Report No. 70
19.11. Later Calcutta case.-
The extreme view that the covenant is void, which was taken in the earlier Calcutta case,1 was not approved by the same High Court in a judgment of a Division Bench consisting of Jenkins C.J. and Mokherjee J.2 That Bench at least held that the covenant was valid, though it did not regard it as nullifying the assignment.
1. Nilmadhab v. Narattam, 1890 ILR 17 Cal 826.
2. Basarat Ali Khan v. Manirulla, 1909 ILR 36 Cal 745 (746), followed in S.K. Roy Chaudhury v. A.L. Khan, (1960) 65 CWN 1050 (1052).
19.12. Madras view.-
In a Madras case,1 Bhashyam Ayyangar, J., dealing with the question of forfeiture, expressed himself strongly against the Calcutta view in these words-Moore J. concurred with him:
"The stipulation that the lessee shall have no right to transfer his interest is clearly one intended for the benefit of the lessor and it would be possible to hold, following the dictum in Nil Madhab Sikdar v. Narattam Sikdar, ILR 17 Cal 827 that the condition against alienation cannot be said to be for the benefit of the lessor and hence it is void under the provisions of section 10 of Act IV of 1882.
The stipulation against alienation is not void but valid (Vyankatrayya v. Shivrnmbhat, ILR 7 Born 256) and if the plaintiffs had sued for an injunction to restrain the defendants' assigner from making the assignment-or sued for damages for breach of the stipulation, they would have been entitled to the remedy sought for (Jivandas Keshavji v. Framji Nanabhai, 7 Born HCR (ACT) 69; Tamaya v. Timana Ganjaya, ILR 7 Born 262 (265); McEacharan v. Colton, 1902 AC 104 (PC), and Foa on 'Landlord and Tenant', 2nd edition, page 211).
It may also be that a transfer by the lessee, absolutely or by way of mortgage or sub-lease, in breach of the covenant not to alienate, will be void as against the lessor and he may realise arrears of rent due by the lessee, by attaching and selling his interest in the lease as effectually as if there had been no transfer by the lessee and the transfer will also be inoperative to secure to the transferee, as against the lessor, the benefit of the lessor's contract under section 108(c) of the Transfer of Property Act."
1. Parameshri v. Vittappa, 1903 ILR 26 Mad 157 (161) (Bhashyam Ayyangar & Moore, JJ.).
19.13. Other provisions in the Act.-
Under section 111(g), so far as is material, a lease of immovable property determines by forfeiture, that is to say, in case the lessee breaks an express condition which provides that on breach thereof a lesser may re-enter and the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease.
Under section 108(j), so far as is material, in the absence of a contract or local usage to the contrary, the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property and any transferee of such interest or part may again transfer it. The lessee shall not, by reason of such transfer, cease to be subject to any of the liabilities attaching to the lease.
19.14. Confusion between right of forfeiture and validity of assignment.-
The case law discussed above shows the uncertainly. It would seem that the difficulty has arisen because a confusion has been made between the lessor's right to forfeit under section 111(g)-for which the Act requires an express provision for re-entry-and the effect of the breach of the prohibition against assignment on the validity of assignment-a matter on which section 111 has no relevance. The point to be determined is the meaning of the words "for the benefit of the lesser" in sections 10 and 12.
19.15. Calcutta case.-
The earlier Calcutta case1 is often cited in support of the narrow construction of "for the benefit". But what that case decided was that the compulsory sale of the lessee's interest in execution of a decree obtained against the lessee was valid. The observation that since there was no right of re-entry, the condition against alienation was not for "the benefit of the lessor", was obiter. From other points of view also, this observation was obiter, because the lessor did not sue to declare the assignment as void, but sued for a declaration that the lease was forfeited. That relief he obviously could not claim as there was no power of re-entry.
1. Nil Madhav v. Narattam, 1890 ILR 17 Cal 827.
19.16. Position under case law in India.-
The position then seems to be that while, (i) the earlier Calcutta view would invalidate the very covenant, (ii) the later Calcutta view would recognise it to the extent of permitting a grant of damages, and (iii) observations in the Madras judgment would not only permit the grant of damages, but also validate the covenant and nullify the assignment-though, of course, forfeiture cannot be ordered in the absence of a provision conferring a right of re-entry.1
1. Section 111(g).
19.17. Anomaly caused by Calcutta view.-
Apart from the position under case law, the question should be examined on the score of principle. Whatever be the reasons in equity for denying the right to forfeit a tenancy in the absence of an express clause conferring a power of re-entry, is there sufficient justification or juristic reason for recognising the assignment as valid, where there is a valid covenant against it? The anomaly of taking such a view could be illustrated by taking a hypothetical case. A lessor who is a vegetarian creates a lease in favour of A, who is also a vegetarian; the lessor inserts a covenant that the lessee shall not assign the lease to a non-vegetarian.
