Decided on July 26,1967



- (1.) THIS appeal is in a suit to redeem a puisne mortgage, the kachit (counter-deed) whereof is Ext. A I dated 22nd July 1931, executed by the 1st defendant in favour of the plaintiff. The 1st defendant died pending the suit and is represented by defendants 2 to 4, defendants 2 and 3 being his sons, and defendant 4 the wife of defendant 2. The 5th defendant is his mother-in-law. By the written statement filed on 14th October 1950 the 1st defendant claimed immunity from eviction as a tenant under Ext. A I which he allowed to be a lease in substance, and in any view as holder of a kudiyiruppu on the suit property entitled and willing to purchase the rights of the landlord therein. That contention is continued by his legal representatives. The Courts below concurrently found the transaction under Ext. A I to be a mortgage and therefore redeemable. The Munsif held the defendants to be kudiyiruppu holders and therefore tenants entitled to immunity from eviction, and dismissed the suit; but on appeal by plaintiff, the Subordinate Judge held the defendants not to be kudiyiruppu holders entitled to fixity of tenure and decreed redemption on payment of Rs. 200/-as the mortgage amount and Rs. 8859. 76 as value of improvements. Defendants 2 to 5 have come up in second appeal
(2.) THE first question raised is whether the transaction under Ext. A 1 is a lease or a usufructuary mortgage. THE document reads: As ruled by a Full Bench of this Court in Krishnan nair v. Sivaraman Nambudiri 1967 KLT. 78 FB. as also by the Supreme Court in lakshmi v-Narayani 1967 KLT. 1 SC. the distinction between a lease and a mortgage lies in the purpose of the transfer of property: a lease is for the purpose of enjoyment of the property and a mortgage is for the purpose of securing a loan. The property here is a small bit of building Site, about 18 odd cents in extent. The recitals in Ext. A 1 are clear that the purpose of the transfer is not cultivation of the land or even residence thereon, and Ext. A-2, the book of accounts of the plaintiff, shows that the purpose of execution of Ext. A 1 was to raise funds to be remitted to a Bank towards interest on a pronote executed in its favour by the plaintiff. Ext. A 1 spells a usufructuary mortgage. Counsel for appellant relied on the dicta in Krishnan nair v. Sivaraman Nambudiri 1967 KLT. 78 FB. to support his contention that the instant transaction is in substance a lease and not a mortgage. The test of "the ratio which the amount periodically payable to the transferor bears to the rental value of the property, a higher ratio being indicative of a lea se and a lower of a mortgage" cannot help the appellants as such ratio in the instant transaction is very low, being less than 6 in 40 (to be exact Rs. 5 as. 10 in Rs. 40 ).
(3.) COUNSEL urged alternatively that. Ext. A 1 embodies a composite transaction of a mortgage-cum-lease attracting the ratio of para 6 of the Full Bench judgment, which runs thus: "moreover, as in the instance noticed in the order dated 8-11-1963 staying the hearing of S. A. No. 88 of 1963 under S. 5 of Act 7 of 1963, a transaction can be a composite transaction embodying both a mortgage and a lease. If it is at least in part a lease no matter how small a part, the person holding under it would be a tenant entitled to fixity under S. 13 so that redemption of the part which is a mortgage, no matter how predominant a part, would not entitle the mortgagor to obtain possession which is what a plaintiff suing for redemption normally wants. Therefore, the proper question to be asked in such cases is whether the transaction is, to any extent, a lease. " The argument is that insofaras the instant transaction stipulates payment of a residual rent of Rs. 5 As. 10 per annum it partakes the nature of a lease and therefore comes within the dictum quoted above. As the exact import of that dictum appeared to me a bit baffling, particularly as to the meaning of the expression "a composite transaction embodying both a mortgage and a lease" in respect of the same property, entitling the grantee to fixity of tenure "if it is at least in part a lease", I have got down the order dated 8th November 1963 referred to therein as an instance of seen a transaction. I must say it at once revealed the significance of the observation in Quinn v. Leathern 1901 AC. 495 that a judicial pronouncement, though general in its expression, must be understood Secundum subjectam materiam, which implies that, when a judge's mind is preoccupied with a case, his thoughts and therefore his expressions are bounded by the facts and circumstances of that case he is deciding. The composite transaction that provoked the concerned dictum was a Melvaippapattachit, the terms of which are given in the order itself thus: "melvaipappattacheet executed by Mathai Mathew and wife Annamma in favour of Gheevarughese Gheevarugtese on 11th