S.B. ABDUL AZEEZ (BY LRS.)versusM. MANIYAPPA SETTY & ANR.

                       S.B. ABDUL AZEEZ (BY LRS.)                                     A
                                           v.

                      M. MANIYAPPA SETTY & ANR.

                               OCTOBER 14, 1988
                                                                                      B
              [R.S. PATHAK, CJ AND S. NATARAJAN, J.]

          Karnataka Rent Control Act, 1961-Section J(h)-Definition of
    Landlord-Whether includes usufructuary mortgagee who is entitled to
    be in possession of the mortgaged property and/or to receive the rents
    and profits in lieu of interest or in payment of the mortgage money.
    Held-Yes.
                                                                                      c

          Karnataka Rent Control Act, 1961-Section 2 I(l)(h)-Whether
    usufructuary mortgagee with possession stands on a part with owner of
    building to seek eviction of tenant. Held-Yes.
:
                                                                                      D
          The appellant, now represented by his legal representatives, had
    taken on rent certain premises and was in occupation thereof. On the
    basis of a usufructuary mortgage executed by the landlord in their
    favour, the respondents who are the partners, sought the eviction of the
    appellant under section 2l(l)(h) of the Karnataka Rent Control Act,
     i961 on the ground that they were bona fide in need of the premises to           E
    run their business. The appellant's defence was that the usufructuary
    mortgage was a sham and nominal transaction created by the landlord
    with an oblique motive because he had refused to pay higher rent for the
    premises and secondly the mortgagees were not bona fide in need of the
    premises for their business. The Trial Court rejected both the defences
    and ordered eviction and the said order was affirmed by the appellate             F
    court and the High Court. Hence this appeal.

           Dismissing the appeal, this Court,

            HELD: The definition of 'landlord' in Section 3(h), is an inclusive
     definition and would take within its fold an~ peroon who for the time            G
    ·being is receiving or is entitled to receive the rent in respect of the leased
     premises .. The person receiving or entitled to receive the rent may do so
     either on his. own account or on account of or on behalf of or for the
     benefit of any other person or as a trustee, guardian or receiver for any
     other person. A mortgagee with possession undoubtedly falls under the
     first category as under Sec. 58(d) of the Transfer of Property Act, he is        H
                                         505
    506          SUPREME COURT REPORTS                 [1988] Supp. 3 S.C.R.

    entitled to receive the rent on his own account and this factor makes the
A
    usufructuary mortgagee stand on a higher and different footing than
    other persons accorded the status of a landlord under Section 3(h)
    because their entitlement to receive rent is on behalf of or for the benefit
    of others and not on their own account. [SlOF-H]

B         V. Baluswamy Servai v. N. Raju Servai, [1966] 2 MLJ 4; T.
    Ezhumalai v. Padmavathi Ammal, [1971] 2 MLJ 121; Aswatharamiah
    v. Special Deputy Commissioner, [1977] i Karnataka Law Journal 332;
    S. Subramanayaswamy v. Deputy Commissioner, Bangalore, AIR 1981
    Karnataka 190; R. Vijendra v. H.R. & A. C., !LR 1988 Kar. 1591,
    referred to.
i
c         If the legislature so wanted, it would have undoubtedly cate-
    gorised a mortgagee with possession also as one of the excluded class of
    landlords for the purpose of sec. 2l(l)(h) of the Act. Obviously the
    legislature has not done so as would appear from the explanation to
    clause 4 of sec. 21. [SUD-El
D
          A mortgagee with possession, steps into the shoes of the mort-
    gagor and becomes entitled to all the rights of the mortgagor and the
    only right left with the mortgagor is the right of redemption. A mort-
    gagee with possession is entitled to be in possession of the mortgage
    property as long as it is not redeemed. If the mortgagee with possession
    leases back ihe property to the mortgagor, he acquires the rights of a
    lessor and is. entitled to enforce the terms of the lease against the
    mortgagor. [5 UF-G]                                                      ·

          Mathur Lal v. Keshar Bai & Anr., AIR 1971 SC 310, referred to.

F         there can be no doubt that a mortgagee with possession stands
    very differently from other kinds of landlords envisaged under section
    3(h) of the Act. He is therefore entitled, as much as the owner himself,
    to seek recover.Y of _possession of the leased _premises from a tenant for
    his own bona fide requirements of use. [SUG-H]

O        V. Baluswamy Servai v. N. Raju Servai, [1966) 2 MLJ 4; R.
    Vijendra v. H.R. & A.C., ILR 1988 Kar. 1591, approved.

