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PETITIONER: ASA RAM AND ANOTHER

       Vs.

RESPONDENT: MST.  RAM KALI AND ANOTHER

DATE OF JUDGMENT: 21/11/1957

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA DAS, S.K. GAJENDRAGADKAR, P.B.

CITATION:  1958 AIR  183            1958 SCR  988

ACT:        Tenancy--Hereditary  right,  when can come  into  existence-        Lease  by mortgagee--When binding on mortgagor--Transfer  of        Property  Act,  1882 (IV of 1882), s. 76(a)--U.  P.  Tenancy        Act, 1939 (U. P. XVII Of - 1939), S. 29(a).

HEADNOTE:        Section 29(a) of the U. P. Tenancy Act, 1939, provides  that        every person who was at the commencement of the Act a tenant        of  land shall be entitled to all the rights  of  hereditary        tenants under the Act.  Some classes of tenants are excepted        from  the  operation of this provision, and one of  them  is        tenants of Sir lands.        The  lands  in question were originally held in Sir  but  in        pursuance  of a deed of usufructuary mortgage dated July  8,        1930,  they  were entered as Khudkasht in the names  of  the        mortgagees.  Subsequently the respondents took possession of        the lands from the mortgagees under a Kabuliat dated May 26,        1936.  After redemption of the mortgage the appellants,  the        representatives   of  the  mortgagors,  filed  a  suit   for        possession  under  s.  180 of the U.P.  Tenancy  Act,  1939,        against  the  respondents  on the  footing  that  they  were        trespassers.   The respondents contended, inter  alia,  that        they were legally in possession of the lands because (1) the        lease  on the basis of which the Kabuliat of May  26,  1936,        was executed, was binding on the appellants, and (2) in  any        case, as the respondents were in possession of the lands  as        tenants  on  the date of the commencement of the  Act,  they        were entitled to all the rights of hereditary tenants  under        s.  29(a) of the Act.  It was found that the action  of  the        mortgagees in leasing the lands to the tenants on the  terms        set out in the Kabuliat was neither prudent nor bonafide:        Held:     (1)  that  under  S.  76(a)  of  the  Transfer  of        Property  Act,  1882,  an agricultural lease  created  by  a        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;        (2)  that a person who claims rights as a hereditary  tenant        under S. 29(a) of the U.P. Tenancy Act, 1939, must show that        on the date of the commencement of the Act he was lawfully a

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      tenant.        Accordingly,  as the lease in question could not  be  upheld        under S. 76(a) of the Transfer of Property Act, 1882,  there        was no admission of tenant by any person having authority to        do so, and                                    987        the  transaction could not form the foundation on which  any        rights under s. 29(a) of the U. P. Tenancy Act, 1939,  could        be based.        Mahabir Gope and others v. Harbans Narain Singh and  others,        [1952] S.C.R. 775, referred to.

JUDGMENT:        CIVIL APPELLATE JURISDICTION : Civil Appeal No. 56 of 1956.        Appeal  by special leave from the judgment and  order  dated        February  4, 1954, of the U. P. Board of Revenue  in  Appeal        No. 96 of 1948-49.        Dewan Charanjit Lal, for the appellants.        S.   P. Sinha, J. B. Dadachanji, S. N. Andley and  Rameshwar        Nath, for the respondents.        1957.  November 21.  The following Judgment of the Court was        delivered by        VENKATARAMA AIYAR J.-The facts material for purposes of this        appeal have been stated by us in our order dated February 6,        1957,  and may be briefly recapitulated.  The suit  property        is agricultural land of the extent of 10 Bighas, 13  Biswas.        On  July 8, 1930, the then owners of the land,  Ram  Prashad        and  Udairaj, executed a usufructuary mortgage over  it  and        certain other properties, with which we are not concerned in        this litigation, in favour of Dwaraka Prashad, Naubat  Singh        and Munshilal.  The lands were originally held in Sir by the        mortgagors,   but  as  part  of  their  bargain   with   the        mortgagees,  they applied to have their names  removed  from        the Sir, and that was done by an order dated June 18,  1930,        the lands being thereafter entered as Khudkasht in the names        of  the  mortgagees.  In 1941, Ram  Prashad,  the  surviving        mortgagor, filed Suit No. 132 of 1941 for- redemption of the        mortgage.   The  suit was contested, but it  was  eventually        decreed, the amount due to the mortgagees being fixed at Rs.        1,860.   Subsequent to the decree, Ram Prashad died  leaving        him   surviving,  the  appellants  herein,  as   his   legal        representatives.  On September 6,1945, the amount due  under        the mortgage was paid by them and the mortgage was redeemed.        When they sought to take possession of the suit  properties,        they were obstructed by Govind Sahai and Bhagwan Sahai,  who        claimed to have been admitted as tenants        988        by  the  mortgagees.  Thereafter, the appellants  filed  the        suit,  out of which the present appeal arises, under s.  180        of  the  U.  P. Tenancy Act No. XVII  of  1939,  hereinafter        referred  to  as the Act, to eject them,  treating  them  as        trespassers.   The defendants resisted the suit  on  various        grounds,  of which only one is now material.   They  claimed        that they were not trespassers but hereditary tenants  under        the Act, and could not therefore be ejected, and Issue 2 was        raised with reference to this plea.        The Revenue Officer, Meerut, who tried the suit held on this        Issue  that as the lands bad been held by the mortgagors  as        Sir,  and  that  as  the  mortgagees  had  been   themselves        cultivating  them as Khudkasht, the defendants could not  be        held  to  be hereditary tenants, and  passed  accordingly  a        decree  in ejectment in favour of the appellants,  and  this        decree  was confirmed on appeal by the Commissioner,  Meerut

