ppeal No
239 of 1954
Appeal from the judgment and decree dated December 12 1950 of the Patna High Court in Appeal from Original Decree No 188 of 1945 arising out of the judgment and decree dated December 18 1945 of the Court of the Additional Subordinate Judge IV Class Gaya in Title Suit No 4 of 1945
Purshottam Tricumdas and section P Varma for the appellant
SP Sinha and R C Prasad for respondents Nos 1 4 8 10 13 and 14
May 23
The Judgment of the Court was delivered by SUBBA RAO J
This appeal by certificate tinder article 133 1 a of the Constitution of India is directed against the judgment and decree of the High Court of Judicature at Patna setting aside those of the Subordinate Judge Gaya in a suit for redemption of an usufructuary mortgage
Deokinand the common ancestor of plaintiff respondents 1 to 4 and proforma respondents 6 to 12 executed a document dated August 20 1923 in favour of Mahant Tokhnarain Puri of Nadra the predecessor ininterest of defendant 1 hypothecating eight annas milkiat share in mauza Lodipur Mahimabigha Tauze No 4246 for the purpose of discharging a debt of Rs 31701 payable by him to the Mahanth
There are conflicting versions in regard to the nature of this transaction respondents claim it to be a usufructuary 1087 mortgage while the appellant asserts it to be a lease
The plaintiff respondents instituted Title Suit No 4 of 1945 in the Court of the Additional Subordinate Judge 1V Gaya for redemption of the said document on the basis that it was a usufructuary mortgage for rendition of accounts and for the recovery of surplus profits due to them
The appellant pleaded inter alia that the suit for redemption was not maintainable as the document was not a mortgage but lease that on the assumption that it was a mortgage it would only be an anomalous mortgage in respect where of there was no statutory liability to render accounts to the plaintiff that even if it was a usufructuary mortgage it was governed by the provisions of section 77 of the Transfer of Property Act taking the mortgage out of the purview of section 76 d and g of the said Act
It is not necessary to particularize other defences as nothing turns upon them in the appeal
The learned Subordinate Judge held that the document created a usufructuary mortgage and not a lease and that section 77 of the Transfer of Property Act applied to the document exonerating the appellant from any liability to render accounts
In the result the learned Subordinate Judge gave a conditional decree in favour of respondents I to 4 for possession on their depositing in Court a sum of Rs 26839 7 0 within six months from the date of the decree
The plaintiff respondents preferred an appeal against that decree to the High Court at Patna
The High Court agreed with the learned Subordinate Judge that the document was a sufructuary mortgage but differed from him on the question of applicability of section 77 of the Transfer of Property Act
The High Court set aside the decree of the learned Subordinate Judge and passed instead a preliminary decree for redemption and sale on default of payment the decree also directed the rendition of accounts between the parties in the light of the directions given in the judgment
The second defendant against whom the decree was passed preferred the above appeal
The point to be first decided is whether the transaction is a lease as contended by the contesting respondents
The only guiding rule that can be extracted 1088 from the cases on the subject is that the intention of the parties must be looked into and that once you get a debt with security of land for its redemption then the arrangement is a mortgage by whatever name it is called  See Ghosh on Mortgages V Edn Vol 1 p 102
Let us now examine the terms of the document Exhibit A 3 to ascertain the intention of the parties
The document was obviously not drafted by a trained mind
It appears to be a confused product of one of those village document writers
We shall read the document omitting the recitals not material to the question raised The first part of the document recited that the executant was heavily indebted to the other party under mortgage bonds and also otherwise and that common friends settled that a part of the properties mortgaged should be let out in ijara with possession at a lower rate of interest so that the increment of interest may be checked and the present necessities may be met 
It was also stated in the document that in respect of the said property there was a pre existing thika lease dated April 21 1922 in favour of Munshi Dodraj Lal alias Munshi Jatadhari Lal for a period of 9 years and that under the said lease Rs 2205 was taken by the executant as peshgi money without interest and the rent was fixed at a sum of Rs 2205
Then the document proceeds to state thus  In respect of Rs 29496 the total sum of peshgi money he should for the satisfaction of interest thereon get executed a usufructuary mortgage deed bearing a lower rate of interest in respect of 8 annas share i e half share in mauza Lodipur Mahima Bigha principal with dependencies together known and unknown tola and totals       for term of 15 years on fixing Rs 2205 as the annual rental and by getting mortgaged there
under 8 annas proprietary interest thikadari interest together with peshgi money and the right to receive thikadari rent from the said thikadars
Accordingly at the request and entreaty of me the executant the said Mahanthji took pity at my condition and agreed to my request and got ready to get usufructuary mortgage deed executed
