Gujarat High Court
Anjuben Valji & 6 vs Soni Vrajlal Tapubhai on 11 June, 2015
Author: Akil Kureshi
Bench: Akil Kureshi
C/SA/49/1999 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SECOND APPEAL NO. 49 of 1999
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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ANJUBEN VALJI & 6....Appellant(s)
Versus
SONI VRAJLAL TAPUBHAI....Respondent(s)
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Appearance:
MR MEHUL S SHAH, ADVOCATE for the Appellant(s) No. 1 - 4.5 , 5 - 7.4
MR HRIDAY BUCH, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
Date : 11/06/2015
ORAL JUDGMENT
1. This appeal arises out of a judgement and decree of the Page 1 of 18 C/SA/49/1999 JUDGMENT trial Court dated 22.8.1989 passed in Regular Civil Suit No. 2/1982 and the appellate order dated 11.7.1994 passed by the Assistant Judge, Bhavnagar in Regular Civil Appeal no. 60/1989. The appellants were the original plaintiffs. They had filed a civil suit with a prayer for redemption of mortgage of the suit property in the nature of a shop, upon returning of the mortgage amount of Rs.2300/ to the defendants and for being handed over the possession of the mortgaged property. Such suit was dismissed by the trial Court. First Appeal was dismissed by the Sessions Court. Hence this Second Appeal.
2. At the outset, one may record the facts in brief. The appellants original plaintiffs are the owners of a shop in village Gathda. The predecessorintitle of the plaintiffs had mortgaged the said property in favour of one Darji Bhuralal Laxmanbhai by creating a mortgage deed dated 28.11.1952. It is the case of the plaintiffs that in order to repay the mortgage money to the said Darji Bhuralal Laxmanbhai, the shop was mortgaged in favour of Khimji Zaverbhai, HUF, by borrowing a sum of Rs.2300/ on 11.12.1959. As per the terms of the mortgage, the mortgagor would not claim any rent of the property, the mortgagee would not be entitled to interest on the mortgaged money. On the premise that when the plaintiffs offered to repay the mortgage amount to redeem the mortgage, the defendants refused to do so, the said suit was filed before the Court of Civil Judge (Junior Division) Gathda.
3. The defendant no.7 claiming that in a family arrangement Page 2 of 18 C/SA/49/1999 JUDGMENT he was assigned the mortgaged shop, filed a detailed written statement at exh.13 and opposed the suit. In such written statement, the creation of mortgage for a sum of Rs.2300/ was accepted. It was however, averred that prior to creation of the said mortgage on 12.12.1959, the defendants were already enjoying the possession of the suit property as tenants for a monthly rent of Rs.7.50. It was therefore, contended that the plaintiffs have no right to reclaim the possession of the suit property by merely returning the mortgage amount of Rs.2300/ since even after redemption of such mortgage, the preexisting tenancy would survive. The said defendant in the written statement agreed to redemption of mortgage upon returning of the money but opposed the prayer for eviction.
4. The trial Court framed the following issues :
1) Whether the plaintiffs prove that on 11.12.1959, the suit property was mortgaged in favour of Soni Khimji Zaverbhai, HUF, For a sum of Rs.2300/?
2) Whether the plaintiffs prove that the mortgaged shop had come in the share of defendant no.7 pursuant to partition of HUF property?
3) Whether the defendant no.7 proves that he was tenant of the suit property prior to creation of the said mortgage?
4) If issue no.3 is proved, whether the plaintiffs had given legal notice for eviction?Page 3 of 18
C/SA/49/1999 JUDGMENT
5) If issue no.3 is proved what would be the standard
rent?
6) Whether the defendant no.7 was ready and willing to
pay the standard rent?
7) Whether the plaintiff is entitled to any reliefs?
8) What order?
5. The learned Judge answered the issues in the following manner :
• Issues no.1,2,3 and 6 in the affirmative.
• Issue no.4 in the negative.
• Regarding issue no.5, he declared Rs.7.50 as standard rent.
• Regarding issue no.7 and 8, it was held that the plaintiffs would be entitled to symbolic possession but not the vacant possession of the suit property and passed the final order accordingly.
