14 December 1971
Supreme Court
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BHAWANJI LAKHAMHI & ORS. Vs HIMATLAL JAMNADAS DANI & ORS.

Bench: MATHEW,KUTTYIL KURIEN
Case number: Appeal Civil 1546 of 1969


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PETITIONER: BHAWANJI LAKHAMHI & ORS.

       Vs.

RESPONDENT: HIMATLAL JAMNADAS DANI & ORS.

DATE OF JUDGMENT14/12/1971

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN VAIDYIALINGAM, C.A.

CITATION:  1972 AIR  819            1972 SCR  (2) 890  1972 SCC  (1) 388  CITATOR INFO :  R          1973 SC 508  (8)  RF         1978 SC1518  (7)

ACT: Transfer of Property Act, s. 116 and Bombay Rents, Hotel and Lodging House Rates (control) Act, 1947-Contractual  tenancy determined by efflux of time-Tenancy thereafter protected by statute   Tenant  continuing  in  possession  and   landlord accepting  rent-Without  proof  that both  parties  had  the necessary intention there is no ’holding over’ by the tenant within meaning of s. 116 of Transfer of Property Act.

HEADNOTE: The  appellants  were lessees of a plot of land  in  Bombay. The  lease Was granted in 1948 and was determined by  efflux of  time  on  September 30, 1958.   However  the  appellants continued to occupy the land and to pay rent to the lessors. On  August  7, 1959 the lessors gave  notice  purporting  to terminate  the tenancy in the land by the end  of  September 1959 on the ground inter alia that the lessors required  the plot  for  the  purpose of putting up  construction  on  it. Since the appellants did not vacate the premises the lessors filed a suit on October 22, 1959 in the Small Causes  Court, Bombay.   The appellants contended in defence that the  land was  not required by the lessors bona fide for  purposes  of construction.  They further contended that they were tenants holding over within the meaning of s. 116 of the Transfer of Property Act, and that since the landlord had accepted  rent after  the  tenancy had determined by afflux of time  a  new lease had come into being and as the original lease was  for a manufacturing purpose the new lease was by implication for the  same  purpose and consequently six months’  notice  was required  for  its termination by the  lessors.   The  Trial Court  held that the, plaintiff required the plot bona  fide for constructing a new building within the meaning of clause (1)  of sub-section (1) of ’section 13 of the Bombay  Rents, Hotel  and  Lodging House Rates (Control)  Act,  1947.   The Court  also held. that the tenancy terminated by  efflux  of time, but that the lessees continued in possession by virtue of  the  immunity from eviction conferred by  the  aforesaid Bombay  Act  and so they were not holding  over  within  the meaning  of  s. 116 of the Transfer of  Property  Act.   The

