Narayanaru Thrivikranaru vs V.Madhavan Potty And Others

Supreme Court10 February 2000D.P. Wadhwa · Syed Shah Mohammad Quadri

SCC(2000) 2 SCC 422
Neutral2000 INSC 60
AIRAIR 2000 SC 904
SCR[2000] 1 SCR 752

Ratio decidendi

The rule this decision rests on

1. Findings of fact made by the trial court and confirmed on appeal become final and binding on the parties, and cannot be reopened or disregarded by a higher court in a subsequent stage of the same proceedings (such as execution), absent specific statutory authority to do so. 2. Section 12(1) of the Kerala Land Reforms Act, which permits any interested person to prove that a transaction purporting to be a mortgage is in substance a lease, does not authorize a court to supersede or ignore findings already made by the trial court that an earlier lease relationship had terminated upon execution of the mortgage transaction, but only permits proof of the true substance of the mortgage transaction itself. 3. A transaction described as "Ottikuzhikanam" that falls within the definition of a mortgage under the Transfer of Property Act, 1882, is excluded from the statutory definition of "Ottikuzhikanam" under the Kerala Land Reforms Act and does not confer the status of tenant with fixity of tenure under that Act. 4. Where a party changes the nature of a transaction from lease to usufructuary mortgage, the court may infer from the circumstances prevailing at the time—including the comparative legal position and durability of the two forms of tenure—that the parties intended a substantive change in their relationship, absent clear evidence or stipulations indicating continuance of the earlier relationship. 5. The presence or absence of rent stipulations in a document, read together with its nomenclature and the quantum of consideration, are relevant indicia for determining whether a transaction is truly a mortgage or a lease.

Written by Miss Lucy from the judgment below, not taken from a headnote.

Judgment

As delivered

CASE NO.:Appeal (civil) 5392 of 1997

PETITIONER:NARAYANARU THRIVIKRANARU

Vs.

RESPONDENT:V.MADHAVAN POTTY AND OTHERS

DATE OF JUDGMENT: 10/02/2000

BENCH:D.P. Wadhwa & Syed Shah Mohammad Quadri

JUDGMENT:

Thomas J.

L...I...T.......T.......T.......T.......T.......T.......T..J

Appellant won the cause at all the tiers in the judicialhierarchy during trial stage but the fruits of the decreewhich he earned thereby are still eluding him. The decreeis practically rendered nonest during execution stage as theHigh Court upheld t he contentions of the contestingrespondents in disregard of the contrary findings madeduring trial stage. The order so passed by a learned singlejudge of the High Court of Kerala is now being challenged inthis appeal by special leave.

Facts, spread over to a wide range of period coveringmore than half a century by now, can be stated as follows:

In 1943 a document (Ex. P1) was executed styling it as"Otti and Kuzhikanam" in favour of the first respondent inrespect of the suit propert es. In fact those propertieswere outstanding on lease with the respondent before theexecution of Ex.P1. A suit for redemption of mortgage wasfiled by the appellant, claiming to be entitled to redeemthe mortgage, on the premise that Ex. P1 was a us fructuarymortgage. First respondent, after admitting the executionof Ex.P1, contended that it was not meant to terminate theearlier lease arrangement and hence he continued to be alessee of the property notwithstanding the execution ofEx.P1. The t ial court found that first respondent was inpossession of the land as mortgagee and not as lessee. Onthe strength of such a finding the trial court passed adecree for redemption of the mortgage on condition that themortgage amount and value of the i provements effected bythe first respondent on the property should be paid to him.

First respondent filed a regular appeal against the saidjudgment before the sub-Court and that court upheld thedecree passed by the trial court. He then filed a secondappeal before the High Court of Kerala. As per the judgmentdated 12.1.1967 the Hi gh Court dismissed the second appeal.Thus, the decree for redemption of the mortgage becamefinal.

It was in the second round of the litigation, whenappellant moved for execution of the decree after depositingthe entire amount due thereunder that he had to face harderhurdles. The Kerala Land Reforms Act (for short the Act)came into force in the m eanwhile which conferred fixity oftenure on tenants of agricultural lands. First respondentraised a contention, in the execution court, that he is atenant on the land and is hence entitled to the protectionenvisaged in the Act. The execution court eferred the saidquestion to the Land Tribunal as provided in Section 125(3)of the Act for a decision on the aforesaid claim of thefirst respondent. The Land Tribunal answered the referenceagainst the first respondent and forwarded the records ofthe case back to the execution court. On the strength ofthe finding so recorded by the Land Tribunal the executioncourt directed delivery of the suit property to be given tothe appellant as per its order dated 30.11.1995.

