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Report No. 26

Clause 48

General.-This clause deals with properties which are or are not divisible among the creditors, and, following the scheme of section 52 of the Presidency Act, it is in two parts, sub-clause (1) describing properties which are not divisible among the creditors, and sub-clause (2) describing those which are.

Sub-clause (1).-Section 28(5) of the Provincial Insolvency Act, which corresponds to section 52(1), Presidency Act, differs from it in two respects:-

(i) It does not exclude properties held in trust by the insolvent. But, under the general law, the result would be the same as in the Presidency Act. Such properties have been excluded to avoid any doubt.

(ii) It does not enumerate, as does section 52(1)(b) of the Presidency Act, the articles which do not pass on to the Official Receiver, but generally provides that whatever is not attachable under section 60 of the Civil Procedure Code will not vest in the court. This has been adopted as more comprehensive.

The Presidency Act imposes in this respect a limit of rupees 300 in the whole, which appears to be unnecessary.

Insurance policies have been excluded, following section 91(b) Australian Act. Tenancies.-This is discussed below1.

Sub-clause (2).-This sets out the properties which are divisible among the creditors.

Paragraph (a)-Corresponds to section 28(2), earlier part, of the Provincial Act, and follows section 52(2)(a) of the Presidency Act, but omits therefrom after-acquired properties, for which there is a separate provision later2.

Paragraph (b)-Is taken from section 52(2)(b), Presidency Act and section 28A of the Provincial Act3. Paragraph (c) corresponds to section 28(4) of the Provincial Act, and follows section 52(2)(a), latter part, Presidency Act.

Section 28A of the Provincial Act contains two provisos which have been omitted in the draft, as they are obsolete now.

Reputed ownership.-The doctrine of reputed ownership is proposed to be abolished and a new provision4 is recommended in its place5.

After-acquired property.-Paragraph (c)-This deals with after-acquired property. There is difference between section 52(2)(a) of the Presidency Act and section 28(4) of the Provincial Act6, in this respect.

The Bill has adopted the law as laid down in the Provincial Act7.

Hire-purchase transactions.-In an earlier Report8 of the Law Commission, a recommendation had been made to exclude goods taken under hire-purchase from the doctrine of reputed ownership.

As the doctrine is being replaced by a different provision9, it becomes unnecessary to incorporate any special provision on the subject.

Insolvency and tenancies.-1. The question of vesting of tenancies, particularly statutory tenancies, is considered below.

2. Ordinarily speaking, all leases would be "property" and would, on the insolvency of the lessee, vest in the Official Assignee10. The question has been raised whether an exception should not be made for tenancies to which the Rent Control Act of the State concerned applies. The following points require consideration:-

(i) Whether the exemption should apply to all premises wherever situated, or whether it should be confined to those areas where some legislation in the nature of Rent Control Act is in force;

(ii) If it is to be confined to areas where the Rent Control Act is in force, the next question is, whether it should apply to all kinds of leases or whether it should be confined to those leases where the tenancy is purely statutory, i.e., where, after determination of the tenancy, the tenant continues only by virtue of the Rent Control Act.

(iii) whether, (if it is to be applied to all areas in which Rent Control Act is in force) should it cover all premises, or only premises of a certain area, value or rent?

After careful consideration, it is felt that the provision should apply to all tenancies in respect of premises to which the Rent Control Act applies, irrespective of area, value or rent.

3. The Rent Control Acts do not appear to contain any express provision barring the attachment of tenancies to which those Acts apply. There are, however, provisions prohibiting the tenant from sub-letting the premises or assigning or transferring11 in any other manner his interest therein (subject to certain exceptions not relevant for the purpose)12. Unauthorised sub-letting or assigning, etc., is a ground justifying the landlord's claim for recovery of possession under, for example, section 13(1)(e) of the Bombay Act and section 14(1)(b) of the Delhi Act.

4. The definition of "statutory tenant" in the English Act may be noted here.

Section 49(1) of the (English) Housing Repairs and Rents Act, 1954 (2 and 3 Eliz.

2, c. 53) gives the following definition:-

"statutory tenant" means a tenant [as defined in section 12(1)(g) of the Act of 1920] who retains possession by virtue of the Rent Acts and not as being entitled to a tenancy, and "statutory tenancy" shall be construed accordingly.

The definition of "landlord" and "tenant" in the English Act of 1920 is as follows: -

'The expression "landlord" also includes in relation to any dwelling-house any person, other than a tenant, who is or would but for this Act be entitled to possession of the dwelling-house and the expressions "tenant" and "tenancy" include sub-tenant and sub-tenancy and the expression "let" includes sub-let; and the expression "tenant" includes the widow of a tenant dying intestate who was residing with him at the time of his death, or where a tenant dying intestate leaves no such widow or is a woman, such member of the tenant's family so residing as aforesaid as may be decided in default of agreement by the county court.'.

5. It is considered that the protection should not be confined to purely statutory tenancies as defined in the English Act.

(It has been held in England that a statutory tenancy under the Rent Acts normally arises when a tenant under a lease or other contractual tenancy within the Act holds over, i.e., remains in possession after the13 expiration of the contractual tenancy. Another case of statutory tenancy is the one where, without any formal termination of the tenancy, a contractual tenant dies leaving a widow or other relative resident with him, who does not take as his personal representative14.)

