Mortgagee In Possession Can Be Recognized As Statutory Tenant By Religious Institution: Madras High Court Dismisses Appeal Following Settlement

"The relationship between the parties has been modified from that of mortgagee under possession to that of a statutory tenant, the said fact may be recorded and the appeal itself be dismissed." Madras High Court has dismissed a Second Appeal after recording a significant modification in the legal relationship between a religious institution and the party in possession of its property.

A bench of Justice V. Lakshminarayanan, in its order, noted that the respondent-temple had formally recognized the appellant as a statutory tenant, effectively settling a long-standing dispute over the redemption of a century-old usufructuary mortgage.

The court observed that since the Executive Officer of the temple had passed an order recognizing the appellant's status as a tenant and fixed a monthly rent, the previous decrees for delivery of possession required modification in light of this new arrangement.

The dispute originated from a suit filed by Arulmigu Veerabadrasami Koil (the plaintiff temple) seeking the redemption of a usufructuary mortgage and delivery of possession of its property. The property had been mortgaged to a choultry in September 1909 for a period of 99 years for a sum of Rs. 1,700. The temple filed the suit in 1999, claiming the benefit of Section 5A of the Tamil Nadu Debt Relief Act, 1978, arguing the mortgage stood discharged as the mortgagee had been in possession for over 30 years.

While the trial court and the first appellate court had granted a decree for redemption and recovery of possession in favor of the temple, the third defendant challenged these findings in a Second Appeal. The appellant contended that a 'Saswatha Kowl' deed executed in November 1909 allowed the mortgagee to continue as a tenant on an annual rent after the mortgage period expired.

The primary issue before the court was whether the appellant, who came into possession through a mortgagee, could be recognized as a statutory tenant by the religious institution. The court also considered the impact of the temple Executive Officer's subsequent administrative order recognizing the tenancy on the pending litigation for recovery of possession.

Recognition of Status as Statutory Tenant

During the pendency of the Second Appeal, a crucial administrative development occurred. The appellant approached the Executive Officer of the temple seeking to recognize the relationship as that of a landlord and tenant rather than a mortgagee in possession. The court noted that on May 30, 2024, the Executive Officer passed an order officially recognizing the third defendant as a tenant.

The court emphasized that this shift in legal status fundamentally altered the nature of the dispute. By recognizing the appellant as a statutory tenant, the religious institution effectively waived its immediate right to recovery of possession under the redemption decree, provided the terms of the tenancy were met.

"Relationship modified from mortgagee under possession to statutory tenant."

Settlement of Arrears and Monthly Rent

The court meticulously recorded the financial terms of the new arrangement. The Executive Officer had fixed the monthly rent at Rs. 31,920 and initially called for the payment of arrears amounting to over Rs. 54 lakhs. It was noted that the appellant had been remitting the rent regularly during the pendency of the appeal and had cleared a significant portion of the dues.

Counsel for the religious institution informed the court that as of the date of the hearing, the outstanding arrears stood at Rs. 22,28,157. The appellant's counsel sought time to clear this balance in installments, a proposal to which the temple’s counsel agreed on instructions.

"Appellant granted 8 weeks to clear arrears of Rs. 22.28 Lakhs."

Final Directions and Dismissal of Appeal

In view of the consensus reached between the parties and the formal recognition of the tenancy, the court found it appropriate to dismiss the Second Appeal while recording the terms of the settlement. The bench granted the appellant eight weeks to clear the remaining arrears of Rs. 22,28,157, either in a single payment or in four installments.

The court clarified that the grant of time to pay arrears does not exempt the tenant from his ongoing obligation to pay the monthly liability of Rs. 31,920. The bench also directed the matter to be called on September 1, 2026, specifically for reporting compliance with the payment schedule.

The ruling underscores the power of religious institutions to regularize the occupation of their properties by converting long-term possessory interests into statutory tenancies. By recording this settlement, the High Court ensured the temple receives a fair market rent and recovers substantial arrears while providing the occupant with legal status as a tenant.

Date of Decision: 06 July 2026