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Judgment
Mohan, J.—These two appeals can be dealt with under a common judgment since the question of law that arises for our consideration is one and the same in both. First, we will take up Appeal No. 588 of 1982 which arises out of O.S. No. 68 of 1980. The said suit was filed for redemption. The admitted facts are as follows:�The plaintiff is the owner of the suit properties. He executed two mortgages by way of othi, viz., Ex.A1 dated 4-7-1974 for Rs. 30,000 and Ex.A2 of even date for an equal sum of Rs. 30,000. As per the terms of the mortgage deeds, the mortgagee should enjoy the properties in lieu of interest and should pay the principal amount. The plaintiff is entitled to the benefits of Tamil Nadu Act 40 of 1979. Under S.9 of the said Act, the principal amount is liable to be scaled down. Though the plaintiff tendered the amount, the defendant refused to receive the same and give discharge of the othi. Hence the suit. Notice was given on 10-1-1980, which was received on 12-1-1980, but the defendant sent no reply. Therefore, it necessitated the plaintiff to come forward with the suit, with a deposit of Rs. 26,800 at the rate of Rs. 13,400 for each of the mortgages and redemption is prayed for. It should be noticed at this juncture that the plaintiff did not mention about the lease back arrangement which came to light only when the written statement of the mortgagee was filed. The defendant admitted the two othis for Rs. 30,000 each. However, the plaintiff had obtained a lease back agreeing to pay an annual rent of Rs. 6,200 on 4-7-1974, the date of Ex.B1. This has been suppressed by the plaintiff. The rent is payable at the rate of Rs. 3,200 and 3,000 within the 13th of March, being the equivalent to the 30th of the Tamil Month of Masi and the 13th of June, equivalent to the 30th Vaigasi, every year. The plaintiff paid the rents on 14th March and 12th June at the above rates. Subsequently he paid Rs. 2,000 on the 17th of Karthigai in the year 1153 (M.E). Thereafter no amount was paid. The defendant did not enjoy the properties and therefore, the plaintiff''s claim is not enforceable. In so far as the plaintiff has not come forward with the deposit of the correct amount, he is not entitled to redemption. Even in the notice the plaintiff has not mentioned the exact amounts. He has mentioned in a vague manner that he is entitled to scaling down. The conduct of the plaintiff is unreasonable, because when it was sufficient to file a petition under S.17 of Act 40 of 1979 for scaling down, there was no justification for resorting to a suit. The plaintiff is bound to pay the entire othi amounts and the amounts due under the lease. Since he has defaulted to pay the rents due from 14-3-1978 to 13-6-1978, the defendant has filed O.S. No. 194 of 1979 for recovery of the rent amounts of Rs. 22,845.90 P. Even thereafter, the plaintiff had not paid the rents. In any event, the plaintiff is not entitled to costs.
On the above pleadings, the following issues were set down for trial:�
(1) Whether the suit as framed is not maintainable?
(2) Whether the plaintiff is entitled to the benefits of Act 40 of 1979?
(3) Whether the plaintiff has deposited the correct amount?
(4) Whether the plaintiff is entitled to the costs of the suit?
(5) Whether the court-fee paid is not correct?
(6) To what amount is the is plaintiff entitled?
On Issue 2, the learned Subordinate Judge on Tenkasi came to the conclusion that the plaintiff was entitled to get the benefits of Tamil Nadu Act 40 of 1979. On Issue 3, various cases were referred to and the issue was answered in favour of the plaintiff, holding that the plaintiff, had deposited the correct amount. On Issues 1 and 5, the Court held that the suit as framed was maintainable and that the court-fee paid is correct. Issue 4 was answered in favour of the defendant. In the result, under Issue 6, a preliminary decree for redemption was passed giving two months'' time.
Appeal No. 586 of 1982 is directed against O.S. No. 153 of 1980, in which the two plaintiffs viz., brothers, filed the suit for redemption on the mortgage, Ex.A1 dated 17th July, 1974 for Rs. 40,000. Here again, the mortgage was admitted. However, the plaintiffs claimed that they were entitled to scaling down. When the amount was tendered after scaling down, that was refused to be accepted by the defendant. The defendant not only refused to receive the amount, but also filed O.S. No. 195 of 1979 as though there had been default in the payment of rents. A lawyer''s notice was sent on 15-3-1980 which was received by the defendant on 19-3-1980, but no reply was sent. A sum of Rs. 16,350 was deposited towards redemption and hence the suit.