There is no express provision for re-entry. The lessee attempts to assign the lease to a non-vegetarian. Is it adequate justice if the lessor is merely given the right to compensation for the loss, caused? In its very nature, such a loss cannot be adequately estimated in terms of money. It is true that before the assignment the lessor could have sued for an injunction, but what is to happen if the assignment has already been executed by the lessee?
To take the position that such an assignment is valid notwithstanding, the covenant and that the lessor can sue only for damages-even if such a position is supported by a few cases-is not really doing substantial justice. Substantial justice, it is urged, would be better achieved if the lessor has a right to get the assignment set aside-without, of course, forfeiting the lease. The assignee will not, under such a provision, get the right to occupy the premises, it may be that the lessee is not interested in the lease. If so, the lessee can surrender the premises. The doctrine of equity which gave birth to the provisions against forfeiture, does not necessitate the further position that the assignment must also be recognised.
19.18. English law.-
It is usually stated in the commentaries on the Act that in English law, in the absence of an express covenant providing for re-entry, the assignment is valid. This does not, however, appear to be a totally accurate statement of the position. The case of Commissioners of Works v. Hu11, (1922) 1 KB 205: 1921 All ER Reprint 508 : Halsbury's, 3rd Edn., Vol. 23, p. 665 is one of the cases cited in support of the proposition.
But actually in that case the clause prohibiting assignment provided for forfeiture and proceedings of the lessor against the assignee for ejectment were successful. The case of Williams v. Erle, (1868) was one relating to the question of damages. Other cases also do not directly relate to the validity of the assignment.
19.19. The assumption that in English law in the absence of a power of re-entry an assignment is valid seems to be debatable. Of course, a lease may contain an express proviso for re-entry or forfeiture by the landlord on specified events. Such a proviso leaves it optional to the landlord whet her be will exercise his right of determining the lease upon a cause of forfeiture arising. The lease is not void but voidable, and only the landlord can avoid it1.
1. Halsbury's, 3rd Edn., Vol. 23, pp. 665-666, para. 1389; Jardino v. Attorney-General for Newfoundland, 1932 AC 275 (PC) and other cases.
19.20. Aspect of condition.-
But English law also recognises the rule that the lease may be made determinable without an express proviso for re-entry, if the event specified is a "condition" subject to which the term was created1 and the event happens.
In this context English law makes a distinction of much the same nature found in the law relating to sale of goods between condition and warranty. If the clause which is put forward constitutes only an "agreement" on the part of the lessee to do or not to do a specific act, and if the clause is not tantamount to a "condition", the landlord cannot re-enter for breach of it except under an express proviso for re-entry. It will thus be obvious that even in the absence of a proviso for re-entry under English law, a stipulation in a lease may amount to a condition and in that case the lesser is even allowed to terminate the lease.
Now, if the lessor is competent to terminate, then it follows that in the case of a covenant against assignment being broken, the covenant (if construed as a condition) gives the lessor the right to nullify the assignment. If he has got the right to forfeit the lease, it follows that he is competent not to recognise the assignment. In fact, the true position in English law seems to be that since forfeiture is a matter stricti juris, an assignment which is void does not give cause for forfeiture ipso facto.2
Of course, where a covenant against assignment or underletting with a proviso for re-entry on breach of covenant is broken, the lessor can either re-enter for the forfeiture or sue for damages for the breach. The option is his, subject to the provisions as to relief against forfeiture. It is also true that an assignee in possession must comply with the stipulations of the lease notwithstanding the want of the landlord's consent requisition under the clause against assignment.3
1. Halsbury's, 3rd Edn., Vol. 23, p. 666, para. 1390.
2. Deed Llyod v. Powell, (1826) 5 B&C 308 (313), Halsbury's, 3rd Edn., Vol. 23, p. 630, footnote (1).
3. McBacharn v. Colton, 1902 AC 104 (PC).