Full Judgment Text
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PETITIONER:
JADAVJI PURSHOTTAM
Vs.
RESPONDENT:
DHAMI NAVNITBHAI AMARATLAL & ORS.
DATE OF JUDGMENT09/09/1987
BENCH:
NATRAJAN, S. (J)
BENCH:
NATRAJAN, S. (J)
MUKHARJI, SABYASACHI (J)
CITATION:
1987 AIR 2146 1988 SCR (1) 76
1987 SCC (4) 223 JT 1987 (3) 523
1987 SCALE (2)535
CITATOR INFO :
F 1989 SC 436 (42,45,51)
R 1989 SC1110 (12,18)
ACT:
Saurashtra Rent Control Act, 1951: Lease of mortgaged
premises by mortgagee beyond the term of the mortgage-
Mortgagee not authorised to create such tenancy-Whether
mortgagors entitled to possession on redemption-Tenant
whether necessary party to execution application-Whether
tenancy rights protected under the Rent Act.
Transfer of Property Act, 1882: s. 98-Anomalous
mortgage-Rights of parties.
HEADNOTE:
The respondents mortgaged a house property in Bhavnagar
with ID possession to a business firm in July, 1947. The
ground floor of the house was already in the occupation of a
tenant and hence the mortgagors endorsed the rent deed to
the mortgagee for the remaining period of the lease. Clause
5 of the mortgage deed gave option to the mortgagee to give
the house property on rent to anyone and made the mortgagors
accountable for loss of rental income. Clause 7 empowered
the mortgagee to keep the property in his possession till
the mortgage debt was repaid. Clause 10 entitled the
mortgagors to redeem the mortgage at any time and stated
that as soon as redemption took place, the mortgagee should
return the documents of title and re-deliver possession of
the house to the mortgagors. Notwithstanding the mortgage
purporting to be possessory the deed provided for payment of
interest, and for the mortgagee to demand repayment of the
mortgage amount at any time it deemed fit.
When the existing tenant vacated the portion occupied
by him, in November, 191;6, the mortgagee inducted the
appellant as a tenant. The Saurashtra Rent Control Act, 1951
had in the meantime come into force. This was replaced by
the Bombay Rents, Hotel and Lodging House Rates Control Act,
1947 with effect from 1.1.1964. The ejectment proceedings
initiated by the mortgagee against the tenant-appellant were
pending when the mortgage was discharged in October, 1972 in
terms of the memo of compromise, which stated that the
ground floor of the house had been given on rent to the
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appellant, that the mortgagee had filed a case against him,
that in such circumstances the
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vacant possession of the ground floor could not be
delivered, and that the mortgagors were entitled to obtain
vacant possession of the said portion from the appellant. In
the execution proceedings taken out by the mortgagors
thereafter the executing court held that they were entitled
to get only symbolic delivery and not physical possession of
the leased property.
The High Court held that as the mortgage was an
anomalous mortgage, the rights of the mortgagee have to be
determined with reference to the terms of the mortgage deed,
that though the mortgage deed permitted the mortgagee to
create tenancies, the said permission did not extend to
granting lease beyond the term of the mortgage and it was
subject to the stipulation in the mortgage deed that the
mortgagee should deliver possession whenever the mortgage
was redeemed, and hence when the mortgagee’s right to
possession came to an end, he ceased to be a lessor and the
appellant was bound to surrender possession and he had no
right to invoke the provisions of the Rent Acts to continue
his tenancy, and that the appellant was not a necessary
party to the suit or the execution application, as his
possession was akin to that of a sub-lessee and the
execution application was therefore legally maintainable
against him.
In this appeal by certificate it was contended for the
appellant-tenant that his tenancy rights were protected
under the Saurashtra Rent Act and the Bombay Rent Act, that
the mortgagors had given an unrestricted power to the
mortgagee to create a tenancy for any length of time, and
were therefore, bound to accept the lease transaction even
after the redemption of the mortgage deed, that his tenancy
rights became enlarged by the subsequent legislation enacted
for affording protection to tenants, and that by reason of
the authority given to the mortgagee to create tenancy the
mortgagors had constituted the mortgagee as their agent and
hence they as principals were bound by the acts of their
agent.
