Holding

A lease granted by a mortgagee in possession is not binding on the mortgagors after redemption if the mortgage deed limits the mortgagee’s authority to lease only subject to the obligation to return possession on redemption.

Summary

The mortgagors mortgaged a house with possession to a business firm in 1947, authorising the mortgagee to rent out the premises but obliging him to return possession on redemption. After the original tenant vacated, the mortgagee inducted Jadavji Purshotiam as a tenant in 1956. The mortgage was redeemed in 1972, and the mortgagors sought possession of the ground floor. The High Court held that the mortgage was anomalous, the mortgagee's authority to create a lease was limited by the stipulation to deliver possession on redemption, and therefore the tenancy did not survive redemption; the appellant was not a necessary party to the execution proceedings and could be ejected. The Supreme Court affirmed this view, ruling that the lease was not binding on the mortgagors after redemption and that the execution decree was binding on the appellant as a sub‑tenant. The appeal was dismissed.

Issues considered

Whether a tenancy created by a mortgagee in possession binds the mortgagors after the mortgage is redeemed when the mortgage deed limits the mortgagee's authority.
Whether the appellant's tenancy rights are protected under the Saurashtra Rent Control Act, 1951 and the Bombay Rent Act.
Whether the appellant is a necessary party to the execution proceedings and whether the execution decree binds him.
Whether the mortgage is an anomalous mortgage governed by Section 98 of the Transfer of Property Act, 1882.
Whether the mortgagee acted as an agent of the mortgagors.

Legislation cited

Subjects

anomalous mortgagelease beyond redemptionmortgagee's authorityrent control legislationtenant rightsexecution decreesub‑tenantSection 98 Transfer of Property Act

Judgment

A JADAVJI PURSHOTIAM
v.
DHAMI NAVNITBHAI AMARATLAL & ORS.

SEPTEMBER 9, 1987.

13 [SABYASACHI MUKHARJI AND S. NATARAJAN, JJ.)

Saurashtra Rent Control Act, 1951: Lease of mortgaged premises
by mortgagee beyond the term of the mortgage-Mortgagee not autho-
rised to create such tenancy-Whether mortgagors entitled to possession
on redemption-Tenant whether necessary party to execution appli·
C cation-Whether tenancy rights protected under the Rent Act.

Transfer of Property Act, 1882: s. 98-Anomalous mortgage-
Rights ofparties.

The respondents mortgaged a house property in Bhavnagar with
II> possession to a business firm in July, 1947. The ground floor of the
house was already in the occupation of a tenant and hence the mort-
gagors endorsed the rent deed to the mortgagee for the remaining
period of the lease. Clause 5 of the mortgage deed gave option to the
mortgagee to give the house property on rent to anyone and made the
mortgagors acconntable for loss of rental income. Clause 7 empowered
E the mortgagee to keep the property in his possession till the mortgage
debt was repaid. Clause 10 entitled the mortgagors to redeem the mort-
gage at any time and stated that as soon as redemption took place, the

F
mortgagee should return the documents of title and re-deliver posses-
sion of the house to the mortgagors. Notwithstanding the mortgage
purporting to be possessory the deed provided for payment of interest,
and for the mortgagee to demand repayment of the mortgage amount at
-
any time it deemed fit.

When the existing tenant vacated the portion occupied by him, in
November, 1956, the mortgagee inducted the appellant as a tenant. The
Saurashtra Rent Control Act, 1951 had in the meantime come into
G force. This was replaced by the Bombay Rents, Hotel and Lodging
House Rates Control Act, 1947 with effect from I.1.1964. The eject-
ment proceedings initiated by the mortgagee against the tenant-
appellant were pending when the mortgage was discharged in October, k
1972 in terms of the memo of compromise, which stated that the ground
floor of the house had been given on rent to the appellant, that the
H mortgagee had filed a case against him, that in such circumstances the
76
JADAVJI PURSHOITAM v. D.N. AMARATLAL 77

vacant possession of the ground floor could not be delivered, and that A
I..
the mortgagors were entitled to obtain vacant possession of the said
portion from the appellant. In the execution proceedings taken out by
the mortgagors thereafter the executing court held that they were en-
titled to get only symbolic delivery and not physical possession of the
leased property.
B
The High Court held that as the mortgage was an anomalous
mortgage, the rights of the mortgagee have to be determined with refe-
<
rence to the terms of the mortgage deed, that though the mortgage deed
permitted the mortgagee to create tenancies, the said permission did not
extend to granting lease beyond the term of the mortgage and it was
subject to the stipulation in the mortgage deed that the mortgagee c
~
should deliver possession whenever the mortgage was redeemed, and
hence when the mortgagee's right to possession came to an end, he
ceased to be a lessor and the appellant was bound to surrender possession
and he had no right to invoke the provisions of the Rent Acts to continue
his tenancy, and that the appellant was not a necessary party to the suit
or the execution application, as his possession was akin to that of a D
sub-lessee and the execution application was therefore legally maintain-
able against him.