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Trial  Court  accordingly decreed the suit.  In  appeal  the appellate Court confirmed the decree.The    High    Court rejected  the  appellants’ petition under Art.  227  of  the Constitution. In appeal to this Court by Special  leave, HELD : The act ofholding over after the expiration of the term does not create  tenancy ofany  kind.  if  a  tenant remains  in possession after the determination of the  lease the  common law rule is that he is a tenant on  sufferance. A  distinction should be drawn between a tenant  continuing- in  possession after the determination of the term with  the consent  of the landlord and a tenant doing so  without  his consent.   The former is a tenant on sufferance  in  English law  and the latter a tenant holding over a tenant-at  will. In view of the concluding words of s. 116 of the Transfer of Property  Act a lease holding over is in a  better  position than  a tenant-at-will.  The assent of the landlord  to  the continuance  of  possession after the determination  of  the tenancy  will  create  a  new  tenancy.   What  the  section contemplates  is that on one side their- should be an  offer of taking a new lease evidenced by the lessee or  sub-lessee remaining 891 in Possession of the property after his term was over and on the  other  side  there must be a definite  consent  to  the continuance  of  possession  by the  landlord  expressed  by acceptance  of rent or otherwise.  The bases of the  section is thus a bilateral contract between the erstwhile  landlord and  the erstwhile tenant.  If the tenant has the  statutory right to remain in possession, and if he pays the rent, that will  not  normally  be  referable  to  an  offer  for   his continuing  in  possession  which can be  converted  into  a contract  by acceptance thereof by the landlord.  [894  B-D; 897 G-H] In  the case of normal tenancy a landlord is entitled  where he  does  not accept the rent after the notice to  quit,  to file a suit in ejectment and obtain a decree for possession, and  so  his  acceptance  of  rent  is  an  unequivocal  act referable  only to his desire to assent to the  tenant  con- tinuing  in  possession.  That is not so where  a  Rent  Act exists;  and if the tenant says that landlord  accepted  the rent  not  as  statutory  tenant  but  only  as  legal  rent indicating  his  assent to the tenant’s continuing  in  pos- session it is for the tenant to establish it. [898 B-C] In  the present case neither the landlord’s desire that  the appellants  should continue in possession nor the  necessary animus  on  the  part of the tenant had  been  proved.   The parties had not been shown to be ad idem. [898 D] Acccordingly it must be held that there was no holding  over by the appellants and the appeal must be dismissed. Ganga  Dutt Murarka v. Kartik Chandra Das, [1961]  3  S.C.R. 813, reaffirmed. Kai Khushroo Bezonjee Capadia v. Bai Jerbai Hirjibhoy Warden JUDGMENT: K.B.  428,  Morriwon  v.  Jacobs, [1945] 1  K.  B.  577  and Mangilal v. Sugan Chand, A.I.R. 1965 S.C. 101, applied. Manujendra  Dutt  v. Purendu Prosad Roy  Chowdhury  &  Ors., [1967] 1 S.C.R. 475, distinguished.

& CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1546 of 1969. V.M.  Tarkunde,  S.  K. Dholakia and  S.  K.  Bagga,  for appelIants Nos. 1 and 3. S.   K. Bagga, for appellant No. 2.

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D.   V. Patel, A. G. Parikh and B. R. Agarwala, for the respondents. The Judgment of the Court was delivered by Mathew,  J.  This is an appeal by special  leave,  from  the judgment  of the High Court of Bombay dismissing a  petition filed  under  Article 227 of the  Constitution  praying  for issue  of an approprivate writ or order quashing  the  order dated  28-2-1968  passed  by the Full  Bench,  Small  Causes Court, Bombay, in appeal No. 95 of 1963 from the order dated 21-2-1963  passed by the Judge, Small Causes Court,  Bombay, in R.A.E. Suit No. 9293 of 1959. In  this  appeal  we  are concerned  with  a  plot  of  land admeasuring  2108 square yards in Survey No. 171, Hissa  No. 7, at 892 Ghatkopar.   This  plot belonged to one  Jamnadas  Chhotalal Dani.  On 15-11-1948, Jamnadas executed two leases in favour of one Bhawani Laksamsi and Maojibhai Jethabhai,  defendants 1  and  2.  The subject matter of the first  lease  was  two plots,  the  one referred to above and another in  the  same area measuring 805 square yards.  The subject matter of  the second lease was a third plot in the same area. The leases were for a period of ten years and in respect  of the  first plot, the rent payable was Rs. 75/- a month.   In both  the leases there was an option clause  which  entitled the lessees to surrender the leased property by  30-9-1953. The  lessees surrendered the two plots, other than the  plot with  which  we are ,concerned, in pursuance of  the  option clause,  on  15-1-1951, with the result that  the  lease  in respect of the first plot continued.  Jamnadas died on 14-8- 195 1, but before his death he had made a gift of the leased property  in favour of the three respondents.  The lease  in respect of the plot in question here determined by efflux of time  on 30-9-1958.  But the lessees continued to remain  in possession paying rent at the rate of Rs. 75/- per month. On 7-8-1959, the lessors gave notice purporting to Terminate the  tenancy by the end of September, 1959.  They stated  in the  notice  that the lessees had sub-let the  premises  and that  the  lessors  required the plot  for  the  purpose  of putting  up constructions on it. Since the lessees  did  not vacate the premises, the lessors filed suit on 22-10-1959 in the Small Causes Court of Bombay. The lessees contended that they did not sub-let the premises and that the lessors did not bona-fide require the premises for  the purpose of construction.  They also contended  that by  the  acceptance  of  rent  by  the  lessors  after   the termination  of  the  tenancy by efflux  of  time,  a  fresh tenancy was created, that the original lease was granted for erecting a saw mill-a manufacturing purpose and so the lease created  by  holding over was, by implication,  also  for  a manufacturing purpose, and therefore, lessees were  entitled to  six months’ notice expiring with the end of the year  of the  tenancy, and that the tenancy created by  holding  over was not validly determined by the one month’s notice. The trial court held that there was no clear evidence of the subletting of the premises, but that the plaintiffs required the  plot bona fide for constructing a new  building  within the meaning of ,clause (1) of sub-section (1) of Section  13 of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947, hereinafter called the Act.  The court also  held that the tenancy terminated by efflux of time, but that  the lessees  continued in possession by virtue of  the  immunity from  eviction  conferred by the Act and so, they  were  not holding over within the meaning of section 116 893

