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CASE NO.:

Special Leave Petition (civil) 15509-15512 of 1999

PETITIONER:

RAGHURAM RAO AND OTHERS

Vs.

RESPONDENT:

ERIC P. MATHIAS AND OTHERS

DATE OF JUDGMENT: 30/01/2002

BENCH:

M.B. Shah & R.P. Sethi

JUDGMENT:

Shah, J.

Leave granted.

These appeals are filed against the judgment and decree dated

27.10.1998 passed by the High Court of Karnataka at Bangalore in

RSA Nos.1319-22 of 1996. By the impugned judgment and decree,

the High Court set aside the judgment and decree passed by the lower

appellate court and held that plaintiffs are entitled to recover the

possession of lease hold property and decreed the suit accordingly.

Before dealing with the contentions of both the parties, we

would refer to the relevant facts in short. One Nellikai Vyasa Rao

was the owner on mulgeni right of TS No.234 corresponding to RS

No.359 of Attavar village of Mangalore City. Out of the said

property, on 1.11.1903, a registered mulgeni lease was granted for a

land admeasuring approximately 35 cents (subsequently it was found

as 40 cents) by Nellikai Vyasa Rao in favour of Ammanna Maistry.

The relevant condition of the permanent lease deed mulgeni chit

dated 1.11.1903 executed by one Ammanna Maistry in favour of

Nellikai Vyasa Rao, which requires consideration is as under:-

"In case I do not pay rent within time every year or

if there is any short payment I am liable to pay the said

sum with interest at 12% per annum from the date it is

due till payment on the security of the building that may

be built on the property and other improvements therein.

In the event of my feeling that I do not require the said

property, the said property alongwith the buildings and

the improvements shall have to be handed over only to

you on receiving the value of the buildings and

improvements estimated by four Gentlemen and I shall

not have any right to alienate the property either the right

of permanent tenancy or the building etc., by way of sale,

mulgeni or in whatsoever manner to others. If I effect

alienation contrary to this in any manner or if I allow the

property to be attached and sold by any court in

connection with my personal debt, immediately, such

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alienation and also this permanent lease shall be liable to

be totally cancelled and the property shall be reverted to

your possession and enjoyment."

Thereafter, Nellikai Vyasa Rao sold his mugleni rights in respect of

1.20 acres of land in favour of P.F. Mathias which included 40 cents

already leased out to Ammanna Maistry by registered sale deed dated

24.2.1914.

On the death of lessee Ammanna Maistry, his mulgeni holding

was partitioned among his legal heirs pursuant to the decree dated

31.3.1955 passed in partition suit no.O.S.235 of 1950, as under: -

Portion No. To

1. Amba Bai and daughter and grand-daughter

S. Jyothi of lessee.

2. Chandrashekhar

3. Gangadhar

sons of deceased Ammanna

Maistry

It is also admitted that by a gift-deed dated 17.11.1960

Gangadhar gifted 11 cents to his sister Amba and sold remaining 11

cents to Sanjiva Sapalya by a sale deed dated 31.3.1960. Again on

3.10.1974 Amba transferred her holding to Sucharita.

For the aforesaid transfers, plaintiffs did not invoke and enforce the

forfeiture clause on the ground that alienations were within the

members of the family of the deceasedlessee.

Original Suit No.786 of 1990

On 30.3.1981, Sucharita (1) by sale deed sold some portion of

the land in favour of defendant nos.1 to 4; (2) on the same day,

under another sale deed, sold some other portion of the land in favour

of defendant nos.5 and 6; and (3) thereafter on 13.5.1982 sold

remaining portion of the land in favour of defendant no.7. On the

alienation of entire mulgeni holding i.e. 11 cents, by Sucharita, the

plaintiffs invoked the forfeiture clause on the ground of breach of the

condition referred to in the parental lease and, therefore, filed Original

Suit No.25/83, which was subsequently numbered as Original Suit

No.786 of 1990 for possession of the mulgeni holding.

