Holding

A lease granted by a mortgagee during the subsistence of the mortgage ends on redemption; the tenant is not entitled to protection under the Rajasthan Premises (Control of Rent and Eviction) Act, 1950, and the mortgagor is entitled to possession.

Summary

The respondent mortgaged his shop and handed possession to the mortgagees, who subsequently let the premises to the appellant as a tenant. The respondent sued for redemption of the mortgage and vacant possession; the mortgage was redeemed and an order was made to give possession to the respondent. The tenant sought to resist execution of the decree, invoking the Rajasthan Premises (Control of Rent and Eviction) Act, 1950, but the executing court dismissed his application. While a lower appellate court had allowed the tenant’s appeal, the Rajasthan High Court reversed that decision, granting the respondent possession. The Supreme Court held that a lease granted by a mortgagee during the subsistence of the mortgage terminates on redemption, the tenant is not protected by the Rent Act after redemption, and the lease was not an act of ordinary prudence under Section 76A of the Transfer of Property Act. Consequently, the mortgagor‑landlord is entitled to possession and the appeal is dismissed.

Issues considered

Whether a tenant of a mortgagee can continue in possession after redemption of the mortgage until evicted under the Rajasthan Premises (Control of Rent and Eviction) Act, 1950.
Whether a lease created by the mortgagee during the mortgage period constitutes an act of ordinary prudence within the meaning of Section 76A of the Transfer of Property Act, 1882.

Legislation cited

Code of Civil Procedure, 1908s. 151, s. 47
Rajasthan Premises (Control of Rent and Eviction) Act, 1950
Rajasthan Rent Control Acts. 13(1)
Transfer of Property Act, 1882s. 76(a), s. 76A

Subjects

mortgage redemptiontenant rightslease terminationTransfer of Property ActRajasthan Premises (Control of Rent and Eviction) Actpossessionexecution of decree

Judgment

HANUMANT KUMAR TELESARA A
v.
' MOHAN LAL

DECEMBER 1, 1987
B
[A.P. SEN AND B.C. RAY, JJ.]

Rights of tenant of mortgaged property let out by mortgagee to
continue in possession of the property after redemption of the
mortgage-Mortgagor's right to have possession of the property after
redemption.
c
The respondent mortgaged his shop and delivered possession
thereof to the mortgagees with the right to collect rent from the tenant
1 in payment of the interest on the mortgage amount. The mortgagees
let out the premises to the appellant (tenant), during the subsistence of
the mortgage.
D
The respondent filed a suit against the mortgagees for redemp-
tion of the mortgage and recovery of vacant possession of the
mortgaged shop. The appellant-tenant was also impleaded as a party-
defendant in the suit. The suit was decreed and the mortgage was
redeemed, with an order to the mortgagees to give possession of the
E
shop to the respondent. The appellant-tenant filed an application
under Section 47, read with Section lSl of the C.P.C. stating that the
' decree of redemption could not be executed and possession given by
the mortgagees to the respondent/decree-holder, as the tenancy of the

1- appellant subsisted and the same had not been terminated under the
provisions of the Rajasthan Premises (Control of Rent and Eviction)
Act, 1950. This plea of the appellant was rejected by the executing
Court which held that the decree was executable and the appellant had
no interest and he could not resist the execution of the decree.
F

Against this Judgment and Order of the court, the appellant
filed an appeal which was allowed. Thereupon, the respondent pre-
G
ferred a second appeal which was allowed by the High Court. The
appellant appealed to this Court by special leave against the order of
the High Court.

Dismissing the appeal, the Court on a conspectus of the various
decisions of the Court on the subject, H

99
100 SUPREME COURT REPORTS [1988] 2 S.C.R.

.f\ HELD: The lease given by the mortgagee during the subsistence
of the mortgage came to an end on the redemption of the mortgage.
The tenant of the mortgagee in possession is not entitled to the t
protection of the Rent Act against the mortgagor after redemption of
the mortgage, as held by the Rajasthan High Court in 1984 R.L.R.
709, following the decisions of this Court. The letting out of the
B premises to the appellant-tenant was not a prudent act done in the
ordinary course of management, as held by all the Courts below. The
respondent/mortgagor-landlord is entitled to get recovery of posses·
sion. [106A·D I

M/s. Sacha/ma/ Parasram v. Mst. Ratanbai and Ors., AIR 1972
C (SC) 637; The All India Film Corp. Ltd. & Ors. v. Sri Raja Gyan
Nath & Ors. [1969] 3 SCC 79; Mahabir Gape & Ors. v. Harbans
Narain Singh & Ors., [1952] 3 SCR 775; Harihar Prasad Singh &
Anr. v. Must. of Munshi Nath Prasad & Ors., [1956] SCR 1; Asa Ram
& Anr. v. Mst. Ram Kali Anr. AIR 1958 (SC) 183 and Om Prakash '
Garg v. Ganga Sahai & Ors. JT 1987 I SC 245, referred to.
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2524 /...
of 1985.

