Case Note & Summary
The dispute arose from a house in Phaltan where the father of the appellants, Vishnu, was a tenant of the front portion of House No. 115, Rawiwar Path. The house was owned by Baburao Savalaram Kothawale, the original plaintiff. In 1952, Baburao executed three documents styled as conditional sale deeds in favour of Vishnu, transferring possession of the front, rear, and middle portions for amounts of Rs.2,000, Rs.1,200, and Rs.2,000 respectively. These deeds provided for reconveyance if the amounts were repaid within six, seven, and nine years, failing which the deeds would be treated as outright sales. Later, Vishnu created a tenancy of the middle portion in favour of Baburao, but rent was not paid, leading to decrees for rent and possession. Vishnu died in 1957, and his heirs obtained possession of the entire house. In 1959, Baburao sought redemption of the front portion, but the heirs refused, claiming the period had expired. Baburao filed a redemption suit in 1974. The Trial Court held the transactions to be mortgages by conditional sale and passed a preliminary decree for redemption on deposit of Rs.5,200. The lower appellate court dismissed the appeal. The Bombay High Court dismissed the second appeal, holding that the tenancy rights of the heirs over the front portion had merged in the possessory mortgage and did not survive. Special leave was granted by the Supreme Court limited to the question of the front portion. The appellants argued that there was no automatic merger and no implied surrender; the respondent argued that the three documents read together showed an implied surrender, especially the recital of delivery of possession to the purchaser. The Supreme Court examined Section 111(d) of the Transfer of Property Act and precedents including Shah Mathuradas, Sambangi Applaswamy Naidu, Nand Lal, and Nemi Chand, which established that a lease and mortgage cannot merge automatically because neither is a higher estate than the other. The Court held that the intention of the parties at the time of execution of the mortgage deed must be gathered from its terms and surrounding circumstances. In the present case, the mortgage deed contained no provision for delivery of possession upon redemption, no interest was charged on the mortgage amount, and no rent was paid, indicating that rent and interest were intended to offset each other. The tenant had a valid tenancy since 1942 and would not have surrendered while knowing the mortgagor had a right to redeem. Therefore, there was no implied surrender, and the tenancy rights revived upon redemption. The appeal was allowed.
Headnote
A) Transfer of Property - Merger of Lease and Mortgage - No automatic merger under Section 111(d) - Transfer of Property Act, 1882, Section 111(d) - The High Court held that a tenant-mortgagee's lease merged in possessory mortgage and tenancy rights did not survive. The Supreme Court reiterated that a lease and a mortgage in respect of the same property cannot merge because neither estate is higher or lesser than the other. Therefore, mere execution of a possessory mortgage in favour of a sitting tenant does not determine the tenancy automatically; intention to surrender must be established. Held that the tenancy of the front portion did not stand determined by merger under Section 111(d) (Paras 1-5)
B) Transfer of Property - Implied Surrender of Tenancy - Factors for ascertaining intention - Transfer of Property Act, 1882, Section 111(d) - The question whether a tenant-mortgagee impliedly surrendered tenancy rights depends on terms and conditions of mortgage deed and surrounding circumstances. In the present case, the mortgage deed stated no provision for delivery of possession upon redemption, no interest was payable on mortgage amount and no rent was charged, indicating the parties intended rent and interest to offset each other during subsistence of mortgage. The tenant had a valid tenancy since 1942 and would not surrender while conscious of mortgagor's right to redeem. Held that there was no implied surrender and tenancy rights revived on redemption (Paras 1-5)
Issue of Consideration
Whether there was an implied surrender of tenancy by the appellants-defendants in favour of the respondent-plaintiff when the respondent-plaintiff executed a mortgage of the premises in favour of the appellants, and whether tenancy rights revived on redemption.
Final Decision
The Supreme Court held that there was no implied surrender of the tenancy by the appellants-defendants. The tenancy rights in respect of the front portion stood revived upon redemption of the mortgage. The appeal was allowed.
Law Points
- A lease and a mortgage in respect of the same property do not merge automatically under Section 111(d) Transfer of Property Act
- 1882
- implied surrender of tenancy must be inferred from intention of parties
- intention gathered from terms of mortgage deed and surrounding circumstances
- execution of mortgage by lessor in favour of lessee does not by itself determine tenancy
- tenancy rights revive on redemption unless express or implied surrender
Case Details
KIRPAL B.N., BHARUCHA S.P.
