Chapter 13 22

Chapter 13
Rights of Mortgagees
MORTGAGEE’S RIGHT AGAINST THE MORTGAGOR

The mortgagee has two rights, one against the person of the mortgagor,
and the other against mortgaged property. The former is dealt with in
Section 68 and the latter in Sections 67, 69 and 69-A. The mortgagee
may sue the mortgagor for the money in cases dealt with in Section 68
or he may use the profits of the property as in a usufructuary mortgage,
or get the mortgaged property sold as in the case of a simple mortgage,
English mortgage and a mortgage by deposit of title deeds, or foreclose
as in the case of a mortgage by conditional sale and become the owner.
Section 68 provides:
68. Right to sue for mortgage-money. — (1) The mortgagee has a right to sue
for the mortgage-money in the following cases and no others, namely—
(a) where the mortgagor binds himself to repay the same;
(b) where, by any cause other than the wrongful act or default of the mort
gagor or mortgagee, the mortgaged property is wholly or partially
destroyed or the security is rendered insufficient within the meaning
of Section 66, and the mortgagee has given the mortgagor a reasonable
opportunity of providing further security enough to render the whole
security sufficient, and the mortgagor has failed to do so;
(c) where the mortgagee is deprived of the whole or part of his security by or
in consequence of the wrongful act or default of the mortgagor;
(d) where, the mortgagee being entitled to possession of the mortgaged
property, the mortgagor fails to deliver the same to him, or to secure the
possession thereof to him without disturbance by the mortgagor or any
person claiming under a title superior to that of the mortgagor:
Provided that, in the case referred to in clause (a), a transferee from the
mortgagor or from his legal representative shall not be liable to be sued for the
mortgage-money.
(2) Where a suit is brought under clause (a) or clause (b) of sub-section (1),
the Court may, at its discretion, stay the suit and all proceedings therein, not
withstanding any contract to the contrary, until the mortgagee has exhausted
all his available remedies against the mortgaged property or what remains of it,
[S. 68] RIGHTS OF MORTGAGEES 239
unless the mortgagee abandons his security and, if necessary, re-transfers the
mortgaged property.
The contract referred to in clause (a) always exists in a simple mort
gage, English mortgage or mortgage by deposit of title deeds and it may
also exist if expressly provided for in an anomalous mortgage. It must
be noted that merely because a mortgage is a secondary remedy for the
recovery of the money, it cannot be assumed that the primary remedy of
suing on the loan also always exists. The period of limitation for enforce
ment of personal remedy is now three years.
Clause (b) deals with cases when the whole or part of the property
is destroyed by an act of God. This clause may also be compared with
Section 73 already discussed.
Clauses (c) and (d) are really examples of cases where there is breach
of covenant for title referred to in Section 65. One point to be noted
with respect to clause (d) is that the mortgagor is responsible only when
the mortgagee’s possession is disturbed by the mortgagor and not by a
trespasser.
This applies only to usufructuary mortgages. In Pertab Bahadur v
Gajadher Baksh1, the mortgagor covenanted that until delivery of pos
session of the mortgaged property (12 villages) he would pay interest at 2
per cent on the loan. Possession was given immediately, but shortly there
after, the mortgagee was dispossessed of six villages. Thirty-one years
thereafter, the mortgagor filed a suit for redemption and contended that
he was entitled to redeem on payment of the original amount advanced
without any liability to pay interest. It was held:
The mortgage was of the class known as usufructuary mortgages, which are
not uncommon in India, and in which possession of the mortgaged property
is delivered to the mortgagee, who takes the rents and profits [in lieu of inter
est or in payment of the mortgage money, or partly in lieu of interest and
partly in payment of the mortgage money (Act 4 of 1882, S. 58(d))]. In this
case the arrangement between the parties was completed by the execution
of lease, under which the mortgagor became the tenant of the mortgagee,
and paid rent in lieu of interest. Under such a mortgage the mortgagee takes
his chance of the rents and profits being greater or less than the interest
which might have been reserved by the bond, and the mortgagor is entitled to
redeem on repayment of the mortgage money.
But it was contended that,... the reduction of... [the] number [of villages]
to six...constituted a failure on the part of the mortgagor to secure to the
mortgagee possession of the mortgaged property, which entitled the mortga
gee to claim interest in lieu of the rents and profits of the property of which
he was dispossessed.... [But] the mortgagee appears to have acquiesced in
1. 1902 SCC OnLine PC 20: (1901-02) 29 IA 148; Lingaiah v Chikkahonnalagaiah, 1978
SCC OnLine Kar 8: AIR 1978 Kar 146; Sarjug Devi v Bhamar Lal Pugalia.i^z SCC
OnLine Pat 15: AIR 1982 Pat 180; Indian Overseas Bank v N.A. Sellamuthu, 1981 SCC
OnLine Mad 25: AIR 1982 Mad 89.
240 LAW OF TRANSFER OF PROPERTY [Chap. 13
his dispossession.... ‘He brought no suit then, or at any time subsequently,

to recover his mortgage money, but appears to have remained satisfied for
thirty-one years with the diminished security and the possession of the
remaining villages? It may be added that he made no attempt to enhance the
rent of the villages which were left to him, and that they constitute an ample
security for the whole amount of his claim.
SCOPE OF THE PROVISO AS SHOWN BY

THE FOLLOWING DECISION
In Jamna Das v Ram Autar Pande2, the mortgagor sold the mortgaged
CASE PILOT property including the equity of redemption to the respondent who
retained the amount of the mortgage debt out of the price due in order to
redeem the mortgage if he thought fit. The appellant, who was the mort
gagee, obtained a decree for sale of the property. The proceeds proving
insufficient, he sued the respondent personally. It was held:
The action is brought by a mortgagee to enforce against a purchaser of the
mortgaged property an undertaking that he entered into with his vendor. The
mortgagee has no right to avail himself of that. He was no party to the sale.
The purchaser entered into no contract with him, and the purchaser is not
personally bound to pay this mortgage debt.
Under clause (z), a suit filed by a mortgagee under clause (i)(tf) or (b) may
be stayed. The reason is that the mortgagor is not at fault and it is only
fair that the mortgagee should extinguish or exhaust the mortgage before
resorting to the suit for recovering the mortgage-money.
OTHER RIGHTS OF THE MORTGAGEE: RIGHTS OF

FORECLOSURE AND SALE [S. 67]
As regards the rights against property, those of foreclosure and sale are
provided for in Section 67, which reads:
67. Right to foreclosure or sale.—In the absence of a contract to the contrary,
the mortgagee has, at any time after the mortgage-money has become due to him,
and before a decree has been made for the redemption of the mortgaged prop
erty, or the mortgage-money has been paid or deposited as hereinafter provided,
a right to obtain from the Court a decree that the mortgagor shall be absolutely
debarred of his right to redeem the property, or a decree that the property be
sold.
A suit to obtain a decree that a mortgagor shall be absolutely debarred of his
right to redeem the mortgaged property is called a suit for foreclosure.
Nothing in this section shall be deemed —
(a) to authorize any mortgagee, other than a mortgagee by conditional sale
or a mortgagee under an anomalous mortgage by the terms of which he is
entitled to foreclose, to institute a suit for foreclosure, or a usufructuary
2. 1911 SCC OnLine PC 35: (1911-ii) 39 IA 7.

S. 67] RIGHTS OF MORTGAGEES 241
mortgagee as such or a mortgagee by conditional sale as such to institute

a suit for sale; or
(b) to authorize a mortgagor who holds the mortgagee’s rights as his trustee
or legal representative, and who may sue for a sale of the property, to
institute a suit for foreclosure; or
(c) to authorize the mortgagee of a railway, canal, or other work in the main
tenance of which the public are interested, to institute a suit for foreclo
sure or sale; or
(d) to authorize a person interested in part only of the mortgage-money to
institute a suit relating only to a corresponding part of the mortgaged
property, unless the mortgagees have, with the consent of the mortgagor,
severed their interests under the mortgage.
SCOPE
This section deals with mortgagee’s rights. It corresponds to Section 60,
under which the mortgagor has the right to redeem, while under this
section, the mortgagee has a right to foreclosure. The effect of foreclo
sure is to make a conditional conveyance absolute, but, under clause (#),
it is only a mortgagee by conditional sale and a mortgagee under an
anomalous mortgage which gives him the right, that is the right to fore
close. The mortgagor’s right of redemption and the mortgagee’s right of
foreclosure are coextensive. Neither can exercise his right before the due
date. But if no date is fixed the mortgagee must formally make a demand
on the mortgagor.3 Also the mortgagee can enter into a contract to the
contrary unlike a mortgagor with respect to his right to redemption. The
reason for the rule in clause (d) is to prevent harassment to the mortgagor
with several suits by the various mortgagees. That is, all the co-mortga-
gees should, ordinarily, join together and file a single suit.
In Harish Chandra Singh Deo v Bansidhar Mohanty4, it was held by
the Supreme Court that the real beneficiary under a transaction (mort
gage) cannot be disentitled to enforce a right arising thereunder. It was
observed that in Gur Narayan v Sheolal Singh5, the Privy Council only
recognised that the benamidar can also sue and not that the benamidar
alone can sue.
3. Nilakanth Balwant Natu v Shri Satchidanand Vidya Narasinh Bharati Swami Garu,
1930 SCC OnLine PC 36: (19x9-30) 57 IA 194; Amulya Gopal Majumdar v United
Industrial Bank Ltd, 1980 SCC OnLine Cal 118: AIR 1981 Cal 404; Massa Singh v
Gopal Singh, 1983 SCC OnLine P&H 318: AIR 1983 P&H 437; Ram Kishun Prasad v
Manohar Lal Gupta, AIR 2008 NOC 845 (Pat), the mortgagor’s right is protected by
his right of redemption, the mortgagee’s interest is protected by his right to take back
his money. These two rights have to be held in a state of balance. A suit for redemption
cannot be converted into a suit for title because the question of paramount title cannot
be taken up in a suit for redemption. S. Nazeer Ahmed v State Bank of Mysore, (2007)
11 SCC 75, for enforcement of mortgage security by the lender, the remedy has been held
to be sale of mortgaged property. Seeking execution of a decree for recovery of the loan
amount may not be efficacious.
4. AIR 1965 SC 1738: (1966) 1 SCR 153.
5. 1918 SCC OnLine PC 74: (1918-19) 46 IA 1.
The following cases show the scope of the phrase “become due”.
In Lasa Din v Gulab Kunwar*, the mortgage was dated z6 July 1912
and was for six years from that date. It was also covenanted that the mort
gagor would pay interest at 12 per cent per annum and in default of such
payment, the mortgagee had power to realise the entire mortgage-money.
The mortgagor defaulted in the payment of interest for the first year. The
mortgagee filed the suit for a mortgage decree on 28 February 1928. On
the question whether the limitation period of 12 years started to run
from 1913 (the date of first default) or 1918 (1912 + 6 years), it was held:
[After quoting from Panchant v Ansar Husain6 78(below).] It is no doubt true
that the question now before the Board was advisedly left open for future
discussion, but the considerations referred to... are of great weight, and it is
difficult to find an answer to them.... Their Lordships... are not prepared to
hold that the mortgagor could in this way take advantage of his own default:
they do not think that upon such default he would have the right to redeem,
and in their opinion the mortgage money does not ‘become due’ within the
meaning of Art. 132 of the Limitation Act until both the mortgagor’s right to
redeem and the mortgagee’s right to enforce his security have accrued.
In Pancham v Ansar Husain3, a mortgage-deed was executed on 21
February 1893, and the time fixed for repayment was 12 years, but the
mortgagors covenanted to pay annually 500 towards principal and inter
est and that in case of default the mortgagee could sue for the entire debt.
The mortgagor defaulted in making the payment due on February 1894.
The mortgagee instituted the suit to enforce the mortgage by sale of the
property on 21 February 1917. On the question whether the cause of
action arose on 21 February 1894 or 21 February 1905 (1893 +12 years),
for the purposes of limitation, it was held:
Applying certain previous decisions of... [the High] Court, and in particular
a Full Bench decision in Gaya Din v Jhumman Lal9, the High Court held that
CASE PILOT
under a clause in the above form a single default on the part of the mort
gagors, without any act of election, cancellation or other form of response
or acceptance on the part of the mortgagees, and even, it would appear,
against their desire, operates, eo instanti, to make the money secured by the
mortgage ‘become due,’ so that all right of action in respect of the security
is finally barred 12 years later, that is, in the present case, on 21st February
1906. All this the High Court held, notwithstanding that the mortgage is
for a term certain, a provision which may be as much for the benefit of the
mortgagees as of the mortgagors and notwithstanding that the proviso is
exclusively for the benefit of the mortgagees....
Their Lordships would be reluctant, however, to pronounce on...[the]
question in the absence of full argument, and it is accordingly a satisfaction
6. 1932 SCC OnLine PC 35: (1931-32) 59 IA 376.
7. 1926 SCC OnLine PC 26: (1925-26) 53 IA 187.
8. Ibid.
9. 1915 SCC OnLine All 61: ILR (1915) 37 All 400.
to them to find that the present case...can be decided on its own special
circumstances....
... [T]he Plaintiff’s assertion was that the cause of action accrued to them
on the zist February 1894 ... [and] that the suit, which would otherwise have
been out of time, is exempted from limitation only by the payments of inter
est... But the Plaintiffs’ attempt to prove them...entirely failed....
In Lingam Krishna Bhupati Devu Garu v Sri Pusapati Vijayarama
Gajapatiraj™, the mortgage was a simple mortgage and provided that
if the whole or portion of the interest remained unpaid the mortgagee
could take possession of the mortgaged properties as a usufructuary
mortgage. The mortgagee on the mortgagor’s failure to pay the principal
and interest sued for sale of the mortgaged property. It was held:
[The mortgagee] ...retained the position of a simple mortgagee...and asks
the Court to enforce his rights. The decree [for sale] was a matter of course.
[See, cl. (fl)]
In Narsingh Partab v Mohammad Yaqub10 11, the mortgage-deed provided:
1) that one eight annas share in certain villages had been hypothecated in CASE P|L0T
lieu of the principal and interest and that possession had been delivered
in order to pay a part or whole of the interest; 2) the mortgage-money
was promised to be repaid within 35 years; and 3) that the mortgagees
were to manage the property. Possession, however, was not given. On the
question of the mortgagee’s right to a sale, it was held:
In their Lordships’ opinion the mortgage is a combination of a simple mort
gage and an usufructuary mortgage....
It is plain according to the findings of the Subordinate Judge that
the... [mortgagors] have failed to discharge their obligation of making over
possession to the mortgagee and have thereby deprived the mortgagee of part
of his security and in these circumstances their Lordships are of opinion that
under Sect. 68 the money has become payable and the plaintiff is entitled to a
money decree for the same. Their Lordships are further of opinion that under
Sect. 67 a decree for sale can be made. [See, cl. (fl)]
A suit was filed for declaration of title because the mortgagor had failed
to redeem the mortgage. Plaintiff’s father was in possession of property
and the plaintiff inherited that possession. He was not able to produce
any mortgage-deed, nor to show the terms and conditions of the mort
gage or of the date or period fixed for redemption. The court said that by
the mere fact of possession in the absence of any proof of mortgage, the
plaintiff was not entitled to any relief.12
For the remedies available to the mortgagee under the various mort
gages, see, the notes under Section 58.
10. 1911 SCC OnLine PC 7: (1910-11) 15 CWN 441.

11. 1929 SCC OnLine PC 26: (1928-29) 56 IA 299.
12. Gurnam Singh v Hazara Singh, AIR 2015 NOC 389 (P&H).
In Yeo Htean Sew v Abu Zaffer Koreeshee13, the mortgagor agreed to

pay the principal amount of the mortgage within one year and the inter
est every month and that in default of paying interest in one month the
entire amount of principal and interest should become due and payable.
Ordinarily, default in payment of interest does not accelerate the mortga
gee’s right but in this case it was held that there was an express provision
to the contrary.
CLAUSE (b)
The reason for this clause is that if a mortgagor, who is also a trustee for
the mortgagee is allowed to foreclose, he will become trustee of his own
property.
CLAUSE (c)
The reason for this clause is convenience and interest of the general
public.
CLAUSE (d)
In Sunitabala Debi v Dhara Sundari Debi Chowdhurani14, the appellant
executed a mortgage mortgaging the real and personal estate to secure
payment of two equal sums to two widows. One of the widows instituted
a suit on the mortgage-deed for sale of half the mortgaged property. It
was held:
It would, of course, be possible—though inconvenient—to execute in one
document a mortgage of one-half of an entire property in favour of each of
two mortgagees. By this means two independent mortgages would be com
bined in one deed and in such a case independent relief might be granted to
each mortgagee; but the present mortgage does not take that form.... This
mortgage clearly effects the conveyance of the real estate to the mortgagees
as tenants-in-common and no redemption could be effected of part of the
property by paying to one of the mortgagees her separate debt....
Where a mortgage is made by one mortgagor to two tenants-in-common,
the right of either mortgagee who desires to realise the mortgaged property
and obtain payment of the debt, if the consent of the co-mortgagee cannot
be obtained, is to add the co-mortgagee as a defendant to the suit and to ask
for the proper mortgage decree, which would provide for all the necessary
accounts and payments.
That is, normally, a partial sale or foreclosure is not allowed. There may
be exceptions as where the mortgagee becomes part owner or where the
13. 1900 SCC OnLine PC 7: (1899-1900) 27 IA 98.

14. 1919 SCC OnLine PC 33: (1918-19) 46 IA 272.
mortgagor expressly consents to such severance.15 In such a case it is bet

ter for one co-mortgagee to implead the other co-mortgagees.
Section 69 provides for sale without intervention of court in certain
cases. It provides:
69. Power of sale when valid. — (1) A mortgagee, or any person acting on his
behalf, shall, subject to the provisions of this section, have power to sell or con
cur in selling the mortgaged property, or any part thereof, in default of payment
of the mortgage-money, without the intervention of the Court, in the following
cases and in no other, namely:
(a) where the mortgage is an English mortgage, and neither the mortgagor
nor the mortgagee is a Hindu, Muhammadan or Buddhist or a member
of any other race, sect, tribe or class from time to time specified in this
behalf by the State Government, in the Official Gazette;
(b) where a power of sale without the intervention of the Court is expressly
conferred on the mortgagee by the mortgage-deed, and the mortgagee is
the Government;
(c) where a power of sale without the intervention of the Court is expressly
conferred on the mortgagee by mortgage-deed, and the mortgaged prop
erty or any part thereof was, on the date of the execution of the mort
gage-deed, situate within the towns of Calcutta, Madras, Bombay, or in
any other town or area which the State Government may, by notification
in the Official Gazette, specify in this behalf.
(2) No such power shall be exercised unless and until—
(a) notice in writing requiring payment of the principal money has been
served on the mortgagor, or on one of several mortgagors, and default
has been made in payment of the principal money, or part thereof, for
three months after such service; or
(b) some interest under the mortgage amounting at least to five hundred
rupees is in arrear and unpaid for three months after becoming due.
(3) When a sale has been made in professed exercise of such a power, the
title of the purchaser shall not be impeachable on the ground that no case had
arisen to authorise the sale, or that due notice was not given, or that the power
was otherwise improperly or irregularly exercised; but any person damnified by
an unauthorised, or improper, or irregular exercise of the power shall have his
remedy in damages against the person exercising the power.
(4) The money which is received by the mortgagee, arising from the sale, after
discharge of prior encumbrances, if any, to which the sale is not made subject,
or after payment into court under Section 57 of a sum to meet any prior incum
brance, shall, in the absence of a contract to the contrary, be held by him in trust
to be applied by him, first, in payment of all costs, charges and expenses properly
incurred by him as incident to the sale or any attempted sale; and, secondly, in
discharge of the mortgage-money and costs and other money, if any, due under
the mortgage; and the residue of the money so received shall be paid to the person
entitled to the mortgaged property, or authorised to give receipts for the proceeds
of the sale thereof.
(5) Nothing in this section or in Section 69-A applies to powers conferred
before the first day of July, 1882.
15. Vijaya Bhushanamntal v C.N. Evalappa Mudaliar, 1914 SCC OnLine Mad 444: 1LR
{1914) 39 Mad 17; Variavan Saraswathi v Eachampi Theui, 1993 Supp (2) SCC 201.
SCOPE
For the purposes of clauses (a) and (b) it is immaterial where the mort
gaged property is situate. The right conferred by this section, namely,
the right to sell without the intervention of the court, is in addition to
the rights which a mortgagee has to realise his money through court and
the right under Section 69-A of having a receiver appointed. The power
under this section can be exercised by an assignee from the mortgagee by
virtue of Section 59-A. The power can be exercised only when the condi
tions in sub-section (2) are satisfied, and the conditions are not subject to
a contract to the contrary. The sale must be to a third party, because the
mortgagee cannot be both seller and purchaser.
Notwithstanding the wide amplitude of the language, the purchaser
is protected only if he satisfies himself after reasonable enquiries that
the mortgagee has an express power of sale, and fraud of the mortga
gee protects neither the mortgagee nor the purchaser, so that, on that
ground even the sale could be set aside. In Chabildas Lalloobhai n Dayal
Mowji16, the mortgaged property was sold on condition that the pur
chaser should accept such title as the vendors (mortgagees) would give
(though the mortgagor had absolute title to the property) and during the
sale the mortgagees made announcements (which the purchaser knew)
which led the bidders to suppose that the sale was adjourned and to
go away. The purchaser could not get possession from the mortgagor
and hence, filed a suit against him for possession. The conveyance in
his favour was prepared at his instance by the mortgagees’ solicitor who
knew that the condition was unjustifiable. It was held:
[1] The view of the Court of Appeal imputes to a principal [the purchaser] the
knowledge of an agent [the solicitor], not acquired in the matter for which he
was agent, and uses it to upset a transaction of a date before the agency com
menced. This is an extension of the doctrine of constructive notice in which
their Lordships cannot concur....
[2] ‘...[But] (the mortgagees) by themselves or their agents so conducted
themselves with reference to this sale that would be bidders at it were induced
to leave. The plaintiff (the purchaser) had notice of those circumstances,
using the word notice as it is defined in the Transfer of Property Act. He
therefore bought at his peril, and as the sale was not a bona fide auction sale
it must be set aside.’
In Ramkrishna v Official Assignee17, it was pointed out that the mort
gagor having given under the mortgage an express power of sale, cannot,
by filing a suit for redemption, invoke lis pendens under Section 52.
16. 1907 SCC OnLine PC 20: (1906-07) 341A179; S. U.S. Davey Sens v P.M. Narayanastvanu,
1982 SCC OnLine Mad 14: AIR 1983 Mad 217.
17. ILR 45 Mad 774.
S. 69-A] RIGHTS OF MORTGAGEES 247
The remedy of taking possession is available to the usufructuary mort

gagee and an anomalous mortgagee, if there is a special contract giving
such a right to enter into possession.
The mortgagee, instead of entering into possession and becoming lia
ble to account, may yet keep control over the mortgaged property by
exercising the power to appoint a receiver under Section 69-A. The sec
tion provides:
69-A. Appointment of receiver. — (1) A mortgagee having the right to exercise
a power of the sale under Section 69 shall, subject to the provisions of sub-section
(2), be entitled to appoint by writing signed by him or on his behalf, a receiver of
the income of the mortgaged property or any part thereof.
(2) Any person who has been named in the mortgage-deed and is willing and
able to act as receiver may be appointed by the mortgagee.
If no person has been so named, or if all persons named are unable or unwilling
to act, or are dead, the mortgagee may appoint any person to whose appointment
the mortgagor agrees; failing such agreement, the mortgagee shall be entitled to
apply to the Court for the appointment of a receiver, and any person appointed
by the Court shall be deemed to have been duly appointed by the mortgagee.
A receiver may at any time be removed by writing signed by or on behalf of
the mortgagee and the mortgagor, or by the court on application made by either
party and on due cause shown.
A vacancy in the office of receiver may be filled in accordance with the provi
sions of this sub-section.
(3) A receiver appointed under the powers conferred by this section shall be
deemed to be the agent of the mortgagor; and the mortgagor shall be solely re
sponsible for the receiver’s acts or defaults, unless the mortgage-deed otherwise
provides or unless such acts or defaults are due to the improper intervention of
the mortgagee.
(4) The receiver shall have power to demand and recover all the income of
which he is appointed receiver, by suit, execution or otherwise, in the name either
of the mortgagor or of the mortgagee to the full extent of the interest which the
mortgagor could dispose of, and to give valid receipts accordingly for the same,
and to exercise any powers which may have been delegated to him by the mort
gagee, in accordance with the provisions of this section.
(5) A person paying money to the receiver shall not be concerned to inquire if
the appointment of the receiver was valid or not.
(6) The receiver shall be entitled to retain out of any money received by him, for
his remuneration, and in satisfaction of all costs, charges and expenses incurred
by him as receiver, a commission at such rate not exceeding five per cent, on the
gross amount of all money received as is specified in his appointment, and, if no
rate is so specified, then at the rate of five per cent on that gross amount, or at
such other rate as the Court thinks fit to allow, on application made by him for
that purpose.
(7) The receiver shall, if so directed in writing by the mortgagee, insure to
the extent, if any, to which the mortgagee might have insured, and keep insured
against loss or damage by fire, out of the money received by him, the mortgaged
property or any part thereof being of an insurable nature.
(8) Subject to the provisions of this Act as to the application of insurance
money, the receiver shall apply all money received by him as follows, namely—
(/) in discharge of all rents, taxes, land revenue, rates and outgoings what
ever affecting the mortgaged property;
(n) in keeping down all annual sums or other payments, and the interest on
all principal sums, having priority to the mortgage in right whereof he is
receiver;
(Hi) in payment of his commission, and of the premiums on fire, life or other
insurances, if any, properly payable under the mortgage-deed or under
this Act, and the cost of executing necessary or proper repairs directed in
writing by the mortgagee;
(iv) in payment of the interest falling due under the mortgage;
(v) in or towards discharge of the principal money, if so directed in writing
by the mortgagee;
and shall pay the residue, if any, of the money received by him to the person
who, but for the possession of the receiver, would have been entitled to receive
the income of which he is appointed receiver, or who is otherwise entitled to the
mortgaged property.
(9) The provisions of sub-section (1) apply only if and as far as a contrary
intention is not expressed in the mortgage-deed; and the provisions of sub-sec
tions (3) and (8) inclusive may be varied or extended by the mortgage-deed, and,
as so varied or extended, shall, as far as may be, operate in like manner and with
all the like incidents, effects and consequences, as if such variations or extensions
were contained in the said sub-sections.
(10) Application may be made, without the institution of a suit, to the Court
for its opinion, advice or direction on any present question respecting the man
agement or administration of the mortgaged property, other than questions of
difficulty or importance not proper in the opinion of the Court for summary
disposal. A copy of such application shall be served upon, and the hearing thereof
may be attended by, such of the persons interested in the application as the Court
may think fit.
The cost of every application under this sub-section shall be in the discretion
of the Court.
(11) In this section, “the Court” means the Court which would have jurisdic
tion in a suit to enforce the mortgage.
Sale cannot be ordered in arbitration.—A suit for enforcement of a
mortgage by sale has been held to be enforcement of a right in rem. Such
suit can be filed only before a civil court. It cannot be tried by an arbitral
tribunal. Reference to arbitration was held to be not tenable.18
The power under this section can be exercised only when a mortga
gee can exercise the power of sale. Sub-section (z) sets out who can be
appointed as a receiver. Under sub-section (3) the receiver is deemed to
be the agent of the mortgagor and accountable to the mortgagee. Sub
section (4) sets out his powers. Sub-section (6) deals with his remunera
tion. Sub-section (8) sets out his duties in applying the money received by
him. Under sub-section (10) the parties to the mortgage and the receiver
can apply to the court for directions.19
18. Booz Allen & Hamilton Inc v SBI Horne Finance Ltd, {2.011) 5 SCC 532.
19. Sakamari Steel and Alloys Ltd v State Industrial and Investment Corpn, 1978 SCC
OnLine Bom 65: AIR 1979 Bom 66.
S. 67-A] RIGHTS OF MORTGAGEES 249
Section 67-A provides:

67-A. Mortgagee when bound to bring one suit on several mortgages.—A
mortgagee who holds two or more mortgages executed by the same mortgagor in
respect of each of which he has a right to obtain the same kind of decree under
Section 67, and who sues to obtain such decree on any one of the mortgages,
shall, in the absence of a contract to the contrary, be bound to sue on all the
mortgages in respect of which the mortgage-money has become due.
SCOPE
The section corresponds to Section 61, but whereas the mortgagor is
not obliged to consolidate, a mortgagee under this section is under an
obligation to consolidate, where he has a right to obtain the same kind of
decree or relief with respect to each of the mortgages. There may be dif
ficulty in giving effect to this section when the mortgages are in different
areas under the jurisdiction of different courts. / t—X
In S. Rajagopalaswami Naidu v Bank of Karaikudi Ltd20, there were U=/
three mortgages in favour of the respondent-bank, two of which were case pilot
executed by the appellant and his wife and one by the appellant. The
bank filed a suit on the two mortgages executed by the husband and
wife, and thereafter, filed a suit on the foot of the mortgage executed
by the appellant alone. On the question whether it was barred under
Section 67-A it was held:
To attract the applicability of Section 67-A it is essential that the mortgagor
must be the same and he should have executed two or more mortgages in
respect of each of which he has a right to obtain the same kind of decree....
In... [this] case it is not possible to hold that the mortgagor...is the same....
There is no statutory provision... or principle by which the wife and the hus
band could be treated as one entity for the purpose of the mortgages. Each
was owner of a separate and distinct property and both joined in mortgaging
their respective properties. In Moro Raghunath v Balaji21 the first mortgage
was by two brothers and the second mortgage of part of the same property
was by one brother. The Bombay High Court held that the suit to enforce the
first mortgage did not bar a suit to enforce the second mortgage. This was
before the insertion of Section 67-A but the principle embodied...is clearly
illustrated by that case.
Further, failure to consolidate will not bar the suit. The consequence of
such failure is to preclude the mortgagee from enforcing his other mort
gages, with respect to which he could have sued, on the basis that he had
abandoned that part of the claim.
20. (1971) i SCC 18.

21. ILR (1889) 13 Bom 45.
250 LAW OF TRANSFER OF PROPERTY [Chap. 13]
EXERCISES
i. What is meant by foreclosure? (pp. 237-239)
2. When can a mortgagee sue for the mortgage-money? (pp. 236-238)
3. How is the power of private sale exercised? (p. 243)
Visit ebcexplorer.com to access cases

and statutes referred to in the book EBC
through EBC Explorer™ on SCCOnline®; Explorer™
along with updates, articles, videos, blogs
and a host of different resources.
The following cases from this chapter are available

through EBC Explorer™:
• Gaya Din v Jhumman Lal, 1915 SCC OnLine All 61 case pilot
• Harish Chandra Singh Deo v Bansidhar Mohanty,
AIR 1965 SC 1738: (1966) 1 SCR 153
• Jumna Das v Ram Autar Pande, 1911 SCC OnLine PC 35
• Narsingh Partab v Mohammad Yaqub, 1929 SCC OnLine PC 26
• S. Rajagopalaswami Naidu v Bank of Karaikudi Ltd, (1971) 1 SCC 18
Chapter 14
Rights of Mortgagor
RIGHT TO REDEEM
From the definition of “mortgage”, one may imagine that if the money is
not repaid within the specified period, the mortgagor may be debarred
forever from recovering the property. From the ideas that the mortgagor
is a person in dire need of money and so needed to be protected from
himself because he would be willing to prostitute his signature; and the
mortgagee is an unscrupulous moneylender who would drive any kind
of hard bargain and therefore required to be watched, arose the idea
that the mortgagor should be allowed to redeem the mortgaged property
even after the expiry of time of payment; and thus arose the equity of
redemption in favour of the mortgagor. We have, however, the famous
Lord Halsbury (whose name is associated with the Laius of England)
saying in Samuel n Jarrah Timber and Wood Paving Corpn1, that the
equitable doctrine directed against clogging the equity of redemption as
“a principle of equity, the sense or reason of which I am unable to appre
ciate”. This equity in English Law is a statutory right under Section 60
of the Act. This right may become barred, however, by the Statute of
Limitation or the mortgagee obtaining a decree of foreclosure. Even in
suit for foreclosure, indulgence is shown to the mortgagor. In such a suit,
two decrees are passed, a preliminary and a final decree. The former
allows the mortgagor a further period to pay the debt and redeem the
property, and it is only when he fails to take advantage of this period,
that a final decree is passed barring the mortgagor’s right to redeem.
60. Right of mortgagor to redeem.—At any time after the principal money
has become due, the mortgagor has a right, on payment or tender, at a proper
time and place, of the mortgage-money, to require the mortgagee (a) to deliver
to the mortgagor the mortgage-deed and all documents relating to the mort
gaged property which are in the possession or power of the mortgagee, (b) where
1. 1904 AC 313, 315 (HL).

the mortgagee is in possession of the mortgaged property, to deliver possession

thereof to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer
the mortgaged property to him or to such third person as he may direct, or to
execute and (where the mortgage has been effected by a registered instrument) to
have registered an acknowledgment in writing that any right in derogation of his
interest transferred to the mortgagee has been extinguished:
Provided that the right conferred by this section has not been extinguished by
act of the parties or by decree of a Court.
The right conferred by this section is called a right to redeem and a suit to
enforce it is called a suit for redemption.
Nothing in this section shall be deemed to render invalid any provision to
the effect that, if the time fixed for payment of the principal money has been
allowed to pass or no such time has been fixed, the mortgagee shall be entitled to
reasonable notice before payment or tender of such money.
Redemption of portion of mortgaged property.—Nothing in this sec
tion shall entitle a person interested in a share only of the mortgaged
property to redeem his own share only, on payment of a proportionate
part of the amount remaining due on the mortgage, except only where a
mortgagee, or, if there are more mortgagees than one, all such mortga
gees, has or have acquired, in whole or in part, the share of a mortgagor.
NATURE OF RIGHT TO REDEEM

The right to redeem a mortgage, at any time after the mortgage-money
becomes due, is known as the equity of redemption in English Law; but
it is statutory, and therefore, a legal right in India.
A mortgagor is a person who has parted with some of the rights in his
property in order to furnish security for a loan which he takes from the
mortgagee. His right to make payment towards the loan and have his
rights in his property back from the mortgagee is known as the right of
redemption. This right arises from the mortgagor’s residuary ownership
(similar to reversionary rights) in the mortgaged property. The right of
redemption survives as long as the mortgage survives and can only be
extinguished in any one of the two ways: i) by an act of parties, or 2.) by
a decree of the court.
Under the law of limitation it subsists for 30 years after the mort
gage-money has become due. It can be extinguished only as provided in
the proviso. Any other attempt to prevent the exercise of the right would
be treated as a clog and as invalid, because, the rule is “once a mortgage
always a mortgage”. It could, however, be controlled by act of parties, if
it is not a part of the transaction creating the mortgage. Whether or not it
is a part of mortgage transaction is a difficult question depending on the
facts and circumstances of each case. In Shankar Din v Gokal Prasad2,
2. 1912 SCC OnLine PC 28: ILR (1912) 34 All 620; Khatubai Nathu Sumra v Rajgo
Mulji Nanji, 1978 SCC OnLine Guj 36: AIR 1979 Guj 171; Gulkandi v Harnarayan
Phoolchand, 1979 SCC OnLine MP 139: AIR 1980 MP m; Shukar Hanan Mutawali
S. 60] RIGHTS OF MORTGAGOR 253
the mortgagor mortgaged his two villages in 1846 and since then the
mortgagee and his representatives were in possession. In 1870, certain
compromises were entered into between the parties. The documents
showed that although the right of redemption was admitted as subsist
ing, it was subjected to certain conditions. On the question whether the
appellants were entitled to a decree for redemption, it was held:
Whatever may have been the mortgagor’s right under the deed of 1846, the
parties deliberately came to a settlement in 1870 by which his representatives
for certain additional benefit reserved to them under the razinantahs, agreed
to subject their right of redemption to certain conditions. There is nothing
in law to prevent the parties to a mortgage from coming to any arrangement
afterwards qualifying the right to redeem.
A condition postponing redemption in case there was a default in repay- \
ing the mortgage-money is a clog. In Mohd Sher Khan v Seth Swami
DayaP, the mortgagor mortgaged his property for five years and agreed case pilot
that if he did not redeem it at the end of that period, the mortgagee had
a right to take and keep possession for 12 years, during which time the
mortgagor had no right to redeem. The mortgagor committed default
at the end of five years, but later sued to redeem, but the mortgagee
opposed. It was held:
The rights and liabilities of the litigants must depend on the terms of the
instrument as controlled by the Transfer of Property Act, for, even if... [the
mortgage] were an anomalous mortgage, its provisions offend against the
statutory right of redemption conferred by section 60, and the provisions of
one section cannot be used to defeat those of another unless it is impossible
to effect reconciliation between them. An anomalous mortgage enabling a
mortgagee after a lapse of time and in the absence of redemption to enter
and take the rents in satisfaction of the interest would be perfectly valid if it
did not also hinder an existing right to redeem. But it is this that the present
mortgage undoubtedly purports to effect. It is expressly stated to be for five
years, and after that period the principal money became payable. This, under
section 60 of the Transfer of Property Act, is the event on which the mort
gagor had a right on payment of the mortgage-money to redeem.
The section is unqualified in its terms, and contains no saving provision as
other sections do in favour of contracts to the contrary.... In this view, the
mortgagor’s right to redeem must be affirmed...*
v Malkappa, 1979 SCC OnLine Bom 207: AIR 1980 Bom 213 (suit to redeem second
mortgage against different mortgagees); Abdttr Rahim Jiiuani v Vithaldas Ramdas, 1980
SCC OnLine Bom 192: AIR 1981 Bom 58; Sushil Kumar Singh v Braj Mohan Singh, 1980
SCC OnLine Pat 138: AIR 1981 Pat 172; Chbaganlal Keshavlal Mehta v Patel Narandas
Haribhai, (1982) 1 SCC 223; T. Madhauan Chetty v Pnthanoor Bhaskara Chetty, 1982
SCC OnLine Ker 66: AIR 1982 Ker 327; Jayasingh Dnyanu Mhoprekar v Krishna Babaji
Patil, (1985) 4 SCC 162; Deukinandan v Roshan Lal, 1984 SCC OnLine Raj 42: AIR 1985
Raj 11 (lease by mortgagee for clogging redemption); Banwarilal v Puran Chand, AIR
1985 P&H 189.
3. 1921 SCC OnLine PC 97: (1921-22) 49 IA 60.
Even a collateral advantage which subsists in favour of the mortga

gee after the period of redemption is considered a clog if it affects the
property. In Chalikani Venkatarayanim v Zamindar of Tuni4, a mort
CASE PILOT gage-deed contained an agreement by which, if the mortgagee entered
into possession of the property, he could take credit of a fixed sum of
^4000 annually with respect to certain charges which the mortgagee
would have had to incur. The contingency on which the mortgagee could
take possession of the property having happened, the mortgagee sued for
possession and entered in pursuance of the decree he obtained, so that,
the agreement for the annual payment of ^4000 became operative. On
the question of the validity of the agreement, it was held:
It is urged on behalf of the appellants that it gives the mortgagee a collat
eral advantage under the deed which he is not entitled to exact, but their
Lordships think that that contention cannot be supported. The truth is that
it is a fixed payment to be made in respect of a variable charge and though it
may be assumed that the amount was not fixed so as to prejudice the mortga
gee, there is nothing to prevent the mortgagor and mortgagee, entering into
a bargain as to what sum should be charged annually for expenses that may
or may not exceed the agreed figure.
[In this case, the advantage, though collateral, did not extend beyond
the period of redemption. The mortgagor could release the property, put
an end to the mortgagee’s possession and his right to the sum of ^4000.]
It must be kept in mind that a mortgage is in essence a borrowing
transaction, and the immovable property is only involved to the extent
that it functions as security which can be invoked only upon a default in
payment committed by the borrower (mortgagor). The mortgagor must
be permitted to pay back the loan within a reasonable time and have the
encumbrance on his property lifted. It is this act of repayment coupled
with lifting the encumbrance which is known as redemption. Any pro
vision which prevents or hampers or unreasonably postpones the mort
gagor’s right to redemption is void as being a “clog on the equity of
redemption”.
If the mortgagee stipulates that during the subsistence of the mort
gage, if the mortgagor wants to sell the property, the mortgagee has a
right of pre-emption, it is not regarded as a clog, because there is no
obligation on the mortgagor to sell and the mortgagor can redeem the
property. If, however, the mortgagee has an option to purchase, it would
be treated as a clog, because the mortgagee by exercising the option can
put an end to the mortgagor’s right to redeem.
In Seth Ganga Dhar v Shankar Lal5, a usufructuary mortgage
CASE PILOT provided:
4. 1922 SCC OnLine PC 57: (1922-23) 50 IA 41.

5. AIR 1958 SC 770.
I or my heirs will not be entitled to redeem the property for a period of 85

years. After the expiry of 85 years we shall redeem it within a period of six
months. In case we do not redeem within a period of six months....I, my
heirs, and legal representatives shall have no claim over the mortgaged prop
erty, and... the deed will be deemed to be a sale deed.
A suit for redemption was filed 47 years after the execution of the deed
and it was contended that it was premature. It was held:
Under [Section 60 of the Transfer of Property Act], the right [to redeem] can
be exercised only after the mortgage money has become due. In Bakhtaiuar
Begam v Husaini Khanam6 also the same view was expressed in these words:
‘Ordinarily, and in the absence of a special condition entitling the mort
gagor to redeem during the term for which the mortgage is created, the
right of redemption can only arise on the expiration of the specified
period.’
Now, in the present case...there is no stipulation entitling the mortgagor to
redeem during that term [85 years]. That term has not yet expired....
The term providing that the right to redeem will arise after eighty-five
years does not... take away the mortgagor’s right to redeem and is not, there
fore, in that sense, a clog on the equity of redemption. It does, however, pre
vent accrual of the right to redeem for the period mentioned....
The rule against clogs on the equity of redemption...involves that the
courts have the power to relieve a party from his bargain. If he has agreed
to forfeit wholly his right to redeem in certain circumstances, that agree
ment will be avoided. But the courts have gone beyond this. They have also
relieved mortgagors from bargains whereby the right to redeem has not been
taken away but restricted. The question is, is the term now under consider
ation such that a court will exercise its power to grant relief against it?....
In a very early case, namely, Vernon v Bethell7 Earl of Northington L.C.
said:
‘This court, as a court of conscience, is very jealous of persons taking
securities for a loan, and converting such securities into purchases. And
therefore I take it to be an established rule, that a mortgagee can never
provide at the time of making the loan for any event or condition on which
the equity of redemption shall be discharged, and the conveyance abso
lute. And there is great reason and justice in this rule, for necessitous men
are not, truly speaking, free men, but, to answer a present exigency, will
submit to any terms that the crafty may impose upon them.’
Viscount Haldane said in G. & C. Kreglinger v New Patagonia Meat and
Cold Storage Co Ltd8: CASE PILOT
‘...The case of the common law mortgage of land was indeed a gross
one. The land was conveyed to the creditor upon the condition that if the
money he had advanced to feoffor was repaid on a date and at a place
named, the fee simple would revest in the latter, but if the condition was
6. 1914 SCC OnLine PC 6: (1913-14) 41 IA 84.

7. (1762) 2 Eden no: 28 ER 838.
8. 1914 AC 25 (HL); Shivdev Singh v Sucha Singh, (2000) 4 SCC 326.
not strictly and literally fulfilled he should lose the land for ever. What
made the hardship on the debtor a glaring one was that the debt still
remained unpaid and could be recovered from the feoffor notwithstand
ing that he had actually forfeited the land to the mortgagee. Equity, there
fore, at an early date began to relieve against what was virtually a penalty
by compelling the creditor to use his legal title as a mere security.
My Lords, this was the origin of the jurisdiction which we are now
considering, and it is important to bear that origin in mind. For the end to
accomplish which the jurisdiction has been evolved ought to govern and
limit its exercise by equity judges. That end has always been to ascertain,
by parol evidence, if need be, the real nature and substance of the trans
action, and if it turned out to be in truth one of mortgage simply, to place
it on that footing. It was, in ordinary cases, only when there was conduct
which the Court of Chancery regarded as unconscientious that it inter
fered with the freedom of contract... ’
The reason then justifying the court’s power to relieve a mortgagor from
the effects of his bargain is its want of conscience. Putting it in more famil
iar language the court’s jurisdiction to relieve a mortgagor from his bargain
depends on whether it was obtained by taking advantage of any difficulty or
embarrassment that he might have been in when he borrowed the moneys on
the mortgage....
... [D]oes the length of the term... itself lead to the conclusion that it was
an oppressive term? In our view, it does not do so.... It is quite conceivable
that it was to... [the mortgagor’s] advantage.... It seems to us impossible
that if the term was oppressive, that was not realised much earlier and the
suit brought within a short time of the mortgage.
Another illustration is Pomal Kanji Govindji v Vrajlal Karsandas
case pilot Purohit.9 A very long term usufructuary mortgage (99 years) with pos
session together with other unconscionable terms and conditions, such as
mortgagor’s liability to pay interest on a part of the mortgage money at
the time of redemption on expiry of the mortgage period and the mort
gagee’s right of reconstructions at the mortgagor’s expense amounted
to a clog on the equity of redemption. The terms and conditions being
unconscionable made the contract void by themselves.
In the case of a mortgage where the right of redemption is postponed
as contrasted with a case in which the right arose after a long period of
time, the condition disabling a mortgagor from exercising his right of
redemption would be construed as a clog on the right to redeem.10
The maxim became applicable in a case in which no time-limit was
fixed in the matter of a usufructuary mortgage. The court said that the
right to seek redemption does not arise on the date of mortgage. It arises
on the date on which the mortgagor pays or deposits in court the mort
gage money or the balance amount. The principle that once a mortgage
9. (1989) 1 SCC 458.

10. Mohd Sher Khan v Seth Swami Dayal, 19x1 SCC OnLine PC 97: (19x1-22) 49 IA 60.
always a mortgage and therefore always redeemable becomes applicable.

By reason of being in possession of the property, the mortgagee enjoys its
usufruct. He loses nothing in returning the security on payment of mort
gage debt. The limitation period of 30 years as provided in Section
Limitation Act begins to run when the right to seek redemption accrues.11
A mortgagee was not allowed to claim that he had become lessee. He
started as a mortgage. He could not claim any change over to lessee with
out a new transaction and its registration.12
Where the property was put to sale by auction and the sale had been
confirmed by the court by issuing a sale certificate, the right of redemp
tion became lost.13 The right of redemption is lost by foreclosure, sale by
mortgagee, or when redemption becomes time-barred. In a case before
the Supreme Court a Financial Corporation exercised the right to sell the
property because of the mortgagor’s default in payment. The offer of the
prospective purchaser had also been accepted. But before any sale deed
could be executed, the mortgagor intervened for redemption offering the
amount due. The court said that the right of redemption had not been
lost.14
A suit for redemption is simultaneously also a suit for recovery of pos
session.15 Where the mortgagee was already lessee before the mortgage
and there was provision that lease would revive even after redemption, it
was held that redemption by itself did not terminate the lease. A separate
suit for recovery of possession would have to be filed.16
Where the mortgage deed permitted the mortgagee to create tenancies
but did not say anything about whether such tenancies would bind the
mortgagor, the court said that such tenancies had no binding effect on
the mortgagor.17
Where the mortgaged property was redeemed by one of the co-mort-
gagors by paying the full mortgage money, it was held that the period of
limitation for filing a suit by the co-mortgagor for his share against the
11. Ram Kishan v Sheo Ram, 2007 SCC OnLine P&H 1282: AIR 2008 P&H 77.
12. Chandrakant Shankarrao Machale v Parubai Bhairu Mohite, (2008) 6 SCC 745. Harbans
v Om Prakash, (2006) 1 SCC 129, another decision to the same effect. Gurdeu Kaur v
Niranjan Singh, AIR 2008 NOC 2.174 (P&H), no time-limit fixed for redemption of usu
fructuary mortgage, it could be redeemed at any time. By no efflux of time the mortgagee
could claim that he had become the owner. Tara Singh v Amrik Singh, AIR 2008 NOC
2175 (P&H), the right of redemption could be claimed at any time after tendering dues.
Singh Rani v Sheo Ram, (2014) 9 SCC 185, period of 30 years starts running from the
date of payment and not from the date of mortgage. Parkash Chand v Amar Singh, 2010
SCC OnLine HP 2081: AIR 2011 HP 21, no period of limitation in such a mortgage.
13. Bishnu Deni Shaw v Federal Bank Ltd, 2014 SCC OnLine Cal 19746: AIR 2014 Cal 90.
14. L.K. Trust v EDC Ltd, (2011) 6 SCC 780.
15. Tarachand v Sagarbai, (2007) 5 SCC 392.
16. Hasthimal & Sons v P. Tej Raj Sharma, (2007) 11 SCC 87. Another similar case,
Sakinabai Sirajuddin Kanchwala v Shrilal Hansraj Sharma, AIR 2010 NOC 831 (Bom).
17. Thakar Singh v Mula Singh, (2015) 5 SCC 209.
redeeming co-mortgagor was the ordinary period of limitation and not

