Report No. 70
Rent bona fide Paid to Holder Under Defective Title
The transfer of immovable property may raise questions which affect the position of third parties, of which a particular situation which is a frequently recurring one, is the position of a person who holds property "of another person", in regard to rents or profits of the property. Difficulties may arise where a person, having paid the rents or profits of property to A, is faced with the objection by B that A has transferred the property to B and that the rents and profits" should be paid to B.
In such a case, if the person paying the rents or profits is made to pay twice over, there would be hardship. Instead of compelling the person paying to bear the hardship where he has acted in good faith in all respects, the law adopts a different approach; it protects him, leaving the transferor and the transferee-A and B in the above illustration-to litigate against each other, if they so choose.
The determination of the relevant question in that litigation will, of course, in general, depend on specific statutory provisions-for example, sections 55(4)(a) and 55(6)(a) of the Act or a contract between the parties. But so far as the person paying the rents or profits is concerned, he receives protection. Of course, our mentioning the situation of a transfer of immovable property should not be taken as implying that the section which we are going to discuss is confined to that situation.
45.2. Section 50.-
The section reads-
"50. No person shall be chargeable with any rents or profits of any
immovable property, which he has in good faith paid or delivered to any person of whom he in good faith held such property, notwithstanding it may afterwards appear that the person to whom such payment or delivery was made had no right to receive such rents or profits."
The illustration to the section takes the case of lease of a field. A lets the field to B at a rent of Rs. 50 and then transfers the field to C. B, having no notice of the transfer, in good faith pays the rent to A. B is not chargeable with the rent so paid.
Incidentally, this illustration omits to mention one important ingredient of the section, namely, that B should have accepted the lease in good faith or should be holding the property in good faith. As we shall show later, good faith is required in two aspects in the section.
The section does not deal with rights to rent as between transferor and transferee. In regard to sale,1 this aspect is separately dealt with.
1. Sections 55(4)(a) and 55(6)(a).
45.3. Sections 109 and 130.-
This section (like the proviso to section 109 and section 130) is an application of the general principle of law, that if a party fulfils an obligation without notice of the rights of a third party, his obligation is discharged. The section is a general provision, applying to all cases where property is held by one person under another. Section 109, proviso, applies only to leases for non-agricultural purposes.
(1) Where a person who has a right to a land or other property lets it to X and then transfers the property. Thereafter X, without notice of the transfer, in good faith, pays the rent to the transferor. This is the case referred to in the illustration to the section.
(2) Where a person who has no title to a property lets it to X, who takes it in good faith and pays the rent to the lessor in good faith. In this case there is no 'transfer' to any person during the tenancy of X. But the lessor has no title to let it to X. Even in such a case, X cannot be charged by the real owner with rents and profits of the property. The remedy of the latter is only to proceed against the lessor.
(3) The lessor has a defective title and the person having superior title comes on the scene. He cannot demand the rent again.
45.4. Lis pendens.-
This section is subject to the doctrine of Lis pendens contained in section 52. If, therefore, the tenant takes the lease and makes any payment to the mortgagor during the pendency of the suit to enforce the mortgage by the mortgagee, the tenant does so at his own risk and he cannot claim protection under this section1.
1. Girdharlal v. Liladhar, AIR 1931 Born 539.
Section 50 is, almost word by word, the same as an earlier Indian Act1 which was applicable only to cases governed by the English law under section 3 thereof. That section was, in turn, based on earlier English statutes, and its ancestry could be traced to the Statute of Anne2.
The principle of the section represents a general rule of jurisprudence that if a person enters into a contract without notice of any assignment and fulfils the contract to the person with whom he has made that contract, he is discharged from his obligation.3 A tenant is not bound to canvass his landlord's title more than is necessary for his purpose. Indeed, any attempt by him to probe into the secret flaws in the landlord's title might have the effect of terminating his own tenancy in many cases.4
1. Mesne Profits and Improvements Act, 1855 (11 of 1855).
2. 4 Anne, Chapter 16, sections 9 and 10.
3. Alimuddin v. Him Led, 1896 ILR 23 Cal 7 (FB).
45.6. Cases other than transfer.-
Of course, the section is not confined to cases of transfer or to cases of landlord and tenant. Any payment of rent or delivery of profits in regard to immovable property, made bona fide, is protected. This is illustrated by a Bombay case1. A took possession of certain property as a mortgagee and created a lease for 12 years. A died and his interest as mortgagee survived to his brother B. After B's death, A's widow took possession of the property and managed the same and got her name recorded in the revenue papers. The person really entitled to the property was, however, B's sister. B's sister sued the tenant for rent, but the tenant pleaded payment bona fide to A's widow. By reason of section 50, the tenant was held to have been protected.
1. Kaveriamma v. Lingappa, ILR 33 Bom 96 (Scott, C.J. and Chandavarkar, J.).
45.7. Scope of section 50.-
We have already pointed out1 that section 50 is not confined to cases of transfer. Not only is it applicable to cases of succession, but also it applies when there is neither succession nor transmission of interest. Thus, a person paying rent to A in good faith after taking a lease from A in good faith, is not required to pay rent to B, even though it is ultimately held by a court that A had no title or had a defective title to the property. In this sense, it would be correct to say that the person paying rent to the ostensible owner or de facto owner is protected if the other requirements of the section are satisfied.
1. Para. 45.6, supra.
What, then, are the ingredients of the section? In the first place, the person making the payment must have done so in good faith. In the second place, he must have held the property of the person to whom he makes the payment in good faith. If these two ingredients are satisfied, it is immaterial that the person to whom such payment was made had no right to receive it. (For brevity, we are not specifically mentioning the case of delivery other than payment, but the principle is the same).
45.9. Good faith-Two aspects.-
In order that X who has paid or delivered the rents and profits of immovable property to Y may be protected under this section from the demands of Z-the person who is really entitled to such rents and profits,-it is necessary for X to show that-
(1) he held the property in good faith from Y and
(2) he paid the rents or delivered the profits to Y in good faith.
If he did not hold the property in good faith from Y, a payment of rents and profits to the latter cannot obviously be in good faith. X is, therefore, not protected under this section. The mere fact, however, that he holds the property in good faith from Y, does not necessarily mean that payment of delivery of the rents and profits to Y is in good faith. He may hold the property from Y in good faith, but at the time of payment he might have become aware of the fact that Z and not Y was entitled to such rents and profits.