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Mallappa Rachappa Shetgan and ors. Vs. Shivappa Tammanna Hadnur and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberSecond Appeal No. 201 of 1945
Judge
Reported inAIR1950Bom71
ActsTransfer of Property Act, 1882 - Sections 65A and 66
AppellantMallappa Rachappa Shetgan and ors.
RespondentShivappa Tammanna Hadnur and ors.
Appellant AdvocateG.R. Madbhavi, Adv.
Respondent AdvocateN.M. Hungund, Adv.
DispositionAppeal dismissed
Excerpt:
.....persons claiming through him unless it is satisfactorily proved that as a result of said permanent lease security has been rendered insufficient - district judge found in this case that security is sufficient and that finding is not disputed in present case - held, district judge right in holding that permanent lease cannot be said to be not binding on mortgagee or his successor. - - when the matter went in appeal the said decree was affirmed, though the lower appellate court was not satisfied that the plaintiffs' possession as permanent tenants from 1889 had been proved. there are also certain other provisions, contained in section 65a which it is not necessary to set out in the present case, because this case is clearly not governed by section 65a. in regard to lands like those..........for final disposal.4. the question as to whether a mortgagor can execute a lease in respect of the property mortgaged by him is now covered by section 65a, t. p. act. this section provides that a mortgagor shall have power to make leases of the mortgaged property and that the leases thus executed by him would be binding on the mortgagee, provided that the lease is such as would be made in the ordinary course of management of the property concerned and in accordance with any local law, custom or usage. there are also certain other provisions, contained in section 65a which it is not necessary to set out in the present case, because this case is clearly not governed by section 65a. both the mortgage and the lease in this case were executed before 1929 when the present section was enacted.....
Judgment:

Gajendragadkar, J.

1. The short question which arises in this appeal is whether a permanent lease executed by the mortgagor during the pendency of a simple mortgage binds the mortgagee or persons claiming through him. This question arises in this way :

2. In the present suit the plaintiffs claimed a declaration that they were entitled to a two-thirds share in the right of occupation and enjoyment of 7 acres in S. No. 69 at Torvi and to a 4/9ths share in the mango and other fruit trees therein. They had also claimed an injunction restraining the defendants from obstructing them in the enjoyment of the said rights. The plaintiffs' case was that they had been in possession of these properties as permanent tenants since as far back as 1889. Alternatively they alleged that a permanent lease had been executed in their favour by the Jahagirdars of Darga who were the owners of this property in May 1911. At this time the property was subject to two simple mortgages which had been executed by the owners of the property in favour of one Ramdas in 1901 and 1902 respectively. On these mortgages a suit had been brought by the mortgagee, No. 21 of 1916. To this suit the present plaintiffs were cot impleaded though they were in possession of the lands. In the said suit a mortgage decree was passed and in execution of the decree the property was put to sale and purchased by the decree-holder himself for Rs. 1,900. Subsequently the auction purchaser defendant 1 sold the said property to defendant 2. On behalf of these defendants the plaintiffs' claim for declaration and injunction was contested mainly on two grounds. The plaintiffs' allegation that they were in possession of the property as permanent tenants was denied and a claim that the defendants themselves had acquired title to the property by adverse possession was set up. The learned trial Judge found that the plaintiffs had been in possession of this property since 1889 as alleged by them. He also found that the permanent lease on which the plaintiffs alternatively relied had been proved. The defendants' plea that the plaintiffs were not in possession of the property or that they had themselves acquired title to the property by adverse possession was negatived. On these findings the plaintiffs' suit was decreed. When the matter went in appeal the said decree was affirmed, though the lower appellate Court was not satisfied that the plaintiffs' possession as permanent tenants from 1889 had been proved. He, however, held that the permanent lease executed in favour of the plaintiffs in May 1911 was proved and according to him it was a valid lease which bound the defendants. He also found that there was no substance in the defendants' plea of adverse possession.

3. In the present second appeal the main point which Mr. Madbhavi urged before me for the appellants was that the permanent lease having been executed during the continuance of two simple mortgages would not bind the mortgagee or persons claiming through him. The lower appellate Court had not considered this question because it was not raised before it in this specific form. Accordingly, at the instance of Mr. Madbhavi I sent the case back to enable the lower appellate Court to make his finding on this question. Since then it has made his finding against the appellants and the matter has now come before me for final disposal.