the one extended extended for redemption of mortgages.18
A mortgagee may purchase the whole of the mortgaged property or a
part of it. He may be able to get such ownership by purchase or inher
itance or otherwise.19
The mortgagee may dispose of the mortgaged property under a stat
utory right, for example, under the provisions of Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002. He may also dispose of if so authorised by the mortgagor20
or under a decree of a court.21 Where the property held under a usu
fructuary mortgage was sold under court order and the mortgagee
himself purchased it, the Supreme Court considered such sale to be
barred by Section 34, Order 14 CPC. The court also applied Section 90
[Illustration (c)] of the Trusts Act and held that the purchase was under
trust for the mortgagor. The right of redemption was not defeated by
such a transaction. The suit for redemption was filed within time and
therefore, it was allowed.22
Where no time was fixed for redemption, it was held that the mortga
gee could not claim that he had become the owner by efflux of time. The
mortgagor did not redeem. A Punjab Act was applied by the Collector to
order redemption. The same was held to be valid.23
Even mortgaged or pledged property was subject to the priority of
employees dues under the EP Fund, etc. Act, 1952.24 Under Section 61,
Insolvency Act, the property of the insolvent debtor over which a mort
gage was created, the mortgagee would have priority over the insolvent
debtor’s unsecured creditors.25 When a mortgaged property becomes
an evacuee property, the rights of the mortgagee would vest in the
r-A custodian.26
In Seth Chand Ratan v Pandit Durga Prasad27, the rule against clogs
case pilot on equity of redemption is that a mortgage shall always be redeema
ble and a mortgagor’s right to redeem shall neither be taken away nor
18. Becharji Bapuji Thakor v Arjanji Saluji Thakur, AIR 2013 Guj 37.
19. Gangadhar Manji Choudhari v Tukaram Kisan Naikwadi, AIR 2010 NOC 832 (Bom).
20. Syed Noor Mohammad v Syed Khaja Moinuddin, 2007 SCC OnLine AP 781: AIR 2008
AP 82; Rukmani Ammal v Jagdesa Gounder, (2006) 1 SCC 65, mortgagor selling to
mortgagee.
21. K. Chidambara Manickam v Shakeena, 2007 SCC OnLine Mad 675: AIR 2008 Mad 108;
Gaurau Enterprises v SBl, 2011 SCC OnLine MP 1132: AIR 2012 MP 35. Sale by bank.
The right of redemption continues till the sale is completed by registration, Shakeena v
Bank of India, 2007 SCC OnLine Mad 252: AIR 2008 Mad 10.
22. M.R. Satwaji Rao v B. Shama Rao, (2008) 5 SCC 124.
23. Sukhbir Singh v Kali Ram, AIR 2012 NOC 343 (P&H).
24. Maharashtra State Coop Bank Ltd v Provident Fund Commr, (2009) 10 SCC 123.
25. Patel Dayabhai v Ranuj Nagrik Sahakari Bank Ltd, 2010 SCC OnLine Guj 133: AIR
2010 Guj 54.
26. Gulzar Singh v Financial Commr, 2010 SCC OnLine P&H 2809: AIR 2010 P&H 114.
27. (2003) 5 SCC 399, noted Supra.
limited by any contract between the parties. The principle behind the
rule was expressed by Lindley MR in Santley v Wilde23 in these words:
The principle is this: a mortgage is a conveyance of land or an assignment
of chattels as a security for the payment of a debt or the discharge of some
other obligation for which it is given. This is the idea of a mortgage: and the
security is redeemable on the payment or discharge of such debt or obliga
tion, any provision to the contrary notwithstanding. That, in my opinion, is
the law. Any provision inserted to prevent redemption on payment or perfor
mance of the debt or obligation for which the security was given is what is
meant by a clog or fetter on the equity of redemption and is therefore void. It
follows from this, that ‘once a mortgage always a mortgage’.
The right of redemption, therefore, cannot be taken away. The courts will
ignore any contract, the effect of which is to deprive the mortgagor of his
right to redeem the mortgage. One thing, therefore, is clear, namely, that
the term in the mortgage contract, that on the failure of the mortgagor to
redeem the mortgage within the specified period of six months the mortgagor
will have no claim over the mortgaged property, and the mortgage deed will
be deemed to be a deed of sale in favour of the mortgagee, cannot be sus
tained.... The same result also follows from Section 60 of the Transfer of
Property Act. So it was said in Mohd Sher Khan v Seth Swami Dayal19.
In Mrutunjay Pani v Narmada Bala Sasmal28 30, the mortgagor delivered
29
possession of the mortgaged property to the mortgagee and under the CASE PILOT
mortgage-deed the mortgagee had a duty to pay arrears of rent to the
mortgagor’s landlord. The sale, in which the mortgagee purchased the
mortgagor’s equity of redemption, was the result of a dereliction of the
aforesaid duty of the mortgagee. On the question whether the mortgag
or’s right to redeem was lost, it was held:
The legal position may be stated thus: (i) The governing principle is ‘once a
mortgage always a mortgage’ till the mortgage is terminated by the act of the
parties themselves, by merger or by order of the court. (2) Where a mortgagee
purchases the equity of redemption in execution of his mortgage decree with
the leave of court or in execution of a mortgage or money decree obtained
by a third party, the equity of redemption may be extinguished; and, in that
event, the mortgagor cannot sue for redemption without getting the sale set
aside. (3) Where a mortgagor purchases the mortgaged property by reason of
a default committed by him the mortgage is not extinguished and the rela
tionship of mortgagor and mortgagee continues to subsist even thereafter, for
his purchase of the equity of redemption is only in trust for the mortgagor.
[See, S. 90, Trusts Act, 1882]31
28. (1899) 2 Ch 474 (CA).

29. 1921 SCC OnLine PC 97: (1921-22) 49 IA 60; see, pp. 210 and 211.
30. AIR 1961 SC 1353: (1962) 1 SCR 290.
31. Mannathan v Chinnu, 2012 SCC OnLine Mad 383: AIR 2012 Mad 210, condition
imposed against selling of mortgaged property in default of redemption within the stipu
lated time, held a clog.
A mortgagor transferred the property to a third person disregarding

the provision in the mortgage deed that the property could be transferred
only to the mortgagee. The transfer was held to be valid, the court say
ing that the right of pre-emption in favour of the mortgagee was in the
nature of clog on redemption.32
Collateral benefits to the mortgagee have been held to be not in the
nature of a clog.33
In Murarilal v Devkaran34, a term in the mortgage-deed executed in
the State of Alwar (one of the Rajasthan States) provided that if the debt
was not paid by the mortgagor within 15 years, the mortgagee would
become the owner of the property. The mortgagor sued to redeem the
property after the stipulated period was over. It was held:
Does the equitable doctrine ensuing the mortgagor’s equity of redemption in
spite of a clog created on such equity by stipulation in the mortgage deed apply
to the present case? This question arises in this form, because the Transfer
of Property Act did not apply to Alwar at the time when the mortgage was
executed nor at the time when the 15 years’ stipulated period expired.
... [In... Pattabhiramier v Vencatarow Naicken35,]... the Privy Council
upheld the mortgagee’s plea that he became the absolute owner of the prop
erty at the expiration of the stipulated period. [It was said:] stipulations in
such contracts were recognised and enforced according to their letter by the
ancient Hindu law as well as under Mohommedan law.... If the ancient law
of the country... has been modified by any later rule, having the force of
law, that rule must be founded either on positive legislation or on established
practice; [but no] ...specific statutory provision had been cited before the
Board, nor established practice in that behalf had been proved. [The Board]
however, took the precaution of adding... ‘it must not be supposed that Their
Lordships design to disturb any rule of property established by judicial deci
sions so as to form part of the law of the form, wherever such may prevail, or
to affect any title founded thereon’...
[In Thumbasawmy Mudelly v Mahomed Hossain Rowthen36,]... Sir
CASE PILOT
James W. Colvile, who delivered the opinion of the Board, referred to the
earlier decision of the Privy Council in Pattabhiramier case noticed the
trend of judicial pronouncements made by the High Courts in India while
Pattabhiramier case, 1870 SCC OnLine PC 35: (1869-70) 13 Moo IA 560
was pending before the Privy Council, and strongly reiterated the view that
the said decisions of the High Courts were radically unsound. He referred
to the fact that unfortunately, Pattabhiramier case ‘slept for nine years, and
that in the interval the Sudr Court, and afterwards the High Court which
succeeded it, continued the course of decision which the former had given
in 1858’. To the effect, that stipulations contained in mortgage-deeds which
32. Hasthimal & Sons v P. Tej Raj Shanna, (2007) 11 SCC 87.
33. See, for example, the decision in G. & C. Kreglinger v New Patagonia Meat and Cold
Storage Co Ltd, 1914 AC 25 (HL).
34. AIR 1965 SC 225: (1964) 8 SCR 239.
35. 1870 SCC OnLine PC 35: (1869-70) 13 Moo IA 560.
36. 1875 SCC OnLine PC 14: (1874-75) 2 IA 241.
amounted to clog on the equity of redemption could not be enforced on equi

table principles....’
Though the position of the Privy Council decisions is thus clear and con
sistent,... it would be relevant to observe that traditionally, courts in India
have been consistently enforcing the principles of equity which prevent the
enforcement of stipulations in mortgage deeds which unreasonably restrain
or restrict the mortgagor’s right to redeem.... In fact, in Namdeo Lokrnan
Lodhi v Narmadabai37 this Court has emphatically observed that it is axi
omatic that the courts must apply the principles of justice, equity and good
conscience to transactions which come before them for determination even
though the statutory provisions of the Transfer of Property Act are not made
applicable to these transactions....
It is true that according to strict letter of the ancient Hindu law, a stipu
lation that a mortgagor shall pay the amount advanced to him by the mort
gagee within a specified period, was intended to be enforced ...Though that
is so, we ought also to add that according to Sir R.B. Ghose, ordinarily, time
was not of the essence of the contract of mortgage in Hindu Law38 and in
support of this opinion the learned author quotes with approval Colebrooke’s
opinion.
... [I]t is [thus] material to refer to the...decisions pronounced by the
Rajasthan High Court.... In Amba Lal v Amba Lal3940 the Rajasthan High
Court held that Section 60 and its proviso contained a general principle of
law applicable to mortgages in this country, which would be applicable even
in those places where the Transfer of Property Act may not be in force as
such, but where its principles may be in force....
Similarly, in the case of Seleh Raj v Chandan MalAQ, the Rajasthan High
Court held that the principle underlying Section 60 may well be regarded to
be a salutary one and in accordance with the principles of equity, justice and
good conscience....
The same principle has been applied in Himachal Pradesh, vide Nainu v
Kishan Singh41.
Thus, it is clear that the equitable principle of justice, equity and good
conscience had been consistently applied by civil courts in dealing with
mortgages in a substantial part of Rajasthan and that lends support to
the contention of the respondent that it was recognised even in Alwar
and that if a mortgage deed contains a stipulation which unreasonably
restrains or restricts the mortgagor’s equity of redemption courts were
empowered to ignore the stipulation and enforce the mortgagor’s right
to redeem, subject, of course, to the general law of limitation prescribed
in that behalf.42
37. AIR 1953 SC zz8: 1953 SCR 1009.

38. Ghose on The Law of Mortgage in India (7th Edn., Tagore Law Lectures) 232.
39. ILR (1957) 7 Raj 964.
40. ILR i960 Raj 88.
41. 1956 SCC OnLine HP 27: AIR 1957 HP 46.
42. Mathew Varghese v M. Amritha Kumar, (2014) 5 SCC 610, a mortgage remains redeema
ble even after the period of time, if any, fixed for repayment. It may be defeated if there has
In Gulab Chand Sharma v Saraswati Devi43, in a mortgage by condi

tional sale of a perpetual lease, the mortgagor was given four years time
CASE PILOT
to repay. It was also provided in the deed that if the mortgagee received
a notice of re-entry by a public authority (government) for breach of any
covenant of the lease before four years, then the transfer in favour of the
mortgagee would be absolute. The mortgagee averted re-entry by per
forming the covenant. It was held that the mortgagor could successfully
claim to redeem, the clause relating to the transfer becoming absolute,
being a clog on the right of redemption.
In Noakes & Co Ltd v Rice44, the mortgagee was a brewer. The mort
gagor mortgaged the leasehold of a public house to him. The mortgagor
entered into an agreement with the mortgagee that the former would buy
all the beer consumed in the public house only from the mortgagee. It
was held that the stipulation would be valid during the continuance of
the mortgage, but on redemption, the mortgagor would be free from it.
Lord Macnaughten observed:
Redemption is of the very nature and essence of a mortgage.... It is inher
ent in the thing itself.... [E]quity will not permit any device or contrivance
designed or calculated to prevent or impede redemption... when the money
secured by a mortgage of land is paid off, the land itself and the owner of
the land in the use and enjoyment of it must be as free and unfettered to all
intents and purposes as if the land had never been made the subject of the
security.
That is, the agreement conferring the collateral benefit on the mortgagee
will not be enforceable if it is extended beyond the period of redemp
tion. The earlier view in England was that whether a stipulation was
reasonable or not, depended on its reasonableness and not whether it
was confined to the period of mortgage or extended beyond the period
of redemption. This view was restored in the Kreglinger case45 (p. 253).
This rule does not apply in India. Here, on redemption, the mortgagor is
entitled to get back the property mortgaged free from the debt, as well as
every other obligation. Such an obligation if reasonable may enure dur
ing the subsistence of the mortgage but even that will not survive when
the debt is paid off.46
been Foreclosure or actual sale or court order, but not just by announcement to hold sale
by auction. Following Narandas Karsondas v S.A. Kamtam, (1977) 3 SCC 2.47, where the
whole of the process of sale was completed but registration of sale had not yet taken place,
redemption was allowed.
43. (1977) 2 SCC 71.
44. 1902 AC 24 (HL).
45. G. & C. Kreglinger v New Patagonia Meat and Cold Storage Co Ltd, 1914 AC 25 (HL).
46. Khan Bahadur Mehrban Khan v Makhna, 1930 SCC OnLine PC 18: AIR 1930 PC 142.
PRINCIPAL AMOUNT HAS BECOME DUE FOR PAYMENT

The word “due” shows that the mortgagor could not redeem before the
time fixed for payment, but there can be a specific contract enabling the
mortgagor to redeem earlier. In usufructuary mortgages, the mortgagor
can claim the property as soon as the debt is realised from the profits
even without such provision.
In Bakhtawar Begam n Husaini Khan am*1, the question was whether
the right to redeem accrued only on the expiration of the period of nine
years for which the contract was made. It was held:
Ordinarily, and in the absence of a special condition entitling the mortgagor
to redeem during the term for which the mortgage is created, the right of
redemption can only arise on the expiration of the specified period. But there
is nothing in law to prevent the parties from making a provision that the
mortgagor may discharge the debt within the specified period, and take back
the property. Such a provision is usually to the advantage of the mortgagor....
... [HJere the plaintiff’s case is that the mortgagors were entitled to recover
the property within the period of nine years on the liquidation of the debt
with the usufruct of the property.
MORTGAGE-MONEY
The second part of Section 58(d) shows that it includes principal and
interest. If there are two or more joint mortgagees, a payment to one of
them, even of the whole amount, is valid only to the extent of his share
of the debt. Therefore to operate as a payment in respect of the entire
mortgage, it must be paid to all of them jointly.
Since “mortgage-money” includes both principal and interest, ordi
narily, that is, unless there is an express covenant giving a right to sue
for interest separately, the mortgagee cannot bring a separate suit for
interest alone.
DECREE OF COURT
The decree must specifically extinguish the right of redemption. If it does
not do so the mortgage continues to subsist and the mortgagor continues
to have the right to redeem. In Raghunath Singh v Hansraj Kunwar*3, it
was pointed out that the mortgagor can be deprived of the right to redeem
only “by means of and in the manner enacted for that purpose”; and so
unless the section is strictly complied with a second suit for redemption
would lie.
47. 1914 SCC OnLine PC 6: (1913-14) 41IA 84; Lingaiah v Chikkahonnalagaiah, 1978 SCC
OnLine Kar 8: AIR 1978 Kar 146; L.M.L.L. Lakshmanan Chettiar v V.A.R. Alagappa
Chettiar, 1980 SCC OnLine Mad 150: AIR 1981 Mad 338 (Usufructuary mortgage).
48. 1934 SCC OnLine PC 36: (1933-34) 61 IA 362.
Though the proviso does not say so, the equity of redemption would
also be extinguished by operation of law as when the mortgagee inherits
the right or purchases the right in execution of a decree obtained by a
third party against the mortgagor. [See, p. 254]
INDIVISIBILITY OF MORTGAGE SECURITY

Except in the case of the last paragraph to the section a portion of
the mortgaged property cannot be redeemed. The reason is that the
mortgagee values his security as an indivisible whole and if piecemeal
redemption is allowed, the security may depreciate. In Nilakant v Suresh
Chander49, the plaintiff obtained a mortgage in 1866. In June 1867, he
filed a suit for foreclosure. While the suit was pending, in July 1867, the
defendant purchased a part of the mortgaged property in execution of
a decree obtained by a third party against the mortgagor. A decree for
mortgage, accounts, and for sale in default of redemption was passed and
in 1880, the property purchased by the defendant was put up for sale and
the plaintiff purchased the equity of redemption for 1600 and sued the
defendant for possession. The High Court gave the plaintiff a decree for
possession conditional on the defendant’s failure to redeem on the basis
that he was himself a purchaser of the equity of redemption and gave
the defendant six months’ time for redeeming. It was held by the Privy
Council:
It is quite a new thing to hold that the purchaser of a single fragment of the
equity of redemption [defendant] may come without bringing the other pur
chasers before the Court, and have an account as between himself and the
mortgagee alone, so that the mortgagee may be paid off piecemeal. Such a
law would result in great injustice to the mortgagee. It would put him to a
separate suit against each purchaser of a fragment of the equity of redemp
tion though purchasing without his consent, and he would have separate
suits against each of them, and suits in which no one of the parties would
be bound by anything which took place in a suit against another. Different
proportions of value might be struck in the different suits, and the utmost
confusion and embarrassment would be created.
In Mirza Yadalli Beg v Tukaram50, the mortgagor mortgaged 16 fields
case pilot t0 tê appellant and sold one of them to the respondent. The appellant
(mortgagee) filed a suit against the mortgagor without impleading the
respondent and in pursuance of a consent decree of foreclosure entered
into possession of nine of the fields, one of which was the field sold to
respondent. The respondent sought to redeem his property and it was
held that he could redeem the entire mortgage. It was held by the Privy
Council:
49. 1885 SCC OnLine PC 18: (1884-85) 12 IA 171; Naurang Singh v Jangir Singh, 1984 SCC
OnLine P&H 697: AIR 1985 P&H 268.
50. 1920 SCC OnLine PC 43: (1919-20) 47 IA 207.
According to English law the respondents would have been entitled to

redeem the mortgage in its entirety, subject only to the safeguarding of the
equal title to redeem, of any other person who had a right of redemption....
The respondents, being transferees of part of security, by English law, if it
applied, would on the one hand be entitled to redeem the entire mortgage on
the properties generally, and correlatively could not compel the mortgagee to
allow them to redeem their part,...
Subject to proper safeguarding of the rights to redeem, which... [other
co-mortgagors] may possess, their Lordships are of the opinion that this is
not so in India any more than in England, that one of several mortgagors
cannot redeem more than his share, unless the owners of the other shares
consent or do not object.
In Shah Ram Chand v Parbhu Dayal51, a mortgagee (appellant), having
obtained a decree in a suit to enforce his mortgage, bought the mort
gaged property in a judicial sale. On the question as to the amount he
must pay to release the property bought by him from a prior mortgage
created by the mortgagor in respect of that property and three other
items in favour of the respondent, the appellant contended that he need
not pay the whole sum outstanding, because the respondent himself had
released two of the items from the mortgage. It was held:
...[A]part from the exception which it recognizes, the last clause of S. 60
was intended to preclude mortgagors or persons deriving title from them
from claiming independently of agreement to have an equity to redeem their
own share on payment of a proportionate part of ‘the mortgage money.’
The High Court, in their Lordships’ view, have rightly dismissed the plain
tiff’s appeal in this case on the ground that ‘under S. 6o...the integrity of a
mortgage is not broken except where the mortgagee has purchased or other
wise acquired as proprietor a certain portion of the property mortgaged... ’
[See, S. 67(d).]
Suppose A mortgages for ^12,000, three properties X, Y and Z whose
values are in the ratio of 1:2:3 to B. A then sells X to C. Thereafter, in
execution of a money decree obtained by some creditor against A prop
erty Y is brought to sale and B, the mortgagee purchases it, subject to his
own mortgage. C is entitled to make partial redemption of X by paying
to B 2000.
The mortgagor may deposit the money in the court. The mode and
effect of such deposit is set out in Sections 83 and 84.
Section S352 provides:
83. Power to deposit in Court money due on mortgage.—At any time after
the principal money payable in respect of any mortgage has become due and
before a suit for redemption of the mortgaged property is barred, the mortgagor,
51. 1942 SCC OnLine PC 9: (1941-42) 69 IA 98; Jagir Singh v Atma Singh, 1978 SCC OnLine
P&H 226: AIR 1979 P&H 70.
52. Thakur Singh v Ram Baran Singh, (1972) 2 SCC 740 (mortgagor held not entitled to
mesne profits).
or any other person entitled to institute such suit, may deposit, in any Court in
which he might have instituted such suit, to the account of the mortgagee, the
amount remaining due on the mortgage.
Right to money deposited by mortgagor.—The Court shall thereupon cause
written notice of the deposit to be served on the mortgagee, and the mortga
gee may, on presenting a petition (verified in manner prescribed by law for the
verification of plaints) stating the amount then due on the mortgage, and his
willingness to accept the money so deposited in full discharge of such amount,
and on depositing in the same Court mortgage-deed and all documents in his
possession or power relating to the mortgaged property, apply for and receive the
money, and the mortgage-deed, and all such other documents, so deposited shall
be delivered to the mortgagor or such other person as aforesaid.
Where the mortgagee is in possession of the mortgaged property, the Court
shall, before paying to him the amount so deposited, direct him to deliver posses
sion thereof to the mortgagor and at the cost of the mortgagor either to re-trans-
fer the mortgaged property to the mortgagor or to such third person as the
mortgagor may direct or to execute and (where the mortgage has been effected
by a registered instrument) have registered an acknowledgment in writing that
any right in derogation of the mortgagor’s interest transferred to the mortgagee
has been extinguished.
An order for deposit of money does not operate as an adjudication of
any of the points involved in the case. It gives an option to the mortgagee
either to accept such money or refuse it. In case of refusal the mortgagor
can proceed to seek redemption. An order under the section does not
operate as res judicata.53
In Narandas Karsondas v S.A. Kamtam54, the respondent Housing
CASE PILOT Society, the mortgagor, had taken loan from the co-respondent Finance
Society and mortgaged the property to it under an English mortgage. On
default, the mortgagee exercised his right under the mortgage to sell the
property without intervention of court and after notice put the property
to sale by public auction. The appellant auction-purchaser paid the sums
due. Before the sale was completed by registration, etc. the mortgagor
sought to exercise his right of redemption by tendering the amount due.
The appellant based his case on the plea that in such a situation the mort
gagee acts as agent of the mortgagor and hence, binds him.
Rejecting the appeal, the Supreme Court held that the right of redemp
tion which is embodied in Section 60, Transfer of Property Act is availa
ble to the mortgagor unless it has been extinguished by the act of parties.
In India, it is only on execution of the conveyance and registration of
transfer of the mortgagor’s interest by registered instrument that the
mortgagor’s right of redemption will be extinguished. The conferment
of power to sell without intervention of the court in a mortgage-deed
by itself will not deprive the mortgagor of this right of redemption. The
53. Bishwanath Prasad Singh v Rajendra Prasad, (2006) 4 SCC 432.

