Raja Kamakshyanarayan Singh Bahadur Vs.
Chohan Ram & ANR  INSC 47 (23 October 1952)
BHAGWATI, NATWARLAL H.
MAHAJAN, MEHR CHAND AIYAR, N. CHANDRASEKHARA
CITATION: 1952 AIR 401 1953 SCR 108
CITATOR INFO :
F 1967 SC1390 (8)
Transfer of Property Act (IV of 1882), ss.
66, 65-A-Mortgage -Mortgagor in possession-Power to lease-Law before amendment
Act of 1929-Permanent lease by mortgagor-Validity.
Under the law as it stood prior to the
enactment of s. 65-A of the Transfer of Property Act, by Act XX of 1929, the
question whether the mortgagor in possession had powar to lease the mortgaged
property has got to be determined with reference to the 109 authority of the
mortgagor as the bailiff or agent of the mortgagee to deal with the property in
the usual course of management. It has to be determined general principles and
not the distinction between an English mortgage and a simple mortgage or the
considerations germane to s.66 of the Transfer of Property Act, and the true
position is that the mortgagor in possession may make a lease conformable to
usage in the ordinary course of -management; for instance, he may create a
tenancy from year to year in the case of agricultural lands or from month to
month in the case of houses. But it is -not competent to him to grant a lease
unusual terms or to alter the character of the land or to authorise its use in
a manner, or for a purpose, different from the mode in which he himself had
used it before he granted the mortgage. And it is for the lessee, if he wants
to resist the claim of the mortgagee, to establish that the lease in his favour
was granted the usual terms in the ordinary course of management.
Where a mortgagor granted a permanent lease
of the mortgaged property in the year 1925 and the High Court upheld the lease
-as against a person who had purchased the properties in a sale held in
execution of a decree obtained by the mortgagee the mortgage, the ground that
the lease did not impair the security of the mortgagee: Held, that the lease
was not binding the mortgagee or the auction purchaser as it was not a lease
granted in the usual course of management, even though it did not impair the
Madan Mohan Singh v. Raj Kishore Kumari
(1916) 21 C.W.N. 88, approved. Balmukund v. Motilal (1915) 20 C.W.N. 350,
dissented from. Banee Prasad v. Beet Bhunjun Singh (1868) 10 W.R, 325,
CIVIL APPELLATE, JURISDICTION: Civil Appeal
No. 73 of 1950. Appeal from the Judgment and Decree dated the 26th January,
1944, of the High Court of Judicature at Patna (Fazl Ali C. J. and Chatterji
J.) in Appeal from Original Decree No. 4 of 1941, arising out of Judgment and
Decree dated the 20th September, 1940, of the Court of the Additional
Subordinate Judge of Hazaribagh in Title Suit No.
45 of 1939.
S. N. Mukherjee for the appellant.
Gangacharan Mukherjee and A. N. Sinha for the
1952. October 23. The judgment of the Court
was delivered by BHAGWATI J, 110 BHAGWATI J.-The question that arises for our
consideration in this appeal is whether prior to the enactment of section 65-A
of the Transfer of Property Act in 1929 a mortgagor in possession had the power
to grant a permanent lease of the mortgaged property so as to bind the
One Raja Nilkanth Narain Singh was the owner
of Gadi Sirampur and he executed the 1st August, 1914, a simple mortgage of
Gadi Sirampur in favour of the Chota Nagpur Banking Association Limited. In
1920 the Bank filed a suit against his son Wazir Narain Singh to enforce the
mortgage security and obtained a mortgage decree the 29th November, 1921. The
Bank purchased a third share of Gadi Sirampur in execution of that decree the
28th October, 1922.
Proceedings were taken to set aside this
sale. During the pendency of these proceedings it appears that the 5th
November, 1925, Wazir Narain Singh granted a permanent lease of four villages
Nawadih, Koldih, Pandna and Chihutia by a registered Patta to one Hiraman Ram
who was the Manager and Karta of his joint Hindu family. The Permanent lease
was taken by him in his own name and in the name of his son Chohan Ram. An
agreement was subsequently arrived at between the Bank and Wazir Narain Singh
that if Wazir Narain Singh paid to the Bank or before the 16th August, 1926,
the sum of Rs. 1,10,631-4-0 the sale would be set aside.
