Kerala High Court
Hathika And Ors. vs Puthiyapurayil Padmanabhan on 23 November, 1993
Equivalent citations: AIR1994KER141, AIR 1994 KERALA 141, (1994) 2 CURCC 240, (1994) 1 KER LT 345, (1994) 1 KER LJ 89, ILR(1994) 1 KER 83, (1995) 1 CIVILCOURTC 95
JUDGMENT K.P. Balanarayana Marar, J.
1. The appeal arises from a suit for redemption of mortgage. Plaintiffs are the appellants. The trial Court as well as the lower appellate Court held that the transaction to be a lease and the request for redemption was denied. Hence the second appeal.
2. Plaintiffs are admittedly the owners of the building described in the plaint schedule which according to them was mortgaged to defendant as per mortgage deed dated 23-10-1978. An amount of Rs. 1000/- was borrowed from defendant on the security of the building, possession of which was handed over to the defendant on condition to pay an amount of Rs. 85/- per month by way of surplus profits. The document stipulated for payment of interest at 12% on the amount defaulted. The period prescribed in the document is six months on the expiry of which defendant had to retransfer the building to plaintiffs. In case of default to pay the amount within the stipulated period defendant was given the right to realise the amount by way of sale of the right, title and interest of the plaintiffs over the building. Alleging that profits were paid up to 23-7-1982 request was made to retransfer possession. Defendant did not accede to this request. That resulted in the filing of O.P. 18/83 under Section 83 of the Transfer of Property Act. That petition was dismissed. Hence the suit for redemption of the mortgage.
3. Defendant while admitting the transaction contended that the document evidences a lease of the building and not a mortgage. According to him the building was required for his occupation and plaintiffs wanted a document to evidence the transaction. The amount of Rs. 1000/- represents the advance paid. He therefore claimed to be a building tenant coming within the purview of the Kerala Buildings (Lease & Rent Control) Act (2 of 1965).
4. The only document produced before the trial Court is a registration copy of the possessory mortgage deed executed by plaintiffs to defendant. No oral evidence was adduced by the plaintiffs. The defendant examined himself as DW-1. On a consideration of the recitals contained in Ext. A1 and the testimony of DW-1 the trial Court held that the transaction evidences a lease and not a mortgage. In consequence the suit was dismissed. On appeal the lower appellate Court concurred with that decision. The plaintiffs have come up in second appeal challenging those decisions. The second appeal was admitted on the following substantial questions of law formulated in the appeal memorandum.
i. Whether the lower appellate Court has not misconstrued Section 92 of the Evidence Act and has it not misunderstood its scope and object in construing Ext. A1 in the light of extraneous evidence?
ii. On a true construction of its terms whether Ext. A1 is not a redeemable mortgage and is the lower appellate Court correct in law in holding that it amounts to a lease?
iii. Whether the respondent is not estopped from contending that Ext. A1 is not a redeemable mortgage but is a lease ?
5. Heard counsel on both sides.
6. Assailing the decisions of the courts below learned Counsel for the appellants submitted that the various recitals in Ext. A1 had not been properly analysed and considered in order to ascertain the nature of the transaction and the intention of the parties. The nomenclature of the document though not conclusive is an indication regarding the nature of the transaction intended to be created by the parties. The document is styled as a usufructuary mortgage deed. Though it purports to be a usufructuary mortgage deed the transaction amounts to an anomalous mortgage in view of the right conferred on the mortgagee to bring the right of the mortgagor to sale for realisation of the amount borrowed. Before analysing the recitals contained in the document to find out whether the parties intended to create a mortgage or a lease it is worthwhile to refer to the definition of mortgage contained in the Transfer of Property Act and the ingredients of the usufructuary mortgage and an anomalous mortgage.
