Udipi Seshagiri vs Seshamma Shettati and Others

John Wallis, Kt., C.J.—In 1876 the plaintiff''s predecessors-in-title granted a mulgeni lease containing a covenant against alienation to the

predecessors of defendants 4 and 5 who in 1907 in breach of their covenant alienated the holding to defendants 1 to 3. The plaintiff having

obtained a decree for rent against defendants 4 and 5 in O.S. No. 490 of 1916, attached the holding in execution of the decree, when defendants

1 to 3 put in a claim petition and succeeded in getting the attachment raised. The plaintiff then filed this suit to establish his right which was

dismissed by both the Lower Courts. In second Appeal Bakewell and Phillips, JJ. differed and this is an appeal from the prevailing Judgment of

Bakewell, J. dismissing the suit. It is well settled in England that an assignment by a lessee in breach of his covenant not to assign is perfectly valid

to pass the term; and we have been asked to apply the same rule here as it was applied by Sargent, C.J. in Tamayya v. Timappa Ganpaya ILR

(1881) Bom. 262 in Basarat Alikhan v. Manirulla (1909) ILR 36 Cal. 745. Promode Ranjan Ghosh v. Aswini Kumara Nag (1914) 18 C.W.N.

1138 and by Bakewell, J. in the present case. On the other hand it was contended that the rule was inapplicable on the authority of an observation

of Bhashyam Ayyangar, J. in Parameshri v. Vittappa Shanbaga 12 M.L.J. 189 which was followed by a Bench of this Court in another case. All

that Bhashyam Ayyangar, J. said was that a transfer by the lessee in breach of a covenant not to alienate might be void against the lessor and in that

view the transfer would be inoperative to secure to the transferee as against the lessor the benefit of the lessor''s contract u/s 108(c) Transfer of

Property Act. I have no doubt the learned Judge was well aware that such transfers are valid in England and having regard to his express mention

of Section 108, Transfer of Property Act, I think that his suggestion that they may be void was made with reference to the fact that in Section 108,

Transfer of Property Act, the lessee''s power of transfer in Clause (j) and the provision as to the transferee''s rights under the transfer in Clause (c)

are made subject to the words ""in the absence of a contract or local usage to the contrary"" at the beginning of the section. It may be argued on the

strength of these words, and this I think was the view Bhashyam Ayyangar, J. was disposed to take, that whatever be the law in England, the

Transfer of Property Act only recognises transfers by the lessee in the absence of a contract by him not to alienate, which of course means a valid

contract. It has however been expressly decided and may now be considered settled, that covenants not to alienate are valid under the Transfer of

Property Act, as being for the benefit of the lessor, and it was so held by him in that case. It would, also, seem that the learned Judge was

disposed to apply the same rule to agricultural leases not governed by Chapter V, even when they were executed before the coming into force of

the Act. As regards the last point the English rule was applied in 1883 in Tamayya v. Timappa Ganpaya I.L.R(1881) Bom. 262 by Sargent, C.J.

and Melvill, J. in the case of one of these mulgeni leases in North Kanara executed before the enactment of the Transfer of Property Act, after a

very careful examination of the history of this tenure in the previous case, Bin Ram-krishnappa v. S. Bai Nagabhat I.L.R.(1883) Bom, 256

judgment in which was given on the same day. It was there pointed out that in ancient times the interest of the permanent lessee or mulgenidar was

freely transferred and that restrictions against alienations by mulgenidars though not invalid were of comparatively recent origin. In these

circumstances I have come to the conclusion that the decision in Tamayya v. Timappa Ganpaya (1881) 7 Bom. 262 is sufficient authority for the

application of the English rule in the case of mulgeni leases in Kanara executed prior ''to the Transfer of Properly Act, and that it is unnecessary to

consider the effect of Section 108 of that Act on transfers by lessees in breach of covenants in leases subsequent to the Act more especially as the

view of the section apparently taken by Bhashyam Ayyangar, J. has not yet been expressly adopted in any case, and, on the other hand, the

English rule has been applied in Calcutta even after the passing of the Act, though without advertance to the terms of Section 108. In the result I

agree with Bakewell, J. and would dismiss the appeal with costs.

Oldfield, J.

I agree with the Judgment just delivered.

Seshagiri Aiyar, J.

3.The plaintiff''s predecessor granted to the ancestor of defendants 4 and 5 a Mulgeni lease of the property in dispute in 1876. On the. 16th

January 1907, defendants 4 and 5 transferred that lease to defendants 1 to 3. The plaintiff obtained a decree for rent against the former and

attached the properties ignoring the transfer and treating them as if they still belonged to the judgment-debtor. The question is whether the plaintiffs

are entitled to do that.

The lease was granted in the year 1876. There can be no doubt that, if the alienation has been made in the year 1876 or 1879, and if the

question came up before the Courts before 1888, it would have been decided, following English decisions in enunciating principles of equity,

justice, and good conscience, that the alienation was not invalid. I fail to see why the conclusion should be different because the matter comes up

before the Court after the Transfer of Property Act was passed. The rule that prima facie, the legislative enactments of this country should be

consulted for principles of equity, justice, and good conscience should not be held applicable to a transaction which was entered into before the

Act. It would lead to anamolous results to interpret a document in a sense in which it could not have been construed when it was executed.

Moreover, to the class of leases with which we are concerned, the Transfer of Property Act in terms does not apply.

I shall next deal with the question with reference to the Transfer of Property Act itself. u/s 6, every kind of property may be transferred subject

to certain exceptions. By virtue of Section 8, every such transfer passes to the transferee all the interest which the transferor has in the Property

and in its legal incidents. Section 10 provides that a condition in a lease reserving a benefit for the lessor or those claiming under him will not be

regarded as a repugnant condition. Section 12 is important. After enunciating the general rule that conditions reserving a benefit to the transferor on

the transferee endeavouring to dispose of the property are invalid, it says that the benefit clause in a lease is an exception to the rule. This and

Section 10 are clear indications than no condition against alienation is valid unless it be in a lease and the condition is for the benefit of the lessor.

