Skip to content


T.S. Doraiswamy Naidu Vs. Seth T.N. Ahuja and Co., by Its Partner V.K.A. Chugh - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Reported in(1970)1MLJ11
AppellantT.S. Doraiswamy Naidu
RespondentSeth T.N. Ahuja and Co., by Its Partner V.K.A. Chugh
Cases ReferredNamashya v. Chohan Ram
Excerpt:
.....of conferring upon the lessee the rights larger than that which the mortgagor was competent to create under section 65-a of the transfer of property act. with due respect to the learned judges, i do not share their view and i am of opinion that as long as a lease created by the mortgagor in possession is in conformity with the provisions of section 65-a of the act it would hold good against the mortgagee, even though it was created during the pendency of a suit by the mortgagee......to create under section 65-a of the transfer of property act. but that does not mean that the lease created in conformity with that section would not be valid because a suit on the mortgage itself might be pending. the very object of the enactment of section 65-a seems to me to be to provide for rights which might prevail as against the mortgagee and therefore as against any auction purchaser in the mortgage suit also. to resort to section 52 of the act and to hold that a lease created pending a suit on the mortgage would not be valid as against the mortgagee even where the lease conforms to section 65-a does not seem to be correct. a lease created by a mortgagor in possession would always be valid as against him. there was hardly any need to enact section 65-a for that purpose. the.....
Judgment:
ORDER

A. Alagiriswami, J.

1. This petition arises out of an order of the learned Subordinate Judge of Chingleput in E.P. No. 95 of 1967 (in C.S. No. 2 of 1962 High Court). The petitioner was the fifth respondent in the execution petition. The decree sought to 'be executed was on the foot of a mortgage. The mortgagor had, during the pendency of the suit on the mortgage which resulted in the mortgage decree sought to be executed, granted a lease of the mortgaged property in favour of the petitioner for a period of three years. The petitioner wanted his lease to be mentioned in the sale proclamation and this request having been refused, has filed the present revision petition.

2. The petitioner contended that he was not aware of the mortgage in favour of the decree-holder, that the lease in his favour was not collusive and that it was not hit by lis pendens and that as he had a subsisting interest in the property, it had to be disclosed in the sale proclamation. The other facts are not necessary for the purpose of this case. The only question is, whether the lease in favour of the petitioner by the mortgagor having been granted while the suit on a mortgage was pending is hit by the doctrine of lis pendens and cannot, therefore, prevail against the mortgagee decree-holder.

3. The Calcutta High Court in Md. Juman Mia v. Mali Mudiani : AIR1943Cal577 , and the Bombay High Court in Ramadas Popat v. Fakira Pandu : AIR1959Bom19 , have held that such a lease would be hit by the doctrine of lis pendens. On the other hand reliance is placed by the petitioner on the decision in Namashya v. Chohan Ram : [1953]4SCR108 . In the latter decision the Supreme Court does not directly deal with the question whether a lease like the one under consideration would be hit by lis pendens. The decision, however, contains discussion of the law prior to the enactment of Section 65-A of the Transfer of Property Act in 1929. At that time, there were two conflicting views on this question one view was that mortgagors in India remained the owners and when in possession could prima facie exercise the rights of ownership inclusive of the power to grant leases of the mortgaged property; the other view being that a mortgagor in possession might grant a lease conformable to usage in the ordinary course of management but was not competent to grant a lease on unusual terms or authorise the use of land in a manner or for a purpose different from the mode in which he himself had used it before he granted the mortgage. It is this conflict which was sought to be resolved by the enactment of Section 65-A of the Transfer of Property Act. That section contains very salutary principles sufficient to safeguard the rights of a mortgagor and gives effect to the second of the views above set forth rather than the much more liberal view which is first mentioned. As pointed out by the Supreme Court at page 403:

The mortgagee is not normally bound by the acts of the mortgagor with reference to the mortgaged property:But if a mortgagee takes his security with knowledge of the purposes to which the land is applied and allows the mortgagor to remain in possession he will be bound by the acts done by the mortgagor in accordance with the usual course,...Consequently, if the mortgagor after he has granted the mortgage, deals with the property in the usual course of management the interest created by him may be rightly deemed operative against the mortgagee.

There is nothing to show that in this case the mortgagor has dealt with the property except in the usual course of management. It was further stated in the above decision that the mortgagor would in the usual course of management create a tenancy from year to year in the case of agricultural land or from month to month in case of property consisting of houses and his dealings with the mortgaged property in the usual course of management would be operative against the mortgagee. This was again emphasised at page 404 of the report by further adding that it is not competent to the mortgagor to grant a lease on unusual terms, or to alter the character of the land or to authorise its use in a manner or for a purpose different from the mode in which he himself had used it before he granted the mortgage. All these discussions were relevant in the case before the Supreme Court because their Lordships were concerned with the mortgage created in the year 1926. But after the enactment of Section 65-A of the Act, these considerations are not relevant and as I have already mentioned that section provides for salutary safeguards for the protection of the mortgagor's interest. Therefore, the only question that still remains is, whether the fact of a suit on the mortgage being pending in any way affects the right of the mortgagor in possession to grant a lease consistent with the provisions of Section 65-A. In this case, there is no doubt that the lease in favour of the petitioner has been granted conformably to the provisions of Section 65-A. Is there anything in Section 52 of the Act which would compel this Court to hold, as has been held by the Calcutta and Bombay High Courts, that such a lease will not hold good against the mortgagee? (The Bombay High Court realised that as the lease under consideration by them was created after Section 65-A of the Act was enacted, it would have to be investigated whether the lease fell within the powers of mortgagors under that section if it had not been a lease which was created pendente lite. But it was not necessary to go into that question in that case because the question had to be decided upon the doctrine of lis pendens). The reasoning of the Bombay High Court is as follows at (pages 20 and 21):

