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Bhatt Vs. B. Ratnakara Rao and anr. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKarnataka High Court
Decided On
Case NumberCivil Revn. Petn. No. 304 of 1964
Judge
Reported inAIR1966Kant147; AIR1966Mys147; (1965)1MysLJ731
ActsTransfer of Property Act - Sections 108
AppellantBhatt
RespondentB. Ratnakara Rao and anr.
Excerpt:
.....to pay came to end when there was assignment of lease by him to defendant no. 2 - incase of lease lessee between whom and lessor there is privity of contract cannot divest himself of his liability to lessor by making assignment of lease - assignment of lease result in privity of estate between assignee and lessor - as such both assigning lessee and assignee become liable to lessor for payment of rent - held, defendant no. 1 liable to pay rent. held see para 7. - labour & services. dismissal from service: [subhash b. adi, j] dispensation of disciplinary enquiry - electricity (supply) act (54 of 1948) section 79 and karnataka electricity board employees (conduct, discipline, control & appeal) regulations, 1987, regulation 14 petitioner alleged to have been involved in theft -..........become liable to the lessor for the payment of rent, and until between the assignee and the lessor a privity of contract is established by the collection of rent by the lessor from the assignee, the privity of contract between the lessee and the lessor continues and does not come to an end. that was the exposition of the law made by the privy council in ram kinjar banerjee v. satya charan in which lord porter said this at p. 16:'by english law and by indian law an assignee of a lease is liable by privity of estate for all the burdens of the lease, burdens which are imposed upon him by the mere assignment whether he enters into possession or not; see kunhanujan v. anjelu, ilr 17 mad 296 and saldanha v. subraya hebbara, ilr 30 mad 410. the ground upon which he is held liable is that.....
Judgment:
ORDER

(1) This revision petition springs from a suit brought by a lessor for the recovery of rent. The lease was an ancient mulgem lease between the ancestors of the plaintiff and the ancestors of defendant 1. It is not disputed that defendant 1 as the manager of the Hindu joint family to whom the lease was originally granted, was in occupation and possession of the land until 1959 paying the agreed rent to the plaintiff. But on May 11, 1955, under Exhibit B. 3 defendant 1 sold a portion of the property to defendant 2. He made yet another sale under Exhibit B. 4 on March 2, 1957 of the remaining property. On March 5, 1959 a registered notice Exhibit B. 1 was sent by both defendants 1 and 2 to the plaintiff intimating him that there was a sale. On February 26, 1963, the plaintiff brought his suit for the recovery of a sum of Rs. 159 which, according to him, was the rent due for a period of three years following the second sale under Exhibit B. 4. In the plaint, the plaintiff sought a decree against defendant 1 who, according to him, was his lessee. He also asked in the alternative for a decree against such defendant as in the opinion of the Court was liable to pay the rent.

(2) Defendant 2 did not contest the claim but defendant 1 repudiated his liability on the ground that his liability to pay the rent came to an end when there was an assignment of the lease by him to defendant 2 under the two documents Exhibits B. 3 and B. 4. The Court below overruled that contention and made a decree against both the defendants. The petitioner before me is defendant 1 who questions the correctness of that decree.

(3) The only argument addressed before me by Mr. Holla was that the privity of contract which existed between defendant 1 and the plaintiff in respect of the lease between them came to an end when there was a sale of the leased properties in favour of defendant 2. He submission was two-fold. The first was that in law a lessee between whom and the lessor them is a privity of contract has the liberty to terminate that privity of contract and end it by an unilateral act such as the assignment of the lease. The second submission was that the omission on the part of the plaintiff to send any reply to the notice sent to His Majesty on March 5, 1959 amounted to the recognition of the substitution of defendant 2 as lessee in place of defendant 1.

