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Petitioner: KALI PRASAD CHAKRAVARTY VS Respondent: JITENDRA NARAYAN CHOWDHURY
P L D 1952 Dacca 409
P L D 1952 Dacca 409
Before Akbar and Guha, JJ
KALI PRASAD CHAKRAVARTY and another Appellants
Versus
JITENDRA NARAYAN CHOWDHURY and others Respondents
Appeal from Appellate Decree No. 230. of 1944. decided on 7th August, 1951, against the decree of N. N. Sen Gupta, Additional District Judge of Zilla Sylhet, dated the 22nd June, 1943, in Title Appeal No. 121 of 1943, affirming the decree of B. Zaman, Subordinate judge of 2nd Court of Sylhet, dated the 13th January, 1943.
Transfer of Property Act (IV of 1882), S. 66‑Mortgagor in possession creating permanent lease on mortgaged property ‑Lease binding on mortgagee provided security not rendered insufficient thereby.
A mortgagor in a simple mortgage can permanently lease out mortgaged property provided by such act the mortgage security is not rendered insufficient.
[Case‑law discussed.]
B. K. De and Dharani Nath Dutta for Appellants.
Gopal Chandra Das, Tapendra Kumar Pal and S. R. Pal, for Respondents
JUDGMENT
GUHA, J.‑--- This appeal by the plaintiffs' arises out of a suit by the plaintiffs mortgagee auction‑purchasers for joint posses sion of seven annas share of the property mentioned in the schedule to the plaint after declaration of their auction‑pur chased right therein and also for mesne profits and the suit has been dismissed by the trial Court as well as by the appellate Court.
The plaintiffs' case is that on the 4th December, 1905, Radhikamohan Dutt, father of pro forma defendant No. 21 executed a mortgage in favour of plaintiffs' grandmother Benodini Debya in respect of 55 items of properties including the disputed property except 2 hears of land, the claim with respect to which had been withdrawn at the hearing of the suit, and borrowed Rs. 4,000. Admittedly the disputed pro perty appertained to a Nishkar, a nine annas whereof belonged to Gopika Raman Roy, now represented by the Court of Wards and is pro forma defendant No. 22 in this suit and the remaining seven annas share belonged to the mortgagor Radhikamohan. It is admitted that on the 24th January, 1919, Wahedulla and Wajedali representing themselves to be jotedars under Radhikamohan and Gopikaraman transferred the suit land to Joynarain Deb Choudhury, father of the defendants Nos. 1 and 2, by a registered kabala ; and thereafter on the 27th April, 1919, Joynarain Babu took a permanent patni lease in respect of Radhikamohan's (mortgagor's) seven annas share in the Nishkar at a rental of Rs. 14. It is the plaintiffs' case that this patni lease was taken by Joynarain Babu with knowledge of the mortgage in order to defraud the mortgagee. It is admitted that subsequently in July, 1925, Gopikaraman Babu also granted patni lease in respect of his nine annas share in favour of Joynarain Babu. Then in 1934 mortgagee Benodini Debya instituted mortgage suit No. 20 of 1934 against mort gagor Radhikamohan and his lessees and sub‑lessees including Joynarain Babu for enforcement of the mortgage and a pre liminary decree was passed on the 7th March, 1935, which was made final on the 14th December, 1935. It may be stated herein that on Benodini's death during the pendency of the suit the present plaintiffs were substituted in her place and that in the mortgage suit the question whether the patni lease would be binding on the mortgagee or not was left open. The mortgage decree provided that the portions of the mortgage property not covered by the patni and occupancy raiyatis set up by the defendants Nos. 2 to 7 would be first sold and if the said sale did not satisfy the decretal dues then the property covered by the patni lease and occupancy raiyatis would be sold last of all. As the judgment‑debtor, Radhikamohan and his lessees and sub‑lessees, failed to pay the decretal dues, the mortgage property including the disputed land was put up to sale and purchased by the plaintiffs themselves on the 5th July 1937, for Rs. 13,931. On the basis of that auction‑purchase, the plaintiffs now claim joint possession of seven anhas share of the disputed property alleging that the patni lease is a collusive document and it has rendered the mortgage security insuffi cient and that Wahidulla and Wajedali, vendors of Joynarain Babu, had no joie right.
