Raja Kamakshya Narayan Singh Bahadur v. Chohan Ram and Another

Judgment

CIVIL APPELLATE JURISDICTION: Civil Appeal .N"o. 73 of 1950. Appeal from the Judgment and Decree dated the 26th January, 1944, of the High Court of Judicature. at Patna (Faz! Ali C. J. and Chatterji J.) in Appeal from Original D~cree No. 4 of 1941, arising out of Judgment and Decree dated the 20th September, 1940, of the Court of the Additional Subordina~ Judge of Ha7.aribagh in 'Title Suit No. 45 of 1939. S. N. Mukherjee for the appellant. Ganga.charan Mitkherjee and A. N. Sinha for the respondents. 1951 October 23. rrhe judgment of the Court was delivered by BHAGWATI J. 15 [1953] BHAGWATI J. --The question that arises for onr consideration in this appeal is whether prior to the K,in;,;,,:hya euac.tmcnt of seition 65-1\ of the ·rransfer of Propet·ty Narayan Singh Act 1i1 1929 a mortgagor m possess10n had the pow.er Bahadur . to grant a perrr.anent lease of the mortgaged pro- . perty so as to bind the mortgagee. ChohanRam 0 R. N'Jl hN . s· and Another. .irn . aJa 1 rnnt aram mg was t e owner o Gad1 Sirampur a,nd he executed on the 1st August, Bhagwati J. 1914, a simple mortgage of Gadi Sirampur in favour of the Chota N:tgpur Banking Associatiqn Limited.

In 1920 the Bank filed a suit against his son Wazir Narain Singh to enforce the mortgage security and obtained a mortgage decree on the 29th November, 1921. 'fhe Bank purchased a third share of Gadi Sirampnr in execution of that decree on the 28th October, 1922. Proceedings were taken to set aside this sale. During the pendency of these proceedings it appears that on the 5th November, 1925, Wazir Na rain Singh granted a permanent lea;;e of four villages N awaaih, Kolaih, Panana and Chihut.ia by a registered Patta to one Hiraman Ram who was the Manager and Karta of his joint Hindu family. 'rhe permanent lease was taken by him in bis own name and in tbe name of his son Chohan Ram. An agreement was subsequently arrived at between the Bank and Wazir Narain Singh that if Wazir Narain Singh paid to the Bank on or before the 16th August, 19:26, the sum of Rs. 1,10,631-4-0 the sale would be set aside. Wazir Narain Singh executed on the 14th August.

1926, a mortgage of Gadi Sirampur in favour of the Manager of the Court of Wards in charge of the plaintifi's estate during his minority to secure repayment of a suin of Rs. l ,47,0QO and out of the same satisfied the dues of the Bank and the sale in favour of the Bank was accordingly set aside. The plaintiff through the Manager of tl\e Court of Wards filed a suit on the 4th February, 1929, to enforce this mortgage and he impleaded as co-defendants in that suit Hiraman Ram as defendant 20 and his father Dilo Ram as defendant 19. A final decree for sale was passed OI\ t)<e 18th September, 1931, and the S.C.R. SUPREME CODRT REPORTS ill plaintiff purchased Gadi Sirampur rtt the auction sale held rn execution of this-decree on the 6th April, 193.5 .. Delivery of possession was 00tained by the Kani°';l~hya plamt1ff through the Court on the 16th February, Nai·aycin Singh 1936.

Dito Ram died after the mortgage decree but Bahadur Hiraman Ram and his son Chohan Ram continued in actual possession of the disputed villages and the Ghohan Rani plaintiff therefore filed on the 16th November, 1939, g,nd Another. the suit, out of which this appeal arises, in the Court Bhagwati J. of the Additional Subordinate Judge of Hazaribagh against Hiraman Ram and Chohan Ram, defendants 1 and 2, for khas possession of these village,;. The plaintiff contended that he was subrogated to the .position of the Bank, that the dec:·ee which had beeu passed in the mortgage suit waq binding 0:1 the defendants, that he was the auction purchaser in execution of that mortgage decree and that the Patta being subsequent to the plaintiff's mortgage thus came to an end and he was entitled to reco1·er khas possession from the defendants. Ddendant 2 filed his written statement contesting the plaintiff's claim. He denied that the plaintiff was subrogated to the position of the Bank.

