Walter Salis Schwabe, C.J.
1. These are appeals from the decrees of the city Civil Court for ejectment and mesne profits. The plaintiff is a lessee from the trustees of a temple of the lands in question which have been sub-let to the defendants in smaller portions. Several grounds of appeal were raised in the notice of appeal, but they have all been abandoned before us except one ground, namely, that the amount awarded for mesne profits was awarded without any evidence before the Court to justify the amount. The plaintiff had alleged in his plaint that the proper rent of the land is so much. The defendants in their written statements had not admitted that that figure was correct. Without hearing any evidence, the learned Judge accepted the figure as given in the plaint. In my judgment there was no justification for that, and, in the absence of evidence to the contrary, he ought to have taken not that figure but the figure of the rent actually being paid by the various defendants. We are told that nothing was said about the matter in the Court below, and that the plaintiff does not accept the view that the rents actually payable are the proper rents. In the circumstances of the cases, I think it is right that these cases should be sent back to the Judge, City Civil Court, for an enquiry into, and on proper evidence to decide the proper amount payable for mesne profits.
2. But the important question before us is rather raised by petitions presented to this Court by the various defendants under the Madras Act, III of 1922. That Act came into operation after the decrees in these suits but before the execution of those decrees, which, in fact have never been executed, this Court having granted a stay pending the hearing of these appeals. The applications are under Section 9 of that Act, which section provides in certain oases for the purchase by a tenant of his landlord's interest in the land. It is contended on behalf of the plaintiff that that section has no application to a case where a decree for ejectment has been made, as I understand the argument, whether an appeal is pending from that decree or not or whether a decree has or has not been executed. The argument is mainly based on the decision in Latifa Bi v. Mottai Ammal 72 Ind. Cas. 141 : 46 m. 886 : 44 M.L.J. 271 : 17 L. 341 : (1928) M.W.N. 288 : A.I.R. 32 M.L.T. 290 (1923) (M) 320 In that case, the decree for ejectment had been passed, had come up to this Court on appeal and had, on appeal, been confirmed : but the decree had lot been executed when the petition for leaves to purchase under Section 9 was made. It was held that the decree having been passed and confirmed, the Court had no jurisdiction to grant the petition. That these suits are pending in this Court, I think, is clear from a series of decisions, which decide that in this country an appeal is really a continuation of the proceedings or, as it has been put, is a stage in and part of the proceedings in a suit. Vide Krishnamaohariar v. Mangainmal 26 M. 91 F.B., Settappa Goundan v. Muthiah Goundan 31 M. 268 : 4 M.L.T. 77. Kamayya v. Papayya 37 Ind. Cas. 414 : 40 M. 259 : 21 M.L.T. 82 : (1917) M.W.N. 217 , 246 : 5 L.W. 558 : 32 M.L.T. 477 and particularly the very learned Judgment of MOOKERJI, J., in Bai Gharan v. Biswanath 26 Ind. Cas. 410 : 20 C.L.J. 107 See also the decision of the Privy Council in an appeal from Ceylon, Ponnamma v. Arumugam (1905) A.C. 388 : 74 L.J.P.C. 102 : 92 L.T. 740 : 21 T.L.R. 524 In Latifa Bi v. Mottai Ammal 72 Ind. Cas. 141 : 46 m. 886 : 44 M.L.J. 271 : 17 L. 341 : (1928) M.W.N. 288 : A.I.R. 32 M.L.T. 290 (1923) (M) 320 the Court based its judgment mainly on the view that, because Section 10 in terms applied the provisions of this Act for compensation for tenants to oases where there had been decrees for ejectment which had not been executed, it followed that Section 9 was not applicable in such oases. But it is to be observed that Section 10 also applies the compensation sections to cases in which suits are pending, and on the same argument, it would follow that Section 9 need not apply to oases where suits for ejectment are pending, whereas in fact Section 9 applies principally to such oases. The answer, in my judgment, is that Section 10 is dealing with compensation oases, and Section 9 is dealing with cases of purchase and is in itself a complete Code for those cases; and on an examination of Section 9 it is clear that it is intended to apply to cases in which suits are pending and cases in which suits have resulted in decrees but such decrees have not been executed, because in sub-section (3), it says that on an order for conveyance of the land after payment of the price fixed by the Court being made, 'any decree or order in ejectment that may have been passed but which has not been executed shall be vacated.' and there would be no meaning to be attributed to those words at all if it was not contemplated by that section that application could be made in cases where a decree had been passed, but had not been executed.