Original Suit No. 929 of 1990

On the death of Chandrashekhar (son of lessee), his heirs filed

O.S. No.541 of 1980 for partition of the property held by him and a

decree was passed dividing the leased properties between the heirs

who are defendant nos.1 to 3 and 8 to 12 and they acquired

proportionate leasehold rights over the land. For this partition of the

property, it is the say of the plaintiff that the suit invoking forfeiture

clause was not filed on the ground that alienations were within the

members of the family of the deceased-lessee.

Thereafter(1) defendant no.1 by sale deed dated 14.3.1980

sold 0.25 cents 1.12 Sq. meters for Rs.3,000/- in favour of the 6th

defendant;

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(2) The 2nd defendant along with her 5 minor children by a sale

deed dated 14.3.1980 sold an extent of 3½ cents of land for

Rs.57,000/- in favour of the 6th defendant;

(3) Defendant no.1 by a sale deed dated 27.4.1983 sold 0.12 cents

but actually 11¼ cents for Rs.1,30,000/- in favour of the 4th defendant.

(4) The 4th defendant in his turn executed a gift deed dated

27.4.1983 in favour of the 5th defendant.

(5) The 3rd defendant by a sale dated 25.2.1988 sold her portion

measuring 2½ cents of land for Rs.1,05,000/- in favour of the 4th

defendant.

Hence, Original Suit No.929 of 1990 was filed seeking possession of

the above land by invoking forfeiture clause.

Both the suits were tried separately and the trial court arrived at

the conclusion that the lease deed does not specifically prohibit

alienation of the part of the property, but merely because in the

document as there is no recital which bars to alienate a portion of the

property, would itself be not conclusive and the Court has to read the

document according to the intention of the parties. The Court also

held that if there is an express condition, not to alienate the whole

leasehold property, then portion of the leasehold property could not,

also, be transferred by implication. The Court held that the properties

are situated within the metropolitan area to which The Karnataka Rent

Control Act, 1961 (hereinafter referred to as 'Rent Act') is applicable

and, therefore, plaintiff was not entitle to actual possession of the

schedule property but only to constructive possession of the land

subject to payment of all improvements thereon as provided under the

lease-deed.

Being aggrieved thereby, RA Nos.46 and 52 of 1992 were filed

against the judgment and decree dated 31.1.1992 passed in OS No.929

of 1990 and RA Nos.148 and 150 of 1994 were filed against the

judgment and decree dated 30.9.1994 passed in OS No.786 of 1990,

before the District Court at Mangalore. The First Appellate Court

held that what has been alienated in both the suits was only to the

extent of 29 cents from the leasehold property which was 40 cents and

the remaining 11 cents of the leasehold property is not the subject

matter of alienation. The Court, therefore, held that as there is no

condition which prohibits partial alienation of the property in the

mulgeni lease, it would not give right to the plaintiffs to enforce the

forfeiture clause. The Court further held that the lessor has to seek the

relief mainly against the lessee even though the lessee has assigned

the property in favour of his assignee as by virtue of Section 108 of

the Transfer of Property Act, 1882 (hereinafter referred to as "the T.P.

Act") the liability of the lessee will not extinguish by mere reason of

such alienation. Hence, the last recognized lessee is a necessary party.

The lessor can seek relief against the lessee and also the assignee and

he may execute the decree for possession only against the assignee,

but the decree has to be obtained against the lessee. Sucharita was last

recognized lessee, who was necessary party to the suit and the

defendants were proper parties. Hence, the appeals were allowed and

suits were dismissed.

In appeals against the judgment and decree of First Appellate

Court, the High Court referred to the judgments which were

considered by the First Appellate Court and which were referred to at

the time of hearing of the appeals and arrived at the conclusion that

the said decisions would be applicable where there is partial alienation

of the leasehold property, but held that in the present case there was

alienation of the entire leasehold property. The High Court observed

that the decisions in A. Venkataramana Bhatt and Another v.

Krishna Bhatt and Others [AIR 1925 Madras 57], David Cutinha v.

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Salvadora Minazes and others [AIR 1926 Madras 1202], Terrell v.

