1. The question for determination in this revision petition is whether a receiver appointed under Section 69-A of the Transfer of Property Act is bound by a contract entered into by the mortgagor with the tenant In possession of the mortgaged property subsequent to the creation of the mortgage and subsequent to the creation of the tenancy regarding the repayment of a loan taken by the landlord from the tenant, by adjustment against the rent payable. Both the single Judge of the Small Cause Court and the Bench of that Court on a new trial took the view that the sum of Rs. 650-3-3 admittedly advanced by the tenant to the landlord did not amount to a premium or advance payment of rent and consequently was not hit by Section 65-A(2)(b) of the Transfer of Property Act and the receiver was therefore bound by the agreement between the mortgagor and the tenant. All the three Judges overlooked the fact that the agreement about repayment of the advance made by the tenant to the landlord was not part of the lease transaction Admittedly, this loan and the agreement for repayment of it took place after the creation of the tenancy and has nothing to do with the tenancy itself as part of it. It was an independent arrangement or agreement regarding repayment of the loan from out of the rent payable by the tenant. It is not a term of the lease and it is not also a covenant embodied in the lease transaction. Section 65-A(2)(b) deals with covenants and terms of a lease executed by a mortgagor. It does not deal with any subsequent arrangement entered into by the mortgagor with the tenant of the mortgaged property, regarding repayment of any loan which is not charged upon the property or which has no connection with the leasehold interest in the property.
2. Counsel for the respondent contended that the receiver in this case was bound to honour the arrangement entered into between the mortgagor and his tenant, because the receiver is only an agent of the mortgagor, as provided in Section 69-A Clause (3) of the Transfer of Property Act.
'A receiver appointed under the powers conferred by this section shall be deemed to be the agent of the mortgagor and the mortgagor shall be solely responsible for the receiver's acts or defaults, unless the mortgage deed otherwise provides or unless such acts or defaults are due to the improper intervention of the mortgagee.'
3. This clause creates a fiction in the relationship of agent and principal between the receiver and the mortgagor. It is an accepted principle of law that a fiction should be confined to the purposes for which it was created. The language 'shall be deemed to be the agent' makes it clear that the receiver is only an agent by a fiction. The fiction is created for the specific purpose of holding the mortgagor liable for the acts and defaults of the receiver appointed under Section 69-A. Certainly it does not flow from this that the receiver is bound by every agreement entered into by the mortgagor with the tenant unconnected with the transaction of lease and admittedly independent of the transaction of lease of the property in question. Clause (4) of that section is pertinent in this connection. It reads thus:
'The receiver shall have power to demand and recover all the income of which he is appointed receiver, by suit, execution or otherwise, in the name either of the mortgagor or of the mortgagee to the full extent of the interest which the mortgagor could dispose of...............'
4. The rest of the section is not necessary for my present purpose. The key words in the section are 'to the full extent of the interest which the mortgagor could dispose of'. Obviously, these words refer to the interest in the property which the mortgagor could dispose of. As an example one may conceive of a case where the mortgagor in this case after entering into an agreement with the tenant in question sells the property to a third party who has no notice of this agreement Could it then be said that the agreement entered into by the vendor with the tenant in possession would be binding upon the vendee, the purchaser of the property? It would not be so because the agreement in question did not diminish the extent of the interest which the mortgagor could dispose of in the property. In other words, the agreement in question never came near or affected the mortgagor's interest in the property. It remained all along in independent contract or arrangement for repayment of a loan and had nothing to do or had any connection with the mortgagor's interest in the immoveable property, namely, the house in question. The receiver is therefore not bound to honour such an agreement and he is entitled under Clause (4) of Section 69-A of the Act to sue for and recover all the income which the mortgagor was entitled to from the property. The extent of the mortgagor's right in the property is the only measure of the receiver's power to gather the income. In this view, all the three learned Judges of the Court of Small Causes were wrong in allowing the defence set up to the suit to prevail. The revision is therefore allowed, and the suit is decreed in full as prayed for in the plaint, with costs throughout.