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CASE NO.: Appeal (civil) 8395  of 1983

PETITIONER: PURAN CHAND (D) THROUGH LRS.  & ORS.

       Vs.

RESPONDENT: KIRPAL SINGH (D) & ORS.

DATE OF JUDGMENT:       15/12/2000

BENCH: Ruma Pal, S.S.M.Quadri

JUDGMENT:

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     J U D G M E N T

     RUMA PAL, J.

     The  Appellants  Nos.   2 to 4 are the owners  of  247 Kanals  and  15 marlas of agricultural land situated in  the district  of  Patiala.  The Appellant No.1 is the  erstwhile second  mortgagee of the land.  The Respondents Nos.1 and  2 were  the  erstwhile prior mortgagees of the land  and  also claim  to  be  tenants  of the land.   The  question  to  be determined  is  whether  despite  redemption  of  the  prior mortgage  by  payment to the respondents 1 and 2,  they  can claim  to remain in occupation of the land as tenants.   The land  was  owned by Raunaq Ram, predecessor-in- interest  of the   appellants.   Raunaq  Ram   mortgaged  the  land  with possession to Amar Singh ( the respondent No.3 before us) on 22nd  March 1950.  During the year 1951-52, Amar Singh  sold his  interest in the land to Labhu Ram.  Labhu Ram  inducted Bir  Singh,  the  father of the respondents 1 and  2,  as  a tenant in respect of the land in November 1953.  After Labhu Rams death, his son Sat Paul sold his rights as a mortgagee which  he had inherited from Labhu Ram to the respondents  1 and  2 by two deeds dated 14th January 1963 and 5th December 1966.   The  respondents  1  and 2,  therefore,  became  the mortgagees of the entirety of the disputed land by 1966.  In 1971, Bir Singh died.  The respondents 1 and 2, as his sons, claim  to have inherited his tenancy rights to the land.  In the  meanwhile,  Raunaq Ram had died leaving behind him  his widow,  Ram  Piari  (respondent No.6)  and  four  daughters, namely,  Purni, Lachhmi, Sheela (the appellants 2 to 4)  and Dayawanti (respondent No.5).  Raunaq Ram had executed a will in  favour of his four daughters by which he bequeathed  the land to them.  All four daughters executed a second mortgage with  possession  of  the  land in  favour  of  Puran  Chand (appellant  No.1).  On 26th August 1971, the four appellants filed  a  suit for redemption of the prior mortgage  against the  respondents 1 and 2.  The defence of the respondents  1

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and  2 that they were entitled to continue in possession  of the land as tenants of Labhu Ram was negatived on the ground that  since  the  respondents   had  purchased  Labhu  Rams interest  as  mortgagee with possession of the  land  before their  father  expired,  they did not  inherit  any  tenancy rights as they could not be their own tenants.  The suit was accordingly  decreed in favour of the appellant No.1 on 28th April  1977  and he was given the right to redeem the  first mortgage  and obtain possession of the land upon payment  of Rs.18,000/-  on  or before 28th April 1977.   The  Appellant No.1  duly  deposited Rs.18,000/- in Court pursuant  to  the decree.  The was respondents 1 and 2 preferred an appeal but their   appeal  dismissed.The  respondents  1  and  2   then preferred a second appeal before the High Court.  During the pendency  of the second appeal, two significant events  took place.  First, Puran Chands mortgage was wholly redeemed by the appellants 2 to 4 so that they resumed full ownership of the  land.   The  second  event  was  that  Dayawanti,  (the respondent  No.5  before us, the fourth daughter  of  Raunaq Ram), sold her share of the equity of redemption in the land in  favour of the respondents 1 and 2 by two separate  deeds dated  8th  September  1977  and  11th  January  1978.   The respondents 1 and 2 filed an application claiming redemption against  Puran Chand in respect of 1/4th of the land sold to them  by  Dayawanti  before the  Collector.   The  Collector dismissed  the application.  The respondents then filed  two applications  in  the pending second appeal before the  High Court;   the  first application was to bring on  record  the fact  of  the  purchase  of 1/4th share  of  the  land  from Dayawanti  and;  the second for being allowed to redeem  the mortgage  of Puran Chand in respect of such 1/4th  interest. The  second appeal was disposed of by the High Court on 25th January  1983.   The High Court held that despite  the  fact that  the  decree had been passed in favour of Puran  Chand, because  the  appellants 2 to 4 had redeemed  his  mortgage, they  were entitled to the benefit of the decree.  The  High Court also held that the Trial Court and the First Appellate Court were not in error in decreeing the suit for redemption against  the respondents 1 and 2 and that the prior mortgage had in fact been redeemed.  The High Court, however, allowed the second appeal of the respondents 1 and 2 by holding that they were entitled to continue in actual physical possession of  the  land as tenants despite the decree  of  redemption. According  to  the  High Court the  respondents  rights  as tenants  did  not merge with their rights as mortgagees  and therefore  even on redemption of the mortgage, their tenancy rights  survived.   Normally  the right of  the  mortgagees tenants  to  continue in possession is co-terminus with  the mortgagees  right to do so on the principle that no one can give  a  better right than he has himself.  This  maxim  was recognised in the locus classicus Mahabir Gope and Others V. Harbans Narain Singh and Others 1952 3 SCR 775 when it said: The  general  rule is that a person cannot by  transfer  or otherwise  confer a better title on another than he  himself has.   A mortgagee cannot, therefore, create an interest  in the   mortgaged  property  which   will  enure  beyond   the termination  of  his  interest as mortgagee.   Further,  the mortgagee,  who takes possession of the mortgaged  property, must manage it as a person of ordinary prudence would manage it if it were his own;  and he must not commit any act which is  destructive  or permanently injurious to  the  property; see  section  76, sub clauses (a) & (e) of the  Transfer  of Property  Act.   It  follows that he may  grant  leases  not extending  beyond  the period of the mortgage;   any  leases granted  by  him  must  come to an  end  at  redemption.   A

