Burn And Company Ltd vs Its Workmen

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal Nos. 97 to 99 of 1963

Decision Date: 06/12/1963

Coram: DAS GUPTA

In this matter, the Supreme Court of India examined an industrial dispute that had been brought before it on 6 December 1963 between Burn And Company Ltd. as the petitioner and its workmen as the respondent. The dispute concerned the computation of a profit‑bonus for the financial year 1960 and involved a number of subsidiary issues, including the proper treatment of rehabilitation charges, the admissibility of salaries, rates and taxes of previous years as expenses for the year in question, the relevance of the auditor’s findings, the status of money paid into a development rebate statutory reserve, the classification of certain expenditures as revenue or capital, the contribution to the provident‑fund trustees, and the calculation of gross profits for the purpose of determining both preference and ordinary dividend rates. The company had indicated its willingness to pay a bonus equivalent to three and a half months’ wages, whereas the workmen contended that a larger amount was due. Applying principles previously articulated by this Court, the Tribunal first determined the net surplus that was available after deducting both the income‑tax return on working capital and the rehabilitation charges from the gross profit. It then appears that the Tribunal derived the annual rehabilitation charge principally from the determination made in an earlier bonus dispute concerning the same issue. The evidence presented by the company in the present reference concerning the quantum of rehabilitation charge was rejected by the Tribunal. In arriving at the figure for gross profits, the Tribunal added back to the net profit not only the sum that the company itself had agreed should be added, but also the amounts that had been paid as salaries for earlier years, the rates and taxes applicable to those earlier years, the contribution made to the provident fund, the amount transferred to the development rebate statutory reserve, certain expenditures said to have been incurred on purchases and repairs, and other expenditures recorded under the heading “Miscellaneous expenses.” On the basis of these calculations, the Tribunal awarded the workmen a bonus equal to fifty‑one months’ wages. The Court held that once an industrial adjudicating authority has properly decided what is necessary for rehabilitation and over how many years such rehabilitation should be spread, that assessment should not be disturbed lightly in subsequent years. It emphasized that industrial adjudication must look forward and determine the total rehabilitation charge and the period over which it is to be spread, recognizing rehabilitation as a long‑term problem. However, the Court warned that if a decision in any year rests more on a lack of evidence than on a careful investigation of the evidence before it, it would be unreasonable to treat that decision as binding for all future years. In such circumstances, if reliable evidence is later produced by the company concerning rehabilitation, the Tribunal must give that evidence due weight and may not reject it merely because of earlier findings. The Court further held that the payment of salaries, as well as the rates and taxes of previous years, cannot be treated as proper expenses of the year that is being examined for the purpose of ascertaining the available surplus.

The Court observed that, for the purpose of determining the surplus that is available, it is not permissible to include the credits and debits that arise from the operations of preceding years. It reiterated its earlier decisions that such earlier-year entries cannot be taken into account because the individual workmen who earned those credits or incurred those debits are not the same persons in the current year. Consequently, each year must be treated as a distinct set of circumstances, and financial items relating to previous periods are irrelevant to the calculation of the surplus that can be distributed in the year under consideration.

The Court further stated that the Tribunal was not obligated to accept as correct any conclusions that had been reached by the Auditors of the company. In the absence of satisfactory evidence, the Tribunal was justified in rejecting the company's claim that all the expenditures recorded under various headings such as purchases and repairs in the profit and loss account were to be treated as revenue expenses. The Tribunal therefore exercised its independent judgment and refused to adopt the auditor‑derived categorisation where the supporting proof was inadequate.

The Court explained that amounts transferred to a development rebate statutory reserve could not be characterised as revenue expenditure. It reasoned that because the reserve remained available for use by the company throughout the financial year, it did not represent a consumption of profit that should be deducted from the revenue account. Accordingly, such transfers should be treated as retained capital rather than as an expense that reduces the net profit for the year.

Regarding the contributions made to the trustees of the Employees’ Provident Fund in accordance with statutory requirements, the Court held that these payments should not be viewed as provisions for a future liability. Instead, the Court described them as payments that satisfied a liability arising in the year in question. As a result, the contributions could not be added back to net profits when the gross profits were being calculated, because they were already a current‑year expense demanded by law.

The Court then turned to the issue of dividends on preference shares. It affirmed that the contractual rate of seven per cent on preference shares could not be reduced. The Court also noted that an increase of thirty per cent in the dividend was permissible under section three, subsection one, of the Preference Shares (Regulation of Dividends) Act. However, the Court clarified that such an increased rate could not be extended to ordinary shares, which are governed by a different set of rules. In making this observation, the Court referred to the earlier decision in 825 Indian Hume Pipe Co. Ltd. v. Their Workmen, reported in the 1959 Supplement to the Second Series of the Supreme Court Reports at page 948.

The matter was placed before the Civil Appellate Jurisdiction of this Court. The appeals were numbered 97 to 99 of 1963 and were filed by special leave from an award dated 11 October 1961 rendered by the Second Industrial Tribunal, West Bengal, in case number VIII‑534 of 1960. Counsel for the appellant and counsel for respondent No. 1 appeared in appeal number 97 of 1963; counsel for the appellant and counsel for respondent No. 3 appeared in appeal number 98 of 1963; and counsel for the appellant and counsel for respondent No. 4 appeared in appeal number 99 of 1963. Additional counsel represented the appellant in the third appeal. The judgment was delivered on 6 December 1963 by Justice Das Gupta.

The Court described the substance of the dispute as a disagreement between Burn & Company Limited, an iron works located in Howrah, and its workmen concerning the payment of a profit bonus for the financial year 1960. The Court noted that the same company had been involved in earlier bonus disputes for the years 1951‑52, 1953‑54 and 1955‑56, each of which had been resolved by awards of Industrial Tribunals in West Bengal. One of those earlier awards, concerning the bonus payable for the year 1955‑56, had subsequently been taken to this Court on appeal and had been disposed of by a judgment dated 8 March 1960. The Court further recorded that, for the company’s financial year running from 1 May 1958 to 30 April 1959, the computation of the bonus was the subject of the present proceedings, which had now been brought before this appellate forum.