Here again, the defendant took the very same stand, that the lease back dated 17th July 1974 under Exhibit B.1 had been suppressed. The rent payable is Rs. 2,100 per year in two instalments. The plaintiffs had so far paid only two instalments, namely on 14-3-1975 and 18-6-1975, but subsequently no payment was made. The defendant did not enjoy the properties. The exact quantum which the plaintiffs are liable to pay had not been stated. Even under S.9 (9) (a) (i) of Tamil Nadu Act 40 of 1979, the plaintiffs are bound to pay the entire amount of Rs. 40,000 plus 9 per cent interest per annum. The notice dated 15-3-1980 does not set out the correct figure that the plaintiffs are liable to pay. Here again, it would have been sufficient if a petition for scaling down under S.17 of the Act had been filed, but instead, a regular suit had come to be preferred. The suit, O.S. No. 195 of 1979, has been necessitated because of the default in the payment of rent. In that suit, the defendant has sought to recover a sum of Rs. 16,451-70 P. In spite of the suit, no payment of rent had been forthcoming. The plaintiffs are not entitled to the costs of the suit in any event.
On the above pleadings, the following issues came to be set down for trial:�
(1) Whether the plaintiffs are entitled to the benefits of Tamil Nadu Act 40 of 1979?
(2) Whether the plaintiffs have deposited the correct amount due for the othi?
(3) Whether the court-fees paid is correct?
(4) Whether the plaintiffs are not entitled to costs of the suit?
(5) To what relief are the plaintiffs entitled?
On Issue 1, the learned Subordinate Judge held that the plaintiffs are entitled to the benefits of Tamil Nadu Act 40 of 1979. On issues 2, he held that the correct amount had come to be deposited. On Issue 3, it was held that the court-fee paid was correct. On Issue 4 it was held that the defendant need not be mulcted with the costs of the suit. In the result, under Issue 5, a preliminary decree was passed without costs, granting two months'' time.
Aggrieved by these judgments and decrees, the two appeals have come to be preferred by the mortgagee.
The one and the only contention urged in both the appeals is a contention based on law as to the application of the correct sub-section of S.9 of Tamil Nadu Act 40 of 1979 (hereinafter referred to as the Act).
We may make it clear even at this stage that though the secondary evidence of the mortgage deeds and the deed of lease back had been filed and admitted, yet nothing much turned upon the same, in this case, because the parties are in agreement as to the contents of the terms of the documents. Hence we need not get detained on the admissibility of the secondary evidence. More so, when the parties have rest content with the documentary evidence. It is in these situations the appeals arise before us.
Pending appeals, the appellant died. Separate applications have been taken out in both the appeals to bring the legal representatives of the appellant and also to appoint a guardian for the minor. As regards the petitions for the latter relief of appointment of guardian, we may straightaway say that, thanks to the proverbial law''s delay, the erstwhile minor has become a major and those applications, viz., C.M.P. Nos. 18088 and 18090/87 are rendered unnecessary by sheer efflux of time. Consequently, we pass no orders on those applications, but allow the other applications, viz. C.M.P. Nos. 18087 and 18039 of 1987 to bring the legal representatives of the appellant.
Now, on to the merits of the appeals, Mr. T.R. Mani, learned counsel for the appellant, would urge that S. 9 of the Act is a code in itself. A reading of that provision will clearly show that the act applies to all mortgages, (i) executed at any time before the 14th of July 1978 and (ii) by virtue of which the mortgagee is in possession of the mortgaged properties. If these two classifications are satisfied, then the Section would apply. However, with regard to a case of lease back, specially it has been provided under sub-S.(9) of the said Section. Therefore, it is that Section alone that shall apply, and no other Section would apply. There is no possibility of sub-S.(3) being made applicable, because the law is, the special excludes the general. This exclusion has been succinctly brought out in S.9 (9) (a) (ii) which says that nothing contained in sub-S.(3) or sub-S.(4) shall apply to any debt falling under clause (i). The debt in question, having regard to the lease back in both the cases, under Exhibit B.1, will fall only under sub-S.(9) (a) (i). Therefore, the mortgagee is entitled to the said amount which has been given in the memorandum of appear and if that is acceptable to the respondent-mortgagor, a decree could be passed in his favour for the said amount. In support of this argument, that to cases of lease back only sub-S.(9) would apply, learned counsel relies on Muthuswami Odayar v. Savarimuthu Odayar 76 L.W. 63= 1963 I M.L.J. 171 (F.B.). Though that case related to one arising under Tamil Nadu Act IV of 1938 and amending S.9-A, in so far as that very Section has been incorporated in the present Act as a provision of the parent Act, one need not travel beyond this ruling to hold that this sub-S.(9) (a) (i) alone is applicable.