Chatterton [(1922) 2 Ch. D. 647] and P. Veda Bhat v. Mahalaxmi

Amma [AIR (34) 1947 Madras 441] would not be applicable as there

is alienation of the entire leasehold property. The Court has not dealt

with any other contention.

Being aggrieved by the judgment of High Court, the defendants

have filed the instant appeals.

At the outset, for the nature of Mulgeni lease, we would refer to

the decision in Vyankatraya Bin Ramkrishnapa v. Shivrambhat Bin

Nagabhat [(1883) VII Bombay Series 256], wherein the High Court

of Bombay considered the same and held as under: -

"In the minute of the Revenue Board (see p.28 of a

book, Exhibit A, in the suit of Vyakunta Bapuji v. The

Government of Bombay [(12 Bom. HC Rep. App.1),

better known as the Kanara Case] it is said:"The

exclusive rights to the hereditary possession and usufruct

of the soil is in Kanara termed varga, meaning separate

independent property in the land, and seems originally, as

in Malabar, to have been vested in the military tribe of

the Nayrs, the first and, at one time, the exclusive mulis

or landlords of that province; for, except to unclaimed

waste, and to estates escheated from want of heirs, it does

not appear that the Government in Kanara at any time

possessed, or even pretended to, the smallest right to

property in the land. The Nayrs had under them a

number of inferior rayats, called genis or tenants, to

whom they rented out the portions of their lands which

they did not cultivate by means of hired labourers or

slaves; the genis or tenants were of two distinct classes

the mulgenis, or permanent tenants, and the chali genis or

temporary tenants. The mulgenis, or permanent tenants

of Kanara, were a class of people unknown to Malabar,

who, on condition of the payment of a specified

invariable rent to the muli, or landlord, and his

successors, obtained from him a perpetual grant of a

certain portion of land to be held by them and their heirs

for ever. This right could not be sold by the mulgeni or

his heirs, but it might be mortgaged by them, and so long

as the stipulated rent continued to be duly paid, he and

his descendants inherited this land like any other part of

their hereditary property. This class of people, therefore,

may be considered rather as subordinate landlords than as

tenants of the soil, more especially as though many of

them cultivated their lands by means of hired labourers or

slaves, others sub-rented them to the chali genis or

temporary tenants."

The Court in that case traced the history of mulgeni tenure and

observed thus:-

"These authorities show clearly that the mulgenis

were only tenants, although tenants in perpetuity, holding

under their superior landlords, the mulgars, whose estate,

like that of tenants in fee simple in England, would

appear to have been the highest estates in the land known

to the law in Kanara; and, further, that although

originally mulgeni tenants were not restricted by the

terms of their leases from alienation, the practice had

grown uphow soon it does not appear, but at any rate

by the beginning of the present centuryof leasing the

land in perpetuity at a fixed rent coupled with such and

other restrictions.

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Lastly, it is not suggested that the law has either by

Statute or judicial decision defined the mulgeni tenure.

Under these circumstances it would be impossible,

we think, to hold that restriction against alienation is so

repugnant to the mulgeni tenure in the contemplation of

law, that a clause to that effect must be held to be void.

But it was said that such a clause in a permanent lease

makes the land for ever inalienable and is, therefore, void

on the ground of public policy. That view however,

would not appear to have been taken by the framers of

the Transfer of Property Act, for we find that by Section

105 it recognizes leases in perpetuity, and that Section

10, which forbids a clause against alienation in general,

makes an exception in the case of leases where it is

introduced for the benefit of the lessor."

Nothing is pointed out to take any other view with regard to the

nature of the mulgeni tenure and we, therefore, adopt the same.

The submissions of the learned counsel for the parties which

require consideration are: -

(I) Whether in case of perpetual lease, the condition not to

alienate the property would be illegal and void?

(II) Whether notice under Section 111(g) of the T.P. Act is

necessary before filing of the suit in the present case?

(III) In any case, there is no express condition restraining

partial alienation of the leasehold property, therefore

also, the judgment and decree passed by the High Court

is illegal.