In the fiscal year that ended on 30 April 1959, any bonus that might be payable was to be paid in the year 1960. The Company indicated that it was ready to pay a bonus equivalent to three and one‑half months’ wages, but the workmen insisted on a much larger amount. During settlement negotiations, the Deputy Labour Commissioner suggested that the Company advance three months’ wages as a bonus, and the Company complied with that suggestion. However, the settlement discussions later broke down and no agreement was reached. Applying the principles previously laid down by this Court, the Industrial Tribunal calculated the net surplus that was available for the purpose of paying a bonus and arrived at a figure of Rs 53.31 lacs. The Tribunal then considered that the Company had already contributed Rs 10.74 lacs to the Employees’ Provident Fund and that the Company would be entitled to an income‑tax rebate on the bonus payment. After taking these amounts into account, the Tribunal held that a sum of Rs 35.20 lacs could be fairly distributed to the workmen as bonus. Accordingly, the Tribunal awarded a bonus equivalent to five and one‑half months’ wages and directed that the three months’ wages already paid in advance be set off against the newly awarded bonus. Both the Company and the workmen filed appeals against this award by way of special leave. The principal dispute, as is usual in such cases, concerned the method of computing the surplus that was available for distribution. Various unions representing the workmen submitted statements that showed a gross profit of roughly seven crores and thirty‑five lacs, with the surplus available being only a few lacs less than that amount. By contrast, the Company’s statement placed gross profits at Rs 1,48,891.72. From this figure, the Company deducted several prior charges that must be subtracted to arrive at the surplus, namely: income tax of Rs 58,92,925; return on paid‑up capital of Rs 95,55,300; return on working capital of Rs 5,73,326; rehabilitation charges including a notional normal depreciation of Rs 20,37,103; and normal depreciation for the year amounting to Rs 72,64,579. After making these deductions, the Company’s computation yielded an available surplus of Rs 1,95,932, which would correspond to less than ten days’ wages for the workmen. The Tribunal, however, reached a different conclusion. It calculated gross profits at Rs 181,82,000 and, from that amount, deducted Rs 71.36 lacs for income tax, Rs 7,39 lacs as return on working capital, and additional sums for rehabilitation. Specifically, the Tribunal deducted Rs 23.66 lacs as rehabilitation charges, apart from the Rs 20.37 lacs already deducted under the head “Notional Normal Depreciation”. Mr Sen, appearing on behalf of the Company, pointed out that the Tribunal’s computation appeared to contain a clear error. He argued that if the Tribunal decided that Rs 23.66 lacs represented the annual rehabilitation charge, that full amount should not be deducted in addition to the Rs 20.73 lacs already deducted for Notional Normal Depreciation. Mr Sen further acknowledged that, should the Tribunal’s decision regarding the rehabilitation charge be upheld, the allowable rehabilitation charge for the year in question would be Rs 3.29 lacs, to be added to the Rs 20.37 lacs already deducted under Notional Normal Depreciation.

In this case, the Court observed that for the year 1958‑59 the Tribunal should have allowed only a prior rehabilitation charge of Rs 3.29 lacs in addition to the Rs 20.37 lacs already deducted under the heading Notional Normal Depreciation. Had the Tribunal applied this reduced prior charge while keeping all other amounts it had computed, the surplus available for distribution would have increased to Rs 73.68 lacs. Conversely, if the Tribunal’s original determination that Rs 23.66 lacs represented the proper annual rehabilitation charge for that year were left unchanged, the surplus would have remained around Rs 51 lacs even if the Company’s other calculations in its statement were accepted. The Court noted that the Company’s claim for rehabilitation charges, including Notional Normal Depreciation, totaled Rs 72.64 lacs, which exceeded the Tribunal’s allowable amount by roughly Rs 49 lacs. Mr Sen, appearing for the Company, sought to persuade the Court to overturn the Tribunal’s conclusion on the quantum of rehabilitation charge for 1958‑59. The Court explained that the Tribunal had arrived at the figure of Rs 23.66 lacs primarily by referring to a previous award in the bonus dispute for the year 1954‑55. In that award, the annual rehabilitation cost had been fixed at Rs 14.30 lacs for machinery and Rs 4.00 lacs for buildings, amounting to a total of Rs 18.30 lacs, to which an additional Rs 5.36 lacs had been added for the period elapsed since 1954‑55. The Court recorded that the Company had produced evidence in the present reference challenging the Tribunal’s reliance on the 1954‑55 award. Mr Sen argued that the Tribunal erred by binding itself to the assessment made in that earlier bonus dispute and that this error justified the Tribunal’s rejection of the Company’s evidence in the current proceedings. The Court held that once an industrial adjudicating authority, after a proper investigation and careful scrutiny of evidence, determines what is necessary for rehabilitation and over how many years the cost should be spread, that determination should not be lightly disturbed in later years. The Court emphasized that the nature of rehabilitation requires the adjudicating body to project future needs and decide the total charge and its allocation over the relevant years. Although some degree of uncertainty is inherent in such forward‑looking calculations, the Court affirmed that the resulting figures ordinarily provide a solid basis for the deductions required to compute the available surplus.

In this case, the Court explained that once a total rehabilitation charge for a period of years has been determined and an assessment for the specific year in dispute has been made, it would be unreasonable and in fact meaningless to reopen the investigation each year. Rehabilitation is correctly viewed as a long‑term problem; therefore, after a proper investigation and the ascertainment of the correct figure, that calculation should normally be applied to subsequent years. Mr. Sen did not dispute the basic principle, but he argued that a determination made in a particular year on the basis of insufficient evidence should not bind future years. He contended that, when the question of rehabilitation charges arose in the bonus dispute for the year 1954‑55, the employer was unable to produce complete evidence, which led the Tribunal to assess the necessary amount as eighteen to thirty lakh rupees for rehabilitation of machinery and building. Now that the employer can produce proper evidence, he should be allowed to convince the Tribunal of the actual requirements. The Court found considerable merit in that contention. After examining the award in the 1954‑55 bonus dispute, the Court was satisfied that the Tribunal had not received proper evidence in making the rehabilitation assessment. Accordingly, the Court agreed that it would not be reasonable to treat the assessment made in that year as binding on the employer in the present dispute. However, the Court could not accept Mr. Sen’s further claim that the Tribunal had rejected the employer’s evidence simply because it felt bound by the previous assessment. The Court observed that the Tribunal had examined the newly adduced evidence independently of the earlier assessment and, finding it unreliable, had nevertheless given the employer the benefit of the previous assessment. The Tribunal had provided clear and cogent reasons for rejecting the evidence, and the Court found no basis to reassess those reasons. One of the principal reasons noted by the Tribunal was that, although quotations had been obtained from Western European countries, no quotations had been secured from Eastern European nations such as East Germany, Poland, Czechoslovakia and the USSR. Mr. Sen correctly submitted that the Company should be free to decide from which country the new machinery should be sourced, and if it chose to obtain replacements from the same Western European sources as the original equipment, it would be unreasonable to disregard the quotations received from those countries.

The Tribunal observed that the Company had decided that rehabilitation could be properly effected by obtaining replacement machinery from the Western European countries from which the original equipment had been sourced, and therefore it would be unreasonable to disregard the quotations that had been received from those countries. However, the Tribunal also pointed out that Mr. Mukherjee, who acted as a witness for the Company, had himself admitted that rehabilitation could conveniently be carried out by importing machinery from Eastern European countries. The sole reason offered by that witness for not obtaining quotations from those Eastern European sources was the claim that all types of machines would not be available there at a given time. The Tribunal considered this explanation to be irrelevant, because it is not ordinarily necessary to replace all machines simultaneously. In this connection, the Tribunal noted that arranging payments for purchases from Eastern European countries is easier, since those countries would accept payments in rupees, whereas comparable purchases from Western European countries would require foreign exchange that might not be readily available. The Tribunal further observed that Mr. Mukherjee had produced no records showing any recent purchases of machinery that would demonstrate how replacements had actually been made. In addition, the Tribunal gave weight to the observation that Mr. Nadjarian, who testified about the price of buildings, claimed to have derived his figures from records that have not been produced, making his testimony difficult to accept. After considering the reasons set out by the Tribunal, the Court was convinced that the Tribunal had not acted arbitrarily in finding the Company’s evidence unreliable. Although the Tribunal could have refused to award any amount for the rehabilitation charge for the year 1958‑59 after rejecting the Company’s evidence, it correctly resisted that inclination and instead gave the Company the benefit of the assessment made for the year 1954‑55. Consequently, the Court saw no basis for disturbing the Tribunal’s findings on the rehabilitation charge. The Court added, however, that if in any future dispute the Company adduces reliable evidence on the rehabilitation question, such evidence should be given due weight and not be rejected merely because of findings in the earlier 1954‑55 dispute or in the present reference. As previously noted, leaving the Tribunal’s findings on rehabilitation unchanged results in an available surplus of approximately Rs 51 lacs, even if all other figures calculated by the Company are accepted. On that amount of surplus, it would not be reasonable to disturb the Tribunal’s award of five and a half months’ wages as bonus to the workmen. This suffices to dispose of the Company’s appeal. Nevertheless, to determine whether the workmen’s claim for a bonus exceeding the amount allowed by the Tribunal is justified, it is necessary to examine some of the other figures used in calculating the available surplus.

In order to decide whether the workmen could claim a bonus larger than that granted by the Tribunal, the Court found it necessary to examine several of the figures that had been employed in calculating the available surplus. The Tribunal had arrived at a gross profit of Rs 181.82 lacs by adding back to the net profit, in addition to the amount that the Company itself had agreed should be added, a series of sums that related to earlier years and to certain reserves. These added amounts comprised Rs 2,87,342 paid as salaries for previous years, Rs 10,74,523 contributed to the provident fund, Rs 2,07,322 placed into the development rebate statutory reserve, Rs 13,48,403 taken from expenditure described as being incurred on purchases of raw and other materials, stores and spare parts, repairs to buildings and repairs to machinery, Rs 3,27,856 drawn from the head labelled Miscellaneous Expenses, and Rs 50,871 paid as rates and taxes for previous years. The Court agreed with the Tribunal that salaries of earlier years and rates and taxes of earlier years could not be treated as proper expenses of the accounting year 1958‑59 for the purpose of ascertaining the surplus that was available for distribution, because earlier‑year credits and debits must be excluded since the workmen involved are not identical from one year to the next, as has been explained in previous decisions of this Court. It was also clear that the Tribunal was justified in refusing, in the absence of satisfactory evidence, to accept the Company’s contention that the expenditures shown under the profit‑and‑loss headings of purchases of raw and other materials, stores and spare parts, repairs to buildings and repairs to machinery were all revenue expenditure. Counsel for the Company pointed out that the annual accounts displayed the capital expenditure separately and argued that the entries in the profit‑and‑loss account for those items had been accepted by the Auditors as correctly shown as revenue expenditure, and therefore the Tribunal should not have doubted that view. The Court could not agree that the Tribunal was bound to accept the Auditors’ assessment as conclusive, because a genuine dispute had been raised as to whether those items had been wholly spent as revenue expenditure. The burden was on the Company to produce additional evidence supporting the auditor’s classification, and no such evidence was offered. Consequently, no fault could be attached to the Tribunal for proceeding to treat two and a half per cent of the total of those four items as representing capital expenses. The Tribunal was also correct in adding back the amount placed into the development rebate statutory reserve, since money paid into that reserve remained available for the Company’s use throughout the year and therefore could not be treated as a revenue expense. However, the Court thought that the Tribunal had erred in adding back Rs 10,74,523 that had been paid during the year by the Company to the trustees of the provident fund.

In considering the amount that had been added back for the contribution to the provident fund, the Tribunal appears to have relied on a passage of a previous judgment of this Court in Indian Hume Pipe Co., Ltd. v. Their Workmen (1). At page 954 of that report, Justice Bhagwati, speaking for the Court, observed that “It is well‑settled that the actual income‑tax payable by the Company on the basis of the full statutory depreciation allowed by the income‑tax authorities for the relevant accounting year should be taken into account as a prior charge irrespective of any set‑off allowed by the Income‑Tax authorities for prior charges or any other considerations such as building up of income‑tax reserves for payment of enhanced liabilities of income‑tax accruing in future. It is also well‑settled that the calculations of the surplus available for distribution should be made having regard to the working of the industrial concern in the relevant accounting year without taking into consideration the credits and debits which are referable to the working of the previous years, e.g., the refund of excess profits tax paid in the past or loss of previous years carried forward but written off in the accounting year as also future liabilities, e.g., redemption of debenture stock, or provision for Provident Fund and Gratuity and other benefits, etc., which, however necessary they may be, cannot be included in the category of prior charges.” The Court’s reference to a provision for the provident fund as an item meant to meet a future liability was made on the assumption that the employer retained the money separately so that it could be paid in a later year when the liability became due (1) [1959] Supp. 2 S.C.R. 948. This reasoning cannot be applied to the present situation, where the contribution to the provident fund must be paid to the trustees under the statutory scheme. The liability to make that payment arises directly from the Act, and the company does not keep the money aside for discretionary future use. Consequently, the contribution should not be treated as a provision for a future liability; rather, it is a payment responding to a demand that arose in the year concerned, namely 1958‑59, and therefore it must not be added back to net profit when gross profit is being calculated. Regarding the sum of Rs 3,27,856 that had been added back from the miscellaneous expenses, the Tribunal erred in respect of Rs 2,83,156 of that amount. The breakdown shown in Exhibit F for miscellaneous expenses listed, among other items, Rs 6,52,230 spent on freight, customs duty and similar charges. The Tribunal reasoned that because Rs 2,83,156 appeared separately in the profit and loss account as freight and shipping charges, it might have been doubly included in the Rs 6,52,230 shown under the head “freight, customs duty etc.”

It was observed that the amount shown separately in the profit and loss account as freight and shipping charges could plausibly have been included a second time in the sum of Rs 6,56,230 that appeared under the heading freight, customs duty etc. The counsel for the respondent argued that it would be unreasonable to suppose that the same vouchers had been accepted by the auditors to support expenditure entries under two distinct heads. Accordingly, it was submitted that the amount of Rs 2,83,156 recorded as freight and shipping charges should be regarded as independent and separate from the freight, customs duty etc. that were recorded under the miscellaneous expenses heading. The Court found substantial merit in this argument and concluded that it was reasonable to believe that the Rs 2,83,156 shown in the profit and loss account under freight and shipping charges had not been counted again under miscellaneous expenses. Consequently, the Tribunal’s decision to add back the sum of Rs 2,83,156 was held to be erroneous. Regarding the remaining items that, together with the Rs 2,83,156, constituted the total of Rs 3,27,856 which the Tribunal had added back, the Court saw no reason to overturn the Tribunal’s conclusion. Likewise, the Court saw no reason to disturb the Tribunal’s findings that the contractual rate of 7 percent on preference shares should not be reduced and that an increase of 30 percent was permissible under section 3(1) of the Preference Shares (Regulation of Dividends) Act, 1960. The Court also agreed that such an increase could not be permitted in respect of the ordinary shares. On behalf of the workmen, an objection was raised concerning the Tribunal’s findings on the amount of working capital that had been utilized, on the ground that the evidence did not clearly indicate the periods during which the amounts were employed. After examining the testimony of Mr Ghose and Mr Dutt, the Tribunal accepted their evidence and the Court held that the mention of minor weaknesses in some details did not undermine the finality of the Tribunal’s conclusion. As a result of not adding back the amounts of Rs 10,74,523 and Rs 2,83,156, the gross profits were determined to be Rs 168.25 lacs. After allowing for statutory depreciation and the development rebate totalling Rs 17,86,583, the income‑tax liability amounted to Rs 67.67 lacs. The calculations of the available surplus were therefore as follows: gross profits of Rs 168.25 lacs, less normal notional depreciation of Rs 20.37 lacs, less income‑tax of Rs 67.67 lacs, less return on paid‑up capital of Rs 7.39 lacs, less return on working capital of Rs 5.73 lacs, and less rehabilitation charges of Rs 3.29 lacs, resulting in an available surplus of Rs 63.80 lacs. The Court regarded the award of a bonus equivalent to five and a half months’ wages as reasonable and proper based on this available surplus. The employer’s request for a reduction in the bonus and the workmen’s claim for an increase were both found to be unjustified. Accordingly, all the appeals were dismissed and no order as to costs was made. The appeals were dismissed.

