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PETITIONER: RAJA KAMAKSHYANARAYAN SINGH BAHADUR

       Vs.

RESPONDENT: CHOHAN RAM AND ANOTHER

DATE OF JUDGMENT: 23/10/1952

BENCH: BHAGWATI, NATWARLAL H. BENCH: BHAGWATI, NATWARLAL H. MAHAJAN, MEHR CHAND AIYAR, N. CHANDRASEKHARA

CITATION:  1952 AIR  401            1953 SCR  108  CITATOR INFO :  F          1967 SC1390  (8)

ACT: Transfer of Property Act (IV of 1882), ss. 66, 65-A-Mortgage -Mortgagor in possession-Power to lease-Law before amendment Act of 1929-Permanent lease by mortgagor-Validity.

HEADNOTE: Under the law as it stood prior to the enactment of s.  65-A of  the  Transfer of Property Act, by Act XX  of  1929,  the question  whether the mortgagor in possession had  powar  to lease  the mortgaged property has got to be determined  with reference to the                             109 authority  of the mortgagor as the bailiff or agent  of  the mortgagee  to deal with the property in the usual course  of management.   It has to be determined    general  principles and not   the distinction between an English mortgage and  a simple  mortgage or   the considerations germane to s.66  of the Transfer of Property Act, and the true position is  that the mortgagor in possession may make a lease conformable  to usage  in the ordinary course of -management; for  instance, he  may  create a tenancy from year to year in the  case  of agricultural  lands  or from month to month in the  case  of houses.   But it is -not competent to him to grant  a  lease 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.  And it is for the lessee, if he wants to resist the claim of the mortgagee, to establish that  the lease  in  his favour was granted   the usual terms  in  the ordinary course of management.        Where  a mortgagor granted a permanent lease  of  the mortgaged  property  in  the year 1925 and  the  High  Court upheld the lease -as against a person who had purchased  the properties in a sale held in execution of a decree  obtained by the mortgagee   the mortgage,   the ground that the lease did not impair the security of the mortgagee: Held, that the lease  was  not  binding    the  mortgagee  or  the  auction purchaser as it was not a lease granted in the usual  course of management, even though it did not impair the security.

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    Madan  Mohan  Singh  v. Raj Kishore  Kumari  (1916)  21 C.W.N. 88, approved.  Balmukund v. Motilal (1915) 20  C.W.N. 350,  dissented  from.  Banee Prasad v. Beet  Bhunjun  Singh (1868) 10 W.R, 325, explained.

JUDGMENT: CIVIL APPELLATE, JURISDICTION: Civil Appeal No.  73 of 1950.  Appeal from the Judgment and Decree  dated the  26th January, 1944, of the High Court of Judicature  at Patna  (Fazl  Ali  C. J. and Chatterji J.)  in  Appeal  from Original  Decree No. 4 of 1941, arising out of Judgment  and Decree  dated the 20th September, 1940, of the Court of  the Additional Subordinate Judge of Hazaribagh in Title Suit No. 45 of 1939. S. N. Mukherjee for the appellant. Gangacharan Mukherjee and A. N. Sinha for the respondents. 1952.  October 23.  The judgment of the Court was  delivered by BHAGWATI J, 110 BHAGWATI  J.-The question that arises for our  consideration in this appeal is whether prior to the enactment of  section 65-A of the Transfer of Property Act in 1929 a mortgagor  in possession  had the power to grant a permanent lease of  the mortgaged property so as to bind the mortgagee.       One Raja Nilkanth Narain Singh was the owner of  Gadi Sirampur  and he executed   the 1st August, 1914,  a  simple mortgage  of  Gadi Sirampur in favour of  the  Chota  Nagpur Banking Association Limited.  In 1920 the Bank filed a  suit against  his son Wazir Narain Singh to enforce the  mortgage security and obtained a mortgage decree   the 29th November, 1921.  The Bank purchased a third share of Gadi Sirampur  in execution   of  that  decree    the  28th   October,   1922. Proceedings  were taken to set aside this sale.  During  the pendency  of  these proceedings it appears  that    the  5th November, 1925, Wazir Narain Singh granted a permanent lease of  four villages Nawadih, Koldih, Pandna and Chihutia by  a registered Patta to one Hiraman Ram who was the Manager  and Karta  of his joint Hindu family.  The Permanent  lease  was taken  by  him in his own name and in the name  of  his  son Chohan  Ram.   An  agreement  was  subsequently  arrived  at between the Bank and Wazir Narain Singh that if Wazir Narain Singh  paid to the Bank   or before the 16th  August,  1926, the  sum  of Rs. 1,10,631-4-0 the sale would be  set  aside. Wazir  Narain  Singh  executed   the 14th  August,  1926,  a mortgage  of Gadi Sirampur in favour of the Manager  of  the Court  of Wards in charge of the plaintiff’s  estate  during -his  minority to secure repayment of a sum of Rs.  1,47,000 and  out of the same satisfied the dues of the Bank and  the sale  in favour of the Ban was accordingly set  aside.   The plaintiff through the Manager of the Court of Wards filed  a suit   the 4th February, 1929, to enforce this mortgage  and he  impleaded as co-defendants in that suit Hiraman  Ram  as defendant  20  and his father Dilo Ram as defendant  19.   A final decree for sale was passed   the 18th September, 1931, and the 111 Plaintiff  purchased Gadi Sirampur at the auction sale  held in execution of this decree   the 6th April, 1935.  Delivery of  possession  was obtained by the  plaintiff  through  the Court    the 16th February, 1936.  Dilo Ram died  after  the mortgage  decree  but  Hiraman Ram and his  son  Chohan  Ram continued in actual possession of the disputed villages  and the plaintiff therefore filed   the 16th November, 1939, the

