All India Film Corporation Ltd. & Ors v. Shri Raja Gyan Nath and Ors.
Hidayatulluh, C.J. These are appeals by certificate granted
by the Punja!: High Court against the judgment and decree dated
March 19, 1963. The property in dispute is a building iQ. Jul
lundur City in which there is located a cinema. It was formerly
called 'ChitraTa!kies' and now is known as 'Odeon Cinema'. The
building was constructed in 1933 on land measuring 3 kanals and
1 7 marlas. The original owner-one Azim Baksh-migrated to
FILM CORP, LTD. v. GYAN NATH (Hidayatullah, C.l.) f,83
Pakistan in 194 7 and this property was declared evacuee property.
Before migration Azim Baksh had dealt with this property in
several ways. On January 21, . 1946 he had mortgaged the
building with possession for Rs. 70,000/- with Malawa Ram and
Gainda Mal. On January 22, 1946 Azim Baksh took the build
ing on lease on a rent of Rs. 162.8 annas for 11 months from the
mortgagees. He executed a rent note. On February 8, 1946
this rent note was cancelled. An endorsement was made on the
. rent note to the following effect :
"With the consent of Lal Gainda Ram and Malawa
Ram, the said rent-deed has been cancelled. Rent for
one month may be included in the mortgage amount.
The mortgagees are entitled to carry on the aforesaid
cinema in any way they like or may give the same on
lease to any body else. I shall have no objection''.
Previously Azlffi Baksh had rented this building to Sant Ram
and Sita Ram on Rs. 150/- per mo1 h. After the release of the
property the mortgagees leased it to Sita Ram and Sohan Lal
on Rs. 200/- per month. This lease was terminated on July 26,
1950. On August, 1951 the mortgagees leased it to the All India
Film Corporation Ltd., appellant No. 1 (defendant No. 2), on
Rs. 250/- per month vide Ex. D.2 W.2/1. The lease was for 5
years in the first instance from September 15, 1951 to September
14, 1956. It was, however, renewable for 10 years by yearly
renewals. There was a condition that renewal on the same terms
was not to !le refused. By this lease, the lessee was given full
right to use the property whether by itself or through agents or in
partnership or by sub-leasing.
Malawa Ram and Gainda Mal partitioned their property and
this house fell to the share of Gainda Mal. The lessee company
in its turn sub-let the premises to defendants 3 to 9 on a monthly
rent of Rs. 1,250/-. This was on May 16, 1952. Before sub
leasing the premises, the head lessee companv had equipped the
house with cinema machinery etc. and the sub-lease included the
use of machinery etc.
Gainda Mal applied under Evacuee Interest Separation Act,
1951 for separation of his interest. The Competent Officer by
his order, August 25, 1955, determined the mortgage charge as
Rs. 90,807.4 annas and ordered sale of the building and land to·
gether with another plot. The respondent in this appeal r..aja
Gyan Nath purchased the cinema with the land (3 kanals 17 mar
las) for Rs. 65,000/- on December 3, lC.:55. The sale certificate
was issued on March 3, 1956. The mortgage charge was paid off
on April 19, 1958.
The purchaser Raja G) .m Nath then filed a suit for possession
of this property from the head Jessee and the sub-lessees on August
5, 1959 and for mesne profits at the rate of Rs. 1,250/- per month.
The sub-lessees claimed the benefit of the East Punjab Urban Rent
Restriction Act (3 of 1949). Later ilie plaintiff gave up his claim
to the cinema machinery, furniture and fittings. The trial Judge
decreed the claim in full except that mesne profits were reduced
to Rs. 500/- per month and half of the costs were disallowed. De
fendants 2, 4, 10 and 11 appealed against the decree to the High
Court. The plaintiff cross-objected asking for mesne profits at
Rs. 1,250/- with interest at 6% per year and the remaining costs.
The High Court affirmed the decree, but reduced mesne profits
further from Rs. 500/- to Rs. 250/- per month. The mesne pro
fits were to run from the date of suit till possession with interest
at 6 % per annum. The High Court granted a certificate to both
sides and they have filed their respective appeals.
In the High Court tmly three points were urged :
(1) Whether the defendants were protected by the D
East Punjab Urban Rent Restriction Act (3 of 1949) ?
(2) What were the mesne profits ? and
(3) Whether plaintiff was entitled .to possession be-
fore the expiry of the full term of the lease with right to E
renewals?
These are the only points which have been urged before us in
these appeals.
The first question to consider is this : Did the tenancy creat
ed by the mortgagee in possession survive the termination of the
mortgagee interest so as to be binding on the purchaser? A gene
ral proposition of law is that no person can confer on another a
better title than he himself has. A mortgage is a transfer of an
interest in specific immovable property for the purpose of securing
repayment of a loan. A morgtagee's interest lasts only as long as
the mortgage has not been paid off. Therefore on redemption
of the mortgage the title of the mortgagee comes to an end. A
derivative title from him must ordinarily come to an end with the
termination of the mortgagee's title. The mortgagee by creating
a tenancy becomes the lessor of the property but his interest as
lessor is coterminous with his mortgagee interest. Section 111 ( c)
of the Transfer of Property Act provides that a lease of immovable
property determines where the interest of the lessor in the pro
perty terminates on, or his power to dispose of the same, extends
only to the happening of any event-by ,_the happening of such
FILM CORP. LTD v. GYAN NATH (Hidayatullah, C.J.) 585
event. The duration of the mortgagee's interest determines his
position as the lessor. The relationship of lessor and lessee can
not subsist beyond the mortgagee's interest unless the relationship
is agreed to by the mortgagor or a fresh relationship is recreated.