4. The question as to whether a mortgagor can execute a lease in respect of the property mortgaged by him is now covered by Section 65A, T. P. Act. This section provides that a mortgagor shall have power to make leases of the mortgaged property and that the leases thus executed by him would be binding on the mortgagee, provided that the lease is such as would be made in the ordinary course of management of the property concerned and in accordance with any local law, custom or usage. There are also certain other provisions, contained in Section 65A which it is not necessary to set out in the present case, because this case is clearly not governed by Section 65A. Both the mortgage and the lease in this case were executed before 1929 when the present section was enacted and it is conceded before me by both the learned advocates that the new section is not retrospective in affect. That being so, the question which arises before me in the present appeal has to be considered in the light of the provisions of Section 66, T. P. Act.

5. Section 66 lays down that a mortgagor in possession of the mortgaged property is not liable to the mortgagee for allowing the property to deteriorate; but he

'must not commit any act which is destructive or permanently injurious thereto, if the security is insufficient or will be rendered insufficient by such act.'

The explanation to this section shows when a security could be said to be insufficient within the meaning of this section. In regard to lands like those with which I am concerned in the present appeal the security can be deemed to be sufficient under this explanation if the value of the mortgaged property exceeds by one-third the amount for the time being due on the mortgage. It is true that Section 66 does not expressly deal with leases, but it is conceded that the principles underlying this section apply to leases whether permanent or for limited duration. Now, it is quite clear that the powers conferred upon the mortgagor under this section are very wide. He is not responsible if the property deteriorates, and he would likewise not be responsible even if he committed an act which is destructive or permanently injurious to the property so long as he can show that despite the said act the security is sufficient for the payment of the mortgage debt. After all in the case of a simple mortgage the only right which the mortgagee has is to demand the payment of the mortgage amount which the mortgagor has personally bound himself to pay and on his failure to pay that amount to have the mortgaged property sold in order that the debt should be paid. That being the position, looking at the words of Section 66 themselves, apart from authority, it seems to me difficult to hold that a permanent lease executed by a mortgagor during the continuance of s simple mortgage could be challenged by the mortgagee or persons claiming through him unless it is satisfactorily proved that as a result of the said permanent lease the security has been rendered insufficient. It has been found by the learned District Judge in this case that the security is sufficient, and that finding is not disputed before me. That being so, I think the learned District Judge was right in holding that the permanent lease cannot be said to be not binding on the mortgagee or his successor.

6. In King v. Smith, (1843) 2 Har 239 : 62 R.R. 93, Wigram V. C. was dealing with a case where the mortgagor had felled timber in the mortgaged property and the question which arose was whether by reason of this act of waste the mortgagor had become liable to the mortgagee. In dealing with this question it was observed by the learned Judge that the question which must be tried is whether the property the mortgagee takes as a security is sufficient in this sense--that the security is worth so much more than the money advanced.Applying that test it was held that the act of cutting timber could not be considered as substantially impairing the value which was the basis of the contract between the parties at the time it was entered into. It seems to me that it is precisely this test which must be applied in deciding the present question under Section 66, T. P. Act.

7. Mr. Madbhavi has, however, relied upon certain decisions of the Calcutta and the Luck-now High Courts in which a contrary view has prevailed, though he has himself fairly pointed out that the Allahabad and the Patna High Courts take the view which appears to me to be consistent with the plain words of Section 66. It appears that there is no reported Bombay decision on this point.

8. Now, before dealing with the decisions cited before me it may not be inappropriate to refer to certain observations made by Jenkins C.J. in Balmukund Ruyia v. Mati Lal 20 C. W. N. 350 : A. I. R. 1916 Cal. 870. This is what the learned Chief Justice observed (p. 353):

'The relative positions of a mortgagee and of a tenant under a tenancy created by the mortgagor after a legal mortgage is well settled in England, bat it would be a mistake to apply these English rules to the relations resulting from an Indian simple mortgage. The rule of Keech v. Hall (1778) 1 Doug. 21, the leading English case, is one of conveyancing but under a simple mortgage the mortgagor does not part with possession, and the right of a mortgagee is merely to cause the mortgaged property to be sold for the payment of his debt.'