The defendants Nos. 1 and 2 are sons of Joynarain Babu, the Patnidar. Pro forma defendant No. 21 is son of the mortgagor Radhikamohan, defendant No. 22 is representative of Gopikaraman and defendants Nos. 3 to 20 are lessees of defend ants Nos. 1 and 2. The suit has been contested by different defendants by filing 8 separate written statements, one‑by defendants Nos. 1 and 2, one by defendants Nos. 3, 6, 18, 19 and 20, one by defendants Nos. 4 and 7, one by defendant No. 10 one by defendants Nos. 11 and 12, one by defendant No. 16, one by defendant No. 17, one by defendants Nos. 9, 14 and 15 and another by defendant No. 5. The defendants Nos. 1 and 2 deny the allegation of collusion and set up not only patni but also jote right in the suit land and further contend that the patni having been granted on usual terms in the ordinary course of management, the plaintiff's claim for possession is not sustainable. The other defendants contend that they are bona fide sub‑lessees under defendants Nos. 1 and 2 and cannot be evicted.
The learned Subordinate judge of the trial Court has dismissed the suit without costs holding inter alia that (a) the allegation of collusion is a prodigious mockery, (b) the mort gage security has not in any way been injured or rendered insufficient because (i) the mortgage money Rs. 4,000 swelled to Rs. 9,000 at the date of the patni calculating interest at the 'bond rate and adding to it Rs. 3,000 i.e., one‑third according to the provision in the explanation to section 66 of the Transfer of Property Act, the total amount comes to Rs. 12,000, whereas the mortgaged properties have fetched Rs. 13,931 at the sale, (ii) the expression "the amount for time being due" in section 66 means the amount payable at the date of the lease, (iii) the expression "for the time being" in that section logically means the period from the date of the bond till .the expiry of the due date for payment and on that basis the amount due will not exceed Rs. .12,000, (iv) a portion of the mortgage property was acquired by the Government before the mortgage sale and but for this acquisition the sale would have fetched more than Rs. 13,931, (v) the rote of Wahidulla and Wajedali which bore a rental of Rs. 30 per year originally but after transfer and acquisition by Government of a portion of the holding fetched an annual rent of Rs. 12‑8‑0 of which a sum of Rs. 5‑ 7‑3 pies was payable to Radhikamohan (mortgagor) and Rs. 7‑0‑9 pies was payable to Gopikaraman and the patni lease granted by Radhikamohan in respect of his 7 annas' share to Joynarain Babu fetched an annual rent of Rs. 14 which enhanced and appreciated the mortgage security, (c) that the jote right of Joynarain Babu acquired from Wahidulla and Wajedali was recognised by Radhikamoban and Gopikaraman and on that ground also the plaintiffs could not get possession and so the question of patni diminish ing the mortgage security did not arise, (d) the disputed land was gala at the date of the lease and the mortgagor granted the patni lease in the ordinary course of management for raising the land to construct bashas thereon which itself was an improvement of mortgage security, (e) the occupancy right of Joynarain Babu was recognised by Radhikamohan and Gopikaraman, (f) the plaintiffs' guardian Rai Bahadur Nagendra Nath Choudhury, who used to look after their property, knew of the improvement of the suit land after the lease and no protest was made when Joynarain Babu after the patni least improved the land, and (g) there was no merger of jote in the patni.
On appeal by the plaintiffs, the learned Additional District Judge of Sylhet has dismissed the appeal affirming the decision of the trial Court holding inter alia that (i) under section 66 of the Transfer of Property Act, the insufficiency of mortgage security must have reference to the time when the question arises, (ii) the mortgagor having been a rent receiver, the creation of the patni reserving an annual rent of Rs. 14 in place of Rs. 5‑7‑3 pies payable in mortgagor's share, proportionately raised the value of the mortgage security at the date of the patni (iii) the evidence of P. W. 1 is that the mortgage property fetched adequate and proper price at the sale, (iv) the fact that the plaintiffs did not attempt to enforce their mortgage between 1919, the year of the patni lease, till 1934 when the mortgage suit was filed without taking advan tage of the provision in section 68 of the Transfer of Property Act also leads to the conclusion that they considered the security sufficient throughout the entire period, (v) the patni was created in the ordinary course of management and that the conversion of practically useless lands into building sites could not under the circumstances be held to have reduced the security, and (vi) the patni was in no way detrimental to the interest of the mortgage and it was created in the ordinary coarse of management without rendering the security insuffi cient or materially altering the nature of the land, within the knowledge of the plaintiffs long before the mortgage was sought to be enforced. The other finding of the learned Additional District judge is that the jote had been merged and been deter mined by the action of Joynarain Babu ; but for the purpose of this appeal we need not consider this finding because in this appeal both parties have accepted that finding as correct. The learned Additional District judge, however, on the cross -objection of the defendants modified the decree of the trial Court as regards costs and held that the defendants would get their costs of the trial Court as well as of the appellate Court.