(4) The second submission is, it is obvious without any substance. It is true that in Exhibit B. 1 which was the notice sent by both the defendants, the plaintiff was intimated that is consequence of the sale made to defendant 2 of the rights in the mulgeni lease, the liability to pay rent had ceased and defendant 2 was the only person from whom the plaintiff could recover the rent. It was open to the plaintiff to ignore the notice and to continue to regard defendant 1 as his tenant, if, in law, the lease between defendant 1 and the plaintiff continued. That that is the correct position was explained by the Privy Council in Satya Niranjan v. Surajbala Debi, AIR 1939 PC 13.

(5) Turning to the first submission, it should be observed that although the lease was as ancient lease there was a privity of contract established between plaintiff and defendant 1 when defendant 1 entered on the property of lessee and paid rent to the plaintiff and continued to do so. That defendant 1 was paying rent to the plaintiff in that way on behalf of the joint family of which he was the manager, was not disputed before me. Although defendant 1 was not the original lessee, there was a privity of contract between him and the plaintiff in consequence of defendant 1 entering on the land in that way and the payment of the rent to the lessor.

(6) That a privity of contract was established in that way between the plaintiff and the defendant 1 was not between the plaintiff and defendant 1 was not disputed by Mr. Holla. He, however, asserted that that privity of contract ceased to exist and disappeared when there was an assignment of the lease to defendant 2.

(7) It is a firmly established principle that in the case of a lease, the lessee between whom and the lessor there is a privity of contract, cannot divest himself of his liability to the lessor by merely making an assignment of the lease. The assignment of the lease may result in a privity of estate between the assignee and the lessor in consequence of which, both the assigning lessee and the assignee become liable to the lessor for the payment of rent, and until between the assignee and the lessor a privity of contract is established by the collection of rent by the lessor from the assignee, the privity of contract between the lessee and the lessor continues and does not come to an end. That was the exposition of the law made by the Privy Council in Ram Kinjar Banerjee v. Satya Charan in which Lord Porter said this at p. 16:

'By English Law and by Indian law an assignee of a lease is liable by privity of estate for all the burdens of the lease, burdens which are imposed upon him by the mere assignment whether he enters into possession or not; see Kunhanujan v. Anjelu, ILR 17 Mad 296 and Saldanha v. Subraya Hebbara, ILR 30 Mad 410. The ground upon which he is held liable is that the whole of the assignor's interest has passed to him by the deed of assignment and that the assignor having no longer any interest cannot be liable by privity of estate though he still remains liable to contract if he was party to the original lease.'

This principle founded by the Privy Council is what also section 108(j) of the Transfer of Property Act incorporates. That clause provides that although a lessee may transfer absolutely or by way of mortgage or sublease 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. That this principle is a principle of justice, equity and good conscience and would govern also agricultural leases to which the provisions of the Transfer of Property Act are not applicable was what was explained by the High Court of Madras in ILR 30 Mad 410.

(8) This principle was reaffirmed by Rajamannar C.J. in Krishna Bhatta v. Narayana Acharya, AIR 1949 Mad 618, in which he expressed the view that while the liability of the transferee rests on a privity of estate, the liability of the original lessee would continue, as it rested on a privity of contract although such liability would cease to exist when the lessor collects the rent from the transferee.

(9) But Mr. Holla urged that the principle enunciated by the Privy Council in Ramkinkar's cas and in Krishna Bhatta's case, AIR 1949 Mad 618 was applicable only where the transferring lessee was the original lessee between whom and the lessor then in existence the lease came into being. This submission was founded upon the words 'original lease' and 'original lease' were used by Rajamannar C.J. in the two decisions referred to above. The words 'original lessee' were used by Rajamannar C.J. by reason of the fact that the original lessee was himself the person who had made the first assignment although there was a further assignment by the assignee in the case before him. Although lord Porter did not use the words' original lessee' but alluded to the liability by a person who was a party to the 'original lessee' there cannot be any doubt about the applicability of the rule enunciated by the Privy Council even to cases where although the original lessee is dead, there is privity of contract between his heirs and the heirs of the original lessor. Once privity of contract comes into being, no other principle than that which was enunciated by the Privy Council can have any application.