6. In such judgement, the trial Court held that even prior to creation of the mortgage, the defendants were occupying the suit property as tenants. A reference was made to mortgage deed dated 12.12.1959, exh.52, in which it was mentioned that since three months prior to creation of mortgage, the defendants had been inducted as tenants for Page 4 of 18 C/SA/49/1999 JUDGMENT a monthly rent of Rs.7.50. The trial Court was of the opinion that though the plaintiffs had a right to redeem the mortgage, had no right to evict the tenant who was occupying the mortgaged property prior to creation of the mortgage. Having held the defendants as tenant, the Court proceeded to fix the standard rent of the property at Rs.7.50. Eventually therefore, an order was passed directing the defendants to redeem the mortgage upon the plaintiffs paying the sum of Rs.2300/ but rejected the plaintiffs' prayer for vacant possession of the suit property.
7. The appellate Court referred to the accounting entries in the HUF business to confirm the view of the trial Court that there was a preexisting tenancy in favour of the defendants at the time of creation of the mortgage. These judgements, the plaintiffs have challenged in this Second Appeal.
8. Learned advocate Shri Mehul Shah for the appellants submitted that the Courts below committed a serious error in not granting the decree for eviction. He submitted that there was no evidence on record to suggest that the defendants were inducted as tenants by the plaintiffs, nor was there any such finding of the Courts below. In that view of the matter, the tenancy even if created by the earlier mortgagee, the same would be coterminus with the mortgage. In the alternative, the counsel contended that proper reading of mortgage deed dated 11.12.1959 would show that the defendants had surrendered the tenancy.
According to him, this was a case of implied surrender of the tenancy rights. Counsel contended that there was Page 5 of 18 C/SA/49/1999 JUDGMENT nothing in the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 which would prevent the tenant from surrendering any such rights.
Counsel further submitted that the written statement filed by defendant no.7 is silent on who created the tenancy. The tenant without establishing that the same was created by the owners, cannot continue in possession post termination of the mortgage. Counsel relied on several decisions to which, I may refer at a later stage.
9. On the other hand, learned counsel Shri Hriday Buch for defendant no.7 contended that there was reliable evidence on record to establish that the defendants were in occupation of the suit property as tenants at the time the mortgage in their favour was created. The Courts below have assessed such evidence and come to factual findings which are not perverse. In Second Appeal, therefore, this Court would not interfere with such factual findings. Counsel submitted that the plaintiffs had accepted the rent from the defendants prior to creation of mortgage clearly demonstrating that it was the plaintiffs who had inducted the defendants as tenants and not the earlier mortgagor. Such tenancy would continue even after redemption of the mortgage.
It was next contended that the plaintiffs have not taken any ground of implied surrender either in the pleadings or during the course of trial. They would therefore, be precluded from raising any such contention at this stage. In any case, according to the counsel, there was Page 6 of 18 C/SA/49/1999 JUDGMENT no surrender, expressed or implied, by the defendants of their preexisting tenancy rights at the time of creation of mortgage. He also relied on decisions to which I would refer to at a later stage.
10. While admitting the appeal, the Court had framed the following substantial questions of law :
"(A) Whether while passing decree for redemption, return of possession of the mortgaged property by handing over back to the mortgagor on redemption can be refused?
(B) Whether the judgments and decree passed by the lower courts are vitiated as they have been passed without ordering handing over back possession of the mortgaged property to the mortgagor on payment of mortgagedeed amount?
(C) Whether the tenancy rights of the mortgagee can enure even after redemption of mortgage?"
11. In context of these questions and the contentions of the advocates, I may refer to the relevant evidence. As noted, the plaintiffs' basis for filing the suit was creation of mortgage under a mortgage deed exh.52 dated 11.12.1959. According to the plaintiffs even upon tendering of the mortgage money, the defendants refused to handover the vacant possession of the suit property. The stand taken by defendant no.7 in the written statement was of preexisting tenancy which according to the defendant could not be terminated even after redemption of the mortgage.
12. Bachubhai Valjibhai, one of the plaintiffs was examined as the first witness at exh.51. He pointed out Page 7 of 18 C/SA/49/1999 JUDGMENT that the suit property was mortgaged for a sum of Rs.2300/ and the possession of the shop was handed over to the defendants. Previously the shop was in possession of Bhurabhai Laxmanbhai. In order to redeem the mortgage in his favour, the present mortgage was created. He had deposited the said sum of Rs.2300/ along with the suit.
In the cross examination, he denied that he had given the suit shop to the defendants on rent. According to him, the defendants acquired the possession of the property under the mortgage.
13. The defendants examined their first witness Soni Vrajlal Tribhovandas at exh.61, the defendant no.7. He deposed that upon family arrangement, the shop had come in his share. The shop was given on rent by the plaintiffs before creation of the mortgage. He referred to the entries in accounting book maintained by HUF where payment of rent of Rs.7.50 per month to the plaintiffs for the shop in question was recorded which was produced at exh.62. He declared that he was prepared to redeem the mortgage upon returning of the mortgage money but asserted that he had not defaulted in payment of rent and in any case was ready and willing to pay the arrears, if any.