54. (1977) 3 SCC 247; Paramesiuaran Govindan v Krishnan Bhaskaran, 1993 Supp (1) SCC
572; Mancheri Puthusseri Ahmed v Kuthirauattam Estate Receiver, (1996) 6 SCC 185.
extinction of the right of redemption has to be subsequent to the deed

conferring such power. The right of redemption is not extinguished at
the expiry of the period. The equity of redemption is not extinguished by
mere contract for sale.
The mortgagor’s right to redeem will survive until there has been com
pletion of sale by the mortgagee by a registered deed. In England, a sale
of property takes place by agreement but it is not so in our country. The
power to sell shall not be exercised unless and until notice in writing
requiring payment of the principal money has been served on the mort
gagor. Further Section 69(3), Transfer of Property Act shows that when a
sale has been made in professed exercise of such a power the title of the
purchaser shall not be impeachable on the ground that no case had arisen
to authorise the sale. Therefore, until the sale is complete by registration
the mortgagor does not lose right of redemption.
The English decisions are based on the provisions of the Law of
Property Act, 192.5. In England sale is effected by the contract of sale,
and in India an agreement for sale is not a sale or transfer of interest. In
England, a mortgagee gets an equitable interest in the property. Under
the English doctrine a contract of sale transfers an equitable estate to
the purchaser. In India, there is no equity or right in property created
in favour of the purchaser by the contract between the mortgagee and
the proposed purchaser. In India, there is no distinction between legal
and equitable estates. The law of India knows nothing of that distinc
tion between legal and equitable property in the sense in which it was
understood when equity was administered by the Court of Chancery in
England. Under the Indian law, there can be but one owner that is, the
legal owner.
A contract of sale does not of itself create any interest in, or charge
on, the property. This is expressly declared in Section 54, Transfer of
Property Act. The fiduciary character of the personal obligation created
by a contract for sale is recognised in Section 3, Specific Relief Act, 1963,
and in Section 91, Trusts Act. The personal obligation created by a con
tract of sale is described in Section 40, Transfer of Property Act as an
obligation arising out of contract and annexed to the ownership of prop
erty, but not amounting to interest or easement therein.
In India, the word “transfer” is defined with reference to the word
“convey”. The word “transfer” in English Law in its narrower and more
usual sense refers to the transfer of an estate in land. The word “con
veys” in Section 5, Transfer of Property Act is used in the wider sense of
conveying ownership.
Hence, it cannot be held that the mortgagor lost the right of redemp
tion just because the property was put in auction. The mortgagor has a
right to redeem unless the sale of the property was completed by registra
tion in accordance with the provisions of the Registration Act.
It is erroneous to suggest that the mortgagee is acting as the agent of

the mortgagor in selling the property. The mortgagee exercises his right
under a totally superior claim which is not under the mortgagor, but
against him.
Where the mortgagor binds himself to repay the mortgage-money on
a certain date, and transfers the mortgaged property absolutely to the
mortgagee, but subject to a proviso that he will retransfer it to the mort
gagor upon payment of the mortgage-money as agreed, the transaction is
called an English mortgage.
The court also referred to Rani Chhatra Kumari v Mohan Bikram55,
Ram Baran Prasad v Ram Mohit Hazra56, Abraham Ezra Issac Mansoorv
Abdul Latiff Usman57, Ellappa Naiker v Sivasubramanian Maniagaran53,
Meenakshi Velu v Rasturi Sakunthala59, Waring (Lord) v London &
Manchester Assurance Co Ltd60, and Property and Bloodstock Ltd v
Emerton61.
WHO CAN REDEEM [S. 91]

Section 91 sets out the persons who are entitled to sue for redemption
and hence, entitled to deposit. The section provides:
91. Persons who may sue for redemption. — Besides the mortgagor, any of the
following persons may redeem, or institute a suit for redemption of, the mort
gaged property, namely—
(a) any person (other than the mortgagee of the interest sought to be
redeemed) who has any interest in, or charge upon, the property mort
gaged or in or upon the right to redeem the same;
(b) any surety for the payment of the mortgage-debt or any part thereof; or
(c) any creditor of the mortgagor who has in a suit for the administration of
his estate obtained a decree for sale of the mortgaged property.
CLAUSE (a): PERSON HAVING INTEREST IN OR

CHARGE ON PROPERTY
If the mortgagor is the lessee of the property, his lessor cannot redeem,
because he has no interest in the tenancy right. So also a Hindu rever
sioner is not entitled to redeem, because he has no present interest in
the property. But a person who has the smallest interest in the equity of
redemption is entitled to sue under this section.62 A sub-mortgagee (see,
55. 1931 SCC OnLine PC 46: (1930-31) 58 IA 279.
56. AIR 1967 SC 744.
57. 1943 SCC OnLine Bom 62: ILR 1944 Bom 549.
58. 1936 SCC OnLine Mad 148: AIR 1937 Mad 293.
59. ILR (1967) 3 Mad 161.
60. 1935 Ch 310.
61. 1968 Ch 94: (1967) 3 WLR 973 (CA).
62. Gudarmal v Bansilal, 1970 SCC OnLine Raj 15: AIR 1971 Raj 175; Raj Narain Pandey
v Sant Prasad Teiuari, (1973) 2. SCC 35; Nabi Rasool v Mohd Maqshood, 1982 SCC
OnLine All 660: AIR 1982 All 503.
p. 219) of the puisne mortgagee has also the right to redeem. See, Mirza
Yadalli Beg v Tukaram63.
A mortgagor has thus, after the mortgage-money has become due and
before he loses his right to redeem, the following remedies:
1. pay or tender at the proper time and place under Section 60;
2. deposit the amount due under Section 83; and
3. sue for redemption under this section.
The object of Section 83 is to enable a mortgagor to discharge the mort
gage without litigation. If, however, there is a dispute as to who is the
mortgagee the court will refer the parties to a regular suit.
In Ram Chandra Marivari v Ram Keshobati64, the mortgagor after
tendering the amount, according to him due to the mortgagee, deposited
it in court, because the mortgagee refused to deliver the bond. It was
then, by some manoeuvre or contrivance upon which the mortgagee for
reasons best known to him, has deliberately abstained from letting in
light, drawn out by the mortgagee’s agent. Thereafter, the mortgagee
filed a suit for a sum which according to him represented the balance due
and interest. It was held:
The Act provides that money lodged, as this was, ‘in full discharge’ of a lia
bility can only be drawn out by a creditor in full discharge of that liability.
The agent of the appellants appointed ad hoc drew out this money. It is for
them to shew that he acted under such conditions that the statutory result
does not follow from his act. If they fail to do this, as they have failed in the
present case, then there is nothing to defeat or modify the operation of the
statute, and the consequences must be those which it prescribes.
The money drawn out must therefore be held to have been drawn out in
full discharge of the mortgagor’s liability. $ c=\
In Hewanchal Singh v Jawahir Singh65, one of the conditions of the
mortgage was that interest shall be paid year after year and if there was case pilot
default, the mortgagee was at liberty to realise it by suit. The mortgagor
made default at the end of the first year and the mortgagee sued and
recovered the interest. Before the end of the second year, the mortgagor
deposited the principal amount into court but the court dismissed the
application to issue notice to the mortgagee, because the mortgagor
could redeem only at the end of the second year. At the end of the sec
ond year, the mortgagee sued for the interest, and obtained a decree.
The mortgagor then filed a suit and contended that since he had depos
ited the principal money, no interest was due for the second year under
63. 1920 SCC OnLine PC 43: (1919-20) 47 IA 207; Paricchan Mistry v Achhiabar Mistry,
(1996) 5 SCC 526; Beli Ram v Salig Ram, (1996) 7 SCC 186; State of Punjab v Ram
Rakha, (1997) 10 SCC 172.
64. 1909 SCC OnLine PC 6: (1908-09) 36 IA 85.
65. ILR (1888) 16 Cal 307 (PC).
Section 84. It was held that as the interest due at the end of the second
year had not been paid, nor tendered, nor placed at the mortgagee’s dis
posal by deposit in court, the condition relating to redemption had not
been fulfilled at the close of the second year, when the suit was brought,
and that it ought to be dismissed.
84. Cessation of interest.—When mortgagor or such other person as afore
said has tendered or deposited in Court under Section 83 the amount remain
ing due on the mortgage, interest on the principal money shall cease from the
date of the tender or in the case of a deposit, where no previous tender of such
amount has been made as soon as the mortgagor or such other person as afore
said has done all that has to be done by him to enable the mortgagee to take such
amount out of Court, and the notice required by Section 83 has been served on
the mortgagee:
Provided that, where the mortgagor has deposited such amount without hav
ing made a previous tender thereof and has subsequently withdrawn the same or
any part thereof, interest on the principal money shall be payable from the date
of such withdrawal.
Nothing in this section or in Section 83 shall be deemed to deprive the mort
gagee of his right to interest when there exists a contract that he shall be entitled
to reasonable notice before payment or tender of the mortgage-money and such
notice has not been given before the making the tender or deposit, as the case
may be.
In Chalikani Venkatarayanim v Zamindar ofTuni66, it was also held:
It is very difficult indeed to say whether or not a man will be able to have
control of money at a future date and the real question to be determined
here is not whether the money was within the power of the appellants but
whether the mortgagee in the letter he sent in answer to the offer definitely
and unequivocally refused to accept the money were it tendered. Before
reading this reply it is well to bear in mind what has been stated by Vice-
Chancellor Wigram in the case of Hunter v Daniel67, as to the true posi
tion in such a case. He there says: ‘The practice of the Courts, is not to
require a party to make a formal tender where from the facts stated in the
Bill or from the evidence it appears the tender would have been a mere form
and that the party to whom it was made would have refused to accept the
money.’ Their Lordships think that that is a true and accurate expression
of the law, and the question, therefore, is whether the answer that was
sent on behalf of the mortgagee amounted to a clear refusal to accept the
money....
Their Lordships are unable to construe the letter as equivalent to any such
clear release to the mortgagor of his obligation to tender the money as is
required in order to justify him in not having presented it for receipt. From
that time to this nothing has in fact been tendered. No money has been paid
into Court and no effort on the part of the mortgagor has been made to
66. 1921 SCC OnLine PC 57: (1922-23) 50 IA 41.

67. (1845) 4 Hare 420.
S. 60-B] RIGHTS OF MORTGAGOR 271
satisfy his obligations under the deed. Their Lordships, therefore, think that
the appellant must fail upon that part of his appeal.
The necessity for the return of the title deeds under Section 60 arises
because if the mortgagor is not in possession of his title deeds a presump
tion may be raised that the mortgage is not discharged.
As regards the delivery of the property is concerned this arises in the
case of a usufructuary mortgage and a further provision is made in this
connection in Sections 62. and 63.
A reconveyance under Section 60 is necessary only when the mortgage
is an English mortgage. Closely connected with this matter, there are two
other Sections 60-A and 60-B. Section 60-A reads as follows:
60-A. Obligation to transfer to third party instead of retransference to mort
gagor.— (1) Where a mortgagor is entitled to redemption then, on the fulfilment
of any conditions on the fulfilment of which he would be entitled to require a
re-transfer, he may require the mortgagee, instead of re-transferring the prop
erty, to assign the mortgage debt and transfer the mortgaged property to such
third person as the mortgagor may direct; and the mortgagee shall be bound to
assign and transfer accordingly.
(2.) The rights conferred by the section belong to and may be enforced by the
mortgagor or by encumbrancer notwithstanding an intermediate encumbrance;
but the requisition of any encumbrancer shall prevail over a requisition of the
mortgagor and, as between encumbrancers, the requisition of a prior encum
brancer shall prevail over that of a subsequent encumbrancer.
(3) The provisions of this section do not apply in the case of a mortgagee who
is or has been in possession.
CLAUSE 1: ASSIGNMENT
This deals with the right of the mortgagor to require the mortgagee to
assign the mortgage to a third person.
CLAUSE 2: ENCUMBRANCER
Encumbrancer is a person who has an encumbrance over another’s prop
erty, such as a puisne mortgagee.
CLAUSE 3: TRANSFER OF MORTGAGE BY MORTGAGEE

If a mortgagee in possession is allowed to transfer the mortgage to a
third party, he will have to transfer the possession also and questions of
accounts between such mortgagees and the mortgagor would arise and
complicate matters. That is the reason for the exception. Section 60-B
reads as follows:
60-B. Right to inspection and production of documents.—A mortgagor, as
long as his right of redemption subsists, shall be entitled at all reasonable times,
at his request and at his own cost, and on payment of the mortgagee’s costs and
expenses in this behalf, to inspect and make copies or abstracts of, or extracts
from, documents of title relating to the mortgaged property which are in the
custody or power of the mortgagee.
One other point may be noticed which arises as a result of the repeal of
Section 99 by Order 34, Rule 14 CPC. The legal position is as follows:
A mortgagee can have the mortgage property sold in satisfaction of any
claim of his against the mortgagor which is not connected with the mort
gage. Therefore, if the mortgagee purchases the property in a sale in
execution of the money decree, unconnected with the mortgage, he will
get the right with mortgagor’s right to redeem extinguished, provided
the purchase is with leave of court.68 But if the decree is on the personal
covenant in the mortgage, then it is a claim under the mortgage, and the
mortgagee cannot deprive the mortgagor of his right to redeem.69 This
prohibition does not, however, apply where the mortgagee purchases
in execution of a decree by a third person, irrespective of whether the
decree is a decree of mortgage or a money decree.
The rules as to partial redemption may be summarised as below (last
part of Section 60):
1. The general rule is that a mortgage should be regarded as one,
entire and indivisible, that is, one of the several mortgagors cannot
redeem his share of the property on payment of his share of the
debt.
z. Such a co-mortgagor may however redeem the entire property by
paying the entire debt.
3. He may then ask for contribution from other co-mortgagors.
4. If a mortgagee acquires a share in the property, the indivisibility
of the mortgage comes to an end. (The word “mortgagee” includes
all the mortgagees if there is more than one). The result is that the
debt is reduced to the extent of such acquisition and the rest of the
properties are liable only for the balance of the debt.
5. Once the indivisibility is gone, one co-mortgagor can redeem his
share only.
6. If a mortgagee releases a portion of the property or releases one of
the co-mortgagors, the indivisibility does not cease.
7. If the mortgagee consents—the consent being given to all
co-mortgagors, if there is more than one—a partial redemption is
allowed.
8. Partial foreclosure and partial redemption are thus allowed
if the mortgagor consents in one case and the mortgagee in the
other.
68. Mahabir Pershad Singh v Macnaghten, 1889 SCC OnLine PC 2: (1888-89) 16 IA 107.
69. Khiarajmal vDaim, 1904 SCC OnLine PC 27: (1904-05) 32 IA 23: ILR (1904) 32 Cal 296
(PC).
Section 61 provides for another right of the mortgagor. It provides:

61. Right to redeem separately or simultaneously.—A mortgagor who has
executed two or more mortgages in favour of the same mortgagee shall, in the
absence of a contract to the contrary, when the principal money of any two or
more of the mortgages has become due, be entitled to redeem any one such mort
gage separately, or any two or more of such mortgages together.
SCOPE
The section applies to any number of mortgages by the same mortgagor
to the same mortgagee, and after the amendment in 192,9, not only to
cases where different properties are mortgaged but also where the same
property is mortgaged under successive mortgages. If a mortgagor came
to court, prior to the passing of the Act, for redeeming mortgaged prop
erty he had to discharge all the mortgage debts due to the mortgagee
from the mortgagor, that is, the mortgagee was entitled to consolidate
the mortgages. This doctrine of consolidation was abolished in England
and by the Act in India. There can, however, be an express contract to
the contrary permitting consolidation. [See also, S. 67-A]
CONSOLIDATION OF SECURED AND UNSECURED DEBTS

This is not ordinarily possible. Any agreement by which the mortgagee
tries to get a personal loan and a mortgage loan paid at the same time
would be considered a clog. If the money debt however creates a charge
on the property, an express contract of consolidation is enforceable. In
a case where, after incurring a simple money debt, the debtor executes a
mortgage in which he agrees not to redeem the mortgage without paying
off the debt, it could be treated as an express covenant for consolidation
on the ground that the subsequent mortgage is also a security for the
earlier debt.
TACKING
One other rule, namely, prohibition of tacking by the mortgagee, except
to a limited extent, may be dealt with in this chapter as a right of the
mortgagor. Suppose the mortgagor borrows ^1000 from A and mort
gages his property. On the security of the same property, suppose he bor
rows ^200 and ^300 from B and C respectively, and, thereafter borrows
another sum of ^200 from A. If A did not know of the advances made
by B and C, he could “tack” his subsequent loan of ^200 to the first loan
of 1000 and claim preference over B and C, but the right to tack is now
modified by Sections 93 and 79.
93. Prohibition of tacking.—No mortgagee paying off a prior mortgage,
whether with or without notice of an intermediate mortgage, shall thereby
acquire any priority in respect of his original security; and, except in the case pro
vided for by Section 79, no mortgagee making a subsequent advance to the mort
gagor, whether with or without notice of an intermediate mortgage, shall thereby
acquire any priority in respect of his security for such subsequent advance.
When a third mortgagee pays off the first mortgage, by Section 92, he is
subrogated to the first mortgagee’s rights; but the third mortgagee can
not tack on his own mortgage to the first and claim priority over the
intermediate mortgage. The only extent to which tacking is permitted is
set out in Section 79 which deals with further advances.
And Section 79 provides:
79. Mortgage to secure uncertain amount when maximum is expressed.—If
a mortgage made to secure future advances, the performance of an engagement
or the balance of a running account, expresses the maximum to be secured
thereby, a subsequent mortgage of the same property shall, if made with notice of
the prior mortgage, be postponed to the prior mortgage in respect of all advances
or debts not exceeding the maximum, though made or allowed with notice of the
subsequent mortgage.
Illustration
A mortgages Sultanpur to his bankers, B & Co., to secure the balance of his
account with them to the extent of 10,000. A then mortgages Sultanpur to C, to
secure ^10,000, C having notice of the mortgage to B & Co., and C gives notice
to B & Co., of the second mortgage. At the date of the second mortgage, the
balance due to B & Co., does not exceed ^5000, B & Co., subsequently advance
to A sums making the balance of the account against him exceed the sum of
^10,000. B & Co., are entitled, to the extent of 10,000, to priority over C.
ENGLISH LAW
The English rule is slightly different. In the illustration B was entitled to
priority because C had notice of B’s mortgage. Under the English rule,
B would have priority only if he had no notice of the mortgage in C’s
favour.
SCOPE
In Dalip Narayan v Chait Narayan70, it was said:
CASE PILOT The general rule laid down (in Sections 79 and 80) is that a mortgagee,
making a further advance, shall not in respect of that advance acquire any
priority as against an intermediate mortgagee; but this is subject to the excep
tion that the intermediate mortgagee who has notice of the prior mortgage
is postponed in respect of advances subsequently made on the security of
70. (1912) 16 Cal LJ 394.

that mortgage, provided it expresses the maximum to be secured thereby

and that maximum is not exceeded. (In the present case the prior mortgage
was registered on nth October, 1900 and the subsequent mortgage on 12th
October, 1900). Even if, therefore, the view taken, namely, that registration
is equivalent to notice, were adopted, it could not be said that the subsequent
mortgagee had notice of the prior mortgage; before the puisne encumbrancer
negotiated for the advance of his money, he could not have discovered by the
most diligent search in the registration office, the fact of the prior mortgage.
In Imperial Bank of India v U. Rai Gyaw Thu and Co Ltd7', the mort
gagor deposited title deeds of his property with the bank, to secure
advances to be made by the bank, but later mortgaged the property to
the respondent without notice to the bank. The later mortgage was regis
tered but the respondent did not ask for the title deeds. On the question
of priority between the appellant and the respondent, it was held:
It is to be observed that there is here no distinction between legal and equita
ble mortgages as in English law, where the legal mortgage will always prevail
against the equitable unless the holder of the legal has done or omitted to do
something which prevents him in equity from asserting his paramount rights.
The various classes of mortgages are merely described, and then as regards
mortgage by ...deposit of title deeds, that is spoken of as a known method.
That known method had consisted in applying the doctrine of English law
that such deposit effected a mortgage good against the mortgagor, although
no actual conveyance of the property had been made, may be taken as cer
tain,...and consequently priority sections had application.
Priority is dealt with in general terms by S. 48,...[and] [t]his is what is
expressed in the old maxim qui prior est tempore potior est jure. But priority
is specifically dealt with in Ss. 78, 79 and 80....
[The two points which arise are:] (1) whether the registration of the
respondents’ mortgage was ipso facto notice to the Bank, thus preventing
the bank from making further advances upon the doctrine of Hopkinson v
Rolt72, and (2) whether the fact that the respondents in taking the mortgage
did not ask for the title-deeds, brought into play the provisions of S. 78 ....
Their Lordships... think that the words of S. 79 mean that the mortgage
there referred to must express a maximum. The [opening] words... denom
inate the different classes of mortgages, but to bring them under S. 79 they
must have the common feature of a maximum expressed....
[‘Future’] ...from the context must mean subsequent to the intermediate
mortgage, and if that is so, then in the sense of the section an advance when
made after another mortgage is granted becomes a ‘future’ advance....
The bank which had no maximum expressed so as to get the benefit of
S. 79 took the risk of there being an intermediate mortgage. Their further
advances could not in any sense be said to have been induced by any action
of the respondents [and Section 78 does not apply.]
71. 1923 SCC OnLine PC 41: (1922-23) 50 IA 283.

72. (1861) 9 HLC 514: 11 ER 829.
276 LAW OF TRANSFER OF PROPERTY [Chap. 14)
[Considerations as to the exigencies of business,] while founded on views

as to business which are obviously of the greatest practical importance
would, in their Lordships’ opinion, be rather arguments for the invocation of
the Legislature than an incentive to the putting of a forced construction on
sections of an Act which in themselves were, in their Lordships’ judgment,
capable of only one interpretation. It may, however, be not amiss to point out
that, in their Lordships’ view, the remedy is given in the Act itself, and that
is by the insertion in the arrangements for such mortgages of a maximum as
indicated by S. 79. The insertion of such a maximum eludes the result which
otherwise would obtain in the case of Hopkinson v Rolt. It is true that the
subsequent mortgage must be made with notice of the prior mortgage which
includes the maximum. But a case like the present, where the lender took the
subsequent mortgage without asking for the title deeds, would be met by S. 3
of the Act... for a mortgagee taking a mortgage in a place where he knew that
mortgages by deposit of title deeds were legal and usual and not to ascertain
whether the title deeds were already pledged was such abstention from an
enquiry which he ought to have made or such negligence as to infer notice in
terms of the section.... [I]f there had been a maximum then the... case would
have fallen under S. 79.
EXERCISES
1. Explain “Once a mortgage always a mortgage”, (pp. 250-257)
2. Can a mortgage be made irredeemable after a period? (pp. 269-270)
3. What are the rules regarding partial redemption? (pp. 270-271)
4. What is consolidation? (p. 271)
5. What is the rule of priority between mortgagees? (pp. 272-273)
6. Explain “tacking”, (pp. 271-272)

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• Chalikani Venkatarayanim v Zamindar ofTuni, CASE PILOT
1922 SCC OnLine PC 57
• Dalip Narayan v Chait Narayan, (1912) 16 Cal LJ 394
RIGHTS OF MORTGAGOR 277
(contd.)
• G. & C. Kreglinger v New Patagonia Meat and Cold Storage Co Ltd,

1914 AC 25 (HL)
• Gulab Chand Sharma v Saraswati Devi, (1977) 2 SCC 71
• Hewanchal Singh v Jatuahir Singh, ILR (1888) 16 Cal 307 (PC)
• Mirza Yadalli Beg v Tukaram, 1920 SCC OnLine PC 43
• Mohd Sher Khan v Seth Swami Dayal, 1921 SCC OnLine PC 97
• Mrutunjay Pani v Narmada Bala Sasmal, AIR 1961 SC 1353:
(1962) 1 SCR 290
• Narandas Karsondas v S.A. Kamtam, (1977) 3 SCC 247
• Pomal Kanji Gouindji v Vrajlal Karsandas Purohit, (1989) 1 SCC 458
• Seth Chand Ratan v Pandit Durga Prasad, (2003) 5 SCC 399
• Seth Ganga Dhar v Shankar Lal, AIR 1958 SC 770
• Thumbasawmy Mudelly v Mahomed Hossain Rowthen, 1875 SCC
OnLine PC 14
Chapter 15
Rights of a Mortgagee
Against Other Mortgagees
These can be dealt with under three heads, namely, priorities, subroga
tion and marshalling and contribution.
PRIORITIES
The general rule is in Section 48. It is subject to two exceptions, namely,
Sections 78 and 94. Section 78 provides:
78. Postponement of prior mortgagee.—Where, through the fraud, mis
representation or gross neglect of a prior mortgagee, another person has been
induced to advance money on the security of the mortgaged property, the prior
mortgagee shall be postponed to the subsequent mortgagee.
See, Section 48, for the general rule. For “fraud” and “misrepresenta
tion” see, Sections 17 and 18, Contract Act.
In Raman Chetty v Steel Brothers and Co Ltd1, a mortgagee (appel
CASE PILOT lant) induced the respondent to advance money to the mortgagor by rep
resenting that the mortgaged property was free from encumbrances. It
was held:
The Appellant having thus concurred in inducing the Respondents to advance
their money, as a first charge, cannot now turn round and claim priority over
that charge in favour of their own mortgage subsisting from an earlier date.
In P.S.S.M.K.T. Cathiresan Chettiar v N.S. Natchiappa Chettiar2, relief
CASE PILOT was claimed against the appellant on the footing of his being a subse
quent encumbrancer. The appellant claimed priority on the basis of an
agreement between himself and the respondent, the evidence regarding
which was unsatisfactory. It was held:
1. 1911 SCC OnLine PC 22: (1910-11) 15 CWN 813.