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of  the Transfer of Property Act, notwithstanding  the  fact that  rent was accepted by the lessors from month  to  month after  30-9-1958, and that it was not necessary to give  the lessees six months’ notice expiring with the end of the year of  the tenancy, for terminating that tenancy.   In  appeal, the  Full  Bench  of the Small Causes  Court  confirmed  the decree of the trial court.  It was to quash this decree that the  petition  under Article 227 was filed before  the  High Court. Before the High Court, the main contention of the appellants was that, since a fresh tenancy by holding over was  created by  the  acceptance  of  rent  by  the  lessors  after   the determination of the lease by efflux of time, the appellants were entitled to six months’ notice expiring with the end of the year of the tenancy, as the lease originally granted was for  a  manufacturing  purpose,  and  therefore,  the  lease created by the holding over was also for same purpose.   The High Court was of (the opinion that in view of the  decision of this Court in Ganga Dutt Murarka v. Kartik Chandra Das(l) no  case was made out for new tenancy by holding over  under section  116 of the Transfer of Property Act as  the  appel- lants  had obtained the status of irremovability  under  the Act,  and as there was no contractual tenancy,  the  tenants were  not entitled to any notice.  The Court also held  that the lease which was granted for erecting a saw mill was  not a lease for manufacturing purpose. Counsel  for the appellants argued that the appellants  were holding over as the lessors were receiving the rent from the appellants after the termination of the tenancy by efflux of time  on  30-9-1958  and the  fact  that  appellants  gained immunity  from  eviction  by virtue of  the  Act  was  quite immaterial  in deciding the question whether the  appellants were  holding  over  under section 116 of  the  Transfer  of Property  Act.   He  submitted  that  as  there  was  a  new contractual  tenancy  created  by  the  holding  over,   the appellants  were  entitled  to six  months’  notice  as  the purpose  of  the  original lease  was  for  a  manufacturing purpose  and  that purpose became incorporated  in  the  new lease  by  implication of law.  Counsel  said  that  certain vital  points were omitted to be considered in the  decision of  this  Court  in Ganga Dutt  Murarka  v.  Kartik  Chandra Das,(1)   and   therefore,   the   decision   requires   re- consideration.  In Ganga Dutt Mararka v. Karlik Chandra Das, this  Court held that where a contractual tenancy, to  which rent  control legislation applied, had expired by efflux  of time  or by determination by notice to quit and  the  tenant continued in possession of the premises, acceptance of  rent from  the  tenant by the landlord after  the  expiration  or determination  of  the contractual tenancy will  not  afford ground  for holding that the landlord had assented to a  new contractual tenancy.  It was further. held (1)  [1961] 3 S.C.R. 813. 894 that acceptance by the landlord from the tenant, after  the contractual  tenancy had expired, of amounts  equivalent  to rent, or amounts which were fixed as standard rent, did  not amount  to  acceptance  of rent from  a  lessee  within  the meaning of section 1 1 6 of the Transfer of Property Act. The  act  of holding over after the expiration of  the  term does not create a tenancy of any kind.  If a tenant  remains in  possession  after the determination of  the  lease,  the common  law  rule is that he is a tenant on  sufferance.   A distinction  should be drawn between a tenant continuing  in possession  after  the determination of the  term  with  the consent  of the landlord and a tenant doing so  without  his