This the mortgagor or the person succeeding to the mortgagor's
interest may elect to do. But if he does not, the lessee cannot
claim any rights beyond the term of his original lessor's interest.
These propositions are well-understood and find support in two
rulinp,s of this Court in Mahabir Gape and others v. Harbans
Narain Singh(') and Asaram and others v. Mst. Ram Kali(').
To the above propositions there is, however, one exception.
That flows from s. 76(a) which lays down liabilities of a mortgagee
in possession. It is provided there that when during the conti
nuance of the mortgage, the mortgagee takes possession of the
mortgaged property, he must manage the property as a person of
ordinary prudence would manage it if it were his own. From
this it is inferred that acts done bona fide and prudently in the
ordinary course of management, may bind even after the termi
nation of tne title of the mortgagee in possession. This principle
applies ordinarily to the management of agricultural lands and
has seldom been extended to urban property so as to tie it up in
the hands of lessees or to confer on them rights under special
statutes. To this again there is an exception. The lease will
continue to bind the mortgagor or persons deriving interest from
him if the mortgagor had concurred to grant it.
Applying these principles to the facts of this case, we find
that the property, the subject of the lease, was a house in the
city of Jullundur suitable for a cinema theatre. This was leased
for five years on a rent of Rs. 250/- p.m. This sum included the
use of a passage for which the rent was Rs. 100/- p.m. In effect
the rent of the building was Rs. 150/-. This was lower rent
than the rent it had fetched before. The mortgagee further
agreed to renewal of the lease on the same terms for a further
period of 10 years. It is in evidence that a plot only 8 marlas
formed the passage and the rent was Rs. 100/- and on that basis ·
land of 3 kanals and 17 marlas with a building fit for cinema
ought to have fetched much more. Such a building in a grow
ing city ought not to have been tied down for a period of fifteen
years, to a rent of Rs. 150/- or even Rs. 250/- p.m. The learned
subordinate Judge pointed out that the annual rent of the building
was assessed at Rs. 10,800/- for the years 1950-55. This shows
how low was the actual rent. The history of the building in the
hands of the head lessee shows that after an investment of Rs.
60,000/- the rent went upto Rs. 1,250 p.m. with additional rights
(I) [1952] S.C.R. 775. (2) [1958] S.C.R. ~86.
586 SUPREME COURT REPORTS (1970] 2 S.C.R.
to the head lessee. The building without the fittings and the
land of the passage fetched Rs. 65,000/-. Therefore a tenant
willing to pay a better rent could easily have been found. The
case is thus not covered by the exception because we cannot hold
that such a long lease on such a small rent was an act of ,prudence,
whether it was u bona fide act or not, and whether the exception
can apply to urban property.
This brings us to the next question. It is whether the tenants
could t~ke advantage of the provisions of the East Punjab Urban
Rent Restriction Act, 1949 ? The answer to this question de
pends on whether we can say that there was a tenancy to protect.
We have shown above that the lease came to an end with the
mortgagee's interest in the property. Although this was not a
case of a redemption plain and simple because a straight redemp
tion was refused, the property was put to sale and the purchaser
paid off the mortgage in full. The interests of the mortgagor and
mortgagee united in the person of the purchaser arid the mortgage
ceased to subsist. In this view of the matter the purchaser,
speaking in his character as a mortgagor, could claim that the
mortgagee's .action came to an end and there did not subsist any
relationship between him and the tenants.
The respondents attempted to argue that the Rent Restriction
Act defines landlord and tenant with reference to the payment of
rent. A landlord means a person entitl.!d to receive rent and a E
tenant means any person by whom or on whose account rent is
payable. These definitions apply if the tenan,y, either real or
statutory, could be said to survive after the termination oi the
mortgage .. The scheme of s. 10 of the Evacuee Interest (Separa
tion) Act, 1951 is that in the case of a mortgagor or a mortgagee,
(a) the Competent Officer may pay to the Custodian or the clai- F
mant the amount payable under the mortgage debt and redeem
the property, or (b) the Competent Officer may sell the mort
gaged property for satisfaction of the mortgage debt and distribute
the sale proceeds thereof, or (c) the Competent Officer may parti-
tion the property between the mortgagor ru;d the mortgagee pro·
portionate to their shares, or (d) adopt a combination of any of G
these measures. It is obvious that method (b) was followed. The
property was sold and the mortgage was satisfied. This led to the
extinction of the mortgagees' interest and the purchaser acquired
full title to the property. The termination of the mortgagee in
terest terminated the relationship of landlord and tenant and it
could not, in the circumstances, be said to run with the land.
There being no. landlord and no tenant, ' the provisions of the H
Rent Restriction Act could not apply any further. Nor could it
be said that when the mortgagor cancelled the rent note and autho-
FILM CORP. LTD. v. GYAN NATH (HidayatuUah, C.J.) 587
rised the mortgagee to find any oilier tenant, the intention was
to allow. expressly-a tenancy beyond the term of the mortgage.
In this view of the matter the decision of the High Court and the
court below cannot be said to be erroneous.
There remains to consider the question of mesne profits. The
High Court reduced the mesne profits to Rs. 250/- p.m. which
was the actual rent paid for the building and the passage. There
is some doubt as to whether this sum included Rs. 100/- for the
use of the passage. However, we think that the matter is between
the purchaser and the head lessee. The rent of Rs. 250/-, al
though on a low side, was the actual rent on which the premises
were held. The High Court was, therefore, not wrong in limit
ing mesne profits to that figure.
The result is that both the appeals fail and will be dismissed
with costs. There will be a right to set off the costs and the re
sulting difference alone will be payable.
Y.P. Appeals dismissed.
L3SupCI/70-7