2. 1933 SCC OnLine PC 35: AIR 1933 PC 191; SB1 v Kerala Financial Corpn, 1982 SCC
OnLine Ker 194: AIR 1983 Ker 38.
[S. 94] RIGHTS OF A MORTGAGEE AGAINST MORTGAGEES 279
The appellant’s bond is later than...[that of the respondent,] which being

duly registered confers, unless displaced, a valid security in priority to all of
a later date. The onus lies on the appellant to displace that priority....
... [T]he appellant had failed to prove the agreement, which it was essen
tial for him to prove for the purpose of establishing the priority which he
claimed.
If a mortgagor deposits his title deeds with a bank to secure a debt or
an overdraft, but the manager of the bank allows the mortgagor to take
back the title deeds and thus enables the mortgagor to create another
mortgage by deposit of title deeds, it would be a case of gross neglect on
the part of the manager of the first bank and the mortgage in favour of
his bank will lose its priority.
An equitable mortgage was created in favour of a banking company by
depositing certified copies of title deeds. The owner subsequently created
a mortgage in favour of another bank by depositing original title deeds.
The subsequent mortgagee bank was allowed to claim priority over the
first. It was an error on the part of the first bank to have accepted copies
without proper verification of the fact whether the originals had really
been lost.3
94. Rights of mesne mortgagee.—Where a property is mortgaged for suc
cessive debts to successive mortgagees, a mesne mortgagee has the same rights
against mortgagees posterior to himself as he has against the mortgagor.
This section together with Section 91(d) embodies the rule picturesquely
stated as “redeem up and foreclose down”. Suppose a mortgagor mort
gages his property successively one after the other in favour of A, B and
C, B as the assignee of the equity of redemption can redeem A under
Section 91. Similarly, C can redeem both A and B. Under this section,
[S. 94] B can foreclose C who is an assignee of the equity of redemption
and the mortgagor; and A can foreclose both B and C who are only
transferees of the equity of redemption and of course the mortgagor.4
There is also another English rule which states that you can fore
close without redeeming, but you cannot redeem without foreclosing.
For example, in the above illustration, B can foreclose C and the mort
gagor without redeeming A. But this rule does not apply strictly in India,
because under Order 34, Rule 1 CPC, all persons having interest in the
3. Indian Bank v Punjab National Bank, 2009 SCC OnLine Mad 1150: AIR 2010 Mad 84.
4. Chamattoor Chelanianna v Thantattoor Kuruntbikkat Pare Manakkal Parameswaran,
1969 SCC OnLine Ker 102: AIR 1971 Ker 3; Rurram Ramamohana Rao v Koda
Kanakacharyulu, 1980 SCC OnLine AP 37: AIR 1980 AP 305; C.V. Ragahavdhar v
Lakshniinarasamrna, 1980 Supp SCC 610; Mohaddinsaheb Shikandar Saheb Maniyar
v Hasabsaheb Karirnsaheb Maniyar, 1982 SCC OnLine Kar 83: AIR 1983 Kar 13; Assar
Ali Kha v Baijnath Prasad, 1982 SCC OnLine All 1056: AIR 1983 Ail 197; ]ago Devi v
Widow, 1984 SCC OnLine Pat 57: AIR 1984 Pat 362; Jamiat Singh v State of Punjab,
1984 SCC OnLine P&H 50: AIR 1984 P&H 351.
mortgage security or in the right of redemption are required to be made

parties; and though under its Explanation a prior mortgagee is not a nec
essary party to certain suits, in practice, to avoid multiplicity of suits and
complications regarding the taking of accounts, all interested persons are
made parties.
As a result of the Explanation to Order 34, Rule 1 CPC, there is
another possibility: there can be foreclosure without redemption, but
there cannot be redemption without foreclosure. Suppose M, the owner
of a property mortgages it to A, B and C in that order. A is entitled to
foreclose (in the general sense, i.e. bring to sale) as against M, B and
C. Similarly, B is entitled to foreclose M and C without impleading A.
Therefore, there can be foreclosure without redemption. But, if B files a
suit for redemption against A, M and C are necessary parties to that suit
and so B will be foreclosing M and C. That is, there cannot be redemp
tion of A without foreclosing M and C.
SUBROGATION [S. 92]

Subrogation means substitution. When a person pays off a mortgagee, in
certain circumstances, that person is entitled to the rights of the mort
gagee, that is, entitled to be substituted for the mortgagee. The right of
subrogation is dealt with in Section 92.
This section deals with two kinds of subrogation: one, by operation
of law or legal subrogation and the other by agreement or conventional
subrogation. The former arises when the person discharges the mortgage
because he has some interest of his own in the property to protect, or an
obligation, express or implied, to repay. The latter arises when there is
an agreement in writing registered that the person paying off should be
subrogated.
The section provides as follows:
92. Subrogation.—Any of the persons referred to in Section 91 (other than
the mortgagor) and any co-mortgagor shall, on redeeming property subject to
the mortgage, have, so far as regards redemption, foreclosure or sale of such
property, the same rights as the mortgagee whose mortgage he redeems may have
against the mortgagor or any other mortgagee.
The right conferred by this section is called the right of subrogation, and a
person acquiring the same is said to be subrogated to the rights of the mortgagee
whose mortgage he redeems.
A person who has advanced to a mortgagor money with which the mortgage
has been redeemed shall be subrogated to the rights of the mortgagee whose
mortgage has been redeemed, if the mortgagor has by a registered instrument
agreed that such persons shall be so subrogated.
Nothing in this section shall be deemed to confer a right of subrogation on
any person unless the mortgage in respect of which the right is claimed has been
redeemed in full.
S. 92] RIGHTS OF A MORTGAGEE AGAINST MORTGAGEES 281
The principles underlying subrogation are fully explained in the follow

ing cases, though some of them arose before the Act was passed and
some under the Act before amendment.
In Ram Tuhul Singh v Bisestvar Lail Sahoo5, the appellant was a
shareholder in a certain estate which was sold for arrears of government
revenue, and the surplus was left in the hands of Collector. The appel
lant’s share in the surplus was about ^35,000. A creditor of the appel
lant attached this interest and obtained an order for its sale and it was
bought by the respondent for ^8000 and the sale was confirmed in spite
of protests and objections by the appellant. The respondent thereafter
petitioned the Collector for payment to him of ^35,000 and odd; but as
in the meanwhile the revenue sale was set aside the Collector refused to
pay. The respondent then instituted a suit for recovery of ^8000 with
interest. It was held:
What was the real nature of their purchase at the execution sale? What did
they buy? They bought the appellant’s interest in the surplus proceeds, sub
ject to the contingency of his succeeding in his suit to set aside the revenue
sale, in which event that interest would become nil. They did this with their
eyes open, since, at least before the sale was confirmed, they had notice that
the suit had been commenced. There was no warranty or contract on his
part. The sale was held under proceedings in invitum, and indeed against
his express protest. The parties were at arm’s length. The appellant was free
to prosecute his suit; the respondents free to impose their rights, should he
fail, to the uttermost farthing. What they bought, then, was the chance of
getting ^35,000 for ^8000, dependent on the happening or non-happening
of a certain event. And a substantial chance it must be taken to have been,
since the construction of the clause...on which the right to annul the sale
depended, was doubtful and the Court of first instance determined the ques
tion against the appellant. If that judgment had stood, he would have lost
his land; and the respondents would have taken from him all its proceeds,
except the ^8000 applied in satisfaction of his debts. It is difficult to see
upon what general equity existing between parties thus situated the appel
lant ought to be compelled to restore the respondents to their original posi
tion, because the event on which they speculated has ultimately gone against
them.
Then it is said that if the respondents fail in the present suit, the appellant
will not only keep the estate which he has recovered, but will get debts to the
amount of ^8000 for which his property was liable to be attached, and sold,
paid with the plaintiff’s money.
But, even if this were true, it is not in every case in which a man has bene
fited by the money of another, that an obligation to repay that money arises.
The question is not to be determined by nice considerations of what may be
fair or proper according to the highest morality. To support such a suit there
must be an obligation, express or implied, to repay. It is well settled that there
5. 1875 SCC OnLine PC 7: (1874-75) z IA 131*

is no such obligation in the case of a voluntary payment by A of B's debt. Still

less will the action lie when the money has been paid as here, against the will
of the party for whose use it is supposed to have been paid—Stakes v Lewis6.
The same principle in regard to voluntary payment applies in the case of
subrogation also.
In Gokuldoss Gopaldoss v Rambux Seochand7, the appellant pur
CASE PILOT chased the equity of redemption in property mortgaged and paid off the
first mortgage with notice of a second mortgage. The second mortgagee
instituted a suit to enforce his mortgage. It was held:
[The doctrine in Toulmin v Steere8, is that]... in the case of a purchase from
the owner of an equity of redemption, the purchaser with notice, whether
actual or constructive, of other incumbrances, is not, in the absence of
any contemporaneous expression of intention, entitled as against the other
incumbrances of whose securities he has notice, to say afterwards that the
incumbrances so paid off are not extinguished....
In India the art of conveyancing has been and is of a very simple charac
ter. Their Lordships cannot find that a formal transfer of a mortgage is ever
made, or an intention to keep it alive ever formally expressed. To apply to
such a practice the doctrine of Toulmin v Steere9 seems to them likely, not
to promote justice and equity, but to lead to confusion, to multiplication of
documents, to useless technicalities, to expense, and to litigation.
The obvious question to ask in the interest of justice, equity and good
conscience, is what was the intention of the party paying off the charge?
He had a right to extinguish it and a right to keep it alive.... If there is no
express evidence of... [the intention], what intention should be ascribed to
him? The ordinary rule is that a man having a right to act in either of two
ways, shall be assumed to have acted according to his interest. [Therefore,
the purchaser must be assumed] to have intended to keep the first mortgage
alive, and therefore, he was entitled to stand in the place of the first mortga
gee and to retain possession against the second mortgagee.
In this case, property was sold subject to two mortgages. The purchaser
paid off the first mortgage in favour of a bank, and, in a suit by the sec
ond mortgagee claimed that he has subrogated to the rights of the first
mortgagee. The Judicial Committee observed:
... [T]he debt to the bank was not paid off out of the purchase-money. The
Appellant purchased the interest of the mortgagor only, and did not in
any way bind himself to pay off that debt. When he paid the bank, some
six months afterwards, it was not because he was under an obligation to
do so.
6. i T It zo.
7. 1884 SCC OnLine PC 11: (1883-84) 11 IA 126.
8. 3 Mer 210.
9. Ibid.
Two points follow from these observations:

i. A purchaser who pays the mortgage from the purchase money will
not be allowed to claim subrogation. The reason is, it is really the
vendor-mortgagor who is paying in such a case through the hands
of the purchaser, and there is no question of a mortgagor claiming
right of subrogation. He is surely doing his duty and is not entitled
to any security. “There is nobody against whom he need to enforce
the security thus set free by himself.” The test in such cases is to see
whose money has been paid. Is it in addition to the purchase money
or out of the purchase money?
2. If there is a covenant under which the purchaser undertakes to pay,
he will not be allowed the right of subrogation, because there is no
difference between himself and the mortgagor.
This case arose before the Act was passed and subrogation was made a
matter of intention and presumed intention.
Further the intention to keep alive the first mortgage is obvious.
In Dinobundhu Shaw Chowdhry v Jogmaya Dasi10, property was
attached in execution of a decree, and the owner of the property in igno CASE PILOT
rance of the attachment and in pursuance of a fair arrangement with the
respondent paid off an earlier mortgage from money borrowed from the
respondent and mortgaged the property to the respondent. The intention
of the parties was to give the respondent a first charge on the property.
Thereafter, in pursuance of the attachment, the property was sold and
the appellant purchased it. The appellant was informed of the discharge
of the earlier mortgage and of the mortgage in respondent’s favour before
he purchased it. He, however, claimed that he was entitled to the prop
erty free from encumbrances on the ground that the respondent’s mort
gage was after the property was attached. It was held:
The law upon this subject and its application to transactions in India will be
found in Mohesh Lal v Mohunt Bataan Dasu and Gokuldoss Gopaldoss v
Rambux Seochand1112 . The Subordinate Judge has summed it up accurately
thus: ‘When the owner of an estate pays charges on the estate which he is not
personally liable to pay, the question whether those charges are to be con
sidered as extinguished or as kept alive for his benefit is simply a question
of intention. The intention may be found in the circumstances attending the
transaction, or may be presumed from a consideration of the fact whether it
is or is not for his benefit that the charge should be kept on foot.’ Here the
mortgagor was paying off his own debts, but he was doing so for the benefit
of... [the respondent] and in performance of the agreement with him. The
respondent was intended to have the first and only charge, and it is idle to
10. 1901 SCC OnLine PC 29: (1901-02) 29 IA 9.

11. 1883 SCC OnLine PC 2: (1882-83) 10 IA 62.
12. 1884 SCC OnLine PC 11: (1883-84) n IA 126.
contend that there was any intention to extinguish the old mortgages for the
benefit of the execution creditor or any purchaser at the...sale.
This case arose after the Act was passed but before the present section
was enacted in 1929. The law of subrogation was continued to be consid-
r-A ered as a matter of intention.
U=/ In Mohd Ibrahim Hossain Khan v Ambika Pershad Singh1314 , there was
case pilot a zurpeshgi mortgage of 1874 and the properties comprised therein were
mortgaged under a simple mortgage to one Mst Alfan in 1888; the mort
gage-money was applied for discharging the zurpeshgi mortgage, and
the zurpeshgi deed was handed over to the later mortgagee. In a suit by
the simple mortgagee to enforce the mortgage by sale of the properties,
it was held:
It has been held by this Board, in Mohesh Lal v Mohunt Bawan Das™, that
whether a mortgage paid off is extinguished or kept alive depends upon the
intention of the parties. It has also been held by this Board in Gokuldoss
Gopaldoss v Rambux Seochand'5, that the ordinary rule is that a man hav
ing a right to act in either of two ways shall be assumed to have acted accord
ing to his interests. In the last-mentioned case it was held by this Board that
the purchaser of an equity of redemption in immovable property situated in
India, who, having notice of a second mortgage, paid off a first mortgage
upon the property without an assignment of the first mortgage to him, must
be assumed, according to the rule of justice, equity, and good conscience, to
have intended to keep the first mortgage alive, and consequently was entitled
to stand in the place of the first mortgagee and to retain possession against
the second mortgagee until repayment. In that case this Board was pressed
to apply the doctrine of Toulmin v Steere16, but this Board observed that: ‘In
CASE PILOT
India the art of conveyancing has been and is of a very simple character. Their
Lordships cannot find that a formal transfer of a mortgage is ever made, or
an intention to keep it alive ever formally expressed. To apply to such a prac
tice the doctrine of Toulmin v Steere1718 seems to them likely, not to promote
19
justice and equity, but to lead to confusion, to multiplication of documents,
to useless technicalities, to expense, and to litigation.’ And their Lordships
in that case held that the obvious question to ask, in the interests of justice,
equity, and good conscience, is, what was the intention of the party paying
off the charge? What this Board said in 1884 as to the art of conveyancing in
India, and the practice in such cases, is true as to the art of conveyancing and
the practice in such cases at the present day. The law on these points applied
in the judgments of this Board in Mohesh Lal v Mohunt Bawan Das™ and
Gokuldoss Gopaldoss v Rambux Seochand13 was subsequently applied by
13. 1912 SCC OnLine PC 3: (1911-12.) 39 IA 68.

14. 1883 SCC OnLine PC 2: (1882-83) 10 IA 62.
15. 1884 SCC OnLine PC 11: (1883-84) 11 IA 126.
16. 3 Mer 210.
17. Ibid.
18. 1883 SCC OnLine PC 2: (1882-83) 10 IA 62.
19. 1884 SCC OnLine PC n: (1883-84) 11 IA 126.
this Board in Dinobundhu Shaw Chowdhry v Jogmaya Dasi1Q. Applying the

rule of justice, equity, and good conscience, their Lordships in this appeal
hold that the charge created by the zarpeshgi deed of... 1874, was kept alive
for the benefit of Mussammat Alfan.
In Malireddi Ayyareddi v Gopalakrishnayya21, certain lands were sub
ject to three mortgages. The first and third were upon the lands merely, CASE PILOT
but the second was on the crops as well as the land. The purchaser from
the mortgagor paid to the second mortgagee money to save the crops
from sales in execution of the decree which he obtained on his mortgage.
On the question of priority between the purchaser and the third mortga
gee, it was held:
It is now settled law that where in India there are several mortgages on a
property, the owner of the property subject to the mortgages may, if he pays
off an earlier charge, treat himself as buying it and stand in the same position
as his vendor, or to put it in another way, he may keep the incumbrance alive
for his benefit and thus come in before a later mortgagee. This rule would
not apply if the owner of the property had covenanted to pay the later mort
gage-debt, but in this case there was no such personal covenant. It is further
to be presumed, and indeed the statute so enacts (Transfer of Property Act,
sec. ioi), that if there is no indication to the contrary the owner has intended
to have kept alive the previous charge if it would be for his benefit.
In Nasir-Uddin v Ahmad Husain11, there was a suit for specific perfor
mance of a contract to sell land. The defendants were subsequent pur
chasers with knowledge of the contract. As purchasers they discharged
mortgages upon the property. The suit was decreed. It was also held:
It seems that the appellants [defendants] have, in virtue of their claim to
be purchasers, discharged mortgages upon the property. In respect of any
money paid by way of such discharge they are entitled to stand in the shoes
of the mortgagees whom they have paid off.
Under the present law, if subrogation is specifically provided for in favour
of the person paying, by a registered instrument, then such a person
would be entitled to subrogation. [See, S. 92(3)]
In Janaki Nath Roy v Pramatha Nath Malia23, the mortgagor exe
cuted four mortgages in favour of the appellant on four different items CASE PILOT
of property, A, B, C and D on different dates successively. The terms of
the mortgages were so worded that each mortgage was a mortgage of
the item dealt with as well as an additional security for the earlier mort
gages. Thereafter, he mortgaged all the properties to the respondent for
money to be advanced by him to pay off the mortgages in favour of the
appellant, the respondent being subrogated to the rights of the appellant.
20. 1901 SCC OnLine PC 29: (1901-02) 29 IA 9.
21. 1923 SCC OnLine PC 55: (1923-24) 51 IA 140.
22. 1926 SCC OnLine PC 38: AIR 1926 PC 109.
23. 1939 SCC OnLine PC 58: (1939-40) 67 IA 82.
The respondent paid off the amount due on mortgages relating to prop
erties A, B and C but not on D. In a suit by the appellant to enforce the
rights under the fourth mortgage with respect to item D and in default of
payment, for sale of all the properties of A, B, C and D, the respondent
contended that he had a priority with respect to the items, A, B, and C
having been subrogated to the position of the appellant as first mortga
gee. It was held:
... [T]he doctrine of consolidation has nothing to do with the case. That
doctrine can only apply when a mortgagee holds (say) a mortgage on prop
erty A and also a separate mortgage on property B belonging to the same
mortgagor. In such a case after the expiry of the legal right of redemption the
mortgagor in cases where the right of consolidation is still applicable is only
allowed to exercise his equitable right of redemption of the one property on
the terms of redeeming the other.
In the case, however, of a mortgagee holding a first mortgage on property
A and also a second mortgage on the same property the mortgagor cannot on
payment off of the first mortgage redeem the property, that is to say, claim a
reconveyance and delivery up of the title deeds, and so forth, unless he repays
what is due on the second mortgage. But this is not because of the doctrine
of consolidation but by reason of the fact that he has a second mortgage on
the property....
[In the present case], the properties [A, B and C] themselves could not be
wholly redeemed because of the charge thereon of the sum advanced under
the fourth mortgage, a position that was recognised by the express terms of
that mortgage. This did not, however, in any way affect the right of a person
other than the mortgagor himself on paying or providing for the payment of
the sums due under the first three mortgages to be subrogated to the rights
of the appellants....
Taking first the law as it stood in December, 192.7, it has nowhere been bet
ter expressed than it was by Mookerjee J. in... Gurdeo Singh v Chandrikah
Singh24. That learned judge said this:
‘It may be said in general that to entitle one to invoke the equitable right
of subrogation he must either occupy the position of a surety of the debt
or must have made the payment under an agreement with the debtor or
creditor that he should receive and hold an assignment of the debt as secu
rity or he must stand in such a relation to the mortgaged premises that his
interest cannot otherwise be adequately protected.’
...Mookerjee J., however, went on to point out that a person who claims
to be subrogated to the rights of a mortgagee must pay the entire amount
of the incumbrance in question. Payment of a portion only of the incum
brance is not sufficient. It is obvious, he said, that the contrary views would
lead to endless difficulties. With these observations of the learned Judge their
Lordships desire to express their entire agreement. It is indeed to be observed
that such a qualification of the right of subrogation applies whether the right
be claimed under the statute or under the pre-existing law.
24. ILR (1909) 36 Cal 193.

Turning now to the statute, the first thing to be observed is that third par
agraph of Section 92 only applies where the mortgage has been redeemed. In
the present case it is said that the mortgage has not been redeemed inasmuch
as there has been no reconveyance, or what in India takes the place of a recon
veyance. This contention, however, loses sight of the distinction between the
redemption of a mortgage and the redemption of the property mortgaged. In
their Lordships’ opinion it is clear that the words in the section ‘mortgage
has been redeemed’ refer merely to the payment of the mortgage money, and
not to an extinction of the mortgagees’ rights over the mortgaged property.
If such rights had become extinguished there would be none to which the
person advancing the money could be subrogated. The fourth paragraph
moreover seems to contemplate that a mortgage may be redeemed in part,
and this clearly shows that by redemption is meant no more than payment of
the mortgage money. That being so and the mortgage of the... [respondent]
having been duly registered,... [he] is entitled to be subrogated to the rights
of the appellant under the first three mortgages by virtue of the plain terms
of Section 92. if such section be applicable....
(On the terms of the mortgage it was held that the fourth mortgage was
not a comprehensive mortgage of all the properties, and therefore there
was a complete redemption of the independent mortgages on items, A, B
and C and therefore the respondent was entitled to be subrogated to the
appellant’s rights with respect to those three mortgages.) (—-A
In Man Mohan Das v Janki Prasad25, a suit was instituted against an
idol claiming money on a mortgage. The appellant loaned money to the case pilot
respondent, who was one of managers of the idol and with that money
the decree debt in the suit was discharged and in consequence the idol
was benefited and the trust freed from the burden of the decree debt. On
the question whether the appellant by discharging the mortgage debt by
loan had subrogated himself to the rights of the decree-holder in the suit
against the idol, it was held:
The doctrine of subrogation is in essence a simple matter. It means the sub
stitution of one creditor for another. The law of subrogation in India is con
tained in s. 92 of the Transfer of Property Act. This section is new, and
was inserted by Section 47 of Act 20 of 1929. By S. 39 of the amending
Act, ss. 74 and 75 of the Transfer of Property Act, which contained only
in an imperfect form the law of subrogation, were repealed. The new sec
tion deals with the rights of subrogation of two different classes of persons.
[Paragraph 1]... deals with the rights of persons who have an existing inter
est in the property.... [Paragraph 3]...with reference to which the case of
the appellant was argued, deals with the rights of strangers who acquire an
interest in the property. The right mentioned... [in paragraph 3,] referred
to usually as ‘conventional or contractual’ subrogation, is founded on the
principle of an agreement between a borrower and a lender that the lender
shall be subrogated to the rights of the original creditor.
25. (1944-45) 72. IA 39.

As s. 92. was not in force at the time of the suit mortgage,... the question
was raised whether or not it has retrospective operation.... Their Lordships,
however, do not think it is necessary to decide the question whether the sec
tion has, or has not retrospective effect, as in their opinion the appellant is
not entitled to the right of subrogation whether the case is governed by s. 92
or by the previous law.... [T]he appellant [in order] to succeed must prove
that the money was advanced by him to the mortgagor. In the present case
that has not been proved, as the money was advanced, not to the idol through
its trustees, but to respondent No. 1 personally, who could not by himself
represent the idol; nor is any registered instrument executed by both the
trustees forthcoming; the only document is that signed by respondent No. 1
alone.... The defect which has proved fatal to the appellant’s claim under
the document has proved equally fatal to his claim based on the statute also.
[The decision in Butler v Rice2627,]... would seem to support the view that a
28
mere volunteer who discharges a mortgage debt binding on the property, as
in the present case, could claim to be subrogated to the rights of the creditor
on the mortgaged property for the amount paid by him. Whatever force such
a doctrine may possess in England, the Board has negatived such a plea as
regards India—see Ram Tuhul Singh v Bisesivar Lal! Sahoo11. Even before
the amendment of the Act, to support a claim to subrogation by one who
has lent money to a mortgagor to redeem a mortgage, an agreement express
or implied that the lender shall be subrogated to the rights of the creditor
was necessary to be proved. In this connection reference may be made to the
Board’s decision in Raja Janaki Nath Roy v Pramatha Nath Malia23, where
in considering what was the law as to ‘partial subrogation’ before the Act was
amended by Act XX of 192.9, it was observed as follows: ‘Taking the law as it
stood in December, 1927, it has nowhere been better expressed than it was by
Mookerjee J. in... [36 Cal 193]. That learned judge said thus: “It may be said,
in general, that to entitle one to invoke the equitable right of subrogation, he
must either occupy the position of a surety of the debt, or must have made
the payment under an agreement with the debtor or creditor that he should
receive and hold an assignment of the debt as security, or he must stand in
such a relation to the mortgaged premises that his interest cannot otherwise
be adequately protected.”’... It is clear from the above statement of the previ
ous state of the law that the appellant being a mere stranger—neither being
a surety of the debt, nor being otherwise interested in the property—has, to
succeed on the equitable doctrine of subrogation, to prove that there was an
agreement between him and the debtor or creditor that he should receive and
hold an assignment of the debt as security. As he has not been able to prove
such an agreement his appeal fails even under the previous state of the law.
After the amendment of the Act the right of subrogation can be claimed by
the lender only if the mortgagor has by a registered instrument agreed that
he shall be so subrogated. The right can no longer be claimed or granted as
before, on very slight evidence, or what may be described as the semblance of
an agreement. In the present case, in their Lordships’ view, there is no such
26. (1910) 2 Ch 277.