He contended that the decree in the mortgage suit was not binding on him as he was not a party to that suit. He further contended that the Patta could not be put an end to by the auction sale of the mortgaged property. 'rhe defend· ant 1 filed a separate written statement. He denied that he was the Manager and Karta of the joint Hindu family. He also contended that .there was a partition amongst the members of the joint family within a year after their possession of the properties in suit and the properties had been allotted at that partition to the defendant 2. The trial Court held that the plaintiff was subrogated to the position of the Bank.

It also held that the defendant 1 was the Manager and Karta of the joint family and that the defendant 2 was fully represented iu the mortgage suit, tha\, the decree in the mortgage suit was binding on the defenda,nts and that the plaintiff was entitled to recover possession ii2 StJPREME COURT REPORTS [1g53j of the said properties and mesue profits from the defendants. 'l'he defendants appealed against this KaR~k:h " decree to the High Court of Judicature at Patna. Nara':.n Si~gh The 'High Court negatived the contention in regard Bahadur to constructive res Judicata which was urged on behalf of the plaintiff. It then considered the further cou- Ckohan Ram ten ti on that Wazir Narayan Singh had, after creating and Another. k t e mortgage m a vour o t e au no power to Bhagwati J. grant the permanent lease in question to the defendants.

After considering all the authorities which were cited before it, it came to the conclusion that the question whether WaY.ir Narayan Singh had got such power or not had to be determined with reference to the provisions of section 66 of the Transfer of Pro-, perty Act and the crucial test was whether the lease rendered the mortgagee's security insufficient. In spite of the fact that there was no allegation in the plaint that the defendant's lease had the effect of rendering the security of the Bank insufficient, the High Court went into this question and on a calculation of some figures came to the conclusion that the lease of the disputed villages in favour ofthe defendants did not in any way render the security of the bank insufficient.

It therefore held that the lease was valid and was not affected by the plaintiff's mortgage decree or by the execution sale under that decree and accordingly dismissed the plaintiff's suit. 'rhe plaintiff obtained leave to appeal to the Privy Council from this decision of the High Court and the appeal was admitted on the 9th January, 1946. Both the Courts below found that the plaintiff was subrogated to the position of the Bank. 'rhey also found that the defendant 2 was sufficiently represented in the mortgage suit .. 'rhese findings ·Were no.t challenged before us and the only question which survived for our consideration was whether Wazir Narayan Singh had the power to grant a permanent lease to the defendants so as to bind the plaintiff. The question whether Wazir Narayan Singh had such po,wer has got to be determined under the law as it stood prior to the enactment of section 65-A of S.C.R. SUPREME COUR'l 1 REPOR'fS the Transfer of Property Act by Act XX of 1929.

The mortgagor's power to lease the mortgaged property was the subject-matter of conflicting judicial decisions. KllR"Jk"1 ma .s iya, Relymg upon the rule of English common law under N<1r<1y<1n Singh which the mortgagor had no power to lease, it was B<1h<1dur held in some cases that a mortgagor could not ordinarily without the concurrence of the mortgagee exe- Ghohlln Rllm ld b b d llnd Anothe,._ cute a lease which cou . e in ing on t e mortgagee. In other cases a distinction was drawn between Bh<1gw<1ti J. English mortgages and other mortgages and it was considered that the mortgagor in India remained the owner and when in possession could prima facie exercise the rights of ownership inclusive of the power to grant leases of the mortgaged property. 'fhe question was decided with reference to section 66 of the Transfer of Property Act and it was held that the mortgagor could grant leases which were not wasteful in their effect on the mortgagee's s'eeurity.

