S.B.
Abdul Azeez Vs. M. Maniyappa Setty & Anr [1988] INSC 324 (14 October 1988)
Natrajan,
S. (J) Natrajan, S. (J) Pathak, R.S. (Cj)
CITATION:
1989 AIR 553 1988 SCR Supl. (3) 505 1988 SCC (4) 727 JT 1988 (4) 133 1988 SCALE
(2)1009
ACT:
Karnataka
Rent Control Act, 1961--Section 3(h)-- Definition of Landlord--Whether includes
usufructuary mortgagee who is entitled to be in possession of the mortgaged
property and/or to receive the rents and profits in lieu of interest or in
payment of the rnortgage money.
Held--Yes.
%
Karnataka Rent Control Act, 1961--Section 21(1)(h)-- Whether usufructuary
mortgagee with possession stands on a part with owner of building to seek
eviction of tenant.
Held--Yes.
HEAD NOTE:
The
appellant, now represented by his legal representatives, had taken on rent
certain premises and was in occupation thereof. On the basis of a usufructuary
mortgage executed by the landlord in their favour, the respondents who are the
partners, sought the eviction of the appellant under section 21(1)(h) of the
Karnataka Rent Control Act, 1961 on the ground that they were bona fide in need
of the premises to run their business. The appellant's defence was that the usufructuary
mortgage was a sham and nominal transaction created by the landlord with an oblique
motive because he had refused to pay higher rent for the premises and secondly
the mortgagees were not bona fide in need of the premises for their business.
The Trial Court rejected both the defences and ordered eviction and the said
order was affirmed by the appellate court and the High Court. Hence this
appeal.
Dismissing
the appeal, this Court,
HELD:
The definition of landlord' in Section 3(h),is an inclusive definition and
would take within its fold any per.
who
for the time being is receiving or is entitled to receive the rent in respect
of the leased premises. The person receiving or entitled to receive the rent
may do so either on his own account or On account of or on behalf of or for the
benefit of any other person or as a trustee, guardian or receiver for any other
person. A mortgagee with possession undoubtedly falls under the first category
as under Sec. 58(d) of the Transfer of property Act, he is PG NO 505 PG NO 506
entitled to receive the rent on his own account and this factor makes the usufructuary
mortgagee stand on a higher and different footing than other persons accorded
the status of a landlord under Scction 3(h) because their entitlement to
receive rent is on behalf of or for the benefit of others and not on their own
account. [5l0F-H] V. Baluswamy Servai v. N. Raju Servai, [1966] 2 MLJ 4; T. Ezhumalai
v. Padmavathi Ammal, [1971] J 2 MLJ 121 Aswatharamiah v. Special Deputy
Commissioner, [1977] 1 Karnataka Law Journal 332; S. Subramanayaswamy v. Deputy
Commissioner, Bangalore, AIR 1981 Karnataka 190; R. Vijendra v. H.R. &
A.C., ILR 1988 Kar. 1591, referred to.
If the
legislature so wanted, it would have undoubtedly categorised a mortgagee with
possession also as one of the excluded class of landlords for the purpose of
sec. 21(1)(h) of the Act. Obviously the legislature has not done so as would
appear from the explanation to clause 4 of sec. 2l. [511D-E] A mortgagee with
possession, steps into the shoes of the mortgagor and becomes entitled to all
the rights of the mortgagor and the only right left with the mortgagor is the
redemption. A mortgagee with possession is entitled to be in posession of the
mortgage property as long as it is not redeemed. If the mortgagee with
possession leases back the property to the mortgagor, he acquires the rights of
a lessor and is entitled to enforce the terms of he lease against the
mortgagor. [511F-G] Mathur Lal v. Keshar Bai & Anr., AIR 1971 SC 310,
referred to.
There
can be no doubt that a mortgagee with possession stands very differently from other
kinds of landlords euvisagad under section 3(b) of the Act. He is therefore
entitled, as much as the owner himself, to seek recovery of posession of the
leased premises from a tenant for him own bona fide requirement of use.
[511g-H] V.Baluswamy Servai v. N. Raju Servai [1966] 2 MLJ 4; R Vijendra v. H.
