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The Municipal Corporation of the City of Bombay Vs. Vasantlal Fulchand Anand Jaitha - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberSuit No. 375 of 1934 and O.C.J. Appeal No. 50 of 1937
Judge
Reported inAIR1938Bom360; (1938)40BOMLR497
AppellantThe Municipal Corporation of the City of Bombay
RespondentVasantlal Fulchand Anand Jaitha
DispositionAppeal allowed
Excerpt:
.....dissolution. the claim against the old firm was on estoppel, because the old firm had represented to the plaintiff that they were still carrying on business as a firm by not giving notice of dissolution, and these two claims were clearly inconsistent. but references to the assignee as a lessee are not, in my opinion, nearly strong enough to justify an inference that the lessors released their claim against the original lessees. in the case of a long lease like this one, where there is no restriction on the right of the lessee to assign, the lessor has no means of insuring a solvent tenant, after assignment, and it would be a serious step to release the original lessee from his liability. this distinction between joint liability and several liability has been clearly pointed out in thd..........there must be something more than the fact of the mere transfer which causes the cessation of the lessee's liability. what is the evidence of the ' something more ' in this case the learned counsel for the respondents relied on certain statements made by the lessors in the plaint in the previous suit, on a resolution stating that dayabhai, the assignee, was the ' lessee ', and also on the fact that the notice of forfeiture was served upon the assignee and rent was claimed from him. all this does not amount to ' recognition ' of the assignee as their lessee. what is necessary is that there must be a substitution of the assignee as the person liable to the lessors on the personal covenant. there is no evidence of such substitution, and the facts and statements relied on do not warrant the.....
Judgment:

John Beaumont, Kt., C.J.

1. This is an appeal from a judgment of Mr. Justice Kania. The plaintiffs are the Municipal Corporation of the City of Bombay, and they are suing on a covenant for payment of rent contained in a lease. The lease was dated March 13, 1923, and was made between the trustees of the Bombay Improvement Trust, to whose rights the plaintiffs have succeeded by statute, as lessors, and the original defendants as lessees. It is a lease for nine-hundred and ninety-nine years and contains a covenant by the lessees to pay the rent reserved during the term, and it is to be noted that there is no covenant against assignment of the lease.

2. On December 17, 1930, the lease was assigned by the lessees to one Daya-bhai. Dayabhai omitted to pay the rent due under the lease, and on December 17, 1931, the lessors forfeited the lease. Subsequently the lessors sued Dayabhai for rent due down to the date of forfeiture and recovered judgment against him, but that judgment remains unsatisfied. The original 1st defendant died and the present first defendant is brought on record as his heir and legal representative. The plaintiffs having failed to secure payment of the rent due down to the date of the forfeiture from the assignee now sue on the covenant of the original lessees for that amount; and two questions have been argued in this appeal. First, whether the recovery of judgment against the assignee operated as a bar to a subsequent claim against the original lessees : and, secondly, whether the plaintiffs have impliedly released the defendants from their obligation to pay the rent.

3. The first point was raised in the issues but was not decided by the learned Judge. On the second point, he held that the plaintiffs had released the defendants from their liability to pay the rent due under the lease, and dismissed the suit. On the question whether obtaining judgment for rent against the assignee of a lease operates as a bar to a subsequent claim against the original lessee upon his covenant, there seems to be very little direct authority. The only case on the matter referred to by counsel was decided as long ago as 1619. It is the case of Brett v. Cumberland (1619) Cro. Jac. 521. In that case it was affirmed that the lessor may sue either the lessee or the assignee or both at the same time, but he can only have one satisfaction. The case does not really touch the question whether judgment against an assignee will operate as a bar to a subsequent action against the lessee. The principles, however, which apply to such a case are well-settled. Where there is joint liability, judgment against one joint debtor operates as a bar to a subsequent claim against the other joint debtors, the principle being that there is only one debt, and only one cause of action, and the debt being merged in the judgment, there is no remaining cause of action against the other joint debtors. That is the principle of King v. Hoae (1844) 13 M. & W. 494 and Kendall v. Hamilton (1879) 4 App. Cas. 504. On the other hand, where the liability of more than one debtor is either joint and several, or several only, a judgment against one is no bar to a subsequent claim against the others, because in such a case the cause of action against each debtor is distinct, and the fact that the cause of action against one debtor is merged in the judgment has no effect upon the cause of action against the other debtors. The most recent authority for that proposition is the case of Isaacs & Sons v. Salbstein (1916) 2 K.B. 139. In the present case I think it clear that there is a separate cause of action against the original lessees and the assignee. The original lessees are liable on their covenant, that is by privity of contract, and the assignee is liable by privity of estate, that is by virtue of the relationship which exists between him and the landlord. It is true that as between the assignee and the original lessees, the assignee is primarily liable. But on the other hand, it is settled that in law the lessee is not a mere guarantor for the assignee. The authority for that proposition is to be found in Baynton v. Morgan (1888) 22 Q.B.D. 74.