(IV) Whether the heirs of the original lessee are necessary

parties in case of determination of lease?

Contention Nos.I and II

For appreciating these contentions, we would first refer to

Section 10 of the T.P. Act which inter alia provides that "where

property is transferred subject to a condition or limitation absolutely

restraining the transferee or any person claiming under him from

parting with or disposing of his interest in the property, the condition

or limitation is void, except 'in the case of a lease where the

condition is for the benefit of the lessor or those claiming under

him'." The section does not carve out any exception with regard to

perpetual or permanent lease. It applies to permanent or temporary

lease. In view of the specific exception carved out in case of lease, in

our view, there is no substance in the contention of the learned

counsel for the appellant that the condition which restrains the lessee

from alienating leasehold property is in any way illegal or void.

Similarly, contention that notice in writing is required as

contemplated under Section 111 (g) before terminating the lease is

also without any substance because in the present case, the lease deed

was executed prior to the coming into force of the Transfer of

Property (Amendment) Act, 1929 (20 of 1929). The relevant part of

the amended section provides that a lease of immoveable property

determines "by forfeiture; that is to say, in case the lessee breaks an

express condition which provides that, on breach thereof, the lessor

may re-enter and the lessor or his transferee 'gives notice in writing to

the lessee of' his intention to determine the lease". The words 'gives

notice in writing to the lessee of' were substituted by the Amendment

Act which came into force from 1st April 1930 for the words 'does

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some act showing'. So prior to the aforesaid amendment which

requires giving of notice in writing was not essential for determining

the lease and what was required was some act of showing intention to

determine the lease. This issue is concluded by the decision of this

Court in Namdeo Lokman Lodhi v. Narmadabai and others [(1953)

SCR 1009] and Shri Rattan Lal v. Shri Vardesh Chander and others

[(1976) 2 SCC 103]. The First Appellate Court, therefore, has also

rightly rejected the said contention.

Contention No.III

However, the next contention which requires consideration is

whether there is express condition which prohibits partial alienation of

the leasehold property?

The finding of High Court on the question of partial alienation,

in our view, is without considering the facts as discussed in detail by

the trial court as well as by the First Appellate Court. Both the courts

on facts held that there was partial alienation of the leasehold

property. It appears that the High Court took into consideration the

alienations because of the partition suits filed between the family

members of the deceased lessee, but forgot the fact that the lessor in

the suit itself had stated that as the said alienations were between

family members, forfeiture clause was not invoked at that time. Same

thing is stated before this Court in written submission filed by the

learned counsel for the appellants-defendants. The First Appellate

Court has specifically arrived at the conclusion that out of the

leasehold property which was 40 cents what has been alienated in

both the suits was only to the extent of 29 cents and remaining 11

cents acquired in the partition by Sanjiva Sapalya was not the subject

matter of alienation. It appears that the High Court has overlooked

this aspect and decided the entire matter without application of mind

to the facts and contentions of the parties.

In the present case, the aforequoted lease deed was executed by

the lessee and not by the lessor. In the lease deed it is provided that

the lessee (I) will not have any right to alienate the property, either the

right of permanent tenancy or the buildings etc. (which may be built

by the lessee on the property) by way of sale of mulgeni or in

whatsoever manner to others and if such alienation is affected, the

permanent lease shall be liable to be totally cancelled and the property

shall be reverted to the possession and enjoyment of (you) lessor, on

receiving the value of the buildings and improvements estimated by

four gentlemen. Therefore, there is express condition accepted by the

lessee not to alienate the leasehold property. However, there is no

express condition to the effect that lessee will have no right to alienate

part of the property. With regard to the nature of the mulgeni tenure,

it has been observed by the Bombay High Court in Vyankatraya Bin

Ramkrishnapa's case (Supra) that this class of people may be

considered rather as subordinate landlords than as tenants of the soil

more especially as though many of them cultivated their lands by

means of hired labourers or others sub-rented them to the temporary

tenants.

