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Daramma And Ors. v. Mariamma And Ors.
Factual and Procedural Background
This matter arises from Second Appeal No. 742 of 1894 and a remand order of the High Court dated 19 October 1896 which held that the question whether usufructuary mortgagees in South Canara are entitled, by local custom, to the value of improvements effected by them had not been finally determined. The High Court directed that "the question" be tried because it found nothing in the mortgage instrument or exhibit A to show the parties intended to contract out of any such custom.
Pursuant to that remand the District Judge issued commissions to the several Munsifs in his district to collect evidence. Six Munsifs reported; the collected evidence (oral and documentary) was returned to the High Court. The appellants were represented by Mr. T. Bhavani Rao, who contended that the custom was established and that there were no limitations on the character of recoverable improvements. The respondents did not appear.
The District Judge found that, on the whole of the evidence, a custom existed in South Canara under which a usufructuary mortgagee at the termination of his occupation has a valid claim to compensation for improvements effected during his term in the absence of any special agreement to the contrary. The Judge further defined the appropriate scope of compensable "improvements" and explained the equitable principles underpinning such awards.
The High Court accepted the District Judge's findings, declared that the mortgagees (defendants) were entitled to the value of improvements effected by them (defining "improvements" as works beneficial to the property or to which a reasonable owner would have consented), and directed that a finding as to the value be reported. Subsequently, upon a petition by the parties, the Court cancelled its order calling for a finding as to value and left the question of valuation to be determined in any future suit for recovery of possession. A decree was to be drawn declaring the defendants' entitlement to the value of improvements; no order as to costs was made.
Legal Issues Presented
- Whether there exists a custom in South Canara entitling a usufructuary mortgagee to the value of improvements effected by him during his period of occupation.
- If such a custom exists, what kinds of "improvements" are compensable under it (i.e., what improvements are to be paid for)?
- The Vth issue framed in the suit: What is the value of improvements, if any, effected on the mortgaged properties; and is the same recoverable in addition to the mortgage amount?
Arguments of the Parties
Appellants' Arguments
- The custom in South Canara entitling usufructuary mortgagees to compensation for improvements is established by the evidence collected (oral and documentary, including district decisions and exhibits).
- There is no limitation as to the character of the improvements for which a mortgagee is entitled to recover; in other words, all classes of improvements should be recoverable.
Respondents' Position
- There was no appearance on behalf of the respondents before the District Judge when the commissions' evidence was considered. The opinion notes "For respondents there is no appearance."
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Exhibits marked XLVII, XLVIII and XLIX (decisions of Courts in the district) | Support for the existence of a customary rule awarding compensation to occupiers (including usufructuary mortgagees) for improvements effected during occupation. | The District Judge treated these exhibits as important documentary evidence and relied on them as showing that local courts have awarded compensation in similar cases, contributing to the establishment of the custom. |
| Decision of 1871 (referred to in the record) by Judges Holloway and Kindersley (authority identified with Malabar customary law) | Recognition that the customary law in Malabar entitled evicted occupiers to compensation for improvements; cited by later local courts and said to have influenced the creation of precedent in South Canara. | The District Judge observed that this 1871 decision (though concerned with landlord and tenant under Malabar tenure) contributed to a body of precedent which district courts have followed, and that it likely helped to create or reinforce the local custom as applied to usufructuary mortgagees. |
| Series of previous awards and decisions of Courts in the South Canara district (general reference) | Demonstration that compensation for improvements has been repeatedly awarded, thereby creating or confirming a local custom and aligning with equitable principles. | The Judge concluded that the custom has been created and established by a series of such awards, and relied on that series in reaching the conclusion that mortgagees were entitled to compensation for improvements. |
Court's Reasoning and Analysis
The Court's analysis proceeded in sequential steps, grounded in evidence collection, comparison with prior decisions, and equitable principle:
- Contractual interpretation: The High Court initially determined there was nothing in the language of the mortgage instrument or exhibit A to show the parties intended to exclude any claim the mortgagee might have to the value of improvements by operation of customary law. Consequently, the question of custom could not be foreclosed by the written instrument.
- Remand and evidentiary process: The High Court remanded the matter for a factual inquiry into two issues: (1) whether a custom exists in South Canara entitling usufructuary mortgagees to compensation for improvements, and (2) what constitutes compensable improvements. The District Judge complied by considering existing evidence and issuing commissions to six Munsifs to collect oral and documentary material.
- Evaluation of collected evidence: The District Judge summarized the reports: four of six Munsifs (Kundapur, Karkal, Puttur and Mangalore) supported the existence of the custom; Udipi found the evidence insufficient to establish the custom but also not convincing against it; Kassargode reported no evidence. Documentary evidence chiefly consisted of prior local court decisions and appeals (including exhibits XLVII–XLIX).
- Weight of precedent and local decisions: The District Judge emphasized the persuasive force of earlier district judgments (including a notable decision of 1871 that applied Malabar customary law language) and how subsequent district courts had followed that dictum—leading to the conclusion that a local custom had been established by repeated awards.