In the cross examination, he asserted that he had entered into the mortgage along with the possession of the shop as a tenant. He stated that such tenancy was not created by the earlier mortgagee.
14. It is not necessary to refer to oral deposition of other Page 8 of 18 C/SA/49/1999 JUDGMENT witnesses of the defendants.
15. The first mortgage deed dated 28.11.1952 was produced at exh.53. This mortgage was created by the plaintiffs in favour of Bhurabhai Laxmanbhai upon payment of Rs.2000/ and the mortgagor had to pay interest to the mortgagee at a decided rate. In turn, the mortgagee was allowed to lease out the property and whatever the income generated from such activity would be first appropriated towards the plaintiffs' interest liability. One may notice that in such mortgage deed, there was no specific mention of the mortgagee being authorised to create a tenancy to enure beyond the mortgage.
16. Subsequent mortgage in favour of the defendants dated 11.12.1959 was produced at exh.52. The suit premises were mortgaged in favour of the defendants by the plaintiffs upon receipt of Rs.2300/. In this agreement, it was stated that the mortgagee had paid on the date of the mortgage a sum of Rs.2300/, in exchange of which the mortgage was created. It was also stated that the shop was previously mortgaged to Darji Bhuralal Laxmanbhai. In order to redeem the mortgage, said sum of Rs.2300/ was borrowed. Significantly, the document recorded that the mortgagee was the tenant of the suit shop since past three months paying rent of Rs.7.50 per month. It was decided that the mortgagor will not claim any rent towards the shop and the mortgagee will not claim any interest on the borrowed sum.
17. In the accounts of the HUF, entry exh.62, dated Page 9 of 18 C/SA/49/1999 JUDGMENT 15.12.1959 showed debit of Rs.7.50 for payment of rent of the shop to Merai Valji Gopalbhai for the Kartak month on the say of Bhurabhai Laxmanbhai. Entry exh.66 in the said accounts dated 11.12.1959 records debit of Rs.2300/ for creation of mortgage in favour of Valji Gopalbhai for returning the money to Bhurabhai Laxmanbhai.
18. From the above, it can be seen that in the present case, we are concerned with the question of continuance of the tenancy after the first mortgage was redeemed. From the evidence on record, it clearly emerges that the defendants were already occupying the possession of the suit shop on the date of creation of the mortgage. In the mortgage itself which was created by the plaintiffs, it was recorded that the defendants were occupying the shop since three months paying monthly rent of Rs.7.50. The plaintiffs' contention therefore, that the possession of the suit shop was given to the defendants only on the creation of deed of mortgage is not correct. In addition to this clear recitation in the mortgage deed, we have by way of corroborative evidence, the accounting entry exh.62 showing payment of rent of Rs.7.50 for the month of Kartak. The mortgage was created in the following month of Magshar. In that view of the matter, the legal question would be whether upon redemption of the first mortgage, such tenancy would be terminated or whether as canvassed by Shri Buch, the tenancy would continue and survive even post the second mortgage. According to him, upon creation of the mortgage in favour of the defendants, the tenancy would remain suspended and as soon as the mortgage is redeemed, the tenancy would revive and as Page 10 of 18 C/SA/49/1999 JUDGMENT long as the tenants are ready and willing to pay the standard rent, they cannot be evicted from the suit premises.
19. We may first refer to the legal position on this aspect as emerging from the following decisions cited by Shri Mehul Shah. A similar issue came up for consideration before the larger Bench of this Court in case of Lalji Purshottam v. Thacker Madhavji Meghaji reported in 17 GLR 497. The Full Bench considered the following questions :
"(1) Whether under Section 76(a) of the Transfer of Property Act, a lease created by the mortgagee in possession of an urban immovable property would be binding on the mortgagor after redemption of mortgage assuming that the lease is such as a prudent owner of property would have granted in usual course of management?
(2) Whether, even apart from S. 76(a) of the Transfer of Property Act, a lease created in exercise of a general power to grant a lease expressly conferred on the mortgagee under the mortgage deed would be binding on the mortgagor after redemption of the mortgage?
(3) Whether a tenant inducted on the property by a mortgagee with possession, whose tenancy is not binding on the mortgagor after redemption of the mortgage, would still be protected under the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947?"
