(1) This is an application filed by the insolvent Mohanarangiah Chetty under the following circumstances. He had been carrying on business in textiles at No. 90 Godown St. Madras for 20 years. He contracted debts in the trade and he was adjudicated insolvent on 21-1-1964 on a creditor's petition. During the pendency of the insolvency proceedings, one creditor, Devi Singh, had obtained and order for attachment before judgment of the stock-in-trade in the place of business. Later, the Official assignee took vacant possession thereof on 3-2-1964. He has locked up the premises. The insolvent says in the application that there are several businessmen who are prepared to take him as a working partner, if permission could be given by this court to carry on the textile business at No. 90 Godown Street. He says that the persons concerned had promised that the insolvent himself would not have any liability for the loss or debts in the business. He says that if permission is granted he is prepared to make arrangements with the landlord for the running of the business there. He submits that the lease was not for any fixed term and there was no leasehold right to vest in the Official Assignee, and the Official assignee would not be liable for the future rents. He points out that he has a large family and has no other source of income to maintain himself and his family. He undertakes to keep regular accounts and to abide by the directions of the court in the conduct of the business.
(2) The application is opposed by the Official Assignee. In the course of the hearing of the petition I felt it desirable to issue notice to the landlady of the premises. She appeared by counsel Sri. A. Subramaniam.
(3) The main question which was mooted in the arguments before me by Mr. S. Rangaswami Aiyangar, learned counsel for the insolvent-applicant, was that though in its inception the tenancy might have been a monthly tenancy governed by the provisions of the Transfer of Property Act, yet after the passing of the Acts relating to the letting of residential and non-residential buildings in the city, the last of which is the Madras Buildings (Lease and Rent Control) Act, 1960 (Act 18 of 1960) the insolvent became a statutory tenant and the relationship between him and the landlord (the term used in the Act, which includes even the landlady) would be governed by the provisions of the Act and on a true construction of these provisions he has only a personal right to occupy the premises as a tenant that this personal right is not property within the meaning of S. 17 of the Presidency Towns Insolvency Act, which would vest in the Official Assignee, that consequently, the Official Assignee need not fear that he would be liable to pay rent for the future occupation of the premises, that the question of future occupation of the premises is one which concerns only the insolvent and the landlady and that the Official Assignee has no right to retain possession of the keys.
The learned counsel conceded that if the landlady should choose to evict the insolvent following the procedure prescribed under the Madras Buildings (Lease and Rent Control) Act, 1960 he would have to submit to it in due course. In support of his contention that the insolvent's right of occupation is only statutory under the provisions of the Madras Buildings (Lease and Rent Control) Act and is not property which can vest in the Official Assignee, the learned counsel has cited the decision of Bhagwati J. (as he then was) in Peregrino Rodrigues, in Re ILR 1945 Bom 702: (AIR 1945 Bom 173). That decision certainly supports the contention. That decision was given under the Bombay Rent Restriction Act 1939, and it was held that the statutory tenancy to which the insolvent became entitled by virtue of the Act was not property within the meaning of Section 62 of the Presidency Towns Insolvency Act, and did not vest in the Official Assignee by the adjudication order and it was not therefore necessary for the Official Assignee to disclaim any interest therein.
The learned Judge followed the decision in Sutton. Dorf, 1932-2 KB 304. To the same effect as the decision in 1932-2 KB 304 is the decision of the Court of Appeal in Smith v. Odder, 1949 WN 249. It is unnecessary to go into the facts of these cases in further detail. It insufficient to refer to the provisions of the Madras Buildings (Lease and Rent Control) Act, 1960, which support the contention. The definition of tenant in S. 2(8) runs thus:
"Tenant means any person by whom or on whose account rent is payable for a building and includes the surviving spouses, or any son, or daughter or the legal representative of a deceased tenant who had been living with the tenant in the building as a member of the tenant's family upto the death of the tenant and a person continuing in possession after the termination of the tenancy in his favour, but does not include a person placed in occupation of a building by its tenant or person to whom the collection of rents or fees in a public market, cart-stand or slaughter house or of rents for shops has been farmed out or leased by a Municipal council or district board or the Corporation of Madras".
