Decided on October 10,1963

VELU Respondents

Referred Judgements :-



P.T.RAMAN NAYAR,J. - (1.)THIS appeal,by a plaintiff,is against an order of remand.
(2.)ON 22nd September 1948,the respondent -defen­dants,who are admittedly agriculturists entitled to the benefits of Kerala Act 31 of 1958,borrowed Rs.4,250 from the appellant -plaintiff on the possessory mortgage,Ext.P -2,under the terms whereof the profits accruing from the mortgaged property were to be appropriated in lieu of interest.On 27th March 1950,they paid a sum of Rs.2,500 towards the debt,thus reducing the principal to Rs.1,750.On the same day,they took the property back on lease under Ext.P -1 for an annual rent of Rs.210,which works out exactly to interest at 12 per cent per annum on the outstanding principal.( This shows that though no rate of interest is specified in the mortgage,the provision being that the entire profits should be appropriated in lieu of interest,the interest could not have worked out to less than 12% per annum.) In 1960 the plaintiff brought his present suit in which(after an amendment of the plaint on the basis that the defendants were entitled to the benefits of Act 31 of 1958)he sought a decree for the outstanding principal of Rs.1,750 together with interest thereon at 5% per annum from 27th July 1958,the rent due under Ext.P -1 up to that date having been paid in full.
(3.)THE defendants contended that,although the mortgage,Ext.P -2,purported to be a possessory mortgage,possession was not,in fact,handed over,and that,till the date of the leaseback under Ext.P -1,they were paying interest at the rate of 12% per annum.They therefore demanded that the debt be scaled down under the provi­sions of the Act,interest being allowed only at the rate of 5% per annum from the date of the mortgage in accor­dance with section 5.
The first court,while rightly holding that under sub -section(6)of section 11 of the Act,the possessory mortgage could be deemed to be a simple mortgage only from the date of the leaseback in other words,from 27th March 1950,at the same time wrongly held that,by reason of clause(b)of the sub -section,only interest accrued due after the commencement of the Act,i.e .,after 14th July 1958,could be reduced to 5% and that there could be no reopening of the payments made before that date which it thought must be appropriated in entirety in satisfaction of the interest accrued up to that date.( These payments were as for rent,but,by reason of the retrospective transmutation of the possessory mort­gage into a simple mortgage with effect from the date of the leaseback so that it is as if the leaseback had never been,must be deemed to have been never due on that account.) In so holding,it apparently lost sight of the provisions of clause (a) of sub -section(6)which says that, The Mortgage shall be deemed to be a simple mortgage from the date of the leaseback and the prov isions of this Act shall apply to the debt covered by the mortgage " ;. Among the provisions to be so applied would be sections 4 and 5 of the Act, This view has been taken by a Division Bench of this court in Pylee v. Madhavi Amma 1963 K.L.T.332 so that the Single Judge decision to the contrary in Philipose v. Raman 1963 K.L.T.317 cannot be regarded as good law. That section 11(6 ),by clause(b)thereof,provides only for interest after the commencement of the Act rather unnecessarily,I should have thought,since the effect of section 5(1 )(a )(i)would be to make 5% the rate both before and after the commencement,it being highly unlikely that the contract rate would,in any case,be less than 5% in this particular case,it was more than 12% and if,in any case,it is actually less,that the intention was that interest should be paid at the higher rate of 5% after the commencement of the Act and not for interest accrued due before that date,does not imply that in respect of such interest the provision in the mortgage for the appropriation of profits in lieu of interest is extant.For,with the retrospective conversion of the possessory mortgage into a simple mortgage as from the date of the leaseback,that provision goes,with the result that payment of interest on the simple mortgage will be governed by section 5 which is attracted by clause(a)of section 11(6 ).


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