Wazir Narain Singh executed the 14th August,
1926, a mortgage of Gadi Sirampur in favour of the Manager of the Court of
Wards in charge of the plaintiff's estate during -his minority to secure
repayment of a sum of Rs. 1,47,000 and out of the same satisfied the dues of
the Bank and the sale in favour of the Ban was accordingly set aside. The
plaintiff through the Manager of the Court of Wards filed a suit the 4th
February, 1929, to enforce this mortgage and he impleaded as co-defendants in
that suit Hiraman Ram as defendant 20 and his father Dilo Ram as defendant 19.
A final decree for sale was passed the 18th September, 1931, and the 111
Plaintiff purchased Gadi Sirampur at the auction sale held in execution of this
decree the 6th April, 1935. Delivery of possession was obtained by the
plaintiff through the Court the 16th February, 1936. Dilo Ram died after the
mortgage decree but Hiraman Ram and his son Chohan Ram continued in actual
possession of the disputed villages and the plaintiff therefore filed the 16th
November, 1939, the suit, out of which this appeal arises, in the Court of the
Additional Subordinate Judge of Hazaribagh against Hiraman Ram and Chohan Ram,
defendants 1 and 2, for khas possession of these villages. The plaintiff
contended that he was subrogated to the position of the Bank, that the decree
which had been passed in the mortgage suit was binding the defendants, that he
was the auction purchaser in execution of that mortgage decree and that the Patta
-being subsequent to the plaintiff's mortgage thus came to an end and he was
entitled to recover khas possession from the defendants.
Defendant 2 filed his written statement
contesting the plaintiff's claim. He denied that the plaintiff. was subrogated
to the position of the Bank. He contended that the decree in the mortgage suit
was not binding him as he was not :a party to that suit. lie further contended
that the Patta could not be put an end to by the auction sale of the mortgaged
property. The defendant I filed a separate written statement. He denied that he
was the Manager and Karta of the joint Hindu family. He also contended that
there was a partition amongst the members of the joint family within a year
after their possession of the properties in suit and the properties had been
allotted at that partition to the defendant 2.
The trial Court hold that, the plaintiff was
subrogated to the position of the Bank. It also held that the defendant 1 was
the Manager and Karta of the joint family and that the defendant 2 was fully
represented in the mortgage suit, that the decree in the mortgage suit was
binding the defendants and that the plaintiff was entitled to recover
possession 112 of the said properties and mesne profits from the defendants. The
defendants appealed against this decree to the High Court of Judicature at
Patna. The High Court negatived the contention in regard to constructive res
judicata which was urged behalf of the plaintiff. It then considered the
further contention that Wazir Narayan Singh had, after creating the mortgage in
favour of the Bank no power to grant the permanent lease in question to the
defendants. After considering all the authorities which were cited before it,
it came to the -conclusion that the question whether Wazir Narayan Singh had
got such power or not had to be determined with reference to the provisions of
section 66 of the Transfer of Property Act and the crucial test was whether the
lease rendered the mortgagee's security insufficient. In spite of the fact that
there was no allegation in the plaint that the defendant's lease had the effect
of rendering the security of -the Bank insufficient, the High Court went into
this question and a calculation of some figures came to the conclusion that the
lease of the disputed villages in favour of the defendants did not in any way
render the security of the bank insufficient. It therefore held that the lease
was valid and was not affected by the plaintiff's mortgage, decree or by the
execution sale under that decree and accordingly dismissed the plaintiff's
suit. The plaintiff obtained leave to appeal to the Privy Council from this
decision of the High Court and the appeal was admitted the 9th January, 1946.
