SHAH MATHURADAS MAGANLAL & CO. versus NAGAPPA SHANKARAPPA MALAGE & ORS.

Citation: [1976] 3 S.C.R. 789 · Decided: 23-03-1976 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed

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Judgment (excerpt)

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789 
SHAH MATHURADAS MAGANLAL & CO. 
v. 
NAGAPPA SHANKARAPPA MALAGE & ORS. 
March 23, 1976 
[A. N. RAY, C.J. AND JASWANT SINGH, JJ.) 
Mortgage-Tenant in occupation taking a Possessory mortgage of the building 
·'.4:ith powers to sublet w.e.f. 7-11-1953 by a Deed of mortgage· Jr. May 21st. 
1953-Whether the tenancy revives on redemption of mortgage-Interpretation 
of-The Transfer of Property Act, 1882 Ss. 62, ll(d)(e) and (/}-Doctrine of 
surrender and Doctrine of Merger distinguished. 
In the suit, for redemption of mortgage and recovery of possession, the 
appellant mortgagee in possession of the suit house w.ei. 7-11-1953 by virtue 
of the Deed of Possessory mortgage dt. 21-5-1953 contested on the ground 
that, in view of the fact that he was a tenant prior to the mortgage, he was 
entitled to retain the possession even after the redemption. The trial court 
accepting the contention decreed only symbolical possession. On appeal by · 
respondent No. 1 the mortgagor, the first appellate court reversed. the decree 
and ordered recovery of possession of the property on deposit of the expenses 
towards repairs being a "clog on redemption''. The High Court on Second 
Appeal confirmed the said orders holding that the Deed of Mortgage shows 
that the relationship between the appellant and the respondent was that of a 
mortgagee and mortgagor. 
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Affirmin~ the judgment of the High Court and dismissing the appeal by 
special leave, the court 
HELD : (i) Ordinarily the doctrine of merger applies to extinction of 
mortgage security occuring by the merger of a lower in ·a higher security and 
by the merger of a lesser estate in a greater estate. \Vhere the capacity in 
which a person in posse,sion of the mortgagee's rights is something quite 
different from the capacity in which he is in pcssession of the equity of redemp-
tion. the mere fact that thC two capacities are united iii the same physical 
person cannot result in a merger. For a merger to arise it is necessary that 
a lesser estate and a higher estate should merge in one person at one and 
the same time and in the same right, and no interest in the property should 
remain outside. In the case of a lease the· estate that is in the lessor is 
the reversion. In the· case of· a mortgage the estate that is outstanding being 
the equity of redemption of the mortgagor, there cannot be a merger of lease 
and . mortgage in respect of the same property since neither of them is a 
higher or lesser estate. 
[793B-D] 
Narayan v. Ramchandra 65 Born. L.R. p. 449 (approved) 
(ii) A surrender under Clauses (e) and (f) of the Transfer of Property·Act 
is an yielding up of the term of the lessee's interest to him who bas the immediate 
reversion or the lessor's interest. Implied surrender by operation of law occurs 
by the creation of a new relationship or relinquishment of possession, if the 
lessee accepts a new lease that in itself is a surrender. Surrender can also be 
implied from the consent of the parties or from such facts as the relinQuishment 
of possession by the lessee and taking over possession by the lessor. Relinquish· 
ment. of possession operates as an implied surrender. There must be taking of 
possession, not necessarily a physical taking, but something amounting to a 
Tirtual taking of possession. Whether this bas occurred is a question of tact. 
[793H, 794A-B] 
(iii) (a) In the inst3.nt case, on the redemptiOn of the mortgage the 
respondent bad a right to record possession both on the terms of the mortgago 
deed and u/s 62 of the Transfer of Property Act (b) The provision for 
subletting in the Mortgage Deed, contrary to section 15 of the Bombay, Rents, 
Hotel and Lodging House. Rates Control Acfy 1957 as it stood in 1953 shows 
that the character of tenant is lost; (c) Continuing the tenancy till 7-ll-19S3 
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A 
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790 
SUPREME COURT REPORTS 
[1976) 3 S.C.R. 
and confirming the. possession of the appellant as mortgagee w.e.f. that date 
is an unequiv5Jcal ~onduct showing that no tenancy \'\'as to exist from 7-11-1953, 
but the relatlonsh1~ was that of a mortgagor and mortgagee and {d) there 
wo~J~ be no questt_on . of the tenancy being kept in abeyance or the tenancy 
rev1v1ng on the explfabon of the period of mortgage. 
[792F G 793A-H & 
794D] 
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CIVIL APPELATE JURISDICTION : Civil Appeal No. 450 of 1970 
Appeal by Special Leave from the Judgment and Order dated the 
6th February, 1970 of the Bombay High Court in Seco

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