1. The appellant in this second appeal claims compensation, for the value of the superstructure erected by him on a vacant site in which he was let into possession under certain terms and conditions, invoking the doctrine of equitable estoppel as enunciated in Ramsden v. Dyson, (1865) 1 H.L. 129,
2. C. A. Subramania lyer obtained an assignment of a bit of property from the Ramnad Samas-thanam as it was before the enactment of the Madras Estates Abolition Act. As owner of the property Subramania Aiyer let into possession Alagiriswami Kone enabling him to occupy an extent of 1-1/2 cents on his paying a monthly rental of Rs. 3. Alagirisami put up a hut in the year 1946 and conducted a grocery business therein.
In 1948, according to Alagirisami, there was an agreement between him and Subramania lyer under which he was allowed to build a pucca masonry structure, on the demised land at his own cost with 4definite promise on the part of Subramania lyer not (to evict him so long as he continued to pay the ground rent of Rs. 3 per month and also to sell the site to him in case he wanted to sell away the property. On this assurance on the part of Subramania Aiyar arising out of the agreement referred to Alagirisami constructed a structure of substantial value on the property.
The relationship between Subramania Aiyar and Alagirisami continued cordially till Subramania Ayar sold the property under Ex. A. 1 dated 20-9-1951 in favour of one T. J, Antony. The purchaser Antony caused a notice to be issued through, his counsel to Alagirisami to quit and deliver possession of the property as evidenced by Ex. B. L dated 18-2-1952, A reply to this was sent by Alagirisami under Ex. A. 9 dated 27-2-1952 setting out the circumstances under which Be was in possession of the property.
3. O. S. No. 5 of 1953 on the file of the District Munsiff's Court, Ramnad, 'was instituted by Antony for recovery of possession of the said 1-1/2 cents of property from Alagirisamy impleaded as the defendant in the suit. The plaintiff averred that after he purchased the property from C. A, Subramania lyer for Rs. 750 under the registered sale deed dated 20-9-1951 he orally leased out the suit site togetherwith the building thereon to the defendant on a rental of Rs. 5 per month.
He complained that the defendant failed to paythe rent and that he also failed to deliver possession on notice to quit. The plaintiff also claimed a sun of Rs. 68-5-4 stated to be arrears of rent from 20-9-1951 the date of purchase, to 10-11-1952, at the rate of Rs. 5 per month. This amount was claimed by the plaintiff alternatively, in the event of the court finding that there was no letting out of the property by him to the defendants, as damages for use and occupation of the premises by the defendant
4. The defendant resisted the suit and based himself entirely on the oral agreement between himself and the plaintiff's vendor under which he claimed to be a perpetual tenant not liable to be evicted. He also claimed the right of pre-emption. He denied the oral lease as alleged by the plaintiff of his having let out the property to him on a rental of Rs. 5 per month after his purchase. He further contended that in any event he is not liable to be evicted without being compensated for the value of the superstructure put up by him on the property under the terms of the agreement between himself and the said Subramania lyer.
5. At the trial of the suit before the learned District Munsiff of Ramnad the defendant practically gave up the plea of permanent tenancy and the plea based upon the right of pre-emption. He was willing to be evicted from the suit property provided adequate compensation was afforded to him in respect of the superstructure erected by him on the demised property.
The learned District Munsiff found that the case of the plaintiff of an oral lease between him and the defendant was untrue. He also found that the oral agreement pleaded by the defendant between himself and Subramania Aiyar relating to the terms and conditions under which the superstructure came to be erected was true. He assessed the value of the superstructure in the sum of Rs. 611-10-0.
He found that the plaintiff will be entitled to damages for use and occupation from the defendant only at the rate of Rs. 3 per month. Accordingly a decree for possession of the suit properties conditional on payment by the plaintiff of Rs. 611-10-0 to defendant by way of compensation for the superstructure and for recovery of a sum of Rs. 41 by way of damages for use and occupation by the defendant: for the period 20-9-1951 to 10-11-1952 was passed.