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suit,  out of which this appeal arises, in the Court of  the Additional  Subordinate Judge of Hazaribagh against  Hiraman Ram and Chohan Ram, defendants 1 and 2, for khas  possession of  these  villages.  The plaintiff contended  that  he  was subrogated  to  the position of the Bank,  that  the  decree which had been passed in the mortgage suit was binding   the defendants,  that he was the auction purchaser in  execution of that mortgage decree and that the Patta -being subsequent to  the plaintiff’s mortgage thus came to an end and he  was entitled  to  recover khas possession from  the  defendants. Defendant  2  filed  his written  statement  contesting  the plaintiff’s  claim.   He  denied  that  the  plaintiff.  was subrogated  to the position of the Bank.  He contended  that the decree in the mortgage suit was not binding   him as  he was  not :a party to that suit. lie further  contended  that the Patta could not be put an end to by the auction sale  of the  mortgaged property.  The defendant I filed  a  separate written  statement.  He denied that he was the  Manager  and Karta  of  the joint Hindu family.  He also  contended  that there  was  a  partition amongst the members  of  the  joint family   within  a  year  after  their  possession  of   the properties  in suit and the properties had been allotted  at that partition to the defendant 2. The  trial Court hold that, the plaintiff was subrogated  to the position of the Bank.  It also held that the defendant 1 was  the Manager and Karta of the joint family and that  the defendant 2 was fully represented in the mortgage suit, that the decree in the mortgage suit was binding   the defendants and that the plaintiff was entitled to recover possession 112      of  the  said properties and mesne  profits  from  the defendants.  The defendants appealed against this decree  to the  High  Court  of Judicature at Patna.   The  High  Court negatived  the  contention  in regard  to  constructive  res judicata which was urged   behalf of the plaintiff.  It then considered  the further contention that Wazir Narayan  Singh had,  after creating the mortgage in favour of the  Bank  no power  to  grant  the permanent lease  in  question  to  the defendants.   After  considering all the  authorities  which were  cited before it, it came to the -conclusion  that  the question  whether Wazir Narayan Singh had got such power  or not had to be determined with reference to the provisions of section  66 of the Transfer of Property Act and the  crucial test was whether the lease rendered the mortgagee’s security insufficient.   In  spite  of the fact  that  there  was  no allegation in the plaint that the defendant’s lease had  the effect of rendering the security of -the Bank  insufficient, the  High Court went into this question and   a  calculation of some figures came to the conclusion that the lease of the disputed villages in favour of the defendants did not in any way  render  the  security of  the  bank  insufficient.   It therefore held that the lease was valid and was not affected by the plaintiff’s mortgage, decree or by the execution sale under that decree and accordingly dismissed the  plaintiff’s suit.   The plaintiff obtained leave to appeal to the  Privy Council from this decision of the High Court and the  appeal was admitted   the 9th January, 1946.         Both the Courts below found that the plaintiff  was subrogated  to  the position of the Bank.  They  also  found that  the  defendant 2 was sufficiently represented  in  the mortgage suit.  These findings were not challenged before us and  the only question which survived for our  consideration was  whether  Wazir Narayan Singh had the power to  grant  a permanent  lease  to  the  defendants  so  as  to  bind  the plaintiff.