7. Mortgage as defined in Section 58(a) of the Transfer of Property Act is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability. The essentials of the mortgage are: (i) A transfer of an interest; (ii) in specific immovable property and (iii) as security for the repayment of the loan. The definition of a mortgage deed is contained in Section 2(17) of the Stamp Act. It reads:
"Mortgage deed includes every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of the loan, or an existing or future debt, or the performance of an engagement, one person transfers, or creates to, or in favour of another, a right over or in respect of specified property."
8. Though the definition of mortgage deed is wide enough to include movable property also the transaction as envisaged by that definition is one intended for the purpose of securing money advanced or to be advanced by way of loan or an existing or future debt or the performance of an engagement. In other words, a transfer of an interest over specified property is required so as to bring it under the definition of mortgage deed contained in Section 2(17) of the Stamp Act.
9. Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money, the transaction is called a simple mortgage. In case the mortgagor delivers possession of the mortgaged property to the mortgagee the transaction becomes a usufructuary mortgage. Section 58 of the Transfer of Property Act envisages several kinds of mortgages, viz. simple mortgage, usufructuary mortgage, mortgage by conditional sale, English mortgage and mortgage by deposit of title deeds. Still another kind of mortgage is also envisaged by that section and that is called anomalous mortgage which as per the definition is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage or a mortgage by deposit of title deeds. The rights of the mortgagor and the mortgagee under the various types of mortgages are also enumerated in the Transfer of Property Act. Though Ext. A1 is styled as a possessory mortgage deed the mortgagee is given the right to bring the property to sale on the mortgagor failing to pay the mortgaged money after the prescribed period. The document is not therefore a usufructuary mortgage simpliciter whereas it partakes the character of a simple mortgage also. Such a mortgage comes under the category of anomalous mortgage. The rights and liabilities of parties to anomalous mortgage are prescribed in Section 98 of the Transfer of Property Act. As per that provision the rights and liabilities of the parties shall be determined by the contract as evidenced in the mortgaged deed and so far as such contract does not extend local usage. When the terms are reduced to writing the rights of the parties to an anomalous mortgage are therefore to be determined by such terms. It cannot be disputed that where there is an express undertaking in a mortgage deed to pay money the mortgage will not be a possessory mortgage even if the mortgagee was given possession of the property. The transaction partakes the character of a simple mortgage also and is thus converted into a anomalous mortgage which can also be termed as a simple cum usufructuary mortgage. On a reading of the various recitals contained in Ext. A1 it would appear that the document though styled as a possessory mortgage is in effect an anomalous mortgage, the mortgagee having been given the right to realise the mortgage money by bringing the right, title and interest of the mortgagor to sale.
10. Since the parties intended to create a lease of the building and not a mortgage oral evidence is permissible to prove the real nature of the transaction argues counsel. According to him Section 92 of the Evidence Act is no bar in adducing evidence to prove the nature of the transaction. Section 92 applies when a party seeks to rely upon the document embodying the terms of the transaction. The law declares that the nature and intent of the transaction are to be gathered from the terms of the document itself and no evidence of any oral agreement can be admitted as between the parties to such document for the purpose of contradicting or modifying its terms. But the bar is not applicable when the case of the party is that the transaction recorded in the document was never intended to be acted upon and that the document is a sham transaction. Such a question arises when the party asserts that the transaction intended was different from the transaction embodied in the document. It is settled law that oral evidence is admissible to show that the document executed by the parties was never intended to operate whereas parties had entered into some other transaction which was not recorded in the document. But oral evidence is not admissible to contradict or vary the terms of the agreement reduced to writing. What are the circumstances in which oral evidence may guide the court to ascertain the real intention of the parties were considered by the Supreme Court in Raj Kumar Rajindra Singh v. State of Himachal Pradesh, AIR 1990 SC 1833. It was held that if the terms of the document are clear and unambiguous, extrinsic evidence to ascertain the true intention of the parties is inadmissible because Section 92 of the Evidence Act mandates that in such a case the intention must be gathered from the language employed in the document. It is observed that if the language employed is ambiguous and admits of a variety of meanings, the 6th proviso to Section 92 can be invoked which permits tendering of extrinsic evidence as to acts, conduct and surrounding circumstances to enable the court to ascertain the real intention of the parties. In such a case such oral evidence may guide the court in unravelling the true intention of the parties. The Supreme Court further held that the object of admissibility of such evidence in such circumstances is to assist the court to get to the real intention of the parties and thereby overcome the difficulty caused by the ambiguity. In such a case the subsequent conduct of the parties furnishes evidence to clear the blurred area and to ascertain the true intention of the author of the document.
