Supreme Court: In the appeal filed on behalf of appellant, Karnani Industrial Bank Ltd. in an action in ejectment commenced by respondents for recovery of possession of two premises, in Calcutta, the 3-Judges Bench of M.C. Mahajan*, Vivian Bose, and B. Jagannadhadas, JJ., held that no landlord-tenant relationship existed between appellant, the mortgagee of tenant and landlord qua the leased property and mere deposit of monthly rent by appellant was not sufficient to establish such relationship. Thus, appellant not being a tenant, was not entitled to protection afforded to tenants under the Calcutta House Rent Control Order, 1943 (‘1943 Order’).
Background
The two plots belonged to a Calcutta solicitor and landlord, Shamaldhona Dutt. On 27-08-1903, he granted a lease of one of the two plots, which was a bare plot of land, to two persons, Mahomed Moosajee Attia and Sheikh Serajuddin for a period of forty years expiring on 01-10-1943. The rent reserved was Rs 1050 a month and there was an express covenant that the lessees would erect a building on the premises at a cost of not less than Rs 1 lakh and the building would on the expiry of the lease be delivered to the landlord. Attiya, one of the lessees, died in 1905 and his right, title, and interest in the leasehold premises were assigned by his heirs in favour of Serajuddin, who thus became the sole lessee in respect of the first premises. On 05-08-1913, another premises, which had been purchased by Shamaldhona Dutt benami in the name of his daughter Rajlakshmi, was leased to Serajuddin for a period of thirty years, ending 01-10-1943, when the other lease would also expire. It was provided in this lease that the lessee should at his own cost erect a structure for not less than Rs 5000 within six years from the date of the registration of the document, upon the demised land possession of which would be yielded to the landlord when the lease expired.
Shamaldhona Dutt died in December 1917 and probate of his will was granted to his daughter Rajlakshmi. Serajuddin built structures on the two plots of land and being in need of money, he borrowed a sum of Rs 5,40,000 from Karnani Industrial Bank Ltd., on 25-01-1922, and as security for the amount executed a mortgage in favour of the Bank hypothecating the leasehold interest in the two premises. By an agreement made on 03-07-1923, the mortgagee was allowed to take possession of the mortgage premises and to collect the rents and profits which after payment of the outgoings were to be applied in reduction of the mortgage debt. Serajuddin died on 10-09-1937 and both the leases expired on 01-10-1943. Serajuddin’s heirs and the mortgagee did not deliver possession of the lands leased in terms of the leases in spite of the demand made by the landlord; hence, the present suit was brought in ejectment on 20-12-1943.
The appellant submitted that it was entitled to protection under the 1943 Order, but this submission was negatived, and the respondents’ suit was decreed as laid. Appellant appealed against this decision to the appeal Bench of the Calcutta High Court (‘High Court’). Some of Serajuddin’s heirs also preferred an appeal but it was not admitted as it was barred by limitation. The decree granted to respondents became conclusive and final as against the heirs of the lessee. Appellant’s appeal was dismissed by the High Court on the ground that the decree having become conclusive against the heirs of Serajuddin, appellant was not entitled to any relief under the provisions of the 1943 Order, it not being a tenant as defined in that Order. A certificate for leave to appeal to the Federal Court was granted and the appeal was now before this Court.
Analysis, Law, and Decision
The Supreme Court opined that there was no reason for differing from the High Court in its finding that appellant was not entitled to the protection of the 1943 Order, it not being a tenant as defined in the 1943 Order, of the houses in suit. The Supreme Court stated that as an English mortgagee, appellant had no absolute interest in the leasehold premises and between it and the landlord there was no privity in estates as regards that interest. Thus, appellant could not be considered a person legally liable to pay rent to the landlord or from whom the landlord was entitled to receive it.
The Supreme Court relied on Ram Kinkar Banerjee v. Satya Charan Srimani, , wherein the Judicial Committee held that in India, the interest which remained in a mortgagor, whatever form was used, was a legal interest, and a mortgagor, when he assigned his interest under a lease to a mortgagee by an English mortgage in the form specified in Section of the did not transfer an absolute interest, and consequently, the mortgagee was not liable by privity of estate for the burdens of the lease. The Supreme Court noted that the same view was expressed by the Board in Jagadamba Loan Co. Ltd. v. Shiba Prasad Singh, .
The Supreme Court noted that the expression “tenant” in Section 2(5) of the 1943 Order was defined as meaning any person by whom or on whose account rent was payable for a house and stated that it included a person continuing in possession after the termination of a tenancy in his favour. The Supreme Court stated that the contention that appellant was within the definition as under an arrangement with the lessees, it actually paid rent to the landlord was not sound inasmuch as the landlord was not a party to that arrangement and the covenants in the lease were not enforceable as between him and appellant. The actual payments made by appellant to the landlord were only being made on behalf of the lessees. The definition of the expression “tenant” was thus not attracted to the case of appellant as the rent of the premises was not payable by appellant or on its account to the landlord. It was payable only by or on account of Serajuddin or his heirs.
The Supreme Court stated that the contention that so long as the original tenant continued paying the rent, the Court had no jurisdiction to make an order for recovery of possession, no matter against whom that order was prayed for, was untenable. The Supreme Court stated that Section 9 provided that no order or decree for the recovery of possession of any house shall be made so long as the tenant pays rent to the full extent allowable by the order and performs the conditions of the tenancy and this section gave protection to a tenant so long as he continued paying the rent and performs the conditions of the tenancy. The Supreme Court opined that Section 9 did not give any protection to a mortgagee of the description of appellant. Moreover, the section only applied to cases where the suit was for recovery of possession of a house in actual occupation of a tenant. In the present case, the buildings were in actual occupation of sub-tenants and Serajuddin’s heirs and appellant were merely rent collectors and not being in actual possession of the premises, were not entitled to protection under the 1943 Order.
The Supreme Court opined that the 1943 Order had no application to the facts of the present case because on the terms of the lease, the buildings in suit did not yet belong to the landlord and the lessees had yet not been divested of their ownership. The Supreme Court stated that on the expiry of the term of the leases these had to be surrendered without compensation to the landlord, but this had yet not happened, and the suit was to enforce that covenant in the two leases. The landlord would become owner of these houses when he entered into possession of them in pursuance of the decree in the suit. The Supreme Court also opined that the provisions of the 1943 Order confer no protection on a person in respect of a house of which the ownership was for the time being vested in the person claiming such a benefit.
The Supreme Court dismissed the appeal with costs and held that as the decree granted to respondents had become conclusive against the heirs of the lessees, these could not be reopened at the instance of appellant, as it was not entitled to the protection of the 1943 Order.
[Karnani Industrial Bank Ltd. v. Prafulla Chandra Ghose, , decided on 31-03-1953]
Note: Landlord-Tenant Relationship
In Delta International Ltd. v. Shyam Sundar Ganeriwalla, , the Supreme Court stated that exclusive possession was not the sole indica to establish the relationship of landlord and tenant between the parties. Further, in S.R. Radhakrishnan v. Neelamegam, , it was held that mere payment of rent does not make that person a tenant and so, if one continued to be in possession of the suit premises, it does not follow that he is a tenant.
*Judgment authored by: Justice M.C. Mahajan
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