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          The  question  whether Wazir Narayan  Singh  had such  power  has got to be determined under -the law  as  it stood prior to the enactment of section 65-A of                            113 the  Transfer  of  Property  Act by Act  XX  of  1929.   The mortgagor’s  power to lease the mortgaged property  was  the subject-matter  of conflicting judicial decisions.   Relying upon  the  rule  of  English  common  law  under  which  the mortgagor  had no power to lease, it was held in some  cases that   a   mortgagor  could  not  ordinarily   without   the concurrence of the mortgagee execute a lease which could  be binding    the mortgagee.  In other cases a distinction  was drawn  between English mortgages and other mortgages and  it was  considered  that the mortgagor in  India  remained  the owner and when in possession could prima facie exercise  the rights  of ownership inclusive of the power to grant  leases of  the mortgaged property.  The Question was  decided  with reference to section 66 of the Transfer of Property Act  and it was held that the mortgagor could grant leases which were not  wasteful  in their effect   the  mortgagee’s  security. This was the principle deduced by Jenkins C.J. in  Balmukund v.  Motilal(1)  from the old case of Banee Pershad  v.  Beet Bhunjun Singh(1).  This line of reasoning was not adopted in other  cases which laid down a different rule, viz., 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   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. This was laid down by Sir Ashutosh  Mukherjee J.  in  Madan Mohan Singh v. Raj  Kishore  Kumari(3)and  was followed in a number of cases. There was thus a conflict  of decisions  which was sought to be resolved by the  enactment of section 65-A of the Transfer of Property Act which  dealt with  the  mortgagor’s  power to  lease  while  lawfully  in possession of the mortgaged property. "It is an elementary rule that though a mortgagor may assign the  mortgaged premises, the assignee can only take  subject to the encumbrances, and if the (1)  (1915) 20 C. W. N. 350. (2)  (i868) 10 W.R. 325. (3)  (i9i6) 21 C, W. N. 88. 114 property  is  sold  or  foreclosed  by  the  mortgagee,  any interest  which  the mortgagor may have  created  since  the mortgage will be destroyed"’. (Ghosh   Mortgage, Vol.  I, p. 212.)  As  was  observed  by Lord  Selborne  in  Corbett  v. Plowden(1),  "If  a mortgagor left in possession,  grants  a lease without the concurrence of the mortgagee (and for this purpose,  it makes no difference whether it is an  equitable lease  by an agreement under which possession is taken or  a legal  lease by actual demise), the lessee has a  precarious title,  inasmuch  as although the lease is good  as  between himself  and  the mortgagor who granted  it,  the  paramount title  of  the  mortgagee may be asserted  against  both  of them."  It does not however follow that a lessee  from  the. mortgagor  acquires  no interest whatever  in  the  property demised  to him.  A person taking a lease from  a  mortgagor after the mortgage does acquire an interest in the equity of redemption and can claim to redeem   that footing.  But this right  of redemption does not necessarily mean that a  lease of this character is always operative against the mortgagee. Merely  because  a  lessee  acquires  an  interest  in   the mortgaged  property  which is sufficient to  enable  him  to redeem  the  mortgage it does not follow that  the  interest

