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2019 DIGILAW 313 (KER)

C. Vijaya Thulasi v. D. Sudarsanan

2019-04-02

P.SOMARAJAN

body2019
JUDGMENT : The plaintiff is the appellant. A suit for redemption of mortgage by the mortgagor/plaintiff ended in dismissal in both the Trial Court and the First Appellate Court. Aggrieved by the said concurrent finding and decree of dismissal of suit, the plaintiffs came up with this appeal. 2. The subject matter of the suit consists of plaint schedule properties having an extent of 22 cents. The relief sought in the plaint is for redemption of the mortgage and also for declaring that Ext.A3 gift deed and Ext.A5 release deed are void. Both the Trial Court and the First Appellate Court found that Ext.A4 document is a lease deed and as such the relief of redemption of mortgage rejected concurrently. 3. The substantial questions to be addressed are: (i) What actually amounts to the expression “Ottikuzhikanam” ? Whether it stands for lease or mortgage and whether the Trial Court and the First Appellate Court are justified in construing Ext.A4 as a lease? (ii) What actually makes the difference between an usufructuary mortgage and a lease and what are the factors which makes the difference, when the document is styled as “Ottikuzhikanam”? 4. The plaintiffs claim that Ext.A4 is a mortgage. Ext.A3 is the gift deed executed by father of the second defendant in favour of one Ravindran Nair, who is represented in the suit by defendants 3 to 6. Ext.A3 dated 31/05/1973 is a gift in favour of Ravindran Nair with respect to a portion of property having an extent of 14 cents out of 44 cents. The second defendant executed a release deed in favour of the first defendant releasing his right over the remaining part of 30 cents of property. Ext. A4 deed dated 14/07/1962 was executed by Damodara Panicker, the original owner of the property. It is in favour of second defendant and his sisters who are the nephew and niece of Damodara Panicker. Ext.A1 is the Will left out by Damodara Panicker dated 27/03/1967. He passed away on 04/07/1968. The plaintiffs are the persons claiming under the Will. The dispute centers around the nature of Ext.A4 deed. According to the plaintiffs, it is a mortgage but it was disputed by the defendants and asserted that it is a lease arrangement. 5. Ext.A1 is the Will left out by Damodara Panicker dated 27/03/1967. He passed away on 04/07/1968. The plaintiffs are the persons claiming under the Will. The dispute centers around the nature of Ext.A4 deed. According to the plaintiffs, it is a mortgage but it was disputed by the defendants and asserted that it is a lease arrangement. 5. While the suit was pending before the Trial Court, a reference under Section 125 of Kerala Land Reforms Act 1963 (for short the Act) was made and the issue regarding right conferred under the Act was referred to the Land Tribunal for decision. The Land Tribunal in turn found that Ext.A4 document is a lease arrangement and passed an order, granting fixity of tenure in favour of defendants. On receipt of the order from the Land Tribunal, the Trial Court accepted the same and consequently the suit was dismissed. 6. In appeal, the First Appellate Court on a re-appraisal of facts and evidence found that Ext.A4 document is not a mortgage and concurred with the finding rendered by the Land Tribunal granting fixity of tenure in favour of the defendants, consequently the appeal was dismissed, confirming the decree and judgment of the Trial Court. 7. Ext.A4 is named as 'Ottikuzhikanam Deed'. Though the nomenclature of document not decisive to adjudicate the real nature of the document/transaction, it has got its own importance as it would prima facie show the intention of the executant. The definition given to the expression 'Ottikuzhikanam' under Section 2 (39A) of the Act is extracted below for reference: “[(39A) “Ottikuzhikanam” means a transfer for consideration by a person to another of any land other than nilam for the enjoyment of that land and for the purpose of making improvements thereon, but shall not include a mortgage within the meaning of the Transfer of Property Act, 1882;]” (Emphasis supplied) 8. The essential ingredient which makes a mortgage or a lease is the purpose for which the arrangement was entered into and if it is for securing a debt existing, present or future either in part or in whole, the document would be essentially a mortgage. The definition given under the section for the expression “Ottikuzhikanam” should be understood excluding a mortgage within the meaning of Transfer of Property Act,1882. The definition is not exhaustive or inclusive, but excluded a mortgage within the meaning of Transfer of Property Act. The definition given under the section for the expression “Ottikuzhikanam” should be understood excluding a mortgage within the meaning of Transfer of