From the Judgment and Order dated 26.11.1984 of the Rajas·
than High Court in S.A. No. 12 of 1976. y
E
Shankar Ghosh, B.P. Maheshwari and Jl:S. Dorpura for the
Appellant.

V.M. Tarkunde, S.K. Jain, Himansu Atrey and Mrs. Probha
Jain for the Respondent.
F
The Judgment of the Court was delivered by

RAY, J. This is an appeal by special leave against the judgment
and order dated 26th November, 1984 in S.B. Civil Execution Second
Appeal No. 12 of 1976 whereby the appeal was allowed and respon-
G dent was granted one year time to vacate the premises.

The facts giving rise to this appeal are as follows:-

The respondent mortgaged the shop belonging to him to the
defendant Nos. 1 to 11 on 9th May, 1950 by a registered
H mortgage deed. The possession of the premises was given to the
HANUMANT v. MOHAN LAL [RAY. J.] 101

mortgagees with right to collect rent from the tenant in payment
A
of interest on the mortgage amount. the mortgagees let out the
premises to the defendant petitioner during the subsistence of
mortgage.
The respondent filed a suit for redemption of the mortgage and
for vacant possession of the said shop against the mortgagees i.e. the
B
defendant Nos. I to 11. The appellant who was the tenant of the shop
was impleaded as party defendant No. 12 in the suit. The suit was
decreed and the mortgage was redeemed. There was an order for
giving vacant possession of the shop by the defendant Nos. 1 to 11 to
the respondent i.e. the owner of the shop. In Execution case No. 126
of 1975 the tenant appellant filed an application under Section 47
read with Section 151 of the Code of Civil Procedure, 1908 stating c
inter alia that the decree could not be executed and possession of the
shop could not be given by the mortgagees to the decree-holder res-
t pondent as the tenancy of the appellant subsisted &nd the same had
not been terminated under the provisions of the Ra jasthan Premises
(Control of Rent and Eviction) Act, 1950. This plea was rejected by
D
the executing court holding inter alia that letting out of the shop to
the defendant No. 12 by the mortgagees was held to be not a bona
fide act made as a person of ordinary prudence in the course of
management of the property under Section 76A of Transfer of
Property Act and that the relationship of the lessor and lessee could
not subsist beyond the mortgagee's interest unless a new relationship
E
was created between the landlord and the tenant-appellant. It was
also held that the termination of the mortgagee's interest put an end
to the relationship of landlord and tenant and the provisions of the
Rent Control Act could not apply any further. The decree was execu-
table and the appellant had no interest and as such he could not resist
the execution of the decree. The application was dismissed.
F
Against this judgment and order the appellant filed an appeal
being Civil Appeal No. 13 of 1976. The said appeal was, however,
allowed' on a finding that the provisions of Section 13(1) of the
Rajasthan Rent Control Act expressly ruled out the operation of the
... Transfer of Property Act and a person inducted as a tenant on the
premises in a lawful manner could not be evicted except in accor- G
dance with the provisions of the Act. The decision in Mis Sacha/ma/
Parasram v. Mst. Ratanbai & Ors., AIR 1972 (SC) 637 and The All India
Film Corp. Ltd. and Ors. v. Sri Raja Cyan Nath & Ors., [196913 S.C.C.
79 were held to be not applicable to the instant case. The interest of the
appellant as a tenant subsists even after redemption of the mortgage
until it is terminated in accordance with the provisions of the aforesaid H
102 SUPREME COURT REPORTS [1988] 2 S.C.R.

A Rajasthan Premises (Control of Rent and Eviction) Act, 1950.

The respondent preferred a second Appeal being S.B. Civil f
Execution Second Appeal No. 12 of 1976. The said appeal was
allowed by the High .Court relying on the full bench decision of the
High Court in 1984 R.L.R. page 709. bn the prayer of the appellant
B one year time was granted, on the expiry of which possession of the
said premises shall have to be delivered. A written undertaking to
that effect had been filed by the appellant in compliance with the
directions of the Court.

