CARONA SHOE CO. LTD. AND ANR. v. K.C. BHASKARAN NAIR

Citation: [1989] 1 S.C.R. 974

Court: Supreme Court of India

Bench: SABYASACHI MUKHERJI, S. RANGANATHAN

Case summary

Whether a particular lease is bona fide or prudent act of management, is primarily a question of fact, though whether on account of the bona fide or prudent act of the mortgagor his lessee was entitled to continue even after the mortgage was determined, is a question of law....

Judgment text

The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This appeal by leave is from the judgment . and order of the High Court of Kerala, dated 21st October, 1986. It arises in the following circumstances: The building in question which is a shop building No. T. C. 887, M. G. Road, Pazhavangadi, Trivandrum, is part of a pucca three storeyed building belonging to one M. P. Philip and as per his settlement the disputed shop-building and two other rooms devolved on one of his sons M. M. Philip. While this disputed shop-building was in the possession of a tenant under the owner, the owner mortgaged the disputed building and the remaining portions to the first defendant with a direction to receive the rent from the tenant. The mortgagor directed the tenant also to attorn to this mortgagee.

The first defendant subsequently in the course of his management of the mortgaged property, gave the building on lease to the appellants for a higher rent when the former tenant vacated the same. Subsequently, the owner executed a subsequent mortgage with a direction to redeem the mortgage in favour of the first defendant and before the subsequent mortgagee took steps to redeem the mortgage, the owner assigned his equity of redemption to the respondent. The respondent and the subsequent mortgagee together as plaintiffs 1 and 2 filed a suit to redeem the mortgage of the first defendant impleading the appel- CARONA SHOE CO. v. K. C. B. NAIR IMUKHARJI, J. ] 977 ! ants as well as respondents and claimed recovery of the khas posses- -,: sion of the building.

The appellants contended that they are tenants of the building inducted into possession by the mortgagee as a mode of enjoymenUhat the mortgage deed authorised the mortgagee to enjoy the building by letting it out and they were not liable to be evicted through a decree of court in a redemption suit without an order under the Kerala Building (Lease & Rent Control) Act, 1965 (hereinafter 'f referred to as 'the Act'). The trial court decreed the suit and directed recovery of possession of the shop-building on the ground that the mortgagee could not induct a tenant and give him any right to continue in possession even after the redemption of the mortgage. On appeal by - -< and a portion of the first floor. + I am writing this letter to you because my first preference is for your company. The main reason is that you are conducting the business in the same shop for some years. Second thing is that I have already agreed to you at the I\ discussion even though there was no written consent.

In the lighlof the 'above, I give below my terms and conditions for r-enting out the shop with additional space annexed, if you y are interested to continue the business in my building. Of course, the expenses (portion) for the same will have to be borne by you. But I will provide you with a very good show room considering your requirements. Necessary bathroom, lavatory, office cabin etc. will also be provided in consulta- ~ .. ,tion with your representative. I had a discussion with Mr ' L. W. Baaker, A. R. I. B. A. (The British Architect who is doing so many artistic modem buildings and show room etc. throughout India including the Chitralekha Film Studio) and the Art. Director and Interior Decorator of our Studio regarding the subject. " Thereafter, certain terms and conditions of the proposed lease were suggested. Ultimately, however, no such lease was executed.

This communication strictly, in our opinion, negates the submission that there was any concurrence or approval of the mortgagor of the continuance of the appellant's as tenants after the expiry or redemption of the mortgage. · It was then submitted by Sri Iyer that in view of the provisions of "'1 the Act, it was not possible for the respondents to execute the decree. After an exhaustive discussion of the relevant authorities, it has been held hy this Court in Poma/ Kanji Govindji's case (supra) that in k respect of the urban immovable properties, the tenants do not get any protection after the redemption of mortgage. Sri Iyer, however drew our attention to Sec. 11 of the Act, to contend that notwithstanding anything contained in any other law or contract, a tenant shall not be evicted, whether in execution of a decree or otherwise, except in .. accordance with the provisions of the Act. He drew our attention to /j the definition of 'tenant' under sec.

2(6) of the Act which defines a tenant as a person by whom or on whose account rent is payable for a ,___ building and includes the heir or heirs of a deceased tenant and a person continuing in possession after the termination of the tenancy in I his favour. Similarly, landlord is defined under S. 2(3) of the Act as \; follows: t "(3) "landlord" includes the person who is receiving or is entitled to receive the rent of a building, whether on his own account or on behalf of another or on behalf of himself and other or as an ~gent, trustee, executor, administrator, receiver or gurdian or who would so receive the rent or be entitled to receive the rent, if the building were let to a tenant. " But in view of the said definitions, we are of the opinion that between the appellants and the respondent, there was never any landlord or tenant relationship. The appellants were never the tenants of the respondent. Sri Iyer drew our attention to the observations of this CARONA SHOE CO. v. K. C. B.

NAIR [MUKHARJI, J. i 983 Court in Raj Brij Krishna & Anr. v. S. K. Shaw & Bros. , [1951] 2 SCR 145, where it was held that the non obstante clause would be applicable. Our attention was drawn to the observations of Fazal Ali, J. at page 150 of the report. There, the Court observed that Section 11 of the Bihar Buildings (Lease, Rent & Eviction) Control Act, 1947 was self-contained section, and it was wholly unnecessary to go outside the Act for determining whether a tenant was liable to be evicted or not, and under what conditions he could be evicted. But in the instant case, the appellants were not the tenants. The respondent, the original mortgagor, would never after the redemption of the mortgage have treated the appellants to be tenants. There was no relationship ever between the appellants and the respondent. The mortgagor had a separate and distinct interest which was wiped out on the redemption of the mortgage or expiry of the period of mortgage.