11. The principles to be applied while interpreting a document were laid down by a Division Bench of this Court in Narayani Amma v. Narayanan Namboodiri, 1985 Ker LJ 49. It was held that the question is not what the parties to the deed may have intended to do by entering into that deed, but what is the meaning of the words used in the deed. The parties may have meant different things but still the terms of the language used in the deed should bind them. It is observed that it is for the court to interpret such terms or language used in the deed. The matter was again considered by another Division Bench in Muslim Educational Society v. Paryaryi, 1986 Ker LT 1165 : (AIR 1987 Ker 80), where it was held (at p. 83 of AIR):
"The intention of the parties to an instrument gathered from outside the document may be a useful guideline in the construction of ambiguous terms of the instrument. But when the deed itself is clear enough in showing the true scope and contour of the transaction, intention of the parties, even if discernible from evidence, shall not whittle down or enlarge the amplitude of the express stipulations made in the document. The test is what a reasonable man would reasonably understand from the terms recited in the document."
12. The relevancy of the intention of the parties was again considered by this Court in Moideenkutty Haji v. Muhammadali, (1987) 2 Ker LT 994. It was held that the intention of the parties has necessarily to be gathered primarily or in the first instance from the language used by them in the agreement, the substance of it, as opposed to the form. That is the first and manifest expression of their intent and what they intended to achieve under the transaction. The Division Bench further held :
"It is a general principle that the intention which the framer of a document had in his mind when he brings it into existence is not the material factor, but what is incorporated in the document. The question is not what the writer of the document intended or meant (in his mind), but what a reasonable man reading the document as a whole would understand it to mean. The intention has thus to be gathered from the language of the document, explained if necessary by the circumstances and the conduct of the parties."
13. A document containing more or less identical recitals was interpreted by a Division Bench of this Court in Gilbert v. Vivekanandan, (1988) 1 Ker LT 50. Following the decision in Moideenkutty Haji's case (1987 (2) Ker LT 994) (supra), the Bench held that the nature of the transaction has to be determined with reference to the legal effect of the words used by them. It is not open to the court to ignore the legal effect of words which are express and clear, whatever be the consequence and whatever be the disadvantage or hardship that might ultimately cause to one or more of the parties. The Bench further held :
"The question is not what the parties had intended or meant, but what is the legal effect of the words which they used, which means, what a reasonable man reading the document would understand them to mean. It is only in the case of ambiguity in the language used by them is it permissible for the court to look at the surrounding circumstances to determine what the parties actually intended."
14. The Bench decisions of this Court aforementioned have laid down the law in clear terms. The position therefore is that the intention of the parties has to be gathered from the terms of the document when they are express and clear. Whatever be the consequence and whatever be the hardship caused to one of the parties the legal effect of those words cannot be ignored. The question is not what the parties had intended or meant but what is the legal effect of the words used by them in the deed. The court can look into the surrounding circumstances to ascertain the intention of the parties only in case of ambiguity in the language used. As observed by the Supreme Court oral evidence may guide the court in unravelling the true intention of the parties in such a case and tendering of extrinsic evidence as to acts, conduct and surrounding circumstances is permissible to enable the court to ascertain the real intention of the parties. In short, the court is concerned with the substance of the document, the recitals therein and not the form and the recitals are to be construed to ascertain the real intention of the parties in [the light of such recitals and other available facts and circumstances.