3. In my judgment all these cases come directly under Section 9. The tenants are persons who would be entitled to compensation under Section 3. They have made their applications within 15 days after the date of the coming into force of the Act, and they have made their application to the proper Court, namely, this Court, in which the suits were then pending. In my judgment, if there had been no appeal pending, they could properly have made their application to the City Civil Court, because, in my view, it was the intention, and must have been the intention, of this Act that, after the decree but before the execution at any time, application could be made to the Court having had control of the suit.
4. It follows from what I have said that I do not agree with the decision in Latifa Bi v. Mottai Animal 72 Ind. Cas. 141 : 46 m. 886 : 44 M.L.J. 271 : 17 L. 341 : (1928) M.W.N. 288 : 32 M.L.T. 290 A.I.R.(1923) (M) 320 I do not think that it makes any difference that the decree of the City Civil Court in that case had been affirmed by this Court, so long as the decree had not been executed.
5. Under Section 9 we have to fix the price according to the market-value of the land on the date of the order and for this purpose 'land' means 'the interest in the land and all other interests which the landlord can convey under any power.' For the assistance of the Court in fixing that value, this matter must be referred to some suitable person. The principle of the valuation in such a case will be to ascertain the market value of the plaintiff's interest in the land as on the date of the order, that is, today. In arriving at that market-Value, he will have to take a reasonable rent from the day of the expiration of the notice to quit until today, and then to capitalize the value of the rent for the reminder of the plaintiff's term less, of course, the amount of rent for the balance of the term which the plaintiff had to pay to his superior landlord and which will now become payable by. the tenants. He will take into account any enforceable power to renew that the plaintiff may have.
6. The question of mesne profits which we propose to remit to the City Civil Court will become unnecessay for decision in the event of the price fixed for the land being paid, and, therefore, the further hearing before the City Civil Court must be stayed pending the final disposal of the petitions under Section 9.
7. The appellants have succeeded in this appeal. It is true that the main part of the argument has turned on the petitions, but they were entitled to come here and complain that an order for mesne profits was made against them which was wrong, and the usual result will follow that the first respondent must pay the just of the appellants--one set. It might have been a case where we should order less costs to be paid but for the fact that the first respondent has refused to admit the right of the appellants under Section 9, and it is by reason of that refusal that this appeal has really been substantially fought.
8. The appellants have brought the superior landlord before the Court quite unnecessarily and quite wrongly, and they must pay for having done so his costs one set.
9. The further consideration of the petitions will be adjourned until Monday the 8th instant. The question of costs on the petitions is reserved.
9. I agree. I only wish to say a word or two on the interpretation of sections 9 and 10 of Act III of 1922. Section 10, as I read it, is intended to introduce into the obligation for compensation by landlords to tenants, a similar species of relief proceeding parallel with the trial of the suit and postponing the obtaining of a decree or preventing its execution when obtained, as Section 9 applies to the privilege granted to tenants to purchase the landlord's right. Section 9 obviously applies to pending suits, otherwise a reference to a summons is unmeaning, and it also applies to suits in which decrees have been passed but not executed, as sub-section (3) clearly indicates. It, therefore applies to both, the stages of suits which are contemplated also by Section 10. I, therefore, must disagree with the judgment of SPENCER and VENKATASUBBA RAO, JJ., in Latifa Bi v. Mottni Ammal 72 Ind. Cas. 141 : 46 m. 886 : 44 M.L.J. 271 : 17 L. 341 : (1928) M.W.N. 288 : 32 M.L.T. 290 A.I.R.(1923) (M) 320 in so far as they interpret the omission of Section 9 in Section 10 as implying that Section 9 cannot apply to suits in which a decree has been passed before the Act came into force, although not executed. The whole object of Section 9 appears to me to be to allow the tenant who is liable to ejectment, whether under a decree or not, to purchase the landlord's right. So long as the decree for ejectment has not been executed, what the reasons for non-execution may be and whether or not they were due to an application by the tenant himself for stay of execution do not matter and cannot^ affect the applicability of the section.