Property Act,1882. The definition is not exhaustive or inclusive, but excluded a mortgage within the meaning of Transfer of Property Act. The expression “Otti” stands for mortgage, but the expression “Kanam” and “Kuzhikanam” stand for lease. When the document is named as “Ottikuzhikanam” or “Ottiyum Kuzhikanavum” or “Ottiyum Kanavum”, though prima facie shows the intention of the parties, the purpose must be ascertained from the contents of the document whether it would satisfy a mortgage or a lease in reference to the intention of parties. There may be cases of composite documents consisting of mortgage in one part and a lease in other part. The issue may became more complicated when there is a usufructuary mortgage satisfying enjoyment of property coupled with possession and right to get “michavaram” which are incidents of a lease. The definition given under Section 2(39 A) of the Act governs the field - a lease, other than a mortgage within the meaning of Transfer of Property Act. When the document satisfies a transfer of interest or right for the beneficial enjoyment of property and for its improvement, the document would be a lease, on satisfying that the transfer was made for consideration over an immovable property other than a Nilam. Ext.A4 document would not satisfy these two ingredients which constitute an “Ottikuzhikanam” as defined under Section 2(39A) of the Act, though there is a clause enabling the beneficiary under the document to make improvements thereof. A mere clause enabling the beneficiary under a deed to enjoy the property and to make improvements therein included as part of normal terms and conditions, would not bring the matter within the sweep of “Ottikuzhikanam” as defined under Section 2(39A) of the Act, but it must be the essential term of the contract and for that essential term and purpose, the contract must be entered into, otherwise, it cannot be brought under the purview of “Ottikuzhikanam”, a lease as defined under Section 2(39A) of the Act. It must be shown that the contract was essentially entered into for the purpose of its enjoyment and for making improvements so as to bring the relationship within the ambit of Section 2(39A) of the Act. It must be shown that the contract was essentially entered into for the purpose of its enjoyment and for making improvements so as to bring the relationship within the ambit of Section 2(39A) of the Act. Ext.A4, though contains a clause permitting improvements, it is incorporated as one of the general conditions and not as the essence of the contract. The document essentially executed for the purpose of securing a debt which comes to Rs.5,000/- inclusive of a pre-existing debt of Rs.2,700/-. Hence it cannot be brought under the purview of the definition under Section 2(39A) of the Act. 9. In Ext.A4, there is provision for payment of “michavaram”. “Michavaram” is an incident to lease, but not decisive to the nature of document as it is invariably used both in leases and mortgages. It stands for excess of profit. It is defined under Section 2(36) of the Act as under : “ “michavaram”means the money or produce or both specified as michavaram in the document evidencing the transfer by a person of an interest in specific immovable property to another person, and includes the balance of money or produce or both payable periodically under the document evidencing such transfer after deducting from the money or produce or both due to the transferor, the interest due on the amount advanced to the transferor, but does not include customary dues” 10. The expression “rent” is defined under 2(49) of the Act, which is extracted below for reference: “ “rent” means whatever is lawfully payable in money or in kind or in both by a person permitted to have the use and occupation of any land to the person so permitting, and includes michavaram, but does not include customary dues” 11. A conjoint reading of definition of “Michavaram” and “Rent” under Section 2(36) and 2(49) of the Act would make the legal position crystal clear that the expression “Michavaram” stands for rent also. But as discussed earlier, payment of “Michavaram” is not decisive. An identical case was taken up by a Full Bench of this Court constituting five Judges in Velayudhan Vivekanandan v. Ayyappan Sadasivan [ 1975 KLT 1 (FB)] and after referring various decisions of the Apex Court and the High Courts, a document which is styled as “Ottikuzhikanam” appended to the judgment found to be a mortgage and not a lease. An identical case was taken up by a Full Bench of this Court constituting five Judges in Velayudhan Vivekanandan v. Ayyappan Sadasivan [ 1975 KLT 1 (FB)] and after referring various decisions of the Apex Court and the High Courts, a document which is styled as “Ottikuzhikanam” appended to the judgment found to be a mortgage and not a lease. It was a case wherein the document was styled as “Ottiyum Kuzhikanavum”. There is provision for improving the property by planting trees and to enjoy and possess the property. But the document was executed for securing a loan of Rs.6,601/-, including existing liabilities and even a portion of the amount was retained for the purposes mentioned therein. Ext.A4 involved in the instant case is identical except the fact that there is no provision for payment of “Michavaram”. 