Dismissing the appeal,
^
HELD: 1.1 A tenancy created by a mortgagee in
possession may be binding even after the termination of the
title of the mortgagee in possession if the mortgagors had
concurred to the grant of the lease. [88B]
1.2 In the instant case, the mortgagors had not
empowered the mortgagee to create a tenancy which would be
binding on them after the
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redemption of the mortgage. The authorisation given to the
mortgagee was not an unconditional and absolute one. It was
circumscribed by the stipulation that the mortgagee should
re-deliver the possession of the property whenever the
mortgage was redeemed. The lease granted by the mortgagee
could not thus enure beyond the term of the mortgage. [9lE,
90A, 91BC]
1.3 This was not a case where the mortgagee was put in
possession of the mortgaged property in older to appropriate
the usufructs in lieu of interest. The mortgagors had agreed
to pay interest to the mortgagee at mercantile rate and also
as per contractual rate. Furthermore, the mortgage deed
absolved the mortgagee of any liability for loss of income
from the mortgaged property due to fall in rent or non-
payment of rent or due to non-leasing of the property and
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keeping the house vacant. On account of these guarantees the
mortgagee was under no compulsion to lease out the property
just because of the permission given to him to grant lease,
either to secure rental income in lieu of interest or on
grounds of prudent management. The mortgagee should have
realised that by inducting the appellant, he was running the
risk of being unable to deliver possession of the house to
the mortgagors when the mortgage was redeemed and thereby he
would be contravening clauses 7 and 10 of the mortgage deed.
[90D-E]
1.4 The mortgage in the instant case was an anomalous
mortgage and not an usufructuary one. The rights of the
parties to the mortgage therefore would be governed by s. 98
of the Transfer of Property Act, which provides for
determination of the rights of the parties in accordance
with the terms of the mortgage deed. Consequently, the
appellant could claim tenancy rights only as against his
landlord viz. the mortgagee and not against the mortgagors.
As soon as the mortgagee’s rights became extinguished by
redemption of the mortgage, neither he nor anyone inducted
by him had a right to be in possession of the mortgaged
property. [85CE, 91F]
Film Corporation Ltd. v. Gyan Nath, [1970] 2 SCR 581;
Purshottam v. Madhavaji Meghaji, AIR 1976 Gujarat 161; 17
G.L.R. 497; SV Venkatarama Reddiar v. Abdul Gani Rowther &
Ors. AIR 1980 Madras 276; and Devkinandan v. Roshan Lal, AIR
1985 Rajasthan 11, referred to.
2. No question of imprudence can arise where the rights
of the tenant were enlarged by tenancy legislation enacted
after the tenant was put in possession by the mortgagee. In
the instant case, the appellant’s rights, as a tenant, did
not become enlarged by means of any tenancy
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legislation which came to be enacted after the lease was
granted. The Saurashtra Rent Control Act, 1951 was already
in force when the appellant was inducted into possession
from December 4, 1956. It cannot be claimed that the Bombay
Rents, Hotel and Lodging House Rates Control Act, 1947 which
had replaced the Saurashtra Act from January 1, 1964, was a
subsequent tenancy legislation that had enlarged the tenancy
rights of the appellant, since the second appeal pertaining
to the standard rent application and the suit for ejectment
filed by the mortgagee were instituted in 1963 before the
repeal of the Saurashtra Act. [88A, 91E, 88F,H, 89AB,DE]
Mahabir Gope v. Harbans Narain, [1952] SCR 775; Asa Ram
v. Ram Kali, [1958] SCR 986; Dahya Lal v. Rasul Mohammed
Abdul Rahim, [1963] 3 SCR l; Prabhu v. Ram Dev, [1966] 3 SCR
676 and Mula’s Transfer of Property Act, 7th Edn. p. 514,
referred to.
3. The relationship between the parties to the mortgage
was always one of debtor and creditor. There was, thus, no
question of the mortgagors constituting the mortgagee as
their agent. [9lD] D
4. The appellant had no independent rights and hence it
was not necessary that he should have been made a party to
the suit filed by the mortgagors after the redemption of the
mortgage. His position was akin to that of a sub-tenant
whose rights were co-terminus with those of the tenant
himself. The mortgagors were, therefore, entitled to seek
ejectment of the mortgagee and the tenant inducted by him.
The execution application taken against the mortgagee would
be binding on the appellant. [9lG-H]
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JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 47(N) of
1978.
From the Judgment and Decree dated 4.7.1977 of the
Gujarat High Court in F.A. No. 152 of 1974.
K.N. Bhatt, P.H. Parekh and P.K. Manohar for the
Appellant.
T.U. Mehta, and S.C. Patel for the Respondents.
The Judgment of the Court was delivered by
NATARAJAN, J. This appeal by certificate under Article
133 of the Constitution is directed against a judgment of
the High Court of
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Gujarat in an appeal arising from the execution proceedings.