The mortgagor on redemption of mortgage gets back his own right, he is not the successor-in-interest of the mortgagee. Interest, if any, created by the mortgagee on the mortgagor's right, must disappear on ceasing of interest of the mortgagee. In that view of the matter, in our opinion, thus the said observations would not be of any relevance to the present case. Similarly, reliance was placed on the observations of this Court by Sri Iyer in Mis Raval & Co. v. K. G. Ramachandran & Ors. , [1974] 1 sec 424. The observations that the definitions of 'landlord' and 'tenant' might apply even if the contractual tenancy has come to an end. But that is not the situation here in the instant case. In the said case, Bhagwati, J. as the Chief Justice then was, in his judgment at page 439 of the report observed that sub-section (1) of section 4 of the Act in question i. e.

, Tamil Nadu Buildings (Lease & Rent Control) Act, 1960 contemplated that an application for fixation of fair rent of a building I might be made by the tenant or the landlord. The definition of 'tenant', it was observed, included contractual tenant as well as tenant remaining in possession of the building after de. termination of the contractual tenancy, i. e. statutory tenant, and both contractual tenant and statutory tenant could, therefore, apply. It was, therefore, submitted in this case that on the analogy of the contractual tenant, the appellants were entitled to the protection of the Act. We are unable to agree. It is not a question of a contractual tenancy coming to an end. The limited estate created in favour of the mortgagee having disappeared, all rights emanating from that limited estate disappear and the superior right of the mortgagor comes not in place of the mortgagee but.

as a result of an independent title, and as such the mortgagor cannot be bound by any act created or any relationship contracted between the mortgagee and the tenant, unless it is permitted by the mortgage-deed. Reliance was also placed on certain observations of t' ' this Court in V. Dhanpal Chettiar v. Yesodai Ammal, [1979] 4 SCC 214. Therein, it was held that under the State Rent Acts, the concept of contractual tenancy has lost much of its significance and force. Therefore, giving of the notice was a mere surplusage and unlike the law under the Transfer of Property Act, 1882, it does not entitle the landlord to evict the tenant. In our opinion, the observations of the said decision cannot have any assistance or significance for the purpose of the issues involved in the present controversy. Our attention was also drawn to the observations of this Court in Poma!

Kanji Govindji's case (supra) at para 42 of page 326 and it was contended that in this case impliedly the mortgage-deed specifically and categorically made an exception in favour of the tenants that they would continue in possession even after the termination or redemption of the mortgage and that these leases were acts of prudent management. In this connection, reference may be made to Section 60 of the Transfer of Property Act. It is this which gives the mortgagor right to redeem after the date fixed for payment. The mortgagor's right of o redemption and the mortgagee's right of foreclosure or sale are co-extensive. Similarly, Section 76(a) of the Transfer of Property Act which determines the liabilities of the mortgagee and imposes the obligation to manage the property as a person of ordinary prudence. In the instant case, it has been held by the High Court that the induction of the appellants as tenant was not an act of prudent management.

Our attention was also drawn by Sri Iyer to the observation of this Court in Gian Devi Anand v. Jeevan Kumar & Ors. , [1985] 2 SCC 683 in support of his submission that in the emerging jurisprudence of I tenancy legislation the distinction between statutory tenant and contractual tenant has disappeared. The said view, in our opinion, would be of no avail as the respondent is not the successor-in-interest and does not come in place of the mortgagee but by virtue of its independent title. Reliance was also placed on the observations of this Court in G. Ponniah Thevar v. Nalleyam Perumal Pillai & Ors. , [1977] 1SCC500. That decision, in our opinion, has no application. The person inducting the tenant-appellant was a co-widow who had a life interest in the lands.

It was observed that the terms of the statutory protection applied clearly to all tenancies governed by the Madras Cultivating Tenants Protection Act irrespective of the nature of rights of the person who leased the land so long as the lessor was entitled to create a tenancy. In our opinion, the said observations would not be applic- able. The said decision deals with the right of the co-widow in the land. Reference may be made to the facts of that case at page 504, para 10. In our opinion, in view of the said facts, the decision would not apply to the facts of the instant case. On the other hand, in view of the facts and ratio of the principle of the decisions in Jadavji Purshottam, (supra) and Pomalji Govindji, (supra) we are of the opinion that the contentions of Sri Iyer cannot be sustained. The non obstante clause in Section 11(a) of the Act is applicable only to a decree for eviction obtained by a lanlord against a tenant. The appellants were never the tenants of the respondent.

In the aforesaid view of the matter, we are unable to accept the submissions urged in this case and, therefore, the appeal must fail. But in view of the fact that the appellants have been canying on the busi~ ness for some time in the premises in question in order to enable them to adjust their business, we direct that the order for eviction of the appellants should not be executed upon 31st October, 1989 if the appellants give an undertaking within a period of four weeks from this date to give vacant possession in a peaceful manner on 31st October, O 1989; and also containing the usual terms of undertaking. In default of . such undertaking being given within the time aforesaid, the decree·will be forthwith executed. The appeal is accordingly dismissed with costs. Y. L. Appeal dismissed.