15. In the light of the principles enunciated above the recitals in Ext. A1 are to be construed to ascertain whether the parties intended to create a mortgage or a lease. The document is styled as a usufrctuary mortgage. An amount of Rs. 1000/- was borrowed by the defendant and the building described in the mortgage deed was given as security for the amount borrowed. Possession of the building was handed over to the mortgagee who was directed to occupy the same and pay a monthly sum of Rs. 85/- towards "excess profits" after adjusting the balance towards interest on the mortgage amount. A period of six months is stipulated, within which the amount has to be repaid by the mortgagor. The document provides for payment of interest at 12% per annum on the profits agreed to be paid. In case the mortgage money was not paid within the period stipulated the mortgagee is given the right to bring the property to sale and realise the amount. In case the amount realised is not sufficient to discharge the amount due the mortgagee can proceed against other proprietor of the mortgagor and the mortgagor personally. The document also mentions about adebt due to one Moideen to the extent of Rs. 500/-. The mortgagee was not given the right to effect any improvements and he was also restrained from transferring the building in any manner. The cumulative effect of these recitals is to suggest that the parties intended to create a mortgage and not a lease of the building. There is no ambiguity in the terms of the document so as to enable the court to look into surrounding circumstances and other facts to ascertain the intention of the parties. There is no averment of any fraud, undue influence or the like on the part of the plaintiff which induced the defendant to enter into a transaction of this nature. True, there is the evidence of defendant who had spoken about his pressing necessity of a house for occupation and the willingness of the plaintiff to entrust the building on a usufructuary mortgage. But that intention cannot be spelt out from any of the recitals contained in the document. As observed by this Court in Gilbert's case (1988 (1) Ker LT 50) (supra) the parties were dealing with each other at arms length and of their own volition. Defendant had advanced an amount of Rs. 1000/-knowing fully well that he was getting the document by which a mortgage was created over the building. He was also given the right to bring the property to sale for realisation of the mortgage money. Having conferred a right of sale on the defendant it is not open to him now to contend that the parties intended to create a lease and the transaction envisages only a letting of the building on rent. Applying the principles laid down in the Bench decisions of this Court aforementioned the only conclusion possible is that the document Ext. A1 evidences an anomalous mortgage and not a lease. Moreover the rights and liabilities of the parties to an anomalous mortgage are to be determined by the contract as evidenced in the mortgage deed by virtue of the provision contained in Section 98 of the Transfer of Property Act. In any case therefore the plea that defendant is a lessee of the building is unsustainable and has to be repelled. The Courts below have not made a proper approach to the problem in the light of the legal principles and especially, the decisions of this Court. The judgment and decrees of the Courts below are liable to be set aside and I do so.
16. Counsel draws attention to the decision of this Court in S. A. 678/ 84 rendered on 21-6-1989. That also was a suit for redemption of a mortgage wherein defendant raised a plea that the transaction amounted to lease and not a mortgage. On an interpretation of the recitals in the document and on a consideration of the facts and circumstances the learned Judge ruled that the parties intended to create a rental arrangement and defendant was held liable to be evicted only by taking recourse to the provisions of the Rent Control Act. Considerable reliance was placed on this decision by the learned counsel. According to him the facts of this case are almost identical. The Division Bench decision of this Court in Gilbert's case (1988 (1) Ker LT 50) (supra) had been brought to the attention of the learned Judge. But that was distinguished with the observation that that decision cannot be taken as laying down any law that in all cases of execution of such documents a consideration whether it created a landlord and tenant relationship is ruled out. It is observed that whatever was stated in that decision could be taken as applicable only to the facts of that case. If that observation can be relied on a decision in this case also has to be rendered on the facts of this case. No reasons are seen to have been given for not following the decision of the Division Bench. Attention was also not seen drawn to the earlier Division Bench decisions of this Court, one of which was referred in Gilbert's case. The principles to be applied in the matter of understanding the nature of a document had been laid down in the Division Bench decisions of this Court referred earlier. I am bound to follow the principles laid down by the Division Bench.