This was the principle deduced by Jenkins C.J. in Balmukund v. Motilal(1) from the old case of Banee Pershad v. Reet Bhunjiin Singh( 2). 1his line of reasoning was not adopted in other cases which laid down a different rule, viz., that a mortgagor in possession might grant a lease conformable to usage in the ordinary course of management but was not competent to grant a lease on unusual terms or authorise the use of land in a manner, or for a purpose, different from the mode in which he himself had used it before he granted the mortgage. This was laid down by Sir Ashutosh Mukherjee J. in Madan Mohan Singh v. Raj Kishore Kumari( 3) and was followed in a number of cases. 1 1here was thus a conflict of decisions which was sought to be resolved by the enactment of section 65-A of the Transfer of Property Act which dealt with the mortgagor's power to lease while lawfully in possession of the mortgaged property.

"It is an elementary rule that though a mortgagor may assign the mortgaged premises, the assignee can only take subject to the encumbrances, and if the (1) (1915) 20 C. W, N. 350, (2) (1868) IO W.R. ~25. (3) (1916) 21 C. W. N. ~8. SUPREME COUR'P REPORTS [1953) property is sold or foreclosed by the mortgagee, any interest which the mor,tgagor may have created since Kam";T:hy• the m~rtgage will be destroyed". (Ghosh on Mort- Nara11.,, Singh gage, Vol. I, p. 212.) As was observed by J~ord Se1- Bahadur borne in Corbett v. Plowden('), "If a mortgagor left in posse,sion, grants a lease without tbe concur- Ckohan Ram rence of the mortgagee (and for this purpose, it and Another. makes no difference whether ip is an equitable lease Bhagwati J. by au agreement under which possession is taken or a legal lease by actual demise), the lessee has a precarious title, inasmuch as although the lease is good as between himself and the mortgagor who granted it, the paramount title of the mortgagee may be asserted against both of them."

It does not however follow that a lessee from the mortgagor acquires no interest whatever in the property demised to him. A person taking a lease from a mortgagor after the mortgage does acquire au interest in the equity of redemption and can claim to redeem on that footing. But this right of redemption does not necessarily mean that a lease of this character is always operative against the mortgagee. Merely b€cause a lessee acquires au interest in the mortgaged property which is sufficient to enable him to redeem the mortgage it does not follow that the interest which the lessee bas thus acquired is operative against the mortgagee. The true position is somewhere in the middle ·of these two extremes. The mortgagee is not normally bound by the acts of the mortgagor with reference to the mortgaged property.

"But if a mortgagee takes his security with knowledge of the.purposes to which the land is applied and allows the mortgagor to remain in possession he will be bound by the acts done by the mortgagor in accordance with the usual course." (Ghosh on Mortgage, Vol. I, p. 212.) As indicated in the observations of Sir James Parke in Pope v. Briggs(') the mortgagor might be considered as acting in the nature of a bailiff or agent for the mortgagee. Consequently, if the mortgagor, after he has granted the (I) (1884) •5 Ch. D. 678 at p. 681. {2) (1829) 9 Barn, & Cres. 245 at p. z58. S.O.R. mortgage, deals with the property in the usual course of management, the interest•created by him may be rightly deemed operative against the mortgagee. An illustration of this view is found in the case of 0Moreland v. RichardsonC) where a person took a mortgage of a burial ground and it was held that, as the object of the burial ground is to grant rights of burial, this being the mode in which such property is dealt with, the mortgagee was not entitled to disturb the graves of those who had been buried on the land, *hile the mortgagor continued to hold it. 'rhe mortgagor could thus in the usual course Gf management create a ten~ ancy from year to year in the case of agricultural land or from month to month in the case of property consisting of houses and his dealings with the mortgaged property in the usual course of management would be operative against the mortgagee.