First respondent filed a revision before the High Courtchallenging the said order of the executing court. Therevision was allowed by the High Court as per order dated12.1.1996 rendered by a learned single judge who set asidethe order of the executio n court, which is being challengednow.

We heard the arguments of Mr. C.S.Vaidyanathan, SeniorAdvocate for the appellant and Mr. P. Krishnamurthy,Senior Advocate for the first respondent. Another writtensubmission has been put in by the advocate on behalf ofrespondent Nos. 3 and 4, thoug h they did not contest thecase at any earlier stage. All of them were duly consideredby us.

Learned single judge, in the impugned order, held thatthe earlier lease (which existed prior to Ex.P1) in favourof the first respondent did not come to an end despiteexecution of Ex.P1. The following are the main reasoningadopted by the learned sing le judge:

"There is nothing on record to show that they had agreedto surrender tenancy right on the execution of the mortgagedeed. Lease was a valuable right. In the case of mortgage,mortgagor was having the right to redeem the mortgage.There is nothing on ecord to show that the lessees in theinstant case were conscious of the possibility of redemptionof the mortgage by the mortgagor when they executedOttikuzhikanam deed in 1943. So also, there is no clearstatement in the Ottikuzhikanam deed of 1943 t at partieswanted to terminate their earlier relationship of landlordand tenant. The fact that parties were aware that for thetermination of leasehold right a document to that effect hasto be executed is evident by the execution of documentNo.1159 o 1943 when they wanted to terminate leaseholdinterest in respect of 53 cents of properties comprised inSy.No.43. In such a situation, if they had intended toterminate leasehold interest in respect of the decreeschedule properties, there should have een a release deed ofleasehold interest or should have made necessary statementsin the Ottikuzhikanam deed expressing their clear intentionto give an end to the lease arrangement. In the absence ofsuch clear statements in the Ottikuzhikanam deed, I ind itdifficult to hold that the leasehold interest was terminatedby the execution of document No.1158 of 1943."

It was not open to the High Court to consider at thisstage, whether Ex.P1 did not come into force or whether theearlier lease survived the transaction covered by the saiddocument. Those were the points hotly disputed during trialstage of the same li tigation and definite findings havebeen made thereon by the trial court. Those findings wereagainst the first respondent which were confirmed in appealand they have become final. However, learned counsel forthe first respondent contended that Secti n 12(1) of the Actenabled the parties to re-agitate such issuesnotwithstanding any finding made in the judgment. We will,therefore examine the said provision. Section 12(1) of theAct reads thus:

"12. Right to prove real nature of transaction.- (1)Notwithstanding anything in the Indian Evidence Act, 1872,or in any other law for the time being in force, or in anyjudgement, decree or order of court, any person interestedin any land may prove hat a transaction purporting to be amortgage, otti karipanayam, panayam, nerpanayam or licenceof that land is in substance a transaction by way of kanam,kanam-kuzhikanam, Kuzhikanam, verumpattam or other lease,under which the transferee is entitled t fixity of tenure inaccordance with the provisions of section 13 and to theother rights of a tenant under this Act."

It enables any person interested in the land to provethat a transaction purporting to be a mortgage is, insubstance, a transaction by way of lease. The non-obstantelimb of the Section insulates a transaction which purportsto be a mortgage, from any other law or judgment or decree.What is saved thereby is "the transaction purporting to be amortgage." But that saving clause is not a carte blanche forignoring the transaction altogether. Section 12 of the Actdoes not permit the court to superse e the findings made bythe Court to the effect that the earlier lease came to anend with the execution of the transaction which purports tobe a mortgage. In other words, what section 12 entitles aperson is to prove the real substance of the transacti ncovered by Ex.P1, albeit the ostensible tenor of thedocument. Hence the finding of the High Court in theimpugned order cannot be salvaged with the aid of Section 12of the Act.