       The appellant's argument that a scheming landlord can adopt the
  devious method of creating a sham _deed of usufructuary mortgage In .
  order to have a tenant evicted has no force because it fails to note that
H an o.rder of eviction under sec. 2l(l)(b) would not be passed by the
            '. S.B. ABDUL v. M.M. SEITY [NATARAJAN, J.]            507

court for the mere asking because, the mortgagee with possession has      A
first get to prove that the premises are reasonably and bona fide
required by him for occupation by himself, [512B-C]

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1006
of 1980.
                                                                          B
     From the Judgment and Order dated 13.2.1980 of the Karnataka
High Court in C.R,P. No. 1287 of 1977.

     R.B. Datar for the Appellant.

     S,S. Javali and Ravi P, Wadhwani for the Respondents.
                                                                          c
     The Judgment of the Court was delivered by

      NA TARAJAN, J. Does a mortgagee with possession stand on a
par with an owner of a building to seek the eviction of a tenant under
Section 21(1)(h) of the Karnataka Rent Control Act, 1961 (for short       D
the 'Act' hereinafter) for his bona fide requirement of the tenanted
premises for residential or business needs is the question for determi-
nation in this appeal by special leave by a ten~nt The Trial Court, the
Appellate Court and the High Court in revision have answered the
question in the affirmative and the aggrieved tenant, now represented
by his legal representatives is before us in appeal.                      E

      The tenanted shop belongs to one Nanjappa and the appellant
had taken the same on rent for running a cycle shop, On the foot of an
usufructuary mortgage executed in their favour, the respondents, who
are partners, sought the eviction of the appellant under Section
21( l)(h) of the Act. Their case was that they were also running a cycle F
shop in a rented premises but since their landlord had· obtained an
order of eviction against them they were bona fide in need of another
building to run their business. In· such circumstances they had
advanced a sum of Rs,25,000 to the appellant's landlord Nanjappa and
obtained a usufructuary mortgage of the tenanted premises and thus
having stepped into the shoes of the landlord, they were seeking the G
eviction of the appellant. The appellant's defence was that the
usufructuary mortgage was a sham and nominal transaction created by
the landlord with an oblique motive because he had refused to pay
higher rent for the premises and secondly the mortgagees were not
bona fide in need of the petition premises for th.eir business. The Trial
Court rejected both the defences and ordered eviction and the said H
    508         SUPREME COURT REPORTS                [ 1988] Supp. 3 S.C.R.

    order has been affirmed by the Appellate Court and the High Co~rt.
A
          In this appeal there is no challenge to the findings that the
    respondents were bona fide in need of another shop to run their
    business and that they had obtained an usufructuary mortgage of the
    tenanted premises from the owner Nanjappa. However, the conten-
B   tion of the appellants is that a usufructuary mortgagee cannot be
    equated with the mortgagor/landlord for seeking the tenant's eviction
    under Section 21( l)(h) on the ground uf bona fide requirement of the
    leased premises for his own use. The argument of Mr. Datar, learned
    counsel for the appellant was that the Act is a beneficial piece of
    legislation intended to protect the tenants from unreasonable evictions
    and as such the provisions of Section 21 have to be construed in such a
c   manner that the rights of the tenants are not taken away beyond t!te
    limits of the Section. It was urged by the learned counsel that if Section
    21( l)(h) is to be liberally constr_ued so as to equate a usufructuary


D
    mortgagee with the owner of a building and enable him to seek evic-
    tion of a tenant under Section 2 l(l)(h), then it would give a handlefor
    scheming landlords, who cannot the_mselves obtain an order of evi~tk>n
                                                                                 -
    against their tenants under Section 21(1)(h), to create a nominal deed
    of usufructuary mortgage and have their tenants evicted with the help
    of the mortgagee and then secure possession of the leased premises for
    themselves. In this context it was pointed out by Mr. Datar that the
    usufructuary mortgage in favour of the respondents was only for a
E   period of 30 months and therefore the mortgage should be treated as a
    colourable transaction.

          Before we examine the merit of these contentions, we may refer
    to the relevant provisions of the Act. The term 'landlord' is defined in
    Clause (h) of Section 3 of the Act as under:
F
                "Landlord:___'Landlord means any person who is for the
                time being, receiving or entitled to receive, rent in respect
               of any premises whether on his own account, or on
                account, or on behalf of, or for the benefit of any other
                person or as a trustee,_ guardian_or receiver for any other
G               person or who would so receive the rent or be entitled to
                receive the rent if the premises were let to a tenant; and
                includes any person not being a tenant who from time to
                time derives title under a landlord; and further includes in
               sespect of hi~ sub-tenant who has sub-let any premises."

H   Section 21( l)(h) under which the eviction-petition was filed reads as
    under:
               · S.B. ABDUL v. M.M. SETTY [NATARAJAN, J.l                  509

               "21(1)(h)-that the premises are reasonably and bona fide
                                                                                  A
               required by the landlord for occupation by himself or any
               person for whose benefit the premises are held or where
               the landlord is a trustee of a public charitable trust, that the
               premises are required for occupation for the purpose of the
               trust."
"                                                                            B
    On a reading of Section 3(h) it may be seen that it is an inclusive
    definition and takes within the fold of 'landlord' not only the owner of
    the premises but any person who for the time being is receiving or is
    entitled to receive the rent, whether on his own account or on account
    of, or on behalf of or for the benefit Of any other person or as a
    trustees, guardian or receiver for any other person etc, A usufructuary C
    mortgagee, as per Section 58(d) of the Transfer of Property Act is
    entitled to be in possession of the mortgage property or to receive the
    rents and profits, either in full or in part, accruing from the property
    and appropriate the rents and profits in lieu of interest or in paymer.:
    of the mortgage money or partly in lieu of interest or partly in payment
    of the mortgage money, By reason of his entitlement to receive the D
    rent of the mortgage property, a mortgagee with possession will
    undoubtedly constitute a landlord within the meaning of Section 3(h)
    of the Act. The appellant's counsel did not dispute this position, He
    would however say that even so, Section 21(1)(h) should be read down
    so as to restrict the meaning of the word "landlord" in that clause to
    the owner of the premises alone and not to a usufructuary mortgagee. E
    Before considering the matter, we may refer to some of the decisions
    where the same question has been considered.

           A learned single judge of the Madras High Court has held in V.
    Baluswamy Servai v. N. Raju Servai, [1966] 2 MLJ 4 that a
    usufructuary mortgagee of a building in the occupation of a tenant F
    would undoubtedly constitute a landlord within the meaning of Sec-
    tion 2(6) of the Madras Buildings (lease & Rent Control) Act, 1960, as
    he is entitled to receive the rent of the building on his own account and
    therefore he would be entitled to evict a tenant under Section
    10(3)(a)(i) of the Act on the ground of bona fide requirement of the
    premises for his personal occupation. This ratio was followed in G
    T. Ezhumalai v. Padmavathi Ammal, [1971] 2 MLJ 121. The same
    view was taken by a learned single judge of the Karnataka High Court
    also in a case arising under the Karnataka Rent Control Act in
    AswathaMmiah v. Special Deputy Commissioner, [1977] 1 Karnataka
    Law Journal 332. However, a Division Bench of the Karnataka High
    Court took a different view in S. Subramanayaswamy v. Deputy Com- I-{



                                                                                      ;:
    510         SUPREME COURT REPORTS                [1988] Supp. 3 S.C.R.

    missioner, Bangalore, AIR 1981 Karnataka 190 and held that though a
A
    mortgagee with possession may satisfy the definition of 'landlord'
    under Section 3(h) of the Karnataka Act, he would not be entitled to
    claim priority in the matter of allotment of the mortgage premises to
    himself under Section 5 as the benefit of the Section could be availed
    of only by the owner/landlord.
B
          As the decision in S. Subramanayaswamy (supra) conflicted with
    some· of the earlier decisions of the High Court, a reference was made
    toafullBenchinR. Vijendrav.H.R. &A.C.,ILR 1988Kar. 159lfor
    settlement of law on the question formulated as under:

                "Whether an usufructuary mortgagee is a landlord for
c               purposes of Part II of the Karnataka Rent Control Act,
                196 l."

    The Full Bench answered the reference in the affirmative and held that
    since delivery of possession is a necessary concomitant of a usufruc-       •
D   tuary mortgage and since the concomitant entitles the usufructuary
    mortgagee to claim possession of the property to the exclusion of all
    others, including the mortgagor, the mortgagee is for all intents and
    purposes the owner himseif, as he steps into the shoes of owner, and
    by reason of it he acquires the status of a landlord under Section 3(h)
    as well as the provisions in Part II for claiming possession of the
E   mortgage premises for his personal occupation. On a consideration of
    the matter we find ourselves in agreement with the view taken by the
    Full Bench. We may now give the reasons for our view.

