JUDGMENT [ENTITY], J.
1. The plaintiff filed the present suit for recovering possession of the mortgaged property on the ground that the mortgage-debt had been extinguished under the [ACT]. They alternatively prayed for redemption of mortgage and possession of the suit land in case the Court held that the mortgage debt was not extinguished. S. No. 228, admeasuring 2 acres and 20 gunthas of village Mitha Dharva of Chanasma Taluka in Mehsana District is the suit land. The mortgage was executed on 8th May 1945 for a sum of Rs. 1600/- and is evidenced by deed, Ex[SECTION]. [ENTITY], the original plaintiff, was the mortgagor. [ENTITY], the father of defendants Nos. 1 and 2 and [ENTITY], defendant No. 3 were the mortgagees.
2. It was contended by the defendants in defence that the transaction in question was a sale and not a mortgage, that the mortgage was executed in order to recover a sum of Rs. 800/- from [ENTITY], defendant No. 3, that the defendants had become owners by adverse possession, that the defendants were tenants prior to the mortgage and that the mortgage debt was extinguished.
3. The learned Trial Judge held that the mortgage-debt was extin guished under the [ACT] and that the transaction evidenced by Ex[SECTION] was a transaction of mortgage and that no oral evidence was admissible to vary the terms of that transaction. The learned Trial Judge did not raise any issue as to tenancy. In light of the findings recorded he passed in favour of the plaintiff decree for possession.
4. The defendants appealed to the District Court. The learned Appellate Judge held that the mortgage-debt was not extinguished, that the transaction in question was a mortgage and that no evidence could be admitted to vary its terms. He also upheld the contention raised by the plaintiff that no issue as to tenancy was necessary to be raised because the [ACT] was not in force in Baroda State in 1945 when the mortgage was executed. He therefore modified the decree and passed in favour of the plaintiff decree for redemption and possession.
5. It is that appellate decree which is challenged by the defendants in this Second Appeal. This appeal came up before me sitting singly for final hearing and decision. Mr. [ENTITY] who appeared on behalf of the defendants had then raised before me three contentions. I decided the two contentions raised by him and referred, so far as the remaining contention was concerned, the following question to the Division Bench as I could not concur in the decision of Mr. Justice [ENTITY] in [ENTITY] Nathudas (since deceased by [ENTITY]) and [PRECEDENT].
Does the tenancy of a tenant who entered into a transaction of mortgage With the landlord at the time when his tenancy was not protected by any law and was merely a creature of contract between the parties remain in abeyance or come to en end? Does such a tenancy revive by virtue of [SECTION] of the [ACT] upon redemption or mortgage?
6. It is under these circumstances that this appeal has been placed before the Division Bench.
7. [SECTION] of the [ACT] provides as under:
If any land is mortgaged by a landlord by way of an usufructuary mortgage to a tenant cultivating such land, the tenancy of such land shall be in abeyance during the period the mortgage subsists. After the expiry of the said period it shall, notwithstanding any other law for the time being in force, be lawful to the tenant to continue to hold the land on the terms and conditions on which he held it before the mortgage was created.
The language of this section makes it very clear that an antecedent tenancy upon which usufructuary mortgage has been superimposed alone survives. [SECTION] of the [ACT] defines several kinds of mortgages - simple mortgage, mortgage by conditional sale, [usufructuary mortgage, English mortgage, mortgage by deposit of title-deeds and anomalous mortgage. [SECTION] of the [ACT] deals with a case where a tenant in possession of a land has entered into a transaction of usufructuary mortgage in respect of the land in his possession with his landlord. The scheme of [SECTION] is that if usufructuary mortgage has been superimposed upon the tenancy of an agricultural land, then the tenancy remains in abeyance during the subsistence of the usufructuary mortgage and revives after the expiry of the period of the usufructuary mortgage or after the redemption of the usufructuary mortgage. The decision of Mr. Justice [ENTITY] in [ENTITY]'s case (supra) does not correctly interpret [SECTION] because he applied the provisions of [SECTION] even to a case where the tenant took in respect of the land in his possession mortgage by conditional sale. In our opinion, that is an incorrect interpretation of [SECTION] The operation of [SECTION] is confined only to usufructuary mortgage which the tenant in possession of a land has taken from his landlord in respect of that land. It has no application to a case where the tenant has taken a simple mortgage or mortgage by conditional sale, English mortgage, mortgage by deposit of title-deeds or an anomalous mortgage.