It will be seen that under this definition the Official Assignee on whom the property of the insolvent would devolve under S. 17 of the Presidency Towns Insolvency Act cannot come in. Indeed there are restrictions enacted in the Madras Buildings (Lease and Rent Control) Act, 1960 on the right of the tenant (insolvent) to sublet or transfer the premises occupied by him. Section 10(2)(ii)(a) of Madras Act 18 of 1960 says that if a tenant transfers his right or sublets the entire building or any portion thereof and if the lease in his favour does not confer on him the right to do so, he is liable to be evicted on that ground by the landlord. This provision is a marked departure from the provisions of the Transfer of Property Act under which if there is no prohibition against subletting, the tenant can sublet the premises. Equally, while under the Transfer of Property Act mere non-payment of rent will not entail eviction in the absence of express provision to that effect, under the provisions of Madras Act 18 of 1960, non-payment of rent will be a ground for eviction under S. 10(2)(i). The fact that the lease may be for a fixed period is of no particular relevance on the question of sub-letting under the provisions of Madras Act 18 of 1960.
The circumstance that the lease is for a fixed period will ensure to the benefit of the tenant only in the contingency of the landlord requiring the premises for his own occupation. section 10(3) enacts the circumstances under which the landlord can obtain possession of his building for his own occupation. section 10(3)(d) enacts:
"Where the tenancy is for a specified period agreed upon between the landlord and the tenant, the landlord shall not be entitled to apply under this sub-section before the expiry of such period." It is unnecessary to labour further the point that the provisions of the Madras act 18 of 1960 have substantially modified the provisions of the Transfer of Property Act and the provisions of the former act will prevail.
(4) The above considerations are enough to show that the right of occupation of the insolvent in the premises is not property within the meaning of S. 17 of the Presidency Towns Insolvency Act so as to vest in the Official Assignee. This view as already stated finds support in the decisions already referred to
(5) The Official assignee cited the decision in Stafford v. Levy, 1946-2 All ER 256 but that case is distinguishable. Though it says that there may be some inaccuracy in the statement of facts in 1932-2 KB 304 no doubt is cast on the proposition that where the insolvent is in possession under statutory tenancy that right does not vest in the Official Assignee. This proposition has been adopted as correct by the text book writers also. Thus Williams on Bankruptcy 17th Edn. states at page 404.
"Statutory tenancy under the Rent Restriction Acts is not property of the statutory tenant within the meaning of S. 167 and therefore does not pass to his trustee and cannot be disclaimed "(The decisions referred to are 1932-2 KB 304 and 1949 WN 249 (256)."
Similarly in Hall and Redman's Law of Landlord and Tenant 13th Edn. page 1034, it is stated:
"If a statutory tenant becomes bankrupt, the tenancy does not vest in the trustee in bankruptcy" and Sutton v. Dorf. 1932-2 KB 304 is cited in support.
Similarly in Halsbury's Laws of England. Vol. 3 paragraph 1586, page 806 it is stated.
" A statutory tenant has no interest to assign or transmit by will or to his trustee in bankruptcy" and the cases cited in support are 1932-2 KB 304 and 1949 WN 249 (256). Reference may also be made to the instructive decision of Jagadisan and Kailasam J.J in Ganapathi Iyer v. Ayyakannu, 1961-1 Mad LJ 217 under the Madras Cultivating Tenants Protection Act XXV of 1955, where also it was laid down that the interest in the land of the cultivating tenant is purely personal to him and his heirs and cannot be subset.
(6) It follows from the above discussion that the Official Assignee has no right to retain the keys of the premises, since they were taken from the possession of the insolvent. They must be restored to the insolvent and they cannot be handed over to the landlady. The landlady can recover possession of the premises from the insolvent only by following the provisions of Madras Act 18 of 1960. That right is left open.
(7) As for the prayer of the insolvent to be allowed to do business in the premises I am not inclined to grant any such permission. This however is not intended to prevent him from carrying on business himself, if otherwise he is entitled to do so, so long as he observes the provisions of the Presidency Towns Insolvency Act, 1909. For instance, the assets and profits that he acquires in the new business will vest in the Official Assignee and he would be liable for punishment in the criminal court if he borrows Rs. 50 or more from a creditor with out disclosing that he is an undischarged insolvent.
(8) The petition is accordingly allowed to the extent that the Official Assignee is directed to deliver the keys of the premises No. 90 Godown Street to the insolvent, but is otherwise dismissed. The right of the landlady to evict the insolvent is left open.
(9) Order accordingly.