The appellant is a tenant inducted to the ground floor of a
building in Bhavnagar by a mortgagee in possession and the
question for consideration is whether the mortgagors are
entitled to dispossess him by reason of the redemption of
the mortgage debt.
For a full and effective understanding of the issues
involved in the case a maze of details have to be gone
through and we will, there fore, advert ourselves to that
task. In July 1947 Dhami Navnitbhai Amaratlal, the first
respondent, acting for himself and his minor son mortgaged a
house property with possession to a business firm known as
Bhagwan Das Chagan Lal to secure repayment of a loan of
Rs.21,000. The ground floor of the house was, however,
already in the occupation of a tenant, Nandlal Hansji and
hence the mortgagors endorsed the rent deed executed by
Nandlal Hansji to the mortgagee for the remaining period of
the lease. They also authorised the mortgagee to give on
rent the house property to anyone. Under clause lO of the
mortgage deed it was provided that the mortgage could be
redeemed whenever the mortgagors paid the mortgage amount
and on redemption the mortgagee should return the title
deeds and deliver possession of the mortgage property to the
mortgagors. Notwithstanding the mortgage purporting to be a
possessory mortgage, the mortgage deed provided for payment
of interest and for the mortgagee to demand repayment of the
mortgage amount at any time it deemed fit and if the demand
was not met, to file a suit and bring the mortgage property
for sale and also to proceed against the person and other
items of properties of the mortgagors for recovery of the
balance amount, if any. By a further mortgage deed dated
21.3.1950 the mortgagors obtained another loan of Rs.16,000
from the mortgagee on the same security.
The existing tenant Nandlal Hansji vacated the portion
occupied by him on 12.11.1956. Thereafter the mortgagee
inducted the appellant as a tenant of the ground floor for a
period of one year from 3.12.56 to 2.12.57 on a monthly rent
of Rs.125. The lease deed, how ever, came to be executed
only after one year, i.e., on 9.12.1957. On 13.7.1958 the
mortgagee issued a notice to the appellant terminating the
tenancy and calling upon him to surrender possession on the
ground he had failed to pay the rent. The appellant did not
surrender possession and instead filed Civil Misc.
Application No. 40 of 1958 for fixation of standard rent. It
is relevant to mention here that the Saurashtra Rent Control
Act, 195 1 governed the leases of buildings in Saurashtra
region including Bhavnagar. The mortgagee filed Civil Suit
No. 46 of 1958 against the appellant for recovering the
arrears of rent
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and possession of the leased premises. On 13.4.60 the Trial
Court allowed the tenant’s petition for fixation of standard
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rent and dismissed the mortgagee’s suit for arrears of rent
and possession. The Trial Court fixed the standard rent at
Rs.52.10 as against the contractual rent of Rs.125. The
mortgagee filed successive appeals before the District Judge
and the High Court against the judgments of the Trial Court
in the Standard Rent Petition and the suit for ejectment but
failed in both the appeals before both the Appellate Courts.
During the pendency of the ejectment proceedings, the
mortgagee filed Special Civil Suit No. 8/62 against the
mortgagors for recovery of the mortgage amounts under the
two mortgages and a consent decree was passed stipulating
that the mortgagors should pay Rs.18,000 in six months,
i.e., by 20.5.63 with running interest at 6% p.a. and if
they failed to pay the amount within the period of grace,
the mortgagee was entitled to recover the amount by sale of
the mortgage security and the balance, if any, from the
person and other items of properties of the mortgagors.
As the mortgagors failed to pay the decree amount in
terms of the consent decree, the mortgagee took out
execution proceedings in Special Darkhast No. 7/72. Therein
the parties once again compromised and the compromise was
recorded on 7.10.72 and in the memo of compromise it was
stated that the ground floor portion of the house had been
given on rent to the appellant, that the mortgagee has filed
a case against him, that in such circumstances the vacant
possession of the ground floor cannot be delivered and that
the mortgagors were entitled to obtain vacant possession of
the ground floor portion of the house from the appellant. As
regards the decree amount the compromise memo stated that
the full amount of Rs.18,000 had been paid and no further
amount was payable to the mortgagee.
After the compromise memo was recorded the mortgagors
took out execution application No. 3/73 for the issue of a
warrant of possession for obtaining possession of the ground
floor. The Executing Court issued a warrant of possession
even though the appellant was not impleaded as a party in
the suit or the execution application. The appellant
preferred Appeal No. 190 of 1973 to the High Court and the
High Court revoked the warrant of possession and remitted
the matter to the Executing Court for going into the
question whether the consent decree and final decree to
which the mortgagors and mortgagee were alone parties would
be binding on the appellant-(tenant) and furthermore whether
the mortgagors would be entitled to delivery of physical
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possession of the leased premises or only symbolic delivery.