Hence in this appeal by the plaintiffs. Mr. B. K. De, the learned Advocate for the appellants raises one main question, namely, that in view of the provisions of section 66 of the Transfer of Property Act, the Courts below should have held that the mortgagor had no 'right to create a patni lease, which is a permanent tenure, and thereby depreciate the mortgage security and such a lease is not binding on the mortgagee auction‑purchasers and, therefore, the plaintiffs are entitled to possession.
At the outset we must observe that according to the plaintiffs, the sale in mortgage execution fetched proper price and Mr. De has also made it clear before us that the mortgage decree dues have been fully satisfied by the proceeds of the sale in execution of the mortgage decree. The mortgage in question is, dated the 4th December, 1905, and so there is no question that the provisions of section 65‑B of the Transfer of Property Act, inserted by Act XX of 1929, have any applica tion in this case because that section has no retrospective effect. Dasan Sahu v. Mst. Ramdulari I L R 10 Pat. 332. It is not controverted that in this case the mortgage in question is a simple mortgage.
The whole argument of the learned Advocate of the appellants is based on the decision of the Calcutta High Court in the case of Modan Mohan Singh v. Rajkishori 21 C W N $8, decided on the 22nd August, 1912, and decision of that Court in Gobinda Chandra Saha and others v. Sasadhar Mondal 51 C W N 323, which follows the earlier decision in 21 C W N. The learned Advocate argues that the interpretation of section 66 of the Transfer of Property Act in the aforesaid two decisions is sound on principle and should be accepted in preference to the decisions of the Allahabad, Patna and other High Courts, where a contrary view has been accepted. We, therefore, propose to decide, which view is correct on principle and in doing so, we shall have to examine the language used in section 66 of the Transfer of Property Act and find out the intention of the Legislature in enacting that section in doing so we shall have to take into consideration all parts of, the Statute Section 66 of the Transfer of Property Act runs as follows :‑
"Section 66.‑A mortgagor in possession of the mortgaged property is not liable to the mortgagee for allowing the property to deteriorate ; but he must not commit any act which is destructive or permanently injurious thereto if the security is insufficient or will be rendered insufficient by such act."
"Explanation.‑--- A security is insufficient within the meaning of this section unless the value of the mortgaged property exceeds by one‑third, or, if consisting of buildings, exceeds by one half, the amount for the time being due on the mortgage".
It may be stated here that the section itself is in harmony with the English law and section 68 of the Act prescribes a remedy for a case under this section. Again this section lays down an equitable rule and protects the mortgagee as section 108 (a) protects the lessor.