4. The Advocate General does not dispute these principles, but contends that this is a case of alternative liability, and that although the judgment against the assignee does not directly affect the debt of the lessees, nevertheless, the lessors having elected to proceed against the assignee cannot afterwards proceed against the lessees, and he relies on Scarf v. Jardine (1882) 7 App. Cas. 345 and Morel Brothers & Co., Limited v. Westmorland (Earl of) (1903) 1 K. B. 64, affirmed : (1904) A.C. 11. In those cases however the claims were not merely alternative, but alternative and mutually inconsistent. Scarf v. Jardine was a case in which there was a partnership consisting of A and B, which was dissolved and the business was continued under the same name by a firm consisting of B and C. The plaintiff supplied goods to the new partnership without any notice that the old partnership, with which he had dealt in the past, had been dissolved. The new partnership became insolvent and the plaintiff claimed for the price of the goods which he had supplied to the new partnership in the insolvency of that partnership, and as he failed to recover payment of the amount due to him, he then sued A on the ground that A had been a partner in the original firm and had never given notice to the plaintiff of the dissolution. The House of Lords held that the respective claims against the two firms were valid, but were mutually inconsistent. The claim against the new firm was on the facts, because the new firm had in fact ordered and received goods for which the plaintiff was seeking payment. The claim against the old firm was on estoppel, because the old firm had represented to the plaintiff that they were still carrying on business as a firm by not giving notice of dissolution, and these two claims were clearly inconsistent. The plaintiff having elected to proceed against the new firm on the facts could not afterwards turn round and sue the old firm on different assumed facts created by estoppel. Morel Brothers & Co., Limited v. Earl ofWestmorland was a case of principal and agent. The plaintiffs supplied goods to a wife in her own name and recovered judgment against her. They then claimed that she was in fact acting as agent for her husband, who was liable as a principal, and it was held that a suit against the husband' did not lie. But there again, the claims of the plaintiffs against both wife and husband were inconsistent with each other. If the wife was liable at all, she was liable as a principal, which was inconsistent with the liability of the husband. If, on the other hand, the husband was liable, then the wife was acting solely as agent, and was not liable. In both those cases the election of the plaintiff to proceed, against one of two alternative debtors (and obtaining judgment is a conclusive election) operated to put an end to his claim against the second debtor. But in the present case, there is no inconsistency whatever between the liability of the original lessees on their covenant, and the liability of the assignee arising by reason of privity of estate, though the several liabilities are in respect of the same subject-matter. The causes of action being distinct, I am of opinion that the judgment obtained against the assignee is no bar to the claim against the lessees. The Advocate General relied also on a decision of this Court in National Petroleum Company, Ltd. v. Popatlal : AIR1936Bom344 . In that case defendant No. 2 had incurred1 liability to the plaintiff and defendant No. 1 had covenanted with defendant No. 2 to indemnify him against his liability to the plaintiff. The plaintiff recovered judgment against defendant No. 2. Apart; from the fact that there was no contractual liability between the plaintiff and defendant No. 1, the Court held that the judgment against defendant. No. 2 had merged the debt, and there was therefore no debt on which the covenant of guarantee of defendant No. 1 could operate. No doubt, the Court made some observations about cases of alternative liability, but those observations were not strictly necessary, and some of them may have gone too far.

5. On the second point, I am quite unable to agree with the learned Judge's view that the lessors have impliedly released the original lessees from their covenant. There is no evidence of any express release, nor in my view is there any evidence of facts from which a release can be implied. The learned Judge relied on the following matters : first, that a notice was served by the lessors on the assignee determining the lease and forfeiting it; secondly, that a resolution was passed by the lessors which recites that the assignee was the present lessee and sanctioning the filing of a suit against him ; and, thirdly, that in the plaint filed by the lessors against the assignee they referred tothe assignee: as the lessee under the lease. But references to the assignee as a lessee are not, in my opinion, nearly strong enough to justify an inference that the lessors released their claim against the original lessees. After the lessees assigned the lease, which they were entitled to do, the lessors were bound to recognize the assignee as their tenant, and it would be in accordance with normal practice for them to refer to the person entitled to the lease as a; lessee. In the case of a long lease like this one, where there is no restriction on the right of the lessee to assign, the lessor has no means of insuring a solvent tenant, after assignment, and it would be a serious step to release the original lessee from his liability. There is no evidence that the question of granting such a release was ever considered or discussed, and in my opinion there is no ground for saying that the plaintiffs, or their predecessors, have released the original lessees from the covenant into which they entered to pay the rent, It is, of course, clear that if the plaintiffs obtain anything under their judgment against the assignee, they cannot get the money over again from the lessees. But that is a matter of adjustment in execution.

6. The appeal must be allowed, and the plaintiffs will get a decree in terms of prayer A of the plaint with costs of the suit and costs of the appeal.

B.J. Wadia, J.

