides that if the rent remains in arrears it is to bear interest at 12 per cent, per annum and also that arrears of rent should be a charge on the equity of redemption.
4. It is admitted that both documents were parts of the same transaction in the sense that they were brought into existence by an arrangement made at the same time for a common purpose. The mortgagor has remained in possession ever since the mortgage and lease. As he fell into arrears of the rent provided in Ex. B, the mortgagee brought a suit O.S. No. 435 of 1923 and obtained a decree. This suit was brought in 1926 for Rs. 600 due under Ex. A and for subsequent arrears due under Ex. B.
5. The appellants' (defendants') contention is that on the date of the former suit in 1923 the plaintiff had the right to sue for the principal under Ex. A, that the payments under Ex. B are really and substantially for interest, and that as the plaintiff failed to sue for the principal in the former suit after it became due, the present suit for it is barred under Order 2, Rule 2, as it is a claim arising on the same cause of action as that on which the former suit was founded. Both the Lower Courts have overruled this contention.
6. The principle on which cases of this class fall to be decided was explained by the Privy Council in Kishan Narain v. Pala Mal (1922) L.R. 50 I.A. 115 : I.L.R. 4 L. 32 : 44 M.L.J. 123 (P.C.):
If a mortgage deed provides for the payment of principal and interest as independent obligations, Order 2, Rule 2 of the Code of Civil Procedure does not preclude the mortgagee from suing to recover the principal by reason of his having previously sued for a personal decree for the interest due. But in the case of a mortgage deed which upon a default in the payment of interest gives the mortgagee the right to realise both the principal and interest, if the mortgagee, upon a default occurring, sues to realise the interest from the property, the rule above referred to precludes him from afterwards suing to realise the principal due, even if by his plaint in the first suit he has purported to reserve the right to do so.
7. In that case and in Muhammad Hafiz v. Muhammad Zakariya (1921) L.R. 49 I.A. 9 : I.L.R. 44 All. 121 : 42 M.L.J. 248 (P.C.) the mortgages were simple mortgages containing default clauses giving the mortgagee the right to sue for the principal on default of payment of interest on the stipulated dates. Even in such cases, if according to the deed there are independent obligations for the payment of principal and interest, the mortgagee is not debarred by Order 2, Rule 2, by suing for a personal decree for interest alone from suing subsequently for the principal. The question in such cases therefore does not depend on whether the agreement for interest and principal is expressed in one or more documents or whether the documents, if more than one, all arose out of one transaction. The document or documents must be examined to see whether the obligation on which the former suit for interest was based was independent of that on which the subsequent suit is brought.
8. In this case the obligation to pay principal and that to pay rent which was the equivalent of interest, arose independently of each other. The mortgage being usufructuary, in the absence of a special covenant to pay, there would ordinarily be no personal obligation on the mortgagor's, part to repay the principal, nor would the mortgagee be entitled to sue for sale. The plaintiffs' right in this case to sue for sale for the principal is entirely due to the special covenant to that effect in the mortgage deed. As for interest, the mortgage deed does not provide at all for it, because the mortgage being usufructuary, the mortgagee was to be in possession and appropriate the income in lieu of interest. The defendants' obligation to pay the income arose entirely out of the lease back by which he engaged to hold the property as lessee and his payments under the lease are legally payments of rent. Neither the fact that these payments if made would be appropriated by the lessor-mortgagee towards interest for which as such the mortgage did not provide, nor the fact that if the payments were not made, they would be charged on the equity of redemption can change the legal character of the payments. There is no provision in either of the two documents making the right of the mortgagee to sue for the principal depend in any manner on the failure of the mortgagor-lessee to pay the rents regularly. It cannot be doubted that after the expiry of the three years of the lease, the plaintiff was entitled to take back possession even if the rents were being regularly paid, and to enjoy the property either by himself or through another lessee; nor can it be doubted that after the three years the plaintiff would be entitled to sue for sale and realise the principal even if the plaintiff had taken back possession and there could therefore be no question of the defendants being in default of rent. These considerations show that the former suit was brought on an obligation or cause of action with which the right of suit for the mortgage money had no legal connection and that the present suit so far as it is for principal is founded on the right of suit provided by the mortgage deed and so far as it is for rent for a period subsequent to the old suit on the lease. Neither of these claims can be said to be included in the cause of action for the old suit which was for rent till then due.
