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Parashram Yeshvantseth Alwe Vs. Lakshmibai Babaji Samant - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtMumbai
Decided On
Case NumberLetters Patent Appeal No. 12 of 1929
Judge
Reported in(1931)33BOMLR755
AppellantParashram Yeshvantseth Alwe
RespondentLakshmibai Babaji Samant
DispositionAppeal dismissed
Excerpt:
mortgage-subsequent permanent leases by mortgagor to mortgagee-leases unfair to mortgagor-mortgagor not bound by the leases.; the plaintiffs mortgaged their property to defendants first in 1897, and again in 1902. in 1907, the plaintiffs passed permanent leases of a portion of the mortgaged property in favour of defendants on terms which were unfair and not beneficial to the plaintiffs. the plaintiffs having sued to redeem the property free of the leases:-; decreeing redemption, that the transaction of the permanent leases having been unfair, it could not be acted upon by the court, even if it be subsequent to the transaction of the mortgage. - [couto; m.l. pendse, jj.] in the first instance the order passed under s. 132(5) is an order of a summary nature and does not conclude the rights..........and although there may not at first sight appear to be much distinction between a permanent lease of mortgaged property in favour of the mortgagee and a sale of the equity of redemption to him, there may (sic) be a material distinction as has been explained in webb v. rorke (1806) 2 sch, & lef. 661, which is one of the cases relied on in subrao mangeshaya v. manjapa shetti. the question whether the decision in the latter case is in any way affected by the english decisions cited by mr. coyajee may well be left for consideration when necessary in a case in which that legal question necessarily arises.12. there is one other point on which i desire to make a few remarks in connection with subrao mangeshaya v. manjapa shetti. in that case two questions arose, firstly, whether the.....
Judgment:

Patkar, J.

1. The question involved in this appeal is whether the permanent leases of part of the land by the mortgagor's representative to the mortgagee's representative subsequent to the date of the mortgage are valid.

2. In 1897, the plaintiff's father Govind mortgaged certain property to Yeshwant, the father of defendants Nos. 1, 2, and 3. The mortgagor . Govind died leaving Annapurnabai his widow, two sons Dattatraya and Tukaram, and a daughter the present plaintiff. In 1901 Dattatraya died and Tukaram was a lunatic. In 1902, Annapurnabai, as the guardian of her lunatic son Tukaram, passed a second mortgage in favour of defendant No. 1; and in 1907 passed two permanent leases, one in favour of defendant No. 1, Exhibit 55, and another in favour of defend-No. 2, Exhibit 56. Tukaram died and the plaintiff as the heir of Tukaram brought a suit for redemption of the mortgage, contending that the leases passed by Annapurnabai in the year 1907 were not binding on her.

3. The learned Subordinate Judge held that the leases were not binding, as the transactions were not fair and the rent reserved was almost nil. On appeal, the learned First Class Subordinate Judge, A.P., held that the leases were granted for a very lowrent, and that both the leases were unfair transactions, not at all beneficial to the lessor, and that the leases were not binding on the plaintiff.

4. On second appeal, Baker J., following the decisions in the cases of Subrao Mangeshaya v. Manjapa Shetti ILR (1892) 16 Bom. 705 and Ram Narain Pattack v. Surathnath Pandapadhya (1920) 5 P.L.J. 423, held that the leases were not binding on the present plaintiff, and further accepted the finding of the lower Courts that the terms of the leases were unfair.

5. It is urged in this Letters Patent appeal that though a permanent lease entered into at the time of the mortgage would amount to a clog on the equity of redemption, a subsequent agreement of permanent lease would be valid according to the decisions in Samuel v. Jarrah Timber and Wood Paving Corporation [1904] A.C. 323 and Lisle v. Reeve [1902] 1 Ch. 53, confirmed in appeal in Reeve v. Lisle [1902] A.C. 461.

6. It appears that the decision in Subrao Mangeshaya v. Manjapa Shetti is based on the decisions in two cases, Webb v. Rorke (1806) 2 Sch. & Lef. 661 and Hickes v. Cooke (1816) 4 Dow. 16 In the first case it was held that a lease for a long term of years (as 999 years), at a rent no higher than would be reserved on a common occupation lease if the rent were a fair rent, would be set aside, even without the circumstance of oppression . or fraud on the principle that the parties were not on equal terms and that such a lease was in effect parting with the inheritance. In the second case it was held that a lease from a mortgagor to a mortgagee will be looked at with suspicion, especially if the latter obtains any ad vantage beyond his interest. In Subrao's case the permanent lease subsequent to the mortgage was held not binding on the mortgagor on the ground that the permanent lease would diminish the value of the equity of redemption; and no acquiescence could be inferred as it was not alleged that rent was received by the mortgagor. In Ram Narain v. Surathnath Das J. doubted whether a subsequent lease by the mortgagor to the mortgagee might be called a clog on redemption but though a mortgagee might take a release of the equity of redemption from the mortgagor, he may not take from him an interest such as a long lease with the result that the value of the estate is materially lessened. The question whether a permanent lease subsequent to a mortgage would or would not amount to a clog on the equity of redemption has not been authoritatively decided in any of the reported decisions.