9. In the present case, Section 9 in terms applies. There are suits instituted against the defendants and decrees which have not yet been executed; and there are applications put in by them, within 15 days of the coming into force of the Act, to the Court, that is this Court, before whom the suits (in their stages as appeals) were then pending. Therefore, the defendants are fully entitled to take full advantage of Section 9 and have their applications under Section 9 heard and determined.
10. I, therefore, fully agree with the order proposed by the learned Chief Justice.
11. These Petitions coming on for further hearing on Monday, the 8th January 1923, the Court made the following
12. The parties having failed to agree to price of the lands, we refer the matter to the Official Referee to fix the price of the lands, on the principles laid down in this judgment and to report to us accordingly.
13. Ten days will be allowed for filing objections after the receipt of the report In compliance with the above order, the Official Referee submitted the following
14. The first respondent is a lessee of certain pieces or parcels of land situate on the Royapettah High Road, Madras, under a registered Instrument of Lease, dated the 4th July 1910 entered into between him and the second respondent described in the said Instrument of Lease as trustee for the time being of Apparswami Temple, Mylapore, Madras.
15. The pieces and parcels of land were acquired by one Chidambaraswami who died in May 1871; the lands were by him dedicated in trust for the maintenance of Apparswami Temple and for the performance of Pujas, Cotsavams and other celebrations in the said shrine. In and by his last Will and Testament, dated the 4th May 1871, the said chidambaraswam appointed one Ratnavelu Mudaliar, the father, of the second respondent, as one of the executors to the said Will. On application of the second respondent, Letters of Administration with Will annexed were granted to him on or about the 7th August 1895 with the consent and concurrence of the other sons of the said Ratnavelu Mudaliar.
16. The present petitioners and petitioners in C.M.P. NOS. 901, 903, 905, 907 and 909 their predecessors-in-title and interest have been in occupation of portions of the entire area comprised in the lease in favour of the first respondent, for over 45 years, as lessees of the portions in their respective use and enjoyment. They were possibly in occupation when Chidambaraswami purchased the land.
17. After the second respondent took out Letters of Administration to the estate of the said late Chidambaraswami with the Will of the said deceased annexed thereto, he obtained from the tenants (the petitioners in C.M.P. Nos. 900 to 912) rental agreements in his favour with reference to the pieces of land in their respective occupation.
18. The rent-deeds are not produced; but it is clear that the rent fixed was the same as was paid by them for a considerably long time for the pieces of land in their respective holdings.
19. One of the terms and conditions of the Instrument of Lease entered into between the first and second respondents is that the second defendant shall cause the required leases to be executed and registered by the present tenants in favour of the first respondent in respect of the portion of the demised lands now in their respective possession, enjoyment use and occupation and that under the terms under which they are at present held.
20. In terms of the said provision in the said lease-deeds, the tenants on the land (the petitioners in C.M.P. Nos. 900 to 912) executed rental agreements in favour of the first respondent.
21. The leases were not for any fixed term and were terminable by the first respondent at his pleasure. The first respondent determined the 'tenancies by notice and instituted suits in the City Civil Court and obtained decrees for ejectment and for mesne profits, against the tenants. The tenants preferred appeals against the said decrees and pending disposal of the appeals obtained stay of proceedings. During the pendency of the appeals, the tenants filed petitions under the provisions of Section 9 of Madras Act III of 1922 in which they seek to purchase out their landlords interest in the land so as to secure to them immunity from eviction.
22. The order of reference directs me to determine the market value of the interest of the first respondent (intermediate landlord) in the land comprised in each of the petitions as on the date of the order.
24. In arriving at the market value of the first respondent's interest in the land I am asked to determine the reasonable rent which each piece of land could have fetched to the first respondent from the date of termination of the lease, i.e., from 1st September 1916, to the date of the order, namely, the 8th January 1923, and then to capitalize the net rental which the intermediate landlord the first respondent would be able to realize from his tenants up to the termination of his lease by efflux of time, i.e., up to the 30th June 1931. I am also directed to take into consideration any enforceable power to renew that the plaintiff (first respondent) may have.
