Full Judgment Text
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PETITIONER:
CARONA SHOE CO. LTD. AND ANR.
Vs.
RESPONDENT:
K.C. BHASKARAN NAIR
DATE OF JUDGMENT09/03/1989
BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
RANGNATHAN, S.
CITATION:
1989 AIR 1110 1989 SCR (1) 974
1989 SCC (2) 395 JT 1989 (1) 525
1989 SCALE (1)588
ACT:
Kerala Buildings (Lease and Rent Control) Act 1961:
Sections 2(3), 2(6) and 11(a)--Tenants inducted into posses-
sion by mortgagee--Whether liable to eviction through a
decree of Court passed in a suit for redemption of mortgage.
Section 76(a) of the Transfer of Property Act 1882--Whether
attracted.
HEADNOTE:
The appellants are tenants. The premises in dispute is a
shop building bearing No. T.C. 887, M.G. Road, Pazhavangadi,
Trivandrum, part of a Pucca three storeyed building owned by
one M.P. Phillip. As per the settlement the shop in dispute
devolved on one of his sons, while the shop was in the
possession of the tenant. During the tenancy owner mortgaged
the premises in dispute and the remaining portions to the
first defendant with a direction to receive the rent from
the tenant. The tenant was asked to attorn to the mortgagee.
The first defendant in course of management of the property
gave the building on lease to the appellants for a higher
rent; the earlier tenant having vacated the same. The owner
thereafter executed the second mortgage with a direction to
redeem the mortgage in favour of the first defendant and
before the subsequent mortgagee took steps to redeem the
mortgage, the owner assigned his equity of redemption to the
respondent.
The Respondent and the subsequent mortgagee together as
plaintiffs 1 & 2 filed a suit to redeem the mortgage of the
first defendant impleading the appellants as parties and
claimed recovery of the Khas possession of the building. The
appellants contended (i) that they are tenants of the build-
ing inducted into possession by the mortgagee as a mode of
enjoyment; (ii) that the mortgage deed authorised the mort-
gagee to enjoy the building by letting it out and that they
were not liable to be evicted through a decree of Court in
redemption Suit without an order under the Kerala Building
(Lease and Rent Control) Act 1965.
The trial Court decreed the suit and directed recovery
of possession of the Shop building. It took the view that
the mortgagee could not induct a tenant and give him any
right to continue in possession even after the redemption of
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the mortgage.
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On appeal, the first appellate Court held that the
disputed building was a shop building which was never in the
enjoyment of the owner; mode of enjoyment of the owner being
by letting it out and when the mortgagee enjoyed the proper-
ty in that manner by letting it out, the person put in
possession as a tenant was entitled to continue in posses-
sion even after redemption, until evicted under the Rent
Control Act. It also found that the mortgage deed impliedly
authorised the mortgagee to let out the building. In that
view of the matter, the trial Court’s order was set aside.
The Respondent thereupon filed a second appeal before
the High Court- The High Court took the view that it was not
open to the mortgagee to induct a person into possession
which conferred any right on the tenant to continue in
possession even after redemption. Accordingly it allowed the
appeal and a decree for eviction was passed. Hence this
appeal by the appellants tenant.
Dismissing the appeal, but directing that the decree
for eviction should not be executed till the 31st October,
1989 if the appellants give usual undertaking to deliver
vacant possession on 31st October, 1989, this Court,
HELD: That the mortgagor on redemption of mortgage gets
back his own right; he is not the successor-in-interest of
the mortgagee. Interest, if any, created by the mortgagee on
the mortgagor’s right, must disappear on ceasing of the
interest of the mortgagee. [983C-D]
The limited estate created in favour of the mortgagee
having disappeared, all rights emanating from that limited
estate disappear and the superior right of the mortgagor
comes not in place of the mortgagee but as a result of an
independent title, and as such the mortgagor cannot be bound
by any act created or any relationship contracted between
the mortgagee and the tenant, unless it is permitted by the
mortgage-deed-[983G-H]
The mortgagor’s right of redemption and the mortga-
gee’s right of foreclosure or sale are co-extensive. [984D]
Jadavji purshottam v. Dhani Navnitbhai Amaratlal &
Ors., [1988] 4 SCC 223 and Pornal Kanji Govindji & Ors. v.
