1997 INSC 0350
                                 Polammarasetti Varana Venka Satyanarayana

                                                           Vs

                                   Suddha Apparao Naidu (Dead) and Others

                                          Civil Appeal No. 1738 of 1987

                                          (G. N. Ray, G. T. Nanavati JJ)

                                                      18.03.1997

                                                        ORDER

1. This appeal is directed against the judgment of the Andhra Pradesh High Court dated 16-4-1987,
passed in Second Appeal No. 308 of 1981. By the impugned judgment, the High Court has
dismissed the Second Appeal preferred by the appellant. One Bheemarasetti Adinarayana Naidu was
the plaintiff in Suit No. OS No. 55 of 1967 in the Court of District Munsif, Anakapalli which was
renumbered as OS No. 260 of 1969 in the Court of Principal District Munsif, Yellamanchili. Such
suit was instituted by the plaintiff for redemption of usufructuary mortgage created by deed dated
11-12-1946 (Ext. A-1) on the basis of the sale deed dated 19-9-1960 (Ext. A-2) under which the said
plaintiff purchased the property with a right to redeem. The appellant was the second defendant in
the said suit. There is no dispute that at the time of creating such usufructuary mortgage in 1946, the
appellant was continuing as a lessee and the lease was to expire in 1948. The appellant contended
that his right as lessee continued despite the said usufructuary mortgage and in view of such right
continuing, he had acquired non-evictable right and, therefore, there was no question of taking over
possession of the property from him by redemption of mortgage. Such contention has not been
accepted either by the court below or by the High Court.

2. Mr. K. Ram Kumar, learned counsel appearing for the appellant, has contended that simply on
execution of usufructuary mortgage, the right of the lessee does not come to an end unless and until
it can be established that such leasehold interest had been terminated or the leasehold interest had
been surrendered either by express conduct of the parties or by necessary implication flowing from
the deed of mortgage. Save as aforesaid, it must be held that the leasehold interest continues
notwithstanding creation of usufructuary mortgage. In support of such contention, reliance has been
made to the decision of this Court in Gopalan Krishnankutty v. Kunjamma Pillai Sarojini Amma
((1996) 3 SCC 424). After taking into consideration the decisions of this Court in Narayan Vishnu
Hendre v. Baburao Savalaram Kothawale ((1995) 6 SCC 608) and in Gambangi Applaswamy Naidu
v. Behara Venkataramanayya Patro ((1984) 4 SCC 382) and in Shah Mathuradas Maganlal & Co. v.
Nagappa Shankarappn Malage ((1976) 3 SCC 660) it has a been held in Gopalan Krishnankutty case
((1996) 3 SCC 424) that simply on the execution of the usufructuary mortgage deed, surrender of
tenancy right cannot be inferred but the question of continuance of leasehold interest upon execution
of usufructuary mortgage is required to be decided on the fact situation of the case.

3. Mr. Ram Kumar has submitted that there is no automatic merger of interest of the lessee with that
of the mortgagee and in the absence of proof of surrender by the defendant of his leasehold interest
and to hold only the right of mortgagee, the plaintiff is not entitled to automatically claim
possession of the leasehold premises by redeeming the mortgage.
4. We have taken into consideration the mortgage deed executed in 1946. In our view, a clear
intention of only retaining the mortgagee's interest is to be inferred in view of the specific statement
that on redemption, the mortgagee should deliver possession to the mortgagor. We may indicate that
the expression to that effect used in the mortgage deed has been noted by the courts below. We may
also indicate that there is no indication in the mortgage deed as to how the rent payable by the
mortgagee qua lessee was to be adjusted between the parties. The absence of any mode of
adjustment of leasehold rent implies that it was not intended that despite the said mortgage, parties
intended that the leasehold interest was to continue. It may also be indicated here that leasehold
interest was to expire in 1948. In the absence of any payment of rent for such leasehold interest and
acceptance of such payment after expiring of the period of lease it cannot also be contended that
there was a case of holding over by the lessee. In the aforesaid circumstances, the finding by the
courts below that the leasehold interest had come to an end and the plaintiff was entitled to the
redemption of the mortgage and to take delivery of the properties under this mortgage deed cannot
be held to be unjust or improper. We, therefore, do not find any reason to interfere with the
impugned judgment of the High Court. The appeal, therefore, fails and is dismissed. No costs.