R. & A . C., ILR 1988 Kar. 1591, approved.
The
appellant's argument that a scheming landlord can adopt the devious method of
creating a sham deed of usufructuary mortgage in order to have u tenant evicted
has no force because il fails to note that an order of eviction under sec. 21(1)(h)
would not be Passed by the court for the PG NO 507 mere asking because, the
mortgagee with possession has first get to prove that the premises are
reasonably and bona fide required by him for occupation by himself. [512B-C]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1006 ot 1980.
From
the Judgment and Order dated 13.2.1980 of the Karnataka High Court in C.R.P.
No. 1287 of 1977.
R.B. Datar
for the Appellant.
S.S. Javali
and Ravi P. Wadhwani for the Respondents.
The
Judgment of the Court was delivered by NATARAJAN, J. Does a mortgagee with
possession stand on a par with an owner of a building to seek the eviction of a
tenant under Section 21(l)(h) of the Karnataka Rent Control Act, 1961 (for
short the Act' hereinafter) for his bona fide requirement of the tenanted
premises for residential or business needs is the question for determination in
this appeal by special leave by a tenant. The Trial Court, the Appellate Court
and the High Court in revision have answered the question in the affirmative
and the aggrieved tenant now represented by his Iegal representatives is before
us in appeal.
The
tenanted shop to one Nanjappa and the appellant had taken the same on rent for
running a cycle shop. On the foot of an usufructuary mortgage executed in their
favour, the respondents, who are partners, sought the eviction of the appellant
under Section 2l(1)(h) of the Act. Their case was that they were also running a
cycle shop in a rented premises but since their landlord had obtained an order
of eviction against th In they were bona fide in need of another building to
run their business. In such circumstance they had advanced a sum of Rs.25,000
to the appellant's landlord Nanjappa and obtained a usufructuary mortgage of
the tenanted premises and thus having stepped into the shoes of the landlord,
they were seeking the eviction of the appellant. The appellant's defence was
that the usufructuary mortgage was a sham and nominal translation created by
the landlord with an oblique motive because he had refused to pay higher rent
for the premises and secondly the mortgagees were not bona fide in need of the
petition premises for their business, The Trial Court rejected both the defences
and ordered eviction and the said order has been affirmed PG NO 508 by the
Appellate Court and the High Court.
In
this appeal there is no challenge to the findings that the respondents were
bona fide in need of another shop to run their business and that they had
obtained an usufructuary mortagage of the tenanted premises from the owner Nanjappa.
However, the contention of the appellants is that a usufructuary mortgagee
cannot be equated with the mortgagor/landlord for seeking the tenant's eviction
under Section 21(1)(h) on the ground of bona fide requirement of the leased
premises for his own use. The argument of Mr. Datar, learned counsel for the
appellant was that the Act is a beneficial piece of legislation intended to
protect the tenants from unreasonable evictions and as such the provisions of
Section 21 have to be construed in such a manner that the right of the tenants
are not taken away beyond the limits of the Section. It was urged by the
learned counsel that if Section 21(1)(h) is to be liberally construed so as to
equate a usufructuary mortgagee with the owner of a building and enable him to
seek eviction of a tenant under Section 21(1)(h), then it would give a handle
for scheming landlords, who cannot themselves obtain an order of eviction against
their tenants under Section 21(1)(h), to crate a nominal deed of usufructuary
mortgage and have their tenants evicted with the help of the mortgagee and then
secure possession of the leased premises for themselves. In this eontext it was
pointed out by Mr. Datar that the usufructuary mortgage in favour of the
respondents was only for a period of 30 months and therefore the mortgage
should be treated as a colourable transaction.
Before
we examine the merit of these contentions, we may refer to the relevant
provisions of the Act. The term `landlord' is defined in Clause (h) of Section
3 of the Act as under:
"Landlord--`Landlord
means any person who is for the time being, receiving or entitled to receive,
rent in respect of any premises whether on his own account, or on account, or
on behalf of, or for the benefit of any other person or as a trustee, guardian
or receiver for any other person or who would so receive the rent or be
entitled to receive the rent if the premises were let to a tenant; and includes
any person not being a tenant who from time to time derives title under a
landlord; and further includes in respect of his sub-tenant who has sub-let any
premises;" Section 21(1)(h) under which the eviction-petition was filed
reads as under:
PG NO
509 "21( I)(h)--that the premises are reasonably and bona fide required by
the landlord for occupation by himself or any person for whose benefit the
premises are held or where the landlord is a trustee of a public charitable
trust, that the premises are required for occupation for the purpose of the
trust.