Mr. T.R. Rajagopalan, learned counsel for the respondents, would submit that no doubt, sub-S.(9) of S.9 deals with cases of lease back. But the entire Section must be read in order to give the benefit according under the Section to the mortgagors (the debtors). So read, the Explanation to sub-S. (i) of S.9 containing the deeming clause that notwithstanding the lease back the mortgagee will be considered to be one having possession, will have a great say in the matter. Therefore, in such a case, notwithstanding the leaseback as evidenced by Ex.B1 dated 4-7-1974 and 17-7-1974, if the mortgagee is deemed to be in possession, there is every scope for applying sub-S.(3) of S.9. In such an event, the mortgagor could base his claim alternatively either on sub-S.(9) or under sub-S.(3), whichever is beneficial to him. It is only because of that, under sub-S.(3) the claim was made before the lower court and has been rightly accepted.
In order to appreciate the respective contentions, it is necessary on our part to deal with S.9 at some great detail. The Act itself is called the Tamil Nadu Debt Relief Act, 1979. In this State, there have been forerunners to this, the principal of them being Tamil Nadu Act 4 of 1938. It was found that mortgagees, taking advantage of the impecunious circumstances of poor agriculturists, drew hard bargains as a result of which the mortgagors had to be relieved of the oppression by the crafty money-lenders. It was with this noble object, Tamil Nadu Act 4 of 1938 came to be enacted. The validity of the same was unsuccessfully challenged. The Court came to the rescue of the poor mortgagor, who, it was found, being necessitous men, would yield to any usurious term that the crafty money-lender may impose. And it is thereafter, such beneficial provisions came to be extended successfully by various Acts, such as Tamil Nadu Debt Relief Act of 1972 and the present Act of 1979. This is only to relieve the mortgagor of the usurious conditions or the burden of the mortgages which terms came to be imposed so as to make him a perennial debtor. The very heading, Tamil Nadu Debt Relief Act, 1979 itself suggests this, with this background, we go to S.9.
As rightly contended by Mr. T.R. Mani, learned counsel for the appellants, the Act is a code in itself, being a special provision in respect of mortgages. This occurs in Chapter II under the heading of ''Relief from Indebtedness and Scaling down of Debts''. ''Without much ado, we may say that this is a provision which is nothing more than a repetition of S. 9A of Tamil Nadu Act 4 of 1938. With the passage of time and the gaining of experience, what was introduced as an amending provision to Tamil Nadu Act 4 of 1938, had come to be incorporated as a provision of the parent Act itself. Word to word, it is the same Section, because it is the same kind of benefit that is sought to be conferred in respect of mortgages.
Two qualifications necessary for the application of this provision are:
(i) the mortgages must have been executed prior to 14th of July, 1978; and
(ii) the mortgagee must be in possession either wholly or in part of the property by virtue of the mortgage transaction.
Undoubtedly, in this case, all the three mortgages fall within the scope of the Act. In A.S. No. 588 of 1982 Ex.A1 is dated 4-7-1974 and Ex.A2 is also of the same date. In A.S. No. 586 of 1982 Ex.A1 is dated 17-7-1974. Therefore, the first condition is satisfied. With regard to the second, that also is satisfied, because, admittedly, the mortgagee was in possession. It may, at this stage, be noted that the very plaint itself proceeded on that footing, of course, without disclosing the lease back in the respective cases, under Ex.B1 dated 4-7-1974 in the former case and 17-7-1974 in the latter case. As to what is the effect of lease back, we will consider a little later. In the case of a mortgagee in possession of the whole of the mortgaged property for an aggregate period of less than ten years, the mortgagor shall be liable to pay as per Cl. (i) to (iii) of sub-S.(3). On the contrary, where the mortgagee is in possession of only a portion of the mortgaged property for an aggregate period of less than ten years, the mortgagor would be entitled to redeem only on the payment of the amount stipulated under Cl.(i) to (iv) of sub-S.(4). However, where the mortgagee had been in possession of the whole of the mortgaged property for an aggregate period of ten years or more, then the mortgage debt shall be deemed to be entirely discharged with effect from the expiry of the period of ten years. This will be so, notwithstanding S.8 or S.12 of the Act. We may at once state that S.8 is one which deals with debts incurred prior to 14th July, 1978, and provides for scaling down. S.12 deals with the rates of interest while so scaling down. So, they are not material for our purposes. Here again, the sub-Section states, where the period had expired prior to 14-7-1978, as to what will be the liability of the mortgagor, and that is stipulated in Cl.(i) to (iii). Likewise, in cases of the mortgagee being in possession of only a portion for an aggregate period of ten years or more, sub-S.(6) takes care of the same.
Sub-S.(7) says, the portion of the principal amount shall be determined in the manner prescribed by the rules.