Both the Courts below found that the
plaintiff was subrogated to the position of the Bank. They also found that the
defendant 2 was sufficiently represented in the mortgage suit. These findings
were not challenged before us and the only question which survived for our
consideration was whether Wazir Narayan Singh had the power to grant a
permanent lease to the defendants so as to bind the plaintiff.
The question whether Wazir Narayan Singh had
such power has got to be determined under -the law as it stood prior to the
enactment of section 65-A of 113 the Transfer of Property Act by Act XX of
1929. The mortgagor's power to lease the mortgaged property was the
subject-matter of conflicting judicial decisions. Relying upon the rule of
English common law under which the mortgagor had no power to lease, it was held
in some cases that a mortgagor could not ordinarily without the concurrence of
the mortgagee execute a lease which could be binding the mortgagee. In other
cases a distinction was drawn between English mortgages and other mortgages and
it was considered that the mortgagor in India remained the owner and when in
possession could prima facie exercise the rights of ownership inclusive of the
power to grant leases of the mortgaged property. The Question was decided with
reference to section 66 of the Transfer of Property Act and it was held that
the mortgagor could grant leases which were not wasteful in their effect the
This was the principle deduced by Jenkins
C.J. in Balmukund v. Motilal(1) from the old case of Banee Pershad v. Beet
Bhunjun Singh(1). This line of reasoning was not adopted in other cases which
laid down a different rule, viz., that a mortgagor in possession might grant a
lease conformable to usage in the ordinary course of management but was not
competent to grant a lease unusual terms or authorise the use of land in a
manner, or for a purpose, different from the mode in which he himself had used
it before he granted the mortgage. This was laid down by Sir Ashutosh Mukherjee
J. in Madan Mohan Singh v. Raj Kishore Kumari(3)and was followed in a number of
cases. There was thus a conflict of decisions which was sought to be resolved
by the enactment of section 65-A of the Transfer of Property Act which dealt
with the mortgagor's power to lease while lawfully in possession of the mortgaged
"It is an elementary rule that though a
mortgagor may assign the mortgaged premises, the assignee can only take subject
to the encumbrances, and if the (1) (1915) 20 C. W. N. 350.
(2) (i868) 10 W.R. 325.
(3) (i9i6) 21 C, W. N. 88.
114 property is sold or foreclosed by the
mortgagee, any interest which the mortgagor may have created since the mortgage
will be destroyed"'. (Ghosh Mortgage, Vol. I, p.
212.) As was observed by Lord Selborne in
Plowden(1), "If a mortgagor left in
possession, grants a lease without the concurrence of the mortgagee (and for
this purpose, it makes no difference whether it is an equitable lease by an
agreement under which possession is taken or a legal lease by actual demise),
the lessee has a precarious title, inasmuch as although the lease is good as
between himself and the mortgagor who granted it, the paramount title of the
mortgagee may be asserted against both of them." It does not however
follow that a lessee from the.
mortgagor acquires no interest whatever in
the property demised to him. A person taking a lease from a mortgagor after the
mortgage does acquire an interest in the equity of redemption and can claim to
redeem that footing. But this right of redemption does not necessarily mean that
a lease of this character is always operative against the mortgagee.
Merely because a lessee acquires an interest
in the mortgaged property which is sufficient to enable him to redeem the
mortgage it does not follow that the interest which the lessee has thus
acquired is operative against the mortgagee. The true position is somewhere in
the middle of these two extremes. The mortgagee is not normally bound by the
acts of the mortgagor with reference to the mortgaged property. " But if a
mortgagee takes his security with knowledge of the purposes to which the land
is applied and allows the mortgagor to remain in possession he *ill be bound by
the acts done by the mortgagor in accordance with the usual course."
(Ghosh Mortgage, Vol. I, p. 212.) As indicated in the observations of Sir James
Parke in Pope v.
Briggs (2) the mortgagor might be considered
as acting in the nature of a bailiff or agent for the mortgagee. Con-
sequently, if the mortgagor, -after he has granted the (1) (1884) 25 Ch. D. 678
at p. 681.
(2) (1829) 9 Barn. & Cres. 245 at p. 258.