Therefore 1 the executant 1089    have voluntarily let out in ijara with possession the whole and entire 8 annas i e half of Mauza Lodipur Mahima Bigha for a peshgi money of Rs 31701that Rs 29496 the peshgi money bearing interest at 12 per cent
per month and Rs 2205 tile peshgi money without interest at an annual rental of Rs 2205 including revenue and cesses for a term of 15 years commencing from 1331 Fasli to 1345 Fasli    and have put him in possession and occupation of the ijiara property as my representative
It is desired that the said ijaradar should enter into and remain in possession and occupation of the ijara property and so long as the thika of  Munshi Dodraj Lal alias Jatadhari Lal       is intact and in force he should realize the rent from the above named thikadars and their heirs and representatives in accordance with the stipulations made in the thika patta and kabuliat as representative of me the executant and bring it into his possession and use that is to say on his own authority he should set off Rs 1769 12 0 on account of the interest on the peshgi money bearing interest mentioned in this deed year after year and pay the remaining sum of Rs 435 4 0 the amount of rent due by the ijaradar ie the reserved rent to me the executant and my heirs and representatives The ijaradar should not make any default
If he does so he and his heirs and representatives shall be held liable to pay interest at 12 per cent
per month
 Then the document proceeds to incorporate the terms agreed upon by the parties to take effect after the termination of the thikadari interest
It is stated  The ijaradar of this ijara deed or his heirs and representatives on his own authority shall be competent to bring the thika property into his sir possession as ijara property as a representative of me the executant in accordance with the stipulations made in the patta and kabuliats after setting off Rs 2205 the peshgi money due to the thikadars by me the executant against the annual thikadari rent
The said ijaradar should make his own arrangement for the cultivation of the ijara property get it cultivated 1090 by others realise the nakdi and jinsi income of the ijara property from the tenants and appropriate the produce of both the shares thereof
1 the executant and my heirs and representatives neither have nor shall have any right claim and
demand in respect of tile produce or the income of the ijara property so long as the ijara deed is intact except getting Rs 435 4 0 the rent after the payment and deduction of interest on the peshgi money bearing interest
 The document then allocates the liability in respect of improvements and sums spent in regard to boundary disputes to one or other of the parties to the document and then it continues to state  The peshgi money amounting to Rs 31701 with and without interest as mentioned in this ijara deed has been realized from the ijaradar in this manner that I allowed Rs 28246 the amount of loan principal with simple and compound interest as per account given below after remission of the interest due to the ijaradar under all the three mortgage bonds to be set off against the peshgi money by getting a note made to that effect on the back of the said mortgage bonds which I allowed to remain with the ijaradar as a proof of pavnient of the peshgi money covered by this deed The term of this ijara deed with possession shall terminate in the month of Jeth 1345 Fasli when 1 the executant or my heirs and representatives shall repay Rs 31701 being the peshgi money with and without interest mentioned in this deed in cash and in one lump sum to the said ijaradar or his heirs and representatives 1 shall bring the ijara property into my sir possession
If I do not repay the peshgi money with and without interest on the expiry of the term of this ijara deed with possession then till the repayment of the whole and entire peshgi money with and without interest this ijara deed with possession shall precisely with all the stipulations remain in force and intact
1 the executant or my heirs and representatives shall not put forward any sort of claim or demand in respect of an increase in the produce save and except the claim 1091 for getting rent as fixed and the mentioned above         in security of the payment of the peshgi money with or without interest mentioned in this ijara deed I the executant have mortgaged hypothecated encumbered and made liable the ijara property
I do hereby make a trustworthy declaration that till the repayment of the entire peshgi money of the ijaradar I shall not in any way directly or indirectly on any allegation mortgage hypothecate
encumber and transfer the ijara property
 The gist of the aforesaid transaction may be stated thus The executant was indebted to the other party in a large amount under mortgage bonds and otherwise
Through the intervention of common friends with a view to salvage some property the amount due from the executant to the other party was fixed in the sum of Rs 29496 and it was settled that half share in mauza should be given as security to the other party
At the time of the execution of the document there was an outstanding thika document in favour of a third party whereunder the said party advanced a sum of Rs 2205 to the executant and agreed to pay Rs 2205 as annual rent
As the other party agreed to discharge the advance paid by the third party to the executant the right to collect the rent from him was also agreed to be given as security to the other party