6. The plaintiff preferred an appeal, in A. S. No, 34 of 1958 on the file of the Sub Court, Siva-ganga. The learned Subordinate Judge confirmed the finding of the trial court that the oral lease put forward by the plaintiff was absolutely untrue. He also concurred with the finding of the trial court that the superstructure was put up by the defendant at a cost of Rs. 611-10-0, He did not upset the find-ling of the trial court on the question of the agreement between the defendant and Subramania Aiyar. But the learned Subordinate Judge however held that the plaintiff was not liable to pay any compensation to the defendant for the value of the superstructure on the ground that neither the provisions of Section 51 of the Transfer of Property Act nor the rule of equitable estoppel had any application to the facts and circumstances of the case. The learned Subordinate Judge therefore granted an absolute decree for possession in favour of the plaintiff but granted three months time to the defendant for removal of the superstructure.
7. This second appeal has been preferred by the aggrieved defendant. The only question for consideration is whether the lower appellate court was right in holding that the defendant was not entitled to the compensation for the value of the building erected by him on the demised property. It is clear that Section 51 of the Transfer of Property Act cannot, help the defendant to get the compensation.
The applicability of Section 51 is confined to transferee who in good faith believes himself to be absolutely entitled to the property in respect of which he makes any improvement A lessee simpliciter is of course not a person absolutely entitled to the demised property and it cannot be said that any improvement made by a lessee was made under the belief that he was absolutely entitled to the property.
Section 108 Clause (b) of the Transfer of Property Act provides that the lessee may even after the termination of the lease remove at any time whilst he is in possession of the property leased but not afterwards all things which he has attached to the earth provided he leaves the property in the state in which he received it The ordinary incidence of the relationship between a landlord and tenant cannot extend beyond what is provided for under Section 108(h) of the Transfer of Property Act, in respect of the superstructure that may come up on the leasehold property at the instance of the lessee.
There cannot be any right on the part of the lessee to compel the lessor to pay compensation to him at the expiration of the lease for improvements made on the land as otherwise it may help the lessee to improve the land beyond all the means of the lessor to get back the property. The law does not recognise the lessee's light to improve the leaseholdestate from out of the lessor's estate which may in some extreme cases cause the lessor deprivation of the estate itself.
8. There is a long line of authority of this court, too numerous to be cited, taking the view that a lessee is not entitled to the benefits of Section 51 of the Transfer of Property Act. Indeed the very language of the statute is so clear and explicit that it is impossible for a lessee to claim the benefit of that provi-sion.
9. But the doctrine of equitable estoppel, or (he rule in (1865) 1 H.L. 129, as it may be call-ed, lies outside the statutory provisions of the Transfer of Property Act. That rule goes far beyond the principle embodied in Section 51 of the Transfer of property Act. That rule is not excluded by Section 51 of the Act, I shall first refer to the rule in (1865) 1 H.L. 129. The headnote in that report sets out the principles laid down therein as follows :
'If a stranger begins to build on laud supposing jt to be his own, and the real owner, perceiving his mistake abstains from setting him right, and leaves him to persevere in his error, a court of equity will not afterwards allow the real owner to assert his title to the land.
But if a stranger builds on land knowing it to be the property of another, equity will not prevent the real owner from afterwards claiming the land, with the benefit of all the expenditure upon it.
So if a tenant builds on his landlord's land, he does not, in the absence of special circumstances, acquire any right to prevent the landlord from taking possession of the land and buildings when the tenancy has determined.
If the tenant being a mere tenant at will, builds on the land in the belief that he thereby acquires a title afterwards to claim a lease of the land, and the landlord allows him so to build, knowing that he is acting in that belief and does not interfere to correct the error, semble, that equity will interfere to compel the grant of a lease.'
10. On the facts in the said case there was a difference of opinion between Lord Kingsdown, theonly dissenting learned Law Lord, and the other learned Law Lords in the case. But so far as the principle of law was concerned, there was a consensus of legal opinion. Lord Wensleydale enunciated the rule thus at page 168 :
'If a stranger build on my land, supposing it to be his own, and I, knowing it to be mine, do not interfere, but leave him to go on, equity considers it to be dishonest in me to remain passive and afterwards to interfere and take the profit. But if a stranger build knowingly upon my land, there is no principle of equity which prevents me from insisting on having back my land, with all the additional value which the occupier has imprudently added to it. If a tenant of mine does the same thing, he cannot insist on refusing to give up the estate at the end of his term. It was his own folly to build.'