Vrajlal Karsandas Purohit & Ors., [1988] 4 Judgment Today SC
307, followed.
976
Raj Brij Raj Krishna & Anr. v.S.K. Shaw & Bros., [1951]
2 SCR 145; M/s. Raval & Co. v.K.G. Ram Chandran & Ors.,
[1974] 1 SCC 424; V. Dhanpal Chettiar v. Yesodai Ammal,
[1979] 4 SCC 214; Gian Devi Anand v. Jeevan Kumar & Ors.,
[1985] 2 SCC 683 and G. Ponnial Thevar v. Nalleyam Perumal
Pillai & Ors., [1977] 1 SCC 500 not applicable.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1065 of
1987.
From the Judgment and Order dated 21.10.1986 of the
Kerala High Court in S.A. No. 491 of 1980.
G. Vishwanatha Iyer, S. Balakrishnan and M.K.D. Namboo-
dri for the Appellants.
T.S. Krishnamoorthy Iyer, A.K. Srivastava and S.C. Birla
for the Respondent.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. This appeal by leave is from the
judgment and order of the High Court of Kerala, dated 21st
October, 1986. It arises in the following circumstances:
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The building in question which is a shop building No.
T.C. 887, M.G. Road, Pazhavangadi, Trivandrum, is part of a
pucca three storeyed building belonging to one M.P. Philip
and as per his settlement the disputed shop-building and two
other rooms devolved on one of his sons M.M. Philip. While
this disputed shop-building was in the possession of a
tenant under the owner, the owner mortgaged the disputed
building and the remaining portions to the first defendant
with a direction to receive the rent from the tenant. The
mortgagor directed the tenant also to attorn to this mortga-
gee. The first defendant subsequently in the course of his
management of the mortgaged property, gave the building on
lease to the appellants for a higher rent when the former
tenant vacated the same. Subsequently, the owner executed a
subsequent mortgage with a direction to redeem the mortgage
in favour of the first defendant and before the subsequent
mortgagee took steps to redeem the mortgage, the owner
assigned his equity of redemption to the respondent. The
respondent and the subsequent mortgagee together as plain-
tiffs 1 and 2 filed a suit to redeem the mortgage of the
first defendant impleading the appel-
977
lants as well as respondents and claimed recovery of the
khas possession of the building. The appellants contended
that they are tenants of the building inducted into posses-
sion by the mortgagee as a mode of enjoyment that the mort-
gage deed authorised the mortgagee to enjoy the building by
letting it out and they were not liable to be evicted
through a decree of court in a redemption suit without an
order under the Kerala Building (Lease & Rent Control) Act,
1965 (hereinafter referred to as ’the Act’). The trial court
decreed the suit and directed recovery of possession of the
shop-building on the ground that the mortgagee could not
induct a tenant and give him any right to continue in pos-
session even after the redemption of the mortgage. On appeal
by the appellants, the first appellate court held that the
disputed building was a shop-building which was never in the
enjoyment of the owner and the mode of enjoyment of the
owner of the property was by letting it out and when the
mortgagee enjoyed the property in that manner, by letting it
out, the person put in possession as a tenant was entitled
to continue in possession even after redemption, until
evicted under the Rent Control Act. The first appellate
court further found that the mortgage deed impliedly autho-
rised the mortgagee to let out the building. In that view
the decree for khas possession of the shop-building in
possession of the appellants was denied to the respondent.
The respondent filed a second appeal before the High
Court, raising the following three contentions:
(1) Whether under section 76(a) of the Trans-
fer of Property Act, 1882, a tenancy created
by the mortgagee in possession of an urban
immovable property would be binding on the
mortgagor after redemption of the mortgage,
assuming that the tenancy was such as a pru-
dent owner of property would have granted in
the usual course of management.
(2) Whether a tenancy created in
exercise of a general power to grant a lease
expressly or impliedly conferred on the mort-
gagee would survive the redemption of the
mortgage in view of Sec. 111(c) of the Trans-
fer of Property Act, 1882; and
(3) Whether a tenant inducted on the
property by a mortgagee with possession, would
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after redemption of the mortgage be protected
under the provisions of s. 11(1) of the Act.