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consent.   The former is a tenant at sufferance  in  English Law  and  the latter a tenant holding over or  a  tenant  at will.  In view of the concluding words of section 116 of the Transfer  of  Property Act, a lessee holding over  is  in  a better  position than a tenant at will.  The assent  of  the landlord   to  the  continuance  of  possession  after   the determination  of  the tenancy will create  a  new  tenancy. What  the  section contemplates is that on  one  side  there should  be an offer of taking a new lease evidenced  by  the lessee or sub-lessee remaining in possession of the property after his term was over and on the other side there must  be a  definite consent to the continuance of possession by  the landlord  expressed by acceptance of rent or otherwise.   In Kai Khushroo Bezonjee Capadia v. Bai Jerbai Hirjibhoy Warden and  another(), the Federal Court had occasion  to  consider the  question  of the nature of the  tenancy  created  under section 116 of the Transfer of Property Act and Mukberiea J. speaking  for the majority said, that the tenancy  which  is created by the "holding over" of a lessee or under-lessee is a  new tenancy in law even though many of the terms  of  the old lease might be continued in it, by implication; and that to  brine  a  new tenancy into existence, there  must  be  a bilateral  act.  It was further held that the assent of  the landlord  which  is founded on acceptance of  rent  must  be acceptance  of rent as such and in clear recognition of  the tenancy right asserted by the person who pays it.  Patanjali Sastri  J.,  in his dissenting judgment,  has  substantially agreed  with  the  majority as regards  the  nature  of  the tenancy  created by section 116 of the Transfer of  Property Act, and that is evident from the following observations :-               "Turning  now  to the main point, it  will  be               seen  that the section Postulates  the  lessee               remaining    in    possession    after     the               determination  of the lease which  is  conduct               indicative,  in ordinary circumstances of  his               desire  to  continue  as a  tenant  under  the               lessor and implies a tacit offer to take a new               tenancy from the expiration of the (1)  [1949-50] F.C.R. 262.                             895               old  on  the  same terms so far  as  they  are               applicable to the new situation, and when  the               lessor assents to the lessee so continuing  in               possession,  he tacitly accepts  the  latter’s               offer  and  a  fresh tenancy  results  by  the               implied   agreement  of  the  parties.    When               further  the lessee in that situation  tenders               rent and the lessor accepts it, their  conduct               raises   more   readily   and   clearly    the               implication   of  an  agreement  between   the               parties to create a fresh tenancy." Mere acceptance of amounts equivalent to rent by a  landlord from  a  tenant  in  possession  after  a  lease  had   been determined, either by efflux of time or by notice to  quilt, and  who enjoys statutory immunity from eviction except  on well  defined grounds as in the Act, cannot be  regarded  as evidence  of  a  new agreement of tenancy.   In  Ganga  Dutt Murarka  v.  Kartik Chandra Das,(1) this Court  observed  as follows :-               "  By  the Rent Restriction  Statutes  at  the               material time, Statutory immunity was  granted               to   the  appellant  against   eviction,   and               acceptance of the amounts from him which  were               equivalent  to  rent  after  the   contractual               tenancy  had  expired or which were  fixed  as