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      Division.   The defendants took the matter in appeal to  the        Board  of  Revenue (Second Appeal No. 96 of 1948).   By  its        judgment  and decree dated February 4, 1954, the Board  held        that  the  defendants  had been put  in  possession  by  the        mortgagees  under  a Kabuliat dated May 26, 1936,  that  the        rent  fixed  under the Kabuliat, Rs. 112 per  annum,  was  a        reasonable  rate of rent as the circle rate was Rs.  76-6-0,        and  that,  therefore,  the settlement was  binding  on  the        mortgagors,  as it was for "prudent and economic rent".   On        this finding, it allowed the appeal and dismissed the  suit.        Against  this judgment, the plaintiffs have  preferred  this        appeal by special leave.        At  the  original hearing be-fore us,  the  main  contention        pressed  by the appellants was that the Kabuliat  dated  May        26, 1936, was not referred to in the written statement,  and        had not been exhibited at the trial, and that, therefore, no        relief  should  have  been  granted on  the  basis  of  that        document  in  second  appeal.   We,  however,  came  to  the        conclusion  that  as the point had been raised,  though  not        clearly  in the written statement, it ought to be  tried  on        the  merits,  and we accordingly remanded the  case  to  the        Board of Revenue for trial on the following two Issues:        989        (1)  Whether  the  lease  deed dated May 26,  1936,  by  the        mortgagees in favour of the respondents is true and  legally        valid; and        (2)  Whether the said lease is binding on the appellants.        At  the  re-hearing  which we  directed,  the  parties  have        adduced fresh evidence on both the Issues, and the Board  of        Revenue  has submitted its findings thereon.  On  the  first        Issue,  it has held that no lease deed had been executed  by        the mortgagees in favour of the lessees, but that the latter        had executed a a Kabuliat in favour of the mortgagees on May        26,  1936, and that its truth had not been  questioned.   On        the second Issue, its finding is as follows:        "Whether  the  Qabuliat was binding or not depended  on  the        question  whether mortgagees bad a right to settle the  land        and  whether such settlement was binding on the  mortgagors.        There  was nothing in the mortgage deed which would  prevent        the mortgagees from settling the land, even though. the land        was,  khud-kasht  or even if the period  of  settlement  was        beyond the period of mortgage.  The mortgagees acted in  the        prudent  management of the property settling the land on  an        economic rent.  The action of the mortgagees was, therefore,        binding  on the mortgagors.  Hence the Qabuliat was  binding        on the appellants."        The appallents attack both these findings as incorrect.   As        regards the first Issue, their contention is that in view of        the  finding that the mortgagees had not executed any  lease        deed,  Govind  Sahai and Bhagwan Sahai could not  claim  the        status  of  tenants solely on the strength of  the  Kabuliat        executed  by  them  on May 26, 1936, as that  was  merely  a        unilateral undertaking by them to cultivate.  But the  mort-        gagees  have given evidence that they accepted the  Kabuliat        and received rent as provided therein.  There is, therefore,        no substance in this objection, which must be overruled.        The  main controversy in this appeal relates to the  finding        on the second Issue.  The appellants complain that the Board        has merely repeated its previous        990        finding  on  the  point  without  reference  either  to  the        requirements of s. 76(a) of the Transfer of Property Act, or        to the evidence that had been adduced by the parties at  the        remand.   We are constrained to observe that this  complaint        is well-founded.  The law undoubtedly is that no person  can

