Kerala High Court
K.C. Bhaskaran Nair vs Carona Shoe Co. Ltd. And Anr. on 21 October, 1986
Equivalent citations: AIR1987KER132, AIR 1987 KERALA 132, (1987) 1 KER LT 14, 1986 (1) RENCR 649, (1987) 1 RENCR 649, (1987) KER LJ 18, (1987) 1 CURCC 692
JUDGMENT S. Padmanabhan, J.
1. The three substantial questions of law on which notice was issued in this second appeal are :
1) Whether under Section 76(a) of the Transfer of Property Act, 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 is such as a prudent 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 mortgagee would survive the redemption of the mortgage in view of Section 111 (c) of the Transfer of Property Act.
and 3) Whether a tenant inducted on the property by a mortgagee with possession, would after redemption of the mortgage be protected under the provisions of Section 11(1) of the Kerala Buildings (Lease and Rent Control) Act, 1965.
2. First plaintiff in a suit for redemption of a mortgage is the appellant. The mortgage Ext. A1 dated 4-/-1960 was executed by the then owner Philip in favour of the 1st defendant. The property consists of a non-residential building and site in an urban area. By assignment the right to redeem devolved on the first plaintiff. Second defendant is a company and the 3rd defendant is its manager. They are tenants of a portion of the building under the mortgagee. First defendant did not dispute the right to redeem. Defendants 2 and 3 disputed plaintiff's right to recover possession even if the mortgage is redeemed. They claimed that they are entitled to continue in possession subject to the provisions of the Rent Control Act. Trial Court found that defendants 2 and 3 are also liable to surrender on redemption. There were two appeals, one by defendants 2 and 3 and the other by the 1st defendant. They were disposed of by a common judgment. Contention of defendants 2 and 3 was upheld and the appeal filed by them was allowed finding that they are liable to be evicted only through an order of the Rent Controller. The appeal filed by the 1st defendant was also partly allowed enhancing the redemption price. But that decision is not challenged in second appeal
3. Dispute is only regarding one room occupied by defendants 2 and 3 who run a shoemart on the basis of a rent arrangement by the 1st defendant mortgagee. At the lime of Ext. A1 mortgage this room was in the possession of another tenant of the mortgagor who was conducting a press. The mortgagee was authorised to collect rent or evict the tenant. That tenant was subsequently evicted by the mortgagee who then let out the room to defendants 2 and 3. The case of the respondents is that there is no indication from Ext. Al that the mortgage was executed with the intention that the mortgagee himself should do business in the building without letting it out and the mere fact that a tenant was in occupation at the time of mortgage indicates to the contrary. Therefore the argument was that the acts of evicting the original lessee and letting out to defendants 2 and 3 were actually acts of management of the property as a person of ordinary prudence would manage it, if it were his own. In other words the contention is that even if the mortgagor was in possession he would have also done the same thing and under Section 76(a) of the Transfer of Property Act the tenant of the mortgagee is entitled to continue even after the mortgage is determined. This is an exception to the general rule embodied in Section 111 (c) of the Transfer of Property Act that a lease of immovable property determines where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event by the happening of such event.
4. The two grounds relied on by the District Judge to allow the appeal are that the tenants are protected under Section 76(a) of the Transfer of Property Act and the mortgagee had implied authority of the mortgagor to let out. Protection under Section 76 (a) of the Act is a contention which was never raised in the pleadings. According to the counsel for the respondents, it is a pure question of law unconnected with any question of fact and therefore no pleading is necessary and even without pleading such a contention could be raised and considered by the Court at the time of arguments. I do not think I will be able to agree. Whether a particular lease is bona fide or prudent is purely a question of fact though the question whether on account of the bona fide or prudent act of the mortgagor his lessee is entitled to continue even after the mortgage is determined may be a question of Law. But the decision on that question of law depends on the question of fact whether the lease is bona fide or prudent as a person of ordinary prudence would manage it as if it were his own. On that question of fact and on the question of law based on that question of fact there should be definite pleading so that the plaintiff must have an opportunity of meeting the claim and adducing evidence in rebuttal. Normally a benefit which is not pleaded cannot be given and the District Judge was not justified in granting the protection under Section 76(a) without a plea in that respect made in the written statement. There was no issue in this respect and the judgment of the trial Court does not show that such a contention was raised. That the mortgagee had implied authority of the mortgagor to let out is also not a contention raised in the pleadings and on which the parties joined issue. The contention was only that the lease was with the knowledge or consent of the mortgagor, There is no evidence in support of that contention and neither the trial Court nor the appellate Court found that there was such knowledge or consent. The finding of the District Judge that the mortgagee had implied authority of the mortgagor to let out is not only lacking in pleadings or issue, but it is also not warranted by the provisions of the mortgage deed or the evidence. Thus the two grounds relied on by the District Judge cannot basically stand. Those findings have been specifically challenged in the memorandum of second appeal.