9. The above view is supported by the decision in Muhammad Hussain v. Abdul Ghafur Khan (1921) in which the facts were similar. To the same effect is Ralia Ram v. Amir Chand (1921) I.L.R. 3 Lah. 1. In both these cases it was held that the institution of the former suit based on the lease was no bar to a subsequent suit based on the mortgage and the observations in Madhwa Sidhanta Onahini Nidhi v. Venkataramanjulu Naidu (1903) I.L.R. 26 Mad. 662 were distinguished. In the latter case there was a usufructuary mortgage and a lease back. The mortgage provided for repayment at the rate of Rs. 65-10-0 per month made up of Rs. 35 for principal and Rs. 30-10-0 for interest at 14 annas per cent. The mortgagee was to pay himself the interest at the above rate by letting out the property and if the rents derived fell short the mortgagors bound themselves to pay the deficiency every month. The mortgage deed also provided for compound interest on the monthly payments in arrears. By the lease back of even date the mortgagors took back the property as tenants at a rent of Rs. 30-10-0 per month agreeing to pay compound interest on rent in arrears at the rate mentioned in the mortgage deed and also agreeing to surrender possession of the property on thirty days' notice. The mortgagors made some payments but fell into arrears and remained in possession when the suit was brought for the recovery of the principal amount and interest at the agreed rate. Boddam, J., on the Original Side dismissed the suit holding that the mortgage was a purely usufructuary one which did not give the plaintiff the right of suing either for principal or for interest and that the plaintiff having been given legal possession under the mortgage and let out the property to the mortgagors as tenants had only himself to thank if he did not recover possession from his tenants. In appeal a Bench of three Judges held that the mortgage and the lease back should be read together to determine the rights of the parties and so read the mortgage did contain a covenant to pay principal and interest in instalments and also conferred a power on the mortgagee to take possession of the mortgaged property and apply the usufruct in the discharge of interest and principal. They therefore awarded the plaintiff a decree. That decision was not concerned with the effect of Order 2, Rule 2, but only with the construction of the mortgage then in question. It is only an application of the rule that where there are several contemporaneous documents evidencing a transaction, they must all be read together for determining the rights of the parties. In this connection reference may be made to Ramarayanimgar v. Maharajah of Venkatagiri (1920) I.L.R. 44 M. 301 : 40 M.L.J. 236 wherein a case of a usufructuary mortgage and lease back where the lease contained a clause making the arrears of rent a charge on the mortgaged and other property it was held that the rights under the mortgage and those under the lease are so far distinct from each other as to entitle the mortgagor to redeem the mortgage on payment of the principal sum due on the mortgage deed without at the same time having to pay the arrears of rent though charged on the equity of redemption. That would seem to supply the test whether the two obligations are one or independent so as to constitute the same or different causes of action. If in this case the defendant-mortgagor is, as he appears to be, entitled to redeem the plaintiff's mortgage and to recover possession on payment of Rs. 600 without having at the same time to pay whatever arrears of rent may be due by him though charged on the equity of redemption (for which latter amount the plaintiff's remedy would be by a separate suit) it is impossible to contend that the plaintiff's old suit on the lease can operate as a bar under Order 2, Rule 2, to the present one.
10. The appellant however referred to two later cases from Lahore, viz., Rala Ram v. Diwan Chand A.I.R. 1921 Lah. 225 and Diwan Chand v. Ralla Ram A.I.R. 1926 Lah. 559. In the latter case the usufructuary mortgage, dated 29th April, 1914, was for Rs. 1,000 for a term of 18 months and the lease back of the same date was for a period of 11 months for a monthly rent of Rs. 4. In June, 1917, the mortgagor being still in possession as tenant, the mortgagee brought a suit for Rs. 120 claimed as arrears of rent. Only Rs. 4 was decreed, the rest of the suit being dismissed on the ground that the tenancy had expired at the end of 11 months. In May, 1919, the mortgagee brought a suit for Rs. 1,256 being the principal amount of Rs. 1,000 and the balance claimed as arrears of interest. That suit was dismissed as barred under Order 2, Rule 2, a decision which was upheld by the Lahore High Court in February, 1921. Then the mortgagee brought a third suit claiming possession and the question was whether the suit for possession was affected by Order 2, Rule 2, and it was held that it was. That is not the present question which is whether the mortgagee's second suit in that case for money was so affected. All that the cited decision says about that matter is that the ground of decision was that the two deeds should be read together. This is of no help to us in deciding the present case. We are not prepared to follow the other decision cited as it does not appear to give sufficient weight to the consideration whether though forming parts of the same transaction the obligation under the mortgage and the obligation under the lease are, having regard to the intention of the parties, to be treated as independent. If so, the fact that they arose out of the same transaction would not attract the bar under Order 2, Rule 2. See Payana Reena Saminathan v. Pana Lana Palaniappa (1913) L.R. 41 I.A. 142 where the Privy Council said that the rule is directed to securing the exhaustion of the relief in respect of a cause of action and not to the inclusion in one and the same action of different causes of action even though they arise from the same transaction. In this case we have no doubt that the arrangement whereby the mortgagor was to remain in possession as lessee under the mortgagee was one intended to benefit the mortgagor himself and the agreement to pay rent was therefore as much in his own interest as in that of the mortgagee. The attempt to make use of Order 2, Rule 2 in this connection is to convert what was intended as a shield into a sword.
11. The second appeal fails and is dismissed with costs.