In this appeal by certificate it was contended for the appellant-
tenant that his tenancy rights were protected under the Saurashtra
Rent Act and the Bombay Rent Act, that the mortgagors had given an E
unrestricted power to the mortgagee to create a tenancy for any length
of time, and were therefore, bound to accept the lease transaction even
after the redemption of the mortgage deed, that his tenancy rights
became enlarged by the subsequent legislation enacted for affording
protection to tenants, and that by reason of the authority given to the
mortgagee to create tenancy the mortgagors had constituted the mort- F

~
gagee as their agent and hence they as principals were bound by the acts
of their agent.

Dismissing the appeal,

HELD: I.I A tenancy created by a mortgagee in possession G
may be binding even after the termination of the title of the mort-
gagee in possession if the mortgagors had concurred to the grant of the
lease. [88B]

1.2 In the instant case, the mortgagors had not empowered the
mortgagee to create a tenancy which would be binding on them after the H
78 SUPREME COURT REPORTS (1988) I S.C.R.

A redemption of the mortgage. The authorisation given to the mortgagee
was not an unconditional and absolute one. It was circumscribed by the
"stipulation that the mortgagee should re-deliver the possession of the property
whenever the mortgage was redeemed. The lease granted by the mortgagee
could not thus enure beyond the term of !he mortgage. [9IE, 90A, 91BC)

B 1.3 This was not a case where the mortgagee was put in posses·
sion of the mortgaged property in 01 der to appropriate the usufructs in
lieu of interest. The mortgagors had agreed to pay interest to the mort-
gagee at mercantile rate and also as per contractual rate. Furthermore,
the mortgage deed absolved the mortgagee of any liability for loss of
income from the mortgaged property due to fall in rent or non-payment
C of rent or due to non-leasing of the property and keeping the house
vacant. On account of these guarantees the mortgagee was under no
compulsion to lease out the property just because of the permission
given to him to grant lease, either to secure rental income in lieu of
interest or on grounds of prudent management. The mortgagee should
have realised that by inducting the appellant, he was running the risk of
D being unable to deliver possession of the house to the mortgagors when
the mortgage was redeemed and thereby he would be contravening
clauses 7 and 10 of the mortgage deed. [900-E)

1.4 The mortgage in the instant case was an anomalous mortgage
and not an usufructuary one. The rights of the parties to the mortgage
E therefore would be governed by s. 98 of the Transfer of Property Act,
which provides for determination of the rights of the parties in accor·
dance with the terms of the mortgage deed. Consequently, the appellant
could claim tenancy rights only as against his landlord viz. the mort-
gagee and not against the mortgagors. As soon as the mortgagee's rights
became extinguished by redemption of the mortgage, neither he nor
F anyone inducted by him had a right to be in possession of the mortgaged
property. [85CE, 91F]
I
~

Film Corporation Ltd. v. Gyan Nath, (1970] 2 SCR 581;
Purshottam v. Madhavaji Meghaji, AIR 1976 Gujarat 161; 17 G.L.R.
497; SV Venkatarama Reddiar v. Abdul Gani Rowther & Ors. AIR
G 1980 Madras 276; and Devkinandan v. Roshan Lal, AIR 1985
/ Rajasthan 11, referred to.

2. No question of imprudence can arise where the rights of the
tenant were enlarged by tenancy legislation enacted after the tenant was
put in possession by the mortgagee. In the instant case, the appellant's
H rights, as a tenant, did not become enlarged by means of any tenancy I

t
JADAVJI PURSHOTIAM v. D.N. AMARATLAL (NATARAJAN, J.] 79

legislation which came to be enacted after the lease was granted. The A
Saurashtra Rent Control Act, 1951 was already in force when the appel-
lant was inducted into possession from December 4, 1956. It cannot be
claimed that the Bombay Rents, Hotel and Lodging House Rates Con-
trol Act, 1947 which had replaced the Saurashtra Act from January 1,
1964, was a subsequent tenancy legislation that had enlarged the
tenancy rights of the appellant, since the second appeal pertaining to B
the standard rent application and the suit for ejectment filed by the
mortgagee were instituted in 1963 before the repeal of the Saurashtra
Act. [SSA, 91E, 88F ,H, 89AB,DE]

Mahabir Gape v. Harbans Narain, [1952] SCR 775; Asa Ram v.
Ram Kali, [1958] SCR 986; Dahya Lal v. Rasul Mohammed Abdul C
Rahim, [1963] 3 SCR 1; Prabhu v. Ram Dev, [1966] 3 SCR 676 and
Mula's Transfer of Property Act, 7th Edn. p. 514, referred to.

