Bhola and Others vs Jhundoo and Others

Harbans Singh, J.—This execution second appeal raised an important point of law for the decision of which the matter has been placed before this Bench.

The facts necessary for the decision of this case, which have been given in my reference order, may briefly be recapitulated here. Jhandu and others, Respondents before us (hereinafter referred to as the mortgagors) represent the original owners of the land in dispute which was mortgaged with possession by their predecessors-in-interest with the predecessors in-interest of Molu, etc. (hereinafter to as the mortgagees). As a result of the proceedings taken by the mortgagors, a final decree for possession by redemption was passed against the mortgagees on 25th of April, 1962. When execution was sought to be taken, objections were raised on behalf of Bhola and others, who are now Appellants before us, claiming that they had been cultivating the land in dispute under the mortgagees for a number of years and were in actual possession as such and that the decree-holder-mortgagors were not entitled to get actual physical possession and were entitled only to symbolical possession as owners. In other words, their claim was that they cannot be dispossessed except in accordance with the existing tenancy laws. The trial Court upheld these objections on the interpretation of Order 21, Rule 35, CPC , holding that the objector-tenants not being parties to the suit, were not bound by the decree irrespective of the fact whether they can be treated as tenants of the decree-holders or as trespassers. The decree-holders went up in appeal and the learned District Judge, Sangrur, found in their favour and directed warrants to be issued in execution of the decree for actual physical possession of the land in dispute. Before the lower appellate Court, one of the objections raised on behalf of the tenants was that no appeal lay u/s 47 of the CPC . This was negatived by the Court holding that all questions between the parties to the suit or their representatives and relating to the execution, discharge or satisfaction of the decree can be determined by the Court executing the decree and not by a separate Court. He further held that the word "representative" as used in this section would cover the tenants, who claimed an interest in the property created by the mortgagees-judgment-debtors. On merits, he came to the conclusion, on consideration of the authorities cited before him, that on redemption of the mortgage, the tenancy created by the mortgagees came to an end. The present appeal has been filed by the tenants challenging this order.

With regard to the question as to whether, an appeal lay u/s 47 or not, hardly any arguments were addressed and I am inclined to hold that even on their own showing, the Appellants'' claim is based on their having been inducted as tenants over the land by the mortgagees and, consequently, they are claiming in a sense as representatives of the mortgagees-judgment-debtors.

The real question, however, is as to the effect of redemption on the rights of the Appellants. This requires the determination of the effect of Sections 76 and 111 of the Transfer of Property Act The relevant portions of these sections may be reproduced as follows:

When, during the continuance of the mortgage, the mortgagee takes possession, of the mortgaged property

(a) he must manage the property as a person of ordinary prudence would manage it if it were his own;

(b)..........

(c)..........

(d)..........

(e) he must, not commit any act Which is destructive or permanently injurious to the property.

A lease of immovable property determines--

(a).........

(b)............

(c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event by the happening of such event.

The effect of these two provisions has been given by the Supreme Court in Mahabir Gope and Others Vs. Harbans Narain Singh and Others, , at page 206, in the following words:

The general rule is that a person cannot by transfer or otherwise confer a better title on another than he himself has. A mortgagee cannot, therefore, create an interest in the mortgaged property which will enure beyond the termination of his interest as mortgagee. Further the mortgagee who takes possession of the mortgaged property must manage as a person of ordinary prudence would manage it if it were his own; and he must not commit any act which is destructive or permanently injurious to the property; see Section 76, Sub-clauses (a) and (e) of the Transfer of Property Act. It follows that he may grant leases not extending beyond the period of the mortgage; any leases granted by him must come to an end at redemption. A mortgagee cannot during the subsistence of the mortgage, act in a manner detrimental to the mortgagor''s interest such as by giving a lease which may enable the tenant to acquire permanent or occupancy rights in the land thereby defeating the mortgagor''s right to ''khas'' possession; it would be an act which would fall within the provisions of Section 76, Sub-clause (e) of the Transfer of Property Act.

A permissible settlement by a mortgagee in possession with a tenant in the course of prudent management and the springing up of rights in the tenant, conferred or created by statute based on the nature of the land and possession for the requisite period is a different matter altogether. It is an exception to the general rule. The tenant cannot be rejected, by the mortgagor even after the redemption of the mortgage. He may become an occupancy ''raiyat'' in some cases and a non-occupancy ''raiyat'' in other cases. But the settlement of the tenant by the mortgagee must have been a bona fide one. This exception will mot apply in a case where the terms of the mortagage prohibit the mortgagee from making any settlement of tenants on the land either expressly or by necessary implication.

The present appeal was completed and put up for hearing without the records, the same being an execution second appeal. However, it was not suggested that in the mortgage deed there was either any express prohibition or express power given to settle tenants on the land and for the present, therefore, I would proceed on the hypothesis that there is no express provision either way.