In the present matter, the Court considered the appeal of respondents V S Kadambolithaya and others against the judgment of the High Court. The case involved a mortgage suit for redemption, raising the question of whether a mortgagee who enjoys benefits under a deed must also accept the obligations imposed by that deed, and how the doctrine of election applied. The properties described in the plaint as belonging to Schedules A, B and C had originally been mortgaged to a person named Kunjamu and other mortgagees. By a partition among the mortgagees’ family, Kunjamu received one‑fourth shares in the interests over those properties. After Kunjamu’s death, the mortgagors and mortgagees executed an agreement recorded as exhibits P‑2 and P‑2(a). This agreement referred to the original mortgage deed exhibited as P‑1 but released the properties listed in Schedule C. The remaining properties shown in Schedules A and B were to be enjoyed by the mortgagees for a period of forty years, and it was further agreed that upon the expiry of that period the mortgagors would have an option to redeem the mortgaged land upon payment of the amount due.

At the time when exhibits P‑2 and P‑2(a) were executed, a man named Kunhi Pakki, who was the grandfather of the third respondent, was a minor because he was the son of Kunjamu. Kunhi Pakki’s mother signed the documents on her own behalf, but neither she nor any legally constituted guardian signed the exhibits on behalf of the minor. The first respondent subsequently purchased the properties covered by Schedules A and B and instituted a suit for redemption. The plaintiff argued that, under exhibit P‑2, the mortgagors were entitled to remain in possession of the mortgaged lands for forty years beginning in 1862; therefore, the right of redemption would have arisen in 1902, and the suit filed in 1944 was within the sixty‑year limitation period prescribed by Article 148 of the Limitation Act. The defence contended that, with respect to the share that had belonged to Kunjamu, the inheritor Kunhi Pakki could not be bound by exhibit P‑2(a) because he was a minor at the relevant time and neither he nor any legal guardian had signed the document. Consequently, the defence asserted that the share that passed to Kunhi Pakki and later to the third respondent was barred by limitation and therefore not liable to redemption.

The trial court examined the evidence and held that, although Kunhi Pakki was a minor, he had nonetheless taken the benefit of the agreement reflected in exhibits P‑2 and P‑2(a). Accordingly, his successors could not repudiate those benefits, and the suit was not barred by limitation; the properties were therefore liable to be redeemed. The High Court affirmed the trial court’s decision on the main issue. The present appeal was filed by way of a certificate granted by the High Court. In its judgment, the Court set out two principal holdings. First, it observed that Kunhi Pakki was not directly bound by exhibits P‑2 and P‑2(a) because, being a minor, no legal guardian had signed those documents on his behalf; consequently, exhibit P‑2(a) could not be used to demonstrate either an acknowledgment by him or an extension of the terms of the original usufructuary mortgage. Second, the Court noted that the evidence showed Kunhi Pakki had accepted the benefit under exhibit P‑2, and therefore neither he nor his successors could argue that the mortgage in exhibit P‑1 was independent of the rights and obligations created by exhibit P‑2.

The Court observed that the statutory limitation had expired after the lapse of sixty years from the year 1842. It applied the doctrine of election with respect to the one‑fourth share that was then in the possession of the present appellants. The doctrine, as explained by the Court, requires that a person who accepts a benefit under any deed, will or similar instrument must adopt the entire content of that instrument, must comply with all its provisions, and must renounce any rights that are inconsistent with those provisions; in other words, a person cannot both approve and disapprove of the same transaction. The civil appellate jurisdiction concerned Civil Appeal No. 446 of 1960, which was an appeal from the judgment and decree dated 3 November 1955 of the Madras High Court in A.S. No. 138 of 1957. Counsel for the appellants appeared, while counsel for the respondents also appeared. The judgment of the Court was delivered on 6 December 1963 by Justice Hidayatullah. This appeal was filed by way of a certificate granted by the Madras High Court against its common judgment and decree dated 3 November 1955 in A.S. Nos. 88 and 138 of 1947. The appellants comprised seven of the original one‑hundred‑and‑thirty‑nine defendants, and the respondents were the two plaintiffs together with the original defendant No. 1. The appeal arose out of a suit seeking redemption of a usufructuary mortgage dated 26 April 1862 and delivery of possession of the properties described in Schedules A and B of the plaint, together with mesne profits from the date of redemption until possession was delivered. The mortgaged property had passed into the hands of several persons, which explained the large number of defendants joined in the suit. The Court then set out the factual background, noting that the plaint incorporated three schedules, designated A, B and C, which described properties belonging to the Alyasantana family of the second respondent. On 14 April 1842, Madana, who was then the Ejaman of the family, usufructuarily mortgaged the properties covered by Schedules A, B and C in favour of Kunhammu Hajar for a sum of 1,250 varahas or pagodas (equivalent to Rs 5,000) as evidenced by Exhibit P‑1. The deed contained no provision for repayment of the principal or for the usufructuary mortgage to be set off. Instead, it included a clause stating that at the end of the cultivation season, whenever the mortgagor declared that the land was no longer required, the amount of one thousand two hundred and fifty varahas together with the value of any improvements would be paid in a lump sum, and the land, house, cattle‑shed, out‑house and other possessions would be returned to the mortgagor, with the deed and any prior documents being redeemed. Although the mortgage deed was ostensibly executed in the name of Kunhammu Hajar, he acted on behalf of his brothers, sisters, nephews, nieces and other relatives. The mortgaged property was described as land bearing a beriz of forty‑four and one‑half pagodas (equivalent to Rs 227‑10‑8) situated in Warg No. 34 of Kumbadaje.