7. I am of the same opinion. The two important questions that arise in this appeal are (1) whether the defendants have been released from liability on their personal covenant to pay rent to their lessors, and (2) whether by reason of the lessors having filed suit No. 175 of 1932 against the assignee and proceeded to judgment against him, the plaintiffs are precluded from making any claim in respect of arrears of rents and Municipal taxes in respect of the demised premises against the defendants. The learned Judge in the Court below has dealt at some length with the first of these questions, but has not dealt with the second at all. The latter question is of equal importance with the other, and was argued first before us.

8. We have first to consider what is the cause of action of the lessors, taking the Municipal Corporation of the City of Bombay as the statutory successors to the Trustees of the Bombay Improvement Trust, against the lessees, and what is the cause of action against the assignee. Is the cause of action one against both, or are there separate causes of action against them The lessees and the assignee are not jointly liable to the lessors. If they were, the cause of action would be one, and the judgment in the previous suit against the assignee would be a bar to another suit against the lessees, as the cause of action would be merged in the judgment. If, however, the lessees and the assignee are severally liable to the lessors, the judgment would not preclude the second suit. There are in my opinion two distinct causes of action, and there is no merger of the debt by reason of the judgment in the previous suit. The two causes of action no doubt arise out of the same subject-matter, but they are still distinct, inasmuch as the cause of action against the lessees is based on the personal covenant, and the cause of action against the assignee is based on what is called the ' privity of estate ' between him and the lessors. Such 'privity of estate' arises from the fact of the assignee being in possession of the premises for the time being, or, as it is sometimes said, from being the owner of the lease. This distinction between joint liability and several liability has been clearly pointed out in thd judgments of Pickford L.J. and Bankes L.J. in Isaacs & Sons v. Salbstein (1916) 2 K.B. 139. That being the position, the judgment against the assignee is not in my opinion a bar to the present suit against the lessees. There is no question of estoppel here, nor is the matter one of res judicata, as the parties in the two suits are different. There can also be no question of election. It is not suggested that there was any relation of principal and agent between the lessees and the assignee. In that case there would be an alternative liability on the same cause of action on the principle laid down in the leading case of Morel Brothers & Co., Limited v. Westmorland (Earl of) (1904) A.C. 11. That principle was held binding, even though the creditor had recovered judgment only for a part of the amount due to him against the wife, and wished to proceed against the husband for the balance. See French v. Howie (1906) 2 K.B. 674, reversing the judgment in (1905) 2 K.B. 580. The liability of principal and agent is based on the same cause of action, but it gives rise to two alternate and inconsistent claims.

9. It cannot, however, be said that the plaintiffs have an alternative remedy against the lessees and the assignee which could be made available against only one of them. The obligations of the two are several, and the cause of action for the rent claimed from the assignee is not the same cause of action as the claim for the rent against the lessees, though the amount of the rent claimed is the same. The question is not whether the sum claimed from the lessees might have been recovered from the assignee in the former action. The only enquiry is whether the same cause of action has been litigated and considered in the previous suit. It has not been litigated, and one test is that the same evidence cannot be sufficient to sustain both actions. The judgment against the assignee does not therefore preclude the present suit. In order to bar the second action it is essential that the earlier judgment should be for the same cause of action as it is sought to enforce in the later proceedings. A lessor can proceed against the lessee and assignee in two separate actions respectively, or he can proceed against them both in one and the same action ; but he can have only one satisfaction for the amount due to him. The plaintiffs cannot therefore recover the rent twice over. In fact they have been unable to recover anything from the assignee.

10. The other question is whether the lessees have been released from their liability under the personal covenant. Section 108(j) of the Transfer of Property Act runs as follows :-

The lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease.

The word ' only ' is of some significance, for it means that there must be something more than the fact of the mere transfer which causes the cessation of the lessee's liability. What is the evidence of the ' something more ' in this case The learned Counsel for the respondents relied on certain statements made by the lessors in the plaint in the previous suit, on a resolution stating that Dayabhai, the assignee, was the ' lessee ', and also on the fact that the notice of forfeiture was served upon the assignee and rent was claimed from him. All this does not amount to ' recognition ' of the assignee as their lessee. What is necessary is that there must be a substitution of the assignee as the person liable to the lessors on the personal covenant. There is no evidence of such substitution, and the facts and statements relied on do not warrant the inference that there was such substitution or that there was an implied release. As poined out by Woodfall, 23rd edn., page 324,

A lessee continues liable upon express covenants in the lease, notwithstanding any assignment; therefore an action of covenant will lie against a lessee for years, or his executors, on an express covenant, notwithstanding he has assigned his term and the lessor has accepted rent from the assignee. The lessor may at the same time sue the lessee upon his express covenant, and the assignee upon the privity of estate ; but it has been said that he can have execution against one only.

11. It is not stated that the actions against the lessee and the assignee are exclusive of one another, or that one action precludes the other. There can be two suits, one against the lessee and another against the assignee, though there can be execution against one only. In my opinion the liability of the lessees under their personal covenant has not ceased, and they still continue liable to the lessors, although the lessors have proceeded to judgment against the assignee.

12. I therefore agree that this appeal must be allowed with costs.


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