3. The relationship between the parties to the mortgage was
always one of debtor and creditor. There was, thus, no question of the
mortgagors constituting the mortgagee as their agent. [91D] D

4. The appellant had no independent rights and hence it was not
necessary that he should have been made a party to the suit filed by the
mortgagors after the redemption of the mortgage. His position was akin
to that of a sub-tenant whose rights were co-terminus with those of the
tenant himself. The mortgagors were, therefore, entitled. to seek eject- E
ment of the mortgagee and the tenant inducted by him. The execution
application taken against the mortgagee would be binding on the
appellant. [91G-H]

CIVIL APPELLATE JURISDICTION: Civil Appeal No.
47(N) of 1978. F

From the Judgment and Decree dated 4.7.1977 of the Gujarat
High Court in F.A. No. 152 of 1974.

K.N. Bhatt, P.H. Parekh and P.K. Manohar for the Appellant.
G
T.U. Mehta, and S.C. Patel for the Respondents.

!... The Judgment of the Court was delivered by

NATARAJAN, J. This appeal by certificate under Article 133 of
the Constitution is directed against a judgment of the High Court of H
80 SUPREME COURT REPORTS [1988] 1 S.C.R.

A Gujarat in an appeal arising from the execution proceedings. The
appellant is a tenant inducted to the ground floor of a building in
Bhavnagar by a mortgagee in possession and the question for consi-
deration is whether the mortgagors are entitled to dispossess him by
reason of the redemption of the mortgage debt.

B For a full and effective understanding of the issues involved in
the case a maze of details have to be gone through and we will, there-
fore, advert ourselves to that task. In July 1947 Dhami Navnitbhai
Amaratlal, the first respondent, acting for himself and his minor son
mortgaged a house property with possession to a business firm known
as Bhagwan Das Chagan Lal to secure repayment of a loan of
C Rs.21,000. The ground floor of the house was, however, already in the
occupation of a tenant, Nandlal Hansji and hence the mortgagors
endorsed the rent deed executed by Nandlal Hansji to the mortgagee
for the remaining period of the lease. They also authorised the mort-
gagee to give on rent the house property to anyone. Under clause IO of
the mortgage deed it was provided that the mortgage could be
D redeemed whenever the mortgagors paid the mortgage amount and
on redemption the mortgagee should return the title deeds and deliver
possession of the mortgage property to the mortgagors. Notwithstand-
ing the mortgage purporting to be a possessory mortgage, the mortgage
deed provided for payment of interest and for the mortgagee to demand
repayment of the mortgage amount at any time it deemed fit and if the
E demand was not met, to file a suit and bring the mortgage property for
sale and also to proceed against the person and other items·of proper-
ties of the mortgagors for recovery of the balance amount, if any. By a
further mortgage deed dated 21.3.1950 the mortgagors obtained ano-
ther loan of Rs. 16,000 from the mortgagee on the same security.

F The existing tenant Nandlal Hansji vacated the portion occupied
by him on 12.11.1956. Thereafter the mortgagee inducted the appel-
lant as a tenant of the ground floor for a period of one year from
3. 12.56 to 2.12.57 on a monthly rent of Rs.125. The lease deed, how-
ever, came to be executed only after one year, i.e., on 9.12.1957. On
13. 7. 1958 the mortgagee issued a notice to the appellant terminating
G the tenancy and calling upon him to surrender possession on the
ground he had failed to pay the rent. The appellant did not surrender
possession and instead filed Civil Misc. Application No. 40 of 1958 for
fixation of standard rent. It is relevant to mention here that the
Saurashtra Rent Control Act, 1951 governed the leases of buildings in
Saurashtra region including Bhavnagar. The mortgagee filed Civil Suit
H No. 46 of 1958 against t~e appellant for recovering the arrears of rent
JADAVJI PURSHOITAM v. D.N. AMARATLAL [NATARAJAN, J.] 81

and possession of the leased premises. On 13.4.60 the Trial Court
.A A
allowed the tenant's petition for fixation of standard rent and dismis-
sed the mortgagee's suit for arrears of rent and possession. The Trial
Court fixed the standard rent at Rs.52.10 as against the contractual
rent of Rs.125. The mortgagee filed successive appeals before the
District Judge and the High Court against the judgments of the Trial
Court in the Standard Rent Petition and the suit for ejectment but B
failed in both the appeals before both the Appellate Courts.
)'
During the pendency of the ejectment proceedings, the mortgagee
filed Special Civil Suit No. 8/62 against the mortgagors for recovery of
• the mortgage amounts under the two mortgages and a consent decree

~
was passed stipulating that the mortgagors should pay Rs.18,000in six
months, i.e., by 20.5.63 with running interest at 6% p.a. and if they c
failed to pay the amount within the period of grace, the mortgagee was
\ entitled to recover the amount by sale of the mortgage security and the
balance, if any, from the person and other items of properties of the
mortgagors.
D
As the mortgagors failed to pay the decree amount in terms of
the consent decree, the mortgagee took out execution proceedings in
Special Darkhast No. 7/72. Therein the parties once again compro-
mised and the compromise was recorded on 7.10.72 and in the memo
of compromise it was stated that the ground floor portion of the house
....\ had been given on rent to the appellant, that the mortgagee has filed a E
case against him, that in such circumstances the vacant possession of
the ground floor cannot be delivered and that the mortgagors were
entitled to obtain vacant possession of the ground floor portion of the