In the village of Netanige Magne, located in Bekal taluk, the entire ward was assessed at a value of fifty‑six and a half pagodas and it comprised thirty‑seven fields that were identified only by name and not by any fixed boundaries. The mortgagees who were granted possession of these lands also received possession of several heads of cattle and other movable assets, and the deed contained a separate provision governing the redemption of those movables. In the year 1857 the family of the mortgagees carried out a partition through a series of registered documents collectively identified as the Ex. P‑6 series. That partition was not effected by metes and bounds or by allocating whole fields; instead it divided the land according to the fraction of the assessed value, or beriz, that each party was required to pay. The present appeal is concerned only with the one‑fourth share that was allotted to Kunhammu Hajar. In the partition deed labelled Ex. P‑6, his share is described as follows: it consists of a one‑fourth portion of the Belinjada land bearing a maindana named Kuntamma Varg in Kunvadaji village, Netanige Magne, with a beriz of Rs 56‑14‑8, and includes land, Bavaities, bordering trees, soil and the adjoining field. The other family members obtained shares according to their respective rights, as recorded in separate documents dated between April 3, 1857 and April 30, 1857. After this partition, Kunhammu Hajar passed away. Subsequently, on April 26, 1862, the mortgagors and mortgagees entered into an agreement documented by Exs. P‑2 and P‑2(a), wherein Ex. P‑1 was reaffirmed; however, under this agreement the mortgagees were relieved of certain properties that are now shown in Schedule C of the plaint. The mortgagors agreed that the remaining properties, now set out in Schedules A and B of the plaint, would be enjoyed by the mortgagees for a period of forty years from the date of that document, together with any improvements made thereon. The mortgagors further covenanted that if, after the expiry of the forty‑year term, they required the land and, at the appropriate cultivation season, the full mortgage amount under the usufructuary mortgage (Ex. P‑1) along with the sums arising from two other charge‑creating deeds and the Rs 100 taken at the execution of Ex. P‑2, plus the amounts related to improvements, were paid in a single lump sum, then the land and the bond would be deemed redeemed. Ex. P‑2 was signed by the mortgagors, and a counterpart, Ex. P‑2(a), was executed, among others, by Aliamma, the widow of Kunhammu Hajar, who signed in her own name but not on behalf of her minor son Kunhi Pakki. Consequently, Kunhi Pakki’s share in the mortgage was not represented in Exs. P‑2 and P‑2(a). Kunhi Pakki died in 1934, and the first defendant in this appeal, who is also the third respondent, is his grandson. It may be noted that the two deeds which created a charge and which were to be discharged together with Ex. P‑1 and Ex. P‑2 have been retained by the High Court.

The Court below had been asked to determine the principal sum of Rs 2,000. For the present discussion the Court set aside, for the time being, any reference to the later inheritance of the share belonging to Kunhi Pakki, the son of Kunhammu Hajar, whose interest in Exhibit P‑1 formed the core dispute of the case; those details would be addressed later. The suit presently before the Court had been instituted for the redemption of Exhibit P‑2 by the first and the second respondents. The first respondent had purchased the properties listed in Schedule A in July 1941 by executing Exhibit P‑83, and had undertaken to redeem the mortgaged properties described in Schedules A and B and to deliver possession of the Schedule B properties to the legal representative of the family of Madana. The second respondent, identified at the time as Elaiiianthi, was that legal representative. The suit was filed on 20 April 1944. The filing date would plainly be barred by Article 148 of the Indian Limitation Act unless the effect of Exhibits P‑2 and P‑2(a) and the stipulated period of forty years during which the mortgagees were entitled to remain in possession from 1862 were taken into account to save the limitation period.

The plaintiffs argued that their claim was timely because Exhibit P‑2 provided that the mortgagees could remain in possession for forty years starting on 26 April 1862, which meant that the right of redemption first arose on 27 April 1902. Accordingly, a claim made in 1944 fell within the sixty‑year period prescribed by Article 148. The defence contended that, with respect to the share of Kunhammu Hajar, Kunhi Pakki—who had inherited that share—was not bound by Exhibit P‑2(a). The defence stressed that Kunhi Pakki had been a minor at the time and neither he nor any legal guardian had executed Exhibit P‑2(a) on his behalf. It was further submitted that Mohammedan law did not recognise a doctrine of representation, and that even if the mother had signed Exhibit P‑2(a), she would have been a “fazuli”, i.e., an unauthorised person. Consequently, the defence maintained that for Kunhi Pakki’s share, Exhibits P‑2 and P‑2(a) could not save the limitation period and that the one‑quarter share of Kunhammu Hajar was not liable to be redeemed. The defence also claimed that the plaintiffs were required to pay for improvements made on the property.

The trial judge held that the suit was within the limitation period as it applied to the one‑quarter share of Kunhammu Hajar owned by C. Mahamood, identified as defendant 8. The judge applied the equitable doctrine of election, reasoning that Kunhi Pakki had accepted and benefited from Exhibits P‑2 and P‑2(a), and therefore his successors could not avoid their obligations. Regarding the improvements, the trial judge determined that an amount of Rs 4,089‑2‑0 was due. Accordingly, the trial judge passed a decree that, inter alia, ordered the redemption of C. Mahamood’s share on payment of the redemption price together with the amount due for improvements and the interest accruing thereon. Subsequent to this decree, application A.S. 138 of 1947 was filed by defendants numbered 3, 5, 8, 9, 49, 50, 525, 67, 68 and 121, and application A.S. 88 of 1947 was filed by defendant 58.

In the continuation of the litigation, the application identified as A. S. 138 of 1947 was lodged by defendant number 58. The plaintiffs responded by filing a cross‑objection to that application. The High Court, in its judgment, modified the decree only with respect to the amounts that were due for the improvements carried out on the property, while it left untouched the principal issue that had been raised before the trial judge. On that main question, the High Court endorsed the trial judge’s view that the suit was barred by the limitation period and that the equitable doctrine of election applied to the conduct of Kunhi Pakki in relation to the documents labelled Ex. P‑2 and Ex. P‑2(a). The appeal now before this Court asserts that the High Court’s conclusions on both the limitation bar and the doctrine of election were wrong. In addition, the appellant submits that the High Court made a further error by awarding mesne profits from the date fixed in the preliminary decree for redemption, because the High Court had also found that the amount payable for improvements had increased and, consequently, the improvement sum had to be discharged in full before any right to redemption could be claimed. Before the Court can examine these points of law and the alleged errors, it finds it necessary to recite the fuller factual background that underlies the present dispute.

