Case ID: 615

Judgment:
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. S.P. 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. 31	701 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. 26	839 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. 2	205 was taken by the executant as peshgi money without interest and the rent was fixed at a sum of Rs. 2	205. Then the document proceeds to state thus: " In respect of Rs. 29	496 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. 2	205 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. 31	701that Rs. 29	496	 the peshgi money bearing interest at 1/2 per cent. per month and Rs. 2	205	 tile peshgi money without interest	 at an annual rental of Rs. 2	205 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. 1	769 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	 i.e.	 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 1/2 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. 2	205 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. 31	701 with and without interest as mentioned in this ijara deed has been realized from the ijaradar in this manner that I allowed Rs. 28	246	 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. 31	701 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. 29	496 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. 2	205 to the executant and agreed to pay Rs. 2	205 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. 31	701 under the document	 out of which Rs. 29	496 bore interest at i per cent. per month and Rs. 2	205 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. 2	205 from the thikadars	 set off Rs. 1	769 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. 2	205 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. 29	496	 i.e.	 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. 1	769 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	 (g)he 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; (h)his 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 76(g) 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 A(3)	 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 A(3)	 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 s.77	 need not be considered in this case	 for	 whether s.77 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 A(3) 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:
D executed a document in favour of M hypothecating an eight annas share in a village for the purpose of discharging a debt of Rs. 29	496 payable by him to Al. In respect of this property there was a pre existing think in favour of j for a period of 9 years	 under which D took Rs. 2	205 as peshgi money without interest and the annual rent was fixed at RS. 2	205. The document provided that (i) interest at 1/2 per cent. per month was payable on the sum Of Rs. 29	496 ; (ii) (luring the subsistence of the thika M would receive the rent from j and appropriate Rs. 1	769 12 o towards interest and pay Rs. 435 4 o as rent to D ; (iii) after the expiry of the thika M would take physical possession of the land and appropriate the produce towards interest and Pay Rs. 435 4 o as rent to D; (iv) on the expiry of the thika M would repay the peshgi amount of Rs. 2	205 to j and this sum was added to principal amount due ; (v) on the expiry of 15 years	 or after the extended period	 D would repay the entire principal amount; (vi) and the property was given as security for the amount payable by D. The respondents who are successors of D instituted a suit for redemption on the basis that the transaction was a usufructuary mortgage	 for rendition of accounts and for recovery of surplus profits. The appellant	 successor of M	 contended that the suit for redemption was not maintainable as the transaction was not a mortgage but a lease	 and that even if it was a mortgage there was no statutory liability to render accounts as the document provided that the receipts were to be taken in lieu of interest and the case was governed by section 77	 Transfer of Property Act : Held	 that the transaction was a mortgage and not a lease. The guiding rule of construction is that the intention of the parties must be looked into and that once there is debt with security of land for its redemption the arrangement is a mortgage by whatever name it is called. Held	 further	 that there was a contract between the mort gagor and the mortgagee within the meaning Of section 77	 Transfer of Property Act to the effect that the receipts from the mortgaged property be taken in lieu of interest and consequently the mortgagee was not liable to render accounts. The stipulation 1086 in the document for payment of Rs. 435 4 0 to the mortgagor was a personal obligation of the mortgagee and he had a right to take the entire receipts from the land in lieu of interest. Though the rate of interest is stated as per cent. per month it was 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. The mere fact of the mention of the rate of interest could not make section 77 inapplicable in view of the clearly expressed intention of the parties. Pandit Bachchu Lal vs Chaudhri Syed Mohammad Mah	 (1033) 	 referred to.