Holding

In a perpetual lease, unless there is an express condition expressly prohibiting partial alienation, the forfeiture clause cannot be invoked, and the lessee or his heirs must be joined as necessary parties for determination of the lease.

Summary

The case concerned a permanent mulgeni lease of about 40 cents of land granted in 1903 with an express clause prohibiting the lessee from alienating the whole leasehold property, but without any clause restricting partial alienation. After the lessee's death, the leasehold was partitioned among heirs and portions were subsequently sold or gifted. The lessor invoked the forfeiture clause to recover possession, arguing that any alienation breached the lease. The trial court held that the lease did not expressly forbid partial alienation; the High Court reversed and allowed forfeiture, while the First Appellate Court dismissed the suits, holding that no express condition barred partial alienation and that the lessee (or his heirs) were necessary parties. The Supreme Court affirmed the appellate view, holding that under Section 111(g) of the Transfer of Property Act a forfeiture can arise only on breach of an express condition, and no such condition restraining partial alienation existed; therefore the forfeiture clause could not be invoked and the suits were dismissed. The Court also clarified that notice in writing was not required for leases executed before the 1929 amendment, and that the Karnataka Rent Control Act was not applicable as the issue was not raised.

Issues considered

Whether a condition restraining alienation of leasehold property in a perpetual lease is illegal or void under Section 10 of the Transfer of Property Act.
Whether notice in writing under Section 111(g) of the Transfer of Property Act is required before terminating the lease.
Whether an express condition prohibiting partial alienation of the leasehold property exists, and if its absence precludes invoking the forfeiture clause.
Whether the heirs of the original lessee are necessary parties for determination of the lease under Section 108 of the Transfer of Property Act.
Whether the provisions of the Karnataka Rent Control Act, 1961 apply to a tenant with a perpetual lease.

Legislation cited

Karnataka Rent Control Act, 1961s. 23
Transfer of Property Act, 1882s. 10, s. 108(j), s. 108(q), s. 11(g)

Subjects

perpetual leaseforfeiture clausepartial alienationexpress conditionTransfer of Property Actprivity of contractKarnataka Rent Control Actmulgeni leaselease terminationnotice requirement

Judgment

)
RAGHURAM RAO AND ORS. A
v.
ERIC P. MATHIAS AND ORS.

JANUARY 30, 2002

[M.B. SHAH AND R.P. SETHI, JJ.) B

Transfer of Property Act, 1882:

Section 111 (g)-Lease-Perpetual lease-Partial alienation of leasehold
.. property-Forfeiture clause-Invoking of-Lease deed imposing express C
prohibition on lessee from alienating the leasehold property-However, no
express condition restraining partial alienation ofproperty-Held, unless there
is an express condition restraining partial alienation, forfeiture clause would
not apply.

Section 10-Lease-Perpetual lease-Prohibition restraining lessee from
D
alienating the leasehold property-Held, not illegal or void.

Section J J J(g)-Lease-Termination of lease-Notice in writing-
Requirement of-Lease deed executed prior to the coming into force of the
Transfer of Property (Amendment) Act, 1929-Held, notice in writing not E
necessary for terminating the lease deed

Section 1080) and (g)-Lease-Determination of-Partial alienation of
leasehold property-Suit for possession by transferee of lessor's interest
invoking forfeiture clause-Legal heirs of the original lessee not made parties
to the suit-Effect of-Held, privily of contract is between the lessor and F
lessee and not between the lessor and transferee-For determining the lease
the lessees were necessary parties-Suit liable to be dismissed for non-joinder
of necessary parties.

Practice and Procedure:
G
Plea-New plea-Raising of-Perpetual lease-Partial alienation a/-
Provision restraining tenant to sublet or transfer the lease premises-Not
applicable to tenant having a right to enjoy the premises in perpetuity-Plea
that lessor not entitled to possession on the ground of partial alienation of
property-Not raised before High Court-Held, not required to be considered H
759
760 SUPREME COURT REPORTS [2002] I S.C.R.

