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Thursday, January 1, 2015

2014(10)S.C. - CIVIL APPEAL NO. 1740 OF 2007 Dr. Thakar Singh (D) by Lrs.& Anr. ………Appellants Vs. Sh. Mula Singh (D) thr. LR. & Ors. ………Respondents




                 CIVIL  APPEAL NO. 1740 OF 2007

Dr. Thakar Singh (D) by Lrs.&  Anr.                      ………Appellants


Sh. Mula Singh (D) thr. LR. & Ors.                    ………Respondents

                               J U D G M E N T


1.    In this Civil Appeal an interesting question arises for decision.  One
Nand Singh and Dr. Thakar Singh filed a suit for recovery for possession  of
various shops cum vacant sites situated in  the  main  Bazar  of  Moga  Town
against 14 defendants.  The suit property had been  mortgaged  to  one  Suba
Singh and Saudagar Singh, defendants 1 and 2, for a sum of Rs.26,000/-  vide
registered mortgage deed dated 9th March 1942.  After taking  an  additional
amount of Rs.3,000/- from the aforesaid Suba Singh and Saudagar  Singh,  the
plaintiffs executed an additional registered mortgage deed dated  3rd  March
1943.  The material terms of the mortgage deed dated 9th  March  1942,  with
which we are concerned, reads as follows:

           “Now we the executants while in our full  senses  and  with  our
           free will having mortgaged with possession the aforesaid  shops,
           Ahatas including lane passage  together  with  material  (malba)
           chob kari (wooden shafts) etc.,  including  well  together  with
           right to ingress and egress convenience and residence in  favour
           of Suba Singh s/o Mutsada Singh, caste Jat resident of Wara Bhai
           and Saudagar Singh son of Sh. Rattan Singh caste Jet r/o Jawahar
           Singh Didar Singh wala in equal share for a sum  of  Rs.26,000/-
           (Twenty Six thousand) only half of  which  comes  to  Rs.13000/-
           (Thirteen thousand) only possession of which has been  given  to
           them. The present mortgagees shall  get  the  actual  possession
           from the previous mortgagees after paying their  mortgage  money
           to them and after getting  the  land  redeemed  from  them.  The
           mortgagees are competent either to be in  occupation  themselves
           or to give on rent to anyone. Whenever the total mortgage  money
           is paid in two lots the half of the mortgage property  shall  be
           got redeemed in two lots at the discretion  of  the  mortgagors.
           The redemption of southern side of the lane shall be  deemed  to
           be half and that of the  northern  side  shall  be  other  half,
           meaning thereby that it will be discretion of the mortgagors  to
           redeem the southern side of lane or the northern side on receipt
           of the half of the mortgage money. We shall be  liable  for  any
           proceedings arising out of any objection thereto. We shall  also
           be liable to  make  good  the  loss  or  damage  caused  to  the
           mortgagees on account of any legal  or  factual  defect  in  the
           mortgaged  property.  The  expenses  for   white   washing   and
           plastering shall be borne by the mortgagees, but the expenses of
           repairs  and  reconstructions  shall  be  borne   by   us,   the
           executants. In case of our failure, the mortgagees shall get  it
           done after giving notice to us and then we shall  be  liable  to
           pay the expenses borne by the  mortgagees.  On  the  payment  of
           mortgage money when the mortgage money is paid, from that day on
           taking possession we  shall  be  entitled  to  receive  rent  in
           future.”  (Underlining ours)

2.    On 25th August 1969, the plaintiffs redeemed the mortgaged  properties
by depositing a sum of Rs.29,000/- . The cause  of  action  for  filing  the
present suit arose on account of the fact that physical  possession  of  the
suit property  was  not  handed  over  to  the  plaintiffs  even  after  the
redemption of the mortgaged property. The defendants 1 and  2  are  said  to
have rented out portions of the suit property to defendants 3 to  14.  Since
the defendants failed to deliver possession, the  plaintiffs  filed  a  suit
for possession and recovery of damages.  In the Trial  Court,  a  number  of
issues were struck between the parties.   In  the  present  appeal,  we  are
concerned basically with Issue 4, which reads as under:

            “Whether the suit is barred under the  provisions  of  the  Rent
           Restrictions Act?”