Consequently, whenever in a lease a contract to the contrary is inserted, what the court has to inquire into is whether that contract is for the benefit

of the lessor. I do not think this proposition is affected by anything contained in Section 108. Clause (c) of that Section provides that the lessor

shall be deemed to contract with the lessee that, if the latter pays the rent, he may hold the property during the period of the lease without

interruption. The further provision is that "" the benefit of such a contract shall be annexed to and go with the lessee''s interest and may be enforced

by every person in whom that interest is for the whole or any part thereof from time to time vested."" I understand this sentence to mean that the

lessor would ordinarily have a right to rent against the lessee''s assignee and the lessee''s assignee would have a right to claim that the lease should

subsist during the stipulated period. This undoubtedly is subject to any condition against alienation that may be found in the lease deed, provided

such a condition is for the benefit of the lessor. Clause (j) is absolute in terms, but I take that the lessee will be governed by the prohibitions

mentioned in Sections 10 and 12.

Then we come to Section 111 which deals with the determination of the lease. It is to be noted that there is no provision terminating a lease on

the breach of every condition in the lease, that is to say, every breach of a contract would not determine a lease ipso facto. By Clause (g) it is

provided that the lessee would incur forfeiture if he breaks an express condition to the effect that, on breach thereof, the lessor may re-enter or the

lease shall become void. If there is no provision for re-entry, or declaring that, on the breach of a condition, the lease shall become void, forfeiture

is not incurred. Consequently a bare stipulation that the lessee shall not transfer the property would not render the transfer inoperative.

The further question is what is the construction to be placed on the words in Sections 10 and 12 of the Transfer of Property Act '' except in the

case of a lease whether the condition is for the benefit of the lessor or those claiming under him.'' From the earliest times, in England, it has been

held that mere restraint upon alienation is not a covenant for the benefit of the lessor. The principle which has guided the framers of the Transfer of

Property Act and which also underlies the decisions of the English Courts is this. Ordinarily the transferor of property is entitled to dispose of his

interest in any way he chooses. A condition imposing limitations on him is not valid. A few exceptions are however recognised. One of them is

where the landlord apprehending that the transfer will injuriously affect his interest stipulates that in the breach of the condition, he shall be at liberty

to re-enter the property or to declare that the lease is void. In such cases a direct benefit to him is secured which would enable him to grant the

lease to somebody else. A covenant by which he seeks simply to impose restrictions upon a lessee is not recognised by law as specifically

enforceable. Section 111 of the Transfer of Property Act fully recognises the above principle. Therefore the construction that I place on Section

108 is that no contract to the contrary will be regarded as binding between the parties unless it be a contract which enables the landlord on the

breach of it to re-enter possession or to put an end to the lease. In my opinion, the bare prohibition, not being for the benefit of the landlord is not a

contract to the contrary which the law recognises as operative.

I will not refer to very many English decisions. Re. Johnson, Ex parte Blackett (1894) 70 L.T. 381. Paul v. Nurse (1828) 8 B & C 486 all

enunciate the principle I have mentioned. In Williams v. Earle (1868) L.R. 3 Q.B. 749. Blackburn, J. with concurrence of Lush, J. said, ""Though

there is a covenant binding on the defendant not to assign, the assignment is nevertheless operative. But the plaintiff is entitled to recover indirectly

by way of damages for breach of the covenant not to assign. See also Hatton v. May (1876) 3Ch. D. 148.

I shall now examine the Indian Gases. In Narayana v. Narayana I.L.R.(1883) M. 327 the learned Judges held that a stipulation that the lease

shall be cancelled is a penal one which can be relieved against. There is also a dictum in that case to the effect that alienation will be inoperative

against the lessor. In Parame-shari v. Vittappa Shanbhaga (1902) 26 M. 157 . Mr. Justice Bhashyam Ayyangar after dealing with a number of

other circumstances expressed himself thus :--""It may also be that a transfer by the lessee-absolutely or by way of mortgage or sub-lease, in

breach of the covenant not to alienate will be void as against the lessor and he may realise arrears of rent due by the lessee, by attaching and selling

his interest in the lease as effectually as if there had been no transfer by the lessee"". This is a very guarded statement which suggests without

deciding a possible conclusion. In Jackiminezes v. Venkataramana Kamthi (1915) 28 Ind Cas 904. Mr. Justice Sadasiva Iyer and Mr. Justice

Napier simply followed the dictum of Bhashyam Iyengar, J without discussion. On the other hand, we have in Basarat Alikhan v. Manirulla ILR

(1909) Cal. 745 the well considered opinion of Sir Lawrence Jenkins, C.J. and Mookerjee, J. This was followed in Promode Ranjan Ghose v.

Aswini Kumar Nag (1914) 18 C.W.N. 1138. See also Nil Madhab Sikdar v. Narottam Sirdar ILR (1890) Cal. 326 and Mahananda Roy v.

Saratmati Debt (1911) 14 C.L.J. 585 and Akran All v. Durga Prasanna Roy Chowdhiri 14. C.L.J. 614 . In Madar Sahib v. Sannabawa I.L.R.

(1895) 21 Bom. 195 it was held that a clause in a lease prohibiting alienation unaccompanied by a provision for re-entry did not put an end to the

lease.

The above discussion leads me to the conclusion that Mr. Justice Bakewell has taken the right view.

I am therefore of opinion that the appeal fails and should be dismissed with costs.