The Executing Court considered the matter afresh and held
that the mortgagors were entitled to get only symbolic
delivery and not delivery of physical possession of the
leased property. The mortgagors preferred First Appeal No.
152 of 1974 before the High Court. A Division Bench of the
High Court allowed the appeal and directed the Executing
Court to issue a warrant of possession for ejecting the
appellant and placing the mortgagors in possession of the
leased premises. The High Court however granted a
certificate of leave to the appellant to prefer an appeal to
this Court and that is how the matter is before us.
The main contention of the appellant before the High
Court was that though the lease was given by the mortgagee,
the lease was binding on the mortgagors even after they had
redeemed the mortgage because they had authorised the
mortgagee to create tenancies over the mortgage property and
secondly because his tenancy rights became protected under
the Saurashtra Act XXII of 1951 which came to be later
replaced by the Bombay Rents, Hotel and Lodging House Rates
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P Control Act No. LVII of 1947 (for short the Bombay Rent
Act) and as such he cannot be evicted by the mortgagors
merely by reason of their repayment of the mortgage debt.
The second contention was that the consent decree and the
final decree on the basis of which the execution application
was taken to dispossess him were not binding on him since he
was not a party to the proceedings. The High Court repelled
both the contentions. In so far as the first contention is
concerned, the High Court held that as the mortgage was an
anomalous mortgage the rights of the mortgagee have to be
determined with reference to the terms of the mortgage deed,
that though the mortgage deed permitted the mortgagee to
create tenancies, the said permission did not extend to
granting leases beyond the term of the mortgage and it was
subject to the stipulation in the mortgage deed that the
mortgagee should deliver possession whenever the mortgage
was redeemed and hence when the mortgagee’s right to
possession came to an end he ceased to be a lesser and the
appellant also ceased to be a lessee and therefore the
appellant was bound to surrender possession and he has no
right to invoke the provisions of the Rent Act to continue
his tenancy. As regards the second contention, the High
Court held that the appellant was not a necessary party to
the suit or the execution application as his possession was
akin to that of a sub-lessee and the execution application
was therefore legally maintainable against him.
Arguing for the appellant, Mr. Bhatt, learned counsel
advanced the following contentions to assail the judgment of
the High Court:
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1. The appellant constituted a tenant as per the
definition of tenant in the Saurashtra Act and the Bombay
Rent Act and therefore the fact that the lease was granted
by a mortgagee with possession and not by the mortgagors
themselves would not affect his tenancy rights under the
Acts in any manner;
2. The High Court, in spite of holding that the
mortgage dated 19.7.1947 was an anomalous mortgage has erred
in referring to Section 76(a) of the Transfer of Property
Act and going into the question whether the granting of a
lease of urban immovable property so as to tie up the
property beyond the term of the mortgage was a prudent act
or not of the mortgagee.
3. The High Court has failed to consider that the
induction of the appellant as a tenant was fully in
accordance with the authority given to the mortgagee under
the mortgage deed and consequently the lease granted to the
appellant was a lawful one. The appellant’s right to invoke
the provisions of the Saurashtra Act XXII of 195 1 and the
Bombay Rent Act to protect his tenancy rights is a
conferment by the statutes and not due to any grant by the
mortgagee. Hence there was no need or necessity for the High
Court to invoke the Full Bench decision of the Gujarat High
Court in Purshottam v. Madhavaji Meghaji, (AIR 1976 Gujarat
161: 17 G.L.R. 497) and take the view that the tenancy
created by the mortgagee would not extend beyond the term of
the mortgage as the lease property was urban immovable
property and not agricultural land;
4. The High Court ought to have followed the consistent
view taken by this Court in numerous decisions that the
rights of a tenant inducted by a mortgagee with possession
would enure even beyond the period of mortgage if by reason
of legislative enactments subsequently made the tenant’s
rights had been given statutory protection (vide the
decisions in Mahabir Gope v. Harbans Narain, [1952] SCR 775;
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Asa Ram v. Ram Kali, 11958] SCR 986 and Dahya Lal v. Rasul
Mohammed Abdul Rahim, [ 1963] 3 SCR 1 and Prabhu v. Ram Dev,
[19661 3 SCR 676).