5. The District Judge has relied on a Division Bench decision of this Court in Kurnaran Nair v. Maniappan Pillai, 1971 Ker LT 269. That was a case in which the lessee of the mortgagee was also a party to the suit for redemption, but the suit was decreed on the basis of a compromise petition to which the plaintiff and the mortgagee alone were parties. The court found that there was no decree against the lessee. Then the contention raised on behalf of the plaintiff was that the lease is determined when the mortgage is terminated and the lessee cannot continue even if he is not a party to the suit.
Gurushiddaswami v. DMD, Jain Sabha AIR 1953 SC 514 and Rupchand v. Raghuvanshi (Pvt) Ltd., AIR 1964 SC 1889 were relied on in support of that contention. In both those cases it was held that a sub-lessee would be bound by a decree for possession passed against the lessee even if the sub-lessee is not a party to the suit. But the decision said that it is difficult to apply the reasoning to the case of a lessee from a mortgagee. In that case a finding was called for from the District Judge and the finding was that the lease in favour of the appellant was granted by the mortgagee in the ordinary course of management and it would be binding on the mortgagor even after the mortgage is redeemed. That finding was accepted by the Division Bench and it was held that the contention that the decree-holder is entitled to execute the decree against the appellant who was not a party to the compromise decree must fail. Two earlier decisions of the Supreme Court, Harihar Prasad v. Deo Narain Prasad, AIR 1956 SC 305 and Asa Ram v. Mst. Ram Kali, AIR 1958 SC 183, were accepted in that decision as clear authorities for the position that Section 76(a) of the Transfer of Property Act enacts an exception to the general rule that a person cannot confer on another any right higher than what he himself possesses and if the lease is one which could have been made by the owner in the course of prudent management, it would be binding on the mortgagors, notwithstanding that the mortgage has been redeemed. That decision proceeded on the assumption that the two Supreme Court decisions relied on therein were applicable to both agricultural and non-agricultural lands in urban area.
6. But there is a subsequent decision of the Supreme Court in Sachalmal Parasram v. Ratanbai, AIR 1972 SC 637 following All India Film Corporation Ltd. v. Raja Gyannath, (1969) 3 SCC 79 and distinguishing two still earlier decisions of the Supreme Court in Mahabir Gopa v. Harbans Narain Singh, AIR 1952 SC 205 and Asaram v. Mst. Ram Kali. AIR 1958 SC 183. That was a case in which the mortgage deed specifically authorised the mortgagee to let out the shop. In that case the claim was under that agreement as well as under Section 76(a) of the Transfer of Property Act. Consequently protection under the M.P. Accommodation Control Act, 1961 was also relied on. Referring to the earlier decisions it was said that the relationship of lessor and lessee cannot subsist beyond the mortgagee's interest unless the relationship is agreed to by the mortgagor or a fresh relationship is recreated. This the mortgagor or the person succeeding to the mortgagor's interest may elect to do. It was also held that if he does not the assessee cannot claim any rights beyond the term of his original lessor's interest. That decision is also authority for the position that the provisions of Section 76(a) of the Transfer of Property Act which is an exception to the general rule embodied in Section 111(c) applies in appropriate cases ordinarily only to the management of agricultural lands and has seldom been extended to urban property so as to tie it up in the hands of lessees or to confer on them rights under special statutes.
7. After the decision in Kumaran Nair's case 1971 Ker LT 269 this Court had occasion to consider this aspect in the decisions in 1981 Ker LT SN 5 Case No. 8, C.K. Kuttappan v. Karthiyayani, AIR 1981 Ker 107, Kolappan Pillay v. Muthamman Pillai Swarnamma 1985 Ker LT 397 and Ayyappan v. Karthiayani Amma 1986 Ker LT 336 : (AIR 1987 Ker 130) and the uniform view was against the applicability of Section 76(a) and in favour of the general rule embodied in Section 111(c) of the Transfer of Property Act. This was following the Supreme Court decision and various Full Bench decisions of other High Courts. Jagan Nath v. Mittar Sain, AIR 1970 Punj & Har 104 , S. V. Venkatarama Reddiar v. Abdul Ghani, AIR 1980 Mad 276, Devkinandan v. Roshan Lal, AIR 1985 Raj 11 and Purshottam v. Madhavji, AIR 1976 Guj 161 favoured that view. So also Mahadeo v. Kantilal, AIR 1980 Bom 79 and S. Hanmanthrao v. H. Gurushanthamma, AIR 1974 Kant 2. It is true that a contrary view was taken in Tajammul Hussain v. Mir Khan, AIR 1974 All 234 (FB).
8. S. V. Venkatarama Reddiar's case, AIR 1980 Mad 276 (FB) is identical on facts also. Law laid down in that case was :
"If a tenancy is created by a mortgagee with possession, the ties of landlord and tenant are snapped eo instanti the mortgage is redeemed and, unless there is a fresh forging of the relationship of landlord and tenant between the mortgagor and the erstwhile tenant by (i) the voluntary act of the parties or (ii) a deemed forging of the relationship by express provision in the Act itself the erstwhile tenant cannot claim protection under the Act so as to perpetuate his occupation of the building as a tenant. The rule of exception contained in Section 76(a) of the T.P. Act cannot be readily and automatically invoked by a tenant let into possession of urban property by a mortgagee with possession. The principle of exception afforded by Section 76(a) of that Act applies ordinarily to the management of agricultural lands and has seldom been extended to urban property so as to tie it up in the hands of lessees or to confer on them rights under special statutes. It may be open to a tenant inducted upon urban property by a mortgagee with possession to rely upon Section 76(a) to claim tenancy right for the full term of the tenancy notwithstanding the redemption of the mortgage earlier. But, it is for the person who claims such benefits to strictly establish the binding nature of the tenancy, created by the mortgagee, on the mortgagor."
9. That decision is also authority for the position that it is for the person who claims benefit under Section 76(a) for the full term of tenancy notwithstanding redemption of the mortgage to strictly establish the binding nature of the tenancy, created by the mortgagee, on the mortgagor. Section 76(a) is an exception which has to be strictly pleaded and proved.
10. What emerges from the decisions is this. The general proposition of law is that no man can convey a better right than he himself is having. Therefore a mortgagee in possession cannot create a 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 Section 76(a) by granting, of lease or otherwise normally arises only in rural agricultural lands and not in urban immovable property. 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. When the tenant of a mortgagee cannot continue after the mortgage is redeemed there is no scope for any relationship of landlord and tenant to arise either under the general law or Rent Acts unless specific benefits arc conferred by statutes. Section 76(a) cannot normally be applied to urban immovable property. Only where the words of the mortgage deed clearly and expressly allow creation of tenancy beyond the term of the mortgage that the lease would be binding on the mortgagor.
11. It necessarily follows that the District Judge went wrong in holding that defendants 2 and 3 are not liable to be evicted in this suit and that they can be evicted only through an order of a competent Rent Controller.
Second appeal is allowed and the decree of the appellate court directing that defendants 2 and 3 arc not liable to be evicted in pursuance of the decree for redemption and they can be evicted only through an order of a competent Rent Controller is hereby set aside. That means defendants 2 and 3 are also liable to be evicted in this suit itself. In the circumstances, parties will suffer costs incurred before this Court.