8. The next question which we are required to examine relates to the exact width and amplitude of [SECTION] It is no doubt true that [SECTION] is retrospective in character because it will serve no purpose whatsoever if it is not going to affect the past transactions of tenants having taken usufructuary mortgages in respect of the lands in their possession from their landlords. The question is whether the lease which a tenant holds from his landlord in respect of the land would come to an end as soon 35 he takes the usufructuary mortgage of the land in question from his landlord. In other words, can it be said that the lesser interest of a tenant which he held prior to the mortgage merged with the greater or higher interest which he took upon the execution of the mortgage or when he entered into the mortgage transaction with his landlord? It appears to us from the decision of Mr. Justice [ENTITY] in [ENTITY]'s case (supra) that it was argued that if anything applied to a case of lease upon usufructuary mortgage was superimposed it was the doctrine of merger. However, Mr. Justice [ENTITY] took the view that doctrine of merger could not apply to a case of this type because an illiterate and unsophisticated tenant would not know what was merger and he would not cut the branch upon which he had been sitting because by entering into the transaction of mortgage he did not know what he was doing and what ramifications it would produce upon his tenancy. Now, whether the doctrine of merger would apply to a case of this type or not, would depend upon whether a party knew the ramifications of what he was doing or not. However, it must be stated that if a tenant took a mortgage of the land in his possession, his tenancy or lease could be brought to an end only in the manner provided by law. In 1945 when the defendant who claims that he was a tenant prior to 1942 took the mortgage of the land from his land, he was governed by the law prevailing in Baroda State. We may incidentally state that the case in which Mr. Justice [ENTITY] recorded his aforesaid decision also arose in the area which was formerly a part of Baroda State. Now, Baroda State had its own [ACT]. It indeed corresponded in large number of respects to our [ACT]. [SECTION] of the [ACT] provides the modes of determining the lease. One of the modes which it provided was that lease would be determined as soon as the right, title and interest of the lessor as well as the lessee vested in one person. That clause was equivalent to [SECTION] of our [ACT] which provided as follows:
A lease of immoveable property determines
in case the interests of the lessee and the lessor id the whole of the property become vested at the same time in one person in the same right.
This is the doctrine of merger. When a tenant takes from his landlord mortgage of the land in his possession, all the rights of the lessor and the lessee do not vest in the lessee. There is something which is left with the lessor who has entered into the transaction of mortgage with his lessee, It is equity of redemption or the right to redeem the mortgage. Therefore, the doctrine of merger which finds statutory expression in [SECTION] of our [ACT] corresponding to [SECTION] of the [ACT] would not be applicable in any manner whatsoever to the case of a tenancy upon which mortgage has been superimposed by a fresh contract entered into between the parties. The next mode of determining the lease which the [ACT], provided was by express surrender of the lease. It also provided for implied surrender of the lease. The provisions in that behalf were identical with the corresponding provisions in [SECTION] of our-[ACT]. The question which has therefore, arisen is whether, the tenancy of a tenant who expressly surrendered his lease at the time of taking the mortgage of the land in question or who impliedly surrendered his lease at that time to his landlord remains in abeyance and survives the redemption of mortgage. It may be noted that [SECTION] of our [ACT] provides that none of the provisions in the Chapter on leases of immovable property will apply to leases for agricultural purposes, except in so far as the State Government may, by notification published in the Official Gazette, declare all or any of such provisions to be so applicable in the case of all or any of such leases, together with, or subject to, those of the local law, if any, for the time being in force. [SECTION] of the [ACT] also contained an indentical provision. It provided that the provisions contained in the Chapter on leases would not apply to leases for agricultural purposes, except where His Highness the Maharaja of Baroda had by notification published in the Official Gazette provided otherwise and applied them to leases. Therefore, the doctrine of merger and the concepts of express and implied surrender incorporated in [SECTION] of our [ACT] corresponding to [SECTION] of the [ACT] cannot propria vigore apply to the case of an agricultural lease upon which the transaction of usufructuary mortgage has been superimposed. Really speaking, therefore, we have to judge the effect of the superimposition of usufructuary mortgage upon lease for agricultural purpose in light of the principles of equity, justice and good conscience. However, there is nothing in [SECTION] of our [ACT] corresponding to [SECTION] of the [ACT] which militates against the principles of equity, justice and good conscience. There is, therefore, no difficulty whatsoever in applying the principles incorporated in [SECTION] of the [ACT] not as statutory principles but as principles of equity, justice and good conscience to all cases of agricultural leases upon which - usufructuary mortgages have been superimposed. Now, this is not a case of an express surrender of lease at the time when the lessee took usufructuary mortgage of the land in question from his lessor.