~
house from the appellant. As regards the decree amount the com-
promise memo stated that the full amount of Rs.18,000 had been paid
and no further amount was payable to the mortgagee. F

After the compromise memo was recorded the mortgagors took
out execution application No. 3/73 for the issue of a warrant of
posses~ion for obtaining possession of the ground floor. The Executing
Court issued a warrant of possession even though the appellant was
not impleaded as a party in the suit or the execution application. The G
appellant preferred Appeal No. 190 of 1973 to the High Court and the
High Court revoked the warrant of possession and remitted the matter
·i- to the Executing Court for going into the question whether the consent
decree and final decree to which the mortgagors and mortgagee were
alone parties would be binding on the appellant-( tenant) and further-
more whether the mortgagors would be entitled to delivery of physical H
'
82 SUPREME COURT REPORTS (1988) I S.C.R.

A possession of the l¢ased premises or only symbolic delivery. The
Executing Court considered the matter afresh and held that the mort-
gagors were entitled to get only symbolic delivery and not delivery of
physical possession of the leased property. The mortgagors preferred
First Appeal No. 15? of 1974 before the High Court. A Division Bench
of the High Court allowed the appeal and directed the Executing
B Court to issue a warrant of possession for ejecting the appellant and
placing the mortgagors in possession of the leased premises. The High
Court however granted a certificate of leave to the appellant to prefer
an appeal to this Court and that is how the matter is before us.

The main contention of the appellant before the High Court was
C that though the lease was given by the mortgagee, the lease was bind·
ing on the mortgagors even after they had redeemed the mortgage
because they had authorised the mortgagee to create tenancies over
the mortgage property and secondly because his tenancy rights became
protected under the Saurashtra Act XXII of 1951 which came to be
later replaced by the Bombay Rents, Hotel and Lodging House Rates
D Control Act No. LVII of 1947 (for short the Bombay Rent Act) and as
such he cannot be evicted by the mortgagors merely by reason of their
repayment of the mortgage debt. The second contention was that the
consent decree and the final decree on the basis of which the execution
application was taken to dispossess him were not binding on him since
he was not a party to the proceedings. The High Court repelled both
E th~ contentions. In so far as the first contention is concerned, the High "'
Court held that as the mortgage was an anomalous mortgage the rights
of the mortgagee have to be determined with reference to the terms of
the mortgage deed, that though the mortgage deed permitted the
mortgagee to create tenancies, the said permission did not extend to ~
granting leases beyond the terrn of the mortgage and it was subject to
f the stipulation in the mortgage deed that the mortgagee should deliver ·
possession whenever the mortgage was redeemed and hence when the
mortgagee's right to possession came to an end he ceased to be a lesser
and the appellant also ceased to be a lessee and therefore the appellant
was bound to surrender possession and he has no right to invoke the
provisions of the Rent Act to continue his tenancy. As regards the
G second contention, the High Court held that the appellant was not a
necessary party to the suit or the execution application as his posses-
sion was akin to that of a sub-lessee and the execution application was
therefore legally maintainable against him. )-

Arguing for the appellant, Mr. Bhatt, learned counsel advanced
H the following contentions to assail the judgment of the High Court:
JADAVJI PURSHOITAM v. D.N. AMARATIAL [NATARAJAN, J.] 83

1. The appellant constituted a tenant as per the definition of
,,1 tenant in the Saurashtra Act and the Bombay Rent Act and therefore
A
the fact that the lease was granted by a mortgagee with possession and
not by the mortgagors themselves would not affect his tenancy rights
under the Acts in any manner;

2. The High Court, in Olpite of holding that the mortgage dated B
19. 7 .1947 was an anomalous mortgage has erred inreferring to Section
76(a) of the Transfer of Property Act and going into the question
)'
whether the granting of a lease of urban immovable property so as to
tie up the property beyond the term of the mortgage was a prudent act
' or not of the mortgagee.
c
) 3. The High Court has failed to consider that the induction of
the appellant as a tenant was fully in accordance with the authority
\ given to the mortgagee under the mortgage deed and consequently the
lease granted to the appellant was a lawful one. The appellant's right
to invoke the provisions of the Saurashtra Act XXII of 1951 and the
Bombay Rent Act to protect his tenancy rights is a conferment by the D
statutes and not due to any grant by the mortgagee. Hence tile re was
no need or necessity for the High Court to invoke the Full Bench
decision of the Gujarat High Court in Purshouam v. Madhavaji
Meghaji, (AIR 1976 Gujarat 161: 17 G.L.R. 497) and take the view that
the tenancy created by the 'mortgagee would not extend beyond the
. --i term of the mortgage as the lease property was urban immovable E
property and not agricultural land;

.. 4. The High Court ought to have followed the consistent view
taken by this Court in numerous decisions that the rights of a tenant
inducted by a mortgagee with possession would enure even beyond the

~
period of mortgage if by reason of legislative enactments subsequently F
made the tenant's rights had been given statutory protection (vide the
decisions in Mahabir Gope v. Harbans Narain, [1952] SCR 775; Asa
Ram v. Ram Kali, [1958] SCR 986 andDahya Lalv. Rasul Mohammed
A~dulRahim, [1963] 3 SCR 1 andPrabhu v. Ram Dev, [1966] 3 SCR676).