The present appeal has been filed by the legal representative known as Beepathumma, who acts on behalf of defendant number 8, C. Mahamood, the son of Abdul Rahiman Haji; C. Mahamood died while the appeal was pending before the High Court. The appeal is also made by the daughter identified as defendant number 9 and by the sons identified as defendants numbers 52, 67 and 68, all of whom are children of C. Mahamood. The remaining appellants are Abdulla, who is defendant number 49 and the son of Mammachumma, and Bipathumma, who is defendant number 50 and the daughter of Mammachumma, identified as defendant number 48. Mammachumma was the sister of Kunhi Pakki, who was the son of Kunhama Hajar. These relationships are important because they connect the parties to the one‑quarter share that, on partition, passed to Kunhammu Hajar as shown in document Ex. P‑6, and that share will feature repeatedly in the narrative that follows. It is also necessary to recall that the land referred to as Warg No. 34 bore the alternative name “Belinja Mainda‑Kinhana”. After the partition, Kunhammu Hajar executed a usufructuary mortgage, recorded as Ex. P‑16, in favour of his elder sister Cheriamma concerning his one‑quarter share on 23 September 1857. At the partition, Cheriamma had received a one‑eighth share, measured as a beriz of Rs 28‑7‑4, as shown in Ex. P‑6(c). The mortgage deed Ex. P‑16 expressly stated that Kunhammu Hajar could redeem the property at any time he chose. Subsequent to that, the documents Ex. P‑2 and Ex. P‑2(a) were created; Cheriamma did not sign Ex. P‑2(a) because she had died before its execution. Following Cheriamma’s death, her one‑eighth share together with the mortgagee rights were divided between her sisters Mammachumma and Aisumma by documents Ex. P‑17 and Ex. P‑17(a) on 6 October 1861. Each sister was allotted a portion of the beriz of Rs 28‑7‑4 taken from the one‑quarter share mortgaged by Kunhammu Hajar and a portion of Rs 14‑3‑8 taken from Cheriamma’s own share. Consequently, Mammachumma and Aisumma each held property valued at a total beriz of Rs 42‑11‑0, representing three‑sixteenths of the entire mortgaged estate. After the death of Kunhammu Hajar, his son Kunhi Pakki disregarded the usufructuary mortgage that had been made in favour of Cheriamma (Ex. P‑16). On 10 July 1884, Kunhi Pakki obtained a sale deed, recorded as Ex. P‑59, from Hammadekunhi, who was the son of Mammachumma. The sale deed described the property as comprising a beriz of Rs 28‑7‑4 situated in Warg No. 34 and

In the sale deed dated 10 July 1884, Kunhi Pakki obtained the portion of the mortgaged property that corresponded to the three‑sixteenth share that had previously belonged to Cheriamma, even though the deed described the property in two separate lots. The first lot carried a beriz of Rs 28‑7‑4 and the second lot a beriz of Rs 14‑3‑8. No specific boundaries were set out in the deed because it stated that Kunhi Pakki was already in possession of a part of the properties situated in the same Warg. By acquiring both lots, Kunhi Pakki thereby held properties with a total beriz of Rs 42‑11‑0, which had earlier been the share of Mammachumma. Subsequently, on 18 January 1887, Kunhi Pakki executed a simple mortgage in favour of Laxmana Bhakta for the amount of Rs 5,500. In that mortgage the property was identified as Belinja Mainda Kinhana (Warg No. 34) and again described in two lots, one bearing a beriz of Rs 28‑7‑4 and the other Rs 14‑3‑8. This description indicated that the mortgage covered the three‑sixteenth share that Kunhi Pakki had acquired through the earlier sale deed. The correlation was further confirmed by the fact that the boundaries mentioned in the mortgage were quoted as being the same as those set out in the 1884 sale deed. The nature of Kunhi Pakki’s interest in the mortgaged land was described as “Avadhi‑Ilidarwar”, meaning a usufructuary mortgage for a fixed term in lieu of interest, as shown in Exhibit P‑1 read together with Exhibit P‑2. Later, on 11 February 1892, Kunhi Pakki executed another simple mortgage, this time in favour of Anantha Kini for Rs 2,000. The mortgage referred to property with a beriz of roughly Rs 56 and also mentioned the two lots of Rs 28‑7‑4 and Rs 14‑3‑8, indicating that the entire seven‑sixteenth share (the one‑fourth share together with the three‑sixteenth share) was being mortgaged. No new boundaries were provided, but the deed reiterated that the boundaries were the same as those described in the 1887 mortgage to Laxmana Bhakta. The document further stated that no additional documents were handed over at that time, but the mortgager undertook to supply them later. On 29 September 1902, Kunhi Pakki, his wife Beepathumma and his son Kunhammu executed a usufructuary mortgage, identified as Exhibit P‑62, for Rs 32,000 in favour of Vaikunta Bhakta. This mortgage encompassed several lots, and item 18 specifically referred to land with a beriz of Rs 98‑11‑0 located in Belinjada Maindana Kinyana (Warg No. 34), thereby showing that the mortgagor was mortgaging both his one‑fourth share and the three‑sixteenth share that had originated from Cheriamma. A recital in the deed affirmed that all “Vola‑documents” were delivered, and evidence established that Exhibit P‑2 was among those documents. Vaikunta Bhakta subsequently transferred the mortgagee rights under Exhibit P‑62 to Abdul Rahiman and Korgappa by way of Exhibit P‑64 dated 10 April 1913; item 18 of that transfer again identified land in Warg No. 34 with the same beriz of Rs 98‑11‑0 and referred to the boundaries as shown in the Ilidarwar documents Exhibit P‑1 and Exhibit P‑2. Moreover, on 26 August 1924, Kunhi Pakki executed another document, Exhibit P‑65, creating a charge on the same properties in favour of the assignees. That charge expressly related to the properties that had previously been subject to the usufructuary mortgage executed on 29 September 1902 in favour of Vaikunta Bhakta, as recorded in Exhibit P‑62.

In 1930 the heirs of Abdul Rahiman and the heirs of Koragappa executed a partition that was recorded as Exhibit D‑54. At that partition the Kumbadaje properties that had been the subject of earlier mortgages and a charge were allotted to the share of Abdul Rahiman’s heirs. Exhibit D‑54 expressly stated that all relevant documents were handed over to the heirs of Abdul Rahiman. C. Mahamood, who was the son of Abdul Rahiman, obtained on 23 September 1930 a release of the shares that had belonged to his mother, brother and sister, as evidenced by Exhibit P‑66. Exhibit P‑66 mentioned that the lands in Kumbadaje village had been acquired by an assignment from Vaikunta Bhakta and were being held under a usufructuary mortgage that specified a term. The same exhibit also recorded a charge of Rs 9,500 that had been created by Kunhi Pakki on 26 August 1924. It further confirmed that all documents relating to the Kumbadaje village properties had been handed over to C. Mahamood, the son of Abdul Rahiman. The total beriz of the Kumbadaje properties was shown as Rs 198‑8‑0 because it included certain sub‑divisions that were not part of Exhibits P‑64 and P‑65. In this manner the eighth defendant acquired a 7/16 share of the interest originally held by Kunhi Pakki.

The judgment then turned to three additional documents that had either been executed by Kunhi Pakki or were in his favour, the most important of which was Exhibit P‑3 dated 4 September 1871. Exhibit P‑3 recorded a mortgage granted by the original mortgagors in favour of Kunhi Pakki. It was recalled that the properties listed in Schedule C had been released when Exhibit P‑1, which originally had no time limit, was converted into a mortgage with a fixed term by Exhibit P‑2 in 1862. Kunhi Pakki subsequently obtained a mortgage over the released properties that provided a term of thirty‑two years of enjoyment, thereby placing the three properties described in Schedules A, B and C on the same footing as those mentioned in Exhibit P‑1. The significance of the thirty‑two‑year term was that the new mortgage was to run for the same period as the earlier mortgage deed. The document further stated that Kunhi Pakki was already enjoying another property bearing a beriz of Rs 227‑10‑10 in Waag No. 34, held under a usufructuary mortgage with a time limit, as authorized by a registered instrument of 1862 executed by his mother Aliamma. Certain recitals of that instrument were reproduced: “Out of the property enjoyed by you previously under usufructuary mortgage with time‑limit i.e., out of the property bearing a beriz of Rs 227‑10‑10 and entered in Muli No. 34 our ancestor, Maindana Kinhanna varg in Kumbadaje village, the said Nettanige magne attached to the sub‑district of Kasaragod, South Kanara district, in respect of which property the entire tirve is paid by yourself, the particulars of the property enjoyed by us without payment of tirve tinder the registered Karar (Agreement) deed executed on the 14th.”