9. Next, what is an implied surrender? When a lessee takes the usufructuary mortgage of the land in his possession from his lessor does he surrender his tenancy by necessary implication? This question has been dealt with in quite a good number of decisions which have been cited before us.
10. In [PRECEDENT]. it has been laid down that the question whether the tenancy continues after execution of a mortgage depends upon the question whether it can co-exist with usufructuary mortgage and it has to be decided with reference to the provisions in the documents, particularly the usufructuary mortgage. In order to determine whether the lessee or the tenant surrendered his tenancy by necessary implication when he took the mortgage from his landlord of the land in question, the test which we must apply is whether there is incompatibility between the lease and the mortgage which would not allow them to co exist. It has been laid down by the Andhra Pradesh High Court that there is no incompatibility in the co-existence of the lease and the mortgage, in the same person.
11. In [PRECEDENT] it has been observed by a Division Bench of the Allahabad High Court that the doctrine of merger applies where there is coalescence of the entire interest of the lessee and the entire interest of the lessor in one person and that it is that coalescence which is essential for the ter mination of the lease. It has been further observed in that decision that the doctrine of merger is founded on the principle of avoidance of inconsistency. Dealing with the question of co-existence of lease-mortgage the Allahabad High Court has observed that when the lessor executes an usufructuary mortgage of the demised premises in favour of the lessee, the lessor does not pass on his entire interest to the lessee. By the mortgage he merely transfers only an interest in the premises and not all the rights of an owner. The interest which is transferred to the lessee-mortgagee consists of the right to possess and to enjoy the usufruct of the property until the mortgage-money is paid. The lessor mortgagor retains with himself a legal interest in the property. It is his substantial legal interest because he can assign his right of redemption and can create a second mortgage in respect of the same property. It has been further observed by the Allahabad High Court in that decision that there is no inconsistency or incompatibility in one person being the lessee and usu fructuary mortgagee of the same property at the same time because his obligation as a lessee remains suspended during the subsistence of the mortgage. It was, therefore, held by the Allahabad High Court that the tenancy of the defendants in that case did not cease with the taking of the usufructuary mortgage of the shop.
12. In [PRECEDENT] it has been held by a learned single Judge of that High Court that the tenancy rights of the possessory mortgagee remain in abeyance during the period of mortgage and the parties would revert to their former positions after the redemption and that on redemption the landlord would not be entitled to get possession of the land. It is further observed that there cannot be a presumption that a lessee's right whether durable or otherwise is lost for ever by implied surrender merely on his becoming a possessory mortgagee. Therefore, according to him, the question whether there was an implied surrender of lessee's rights on the execution of a usufructuary mortgage must be decided with reference to the protection afforded to the tenant by legislation, if any. The question of co-existence of tenancy with usufructuary mortgage has to be decided by the terms of the deeds of mortgage and lease.
13. In [PRECEDENT] it has been held by a Division Bench of that Court that the taking of a mortgage by the lessee in respect of the property in his possession cannot always be taken to amount to an implied surrender of his leasehold right as contemplated by [SECTION] of the [ACT]. The question whether there has been such an implied surrender has to be gathered from the intention of the parties as disclosed by the attendant circumstances.