5. The observations in Film Corporation Ltd. v. Gyan Nath, G
[ 1970] 2 SCR 581/thail the general principle of the bona fide and pru-
dent acts of the mortgagee in possession being binding on the mort-
gagor even after the title of the mortgagee comes to an end would
~ ordinarily apply to management of agricultural lands and would sel-
dom extend to urban property was by way of an obiter. Indeed the
very same decision has recognised that even if the lease granted by the H
84 SUPREME COURT REPORTS [1988] 1 S.C.R.

A mortgagee is of urban immovable property, it will be binding on the ,!.,,
mortgagor if he had concurred with the granting of the lease. Even in
Sacha/ma/ Parasram v. Ratan Bai, AIR 1972 SC 673 where the view
taken in Film Corporation's case has been followed, the observations
would only constitute obiter because the decision there too had been
rendered in acceptance of the finding of the District Judge that the
B tenancy created by the mortgagee was not a prudent act.

6. The Full Bench decision in Purshottam's case relied upon by ~.
the High Court and the Full Bench decisions rendered in SV Ven-
katarama Reddiar v. Abdul Gani Rowther & Ors., AIR 1980 Madras
276 and Devkinandan v. Roshan Lal, AIR 1985 Rajasthan 11 do not
C affect the appellant's case in any manner since all these decisions have
been rendered in observance of the obiter dicta of this Court in Film {
Corporation's case and Sacha/ma/ Paras ram's case. ·' J

7. If for any reason this Court is of the view that the judgments
in Film Corporation's case and Sacha/ma/ Parasram's case have enun-
D ciated a law differentiating between agricultural land on the one hand
and urban immovable property on the other and holding that any lease
granted by a mortgagee with possession of urban immovable property
would not constitute a bona fide and prudent act and as such the
tenancy will not be binding on the mortgagor after the redemption of
the mortgage, this Bench should refer the appeal to a larger Bench for
E resolving the conflict between the law laid down in the earlier cases ~
and the view taken in the two cases mentioned above.

Replying to the arguments of the appellant's counsel, Mr. T. U.
Mehta, learned counsel for the respondents submitted that the High
Court has rightly found that the mortgagee had no authority to create a
F tenancy beyond the term of the mortgage because the mortgagors had ....
given only a limited authority to the mortgagee to create tenancies ,.
over the property and had specifically stipulated that the mortgagee
should re-deliver possession of the property whenever the mortgage
was redeemed. Hence the permission given to the mortgagee to grant
lease of the mortgage property was subject to the requirement that he
G should surrender possession of the property as soon as the mortgage
was redeemed. The learned counsel, therefore, stated that the appel-
lant had no right to claim tenancy rights as against the mortgagors and
that he cannot claim protection under the Saurashtra Act XXII of 1951 ~
or the Bombay Rent Act because the mortgagee ceased to be a lessor
when the mortgage was redeemed and the tenant (appellant) also
H ceased to be a tenant eo instanti the mortgagee ceased to be a lessor.
JADAVJI PURSHOITAM v. D.N. AMARATLAL [NATARAJAN, J.) 85

Alternatively, the learned counsel submitted that even if the observa-
A lions contained in Film Corporation's case and Sacha/ma/ Parasram's
A
case are to be viewed as obiter dicta. the Full Bench decisions
rendered by the Gujarat High Court in Purshottam v. Madhavji
Meghaji and by the Madras High Court in SV Venkatarama Reddiar v.
Abdul Gani Rowther & Ors. have given succinct and adequate reasons
for a differentiation being made between a lease of agricultural land B
and a lease of urban immovable Property leased by a mortgagee with
possession and hence those decisions merit acceptance by this Court
r and therefore it must be held that the grant of lease of an urban
immovable property by the mortgagee was not a prudent act and
=c would not, therefore, bind the mortgagors.
c
~ Before taking up for consideration the various contentions of the
appellant's counsel it is necessary that the basic factors governing the
rights of the parties are identified and kept in the forefront. The High
Court has held the first mortgage dated 19.7.1947 was an anomalous
mortgage and not an usufructuary mortgage. This finding of the High
Court is un-assailable and indeed neither of the parties controverts the D
finding. The legal consequence of the finding is that the rights of the
parties to the mortgage would not be governed by Section 76 of the
Transfer of Property Act but by Section 98 of the said Act. Section 98
provides that in the case of anomalous mortgages the rights of the
parties have to be determined in accordance with the terms of the
-i mortgage deed. Looking into the mortgage deed the first sentence in E
' the text of the deed and clauses 2, 3, 4, 5, 7, & 10 have relevance and
they reads as under:-

r- "To wit we have borrowed tb'e below mentioned amount of
Rs.21,000 in words rupees twenty one thousands, from
you, with an interest at a rate of six annas per hundred per F
- month, under the business method of Diwali and under the
remaining method by compound interest under this agree-
ment in respect of interest.

