Holding

Section 12(1) of the Kerala Land Reforms Act does not permit a court to supersede a final judicial finding that the earlier lease ended with the execution of a mortgage, and the 1943 document is a mortgage.

Summary

The appellant owned agricultural land that was leased to the first respondent. In 1943 a document titled "Otti and Kuzhikanam" was executed in favour of the respondent, which the appellant claimed was a usufructuary mortgage. The trial court held the document to be a mortgage, declared the respondent a mortgagee and decreed redemption in favour of the appellant; this finding was upheld on appeal. After the Kerala Land Reforms Act came into force, the respondent asserted that he remained a tenant protected by the Act and obtained a favourable order from the execution court, which was later set aside by the High Court on the ground that the earlier lease survived the 1943 transaction. The Supreme Court examined whether Section 12(1) of the Kerala Land Reforms Act allows a party to overturn the trial court's finding that the 1943 document was a mortgage and that the lease ended. The Court held that Section 12 merely permits proof of the true nature of a transaction but does not permit a court to disregard a final finding that the lease terminated with the mortgage, and therefore restored the trial court's decree. The appeal was allowed and the High Court’s revision order dismissed.

Issues considered

Whether Section 12(1) of the Kerala Land Reforms Act enables a party to overturn a trial court's finding that a transaction titled "Otti and Kuzhikanam" was a mortgage and that the earlier lease terminated.
Whether the 1943 document constitutes a mortgage within the meaning of the Transfer of Property Act or a lease (Ottikuzhikanam) under the Kerala Land Reforms Act.

Legislation cited

Subjects

Kerala Land Reforms ActSection 12mortgage vs leaseredemption of mortgagetenant rightsOttikuzhikanamTransfer of Property Actlease terminationexecution of decree

Judgment

A NARAYANARU THRIVIKRANARV
v.
-
V. MADHAVAN POTIY AND ORS.

FEBRUARY 10, 2000
B
(KT. THOMAS, D.P. WADHWA AND
S.S. MOHAMMAD OUADRI, JJ.J

Kera/a La11d Refonns Act-Sectio11 12-Right to prove real nature of
tra11sacti01i-Execution of a document styling it as 'Otti a11d Kazhikanam' i11
c favour of respondent-Properties "'ere already outsta11ding 011 lease with .-
respo11del!t-Suit for redemption-Respondent's claim that he continued to be
lessee of the property 11otwithstanding executio11 of document-Whether main-
tai11able-He/d, no finding recorded by all the courts that the document was
a mortgage cannot be interfered with.
D
Suit properties were on lease with the first respondent. In 1943, a
document title as 'Otti and Kuzhikanam' was executed in favour of the
respondent in respect of the same properties. The appellant filed a suit for
redemption of mortgage. First respondent alleged that he continued to be ,,
a lessee of the property notwithstanding the execution of the document as
E it was not meant to terminate the earlier lease arrangement. The trial
Court passed a decree for redem11tion of the mortgage, holding that the <:cc
first respondent was in possession of the land as mortgagte and not as
lessee. The decree for redemption was upheld in subsequent appeals. The
appellant filed execution proceedings after depositing the entire amount
F due. After the enactment of the Kerala Land Reforms Act, which conferred
fixity of tenure of the agricultural land, 1st respondent claimed himself as
a tenant of the land, hence entitled to the protection envisaged in the Act.
Dismissing respondent's claim, the execution court directed delivery of the
suit property to be given to the appellant. However, in revision, the High
Court set aside the order of the execution court, holding that the earlier
G lease in favour of the first respondent did uot come to an end despite
execution of the document title as 'Qtti and Kuzhikanam'. This appeal has c
been filed against the order passed by the Single Judge. .--

First respondent contended that Section 12(i) of the Act enabled the
H parties to reagitate such issues as to whether on the execution of that
752
NARAYANARL THRIVIKRANARL' v. V. !\1ADHAVAN. 753

document, the earlier lease survived the transaction covered by the said A
document, notwithstanding any findings made in the judgment. The ques-
tion raised for consideration was whether first respondent succeeded in
establishing that the transaction covered by the document was really a
lease or that first respondent was a tenant of the suit properties.