With the result the executant received Rs 31701 under the document out of which Rs 29496 bore interest at i per cent
per month and Rs 2205 did not carry interest presumably because the other party did not actually pay the amount to the executant
The document divided the transaction into two parts
The first part dealt with the terms governing the parties during the subsistence of the thikadari interest the second part mentioned the terms binding on the parties after the expiry of the said interest
During the first period the other party would receive the annual rent of Rs 2205 from the thikadars set off Rs 1769 12 0 on account of interest on the peshgi money bearing interest and pay the 139 1092 remaining sum of Rs 435 4 0 as reserved rent to the executant
After the expiry of the thikadari interest in 1338 Fasli the other party would take actual possession by setting off Rs 2205 the peshgi money due to the thikadars by the executant against the annual thikadari rent
After getting possession of the ijara property the other party would make arrangements for its cultivation and appropriate the produce towards interest paying the executant only a sum of Rs 435 4 0 as rent
The previous deeds were dis charged and endorsements to that effect made on the back of the documents
If the debt was not discharged within 1345 Fasli it was agreed that till the repayment of the entire peshgi money the ijara deed with possession would precisely with all stipulations remain in force and intact
The executant in express terms undertook not to put forward any sort of claim or demand in respect of the increase in the produce except and save to get rent as fixed in the document
From the aforesaid summary of the recitals in the document the following facts emerge 1 The executant owed large sums of money to the other party 2 interest at i per cent
per month was agreed to be paid on the sum of Rs 29496 ie on the entire consideration excluding that amount which was advanced by the thikadars to the executant 3 the manner of discharging the debt was prescribed in the document namely that during the subsistence of the thikadari interest the other party would receive the rent from the thikadars and appropriate Rs 1769 12 0 on account of interest and pay a sum of Rs 435 4 0 as rent to the executant and that after the expiry of the thikadari interest the other party would take physical possession of the land and appropriate the produce towards interest and pay only a sum of Rs 435 4 0 as rent to the executant 4 on the expiry of 15 years period or after the extended period the executant would pay the entire principal amount to the other party 5 8 annas share in the mauza was specifically given as security for the amount payable by the executant
Under the document there was a relationship of creditor and debtor between the 1093 parties and the property was given as security for the payment of the amount advanced with interest
Though the document is described as a cowle the parties who have had earlier transactions must be deemed to have known the nature of the transaction they were entering into
In clear and express terms the nature of the transaction has been stated in more than one place
The executant requested the other party in respect of the advance amount and interest to get executed by him a usufructuary mortgage deed bearing a lower rate of interest in respect of the 8 annas share
After mentioning the various terms the executant restated the intention of the parties in the following terms In security of the payment of the peshgi money with or without interest mentioned in this ijara deed I the executant have mortgaged hypothecated encumbered and made liable the ijara property Therefore whatever ambiguity there might be in the recitals that was dispelled by the unambiguous declaration made by the parties that the property was given as security for the loan and the document was executed as a mortgage
The gist of the document was not a letting of the premises with a rent reserved but a mortgage of the premises with a small portion of the income of it made payable to the plaintiff
There is therefore no scope for the argument in this case that the document is a lease and not a mortgage
We hold agreeing with the High Court that the document is a mortgage and not a lease
Even so it was contended by the learned Counsel for the appellant that the document did not create an usufructuary mortgage but only an anomalous mortgage
This contention was raised as a foundation to the argument that if the document was an anomalous mortgage the rights and liabilities of the parties would be governed by the terms of the contract between them and not by the provisions of section 76 of the Transfer of Property Act
The question does not really fall to be decided in this case
Whether the transaction is a usufructuary mortgage or an anomalous mortgage in the circumstances of the case there will 1094 not be any difference in the matter of rendition of accounts for in the ultimate analysis as we would presently show the true construction of the relevant terms of the document would afford an answer to the question raised
We shall therefore proceed to consider the question on the alternative basis
If it was a usufructuary mortgage it is contended by the appellant that he was not liable to render accounts to the mortgagor as Linder the mortgage deed he was authorized to take the receipts in lieu of interest within the meaning of section 77 of the Transfer of Property Act
