IMPORTANT POINT
The guidelines for deciding whether a transaction is a lease or a mortgage contemplates that the name given to the document is not conclusive, the question has to be decided with reference to the predominant intention of the parties as gathered from the recitals and the terms of the documents and the surrounding circumstances including conduct of the parties.

Headnote:RENT LAWS-Karnataka Rent Control Act, 1961-Eviction on ground of demolition of old building for reconstruction-Tenant s application for re-letting the shop in new building-Maintainability-Appellant Trust was owner of an old building in which there were 8 to 9 shops-In 1950 one of the shops was let out to respondent defendant as a tenant-Respondent surrendered his shop in the old building in 1969 after receiving notice from appellant indicating its intention to demolish the old building and to construct a new building-Other tenants were evicted under the orders of the Court-Construction of new building completed by 1975-Respondent called upon appellant to re-let the shop in new building-Redeemable mortgage for three years had to be executed in favour of respondent as appellant was in need of money-Respondent paid Rs. 16,200/- to appellant against delivery of possession-On expiry of mortgage period, suit instituted by appellant for possession, damages and mesne profits-Whether finding of appellate Court that self redeeming mortgage deed executed by respondent in favour of appellant, as a void document, as being opposed to provisions of Rent Act is sustainable-(Yes).
       Held : The guidelines for deciding - whether a transaction is a lease or a mortgage contemplate that the name given to the document is not conclusive. The question has to be decided with reference to the predominant intention of the parties as gathered from the recitals and the terms of the documents and the surrounding circumstances including conduct of the parties. In the case of a mortgage, there is a transfer of interest to secure repayment of debt and in the case of a lease, there is a transfer of a right to enjoy the property. (Para 12)
       The respondent had not voluntarily surrendered his shop in the old building as alleged by the appellant. Secondly, the respondent has proved that in 1976, PW2 offered to re-let the shop in the new building on the respondent s advancing Rs. 16,200/- to the trustees for three years. In this connection, PW2 has admitted, in his evidence, receipt of the letter dated 10.10.1975 from the respondent calling upon the trustees to re-let the premises. Further, in his evidence, PW2, has admitted that the respondent herein had raised a loan of Rs. 10,000/- from his father-in-law as suggested by him (PW2). Thirdly, as found by the Courts below, Rs. 16,200/- represented three years advance rent calculated @ Rs. 450/- per month. Fourthly, as rightly held by the High Court, there was no reason for voluntarily surrendering the tenancy by the respondent. Lastly, the entries in the Income-tax returns of the respondent, brought on record by the appellant, proves that the amount paid by the respondent was on account of rent. It is relevant to point out that the appellant has not produced its own accounts to show how they have accounted for Rs. 16,200/- in their books. (Para 11)

JUDGMENT

Kapadia, J.-This is an appeal by special leave filed by appellant-plaintiff against the judgment dated 4th August, 1998 of the High Court of Karnataka confirming the judgment and order dated 6th February, 1993 passed by the District Judge, Mysore dismissing the suit filed by the appellant-plaintiff holding inter alia that Ex.P5 dated 1.10.1976 was only a device to get over the provisions of the Karnataka Rent Control Act, 1961 (hereinafter referred to for the sake of brevity as "the said Act, 1961").

2. The undisputed facts are as follows:

Appellant-Kaveripatnam Subbaraya Setty Annaiah Setty Charities Trust was the owner of an old building in which there were 8 to 9 shops situated in Rave Beedi. In 1950 one of the shops was let out to the respondent-defendant as a tenant. In the year 1969, the appellant conveyed to the respondent and other tenants of the old building its desire to demolish the old building and in its place to erect modern shops so that higher rent could be fetched. Respondent herein surrendered his shop in the old building on 27.8.1969 after receiving notice from the appellant indicating its intention to demolish the old building and to construct a new building. Some of the tenants refused to surrender. Appellant filed eviction petitions against those tenants under the said Act, 1961. They were evicted under the orders of the Court. Respondent herein and the trustees belonged to the same community and, therefore, he surrendered possession of his shop pursuant to the above mentioned notice. The old building was demolished in 1969 and the construction of the new building was completed by 1975. On 10.10.1975, the respondent called upon the appellant to re-let the shop in the new building as he was a tenant in the old building to which no reply was given by the appellant.

3. On 1.10.1976, Ex.P5 was entered into between the appellant and the respondent. In Ex.P5, it was recited that the appellant was in need of money and, therefore, a redeemable mortgage for three years had to be executed for Rs. 16,200/- in favour of respondent. Under Ex.P5, the said sum of Rs. 16,200/- was to be repaid in full by virtue of respondent being in possession and enjoyment of the shop for three years. On 4.10.1976, the respondent paid Rs. 16,200/- to the appellant against delivery of possession. The mortgage period expired on 1.10.1979.

4. On 12.3.1980, suit No.41 of 1980 was instituted by the appellant in the court of Principal Civil Judge, Mysore for possession, damages and mesne profits. The above facts were stated in the plaint. By his written statement, the respondent pleaded that he was a tenant from 1950 of the shop in the old building. In 1969, the trustees expressed their desire to demolish the old building and to construct a new building. He did not resist the eviction as he belonged to the same community as the trustees and as he was orally assured by the trustees that the shop in the new building would be re-let to him. He further pointed out that on 10.10.1975, he had called upon the trustees to re-let the shop in the new building to him as a tenant, to which no reply was received. He further alleged that he had offered to pay Rs. 6000/- and that he had also offered to pay rent @ Rs. 335/- per month, to which no reply was given. According to the written statement, in 1976, a suggestion came from the trustees that they were ready and willing to consider his offer if he was ready to advance Rs. 16,200/- and if he was ready to pay increased rent of Rs. 450/- to the appellant. The respondent pleaded his inability to raise Rs. 16,200/- upon which he was assured by PW2 that one Anjaneya Gupta (father-in-law of PW2) would advance a loan of Rs. 10,000/- against the promissory note. PW2 was the managing trustee. On 4.10.1976, Anjaneya Gupta advanced the said amount to the respondent. On the same day, the respondent paid Rs. 16,200/- to the appellant against delivery of possession. The respondent, therefore, submitted in his wr

Click Here to Read the rest of this document

2004 Supreme(SC) 730

Cases Referred (2)