In this case, the Court examined a mortgage executed on 27 April 1862 by the mother of the mortgagor, Alima Hajumma, and others, in favour of the parties to the suit. The document stated, “All this entire property is mortgaged to you with a time‑limit of thirty‑two years from this Prajothpathi year onwards; and the one said Karar document obtained by us and mentioned above is given to you;” and further provided that “If the principal amount and interest fall into arrears, that arrears of interest also shall be paid, after the due date, at that time only when the mortgage amount relating to your Avadh Ilida Arwar (usufructuary mortgage with time‑limit) is paid and when the property and the documents are redeemed; and, the property, this document, and the documents mentioned herein and also to be got redeemed by you from the said Hammada Kunhi Beaty shall be got redeemed by us.” The consideration for this mortgage was intended to discharge the liabilities of Hammada Kunhi and others, which in total amounted to Rs 565‑8‑0, and the mortgagors acknowledged receipt of Rs 234‑8‑0. By executing this instrument, Kunhi Pakki placed all the properties on an equal footing, thereby neutralising the effect of the earlier release of properties recorded in Exhibit P‑2(a). The records indicated that Kunhi Pakki himself did not make the payments, because on 21 September 1872 he executed a simple mortgage in favour of Hammada Kunhi for Rs 800, as shown in Exhibit P‑3(a). In that deed, he declared that the property was mortgaged without possession and remained in the enjoyment of the original owners. The final document relevant to the proceedings was Exhibit P‑4, a usufructuary mortgage executed by the original mortgagors in favour of Hammada Kunhi on 29 May 1877. This later mortgage expressly referred to the earlier deeds of Kunhi Pakki concerning the released properties, specifically citing Exhibit P‑2 and stating that the property was now held under a usufructuary mortgage with a time‑limit. The mortgagees contended that the one‑quarter share of Kunhi Pakki, which was not subject to any time‑limit because Kunhi Pakki was a minor when Exhibits P‑2 and P‑2(a) were executed, could not be redeemed by the plaintiff since the suit relating to that share was time‑barred. To appreciate this contention, the Court provided a brief history of the law of limitation from 1842 to 1902. When Exhibit P‑1 was executed in 1842, no statutory limitation period existed for the redemption of a usufructuary mortgage. A limitation period of sixty years was first introduced in 1859, prescribing redemption within sixty years from the date of the mortgage. This statutory development appeared to motivate the execution of Exhibits P‑2 and P‑2(a), as the mortgagees possibly feared that redemption could be claimed at any time within the sixty‑year window from the original mortgage date.

The Court explained that the mortgage created in 1842 carried a last possible date for redemption in 1902. By fixing a certain term of forty years, the parties shifted the redemption date to 1902, and consequently redemption could not occur before that year. The mortgagors also derived benefit from the arrangement because they obtained a release of certain properties and received a cash payment of one hundred rupees. The statutory period of sixty years was reaffirmed in the Act of 1871, but that enactment added a provision that if an acknowledgment occurred during the sixty‑year period, the limitation period would be measured from the date of such acknowledgment. Article 148 of the Limitation Act, as introduced by the Act of 1877, stipulates that the sixty‑year period is to be measured from the time when redemption becomes due. The mortgagors argued that they were entitled to rely on the present Act read together with Exhibits P‑2 and P‑2(a), and that the time for redemption would therefore expire sixty years after the date on which redemption became due under those exhibits, namely in 1902. The Court noted that the law of limitation is a matter of procedure and that the procedural provisions in force on the date the suit was filed are the ones that apply. Since the suit was instituted in 1944, the Act of 1877 governed the limitation issue. The sole question in dispute was the moment at which the mortgage became due for redemption. According to the mortgage documents, the limitation period began to run from the date of the mortgage under the Act of 1859 and did not cease with respect to the share of Kunhi Pakki, because he was not bound by Exhibits P‑2 and P‑2(a). The mortgagors, however, contended that Kunhi Pakki had accepted Exhibits P‑2 and P‑2(a) as his own documents, had obtained benefits from them in various ways, and that the appellants were either estopped from asserting the contrary or, having approved and adopted those documents and taken their advantage, could not now repudiate them. In other words, the mortgagors sought to invoke the equitable doctrine of election against Kunhi Pakki and consequently against the subsequent holder who derived title from Kunhi Pakki. This argument was accepted by the High Court and by the court below. It was urged that those courts had applied the doctrine erroneously in the present case. Counsel for the appellants, identified as Mr S.T. Desai, admitted that the mortgagors had not lost their right to the properties comprised in Exhibit P‑2 and that Exhibit P‑2 incorporated Exhibit P‑1. Exhibits P‑63 and P‑63(a) had been filed to establish the connection, but in view of the admission, further elaboration was deemed unnecessary. He also conceded that he could not establish a claim under Article 134 of the Indian Limitation Act. He argued that the doctrine of election is merely a form of estoppel and that estoppel cannot be raised against statutory law, particularly the Limitation Act, because of section 3 of that Act. He relied upon a decision of the Madras High Court reported in Sitarama Chetty and

In the case cited as Anr. v. Krishnaswami Chetty (1) the Court of Appeal, with White C. J. speaking, quoted a passage from Mr. Mitra’s book on the law of limitation and observed that an agreement made by a person against whom a cause of action has arisen, in which that person promises not to rely on the statute, cannot affect the operation of the statute on the original cause of action unless such agreement amounts to an acknowledgment of liability that the statute itself recognises as an exception to the general rule. The citation for this authority is [1915] I.L.R. Mad., 38 374. Counsel for the appellants, Mr. Desai, also relied upon the decision in Govardhan Das v. Dau Dayal (1), which holds that no individual can contract himself out of the operation of the limitation statute, nor can an estoppel be pleaded against a statutory bar of limitation. He pointed out that several other cases that had been cited by the opposing side were not applicable to the present facts and therefore need not be considered. On the basis of these authorities, Mr. Desai argued that unless the exhibits labelled P‑2 and P‑2(a) can be pleaded as an acknowledgment, the defence of limitation cannot be saved with respect to Kunhi Pakki’s share, and consequently the suit must be dismissed pursuant to section 3 of the Limitation Act. He further contended that the equitable doctrine of election does not apply in the present matter because the documents relied upon refer not to the one‑quarter share of Kunhi Pakki but rather to the three‑sixteenth share of Cheriamma, a share which Kunhi Pakki later acquired. In his view this conclusion is unavoidable if the exhibits P‑59, P‑60 and P‑61 are read together. He submitted that in those documents Kunhi Pakki certainly linked the three‑sixteenth share with the exhibits P‑2 and P‑2(a), yet he treated his own one‑quarter share as a distinct matter. There is no doubt, he asserted, that Kunhi Pakki was not directly bound by the deeds labelled P‑2 and P‑2(a). Mr. Desai correctly noted that because Kunhi Pakki was a minor at the relevant time and no guardian signed on his behalf, exhibit P‑2(a) cannot be used to demonstrate either an acknowledgment by him or an extension of the term of the original usufructuary mortgage. The sole question that remains, according to him, is whether, by virtue of the later documents and Kunhi Pakki’s subsequent conduct, it can be said that he obtained the benefit of exhibit P‑2(a) which would bind him to accept the entirety of exhibits P‑2 and P‑2(a). If Kunhi Pakki were bound in this manner, no issue of extending the limitation period or of acknowledgment would arise, and section 3 of the Limitation Act would not impede the claim because the limitation would run only from the year 1902. This outcome follows from the fact that the mortgagors were unable to redeem the property, including Kunhi Pakki’s share, for a period of forty years beginning in 1862. The doctrine of election applied in this case is well settled and may be expressed in the classic words of Maitland: “That he who accepts a benefit under a deed or will or other instrument must adopt the whole contents of that instrument, must conform to all its provisions and renounce all rights that are inconsistent with it” (see Maitland’s Lectures on Equity, Lecture 18). (1) [1932] I.L.R. 54 All. 573.