A by Supreme Court-Karnataka Rent Control Act, 1961-Section 23.
Words and Phrases:

'Express condition '-Meaning of in the context of Section 111 (g) of the
Transfer of Property Act, 1882.
B
Original owner of the property in dispute created a permanent lease
deed with an express condition that the lessee could not have right to
alienate the leased property and if such alienation was effected the lease
-
shall stand cancelled and the possession would be reverted back to the
lessor. On the death of the lessee there was partial alienation of the
C ~ieasehold prop~llty between the legal heirs of the lessee through a partition
suit. Plaintiff...respondents transferee of lessor's interest did not invoke the
forfeiture clause on the ground that the alienations were within the
members of the family of the deceased lessee. However, when the legal
heirs of the lessee sold certain portion of the leased property in favour of
D defendants by various sale deeds, plaintiff-respondents filed suits for
possession invoking the forfeiture clause. Trial court decreed the suit
holding that though the lease deed does not specifically prohibit alienation
of the part of the property but since there was an express condition not
to alienate the whole leasehold property, portion of the leased property
could not also be transferred by implication. On appeal, the First Appellate
E Court held that as there was no condition which prohibits partial alienation
of the property, it would not give right to the plaintiffs to enforce forfeiture
clause; 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 Transfer of Property Act, 1882, the liability of
F the lessee would not extinguish by mere reason of such alienation.
However, on second appeal, High Court set aside the judgment and decree
passed by the First Appellate Court and held that the plaintiffs were
entitled to recover the possession of leasehold property and decreed the
suit accordingly. Hrnce the present appeals.

G Allowing the appeals and setting aside the order of the High Court,
the Court

HELD : 1. Unless there is an 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
H perpetual lease and such conditions cannot be inferred by implication.
RAGHURAM RAO v. ERIC. P. MATHIAS 761

Section 11 l(g) of the Transfer of Property Act itself requires that for A
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 the instant case the lease deed provided that the lessee will not have any B
right to alienate the property, either the right of permanent tenancy or
the building 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 11roperty shall be reverted to the possession and enjoyment of lessor,
on receiving the value of the buildings and improvements estimated by four C
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.
Thus, in the instant case, plaintiff respondent were not entitled to invoker
the forfeiture clause. [770-E-F; H; 771-A]
D
A. Venkataramana Bhatta v. Krishna Bhatia, AIR (1925) Madras 57;
David Cutinha v. Salvadora Minzes and Ors., AIR (1926) Madras 1202; P.
Veda Bhat v. Mahalaxmi Amma, AIR 34 (1947) Madras 441; Keshab
Chandra Sarkar and Ors. v. Gopal Chandra Chanda, AIR (1~7) Cal 636
and lndraloke Studio Ltd. v. Smt. Santi Debi and Ors., AIR (1960) Cal 609, E
approved.

Chatterton v. Terrel, (1923) A.C. 578, referred to.

2. In case of perpetual lease, the condition restraining the lessee not
to alienate the property is not illegal and void. Section 10 of the Transfer
of Property Act which inter alia provides that "where property is F
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 G
exception with regard to perpetual or permanent lease. It applies to
permanent or temporary lease. (769-B-C]

3. In the instant case, notice in writing is not necessary as
contemplated under Section lll(g) before terminating the lease because
the lease deed was executed prior to the coming into force of the Transfer H
762 SUPREME COURT REPORTS [2002] I S.C.R.

A of Property (Amendment) Act, 1929 (20of1929). The relevant part ofthe
amended section provides that 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 the lessor may re-enter and the
lessor or his transferee 'gives notice in writing to the lessee or his intention
B to determine the lease". The words 'give notice in writing to the lessee or
were substituted by the Amendment Act which came into force from
1.4.1930 for the words 'does 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. [769-E-G]
c Namdeo Lokman Lodhi v. Narmadabai and Ors., [1953] SCR 1009 and
Shri Rattan Lal v. Shri Vardesh Chander and Ors., (1976] 2 SCC 103, relied
on.

4. The First Appellate Court was justified in holding that for
D determining the lease the lessees are necessary parties. 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
E 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
Transfer of Property 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
F possession is that of the lessee. Privity of contract is with the lessee and
not with the assignee. Further, under Section 108 (q), on determirnation
of lease, the lessee is bound to put the lessor into possession of the property.
Admittedly, in the present case, the heirs of the deceased lessee are not
joined as party-defendants and thus, the First Appellate Court rightly held
that on ground of non-joinder of necessary parties, the suit was required
G to be dismissed. (772-F-H; 773-A]

Treasurer of Charitable Endowments v. S.F.B. Tyabji, AIR 35 (1948)
Bombay 349, approved.

