Case: KUNHAMINA UMMA Vs. PARU AMMA

transaction was intended to be a mortgage and not a lease. It will always be a significant feature in a document as to whether the jenmom right of the tarwad in the properties has been secured for the kanartham by way of mortgage.16. The first and foremost element to be found for a lease is whether there is the intrinsic intention in the written document for enjoymnent of the property by the transferee in lieu of rent or perquisitiss. Secondly, the term of renewal of the enjoyment would indicate the feature of a lease. Thirdly, it has to be found out whether there is any provision for payment of customary dues. The learned Single Judge in the decision of the Kerala High Court in Hussian Thangal v. Ali 1961 KLT. 1033 rightly said that the use of words like pattam meaning profits would be a strong indication of the transaction to be a lease and not a mortgage.17. The dominant features of a mortgage transaction on the other hand would, be the ascertainment of the ratio of the value of land to the amount advanced. If the ratio of the amount advanced bears a substantial proportion to the value of the property transferred it would be a strong piece of intention and circumstance to indicate loan and a mortgage. A provision entitling the transferee to ask for a return of money by sale of the property would be a very important feature to indicate that the transaction is a loan and a mortgage and not a lease. The absence of such a provision, however, would not totally repel the transaction to be a mortgage. The execution of counter-part is sometimes a common feature in the case of possessory mortgage though the existence of a counter-part by itself will not be conclusive of the question.18. The deed understood in the light of the-surrounding circumstances will provide the answer in the facts and circumstances of a case. In the present case, emphasis was placed by counsel for the appellants on the payment of Government revenue by the transferee. This Court in patel Bhuder Mavji etc. v. Jat Mamdaji Kalaji (deceased) through L. Rs.Jat Saheb Khan Mamdaji etc. (1969) 3 SCR. 690 said that payment of revenue and other dues to the Stare would not clothe the occupants with the right of the tenants. Ordinarily, mortgagees under S.76 (e) of the Transfer of Property Act in the absence of a contrac to the contrary pay out of the income of the property the Government revenue and all other charges of a public nature during their possession of such land. The High Court in the present case correctly said that stipulation in the deed of payment of Government revenue by the transferee was "that by virtue of the grant the liability, to pay revenue is transferred to the grantee and the grantee who had accepted the grant and the liability, when he pays the revenue, pays it on his own behalf". The High Court also correctly held that a mere direction to pay the revenue of the property by the grantee, particularly when no payment is stipulated to be made to the grantor or when the payment is not directed to be made out of anything which is due or payable to the grantor, cannot be construed as a payment or rent or michavaram to the grantor.19. The proportion between the amount advanced and the value of the property is one of the important tests to be taken into consideration in deciding the nature of the transaction. Where the amount advanced bears a substantial proportion to the value of the property it is an important element indicating that the intention was the creation of a mortgage and not a tenancy. In the present case, the amount for which the properties included in Ex. B-6 were sold to the first plaintiff under Ex. A. 2 was Rs. 5000 out of which Rs. 2500 was to go is discharge of the amount under Ex. B-6. The advance, therefore, bore a substantial proportion to the value of the property. This feature when considered along with the fact that the document did not provide payment of any annual purappad to the jenmi and that the annual amount was directed to be paid as revenue of the property which came to Rs. 10-4-0, a paltry recurring annual liability, would be an additional reason to support the intention of the parties that the transaction was a mortgage and not a tenancy.20. It is significant that after the execution of Ex. B-6 defendants No.1 and 2 entered into a partition agreement evidenced by Ex. A-3. The partition deed included transactions called kanam other than the disputed one forming the subject matter of the suit. In almost all the properties held under kanam there was division by metes and bounds, but with regard to Ex. B-6 and the amount of Rs. 2000/- there was no division by metes and bounds. This would also point to the conclusion that the defendants No.1 and 2 never treated Ex. B-6 as creating a tenancy.21. In the present case the features which favour the construction of the transaction to be a mortgage and not a lease are: first, that there is no provision for renewal; secondly, there is no provision for payment of customary dues; thirdly, the property was to be enjoyed by the defendants by way of interest on their advance after payment of land tax to the State; fourthly, the payment of land tax is not a deduction from rent or perquisites; fifthly, there is a provision for surrendering the property with a registered release at the cost of the transferees on the receipt of the consideration of kanam and the balance amount; sixthly, when the consideration is paid back the counter-pattam deeds and prior deeds would be returned; and finally, there is liability to pay interest on the advance and possession and enjoyment of profits of the property is in lieu of interest.