12. The impact of “Michavaram” was also considered by this court in Hussain Thangal v. Ali ( 1961 KLT 1033 ) and held that : “Whether the periodical payments are stated to be by way of residual rent (the “michavaram” of section 2(29) of the Agrarian Relations Act) or by way of residual profits, another way of ascertaining whether the transaction is essentially a lease or a mortgage. This test again often fails in practice it often happens that even in the case of a possessory mortgage the deed speaks of pattom in the process of computing the profits and of purappad or michavaram in referring to the residual payment. In fact the word “pattom” is often used to mean profits though strictly speaking it means rent. That the deed of transfer mentions pattom, purapad or michavaram is therefore no strong indication that the transaction is a kanam and not a mortgage.” 13. The Apex Court had the occasion to consider the test for determining Kanam/Kuzhikanam in reference to what actually makes difference from usufructuary mortgage in Lakshmi and Others v. Narayani and Others (1967 KHC 66 (SC)). Paragraph 2 is extracted below for reference: “S.13 of Act 1 of 1964 gives to every tenant fixity of tenure in respect of his holding and forbids resumption of the holding except as provided in S.14 to 22. S.2 is the definition section. Paragraph 2 is extracted below for reference: “S.13 of Act 1 of 1964 gives to every tenant fixity of tenure in respect of his holding and forbids resumption of the holding except as provided in S.14 to 22. S.2 is the definition section. By S.2 (57), a 'tenant' means any person who has paid or has agreed to pay rent or other consideration for his being allowed by another to possess and enjoy the land of the latter and includes inter alia a kanam-kuzhikanamdar.S2(23) reads: “kanam-kuzhikanam” means and includes a transfer by a landlord to another person of garden lands or of other lands or of both, with the fruit-bearing trees, if any standing thereon at the time of the transfer, for the enjoyment of those trees and for the purpose of planting such fruit-bearing trees thereon, the incidents of which transfer include (a) a right in the transferee to hold the said lands liable for the consideration paid by him or due to him, which consideration is called 'kanartham'; and (b) the liability of the transferor to pay to the transferee interest on the kanartham unless otherwise agreed to by the parties: Provided that a usufructuary mortgage as defined in the Transfer of Property Act.1882 (Central Act 4 of 1882), shall not be deemed to be a kanam-kuzhikanam:” 14. It is further held in that decision that even if all the conditions of Kanam-kuzhikanam mentioned in the main part of Section 2 (23) were satisfied, nevertheless in view of the proviso to Section 2 (23), the transaction would not be a kanamS. kuzhikanam if it is shown that it would satisfy the ingredients which would constitute a usufractuary mortgage as defined in Section 58 (d) of the Transfer of Property Act, 1882. The relevant portion of the judgment extracted below for reference : “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. 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 kanamkuzhikanam 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.” 15. A substantial change was effected to Section 2(23) defining “kanam-kuzhikanam” by amendment Act 35 of 1969 with effect from 1.1.1970 by which the proviso excluding usufructuary mortgage was omitted, but a new provision as Section 2(39A) incorporated by defining the expression “Ottikuzhikanam” in exclusion of a mortgage within the meaning of Transfer of Property Act, 1882. In short, there is no much difference in substance regarding the exclusion of mortgage within the purview of definition to the expression “Ottikuzhikanam” and “Kanam-Kuzhikanam”. Before the amendment by Act 35 of 1969 to the Act, the expression “Ottikuzhikanam” not defined anywhere in the Act. Only the expression “Kanam-Kuzhikanam” alone was defined. It is by virtue of Amendment Act 35 of 1969, a new provision was incorporated as Section 2(39A) for defining the expression “Ottikuzhikanam”. Before the amendment by Act 35 of 1969 to the Act, the expression “Ottikuzhikanam” not defined anywhere in the Act. Only the expression “Kanam-Kuzhikanam” alone was defined. It is by virtue of Amendment Act 35 of 1969, a new provision was incorporated as Section 2(39A) for defining the expression “Ottikuzhikanam”. The