Such questions were answered in the following manner :
Page 11 of 18C/SA/49/1999 JUDGMENT "31. In the light of the above discussion, we answer the questions referred to us as follows: (Q. 1.). S. 76(a) of the Transfer of Property Act cannot apply to a case of urban immovable property and hence a lease created by the mortgagee in possession of an urban immovable property would not be binding on the mortgagor after redemption of the mortgage, even if it were to be assumed that the lease is such as a prudent owner of property would have granted in usual course of management.
(Q. 2). If the words of the mortgage deed clearly and indubitably express an intention to allow expressly creation of a tenancy beyond the term of the mortgage, then only the lease created in exercise of the power expressly conferred by the mortgage deed would be binding on the mortgagor. If the words of the mortgage deed do not clearly and indubitably disclose the intention to allow expressly the creation of a tenancy beyond the terms of the mortgage, the mere fact that the mortgage deed authorizes the mortgagee with possession to induct a tenant would not create a tenancy binding on the mortgagor after the redemption of the mortgage. We may at this stage mention that the opening words of Question No (2) "Whether even apart from section 76 of the Transfer of Property Act" are apt to be misleading and what seems to have been meant while framing this question is whether the granting of a lease in exercise of general power expressly conferred on the mortgagee with possession under the mortgage deed would be binding on the mortgagor after the redemption of the mortgage. It may be pointed out that according to the Supreme Court decision in Asaram v, Mst. Ram Kali, (AIR 1958 SC 183) where there is no prohibition under the mortgage deed expressly prohibiting the mortgagee with possession from granting a lease, the parties will be thrown back on the rights under the Transfer of Property Act and Page 12 of 18 C/SA/49/1999 JUDGMENT the lessees must still establish that the lease is binding on the mortgagors under Section 76(a) of the Act. Under these circumstances we answer question No. (2) as indicated above.
(Q 3) Our answer to Question No. (3) is that a tenant inducted on the property by a mortgagee with possession when the tenancy of that tenant is not binding on the mortgagor after the redemption on the mortgage, is not protected under the provisions of the Bombay Rents. Hotel and Lodging House Rates Control Act, 1947."
20. In case of Carona Shoe Co. Ltd. and another v. K.C. Bhaskaran Nair, reported in AIR 1989 Supreme Court 1110, the Supreme Court expressed similar opinion as under :
"11. These contentions, in our opinion, are concluded by the decision of this Court in Pomal, Kanji Govindji v Vrajlal Karsandas Purohit (AIR 1989 SC 436), wherein it was held that except in cases where the leases specifically and categorically make exceptions in favour of the tenants that they would continue to be in possession even after the expiry or termination of the mortgage, and those leases are acts of prudent management, the tenants inducted by the mortgage would be entitled to the protection under the Rent Act after the redemption of mortgage and in no other cases"
21. These aspects have been highlighted in a recent decision in case of Thakar Singh (Dead) by legal representatives and another v. Mula Singh (Dead) through legal representative and others reported in (2015) 5 Supreme Court Cases 209.
Page 13 of 18C/SA/49/1999 JUDGMENT
22. The legal position thus is sufficiently clear. In case of urban properties, If the mortgage deed clearly expresses an intention to authorise the mortgagee to create a tenancy to enure beyond the term of mortgage, only in such cases, the lease created in exercise of such express powers would bind the mortgagor. If the language used in the mortgage deed does not clearly disclose any such intention, the mere fact that the mortgage deed authorized the mortgagee to induct a tenant, would not create a tenancy binding on the mortgagor after redemption of the mortgage. In such a case, the tenant inducted by the mortgagee would receive no protection of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. It would thus emerge that if the mortgage deed expressly authorises the mortgagee to induct a tenant, not only during the currency of the mortgage but to enure beyond the mortgage period, only in such a case, the tenancy would survive the mortgage. In such a case, the tenant would be entitled to protection under the the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. However, in absence of any such express intention emerging from the mortgage deed, mere right of the mortgagee to induct a tenant would not be sufficient to create a tenancy which would bind the mortgagor after the redemption of the mortgage. This is often times referred to as a clog on the mortgage.
23. In context of this legal position, our inquiry would be two fold. Firstly, whether the defendants were inducted as tenants by the plaintiffs themselves. If that be so, the question of implied or expressed authority of mortgagee to Page 14 of 18 C/SA/49/1999 JUDGMENT create tenancy to enure beyond the period of mortgage would not survive. If the defendants were not inducted as tenants by the plaintiffs, the only possible conclusion could be that they were inducted by the first mortgagee during the currency of mortgage period and in which case, the question of mortgagee's expressed authority to create a tenancy to last beyond the period of mortgage would be relevant.