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      transfer property so as to confer on the transferee a  title        better  than what he possesses.  Therefore, any transfer  of        the  property mortgaged, by the mortgagee must  cease,  when        the  mortgage is redeemed.  Now, s. 76 (a) provides  that  a        mortgagee  in  possession  "must manage the  property  as  a        person  of ordinary prudence would manage it if it were  his        own."  Though  on the language of the statute,  this  is  an        obligation cast on the mortgagee, the authorities have  held        that  an agricultural lease created by him 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.  This being in the nature of an exception, it is        for  the person who claims the benefit thereof, to  strictly        establish it.        Now,  the  question is whether the respondents  have  proved        that the lease of which the Kabuliat dated May 26, 1936,  is        a counter-part, is one which a prudent owner would create in        the  management of his properties.  The Board  has  answered        the  question in favour of the respondents on  two  grounds.        One  is  that  that the mortgage deed dated  July  8,  1930,        contains no prohibition against letting of the lands by  the        mortgagees.   If there is such a prohibition, there  is  the        authority  of  this  Court in Mahabir  Gope  and  others  v.        Harbans Narain Singh and others (1) that the lease will  not        be  binding on the mortgagors.  But where there is  no  such        prohibition,  the only consequence is that the parties  will        be  thrown  back  on  their rights  under  the  Transfer  of        Property Act, and the lessees must still establish that  the        lease  is binding on the mortgagors under s. 76(a)  of  that        Act.        The  second  ground  on  which  the  Board  has  based   its        conclusion that the lease is binding on the appellants        (I)  [1952] S.C.R. 775.        991        is  that the rent fixed in the Kabuliat, Rs. 112  is  higher        than  the  circle  rate  of Rs. 76-6-0.   But  this  is  not        decisive  of  the matter, as what has to be decided  is  not        whether  the rent fixed compares favourably with the  circle        rate,  but whether it is reasonable and fair, having  regard        to the income which a prudent owner could have got from  the        lands,  and that will depend on proof of the net yield  from        the  land and the ruling price of the produce at that  time.        The  lessees have given no evidence on this point.   One  of        the  mortgagees  stated  that  he  and  his  brothers   were        themselves  cultivating the lands till 1936, and  that  they        then gave them on lease, because they were losing Rs. 50  to        Rs.  100  per annum over the transaction.  But  he  gave  no        particulars  as to what the gross yield from the lands  was,        what the expenses of cultivation were, and what the price of        the  produce was.  It is very difficult to believe that  the        tenants  would have agreed to take over lands on  the  terms        contained  in  the  Kabuliat if, in fact, it  was  a  losing        concern.   It is admitted by the mortgagee that the  lessees        made  no  complaint that they were working at a  loss.   His        evidence on this point is vague and unconvincing, and we are        not  impressed by it.  On the other hand, we  have  evidence        which  clinches the matter in favour of the appellants.   It        has  been  already stated that the Revenue  Officer,  Meerut        granted a decree in favour of the appellants for  ejectment.        In  execution  of  this  decree,  the  appellants   obtained        possession  of the suit proper. ties.  On February 4,  1954,        the  Board  set aside the decrees of the Courts  below,  and        dismissed  the  suit  of  the  appellants.   Thereupon,  the        respondents  in execution of the decree got back  possession