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             standard rent did not amount to acceptance  of               rent  from a lessee within the meaning  of  s.               116,  Transfer  of Property Act.   Failure  to               take  action  which  was  consequent  upon   a               statutory prohibition imposed upon the  courts               and not the result of any voluntary conduct on               the part of the appellant did not also  amount               to   "otherwise   assenting  to   the   lessee               continuing  in possession".  Of course,  there               is no prohibition against a landlord  entering               into a fresh contract of tenancy will a tenant               whose  right of occupation is  determined  and               who remains in occupationtion by virtue of the               statutory  immunity.   Apart from  an  express               contract,  conduct  of  the  parties  may  un-               doubtedly  justify  an  inference  that  after               determination of the contractual tenancy,  the               landlord  had  entered into a  fresh  contract               with  the  tenant,  but  whether  the  conduct               justifies such an inference must always depend               upon  the facts of each case.   Occupation  of               premises   by  a  tenant  whose   tenancy   is               determined  is  by virtue  of  the  protection               granted by the statute and not because of  any               right  arising  from  the  contract  which  is               determined.    The   statute   protects    his               possession  so  long as the  conditions  which               justify  a  lessor in obtaining  an  order  of               eviction against him do not exist.  Once  the-               prohibition    against   the    exercise    of               jurisdiction by the, (1) [1961] 3 S.C.R. 813. 896               Court   is  removed,  the  right   to   obtain               possession  by the lessor under  the  ordinary               law  springs into action and the  exercise  of               the  lessor’s right to evict the  tenant  will               not unless the statute provides otherwise,  be               conditioned." In  Davies v. Bristow(1) the Court held that where a  tenant of  a  house  to  which the Increase  of  Rent,  &  c.  (War Restrictions)  Acts apply, holds ever after the expiry of  a notice  to  quit, and pays rent, the landlord is not  to  be taken by accepting it to assent to a renewal of the  tenancy on  the  old terms, for he has no choice but to  accept  the rent;  he could not sue in trespass for mesne  profits,  for those  Acts  provide that the  tenant,  notwithstanding  the notice  to  quit, shall not be regarded as a  trespasser  so long  as he pays the rent and performs the other  conditions of the lease.  In Morrison v. Jacobs(2), Scott L.J. said :               "The sole question before the court is whether               after   the  expiration  of  the   contractual               tenancy   the  mere  fact  of   the   landlord               receiving rent for the dwelling house from the               tenant affords any evidence that the  landlord               had  entered on a new contractual  tenancy  to               take  the  place  of  the  tenancy  which  had               expired.   In  my opinion, it does  not.   The               true view is that the landlord takes the rent,               knowing that the tenant is granted a statutory               tenancy by the Rent Restrictions Acts and that               his  right to gain possession of his  dwelling               house  depends  entirely on  his  establishing               that  he brings himself within the  conditions               laid down by the Acts."

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             In the same case, MacKinnon J. said:               "At  common  law, if at the  expiration  of  a               tenancy  a  landlord has acquired a  right  to               claim   possession  against  his  tenant   and               instead of exercising that right he allows him               to  remain in the house and accepts rent  from               him  as before, the parties by  their  conduct               may, with reason, be held to have entered into               a  new contract of demise.  But the  essential               factor  in  those circumstances  is  that  the               landlord voluntarily abstains from turning the               tenant  out.   When  the  tenant  remains   in               possession,   not  by  reason  of   any   such               abstention  by the landlord, but  because  the               Rent  and Mortgage Interest Restrictions  Acts               deprive  the landlord of his former  power  of               eviction,  no such inference can  property  be               drawn.   That is the very obvious  and  cogent               basis of the decision in Davies v. Bristow". It  was argued on behalf of the appellants, on the basis  of the  ,decision of this Court in Manujendra Dutt  v.  Purendu Prosad Roy (1) [1920]3 K.B. p. 428.         (2) [1945] 1 K.B. p. 577. 897 Chowdhury  & others(l) that if in the case of a  tenancy  to which  Rent  Restriction  Acts  applied,  the  Provision  of section 106 of the Transfer of Property Act was  applicable, there  is  nothing incongruous in making  section  116  also applicable in the case of a statutory tenancy.  In the  said decision, the appellant before this Court was a tenant of  a piece of land.  The lease was for a period of ten years  but the lessee was given the option of renewal on his fulfilling certain  conditions.  The lease deed also provided  that  if the  lessor  required  the lessee to  vacate  the  premises, whether at the time of the expiry of the lease or thereafter (in case the lessee exercised his option to renew the lease) six  month notice to the lessee was necessary.   The  lessee exercised  his  option  to renew the lease  and  offered  to fulfill  the  condition  therefore.  In  the  meanwhile  the Calcutta  Thika Tenancy Act, 1949, was passed.  One  of  the questions  which  arose for consideration  was  whether  the Thika  tenant was entitled to the notice provided under  the lease.  This Court held that the Act did not give a right to the  landlord  to evict a contractual tenant  without  first determining the contractual tenancy.  After referring to the decision of this Court in Mangilal v. Sigam Chand(2), it was held  that section 3 of the Act in question was  similar  to section  4 of the Madhya Pradesh Accommodation  Control  Act (XXIII   of  1965).   It  was  further  held  that  on   the construction  placed  upon the section, name  IV,  that  the provisions  of the section are in addition to those  of  the Transfer  of Property Act, it follows that, before a  tenant can  be  evicted,  a  landlord must  comply  with  both  the provisions  of section 106 of the Transfer of  Property  Act and  those of section 3. In the case before us,  admittedly, the  tenancy has been determined by efflux of time and  what is  contended for is that by the acceptance of rent,  a  new tenancy  has  been created by virtue of  the  provisions  of section  116  of  the Transfer of Property  Art.   In  other words,  the question here is whether the conditions for  the application  of section 116 of the Transfer of Property  Act are fulfilled. Learned counsel for the appellants argued that whenever rent is  accepted by a landlord from a tenant whose  tenancy  has been determined, but who continues in possession, a  tenancy