The appellant thereafter filed the instant appeal on special
C leave.
The following two questions come np for consideration in this
appeal: (i) whether a tenant of a mortgagee can continue as a tenant
after redemption of the mortgage decree until he is evicted from the '
suit premises in accordance with the provisions of the Rajasthan
b Premises (Control of Rent and Eviction) Act, 1950; and (ii) whether
the tenancy created in favour of the appellant can be deemed to be
an act of ordir1ary prudence on the part of the mortgagee in managing
the property falling within Section 76A of the Transfer of Property
Act.

E Identical questions fell for consideration in Mahabir Gope and,
Ors. v. Harbans Narain Singh and Ors., [1952] 3 S.C.R. 775. In this
case the mortgagors mortgaged argicultural lands with possession oy
ijara to the mortgagee to the effect that the mortgagee would culti-
vate the land and take the crops. The mortgagee during the subsis-
tence of the mortgage leased out the land to a tenant. The mortgage
F was redeemed on payment of the mortgage debt. The mortgagor on
being opposed by the tenant to have the possession of the mortgaged
property, filed a suit for recovery of the possession of the land. It
ultimately came up before this Court and it was held as follows:

"The general rule is that a person cannot by transfer or
otherwise confer a better title on another than he himself
has. A mortgagee cannot, therefore, create an interest in
the mortgaged property which will enure beyond the
termination of his interest as a mortgagee. Further, the
f
mortgagee, who takes possession of the mortgaged pro-
perty, must manage it as a person of ordinary prudence
would manage it if it were his own and he must not
HANUMANT_v. MOHAN LAL [RAY, J.) 103

commit any act which is destructive or permanently injuri- A
ous to the property; see section 76, sub-clauses [a) & (e)
of the transfer 11f Property Act. It follows that he may
' grant leases not extending beyond the period of the
mortgage; any leases granted by him must come to an end
at redemption. A mortgagee cannot during the subsistence
of the mortgage act in a manner detrimental to the B
mortgagor's interests such as by giving a lease which may
\ enable the tenant to acquire permanent or occupancy
rights in the land thereby defeating the mortgagor's right

~·
to khas possession; it would be an act which would fall
within the provisions of Section 76, sub-clause (e), of the
Transfer of Property Act. c
A permissible settlement by a mortgagee in posses-
sion with a tenant in the course of prudent management
> and the springing up of rights in the tenant conferred or
created by statute based on the nature of the land and
possession for the requisite period is a different matter D
altogether. It is an exception to the general rule. The
tenant cannot be ejected by the mortgagor even after the
redemption of the mortgage. He may become an occu-
pancy raiyat in some cases and a non-occupancy raiyat in
'f other cases. But the settlement of the tenant by the
' mortgagee must have been a bona fide one. This excep- E
tion will not apply in a case where the terms of the
mortgage prohibit the mortgagee from making any settle-
'· ment of tenants on the land either expressly or by
' necessary implication."
)
+ It was held that the settlement was not a bona fuie one and a F
successor of the tenant did not acquire permanent right of tenancy in
the demised lands under Bihar Tenancy Act.

In Harihar Prasad Sinf(h & Anr. v. Must. of Munshi Nath Prasad
& Ors., [ 1956] S.C.R. 1 where the mortgage was in respect of agri-
• cultural lands, this Court held:- G

> "The law is that a person cannot confer on another any
right higher than what he himself possess, and therefore, a
lease created by a usufructuary mortgagee would normally
terminated on the redemption of the mortgage. Section
76(a) enacts an exception to this rule. If the lease is one H
104 SUPREME COURT REPORTS [1988] 2 S.C.R.

A which could have been made by the owner in the course of
prudent management, it would be binding on the mort-
gagors, notwithstanding that the mortgage has been
redeemed. Even in such a case, the operation of the lea.se
cannot extend beyond the period for which it was granted.
In the present case, assuming that the mortgagees had the
B power under Section 76( a) of the Transfer of Property Act
to continue the lessees under Exhibit 2(a) as tenants on
the lands after the termination of the period fixed therein,
that would confer on them at best the status of tenants
from year to year and not give them the right to continue
in possession after the termination of the agricultural year
during which the redemption takes place."
c
This Court while considering the ambit of provisions of Section
76(a) of the Transfer of Property Act observed in Asa Ram and
Another v. Mst. Ram Kali and Another, A.I.R. 1958 (SC) 183 as f