10a. Lord Kingsdown at page 170 observed as follows:
'The rule of law applicable to the case appears to me to be this: If a man, under a verbal agreement with a landlord for a certain interest in land, or, what amounts to the same thing, under an expectation, created or encouraged by the landlord, that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, will the knowledge of the landlord, and without objection by him, lays out money upon the land, a court of equity will compel the landlord to give effect to such promise or expectation .....'
l0b. Lord Kingsdown further observed at page 171:
'If, on other hand, a tenant being in possession of land, and knowing the nature and extent of his interest, lays out money upon it in the hope or expectation of an extended term or an allowance for expenditure, then, if such hope or expectation has not been created or encouraged by the landlord, the tenant has no claim which any court of law or equity can enforce. This was the principle of the decision in Pilling v. Armitage, (1805) 12 Ves 78 and like the decision in Gregory v. Mighell, (1811) 18 Vea 328, seems founded on the plain rules of reason and justice.'
11. The Judicial Committee in Beniram v. Kundanlal, I.L.R. All 496 referred to (1865) 1 H.L. 129, and stated the principle thus at p, 502:
'In order to raise the equitable estoppel which was enforced against the appellants by both the appellate courts below, it was incumbent upon the respondents to show that the conduct of the owner, whether consisting in abstinence from interfering, or in active intervention was sufficient to justify the legal inference that they had, by plain implication, contracted that the right of tenancy, under which the lessees originally obtained possession of the land, should be changed into a perpetual right of occupation.'
In Forbes v. Ralli , the Judicial Committee extracted the above observation of Lord Kingsdown in (1865) 1 H.L. 129, and referred to it with approval. In that case in 1894, the appellant agreed to give in writing to the respondent a lease of a plot of land for the purpose of erecting buildings. The lease was from year to year at an annual rental of Rs. 180, In 1903, the respondents wanted to build a pucca house upon, the land and the appellant wrote a letter stating that the lease was a permanent lease, though the rent was liable to enhancement,
Acting upon that letter the respondent built a house; the appellant knew of the building and also received a bonus in respect of it. In 1916 the appellant sued to eject the respondent from the land. It was held that whether or not the letting was a permanent one, the statement in the letter that it was so was a representation of fact, and that the appellant was estopped under Section 115 of the Indian Evidence Act from denying that the letting was of that character,
12. In Plimmer v. Wellington Corpn., (1884) 9 A.C. 699, the Judicial Committee had occasion to consider the rule in (1865) 1 H.L. 129. in great detail. In that case the appellant claimed compensation under the Public Works Act, 1832, (New Zealand) on the ground of their having some estate or interest herein within the meaning of that Act. The lessor who demised the property to the appellant had in 1848 created a wharf on the land with the permission of the Government, and had also put up a jetty in 1855.
In 1856 at the request and for the benefit of the Government he incurred large expenditure for the extension of the jetty and for the erection of a warehouse. It was held that the lessor must be deemed to have occupied the ground from 1848 under a revocable licence to use it for the purpose of a wharfinger, that by virtue of some transactions in 1850 such licence ceased to be revocable at the will of the Government whereby the lessor acquired an indefinite, that is practically a perpetual right to the jetty.
The equitable right so acquired was held to be an estate or interest in, to or out of the land within the meaning of the Act of 1882 which directed that on ascertainment of title to compensation the court should not be bound to regard strict legal rights only but should do what is reasonable and just This case of course dealt with the provisions of a particular enactment. But the ground of the decision of the Judicial Committee was really based on the doctrine of equitable estoppel in the light of the rule in (1865) 1 H.L. 129. Sir Arthur Hobhouse stated thus :
'The question still remains as to the extent of interest which Plimmer acquired by his expenditure in 1856, Referring again to the passage quoted from Lord Kingsdown's judgment, there is good authority, for saying what appears to their Lordships to be quite sound in principle, that the equity arising from expenditure on land need not fail merely on the ground that the interest to be secured has not been expressly indicated.'