5. The observations in Film Corporation Ltd. v. Gyan
Nath, [1970] 2 SCR 581/that the general principle of the
bona fide and prudent acts of the mortgagee in possession
being binding on the mortgagor even after the title of the
mortgagee comes to an end would ordinarily apply to
management of agricultural lands and would seldom extend to
urban property was by way of an obiter. Indeed the very same
decision has recognised that even if the lease granted by
the
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mortgagee is of urban immovable property, it will be binding
on the mortgagor if he had concurred with the granting of
the lease. Even in Sachalmal Parasram v. Ratan Bai, AIR 1972
SC 673 where the view taken in Film Corporation’s case has
been followed, the observations would only constitute obiter
because the decision there too had been rendered in
acceptance of the finding of the District Judge that the
tenancy created by the mortgagee was not a prudent act.
6. The Full Bench decision in Purshottam’s case relied
upon by the High Court and the Full Bench decisions rendered
in SV Venkatarama Reddiar v. Abdul Gani Rowther & Ors., AIR
1980 Madras 276 and Devkinandan v. Roshan Lal, AIR 1985
Rajasthan 11 do not affect the appellant’s case in any
manner since all these decisions have been rendered in
observance of the obiter dicta of this Court in Film
Corporation’s case and Sachalmal Parasram’s case.
7. If for any reason this Court is of the view that the
judgments in Film Corporation’s case and Sachalmal
Parasram’s case have enunciated a law differentiating
between agricultural land on the one hand and urban
immovable property on the other and holding that any lease
granted by a mortgagee with possession of urban immovable
property would not constitute a bona fide and prudent act
and as such the tenancy will not be binding on the mortgagor
after the redemption of the mortgage, this Bench should
refer the appeal to a larger Bench for resolving the
conflict between the law laid down in the earlier cases and
the view taken in the two cases mentioned above.
Replying to the arguments of the appellant’s counsel,
Mr. T.U. Mehta, learned counsel for the respondents
submitted that the High Court has rightly found that the
mortgagee had no authority to create a tenancy beyond the
term of the mortgage because the mortgagors had given only a
limited authority to the mortgagee to create tenancies over
the property and had specifically stipulated that the
mortgagee should re-deliver possession of the property
whenever the mortgage was redeemed. Hence the permission
given to the mortgagee to grant lease of the mortgage
property was subject to the requirement that he should
surrender possession of the property as soon as the mortgage
was redeemed. The learned counsel, therefore, stated that
the appellant had no right to claim tenancy rights as
against the mortgagors and that he cannot claim protection
under the Saurashtra Act XXII of 195 1 or the Bombay Rent
Act because the mortgagee ceased to be a lessor when the
mortgage was redeemed and the tenant (appellant) also ceased
to be a tenant eo instanti the mortgagee ceased to be a
lessor.
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Alternatively, the learned counsel submitted that even if
the observations contained in Film Corporation’s case and
Sachalmal Parasram’s case are to be viewed as obiter dicta.
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the Full Bench decisions rendered by the Gujarat High Court
in Purshottam v. Madhavji Meghaji and by the Madras High
Court in SV Venkatarama Reddiar v. Abdul Gani Rowther & Ors.
have given succinct and adequate reasons for a
differentiation being made between a lease of agricultural
land and a lease of urban immovable Property leased by a
mortgagee with possession and hence those decisions merit
acceptance by this Court and therefore it must be held that
the grant of lease of an urban immovable property by the
mortgagee was not a prudent act and would not, therefore,
bind the mortgagors.
Before taking up for consideration the various
contentions of the appellant’s counsel it is necessary that
the basic factors governing the rights of the parties are
identified and kept in the forefront. The High Court has
held the first mortgage dated 19.7.1947 was an anomalous
mortgage and not an usufructuary mortgage. This finding of
the High Court is un-assailable and indeed neither of the
parties controverts the finding. The legal consequence of
the finding is that the rights of the parties to the
mortgage would not be governed by Section 76 of the Transfer
of Property Act but by Section 98 of the said Act. Section
98 provides that in the case of anomalous mortgages the
rights of the parties have to be determined in accordance
with the terms of the mortgage deed. Looking into the
mortgage deed the first sentence in the text of the deed and
clauses 2, 3, 4, S, 7, & 10 have relevance and they reads as
under:-
"To wit we have borrowed the below mentioned
amount of Rs.21,000 in words rupees twenty one
thousands, from you, with an interest at a rate of
six annas per hundred per month, under the
business method of Diwali and under the remaining
method by compound interest under this agreement
in respect of interest.
2. According to the decision we have to pay
to you an amount of interest accruing due every
month. And you are entitled to demand interest on
the interest on any Diwali period if any interest
remain claimable.