The relevant provisions of the Transfer of Property Act are as follows Section 76 When during the continuance of the mortgage the mortgagee takes possession of the mortgaged property ghe must keep clear full and accurate accounts of all sums received and spent by him as mortgagee and at any time during the continuance of the mortgage give the mortgagor at his request and cost true copies of such accounts and of the vouchers by which they are supported hhis receipts from the mortgaged property or where such property is personally occupied by him a fair occupation rent in respect thereof shall after deducting the expenses properly incurred for the management of the property and the collection of rents and profits and the other expenses mentioned in clauses c and d and interest thereon be debited against him in reduction of the amount if any from time to time due to him on account of interest and so far as such receipts exceed any interest due in reduction or discharge of the mortgage money the surplus if any shall be paid to the mortgagor  Section 77 Nothing in section 76 clauses b d g and h applies to cases where there is a contract between the mortgagee and the mortgagor that the receipts from the mortgaged property shall so long as the mortgagee is in possession of the property be taken in lieu of interest on the principal money or in lieu of such interest and defined portions of the principal
 1095 Section 76g of the Transfer of Property Act imposes a liability on a mortgagee to keep full and accurate accounts supported by vouchers
So too he is under a statutory liability under cl h  to debit the nett receipts of the mortgaged property in deduction of the amount due to him from time to time on account of interest and where such receipts exceed any interest due in reduction and discharge of the mortgagemoney and to pay the surplus if any to the mortgagor
Therefore every mortgagee in possession is bound to keep clear full and accurate accounts and to render the accounts to the mortgagor in the manner prescribed in cl h 
But section 77 enacts an exception to the mortgagee s liability under cls
g and h of section 76
Under that section section 77 if there is a contract between the mortgagor and the mortgagee whereunder it is agreed that the receipts of the mortgaged property should so long as the mortgagee is in possession of the property be taken in lieu of interest and a defined portion of the principal the mortgagee is freed from the statutory liability to keep accounts or to render accounts to the mortgagor in the manner prescribed under cls
g and h of section 76 of the Act
This is so because the receipts are set off against the interest and there is nothing to account for
Therefore to insist upon the mortgagee to keep accounts or render accounts to the mortgagor would be an empty forma lity
The essential condition for the application of this section is that the receipts of the property should be taken in lieu of interest or in lieu of interest and a defined portion of the principal
The contention of the learned counsel for the respondents is that unless the contract authorizes the mortgagee to take the entire receipts in lieu of interest or in lieu of interest and defined portions of principal this section cannot be invoked for it is said that the principle behind the section is that one is set off against the other with the result there is nothing to be accounted for whereas if only a part of the receipts is agreed to be paid towards interest or in lieu of such interest and defined portions of the principal there would be surplus in the hands of the mortgagee which would have to be 1096 accounted for
On the basis of that distinction an argument is advanced to the effect that as in the present case the mortgagee had to pay a sum of Is
435 4 0 to the mortgagor he was not authorized by the mortgagor tinder the agreement to take the entire receipts in lieu of interest etc within the meaning of section 77 of the Transfer of Property Act
To put it differently the argument is that out of the receipts from the mortgaged property a portion was paid to the mortgagor and the mortgagee was authorized to take only the balance in lieu of interest and therefore there was no contract between the mortgagor and the mortgagee for the latter taking the entire receipts in lieu of interest
We find it difficult to accept this argument
Under Exhibit A3 the mortgagee undertook an unconditional obligation to pay a sum of Rs 435 4 0 in respect of the property mortgaged to him
This obligation was not made to depend upon the receipts from the property in the possession of the mortgagee
Whether there was yield from the land or not he had to make the payment to the mortgagor
Though he had to pay the rent as a consideration for his enjoyment of the land as a mortgagee his liability did not depend upon the receipts from the land he had to pay receipts or no receipts
His liability was also not confined to the receipts for he was under a personal obligation to pay the amount to the mortgagor
On the other hand the mortgagee was expressly authorized to take the entire income from the land and appropriate the same towards interest and the mortgagor agreed not to put forward any claim or demand in respect of any increase in the produce
Shortly stated the mortgagee was under a personal obligation to pay Rs 435 4 0 to the mortgagor and had a right to take the entire receipts from the land in lieu of interest