The High Court was of the view that as the appellants
had not pleaded that they were inducted into possession by
the mortgagee as
978
prudent act of management, it was not open to the appellants
to contend that they could continue in possession even after
redemption. Further, the High Court was of the view that it
was not open to the mortgagee to induct a person into pos-
session which conferred any right on the tenant to continue
in possession even after redemption.
The High Court categorically came to the conclusion that
protection under s. 76(a) of the Transfer of Property Act,
1882 was never claimed in the written statement. On the
other hand, it was contended by the appellants that this was
a pure question of law unconnected with the question of fact
and, therefore, no pleadings were necessary and even without
pleading such contention could be raised and considered by
the Court at the time of argument. Whether a particular
lease is bona fide or prudent act of management, is primari-
ly a question of fact, though whether on account of the bona
fide or prudent act of the mortgagor his lessee was entitled
to continue even after the mortgage was determined, is a
question of law. The High Court was of the view that the
decision on the question of law is dependent on the question
of fact whether the lease was bona fide or a prudent act of
a person of ordinary prudence, who would manage it as if it
were his own. On that question of fact, there should be
definite pleading so that the plaintiff must have an oppor-
tunity of meeting the claim and adduce evidence in rebuttal.
The High Court therefore could not sustain the right of the
tenant under s. 76(a) of the Transfer of Property Act, as a
matter of prudent management. There was no issue in this
respect and the judgment of the trial court did not show,
according to the High Court, that such a contention was
raised. The only contention that was raised was that the
lease was with the knowledge or consent of the mortgagor.
The High Court further came to the conclusion that there was
no evidence in support of that contention. The finding of
the District Judge that the mortgagee had implied authority
of the mortgagor to let out, was not only lacking in plead-
ings or issue, but it was also not warranted by the provi-
sion of the mortgage deed or the evidence.
The High Court relied on several decisions and came to
the conclusion that the provision of Sec. 76(a) of the
Transfer of Property Act, 1882, which was an exception to
the general rule embodied in Sec. 111(c) applies in appro-
priate cases ordinarily only to the management of agricul-
tural lands and had seldom been extended to urban property
so as to tie up in the hands of lessee or to confer on him
rights under special statutes.
The High Court further came to the conclusion that the
general
979
proposition of law is that no man can convey a better fight
than he himself has. Therefore, a mortgagee in possession
cannot create tenancy with a right to continue in possession
beyond the period of redemption. Normally, lease by the
mortgagee is determined when the mortgage is redeemed since
there is no privity between the mortgagor and the lessee.
The question of prudent management under Sec. 76(a) of the
Transfer of Property Act, 1882 by granting of lease or
otherwise normally arises only in rural agricultural lands
and not in urban immovable property. The High Court further
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came to the conclusion that a mere authorisation to the
mortgagee to lease the property itself does not amount to
any intention to allow expressly the creation of a tenancy
beyond the term of the mortgage. Only where the words of the
mortgage deed clearly and expressly allowed creation of
tenancy beyond the term of the mortgage that the lease would
be binding on the mortgagor. In that view of the matter, the
High Court held that the learned District Judge was wrong in
holding that the defendants Nos. 2 & 3 were not liable to be
evicted in this suit and that they could be evicted only
through an order of a competent Rent Controller. In the
premises, the second appeal was allowed and a decree for
eviction was passed.
Aggrieved thereby, the appellants have come up before
this Court. The question is--was the High Court right.
The first contention of Sri Vishwanatha Iyer, learned
counsel for the appellants, was that in view of the terms of
the mortgage in the instant case, the appellants were enti-
tled to be in possession after redemption of mortgage as
against the mortgagor. He drew our attention to the mortgage
deed dated 4th July, 1960. The mortgagor in that mortgage
deed stated that he was the absolute owner of the property
and therefore he was mortgaging the property. Thereafter,
the deed proceeded to state as follows:
"This property is hereby secured to you on
otti for a term of 2 years for Rs.7,000 which
I have received as recited hereunder. There-
fore, you may possess and enjoy the property
by collecting the rent from the tenants and
after the expiry of two years I shall pay you
the sum of Rs.7,000 and get a release of the
otti ands the expenses for the release should
be shared by us."
