1. The plaintiffs filed the suit out of which this appeal arises, for enforcing the terms of two deeds, a mortgage deed and a lease deed, Exs. C and D respectively. The mortgage deed, dated 24th March 1899, recites that the properties were put in the possession of the mortgagees. The effect of the lease deed which was executed on the next day was to transfer possession back to the mortgagors who agreed to hold the property as the lessees of the mortgagees. Legal possession was thus transferred to the mortgagees who thus became the lessors and the physical possession remained with the mortgagors whose possession was that of the lessees. In other words, the transaction was of the usual type—a possessory mortgage, possession being left with the mortgagors, under a rental agreement. Ex. O, however, is not a usufructuary mortgage pure and simple, for it contains a covenant on the part of the mortgagors to pay the amount, and it also enables the mortgagees, in case of default, to recover the sum by bringing the property to sale. It is this clause that enables the plaintiff to ask for a sale of the property. The learned Subordinate Judge has passed a decree for the principal amount covered by Ex. O and for arrears of rent under Ex. D for three years previous to the institution of the suit. This judgment is challenged both by the plaintiffs and the defendants, the plaintiffs (in their appeal) stating that they are entitled not only to the principal but also the interest in full under Ex. C and the defendants urging (in their memorandum of objection) that the claim is barred by limitation excepting in regard to rent for three years previous to the suit and that the decree in other respects is wrong.
2. We shall deal with the plaintiffs' claim to principal and interest separately. The amount under Ex. C became payable at the expiry of a year from its date that is, in March 1900 and as the suit was filed in 1920 the claim would be prima facie barred by limitation. The plaintiff, however, relies upon Section 20(2) of the Limitation Act and says that his claim is taken out of the statute of limitation by reason of a receipt of rent under that sub-section. The question to be decided is: Has there been a receipt of rent within the meaining of S. 20(2). It is necessary in this connexion, to clear the ground by saying that the defendants have acquiesced in the decree for rent passed by the lower Court and this is consistent with, the admission before us that the tenancy under Ex. D is subsisting. We shall presently consider what is the proper construction of. Ex. D, but it is sufficient for the present-purpose to observe that it is conceded that the relationship of lessor and lessee between the plaintiffs and the defendants-continued at the date of suit. Ex. C directs the mortgagees to pay Government revenue, jenmi michavaram and to appropriate the balance of the income-towards the interest due on the principal, amount of Rs. 4,800. This arrangement pre-supposes that possession was to remain with the mortgagees. By Ex. D a certain lump amount (in-cash and paddy) was fixed as rent; the Government revenue and michavaram the mortgagors were to pay out of this rent and they were to pay the balance-remaining to the mortgagee. Under Ex. C the income, less Government revenue and michavaram, was to be appropriated towards interest. The liability to pay Government revenue and miehavaram primarily thus rested on the plaintiffs, but by Ex. D the defendants were constituted the plaintiffs' agents for the purpose of making these two payments. As the property was given back to the defendants on lease, and as the income would be received by them, they were directed to pay these two amounts. The learned Subordinate Judge has held as a question of fact that the mortgagors during this period paid the Government revenue on plaintiffs' behalf. He has further held as a question of law that such a payment taken the case under S. 20(2) out of the statute of limitation.
3. In our opinion, his conclusion on both these points is correct. In paragraph 6 of the plaint the plaintiffs distinctly allege that michavaram and revenue were paid by defendants 1 to 20 and their ancestors. In paragraph 7 of the additional written statement, the fact of payment by the defendants and their ancestors is not denied, but the plea taken is that the payment was not made on account of the plaintiffs. It is thus undisputed that the defendants and their predecessors paid Government revenue in respect of the suit properties. The question is: Did they make the payment on behalf of the plaintiffs. Under Ex. D they undertook to make the payment. Their position as lessees was not repudiated. To the date of suit it is conceded that their position was that of tenants. Why should it be then assumed that the defendants, in making the payment did not carry out the term which was binding upon them? Their learned counsel suggests that the defendants should be taken to have made payments not in pursuance but in contravention of the terms of Ex. D. When the facts are consistent with the defendants having performed their obligation why should we make their act unlawful and impute to them an intention to break the contract? We are, therefore, satisfied that the learned Judge's conclusion that the defendants throughout paid the Government revenue on behalf of the plaintiffs is correct.