The principle is that the mortgagor being the beneficial owner of the property is not liable to the mortgagee for permissive waste because he may not have the means to prevent it ; but he must not commit any active waste so as to render the security insufficient. The question of what is permissible waste will depend not so much upon the acts of the mortgagor as upon the state of the mortgage account and the value of the property a given moment. The explanation provides a rule for determining whether the security is or is not rendered insufficient. The language of the section "for allowing the property to deteriorate" implies passive conduct and makes the mortgagor liable for causing wanton or malicious waste but the expression "but he must not commit any act ..by such act" means that the mortgagor must not commit an act destructive or permanently injurious to the mortgage property and thereby rendering the security insuffi cient. In this country a mortgagor in possession is not liable to account but he must not be guilty of voluntary waste if the security is insufficient or is likely to be rendered insufficient by his acts and he may also make himself personally liable upon a covenant which was intended for the protection of the security. The expression "security is insufficient" or "insufficient security" has contracted a technical meaning from the ordinary practice of mortgagees in lending money on the security of immovable property. Therefore, whenever any act of mortgagor is likely to impair substantially the value, which is the basis of the contract between the parties, the Courts will interfere for the protection of the mortgagee by restraining the commission of such an act. Section 68 of the Transfer of Property Act lays down provisions for that. The burden of proof of insufficiency of security is on the mortgagee. We have seen that the explanation to section 66 of the Transfer of Property Act has laid down a rule for the purpose of determining the sufficiency of a security based on the practice of a prudent man of business not to lend money unless the property is worth at least one‑third more than the loan and at least half if the property is a building. The rule in section 66 is that the mortgagor is not liable for allowing the mortgage security to deteriorate by not preserving the property and maintaining its value, but he is not to commit any act impairing its value to the mortgagee to the extent mentioned in the explanation. Now, since the mortgage money in a non‑possessory mortgage is never a fixed sum, the permissible acts of the mortgagor must depend upon the state of the mortgage account at the moment. Hence acts which can pass unchallenged at the beginning become intolerable when the mortgage money swells up by accumulated interests. From an analysis of section 66, the following rules can be deduced :‑(i) whether the security is sufficient or insufficient the mortgagor is never liable "for allowing the property to deteriorate", (ii) so long the mortgagor leaves sufficient security to his mortgagee he is not liable for acts amounting to waste whether ameliorative or destructive, (iii) the nature of act is immaterial if property suffers in value to the mortgagee, (iv) the mortgagee cannot ,make any grievance unless the security is or is likely to be diminished to the extent mention ed in the explanation, and (v) the rule is necessarily subject to any contract to the contrary and it being in his favour, it is for him to enforce or waive it.
The right of the mortgagor to deal with the mortgaged property and the limitations to which it is subject flow from the nature of the mortgagor's ownership, which is not absolute but qualified by the reason of the right of the mortgagee to recover his money out of the mortgage security. The most important right possessed by the mortgagor is the right to redeem before it is foreclosed or the property is sold by the mortgagee.
In dealing with the point for our determination, namely, whether the mortgagor can grant a permanent lease, we must keep in our view that there is distinction in the position of a mortgagor in possession in England and in this country. This distinction has been clearly defined by Sir Rashbehari Ghose in his Law of Mortgage, 5th edition, p. 211 in the following words
The position of the mortgagor in possession has given rise to a good deal of, not altogether profitable, discussion in England, where the question whether the mortgagor is in possession as a tenant, and, if so, whether he is a tenant at will or at sufferance or only Quodam Modo would seem to be somewhat debatable points. In this country, however, we are not likely to take a very keen interest in such questions, as the mortgagor does not part with the ownership of the property by pleading it to his creditor even by way of conditional sale ; and his position before foreclosure is, therefore, wholly unlike that of an English mortgagor in possession of a mortgaged property.
The question before us is whether the patni lease granted by the mortgagor Radhikamohan to Joynarain Babu on the 24th January, 1919, is binding on the mortgagee auction- purchasers and if the said lease has deteriorated the mortgage security. In England before the Conveyancing Act, 1888, the mortgagor was absolutely barred from creating any legal interest in mortgage land, but after the passing of the Conveyancing Act, the mortgagor in possession is expressly authorised to make any agricultural or occupation lease for any term not exceeding 21 years or a building lease up to 99 years subject to certain conditions laid down in the Act. Thus in England the mortgagor in possession has power to lease out property during the continuance of the mortgage, subject to certain salutory checks for which there is no authority in this country. The distinction which English Law makes between legal and equitable estates and the effect a mortgage makes on a mortgagor's estate reducing it to a mere equitable estate, necessarily takes away the power of the mortgagor to alienate during the continuance of the mortgage. But there is no such distinction in the law of this country and the mortgagor after his mortgage remains the owner of his property as before, so his power to lease out his property must remain unaffected by his mortgage subject only to the restrictions placed upon his ordinary powers of alienations, which section 66 of the Transfer of Property Act prescribes.