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mortgagee  cannot during the subsistence of the mortgage act in a manner detrimental to the mortgagors interests such as by  giving  a lease which may enable the tenant  to  acquire permanent  or occupancy rights in the land thereby defeating the  mortgagors  right to khas possession;  it would be  an act  which  would fall within the provisions of Section  76, sub-clause (e) of the Transfer of the Property Act.

     The  principle  enunciated  in Mahabir Gope  has  been consistently  followed.   [See:   Harihar Prasad  Singh  and Another V.  Must.  Of Munshi Nath Prasad and Others 1956 SCR 1.   Asa Ram V.  Mst.  Ram Kali ;  1958 SCR 988;  Prabhu  V. Ramdev  & Ors:  1966 3 SCR 676;  All India Film  Corporation Ltd.   V.   Shri  Raja  Gyan Nath:  1970  2  SCR  581;   M/s Sachalmal  Parasram V.  Mst.  Ratanbai :  AIR (1972) SC  637 Jadavji Purshottam V.  Dhami Navnitbhai Amaratlal AIR (1987) SC 2146;  Pomal Kanji Govindji V.  Vrajlal Karsandas Purohit AIR  (1989)  SC  436, Om Prakash Garg V.   Ganga  Sahai  AIR (1988)  SC  108;  Hanumant Kumar Talesara V.  Mohan Lal  AIR (1988)  SC  299].   Mahabir Gopes case also  recognized  an exception  to  the  principle when it held that  in  certain circumstances  a lease created by a mortgagee may be binding on  the mortgagor.  The circumstances were delineated in the following   passage:     A   permissible  settlement  by  a mortgagee  in  possession  with a tenant in  the  course  of prudent  management  and the springing up of rights  in  the tenant  conferred or created by statute based on the  nature of  the  land and possession for the requisite period  is  a different  matter  altogether.   It is an exception  to  the general rule.  The tenant cannot be ejected by the mortgagor even after the redemption of the mortgage.  He may become an occupancy raiyat in some cases and a non-occupancy raiyat in other  cases.   But  the  settlement of the  tenant  by  the mortgagee  must  have been a bona fide one.  This  exception will  not  apply in a case where the terms of  the  mortgage prohibit the mortgagee from making any settlement of tenants on  the land either expressly or by necessary  implication. (Emphasis added)

     The  passage  makes it clear that the  exception  will apply  only when the mortgage deed expressly or by necessary implication  gives  the  mortgagee the power to  lease.   In addition  the tenancy should have been created bona fide  in the  course of prudent management under Section 76(a) of the Transfer  of  Property Act, 1882 and finally, the rights  of the  tenant must be protected by statute.  However,  Mahabir Gopes  case has been almost consistently considered by this Court  in the long line of decisions noted earlier as  being an  authority  for the proposition that even if there is  no term in the mortgage deed authorising the mortgage to induct a   tenant,  nevertheless  the   tenant  could  continue  in possession  despite  redemption  by proving ( i )  that  the tenancy  was  created by the mortgagee as an act of  prudent management  and  (  ii  ) was  protected  by  statute.   The exception  is  sometimes  read as being applicable  only  to agricultural  tenancies.  Thus in Asa Rams case (supra)  it was  said  that  Mahabir  Gope  had  held:   .   that  an@@                  JJJJJJJJJJJJJJJJJJJJJJJJJ agricultural  lease created by him (the mortgagee) would  be binding  on the mortgagor even though the mortgage has  been redeemed,  provided it is of such a character that a prudent owner of property would enter into it in the usual course of management.

     In fact in Mahabir Gope, the right of the agricultural

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tenant  was  considered only because it was referable  to  a statute  which  specifically  protected such right  and  not because  of some inherent difference between an agricultural and  an  urban  tenancy.   The matter was  clarified  in  G. Ponniah  V.  Nalleyam Perumal Pillai AIR (1977 ) SC 244: Our attention has been invited to some cases which relate to the  applicability  of  Section 76 (a) of  the  Transfer  of Property  Act.   It  is true that this  provision  has  been applied  to  tenancies  created   under  various   statutory provisions  regulating the rights of tenants to agricultural lands in States all over India.

