Lakshminarayana Shetty vs Andunhi Beary

K.K. Mathew, J.—This is an appeal filed by the plaintiffs from a decree in a suit for recovery of possession of plaint A schedule property after removal of the shop building standing thereon with past and future mesne profits. The plaint A schedule property belonged to one Lakshmi Raithi. She leased it for a term of 25 years on 31-5-1938 to A. Beary: the rent payable under the lease was Rs. 6/- a year. On 5-7-1939 A. Beary assigned her lease hold interest to defendants 1 and 2. The original landlord died; and the present plaintiffs are his legal representatives. On 30-9-1963 a registered notice was issued by the plaintiffs to the defendants to surrender the property on or before 30-11-1963. The defendants did not surrender and so the suit was filed on 30-1-1964.

The 1st defendant contended among other things that the defendants were entitled to the protection u/s 106 of Act 1 of 1964, that they were not liable to demolish the building, but entitled to its value in the event of surrender of possession. The trial court held that the defendants were not entitled to the benefit of section 106 of Act 1 of 1964 and so cannot claim fixity of tenure; and that they were liable to demolish the building and give vacant possession to the plaintiffs. In appeal by the defendants, the lower appellate court found that the defendants were entitled to fixity of tenure u/s 106 of the Act, that in any event they were not liable to demolish the building, but entitled to get its value by way of improvements in the event of surrender. It was against this decree that this second appeal has been filed.

The only point argued on behalf of the appellant was that defendants are not entitled to fixity of tenure by virtue of section 106(1) of the Land Reforms Act, Act 1 of 1964. Section 106(1) before it was amended by Act 35 of 1969 ran as follows:

106(1). Notwithstanding anything contained in this Act, or in any other law, or any contract, or order or decree of court, where, on any land leased for commercial or industrial purposes, the lessee has constructed buildings for such commercial or industrial purpose before the 18th December 1957, he shall not be liable to be evicted from such land, but shall be liable to pay rent under the contract of tenancy. Such rent shall be liable to be varied every twelve years on the motion of the lessor or the lessee, in such manner as may be prescribed.

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It is admitted that the lease in favour of A. Beary was for a commercial purpose and that A. Beary put up the building for that purpose. The contention of the plaintiffs was that the protection of section 106(1) of the Act is confined to the lessee to whom the lease was granted for commercial or industrial purpose and who has constructed the building for that purpose and that it was not open to a transferee of the lessee to claim that benefit of the sub-section. In Kunhiraman and another v. Chemmarathi and others 1966 K.L.J. 452 Madhavan Nair J., held that on the wording of the sub-section it is only the person to whom a lease was granted for commercial or industrial purpose and who on the basis of the lease constructed a building for that purpose who can claim the benefit of the sub-section, and that a transferee from the lessee was not entitled to claim the protection of the sub-section. The learned judge said:

The object of section 106, as the wording clearly indicates, is not to put a person who has established his business in a building put up by him on land taken on lease from a landlord at the latter''s mercy for the continuance of his source of income. The wording is where....the lessee has constructed buildings for such commercial or industrial purpose....he shall not be liable to be evicted from such land....It is difficult to find that the benefit of the section would enure to a person who has taken an assignment of that lessee''s rights. The pronoun ''he'' in the section can relate only to the lessee who has constructed the building, and not to commercial adventurers who came in as his assignees. The section does not in terms inhibit the landlord''s resumption of the property, but protects him who put up the building for his business.

With respect, we think, the view taken by the learned judge is correct and can be applied to the facts here. Besides, defendants 1 and 2 being transferees, or assignees of A Beary, the lessee, they are liable to the landlord for rent only by virtue of privity of estate and not by privity of contract. The sub-section when it says that "he shall not be liable to be evicted from such land, but shall be liable to pay rent under the contract of tenancy" clearly indicates that the legislature intended only to protect a lessee who is liable under the contract of tenancy to pay the rent. As already stated, defendants 1 and 2 were not liable to pay the rent under the contract of tenancy but only by virtue of privity of estate. In Mammoo v. Asya 1966 KLT 126 a Division Bench of this Court held that it is only a person who is liable for payment of rent under the ''contract of tenancy'' who can claim the protection of the sub-section, that the provision in section 106 (1) that the ''lessee shall be liable to pay rent under the contract of tenancy'' clearly indicates that he must be a person who is in direct relationship with the landlord under the contract of tenancy, who can claim the protection of the sub-section, and that a sub-lessee not being in direct relationship with the landlord under the contract of tenancy is not entitled to the benefit of the sub-section. We, therefore, hold that the defendants are not entitled to claim the benefit of section 106 (1) of Act 1 of 1964. In the result, the decree of the lower appellate court is set aside. The plaintiffs will be entitled to recover possession of the A schedule property on payment of the value of the building as found by the lower appellate court with arrears of rent at the rate of Rs. 6/- per year and interest thereon at the rate of 6% from 31-5-1963, and future interest at the same rate subject to the provision of order XX Rule 12, C.P.C. If the plaintiffs deposit value of improvements, from the date of deposit they will be entitled to mesne profits at the rate to be decided by the execution court. The appeal is accordingly allowed with costs.