3. In respect of the said house other
repairing charges or taxes of the Government or
the Municipality all these expenses shall be paid
by us. We shall have to bring
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insurance on your name and the policy shall be
handed over to you. And if in any circumstances we
do not incur such expenses or we make delay
therein you are entitled to make such expenses and
to pay the amounts at our cost. And if you pay the
amount in the said manner, you are entitled to
recover all these amounts as a portion of amount
claimable under mortgage as an amount claimable
under this mortgage with compound interest at a
rate of six annas per month on all the aforesaid
paid by you. But you are not bound to do any such
expense. If you do not make such expenses and if
any damage is occurred thereby or by any other
reason, no responsibility in respect of the same
shall lie on you. We have given assurance that
insurance has been taken(?).
4. Some portion of the said house has been
given on rent to Patel Nandlal Hodaji under joint
conditions. Under the said conditions we have
executed a rent deed in favour of you from the
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said Nandlal Hodaji for the remaining period.
5. You are entitled to give on rent the said
house to anybody under the aforesaid clauses
number 3-4. You have to give the clear amount of
rent in consideration of the same. If under any
reason any amount of rent is not given or the rent
is given less or any of the portion of the house
is left vacant, the responsibility thereof does
not lie on you. (Rest omitted).
7. You are entitled to obtain this property
or to keep this property in your possession till
any kind of amount claimable remains to be paid
under this mortgage.
10. We are entitled to pay the amount at any
time. And the mortgage shall be redeemed when we
pay up the amounts and the same shall be given to
us and other documents and possession shall be
returned to us. And if we require the documents of
redemption of mortgage and in respect of handing
over possession etc. the same shall be executed
and the same shall be got registered."
From a reading of these clauses it may be seen that although
the mortgagors had delivered possession to the mortgagee
they had bound
87
themselves to pay interest for the mortgage amount, that
they had undertaken the liability to keep the house in good
repair and meet all public charges and pay the insurance
premium and that they had endorsed the lease deed executed
by the tenant Nandlal Hansji (referred to as Patel Nandlal
Hodaji in clause 4) in favour of the mortgagee so that he
could collect the rent from the tenant and credit the same
towards interest. In clause 5 the mortgagee is given
permission to give the house on lease to anyone subject to
the terms contained in clauses 3-4. The authorisation,
however, gives an option to the mortgagee to lease out the
house to anyone or not to grant any lease. This is made
clear by the fact that the mortgagors have further stated in
clause 5 that if the house is given for a lesser rent or the
tenant does not pay the stipulated rent or even if the
mortgagee keeps the house vacant, the mortgagee will not be
held liable for any loss meaning thereby that the mortgagee
will not be held accountable for loss of rental income. This
is obviously because of the undertaking by the mortgagors in
clause 2 that they hold themselves liable to pay interest to
the mortgagee "at the rate of six annas per month under the
business period of Diwali and under the remaining method by
compound interest under the agreement." Under clause 7 the
mortgagors have empowered the mortgagee to keep the property
in his possession till the mortgage debt is fully repaid.
Under clause 10 the mortgagors have stated that they are
entitled to redeem the mortgage at any time and that as soon
as redemption takes place the mortgagee should return the
documents of title and re-deliver possession of the house.
Clauses 7 and 10, therefore, stipulate that the mortgagee is
entitled to retain possession of the mortgage property only
till such time the mortgage debt is outstanding and that as
soon as the mortgage is redeemed the mortgagee is bound to
re-deliver possession of the property to the mortgagors. It
is with reference to these terms the question whether the
mortgagee had authority to give tenancy rights to the
appellant so as to enable him to claim tenancy rights beyond
the term of the mortgage has got to be determined .
Leaving the facts aside for a moment we will turn our
attention to the decision of this Court upon which the
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appellant’s counsel has placed considerable reliance. For
the purpose of the present-case the pronouncement of law in
Mahabir Gope v. Harbans Narain, Asa Ram v. Ram Kali, Dahya
Lal v. Rasul Mohammed Abdul Rahim, and Prabhu v. Ram Dev,
(supra) does not call for mention with reference to each
decision. Suffice it to say that the general principle which
has been recognised in all these cases has been aptly
summarised in Mulla’s Transfer of Property Act. Seventh
Edition, page 514 in the following manner:-
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"No question of imprudence can arise where, as in
Prabhu v. Ram Dev, the rights of the tenant were
enlarged by tenancy legislation enacted after the
tenant was put in pos session by the mortgagee. It
is submitted that this statement of the law is
consistent with all the Supreme Court decisions
quoted above."