It may be stated here that the divergence of judicial opinion on the question of mortgagor's power to grant patni or permanent leases is due to the fact that the distinction between the position of a mortgagor in possession in England and in this country has not been kept in view. It will follow from what has been stated above that a mortgagor in posses sion in this country being the owner of his own property is not only entitled to create lease like patni and permanent leases but may do so irrespective of their effect upon the mortgage security, provided, only they are not wasteful or des tructive within the meaning of section 66 of the Transfer of Property Act, which permanent or long leases would apparently be, if they materially depreciate the saleable value of the property and injuriously affect the interest of the mortgagee. It is, therefore, clear that mortgagee cannot complain of a lease, which does not affect his security. In view of the aforesaid principles, the mortgagor must not do anything which will substantially reduce the value of the mortgage security below the standard fixed in the explanation to section 66 and in that view the validity of the mortgagor's lease shall have to be determined with reference to its effect upon the mortgage security. This view of ours finds support from a long series of decisions. The earliest decision is Banee Parshad v. Reet Bhunjan Singh and others (1868) 10 W R 325 where it has been ruled that the purchaser of property sold under a decree in favour of a mortgagee, takes the property subject to the lease which the mortgagor might have found to be expedient or convenient to create, provided such a lease y has not impaired the value of the property or has not operated to impede the mortgagee's lien. The only criticism that can be made to this decision, is that the report is too meagre. The principle in that case applies here in this case because the disputed land, which was tenanted from before, originally fetched Rs. 5‑7‑3 pies but under the patni lease the annual rent reserved is Rs. 14 and the patnt lease instead of deteriorating the mortgage security appreciated its value. The case of Ghura v. Shitab Kanwar I L R 36 All. 248 is a case similar to that before us. In that case certain sir land was mortgaged by the owner, who during the continuance of the mortgage granted a perpetual lease and after the mortgage property was sold and purchased by the mortgagee, the latter sued the lessee in ejectment but it was held that the mortgagee purchaser was not entitled to a decree for possession as against the lessee because it did not affect his right to realise rent, which was all that he was entitled to under his purchase of the proprietary right. The learned Advocate for the appellants says that whatever may be the view of the Allahabad High Court, we must decide in his favour in view of the decision in Madanmohan v. Rajkishori (supra).
We shall now see if that case, which is the appellants' main support, at all helps them. This case though decided on the 22nd August, 1912, was reported in 1916‑17. There, pending a mortgage suit, the mortgagor settled different portions of the land under mortgage, to different persons, who got their names entered in the record‑of‑rights as tenants in occupation. The plaintiff mortgagee, after his purchase in execution of the mortgage decree, sued for recovery of posses sion from the tenants and the Court held that the plaintiff was entitled to succeed and get possession from the tenants. It may be observed that the decision in Madanmohan's case rests upon a dictum of Romer L. J. in Reynolds v. Ashby (1903) 1KB87(102):
"It would be dangerous if anything like a general authority to the mortgagor to deal with or affect the mortgaged pro perty could be implied from the mere fact that the mortgagee has not taken possession of it."
It may be observed here with respect to the learned judges, who decided Madanmohan's case that "this view follows the English Law, but ignored the different standpoint from which law viewed the mortgagee's right in this country which an apprehensive mortgagee may enlarge by contract, but not otherwise than as provided in this section (section 65), even if he is one English mortgagee". As correctly stated at page 1126 of Sir Hari Singh Gour's Law of Mortgage (5th Edition) citing Wazirali v. Moti Chand (1905) 2 All, L J 294. We may observe that this criticism is just, as will be evident from the comment made by Fisher in his Law of Mortgage on Reynolds v. Ashby (supra). The learned author in dealing with the question of fixtures and hire‑purchase agreements, which was the question raised in Reynolds v. Ashby (supra) says as follows :
"In such cases, if the mortgage is a legal mortgage and the mortgagee had no notice of the hire‑purchase agreements or the latter was made subsequently to the mortgage, the title of the mortgagee will prevail over that of the manu facturer by virtue of his legal title ‑unless the mortgagee has acquisced in their removal."
It is thus evident that the decision in Reynolds v. Ashby (supra) and the observations of Romer L. J., rested upon the legal title being in the mortgagee ; but that is a conception which is unknown to the law of mortgages in this country, and in this matter the Courts must be bound by the definition of a mortgage in section 58 of the Transfer of Property Act.
In that case of Madanmohan (supra) Sir Ashutosh Mukherjee following the dictim of Romer L. J. observed as follows :
The true position thus is that…
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