Further, Section 111(g) itself requires that for forfeiture, lessee

should commit breach of 'an express condition' which provides that

on breach thereof, the lessor may re-enter. The words 'express

condition' itself stipulates that condition must be clear, manifest,

explicit, unambiguous and there is no question of drawing any

inference. In our view, as there is no express condition restraining

partial alienation of the leasehold property, it would not be open to the

transferee of the lessor's right to invoke the forfeiture clause for

determining the perpetual lease and such conditions cannot be inferred

by implication.

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On similar clause, it appears that there is uniformity of

interpretation by various High Courts that unless there is an express

condition restraining partial alienation, forfeiture clause would not

apply.

In A. Venkataramana Bhatta vs. Krishna Bhatta [AIR 1925

MADRAS 57], the Court held thus:-

"A clause for forfeiture must always be construed

strictly as against the person who is trying to take

advantage of it, and effect should be given to it, only so

far as it is rendered absolutely necessary to do so by the

wording of the clause.

A covenant against assignment does not prevent

the tenant from assigning for any part of the term or from

assigning a portion of the premises and unless the

covenant is expressly worded to exclude a partial

alienation of the premises, a partial alienation will not

work forfeiture under a clause which prevents alienation

of the premises. It is always open to the landlord to put

into his lease a covenant against alienation either

complete or partial, if he intends that forfeiture should

result from partial alienation as well, but where he does

not do so, the covenant will not apply to a partial

alienation. Grove v. Portel (1902) 1 Ch. Dn. 727."

In David Cutinha vs. Salvadora Minazes and others [AIR

1926 Madras 1202}, the Court observed thus:-

".There is ample authority in the English Law

and in fact in the law here too to show that unless there is

a restriction against the assignment of any portion of the

demised property, the restraint on the alienation of the

demised premises will not prevent the alienation of a

portion. I am not impressed with the reasoning of the

learned District Judge as to the grant of a mulgeni lease

not being an alienation. It clearly is an alienation. But I

think that the respondents must succeed on the ground

that the restriction on alienation of a portion of the

demised premises is not contained in the words of the

lease which I have set out above. It is perhaps not

necessary to multiply examples, but there are some cases

which have been cited and which lend support to the

contention for the respondent, for instance in Grove v.

Portal [(1902) 1 Ch. D. 727], Joyee, J., quotes the

passage already cited from Church v.Brown [(1808) 15

Ves. 258] and says that the dictum of the lower Court has

never been disapproved of; and again in Russell v.

Beecham [(1924) 1 K.B.525] Serutton, L.J. says quoting

Lord Eldon again that

a covenant not to part with possession of premises

would not restrain the tenant from parting with a part of

the premises, these covenants having been always

construed by Courts of law with the utmost jealousy to

prevent the restraint from going beyond the express

stipulation.

In Chatterton v. Terrel [(1923) A.C. 578] Lord

Wrenbury says:

It is said and said with truth, that if there be a

covenant not to assign or underlet the premises, it is not a

breach to assign or sub-let part of the premises. It was

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not so stipulated, if those be the words, for the words or

any part thereof are not found in the covenant."

The above judgments are followed in P. Veda Bhat v.

Mahalaxmi Amma [AIR (34) 1947 Madras 441]. Same view is also

taken in Keshab Chandra Sarkar and others vs. Gopal Chandra

Chanda [AIR 1937 Cal 636] and in Indraloke Studio Ltd. vs. Sm.

Santi Debi and others [AIR 1960 Cal 609].