25. The rents reserved under the rental agreements executed by the petitioners in respect of the portion of land in their respective use and occupation and the extent of such portion are as set out hereunder:
Name of tenant Extent of land Bent per leased month Bs. A.P. Kanniappa Chetty. 4,940square feet. 1120 Kanniappa Chery. 1,706. '... 050 Velu Gramani 2,240'... r080 Lakahmana Mudali... 1,960'...'040 Janakiainmal 1,300'... 05 Thoyarammal 1,800'... 070 Ponnammal 1,645'... 060
26. The agreements were all executed between the 22nd and 31st August 1912 but the rate of rent was not determined at the date of the lease. According to the evidence of the petitioners the amount of rents fixed in the several instrument of lease were the same which each of them were bound to pay to the second respondent under rental agreements executed by them in his favour, and that such rents were fixed on the basis of rents which they have been paying for the land covered by their respective lease-deeds for upwards of 40 years.
27. It is, therefore, undisputed that the rates of rent prescribed by the rental agreements were those that were adopted more than 40 years ago and not the rates for which the lands could reasonably have been let out on the date of the lease. The amounts fixed by the rental agreements could not, therefore, afford any basis for determining what the reasonable rent would be in respect of the land in the holding of each individual tenant on the date of the termination of the tenancies, i.e, on the 1st September 1916, which date is within four years of the date of the commencement of the tenancy under the said rental agreements.
27. The first respondent filed a number of building leases executed in his favour in respect of other portions of the land which at the date of the lease in his favour were unoccupied.
28. In the plan annexed hereto I have marked the positions and dimensions of the several pieces of land in the possession of the petitioners and I have, for purposes of comparison and reference, also marked the sites comprised in the lease deeds, Exhibits A to G.
29. The rents provided by the agreements executed by the petitioners, except the petitioner in C.M.P. No. 900 of 1922, give an average of about 0-13-6 per ground of 2,400 square feet per month while the lease deed to which
29. In the case of the lease Covered by Exhibit D, however, the rate is about 1-7-0 per ground per month. This, in my opinion, is accounted for by the fact that the land comprised in the lease has a frontage of 80 feet on the Royapettah High Road while the other plots of land are situate in the interior, with access through narrow lanes.
30. The rate of rent as deduced from the lease-deeds Exhibits A-C and E-G has remained uniform from 1918 to 1922. I am of opinion that, regard being had to the situation of the lands in the use and enjoyment of the petitioners, a rate of 1-8-0 per ground per month for the land on which premises 1 and 2 stand and a rate of 1-0-0 per ground per month for the other lands may be accepted as a fair and reasonable rent from 1st September 1916 to the 8th January 1923.
31. I set out hereunder as against each tenant the amount of mense profits calculated at the above rate, and the amount realised by the plaintiff (first respondent) in execution of the decrees obtained by him against the several tenants,
32. The lease in favour of the first respondent would expire by efflux of time on the 30th June 1931. Under the instrument of lease, however, the lessee has the option to renew the lease for a further term of 21 years at a slightly enhanced rate of rental. In fixing the market value of the first respondent's interest in the land I am asked to take into account any enforceable power to renew that the plaintiff may have.
33. I am not referred to any authority which places any limitations on the powers of a Trustee of a Hindu Religious Endowment in granting leases of immoveable properties appertaining to the trust. It appears to me to be well established that permanent leases either with a fixed or unvarying rent or with a premium paid at the commencement of the tenancy -would amount to an alienation of trust properties and could only be justified on grounds on which an alienation of trust properties could be sustained: Palaniappa Ghetty v. Sreenath Daivasikamony Pandara San-nadhi 39 Ind. cas. 722 : 40 M. 709 : 21 C.W.N. 15 A.L.J. 485 : 1 P.L.W. 697 : 33 M.L.J. 1 : 19 Bom. L.R. 567 : 22 M.L.T. 1 : (1917) M.W.N. 507 : 26 C.L.J. 153 : 6 L.W. 222 : 44 J.A. 147 (P.C.), and that such leases are not as into void but are only voidable : Kalyana Venhataramana Aiyangar v. Kasturi Banga Aiyangzr 38 Ind. Cas. 73 : 40 M. 212 : 31 M.L.J. 777 : 20 M.L.T. 490 : 5 L.W. 625 : (1917) M.W.N. 400, Kadiri Masthan Bowther v. Segammall 55 Ind. Cas. 655 : 43 M. 433 : 38 M.L.J. 198 : 11 L.W. 197 : (1920) M.W.N. 185 : 27 M.L.T. 286.
33. The case reported in Gajendra Nath Dey v. Ashraf Hassain 69 Ind. cas. 707 : 27 C.W.n. 159 : 36 C.L.J. 48 A.I.R. (1923) (C) 130., is based on the principle of Muhamrnadan Law which restricts the power of Muthuvalis in the granting of leases of wakf properties and has consequently no application to the present case.
34. Section 38 of the Indian Trust Act provides that, except with the permission of the Principal Civil Court of original jurisdiction no trustee shall lease trust property for a term exceeding 21 years from the date, of execution of the lease nor without reserving the best yearly rent than can reasonably be obtained. This Act does not apply to publics, or private religious or charitable endowments.
The case reported in Kadir Ibrahim v. Aru-nachelam Chettiar 33 M. 397 : 4 Ind. Cas. 1082 : 19 M.L.J., arises out of a lease for 25 years granted by a lay Trustee; the provisions of the Trust Act would apply. It was held in that case that the lease was not void but only voidable at the instance of the cestui que trust. Reference is made to the principle laid down in that decision in the judgment of SPBNCBK, J' in case reported Kadiri Masthan Bowther v. Segammall 55 Ind. Cas. 655 : 43 M. 433 : 38 M.L.J. 198 : 11 L.W. 197 : (1920) M.W.N. 185 : 27 M.L.T. 286, as lending support to the view that a lease by a trustee of a Hindu Religious Endowment for a period exceeding 21 years should by analogy be deemed to be voidable and not void.
35. The lease in the present case is for a period of 21 years with a proviso for renewal for a further period of 21 years as the option of the lessee, subject, however, to the condition that if the lessee should exercise his option he should pay Es. 22| a month for the said renewed term instead of Es. 20 provided for the first term of 21. years
36. In effect it is a lease for a period of 42 years with liberty to the lessee to determine it at the expiry of 21 years. If the underlying principle on which Section 36 of the Indian Trusts Act is based should bedeemed to apply to Hindu Religious Trusts and to control the powers of such trustees in dealing vested immoveable properties vested in them there an be very little doubt the lease would not be binding on the trust, as it would be in excess of the period prescribed and would not be, at the same time, reserving the best rent. If the principle would not apply the question is whether the first defendant or his successor in interest-could enforce the term as to renewal on the termination of the current subsisting lease.
37. Clause (e), Section 21 of the Specific Relief Act relates to contracts made by Trustees in excess of their powers or in breach of their trust and includes such contracts in the category of contracts which cannot be specifically enforced.
38. The illustrations appended to the section as referable to this clause clearly indicate the scope of the clause. In my opinion, the principle laid down is, that Courts of Law would prevent trustees from acting in excess of their powers as regulated by the instrument of trust or from committing breaches of trusts. It does not necessarily follow that other contracts entered into by trustees would all be enforceable in law.
39. In my judgment the test is whether the obligation which the agreement in the present case imposes on the second respondent to grant to the first respondent a lease of the lands in question for a further period of 21 years on the termination of the present lease at a slightly enhanced rent would be binding on the trust, whether, regard being had to the fact that the rental value of lands for building purposes in the City has a tendency to rise, the introduction of a provision that at the expiration of the current lease the rent should be only 124 per cent, higher than at the inception in 1910 and that for a period of 21 years thereafter could be considered to be an act of prudent management or deemed to have been done in the best interests of the trust. The amount of rent fixed under the lease-deed is Rs. 20 a month for a period of 21 years and Bs. 22i a month for a further period of 21 years. On the basis that the extent of land available for being leased out is only 100 grounds, the amount of gross rental which the first respondent would be able to secure at the rate of be 1 per ground per month will be about Rs. 100 per month; making allowance for payments which the first respondent has to make under his lease the net rental would be about Rs. 68-12-0 as will appear later in this Report. The first respondent's case is that he is entitled to obtain compensation for being deprived of the advantgae he is securing by his under-leases.
38. I have no hesitation in coming to the conclusion that the agreement as to renewal is not binding on the trust as in my opinion such an undertaking could not be deemed to have been given as an act of prudent management on the part of the second respondent.
In the view I have taken I do not assign any market-value on the provision as to renewal.
In assessing the market-value of the interest of the intermediate landlord I have to take into consideration the rent he could realize from the land during the unexpired period of the lease and deduct there from the amount payable by him to or on account of the superior landlord during the said period in terms of the conditions and stipulations contained in the instrument of lease.
39. The amount of rent reserved under the lease-deed is Rs. 20 a months in addition to the said monthly rent, the first respondent is under his engagement with his landlord bound to pay and discharge all taxes, rates and assessments whatsoever that may thereafter during the term of the lease become payable for and in respect of any buildings that may thereafter be erected upon the said lands.
40. The extent of land comprised in the lease in favour of the first respondent is 108 grounds; for the purpose of determining the proper proportion of rent which the tenants would have to pay to the superior landlord by virtue of the statutory provision which would in effect make them the assignees portent of the intermediate landlords' interest in the portions in their respective use and occupation, I have to take into consideration only the actual extent of land available for being leased out to tenants and not the entire extent covered by the lease.
41. It is admitted that a portion of the land is covered by a tank and that deduction should be made for the area covered by the tank and also for the extent that will be taken up by roadways and pathways which are and have to be provided for in the allotment of the land as building sites.
42. It is agreed that the actual extent of land available for being leased out may be taken to be 100 grounds.
43. It is also admitted by the first respondent (without prejudice to any possible contentions he may have against his landlord) that for the purpose of the present enquiry the amount of half-yearly assessment imposed by the Corporation of Madras on the land and which is being paid by him may be treated as an amount which under his lease-deed he is under an obligation to pay and discharge.
44. The amount of rent payable by the first respondent to his landlord per month is Rs. 20; the amount of assessment imposed on the land and paid by him is Bs. 62 for every half year or 1018 Rupees per month.
45. The incidence of the burden on each ground would be 30/1/3/100 Rs. per month or Rs. 0-4-10 or, say, Re. 0-5-0 per ground, The interest of the first respondent in the land is the income he would be able to realize from the land less the burden imposed on him under his lease.
46. In assessing the amount of mesne profits payable by the several petitioners herein from the date of the termination of their respective leases I have recorded it as my conclusion that in the case of the land occupied by premises Nos. 1 and 2, Arrack Go down Street, Rs. 1-3-0 per ground per month may be taken to be the reasonable rental value, while in the case of other lands Re. 1 per ground per month may be taken as a fair rental. I have, in coming to that conclusion, adopted the data furnished by the leases granted by the first respondent for other lands comprised in his lease. Those leases are for periods coterminous with the lease in his own favour, I, therefore, assume that if the first respondent were entering into fresh engagements with the petitioners or into engagements with third parties on eviction of the petitioners from the land, he would be prescribing the same scale of rent as he has been able to secure for other lands in the area and that for the period expiring with termination of his own lease.
47. I hereunder set out in tabular from (1) the names of the tenants, (2) the door No. of the house standing on the land comprised in the holding, (3) the extent of ground covered by each holding, (4) the rate of rent per ground per month in respect of each holding as set out above, (5) the proper proportion of the burden which the petitioners by virtue of their purchase would have to pay to the superior landlord per ground per month, and (6) the net amount representing the interest of the first respondent in the land comprised in each separate holding.
48. I have now to capitalise the intermediate landlords interest. Having regard to the present condition of the money market, the interest which investor would be able to realise by loans on the mortgage of immoveable properties and the high rate of interest from Government securities with a definite prospect of such interest continuing for many years to come. I consider that the lowest rate of interest which would be deemed by investors in landed properties as satisfactory would be 74 per cent, per annum.
49. I append below a statement noting against each of the tenants the amounts representing the first respondent's interest in the land in the holding of the individual tenant; and the amount which, if invested at 71/2 per cent, per annum, would give the return representing the intermediate landlords' net return. Thatwhich each individual tenant would have to pay to the first respondent to purohase out his interest in the land in their respective holding.
50. To the figures returned in the last column must be aided the amounts of balance o mesne profits due by the tenants from date of termination of the tenancy up to 1st January 1923, as exhibited in the statement embodied in an earliar portion of this Report. In the case of two of the tenants the realisations by first respondent are in excess of the mesne profits recoverable. The amount of such exoess will be deducted fcom the figures t shown against their names in the last column of the above statement.
51. In the following statement I give against each of the petitioners the amount which, according to my conclusions, would represent the capitalised value at the present moment of the intermediate landlord's interest in the land in the use and enjoyment of each petitioner the amount due b^ or to them in respect of mesne profits payable by them, after crediting them with the amounts realised by first respondent amount would yield to the intermediate landlord by way of interest at 7i per cent, the equivalent of the net income he would be able to realise month after month from each individual tenant. But the amount so capitalised would be set free on the termination of the first respondent's tenancy, i.e., on the 30th June 1931, and would be re-payable on that date to the respective tenants.
52. The equivalent at the present moment of the amount so re-payable to each individual tenant at the expiration of the lease, would be the present worth of that amount ; and the same would have to be deducted from the amount, the balance so ascertained would represent the capitalised value of the intermediate landlord's interest in the land, and would be the consolidated equivalent in value at preset payments to be made during the next 102 months of the tenancy.
53. The amounts shown in the last column the above statement would be the amour.
54. These Appeals and petitions coming on for final hearing on Friday the 14th December 1923, after the submission, by the Official Before, of the Report called for herein, upon perusing the petitions and the affidavits filed in support thereof, the judgment delivered on the 5th January 1923 in C.C.C. Appeals Nos. 51 to 57 of 1921, the said Report by the Official Referee and the memoranda of objections thereunto filed by the Petitioners and the first respondent respectively and upon hearing the arguments of Mr. S.B. Sankara Ayyar, Vakil for the petitioner in all the petitions and Mr. K. Ramachandra Ayyar, the first respondent in person, and the second respondent in all the petitions not appearing in person or by Pleader, the Court delivered the following.
55. These appeals were remanded for a finding to the Official Referee and they come to us on report. The relevant facts are that the trustee of a temple granted a lease to the first respondent of certain building lands, and he sub-let part of these lands to the petitioners. On an attempt to eject the petitioners by the respondent, the petitioners under the Madras Act, III of 1922, which had come into operation meanwhile, claimed to purchase the respondent's interest and the matter was referred to the Official Referee to determine what the value of the respondent's interest in the land was.
56. The Official Referee has reported and he has fixed the proper annual rent of the property ; he has deducted therefrom what he considers a proper proportion of the rents, rates, etc, payable to the superior landlord, the trustee of the temple, appropriate to the petitioners' portions of land; he has capitalized the amount payable on a 74 per cent, basis. In respect of the last I do not agree with the basis on which he has capitalized. I think that, in a matter of this kind, a 6 per cent, basis is quite sufficient, as the amount of the Court interest allowed is about the amount that can be obtained by investing in Government securities and I see no reason at all why in arriving at a figure in a case of this kind we ought to assume that the person receiving the money will invest it at a higher rate of interest in Some speculative form of investment. As regards the deduction of amount for rents, rates, etc., payable to the superior landlord, it is not at all clear that it is a proper deduction to make, because there is no provision in the Act under which the superior landlord can be made to look to the sub-tenant who is taking over part of the interest of the tenant and, in the absence of an agreement by the superior landlord, the tenant would be left liable to pay him at any rate the rent in respect of those portions. This is merely a matter of adjustment. If that liability is to be left totally on the shoulders of the tenant, it is obvious that the sub-tenant cannot, in arriving at the' amount payable by him for compensation, have the sum worked out on the basis that these amounts would be payable by him. However, we are informed that it is possible that the superior landlord will come to terms with these tenants under which he will take the rents, rates, and such like payments from them and relieve the tenant prompt to. This case had better, therefore, be adjourned to Monday next to see if any and what terms could become to in that respect.