As laid down by the Supreme Court, the ordinary rule is that a lease created by the mortgagee will come to an end on the redemption of the mortgage. The only exception, referred to above, is "a permissible settlement by the mortgagee in possession with a tenant in the course of prudent management and the springing up of rights in the tenant conferred or created by statute based on the nature of the land and possession for the requisite period". The argument on behalf or the Learned Counsel for the Appellants was that the settlement of a tenant-at-will on the land did amount to a prudent management of the land in question, particularly in view of the fact that mortgagees were non-agriculturists and were-not expected. to cultivate the land themselves, and that once the tenancy in favour of the Appellants is considered to be a "permissible settlement," then in view of the provisions of Sections 7 and 7 A of the Pepsu Tenancy and Agricultural Lands Act, 1355 (hereinafter referred to as the Pepsu Act), they cannot, be ejected except in accordance with the provisions of those sections.

These matters, in a way, have been dealt with exhaustively by a Bench of the Bombay High Court in Dinkar Bhagwant v. Rau Babaji 59 Bom. L.R. 101. It is not necessary to deal with all the arguments which were addressed in that case and ably met with by the learned Judges. Dealing with the effect of Section 76 of the Transfer of Property Act, it was inter alia, observed as follows:

The first thing to be noticed, however, is that this Clause 76(a) finds mention not in clauses which enumerate the powers of the mortgagee but which enumerate his liabilities. The clause merely reproduces the provision of the English law that the mortgagee must, at his peril, manage the mortgaged property as a person of ordinary prudence would manage it as if it were his own. The clause confers no powers whatever upon the mortgagee. If, consequently, it is intended to argue that any lease which was created by the mortgagee in possession is binding upon the mortgagor after the redemption, there must be found either a statutory power in the mortgagee to make such a lease or an express power.

With regard to the other question as to whether any right could spring up in the tenant in consequence of a statute based on the nature of land and possession for the requisite period, the learned judges considered the provisions of the Bombay Tenancy Act under which, it was argued, a tenant was entitled to retain the property even after the mortgagees interest came to an end and came to the conclusion that those provisions did not confer upon the tenant any right to retain the land as a tenant of the mortgagor after redemption and one of the reasons given by the learned judges for coming to this conclusion was that u/s 5(3) of the aforesaid Act a tenant, in order to get protection, must be "a tenant under a proprietor ''de facto'' or ''de jure'' and that a mortgagee was not included in the definition of a proprietor".

(See observations at. page 113 of the report).

The Learned Counsel for the Appellants urged that the judgment of the Bombay High Court in Dinkar Bhagwant''s case is completely distinguishable on both the points. With regard to the second point he urged that the decision, no doubt, is correct so far as it goes and even the Supreme Court in Harihar Prasad v. Deonarain Prasad AIR 1956 S.C. 305, came to the similar conclusion with regard to the provisions of the Bihar Tenancy Act, which were more or less identical with those of the Bombay Act. In head-note (g) it was observed as follows:

Before a person can claim occupancy rights u/s 21, he must'' establish that he is a raiyat as defined in Section 5(2) and (3). Where, therefore, the lessees acquire the right to hold the lands for the purpose of cultivation from the mortgagees and not under the mortgagors, they are not raiyats as defined in Section 5(3) and can claim no rights u/s 21. A mortgagee is no doubt the transferee of an interest in immovable property, and. may in a loose sense be said to be the owner of that interest. But the definition of a proprietor requires that he should own the estate or part thereof and not merely an interest therein. It would be a contradiction in terms to say of a mortgagee that he owns the estate over which he owns an interest. Further where the lands were under the personal cultivation of the mortgagors at the time when they were mortgaged, the mortgagees cannot be taken to be the tenure-holders.

The Learned Counsel, however, urged that the relevant provisions of the Punjab Tenancy Act are altogether. different. Clause "f" of Section 2 defines ''landowner'' as having the same meaning as is assigned to it under the Punjab Land Revenue Act, 1887, and includes an allottee. The explanation added, however, is to the following effect:

In respect of land mortgaged with possession, the mortgagee shall be deemed to be a landowner.

It was, therefore, urged that the defect that was found in both the Bombay and the Bihar Acts does not exist in the Pepsu Act and, thus, a tenant under a mortgagee shall be a tenant for all purposes of the Act. Section 7 provides as follows:

No tenancy shall be terminated except in accordance with the provisions of this Act or except on any of the following grounds * * *.

(it is not necessary to. refer to the grounds).

Section 7-A merely gives additional grounds for termination of tenancy in certain cases, which is also not relevant for the decision of the point before us.

