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Pendela Pundarikakshudu Vs. Sontineni Kondayya and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai
Decided On
Reported inAIR1940Mad669; (1940)1MLJ601
AppellantPendela Pundarikakshudu
RespondentSontineni Kondayya and ors.
Cases ReferredTarn v. Turner
Excerpt:
- - 113, were of opinion that a lease could not operate unless it was made in the ordinary course of management and that if it was one on exceptional terms, it ought not to operate......and that before a lease can be declared to be invalid, it is necessary for the person seeking to avoid the lease to strictly prove that the security has not been rendered insufficient, in niader singh v. ram chander : air1935all511 , the amount of property leased was very small and it made no appreciable difference to the mortgage security. in the present case, however, the lease, as already observed, was for a period of ten years; which means that even if the property is sold, the purchaser, whether he be the mortgagor or a third party, can have no hope of getting possession for many years to come. moreover, although the lease was bona fide in the sense that it was for consideration and that the appellant was working only to obtain satisfaction of his own decree, there can be no doubt.....
Judgment:

Horwill, J.

1. The appellant was a simple money creditor of defendants 2 and 3, who executed a mortgage deed in favour of the first defendant on 20th June, 1923, which contained a covenant against leasing the property. The 'first defendant was also an unsecured creditor of defendants 2 and 3 and obtained a simple money decree against them. The first defendant attempted to execute his decree in 1932; but by that time the defendants 2 and 3 had filed an Insolvency Petition, and so the Execution Petition was struck off. The Insolvency Petition was subsequently dismissed; and before the first defendant filed another Execution Petition against defendants 2 and 3, the plaintiff, in order to satisfy his own decree, had persuaded defendants 2 and 3 to execute a lease of the property for ten years. He then filed E.A. No. 2847 of 1933 in the Execution Petition of the first defendant, claiming that the equity of redemption could be sold only subject to his lease. That petition was dismissed, and the plaintiff thereupon filed the present suit for a declaration to that effect. The lower appellate Court dismissed his suit on the ground that under Section 65A of the Transfer of Property Act, such a lease would be void in view of the covenant against leasing the property.

2. It is argued here that Section 65-A would not apply because the mortgage took place before Section 65-A was introduced into the Transfer of Property Act. It is however contended on the other side that although that is true, the lease was actually after Section 65-A was introduced and that Section 65-A therefore applied. On this point I agree with the learned Advocate for the appellant. It is not contended that Section 65-A has any retrospective effect. Its effect was that whereas leases in contravention of a covenant were not void before the amendment, they became void afterwards. In effect, therefore, it added an implied term to the contract, which it could not do to a contract already executed on the date of the amendment.

3. Before Section 65-A was enacted, some Courts were inclined to apply the strict law of England to mortgages in India also; but the view that finally prevailed was that the mortgagor did have a right to lease and that although it was usual to introduce terms into the mortgage prohibiting the mortgagor from leasing lands, yet that condition was honoured as often in the breach as in the observance. It was accordingly held that a mortgage in breach of a covenant was not void. Radha Pershad Misser v. Monohur Das I.L.R.(1880) 6 Cal. 317, Ali Hasan v. Dhirja I.L.R.(1882) 4 All. 518 and Niader Singh v. Ram Chander A.I.R. 1935 All. 518 are authorities for that position; and it is not seriously disputed here that within certain limits lease's can be granted. The above cases proceeded largely on the interpretation of Section 66 of the Transfer of Property Act, which, by implication, gives the mortgagor a great deal of freedom in the management of his lands and even allows him to commit waste provided that the security is not thereby rendered insufficient. It is argued for the appellant that the only test of the validity of a lease is whether it renders the security insufficient and that before a lease can be declared to be invalid, it is necessary for the person seeking to avoid the lease to strictly prove that the security has not been rendered insufficient, In Niader Singh v. Ram Chander : AIR1935All511 , the amount of property leased was very small and it made no appreciable difference to the mortgage security. In the present case, however, the lease, as already observed, was for a period of ten years; which means that even if the property is sold, the purchaser, whether he be the mortgagor or a third party, can have no hope of getting possession for many years to come. Moreover, although the lease was bona fide in the sense that it was for consideration and that the appellant was working only to obtain satisfaction of his own decree, there can be no doubt that he had in view the position of his rival creditors and that this lease was brought about for the purpose of defeating the attempt of the first defendant to proceed against the lands for the satisfaction of his own decree. The learned Judges who decided M.P.M. Section Firm v. Ko Pyu A.I.R. 1932 Rang. 113, were of opinion that a lease could not operate unless it was made in the ordinary course of management and that if it was one on exceptional terms, it ought not to operate. Pandalai, J., in Moidunni Haji v. Madhavan Nair (1932) 65 M.L.J. 826, reviewed all the cases on this question and came to the conclusion that a lease is void, unless it is one granted in the ordinary course of management. Page, C.J., in M.P.M.S. Firm v. Ko Pyu A.I.R. 1932 Rang. 113, thought that Section 65-A was a statement of the then existing law. Following Pandalai, J., in the above case, I hold that the present lease cannot be held to be valid either against the mortgagee or against the other creditors affected by it. The case in Moidunni Haji v. Madhavan Nair (1932) 65 M.L.J. 826 is sought to be distinguished on the ground that there it was an action on the mortgage, whereas it is a mere accident in the present case that the person who is seeking to execute his money decree against the equity of redemption should be the mortgagee. It is no doubt true that we must regard the first defendant not as a mortgagee but as a simple money creditor executing his decree; but if the lease is a void one, he cannot be bound by it.

4. The remaining question is whether the appellant is entitled to redeem. It was held in Basanta Kumar v. Adarmani 40 C.W.N. 57 that even where a lease was void, the lessee would be entitled to redeem. With all due respect to the learned Judge who decided that case, it is difficult to see how if a lease is void (as it was in that case because it related to a mortgage after the passing of Section 65-A of the Transfer of Property Act) it could confer any right at all; but that case was decided largely on the authority of Tarn v. Turner (1888) L.R. 39 Ch. D. 456. I do not however consider this last case an authority for that position. That case was naturally one of an English mortgage, in which the ownership of the property passed by law to the mortgagee, leaving the mortgagor no legal title. The mortgagor therefore had no right left in law to deal with the property and a lease would therefore be technically void. It was however pointed out that although in law such was the position, yet equity recognised what was vulgarly known as an 'equity of redemption' which was regarded in equity as an estate. If it was an estate, then the mortgagor could transfer a part of it or the whole of it, and the transferee would therefore have some right in the property which would entitle him to redeem. Such a lease, if it had taken place in India, would not have been void at all. If a lease is declared to be void by a statute, then the lessee can acquire no right at all.

5. The learned Advocate for the first respondent argues that there was a merger of his mortgage with the equity of redemption which would prevent the lessee from redeeming. He points out that under Section 101 of the Transfer of Property Act, only a subsequent encumbrancer can redeem. At the relevant time, however, there could not have been any such merger; for the suit relates to a time when the mortgagee was seeking to execute his simple money decree by sale of the equity of redemption. It is pointed out by the first respondent that the plaint does not contain a prayer for redemption; and that therefore this Court should not allow the plaintiff to redeem. Both for that reason and on the ground that the lease by the mortgagor for an unusual term to defeat the creditors would not be binding on the first defendant, the appeal is dismissed with costs.

6. Leave to appeal is refused.


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