It is quite true that the petitioner purchased the interest of the mortgagor as well as the second mortgagee at the auction sale, and if that was all that he had purchased then, it could be said that holding the lease good as against the petitioner would not affect the interest of the mortgagee. But what an auction purchaser purchases at a sale upon a mortgage is not only the interest of the mortgagor or the interest of any subsequent mortgagees who have been made parties to the suit, but also the interest of the mortgagee who has brought the property to sale. The petitioner, therefore, had in him both the interests of the mortgagor and the mortgagee after his purchase, and if the lease in favour of opponent No. 1 is held good as against him, then, in that case, the result must necessarily be that Madhava's (mortgagee's) rights in the property, which were the subject-matter of the suit, would be affected.'

' But it seems to us that that does not affect the question of lis pendens. The question whether one party to a suit had or had not got a right to enter into a transaction does not affect the question of lis pendens. A mortgagor, for example, may, pending a suit filed by the mortgagee, convey the equity of redemption to anybody he likes. He may similarly create a second mortgage. The only things which he cannot do is do these things in such a manner as to affect the first mortgagee. If he does create a second mortgage, or if he conveys the equity of redemption, then the second mortgagee or the purchaser takes subject to the result of the suit. That is because once a suit is filed, Section 52 prohibits one party to the suit to effect a transfer which he could have done, if the suit had not been filed, not absolutely, but in such a manner as to affect the rights of the other party to the suit. It seems to us, therefore, that if Section 62 is to be allowed to have full effect, it must be decided that any lease, which is created by a mortgagor pending a suit which was filed by the mortgagee, would not be binding upon the mortgagee, or any person who has subsequently purchased the interest of the mortgagee along with that of the mortgagor in the property in suit, and the lessee will have to take subject to the result of the suit.

Of course, the lessee has got to take subject to the result of the suit. But that would only mean that instead of being the mortgagor's lessee, he would become a lessee of the mortgagee, if the mortgagee happens to become the auction purchaser in Court sale or of any other auction purchaser of the mortgaged property. The Bombay High Court though it does not say so, seems to have been unduly influenced by the consideration that in the case before it, the lessee became, under the provisions of Section 3 (a) of the Bombay Agricultural Tenancy Act, a protected tenant. That is hardly a relevant consideration. It might very well be argued that when Section 65-A of the Transfer of Property Act permits a lease to be granted only in conformity with the provisions of that section, the provisions of another Act like the Bombay Agricultural Tenancy Act would not have effect of conferring upon the lessee the rights larger than that which the mortgagor was competent to create under Section 65-A of the Transfer of Property Act. But that does not mean that the lease created in conformity with that section would not be valid because a suit on the mortgage itself might be pending. The very object of the enactment of Section 65-A seems to me to be to provide for rights which might prevail as against the mortgagee and therefore as against any auction purchaser in the mortgage suit also. To resort to Section 52 of the Act and to hold that a lease created pending a suit on the mortgage would not be valid as against the mortgagee even where the lease conforms to Section 65-A does not seem to be correct. A lease created by a mortgagor in possession would always be valid as against him. There was hardly any need to enact Section 65-A for that purpose. The very purpose of Section 65-A of the Act should be deemed to be to provide for a right in the mortgagor to create a lease that would be valid under all circumstances and not merely against him. That is why salutary safeguards and limitations are placed on the powers of the mortgagor in creating a lease. Otherwise Section 65-A has no meaning at all and, therefore, when a lease has been created in conformity with the Section 65-A that must be held to be valid not merely as against the mortgagor, but also against the mortgagee. There is no contradiction with the principle embodied in Section 52 of the Act in taking this view. The lessee in any case takes the lease subject to the mortgagee's suit. It is difficult to see how by holding that the lease will be given effect to even as against the mortgagee, the mortgagor's interests are in any way affected. The considerations that were relevant before the enactment of Section 65-A of the Act arc no longer relevant and the question whether the mortgagor can create a lease with any limitations no longer arises. I am of opinion, therefore, that the lease in this case should be held to be valid even as against the mortgagee. The real difficulty with the Bombay decision seems to be that the Bench has been subconsciously influenced by the considerations which were relevant before the enactment of the Section 65-A of the Transfer of Property Act. With due respect to the learned Judges, I do not share their view and I am of opinion that as long as a lease created by the mortgagor in possession is in conformity with the provisions of Section 65-A of the Act it would hold good against the mortgagee, even though it was created during the pendency of a suit by the mortgagee.

4. The Civil Revision Petition is allowed and the sale proclamation will include a reference to the lease in favour of the petitioner.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //