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1976 Supreme(SC) 119

SUPREME COURT OF INDIA
A.N. RAY, C.J.I. AND JASWANT SINGH, J.
Shah Mathuradas Maganlal and Co., Appellants
 
Versus
 
Nagappa Shankarappa Malaga and others, Respondents.
Civil Appeal No. 450 of 1970
 
Decided on 23-3-1976.
Advocates appeared
Mr. S. T. Desai Sr. Advocate, (Mr. K. Raj Choudhary and Mrs. Veena Sharma, Advocates with him), for Appellants; Mr. M. V. Tarkunde Sr. Advocate, (Mr. V. N. Ganpule, Advocate with him), for Respondents

Advocates:
K.RAJ CHOUDHARY, S.T.DESAI, V.D.Ganpule, V.M.TARKUNDE, VINA SHARMA

Headnote:Premises in possession of the tenant mortgaged to him — period of redemption fixed - Lease and mortgage in respect of the same property — question of merger - Lease and mortgage in respect of the same property — question of merger

       – In the case of Shah Mathuradas Maganlal v. Nagappa Shankarappa Malaga, AIR 1976 SC 1565 = 1976 UJ (SC) 389, the deed of mortgage shows the features indicating that there was surrender of tenancy and the appellant was only a mortgagor. No particular form of words is essential to make a valid surrender. A surrender may be oral. A surrender may be express although delivery of possession is necessary for surrender in the facts and circumstances in a given case. In the present case, delivery of possession was immediately followed by a redelivery of possession of the appellant as mortgagee. The mortgage deed establishes beyond doubt that the effect of the deed was inconsistent with the continuance or subsistence of the lease because the parties themselves stipulated that the lease was to exist only upto 6th November, 1953. On the redemption of the mortgage the respondent had a right to recover possession both on the terms of the mortgage deed and under Section 62 of the Act.

       – There can be no merger of a lease and a mortgage, even where the two transactions are in respect of the same property. It is well settled that for a merger to arise, it is necessary that lesser estate and a higher estate should merge in one person at and the same time and in the same right and no interest in the property should remain outstanding. In the case of a lease, the estate that is outstanding in the lessor is the reversion; in the case of a mortgage, the estate that is outstanding is the equity or redemption of the mortgagor. Accordingly there cannot be a merger of a lease and a mortgage in respect of the same property since neither of them is a higher or a lessor estate than the other. Even if the rights of the lessee and the rights of the mortgagee in respect of a property were to be united in one person the reversion in regard to the lease and the equity or redemption in regard to the mortgage, would be outstanding in the owner of the property and accordingly there would not be a complete fusion of all the rights of ownership in one person. This position of law was explained in Shah Mathuradas Maganlal v. Nagappa Shankarappa, AIR 1976 SC 1565 and followed in Gambangi Appalaswamy Naidu v. Behara Venkataramanyya Patro, AIR 1984 SC 1728.

       

       – There can be no merger of a lease and a mortgage, even where the two transactions are in respect of the same property. It is well settled that for a merger to arise, it is necessary that 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 outstanding. In the case of a lease, the estate that is outstanding in the lesser is the reversion; in the case of a mortgage, the estate that is outstanding is the equity or redemption of the mortgagor. Accordingly there cannot be a merger of a lease and a mortgage in respect of the same property since neither of them is a higher or a lessor estate than the other. Even if the rights of the lessee and the rights of the mortgagee in respect of a property were to be united in one person the reversion in regard to the lease and the equity or redemption in regard to the mortgage, would be outstanding in the owner of the property and accordingly there would not be a complete fusion of all the rights of ownership is one person. This position of law was explained in Shah Mathuradas Mangalal & Co. v. Nagappa Shankarappa, AIR 1976 SC 1565 and followed in Gambangi Appalaswamy Naidu v. Behara Venkataramanyya Patro, AIR 1984 SC 1728.

JUDGMENT

RAY C. J.:— This appeal by special leave is from the judgment dated 6 February, 1970 of the High Court at Bombay. The Respondent No. 1 obtained a decree for redemption of mortgage dated 21 May 1953 for possession of mortgaged property consisting of a shop and house premises at Sangli.

2. The appellant was mortgagee in possession of the property by a Deed of Mortgage dated 21 May, 1953. The property was mortgaged for Rs. 10,000/- No interest was to be paid, Instead possession of the property was agreed to remain with the mortgagee. The period for redeeming the mortgage was fixed for 10 years from 7 November, 1953.

3. The respondent mortgagor by notice dated 1 October, 1963 informed the appellant that he was ready and willing to redeem the mortgage. The appellant replied that he should be paid Rs. 30,000/- being the expenses for repairs and other incidental expenses. The appellant also claimed that even after the redemption he was entitled to retain possession because his previous tenancy right subsisted.

4. The trial Court held that the tenancy of the appellant would revive on redemption of the mortgage. The trial Court further decreed that the respondent was entitled to get only symbolical possession from the appellant and thereafter get rent of the suit property from the appellant.

5. On appeal the District Judge came to the conclusion that under the Mortgage Deed the appellant ceased to be a tenant with effect from 7 November, 1953 and possession of the appellant thereafter was only as a possessory mortgagee and not as a tenant. On redemption of the mortgage the respondent was entitled to recover possession of the property forthwith. The District Judge passed a decree for the principal mortgage amount and a sum of Rs. 4458.24 on account of repairs in favour of the appellant. The District Judge further gave the respondent a decree for actual possession of the property from the appellant after the respondent deposited the amount in the Court.

6. The High Court on second appeal held that the Deed of Mortgage shows that the relationship between the appellant and the respondent was that of a mortgagee and mortgagor and confirmed the decree in favour of the respondent.

7. Counsel for the appellant contended that in case of a tenant in possession who takes a possessory mortgage the effect of such mortgage is that the tenants rights remain in abeyance during the term of mortgage and the parties revert to their former position on redemption. It was also said that the mortgagor respondent could not take possession from the appellant without actual eviction. The mortgage according to the appellant was unsufructuary mortgage with the result that at the 1567 end of 10 years being the period of mortgage possession the mortgagee acquires the statutory protection given to the tenants.

8. The Mortgage Deed is described as a Possessory Mortgage Deed of the house-site and was for a sum of Rs. 10,000/-. The respondent mortgagor stated, inter alia, as follows:-

"I have given you the house-site in possessory mortgage in consideration of the aforesaid amount. The said property is in your possession as the last tenant by the date 6 November, 1953. The possession thenceforth is confirmed by this Deed of Possessory Mortgage. Hence you are to either use the house-site and shop premises for home (personal) purpose or let it to anybody. The income that may be received by giving the property on rent is to be appropriated by you towards the interest on the said amount. I shall not pay you any interest separately. I shall not ask for the accounts in respect of the income of the house-site from you. I am to pay all the Government dues. I am also to carry out repairs of all sorts to the house premises, and I shall do so. If I fail to pay Government dues and if I do not defray the costs of the repairs you are to pay all the said Government dues and defray the costs of the repairs. The aforesaid amounts which you may have to pay and spend will be paid by me t
















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