4. We shall now proceed to consider whether by reason of this payment the claim is saved from the bar of limitation.
5. Section 20 of the Limitation Act runs as follows:
(1) Where interest on a debtor legacy is, before the expiration of the prescribed period, paid as such by the person liable to pay the debt or legacy, or by his agent duly authorized is this behalf, or where part of the principal of a debt is, before the expiration of the prescribed period paid by the debtor or by his agent duly authorized is this behalf, a fresh period of limitation shall be computed from the time when the payment was made. Provided that, in the case of part payment of the principal of a debt, the fact of the payment appears in the handwriting of the person making the same.
(2) Where mortgaged land is in the possession of the mortgagee, the receipt of the rent or produce of such land shall be deemed to be a payment for the purpose of sub-section (1).
6. It is first contended on behalf of the defendants that the revenue paid to the Government cannot be treated as rent. This argument is clearly untenable because under Ex. D the amount agreed to be paid as rent includes the sum payable as revenue. The fact is that an inclusive amount has been stated as rent, the mortgagor undertaking the liability to pay out of it the Government revenue. There is nothing to prevent a tenant from agreeing to pay his landlord any rent he pleases and the landlord directing him to pay out of that rent the revenue on the property. This is not unusual, and where the parties expressly agree to treat a certain sum as rent, it is not for the Court to say that rent is not really rent, because it is liable to certain deductions.
7. The next contention of the defendant is that payment by them is not equivalent to a receipt by the landlord (the plaintiff). This objection again seems unsound. What does the payment by the defendants really mean? It involves first receipt by the plaintiff who was under the agreement entitled to receive the sum, and secondly it involves the payment of the same sum by the plaintiff in his turn to the Government. The second contention must therefore be also overruled.
8. It is thirdly contended by the learned counsel for the defendants that receipt of rent to be effectual under the section must amount to a payment of interest or payment of principal so as to satisfy the first part of that section. In the present case the Government revenue, while being under the terms of Exs. C and D a part of the rent, is not interest. But this in our opinion, makes no difference We cannot accept the construction suggested that the receipt of rent mentioned: in sub-S. 2 is subject to the conditions mentioned in sub-S. 1. If the argument put forward were sound, it would follow that if rent or produce received is appropriated towards the principal of the debt, the part payment must appear is the handwriting of the person making the payment. Is there a person that makes the payment at all? Ex hypothesi there is no such person. Granting that the receipt of the rent by the mortgagee is to be treated as a payment by the mortgagor, is it reasonable to expect that such a payment should appear in the handwriting of the debtor? The object of the section is clearly to benefit the mortgagees in possession who receive the rent or produce from the land. This object will be clearly frustrated by adopting the construction suggested. Sub-S. 1 contains four paragraphs and when on sub-S. 2 it is said that the receipt shall be deemed to be a payment for the purpose of sub-S. 1, it does not follow that the payment referred to must necessarily be that indicated in the first and second paragraphs alone of the first sub-section. We shall be giving effect to the intention of the Legislature by holding that the payment referred to is the payment mentioned in paragraph 3.
9. The section really refers to three things: (1) Payment of interest on a debt or legacy by the debtor or his agent; (2) part-payment of principal of a debt by the debtor or his agent; (3) receipt by mortgagee in possession of the rent or produce on the land. The meaning of the section is that a fresh period of limitation shall be computed from the time of such payment or receipt. This is the effect of the section, but as this idea is expressed in it in a somewhat different order, it has been found necessary to say that the receipt under sub-S. 2 shall be deemed to be payment under sub-S. 1. The section would undoubtedly have been better worded of the receipt of rent had been mentioned immediately after the payment of interest and the part payment of principal, and if the provision then followed that fresh period of limitation shall be computed from the time of payment or receipt. The question is bare of authority, but this is the view we take of it, and the third contention must be accordingly overruled.