2. According to the decision we have to pay to you an
amount of interest accruing due every month. And you are G
entitled to demand interest on the interest on any Diwali
period if any interest remain claimable.
-l
3. In respect of the said house other repamng
charges or taxes of the Government or the Municipality all
these expenses shall be paid by us. We shall have to bring H
86 SUPREME COURT REPORTS [ 1988] 1 S. C.R.

insurance on your name and the policy shall be handed
A
over to you. And if in any circumstances we do not incur
such expenses or we make delay therein you are entitled to
make such expenses and to pay the amounts at our cost.
And if you pay the amount in the said manner, you are
entitled to recover all these amounts as a portion of amount
B claimable under mortgage as an amount claimable under
this mortgage with compound interest at a rate of six annas
per month on all the aforesaid paid by you. But you are not
bound to do any such expense. If you <;lo not make such
expenses and if any damage is occurred thereby or by any
other reason, no responsibility in respect of the same shall
lie on you. We have given assurance that insurance has
c been taken(?).

4. Some portion of the said house has been given on
rent to Patel Nandlal Hodaji under joint conditions. Under
the said conditions we have executed a rent deed in favour
D of you from the said Nandlal Hodaji for the remaining
period.

5. You are entitled to give on rent the said house to
anybody under the aforesaid clauses number 3-4. You have
to give the clear amount of rent in consideration of the
E same. If under any reason any amount of rent is not given
or the rent is given less or any of the portion of the house is
left vacant, the responsibility thereof does not lie on you.

F
(Rest omitted).

7. You are entitled to obtain this property or to keep
this property in your possession till any kind of amount
-
claimable remains to be paid under this mortgage. j-
10. We are entitled to pay the amount at any time.
And the mortgage shall be redeemed when we pay up the
amounts and the same shall be given to us and other docu-
G ments and possession shall be returned to us. And if we
require the documents of redemption of mortgage and in
respect of handing over possession· etc. the same shall be
executed and the same shall be got registered." )- .

From a reading of these clauses it may be seen that although the
H mortgagors had delivered possession to the mortgagee they had bound
JADAVJI PURSHOTIAM v. D.N. AMARA1LAL [NATARAJAN, J.) 87

themselves to pay interest for the mortgage amount, that they had A
,
" undertaken the liability to keep the house in good repair and meet all
public charges and pay the insurance premium and that they had
endorsed the Jease deed executed by the tenant Nandlal Hansji (refer-
red to as Patel N andlal Hoda ji in clause 4) in favour of the mortgagee
so that he could collect the rent from the tenant and credit the same
towards interest. In clause 5 the mortgagee is given permission to give B
the house on lease to anyone subject to the terms contained in clauses
}- 3-4. The authorisation, however, gives an option to the mortgagee to
lease out the house to anyone or not to grant any lease. This is made

. clear by the fact that the mortgagors have further stated in clause 5
that if the house is given for a lesser rent or the tenant does not pay the
stipula1ed rent or even if the mortgagee keeps the house vacant, the
c
) mortgagee will not be held liable for any loss meaning thereby that the
mortgagee will not be held accountable for loss of rental income, This
\ is obviously because of the undertaking by the mortgagors in clause 2
that they hold themselves liable to pay interest to the mortgagee "at
the rate of six annas per month under the business period of Diwali
and under the remaining method by compound interest under the D
agreement." Und.er clause 7 the mortgagors have empowered the
mortgagee to keep the property in his possession till the mortgage debt
is fully repaid. Under clause 10 the mortgagors have stated that they
are entitled to redeem the mortgage at any time and that as soon as
redemption takes place the mortgagee should return the documents of
~ title and re-deliver possession of the house. Clauses 7 and 10, there- E
fore, stipulate that the mortgagee is entitled to retain possession of the
mortgage property only till such time the mortgage debt is outstanding
and that as soon as the mortgage is redeemed the mortgagee is bound
to re-deliver possession of the property to the mortgagors. It is with
reference to these terms the question whether the mortgagee had
)
authority to give tenancy rights to the appellant so as to enable him to F
claim tenancy rights beyond the term of the mortgage has got to be
l determined.

Leaving the facts aside for a moment we will turn our attention
to the decision of this Court upon which the appellant's counsel has
placed considerable reliance. For the purpose of the present-case the G
pronouncement of law in Mahabir Gope v. Harbans Narain, Asa Ram
v. Ram Kali, Dahya Lal v. Rasul Mohammed Abdul Rahim, and
·-+-.., Prabhu v. Ram Dev, (supra) does not call for mention with reference
to each decision. Suffice it to say that the general principle which has
been recognised in all these cases has been aptly summarised in
Mull1ls Transfer of Property Act. Seventh Edition, page 514 in the H
following manner:-
88 SUPREME COURT REPORTS [1988] 1 S.C.R.