The mortgagee was to enjoy the property by collecting
the rent from the tenants. This mortgage was renewed for the
second time on
980
17th August, 1977. The second mortgage deed recited that the
shop in Item I which was in possession of Carona Shoe Compa-
ny, was given for enjoyment. Therefore, the fact that the
tenant was there, is accepted.
It was contended that as no amount was being paid as
interest, the mortgagee was entitled to the benefit, that is
to say, the rent from the premises in question. It was
contended that the High Court was wrong in holding that it
was not an act of prudent management. Sri Iyer referred to
the document dated 3rd June, 1977 which recited as follows:
"But the portion where the Ringal shop was
situate alone was given possession to you and
the remaining portion forming upstairs to the
shop previously Ringal Shop, now Carona Shoe
Mart, and the shed portion behind it was let
out to Chellamma Pillai by the mortgagor and
she is occupying it while so the mortgagor has
executed a subsequent mortgage and an agree-
ment for sale to Chellamma Pillai and she
is entitled to redeem you and recover posses-
sion of the building."
These contentions, in our opinion, are concluded by the
decision of this Court in PomaI, Kanji Gvoindji & Ors. v.
Vrajlal Karsandas Purohit & Ors., [1988] 4 Jmt. Today SC
307, wherein it was held that except in cases where the
leases specifically and categorically make exceptions in
favour of the tenants that they would continue to be in
possession even after the expiry or termination of the
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mortgage, and those leases are acts of prudent management,
the tenants inducted by the mortgage would be entitled to
the protection under the Rent Act after the redemption of
mortgage .and in no other cases.
Sri Iyer, in our opinion, is wrong in contending that in
the instant case the mortgage deed specifically empowered
the mortgagor to induct tenant who would continue to be in
possession even after the redemption or end of the mortgage.
It is true that the mortgage deed recited that the tenants
were there. It is also true that the mortgage deed also
enjoined that the method of realisation of the rent as the
method of having the usufruct of the mortgage by the mortga-
gee. But it must be understood that so long as the mortgage
subsisted, there was relationship of tenant and landlord. It
could not be so after the mortgage was redeemed. There is
nothing in the mortgage-deed in the instant case which
warranted the conclusion that the mortgagee could
981
induct tenants who Would continue beyond the term of the
existence of the mortgage or who would be given rights even
after the expiry of the mortgage. Sri Iyer then submitted
that this Court in the aforesaid decision had referred to
another decision of this Court, namely, Jadavji Purshottam
v. Dhami Navnitbhai Amaratlal & Ors., [1988] 4 SCC 223 where
it was held that if the lease granted to the tenant by the
mortgagee had the approval or concurrence of the mortgagor,
the same would entitle the tenant to claim tenancy rights
even as against the mortgagor after he had redeemed the
mortgage, then in such a case, such tenants would continue
to be in possession. Sri Iyer drew our attention to the
observations of this Court in the aforesaid decision at para
13 of page 236 of the report. With reference to the term of
the mortgage in the instant case and the communications
between the parties, Sri Iyer tried to contend that the
lease granted in favour of the appellants by the mortgagee
had the approval or concurrence of the mortgagor. We are,
however, unable to accept or find in the correspondence any
such approval or concurrence. We have referred to the mort-
gage deed and the sale deed as mentioned hereinbefore. Sri
Iyer drew our attention to a letter dated 7th October, 1977
addressed to the Rent Controller with a copy to the General
Manager, Carona Shoe Co. Ltd. Therein, the respondent had
negotiated or made an offer and expressed preference for the
appellant-company. The letter contained the following state-
ments:
"Under the circumstances, I have now finally
decided to settle all the issues and start the
construction of the rear portion as early as
possible as I have two more offers (other than
yours) for renting out the entire ground floor
(about 1,500 sq. ft.) which includes the space
now occupied by you and a portion of the first
floor.
I am writing this letter to you because my
first preference is for your company. The main
reason is that you are conducting the business
in the same shop for some years. Second thing
is that I have already agreed to you at the
discussion even though there was no written
consent. In the light of the above, I give
below my terms and conditions for renting out
the shop with additional space annexed, if
you are interested to continue the business in
my building. Of course, the expenses (portion)
for the same will have to be borne by you. But
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I will provide you with a very good show room
considering your requirements. Necessary
bathroom, lavatory, office cabin etc. will
also be provided in consulta-
982
tion with your representative. I had a discus-
sion with Mr L.W. Baaker, A.R.I.B.A. (The
British Architect who is doing so many artis-
tic modern buildings and show room etc.
throughout India including the Chitralekha
Film Studio) and the Art. Director and Interi-
or Decorator of our Studio regarding the
subject."