The contention of the Learned Counsel for the Appellants, in short, therefore, is that if a mortgagee is authorised under the law to settle a tenant on the land, which is mortgaged with him, then the mortgagee is a landowner within the meaning of the Pepsu Act and such a tenancy created by the mortgagee cannot be terminated except in accordance with the provisions of Sections 7 and 7A. I feel that there is force in '' this contention. Dinkar Bhagwant''s case loses its force so far as this point is concerned because the provisions that were being considered by the learned judges of the Bombay High Court were materially different from those in the Pepsu Act. The latter Act makes no distinction between the mortgagor and the mortgagee and both of them are landowners within the meaning of the Act, and the only question for determination, therefore, is whether the tenant, who claims protection under the Act, is one whose settlement by the mortgagee was permissible.

In this respect also, the argument which appealed to. the learned judges in Dinkar Bhagwant''s case does not hold good because of the clear observations by the Supreme Court in Asa Ram and Another Vs. Mst. Ram Kali and Another, That was a case in which the mortgagees admitted certain persons as tenants under a qabuliat dated the 26th of May, 1936, in their favour at an annual rent of Rs. 112 per annum. In 1945 the mortgage was redeemed by payment of the amount as a result of the redemption decree. They were, however, resisted by the tenants when they sought actual possession. The matter was taken up by the successor-in-interest of the mortgagors before the revenue authorities and ultimately the board of Revenue came to the conclusion that the "settlement of tenants" was at a reasonable rate because the circle rate was Rs. 76-6-0 per annum, and held the settlement binding on the mortgagors being one for "prudent and economic! rent". The Supreme Court remanded the case for trial of the following two issues--

(1) whether the lease deed dated May 26, 1936, by the mortgagees in favour of the Respondents is true and legally valid; and

(2) whether the said lease is binding on the Appellants.

With regard to the second issue, which was found by the Board of Revenue in favour of the tenants, even after remands it was observed by the Supreme Court at page 185 of the report as follows:

The law undoubtedly is that no person can transfer property so as to confer on the transferee a title better than what he possesses. Therefore, any transfer of the property mortgaged, by the mortgagee must cease, when the mortgage is redeemed. Now, Section 76(a) provides that a mortgagee in possession ''must manage the property as a person of ordinary prudence would manage it if it were his own''. Though on the language of the statute, this is an obligation cast on the mortgagee, the authorities have held that an agricultural lease created by him would be binding on the mortgagor even though the mortgage has been redeemed, provided it is of such a character that a prudent owner of property would enter into it in the usual course of management. This being in the nature of an exception, it is for the person who claims the benefit thereof, to strictly establish it.

Facts of the case were then examined and, on merits, it was held that the mere fact that the rent fixed was more than the Circle rate was not decisive of the question whether the settlement was reasonable or not, and came to the conclusion that the settlement not being reasonable and proper was not binding on the mortgagors. The observations reproduced above, particularly those underlined by me (italicised herein) negative altogether the argument utilised in Dinkar Bhagwant''s case by the Bombay High Court that Section 76 does not confer any right on the mortgagee. In view of the above observations, it must be held that the agricultural lease created by the mortgagees may be binding on the mortgagor even after the redemption of the mortgage "provided it is of such a character that a prudent owner of property would enter into it in the usual course of management".

As I have already stated above, records are not before us and, in any case, the Courts below have given no finding whatever (1) as to whether any lease was, in fact, created by the mortgagees in favour of the Appellants and (2) if so, whether, taking all the circumstances into consideration, it is binding on the mortgagors, being of a character that a prudent owner of the property would enter into it in the usual course of management.

In view of the above, therefore, I feel that the only course open to us is to remand the case for the trial of these two issues.

On behalf of the Respondents, we were referred to a recent judgment of a Division Bench of this Court in All India Film Corporation Ltd. v. Shri Raja Gyan Nath. Regular First Appeal No. 281 of 1960, decided on 19th of March, 1963, in which the view taken was that a lease created by the mortgagee of urban property, in the absence of any express provision to that effect, would not be binding on the mortgagor, who, on redemption, would be entitled to actual physical possession of the property. It was urged that this decision ran counter to the observations of the Supreme Court in Asa Ram''s case. This case was referred to by Mahajan, J., who delivered the judgment in the regular first appeal, referred to above, in the course of an exhaustive discussion of all the authorities, and distinguished the same on the ground that the case before the Supreme Court related to agricultural land. For the present case, it is not necessary for me to examine the question whether this distinction was rightly made or not because, in any case, this case of All-India Film Corporation is no authority for the proposition that a lease created by a mortgagee of agricultural land would, in no case, be binding on the mortgagor in the absence of any express provision to that effect in the deed.

For the reasons given above, therefore, the case is remanded to the trial Court, before whom the parties are directed to appear on 20th January, 1964, for taking date for further proceedings. Parties will be given a reasonable opportunity for leading such evidence as they may deem fit and as may be considered relevant on the two issues, referred to above, and a report will be submitted, through the District Judge to this Court without any avoidable delay. In any case, effort should be made to submit this report within three months of the date of the appearance of the parties.

D. Falshaw, C.J.

I agree.