The Trial Court decided the case on all 11 issues and held that  on  a  true
reading of the mortgage deed, the mortgagor had recognized  the  tenants  of
the  mortgagee  whose  tenancy  therefore  did  not  come  to  an  end  with
redemption of the mortgage.  In First Appeal, the High Court of  Punjab  and
Haryana did not go into any of the other issues including the  issue  as  to
whether the tenancies were created before or after the execution of the  two
mortgage deeds.  It held on a reading of a  clause  in  the  first  mortgage
deed that since the mortgagors  would  be  entitled  to  future  rent  after
redemption, it is clear that the mortgagors recognized all  tenants  created
by the mortgagees during the subsistence of the  mortgage.  Issue  No.4  was
answered accordingly  and  the  suit  for  vacant  possession  of  the  suit
property from defendants was held not to be maintainable in law.

3.    Learned counsel  for  the  appellants  raised  a  two-fold  contention
before us.  Firstly, a correct reading of the two mortgage deeds would  only
lead to the conclusion that on  redemption  all  tenancies  created  by  the
mortgagees would cease to have any effect and would not be  binding  on  the
mortgagors.  Alternatively, it was also argued that if it  were  found  that
on a true construction of  the  mortgage  deed  the  mortgagors’  right   to
redeem was in fact clogged such  clog  would  not  be  countenanced  by  the
courts and full effect of  redemption  including  the  right  to  take  back
possession of the  mortgaged  property  free  from  all  encumbrances  would
ensue.   Learned  counsel  for  the  respondents  basically  supported   the
judgment under appeal and argued that it was clear from  a  reading  of  the
mortgage deed that the mortgagors had in fact recognized  tenancies  created
by the mortgagees and therefore the present suit would not  be  maintainable
- the mortgagors have to go to a Rent Court  to  make  out  some  ground  of
eviction against tenants recognized by them.

4.    The right of a mortgagor to redeem is dealt with by Section 60 of  the
Transfer of Property Act.  Section 60 reads as follows:

           “60. Right of mortgagor to redeem
           At any time  after  the  principal  money  has  become  due,  the
           mortgagor has a right, on payment or tender, at a proper time and
           place, of the mortgage-money, to require  the  mortgagee  (a)  to
           deliver to the mortgagor  the  mortgage-deed  and  all  documents
           relating to the mortgaged property which are in the possession or
           power of the mortgagee, (b) where the mortgagee is in  possession
           of the mortgaged property, to deliver possession thereof  to  the
           mortgagor, and (c) at the cost of the  mortgagor  either  to  re-
           transfer the mortgaged property to him or to such third person as
           he may direct, or to execute and (where  the  mortgage  has  been
           effected by  a  registered  instrument)  to  have  registered  an
           acknowledgement in writing that any right in  derogation  of  his
           interest transferred to the mortgagee has been extinguished:

           Provided that the right conferred by this section  has  not  been
           extinguished by act of the parties or by decree of a Court.

           The right conferred by this section is called a right  to  redeem
           and a suit to enforce it is called a suit for redemption.

           Nothing in this section shall be deemed  to  render  invalid  any
           provision to the effect that, if the time fixed  for  payment  of
           the principal money has been allowed to pass or no such time  has
           been fixed, the mortgagee shall be entitled to reasonable  notice
           before payment or tender of such money.”

Section 62 also recognizes the right of a usufructuary mortgagor to  recover
possession under certain circumstances.  Further, the rights of a  mortgagee
in possession are dealt with by Section 72 of the Transfer of Property  Act.
 Suffice it to say that the right to create tenancies  is  not  one  of  the
rights  enumerated  in  this  section.   Section  76  (a)   deals   with   a
usufructuary mortgagee  managing  the  property  as  a  person  of  ordinary
prudence would manage if it were his own.  Section 111(c)  of  the  Transfer
of Property Act states:

           “S. 111 Determination of lease. —A lease of immovable property
           determines –-

           (c) where the interest of the lessor in the property  terminates
           on, or his power to dispose of the same  extends  only  to,  the
           happening of any event –- by the happening of such event;”

In All Indian Film Corpoation Ltd. & Ors. v.  Sri  Raja  Gyan  Nath  &  Ors.
[1969 (3) SCC 79], a similar question  arose  before  this  Court.   In  the
facts of that case, the mortgage was  redeemed  on  19th  April  1958  after
which the respondent No.1 filed a suit for possession of the  property  from
the head lessee and his sub-lessees.  The sub-lessees  claimed  the  benefit
of the East Punjab Urban Restriction Act.  In repelling  the  contention  of
the sub-lessees that they were protected tenants as against  the  mortgagor,
this Court stated:

           “7. The first question to consider  is  this:  Did  the  tenancy
           created by the mortgagee in possession survive  the  termination
           of the mortgagee interest so as to be binding on the  purchaser?
           A general proposition of law is that no  person  can  confer  on
           another a better title than he himself  has.  A  mortgage  is  a
           transfer of an interest in specific immovable property  for  the
           purpose of securing -repayment of a loan. A mortgagee's interest
           lasts only as long as  the  mortgage  has  not  been  paid  off.
           Therefore on  redemption  of  the  mortgage  the  title  of  the
           mortgagee comes to an end. A  derivative  title  from  him  must
           ordinarily  come  to  an  end  with  the  termination   of   the
           mortgagee's title. The mortgagee by creating a  tenancy  becomes
           the lessor of the property but his interest  as  lessor  is  co-
           terminous with his mortgagee interest.  Section  111(c)  of  the
           Transfer of Property Act provides  that  a  lease  of  immovable
           property determines where the interest  of  the  lessor  in  the
           property terminates on, or his power to  dispose  of  the  same,
           extends only to the happening of any event-by the  happening  of
           such event. The duration of the mortgagee's interest  determines
           his position as the  lessor.  The  relationship  of  lessor  and
           lessee cannot subsist beyond the mortgagee's interest unless the
           relationship  is  agreed  to  by  the  mortgagor  or   a   fresh
           relationship is recreated. This  the  mortgagor  or  the  person
           succeeding to the mortgagor's interest may elect to do.  But  if
           he does not, the lessee cannot claim any rights beyond the  term
           of his original lessor's interest. These propositions are  well-
           understood and find support in two  rulings  of  this  Court  in
           Mahabir Gope and Ors. v. Harbans Narain Singh [1952]1SCR775  and
           Asaram and Ors. v. Mst. Ram Kali [1958] S.C.R.986

           8. To the above propositions there is, however,  one  exception.
           That flows from Section 76(a) which lays down liabilities  of  a
           mortgagee in possession. It is provided there that  when  during
           the continuance of the mortgage, the mortgagee takes  possession
           of the mortgaged property, he must  manage  the  property  as  a
           person of ordinary prudence would manage it if it were his  own.
           From this it is inferred that acts done bona fide and  prudently
           in the ordinary course of management, may bind  even  after  the
           termination of the title of the mortgagee  in  possession.  This
           principle applies ordinarily to the management  of  agricultural
           lands and has seldom been extended to urban property  so  as  to
           tie it up in the hands of lessees or to confer  on  them  rights
           under special statutes. To this again there is an exception. The
           lease will continue to bind the mortgagor  or  persons  deriving
           interest from him if the mortgagor had concurred to grant it.”

This judgment was followed in M/s. Sachalmal  Parasam  v.  Smt.  Ratnabai  &
Ors. [1973 (3) SCC 198] at paragraphs  5 to 9.

5.    In Pomal Kanji Govindji & Ors. v. Vrajlal  Karsandas  Purohit  &  Ors.
[1989 (1) SCC 458], this Court dealt with the same question and  arrived  at
two basic conclusions. The first is that a clog on the equity of  redemption
will be disregarded by a Court of law and secondly that a lease  created  by
a mortgagee in possession of  an  urban  immovable  property  would  not  be
binding on the mortgagor after redemption of a mortgage even  assuming  such
lease is as a prudent owner of property would  have  granted  in  the  usual
course of management.  This Court held:

           “32. It is a settled law in England and in India that a  mortgage
           cannot  be  made  altogether  irredeemable  or  redemption   made
           illusory. The law must respond and be responsive to the felt  and
           discernible compulsions of circumstances that would be equitable,
           fair and just, and unless there is anything to  the  contrary  in
           the statute, court must take cognisance  of  that  fact  and  act
           accordingly. In the context of fast  changing  circumstances  and
           economic stability, long-term for redemption makes a mortgage  an
           illusory mortgage, though not decisive. It should prima facie  be
           an indication as to how clogs on equity of redemption  should  be

           33. In the facts and the circumstances and in view  of  the  long
           period for redemption, the provision for interest @  ½  per  cent
           per annum payable on the principal amount at the end of the  long
           period,  the  clause  regarding  the  repairs   etc.,   and   the
           mortgagor's financial condition, all these suggest that there was
           clog on equity. The submissions made by Mr. Sachar and Mr.  Mehta
           are, therefore, unacceptable.

           35. Before we dispose of the contentions on the second aspect, we
           must deal with some of the decisions of the Gujarat High Court to
           which reference had been made and some of which was also referred
           before us. We have noticed the decision of the Gujarat High Court
           in Khatubai  Nathu  Sumra  v.  Rajgo  Mulji  Nanji.  In  Maganlal
           Chhotalal Chhatrapati v. Bhalchandra Chhaganlal Shah, P.D. Desai,
           J. as the learned Chief Justice then was, held that the  doctrine
           of clog on the  equity  of  redemption  means  that  no  contract
           between a mortgagor  and  mortgagee  made  at  the  time  of  the
           mortgage and as a part of the mortgage transaction or,  in  other
           words, as a part of the loan, would be valid if it  in  substance
           and effect prevents the mortgagor from getting back his  property
           on payment of what is due on his security. Any such bargain which
           has that effect is invalid. The  learned  Judge  reiterated  that
           whether in a particular case long term amounted to a clog on  the
           equity of redemption had to be decided on the evidence on  record
           which brings out the attending circumstances or  might  arise  by
           necessary implication on a combined reading of all the  terms  of
           the mortgage. The learned Judge found  that  this  long  term  of
           lease along with the cost of repairing or  reconstruction  to  be
           paid at the time of redemption by the  mortgagor  indicated  that
           there was  clog  on  equity  of  redemption.  The  learned  Judge
           referred to certain observations of Mr. Justice  Macklin  of  the
           Bombay  High  Court  where  Justice  Macklin  had  observed  that
           anything which does have the appearance  of  clogging  redemption
           must be examined critically, and that if the  conditions  in  the
           mortgage  taken  as  a  whole  and  added  together   do   create
           unnecessary difficulties in the way of redemption it  seems  that
           is a greater or less clog upon the equity  of  redemption  within
           the  ordinary  meaning  of  the  term.  In  our   opinion,   such
           observations  will  apply  with  greater  force  in  the  present
           inflationary market. The other decision to which reference may be
           made is the decision of the Gujarat High Court in Soni Motiben v.
           M/s. Hiralal Lakhamshi. This also reiterates the same  principle.
           In Vadilal Chhaganlal Soni v. Gokaldas  Mansukh  also,  the  same
           principle  was  reiterated.  In  that  case,  it  was   held   by
           Gajendragadkar, J., as the learned Chief Justice then  was,  that
           the agreement between the mortgagor and mortgagee  was  that  the
           mortgagor was to redeem the mortgage 99 years after its execution
           and the mortgagee was given full authority to build any structure
           on the plot mortgaged after spending any amount he liked. It  was
           held that the two terms of the mortgage were so unreasonable  and
           oppressive  that  these  amounted  to  clog  on  the  equity   of
           redemption. Similar was the position in the case of Sarjug  Mahto
           v. Smt. Devrup Devi, where also the mortgage was for 99 years. In
           Chhedi Lal v. Babu Nandan, the court reiterated that  freedom  of
           contract unless it is vitiated by undue influence or pressure  of
           poverty should be given a free play. In the  inflationary  world,
           long term for redemption would prima facie raise a presumption of
           clog on the equity of redemption. See also  the  observations  in
           Rashbehary Ghose's 'Law of Mortgage' 6th Edn. pages 227 and 228.

           39. On the second aspect of the question whether the right of the
           tenants of the mortgagees are protected after the  redemption  of
           mortgage, reliance was placed by the First Appellate Court on the
           decision of the Full Bench of the Gujarat  High  Court  in  Lalji
           Purshottam v. Thacker Madhavji  Meghaji.  There  urban  immovable
           property was mortgaged with possession, mortgagee creating  lease
           during the subsistence of the mortgage. The question was  whether
           after redemption  of  mortgage  such  lease  is  binding  on  the
           mortgagor. It was held  that  Section 76(a) of  the  Transfer  of
           Property Act would not apply to such cases. There must be express
           words showing an intention if tenancy was to  be  created  beyond
           the term of  the  mortgage.  Mere  reference  that  mortgagee  is
           entitled to lease property does not create a binding  tenancy  on
           the  mortgagor.  After  the  redemption  of  the   mortgage   the
           relationship of landlord and tenant does not exist. Such  tenant,
           therefore, does not get any protection  under  Section 12 of  the
           Bombay Rent Control Act, it was held. The Gujarat High Court  had
           referred to several decisions of  this  Court.  In  Mahabir  Gope
           v. Harbans Narain Singh which was a decision dealing with a lease
           created by a mortgagee with possession under  the  Bihar  Tenancy
           Act, this Court reiterated that the general rule is that a person
           cannot by transfer or otherwise confer a better title on  another
           than he himself has. A mortgagee  cannot,  therefore,  create  an
           interest in the mortgaged property which will  enure  beyond  the
           termination of his interest as mortgagee. Further the  mortgagee,
           who takes possession of the mortgaged property, must manage it as
           person of ordinary prudence would manage if it were his own;  and
           he must not commit any act which is  destructive  or  permanently
           injurious to the property. Reliance maybe placed for this purpose
           on Section 76, clauses (a) and (e) of the  Transfer  of  Property
           Act, 1882. It was held that the provisions of Sections 20 and  21
           of the Bihar Tenancy Act, did not apply to the lessees since they
           were not 'settled raiyats' and the lessees  could  not  claim  to
           have secured under the statute occupancy rights in the  land.  It
           was  further  held  that  the  mortgagor  was  entitled  to   the
           possession of the land upon redemption  of  the  mortgage.  In  a
           slightly different context in Harihar  Prasad  Singh  v. Mst.  of
           Munshi Nath Prasad, this Court was concerned with a mortgage with
           possession effected on  agricultural  land.  This  Court  had  to
           consider in that decision whether under  the  provisions  of  the
           Bihar Tenancy Act the tenant inducted on the  mortgaged  property
           during the pendency of the mortgage could claim right  to  remain
           in  possession  after  the  redemption.  Venkatarama  Ayyar,  J.,
           speaking for the Court pointed out that if the tenant  could  not
           resist   the   suit   for   ejectment   either   by   reason   of
           Section 76(a) of the Transfer of Property  Act  or  Section 21 of
           the Bihar Tenancy Act, the tenant could not get such a right as a
           result of the interaction of  both  those  sections.  This  Court
           ultimately held that the tenants inducted by the  mortgagee  with
           possession had failed to establish that they  had  any  right  of
           occupancy over the  suit  lands  and  that  the  plaintiffs  were
           entitled to a decree in ejectment, with future mesne  profits  as
           claimed  in  the   plaint.   Thus   a   right   claimable   under
           Section 76(a) of the Transfer of Property Act because of a  lease
           created in the course of prudent management of the  property  was
           put on a different footing altogether from a right created  by  a
           special statute.