Thereafter, certain terms and conditions of the proposed
lease were suggested. Ultimately, however, no such lease was
executed. This communication strictly, in our opinion,
negates the submission that there was any concurrence or
approval of the mortgagor of the continuance of the appel-
lant’s as tenants after the expiry or redemption of the
mortgage.
It was then submitted by Sri Iyer that in view of the
provisions of the Act, it was not possible for the respond-
ents to execute the decree. After an exhaustive discussion
of the relevant authorities, it has been held by this Court
in Pomal Kanji Govindji’s case (supra) that in respect of
the urban immovable properties, the tenants do not get any
protection after the redemption of mortgage. Sri Iyer,
however drew our attention to Sec. 11 of the Act, to contend
that notwithstanding anything contained in any other law or
contract, a tenant shall not be evicted, whether in execu-
tion of a decree or otherwise, except in accordance with the
provisions of the Act. He drew our attention to the defini-
tion of ’tenant’ under sec. 2(6) of the Act which defines a
tenant as a person by whom or on whose account rent is
payable for a building and includes the heir or heirs of a
deceased tenant and a person continuing in possession after
the termination of the tenancy m his favour. Similarly,
landlord is defined under S. 2(3) of the Act as follows:
"(3) "landlord" includes the person who is
receiving or is entitled to receive the rent
of a building, whether on his own account or
on behalf of another or on behalf of himself
and other or as an agent, trustee, executor,
administrator, receiver or guardian or who
would so receive the rent or be entitled to
receive the rent, if the building were let to
a tenant."
But in view of the said definitions, we are of the
opinion that between the appellants and the respondent,
there was never any landlord or tenant relationship. The
appellants were never the tenants of the respondent. Sri
Iyer drew our attention to the observations of this
983
Court in Raj Brij Krishna & Anr. v.S.K. Shaw & Bros., [1951]
2 SCR 145, where it was held that the non obstante clause
would be applicable. Our attention was drawn to the observa-
tions of Fazal Ali, J. at page 150 of the report. There, the
Court observed that Section 11 of the Bihar Buildings
(Lease, Rent & Eviction) Control Act, 1947 was a self-con-
tained section, and it was wholly unnecessary to go outside
the Act for determining whether a tenant was liable to be
evicted or not, and under what conditions he could be evict-
ed. But in the instant case, the appellants were not the
tenants. The respondent, the original mortgagor, would never
after the redemption of the mortgage have treated the appel-
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lants to be tenants. There was no relationship ever between
the appellants and the respondent. The mortgagor had a
separate and distinct interest which was wiped out on the
redemption of the mortgage or expiry of the period of mort-
gage. The mortgagor on redemption of mortgage gets back his
own right, he is not the successor-in-interest of the mort-
gagee. Interest, if any, created by the mortgagee on the
mortgagor’s right, must disappear on ceasing of interest of
the mortgagee. In that view of the matter, in our opinion,
thus the said observations would not be of any relevance to
the present case. Similarly, reliance was placed on the
observations of this Court by Sri Iyer in M/s Raval & Co.
v.K.G. Ramachandran & Ors., [1974] 1 SCC 424. The observa-
tions that the definitions of ’landlord’ and ’tenant’ might
apply even if the contractual tenancy has come to an end.