24. Insofar as the first aspect is concerned, the defendants have not led any evidence to show that they were inducted as tenants of the suit shop by the plaintiffs. I have already concluded that the defendants were put in possession of the suit property three months prior to creation of the mortgage in their favour. Even the mortgage deed exh.52 records their presence as tenants for a rent of Rs.7.50 per month. However, this mortgage deed duly signed by the representatives plaintiffs and the defendants also mentions that a sum of Rs.2300/ was borrowed from the defendants for paying borrowed money of Rs.2000/ to the previous mortgagee. Such sum was paid on the date of creation of the mortgage deed i.e. 11.12.1959. Even the accounting entry exh.66 in the books of account of HUF of the defendants recorded that said sum of Rs.2300/ was withdrawn for the purpose of paying to the plaintiffs for refund to the previous mortgagee. Till 11.12.1959, therefore, earlier mortgage was not redeemed. The previous mortgagee therefore, was in the possession of the shop as a mortgagee. The plaintiffs therefore, could not have inducted the defendants as tenants. There is further indication of the defendants having been rented out the Page 15 of 18 C/SA/49/1999 JUDGMENT shop by the previous mortgagee. In entry exh.62 where while debiting Rs.7.50, it was recorded that the said sum was for payment of rent of previous month to the plaintiffs but under the instructions of Bhura Laxmanbhai, the previous mortgagee. If the defendants were inducted as tenants by the plaintiffs, reference to the instructions of the previous mortgagee in their own books of accounts was wholly unnecessary and incongruent. It can therefore, be safely concluded that the defendants were given the suit shop on rent by the previous mortgagee and not the plaintiffs. The defendants themselves have not produced any evidence to the contrary which was their primary burden. In the written statement no such firm stand has been taken. Except for oral deposition by defendant no.7. no other evidence is forthcoming. Even the Courts below have given no clear finding that the tenancy was created by the plaintiffs.
25. The subsidiary question therefore, is did the mortgage deed in question, exh.53, authorise the mortgagee to create a tenancy to enure beyond the period of mortgage. As recorded under the said mortgage, the plaintiffs and the mortgagor had to bear the interest on the borrowed sum of Rs.2000/. The mortgagee had the authority to rent out the property. The rent proceeds would first be appropriated towards the interest liability of the plaintiffs. The mortgagee would retain the excess, if any. However, this deed nowhere either expressly or impliedly authorize the mortgagor to create a tenancy beyond the period of mortgage. As held by the Full Bench in case of Lalji Purshottam v. Thacker Madhavji Meghaji(supra), Page 16 of 18 C/SA/49/1999 JUDGMENT there has to be a specific, clear and unequivocal power in favour of the mortgagee to create such a tenancy as would enure beyond the period of mortgage, only upon which even after redemption of the mortgage, the tenancy created by the mortgagee would continue and bind the mortgagor and tenant so inducted would get the protection of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. No such recitation in any part of the mortgage exh.52 is to be found. Such power in plain terms is missing.
26. Learned advocate Shri Buch relied on the decision in case of Gopalan Krishnankutty v. Kunjamma Pillai Sarojini Amma and others reported in (1996) 3 Supreme Court Cases 424. It was however, a case of creation of mortgage in favour of a lessee by lessor himself. Upon redemption of the mortgage, the High Court held that there was surrender of prior lease at the time of execution of the mortgage. The Supreme Court observed that the question has to be decided on the contents of the deed since there is no other evidence of surrender of lease by the defendant on execution of the mortgage. Vitally in the present case, the lease was created by the owner himself.
In case of Patel Atmaram Nathudas and others v. Patel Babubhai Kashavlal reported in AIR 1975 Gujarat 120, relied by the counsel for the respondents, it was held that the tenant does not forfeit his right to continue as a tenant by reason of the creation of a mortgage in his favour. Upon creation of mortgage, his tenancy rights do not merge. There can be no quarrel with this proposition. However, in the present case, as already held, the tenancy Page 17 of 18 C/SA/49/1999 JUDGMENT was created by an earlier mortgagor and not by the plaintiffs.
27. Under the circumstances, the Courts below committed a legal error in disallowing the suit. The questions framed are answered in favour of the appellants. Judgement and decree of the trial Court as upheld by the appellate Court are reversed. The suit is decreed. The defendant no.7 shall evict the suit premises latest by 31.12.2015. Second Appeal is allowed and disposed of.
R&P be sent back to concerned trial Court.
(AKIL KURESHI, J.) raghu Page 18 of 18