GILBERT v. VIVEKANANDAN — 1987 DIGILAW 546 (KER)

Judgment :- Kochu Thommen, J. The plaintiff in a suit for redemption and recovery of possession is the appellant. The case of the appellant is that the suit property consisting of three shop rooms and the fixtures had been allotted to him under Ext A5 which is a registered deed of partition dated 26-5-1982. Prior to Ext. A5, one of the co-owners of the property (whom we shall refer to as the first executant) and the defendant executed Ext. Al dated 15-1-1980 whereby the first executant borrowed a sum of Rs. 25.000/- from the defendant and put the defendant into possession of the suit property specifically for a period of one year. Ext. Al which is styled as a deed of mortgage further provides that the defendant should pay to the first executant every month a sum of Rs. 2.200/- as excess profit. The defendant has the right to claim at the end of the period refund of the money borrowed from him by the first executant. The borrowed amount is referred to the repayment of which, in the event of default by the first executant, is enforceable by the defendant by sale of Relying upon these terms, the plaintiff, subsequent to Ext. A5, instituted the suit for redemption of the mortgage. The defendant, in answer to the plaint the property. The document specifically says allegations, contended that Ext. AI did not evidence a mortgage, but only a lease and that he was, therefore, entitled to the protection of the Kerala Buildings (Lease and Rent Control) Act, 1965 (the "Rent Control act" ). The defendant's contention was accepted by the court below. 2. Counsel for the appellant, Shri. Sivaswamy, submits that the nomenclature of Ext. Al, though not conclusive, is indeed a strong indication as to the nature of the transaction evidenced by that document. He further submits that the transaction satisfies the essential ingredients of an anomalous mortgage in so far as it contains the basic elements of a simple mortgage as well as a usufructuary mortgage. The first executant, counsel points out, has bound himself personally to pay the mortgage money He has expressly agreed that in the event of his failing to pay the money, according to the contract, the mortgagee would be entitled to cause the mortgaged property to be sold and the proceeds of sale to be applied in payment of the mortgage money. The mortgagee was put into possession of the suit property specifically for a period of one year. These elements, evident in the document, conclusively refer to the type of mortgage contemplated under S.58(g) of the Transfer of Property Act, 1882. Counsel further refers to Ss.76, 77 as well as S.98 of that Act and submits that the monthly payment postulated under the document refers to a "fair occupation rent" as agreed to between the parties in lieu of any need to submit accounts by the mortgagee. These provisions of the contract, counsel says, leave no doubt that the parties intended to enter into a transaction of an anomalous mortgage. 3. Mrs. Sumathi Dandapani, appearing for the defendant, submits that the parties did not intend the transaction to be understood as a mortgage. Though the language used may suggest that it was a mortgage, the document read as a whole would indicate that what was intended by the partes was to enter in to a transaction of lease. In any case, as pleaded by the defendant, all that was intended by the parties, when they entered into the transaction, was to put the defendant into possession by transfer of a right to enjoy the property in consideration of the advance paid in the sum of Rs. 25,000/-and the monthly payment of rent in the sum of Rs. 2.200/-. She further says that what is paid every month is not what is contemplated as a debit in S.76 (h). Nor is it a fair occupation rent. It is. as described in the document, excess profit, meaning that it was something other than what is contemplated under S 76 (h). That payment, she says, is, therefore, "rent" in Consideration of a lease as defined under S.105. The object of the transaction was not to secure the meagre sum of Rs 25,000/- received by the first executant, who is, according to the evidence, a man of considerable means. The object of the parties was to transfer a right to enjoy the properly, counsel submits. 4. The document must be read as a whole to understand its true nature and significance. The character of the document must be determined with reference to the effect of the words used by the parties. As stated by the Supreme Court in Chunshun Jha v. Ebadat Ali, AIR. 1954 SC. 4. The document must be read as a whole to understand its true nature and significance. The character of the document must be determined with reference to the effect of the words used by the parties. As stated by the Supreme Court in Chunshun Jha v. Ebadat Ali, AIR. 1954 SC. 345, 346: "...If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. -The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If however there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended." (emphasis supplied) Referring to this principle, Lord Justice Devlin observes in Daviesv. Elsby Brothers Ltd., (1961) 1 WLR. 170,176: 'It is a general principle... that the intention which the framer 'of the document has in mind when he brings it into existence is not material as a genera! Principle the question is not what the writer of the document intended or meant but what a reasonable man reading the document would understand it to mean: " (emphasis supplied) In Street v. Mountford, (1985) 2 All. ER. 289, 294 (H.L.) this principle was restated by the House of Lords. Lord Templeman says: '......Both parties enjoyed freedom to contract or not to contract and both parties exercised that freedom by contracting on