"No question of imprudence can ~rise where, as in Prabhu
A
v. Ram Dev, the rights of the. tenant were enlarged by
A
tenancy legislation enacted after the tenant was put in pos-
session by the mortgagee. It is submitted that this state-
ment of the law is consistent with all the Supreme Court
decisions quoted above."
B
The other proposition of law which has found acceptance with this
Court is that a tenancy created by a mortgagee in possession may be '-{
binding even after the termination of the title of the mortgagee in
possession if the mortgagors had concurred to the grant of the lease
(vide Film Corporation's case.) '
c
~
It now behoves us to consider whether the appellant's case falls
under one of the two categories sef out above i.e., ( 1) whether his
tenancy rights came to be enlarged by tenancy legislation after he was I

put in possession by the mortgagee, or (2) whether the tenancy created
in his favour by the mortgagee had the concurrence of the mortgagors
D so as to entitle the appellant to c1aim tenancy rights even after the
redemption of the mortgage. In so far as the first question is con-
cerned, the appellant was .not inducted into possession soon after the
mortgage deed was executed and the mortgagee was put in possession
of the property but long thereafter. In fact there was already a tenant
on the mortgage property when the mortgagee was put in possession in .__
E July 1947. During the period of tenancy of that tenant (Nandlal
Hansji) the Saurashtra Act XXII of 1951 came to be enacted and it
gave protection to the tenants from paying exhorbitant rent and from
unreasonable eviction. Despite the enlargement of his tenancy rights
by the Act, Nandlal Hansji vacated the lease premises in 1956 and it
was thereafter the mortgagee inducted the appellant in possession.
F This is, therefore, a case where the Saurashtra Act was already in force
when the appellant was inducted into possession. By no stretch of
imagination can the appellant contend that his tenancy rights became >-
enlarged after the mortgagee granted him the lease by subsequent
legislation enacted for affording protection to tenants. The fact that
the mortgagee had granted lease only for a period of one year will not
G alter the situation in any manner because not only had the mortgagee
executed the lease deed after the expiry of the lease period of one year
but also because the restriction of the lease period to one year was of
no consequence in view of the provisions contained in the Saurashtra )-
Act XXII of 1951. The learned counsel for the appellant placed re-
liance on the fact that the Bombay Rent Act had come to be enacted
H after the appellant was inducted into the property and hence it is a
JADAVJI PURSHOTIAM v. D.N. AMARATLAL [NATARAJAN, J.j 89

.J subsequent tenancy legislation which has enlarged the tenancy rights A
of the appellant. This argument overlooks the fact that Saurashtra Act
XXII of 1951 was already in force when the mortgagee granted the
lease to the appellant and the said Act continued to be in force till
31.12.1963 and it was only from 1.1.1964 the Bombay Rent Act came
to replace Saurashtra Act XXII of 1951. In the second appeals pertain-
ing to the standard rent application and the suit for ejectment filed by B
the mortgagee the High Court has observed as follows:-
-r· "Now, it is not in dispute that the civil suit as well as the
standard rent application were instituted at the time when
~
the Saurashtra Act was in operation in Bhavnagar area. It
is not disputed that the present appeals are governed by the c

.
) said Act. However, I may say that the Saurashtra Act was
repealed by Section 51 of Gujarat Act 57 of 1964 and the
Bombay Rent, Hotel and Lodging House Rates Control
Act, 1947 (Bombay Act LVII of 1947), it will hereafter be
referred to as "the Bombay Act" was extended to the area
comprised in the former State of Saurashtra which includes D
Bhavnagar where the suit premises are situate. The repeal
is with effect from December 31, 1963. The present two
second appeals have been instituted some time in February
1968 (sic for 1963) before the repeal of the Saurashtra Act.
Thus the present second appeal will have to be decided on
the footing that the Saurashtra Act is applicable to the suit E
premises.''

-· It is, therefore, futile for the counsel to contend that the tenancy in
favour of the appellant was created when no tenancy legislation was in
force and the appellant's rights became enlarged by reason of tenancy
F
legislation enacted subsequently viz. the Bombay Rent Act. Hence,
the reliance of the appellant's counsel on the four earlier decisions of
~ this Court, including the two decisions rendered by Benches of five
Judges cannot be of any avail to the appellant.