14. In [PRECEDENT] a learned single Judge of that Court has held that the principle of implied surrender is founded on English law, upon the rule of estoppel, which precludes a lessee from disputing the validity of the second lease which he has accepted and which cannot co-exist with the first lease. He has further held that in India the principle which operates is that when ever a certain relationship exists between two parties in respect of a subject matter and a new relationship arises as regards the identical subject-matter, if the two sets of relationships cannot co-exist as being inconsistent and incompatible, that is to say, if the latter can come into effect only on termination of the earlier, the earlier would be deemed to have been terminated in order to enable the latter to operate. This is how the principle of implied surrender has been explained in that decision
15. In [PRECEDENT]. a learned single Judge of the Madras High Court has struck a different note. He has held that where a possessory mortgage is executed in favour of a lessee under a verumpattam lease, the lessee's interest gets merged in the mortgage rights at its acquisition as a large and superior interest and on accepting the possessory mortgage there is an implied surrender of the leasehold.
16. In [PRECEDENT] a learned Single Judge of that Court has held that when a lessee who is not a permanent lessee subsequently takes usufructuary mortgage of the property in his possession, then the two relationships created between the parties - one of lessor and lessee and another of mortgagor and mortgagee - cannot coexist. According to him, therefore, the first relationship of lessor and lessee comes to an end when the subsequent relationship of mortgagor and mortgagee comes into existence.
17. Though [SECTION] of the [ACT] is not applicable to Punjab the question of merger arose before a Division Bench of the Punjab High Court in [PRECEDENT]. It has been held by the Punjab High Court that where merger is pleaded apart from the provisions of [SECTION] has to be determined in each case as to what was the intention of the owner of the bigger estate, whether he intended to keep the smaller estate alive or whether he intended at the time he acquired the bigger estate that the smaller estate should merge and be wiped out.
18. Except the views expressed by the learned single Judges of the Madras High Court and the Rajasthan High Court referred to above, the consensus of judicial opinion is that there is no inconsistency or incompatibility between a lease and a mortgage if one and the same person has taken a lease and a mortgage in respect of the same property. Both can co-exist unless indeed the lease has been expressly or impliedly surrendered. The question of express surrender of a lease by a lessee at the time of mortgage stands on a different footing altogether. So far as implied surrender is concerned, these decisions show that since there is no incompatibility between one and the same person taking a lease and a mortgage, there is no ipso facto implied surrender of the lease when the lessee takes the mortgage of the property in question. It is, therefore, clear that a person can both be a lessee and mortgagee in respect of the same property unless he has expressly or by necessary implication surrendered the lease while taking the mortgage.
19. Now, let us turn to [SECTION] which we have reproduced above it, inter alia, provides that "the tenancy of such land shall be in abeyance during the period the mortgage subsists." If at the time of taking the mortgage the lessee had surrendered the lease expressly or by necessary implication, unless it was not open to him in law to do so, the question of tenancy or lease remaining in abeyance would not arise because a tenancy or lease can remain in abeyance if it exists or has co-existed during the subsistence of the mortgage. If expressly or by necessary implication it was surrendered and had been extinguished or had become non-existent, the question of its remaining in abeyance would not arise. Mr. [ENTITY] who appears for the defendant has in terms conceded before us that if there was an express surrender, there would be no co-existence of lease or tenancy with mortgage and that, therefore, no question of its revival under [SECTION] would arise. However, he has argued that the expression "notwithstanding any other law for the time being in force" used in [SECTION] is inconsistent with [SECTION] of the [ACT] (The [ACT] had also an identical provision couched in similar language) and, therefore, according to him, there could not have been any implied surrender of tenancy by a tenant at the time of taking the mortgage. He is right to the extent that when the tenant or lessee took the mortgage there was no ipso facto implied surrender of the lease merely by virtue of the fact that he took the mortgage of the land in question from his landlord. But, in our opinion, he is not right in his submission that he could not have impliedly surrendered it if that was his intention. [SECTION] of the [ACT] merely enumerates the modes of surrendering or determining a lease. It does not state that there cannot be any implied surrender of a lease. If [SECTION] of