Case: Lakshmi and Ors Vs. Narayani and Ors

The appellants sued for redemption and recovery of the suit lands alleging that Exs. A-1 and B-1 created usufructuary mortgages. The respondents claimed that they were kanam-kuzhikanamdars and entitled to fixity of tenure under S.21 read with S.3(15) of the Malabar Tenancy Act, 1929 (Madras Act 14 of 1930). The trial Court upheld the respondents contention and dismissed the suit. On appeal, the Kerala High Court affirmed this decree. The appellants now appeal to this Court by special leave. During the pendency of this appeal, the Kerala Land Reforms Act, 1963 (Act 1 of 1964) came into force. It is common case before us that the appeal must be disposed of in accordance with the provisions of Act 1 of 1964.

Court's reasoning:
3. Exhibits A-1 and B-1 demised the suit lands together with the fruit-bearing coconut, arecanut and jack trees standing thereon for a period of 24 years. The transfer was for the enjoyment of the lands with the standing trees and for the purpose of planting fruit-bearing trees thereon. The kanam amount or the kanartham under Ex. A-1 was Rs. 5,000 and under Ex. B-1 was Rs. 600. The transferees were entitled to appropriate the income of the lands in lieu of interest on the kanam amounts and to hold the lands even after the expiry of 24 years until payment of the kanam amounts and the value of the trees planted by them. Thus, all the conditions of a kanam-kuzhikanam mentioned in the main part of S.2 (23) were satisfied. Nevertheless, in view of the proviso to S.2 (23), the transactions would not be kanam-kuzhikanam if it is shown that they were by way of usufructuary mortgages as defined in S.58 (d) of the Transfer of Property Act, 1882. A kanam-kuzhikanam and a usufructuary mortgage have many common features. Both the transactions involve or may involve transfer of possession on payment of money by the transferee, set-off of profits against interest and retention of possession until repayment of the money. In spite of their close resemblance, the essential distinction between the two types of transactions must not be overlooked. A kanam-kuzhikanam is a lease, and is, therefore, a transfer of a right to enjoy the property. A mortgage is a transfer of an interest in the property for securing the repayment of a debt. The purpose of one is to enable enjoyment of the property by the transferee, that of the other is to secure the debt. On the question whether a transaction is a kanam-kuzhikanam or a usufructuary mortgage, the name given to it by the parties is a relevant, though not always a decisive, consideration. If the parties described the transaction to be a kanam-kuzhikanam it is a valuable indication that they intended it to be such and not a usufructuary mortgage. If the document purports to be a mortgage, S.12 of the Act allows the parties to prove that it is, in substance a kanam-kuzhikanam or other lease. But if the document purports to be or is, on its true construction, a kanam-kuzhikanam or other lease, S.12 has no application and full effect must be given to the document according to its tenor.4. Both Exs. A-1 and B-1 were styled kanam deeds. Ex. A-1 stated that the demise was in Kettiyadakkam kanam right. "Kettiadaki" means "took possession". The expression "kettiyadakkam kanam" may mean a usufructuary mortgage, but this is not its necessary or invariable meaning. Ex. B-1 explained Ex. A-1. Ex. B-1 explicity stated that the demises under Exs. A-1 and B-1 were in kanam-kuzhikanam right. Exs. A-1 and B-1 read together show that both the transactions were kanam-kuzhikanam. The subsequent documents, Exst. B-2. B-5, B-8, B-9 and B-10 executed between 1921 and 1944 all recited that Exs. A-1 and B-1 were kanam-kuzhikanam transactions. Exs. A-1 and B-1 did no. contain any recital showing that they created security for repayment of a debt. Significantly, the parties did not describe the transactions to be a mortgage, Otti, panayam or a kyvasam panayam. Instead, they described the transactions as kanam¬kuzhikanam and the amounts paid to the transferees as kanartham. Exs. A-1 and B-1 did not purport to be and were not transactions for securing debts. We agree with the Courts below that the transactions were kanam-kuzhikanam and were not usufructuary mortgages.