Allowing the appeal, this Court
B

HELD 1.1. It was not open to the High Court to consider at this
stage, whether the document did not come into force or whether the earlier
lease survived the transaction covered by the said document. Those were
the points hotly disputed during trial stage of the same litigation and c
definite findings have been made thereon by the trial court. Those findings
were against the first respondent which were confirmed in appeal and they
have become final. [757-B-C]

1.2. Section 12 of the Kerala Land Reforms Act, enables any person D
interested in the land to prove that a transaction purporting to be a
mortgage is, in substance, a transaction by way of lease. The non-obstante
limb of the Section insulates a transaction which purports to be a
mortgage, from any other law or judgment or decree. What is saved thereby
is "the transaction purporting to be a mortgage.' But that saving clause is
not a carte blanche for ignoring the transaction altogether. Section 12 of E
the Act does not permit the court to supersede the lindim:s made by the
Court to the effect that the earlier lease came to an end with the execution
of the transaction which p0111orts to be a mortgage. In other words, what
section 12 entitles a person is to prove the real substance of the transaction
covered by the document, albeit the ostensible tenor of the document. p
Hence the findings of the High Court in the impugned order cannot be
salvaged with the aid of Section 12 of the Act. [757-F-H]

- 1.3. There are two types of "Ottikuzhikanam". One type would be a
mortgage within the meaning of Transfer of Property Act. The said type of
"Ottilmzhikanam" is specifically excluded from the ambit of the definition. G
It is the other category of non-mortgage "Ottikuzhikanam" alone has been
brought within the purview of the definition of the term 'Ottikuzhikanam'.
So, even if the nomenclature of the transaction is "Ottikuzhikanam" it
should not be a mortgage, if the transaction is to fall within the purview
of the definition. [758-E-F] H
754 SUPREME COURT REPORTS [200011 S.C.R.
A 1.4. The findings entered by all the courts during the trial stage in
this case was that the document was a mortgage. Such a finding was
binding on the parties to this lis as a normal rule, but Section 12 of the
Act enable the first respondent to prove that the document in substance,
was not a mortgage even in spite of such finding. However, first respondent
B had only endeavoured to show that the earlier lease survived the document
and not that the document was not a mortgage. [758-G]

1.5. The actual mortgage amount reserved in the document was Rs.
850 out of which tine mortgagor had acknowledged receipt of Rs. 750 which
was payable by him to the mortgagee by the way of value of improvements.
C The said amount of Rs. 850 could not be described as negligible by any
standard during the year 1943 in respect of an agricultural land compris-
ing of 1.78 acres situated in a rural area.

The recital in the documellt including its nomenclature, and the
amount or mortgage debt are poignantly in favour of holding the transac-
D tion to be a mortgage and not a l::ssee. [759-D-E; GJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5392 of
1997.

From the Judgment and Order dated 12.1.96 of the Kerala High
E Court in C.R.P. No. 2480 of 1995-M.

R. Sundarvaradan, C. Sitaramaiah, C.S. Vaidyanathan, K.R. Nam-
biar, Shivam, B.K. Yadav, K.V. Mohan and K.N.Tripathy for the Appellant.

F P. Krishnamurthi, P.S. Poti, Ms. Malini Poduval, Ramesh Babu and
Ms. Lan Singh Rongmir for the Respondent No. 1.

K. Sukumaran, Ms. Karthika S., Ms. Baby Krishnan for the Respon-
dent Nos. 3-4.

The Judgment of the Court was delivered by
G
THOMAS, J. Appellant won the cause at all the tiers in the judicial
hierarchy during trial stage but the fruits of the decree which he earm:d
thereby are still eluding him. The decree is practically rendered nonest
during execution stage as the High Court upheld the contentions of th\:
H contesting respondents in disregard of the contrary findings made during_
NARAYA.'llARUTHRIVIKRANARU v. V. MADHAVAN. fIHOMAS, J.J 755

- trial stage. The order so passed by a learned single judge of the High Court
of Kerala is now being challenged in tllli, appeal by special leave.

Facts, spread over to a widt: range of period covi::ring more than half
A

a century by now, can be stated as follows : In 1943 a document (Ex. Pl)
was executed styling it as '"Otti and Kuzhikanam" in favour of the first
respondent in respect of the suit properties. In fact those properties wt:re
B
outstanding on least with the rt:spondt:nt before tht: execution of Ex. Pl.
A suit for redemption of mortgage was filed by the appellant, daiming to
be entitltd to redeem the mortgage, on the premists that Ex. Pl was a
usufructuary mortgage. First respondent, aftt:r admitting the extcution of
Ex.Pl, contended that it was not meant to terminate the earlii::r lease C
arrangement and hence he continued to be a lessee of the property
notwithstanding the execution of Ex.P1. The trial court found that first
respondent was in posst:ssion of the land as mortgagee and not as lessee.
On the strength of such a fining the trial court passed a decree for
redemption of the mortgage on condition that the mortgage amount and D
value of the improvements effected by the first respondent on the property
should be paid to him.

First rtspondi::nt filed a regular appeal against the said judgment
before the sub-Court and that court uphdd the decrt:t: passed by the trial
E
court. Ht then filed a second appeal btfore the High Court of Kerala. As
per the judgment dated 12.1.1%7 th.: H;gh Court dismisst:d the second
appeal. Thus, the decree for redemption of the mortgage became final.

