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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 77 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 78 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 79 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 80 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 81 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 82 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: 83      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 84 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. 85 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 86           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:- 88           "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 89 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 90 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, 91 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 92 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. 93