Sub-S.(8)says that the mortgagor is liable to pay for improvements. Then comes the important sub-S.(9), Cl.(a)(i) and (ii). They are extracted below: �
Sub-S.9(a) (i): Except in cases falling under sub-S.(5)(a) where the mortgaged property or, as the case may be, the portion thereof in the possession of the mortgagee has been leased back to the mortgagor by the mortgagee, the rent due to the mortgagee under the lease (after deducting from such rent any revenue tax or cess paid or payable by the mortgagee in respect of the property) shall be deemed to be the interest on the mortgage debt or the portion thereof attributable to the portion of the property aforesaid and the provisions of S.8, read with S.12, shall apply to the entire debt.
(ii) Nothing contained in sub-S.(3) or sub-S.(4) shall apply to any debt falling under sub-clause (i).
(b) In case falling under sub-S.(5)(a), where the property has been leased back to the mortgagor by the mortgagee, nothing contained in that sub-section shall affect the right of the mortgagee to recover any rent due to him under the lease for any period before the date on which the mortgage debt is deemed to have been wholly discharged by virtue of that subsection, if such rents have not become barred by limitation under any law for the time being in force.
A careful reading of the above clearly shows that in the case of lease back, it is sub-S.(9) alone that would apply, because this is a specific section dealing with cases of lease back. For purposes of appreciation, we will now draw a tabulated statement of Sub S.(9) (a) (i) and (ii) of S.9-A of Tamil Nadu Act 4 of 1938 and Sub-S.(9)(a)(i) and (ii) of S.9 of the present Act:�
S.9A of Act IV/1938: (Sub-S (9) (a) (i) & (ii):
Sub-S (9) (a) (i) & (ii) of T.N. Act 40/1979:
(i) Except in cases falling under sub-S (5)(a) where the mortgaged property or as the case may be, the portion thereof, in the possession of the mortgagee has been leased back to the mortgagor by the mortgagee, the rent due to the mortgagee under the lease after deducting from such rent any revenue, tax or cess paid or payable by the mortgagee in respect of the property shall be deemed to be the interest on the mortgage debt or the portion thereof attributable to the portion of the property aforesaid and the provisions of S.8 read with S.12, or under S.13 as the case may be shall apply to the entire debt.
(i) Except in cases falling under sub-S.(5)(a) where the mortgaged property or as the case may be, the portion thereof, in the possession of the mortgagee has been leased back to the mortgagor by the mortgagee the rent due to the mortgagee under the lease (after deducting from such rent any revenue, tax or cess paid or payable by the mortgagee in respect of the property) shall be deemed to be the interest on the mortgage debt or the portion thereof attributable to the portion of the property aforesaid and the provisions of S.8 read with S.12, shall apply to the entire debt.
(ii) Nothing contained in sub-S.(3) or sub-S.(4) shall apply to any debt falling under sub-clause (i)
(ii) Nothing contained in sub-S.(3) or sub-S.(4) shall apply to any debt falling under sub-clause (i)
Concerning S. 9-A of Tamil Nadu Act 4 of 1938 a Full Bench of this Court in Muthuswami Odayar v. Savarimuthu Odayar 76 L.W. 63= (1963) I-M.L.J. 171 (F.B.), held as follows:�
S.9-A of the Madras Agriculturists Relief Act provides for the manner of scaling down of the debt in cases where the mortgagee instead of enjoying the property usufructuary mortgaged to him, leases it back to the mortgagor.
The provisions of S.9-A of the Act can be invoked only at the time of the redemption of the mortgage.
For calculating the amount due to the mortgagee at the time of redemption, sub-S.(9) (a)(i) enacts a fiction, namely, that ''the rent due to the mortgagee under the lease...shall be deemed to be the interest on the mortgage debt'', which is liable to be scaled down in accordance with the appropriate provisions of the Act for non-usufructuary mortgages. The sub-Section deems rent that is due as interest. That cannot mean that the rent that had been paid should also be deemed to be interest. The rents which had been voluntarily paid already by the mortgagor could not be deemed to be interest, thereby attracting the principle recognised in Chellammal v. Abdul Ghafur Khan 74 L.W. Page 556= ILR (1961) Mad. 1061= (1961) 2-M.L.J. 222 (F.B.)
Under sub-S. (9) (a) (i) what is regarded as interest is only rent that is due under the lease. The word ''due'' has to be given its plain meaning, namely, that it still remains unpaid. There is nothing in the statute to extend is meaning so as to include really what is not due, namely, that which has been paid already. The purpose of the fiction is to fix the amount for redemption and not to scale down the debt. Where there are arrears of rent due at the time of redemption, the fiction will certainly operate and the debtor will be relieved except to the limit of 5� per cent per annum on the principal money secured.