27. 1875 SCC OnLine PC 7: (1874-75) z IA 131.
28. 1939 SCC OnLine PC 58: (1939-40) 67 IA 82.
evidence or semblance even of an agreement between the appellant and the

idol, or the creditor. The mere fact that money borrowed from him was used
for paying off a previous charge does not entitle the appellant to the benefit
of the discharged security.
Lastly, it was argued forcibly that if the appellant fails in the present suit
the idol gets the property freed from liability with the aid of the appellant’s
money, and that therefore relief should be given to him on general princi
ples of justice and equity, but as observed by their Lordships in...[LR 2 IA
131]: ‘...It is not in every case in which a man has benefited by the money
of another, that an obligation to repay that money arises. The question is
not to be determined by nice considerations of what may be fair or proper
according to the highest morality. To support such a suit there must be an
obligation, express or implied, to repay. It is well settled that there is no such
obligation in the case of a voluntary payment by A of B’s debt....’
In Ganeshi Lal v Joti Pershad29, a co-mortgagor in Punjab paid to the
mortgagee less than the amount due and redeemed the mortgaged prop CASE PILOT
erty. He however, claimed from the co-mortgagor, contribution, on the
basis of the full amount. It was held:
It is not denied that... [the appellant] who redeemed the prior mortgage is
subrogated to the mortgagee’s rights, but the controversy is about the extent
of his rights as subrogee. By virtue of redemption, does he get all the rights of
the mortgagee and hold the mortgage as a shield against the co-mortgagors
for the full amount due on the mortgage on the date of redemption whatever
he may have himself paid to get it discharged, or does he stand in the mortga
gee’s shoes only to the extent of getting reimbursed from the co-mortgagors
for their shares in the amount actually paid by him?...
... [Section 92] is a new section and was inserted by the amending Act 20
of 1929. The original Sections 74 and 75 conferred the right to redeem in
express terms only on the second or other subsequent mortgagees, though
the co-mortgagor’s right to subrogation on redemption was recognised even
before the Act. As the Transfer of Property Act has not been extended to the
State of East Punjab, it is unnecessary to decide whether Section 92 is retro
spective in its operation, on which point there has been a conflict of opinion
between the several High Courts. Section 95 of the Act which removed the
confusion caused by the old section which, conferring on the co-mortgagor
what was called a charge, and thus seeming to negative the application of the
doctrine of subrogation, is also inapplicable to the present case. We, there
fore, steer clear of Sections 74 and 75 of the old Act and Sections 92 and 95 of
the present Act, and we are free to decide the question on principles of justice,
equity and good conscience.
If we remember that the doctrine of subrogation which means substitu
tion of one person in place of another and giving him the rights of the latter
is essentially an equitable doctrine in its origin and application, and if we
29. AIR 1953 SC 1: 1953 SCR 243; Daulat Ram v Saroop Ram, (1996) 9 SCC 428;
Kesavanchari Gopalakrishnan Achari v Vein Achari Pappukutty Achari, (1996) 7 SCC
720; Vallikat T.V.L. Amrna v Vallikat T.V.D. Mennon, (1997) 3 SCC 317.
examine the reason behind it, the answer to the question which we have to
decide in this appeal is not difficult. Equity insists on the ultimate payment
of a debt by one who in justice and good conscience is bound to pay it, and it
is well recognised that where there are several joint debtors, the person mak
ing the payment is a principal debtor as regards the part of the liability he is
to discharge and a surety in respect of the shares of the rest of the debtors.
Such being the legal position as among the co-mortgagors, if one of them
redeems a mortgage over the property which belongs jointly to himself and
the rest, equity confers on him a right to reimburse himself for the amount
spent in excess by him in the matter of redemption; he can call upon the
co-mortgagors to contribute towards the excess which he has paid over his
own share. This proposition is postulated in several authorities. In the early
case of Hodgson v Shaw50, Lord Brougham said:
‘The rule is undoubted, and it is one founded on the plainest principles
of natural reason and justice, that the surety paying off a debt shall stand
in the place of the creditor, and have all the rights which he has, for the
purpose of obtaining his reimbursement?...
The redeeming co-mortgagor being only a surety for the other co-mortgag-
ors, his right is, strictly speaking, a right of reimbursement or contribution,
and in law, when we have regard to the principles of equity and justice, there
should be no difference between a case where he discharges an unsecured
debt and a case where he discharges a secured debt. It is unnecessary for
us to decide in this appeal whether Section 92 of the Transfer of Property
Act was intended to strike a departure from this position when it states that
the co-mortgagor shall have the same rights as the mortgagee whose mort
gage he redeems, and whether it was intended to abrogate the rule of equity
as between co-debtors, and provide for the enforcement of the liability
on the ...amount due under the mortgage; and this is because, as has been
already stated, we are governed not by the statute but by general principles of
equity and justice. If it is equitable that the redeeming co-mortgagor should
be substituted in the mortgagee’s place, it is equally equitable that the other
co-mortgagors should not be called upon to pay more than he paid in dis
charge of the encumbrance.
Principles emerging from the decisions.—The following principles
relating to subrogation can be derived from the decisions discussed above:
1. Subrogation could be legal or conventional.
2. Before the enactment of Section 92 as it now stands, whether a
person paying off a mortgagee was subrogated to the rights of the
mortgagee, depended on intentions and presumptions. The law
now is, if it is a matter of conventional subrogation, there must be
an express agreement and it should be contained in a registered
instrument.3031
3. Subrogation enables the person paying off a creditor to stand in his
shoes with respect to the rights, remedies and securities which the
30. 40 ER 70.
31. Krishna Pillai v Velayudhan Pillai, 1978 SCC OnLine Ker 132: AIR 1979 Ker 47.
creditor had, the reason for recognising such a right being, that if
he is not so subrogated, subsequent encumbrancers will have prior
ity over him.32
4. The right arises only when the mortgage to which it relates has
been fully discharged.33
5. Such a principle of reimbursement is also recognised by Section 69,
Contract Act, but that section gives only a personal right, whereas
this section [S. 92,, Transfer of Property Act] gives a charge on
property.
6. Just as in Section 69, Contract Act, a volunteer can not claim sub
rogation, the person paying off a creditor must have a pre-exist
ing interest in the property, that is, he must have some interest in
the property even before he makes his payment. If he has no such
interest and the interest arises only because of his payment to the
creditor then he can claim to be subrogated only on the basis of
conventional subrogation which involves an express agreement in a
registered instrument.34
7. Where there is a covenant to discharge or the discharge of the mort
gage was out of the purchase money, there cannot be subrogation
unless there is a registered instrument providing for it.
8. If a person enters into a covenant to pay off a certain mortgage A
he cannot discharge an earlier mortgage B and claim to be subro
gated to the rights of the mortgagee of mortgage B as against A.
There is one exception however, and that arises in a case when the
earlier mortgage was not disclosed to the person who had entered
into the covenant.
9. There is one exception where a mortgagor would be entitled to
subrogation. Suppose, he is an owner of property worth ^1000
and there is a mortgage on it for ^500. A purchaser may purchase
the property for 500, promising to pay the balance of 500 to the
mortgagee. If the mortgagee is not paid the amount, he has a right
to sue the mortgagor on the personal covenant under Section 68
and recover the money from the mortgagor. It is only fair that the
mortgagor should get the money from the purchaser.
10. If more than one person advances money to the mortgagor and the
entire mortgage is paid off, all such persons would be subrogated to
the rights of the mortgagee in proportion to the amount of money
advanced by each.
32. Economic Transport Organization v Charan Spg Mills (P) Ltd, (2010) 4 SCC 114, the
insurer having paid off the claim of the injured party became entitled by virtue of the
doctrine of subrogation to sue the wrongdoer.
33. Kundan Singh v Fattja Singh, 1979 SCC OnLine P&H 83: AIR 1979 P&H 212.
34. Paramjola Devi v Shamshul Zoha, 2008 SCC OnLine Pat 44: AIR 2009 Pat 6, a co-mort-
gagor who paid the entire money was substituted in place of the original mortgagee. His
legal heirs became entitled to receive benefits of such payment.
It may be mentioned that the section is not exhaustive and there may be
cases of what one may term equitable subrogation. Suppose, a property
is sold in execution of a decree. The purchaser pays off a mortgage on
the property. Suppose, the sale is subsequently set aside. In such a situ
ation it is equitable that the purchaser is subrogated to the rights of the
mortgagee.
RIGHT OF REDEEMING CO-MORTGAGOR TO

EXPENSES [S. 95]
95. Right of redeeming co-mortgagor to expenses.—Where one of several
mortgagors redeems the mortgaged property, he shall, in enforcing his right of
subrogation under Section 92 against his co-mortgagors, be entitled to add to the
mortgage-money recoverable from them such proportion of the expenses prop
erly incurred in such redemption as is attributable to their share in the property.
Under Section 92 it is already stated that a redeeming co-mortgagor
is subrogated to the rights of the mortgagee. This section provides for
expenses also as against the co-mortgagors, on such redemption.35
Effect on lease granted by mortgagee.—The normal rule is that such
a lease becomes terminated on redemption of the mortgage. The excep
tions are: 1) in the case of agricultural land, but not urban land, lease
granted bona fide by a mortgagee and prudently in the ordinary course
of management may bind the mortgagor even after termination of the
title of the mortgagee in possession; and 2) in the case of agricultural
or urban land, lease granted by the mortgagee will continue to bind
the mortgagor if he had concurred in its grant. There should be express
words in the mortgage deed showing an intention to grant such concur
rence. The fact that the mortgagor stated in this case that on redemption
he would be entitled to receive future rents did not amount to an agree
ment to be bound by the mortgage.36
MARSHALLING AND CONTRIBUTION

Marshalling is provided for in Section 81. It says:
81. Marshalling securities.—If the owner of two or more properties mort
gages them to one person and then mortgages one or more of the properties to
another person, the subsequent mortgagee is, in the absence of a contract to the
contrary, entitled to have the prior mortgage debt satisfied out of the property
or properties not mortgaged to him, so far as the same will extend, but not so as
to prejudice the rights of the prior mortgagee or of any other person who has for
consideration acquired an interest in any of the properties.
35. A.N. Ranganatha Naidu v Senthamarai, 1978 SCC OnLine Mad 133: (1978) 91 LW 566;
Valliamma Champaka Pillai v Sivathanu Pillai, (1979) 4 SCC 429; Sushil Kumar Sen v
Ram Chandra Sharma, 1981 SCC OnLine All 773: AIR 1982 All 129; Sis Ram v Sukh
Lal, 1981 SCC OnLine P&H 253: AIR 1982 P&H 185 [Art. 61, Limitation Act].
36. Thakar Singh v Mula Singh, (2015) 5 SCC 209.
The section may be compared with Section 56.

Marshalling cannot be claimed if one of the properties is released by
the prior mortgagee, but in such a case, the subsequent mortgagee can
claim proportionate contribution against the mortgagor. Marshalling
also cannot be claimed if there is a contract to the contrary. Marshalling
can be claimed not only by subsequent mortgagees, but also by a pur
chaser in execution of the mortgage decree of the subsequent mortgagee;
but a lessee cannot claim the right. One condition for claiming marshal
ling is that there must be a common debtor. Marshalling is available only
if there are two properties involved and not if portions of a property
are dealt with. Question of the notice of the prior mortgage is irrelevant
under the section as it now stands.
The law relating to contribution is stated in Section 82 which is as
follows:
82. Contribution to mortgage debt.—Where property subject to a mortgage
belongs to two or more persons having distinct and separate rights of ownership
therein, the different shares in or parts of such property owned by such persons
are, in the absence of a contract to the contrary, liable to contribute rateably
to the debt secured by the mortgage, and for the purpose of determining the
rate at which each such share or part shall contribute, the value thereof shall be
deemed to be its value at the date of the mortgage after deduction of the amount
of any other mortgage or charge to which it may have been subject on that
date.
Where, of two properties belonging to the same owner, one is mortgaged to
secure one debt and then both are mortgaged to secure another debt, and the
former debt is paid out of the former property, each property is, in the absence
of a contract to the contrary, liable to contribute rateably to the latter debt after
deducting the amount of the former debt from the value of the property out of
which it has been paid.
Nothing in this section applies to a property liable under Section 81 to the
claim of the subsequent mortgagee.
CONTRACT TO THE CONTRARY

Such a contract may be express or implied.
In Kedar Lal Seal v Hari Lal Seal37, the plaintiff sued on a mortgage
and claimed that the three mortgagors were to contribute in equal shares.
The mortgagors did not deny their liability to contribute but contended
that their respective liabilities should be proportionate to the benefit
derived by each. It was held:
The sections of the Transfer of Property Act which concern us are Sections
82 and 92. The first confers a right of contribution and rhe second a right
of subrogation.... The Privy Council pointed out in Rani Chhatra Kumari
CASE PILOT
37. AIR 1952 SC 47: 1952 SCR 179; Stibodh Chandra Das v Satish Chandra Das, 1978 SCC
OnLine All 300: AIR 1978 All 412.
v Mohan Bikram38, that the doctrine of equitable estates has no application

in India.... In the case of Section 82 the Privy Council held in Ganeshi Lal
CASE PILOT
v Charan Singh3940 , that, that section prescribes the conditions in which con
tribution is payable and that it is not proper to introduce into the matter
any extrinsic principle to modify statutory provisions. These matters have
been dealt with by statute and we are now only concerned with the statu
tory rights and cannot in the face of statutory provisions have recourse to
equitable principles however fair they may appear at first sight. [But there is]
a competition between Sections 82 and 92 of the Transfer of Property Act
[on the one hand] and Section 43 of the Contract Act [on the other]. So far
as Section 43 is concerned, I am not prepared to apply it unless Sections 82
and 92 can be excluded. Both Sections 43 and 82 deal with the question of
contribution. Section 43 is a provision of the Contract Act dealing with con
tracts generally. Section 82 applies to mortgages. As the right to contribution
here arises out of a mortgage, I am clear that Section 82 must exclude Section
43 because where there is a general law and a special law dealing with a
particular matter, the special excludes the general. In my opinion the whole
law of mortgage in India, including the law of contribution arising out of a
transaction of mortgage, is now statutory and is embodied in the Transfer
of Property Act, read with the Civil Procedure Code. Now, when parties
enter into a mortgage they know, or must be taken to know, that the law of
mortgage provides for this very question of contribution. It confers rights
on the mortgagor who redeems and directs that, in the absence of a con
tract to the contrary, he shall be reimbursed in a particular way out of par
ticular properties.... There being no contract to the contrary the plaintiff’s
only remedy is under Section 92 of the Transfer of Property Act, read with
Section 82.
In this case the Supreme Court held that the contract to the contrary
should be express. But in Thoppai M. Muthiah Bhagavathar v T.V.
Venkataram a Ayya^, it was held that a contract may be implied from
the manner in which the mortgage-money was shared, was not cited.
It is only mortgagors who would be bound by a contract between
them, but not the mortgagee, unless he is also a party to the contract.
If there is contract between A and B, the mortgagors, regarding the rate
of contribution, and if A transfers his property to C, C also would not
be bound by the contract between the mortgagors unless he expressly
consents.41 It is respectfully submitted that C should be held to be bound
if he had notice of the contract between A and B. If the mortgagee, who
was a party to the contract between A and B transfers his right to D, D
would be bound by such a contract.
38. 1931 SCC OnLine PC 46: (1930-31) 58 IA 279.

39. 1930 SCC OnLine PC 30: (1929-30) 57 IA 189.
41. Damodarasami Naicken v Goubtdarajulu Naidu, 1943 SCC OnLine Mad 37: AIR 1943
Mad 429.
In Shah Ram Chand v Parbhu Dayal42, [see., p. 263] it was also held
that the release of a part of the property by the mortgagee does not take
away as regards that part the liability to contribute which Section 82
imposes upon the different parts.
Where two mortgagees claim to be satisfied out of the same property,
the rule to be applied is marshalling under Section 81. But where one
mortgagor, who has only a share in the mortgaged property, pays off the
entire mortgage, his rights as against the other shares depend on the rule
of contribution set out in this section. If a property is equally liable with
another to pay a debt, it shall not escape, merely because the debt was
paid out of the other property.
In Bohra Thakur Das v Collector of Aligarh4344 , two items of property
A and K were mortgaged to one N. The mortgagor earlier (1868) exe CASE PILOT
cuted a simple mortgage of K in favour of N and another. In execution
of a decree on that mortgage N and the other mortgagee brought the
property K to sale, purchased it themselves and became absolute own
ers thereof. The appellant, who was the representative in interest of the
mortgagor filed a suit claiming inter alia that he was entitled to redeem
A upon payment of the proportionate share of the mortgage-money; his
contention being that as N purchased K on which the mortgage-debt was
secured, it was pro tanto satisfied and A was only liable for the share
legitimately chargeable on it. It was held:
As... [K] was sold and purchased by... [N] in execution and part satisfaction
of a decree obtained on the prior mortgage of 1868, the Courts in India prop
erly overruled the appellant’s contention which has not been pressed before
this Board.
The principle of this decision is that there is no personal liability, the lia
bility to contribute being laid on the items of property mortgaged. Where
therefore, one of the items, in the present case K, is sold to discharge a
prior mortgage, it is no longer liable for contribution, because, the prior
debt has exhausted it completely and it is no longer available, as per the
second paragraph of the section.
In Narayanan Chetti v Nallammal", the eastern portion of a property
mortgaged to the plaintiff’s grandfather was transferred by the mort
gagor and was eventually purchased by the first defendant. There was a
second mortgage in favour of the same mortgagee on the western portion
which was ultimately purchased by the second defendant. The first mort
gage was assigned to one C and the second mortgage in a partition fell to
the share of the plaintiff. C filed a suit on his mortgage and in execution
of the decree brought the western portion of the property to sale and it
42. 1942 SCC OnLine PC 9: (1941-42) 69 IA 98.

43. 1910 SCC OnLine PC 20: (1909-10) 37 IA 182.
44. 1942 SCC OnLine Mad 211: (1942) 55 LW 759.
was purchased by the first defendant. In a suit for contribution against

the first defendant by the plaintiff, it was held:
The right of contribution rests upon the principle that a property which is
equally liable with another to pay a debt shall not be relieved of the entire
burden of the debt because the creditor has been paid out of that property
alone.... The section expressly refers to a case where the mortgaged property
is subsequently divided into shares held separately and not merely to a case
where several properties are mortgaged, and it is placed beyond question
that the valuation for purposes of contribution shall be that at the date of
the mortgage. Both before the amendment and now the liability to contribute
is a liability which is imposed upon the land and therefore is not a personal
liability....
A second mortgagee does not stand in the shoes of a mortgagor. Where
there is a second mortgage, the second mortgagee holds a mortgagee’s interest
in the property and the fact that some other person has previously received a
mortgagee’s interest does not detract from the nature of his interest. When a
person agrees to lend money on the security of a second mortgage of a por
tion of the property he knows that the first mortgagee has the benefit of the
whole of the property, and that the first mortgagee, if he calls in the mortgage
loan, will have the right to cause the whole of the hypotheca to be sold. If the
first mortgagee does cause the whole of the hypotheca to be sold, the second
mortgagee has the right, as the section stands, to call upon the holder of the
unsold portion to contribute his share of the principal debt.
The principle of this decision may be stated thus: Suppose, two properties
P and Q are mortgaged to A and one of the properties, say P and another
property R are mortgaged to B. If A obtains a decree on his mortgage
and obtains satisfaction by the sale of P, B can only proceed against the
property R [see, the Bohra Thakur Das case, p. 2.93]. The further ques
tion that if R is insufficient to satisfy B's mortgage, whether he could
proceed against Q is answered by the above decision in the affirmative.
If a mortgagor sells a part of the mortgaged property and the mortga
gee realises his debt by the sale of the portion retained by the mortgagor,
the question arises whether the mortgagor can claim contribution from
the purchaser in a case where the mortgagee proceeds against the portion
retained by the mortgagor and the debt is satisfied. If the sale is subject
to the mortgage then the purchaser is in the position of a mortgagor and
his portion would be liable for contribution under the section. If, how
ever, the sale was not subject to mortgage, the purchaser is not a person
having a distinct and separate right in the mortgaged property, and so
the section does not apply and such purchaser cannot be called upon to
contribute.
If the purchaser is the mortgagee himself, the question of contribution
again depends upon whether the mortgagee purchased the full share of
the property or only the equity of redemption. Suppose, a mortgagor
mortgages his properties and subsequently mortgages the same properties
together with other properties to the same mortgagee. Suppose further,

the mortgagee obtains a mortgage decree in respect of the second mort
gage and in execution purchases all the properties except one item which
was subject to the first mortgage and that item was purchased by a third
party, and the purchases were subject to the first mortgage. If the mort
gagee files a suit against that purchaser for contribution he is entitled to
succeed. The debt, to the extent of the same proportion that the property
purchased by the mortgagee bears to the entire property mortgaged, is
discharged by the mortgagee’s purchase. But the proportion which the
property purchased by the third party bears to the entire property mort
gaged remains, and to that extent the property purchased by the third
party would be liable to contribute. The mortgagee purchased a share in
the equity of redemption and the integrity of the mortgage is split up as
laid down in Section 60 and the mortgagor should redeem the propor
tionate part of the debt.
If, however, the mortgagee purchases in entirety one of the properties
mortgaged to him, the mortgagor’s liability attributable to that property
continues to be on the mortgagor. In such a case, there is no question of
contribution and the mortgagee may proceed against the other properties
in order to enforce his entire mortgage debt.
Since the liability to contribute is on the property, if the mortgagee
releases his claim on a distinct share of the mortgaged property, the own
ers of the other shares may still enforce contribution against the share
released.
If a co-mortgagor pays off the entire mortgage amount and redeems
the mortgaged property, he can either claim contribution from the other
co-mortgagors under Section 82, or claim to be subrogated to the rights
of the mortgagee under Section 92.
But, if more than the rateable proportion was realised from a co-mort
gagor, but the entire mortgage was not satisfied, it is respectfully sub
mitted that such co-mortgagor cannot maintain a suit for contribution
against the other co-mortgagors, even though the requirement that the
mortgage should be redeemed in full is not found in Section 82 as it is
found in Section 92.
In Faqir Chand v Aziz Ahmad45, in 1911, a mortgagee sued upon his
mortgage and a puisne mortgagee in respect of one of the properties CASE PILOT
mortgaged satisfied the decree, with the object of freeing the property
from further liability and for the purpose of realising the money from
two other properties. He transferred his rights to the respondent who
filed a suit claiming the amount paid, from the two properties and in the
alternative for account and contribution. It was held:
45. 1931 SCC OnLine PC 91: (1931-31) 59 IA 106; International Coach Builders Ltd v
Karnataka State Financial Corpn, (2003) 10 SCC 482.
The right to contribution in this case is governed by Sect. 82, Transfer of

Property Act, 1882. A new section has now been substituted by an amending
Act (XX of 192.9), but it is not necessary for their Lordships to refer to the
changes which have been effected by it [because the amended section would
not apply to pending proceedings]....
To arrive at the value for contribution purposes of each of several prop
erties on which a particular mortgage is secured, it is clear that the amount
of all prior ‘incumbrances’ upon such properties must be ascertained and
deducted. Their Lordships are in agreement with the High Court that
‘incumbrance’ is a term of wider connotation than ‘mortgage’, but they are
unable to follow the learned Judges in the argument they base upon this
proposition. Where properties A, B and C are all made security for one mort
gage, if property A is subject to a prior incumbrance jointly with properties
X, Y and Z, their Lordships think that the rateable share to be attributed
to A under the prior encumbrance must necessarily be assessed in order to
ascertain its value for the purposes of the mortgage. In the view taken by the
High Court all that would be necessary in such a case would be to see what
was the total amount of the prior incumbrance to which A was liable, irre
spective of the question whether that liability was to be shared by X, Y and
Z. Their Lordships are unable to adopt this view of the meaning of Sect. 82.
It would no doubt greatly simplify the inquiry in such a case as the present,
but simplification would only be attained by a sacrifice of what they regard
as the principle involved.
[The suit was dismissed on the ground that all the parties were not before
the Court.]
Therefore, a co-mortgagor has three remedies in law:
1. a suit for indemnity under Section 69, Contract Act;
2. a suit for contribution with a charge under Section 82, Transfer of
Property Act; and
3. a suit on the basis of subrogation under Section 95, Transfer of
Property Act.
The last paragraph declares that where marshalling and contribution
might conflict, then marshalling is to prevail; or as it is sometimes
said the right to contribution is controlled by the right to marshalling.
Suppose, the common owner of two villages mortgages the first to A,
the second to B, then both to C and finally the first village to D. Under
Section 82, both villages are liable to contribute to the mortgage of C.
From the value of each village the amount of the debts due to A and B
respectively are deducted, and the villages after such deduction are liable
to contribute rateably. But under Section 8i, D has a right to require C to
proceed against the second village first.
RIGHTS OF A MORTGAGEE AGAINST MORTGAGEES 299
EXERCISES
i. When does a subsequent mortgage take precedence over a prior
one? (p. 276)
2. Explain marshalling of securities, (pp. 290-291)
3. What is contribution and what are the rules in relation to a mortgage?
(p. 291)
4. What are the principles of subrogation? (pp. 278-286)
5. What are “legal” and “conventional” subrogation? (pp. 288-290)
6. Can a volunteer claim subrogation? (pp. 286-289)
7. Explain “Redeem up and Foreclose down”, (p. 277)

and statutes referred to in the book
through EBC Explorer™ on SCC Online*;
The following cases from this chapter are available r—X"