7. In the circumstances of the present case, it is found by both the lower Courts that the rent reserved by the leases was low and the terms of the leases were unfair, and the transaction taken as a whole was unfair and not beneficial to the lessor. It is urged on behalf of the appellant that having regard to the pleadings that issue ought not to have been raised. It appears that the issue was raised by the learned Subordinate Judge and a finding was recorded against the appellant, and in the memorandum of appeal no objection was taken to the raising of the issue. The lower appellate Court recorded a finding against the appellant, and before Baker J. that finding was not challenged, and it was accepted by the learned Judge. If the transaction of the permanent lease is unfair, it cannot be acted upon by the Courts even if it be subsequent to the transaction of the mortgage. Under these circumstances, it is unnecessary to go into the question whether a permanent lease subsequent to the mortgage transaction would be a clog on the equity of redemption. In a proper case the question might be considered and referred if necessary to a Full Bench. Having regard to the finding which has been accepted by both the Courts below, and by the High Court in second appeal, we think that there is no ground to interfere in this Letters Patent appeal.

8. The appeal must, therefore, be dismissed with costs.

Broomfield, J.

9. I agree that we are bound by the finding of fact of the trial Court and the first appellate Court-a finding which was not questioned apparently in the argument before Mr. Justice Baker in second appeal-that these permanent leases taken by the mortgagees from the guardian of the mortgagor , were unfair transactions as being for a totally inadequate rent. If that is to be taken as so, Mr. Coyajee for the appellant cannot deny that the leases cannot be held binding on the mortgagor even on the strength of the authorities which he cited. Thus, in Stantley v. Wildc [1899] 2 Ch. 474, Romer L.J. said (p. 478):-

I take it that it is clearly established now, in the first place, that there is no such principle as is suggested, namely, that a mortgagee shall not stipulate for any collateral advantage for himself. He may so stipulate; and, if he does, he may obtain a collateral advantage: nothing can be said against it, and he can enforce it, always assuming that the bargain is not unconscionable or oppressive

10. I agree with the contention of Mr. Thakor in this case that, in the circumstances in which these leases were taken, it was the duty of the mortgagees to show that the transactions were not of that character.

11. On the legal point, the judgment of Sir Charles Sargent in Subrao Mangeshaya v. Manjapa Shetti ILR (1892) 16 Bom. 705 clearly supports the decision of Mr. Justice Baker. That case has never been dissented from. On the other hand, it has been recently followed in Bam Natrain Pattack v. Surathnath Pandapadhya (1920) 5 P.L.J. 423. The recent English cases cited on behalf of the appellant do not deal with leases, and although there may not at first sight appear to be much distinction between a permanent lease of mortgaged property in favour of the mortgagee and a sale of the equity of redemption to him, there may (SIC) be a material distinction as has been explained in Webb v. Rorke (1806) 2 Sch, & Lef. 661, which is one of the cases relied on in Subrao Mangeshaya v. Manjapa Shetti. The question whether the decision in the latter case is in any way affected by the English decisions cited by Mr. Coyajee may well be left for consideration when necessary in a case in which that legal question necessarily arises.

12. There is one other point on which I desire to make a few remarks in connection with Subrao Mangeshaya v. Manjapa Shetti. In that case two questions arose, firstly, whether the mulgeni or permanent lease executed during the pendency of a mortgage was legally valid, and, secondly, whether, on the view that it was not valid, it was open to the plaintiff to challenge it by reason of the fact that he had acquiesced in it. The actual finding was that there had been no acquiescence, but it would appear from the judgment of Sir Charles Sargent that if the finding had been the other way, the lease would not have been set aside. In the case before us also, Mr. Coyajee has contended that there has been acquiescence on the part of the mortgagor. He has pointed out that these permanent leases were executed in 1907, that Anna-purnabai, the guardian of the mortgagor, who executed them survived until 1914, and during her lifetime never raised any objection to them, and that the suit in which the leases were challenged was not brought until the year 1923, that is, nine years after Annapurnabai's death. To that, however, the learned counsel for the respondents has suggested what appears to me a convincing answer. He has pointed out that the first mortgage, Exhibit 53, was executed in the year 1897, and was for a period of fifteen years That would take us to 1912, The second mortgage, Exhibit 52, was executed in the year 1902, and was for a period of twenty years. Until the year 1922, therefore, one year before the suit, the mortgagees would be entitled to possession any how, they would be liable to account for the profits, and, under the terms of the mortgage-deed, they would be liable to pay the assessment, an item which is recited as though it were a part of the rent in the permanent leases. Under these circumstances, it appears to me that the fact that no steps were taken to get these leases set aside before 1923 cannot be said to amount to acquiescence on the part of the mortgagor.

13. I agree that the appeal should be dismissed with costs.


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