In this case, the Court noted that the principle of election, as explained in the eighteenth edition of White and Tudor’s Leading Cases in Equity, required a party to choose between two inconsistent or alternative rights when the instrument clearly intended that the person from whom the benefit was derived should not enjoy both. The Court quoted the passage that declares, “Election is the obligation imposed upon a party by courts of equity to choose between two inconsistent or alternative rights or claims in cases where there is clear intention of the person from whom he derives one that he should not enjoy both… That he who accepts a benefit under a deed or will must adopt the whole contents of the instrument.” The Court observed that Indian courts have applied this doctrine repeatedly, and although citing each case was unnecessary, it referred to the Madras High Court decision in Ramakottayya v. Viraraghavayya (1) where, after citing the White and Tudor passage, Chief Justice Coutts Trotter observed that the principle is often expressed as the inability of a person to both approbate and reprobate the same transaction, referring also to the Judicial Committee decision in Rangaswami Gounden v. Nachiappa Gounden (2). The Court further mentioned its recent consideration of the doctrine in Bhau Ram v. Baij Nath Singh and others (3). The central question, the Court explained, was whether, in the words of the Scottish lawyers, Kunhi Pakki could be said to have approbated Exhibit P‑2 and Exhibit P‑2(a), thereby preventing his successors from later repudiating them. The Court pointed to Exhibits P‑3 and P‑4, which plainly indicated that Kunhi Pakki regarded himself as bound by Exhibit P‑2(a) and that the mortgagors were bound by Exhibit P‑2. His acceptance of the mortgage of the released properties showed that he recognized the mortgagors’ release from the obligations of Exhibit P‑1. In Exhibit P‑3, he secured a mortgage on the released properties for a term of thirty‑two years, aligning the two mortgages to run for the same period, and the document described the earlier transaction as an “Avadhi Illida Arwar” (a usufructuary mortgage with a time limit), demonstrating that the time limit set by Exhibits P‑2 and P‑2(a) was within his contemplation. All subsequent documents referred to the Illida Arwar, not only concerning the three‑sixteenth share of Cheriamma but also to the entire seven‑sixteenth share of Kunhi Pakki—his original one‑quarter share obtained through his father by Exhibit P‑6 and the later three‑sixteenth share. By enjoying the mortgage on his one‑quarter share for a definite period of forty years, Kunhi Pakki was deemed to have elected to apply the terms of Exhibit P‑2 to his own share. Having accepted the benefit and thereby approbated the document, neither he nor his successors could claim that the mortgage in Exhibit P‑1 was independent of Exhibit P‑2 or that any limitation had expired on the lapse of sixty years from 1842.

In this case, the Court observed that the limitation period could not be treated as independent of Exhibit P‑2 and it therefore did not expire after sixty years from 1842. The Court further held that the doctrine of election had been correctly applied to the one‑quarter share of Kunhi Pakki, which was then in the possession of the present appellants through defendant 8. The next issue raised by the appellants was that neither the High Court nor the trial Court should have awarded mesne profits against them until they had paid the full redemption price, including compensation for improvements. The trial Court had determined that an amount of Rs 4,089‑2‑0 was due to defendant No. 8; the High Court later increased this amount to Rs 6,625‑7‑0. The Court noted that this represented a substantial increase and, even though the plaintiffs had earlier deposited the entire amount required for redemption, which included the sum of Rs 4,089‑2‑0, they could not be said to have satisfied the condition that entitled them to redemption. Under Exhibit P‑1, which the Court had cited earlier, it was agreed that the sum of 1,250 varahas together with the value of the improvements would be paid in a single lump‑sum payment, and the same term was reiterated in subsequent documents. The respondents argued that the High Court had awarded interest on the additional compensation for improvements, and that, on the basis of equity, the appellants should therefore be required to pay mesne profits for the period of their possession after the trial Judge’s amount had been deposited in court. The Court rejected this contention, stating that no question of equity arose because the mortgage was required to be redeemed according to its own terms. The mortgagors had undertaken to redeem the properties by paying the principal mortgage amount and the compensation for improvements in one lump sum, and they could not complain that the mortgagees were not compelled to surrender possession or to pay mesne profits until the mortgagors had made full payment. Both parties had referred to certain cases, but the Court found those cases to be irrelevant because their facts differed entirely, and consequently no legal principle could be extracted from them. In the present matter, the redemption date had been fixed as 15 April 1946, and the mortgagors had deposited approximately Rs 17,000 in court. The appellate decree was issued on 3 November 1955, and possession was finally delivered in 1957. It was reported that a sum of Rs 11,800 per year had been deposited in court as mesne profits. The Court held that the mortgagees could not claim to retain the lands and to treat the amount deposited as the price of redemption. Even if the mortgagees were not required to hand over possession until the full amount, including compensation for improvements, had been paid, they could not appropriate the money for their own use. Accordingly, the Court concluded that the mortgagees were required to pay interest on the amount paid by the mortgagors from the date of withdrawal of that amount until possession was delivered, at a rate of six per cent per annum.

In the matter before the Court, the judges decided that any interest which might be payable on the amount withdrawn by the mortgagees should be computed at a simple rate for each year that the sum remained outstanding. The Court also held that the extra sum that the mortgagees were entitled to receive as compensation would be deducted from the amount already paid, and that the accounts of the parties would be adjusted to reflect that deduction and to bring the balances to an accurate final figure. Having made those financial determinations, the Court concluded that the appeal could be allowed in part, as was explained in the earlier portions of the judgment. Because the principal point raised by the appellants had not been successful, the Court ordered that the appellants must bear the costs of the appeal and that those costs be payable to the respondents. As a result, the final order recorded that the appeal was partly allowed, with the costs of the proceedings imposed on the appellants.