[Per Mukherjee J. in ]fadan Mohan Singh v. Raj Kishore Kumari(2)]. "Whether the mortgagor possesses any larger powers of leasing is however very questionable. The only reported case in which such a power was recognised is Banee Pershad v. ReetBhunjunSingh(3) but the report in Sutherland is very meagre. The judgment too does not give forth any certain sound (sic.). It is only said that a mortgagor is not restricted in the ma·nagement of the property by making a mortgage and that so long as nothing takes place to impair the value of the mortgagee's security the mortgagor does not exceed his powers in making a lease for a term. 'llhe learned judges add perhaps somewhat unnecessarily that their decision should not go beyond the particular facts of the case before them." (Ghosh on Mortgage, Vol. I, p. 213.) This case of Banee Pershad v. Beet Bhunjun Singh(3 was considered by Jenkins 0. J.' in Balmukimd v. Motilal( 4)· as an authority for the proposition that as long as nothing took place which impaired the value or impeded the operation of the mortgage, the mortgagor in creating a temporary lease acted within his powers and these observations of Jenkins C.J. were (I)

(1857) 24 Beav; 33. (3) (1868) 10 W.R. 325. (2) (11116) 21 C.W,N. 88 at pp. 91~ 92: ('f) (1915) C.W.N. ~so. Raja Kamakshya Narayan Singh Bahadm· Ghohan Ram and Another. Bhagwati J [1953] · 1952 considered by the Courts as justifying the applicability of the provisions of section 66 of the Transfer of Pro- Kam;;,;hya perty Act while determining the binding nature of the Narayan Singh leases"created by the mortgagor in possession on 'the Bahadur mortgagee. Mukherjee· J. had occasion to consider this very case in Madan Mohan Singh v. Raj Kishore ChohanRani Kumari(') and be cited it in support of the proposition and Another. that the interest created by the mortgagor while dea1- Bhagwati J, ing with the mortgaged property in the usual course of management could he rightly deemed operative against the mortgagee. 'l'he following observations of Mukherjee J. in this connection at page 91 are very apposite:- "As the case is very imperfectly reported, we have examined the record and ascertained the questions in controversy. 'rhe proprietor of an estate mortgaged it on the 12th March, 1861.

On the 7th July, 1862, the mortgagor granted an ijara potta of the property for a term of ten years. The mortgagee subseq nently sued the mortgagor alone and got a decree; at the execution sale which followed, the property was sold on the 24th December, 1863. The purchaser sued on the 12th March, 1867, to eject the lessee, on the ground that as he had acquired the property in the condition in which it was when mortgaged, the lease, which would otherwise run till the 7th July, 1872, did not bind him. The Court of first instance overruled this contention as too broadly formulated, and held that as·the mortgagor had in good faith granted the lease for a limited term on a fair and. reasonable rent, the mortgagee or the purchaser in execution cif his decree could not repudiate it, specially as the mortgage deed did not prohibit the grant of temporary leases to middlemen or cultivators.

On appeal, the District Judge affirmed this view and declined to accept the broad contention that leases of all descriptions granted by a mortgagor were void as against the mortgagee. On second appeal to this Court, Jackson and Mitter JJ, took substantially the same ·view. !!) (1916) 21 C,W.N. 88, s.c.R. These observations of Mukherjee J. point out what 19511 was the ratio decidendi of that case. The question of the sufficiency or insufficiency of the security wa.s not Kam';k~hya really gone into but the Court . considered that the Narayan Singh lease was granted in good faith, was for a limited term Bahadur and stipulat@d a fair and reasonable rent and it was Th Chohan Ram there ore operative against t e mortgagee. e and Another.

Court was really guided by the consideration that the mortgagor dealt with the property in the usual course Bhagwati J. of management and the interest which was thus created by the mortgagor in the usual course must rightly be deemed operative against the mortgagee. The case of Banee Pershxd v. Reet Bhunjan Singh(1) therefore is really no authority for the wide proposition that a mortgagor was not restricted in the management of the property by making a mortgage and that so long as nothing took place to impair the value or impede the operation of the mortgage the mortgagor would be well within his powers in making a lease for a term. In our opinion section 66 of the Transfer of Property Act has nothing to do with the mortgagor's power to lease the mortgaged property. Section 66 is a statutory enactment of the powers of the mortgagor in possession in regard to waste of mortgaged property.