The other proposition of law which has found acceptance with
this Court is that a tenancy created by a mortgagee in
possession may be binding even after the termination of the
title of the mortgagee in possession if the mortgagors had
concurred to the grant of the lease (vide Film Corporation’s
case.)
It now behoves us to consider whether the appellant’s
case falls under one of the two categories set out above
i.e., (1) whether his tenancy rights came to be enlarged by
tenancy legislation after he was put in possession by the
mortgagee, or (2) whether the tenancy created in his favour
by the mortgagee had the concurrence of the mortgagors 1) so
as to entitle the appellant to claim tenancy rights even
after the redemption of the mortgage. In so far as the first
question is concerned, the appellant was not inducted into
possession soon after the mortgage deed was executed and the
mortgagee was put in possession of the property but long
thereafter. In fact there was already a tenant on the
mortgage property when the mortgagee was put in possession
in July 1947. During the period of tenancy of that tenant
(Nandlal Hansji) the Saurashtra Act XXII of 1951 came to be
enacted and it gave protection to the tenants from paying
exhorbitant rent and from unreasonable eviction. Despite the
enlargement of his tenancy rights by the Act, Nandlal Hansji
vacated the lease premises in 1956 and it was thereafter the
mortgagee inducted the appellant in possession. This is,
therefore, a case where the Saurashtra Act was already in
force when the appellant was inducted into possession. By no
stretch of imagination can the appellant contend that his
tenancy rights became enlarged after the mortgagee granted
him the lease by subsequent legislation enacted for
affording protection to tenants. The fact that the mortgagee
had granted lease only for a period of one year will not
alter the situation in any manner because not only had the
mortgagee executed the lease deed after the expiry of the
lease period of one year but also because the restriction of
the lease period to one year was of no consequence in view
of the provisions contained in the Saurashtra Act XXII of
195 1. The learned counsel for the appellant placed reliance
on the fact that the Bombay Rent Act had come to be enacted
after the appellant was inducted into the property and hence
it is a
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subsequent tenancy legislation which has enlarged the
tenancy rights of the appellant. This argument overlooks the
fact that Saurashtra Act XXII of 195 1 was already in force
when the mortgagee granted the lease to the appellant and
the said Act continued to be in force till 31.12.1963 and it
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was only from 1.1.1964 the Bombay Rent Act came to replace
Saurashtra Act XXII of 1951. In the second appeals
pertaining to the standard rent application and the suit for
ejectment filed by the mortgagee the High Court has observed
as follows:-
"Now, it is not in dispute that the civil suit as
well as the standard rent application were
instituted at the time when the Saurashtra Act was
in operation in Bhavnagar area. It is not disputed
that the present appeals are governed by the said
Act. However, I may say that the Saurashtra Act
was repealed by Section 5 1 of Gujarat Act 57 of
1964 and the Bombay Rent, Hotel and Lodging House
Rates Control Act, 1947 (Bombay Act LVII of 1947),
it will hereafter be referred to as "the Bombay
Act" was extended to the area comprised in the
former State of Saurashtra which includes
Bhavnagar where the suit premises are situate. The
repeal is with effect from December 31, 1963. The
present two second appeals have been instituted
some time in February 1968 (sic for 1963) before
the repeal of the Saurashtra Act. Thus the present
second appeal will have to be decided on the
footing that the Saurashtra Act is applicable to
the suit premises.
It is, therefore, futile for the counsel to contend that the
tenancy in favour of the appellant was created when no
tenancy legislation was in force and the appellant’s rights
became enlarged by reason of tenancy legislation enacted
subsequently viz. the Bombay Rent Act. Hence, the reliance
of the appellant’s counsel on the four earlier decisions of
this Court, including the two decisions rendered by Benches
of five Judges cannot be of any avail to the appellant.
We are then left with the question whether the lease
granted to the appellant by the mortgagee had the approval
or concurrence of the mortgagors so as to entitle the
appellant to claim tenancy rights even as against the
mortgagors after they had redeemed the mortgage. The bedrock
for the appellant’s contention that the mortgagors had given
express authority to the mortgagee to create tenancy over
the mortgage property is the first sentence contained in
clause 5 of the mortgage deed which says that "you are
entitled to give on rent the said
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house to anybody under the aforesaid clauses no. 3-4".