But that is not the situation here in the instant case. In
the said case, Bhagwati, J. as the Chief Justice then was,
in his judgment at page 439 of the report observed that
sub-section (1) of section 4 of the Act in question i.e.,
Tamil Nadu Buildings (Lease & Rent Control) Act, 1960 con-
templated that an application for fixation of fair rent of a
building might be made by the tenant or the landlord. The
definition of ’tenant’, it was observed, included contractu-
al tenant as well as tenant remaining in possession of the
building after determination of the contractual tenancy,
i.e. statutory tenant, and both contractual tenant and
statutory tenant could, therefore, apply. It was, therefore,
submitted in this case that on the analogy of the contractu-
al tenant, the appellants were entitled to the protection of
the Act. We are unable to agree. It is not a question of a
contractual tenancy coming to an end. The limited estate
created in favour of the mortgagee having disappeared, all
rights emanating from that limited estate disappear and the
superior fight of the mortgagor comes not in place of the
mortgagee but as a result of an independent title, and as
such the mortgagor cannot be bound by any act created or any
relationship contracted between the mortgagee and the ten-
ant, unless it is permitted by the mortgage-deed- Reliance
was also placed on certain observations of
984
this Court in V. Dhanpal Chettiar v. Yesodai Ammal, [1979] 4
SCC 2 14. Therein, it was held that under the State Rent
Acts, the concept of contractual tenancy has lost much of
its significance and force. Therefore, giving of the notice
was a mere surplusage and unlike the law under the Transfer
of Property Act, 1882, it does not entitle the landlord to
evict the tenant. In our opinion, the observations of the
said decision cannot have any assistance or significance for
the purpose of the issues involved in the present controver-
sy.
Our attention was also drawn to the observations of this
Court in Pomal Kanji Govindji’s case (supra) at para 42 of
page 326 and it was contended that in this case impliedly
the mortgage-deed specifically and categorically made an
exception in favour of the tenants that they would continue
in possession even after the termination or redemption of
the mortgage and that these leases were acts of prudent
management. In this connection, reference may be made to
Section 60 of the Transfer of Property Act. It is this which
gives the mortgagor right to redeem after the date fixed for
payment. The mortgagor’s right of redemption and the mortga-
gee’s right of foreclosure or sale are co-extensive. Simi-
larly, Section 76(a) of the Transfer of Property Act which
determines the liabilities of the mortgagee and imposes the
obligation to manage the property as a person of ordinary
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prudence. In the instant case, it has been held by the High
Court that the induction of the appellants as tenant was not
an act of prudent management.
Our attention was also drawn by Sri Iyer to the observa-
tion of this Court in Gian Devi Anand v. Jeevan Kumar &
Ors., [1985] 2 SCC 683 in support of his submission that in
the emerging jurisprudence of tenancy legislation the dis-
tinction between statutory tenant and contractual tenant has
disappeared. The said view, in our opinion, would be of no
avail as the respondent is not the successor-in-interest and
does not come in place of the mortgagee but by virtue of its
independent title.
Reliance was also placed on the observations of this
Court in G. Ponniah Thevar v. Nalleyam Perumal Pillai &
Ors., [1977] 1 SCC 500. That decision, in our opinion, has
no application. The person inducting the tenant-appellant
was a co-widow who had a life interest in the lands. It was
observed that the terms of the statutory protection applied
clearly to all tenancies governed by the Madras Cultivating
Tenants Protection Act irrespective of the nature of fights
of the person who leased the land so long as the lessor was
entitled to create a tenancy. In our opinion, the said
observations would not be applic-
985
able. The said decision deals with the right of the co-widow
in the land. Reference may be made to the facts of that case
at page 504, para 10. In our opinion, in view of the said
facts, the decision would not apply to the facts of the
instant case. On the other hand, in view of the facts and
ratio of the principle of the decisions in Jadavji Purshot-
tam, (supra) and PomaIii Govindji, (supra) we are of the
opinion that the contentions of Sri Iyer cannot be sus-
tained. The non obstante clause in Section 11(a) of the Act
is applicable only to a decree for eviction obtained by a
landlord against a tenant. The appellants were never the
tenants of the respondent.
In the aforesaid view of the matter, we are unable to
accept the submissions urged in this case and, therefore,
the appeal must fail. But in view of the fact that the
appellants have been carrying on the business for some time
in the premises in question in order to enable them to
adjust their business, we direct that the order for eviction
of the appellants should not be executed upon 31st October,
1989 if the appellants give an undertaking within a period
of four weeks from this date to give vacant possession in a
peaceful manner on 3 1st October, 1989; and also containing
the usual terms of undertaking. In default of such undertak-
ing being given within the time aforesaid, the decree will
be forthwith executed.
The appeal is accordingly dismissed with costs.
Y.L. Appeal dis-
missed.
986