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which the lessee has thus acquired is operative against  the mortgagee.  The true position is somewhere in the middle  of these two extremes.  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  *ill  be bound  by the acts done by the mortgagor in accordance  with the  usual course." (Ghosh   Mortgage, Vol.  I, p. 212.)  As indicated in the observations of Sir James Parke in Pope  v. Briggs  (2) the mortgagor might be considered as  acting  in the  nature of a bailiff or agent for the  mortgagee.   Con- sequently, if the mortgagor, -after he has granted the (1)  (1884) 25 Ch.  D. 678 at p. 681. (2)  (1829) 9 Barn. & Cres. 245 at p. 258.                            115 mortgage,  deals  with the property in the usual  course  of management,  the  interest  created by him  may  be  rightly deemed operative against the mortgagee.  An illustration  of this view is found in the ease of Moreland v.  Richardson(1) where  a person took a mortgage of a burial -ground  and  it Was  held  that, as the object of the burial  ground  is  to grant  rights of burial, this’ being the mode in which  such property  is dealt with, the mortgagee was not  entitled  to disturb the graves of those who had been: buried   the land, while  the  mortgagor continued to hold it.,  The  mortgagor could  thus in the usual course of management create a  ten- ancy  from year to year in the case of agricultural land  or from  month to month in the 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.  [Per  Mukherjee J. in Madan Mohan Singh  v.  Raj Kishore Kumari(2)] "Whether  the  mortgagor  possesses  any  larger  powers  of leasing  is  however very questionable.  The  only  reported case  in which such a power was recognized is Banee  Pershad v. BeetBhunjun Singh(1) but the report in Sutherland is very meagre.   The judgment too does not give forth  any  certain sound  (sic.).  It  is only said that  a  mortgagor  is  not restricted  in  the management of the property by  making  a mortgage  and that so long as nothing takes place to  impair the value of the mortgagee’s security the mortgagor does not exceed his powers in making a lease for a term.  The learned judges   add  perhaps  somewhat  unnecessarily  that   their decision  should not go beyond the particular facts  of  the case before them." (Ghosh   Mortgage, Vol.  I, p. 213.)          This case of Banee Pershad v. Beet Bhunjun Singh(3 was  considered by Jenkins C. J. in Balmukund v.  Motilal(4) as an authority for the proposition that as long as  nothing took place which impaired the value or impeded the operation of the mortgage, the mortgagor in creating a temporary lease acted  within his powers and these observations  of  Jenkins C.J. were (1)  (1857) 24 Beav. 33. (2)  (1916) 21 C.W..N. 88 at pp. 91, 92. (3)  (1868) 10 W.R. 325. (4)   (1915) C.W.N. 350, 116 considered by the Courts as justifying the applicability  of the provisions of section 66 of the Transfer of Property Act while  determining the binding nature of the leases  created by. the mortgagor in possession   the mortgagee.;  Mukherjee J.  had occasion, to consider this very case in Madan  Mohan Singh v. Raj Kishore kumari(1) and he cited it in support of the  proposition that the interest created by the  mortgagor

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while  dealing  with  the mortgaged property  in  the  usual course  of  management  could be  rightly  deemed  operative against  the  mortgagee.   The  following  observations   of Mukberjee  J.  in  this  connection  at  page  91  are  very apposite:-       "As  the case is very imperfectly reported,  we  have examined  the  record  and  ascertained  the  questions   in controversy.  The proprietor of an estate mortgaged it   the 12th  March,  1861.     the 7th July,  t862,  the  mortgagor granted  an  ijara potta of the property for a term  of  ten years.  The mortgagee subsequently sued the mortgagor  alone and got a decree; at the execution sale which-followed,  the property was sold   the 24th December, 1863.  The  purchaser sued    the  12th March, 1867, to eject  the  lessee,    the ground that as he had acquired the property in the condition in  ’Which  it was when mortgaged, the  lease,  which  would otherwise  run  till the 7th July, 1872, did not  bind  him. ’The  Court of first instance overruled this contention  ’as too  broadly formulated, and held that as the mortgagor  had in good faith granted the lease for a limited term   a  fair and  reasonable  rent,  the mortgagee or  the  purchaser  in execution of his decree could not repudiate it, specially as the  mortgage deed did not prohibit the grant  of  temporary leases to middlemen or cultivators.    appeal, the  District Judge  affirmed this view and declined to accept  the  broad contention  that  leases of all descriptions  granted  by  a mortgagor  were  void as against  the  mortgagee.     second appeal   to  this  Court,  Jackson  and  Mitter   JJ.   took substantially the same view." (1)  (1916) 21 C.W.N. 88.                            117          These observations of Mukherjee J. point out  what was  the ratio decidendi of that case.  The question of  the sufficiency or insufficiency of the security was not  really gone  into  but  the Court considered  that  the  lease  was granted in good faith, was for a limited term and stipulated a  fair and- reasonable rent and it was therefore  operative against  the mortgagee.  The Court was really guided by  the consideration that the  mortgagor dealt with the property in the  usual course of management and the interest  which  was thus  created  by  the mortgagor in the  usual  course  must rightly be deemed operative against the mortgagee. ,The case of  Banee  Pershxd  v. Beet Bhunjan  Singh(1)  therefore  is really  no  authority  for  the  wide  proposition  that   a mortgagor  was  not  restricted in  the  management  of  the property  by making a mortgage and that so long  as  nothing took  place,to impair the value, or impede the operation  of the  mortgage the mortgagor would be well within his  powers in making a lease for a term.     In  our opinion section 66 of the Transfer of  Property Act  has nothing to do with the mortgagor’s power  to  lease the   mortgaged  property.   Section  66  is  a   statutory, enactment  of the powers of  the mortgagor in.possession  in regard  to  waste of mortgaged property.  The  mortgagor  in possession  is not liable for what in terms of  the  English Law of Real Property is known as permissive waste, i.e., for omission to repair or to prevent natural deterioration.   He is  however liable for destructive waste is acts  which  are destructive  or  permanently  injurious  to  the   mortgaged property  if  the  security was  insufficient  or  would  be rendered insufficient by such acts.  This section  therefore has no application to the grant of a lease by the  mortgagor in possession.       The  only  relevant  consideration  is  whether,  the mortgagor  in possession having the authority to  deal  with