- Definition and limits of compensable improvements: Rather than compiling an exhaustive list of compensable works (which risked excluding types of improvements not previously litigated), the District Judge adopted an equitable, functional test. He identified the principles on which compensation is traditionally allowed: (a) agreement to compensate; (b) consent to the improvements; or (c) fair grounds to presume consent would have been given. He therefore framed compensable improvements as those for which the consent of the other party may fairly be presumed.
- High Court acceptance and clarification: The High Court accepted the District Judge's findings, reaffirmed that mortgagees are entitled to the value of improvements, and further clarified that "improvements" mean any work beneficial to the property—that is, those to which a reasonable owner would have consented.
- Procedure for valuation: The Court directed that a finding as to value be reported (with opportunity for further evidence and objections), but, following a subsequent civil miscellaneous petition jointly filed by the parties, the Court cancelled the order calling for a valuation finding and left the valuation question to be determined in any future suit brought for recovery of possession.
Holding and Implications
Core Holding: The High Court declared that the defendants (usufructuary mortgagees) are entitled to the value of the improvements effected by them.
Implications and direct consequences:
- The Court accepts and applies a local custom in South Canara (as established by the collected evidence and prior district decisions) that permits a usufructuary mortgagee to claim compensation for improvements made during occupation, in the absence of an agreement to the contrary.
- The Court defined "improvements" for this purpose as any work beneficial to the property or to which a reasonable owner would have consented, and emphasized an equitable test centered on agreement, consent, or a fair presumption of consent.
- Determination of the monetary value of such improvements in this particular case was initially directed to be reported by the lower court with leave to take further evidence; however, on joint request of the parties, the Court cancelled that directed finding and left valuation to be determined in any future suit for recovery of possession.
- The decree to be drawn in Second Appeal No. 742 of 1894 declares the defendants entitled to the value of improvements as explained; the Court made no order as to costs.
1. We are unable to agree with either of the Lower Courts that there is anything in the language of the mortgage instrument or exhibit A to indicate that the intention of the parties was that the mortgagee should forego any claim to the value of improvements, if he was entitled thereto by the customary law. The 5th issue seems to have been raised to try" the question" whether there was a custom in South Canara by which usufructuary mortgagees were entitled to the value of their improvements. No finding has been come to as to the existence or non-existence of this custom, and" the question" must now be tried, as we find that, the parties did not contract themselves out of the custom, if it existed. The question will be whether there is a custom in South Canara entitling a usufructuary mortgagee to the value of improvements effected by him; and if so, what are treated as improvements to be paid for under the custom. In trying this question the Judge should take not only the evidence adduced before himself, but he should issue commissions to the several Munsifs in his District also to take evidence on the point. He must then come to a finding upon the whole of the evidence so taken and submit it to this Court within two months from the date of the receipt of this order. Seven days will be allowed for filing objections after the finding has been posted up in this Court. The further question as to the value of the improvements in this case will be reserved.
In accordance with the above order the District Judge submitted the following Finding:- With reference to the order dated 19th October 1896 of the High Court calling for a finding in S.A. No. 742 of 1894, I have the honour to state as follows:
The remand order recites that "the Vth issue in the suit"--which runs thus:
What is the value of improvements, if any, effected on the mortgaged properties? and is the same recoverable in addition to the mortgage amount?
seems to have been raised to try" the question" whether there was a custom in South Canara, by which usufructuary mortgagees are entitled to the value of their improvements-
and proceeds that, as no finding has been come to as to the existence or non-existence of this custom,
" the question"must now be tried.
The question" resolving itself in 2 heads:
(1) Whether there is a custom in South Canara entitling a usufructuary mortgagee to the value of improvements worked by him, (2) What are the "improvements" to the value of which he is entitled under such custom.
2. As matter on which my finding on these questions is to test, I am directed, besides the evidence adduced before this Court, also to issue commissions to the several Munsifs in the district to take evidence.
The 5 Munsifs have submitted the evidence offered before them, oral and documentary (with their opinions on its value and effect) : before this Court no evidence is offered.
For appellants Mr. T. Bhavani Rao appeared and argued that (1) the custom is established by the evidence;
(2) there is no limitation as to the character of the improvements, the value of which the mortgagee is entitled to recover.
For respondents there is no appearance.
3. The evidence so collected is almost entirely in favour of the existence of such a custom, viz.,
"that the usufructuary mortgagee at the termination of his occupation has a valid claim (in default of any special agreement on the subject) to compensation on account of improvements worked by him daring his term of occupation on the lands held under his usufructuary mortgage."
The weight of evidence on this point is so overwhelming that very little discussion of it is necessary. Of the 6 Munsifs, 4 (Kundapur, Karkal, Puttur and Mangalore) give their opinion unhesitatingly in favor of the custom : the 5th (Udipi) says that the evidence given before him does not establish the custom, but he does not consider the evidence against the custom so given satisfactory : and the 6th (Kassargode) reports that no evidence was produced before him on which any conclusion could be based.