It was in the second round of the litigation, when appellant moved
for execution of the decret after depositing the entire amount due there- F
under that he had to face harder hurdles. The Kerala Land Reforms Act
(for short the Act) came into force in tht meanwhile which conferred fixity
of tenure on tenants of agricultural lands. First respondent raised a con-
tention, in the execution court, that he is a tenant on the land and is hence
entitled to the protection envisaged in the Act. The execution court G
referred the said question to the Land Tribunal as provided in Section
125(3) of the Act for a decision on tht aforesaid claim of the first respon-
dent. The Land Tribunal answered the reference against the first respon-
dent and forwarded the records of thi:: case back to the execution court.
On the strength of ,\ihe finding so recorded by the Land Tribunal the H
756 SUPREME COl:RT REPORTS (2000[ 1 S.C.R.
A execution court directed delive1y of the suit property to be given to the
appellant as per its order dated 30.11.1995.

First respondent filed a revision bt:fore the High Court challenging
the said ordt:r of the executing court. The revision was allowed by the High
B Court as per ordt:r dated 12.1.1996 rendered by a learnt:d single judge who
set aside the order of the execution court, which is being challenged now.

We heard the arguments of Mr. C.S. Vaidyanathan, Senior Advocate
for the appellant and Mr. P. Krishnamurthy, Senior Advocate for the first
respondent. Another written submissi.on has been put in by the advocate
C on behalf of respondent Nos. 3 and 4, though they did not contest the case
at any earlier stage. All of them were duly considered by us.

Learned single judge, in the impugned order, held that the earlier
lease (which existed prior to Ex. Pl) in favour of the first respondent did
D no come to an end despite execution of Ex.Pl. The following are the main
reasoning adopted by the learned single judge :

"There is nothing on rncord to show that they had agreed to

E
surrender tenancy right on the execution of the mortgage deed.
Lease was a valuable right. In the case of mortgage, mortgagor was
having the right to redeem the mortgage. There is nothing on
record to show that the lessees in the instant case were conscious
-
of the po~sibility of redemption of the mortgage by the mortgagor
when they executed Ottikuzhikanam deed in 1943. So also, there
is no clear statement ir, the Ottikuzhikanam deed of 1943 that
F parties wanted to terminate their earlier relationship of landlord
and tenant. The fact that parties wen: aware that for the termina-
tion of leasehold right a document to that effect has to be executed
is evident by the execution of document No. 1159 of 1943 when
they wanted to terminate leasehold interest in respect of 53 cents
G of properties comprised in Sy. No. 43. In such a situation, if they
had intended to terminate leasehold interest in respect of the
decree scltedule properties, there should have been a release deed
of leasehold interest or should have made necessary statements in
the Ottikuzhikanam deed expn:ssing their clear intention to give
H an end to the lease arrangement. In the absence of such clear
)

NARAYA."IARU THRIVJKRANARU v. V. :-.IADHAVAN. [IBOMAS. J.) 757

statements in the Ottikuzhikanam deed, I find it difficult to hold A
that the leasehold interest was terminated by the execution of
document No. 1158 of 1943."

It was not open to the High Court to consider at this stage, whether
Ex.Pl did not come into force or whether the earlier lease survived the
B
transaction covered by the said document. Those were the points hotly
disputed during trial stage of the same litigation and definite findings have
been made thereon by the trial court. Those findings were against the first
respondent which were confirmed in appeal and they have become final.
However, learned counsel for the first respondent contended that Section
12{1) of the Act enabled the parties to re-agitate such issues notwithstand- c
ing any finding made in the judgment. We will, therefore examine the said
provision. Section 12(1) of the Act 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 D
the time being in force, or in any judgment, decree or order of
court, any person interested in any land may prove that a transac-
tion purporting to be a mortgage, otti karipanayam, panayam,
nerpanayam or licence of that land is in substance a transaction
by way of kanam, kanam-kuzhikanam, Kuzhikanam, verumpattam
or other lease, under which the transferee is entitled to fixity of E
tenure in accordance with the provisions of section 13 and to the
other rights of a tenant under this Act."

lt enables any person interested in the land to prove that a transac-
tion purporting to be a mortgage is, in substance, a transaction by way of p
lease. The non-obstante limb of the Section insulates a transaction which
purports to be a mortgage, from any other law or judgment or decree.
What is saved thereby is "the transaction purporting to be a mortgage." But
that saving clause is not a carte blanche for ignoring the transaction
altogether. Section 12 of the Act does not permit the court to supersede
the findings made by the Court to the effect that the earlier lease came to G
an end with the execution of the transaction which purports to be a
mortgage. In other words, what section 12 entitles a person is to prove the
real substance of the transaction covered by Ex.Pl., albeit the ostensible
tenor of the document. Hence the finding of the High Court Court in the
impugned order cannot be salvaged with the aid of Section 12 of the Act. H
758 SUPREME CO CRT REPORTS [2CCO] 1 S.C.R.
A Learned counsel for the first respondent then contended that even
apart from the reasoning made in the impugned order first respondent can
..,-
establish that Ex.Pl is really a lease. On the language of Section 12 of the
Act it is possible to concede such a right to the first respondent, but the
question is whether first respondent succeeded in establishing that the
B transaction coVt:red by Ex.P1 is really a lt.:ase or that first respondent is a
tenant of the suit properties.