On a
reading of Section 3(h) it may be seen that it is an inclusive definition and
takes within the fold of 'landlord not only the owner of the premises but any
person who for the time being is receiving or is entitled to receive the rent,
whether on his own account or on account of, or on behalf of or for the benefit
of any other person or as a trustees, guardian or receiver for any other person
etc. A usufructuary mortgagee, as per Section 58(d) of the Transfer of Property
Act is entitled to be in possession of the mortgage property or to receive the
rents and profits, either in full or in part, accruing from the property and
appropriate the rents and profits in lieu of interest or in payment of the
mortgage money or partly in lieu of interest or partly in payment of the
mortgage money. By reason of his entitlement to receive the rent of the
mortgage property. a mortgagee with possession will undoubtedly constitute a
landlord within the meaning of Section 3(h) of the Act. The appellant's counsel
did not dispute this position. He would however say that even so, Section 21( I)(h)
should be read down so as to restrict the meaning of the word
"landlord" in that clause to the owner of the premises alone and not
to a usufructuary mortgagee. Before considering the matter, we may refer to
some of the decisions where the same question has been considered.
A
learned single judge of the Madras High Court has held in V. Baluswamy Servai
v. N. Raju Servai, [1966] 2 MLJ 4 that a usufructuary mortgagee of a building
in the occupation of a tenant would undoubtedly constitute a landlord within
the meaning of Section 2(6) of the Madras Buildings (lease & Rent Control)
Act, 1960, as he is entitled to receive the rent o the building on is Own
account and therefore he would be entitled to evict a tenant under Section
10(3)(a)(i) of the Act on he ground of bona fide requirement of the premises
for his personal occupation. This ratio was followed in T. Ezhumalai v. Padmavathi
Ammal, [1971] 2 MLJ 121. The same view was taken by a learned single judge of
the Karnataka High Court also in a case arising under the Karnataka Rent
Control Act in Aswatharamiah v. Special Deputy Commissioner, [1977] 1 Karnataka
Law Journal 332.
However,
a Division Bench of the Karnataka High Court took a different view in S.Subramanayaswamy
v. Deputy Commissioner, PG NO 510 Bangalore, AIR 1981 Karnataka 190 and held
that though a mortgagee with possession may satisfy he definition of `landlord'
under Section 3(h) of the Karnataka Act, he would not be entitled to claim
priority in the matter of allotment of the mortgage premises to himself under
Section 5 as the benefit of the Section could be availed of only by the
owner/landlord.
As the
decision in S. Subramanayaswamy (supra) conflicted with some of the earlier
decisions of the High Court, a reference was made to a Full Bench in R. Vijendra
v. H.R. & A.C., ILR 1988 Kar. 1591 for settlement of law on the question
formulated as under:
"Whether
an usufructuary mortgagee is a landlord for purposes of Part II of the
Karnataka Rent Control Act, 1961." The Full Bench answered the reference
in the affirmative and held that since delivery of possession is a necessary
concomitant of a usufructuary mortagage and since the concomitant entitles the usufructuary
mortgagee to claim possession of the property to the exclusion of all other,
including the mortgagor, the mortgagee is for all intents and purposes the
owner himself, as he steps into the shoes of owner, and by reason of it he
acquires the status of a landlord under Section 3(h) as well as the provisions
in Part II for claiming possession of the mortgage premises for is personal
occupation. On a consideration of the matter we find ourselves in agreement
with the view taken by the Full Bench. We may now give the reasons for our
view.
The
definition of `landlord' in Section 3(h), as we have already seen in an
inclusive definition and would take within its fold any person who for the time
being is receiving or is entitled to receive the rent in respect of the leased
premises. The person receiving or entitled to receive the rent may do so either
on his own account or on account of or on behalf of or or the benefit of any
other person or as a trustee, guardian or receiver for any other person. A
mortgagee with possession undoubtedly falls under the first category as he is
entitled to receive the rent on his own account and this factor makes the usufructuary
mortgagee stand on a higher and different footing than other persons accorded
the status of a landlord under Section 3(h) because their entitlement to
receive rent is on behalf of or for the benefit of others and not on their own
account.