• Bohra Thakur Das v Collector of Aligarh, 1910 SCC case pilot
OnLine PC 20
• Dinobundhu Shaw Chowdhry v Jogmaya Dasi, 1901 SCC
OnLine PC 29
• Faqir Chand v Aziz Ahmad, 1931 SCC OnLine PC 91
• Ganeshi Lal v Charan Singh, 1930 SCC OnLine PC 30
• Ganeshi Lal v Joti Pershad, AIR 1953 $C 1: 1953 SCR 243
• Gokuldoss Gopaldoss v Rambux Seochand, 1884 SCC OnLine PC 11
• Janaki Nath Roy v Pramatha Nath Malia, 1939 SCC OnLine PC 58
• Malireddi Ayyareddi v Gopalakrishnayya, 1923 SCC OnLine PC 55
• Man Mohan Das v Janki Prasad, (1944-45) 72 IA 39
• Mohd Ibrahim Hossain Khan v Ambika Pershad Singh, 1912 SCC
OnLine PC 3
• P.S.S.M.K.T. Cathiresan Chettiar v N.S. Natchiappa Chettiar, 1933
SCC OnLine PC 35
• Raman Chetty v Steel Brothers and Co Ltd, 1911 SCC OnLine PC 22
• Rani Chhatra Kumari v Mohan Bikram, 1931 SCC OnLine PC 46
• Toulmin v Steere, 3 Mer 210
Chapter 16
Charges
CHARGE
Charge is defined in Section 100.
100. Charges.—Where immovable property of one person is by act of par
ties or operation of law made security for the payment of money to another,
and the transaction does not amount to a mortgage, the latter person is said to
have charge on the property, and all the provisions hereinbefore contained which
apply to a simple mortgage shall, so far as may be, apply to such charge.
Nothing in this section applies to the charge of a trustee on the trust property
for expenses properly incurred in the execution of his trust, and, save as other
wise expressly provided by any law for the time being in force, no charge shall be
enforced against any property in the hands of a person to whom such property
has been transferred for consideration and without notice of the charge.
DOES NOT AMOUNT TO MORTGAGE

“The broad distinction between a mortgage and a charge is this: that
whereas a charge only gives right to payment out of a particular fund
or a particular property without transferring that fund or property, a
mortgage is in essence a transfer of an interest in specific immovable
property.” This idea is also expressed by saying that a mortgage is a jus
in rem, that is, it is a right against the property, whereas, a charge is jus
ad rem, that is, it is a right to a thing. Being a right against the prop
erty, a mortgage prevails over subsequent transferees, whereas, under
the second paragraph of this section, a charge does not prevail against a
transferee for consideration without notice of the charge. Again, whereas
a mortgage can be created over a specific item of immovable property,
under the company law there can be a floating charge over all the assets
of the company. In a mortgage, there can be sometimes (as in the case of
simple mortgage) be a personal liability unlike in the case of a charge.
Another distinction is that a mortgage can only be created by the act of
the parties, whereas a charge can also be created by operation of law.
[S. 100] CHARGES 301
Though the Act generally deals with transfers inter vivos between par
ties, Section z(d) shows that Section 100, which is in Chapter IV, applies \
to charges by operation of law. In Laxmi Devi v Mukand Kanwar1, the
properties of the third respondent were subject to a charge in favour of case pilot
the first respondent. In execution of a decree obtained by the second
respondent, the appellant purchased the property in ignorance of the
charge as it was not referred to in the proclamation of sale. In an applica
tion by the first respondent to have the sale set aside, it was held:
Section z(d) provides that nothing herein contained shall be deemed to affect,
save as provided by Section 57 and Chapter IV of this Act, any transfer by
operation of law or by, or in execution of, a decree or order of a Court of
competent jurisdiction. The effect of this provision is that the provisions of
the Transfer of Property Act will not apply to any transfer by operation of
law or by, or in execution of, a decree or order of a Court of competent
jurisdiction. This provision is clear and emphatic. It says that nothing in the
Transfer of Property Act will apply to the transfers just indicated; and that
would naturally take in the whole of Section 100. But there is an exception
made to this provision by Section z(d) itself by the saving clause, and this
exception covers cases provided by Section 57 and Chapter IV. Chapter IV
deals with mortgages of immovable property and charges, and includes
Sections 58 to 104. Section 100, therefore, falls within Chapter IV; and the
result of the saving clause is that Section 100 would apply to transfers by
operation of law. There is, therefore, no doubt that if the question as to the
applicability of the latter part of Section 100 to cases of auction sales had to
be determined only by reference to Section 2(d), the answer would clearly be
in favour of such applicability.
It is true that when Section z(d) was originally enacted, the latter part
of Section 100 was not included in the Transfer of Property Act; this was
added in 1929 by Section 50 of the Act zo of 192.9. That, however, would
make no difference to the interpretation of the relevant clause in Section z(d).
The fact that the saving clause included in Section z(d) as it was originally
enacted, could not have taken in the latter part of Section 100, makes no dif
ference in its construction, because as soon as the latter provision was added
to Section 100, it became a part of the provisions contained in Chapter IV
and automatically fell within the terms of the saving clause. If the legislature
had intended that the provision added to Section 100 in 1929 should not fall
within the saving clause, an appropriate provision would have been made by
amending Section z(d) in that behalf. Therefore, Section z(d) by itself clearly
supports... the contention that the appellant who is an auction-purchaser
would be able to claim immunity against the enforcement of the charge in
favour of Respondent 1 by virtue of the provisions contained in the latter
part of Section 100.
1. AIR 1965 SC 834: (1965) 1 SCR 726; State Bank of Bikaner & Jaipur v National Iron &
Steel Rolling Corpn, (1995) 2 SCC 19; R.M. Arunachalam v CIT, (1997) 7 SCC 698; K.
Muthuswami Gounder v N. Palaniappa Gounder, (1998) 7 SCC 327.
In Girishchunder Maiti v Anundmoyi Debi2, a testator gave certain prop

erties to his nephew and provided that “the loan of 15,000 which I took
CASE PILOT
from your father you will repay with interest from the properties”. It
was held that a charge was created on the properties. Therefore, all that
charge requires is that certain property is earmarked for the payment of
a debt. The general view is charges created by act of parties in writing of
value of ^100 or more should be registered. Since, however, no interest is
transferred and Section 100 specifically states that charges do not affect
third parties who take the property for consideration and without notice,
perhaps registration may not be necessary.
No particular form of words is prescribed for creation of a charge by
act of parties. All that is necessary is that there must be a clear intention
to create a charge on a specific property as a security for payment of
money in praesenti.3 A mere undertaking to create a charge does not
have the effect of creating a charge. The sole proprietor of a concern
obtained a loan from the Haryana Financial Corporation. He declared
hypothecation of certain property and also gave an undertaking that he
would not dispose of the property during the currency of the loan. The
seizure of such property and its sale by the corporation was set aside, the
court saying that mere undertaking to create a charge does not have the
effect of becoming a charge.4 An encumbrance on property has the effect
of being a charge. The fact of entering into a memorandum of under
standing for sale of a property has been held to be not creative of any
encumbrance or charge on property. Receipt of money by way of advance
in pursuance of a memorandum is not creative of any encumbrance.5
Again, if the transaction on the face of it purports to be a mortgage,
but the instrument is not operative as such by reason of defective execu
tion, or non-compliance with the formalities prescribed by the law, the
transaction is not converted into a charge. “A bad mortgage does not
amount to a good charge.”
OPERATION OF LAW
The section itself recognises that there can be charges by operation of
law, and this Act itself contains illustrations of such charges. They are:
i) under Section 55(4)(t>) which deals with a vendor’s charge for unpaid
purchase money; 2) under Section $s(6)(b) which deals with a purchaser’s
2. iSSySCCOnLinePC 16: (1886-87) 141A137; T. Rama Seshagiri Rao vN. Kamalakumari,

1981 SCC OnLine AP 144: AIR 1982 AP 107; Heluguntla Hema Bala Sundari v Pandtri
Sakuntalamma, 1982 SCC OnLine AP 134: AIR 1983 AP 49; Rundibala Roy v Putubala,
1984 SCC OnLine Cal 97: AIR 1985 Cal 47.
3. J.K. (Bombay) (P) Ltd v New Kaiser-I-Hind Spg and Wvg Co Ltd, AIR 1970 SC 1041:
(1969) 2 SCR 866.
4. Haryana Financial Corpn v Gurcharan Singh, (2014) 16 SCC 722.
5. Saradamani Kandappan v S. Rajalakshmi, (2.011) 12 SCC 18.
S. 100] CHARGES 303
charge for the amount of purchase money paid in anticipation of delivery

of property; 3) under Section 73 with respect to surplus sale-proceeds of
a revenue sale; and 4) under Section 82 for contribution.
Encumbrance. — An encumbrance has the effect of a charge. The
Supreme Court has declared that an encumbrance to be a charge must
be such a burden on the land which, by reason of a statutory provision,
diminishes value of the land. Such a burden is capable of being found out
on an inspection of the related records. It was further held that such an
encumbrance runs with the property.6
A charge may arise because of tax dues on the property. A property
mortgaged to a bank was sold by auction. The basis of sale about the
property was “as is where is”. A party who participated in the auction
made private enquiries about the state of the property. The court held
that it could not be said that he could not know that the property was
subject to the charge for payment of commercial tax dues. The court did
not permit him to wriggle out of his liability.7
PROVISO
Under the second clause, two exceptions are recognised when a charge is
not enforceable. They are: 1) a trustee cannot enforce his charge against
trust property. His right is only under Section 32, Trusts Act; and 2) a
charge cannot be enforced against a transferee for consideration without
notice. The second category would include even charges created by a
decree of court, except in the case of a transferee pendente lite, that is, in
the case of a transferee during the pendency of a litigation in which the
court creates a charge by its decree.8
EXTINCTION OF CHARGE
A charge may become extinguished by an act of parties, an act amount
ing to novation or merger. One of the rules for becoming the broker
of a Stock Exchange requires deposit of a security. It was held by the
Supreme Court that any security so deposited remains the property of
the member. It could only be liquidated on some default on the part of
the member. Income-tax authorities do not have any preference over dues
of the secured creditors.9
6. Al Champdany Industries Ltd v Official Liquidator, (2009) 4 SCC 486. The court fol
lowed Ahmedabad Municipal Corpn v Haji Abdulgafur Haji Hussenbhai, (1971) 1 SCC
757-
7. Sivagatika Impex (P) Ltd v UCO Bank, 2012 SCC OnLine MP 4132: AIR 2012 MP 132.
8. See, Dattatreya Shanker Mote v Anand Chintaman Datar, (1974) 2 SCC 799.
9. Bombay Stock Exchange v V.S. Kandalgaonkar, (2015) 2 SCC 1.
LIEN
The differences between a charge and a lien are: i) a charge may be cre
ated by act of parties or operation of law, whereas, a lien can be created
only by operation of law; and z) a charge can only be with respect to
immovable property, whereas, a lien can be with respect to movable as
well as immovable property.
EXERCISES
i. Distinguish between a mortgage and a charge, (pp. 298-300)

through EBC Explorer™ on SCC Online®;
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• Girishchunder Maili v Anundtnoyi Debi, 1887 SCC
OnLine PC 16
• Laxmi Devi v Mukand Kantuar, AIR 1965 SC 834: (1965) 1 SCR 726
Chapter 17
Merger
Merger is one of the methods by which a mortgage is extinguished. The

other methods are:
i. by a decree for foreclosure or sale under Section 60;
2. by payment by the mortgagor;
3. by the mortgagee himself releasing the security.
But under Section 101 when there is a subsequent mortgage, the purchase
by a prior mortgagee of the equity of redemption does not bring about
a merger.
It provides:
101. No merger in case of subsequent encumbrance.—Any mortgagee of or
person having a charge upon, immovable property, or any transferee from such
mortgagee or charge-holder, may purchase or otherwise acquire the rights in the
property of the mortgagor or owner, as the case may be, without thereby causing
the mortgage or charge to be merged as between himself and any subsequent
mortgagee of, or person having a subsequent charge upon, the same property;
and no such subsequent mortgagee or charge-holder shall be entitled to foreclose
or sell such property without redeeming the prior mortgage or charge, or other
wise than subject thereto.
Under Section 92, it has shown how the doctrine in Toulmin v Steere'
was held not to be applicable in India, and how the presumption regard
ing the intention to keep alive a discharged encumbrance underwent a
change to the effect that in the absence of any indication to the contrary
the courts would presume that the person discharging an encumbrance
kept it alive if it would be for his benefit. The rule in this section is
to the same effect. A mortgagee purchasing the equity of redemption
would certainly keep alive his own encumbrance if there was subsequent
encumbrance, because it would be to his benefit to keep it alive; for, the
subsequent mortgagee will then have to redeem the prior mortgage.
1. 3 Mer 210; Melegotvda v Gaibu Sab, 1978 SCC OnLine Kar 4: AIR 1978 Kar 71 (case of
lease followed by a mortgage); Gambangi A. Naidu v Behara V. Patro, (1984) 4 SCC 382;
Shafiq Ahmad v Sayeedan, 1983 SCC OnLine All 859: AIR 1984 All 140.
306 LAW OF TRANSFER OF PROPERTY [Chap. 17)
It has been held that lease in mortgage respect of the same property
cannot merge. In this the premises in question was with a tenant. The
owner landlord mortgaged the premises to the tenant. Subsequently,
he redeemed the mortgage and claimed that the tenancy became extin
guished by implied surrender. The said that whether such a merger is to
take place depends on the terms of the mortgage and circumstances of
the case. On facts, the court said, that no such merger had taken place.
The tenant was not bound to surrender possession as the tenancy was
independent of the mortgage and remained so.2
The property was mortgaged in favour of tenants only. The court,
therefore, said that the tenancy of mortgagees merged with the mortgage
and there was implied surrender of tenancy at the time of creation of
mortgage. There could be no revival or continuation of rights of tenants
after redemption of mortgage in the absence of execution of fresh rent
note in their favour.3
EXERCISES
i. Explain the scope of “Merger” in relation to mortgages, (p. 303)
2. Gambangi A. Naidu v Behara V. Patro, (1984) 4 SCC 382..

3. Kanhaiya Lal v Sohan Lal, 2015 SCC OnLine Raj 400: AIR 2015 Raj m.
Chapter 18
Miscellaneous
The next three sections deal with certain procedural matters. They are
as follows:
102. Service or tender on or to agent.—Where the person on or to whom any
notice or tender is to be served or made under this chapter does not reside in the
district in which the mortgaged property or some part thereof is situate, service
or tender on or to an agent holding a general power-of-attorney from such person
or otherwise duly authorized to accept such service or tender shall be deemed
sufficient.
Where no person or agent on whom such notice should be served can be found
or is known to the person required to serve the notice, the latter person may
apply to any Court in which a suit might be brought for redemption of the mort
gaged property, and such Court shall direct in what manner such notice shall be
served, and any notice served in compliance with such direction shall be deemed
sufficient:
Provided that, in the case of a notice required by Section 83, in the case of a
deposit, the application shall be made to the Court in which the deposit has been
made.
Where no person or agent to whom such tender should be made can be found
or is known to the person desiring to make the tender, the latter person may
deposit, in any Court in which a suit might be brought for redemption of the
mortgaged property the amount sought to be tendered, and such deposit shall
have the effect of a tender of such amount.
103. Notice, etc., to or by person incompetent to contract.—Where, under the
provisions of this chapter, a notice is to be served on or by, or a tender or deposit
made or accepted or taken out of court by any person incompetent to contract,
such notice may be served on or by, or tender or deposit made, accepted or taken,
by the legal curator of the property of such person; but where there is no such
curator, and it is requisite or desirable in the interests of such person that a notice
should be served or a tender or deposit made under the provisions of this chapter,
application may be made to any Court in which a suit might be brought for the
redemption of the mortgage to appoint a guardian ad litem for the purpose of
serving or receiving service of such notice, or making or accepting such tender,
or making or taking out of Court such deposit, and for the performance of all
consequential acts which could or ought to be done by such person if he were

competent to contract; and the provision of Order XXXII in the First Schedule to
the Code of Civil Procedure, 1908, shall, so far as may be, apply to such applica
tion and to the parties thereto and to the guardian appointed thereunder.
104. Power to make rules.—The High Court may, from time to time, make
rules consistent with this Act for carrying out, in itself and in the Court of Civil
Judicature subject to its superintendence, the provisions contained in this chapter.
Chapter 19
Leases
Sections 105 to 116 which deal with leases do not apply to agricultural
leases. This is laid down in Section 117 which provides:
117. Exemption of leases for agricultural purposes.—None of the provisions
of this chapter apply to leases for agricultural purposes except in so far as the
State Government may, by notification published in the Official Gazette, declare
all or any of such provisions, to be so applicable in the case of all or any such
leases, together with, or subject to, those of the local law, if any, for the time
being in force.
Such notification shall not take effect until the expiry of six months from the
date of its publication.
Most agricultural leases are subject to local State laws and that is the
reason why this chapter is not made applicable to them. Since the chapter
does not apply, Section 107 also does not apply, that is, agricultural
leases can be made orally.
Agricultural purpose refers to tilling and cultivation for purposes of
raising crops. The expression has been construed liberally and many pur
poses, subservient and ancillary to agricultural purposes defined strictly
as above, are considered to be also agricultural purposes.1
1. Sardamoni Debi v State of Bihar, 1978 SCC OnLine Pat 205: AIR 1979 Pat 106;
Roshanlal v Munshi Rant, AIR 1981 P&H 73; Kalian v District Judge, Allahabad, 1981
SCC OnLine All 107: AIR 1981 All 168; Rampur Engg Co v State, AIR 1981 All 396;
Syed Jaleel Zane v P. Venkata Muralidhar, AIR 1981 AP 328; Santilal Dulichand Shah v
Ramesh Chandra Guzrati, 1980 SCC OnLine Cal 54: AIR 1981 Cal 413 (Lien of lessor);
Sher Singh v Mohd Ismail, 1981 SCC OnLine All 36: AIR 1981 All 114; Hadibandhu
Ho v Luchia Ho, 1981 SCC OnLine Ori 81: AIR 1982 Ori 73; Vijay Kumar v Inder Sain
Minocha, 1981 SCC OnLine Del 231: AIR 1982 Del 260; Kalloo v Dhakadevi, (1982) 1
SCC 633 (Compromise decree); Varupanda Seetharama Swamy v Allam Ugra Narasimha
Murthy, 1982 SCC OnLine AP 107: AIR 1982 AP 454; Punjab Montogomery Transport
Co v Raghuvanshi (P) Ltd, 1981 SCC OnLine Cal 203: AIR 1983 Cal 343; Anisur
Rehman v Sukhdeo Prasad Garodia, 1983 SCC OnLine Pat 248: AIR 1984 Pat 245;
P.R. Catholic Mission v Murugan, AIR 1984 Mad 125; Manathanath Kunhahammed v
Kizhakke Theruuathakath Cherammal Thodiyil Unnimoideenkutty, 2009 SCC OnLine
Section 105 defines “lease”, “lessor”, “lessee”, “premium”, and “rent”

as follows:
105. Lease defined. — A lease of immovable property is a transfer of a right to
enjoy such property, made for a certain time, express or implied, or in perpetuity,
in consideration of a price paid or promised, or of money, a share of crops, ser
vice or any other thing of value, to be rendered periodically or on specified occa
sions to the transferor by the transferee, who accepts the transfer on such terms.
Lessor, lessee, premium and rent defined.—The transferor is called the les
sor, the transferee is called the lessee, the price is called the premium, and the
money, share, service or other thing to be so rendered is called the rent.2
SUB-LEASE
A lease can be granted by a lessee. Such a lease is generally known as a
sub-lease. In Mineral Development Ltd v Union of India3, the appellant,
who was the lessee of a mining lease granted a sub-lease. Its officers
were prosecuted for violating the provisions of the Mines and Minerals
(Regulation and Development) Act, 1948, and Rules, by granting such
sub-lease. It was contended that the sub-lease was not a “mining lease”
under the Act. It was held:
... [I]f one takes the plain meaning of the words used in Section 3(d) [of the
Mines Act] it is clear that the term ‘mining lease’ means any kind of lease
granted for the purpose of searching for, winning,... [etc.] of minerals or
for purposes connected therewith. It is significant that the definition does
not require that the lessor must be the proprietor; and so on a fair reading it
would include a lease executed by the proprietor as much as a lease executed
by the lessee from such a proprietor. If we turn to the definition of ‘lease’ in
Section 105 of the Transfer of Property Act.... What a lease... requires is
a transferor and a transferee and a transfer of immovable property on the
terms and conditions mentioned in Section 105. How the transferor gets his
Ker 570: AIR 2009 Ker 143, the agreement was renewed after one year presumably for
monthly tenancy for manufacturing purpose.
2. Undavilli Nagarathnam v Reddi Satyanarayana Murthi, (1976) 4 SCC 20; Jaswantsingh
Mathurasingh v Ahmedabad Municipal Corpn, 1992 Supp (i) SCC 5; State of Karnataka
CASE PILOT
v Subhash Ruktnayya Guttedar, 1993 Supp (3) SCC 290; Juthika Mulick v Mahendra
Yashwant Bal, (1995) 1 SCC 560; Puran Singh Sahni v Sundari Bhagiaandas Kripalani,
(1991) 2 SCC 180; State of Maharashtra v Atur India (P) Ltd, (1994) 2 SCC 497; Raghubar
Dayal v State of U.P., 1995 Supp (3) SCC 20; United Bank of India v Cooks and Kelvey
Properties (P) Ltd, (1994) 5 SCC 9; Tulsi v Paro, (1997) 2 SCC 706; Aundiappa Nadar v
Gnanambal Animal, (1998) 6 SCC 753; Nilesh Nandkumar Shah v Sikandar Aziz Patel,
(2002) 6 SCC 678; T. Lakshmipathi v P. Nithyananda Reddy, (2003) 5 SCC 150.
The requirements of a lease were stated by the Supreme Court in B. Arvind Kumar v
Govt of India, (2007) 5 SCC 745. Lease deed is also one of the requisites, Narain Prasad
Aggartval v State of M.P., (2007) n SCC 736.
3. AIR i960 SC 1373: (1961) 1 SCR 445; Bans Raj Singh v Krishna Chandra, 1981 SCC
OnLine All 197: AIR 1981 All 280; Madhu Sudan Lal v Sadhu Ram, 1983 SCC OnLine
P&H 559: AIR 1984 P&H 172; Ganesh Trading Co (P) Ltd, re, 1984 SCC OnLine Cal
128: AIR 1985 Cal 37; Vayallakath Mohammedkutty v Illikkal Moosakutty, (1996) 9
SCC 382.
S. 105] LEASES 311
title to make a lease is immaterial so long as the transaction is of the nature

defined in Section 105. Applying therefore the plain words of Section y(d) of
the Act and the definition of lease as contained in Section 105 of the Transfer
of Property Act, it is perfectly clear that there is a transferor in this case
(...appellant), and a transferee... [sub-lessee] who has accepted the transfer;
the transaction is with respect to immovable property and creates a right to
enjoy such property for a certain term and for consideration on the condi
tions mentioned in it. Though, therefore, the document may be termed a sub
lease in view of the fact that the transferor is not the owner of the property
transferred but is itself a lessee, the transaction between the appellant and
the... [sub-lessee] is nothing but a mining lease.
The lessee allowed a dealer to establish his sale outlet at the leased place.
The dealer was not allowed to claim renewal of the lease after expiry of
its term, nor there was any binding obligation to permit him to continue
his dealership.4
TRANSFER OF RIGHT TO ENJOY PROPERTY

What the lessor transfers is a right to the lessee to enjoy whatever prop
erty the lessor has in the immovable property. In Giridhari Singh v Megh
Lal Pandey5, the appellant, a proprietor of a zamindari, granted a lease CASE PILOT
to the respondent “with all rights”. Minerals having been discovered, the
respondent began to work them claiming that they were granted under
the lease and the appellant resisted the claim. It was held:
[In Hari Narayan Singh Deo v Sriram Chakravarti6, this Board] held that the
zamindar ‘must be presumed to be the owner of the underground rights... in CASE PILOT
the absence of evidence that he ever parted with them’.
... [This case was followed in Durga Prasad Singh v Braja Nath Bose7 in
which Lord Macnaghten pronounced] ‘that it must be presumed that the
mineral rights remain in the zamindar in the absence of proof that he had
parted with them.’
Finally, in Sashi Bhushan Misra v Jyoti Prashad Singh Deo8,... it was held
in the language of Lord Buckmaster: ‘These decisions, therefore, have laid
4. Agarwal Automobiles v Indian Oil Corpn Ltd, 2014 SCC OnLine Guj 9104: AIR 2015
Guj 61.
5. 1917 SCC OnLine PC 49: (1916-17) 44 IA 246; Babttlal Somalal v Kantial Hargouandas,
1978 SCC OnLine Guj 46: AIR 1979 Guj 50; Hirendra Nath Poddar v Sibendra Nath
Poddar, 1978 SCC OnLine Cal 267: AIR 1979 Cal 135; Tarkeshtuar Sio Thakur Jiu v CASE PILOT
DarDass Dey & Co, (1979) 3 SCC 106 (Mineral lease); Dondeti Copi Reddy v Anjaneya
Swanryuaru Agraharam, (1980) 1 SCC 498; Jaswantsingh Mathurasingh v Ahniedabad
Municipal Corpn, 1992 Supp (1) SCC 5. Johnson Kanadan v Patel Saw Mill, AIR 2008
NOC 842 (Ker), the lessor was allowed by a clause in the lease deed to enter the premises
and to take usufruct from trees over which the lessee would have no right or their income. CASE PILOT
Hence, there was no exclusive possession with the lessee. The transaction was a licence
and not a lease.
6. 1910 SCC OnLine PC 12: (1909-10) 37 IA 136.
7. 1912 SCC OnLine PC 9: (1911-12) 39 IA 133.
8. 1916 SCC OnLine PC 85: (1916-17) 44 IA 46.
down a principle which applies to and concludes the present dispute. They
establish that when a grant is made by a zamindar of tenure at a fixed rent,
although the tenure may be permanent, heritable, and transferable, minerals
will not be held to have formed part of the grant in the absence of express
evidence to that effect’....
...[The words ‘with all rights’] only give expressly what might otherwise
quite well be implied, namely, that the corpus being once ascertained, there
will be carried with it all rights appurtenant thereto, including not only pos
session of the subject itself, but it may be of rights of passage, water or the
like, which enure to the subject of the pottah and may even be derivable from
outside properties. It must be borne in mind also that the essential character
istic of a lease is that the subject is one which is occupied and enjoyed and
the corpus of which does not in the nature of things and by reason of the
user disappear. In order to cause the latter specially to arise, minerals must be
expressly denominated, so as thus to permit of the idea of partial consump
tion of the subject leased. Their Lordships accordingly are of opinion that the
words founded on do not add to the true scope of the grant nor cause mineral
rights to be included within it.
In Raghunath Roy v Durga Prashad Singh9, a zamindar granted a
CASE PILOT zamindari village as rent-free brahmottar and that the grantee should
enjoy it comfortably by cultivating and getting the same cultivated by
others. On the question whether the subjacent minerals passed under the
grant it was held:
The result at which their Lordships have arrived after a consideration of the
decisions of the Board is that where a Zamindar grants a tenure in lands
within his Zamindari, and it does not clearly appear by the terms of the
grant that a right to the minerals is included, the minerals do not pass to the
grantee. [The fact that the grant was rent free made no difference.]
KINDS OF TENANCIES
i. A tenancy at will is a tenancy which can be terminated at the will
either of the lessor or the lessee. It does not mean that the landlord can
evict him whenever he pleases. He must be given a reasonable notice to
quit.
z. Periodic leases are tenancies from year to year or month to month.
They are the kind of leases referred in Section 108 as leases of uncertain
duration. A monthly tenancy does not mean a tenancy which begins on
the first of every month and expires on the last day of the month and
a fresh tenancy is created for the next month automatically. It means a
tenancy of uncertain duration which can be put an end to by either party
by giving one month’s notice.
3. Permanent leases or leases in perpetuity.
9. 1919 SCC OnLine PC iz: (1918-19) 46 IA 158.