115 mortgage, deals with the property in the
usual course of management, the interest created by him may be rightly deemed
operative against the mortgagee. An illustration of this view is found in the
ease of Moreland v. Richardson(1) where a person took a mortgage of a burial
-ground and it Was held that, as the object of the burial ground is to grant
rights of burial, this' being the mode in which such property is dealt with,
the mortgagee was not entitled to disturb the graves of those who had been:
buried the land, while the mortgagor continued to hold it., The mortgagor could
thus in the usual course of management create a ten- ancy from year to year in
the case of agricultural land or from month to month in the case of property
consisting of houses and his dealings with the mortgaged property in the usual
course of management would be operative against the mortgagee. [Per Mukherjee
J. in Madan Mohan Singh v. Raj Kishore Kumari(2)] "Whether the mortgagor
possesses any larger powers of leasing is however very questionable. The only
reported case in which such a power was recognized is Banee Pershad v.
BeetBhunjun Singh(1) but the report in Sutherland is very meagre. The judgment
too does not give forth any certain sound (sic.). It is only said that a
mortgagor is not restricted in the management of the property by making a
mortgage and that so long as nothing takes place to impair the value of the
mortgagee's security the mortgagor does not exceed his powers in making a lease
for a term. The learned judges add perhaps somewhat unnecessarily that their
decision should not go beyond the particular facts of the case before
them." (Ghosh Mortgage, Vol. I, p. 213.) This case of Banee Pershad v.
Beet Bhunjun Singh(3 was considered by Jenkins C. J. in Balmukund v. Motilal(4)
as an authority for the proposition that as long as nothing took place which
impaired the value or impeded the operation of the mortgage, the mortgagor in
creating a temporary lease acted within his powers and these observations of
Jenkins C.J. were (1) (1857) 24 Beav. 33.
(2) (1916) 21 C.W..N. 88 at pp. 91, 92.
(3) (1868) 10 W.R. 325.
(4) (1915) C.W.N. 350, 116 considered by the
Courts as justifying the applicability of the provisions of section 66 of the
Transfer of Property Act while determining the binding nature of the leases
created by. the mortgagor in possession the mortgagee.; Mukherjee J. had
occasion, to consider this very case in Madan Mohan Singh v. Raj Kishore
kumari(1) and he cited it in support of the proposition that the interest
created by the mortgagor while dealing with the mortgaged property in the usual
course of management could be rightly deemed operative against the mortgagee.
The following observations of Mukberjee J. in this connection at page 91 are
very apposite:- "As the case is very imperfectly reported, we have
examined the record and ascertained the questions in controversy. The
proprietor of an estate mortgaged it the 12th March, 1861. the 7th July, t862,
the mortgagor granted an ijara potta of the property for a term of ten years.
The mortgagee subsequently sued the mortgagor alone and got a decree; at the
execution sale which-followed, the property was sold the 24th December, 1863.
The purchaser sued the 12th March, 1867, to eject the lessee, the ground that
as he had acquired the property in the condition in 'Which it was when
mortgaged, the lease, which would otherwise run till the 7th July, 1872, did
not bind him.
'The Court of first instance overruled this
contention 'as too broadly formulated, and held that as the mortgagor had in
good faith granted the lease for a limited term a fair and reasonable rent, the
mortgagee or the purchaser in execution of his decree could not repudiate it,
specially as the mortgage deed did not prohibit the grant of temporary leases
to middlemen or cultivators. appeal, the District Judge affirmed this view and
declined to accept the broad contention that leases of all descriptions granted
by a mortgagor were void as against the mortgagee. second appeal to this Court,
Jackson and Mitter JJ. took substantially the same view." (1) (1916) 21
117 These observations of Mukherjee J. point
out what was the ratio decidendi of that case. The question of the sufficiency
or insufficiency of the security was not really gone into but the Court
considered that the lease was granted in good faith, was for a limited term and
stipulated a fair and- reasonable rent and it was therefore operative against
the mortgagee. The Court was really guided by the consideration that the
mortgagor dealt with the property in the usual course of management and the
interest which was thus created by the mortgagor in the usual course must
rightly be deemed operative against the mortgagee. ,The case of Banee Pershxd
v. Beet Bhunjan Singh(1) therefore is really no authority for the wide
proposition that a mortgagor was not restricted in the management of the
property by making a mortgage and that so long as nothing took place,to impair
the value, or impede the operation of the mortgage the mortgagor would be well
within his powers in making a lease for a term.