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]The test to be applied is whether the purpose of the transaction is enjoyment of the property by the transferee or whether it is intended to secure the repayment of debt by transfer of interest in the property.The demands which are usually considered relevant to find out the intention of the parties are first the proportion of the amount advanced to the value of the security; secondly, the rate of interest payable on "the sum advanced; thirdly, the absence of a provision for making improvements and the proportion of the rent or purapad to the income reserved for appropriation towards interest and fourthly, the surrounding circumstances at the time of the transition, namely, that the tarward was at the time of the execution of the document in dire need of money to discharge debts to indicate that the transaction was intended to be a mortgage and not a lease. It will always be a significant feature in a document as to whether the jenmom right of the tarwad in the properties has been secured for the kanartham by way of mortgage.16. The first and foremost element to be found for a lease is whether there is the intrinsic intention in the written document for enjoymnent of the property by the transferee in lieu of rent or perquisitiss. Secondly, the term of renewal of the enjoyment would indicate the feature of a lease. Thirdly, it has to be found out whether there is any provision for payment of customary dues. The learned Single Judge in the decision of the Kerala High Court in Hussian Thangal v. Ali 1961 KLT. 1033   rightly said that the use of words like pattam meaning profits would be a strong indication of the transaction to be a lease and not a mortgage.17. The dominant features of a mortgage transaction on the other hand would, be the ascertainment of the ratio of the value of land to the amount advanced. If the ratio of the amount advanced bears a substantial proportion to the value of the property transferred it would be a strong piece of intention and circumstance to indicate loan and a mortgage. A provision entitling the transferee to ask for a return of money by sale of the property would be a very important feature to indicate that the transaction is a loan and a mortgage and not a lease. The absence of such a provision, however, would not totally repel the transaction to be a mortgage. The execution ofis sometimes a common feature in the case of possessory mortgage though the existence of aby itself will not be conclusive of theHigh Court in the present case correctly said that stipulation in the deed of payment of Government revenue by the transferee was "that by virtue of the grant the liability, to pay revenue is transferred to the grantee and the grantee who had accepted the grant and the liability, when he pays the revenue, pays it on his own behalf". The High Court also correctly held that a mere direction to pay the revenue of the property by the grantee, particularly when no payment is stipulated to be made to the grantor or when the payment is not directed to be made out of anything which is due or payable to the grantor, cannot be construed as a payment or rent or michavaram to the grantor.19. The proportion between the amount advanced and the value of the property is one of the important tests to be taken into consideration in deciding the nature of the transaction. Where the amount advanced bears a substantial proportion to the value of the property it is an important element indicating that the intention was the creation of a mortgage and not a tenancy. In the present case, the amount for which the properties included in Ex.were sold to the first plaintiff under Ex. A. 2 was Rs. 5000 out of which Rs. 2500 was to go is discharge of the amount under Ex.The advance, therefore, bore a substantial proportion to the value of the property. This feature when considered along with the fact that the document did not provide payment of any annual purappad to the jenmi and that the annual amount was directed to be paid as revenue of the property which came to Rs.a paltry recurring annual liability, would be an additional reason to support the intention of the parties that the transaction was a mortgage and not a tenancy.20. It is significant that after the execution of Ex.defendants No.1 and 2 entered into a partition agreement evidenced by Ex.The partition deed included transactions called kanam other than the disputed one forming the subject matter of the suit. In almost all the properties held under kanam there was division by metes and bounds, but with regard to Ex.and the amount of Rs. 2000/there was no division by metes and bounds. This would also point to the conclusion that the defendants No.1 and 2 never treated Ex.as creating a tenancy.21. In the present case the features which favour the construction of the transaction to be a mortgage and not a lease are: first, that there is no provision for renewal; secondly, there is no provision for payment of customary dues; thirdly, the property was to be enjoyed by the defendants by way of interest on their advance after payment of land tax to the State; fourthly, the payment of land tax is not a deduction from rent or perquisites; fifthly, there is a provision for surrendering the property with a registered release at the cost of the transferees on the receipt of the consideration of kanam and the balance amount; sixthly, when the consideration is paid back thedeeds and prior deeds would be returned; and finally, there is liability to pay interest on the advance and possession and enjoyment of profits of the property is in lieu of interest.