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      of the properties.  Then, they applied under s. 144, Code of        Civil  Procedure  for recovery of mesne profits  by  way  of        restitution, and obtained a decree for Rs. 7,500 at the rate        of Rs. 1,000 per annum.  If this figure is any guide for the        determination   of  what  income  could  be  got  from   the        properties by a prudent owner, then it is clear beyond doubt        that  the  rent of Rs. 112 fixed in the Kabuliat  is  unduly        low, and it cannot be binding        126        992        on the mortgagors.  It is true that the decree relates to  a        period  much later than the date of the Kabuliat,  and  that        prices had greatly risen during that period.  But making all        allowance for the rise, we think that the transaction is not        one which a prudent owner would enter into in respect of his        properties.        It  was  argued by Mr. Sinha for the  respondents  that  the        decree  passed  in restitution proceedings is  under  appeal        before   the  Commissioner  of  Meerut,  and   should   not,        therefore, be taken into account in determining whether  the        rent  fixed in the Kabuliat was fair and such, as  would  be        binding  on the mortgagors.  But this decree was  passed  on        the application of the respondents claiming mesne profits at        the rate of Rs. 1,000 per annum, assuming that they did  not        ask  for  more, and its importance lies not so much  in  its        being  an adjudication by the Court as in its evidencing  an        admission  by  them  as to the net profits  which  could  be        realised from the lands.        It  would  be material in this connection to  refer  to  the        character  of  the lands over which the lease  was  created.        They  were  held  in Sir by the  mortgagors  and  after  the        execution of the mortgage, entered as Khudkasht in the names        of  the  mortgagees.  They were home-farm  lands  under  the        direct cultivation of the proprietors, as distinguished from        lands  which were under cultivation by tenants,  and  having        regard to the special rights which the tenancy laws all over        India have recognised in the owner in respect of such lands,        an  act  of the mortgagee which puts those rights  in  peril        cannot, as held in Mahabir Gope and others v. Harbans Narain        Singh  and others (supra), be regarded as that of a  prudent        owner,  and it requires exceptional grounds to  justify  it.        Of  that,  there  is no evidence.  On the  other  hand,  the        uncontradicted  evidence  on the side of the  appellants  is        that the lands have got facilities of canal irrigation,  and        are very fertile, and that it would not be economic to lease        them  to  tenants.   It also  appears  that  the  mortgagees        created on the eve of redemption another lease, and that has        been set aside on the ground that it was entered into with a        view to defeat the mortgagors.                                    993        Their  action in leasing the lands to tenants on  the  terms        set  out in the Kabuliat is neither prudent nor  bona  fide,        and  on  a consideration of the entire evidence, we  are  of        opinion, differing from the Board, that the lease  evidenced        by the Kabuliat is not binding on the mortgagors.        It was next contended by Mr. Sinha that even if the Kabuliat        was  not binding on the mortgagors, the  respondents  would,        nevertheless, be hereditary tenants under the provisions  of        the  U. P. Tenancy Act, 1939, and that the appellants  would        have  no  right  to eject them, and he referred  us  to  the        provisions  of  the Act bearing on  the  question.   Section        29(a)  of the Act provides that every person who was at  the        commencement  of the Act a tenant of land shall be  entitled        to all the rights of hereditary tenants under the Act.  Some        classes  of tenants are excepted from the operation of  this