10. The conclusion of the Subordinate Judge that the claim to the principal is not barred is thus correct.
11. Now we shall deal with the plaintiffs' claim to interest. The first question that has to be determined in this connexion is, does Ex. D create a charge only in respect of one year's rent or generally of all rent that accrues? The answer will depend upon the right reading of the document which is in Halayalam. There are certain errors in the Court translation and they have been brought to our notice in the course of the argument. It is not disputed that the defendants have continued to be tenants under Ex. D. It is not suggested that there was a cessation of tenancy at the end of the first year and there was a new tenancy under Section 116 of the Transfer of Property Act which deals with the effect of holding over. The latter part of Ex. D clearly contemplates the ascraing of rent beyond the term of one year fixed. There, are two sentences dealing with there being a charge on the equity of redemption. In the first sentence the first year's rent has been mentioned. In the second sentence again there is a reference to rent. The defendants ask us to treat this reference as a mere redundancy. The words “arrears,” “till discharged,” and “accumulated” in the context in which they occur strongly suggest that the charge that is mentioned in the second sentence refers to the arrears of rent after the first year. Though the parties started by saying in the opening portion of the document that the lease is for a fixed period of one yea r, they in truth intended to enter into a lease from year to year, as the latter part of the document clearly shows; and the parties themselves, as shown, treated the transaction as such. As this is the effect of Ex. D the plaintiff will be entitled to a decree with charge on the property for rent with interest as provided in the document for a period of twelve years immediately preceding the suit.
12. There remains a contention urged for the plaintiff which we shall now proceed to deal with. It is urged that Exs. C and D really constitute one transaction and that the plaintiff is, on that footing, entitled to interest for the whole period from the date of the mortgage to the date of suit. We cannot accede to this argument. It is a question of intention whether the two instruments should be read together and be held to constitute a single transaction or they should be taken separately and each regarded as a separate and independent transaction. Each case depends upon its own facts and no good purpose will be served by our citing the numerous cases to which reference has been made at the Bar. A careful consideration of the two documents in the case leads one to the conclusion that the parties intended that each should constitute a distinct and independent transaction. There is first the fact, that Ex. C while it provides for interest, does not make the mortgagors personally liable for it. Ex. D, on the other hand, contains the personal covenant. Secondly, receiving;an advance of rent (mumpattam) and referring to it in the rental agreement shows that the parties intended that the relation should be that of lessor and lessee. There is thirdly the fact, that whereas Ex. O does not provide for compound interest there is a distinct stipulation in Ex. D under which interest becomes payable on arrears of rent (which in other words is compound interest). As a matter of fact the parties took Particular care to stipulate that certain obligations should flow from the relationship created of landlord and tenant. Fourthly, it is significant that under Ex. D arrears of rent are charged upon the property. There would be a charge in an ordinary mortgage transaction implied in law, so far as interest is concerned. It would be superfluous to refer to such a charge but it would be necessary expressly to make the rent a charge on the property. This is what the parties really did. On the whole we are inclined to the view that the partiess intended to treat each instrument as constituting a distinct and independent transaction. It is the combined and cumulative effect of the circumstances mentioned that makes this document evidence two distinct transactions. If these elements were not found in this combination, the result might be different but we must gat at the intention from all the facts and in the present instance we are satisfied that the two instruments should be considered as evidencing two distinct transactions.
13. The result is the appeal is allowed in part and the decree of the lower Court in modified by awarding to the plaintiff a mortgage decree for the principal amount and rent at 572 paras and 7½ nazhis or its equivalent in money at the rate fixed by the lower Court for a period of twelve years, prior to the institution of the suit, with interest on rent as provided for in Ex. D. Time for redemption six months. There will be no personal decree for rent. In the appeal, each party will bear his own costs. The memo, of objections is dismissed with costs.
14. Appeal partly allowed.