(10) Mr. Holla, however, stoutly maintained that even if there be a privity of contract between the original lessor and original lessee or between their legal representatives or heirs, it was possible for the lessee to terminate his liability under the contract arising out of the contractual relationship by first making an assignment of the lease to someone and by unilateral repudiation of his liability thereafter. That the decision in Taylor v. Shum, (1797) I Bos and Pul 21; 126 ER 755, supports that postulate was Mr. Holla's submission.

(11) I do not find any such enunciation in that case. The premises in that case were demised in the year 1788 by the plaintiff to one Hanah Adamas for twenty one years and afterwards came by several mesne assignments to one Sibley. In the year 1792 Sibley mortgaged the lease to the defendants who on his becoming insolvent and abandoning the premises, took possession of the premises and paid the rent up to Christmas 1795. Then they offered to surrender the premises to the plaintiff and on his refusal to accept, assigned over to William Bishop. Thereafter the defendants were not in possession of the property, nor did they pay any rent. Bishop also did not take possession.

(12) In an action commenced by the plaintiff for recovery of rent from the defendants it was contended that by reason of the assignment made by the defendants to William Bishop, their liability to pay the rent came to an end. That that contention succeeded on the ground that the defendants could assign to whomsoever they pleased and so destroy their own hability.

(13) By the same process, according to Mr. Holla, defendant 1 had also destroyed his own liability. The assignment of the lease to defendant 2 was according to him what brought about the destruction.

(14) But this argument overlooks the distinction between a liability arising out of a privity of contract and a liability arising out of a privity of estate. Whereas in the case of a liability arising out of a privity of estate, such liability perishes where there is an assignment of the lease, the liability is no so destroyed where there is a privity of contract. The liability being one whose source is the contractual relationship cannot be got rid of except by agreement. If the true principle is that although a liability arising out of a privity out of estate comes to an end when there is an assignment of the lease and that a liability arising out of privity of contract does not so come to an end, it is difficult to understand on what principle it could be said that even the liability arising out of a privity of contract can be made to perish by mere assignment by the lessee to someone. Such assignment can produce only a privity of estate between the lessor and the assignee and until that privity of estate gets transformed into a privity of contract which can happen if the lessor collects the rents from the assignees the assignor lessee continues to be liable to perform his obligations under the lease.

(15) In (1797) 1 Bos and Pul 21: 126 ER 755 the action was founded as pointed pout by Heath J. On the privity of estate. It was not founded on the privity of contract. So, it is quite intelligible that the defendants' contention that by reason of the assignment which they made in favour of Willian Bishop, the liability whose source was the privity of estate disappeared, succeeded.

(16) Mr. Holla, however, maintained that it was not very clear from the decision whether the action was not really founded on the privity of contract. It is plain that he is not right in making that submission. That the action was founded only on the privity of estate is what is more than manifest from what Heath J. observed.

(17) The view that I am disposed to take in this case has the support of two decisions of the High Court of Calcutta on which Mr. Rama Kamath depended. In Manmatha Natha v. Balai Chandra Bag : AIR1924Cal359 the legal representative of the original lessee was held not absolved from his liability to perform the convenants of the lease after there was an assignment by him. In Manmath Nath v. Nalinaksh Rai : AIR1925Cal423 the view expressed was that an assignment would not destroy the liability of a lessee between whom and the lessor there was a privity of contract.

(18) There is, however, some dependence placed on the decree in the form in which it was made by the court below. That decree was made against both the defendants and it was said that what established privity of contract between defendant 2 and the plaintiff is the fact that the plaintiff now holds a decree against defendant 2 for the rent payable to him under the lease. It is clear that that does not follow from the decree. Defendant 2 between whom and the plaintiff there was a privity of estate was equally liable to pay the rent, but that liability does not become altered into a liability having for its source a privity of contract until there is realisation of rent by the plaintiff from defendant 2. And of that there is no evidence.

(19) In my opinion, this revision petition has to fail and I dismiss it with costs.

(20) Revision dismissed.


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