          The definition of 'landlord' in Section 3(h), as we have already
    seen is an inclusive definition and would take within its fold any person
F   who for the time being is receiving or is entitled to receive the rent in
    respect of the leased premises. The person receiving or entitled to
    receive the rent may do so either on his own account or on account of
    or on behalf of or for the benefit of any other person or as a trustee,
    guardian or receiver for any other person. A mortgagee with posses-
    sion undoubtedly falls under the first category as he is entitled to
G   receive th,~ rent on his own account and this factor makes the
    usufructuary mortgagee stand on a higher and different footing than
    other persons accorded the status of a landlord under Section 3(h)
    because their entitlement to receive rent is on behalf of or for the
    benefit of others and not on their own account. Secondly it is of signi-
    ficance that the legislature being alive to the expansive nature of the
H   definition of the term 'landlord' in Section 3(h) had realised t~e need
              S.B. ABDUL v. M.M. SEITY [NATARAJAN, J.]                511

to limit the operation of the definition in so far as eviction petitions
                                                                             A
under Section 21(1)(h) are concerned. Section 21(1) sets out various
grounds on which the eviction of a tenant can be sought for. The
grounds may pertain to the omissions or commissions of the tenant or
to the bona fide requirement of the premises by the landlord in various
situations. The legislature has taken care to see that in so far as clause
(h) is concerned viz the premises being reasonably and bona fide             B
required by the landlord for his own occupation or for the benefit of
any person.for whom the premises are held, the status of a landlord
should be denied to a Rent Collector or an Estate Manager. Th•
exclusion is to be found in the Explanation to Clause 4 of Section 21 in
the following terms:

            "For the purpose of clause (h) of the proviso to sub-section     c
            1, expression 'landlord' shall not include a Rent Collector
            or Estate Manager."

 It therefore follows that if the legislature had wanted that a mortgagee
  with possession should not be equated with the owner of the premises D
  and should be denied the benefit of seeking a tenant's eviction under
  Section 21(1)(h), the Legislature would have undoubtedly categorised
  a mortgagee with possession also as one of the excluded class of land-
  lords for the purposes of Section 21(1)(h) of the Act. Obviously there-
  fore the legislature has not wanted a mortgagee with possession to be
  excluded of his right to seek eviction of a tenant from the mortgaged E
  premises under Section 2l(l)(h) of the Act. Thirdly, a mortgagee with
  possession is enjoined by Section 76( a) of the Transfer of Property Act
  to manage the property as a man of ordinary prudence would manage
  it if it were his own. As such the mortgagee's acts, if prudently done,
  could bind the mortgagor even after the redemption of the mortgage.
  A mortgagee with pos~ession, steps into the shoes of the mortgagor F
  and becomes entitled to all the rights of the mortgagor and ·the only
  right left with the mortgagor is the right of redemption. A mortgagee
  with possession is entitled to be in possession of the mortgage property
  as long as it is not redeemed. If the mortgagee with possession leases
  back the property to the mortgagor, he acquires the rights of a lessor
  and is entitled to enforce the terms of the lease against the mortgagor G
                   v.
  (vide-Mathur Lai Keshar Bai & Anr., AIR 1971SC310). On account
· of all these factors there can be no doubt that a mortgagee with posses-
  sion stands very differently from other kinds of landlords envisaged
  under Section 3(h) of the Act. He is therefore entitled, as much as the
  owner himself, to seek recovery of possession of the leased premises ,
  from a tenant for his own bona fide requirements of use. For all these H
    512         SUPREME COURT REPORTS                [1988) Supp. 3 S.C.R.

A   reasons we hold that the view taken by the single judges in the cases
    referred to above and the Full Bench in R. Vijendra"s case (supra) is
    the correct view to be taken.

          As regards the contention of Mr. Datar that a scheming landlord
    can adopt the devious method of creating a sham deed of usufructuary
B
    mortgage in order to have a tenant eyicted, when he himself cannot
    sustain such an action, the argument fails to note that an order of
    eviction under Section 2J(J)(h) would.not be passed by the Court for
    the mere asking because, the mortgagee with possession has first get to
    prove that the premises are reasonably and bona fide required by him
    for occupation by himself. Without the reasonable and bona fide
c   requirement being proved to the satisfaction of the Court, ~o order for
    eviction will be passed. Nextly, even if the mortgagee with possession
    satisfies the above test, he has to pass the further test laid down by
    sub-section .4 of Section 21 which provides that a tenant shall not be
    evicted under Section Zl(l)(h) if the Court is satisfied that the tenant
    would be put to greater hardship by an order of eviction being passed
D   than the hardship that would be caused to the landlord by refusal to
    pass an order of eviction in his favour. These things apart, it is incon-
    ceivable that every landlord who would not be able to evict his tenant
    by resort to Section 21( l)(h) would be able to readily find a willing
    accessory who will be prepared to play the role of a usufructuary
    mortgagee and institute eviction proceedings against the tenant in
E   order to secure the possession of the leased premises and then hand
    over possession to the owner of the building.

           For all these reasons, the appeal deserves to fail and will accord-
    ingly stand dismissed. The appellant is, however, given six months
    time from today to vacate the leased premises subject to the appellant
F   filing an undertaking in the usual terms within four weeks from today.
    There will be no order as to costs. '

    H.S.K.                                                 Appeal dismissed.