the terms set forth in the written agreement and on no other terms. But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade." (emphasis is supplied) See also the decision of this Court in K.P.O. Moideenkutty Haji v. Muhammadali, 1987 (2) KLT. 994 (D. b. ). The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade." (emphasis is supplied) See also the decision of this Court in K.P.O. Moideenkutty Haji v. Muhammadali, 1987 (2) KLT. 994 (D. b. ). These decisions show that even when the parties, uninstructed in law, used language, the legal effect of which they did not intend or forsee, the nature of the transaction which they concluded must be determined with reference to the legal effect of the words used by them. It is not open to the court to ignore the legal effect of words which are express and clear, whatever be the consequences and whatever be the disadvantage or hardship that it might ultimately cause to one or more of the parties. The question is not what the parties had intended or meant, but what is the legal effect of the words which they used, which means, what a reasonable man reading the document would understand them to mean. It is only in the case of ambiguity to the language used by them is it permissible for the court to look at the surrounding circumstances to determine what the parties actually intended. 5. It may be, as suggested by Mrs. Dandapani, the defendant did not really intend to enter into a transaction of mortgage. May be that he intended to gain possession of the property as a lessee and secure for himself the protection of the Rent Control Act. It may even be true that the first executant knew that the defendant intended to enjoy possession of the property, but apparently the first executant was not willing to enter into a transaction of lease for the reason that that would place him at a disadvantage. There is no case that the defendant is the victim of fraud, undue influence or the like, or that he was deceived, or that he did not understand the true meaning of the words used by the parties in the document. Apparently the parties dealt with each other at arms length, and of their own volition concluded the transaction, being well aware of the meaning of the words which they used in the document. Apparently the parties dealt with each other at arms length, and of their own volition concluded the transaction, being well aware of the meaning of the words which they used in the document. When they used the language of mortgage, which they certainly did, as rightly submitted by the plaintiff's counsel, they knew its implications. Whether or not one of the parties intended or hoped to ultimately dodge his obligations as a mortgagee and claim statutory protection as a tenant, he cannot free himself of the legal effect of the words which be freely used in the knowledge of their import and meaning. 6. The first executant as PW.1 says in his cross-examination that what is intended by "excess profit" is the rent paid for the occupation of the premises. The expression "excess profit" appears to be not free of doubt. In that extent there is an ambiguity. But the ambiguity appears to be confined only to that expression. That ambiguity is removed by the clarification given by the first executant in his cross-examination. That being the position, what is paid every month is what the parties believed to be a "fair occupation rent" contemplated under S.76 of the Transfer of Property Act It is true that the document does not evidence any obligation to pay interest. This being an anomalous mortgage, as the terms of the document, which we have referred to above, clearly and undoubtedly, in our view, indicate, the rights and liabilities of the parties have to be determined, as warranted by S.98 of the Transfer of Property Act, with reference to these terms of the contract. The absence of any reference to interest in the contract must, therefore, imply that the parties did not contemplate payment of interest or, as stated by Pwl, the monthly payment was intended to be after adjustment of the interest. Whichever way the document is considered, the fact is that the parties intended that a sum of Rs. 2.200/-must be paid by the defendant as a matter of personal obligation. The defendant agreed to pay the amount every month irrespective of any profit from the property. What be has undertaken is an unconditional obligation to pay the money every month and not a division of profits between the mortgagor and mortgagee. As stated by the Supreme Court in Ramdhan Puriv. Bankey Bihari, AIR. 1958 SC. The defendant agreed to pay the amount every month irrespective of any profit from the property. What be has undertaken is an unconditional obligation to pay the money every month and not a division of profits between the mortgagor and mortgagee. As stated by the Supreme Court in Ramdhan Puriv. Bankey Bihari, AIR. 1958 SC. 941, 946: "It 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" The transaction between the parties, as evidenced by the document, being a mortgage, the defendant is not a lessee. The fact that this construction, which is the only construction that is possible on the words used by the parties, leads to hardship, in that the defendant is exposed to the risk of being unprotected by the provisions of the Rent Control Act, is not a matter which is relevant to the consideration of the question in this appeal. We say this because there is no provision in that Act which enables the court to read in certain circumstances a mortgage as a lease. 7. Accordingly we set aside the judgment and decree of the court below. The suit shall stand decreed as prayed for. The appeal is allowed. In the circumstances of this case, the parties shall bear their respective costs.