follows:
D "The law undoubtedly is that no person can transfer property
so as to confer on the transferee a title better than what he
possesses. Therefore, any transfer of the property mortga·
ged, by the mortgagee must cease, when the mortgage is
redeemed. Now, S. 76(a) provides that a mortgagee in
possession must manage the property as a ·person of ordi-
E nary prudence would manage it if it were his own. Though
on the language of the statute, this is an obligation cast on
the mortgagee, the authorities have held that an agricultural
lease created by him would be binding on the mortgagor
even though the mortgage has been redeemed, provided it is
of such a character that a prudent owner of property would
F enter into it in the usual course of management. This being
in the nature of an exception, it is for the person who claims
the benefit thereof, to strictly establish it."
It has been further observed that if there is a prohibition on mor-
tgagee in letting of lands, the lease will not be binding on th~
G mortgagors. But where there is no such prohibition the parties will be
thrown back on their rights under the Transfer of Property Act, and
lessees must establish that the lease is binding on the mortgagors
µnder Section 76(a) of that Act.
Tbe act of tbe mortgagors leasing out the lands to tenants on
the terms set out in the kabuliat was held to be neither prudent nor
H bona fide and as such the lease was not binding on the mortgagors.
HANUMANT v. MOHAN LAL [RAY, J.I 105

In All India Film Corp. Ltd. & Ors. v. Sri Raja Gyan Nath & A
Ors., (supra), the owner of the property in dispute known as Odeon
Cinema mortgaged the property with possession to mortgagees. The
mortgagor, however, migrated to Pakistan in 1947. The mortgagees
leased out the property to All India Film Corp. Ltd. with option of
yearly renewal for 10 years. The property being an evacuee property,
the Competent Officer after determining the mortgage charge sold B
the property. The respondent purchased the property but could not
get possession as sub-tenants claimed benefit of East Punjab Rent

l Restriction Act (3 of 1949). The purchaser filed a suit for possession
of the property from the Head lessee and sub lessee. It was held by
~ · · this Court:-

c
"The termination of the mortgagee interest terminated
the relationship of landlord and tenant and it could not, in
7
the circumstances, be said to run with the land. There
being no landlord and no tenant, the provisions of the
Rent Restriction Act could not apply any further. Nor
0
could it be said that when the mortgagor cancelled the
rent note and authorised the mortgagee to find any other
tenant, the intention was to allow expressly a tenancy
beyond the term of the mortgage. In this view of the
matter the decision of the High Court and the Court the
below cannot be said to be erroneous."
E

Following the above observations, this Court in Mis Sacha/ma/
Parasram v. Mst. Ratanoai and Ors., (supra) has observed that

I
) tenancy created by the mortgagee in possession does not survive the
termination of the mortgagee's interest. After termination of mort-
t gagee's interest the relationship of landlord and tenant does not F
survive and the claim of protection of Tenancy Act is not available to
the tenant inducted by the mortgagee. The lease was also held to be
not an act of prudent management.

In the case of Om Parkash Garg v. Ganga Sahai & Ors., JT
1987(1) S.C. 245. In which one of us was a party, this Court observed G
that the lease in question being held to be not an act of prudent
management on the part of the mortgagee within the meaning of
Section 76(a) of the transfer of Property Act, 1882, the alleged lease
could not subsist after termination of the mortgage by passing of the
final decree of redemption and the appellant could not take advan-
tage of the.act as there was no subsisting lease in his favour. H
106 SUPREME COURT REPORTS [1988] 2 S.C.R.

A On a conspectus of all these decisions we hold that the lease
given by mortgagee during the subsistence of the mortgage came to
and end on the redemption of the mortgage. It is pertinent to
mention that the question whether after termination of mortgagee's
interest on redemption of mortgage the lessees can claim the benefit
B of Rent Act was considered by the Full Bench of Rajasthan High
Court in 1984 (R.L.R., 709) and the High Court following the
decisions of the Supreme Court has answered that "Tenant of the
mortgagee in possession is not entitled to the protection of Rajasthan
Premises (Control of Rent and Eviction) Act, 1950 against the
mortgagor after redemption of the mortgage." We fully agree with
this view.
c
There is specific finding by all the courts below in the suit
for redemption that the letting out of the premises to the tenant-
appellant by the mortgagees is not a prudent act done in the ordinary
course of the management. This finding being not challenged became
final. The mortgagor-landlord is entitled to get recovery of posses-
D sion. We, therefore, affirm the judgment and order of the High
Court and dismiss the appeal. In the facts and circumstances of the
case, there will be no order as to costs.

S.L. Appeal dismissed.

(
Ji

-)