It is not a case therefore where receipts from the mortgaged property are divided between mortgagor and mortgagee but one where the mortgagee pays a specified amount to the mortgagor and appropriates the entire receipts in lieu of interest
We therefore hold that under the mortgage deed Exhibit A3 there is a contract between the 1097 mortgagee and the mortgagor within the meaning of section 77 of the Transfer of Property Act to the effect that the receipts from the mortgaged property should be taken in lieu of interest
Relying upon the judgment of the High Court a further attempt was made by the learned Counsel for the respondents to contend that the mention of a specified rate of interest in the document is indicative of the fact that under the document the mortgagee would have to take only such part of the nett receipts sufficient to discharge the interest and credit the balance to the mortgagor
The mere mention of a rate of interest does not necessarily lead to the conclu sion
The rate of interest may be stipulated for estimating the amount payable towards interest so that the parties may visualize whether the nett receipts could reasonably be set off against the interest
The rate may also be given for other reasons
The Judicial Committee in Pandit Bachchu Lal vs Chaudhri Syed Mohammad Mah 1 held that notwithstanding the fact that a particular rate of interest was mentioned in the mortgage deed there was a contract within the meaning of section 77 of the Transfer of Property Act
It was a case of a mortgage with possession and a particular rate of interest was mentioned in the mortgage deed
There was a provision for repayment of the principal either in whole or in part before the stipulated period but it was otherwise provided that the mortgagee should appropriate the surplus profits towards interest he having no claim to interest and the mortgagors having no claim to the profits
The Privy Council held on a construction of the mortgage deed that the said deed contained a contract within the meaning of section 77 of the 
In Exhibit A 3 though the rate of interest is stated at i per cent
per month it was obviously mentioned to enable the parties to approximately fix the amount to be appropriated by the mortgagee from and out of the rent received from the thikadar
No doubt the same rate of interest is also mentioned when the 1 1098 parties are dealing with their rights after the expiry of the thikadari interest but in more than one place they have stated in clear and unambiguous terms that the mortgagee could appropriate the produce towards interest and that the mortgagor would not put forward any sort of claim or demand in respect of any increase in the produce
In view of the clearly expressed intention of the parties we cannot hold from the mere fact that the rate of interest is mentioned that the document does not come under the purview of section 77 of the 
We hold that section 77 of the applies to the document and therefore the mortgagee is not liable to render any account to the mortgagor
On the footing that the mortgage is an anomalous mortgage we arrive at the same result
The learned Counsel for the appellant contends that if the mortgage is an anomalous mortgage the parties are only governed by the provisions of section 98 of the and not by the provisions of section 77 of the Act
Section 98 says  In the case of an anomalous mortgage the rights and liabilities of the parties shall be determined by their contract as evidenced in the mortgage deed and so far as such contract does not extend by local usage
The question whether this section excludes the operation of other relevant provisions of the Act including s77 need not be considered in this case for whether s77 applies as the learned Counsel for the respondents contends or the terms of the contract would govern the rights of the parties as the learned counsel for the appellant argues the result would be the same for the question to be decided is whether under the terms of the mortgage the mortgagee has the right to appropriate the entire nett receipts in lieu of interest
We have already held that in Exhibit A3 not only there is such a recital but there is a specific term whereunder the mortgagor expressly agreed not to claim any produce received by the mortgagee
Whether section 77 applies or not under the express terms of the contract 1099 the appellant is not liable to render accounts for the excess receipts
No other point is raised before us
In the result the decree of the High Court is set aside and that of the Subordinate Judge is restored
The appellant will have his costs throughout
Appeal allowed


Summary:
The Central Govt
in exercise of its power under Section 9 of the enacted the Nationalised Banks Management and Miscellaneous Provisions Scheme 1980
Clause 3b of the said scheme deals with the appointment of workmen Directors and it provides that the Central Govt
shall constitute the Board of a Nationalised Bank consisting of one Director from among the employees of the nationalised bank who are workmen to be appointed from out of a panel of 3 such employees furnished to it by the Representative Union
Clause 3c of the Scheme deals with appointment of non workmen Directors and it provides that the Central Government shall constitute the Board of a nationalised bank consisting of one director from among the employees of the nationalised bank who are not workmen to be appointed after consultation with the Reserve Bank
