Lala Som Nath vs L.D. Desai and Others

These two appeals are by the two Defendants in Suit No. 26 of 1946 tried by Ch. Tirath Dass Sehgal, Senior Sub-Judge of Gurdaspur. The suit was a redemption suit. The events giving rise to it are complicated, and some recital of them is necessary.

On 1-2-1935 two persons Daulat Ram and Rattan Chand gave on lease to one Gosain Chandar Bhan certain land admeasuring 12 kanals and 12 marlas, being Khasra No. 6602/6170 in the town of Ratala in the Gurdaspur District. It is not necessary to mention terms of the lease other than its period which was twenty years and the monthly rent which was Rs. 36. Upon this land, Chandar Bhan constructed a cinema building in which he installed furniture and machinery necessary for use of the building as a cinema. This machinery he obtained from a Calcutta firm on a hire purchase agreement. On 14-5-1936 Chandar Bhan mortgage with possession his interest in the property, including land, building, furniture and machinery to one Fateh Ali for an amount of Rs. 12,500. This amount was provided by the mortgage deed to carry interest at 12 annas per cent, per month. On the same day as this mortgage was passed, a lease was executed by which Chandar Bhan became tenant of Fateh Ali on an annual rental of Rs. 1,000. On 7-1-1937, Chandar Bhan sublet the property to Janki Nath who is Defendant 2 in the present suit. This sub-lease was for a term of two years with an option of extension for a further two years. The rent was provided to be Rs. 375 per month or the nett profit of the cinema, whichever amount should be less, and there was provision for advance payment to amount of Rs. 1200. About the end of 1936 there had been default in making payments for the machinery under the hire purchase agreement, and on 16-3-1937, presumably after action by the Calcutta Co., the balance due for the price of the machinery was paid by Som Nath, who is the brother of Janki Nath and who is Defendant 1 in the present suit. It is common ground that little payment, if any, was made by Janki Nath after the sublease in his favour, and on 3-7-1937 Fateh Ali filed a suit against Chandar Bhan in ejectment and to recover arrears of rent. Janki Nath was joined as a party in this suit as subtenant. In the trial Court the suit was decreed against Chandar Bhan but dismissed against Janki Nath. Fateh Ali filed an appeal in the District Court from the dismissal of his suit against Janki Nath, which appeal was dismissed on 25-2-1939. Fateh Ali then filed a second appeal which resulted in a compromise decree passed on 4-4-1940. A week before this compromise decree was passed, namely on 28-3-1940, Fateh Ali conveyed all his interest in the property, including his interest in the litigation, to Som Nath, present Defendant 1 and brother of Janki Nath the Respondent in the appeal thon pending. At the time the compromise decree was passed, the acquisition by Som Nath of the interest of Fateh Ali was brought to the notice of the Court., and a statement of Som Nath agreeing to the compromise decree was filed. By this compromise Janki Nath submitted to a decree in ejectment and for payment of rent. Som Nath took no stop as assignee of the interest of Fateh Ali until immediately before the expiry of the period of limitation when, on 2-4-1943 he filed an execution Appellant On 6-4-1943 the name of Som Nath was substituted as assignee of the decree, and on 19-9-1943 a rent note was executed by Janki Nath in favour of Som Nath, by which Janki Nath purported to take the property as tenant of Som Nath on a monthly rent of Rs. 40 only. I understand that further rent notes in the same terms were passed subsequently by Janki Nath to his brother Som Nath.

On 17-1-1944 the Plaintiff in the present suit purchased the equity of redemption in the mortgage of 14-5-1936 from Chandar Bhan and on 15-3-1944 the present Plaintiffs filed a suit in ejectment against both Som Nath and Janki Nath claiming that they were tenants. This suit was dismissed in November 1945, and an appeal from this dismissal was dismissed in January 1947, it being hold that Janki Nath was a tenant under the mortgagee Som Nath. The present suit for redemption was filed on 9-3-1946 during the pendency of the last mentioned appeal.

By their present plaint Plaintiff claimed that both Defendant are mortgagees on the ground that their family and business is joint or at least they are partners. in the cinema business. The plaint refers to the pending litigation and the plea of Janki Nath in that suit that he is the tenant of Som Nath, states that Janki Nath is in possession of the property, and "on that account also has been made a party." Plaintiffs claimed that the mortgage had been satisfied from the income of the property, but alternatively asked, to redeem on payment of such amount as would be found due.