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the  property in the usual course of management,  the  lease granted  by him can be rightly deemed operative against  the mortgagee.,  The  true  position  has  been  stated  in  the following terms by,, Mukherjee, in Madan Mohan Singh v.  Baj Kishore Kumar(2) (i)  (1868) 1o W.R. 325. 16 (2) (1916) 21 C.W.N. 88 at page 92. 118         "The  true position thus is that the  mortgagor  in possession  may  make a lease conformable to  usage  in  the ordinary course of management, for instance, he may create a tenancy from year to year in the case of agricultural  lands or from month to month in the case of houses.  But it is not competent to the mortgagor to grant a lease   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."     The  question whether the mortgagor in  possession  has power  to  lease  the  mortgaged  property  has  got  to  be determined with reference to the authority of the  mortgagor as  the bailiff or agent for the mortgagee to deal with  the property  in the usual course of management.  It has  to  be determined    general principles and not    the  distinction between an English mortgage and a simple mortgage or    con- siderations  germane  to  section  66  of  the  Transfer  of Property Act.  Having regard therefore to the position  that section  66  has no application to leases of  the  mortgaged property,  the  decision  of Jenkins C.J.  in  Balmukund  v. Motilal(1) and the cases following that line of reasoning do not govern the question before us.       While  we  are   this subject we would  like  to  em- phasise that it is for the lessee if be wants to resist  the claim  of the mortgagee to establish that the lease  in  his favour was granted   the usual terms in the ordinary  course of management.  Such a plea -if established-and it must  not be  overlooked- that the burden of proof in this  matter  is upon him-would furnish a complete answer to the claim of the mortgagee.  If the lessee failed to establish this  position he  would  have  certainly no defence to an  action  at  the instance of the mortgagee. No  allegation was made   behalf if of the  defendants  that the  grant  of the permanent lease was a  dealing  with  the mortgaged property in the usual course of management by  the mortgagor, In the absence of (9)  (1915) 20 C.W.N. 350, 119 any  such  plea  we are of the opinion that  there  was  no. answer  to  the plaintiff’s claim and  the  permanent  lease granted by Wazir Narayan to the defendants could not prevail against the plaintiff. We have therefore come to the conclusion that Wazir  Narayan Singh had no power to grant the permanent lease in  question to  the  defendants,  that  the same  was  not  binding  and operative  against  the plaintiff, that the  defendants  had ample opportunity to@ redeem the mortgage if they so desired but  did not choose to exercise their right  of  redemption, that the execution sale of Gadi Sirampur including the  four villages  in  question  was  binding    them  and  that  the plaintiff  was  entitled  to khas  possession  of  the  four villages   of   which  the  defendants  were   in   wrongful possession.   The appeal is allowed.  The decree passed  -by the High Court dismissing the plaintiff’s suit is set  aside and  the decree passed by the trial court in favour  of  the

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plaintiff is restored with costs throughout.                      Appeal allowed. Agent for the appellant: Ganpat Bai. Agent for respondent No. 1: B. B. Biswas.