The consistent practice of the Central Govt
was to appoint a non workman Director from out of a penal of 3 names furnished to it by the majority association of non workmen employees
By a circular dated 23882 it was clarified that as far as appointment of non workmen Director is concerned there is no justification for restricting the choice to the office bearers of the Association
This was to enable the Central Govt
to appoint any officer of proven 851 ability and character to the Board of Directors of a natio nalised Bank irrespective of his affiliation with any asso ciation
The petitioners in these petitions to this Court chal lenged this circular as contrary to the mandate of the Act and the Scheme and also contended that clause 3 of the Scheme was ultra vires Section 9 of the Act
Allowing the petitions HELD 1
The Circular is ultra vires the Act and the Scheme and it is therefore null and void and of no effect
861C 2
The object of the is to render the largest good to the largest number of people
The object of Section 9 of the Act is to empower the Central Govt
to make a Scheme for the constitution of the Board of Directors so as to include representatives of the employees ie workmen and non workmen and other specified categories viz depositors farmers workers and artisans
The representatives of these classes of people are to be either elected or nominated in the manner specified by the Scheme
The legislature has left it to the Central Government to make a scheme providing for appointment to the Board from amongst the specified catego ries either by election or by nomination
The discretion as to the mode of appointment is left to the Central Govern ment but it is not an unrestrained or unrestricted discre tion but a discretion which must be reasonably exercised so as to give effect to the true intent of the legislature ie to give the Board a truly representative character so as to reflect the genuine interests of the various persons manning or dealing with the bank as an industry and a commercial enterprise
What is postulated is such election or nomina tion as would lend to the Board of Directors its truly representative character in consonance and harmony with the extremely delicate vital and significant role of the bank ing industry in the context of the national policy and objectives and economic development
The mode of election or nomination must therefore be such as would be ideally suitable and appropriate to the banking industry
Neither the election nor the nomination should be conducted in a manner unmindful of the distinctiveness of the banking industry
The Central Govt
must in this regard act in consultation with the Reserve Bank of India which has the necessary expertise and intimate knowledge in the field of banking finance and other connected matters
856F H 857A B C G 852 21 But the Central Government has no discretion to avoid election even where election is appropriate and feasi ble in respect of a particular category of persons
For the appointment of representatives of depositors farmers workers other than employees and Artisans the discretion is entirely that of the Central Govt
to choose the mode of representation
On the other hand in the case of employees election is indeed the most logical the most appropriate the most democratic and certainly the most advantageous form of representation
They are well identified well organised well motivated and interested associates and participants in the banking industry
They are as such a part of the bank as the management is
There can be no legitimate management culture foreign to their vital interests
There can be no valid management policy contrary to their genuine needs
The Act does not contemplate a management unmindful of the true and legitimate interests of the employees
In a nationalised bank everyone is as much an employee as he is an employer
There is no antithesis between the management and the em ployees
The distinction that traditionally existed prior to nationalisation is no longer applicable
The true management culture is indeed the culture that represents the various interests of all persons specified under Section 9 as well as the larger and wider interests of national economy as postulated in the preamble to the Act
858B G 3
The Central Govt
understood sub clause c of Clause 3 regarding non workmen employees to warrant the same type of representation as in the case of workmen employees men tioned under subclause b of Clause 3
The field of choice was thus understood by the Government to be limited to the panel of names furnished by the representative Union of workmen or Association of non workmen as the case may be
But sub clause c of Clause 3 is vaguely drafted and when read without regard to the legislative intent as disclosed by the Act is capable of a contrary interpretation viz there is no justification for restricting the choice of non workmen Directors to the office bearers of the Associa tion
That interpretation is wrong and in any case out of harmony with the principle enshrined in Articles 191c and 43A of the Constitution
860B D 4
It is open to the Central Government to amend the Scheme to improve on the machinery for the conduct of an appropriate election it is incumbent upon it until any such amendment is made to work the present Scheme in such a way as to give the maximum scope for the concerned employees to exercise their choice in the selection of their represen tatives
860H 861A 853