1996 AIR 368, 1995 SCC (6) 608, JT 1995 (7) 393, 1995 SCALE (5) 763
Mr. V.M. Tarkunde, Mr. Raju Ramachandran
Narayan Vishnu Hendre and Ors.
Baburao Savalaram Kothawale since deceased by his heir Anant B
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Nature of Litigation
Civil appeal arising from a suit for redemption of mortgage and recovery of possession of a house, focusing on whether tenancy rights over the front portion survived the mortgage.
Remedy Sought
The appellants-defendants sought to set aside the High Court's judgment and resist delivery of actual possession of the front portion upon redemption, claiming that their tenancy revived.
Filing Reason
The respondent-plaintiff filed a suit for redemption of mortgage and recovery of possession; the appellants-defendants resisted by claiming, among other pleas, that their tenancy over the front portion would revive upon redemption.
Previous Decisions
The Trial Court decreed the redemption suit, holding the transactions to be mortgages by conditional sale, and passed a preliminary decree for redemption on deposit of Rs.5,200. The lower appellate court dismissed the defendants' appeal. The Bombay High Court dismissed the second appeal, holding that the tenancy rights had merged in the possessory mortgage and did not survive. Special leave was granted limited to the front portion.
Issues
Whether the doctrine of merger under Section 111(d) of the Transfer of Property Act applied to extinguish the tenancy when the lessee obtained a possessory mortgage from the landlord.
Whether there was an implied surrender of the tenancy by the appellants-defendants in favour of the respondent-plaintiff at the time of execution of the mortgage deeds.
Whether the tenancy rights of the appellants-defendants in respect of the front portion revived upon redemption of the mortgage.
Submissions/Arguments
The appellants argued that the doctrine of merger did not apply, as a lease and mortgage cannot merge in respect of the same property, and there was no express or implied surrender; therefore, tenancy rights revived on redemption.
The respondent-plaintiff argued that, although there was no automatic merger, the three mortgage documents should be read together and showed an implied surrender, particularly because the deeds stated that possession was delivered to the purchaser/mortgagee.
Ratio Decidendi
A lease and a mortgage in respect of the same property do not merge automatically under Section 111(d) of the Transfer of Property Act, 1882. The question whether a tenant-mortgagee impliedly surrendered tenancy rights depends on the intention of the parties gathered from the terms and conditions of the mortgage deed and surrounding circumstances. The mere execution of a mortgage deed by a landlord in favour of a sitting tenant and the recital of delivery of possession does not by itself amount to an implied surrender. Factors such as absence of provision for delivery of possession upon redemption, adjustment of rent against interest, and the tenant's long-standing possession indicate that the tenancy was not surrendered and it revives upon redemption.
Judgment Excerpts
For a merger to arise, it is necessary that a lesser estate and a higher estate should merge in one person at one and the same time and in the same right, and no interest in the property should remain outside. In the case of a lease the estate that is outstanding is the equity of redemption of the mortgagor. Therefore, there cannot be a merger of lease and mortgage in respect of the same property since neither of them is a higher or lesser estate than the other.
The mortgage deed makes no mention with regard to the delivery of the possession of the mortgagor in the event of his redeeming the mortgage.
Redemption of the mortgage for paying at the same amount of Rs. 2,000/- showed that the parties had agreed that during the subsistence of the mortgage, neither any rent would be payable nor interest would be charged.
Procedural History
On 16.4.1952 and two other dates, the respondent-plaintiff executed three documents styled as conditional sale deeds in favour of Vishnu, the father of the appellants, covering the front, rear, and middle portions of House No. 115, Rawiwar Path, Phaltan. In 1953, Vishnu created a tenancy of the middle portion in favour of the respondent-plaintiff. Rent recovery suit was decreed in March 1956. Vishnu died in 1957; the appellants filed a possession suit in 1958 and obtained a decree in 1959, securing possession of the whole house. On 23.12.1959, the respondent-plaintiff sought redemption of the front portion; the appellants refused. On 17.6.1974, the respondent-plaintiff filed a suit for redemption and recovery of possession. The Trial Court decreed the suit on 3.5.1979 with a preliminary decree for redemption on deposit of Rs.5,200. The lower appellate court and the Bombay High Court dismissed the appeals, with the High Court holding that the tenancy had merged in the mortgage. Special leave was granted by the Supreme Court confined to the front portion; judgment delivered on 13.10.1995.
Acts & Sections
- Transfer of Property Act, 1882: Section 111(d)