The mortgagor in possession is not liable for what in terms of the· English Law of Real Property is known as permissive waste, i.e., for omission to repair or to prevent natural deterioration. He is however liable for destructive waste, i.e., acts which are destructive or permanently injurious to the mortgaged property if the security was insufficient or would be rendered insufficient by such acts. This section therefore has no application to the grant of a lease by the mortgagor in possession. 'fhe only relevant consideration is whether, the mortgagor in possession having the authority to deal with the property in the usual c0nrse of management, tihe leaBe granted by him can be rightly deemed operative against the mortgagee. The true position has been stated in the following terms by Mukherjee J., in Madan Mohan Singh v. Raj Kishore Kumari( 2)..: {I) (1868) IO W,R, 325. (2) (1916) 21 C. W.N. 88 at page 92. [1953]

"The true position thus is that the mortgagor in possession may make a lease conformable to usage in Ka~,":,:,hya the Qrdinary course of management, for instance, he Narayan Sinah may create a tenancy from year to year m the case of Bahadur agricultural lands or from month to month in the case of houses. But it is not competent to the mort- Ohohan Ram gagor to grant a lease on unusual terms, or to alter and Another. the character of the laud or to authorise its use in a manner or for a purpose different from the mode in !Jhauwati J. which he himself had used it before he granted the mortgage." The question whether the mortgagor in possession has power to lease the mortgaged property has got to be determined with reference to the authority of the mortgagor as the bailiff or agent for the mortgagee to deal with the property in •the usual course of management.

It has to be determined ou general principles and not on the distinction between au English mortgage and a simple mortgage or on considerations germane to section 66 of the Transfer of Property Act. Having regard therefore to the position that section 66 has no application to leases of the mortgaged property, the decision of Jenkins C.J. in Balmukund v. Motilal(') and the cases following that line of reasoning do not govern the question before us. While we are on this subject we would like to emphasise that it is for the lessee if he wants to resist the claim of the mortgagee to establish that the lease in his favour was granted on the usual terms in the ordinary course of ,management. Such a plea if established-and it must not be overlooked that the burden of proof in this matter is upon him-would furnish a complete answer to the claim of the mortgagee. If the lessee failed to establish this position he would have certainly no defence to an action at the instance" of tl).e mortgagee.

No allegation was made on behalf of the defendants that the grant of the permanent lease was a dealing with the mortgaged property in the usual course of management by the mortgagor. In the absence of (1Hx915) 20 C.W.N. 350. s.c . .R. SiJPEEME COUR'l' REPORTS any such plea we are of the opinion that there was no answer to the plaintitf's claim and the permanent lease granted by 'lv azir Narayan to the defeni{ants could not prevail against the plaintiff.

We have therefore come to the conclusion that Wazir Narayan Singh had no power to grant the permanent lease in question to the defendants, that the same was not binding and operative against the plaintiff, that the defendants nad ample opportunity to redeem the mortgage if they so desired but d 1id not choose to exercise their right of redemption, that the execution sale of Gadi Sirampur including the four villages in question was binding on them and that the plaintiff was entitled to khas possession of the four villages of which the defendants were in wrongful possession. The appeal is allowed. The decree passed by the High Court dismissing the plaintiff's suit is set aside and the decree passed by the trial court in favour of the plaintiff is restored with costs throughout. Appeal allowed. Agent for the appellant : Ganpat Bai. Agent for respondent No. 1: R. R. Biswas. PAYYAVULA VENGAMMA PAYYA vur_JA KESANNA AND OTHERS [MUK 0HERJEA, 0HANDRASEKHARA AIYAR and BHAGWATI, JJ.]

Arbitration-Arbitrator taking statement from one party in the absence of the other-Legal misconduct-TT alilhty of award-Question of prejudice. Where, in an arbitration under s. 21 of the Indian Arbitration Act, the arbitrator took statements from each of the parties in the absence of the other and made an award: Held, that it is one of t.hi; ~lrirMntM'Y iwinciiplM 6f thA 9.dministro.tion of justice, whether by courts or by arbitration by lawyers or merchants, that a party ~houlc1 not be allowed to use any means whatsoever to influence Raja Kainakshyti Narayan Singh BahadZ<r Chohan Ram and Another. Bhagwati J. Oct. 29.