4. The documentary evidence is (as was naturally to be expected) principally in the shape of original decisions on the point in the Courts of this district and appeals from them.
The oral evidence given before the Kundapur Court in favor of the custom seems to me to carry weight (and the oral evidence of the witnesses for plaintiffs--respondents before the Mangalore Munsif to show that the documents which they produced are of no avail to disprove the custom).
The most important judgments are those marked as exhibits XLVII, XLVIII and XLIX.
This is a case before the late Barkur District Munsif, in which a very heavy claim for improvements (the level of the lands, which abutted on a river, had been raised; wells and tanks formed; expen-
sive buildings erected; trees planted, &c) were disallowed in part :
on appeal before the Principal Sadar Amin, the claim for improve-
ments was altogether disallowed on the ground of absence of either (1) contract or (2) consent on the other part : in special appeal to the High Court, the claim for compensation was decreed--the learned Judges Holloway (at that time acting as Chief Justice) and Kinders-
ley (who bad served in this district as Sub-
* For estimation of Judge) remarking in their order of * remand the value of improve "It is certainly the customary law of Mala-
Although the customary law here stated to exist refers to an evicting landlord and tenant--the case in which the order was passed was one of a mortgage in usufructuary possession, and I think there can belittle doubt that this decision (passed in 1871) has gone far to create more "precedents" to establish the same custom with regard to mortgagees. That decision was passed 25 years ago and probably has created a "custom" by dint of precedent by this time, even if there was none before. On this point--the existence of such a custom previously--there is no evidence before me. That it exists in Malabar under the Kanom tenure is well established--and this should have been in Mr. Justice Holloway's time when he referred to the "Malabar Customary Law" : but whether such a custom--as between usufructuary mortgagees and other parties recovering the land from them--previously existed in South Canara, there is nothing to show.
Since then (as shown by the exhibits produced in this enquiry) the Courts of this district have obviously followed the dictum above given and applied it to cases similar to the one in which it was given.
My opinion on the first point, therefore, is that the custom as above described (para 3) is now established.
5. It now remains to consider what is the nature of the improvements to compensation (value) for which the outgoing mortgagee is entitled.
Are there any limitations or exceptions?
As noted above, the Vakil for appellants claims that there were none and I cannot say that, on the evidence directly given, there are any exceptions established. But there are considerations which have clearly gone to the establishment of the custom--it is one which approves itself in equity to the human mind and is adopted into the equitable law of England (and most other countries)--which suggest the lines on which the claim to value for improvements in such cases should fairly be--and has, in the former cases, which create precedents, which create custom, been--awarded.
6. The grounds on which an allowance is made to the occupier for time or money which he expends in improving the property in his occupation are:
(1) that the other party agreed to compensate him for results so achieved;
(2) that "consent" was given to the improvements worked;
(3) that there are fair grounds for presuming that consent would have bean given if it had been asked.
That District Munsifs in their reports give lists of certain classes of work which have been accepted by the Courts and others in various cases as forming ground for valid claims under this head; and we have the word permanent "improvements" are used in the order above referred to (para. 4).
But to compile a list of particular classes of work which are to be considered "established as claims for compensation by custom," is to run the risk of excluding some which have been overlooked, simply because they do not happen to have come before the Courts in the cases which are produced in this enquiry as precedents showing the custom; and the term "permanent" is too vague to be of much use.
7. I think, therefore, the best finding that I can give on the second point in" the question" raised in this order of remand is-
That compensation has in the past been awarded in cases where the improvements effected have been such that the consent of the other party to the making of such improvements may fairly be presumed-
And that the "custom" has been created by a series of such "awards"--and may best be defined in the same words--This also is in accord with the principles of equity.
This second appeal coming on for hearing on 26th day of April 1897, after the return of the above finding from the Lower Appellate Court, the Court delivered the following)
8. We accept the findings of the Judge, the objections to which are not seriously pressed, and in accordance therewith declare that the mortgagees (the defendants) are entitled to the value of the improvements effected by them, and by "improvements" we understand any work beneficial to the property, or, in other words, to which a reasonable owner would have consented.
9. A finding must therefore now be come to and reported to this Court as to the value of such improvements. Further evidence may be taken if the Judge considers it necessary. The finding must be submitted within a month after the re-opening of Court after the recess. Seven days will be allowed for filing objections after the finding has been posted up in this Court.
10. Before receipt of the finding in accordance with the above judgment and order, the parties put in Civil Miscellaneous Petition No. 91 of 1898 praying that" the question" of the value of improvements may be reserved for determination in any future suit which may be brought for possession and that the order calling for finding may be cancelled.
11. This petition and the second appeal coming on for hearing the Court delivered the following
12. As both parties desire it, we cancel our order calling for a finding as to the value of improvements which we leave to be determined in a suit brought for recovery of possession.
13. The decree in this Second Appeal No. 742 of 1894 can now be drawn up declaring that the defendants are entitled to the value of improvements effected by them, as explained in the judgment. We make no order as to costs.
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