6. The legal position of a statutory tenancy was lucidly explained in a Bombay case15. "The plaintiff was entitled to terminate under the ordinary rules of law the contract which had been established between him and the defendants by the consent decree, and on August 31, 1922, when the plaintiff's notice expired, that tenancy terminated. Had it not been for the Rent Act, the defendants would have been bound to vacate;

but under its provisions they might remain in possession, and under section 9 no order for the recovery of possession of the premises could be made so long as they paid or were ready and willing to pay rent to the full extent allowable by the Act, and perform the conditions of the tenancy. I presume that would mean the conditions of the tenancy existing between the parties before the agreement terminated, which would be continued to that extent by virtue of those words if the tenant remained in possession under the Act".

The statutory tenant's right is a "personal" right to remain in possession of the property, and no more16.

7. The following chart will show the difference between the two kinds of tenancies:-

Contractual tenancy

Statutory tenancy

1. Assignable subject to contract to the contrary. Not assignable (except where there is a statutory provision, as in , section 17 of the English Act of 1957 - Rent Act, 1957-5 and 6 Eliz. 2 Ch. 25).
2. Vest in the heirs on death17-18 Does not vest in the heirs, in the absence of specific provision in the Act. (The English Act of 1957) section 17, provides for such vesting in certain cases. The definition of "tenant" in the English Act of 1920, section 12 and certain Acts in India19-20 has also this effect in substance).
3. Vests in the Official Assignee, on insolvency21. Does not vest in the Official Assignee22, on insolvency.
4. Continuous transmissibility. Transmissibility only by statute, and that also only once23. [Double tansmissibility may be specially provided for as in section 17 of the (English) Rent Act of 1957, - 5 and 6 Eliz 2 Ch. 25].

8. In England it has been held that a statutory tenancy created by the Rent Restrictions Act confers in the statutory tenancy only a personal right to possession, and therefore it is not "property" within section 167 of the Bankruptcy Act, 1914 so as to vest in the trustee in the bankruptcy of the statutory tenant. Thus, in Sutton v. Dorf, 1932 AER Reprint 70 [K.B. Dvn.],24 the plaintiff claimed possession from the defendant of premises which were let by the plaintiff to the defendant for a period of 3 years from a certain date. At the end of the term, he continued in possession as a statutory tenant. In 1930, he was adjudicated a bankrupt and, in 1931 the trustee disclaimed the tenancy under section 54 of the Bankruptcy Act, 1914. The judge made an order of possession, holding the statutory tenancy to be "property". The defendant appealed. It was held, after a discussion of case-law, that the right of the statutory tenant was purely personal right. The case-law had made it clear that it could not be-

(i) assigned;

(ii) sublet; or

(iii) transmitted by will.

It was true, that on death intestate, the tenant's widow or some other member of the family residing with him had a right to continue in possession, under section 12(1)(g) of the Act of 1920; but that was only due to the express statutory provision-the definition of "tenant" which included such person.

(The drafts given below were also considered, but the draft appearing in the Bill was preferred.)

Alternative draft No. 1

"the interest of a tenant in, or the right of a tenant to retain possession of any premises, being premises to which any law relating to the control of rents and of eviction therefrom applies for the time being."

Alternative draft No. 2

"the interest of a tenant in any premises to which any law providing for the control of rents and of eviction therefrom applies for the time being, or the right of a tenant as defined in any such law to retain possession of any premises by virtue of any such law."

1. See below-"Insolvency and Tenancies".

2. Clause 48(2)(c).

3. As to section 28A, see discussion in R.M. Bhatt v. Manila', AIR 1959 Bom 229 Q.C. Shah J.).

4. See clause 51.

5. See para. 18, body of the Report.

6. Cf. Mulla, (1958), pp. 516, 520, 522.

7. See for a detailed discussion the body of the Report, para. 29.

8. 20th Report, para. 10 (Hire-purchase).

9. See clause 51.

10. Reeves v. Davies, (1921) 2 KB 486 (CA).

11. See, for example, section 15 of the Bombay Act and section 16(3) of the Delhi Act.

12. The Bombay Act is the Bombay Rents, Hotels and Lodging Houses Rates Control Act, 1947 (Bombay Act 57 of 1947). The Delhi Act is the Delhi Rent Control Act, 1958 (59 of 1958).

13. Megarry Rent Restriction Acts, (1961), p. 156.

14. See Megarry Rent Restriction Acts, (1961), p. 156.

15. Kalianmal v. Dharamsey Jetha and Co., AIR 1924 Born 330 (331), right hand and 332, left hand (Macleod C.J. and Crump 3.) [Under Bombay Rent War Restrictions Act, 1918 (2 of 1918)).

16. Nihal Chand v. Shia Narain, AIR 1958 Punj 263 (265) (Mehar Singh J.).

17. Megarry, (1961), p. 214.

18. Anwar Ali v. Jamini Lal, ILR (1939) 2 Cal 254 (258) (Nasim Ali J.) (Case of monthly tenancy).

19. Megarry Rent Restriction Acts, (1961), p. 214, top and p. 198.

20. Nehal Chand v. Shiv Narain, AIR 1958 Punj 263 (265), left hand, middle (Mehar Singh J.) [Delhi and Ajmer Merwara Rent Act (19 of 1947)]

21. Megarry Rent Restriction Acts, (1961), p. 198, foot-note 77.

22. Megarry Rent Restriction Acts, (1961), p. 198, foot-note 85.

23. Megarry Rent Restriction Acts, (1961), p. 214, top.

24. (Acton and Talbot JJ.) approved in Smith v. Odder, 1949 WN 249 (Court of Appeal); see Williams, Bankruptcy (17th Edn.), p. 295, foot-note 70.

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