17. Viewed in that perspective and in the absence of any reasons in the judgment rendered in S.A. 678/844 no reliance can be placed on that decision. Moreover, the terms of the document interpreted by this Court in that decision are different from the terms of Ext. A1. The question whether the document envisages an anomalous mortgage is not seen to have been considered in that case. A right of sale having been conferred on the defendant by the document intention to create an anomalous mortgage has been manifested. If that be so, the rights and liabilities of the parties shall be determined by the contract as envisaged in the mortgage deed and as mandated in Section 98 of the Transfer of Property Act. In any view of the matter the decision in S.A. 678/84 is of no assistance to respondent.
18. It is then pointed out that the correctness of the decision in Gilbert's case, (1988) 1 Ker LT 50 was doubted in S.A. 285/88 and a reference has been made to a larger Bench for a determination of the question. At the time of hearing of that second appeal the learned Judge felt that the dictum laid down in Gilbert's case, especially the observation in paragraph (5) of the judgment is at variance with the decision of the Privy Council reported in Tyagaraja v. Vedathanni, AIR 1936 PC 70. In that view of the matter the appeal was adjourned for being heard by a Division Bench. In the decision cited the Privy Council held that oral evidence is admissible to show that a document executed by a person was never intended to operate as an agreement but was brought into existence solely for the purpose of creating evidence about some other matter. It is observed that there is nothing in Sections 91 and 92 of the Evidence Act to exclude oral evidence in such a case to show that there was no agreement between the parties and therefore no contract. Defendant did not dispute either the execution of the document or the payment of money to plaintiff. He had accepted the mortgage deed and occupied the house in pursuance thereto. By that document certain rights are conferred on him which he can enforce against the plaintiff. Defendant has no case that the document was not intended to be acted upon whereas his plea appears to be that he was in need of a house which the plaintiff was prepared to give only on executing a mortgage deed. There is no case that defendant was either deceived by plaintiff or that he is a victim of fraud or undue influence. In paragraph (5) of the judgment in Gilbert's case this Court has only referred to those aspects and the understanding of the terms of the document and their implication by the parties. The Division Bench further stated that whether or not one of the parties intended or hoped to ultimately dodge his obligations as a mortgagee and claim statutory protection as a tenant, he cannot free himself of the legal effect of the words which he freely used in the knowledge of their import and meaning. These observations contained in paragraph (5) of the decision in Gilbert's case cannot be understood to have meant that parties are not at liberty to adduce evidence on the lines indicated by the Privy Council in AIR 1936 PC 70. The Division Bench of this Court in Gilbert's case was only following the earlier Division Bench decision in (1987) 2 Ker LT 994, The learned Judge by the reference order in S.A. 285/88 has only observed that the dictum and especially observation in paragraph (5) of the judgment in Gilbert's case (1988 (1) Ker LT 50) is at variance with the decision of the Privy Council in Tyagaraja's case (AIR 1936 PC 70) (supra). Even in spite of the observations in paragraph (5) of that decision interpretation of Ext. A1 in the light of the principles laid down in the earlier decisions is possible and that was attempted to be done in this decision along with the observations in Gilbert's case. I therefore see no reason to make a reference of this case to a larger Bench or to keep the second appeal pending till a decision is rendered on the reference made by the learned Judge in S.A. 285/88. I have got my own doubts as to whether the decisions of the Privy Council are still binding on the High Courts in this country after the commencement of the Constitution. Since that question is likely to be raised before the Division Bench on the reference in S.A. 285/88 I deem it not proper to consider that aspect in this judgment. For the purpose of the decision of this second appeal it has only to be stated that the observations in the judgment of the Privy Council in Tyagaraja's case do not run counter to the reasonings given by the Division Bench in Gilbert's case and the other three Bench decisions of this Court referred earlier. The result is that a decision has to be rendered on the basis of the propositions laid down by this Court in those Bench decisions. The recitals in Ext. A1 were analysed and interpreted by me in the light of those decisions which I am bound to follow.