The legal conception underlying the term equitable estoppel was explained thus by the Judicial Committee in the Canadian Pacific Rly. Co. v. The King, :
'It is a doctrine which is sometimes alluded to under the name of 'equitable estoppel'. Whether ' there can be any estoppel which is equitable as distinct from legal and whether 'equitable estoppel' is an accurate phrase, their Lordships do not pause to enquire. The foundation upon which reposes the right of equity to intervene is either contract, or the existence of some facts which the legal owner is estopped from denying.'
In a decision of this court in Thavasi Ammal v. Aru-muga Nattar. 7 Mad LW 178 : (A.I.R. 1918 Mad. 419), this question of a claim for compensation by a tenant against a landlord based upon the doctrine of equitable estoppel came in for consideration. It was a Letters Patent Appeal and the Bench consist-ed of three learned judges, Sir John Wallis C. J., and Oldfield and Seshaglri Aiyar, JJ,, At page 190 Seshagiri Aiyar J. observed as follows :
'In the well-known case of (1865) 1 HL 129, It was distinctly laid down that mere standing by would not compel the landlord to pay compensation at the time of eviction. What is actually required is that there should be encouragement by the landlord to build and an implied promise that in case the tenant was ejected, he would be compensated. Estoppel of this kind must be based upon something more substantial than failure to object. If, for example, the evidence given in this case by some of the witnesses to the effect that when the building operations commenced, the landlord was asked whether he would turn the tenant out after the expenditure of a large sum of money, and that he promised that they would not be disturbed, were believed, the landlord should not be allowed to eject the defendant with-out paying compensation.'
13. With respect I agree with this observationand I am of opinion that this should be the governing test in deciding this appeal.
14. The learned District Munsif has found as a.question of fact that the defendant built the shop-on the suit property as a result of an understandingbetween him and Subramania Iyer examined as P.W. 2in the case. He has found that P.W. 2 had fullknowledge of the erection of the building and thathe acquiesced in it. He has also pointed out thatthere was evidence to show that the plaintiff wasalso present at the time of the agreement betweenP.W. 2 and the defendant and that he knew about it.The finding of the learned District Judge is recordedas follows:
'Thus on an examination of the authorities produced by both sides I have come to the conclusion that the defendant built the pucca shop under an agreement and bona fide belief that he will not be evicted from the shop in view of his constructing the shop. From the circumstances and the evidence placed before court it will not be difficult to imply an agreement to pay compensation as it would otherwise be inequitable, to turn out the defendant. The plaintiff cannot be in a better position than the vendor. He is bound by the equities that were existing between his vendor and the defendant.'
15. The learned Subordinate Judge has not disagreed with this finding of the trial court as there is no express finding contra. If this finding of fact is accepted by this court, and I see no reason why it should not be accepted, the claim for compensation put forward on behalf of the appellant is well founded and supported by the decisions referred to above.
16. This is not a case where the tenant is claims ing compensation against the landlord merely on the ground that he put up a superstructure to the knowledge of the landlord who failed to protest or to dissuade him from putting up any such Structure. The tenant put up the superstructure in pursuance of an agreement with the landlord Subramania lyer: that he will not be evicted, and that he will also have a right of pre-emption namely the first Option to purchase the property from the landlord if and when he was inclined to sell.
It is implicit in this agreement which has now been found as a fact by the court below that the tenant will not lose the value of the superstructure In any event. The rule of estoppel enunciated in (1865) 1 H.L. 129, is really based on a presumption' of a contract between the parties or what may be called an implied contract. I am satisfied: that on the facts of this case it is possible to infer as was rightly done by the courts below that the tacit agreement between the parties was that the tenant should not be compelled to surrender the superstructure to the landlord, if he were to be evicted but that he should be paid compensation if he were to quit and deliver possession of the site and the superstructure.
17. The second appeal is allowed; the judgment and decree of the learned Subordinate Judge are set aside and the decree of the trial court is restored, The appellant will get his costs in this appeal and in the lower appellate court.