We are then left with the question wh~ther the lease granted to
the appellant by the mortgagee had the approval or concurrence of the G
mortgagors so as to entitle the appellant to claim tenancy rights even
as against the mortgagors after they had redeemed the mortgage. The
··-t- bedrock for the appellant's contention that the mortgagors had given
express authority to the mortgagee to create tenancy over the mort-
gage property is the first sentence contained in clause 5 of the mort-
gage deed which says that "you are entitled to give on rent the said H
90 SUPREME COURT REPORTS [1988] 1 S.C.R.
i
A house to anybody under the aforesaid clauses no. 3-4". Viewed from
any angle the authorisation given to the mortgagee to give on lease the
mortgage property cannot be said to be an unconditional and absolute
~'
one. In the first place it has to be remembered that the mortgage deed
came into existence in July 1947 which was long prior to the Saurashtra
Act XXII of 1951 being enacted. Neither the mortgagors nor the mort-
B gagee could have anticipated a tenancy legislation like Saurashtra Act
XXII of 1951 being enacted by the Government so as to enlarge the
rights of the tenants. In such circumstances the appellant cannot legiti-
mately contend that the mortgagors bad given an unrestricted power to
the mortgagee to creak a tenancy for any length of time and are
therefore bound to accept the lease transaction even after the redemp-
tion of the mortgage deed. Secondly even without reference to the
C absence of any tenancy legislation when the mortgage deed came to be
executed, there are a host of materials in the mortgage deed itself to
show that the permission given to the mortgagee to induct tenants was
of a very limited and qualified nature. We have already pointed out
that in spite of the mortgagee being given possession, the mortgagors
D had agreed to pay interest to the mortgagee at mercantile rate and also
as per contractual rate. This was not, therefore, a case where the
mortgagee was put in possession of the mortgage property in order to
appropriate the usufructs in lieu of interest. The position stands
further clarified by the recitals in clause 5 which absolve the mortgagee
of any liability for loss of income from the mortgage property due to
E fall in rent or non-payment of rent or even due to non-leasing the
property and keeping the house vacant. On account of these guaran-
tees the mortgagee was under no compulsion to lease out the property,
just because of the permission given to him to grant leases, either to
secure rental income in lieu of interest or on grounds of prudent
management. The mortgagee should have realised that by inducting
F the appellant, he was running the risk of being unable to deliver
possession of the house to the mortgagors when the mortgage was
redeemed and thereby he would be contravening clauses 7 and 10 of the
mortgage deed. In such circumstances there is no scope at all for the
appellant to contend that the mortgagee had leased out the property in
the belief that he was well within the authority given to him by the
G mortgagors to lease out the property and therefore the mortgagors are
bound by the lease transaction.

In the light of these findings it follows that there is neither need
nor necessity for us to go into the question whether the pronounce-
ments made in Film Corporations's case constitute a deviation from
H the ratio laid down in the earlier cases of Mahabir Gope, Asa Ram,
JADAVJI PURSHOTIAM v.. D.N. AMARATLAL [NATARAJAN, J.] 91

Dahya Lal and Prabhu (supra) and as such the appeal ~hould be refer-
A
"" red to a larger Bench for decision. For the same reason we are of the
view that there is no need to go into the question whether the judg-
ments rendered in Purshottam v. Madhavji Meghaji, SV Venkatarama
Reddiar v. Abdul Gani Rowther & Ors. and Devkinandan v. Roshan
Lal, (supra) require consideration by this Court. The High Court. we
may observe, has not held against the appellant because the lease B
granted by the mortgagee pertained to an urban immovable property
but because the mortgagors had not given authority to the mortgagee
'r to create a lease which would enure beyond the term of the mortgage,
and secondly the authority given to the mortgagee to lease out the
.- property was circumscribed by the stipulation that the mortgagee
should re-deliver the possession of the property whenever the mort-
-' ),
\
gage was redeemed.

In the course of the arguments Mr. Bhatt also sought to contend
c

that by reason of the authority given to the mortgagee to create
tenancies over the mortgage property, the mortgagors had constituted
the mortgagee their agent and hence the mortgagors as principals were D
bound by the acts of their agent. We cannot countenance this argu-
ment because the relationship between the parties to the mortgage was
always one of debtor and creditor and there was no question of the
mortgagors constituting the mortgagee as their agent.
_;
Sine'< it has been found that the mortgagors had not empowered F
the mortgagee to create a lease which would be binding on them after
the redemption of the mortgage and since the appellant's rights, as a
tenant, did not become enlarged by means of any tenancy legislation
which came to be enacted after the lease was granted, the appellant
can claim tenancy rights only as against his landlord viz. the mortgagee
and not against the mortgagors. As soon as the mortgagee's rights F
became extinguished by the redemption of the mortgage, neither he
) nor anyone inducted by him has a right to be in possession of the
mortgage property. Consequently, the mortgagors were entitled to
seek ejectment of the mortgagee and the tenant inducted by him. The
appellant had no independent rights and hence it was not necessary
that he should have been made a party to the suit filed by the mort- G
gagee or the execution application taken out by the mortgagors after
the redemption of the mortgage. His position was akin to that of a
sub-tenant whose rights were co-terminus with those of the tenant
-+ himself. As such the execution application taken against the mort-
gagee will be binding on the appellant having no independent rights
of his own, the appellant cannot contend that the decrees and the H
92 SUPREME COURT REPORTS [1988] l 'S.C.R.

A execution application are not binding on him as he was not made a ,,\
party to the proceedings.

For all the reasons aforesaid we are of the view that the appeal
deserves to fail. Accordingly the appeal stands dismissed with costs to
B the contesting respondents.

P.S.S. Appeal dismissed.

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