     The  view was reiterated but with some modification in Pomal  V  .Vrajlal  (supra)  where  the  two  limbs  of  the exception  were seen as two separate exceptions.  all the cases   that  we  have  so   far  considered  are  cases  of agricultural  lands and in each of these cases the  question was  examined  from  two points;  first, whether  the  lease could be said to be a lease granted in the course of prudent management  and,  in the alternative, whether the rights  of the  tenant  inducted by the mortgagee with  possession  had been  enlarged as a result of a special statute dealing with   the  rights  of  tenants of  agricultural  lands.  added) (emphasis If the principle, whether as originally enunciated in  Mahabir Gope or as modified later were to be applied  to the  case before us, three separate obstacles would have  to be  overcome  by  the respondents 1 and 2  before  they  can succeed in their claim to continue in possession as tenants. The  first hurdle that the respondents 1 and 2 would have to overcome  would be to establish the consent of the mortgagor to the creation of the tenancy by the mortgagee.  In fact it was  never the case of the respondents that the tenancy  was created by the mortgagee in terms of the mortgage deed.  The second  hurdle would be to prove the ingredients of  Section 76(a)  which  provides:  that a mortgagee must  manage  the property as a person of ordinary prudence would manage it if it were his own.  As said in Asa Ram (supra) this being in the  nature of an exception, it is for the person who claims the  benefit  thereof,  to   strictly  establish  it.   The respondents  1  and  2 have singularly failed  to  do  this. Though  an  argument was raised before the Trial Court  that the  lease  created by Labhu Ram in favour of Bir Singh  was binding  on  the mortgagor under Section 76 (a) of the  Act, the  argument was specifically negatived by the Trial  Court and  affirmed  on appeal.  No submission was made to  us  on behalf  of  the  respondents Nos.  1 and 2 on the  basis  of Section  76(a).   The  third hurdle is  to  prove  statutory protection.   The  respondents  No.   1  and  2s  claim  to continue  in occupation as tenants despite the redemption of the  mortgage  is sought to be derived from Sections 18  and 8-B  of the Pepsu Tenancy and Agricultural Lands Act,  1955( referred  to  as the 1955 Act).  Section 18 of the 1955  Act provides  for  the  devolution of the tenancy at  the  first instance  on the deceased tenants lineal male  descendants, in  the male line of descent.  Therefore, it is claimed that the  respondents No.  1 and 2 inherited the tenancy right of Bir  Singh.  Section 8B provides:  8B.  Certain  mortgagees to be deemed as tenants under the Act:  -

     (1)  Where, after the commencement of the  Presidents Act, land comprising the tenancy of a tenant is mortgaged to him  with  possession  by  the landowner any  such  land  is subsequently  redeemed  by the landowner, the tenant  shall, notwithstanding  such  redemption or any other law  for  the time  being  in  force, be deemed to be the  tenant  or  the

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landowner  in  respect  of such land on the same  terms  and conditions  on  which it was held by him immediately  before the execution of the mortgage had never been executed.

     (2) Where a tenant referred to in sub- section (1) has been  dispossessed by the landowner in execution of a decree or  order of redemption, he shall be entitled to be restored to  his  tenancy in the manner prescribed on the same  terms and  conditions  on  which it was held  by  him  immediately before  the execution of the mortgage on an application made by  him to an Assistant Collector of the first grade  having jurisdiction   within  a  period  of   one  year  from   the commencement  of  the Pepsu Tenancy and  Agricultural  Lands (Amendment) Ordinance, 1958.

     (3)  An  application received under sub-  section  (2) shall be disposed of by the Assistant Collector of the first grade  in the manner laid down in sub-section (3) of section 8A.

     This  section  is for the benefit of a tenant to  whom the  subject  matter  of  the tenancy  may  be  subsequently mortgaged.  It cannot apply in this case because there is no subsisting  tenancy.   In upholding the respondents Nos.   1 and  2s  right under the Section the High Court appears  to have  lost  sight of the fact that the tenancy of Bir  Singh had been created by Labhu Ram.  After Labhu Rams death, his son  Satpal,  became the landlord.  When Satpal  transferred all  his rights vis-Ã -vis the land to the respondents 1         and 2,  the  Respondents  1 and 2 became the landlords  and  Bir Singh in effect became a tenant under them.  Therefore, when Bir  Singh  died  in 1971, his tenancy rights could  not  be inherited  by his sons for the simple reason that they  were his landlords and could not, as observed by the Trial Court, become  their  own tenants.  When a landlord  transfers  his rights in the leased property to his tenant there would be a merger  of the rights of the tenant in his higher rights  as owner  and  the tenancy would come to an end  under  Section 111(d)   of  the  Transfer  of  Property  Act.    Therefore, whichever way the matter is looked at, the respondents 1 and 2  had  and have no right to continue in possession  of  the mortgaged  land  after redemption of the mortgage except  to the extent of their purchase of Dayawantis share.  The High Court  erred  in holding that they could.  Accordingly,  the decision of the High Court is set aside, the judgment of the First  Appellate  Court is restored and the  appeal  allowed with costs.