legal position settled by the Apex Court in Lakshmi's case (supra) hence squarely applicable to Section 2(23) before and after its amendment and to section 2(39A) which was subsequently incorporated by virtue of amendment Act. Ext.A4 relates to the year 14.7.1962 and governed by the unamended provision, Section 2(23) of the Act. The mere incorporation of right to enjoy the property or to improve the property or for payment of “michavaram”, though incidents of a lease, when it is found to be incorporated incidentally as part of general terms and conditions and not as essential part of the contract and the contract was entered essentially for securing a debt, the transaction would be either usufructuary or anomalous mortgage within the meaning of Transfer of Property Act and not a lease. 16. Yet another crucial test again available when it was shown that the document though reveals securing of a debt, intakes the essential characteristics of a lease. By the advertent of Act 1 of 1964( The Kerala Land Reforms Act, 1963), it has become usual practice to avoid lease under the guise of a mortgage, then the test to be applied is to find out the real relationship and vital part of the transaction as to whether a mortgage was created in disguise and when the mortgage amount found to be nominal or minimum, it has to be construed as a lease in substance rather than a usufructuary or anomalous mortgage. But when the mortgage amount reflects a substantial amount in reference to the value of property mortgaged, it would fall under the mischief of either usufructuary or anomalous mortgage. The mortgage amount involved in the instant case comes to Rs.5,000/- in the year 1962 and the property mortgaged comes to only 1 Acre 2 cents which is an another indication of nature of Ext.A4 as a mortgage rather than a lease. 17. The mortgage amount involved in the instant case comes to Rs.5,000/- in the year 1962 and the property mortgaged comes to only 1 Acre 2 cents which is an another indication of nature of Ext.A4 as a mortgage rather than a lease. 17. It was submitted that there are two demises under the document which are independently and separately named as 'Ottikuzhikanam' and 'Otti' which would prima facie show that the executant was well aware of the difference in the usage “Ottikuzhikanam” and “Otti”. If the intention was to create an “Otti” (mortgage), it would be named as “Otti” instead of “Ottikuzhikanam”. Even if it is accepted, it will not lend any assistance as the expression “Otti” stands for simple mortgage and what is demised under the name “Ottikuzhikanam” is not for creating a simple mortgage (Otti), but for creating a usufructuary or an anomalous mortgage. Hence there is no substance in the said argument. 18. Then comes the question whether it is permissible to have a partial redemption of mortgage. By relying on Leelamma and Others v. T.G.Raveendran Nair ( 2013 (4) KHC 783 ), it was submitted that a partial redemption is bad and not permissible and what is sought in the plaint is only for a partial redemption of property on payment of proportionate mortgage amount. 19. Section 60 of the Transfer of Property Act permits a partial redemption. Section 60 dealing with redemption of portion of mortgaged property says that: “nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except only where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgagor.” 20. But, Order 34 Rule 1 C.P.C. mandates that all persons having an interest either in the mortgage-security or in the right of redemption shall be joined as parties to any suit relating to the mortgage. But the restriction imposed under Order 34 Rule 1 C.P.C. is for the purpose of exercise of equity jurisdiction in the matter of impleadment of a necessary party to ascertain whether it could be possible to pass an effective order. If an effective order can be made, the suit will not be defeated. But the restriction imposed under Order 34 Rule 1 C.P.C. is for the purpose of exercise of equity jurisdiction in the matter of impleadment of a necessary party to ascertain whether it could be possible to pass an effective order. If an effective order can be made, the suit will not be defeated. [Vijendradas T. and Another v. M.Subramanian and Others - 2007 KHC 4228: 2007(8) SCC 751 : AIR 2008 SC 563 (SC)]. 21. It was held by the Apex Court in Chhaganlal Keshavlal Mehta v. Patel Narandas Haribhai, 1982 KHC 392 : AIR 1982 SC 121 : 1982 (1) SCC 223 : 1982 (1) GLR 325 : “A perusal of this provision indicates that a co-motgagor cannot be permitted to redeem his own share of the mortgaged property only on payment of proportionate part of the amount remaining due. In other words the integrity of the mortgage cannot be broken.” 