the [ACT] had in terms provided that there could be no implied surrender of the lease by a tenant, then probably the expression "notwithstanding any other law for the time being in force" used in [SECTION] of the [ACT] could have militated against it and the question of giving overriding effect to [SECTION] on [SECTION] of the [ACT] could have arisen. What [SECTION] does is merely to recognize a mode of surrendering a lease by an act inter vivos. It may be an express act or it may be an act to be inferred from the facts and circumstances of the case. In other words, what [SECTION] provided is that as a lessee would enter into a transaction of lease with his lessor, he could also surrender his lease impliedly. In other words, having laid down the mode in which a lease can be created it has recognized a mode of surrendering it. It is wrong, therefore, to say that the expression "notwithstanding any other law for the time being in force" used in [SECTION] of the [ACT] has an overriding effect on [SECTION] of the [ACT]. Therefore, when it was open to a lessee or a tenant to surrender his lease and if he did so, he validly brought to an end his lease and, therefore, nothing survived for remaining in abeyance during the subsistence of the mortgage and for being revived after redemption of mortgage. Whether a lessee or a tenant had surrendered his lease impliedly at the time when he took the mortgage is indeed to be found out from the facts and circumstances of the case. Amongst them the most important is the mortgage-deed itself. This proposition which emerges from the cumulative consideration of [SECTION] of the [ACT] and [SECTION] of the [ACT] has got to be applied to different situations.
20. In the Bombay Presidency as it was before India became independent, we had the [ACT]. It protected all tenancies which were created before the 1st day of April 1937 (see [SECTION]). It contained provisions which militated against determination of the tenancy. Now if a tenant or a lessee took mortgage of a land from his lessor or landlord to which the [ACT] was applicable, there could not have been any implied surrender of his land when he took the mortgage because the statutory provisions of the [ACT] militated against it. Secondly, if a lessee or a tenant had taken mortgage in respect of a land to which the [ACT] was not attached, the Court will have to find out on evidence whether at the time when the lessee or the tenant took the mortgage he had impliedly surrendered the lease. If he had done so, then there would be no revival of tenancy under [SECTION] upon redemption of mortgage because there was nothing which was kept in abeyance. Similarly, if a lessee or a tenant had taken mortgage in respect of the land to which the [ACT] was not applicable (such as lands situate in Princely States like Baroda) but before the [ACT] was made applicable, the Court will have to find out whether there was an express or implied surrender of lease by the tenant when he took the mortgage of the land in question from his landlord. If there was no surrender, then the lease or the tenancy would revive upon redemption of mortgage but if there was one, there would be nothing which would revive. If a lessee or a tenant took mortgage of a land from his landlord after the [ACT] became applicable to it, there would be revival of tenancy upon redemption of mortgage because he could not expressly or impliedly surrender the lease while taking the mortgage as such a surrender would directly militate against or contravene the provisions of the [ACT] (see [SECTION]).
21. So far as the instant case is concerned, in 1945 when the defen dant took the mortgage in respect of the suit land, neither the [ACT] nor the [ACT] was applicable to it because it was situate in Baroda State to which none of the aforesaid two Acts was applicable. The Court will therefore, have to find out whether in 1948 when the defendant who claim to be the lessee since prior to 1945 took mortgage of the land in question from the plaintiff they had surrendered the lease to the plaintiff. If he had surrendered it, then there could be no revival of the tenancy under [SECTION] of the [ACT] because there was nothing which remained in abeyance during the subsistence of the mortgage as the tenancy came to an end.
Our answer to the first part of the question in is as follows: The tenancy of a tenant who entered into a transaction of mortgage with his landlord at the time when his tenancy was not protected by any law and was merely a creature of contract between the parties would remain in abeyance if it was not surrendered by him expressly or by necessary implication to his landlord at the time of taking the mortgage and would revive. If he had expressly or by necessary implication surrendered it to his landlord, there was nothing which remained in abeyance because the tenancy came to an end. Therefore it would not revive under [SECTION] of the [ACT] which would have no application to it.
22. The answer which we have given to the first part of the question also covers the second part thereof. Having thus answered the question referred to the Division Bench we remit the appeal to the learned single Judge for final decision on merits.