5. The contention of the appellant that since the provisions of Section
H 23 of the Karnataka Rent Control Act, 1961 prohibiting tenant to sub-let
/
RAGHURAM RAO v. ERIC. P. MATHIAS [SHAH, J.) 763

or transfer the premises would not be applicable to a tenant having a right A
to enjoy any premises in perpetuity, the lessor in the instant case is not
entitled to possession of the premises on the ground of alienation of the
<Part of the leasehold property, is not required to be decided in the present
appeal since the said plea was not raised before the High Court.
(774-E-G) B

CIVIL APPEL LA TE JURISDICTION : Civil Appeal Nos. 856-859
of 2002.

From the Judgment and Order dated 27.10.98 of the Karnataka High
Court in R.S.A. No. 1319/96 C/W. R.S.A. Nos., 1320-1322 of 1996.
c
S.N. Bhat for the Appellants.

Ambrish Kumar and Ms. Leena Gonsalves for the Respondent.

The Judgment of the Court was delivered by
D
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 E
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 F
ofMangalore 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 I. l l .1903 execut.ed by one Ammanna MaistP,1 in favour of N ellikai G
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 H ·
764 SUPREME COURT REPORTS [2002] I S.C.R.

A 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 prop~rty
either the right of permanent tenancy or the building etc., by way of
B 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 alienation and also this permanent lease shall be
liable to be totally cancelled and the property shall be reverted to
C your possession and enjoyment."

Thereafter, Nellikai Vyasa Rao sold his mugleni rights in respect of 1.20
acres of landjn favour of P.F. Mathias which included 40 cents already
leased out to Ammanna Maistry by registered sale deed dated 24.2.1914.

D 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
E 1. Amba Bai and S. Jyoti daughter and grand-daughter
of lessee
2. Chandrashekhar sons of deceased Ammanna
Maistry
~
3. Gangadhar
F
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
G and enforce the forfeiture clause on the ground that alienations were within
the members of the family of the deceased-lessee.

Original Suit No. 786 of 1990

On 30.3.1981, Sucharita (1) by sale deed sold some portion of the land
H in favour of defendant Nos. I to 4; - (2) on the same day, under an0ther sale
y
RAGHURAM RAO v. ERIC. P. MATHIAS [SHAH, J.] 765

deed, sold some other portion of the land in favour of defendant Nos. 5 and A
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 plaiatiffs 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 B
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 Jessee), his heirs filed O.S. No.
541 of 1980 for partition of the property held by him and a decree was C
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.
D
Thereafter - (1) defendant No. 1 by sale deed dated 14.3.1980 sold 0.25
cents l.12 Sq. meters for Rs. 3,000 in favour of the 6th defendant;

(2) The 2nd defendant along with her 5 minor children by a sale deed
dated 14.3.1980 sold an extent of 3Y:. cents of land for Rs. 57,000 in favour
of the 6th defendant; E
(3) Defendant No. 1 by a sale deed dated 27.4.1983 sold 0.12 cents
but actually 11 Y. cents for Rs. 1,30,000 in favour of the 4th defendant.

(4) The 4th defendant in his tum executed a gift deed ·dated 27.4.1983
in favour of the 5th defendant. F
(5) The 3rd defendant by a sale dated 25.2.1988 sold her portion
measuring 2Y:. 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.
G
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 H
766 SUPREME COURT REPORTS [2002) I S.C.R.

A 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
B 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 52of1992 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 tiled against the judgment and decree
C 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
D 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 I 08 of the Transfer of Property Act, 1882
(hereinafter referred to as "the T.P. Act") the liability of the lessee will not
E 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 wer~ proper parties. Hence, the appeals were allowed and suits
F 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
G 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
Anr. v. Krishna Bhatt and Ors., AIR (1925) Madras 57, David Cutinha v.
Salvadora Minazes and Ors., AIR (1926) Madras 1202, Terrell v. Chatterton,
H (1922) 2 Ch. D. 647 and P. Veda Bhat v. Mahalaxmi Amma, AIR 34 (1947)
RAGHURAM RAO v. ERIC. P. MATHIAS [SHAH, J.] 767
Madras 441 would not be applicable as there is alienation of the entire A
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 B
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 C
Born. HC Rep. App. l ), 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 D
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 E
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, p
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, G
therefore, may be considered rather as subordinate landlords than as
tenants of the soil, more especially as though many of them cuWvated
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 ofmulgeni tenure and observed H
768 SUPREME COURT REPORTS [2002] 1 S.C.R.

A 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
B known to the law in Kanara; and, further, that although originally
mulgeni tenants were not restricted hy the terms of their leases from
alienation, the practice had grown up-how soon it does not appear,
but at any rate by the beginning of the present century - of leasing
the land in perpetuity at a fixed rent coupled with such and other
restrictions.
c
Lastly, it is not suggested that the law has either by Statute or
judicial decision defmed the mulgeni tenure.