Learned counsel for the first respondent then contendedthat even apart from the reasoning made in the impugnedorder first respondent can establish that Ex.P1 is really alease. On the language of Section 12 of the Act it ispossible to concede such a right to the first respondent,but the question is whether first respondent succeeded inestablishing that the transaction covered by Ex.P1 is reallya lease or that first respondent is a tenant of the suitproperties.

A "tenant" is defined in Section 2(57) of the Act asincluding an "Ottikuzhikanamdar." This item was inserted inthe inclusive definition of "tenant" as per Act 35 of 1969.It means that a person holding land under Ottikuzhikanamarrangement would be a tenant. Now it is necessary to knowwhat is meant by "Ottikuzhikanam." That expression isdefined in Section 2 (39A) as under: 39A. Ottikuzhikanammeans a transfer for consideration by a person to another ofany land other than nilam for the enjoyment of that land andfor the purpose of making improvements thereon, but shallnot include a mortgage within the meaning of the Trans er ofProperty Act, 1882."

The above definition recognises that there are two typesof "Ottikuzhikanam." One type would be a mortgage within themeaning of Transfer of Property Act. It is clear that thesaid type of "Ottikuzhikanam" is specifically excluded fromthe ambit of th definition. It is the other category ofnon-mortgage "Ottikuzhikanam" alone has been brought withinthe purview of the definition. So, even if the nomenclatureof the transaction is "Ottikuzhikanam" it should not be amortgage, if the transaction is t fall within the purview ofthe definition.

In this context it is pertinent to remind that thefinding entered by all the courts during the trial stage inthis case is that Ex.P1 is a mortgage. Such a finding isbinding on the parties to this lis as a normal rule, butSection 12 of the Act enable d the first respondent to provethat Ex.P1, in substance, is not a mortgage even in spite ofsuch a finding. However, first respondent has onlyendeavoured to show that the earlier lease survived Ex.P1and not that Ex.P1 is not a mortgage.

One question is to be answered, if the parties wantedthe earlier relationship to continue; Why should they havechanged from lease to "Otti and Kuzhikanam" in 1943 by theexecution of Ex.P1? We did not get any satisfactory answerto the said question. In this context we cannot forget thefact that during the said period of 1943 a lease of land,whether it was agricultural land or otherwise, had nospecial protection either legislative or otherwise. Ausufructuary mortgage was during then comparative y moredurable than a lease since a mortgagee could continue inpossession until the mortgage debt was paid off. A lessee,during those period was vulnerable to eviction by thelandlord at any time. A tenancy right acquired superiorposition vis-à-vis he usufructuary mortgage only many yearslater. Thus usufructuary mortgagee was in a better positionthan a lessee during 1943. Hence when parties decided tochange from lease to "Ottikuzhikanam" in 1943 it must havebeen because they definitely meant or the change.

The mortgage amount stipulated in Ex.P1 was Rs.850/-.Learned single judge of the High Court highlighted the cashpayment made on the date of execution of the deed asRs.100/- and observed that "the amount so advanced isnegligible when compared with th e value of 1.78 acrescovered by the document." The said reasoning is very tenuousas the actual mortgage amount reserved in the document wasRs.850/- out of which the mortgagor had acknowledged receiptof Rs.750/- which was payable by him to the mortga ee by wayof value of improvements. The said amount of Rs.850/- couldnot be described as negligible by any standard during theyear 1943 in respect of an agricultural land comprising of1.78 acres situated in a rural area.

Another feature to be noticed is that in Ex.P1 there wasno stipulation to pay rent to the landowner. The mortgageewas permitted to utilize the property on the strength ofRs.850/- which the mortgagor had acknowledged to be the debtdue from him to the mortgagee. This feature has to bejuxtaposed with the recital in the earlier lease deed thatthe lessee should pay rent to the landlord.

Thus, the recital in Ex.P1 including its nomenclature,and the amount of mortgage debt are poignantly in favour ofholding the transaction to be a mortgage and not a lessee.

Hence, the finding made by the Court in this case duringthe trial stage, which is binding on the parties, cannot bedisturbed. The decree holder is, therefore, entitled to thefruits of his hard-earned decree. The impugned order of theHigh Court is li able to be set aside. In the result weallow this appeal and set aside the order of the High Courtnow under challenge and the revision petition filed by thefirst respondent in the High Court would, therefore, standdismissed.

CHEERANTHOODIKA AHMMEDKUTTY AND ANR. VS PARAMBUR MARIAKUTTY UMMA AND OTHERS

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