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      provision, and one of them is tenants of Sir lands.  Section        30(6) enacts that,        " Notwithstanding anything in section 29, hereditary  rights        shall not accrue in-        land  transferred by a mortgage to which the  provisions  of        the second paragraph of sub-section (5) of section 15 of the        Agra Tenancy Act, 1926 apply during the period specified  in        that paragraph."        The  provision  in the Agra Tenancy Act, 1926,  referred  to        above, runs as follows:        "  Notwithstanding  anything  in  this  section,  where  the        property  transferred  by means of a mortgage  of  the  kind        specified  in sub-section (5) of section 14 consists  wholly        of   a  specified  area  or  sir,  the  mortgagor   may   by        simultaneous  agreement in writing waive  his  exproprietary        rights,  and in that case the mortgaged land shall,  if  the        mortgagor  regains  within twelve years of the date  of  the        transfer  possession thereof on redemption of the  mortgage,        resume the character of sir.  In such land, statutory rights        shall  not  accrue  for  twelve  years  from  the  date   of        transfer."        One  other  provision  to which reference was  made  is  the        second  proviso  to s. 11 of the U. P.  Tenancy  Act,  1939,        which is as follows:        994        Provided  further  that if on redemption of a  mortgage  the        mortgagor  regains  possession  of  land  which  under   the        provisions  of the Agra Tenancy Act, 1926, ceased to be  sir        and to which the provisions of the second paragraph of  sub-        section  (5)  of section 15 of that Act applied,  such  land        shall again become his sir."        Now, the argument of the respondents is that though the suit        lands  were originally held in Sir, they ceased to  be  such        when  the  mortgage was executed on July 8,  1930,  that  s.        29(a) of the Act therefore applied, that s. 30(6) and s.  11        of  the Act and s. 15 of the Agra Tenancy Act, 1926, had  no        application, as the mortgage comprised also lands which were        not  sir, and as further, possession had not  been  regained        within  twelve  years of the mortgage.   It  is  accordingly        contended  that  the respondents who were in  possession  as        tenants  on January 1, 1940, when the Act came  into  force,        had acquired the status of hereditary tenants under s. 29(a)        of  the Act, and the decision in Jai Singh v.  Munshi  Singh        (1) is relied on, in support of this contention.        The  error  in  this argument lies in  the  assumption  that        Govind  Sahai  and  Bhagwan Sahai became by  virtue  of  the        Kabuliat  dated  May 26, 1936, tenants for  purposes  of  s.        29(a) of the Act.  The true scope of sub-s. (a) of s. 29  is        that it posits that there is on the date of the commencement        of the Act a person who is lawfully a tenant and proceeds to        Confer  on him certain rights.  It is therefore a  condition        precedent  to  the application of this  provision  that  the        person must-have been admitted as tenant by a person who had        the right to do so.  Where, however, the person who purports        to  grant the lease has no authority to do so, whatever  the        rights  inter  se  between the lessor  and  the  lessee,  as        against the true owner the latter does not, in law,  acquire        the  status of a tenant, and s. 29(a) has no application  to        him.   Thus,  if  A  is the owner of  certain  lands  and  B        trespasses on them and grants a lease to C, sub-s. (a) of s.        29 does not operate to confer any rights on C as against  A.        The crucial question for        (1)  (1955) A.L.J. 834.        995        determination,  therefore, is whether the person who  claims

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      rights as a hereditary tenant under s. 29(a) was admitted as        tenant  by  a person who had the right to do so.   An  owner        will  of  course  be  entitled to  admit  a  tenant,  and  a        mortgagee in possession would have a right to do so,  either        if he is authorised in that behalf by the deed of  mortgage,        or if the transaction is one, which is protected by s. 76(a)        of the Transfer of Property Act.  But where the  transaction        is not one which could be upheld under s. 76(a), then  there        is no admission of tenant by any person having authority  to        do  so, and such a transaction though valid as  between  the        mortgagee  and  the lessee’ cannot form  the  foundation  on        which any rights under s. 29, sub-s. (a) of the Act could be        based.        In  Mahabir  Gope  and others v. Harbans  Narain  Singh  and        others  (supra),  it  was  held  that  when  a  usufructuary        mortgagee  created  a  lease in  spite  of  the  prohibition        against letting, contained in the mortgage deed, the  tenant        acquired  no  occupancy rights under the provisions  of  the        Bihar Tenancy Act, even though he had been in possession for        over  30 years, and that the same consequences would  follow        if the lease was not binding on the mortgagor under s. 76(a)        of the Transfer of Property Act, or if it was not bona fide.        On the same principle, and on our finding that the  Kabuliat        dated  May  26, 1936, is not binding on the  appellants,  we        must  hold that Govind Sahai and Bhagwan Sahai  acquired  no        rights  as  hereditary tenants under s. 29(a) of the  U.  P.        Tenancy  Act.  In Jai Singh v. Munshi Singh (supra),  relied        on for the respondents, it was held that " the  agricultural        lease granted by the mortgagee in favour of Jai Singh was  a        lease  granted in the ordinary course of management  ",  and        that, accordingly, the tenant acquired the rights of a here-        ditary  tenant.  That decision has no application  when  the        lease  is, as held by us, not a prudent transaction  binding        on  the mortgagors.  In this view, the questions  raised  by        Mr.  Sinha on the construction of s. 30(6) and s 11  of  the        Act  and s. 15 of the Agra Tenancy Act, 1926, do  not  arise        for decision.        In the result, the appeal is allowed, the decree passed        996        by the Board is set aside, and that of the Revenue  Officer,        Meerut   affirmed  by  the  Commissioner,   restored.    The        respondents will pay the costs of the appellants throughout,        including the costs of the remand.                              Appeal allowed.