Contention No.IV

Further, the First Appellate Court rightly held that for

determining the lease the lessees are necessary parties. Principle is

privity of contract is between the lessor and lessee and not between

the lessor and the transferees. If there is breach of contract, that is to

say, express condition of lease, then it gives option to the lessor to

determine the lease and re-enter the properties let out. For that

purpose, lessee is a necessary party and transferees would be only

proper parties. But without the presence of lessees, lease cannot be

determined and decree for possession of the property cannot be passed

in favour of the lessor. Section 108 (j) of T.P. Act specifically

provides that the lessee shall not, by reason only of such transfer,

cease to be subject to any of the liabilities attaching to the lease. In

the present case, the liability to hand over vacant possession is that of

the lessee. Privity of contract is with the lessee and not with the

assignee. Further, under clause (q) of Section 108, on determination

of lease, the lessee is bound to put the lessor into possession of the

property. Therefore, the First Appellate Court rightly relied upon the

decision rendered by Chagle, C.J. in Treasurer of Charitable

Endowments vs. S.F.B. Tyabji, [AIR (35) 1948 Bombay 349],

wherein dealing with a similar contention, it was observed:-

"The question that arises for determination in this

appeal is what are the rights and liabilities of the lessee

when he has transferred absolutely his interest in the

property. Clause (j) of S.108 expressly provides that the

lessee shall not, by reason only of such transfer, cease to

be subject to any of the liabilities attaching to the lease.

It is clear that as far as the privity of contract is

concerned, the only person liable as between the lessor

and the lessee is the lessee himself. There is no privity of

contract established by the assignment executed by the

lessee in favour of the assignee. But although such a

privity of estate comes into existence between the lessor

and the assignee, the lessee continues to remain liable in

respect of all his covenants by reason of privity of

contract which still continues to subsist as between lessor

and the lessee. In my opinion, if there is no contract,

then the provisions of S.108 would apply and all the

statutory obligations cast upon the lessee by S.108 would

bind the lessee notwithstanding his transferring his

interest absolutely to another person. The latter part of

cl. (j) is in my opinion very plain. It lays down that the

lessee shall not cease to be subject to any of the liabilities

attaching the lease by reason only of the fact that he has

transferred his interest. Therefore, all the liabilities

attaching to the lease to which he was subject would

continue notwithstanding the transfer or assignment. To

put it in a different language, a lessee cannot by his

unilateral act, by assigning his interest in the leasehold

premises, put an end to the obligations which he has

undertaken either by the contract of lease or under the

statute under S.108."

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Admittedly, in the present case, the heirs of the deceased lessee

are not joined as party-defendants. In second suit O.S. No. 786 of

1990, the lessee Sucharita is not joined as a party to the suit by

contending that only defendants who were assignees are required to be

joined as party to the suit proceedings. Hence, the First Appellate

Court rightly held that on ground of non-joinder of necessary parties,

the suit was required to be dismissed.

Lastly, the learned counsel for the appellant referred to the

provisions of Section 23 of the Rent Act, which reads thus: -

"23.Tenant not to sub-let or transfer after

commencement of this part.

(1) Notwithstanding anything contained in any law,

but subject to any contract to the contrary, it shall not be

lawful after the coming into operation of this Part, for

any tenant to sub-let whole or any part of the premises let

to him or to assign or transfer in any other manner his

interest therein;

Provided that the State Government may, by

notification, permit in any area the transfer of interest in

premises held under such leases or class of leases and to

such extent as may be specified in the notification:

Provided further that nothing in this Section shall

apply to a tenant having a right to enjoy any premises in

perpetuity.

(2) Any person who contravenes the provisions of

sub-section (1), shall, on conviction, be punished with

fine which may extend to one hundred rupees."

On the basis of aforesaid section, the learned counsel submitted

that it shall not be lawful for any tenant to sublet or transfer the

premises after commencement of the Act. However, the said

provision is not made applicable to a tenant having a right to enjoy

any premises in perpetuity. Therefore, under the 'Rent Act' lessor is

not entitled to take possession of the premises on the ground of

alienation of the part of the leasehold property from a present tenant

as the Rent Act would govern the relationship between the lessor and

lessee. He submitted that as found by first Appellate Court, Rent Act

is applicable to the suit premises and, therefore, suit for taking

possession was not maintainable as subletting by the permanent tenant

is not unlawful under the Rent Act. In our view, this contention was

not raised before the High Court and hence it is not required to be

decided in this appeal.

In the result, the appeals are allowed and the judgment and

decree passed by the High Court is set aside. The suits filed by the

plaintiff(s) are dismissed. There shall be no order as to costs.

.J.

(M.B. SHAH)

.....J.

January 30, 2002. (R.P. SETHI)

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