P KANNIAPPA CHETTIAR Vs. KRAMACHANDRAIYAR

JUDGEMENT

(1.) These appeals were remanded, for a finding to the Official Referee and they come to us on report. The relevant facts are that the trustee of a temple granted a lease to the 1st respondent of certain building lands, and he sub-let part of these lands to the petitioners. On an attempt to eject the petitioners by the respondent, the petitioners under the Madras Act, III of 1922, which had come into operation meanwhile, claimed to purchase the Respondent's interest and the matter was referred to the Official Referee to determine what the value of the Respondent's interest in the land was.

(2.) The Official Referee has reported and he has fixed the proper annual rent of the property; he has deducted therefrom what he considers a proper proportion of the rents, rates, etc., payable to the superior landlord, the trustee of the temple, appropriate to the petitioners portions of land; he has capitalized the amount payable on a 7 1|2 per cent. basis. In respect of the last I do not agree with the basis on which he has capitalized. I think that in a matter of this kind, a 6 per cent. basis is quite sufficient, as the amount of the Court interest allowed is about the amount that can be obtained by investing in Government securities and I see no reason at all why in arriving at a figure in a case of this kind we ought to assume that the person receiving money will invest it at a higher rate of interest in some speculative form of investment. As regards the deduction of amount for rents, rates, etc., payable to the superior landlord, it is not at all clear that it is a proper deduction to make, because there is no provision in the Act under which the superior landlord can be made to look to the sub-tenant who is taking over part of the interest of the tenant and, in the absence of an agreement by the superior landlord, the tenant would be left to pay him at any rate the rent in respect of those portions. This is merely a matter of adjustment. If that liability is to be left totally on the shoulders of the tenant, it is obvious that the sub-tenant cannot, in arriving at the amount payable by him for compensation, have the sum worked out on the basis that these amounts would be payable by him. However, we are informed that it is possible that the superior landlord will come to terms with these tenants under which he will take the rents, rates, and such like payments from them and relieve the tenant protanto. This case had better, therefore, be adjourned to Monday next to see if any and what terms could be come to in that respect.

(3.) That leaves an important question and that is whether the lease by the temple trustee being for 21 years with an option to the tenant to renew it at the end of the 21 years at an enhanced rent is good or bad. It has been held by the Official Referee that the second 21 years, that is to say, the option period, is not to be taken into consideration in arriving at the compensation, because in his view that option is bad in law on the ground that the trustee had no power to enter into a lease for that period, as he looks upon it as a lease for a period of 42 years with liberty to the tenant to determine it at the expiry of 21 years, and holds that the lease is void. I do not agree with him. The question to be determined in such cases is whether it is a lease that a prudent man would make under the circumstances in the interests of himself if it were his own property, or in the interests of others if he was doing his best for them. The Indian Trusts Act provides in the case of ordinary trustees for the length of lease which they may grant and this lease is for a period longer than would be allowable under that Act, but that Act expressly does not include trusts like the present trust. It may be a very good guide in arriving at the answer to the question whether this was a proper agreement to enter into because one would assume that the legislature in fixing a period as between an ordinary trustee and a cesh qui trust was considering what was reasonably a prudent thing for a trustee to do with trust property. But in this case there is an element which comes into consideration which does not appear to have entered into the consideration of the legislature in passing the Indian Trusts Act and which, in my Judgment, removes this case outside any consideration based on that Act altogether and that is that the lease in question was a building lease. The whole object of the lease was to turn agricultural or undeveloped land into building land, that the tenant under the lease should build upon the land and pay an enhanced rent over and above the agricultural rent because he was going to build upon it, and that at the determination of the tenancy the structure should fall in to the landlord at a valuation. It is obvious that no one is going to enter into an agreement of that kind unless he has a reasonable time before him to make it remunerative; and so we find in England that it has been held as regards trustees who are letting any land for building purposes on a ground rent that the minimum period is 60 years and the maximum 99 years. Here where we are dealing with town property we find that the trustee enters into an agreement for 21 years with an option of renewal at an enhanced rent for 21 years. 1 can find nothing unreasonable or unlawful in the transaction at all, and I am quite clear that the option that he has granted in this case is perfectly valid, and that being so, it is necessary that the option of 21 years should be valued. In arriving at that valuation I think we must first enquire what the rental value of the land is. With some hesitation I have come to the conclusion that the Official Referee's figure is the right one. The matter was before him; he saw this land and enquired into the matter; and though I am clear that he has not erred on the side of liberality, I think there is not enough for us to distrub his finding in that respect. Therefore we must take the same rate as he has taken for the period down to the end of 21 years for the option period. Then again, that will be subject to the question which is still left open as to whether it is to be reduced or not by reason of the amounts for rents, rates, etc., which are payable to the landlord and that will again have to be capitalized on the same basis that I have held is right in respect of the other sum, that is, 6 per cent. As, however, this decision is not binding upon the superior landlord and it will be open to him, if he is so advised, notwithstanding this Judgment to litigate the question as to whether this option is good or bad, it has been agreed between the parties that the amounts found due for the 21 years period shall be paid into Court and invested, that the income thereof shall be paid to the 1 respondent-until the renewal has been granted, or it has been finally decided that the trustee is not bound to grant it, and that the amount shall be paid out to the 1 respondent or in proper proportion to the petitioners if and when that course becomes possible by reason of the final determination of that matter. By reason of this amount remaining in Court there must be liberty to apply to City Civil Court. The compensation for the other period will, of course, be paid to the 1 respondent. No order as to costs. Wallace, J.