CIVIL APPEAL NO. 3008 OF 2001
Markandey Katju, J.
T1. This appeal has been filed
against the impugned judgment of the Karnataka High Court dated
12.2.2001 in C.R.P. No. 2020/2000.
2. Heard learned counsel for the
parties and perused the record.
3. This appeal has arisen out of a
suit for redemption of the mortgage and for possession of the mortgaged
property. The owner of the properties was one Jagadish, who mortgaged
the property with the defendant-respondent under a registered mortgage
deed dated 19.3.1980 with possession by creating an usufructuary
mortgage. It appears that after the mortgage deed, a partial release
deed was signed between the parties on 21.9.1981 by which Jagadish had
undertaken to give the first option to purchase to the mortgagee. On
demand for redemption, the defendant refused and hence the suit was
filed by the plaintiff, who had purchased the property from Jagadish.
4. It appears that before the
aforesaid mortgage deed dated 19.3.1980 was registered, the mortgagee
was already in possession of the property as a tenant of the mortgagor.
In the mortgage deed it was specifically mentioned that on redemption of
the mortgage the mortgagee should become the lessee of the mortgagor
automatically as previous to the mortgage.
5. During the pendency of the suit,
the plaintiff filed application under Order 12 Rule 6 CPC for a decree
on the basis of the admission by the defendant that the mortgage was for
20 years which had expired on 20.3.2000. This application under Order 12
Rule 6 CPC was rejected by the trial court, but in revision the High
Court set aside the order of the trial court and decreed the suit under
Order 12 Rule 6 CPC. Hence, this appeal by special leave.
6. There are basically two points
involved in this case (1) Whether the plaintiff had a right to get
possession on redemption of his mortgage and (2) whether the provision
in the agreement dated 21.9.1981 that the mortgagee will have a right of
pre-emption operates as a clog on the right of redemption of the
7. Taking the second question first,
learned counsel for the appellant has relied on a decision of the House
of Lords in Lewis vs. Frank Love, Ltd, 1961 All. E.R. 446. In
this decision it was clearly laid down by the House of Lords that where
one of the terms arranged between the mortgagor and the mortgagee was
that the mortgagee should have a right of preemption in case the
mortgagor wishes to transfer the property to a third party, such a
condition operates as a clog on the right of redemption of the vendee
from the mortgagor. We fully agree with this view. Hence, we decide this
second point in favour of the respondent who is the vendee of the
8. However, as regards the first
point, we are of the opinion that the respondent did not have a right to
possession automatically on a suit for redemption being decreed.
9. It may be noted that even before
the mortgage deed was executed on 19.3.1980, the mortgagee was in actual
physical possession as a tenant, and this possession continued with him
as a mortgagee. Hence, when the mortgage was redeemed, it did not follow
that the erstwhile mortgagee could be straightway evicted. When the
mortgage comes to an end, the appellant reverted as a tenant,
particularly since there was a specific term in the mortgage deed that
on redemption of the mortgage the mortgagee will be a lessee as previous
to the mortgage.
10. This was a term agreed upon
between the parties and we cannot see how the respondent can resile from
11. In Gopalan Krishnakutty vs.
Kunjamma Pillai Sarojini Amma (1996) 3 SCC 424, a three-Judge Bench
of this Court held that the mere fact that the owner creates a mortgage
in favour of the lessee is not by itself decisive to hold that the prior
lease was surrendered and the possession of the earlier lessee is only
that of a mortgagee on creation of the mortgage, and it depends upon the
intention of the parties at the time of the execution of the mortgage.
This view was reiterated by this Court in Cheriyan Sosamma & others vs.
Sundaressan Pillai Saraswathy Amma & others (1999) 3 SCC 251, Narayan
Vishnu Hendre & others vs. Baburao Savalaram Kothawal (1995) 6 SCC 608.
In these decisions also, it was held that there was no automatic merger
of the interest of lessee with that of a mortgagee, in the absence of
proof of surrender of the lease by the defendant.
12. Learned counsel for the
respondent has relied upon the decision of this Court in Shah
Mathuradas Manganlal & Co. vs. Nagappa Shankarappa Malage & others.
(1976) 3 SCC 660. But in that case it was found as a fact that the
mortgagee had surrendered his tenancy. Hence that decision is
13. In the present case, there was a
specific term in the mortgage deed dated 19.3.1980 that on redemption of
the mortgage, the mortgagee shall become the lessee of the mortgagor
automatically as previous to the mortgage deed. Hence, there was a clear
intention between the parties that the tenancy will continue when the
mortgage is redeemed. Hence, on this point we cannot agree with the High
Court. Accordingly, the impugned judgment is set aside on this point.
The appeal is allowed. No costs.
14. It would, however, be open to
the respondent to file a suit or proceeding for eviction of the
appellant-tenant which will be decided on its own merits.
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