In our opinion section 66 of the Transfer of
Property Act has nothing to do with the mortgagor's power to lease the
mortgaged property. Section 66 is a statutory, enactment of the powers of the
mortgagor in.possession in regard to waste of mortgaged property. The mortgagor
in possession is not liable for what in terms of the English Law of Real
Property is known as permissive waste, i.e., for omission to repair or to
prevent natural deterioration. He is however liable for destructive waste is
acts which are destructive or permanently injurious to the mortgaged property
if the security was insufficient or would be rendered insufficient by such
acts. This section therefore has no application to the grant of a lease by the
mortgagor in possession.
The only relevant consideration is whether,
the mortgagor in possession having the authority to deal with the property in
the usual course of management, the lease granted by him can be rightly deemed
operative against the mortgagee., The true position has been stated in the
following terms by,, Mukherjee, in Madan Mohan Singh v. Baj Kishore Kumar(2)
(i) (1868) 1o W.R. 325.
16 (2) (1916) 21 C.W.N. 88 at page 92.
118 "The true position thus is that the
mortgagor in possession may make a lease conformable to usage in the ordinary
course of management, for instance, he may create a tenancy from year to year
in the case of agricultural lands or from month to month in the case of houses.
But it is not competent to the mortgagor to grant a lease unusual terms, or to
alter the character of the land or to authorise its use in a manner or for a
purpose different from the mode in which he himself had used it before he
granted the mortgage." The question whether the mortgagor in possession
has power to lease the mortgaged property has got to be determined with
reference to the authority of the mortgagor as the bailiff or agent for the
mortgagee to deal with the property in the usual course of management. It has
to be determined general principles and not the distinction between an English
mortgage and a simple mortgage or con- siderations germane to section 66 of the
Transfer of Property Act. Having regard therefore to the position that section
66 has no application to leases of the mortgaged property, the decision of
Jenkins C.J. in Balmukund v.
Motilal(1) and the cases following that line
of reasoning do not govern the question before us.
While we are this subject we would like to
em- phasise that it is for the lessee if be wants to resist the claim of the
mortgagee to establish that the lease in his favour was granted the usual terms
in the ordinary course of management. Such a plea -if established-and it must
not be overlooked- that the burden of proof in this matter is upon him-would
furnish a complete answer to the claim of the mortgagee. If the lessee failed
to establish this position he would have certainly no defence to an action at
the instance of the mortgagee.
No allegation was made behalf if of the
defendants that the grant of the permanent lease was a dealing with the
mortgaged property in the usual course of management by the mortgagor, In the
absence of (9) (1915) 20 C.W.N. 350, 119 any such plea we are of the opinion
that there was no.
answer to the plaintiff's claim and the
permanent lease granted by Wazir Narayan to the defendants could not prevail
against the plaintiff.
We have therefore come to the conclusion that
Wazir Narayan Singh had no power to grant the permanent lease in question to
the defendants, that the same was not binding and operative against the
plaintiff, that the defendants had ample opportunity to@ redeem the mortgage if
they so desired but did not choose to exercise their right of redemption, that
the execution sale of Gadi Sirampur including the four villages in question was
binding them and that the plaintiff was entitled to khas possession of the four
villages of which the defendants were in wrongful possession. The appeal is
allowed. The decree passed -by the High Court dismissing the plaintiff's suit
is set aside and the decree passed by the trial court in favour of the
plaintiff is restored with costs throughout.
Agent for the appellant: Ganpat Bai.
Agent for respondent No. 1: B. B. Biswas.