Both Defendant resisted the suit and raised various contentions. The nature of their material pleas will appear sufficiently from the following recital of the findings. The learned trial Judge found that Plaintiffs were entitled to redeem and rejected a contention that there was bar to the suit by reason of non-compliance with a clause of the mortgage deed providing for three months notice to be given by the mortgagor of his intention to redeem. As regards Defendant Janki Nath the learned Judge held that he was not a co-mortgagee with his brother Som Nath, but was in possession as tenant of Som Nath. He held, however, that the true monthly rent of the property was not Rs. 40 as stated in rent notes passed by Janki Nath to Som Nath, but Rs. 170, and he based this conclusion on the rent note passed by Janki Nath himself to Chandar Bhan, after making allowance for the rent of the machinery which later became the property of Som Nath, The learned Judge rejected the plea of Janki Nath that he is entitled to remain in possession after redemption by reason of the provisions of the East Punjab Rent Restriction Act, (III (3) of 1949). Taking accounts and allowing interest at 7� per cent, per annum under the Punjab Relief of Indebtedness Act, and allowing three months further interest in lieu of the notice of intention to redeem provided in the mortgage deed, the learned Judge found Rs. 5,919-6-0 due under the mortgage, and passed a preliminary decree for redemption on this footing, directing that on final decree being made both Defendants should deliver possession to the Plaintiffs.

From this preliminary decree the two Defendants have filed separate appeals. The appeal of Som Nath is E.F.A. No. 218 of 1949, and that of Janki Nath is R.F.A. No. 223 of 1949. After these appeals were filed an application for stay was rejected by Kapur J. and against this order L.P. Appeal (No. 104 of 1949) has been filed. This naturally will not survive the decision we are now pronouncing in the two appeals themselves.

Taking first the appeal of Som Nath, the memorandum of appeal contains a number of grounds, but in argument before us the learned advotate for Som Nath has taken only the following points. He claims that by reason of the term of the mortgage deed providing for three months notice of intention to redeem, and in the absence of such notice by Plaintiffs, Plaintiffs are not entitled to sue for redemption. He disputes the figure of rent and certain items of the account taken by the trial Court, and lastly he Claims that certain additional furniture has been included in the property of which redemption is allowed, although such, furniture does not find mention in the mortgage deed.

There is no dispute that the mortgage deed in the present case did contain a clause providing for three months notice by the mortgagor of intention to redeem. The validity of such provision is recognised by Section 60, T.P. Act. There was some contest in the trial Court that notice in accordance with this clause had been given. It appears that notice addressed jointly to the Defendants had been sent by post, was returned as refused by Janki Nath and was not re-issued. On the finding of the learned Judge that Janki Nath and Som Nath aro not proved to be partners, and the cinema business is not shown to be a family business, it must be accepted that there was no service of notice on the mortgagee Som Nath.

The question then is whether absence of notice is a bar to the suit for redemption. The learned advocate for Plaintiff Respondents has relied upon the distinction between the right to redeem and a suit to for redemption, pointing out that exercise of the right of payment or tender of the mortgage money is not a condition precedent to the institution of a suit for redemption. Butchanna v. Varahalu 24 Mad. 408 and Raghunandan Rai Vs. Raghunandan Pande and Others, He has also relied upon the commentary to Section 60, T.P. Act, appearing in the latest (1949) Edition of Mulla''s T.P. Act, where the learned author says:

The mortgagee may stipulate for notice for redemption after due date. This is in order to enable him to find another investment. In England the mortgagee is entitled to six months notice of the mortgagor''s intention to redeem, or to six months'' interest in lieu of notice. In India it is generally three months, especially in presidency towns. The omission to give notice would not be a bar to a suit for redemption, but probably, the mortgagee would be entitled to six months'' interest in lieu of notice.

I think with respect this statement of law is correct. Section 60 of itself does not contain words implying operation of the English rule whereby absence of notice only gives rise to a claim for interest, but clear implication of the English rule appears in Section 84, where it is provided:

Nothing in this section or in Section 83 shall be deemed to deprive the mortgagee of his right to interest when there exists a contract that he shall be entitled to reasonable notice before payment or tender of the mortgage money and such notice has not been given before the making of the tender or deposit, as the case may be.