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by  holding  over  is created.  The argument  was  that  the assent  of the lessor alone and not that of the  lessee  was material  for  the  purposes of section  116.   We  are  not inclined  to accept this contention.  We have already  shown that  the  basis  of the, section is  a  bilateral  contract between the erstwhile landlord and the erstwhile tenant   If the tenant has the statutory right to remain in  possession, and if he pays the rent, that will not normally be referable to  an offer for his continuing in possession which  can  be converted  into  a  contract by acceptance  thereof  by  the landlord.  We do not say (1) [1967] 1 S.C.R. 475. (2) A.I.R. 1965 S.C. 101. 898 that  the  operation  of  section  116  is  always  excluded whatever  might be the circumstances under which the  tenant pays the rent and the landlord accepts it.  We have  earlier referred  to  the observations of this Court in  Ganga  Dutt Murarka  v.  Kartik  Chandra Das(1) regarding  some  of  the circumstances  in which a fresh contract of tenancy  may  be inferred.   We have already held the whole basis of  section 116  of  the Transfer of Property Act is that,  in  case  of normal  tenancy, a landlord is entitled, where he  does  not accept the rent after the notice to quit, to file a suit in ejectment  and  obtain a decree for possession, and  so  his acceptance  of rent is an unequivocal act referable only  to his desire to assent to the tenant continuing in possession. That is not so where Rent Act exists; and if the tenant says that landlord accepted the rent not as statutory tenant  but only  as  legal rent indicating his assent to  the  tenant’s continuing in possession, it is for the tenant to  establish it.   No attempt has been made to establish it in this  case and  there is no evidence, apart from the acceptance of  the rent  by  the landlord, to indicate even  remotely  that  he desired  the appellants to continue in possession after  the termination  of  the tenancy.  Besides, as we  have  already indicated, the animus of the tenant in tendering the rent is also  material.  If he tenders the rent as the rent  payable under  the  statutory  tenancy,  the  landlord  cannot,   by accepting it as rent, create a tenancy by holding over.   In such a case the parties would not be id idem and there  will be  no  consensus.  The decision in Ganga  Dutt  Murarka  v. Kartik  Chandra Das(l), Which followed the  principles  laid down  by the Federal Court in Kai Khushrao Bezonjee  Capadia v. Bai Jerbai Hirjibhoy Warden and another(1) is correct and does not require reconsideration. We,  therefore,  come to the conclusion that  there  was  no holding  over  by  the appellants and if  that  be  so,  the question whether the tenancy created by holding over was for manufacturing  purpose and therefore the landlord was  bound to  give  six months’ notice for the  determination  of  the tenancy by holding over does not arise for consideration. Appellants’ counsel prayed that the appellants may be  given some  time  for vacating the premises.   This  Court,  when passing  the order on July 31, 1969, on the application  for stay by the appellants had observed :               "Petitioner undertakes to vacate the  premises               within  such  time  as may be  fixed  by  this               Court." (1) [1961]  3 S.C.R. 813.     (2) [1949-50] F.C.R. 262 899 We  accordingly grant three months, time from today  to  the appellants  to vacate the premises, and they have to  comply with  the  undertaking given to this Court and  referred  to above.

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We dismiss the appeal with costs, G.C.                                   Appeal dismissed. 900