Under these circumstances it would be impossible, we think, to
hold that restriction against alienation is so repugnant to the mulgeni
D
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
E we find that by Section 105 it recognizes leases in perpetuity, and
that Section I 0, 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
F nature of the mulgeni tenure and we, therefore, adept 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
G the property would be illegal and void?
(II) Whether notice under Section 11 !(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
H and decree passed by the High Court is illegal.
)
RAGHURAM RAO v. ERIC. P. MATHIAS [SHAH, J.] 769
(IV) Whether the heirs of the original lessee are necessary parties in A
case of determination of lease?
.,,
~ Contention Nos. I and JI

For appreciating these contentions, we would first refer to Section
10 of the T.P. Act which inter alia provides that "where property is
B
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 c
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.
D
Similarly, contention that notice in writing is required as contemplated
ir
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 E
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
A the lessee of were substituted by the Amendment Act which came into force
from 1st April 1930 for the words 'does some act showing'. So prior to the F
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 Ors.,
[1953] SCR 1009 and Shri Rattan Lal v. Shri Vardesh Chander and Ors.,
[1976] 2 SCC 103. The First Appellate Court, therefore, has also rightly G
rejected the said contention .
...
Contention No. I//
However, the next contention which requires consideration is- whether
there is express condition which prohibits partial alienation of the leasehold
H
770 SUPREME COURT REPORTS (2002) I S.C.R.

A 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
-
B 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
C 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
D 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)
E 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
F 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 th~ 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
G their lands by means of hired labourers or others sub-rented them to the
temporary tenants.
Further, Section 11 I (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
H condition must be clear, manifest, explicit, unambiguous and there is no
)
RAGHURAM RAO v. ERIC. P. MATHIAS [SHAH, J.] 771
question of drawing any inference. In our view, as there is no express condition A
restraini!lg 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.

On similar clause, it appears that there is uniformity of interpretation B
by various High Courts that unless there is an express condition restraining
partial alienation, forfeiture clause would not apply.

In A. Venkataramana Bhatta v. Krishna Bhatta, AIR (1925).MADRAS
57], the Court held thus:-
c
"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 D
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 E
should result from partial alienation is well, but where he does not
do so, the covenant will not apply to a partial alienation. Grove v.
Porte/, (1902) 1 Ch. Do. 727."
In David Cutinha v. Salvadora Minazes and Ors., AIR (l 926) Madras
1202, the Court observed thus:- F
" .......... 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 G
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, . H
772 SUPREME COURT REPORTS (2002] I S.C.R.

A but there are some cases which have been cited itrtd which lend
support to the contention for the respondent, for instance in Grove v.
Portal, (1902) I 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) I K.B.525 Serutton, L.J. says quoting
B 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
"'
c 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
D part of the premises. It was 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. Sal\le view is also taken in Keshab Chandra
Sarkar and Ors. v. Gopal Chandra Chanda, AIR (1937) Cal 636 and in
E Indraloke Studio Ltd. v. Smt. Santi Debi and Ors., AIR (1960) Cal 609.

Contention No. IV

Further, the First Appellate Court rightly held that for detennining the
lease the lessees are necessary parties. Principle is-privity of contract is
F 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 detennine 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
detennined and decree for possession of the property cannot be passed in
G
favour of the lessor. Section l 08 G) 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 t-
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,
H on detennination of lease, the lessee is bound to put the lessor into possession
)
RAGHURAM RAO v. ERIC. P. MATHIAS [SHAH, J.] 773
of the property. Therefore, the First Appellate Court rightly relied upon the A
decision rendered by Chagle, C.J. in Treasurer of Charitable Endowments v.
S.F.B. Tyabji, AIR 35 (1948) Bombay 349, wherein dealing with a similar
contenffon, 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 B
absolutely his interest in the property. Clause G) 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. C
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 D
provisions of S.108 would apply and all the statutory obligations cast
upon the lessee by S. I08 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 E
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 F
statute under S.108."

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. G
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: -
H
774 SUPREME COURT REPORTS (2002] I S.C.R.

A "23.-Tenant not to sub-let or transfer after commencement of this
part.

(I) 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
B 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
c 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 (!),
D. 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
E 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
F 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
G passed by the High Court is set aside. The suits filed by :he plaintiff(s) are
dismissed. There shall be no order as to costs.

S.V.K.I. Appeals allowed.