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2004 Supreme(Kar) 88
Karnataka High Court
K.S.SRINIVAS - Appellant
Versus
V.RAMKUMAR - Respondent
Decided On : 01-30-04
R.F.A. : 849 of 2001
A.SHESHAGIRI RAO, D.L.N.RAO, H.V.RAMA SWAMY, RADHESH PRABHU, TUKURAM S.PAL
The main legal point established in the judgment is that there can be no automatic merger of lease and mortgage rights, and the surrender of lease rights is a question of fact depending on the intention of the parties.
Headnote:
Merger - Tenancy Rights - [Transfer of Property Act, Section 105, Section 111] - The court discussed the automatic merger of lease and mortgage rights, the intention of the parties, and the surrender of lease rights. It highlighted key legal provisions such as Section 105 and Section 111 of the Transfer of Property Act and their interpretations, influencing the court's decision.
Fact of the Case:
Defendant's appeal arising from a suit for possession upon redemption of a mortgage. The key question was whether the tenancy rights held by the Mortgagee would extinguish on the principle of merger upon creation of the mortgage or if the tenant-mortgagee had surrendered the tenancy rights.
Finding of the Court:
The Trial Court answered issues 1 and 2 in the affirmative, holding that the tenancy rights held by the mortgagee had merged in the rights of the Mortgagees and there was an implied surrender of the leasehold rights by the tenant. The suit filed by the plaintiff was decreed with the direction for an enquiry under Order 20, Rule 12 of the CPC for determination of damages.
Issues: The primary issue was whether there was an automatic merger of the interest of the lessee with that of the mortgagee and whether the Mortgagor would be entitled to a decree for possession upon redemption even in the absence of the merger of the rights.
Ratio Decidendi: The court held that there can be no automatic merger of the lease rights with rights under a mortgage even when the two rights vest in one and the same person. It emphasized that the surrender of the rights held by the lessee is a question of fact depending on the intention of the parties as gathered from the terms of the mortgage deed and the surrounding circumstances.
Final Decision: The appeal was allowed in part, and the decree for actual physical possession of the suit property passed by the Trial Court in favor of the plaintiff was set aside, and the suit of the plaintiff was dismissed to that extent only.
( 1 ) THIS is a defendant's appeal arising out of a suit for possession upon redemption of a mortgage. The short but interesting question that arises for consideration is whether the tenancy rights held by the Mortgagee who was occupying the mortgaged property as a tenant would extinguish on the principle of merger upon creation of the mortgage and if they did not whether the tenant-mortgagee had surrendered the tenancy rights so that the Mortgagor was entitled to claim possession of the mortgaged property upon redemption. The question arises in the following backdrop: the suit property which happens to be a single storeyed shop situate within the City Municipal Corporation limits of Bangalore was in the occupation of M/s. KR. Suryanarayana Setty and Sons, a partnership firm as a lessee on payment of monthly rent of Rs. 225/- only. The property was owned by M/s. Venkatachalaiah and Sons, another partnership concern who mortgaged the same with the lessee in terms of a mortgage deed dated 28-8-1982. The Mortgage was to run for a period of ten years. During the currency of the mortgage, M/s. Venkatachalaiah and Sons, the owner was dissolved and the property allotted to the share of the plaintiff. O. S. No. 5818 of 1992 for redemption of the mortgage and for possession of the property was filed by the plaintiff before the xtv Additional City Civil Judge at Bangalore. Apart from other reliefs, the plaint also sought damages from the defendant at the rate of Rs. 200/- per day from 28-8-1992 till the date of full satisfaction of the decree.
( 2 ) IN the written statement filed by the defendant, several defenses were raised. It was inter alia pointed out that M/s. KR. Suryanarayana setty and Sons was carrying on business in the suit premises in the name and style of'srinivas Stores'. Upon dissolution of the said partnership, the second defendant succeeded to the tenancy and other rights in the schedule property and that he was in exclusive possession and enjoyment of the same. It was also alleged that upon redemption of the mortgage, the tenancy rights would stand revived as the parties never intended to put an end to the tenancy that existed on the date of creation of the mortgage. It was alleged that the parties had with the intention of continuing the tenancy even after redemption of the mortgage entered into an agreement on the same date by which the Mortgagor had agreed to continue the lease of the schedule property in favour of the Mortgagee on a monthly rent of Rs. 500/- for a period of eleven months with an option to the lessee to extend the lease period for a period of four years thereafter. The claim for delivery of possession made by the plaintiff was according to the defendants misconceived in the light of the contents of the mortgage deed and the clear understanding between them regarding the continuance of the tenancy even after the mortgage was redeemed.
( 3 ) ON the above pleadings, the Trial Court framed the following six issues:"1. Does the plaintiff prove that he has the right to seek redemption of mortgagee? 2. Does the Plaintiff prove that he has a right to get possession of the suit property? 3. Whether the suit is bad for misjoinder of necessary parties? 4. Whether defendant 2 proves his tenancy rights over the suit premises are held in abeyance during the period of subsistence of the mortgage? 5. Is the plaintiff entitled to the reliefs as prayed for? 6. What decree or order?"by its judgment and decree impugned in this appeal, the Trial Court answered issues 1 and 2 in the affirmative, while issues 3 and 4 were held in the negative and against the defendants. The suit filed by the plaintiff was accordingly decreed with the direction that an enquiry under Order 20, Rule 12 of the CPC shall follow for determination of the damages payable to the defendants from the date of the suit till delivery of actual possession. The Trial Court concluded that the recitals in the deed of Mortgage clearly s