Viewed from any angle the authorisation given to the
mortgagee to give on lease the mortgage property cannot be
said to be an unconditional and absolute one. In the first
place it has to be remembered that the mortgage deed came
into existence in July 1947 which was long prior to the
Saurashtra Act XXII of 1951 being enacted. Neither the
mortgagors nor the mortgagee could have anticipated a
tenancy legislation like Saurashtra Act XXII of 195 1 being
enacted by the Government so as to enlarge the rights of the
tenants. In such circumstances the appellant cannot
legitimately contend that the mortgagors had given an
unrestricted power to the mortgagee to create a tenancy for
any length of time and are therefore bound to accept the
lease transaction even after the redemption of the mortgage
deed. Secondly even without reference to the absence of any
tenancy legislation when the mortgage deed came to be
executed, there are a host of materials in the mortgage deed
itself to show that the permission given to the mortgagee to
induct tenants was of a very limited and qualified nature.
We have already pointed out that in spite of the mortgagee
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being given possession, the mortgagors had agreed to pay
interest to the mortgagee at mercantile rate and also as per
contractual rate. This was not, therefore, a case where the
mortgagee was put in possession of the mortgage property in
order to appropriate the usufructs in lieu of interest. The
position stands further clarified by the recitals in clause
S which absolve the mortgagee of any liability for loss of
income from the mortgage property due to fall in rent or
non-payment of rent or even due to non-leasing the property
and keeping the house vacant. On account of these guarantees
the mortgagee was under no compulsion to lease out the
property, just because of the permission given to him to
grant leases, either to secure rental income in lieu of
interest or on grounds of prudent management. The mortgagee
should have realised that by inducting the appellant, he was
running the risk of being unable to deliver possession of
the house to the mortgagors when the mortgage was redeemed
and thereby he would be contravening clauses 7 and 10 of the
mortgage deed. In such circumstances there is no scope at
all for the appellant to contend that the mortgagee had
leased out the property in the belief that he was well
within the authority given to him by the mortgagors to lease
out the property and therefore the mortgagors are bound by
the lease transaction.
In the light of these findings it follows that there is
neither need nor necessity for us to go into the question
whether the pronouncements made in Film Corporations’s case
constitute a deviation from the ratio laid down in the
earlier cases of Mahabir Gope, Asa Ram,
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Dahya Lal and Prabhu (supra) and as such the appeal should
be referred to a larger Bench for decision. For the same
reason we are of the view that there is no need to go into
the question whether the judgments rendered in Purshottam v.
Madhavji Meghaji, SV Venkatarama Reddiar v. Abdul Gani
Rowther & Ors. and Devkinandan v. Roshan Lal, (supra)
require consideration by this Court. The High Court, we may
observe, has not held against the appellant because the
lease granted by the mortgagee pertained to an urban
immovable property but because the mortgagors had not given
authority to the mortgagee to create a lease which would
enure beyond the term of the mortgage, and secondly the
authority given to the mortgagee to lease out the property
was circumscribed by the stipulation that the mortgagee
should re-deliver the possession of the property whenever
the mortgage was redeemed.
In the course of the arguments Mr. Bhatt also sought to
contend that by reason of the authority given to the
mortgagee to create tenancies over the mortgage property,
the mortgagors had constituted the mortgagee their agent and
hence the mortgagors as principals were bound by the acts of
their agent. We cannot countenance this argument because the
relationship between the parties to the mortgage was always
one of debtor and creditor and there was no question of the
mortgagors constituting the mortgagee as their agent.
Since it has been found that the mortgagors had not
empowered the mortgagee to create a lease which would be
binding on them after the redemption of the mortgage and
since the appellant’s rights, as a tenant, did not become
enlarged by means of any tenancy legislation which came to
be enacted after the lease was granted, the appellant can
claim tenancy rights only as against his landlord viz. the
mortgagee and not against the mortgagors. As soon as the
mortgagee’s rights became extinguished by the redemption of
the mortgage, neither he nor anyone inducted by him has a
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right to be in possession of the mortgage property.
Consequently, the mortgagors were entitled to seek ejectment
of the mortgagee and the tenant inducted by him. The
appellant had no independent rights and hence it was not
necessary that he should have been made a party to the suit
filed by the mortgagee or the execution application taken
out by the mortgagors after the redemption of the mortgage.
His position was akin to that of a sub-tenant whose rights
were co-terminus with those of the tenant himself. As such
the execution application taken against the mortgagee will
be binding on the appellant having no independent rights of
his own, the appellant cannot contend that the decrees and
the
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execution application are not binding on him as he was not
made a party to the proceedings.
For all the reasons aforesaid we are of the view that
the appeal deserves to fail. Accordingly the appeal stands
dismissed with costs to the contesting respondents.
P.S.S. Appeal dismissed.
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