Where in the case of an usufructuary mortgage (to which the scaling down provisions of S.9-A of the Act apply) created after the enactment came into force, there has been a lease back by the mortgagee of the mortgaged property to the mortgagor, the payments of rent made by the latter to the former cannot be regarded as payments made for interest and cannot be re-appropriated towards the principal after providing for interest at the rate prescribed by S.13 of the Act The fiction will operate if there are arrears of rent due at the time of the redemption of the mortgage.
The fiction cannot be extended in a manner so as to make the debtor when he pays rent to the mortgagee qua rent as doing so with the consciousness that he was paying interest and that at a higher rate.
The result of the decisions is that although S.13 of the Act provides a ceiling rate of interest in regard to debts payable by agriculturists with respect to contracts of loans entered into after the Act came into force, the contract to pay higher rate of interest is not per se illegal and that payment of interest in accordance with such a contract cannot be deemed unlawful so as to entitle a debtor to re-open and adjust the excess amount towards the principal.
It is a well settled principle of law that a legal fiction should be limited to the purpose for which it was created and should not be extended beyond its legitimate field.
It is the general principle of law. Specially generalibus derogant, i.e., the special excludes the general. Therefore, it is this principle that will have to apply, as rightly contended by Mr. T.R. Mani. However, Mr. T.R. Rajagopalan will press into service the Explanation to sub-S.(1). The Explanation is to the following effect:�
A mortgagee shall be deemed to be in possession of the property mortgaged to him or any portion thereof, notwithstanding that he had leased it to the mortgagor or any other person.
By virtue of the deeming provision, it is not open to the mortgagee to say that since he had leased back the property to the mortgagor he is not a mortgagee in possession and therefore, the special provision will not apply. The legal fiction created by this deeming provision can be extended only to that and one cannot travel beyond that. With regard to the legal fiction the law has been laid down by Lord Asquith in East End Dwellings Co. Ltd., v. Finsbury Borough Council 1952 AC, 109, as follows:�
If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.
This has been approved by the Supreme Court in The State of Bombay Vs. Pandurang Vinayak Chaphalkar and Others, at p. 246, by stating thus:�
When a statute enacts that something shall be deemed to have been done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion.
Therefore, it is not open to the mortgagor to contend that there are two beneficial provisions, in sub-S.(3) as well as sub-S.(9) of S.9 of the Act and consequently, he could choose whichever is advantageous to him. We find no scope for such an interpretation, especially when there is the specific sub-S.(9) of S.9 dealing with cases of lease back. Consequently we hold that the Court below had erred in applying sub-S.(3) of S.9 of the Act to this case. It is only sub-S.(9) (a) (i) of S. 9 of the Act that would apply to the instant case.
As already pointed out by us, the amount due as calculated under this provision, is what is stated in the memorandum of appeal. To this, learned counsel for the respondents states that the calculation is correct. Accordingly, in A.S. No. 588 of 1982, against O.S. No. 68 of 1980, the mortgagor will be entitled to redeem on payment of a sum of Rs. 90,000 which will be the total amount of liability of the mortgagor. Towards this, admittedly, a sum of Rs. 8.200 had been paid towards arrears of rent. As per the decree in O.S. No. 68 of 1980 a sum of Rs. 26,800 had been deposited into court to the credit of the suit. Both these total up to Rs. 35,000. Deducting the said sum of Rs. 35,000 from Rs. 90,000, there is a balance of Rs. 55,000, on payment of which the mortgagor will be entitled to redemption. This amount will supersede the decree of the Court below. In A.S. No. 586 of 1982, against O.S. No. 153 of 1980, the total liability of the mortgagor will be Rs. 60,000 a sum of Rs. 40,000 being the principal amount with interest at 9 per cent per annum from 17-7-1974 namely the date of the mortgage to 25-2-1981, restricted to half the principal amount, i.e., Rs. 20,000, thus in all Rs. 60,000. Of this, the respondent-mortgagor had already paid Rs. 4,100 towards arrears of rent and a sum of Rs. 16,350 had been deposited to the credit of the suit in the Court below. Both these, added up, come to Rs. 20,450. The balance due after deducting the said sum of Rs. 20,450 from Rs. 60,000, will be Rs. 39,550. On payment of this amount together with the costs, the mortgagor will be entitled to redeem the mortgage. The decrees of the Court below in both the suits will stand superseded as above. In the result, both the appeals are allowed with costs, and decrees of the Court below are modified as indicated above. Time for payment till 31st July, 1988.