22. When statute permits partial redemption, the stigma under Order 44 Rule 1 C.P.C., the rule of procedure has to be construed so as to give full effect to the statutory benefit and it is not permissible to defeat the statutory benefit due to non compliance of procedural requirement under Order 44 Rule 1 C.P.C., unless the non-compliance is of the extent of making the decree ineffective and worthless. While construing redemption of portion of mortgaged property as envisaged under Section 60 of the Transfer of Property Act with the mandate under Order 34 Rule 1 C.P.C., a partial redemption of mortgage is possible without causing breakage to the integrity of the mortgage which stands for indivisible and inseparable right of redemption or foreclosure. When the mortgage right is divisible and separable as against the partial redemption sought, it is permissible and the only requirement is that there shall not be any breakage of integrity of the mortgage. When the mortgage right is co-extensive and inseparable as in the case of fractional right akin to 'coownership property', there cannot be any partial redemption of mortgage. 23. What is dealt with under the above said decision is the question of redemption of mortgage which is co-extensive and not separable between the mortgagees. Section 60 of the Transfer of Property Act, really permits redemption of a portion of mortgaged property provided that there should be payment of proportionate part of mortgage amount. 23. What is dealt with under the above said decision is the question of redemption of mortgage which is co-extensive and not separable between the mortgagees. Section 60 of the Transfer of Property Act, really permits redemption of a portion of mortgaged property provided that there should be payment of proportionate part of mortgage amount. No case was advanced by the defendants that what is offered for redeeming the part of property claimed by the plaintiffs are not the proportionate amount. On the other hand, during the course of argument, the learned counsel undertook to pay the entire mortgage amount which comes to Rs.5,000/- with interest. The finding rendered by the Land Tribunal and the decree and judgment of the Trial Court and the First Appellate Court are liable to be set aside as there is failure to apply the legal position in its correct perspective by the Land Tribunal, Trial Court and the First Appellate Court. The concurrent decree and judgment of both the Trial Court and the First Appellate Court are liable to be set aside. I do so, by allowing this appeal. 24. In the result the appeal is allowed. The decree and judgment of the Trial Court and the First Appellate Court and the order passed by the Land Tribunal are hereby set aside, granting :- (a) a decree of redemption of mortgage on payment of amount of Rs.5000/- with interest at 12% per annum from the date of suit till today and thereafter @ 6 % per annum to the principal sum of Rs.5000/- and also the cost of defendants in first appeal and in the second appeal, together with the improvements over the property which can be ascertained at the time of passing of final decree. (b) The plaintiff shall deposit the above said amount on or before 03/10/2019. Thereon the defendant shall deliver to the plaintiff all documents in his possession along with the power relating to the mortgaged property and its the possession and if so requires re-transfer the property to the plaintiffs at the cost of plaintiffs free from mortgage and from all encumbrance created by the defendants over it. Thereon the defendant shall deliver to the plaintiff all documents in his possession along with the power relating to the mortgaged property and its the possession and if so requires re-transfer the property to the plaintiffs at the cost of plaintiffs free from mortgage and from all encumbrance created by the defendants over it. (c) It is further directed, if no such payment is made on or before 03/10/2019, the plaintiff will be debarred from all rights to redeem the property and in that event, shall re-store defendants with possession of the mortgage property with all documents received from him pertaining to the property. (d) The plaintiff shall apply for passing final decree within thirty days from today and on such application, the improvements made over the property shall be ascertained, besides the documents to be handed over and the clearing of encumbrance created over the property by the defendant. It shall be completed at least two weeks ahead of 03.10.2019 so as to enable the plaintiff to deposit the amount as ordered above. (e) It is made clear that any delay caused in the compliance of requirement stated above would be at the risk of plaintiff and it shall not be a ground for getting extension of time except on account of any delay occasioned in ascertaining the improvements through a commissioner in the final decree stage. (f) The validity of Ext.A3 gift deed and Ext.A5 release deed would be subject to the result of decree granted as (a) to (e) above.