The possessory character of a mortgage is not obliterated by a lease back, and the transaction should be given effect according to its terms.

Patanjali Sastri, J.

1. This is a petition to revise an Order of the Subordinate Judge of South Kanara dismissing an application by the petitioners (judgment-debtors) to scale down the decree for Rs. 34,291-10-9 in O.S. No 70 of 1932 on of the lower Court. The suit was brought by the respondent on foot of a mortgage bond (Ex. B) dated 5th June 1925 whereby the judgment-debtors purported to mortgage the properties usufructuarily to the respondents assignor for Rs. 21,000 out of which only Rs. 20,300 was advanced and a marupat (Ex. C) of the same date under which the mortgaged properties were leased back to them at an annual purappad of 10,150 seers of paddy. The mortgage contained only a covenant to repay the principal but no, stipulation for payment of any interest as the profits were to be enjoyed in lieu of interest. It is common ground that the usufructuary mortgage and the lease back were parts of the same transaction and the respondent himself in suing for the amount due under both these instruments described the amount due under Ex. C as interest payable on the amount advanced under Ex. B. The decree was in the form of an ordinary mortgage decree providing for the payment of Rs. 20,300 as principal and the balance as interest and did not mention any rent as payable thereunder, while the judgment referred to the respondents claim under Ex. C as rent or interest without making any distinction between the two. It is thus clear that at the time when the suit was filed or the decree was passed, it was really immaterial whether the respondents claim under Ex. C was regarded as one for interest or for rent but after the passing of the Madras as Act IV of 1938 the question as to the true nature and incidents of the transaction represented by Exs. B and C has become one of considerate importance to the parties and as accordingly been the subject of keen debate in these proceedings. In support of their application to scale down the decree the petitioners contend that Exs. B and C together amounted in substance to a simple mortgage providing for interest at the rate of half seer of paddy per rupee per year and that accordingly the interest payable under the decree should be scaled down, while the respondent invokes the exception in Section 10(2)(i) of the Act, urging that he was in possession as mortgagee under Ex. B, through the petitioners as his tenants under the marupat Ex. C, the annual payment reserved thereunder being rent and not interest.

2. Before considering this question, it will be convenient to dispose of a minor point raised by the petitioners learned Counsel that it is not open to the respondent to raise the contention referred to above. It is argued that the Court must be taken to have decided in the suit itself that the amount payable under Ex. C was interest and not rent. This argument is based on para. 98 of the judgment where dealing with the question whether the stipulation to pay interest on the purappad reserved in Ex. C was penal and unenforceable, the Court held that it was, treating it as interest on interest. We find it however difficult to hold that this amounts to a definite decision concluding the. question now arising for consideration in favour of the petitioners. As already observed, the learned Judge uses the expression rent or interest throughout the judgment in referring to the sum payable under Ex. C, and even for the purpose of his finding on the issue as to penalty, it was immaterial to determine whether such sum was rent or. interest, for if, as the learned Judge thought, the rate of interest fixed for unpaid purappad was exorbitant, it could be relieved against as penalty under Section 74 of the Indian Contract Act even if the purappad were to be regarded as rent and not as interest - see Upendra Lal v. Ataulla A.I.R. 1917 Cal. 737 and Lal Gopal v. Biswa Nath A.I.R.N. 1918 Cal. 334. We hold therefore that the respondent is not precluded by anything contained in the judgment or decree