19. The document which has come up for consideration in this second appeal is styled as a usufructuary mortgage deed which has been interpreted to be an anomalous mortgage by virtue of the stipulation to bring the property to sale for realisation of the mortgage money. What is mortgaged is only a building. A usufrutuary mortgage in respect of the building alone whether residential or non-residential is not interdicted by any of the provisions of the Transfer of Property Act. Ext. A1 which purports to be such a mortgage is capable of creating legal rights. What is requested for in the plaint is only enforcement of the legal rights which a mortgagor has over such building. The guidelines laid down by the various decisions to determine whether a particular transaction is a mortgage or a lease cannot therefore be made applicable to a case of this nature especially when the document envisages creation of an anomalous mortgage. Furthermore, the mortgagee has been conferred certain rights which he can enforce against the mortgagor. I am referring to the right of the mortgagee to bring the property to sale for realisation of the mortgage money due. When the mortgagee can enforce that right against the mortgagor on the strength of the recital contained in the document I see no reason why the mortgagor cannot enforce his right to get the mortgage redeemed.
20. A contention is raised on behalf of the respondent that the stipulation to pay Rs. 85/- per month is really by way of rent of the building and not towards "excess profit" as mentioned in the document. As observed by this Court in Gilbert's case (1988 (1) Ker LT 50) the expression "excess profit" appears to be not free of doubt. There is no income from the building as far as defendant is concerned. But he is occupying the building and to that extent is in enjoyment thereof. For such enjoyment he has to compensate the plaintiff. What that amount is has not been mentioned. The recital is to the effect that an amount of Rs. 85/- has to be paid as excess profit after adjusting the balance towards interest due on the mortgage amount. To this extent there is some ambiguity in the document. This Court has attempted to resolve that ambiguity in Gilbert's case by observing that what is paid every month is what the panics believed to be "fair occupation rent" contemplated under Section 76 of the Transfer of Property Act. There is an obligation on the part of the defendant to pay interest in case of default of payment of this amount. The amount agreed to be paid therefore represents the profits derived by defendant from the building by use of the same in the nature of occupation. Though defendant is not getting any profit as such from the building it cannot be said that he is not deriving any benefit at all since he is in enjoyment of the premises by occupation thereof, That benefit can be computed in terms of money. What is the quantum computed by the parties is not discernible from the document. The amount agreed to be paid every month represents the profits thus computed minus the interest on the amount advanced. Viewed from that angle there is no ambiguity in Ext. A1regarding stipulation to pay excess profits.
21. Moreover there is yet another difficulty in construing the document as a lease deed. By the terms of the document parties had not bargained for a lease but only a mortgage which confers a right of sale in favour of the mortgagee who now pleads against the terms of the document. The amount agreed to be paid by way of excess profits does not represent the rent of the building. What is the rent payable will have to be determined. Till then it may not be possible for the plaintiff to enforce his rights against the defendant. In case the document is construed as a lease plaintiff will be constrained to get the fair rent of the building adjudicated. The amount seen paid under Ext. A1 will have to be treated as advance paid by the tenant out of which the landlord is entitled to retain only the amount representing one month's rent as advance. The balance will have to be adjusted towards the arrears of rent. Parties had not bargained for these courses of action whereas the building was taken possession of by the defendant after accepting the mortgage deed which confers on him a right to possess the building on the strength of the mortgage deed and also a right to bring the property to sale. In the light of the specific terms of the document the question of plaintiff being driven to several litigations either for getting the fair rent determined or to get eviction of the building does not therefore arise.
For the aforesaid reasons the second appeal is allowed and in reversal of the judgments and decrees of the Courts below the suit is decreed as prayed for. The profits due to plaintiff from the defendant will be adjusted towards the mortgage money. Time two months.