           46. We have noted hereinbefore the ratio and  the  basis  of  the
           decision of this Court in Jadavji Purshottam v. Dhami  Navnitbhai
           Amaratlal.  Shri Mehta submitted that there was no clear  finding
           as to when the tenants were inducted whether before or after  the
           Rent Restriction Act and therefore, he pleaded  that  the  matter
           should be referred to the larger Bench.  In  view  of  the  facts
           found in this case which were similar to the facts  mentioned  in
           Jadavji Purshottam's case, there is no specific authority in  the
           lease which stated that  the  lease  would  continue  beyond  the
           period  of  mortgage.  There  is   no   extended   authority   as
           contemplated in Jadavji Purshottam case found in this  case.  The
           submission was that the matter should be considered by  a  larger
           Bench in the light of the Jadavji Purshottam case. We are  unable
           to accept the said submission. In this  case  the  words  in  the
           mortgage deed, as we are taken through,  did  not  clearly  allow
           creation of tenancy beyond the period of mortgage. That,  in  any
           event, would not have been prudent management, hence, there is no
           finding that the mortgage deed  permitted,  either  expressly  or
           impliedly, creation of tenancy beyond the period. We  think  that
           the tenants were not entitled to protection after  redemption  of
           mortgage. Furthermore, in all these cases the  authority  of  the
           mortgagees to lease out the property, expressed or  implied,  was
           circumscribed by a stipulation  that  the  mortgagee  should  re-
           deliver the possession of the  property  when  the  mortgage  was
           redeemed. In that  context,  we  are  of  the  opinion  that  the
           submissions on behalf of the tenants cannot be entertained.”

                                                   (Emphasis supplied)

6.    In Shivdev Singh & Anr. v. Sucha Singh &  Anr.  [2000  (4)  SCC  326],
this Court held  that  a  mortgage  for  a  period  of  99  years  being  an
unreasonably long period before which redemption could not take place  would
be a clog on the equity of redemption and would therefore be disregarded  by
the Court.  On the facts of the case,  the  mortgage  deed  was  dated  19th
March 1968 and the mortgage was  sought  to  be  redeemed  long  before  the
period of 99 years came to an end.  It was held  that  such  redemption  was
possible and the 99 year period was  held  unenforceable.   It  was  further
held that it is a right of the mortgagor  on  redemption  to  get  back  the
subject of the mortgage and to hold and  enjoy  the  property  in  the  same
manner as he was entitled to hold and enjoy it before the mortgage.   If  he
is prevented from so doing such prevention is bad in law.

7.    There is a long line  of  High  Court  judgments  which  hold  that  a
mortgagee continuing in possession as a tenant after redemption  is  a  clog
on redemption and is invalid as it prevents the mortgagor from getting  back
the property in the same condition as he  gave  it  when  the  mortgage  was
executed. In Mahomed Muse v. Jijibhai Bhagvan [(1885) 9 Bom 524 at pg  525],
it was held:

          “The objection to the condition  in  the  mortgage,  that  if  the
          mortgagor redeemed the land, the mortgage  right  only  should  be
          extinguished, and the lands should remain in the  right  hands  of
          the mortgagee, he paying a rent of 2 Rupees  per  bigha,  has  not
          been dealt with by the Assistant Judge, although it was raised  by
          the fourth ground of the plaintiffs’  appeal.  Such  a  condition,
          although it does not exclude the right of redemption,  fetters  it
          with the onerous  obligation  of  accepting  the  mortgagee  as  a
          perpetual tenant, and ought not, therefore, in our opinion, to  be
          enforced in a Court of Equity.”

In Parmanand Pandit v. Mata Din Rai [(1925) 47 All 582 at pg  584],  it  was

           “As to the first point, it seems to me that  the  condition  that
           even after redemption the mortgagees would hold on the land,  was
           a clog on the equity of redemption. Conditions which  prevent  or
           impede the right of redemption even  after  redemption,  if  such
           conditions are entered into at the same time when the mortgage is
           made, must be taken to be a clog on the equity of redemption.  On
           the other hand, a subsequent contract which modifies the right of
           redemption may  not  be  such  a  clog.  Although  the  principle
           underlying the rule of a clog on redemption is very  old  yet  it
           still prevails and will not permit  any  device  or  contrivance,
           being part of the mortgage transaction  or  contemporaneous  with
           it, to prevent or impede redemption. It follows that any covenant
           under which some right to retain possession is  reserved  to  the
           mortgagee even after the  property  is  redeemed  is  a  clog  on
           redemption as it both prevents and impedes redemption. That  such
           a clause amounts to a clog on redemption is covered by authority.
           In the case of  Mahomed  Muse  v.  Jijibhai  Bhagvan,  which  was
           followed by a learned judge of this court in  the  case  of  Sheo
           Singh v. Birbahadur Singh, and has been subsequently followed  by
           the Madras High Court in the  case  of  Ankinedu  v.  Subbiah,  a
           covenant under which the mortgagee, even  after  redemption,  was
           entitled to retain the property on payment of a fixed  rent,  was
           considered  to  be  a  clog  on  the  equity  of  redemption  and
           unenforceable in a court of equity. I am accordingly  of  opinion
           that the clause cannot bind the mortgagor’s  representatives  and
           that, therefore, if they have paid the entire  amount  due,  they
           are entitled to take possession of the land unencumbered  of  any
           contract for the grant of perpetual lease.”