It is true that Sections 83 and 84 deal with the summary remedy for redemption which is dependent upon the mortgagee''s willingness to accept the money deposited in Court in fall discharge of the money due on the mortgage. Section 84, however, shows dearly that absence of stipulated notice of intention to redeem is no bar to bar to tender or payment, and if it is no bar to the right to redeem, it is difficult to see on what ground it can be held a bar to a suit "to redeem. In this State the T.P. Act has not been applied. If we were to apply the English rule, the absence of notice could be no bar to the suit, although as observed in the passage from Mulla set out above interest for six months ''would be allowed. When applying principles 1 of justice, equity and good conscience in the absence of express statute, I think it may now well be said that we should follow the T.P. Act which has now been operative in India for nearly seventy years. Bat in my opinion the result is the same whether we look to the English rule or to the T.P. Act, and I consider the absence of notice of intention to redeem is to bar to the present suit.

The next question is the rental value to be taken in the account of the mortgage. The argument for Som Nath is that the figure of Rs. 40 a month appearing in rent notes executed in his favour by Janki Nath must he taken as the rental value. It is said that Plaintiffs had notice of these rent notes, but made no attempt to challenge them prior to the present suit, and made no attempt to offer a better tenant. The learned trial Judge has held, and I think for abundant reason, that the figure of Rs. 40 a month has no relation to reality. It was admitted by Som Nath that he had kept accounts. These accounts wore not produced. As pointed out by the learned Judge, Rs. 36 it, month wore payable as rent of the land to the original lesser, and the balance of Rs. 4 as rent of the building and furniture is ridiculous on the face of it. Although partnership between Som Nath and Janki Nath has not been proved, it is obvious that the acquisition by Som Nath of the machinery and the tenancy taken in the name of Janki Nath two months earlier were not unconnected transactions. I cannot accept that the learned Judge has erred in favour of the Plaintiff by relying on the figure of rent in the rent note executed by Janki Nath himself in favour of Chandar Bhan. It is true that by this rent was provided to be Rs. 375 a month or the nett profits whichever should prove less. It is also true that Janki Nath seems to have been a successful defaulter, for admittedly little or no payment of rent was made by him. But the expansion of cinema business in the years of and following the war is a matter of common knowledge of which I think we can take notice. The reduction made by the learned Judge as the amount payable for the machinery acquired by Som Nath has not been challenged soriously before us. I consider, therefore, that the figure taken by the learned Judge, namely, Rs. 170, as the monthly rental received for the period of the mortgage was proper.

Turning now to the disputed items, it is conceded that an item of Rs. 362-8-0 has been omitted by mistake in the statement of the learned Judge of items due to the mortgagee. In respect of items claimed as cost of whitewashing, these are evidenced only by the statement of Som Nath, and as he has declined to produce his accounts they call for no consideration. The claim for interest on payments of Rs. 684 and Rs. 635 which have been allowed as payments made to the owner of the land in the year 1942 is technically correct. Although the rental value of the mortgage property has been found to exceed the interests allowable, and the mortgage amount must, therefore, be taken to have been partly satisfied year by year, the learned Judge has allowed interest on the principal amount of themortgage for the full period of the mortgage. The mortgagee by this mode of account appears to have obtained advantage for outweighingtheloss occasioned by the omission of the item of Rs. 362-8-0 and interest on the two payments totalling about Rs. 1260. I consider, therefore, that there is no ground for disturbing the figure arrived at by the trial Court as that due on the mortgage.

There is no substance in the complaint that furniture not mentioned in the original mortgage deed has been included in the mortgage property. The mortgage deed expressly included not only existing furniture but any furniture which may be added. Plaintiffs claimed according to a list EX. P-27 which was Bled in the year 1938 by Chandar Bhan in the ejectment suit he filed. Ex. P-27 was also filed with the present plaint, and although in the written statement Som Nath said that he did not admit the property to be according to this list, no issue on the point was framed or sought.

In the result, the appeal of Som Nath fails on all points and is, therefore, dismissed with costs.

In the appeal of Janki Nath a preliminary objection was raised as to sufficiency of Court-fee. This Court-fee was paid by Janki Nath u/s 7(xi)(cc), Court-fees Act, on the basis of an annual rent of Rs. 480. The contention of Janki Nath is that he is a tenant and entitled to resist the claim for possession under the East Punjab Rent Restriction Act. It is urged for Respondents that Janki Nath is not their tenant, and if he seeks to contest the order for possession against him, he must pay Court-fee on the value of the property. But Court-fee is to be paid on the nature of the averments made in the plaint or memo, of appeal and is not dependent upon the correctness of those averments. Janki Nath appeals on the ground that as against Plaintiff he is entitled as tenant to protection, and the appeal clearly falls u/s 7, Clause (xi)(cc). It appeared to us, however, that on the finding of the trial Court that Rs. 40 a month bore no relation to the rental of the property, that the valuation must be made upon what has been found to be the true rental, namely Rs. 170 a month. We have allowed time for the deficient Court-fee to be paid on that basis, and the amount has been paid.