In Balmukund's case 20 C. W. N. 350 : A. I. R. 1916 Cal. 870 the Court was dealing with a lease executed by the mortgagor during the continuance of a simple mortgage and it was pointed out by Jenkins C.J. that the mortgagor's power of leasing in the ordinary course of management was not arrested by the execution of a simple mortgage. He referred to an earlier judgment in Banee Pershad v. Reet Bhunjan Singh, 10 W. R. 325, where it was held that as long as nothing took place which impaired the value or impeded the operation of the mortgage, the mortgagor in creating a temporary lease acted within his powers. It may be pointed out that in the cases of both Balmukund 20 C.W.N. 350 : A.I.R. 1916 cal. 870 and Banee Pershad, 10 W.R.:325, the question arose in reference to a temporary lease and not a permanent lease as in the present case. But it seems to me that while applying the test laid down by Section 66 it would not necessarily make any material difference whether the lease is a temporary or a permanent one. In any case, it would not be safe to apply the principles enunciated by English decisions while dealing with the mortgagor's rights in this behalf because prior to the enactment of Section 65A the position with regard to the mortgagor's rights under a simple mortgage in India was substantially different from those of a mortgagor under a legal mortgage in England. It was principally on such considerations that it was held in Niader Singh v. Ram Chander : AIR1935All511 , that a mortgagor in possession is entitled to lease out the mortgaged property permanently irrespective of its effect on the mortgagee provided it is not destructive or permanently injurious of the property so as to render the mortgagee's security insufficient and the purchaser of the property in execution of the mortgage decree is not entitled to turn the lessee out. To the same effect is the judgment of the Patna High Court in Natho Singh v. Lachu Singh A. I. R. 1928 Pat 238: (107 I. C. 156).

9. Mr. Madbhavi has, however, drawn my attention to a subsequent judgment of Malik J. in Fakira v. Jiwan Singh A. I. R. 1947 ALL. 240 : 1946 A. W. R. H. C. 97, where a permanent lease executed by a mortgagor during the continuance of a simple mortgage was held to be not binding on the mortgagee. But that result was obviously based upon the finding recorded by the lower appellate Court that the lease in fact was detrimental to the interests of the mortgagee and had rendered the security insufficient within the meaning of Section 66, T. P. Act. As I have already pointed out, the test to be applied in all such cases must be whether the security is rendered insufficient, and if it appears that that is the result of the alienation in question, there would be no difficulty in holding under Section 66 that the alienation does not bind the mortgagee or persons claiming through him. In such a case the provisions of Section 48, T. P. Act would also come to the aid of the mortgagor.

10. As I have already indicated, the Calcutta High Court and the Lucknow High Court, however, take a different view. In Gobinda Chandra v. Sasadhar Mandal, : AIR1947Cal73 , it has been held by a Division Bench of the Calcutta High Court that under the law prior to the introduction of Section 65A by the amendment of 1929, the mortgagor might be within his rights to create a lease which is from month to month or from year to year as the case might be, but he could not grant a permanent lease with a rent fixed in perpetuity. The learned Judges took the view that such a permanent lease amounts to an alienation of the mortgagor's right to increase rent in future and is as good as the sale of the property itself. The Lucknow High Court in Ram Sahai v. Mahabir Singh 19 Luck. 260 : A. I. R. 1948 oudh 407 and the Rangoon High Court in M. P. M. S. Firm v. Ko Pyu 10 Ran. 210: A. I. R. 1932 Rang 113, have adopted the same view. With respect, it seems to me that in coming to this conclusion the learned Judges have travelled outside the provisions of Section 66. As I started by saying the provisions of Section 66 confer much wider powers on the mortgagor, and in determining whether the mortgagor has exceeded his rights the only test which can and must be applied is to see whether the act of the mortgagor complained against impairs the security so as to render it insufficient. If the security has been rendered insufficient, the act is outside his authority, and cannot bind the mortgagee. If, on the other hand, the security has not been rendered insufficient, the act is within his competence, however much it may be condemned as amounting to a 'destructive or permanently injurious act.' That being my view, I must hold that the permanent lease in this case is binding on defendants 1 and 2.

11. As to the other plea which the defendants took that they had acquired title to this property by adverse possession, it has been found by both the Courts below that there is no substance in this plea. In view of the said concurrent finding it is not open to Mr. Madbhavi to agitate the same question over again in the present second appeal.

12. The result is the appeal fails and must be dismissed with costs.


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