KESHAVLAL TRIBHOVAN DOSHI Vs. MAGANLAL SHIVRAM ADHYARU

JUDGEMENT

(1.) This is a second appeal from the decision of the District Judge of Nadiad, the appellant being the original defendant No. 9, and the point which arises is as to whether defendant No. 9 as a mortgagee of leasehold property is liable for the rent under the lease.

(2.) The facts are that the lease in question was granted on May 24, 1920, to defendants Nos. 1 to 6 and the father of defendants Nos. 7 and 8, the term being thirty years and the rent Rs. 324 odd. In 1925 defendants Nos. 1 to 6 sold their interest to the father of defendants Nos. 7 and 8, and on January 8, 1926, the father of defendants Nos. 7 and 8 mortgaged the property to defendant No. 9. That mortgage is Exh. 32. It contains an agreement for payment of the mortgage money on demand. Then it recites that the land in question is in the absolute ownership and enjoyment of the mortgagor and the operative words are : "Having given up our said possession and enjoyment thereof, we having passed the same in writing to you in san-mortgage with possession today have entrusted the same to your absolute possession." Then it is provided that the income of the property is to be credited against interest and principal and that the mortgagors are to be responsible for the land revenue. It seems to be a mortgage in the nature of an usufructuary mortgage as defined in Section 58 of the Transfer of Property Act. But in view of the fact that the mortgage money is payable on demand, it is, I think, technically not a usufructuary mortgage but an anomalous mortgage. It is quite clear that it is not an English mortgage as defined in Section 58(e) of the Transfer of Property Act, as has been argued by Mr. Chhatrapati for the respondent, because there is no absolute transfer of the property, nor is there any proviso for retransfer on payment of the mortgage money. Then on the same date as the mortgage, the mortgagee granted a rent-note to the mortgagor thereby restoring him to possession as a tenant. Mr. Shah, for the appellant, has argued that, taking those two documents together, they amount to nothing more than a simple mortgage. I doubt that, and I propose to deal with the case on the footing that Exh. 32 is what it purports to be, namely, a mortgage with possession given to the mortgagee. Then to continue with the facts, on November 22, 1928, the mortgagor sold the property to the mortgagee, the present appellant, and put him into possession, and the appellant does not dispute that as from the date of that sale he became liable for the rent due under the lease. But in this suit the plaintiff who is the lessor, or claims under him, is claiming rent against the appellant in respect of the years 1927, 1928 and part of 1929, that is, for a period in which he was mortgagee and not purchaser. The question, therefore, which we have to consider is whether, under a mortgage in the form of Exh. 32, the mortgagee becomes liable for the rent payable under the lease the subject-matter of the mortgage.

(3.) Under English law, in the case of a normal lease, the lessee is liable on the covenants in the lease by privity of contract, and in the case of those covenants which run with the land he is also liable by privity of estate. An assignee of the term is liable by privity of estate in respect of the covenants running with the land, but unless he has entered into some special contract with the lessor he is not liable on the personal contract contained in the lease. Privity of estate depends, not upon the assignee being in possession, but upon the whole term granted by the lease being legally vested in him, so that there is direct privity between his estate and the estate of the reversioner seeking to enforce the covenants. Now here no question of liability under contract arises, because the lessor was not a party to the mortgage. But it is suggested that the English doctrine imposing liability by privity of estate applies. In order to succeed in establishing his claim against the mortgagee, the lessor must prove, first, that the doctrine as to privity of estate between lessor and lessee applies in India, and, secondly, if it does, that under the mortgage in question the whole estate of the lessee was transferred. In dealing with this question one has to look at the provisions of the Transfer of Property Act. Section 105 defines a lease of immoveable property as a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity in consideration of a price as therein mentioned. It is to be noticed that that definition does not refer to a transfer of any estate; it refers merely to a transfer of a right to enjoy the property. Having regard to the fact that the definition includes a lease in perpetuity, a thing unknown to the common law of England, it seems to me that the section designedly omitted any reference to the transfer of an estate, since the transfer to the lessee of the estate in perpetuity would amount to a grant of the fee simple. Section 108 also refers both under Sub-clause (c) and Sub-clause (j) to the interest of the lessee in the property, and not to the estate. Sub-clause (j) empowers the lessee to transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property and provides that the lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease; that is to say, it preserves the liability of the lessee under his contract, notwithstanding an assignment. But the section does not say whether or not the transferee is to be liable on the covenants in the lease. Then Section 109 deals with the right of a transferee from the lessor, but there is no section dealing with the liability of a transferee from the lessee, and it is, I apprehend, to cover this omission that some of the Courts in India have sought to introduce the doctrine of privity of estate. As at present advised I have great doubt whether that very technical rule of English real property law can have any application in India, having regard particularly to the definition of lease contained in Section 105. The English law depends on there being, as there always must be, a reversion expectant on the terra of the lease, however long that term may be. But under Indian law this is not necessarily so, and in the case of a lease in perpetuity it is difficult to see how there ever can be any privity of estate. If the estate passes in perpetuity to the lessee, there is no estate in the lessor; if the estate remains in the lessor then there is no estate in the lessee.