We proceed to consider this appeal on the basis of the finding of the trial Court that Janki Nath is the tenant of his brother the mortgagee. It is not disputed that but for special legislation protecting tenants against eviction, Janki Nath has no defence against the claim by the mortgagors for possession upon redemption. The title of the tenant of a mortgagee is precarious and comes to an end upon termination of the interest of the mortgagee in the property, as is provided by Section 111, T.P. Act.

Coming now to the East Punjab Urban Rent Restriction Act, 1949, it is conceded that it. applies to property of the nature in suit. For Janki Nath it is claimed that on the finding of the trial Court. he falls within the definition of tenant given in Clause (i) of Section 2 of the Act and cannot be evicted by suit by reason of the provisions of Section 13 of the Act.

The material part of the definition of tenant in Section 2(i) is as follows:

(i)''tenant'' means any person by whom or on whose account rent is payable for a building or rented land and includes a tenant continuing in possession after the termination of the tenancy in his favour, but does not include a person placed in occupation of a building or rented land by its tenant, unless with the consent in writing of the landlord....

Clause (1) of Section 13 provides:

(1) A tenant in possession of a building or rented land shall not be evicted therefrom in execution of a decree passed before or after the commencement of this Act or otherwise and whether before or after the termination of the tenancy, except in accordance with the provisions of this section.

Clause (2) provides that "a landlord who socks to evict his tenant" must apply to the Controller appointed under the Act, and sets out the circumstances under which the Controller may give a direction for possession. Landlord is defined in Clause (c) of Section 2 which reads:

(c) ''landlord'' means any person for the time being entitled to receive rent in respect of any building or rented land whether on his own account or on behalf, or for the benefit, of any other person, or as a trustee, guardian, receiver, executor or administrator for any other person, and includes a tenant who sublots any building or rented land in the manner hereinafter authorized, and every person from time to time deriving title under a landlord.

An owner of property does not become a person entitled to receive rent of the property until there is brought into existence a contract of lease between himself and another person. ''Plaintiffs have not entered into any such contract, nor is there any such contract which is binding upon them. Plaintiff''s, therefore, are not landlords within the meaning of the definition. It is true that the words of Clause (1) of Section 13 appear wide and to protect any person who has incurred a liability to pay rent, but in my opinion some limitation must be placed upon the scope of this clause. The Act is not designed to protect trespassers from eviction. Nor would a trespasser become entitled to protection because ho has oreated by contract with a third person, not having rights in the property, a formal relationship of tenant to landlord. Such a contract as between the third person and the trespasser may be enforceable but could be no shield against action by the owner of the property. To hold otherwise would involve that the owner as against a trespasser might find himself in a worse position than as against a tenant, for the limited; right of a landlord under Clause (2) of Section 13 is available against his tenant. In the present, instance Janki Nath could claim that ho is not and has not been the tenant of Plaintiff and that he cannot be evicted on any ground whatever. In my opinion the protection of the Rent Restriction Act is available only to a tenant against at landlord, and the present Plaintiffs are not landlords.

In a recent English case reported in Bryan v. Cassin (1949) 2 ALL E.R. 262, the question was whether a tenant under lease created by a mortgagoer, there being a covenant in the mortgage deed expressly excluding the mtgor''s power of leasing, could claim the benefit of the Rent Restriction Act of 1920 against the mortgagee entitled to possession by reason of default of payments due under the mortgage. In the English Act the definition of landlord is much wider than that under the East Punjab Act, for the English Act provides:

The expression ''landlord'' also includes in relation to any dwelling house any person, other than the tenant, who is or would but for this Act be entitled to possession of the dwelling house....

It was held nevertheless by the Court of Appeal that the tenancy, lawful though it was, and binding as between the mortgagor and his tenant could not avail the tenant against the mortgagees who were asserting paramount title, and the mortgageos wore entitled to possession of the property.

I consider that Janki Nath cannot resist the claim of Plaintiffs to possession, and that his appeal must be dismissed with costs.

Letters Patent Appeal No. 104 of 1949 must also be dismissed with costs and the order of interim stay vacated.