Secondly
it is of significance that the legislature being alive to the expansive nature
of the definition of the term `landlord' in Section 3(h) had realised the need
to limit PG NO 511 the operation of the definition in so far as eviction
petitions under Section 21(1)(h) are concerned. Section 21(1) sets out various
grounds on which the eviction of a tenant can be sought for. The grounds may
pertain to the omissions or commissions of the tenant or to the bona fide
requirement of the premises by the landlord in various situations. The
legislature has taken care to see that in so far as clause (h) is concerned viz
the premises being reasonably and bona fide required by the landlord for his
own occupation or for the benefit of any person for whom the premises are held,
the status of a landlord should be denied to a Rent Collector or an Estate Manager.
The exclusion is to be found in the Explanation to Clause 4 of Section 21 in
the following terms:
"For
the purpose of clause (h) of the proviso to sub- section 1, expression
`landlord' shall not include a Collector or Estate Manager." It therefore
follows that if the legislature had wanted that a mortgagee with possession
should not be equated with the owner of the premises and should be denied the
benefit of seeking a tenant's eviction under Section 21(1)(h), the Legislature
would have undoubtedly categorised a mortgagee with possession also as one of
the excluded class of landlord lords for the Purposes of Section 21(1)(h) of
the Act. Obviously therefore the legislature has not wanted a mortgagee with
possession to be excluded of his right to seek eviction of a tenant from the
mortgaged premises under Section 21(1) of the Act. Thirdly, a mortgagee with
possession is enjoined by Section 76(a) of the Transfer of Property Act manage
the property as a man of ordinary prudence would manage it if it were his own.
As such the mortgagee's acts, it prudently done, could bind the mortgagor even
after the redemption of the mortgage. A mortgagee with possession, steps into
the shoes of the mortgagor and becomes entitled to all the rights of the
mortgagor and the only right left with the mortgagor is the right of
redemption. A mortgage with possession is entitled to be in possession of the
mortgage property as long as it is not redeemed. If the mortgagee with
possession leases back the property to the mortgagor, he acquires the rights of
a lessor and is entitled to enforce the terms of the lease against the
mortgagor (vide Mathur Lal v. Keshar Bai & Anr., AIR 1971 SC 310). On
account of all these factors there can be no doubt that a mortgagee with
possession stands very differently from other kinds of landlords envisaged
under Section 3(h) of the Act. He is therefore entitled, as much as the owner
himself, to seek recovery of possession of the leased premises from a tenant
for his own bona fide requirements of use. For all these reasons we hold PG NO
512 that the view taken by the single judges in the cases referred to above and
the Full Bench in R. Vijendra's case (supra) is the correct view to be taken.
As
regards the contention of Mr. Datar that a scheming landlord can adopt the
devious method of creating a sham deed of usufructuary mortgage in order to
have a tenant evicted, when he himself cannot sustain such an action, the
argument fails to note that an order of eviction under Section 21(1)(h) would
not be passed by the Court for the mere asking because, the mortgagee with
possession has first get to prove that the premises are reasonably and bona
fide required by him for occupation by himself. Without the reasonable and bona
fide requirement being proved to the satisfaction of the Court, no order for
eviction will be passed. Nextly, even if the mortgagee with possession
satisfies the above test, he has to pass the further test laid down by
sub-section 4 of Section 21 which provides that a tenant shall not be evicted
under Section 21(1)(h) if the Court is satisfied that the tenant would be put
to greater hardship by an order of eviction being passed than the hardship that
would be caused to the landlord by refusal to pass an order of eviction in his favour.
These things apart, it is inconceivable every landlord who would not be able to
evict his tenant by resort to Section 21(1)(h) would be able to readily find a
willing accessory who will be prepared to play the role of a usufructuary
mortgagee and institute eviction proceedings against the tenant in order to
secure the possession of the leased premises and then hand over possession to
the owner of the building.
For
all these reasons, the appeal deserves to fail and will accordingly stand
dismissed. The appellant is, however, given six months time from today to
vacate the leased premises subject to the appellant filing an undertaking in
the usual terms within four weeks from today. There will be no order as to
costs.
H.S.K.
Appeal dismissed.
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