August 1953: We the executants are entitled to and are in possession and enjoyment of the property scheduled hereunder-Entrusting the property to you on pattam (lease)for one year from today on a pattam of 155 Pathinazhi paras of paddy, we haw received Rs. 1200 as Melvaipa artham charged on the property for the purpose of getting a surrender of the rights that. . . . Damodaran Pillai is supposed to have in the property. You are authorised to appropriate 54 paras of paddy towards interest for this amount from the pattam and are directed to deliver the balance, 101 paras, at the residence of the 2nd executant's father on or before 10th Medam 1112 and get a receipt from the 1st executant. You shall remain in possession till the term, expires, and, on the expiry of the term, we shall redeem the property on payment of the Melvaipa artham. If any loss or damage occurs in the property. . . you must notify us and if you do so the 1st executant will come and see and jointly harvest and do what is proper so that you suffer no loss of the Melvaipa artham or, interest thereon. . . . " The order continues, "the document calls itself a melvaipapattacheet which literally means a secured loan cum lease deed or mortgage cum lease deed; and its terms amply bear out this description. It opens by saying that the land is given to the transferee on pattam or rent, in the context, on lease, the rent fixed being 155 paras of paddy a year. This itself seems to me sufficient to show that the property was given for the enjoyment of the transfers in consideration of his agreeing to pay rent. This is not altered by the circumstance that, in addition, the transferor takes a loan from the transferee on the security of the property and authorises the latter to deduct the interest from the rent and paying him only the balance. . . . " It is obvious from the terms of that instrument that the landowner first leased out the property and then took an advance from the lessee on the security of the reversion. The learned judge has made this clear in another portion of the order thus: "in fact, the mortgage in this case is of the reversion, and, it is not by accident that the lease is mentioned first in the document, and then the mortgage. " It is then clear that that transaction was a composite one-a lease cum mortgage and its terms and recitals, which induced the observations in Para. 6 of the Full Bench judgment 1967 KLT. 78 cited above, bear no parallel to what are embodied in Ext. A-1. In the instant deed, there is only one transaction not two and the question here is whether that single transaction is a lease or a mortgage. There is no scope here for consideration whether any part of a composite transaction is a lease while its remaining part is a mortgage. In regard to transactions of the kind concerned here it is the observation in para 10 of the Full Bench judgment 1967 KLT. 78 FB. that is pertinent: ". . . Where a transfer of possession for enjoyment may be accompanied by; a transfer of some other interest (in the instance mentioned, of the remainder after the lease created by (he former transfer) by way of security for the loan advanced, it is theoretically possible for the same transfer to be for concurrent purposes, both for the purpose of enjoyment and for the purpose of security. In such a case, it might be necessary to find out the dominant or essential purpose; the other purpose would then be merely incidental, constituting an incident of the transfer rather than its purpose. But, generally speaking, if there is, in truth, a loan and a transfer of possession by way of security, that would be the real purpose of the transfer, and the enjoyment on the part of the transferee which this necessarily involves would be but an incident and not the purpose of the transfer. " And, as has already been said (vide para 3 supra that the real nature of the transact tion depends really on the purpose of the transfer of possessions thereunder. Possession of property can only be for its enjoyment. If it is for enjoyment simpliciter the transfer is a lease. If it is for enjoyment for appropriation of profits, wholly or in part, in lieu of interest or in payment of the principal of a loan advanced it is a usufructary mortgage, exempt where the money advanced is insignificant when to call it a loan on the security of property might be ridiculous. As per Ext. A-1, out of Rs. 40, the annual rental value of the property, a sum of Rs. 34/- odd is to be appropriated by the transferee for interest on his advance and Rs. 5 odd is to be paid as a residual rent to the transferor. The amount advanced cannot then be said to be insignificant in respect of the property concerned. Thus under the dicta in Krishnan nair v. Sivaraman Nambudiri 1967 KLT. 78 FB. the transfer under Ext. A-1 has to be held a usufructuary mortgage, and not a lease.;

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