To the same effect the following judgments have also held that  a  mortgagee
remaining in possession as a tenant post-redemption is invalid as a clog  on

Sheo Singh v. Birbahadar Singh, (1910) 6 IC 707 (All) at pg 708, 709;

Aukinidu v. Subbiah, (1912) 35 Mad 744 at pg 749;

Daolal Rai v. Sheikh Chand, (1915) 31 IC 869 (Nag) at pg 870;

Ram Narain Pathak v. Surathnath, (1920) 57 IC 327 (Pat) at pg 338;

Bhimrao v. Sakharam, AIR 1922 Bom 277 at pg 278;

Satyavatamma v. Padmanabhan, AIR 1957 AP 30 at para 19;

Gobind Ram v. Rajphul Singh, AIR 1973 P & H 94 at para 11, and

Maina Devi v. Thakur Mansingh & Ors., AIR 1986 Raj 44 at para 30.

8.    On the facts of this case, it will be seen that  the  mortgagees  were
entitled to create tenancies by virtue of the mortgage deed dated 9th  March
1942. However, there is nothing in the language  of  the  mortgage  deed  to
indicate clearly that the tenancies  created  by  the  mortgagees  would  be
binding on the mortgagors.  At the  highest,  after  redemption,  and  after
possession is taken, the mortgagor or mortgagors will also  be  entitled  to
receive rent in future.  It will be seen that the mortgagor’s right  to  get
back possession is expressly recognised by the  mortgage  deed  without  any
clear and unambiguous language entitling tenants created by  the  mortgagees
to become tenants of the mortgagors. The  entitlement  to  receive  rent  in
future can by no stretch be held to create a tenancy between  the  mortgagor
and the tenants of the mortgagees.  This phrase has to  be  reconciled  with
the expression immediately preceding it namely “on taking  possession”.   It
is clear that taking of possession from the mortgagees and  his  tenants  is
completely antithetical  to  recognizing  the  mortgagees’  tenants  as  the
mortgagors’ tenants.  If the clause is to be read in  the  manner  that  the
High Court has read it, the  mortgagors  would  not  be  able  to  get  back
possession on redemption which would in fact be a serious interference  with
their right to redeem the property inasmuch as the mortgagors would have  to
evict such tenants after making out a ground for  eviction  under  the  Rent
Act.  Such ground can only be bonafide requirement of the landlord  or  some
ground based on a fault committed by the tenant such as non-payment of  rent
or unlawful subletting etc. Further, such ground may never become  available
to the mortgagor/landlord or may become available  only  after  many  years.
It has already been seen that a mortgagee  continuing  in  possession  after
redemption as tenant of the mortgagor is regarded as a clog  on  redemption.
The position is  not  different  if  the  mortgagee’s  tenants  continue  in
possession after redemption.  This would necessarily have to be  disregarded
as a clog on redemption as  the  right  to  redeem  would  in  substance  be
rendered illusory.  In the circumstances, the judgment  of  the  Punjab  and
Haryana High Court dated 31st March 2004 is set  aside.   All  other  issues
are left open and can be agitated before the High Court. It will be open  to
all  parties  to  raise  such  pleas  as  are  available  to  them  in  law.
Considering that the cause of action in the suit arose  in  1969,  the  High
Court is requested to take up RFA No.238/1979 to decide the other issues  as
early as possible  and  preferably  within  six  months  from  the  date  of
delivery of this judgment.

                                              (Dipak Misra)

                                               (R.F. Nariman)
New Delhi,
October 14, 2014.

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