A "tenant'' is defined in Section 2(57) of the Act as including an
"Ottikuzhikanamdar". This item was inserted in the inclusive definition of
"tenant" as per Act 35 of 1969. lt means that a person holding land under
C Ottikuzhikanam arrangement would be a tenant Now it is necessary to
know what is meant by ''Ottikuzhikanam." That expression is defined in
Section 2 (39A) as under :

'39A. Ottikuzhikanam means a transfer for consideration by a
perwn to another of any land other than nilam for the enjoyment
D 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."

The ahove definition recognises that then; are two types of "Ottikuz-
E hikanam." One type would be mortgage within the meaning of Transfer of
Property Act. It j, clear that the said type of ''Ottikuzikanam" is specifically
excluded from the an;bit of th1.0 dcfimrion. It is the other category of
non-mortgage ''C)ttikuzhik<mam" alone h..s bt:en brought within the purview
of the definition. So, even if the nomenclature of the transaction is "Ot-
tikuzhikanam'' it should not be a mortgage, if the transaction is to fall within
F the purview of the definition.

In this context it is pertinent to remind that the finding entered by
all the courts during the trial stage in this case is that Ex.Pl is a mortgage.
Such a finding is binding on the parties to this 1is as a normal rule, but
G Section 12 of the Act enabled the first respondent to prove that Ex.Pl, in
substance, is not a mortgage even in spite of such a finding. However, first
respondent has only endeavoured to show that the earlier lease survived
Ex.Pl and not that Ex.Pl is not a mortgage.

One question is to be answered, if the parties wanted the earlier
H relationship to continue; why should they have changed from lease to "Otti
NARAYANARIJ lHRIVIKRANARlJ v. V. MADHAVAN. [THOMAS, J.] 759

and Kuzhikanam'' in 1943 by the execution of Ex.Pl? We did not get any A
satisfactory answer to the said question. ln this context we cannot forget
the fact that during the said period of 1943 a lease of land, whether it was
agricultural land or otherwise, had no special protection either legislative
or otherwise. A usufructuary mortgage was during then comparatively
more durable than a lease sinct: a mortgdget: could continue in possession
until the mortgage debt was paid of. A lessee, during those period was
B
vulnerable to eviction by the landlord at any time. A te1 ~ncy right acquired
superior position vis-a-vis the usufrucl:uary mortgage only many years later.
Thus usufructuary mortgagee was in a better position than a lessee during
1943. Hence when partit:s decidt:d to change from lease to "Ottikuz-
hikanam" in 1943 it must have been because they definitt:ly meant for the c
change.

The mortgagt: amount stipulated in Ex.Pl was Rs. 850. Learnt:d
single judge of the High Court highlighted the cash payment made on the
date of execution of the deed as Rs.100 <.tlld observed that "the amount so
advanced is negligible when compared with the value of 1.78 acres covered D
by the document'. The said reasoning is very tenuous as the actual
mortgage amount reserved in the document was Rs. 850 out of which the
mortgagor had acknowledged receipt of Rs. 750 which was payable by him
· to the mortgagee by way of value of improvements. The said amount of Rs.
850 could not be described as negligible by any standard during the year E
1943 in respect of an agricultural land comprising of 1.78 acres situated in
a rural area.

Another feature to be noticed is that in Ex. Pl there was no stipula-
tion to pay rent to the landowner. The mortgagee was permitted to utilize
the property on the strength of Rs. 850 which the mortgagor had acknow- F
!edged to be the debt due from him to the mortgagee. This feature has to
be juxtaposed with the recital in the earlier lease deed that the lessee
should pay rent to the landlord.

Thus, the recital in Ex. Pl including its nomenclature, and the G
amount of mortgage debt are poignantly in favour of holding the transac-
tion to be a mortgage and not a lessee.

Hence, the finding made by the Court in this case during the trial
stage, which is binding on the parties, cannot be disturbed. The decree
holder is, therefore, entitled to the fruits of his hard-earned decree. The H
760 SUPREME COURT REPORTS [2000] l S.C.R.
A impugm:d order of the High Court is liable to be set aside. In the result
we allow this appeal and set aside the order of the High Court now under·
challenge and the revision petition filed by the first respondent in the High
Court would, therefore, stand dismissed.

R.A. Appeal allowed.