57. That leaves an important question, and that is whether the lease by the temple trustee being for 21. years with an option to 'the tenant to renew it at the end of the 21 years at an enhanced rent is good or bad. It has been held by the Official Referee that the second 21 years, that is to say, the option period, is not to be taken into consideration in arriving at the compensation, because in his view that option is bad in law on the ground that the trustee had no power to enter into a lease for that period, as he looks upon it as a lease for a period of 42 years with liberty to the tenant to determine it at the expiry of 21 years, and holds that the lease is void. I do not agree with him. The question to be determined in such cases is whether it is a lease that a prudent man would make under the circumstances in the interests of himself if it were his own property, or in the interests of others if he was doing his best for them. The Indian Trusts Act provides in the case of ordinary trustees for the length of lease which they may grant and this lease is for a period longer than would be allowable under that Act, but that Act expressly does not include trusts like the present trust. It may be a very good guide in arriving at the answer to the question whether this was a proper agreement to enter into because one would assume that the Legislature in fixing a period as between an ordinary trustee and a cestuique trust was considering what was reasonably a prudent thing for a trustee to do with trust property. But in this ease there is an element which comes into consideration which does not appear to have entered into the consideration of the Legislature in passing the Indian Trusts Act and which, in my judgment, removes this case outside any consideration based on that Act altogether and that is that the lease in question was a building lease. The whole object of the lease was to turn agricultural or undeveloped land into building land, that the tenant under the lease should build upon the land and pay an enhanced rent over and above the agricultural rent because he was going to build upon it, and that at the determination of the, tenancy the structure should fall in to the landlord at a valuation. It is obvious that no one is going to enter into an agreement of that kind unless he has a reasonable time before him to make it remunerative; and so we find in England that it has been held as regards trustees who are letting any land for building purposes on a ground rent that the minimum period is 60 years and the maximum 99 years. Here where we are dealing with town property we find that the trustee enters into an agreement for 21 years with an option of renewal at an enhanced rent for 21 years. I can find nothing unreasonable or unlawful in the transaction at all, and I am quite clear that the option that ho has granted in this case is perfectly valid, and, that being so, it is necessary.
58. In arriving at that valuation I think we must first enquire what the rental value of the land is. With some hesitation, I have come to the conclusion that the Official Referee's figure is the right one. The matter was before him ; he saw this land and enquired into the matter; and though I am clear that ho has not erred on the side of liberality, I think, ' there is not enough for us to distrub his finding in that respect. Therefore, we must take the same rate as he has taken for the period down to the end of 21 years for the option period. Then, again, that will be subject to the question which is still left open as to whether it is to be reduded or not by reason of the amounts for rents, rates, etc, which are payable to the landlord and that will again have to be capitalized on the same basis that I have held is right in respect of the other sum, that is, 6 per cent. As, however, this decision is not binding upon the superior landlord and it will be open to him, if he is so advised, notwithstanding this judgment to litigate the question as to whether this option is good or bad, it has been agreed between the parties that the amounts found due for the 21 years period shall be paid into Court and invested, that the income ^thereof shall be paid to the first respondent until the renewal has been granted, or it has been finally decided that the trustee is not bound to grant it, and that the amount shall be paid out to the first respondent or in proper proportion to the petitioners if and when that course becomes possible by reason of the final determination of that matter. By reason of this amount remaining in Court there must be liberty to apply to the City Civil Court. The compensation for the other period will, of course, be paid to the first respondent. No order as to costs.
59. I agree.
The Petitions coming on for orders.
60. The parties have now come to an agreement on the basis of our preliminary judgment of December the 14th. That agreement signed by the Vakil for the appellant and by the first respondent with the statement of account annexed will be filed and the decree drawn up accordingly. There will be liberty to apply to the City Civil Court in respect of this matter generally.