S. 105] LEASES 313
4. A tenancy for a term of years. It is also called termor in English

Law.
In Shivayogeswara Cotton Press v M. Panchaksharappa™, a lease of
land was executed between the predecessors in interest of the parties, for
the purpose of erecting a ginning and pressing cotton factory. The lessee
was given the right to give up possession at will. The lessor’s successor
in interest sought to terminate the lease on the ground that it was a
tenancy-at-will, and the lessee resisted the suit on the ground that it was
a case of permanent tenancy. It was held:
The first argument in support of the conclusion we are asked to arrive at
[that it is a permanent tenancy] is that it is clearly a lease for building pur
poses; and it is rightly pointed out that where the land is let out for building
purposes without a fixed period, the presumption is that it was intended to
create a permanent tenancy. Reliance was placed upon the leading case in
Navalram v JaverilaP', where Sir Lawrence Jenkins, CJ, laid it down that a
presumption in favour of a permanent tenancy arises on a transaction like
the one we have before us....
In this connection the following observations of the Privy Council in the
case of Baboo Lekhraj Roy v Kunhya Singh10 12, may be quoted:
11 \F=3'
‘If a grant be made to a man for an indefinite period, it enures, generally CASe pilot
speaking for his lifetime, and passes no interest to his heirs unless there
are some words showing an intention to grant a hereditary interest. That
rule of construction does not apply if the term for which the grant is made
is fixed or can be definitely ascertained.’...
... [In Janaki Nath Roy v Dina Nath Kundu13, the Judicial Committee of the
Privy Council observed:]
‘On the other hand, restrictions upon the powers of the tenant to dig tanks
and build masonry structures and other provisions in the document were
relied upon by the appellants as indicating a tenancy not of a permanent
nature. That some provisions are to be found which point in that direction
cannot be denied, though some of them may be explained by the existence
of special powers to resume khas possession referred to above. But the
question, after all, is one of construction of a document, viz. what is the
correct view to take of the rights of the parties after considering all the
clauses of the kabuliyat and giving due weight to the several indications
which point in the different directions?....
It must therefore, be held that a stipulation entitling the lessee to surrender
possession of the premises at his will is not wholly inconsistent with the ten
ancy being permanent.
10. AIR 1962 SC 413; Chapsibhai Dhanjibhai Danand v Purushottam, (1971) 2 SCC 205;
Vali Pattabhirama Rao v Sri Ramanuja Ginning and Rice Factory (P) Ltd, 1983 SCC
OnLine AP 207: AIR 1984 AP 176; Aras Khan v AH Mian, 1984 SCC OnLine Pat 127:
AIR 1985 Pat 126.
11. (1905) 7 Bom LR 401.
12. 1877 SCC OnLine PC 13: (1876-77) 4 IA 223.
13. 1931 SCC OnLine PC 55: AIR 1931 PC 207.
In Afzal-Un-Nisa v Abdul Karimx\ the appellant’s predecessors invited

the respondent’s predecessors to occupy land for building purposes
in 1859. There was no document showing the terms, but from 1859
onwards a uniform rent was paid and some of the receipts used the word
“permanent”. The tenants had also erected substantial buildings without
objection by the landlord. There were sales and mortgages and proper
ties passed by succession. It was held:
... [T]he case is in substantially the same position as the case of C. Caspersz
v Kader Nath Sarbadhikari14 15,... [where it was correctly held:] ‘Although the
origin of a tenancy may not be known, yet if there is proved the fact of long
possession of the tenure by the tenants and their ancestors, the fact of the
landlord having permitted them to build a pucca house upon it, the fact of
the house having been there for a very considerable time, of its having been
added to by successive tenants, and of the tenure having from time to time
been transferred by succession and purchase, in which the landlord acqui
esced or of which he had knowledge, a Court is justified in presuming that
the tenure is of a permanent nature.’
REGISTRATION UNDER REGISTRATION ACT, 1908

The creation of a lease has to be registered under the Registration
Act, 1908. A document which falls short of a lease does not have to
be registered. Where a document embodied an agreement between the
parties describing the terms and conditions of their lease agreement, the
court said that it did not amount to a lease deed. Hence, registration was
held to be not necessary.16
PREMIUM AND RENT

In a lease there can be both premium and rent, though the definition
seems to be to the contrary. In Durga Das Khanna v CIT1718 , it was
CASE PILOT observed:
Fazl Ali, J, (as he then was), in CIT v Visheshwar Singh13 referred to the
distinction between a single payment made at the time of the settlement of
the demised property and recurring payments made during the period of its
enjoyment by the lessee. This distinction, according to the learned Judge,
is clearly recognised in Section 105 of the Transfer of Property Act which
defines to both premium and rent.
14. 1919 SCC OnLine PC 11: (1918-19) 46 IA 131.

15. 1901 SCC OnLine Cal 125: ILR (1901) 28 Cal 738.
16. Manish Anand v Ramniuas Gupta, AIR 2012 MP 90; Swetakumari v Shiushankar, 2012
SCC OnLine MP 640: AIR 2012 MP 155, tenancy on the basis of rent note, registration
not necessary.
17. (1969) 1 SCC 429; Tej Kumar Jain v Purshottam, 1980 SCC OnLine MP 21: AIR 1981
MP 55; Harbilas v Roshan Lal, 1982 SCC OnLine P&H 104: AIR 1983 P&H 256; D.K.
Trivedi & Sons v State of Gujarat, 1986 Supp SCC 20.
18. 1939 SCC OnLine Pat 186: (1939) 7 ITR 536.
S. 105] LEASES 315
LEASE AND LICENCE

There are certain fundamental differences between a lease and a licence.
In Associated Hotels of India Ltd v R.N. Kapoor19, the appellant was ^—3/
a proprietor of a hotel and the respondent was occupying a certain space case pilot
in the “Ladies and Gents” cloak rooms. The respondent applied under
the Rent Control Act for fixation of fair rent alleging that he was a ten
ant. The appellant contended inter alia that he was only a licensee and
not a lessee. It was held:
There is a marked distinction between a lease and a licence. Section 105 of
the Transfer of Property Act defines a lease of immovable property, [whereas
Section 52 of the Indian Easements Act defines a licence]....
The following propositions may...be taken as well established: (1) To
ascertain whether a document creates a licence or lease, the substance of
the document must be preferred to the form; (2) the real test is the intention
of the parties—whether they intended to create a lease or a licence; (3) if
the document creates an interest in the property, it is a lease; but, if it only
permits another to make use of the property, of which legal possession con
tinues with the owner, it is a licence; and (4) if under the document a party
gets exclusive possession of the property, pritna facie, he is considered to be
a tenant; but circumstances may be established which negative the intention
to create a lease.
[Since the respondent had exclusive possession of the room occupied by
him, was free from any direction from the appellant and had a right
to transfer his interest (although with the consent of the appellant) the
respondent was a lessee and not a licensee.] c=\
In M.N. Clubwala v Fida Hussain Saheb20, the respondents were
meat-stall holders in the private market of the appellant. On the question case pilot
whether the respondent was a lessee or a licensee, it was held:
While it is true that the essence of a licence is that it is revocable at the
will of the grantor the provision in the licence that the licensee would
19. AIR 1959 SC 1262: (i960) 1 SCR 368; Kidar Nath v Swami, AIR 1978 P&H 204; Chandu
Lal v MCD, 1977 SCC OnLine Del 130: AIR 1978 Del 174; Ram Awatar Singh v Khajan,
1978 SCC OnLine Cal 70: AIR 1978 Cal 337; Tarkeshwar Sio Thakur Jia v Dar Dass
Dey & Co, (1979) 3 SCC 106; Virjii Lauji Makwana v Rainbow Screen Shades, AIR
1979 Guj 178; Laxman Prasad v Shyani Swamp Chandak, 1979 SCC OnLine All 939:
AIR 1980 All 242; Balwantsinghji Anand v Bhagwantrao Ganpatrao Deshmukh, 1980
SCC OnLine Bom 20: AIR 1980 Bom 333; Tejoomal Lakhmichand v MJ. Talegaonkar,
1980 SCC OnLine Bom 270: AIR 1980 Bom 369; Prakash Rao v Bihar SRTC, 1980 SCC
OnLine Pat 141: AIR 1981 Pat 142; Ratilal v Abdul Hussain, AIR 1982 Guj 266; Turab
Ghosi v Laxmi Agarwal, 1983 SCC OnLine All 821: AIR 1984 All 180; Shri Ram v
Kasturi Devi, 1983 SCC OnLine All 609: AIR 1984 All 66; Bhola Nath v Maharao Raja
Saheb Bundi, 1983 SCC OnLine All 528: AIR 1984 All 60; Sant Lal Jain v Avtar Singh,
(1985) 2 SCC 332 (lessee and his licensee); Rotan Kumar Tandon v State of U.P., (1997) 2.
SCC 161; Delta International Ltd v Shyam Sundar Ganeriwalla, (1999) 4 SCC 545; Roop
Kumar v Mohan Thedani, (2003) 6 SCC 595.
20. AIR 1965 SC 610: (1964) 6 SCR 642.
be entitled to a notice before being required to vacate is not inconsistent

with a licence.... (see Halsbury’s Laws of England, 3rd Edn., Vol. 23,
p. 431). ...Indeed, Section 62(c) of the Indian Easements Act, 1882 itself pro
vides that a licence is deemed to be revoked where it has been either granted
for a limited period, or acquired on condition that it shall become void on the
performance or non-performance of a specified act, and the period expires,
or the condition is fulfilled. In the agreements in question the requirement
of a notice is a condition and if that condition is fulfilled the licence will be
deemed to be revoked under Section 62.... Whether an agreement creates
between the parties the relationship of landlord and tenant or merely that of
licensor and licensee the decisive consideration is the intention of the parties.
This intention has to be ascertained on a consideration of all the relevant
provisions in the agreement. In the absence, however, of a formal document
the intention of the parties must be inferred from the circumstances and con
duct of the parties. Here the terms of the document evidencing the agreement
between the parties are not clear and so the surrounding circumstances and
the conduct of the parties have also to be borne in mind for ascertaining
the real relationship between the parties.... One of those circumstances is
whether actual possession of the stalls can be said to have continued with
the landlords or whether it had passed to the stall-holders. Even if it had
passed to a person, his right to exclusive possession would not be conclusive
evidence of the existence of a tenancy though that would be a consideration
of first importance. That is what was held in Errington v Errington21, Cobb v
CASE PILOT
Lane22,... [and] Vurum Subba Rao v Eluru Municipal Council23.... If, how
ever, exclusive possession to which a person is entitled under an agreement
with a landholder is coupled with an interest in the property, the agreement
would be construed not as a mere licence but as a lease (see Associated Hotels
of India Ltd v R.N. Kapoor24). In the case before us, however, while it is true
that each stallholder is entitled to the exclusive use of his stall from day to day
it is clear that he has no right to use it as and when he chooses to do so or to
sleep in the stall during the night after closure of the market or enter the stall
during the night after 11.00 p.m. at his pleasure. He can use it only during
a stated period every day and subject to several conditions. These circum
stances, coupled with the fact that the responsibility for cleaning the stalls,
disinfecting them and of closing the market in which the stalls are situate is
placed by the... [Madras City Municipal Act, 1919], the regulations made
thereunder and the licence issued to the landlords is on the landlords would
indicate that the legal possession of the stalls must also be deemed to have
been with the landlords and not with the stall-holders. The right which the
stall-holders had was to the exclusive use of the stalls during stated hours and
nothing more. Looking at the matter in a slightly different way it would seem
that it could never have been the intention of the parties to grant anything
more than a licence to the stall-holders.
21. (1952.) 1 KB 290 (CA).

22. (1952.) 1 All ER 1199 (CA).
23. ILR (1956) 5 AP 515.
24. AIR 1959 SC 1262: (i960) 1 SCR 368.
S. 105] LEASES 317
Apart from these there are some other differences also between a lease
and licence. They are: i) a lease is generally transferable whereas a licence
is not; z) a lease is generally not revocable, whereas a licence is; 3) if the
lessor transfers the property, a lease is unaffected, whereas a licence is
determined; 4) a lessee can himself sue for trespass, but not a licensee;
5) death of the grantor terminates a licence, but not a lease, and the death
of the grantee passes on the interest to the heirs in the case of a lease, but
not in the case of a licence.
In Sridhar Suar v Shri Jagannath Temple25, the Supreme Court held:
In Qudrat Ullah v Municipal Board, Bareilly2627 , this Court observed: CASE PILOT
‘There is no simple litmus test to distinguish a lease as defined in

Section 105, Transfer of Property Act from a licence as defined in Section 52,
Easements Act, but the character of the transaction turns on the operative
intent of the parties. To put it pithily, if an interest in immovable property
entitling the transferees to enjoyment is created, it is a lease; if permission to
use land without right to exclusive possession is alone granted, a licence is
the legal result.’
[In the present case, the sanand granted by the Superintendent of a temple
to the plaintiff’s ancestor did not create any interest in the site in question
in favour of the plaintiff or his ancestors.] It merely permitted him to open
a ‘saraghara’ which meant a room for storing articles for the sole purpose
of preparing bhog for the three presiding deities. The sanand also did not
confer the right of exclusive possession of the suit property on the grantee.
This is evident from the right of ‘dakhale khas’ of the respondents in the suit
property as also from the proved fact that the ‘saraghara’ was not kept open
by the temple authorities from midnight to 6:00 a.m. during which interval,
the plaintiff could in no case occupy it nor could he have access to it. It has
also been found to have been established from the plaintiff’s evidence itself
that the employees of the... [grantor] used to clean the refuse, etc. which
got accumulated before the suit ‘saraghara’. Thus, none of the elements of
lease can be said to be present in the instant case. In M.N. Clubtvala v Fida
Hussain Saheb17, this Court rejected the claim of holders of certain stalls in
a market that they were lessees and not licensees thereof on the ground that
they had no right to use them after the closure of the market at night and the
responsibility of cleaning and disinfecting the stalls and closing the market at
night lay on the landlord and not on the stall-holders.
In Board of Revenue v A.M. Ansari28, the forest department of the
Government of Andhra Pradesh after giving a sale notice held, in accord CASE PILOT
ance with the terms and conditions thereof, an auction in respect of var
ious items of forest produce. The respondents being the highest bidders
in respect of some of the items of the forest produce were called upon to
25. (1976) 3 SCC 485.

26. (1974) i SCC 202.
27. AIR 1965 SC 610: (1964) 6 SCR 642.
28. (1976) 3 SCC 512.
pay in terms of the conditions of the notice the stamp duty on the agree
ment to be executed by them as if they were leases of immovable property
falling under Article 31(c), Indian Stamp Act, 1899. Aggrieved by the
said notices the respondents moved the High Court under Article 226 of
the Constitution and the High Court held in favour of the respondent.
Dismissing the appeal to it, the Supreme Court held:
A close study of the definitions [of immovable property in the General Clauses
Act, the Transfer of Property Act, the Registration Act and the Sale of Goods
Act] shows that it is the creation of an interest in immovable property or a
right to possess it that distinguishes a lease from a licence. A licence does not
create an interest in the property to which it relates while a lease does. There
is in other words transfer of a right to enjoy the property in case of a lease....
As to whether a particular transaction creates a lease or a licence is always
a question of intention of the parties which is to be inferred by the circum
stances of each case. For the purpose of deciding whether a particular grant
amounts to a lease or a licence it is essential therefore to look to the substance
and essence of the agreement and not to its form. We are fortified in this
view by the decision of the Court in Associated Hotels of India Ltd v R.N.
Kapoor19, where Subba Rao, J observed:
‘If a document gives only a right to use the property in a particular way
or under certain terms while it remains in possession and control of the
owner thereof, it will be a licence. The legal possession, therefore, con
tinues to be with the owner of the property, but the licensee is permitted
to make use of the premises for a particular purpose. But for the permis
sion, his occupation would be unlawful. It does not create in his favour
any estate or interest in the property. There is, therefore, clear distinction
between the two concepts. The dividing line is clear though sometimes it
becomes very thin or even blurred. At one time it was thought that the test
of exclusive possession was infallible and if a person was given exclusive
possession of a premises, it would conclusively establish that he was a
lessee. But there was a change of opinion and the recent trend of judicial
opinion is reflected in Errington v Errington5Q, wherein Lord Denning
reviewing the case law on the subject summarizes the result of his discus
sion at page 155:
“The result of all these cases is that, although a person who is let into
exclusive possession is, prinia facie, to be considered to be tenant, nev
ertheless he will not be held to be so if the circumstances negative any
intention to create a tenancy.”’
The Court of Appeal again in Cobb v Lane51 considered the legal posi
tion and laid down that the intention of the parties was the real test29 31
30
29. AIR 1959 SC 1262: (i960) 1 SCR 368. Chitra Dey v Shillong Municipal Board, AIR 2015
NOC 226 (Megh), the agreement between the Municipal Board and Tenants stated that
the exclusive possession of the stalls was never to be handed over to the tenants and the
right under the agreement was not heritable. The agreement was held to be licence and not
lease.
30. (1952) 1 KB 290 (CA).
31. (1952) 1 All ER 1199 (CA).
S. 105] LEASES 319
for ascertaining the character of document. At p. 1201, Somervell, LJ

stated:
‘...the solution that would seem to have been found is, as one would
expect, that it must depend on the intention of the parties’.
Denning, LJ said much to the same effect at p. 1202.:
‘The question in all these cases is one of intention: Did the circumstances
and the conduct of the parties show that all that was intended was that
the occupier should have a personal privilege with no interest in the
land?....’
The crucial tests to be employed in a case of the present nature can be gath
ered from the observations made by Lord Shaw while delivering the judgment
of the Board in Kauri Timber Co Ltd v Commr of Taxes32. According to
these observations in order that an agreement can be said to partake of the CASE PILOT
character of lease, it is necessary that the grantee should have obtained an
interest in and possession of the land. If the contract does not create an inter
est in land then to use the words of Lord Coleridge, CJ in Marshal v Green33,
the land would be considered as a mere warehouse of the thing sold and the
contract would be a contract for goods.
... [It is, therefore, necessary to notice the salient features of the agree
ment of the present case.] The first salient feature is that they were for a short
duration of nine to ten months. The second important feature...is that they
did not create any estate or interest in land. The third salient feature... is that
the respondents were not granted exclusive possession and control of the land
but were merely granted the right to pluck, cut, carry away and appropriate
the forest produce that might have been existing at the time of the contract or
which might have come into existence during the short period of the currency
of the agreement. The right to go on the land is only ancillary to the real pur
pose of the contract. Thus, the acquisition by the respondents not being an
interest on the sale but merely right to cut the fructus naturalis, we are clearly
of the view that the agreements in question possessed the characteristics of
a licence and did not amount to leases so as to attract the applicability of
Article 31(c), Indian Stamp Act.
A permanent lease may be creative of landlord-tenant relationship if the
landlord reserves for himself the right to evict the tenant.34 In another
case on the point, ownership over the land was not transferred. The
yearly ground rent and its terms were mentioned in the deed. The burden
of paying taxes of every kind was put on the lessee. He was not permitted
to make certain types of alteration. The document was held to be creative
of a lease and not a sale.35
32. 1913 AC 771 (PC).

33. (1875) LR 1 CPD 35 (E).
34. Chittoor Chegaiah v Pedda Jeeyangar Mutt, (2.010) 3 SCC 776. The tenant had perfected
his relationship as tenant by adverse possession. That did not give him ownership and
therefore he could be evicted.
35. Ashok Kumar Jain v Board of Revenue, 2013 SCC OnLine MP 6493: AIR 2014 MP 94.
ENGLISH AND INDIAN LAW

A lease in perpetuity cannot be granted in England. In English Law
where a lessee had not taken possession, he did not have the rights of a
lessee, but only a right to enter known as interesse termini. In India, if
the lease is created by a registered document, delivery of possession is not
necessary. Section 107 sets out the cases in which a registered instrument
is necessary, but that section does not apply to agricultural leases. In
those cases delivery of possession is necessary.
See, Section 10 in this connection.
The formalities for creating a lease are set out in Section 107 as follows:
107. Leases how made.—A lease of immovable property from year to year,
or for any term exceeding one year, or reserving a yearly rent, can be made only
by a registered instrument.
All other leases of immovable property may be made either by a registered
instrument or by oral agreement accompanied by delivery of possession.
Where a lease of immovable property is made by a registered instrument, such
instrument or, where there are more instruments than one, each such instrument
shall be executed by both the lessor and the lessee:
Provided that the State Government may, from time to time, by notification in
the Official Gazette, direct that leases of immovable property, other than leases
from year to year, or for any term exceeding one year, or reserving a yearly rent,
or any class of such leases, may be made by unregistered instrument or by oral
agreement without delivery of possession.
Even a lease for a period of less than one year cannot be made by an
unregistered instrument. It can only be made either by a registered
instrument or an oral agreement accompanied by delivery of possession.
When the rent is fixed by a registered deed it can be altered only by a
registered deed.36 Where a lease is not valid because the deed was not
registered, the deed can be used for the collateral purpose of showing the
nature of possession. The lease will be treated as a monthly lease.
The grant under a lease of a government land was made in a manner
which was a clear abuse of official position by government officers. The
36. Sunil Kumar Roy v Bhowra Kankanee Collieries Ltd, (1970) 3 SCC 565; Batakala Budhia
Patro v Durgasi Dandasi, 1978 SCC OnLine Ori 65: AIR 1978 Ori 103; Thayarammal v
CASE PILOT
People's Charity Fund, 1978 SCC OnLine Kar 41: AIR 1978 Kar 12.5; Antonia Perreira
v Upendra Venkatesh Juarkar, AIR 1978 Goa 19; Purban (P) Ltd v Deb Kumar Shaw,
1977 SCC OnLine Cal 112: AIR 1978 Cal 33; Sultan Moideen v Official Trustee, 1977
SCC OnLine Mad 86: AIR 1978 Mad 248; Vaidyanathan Nadar Ananthan Nadar v
Kochuraman Lakshmanan, 1980 SCC OnLine Ker 35: AIR 1980 Ker 207; State ofU.P.
CASE PILOT
v Phool Chand Agarwal, 1982 SCC OnLine All 74: AIR 1982 All 260 (lease in favour
of Govt.); T.N. Habib v Arogya Mary, 1981 SCC OnLine Mad 113: AIR 1982 Mad 156;
Panka/ Bhargava v Mohinder Nath, (1991) 1 SCC 556; Shri Janki Deni Bhagat Trust v
Ram Swarup Jain, (1995) 5 SCC 314; Weney D’Souze v G.A. Conceicao, (1991) 3 SCC
14; Neki v Satnarain, (1997) 9 SCC 149; Anthony v K.C. Ittoop & Sons, (2000) 6 SCC
394; State ofU.P. v Lalji Tandon, (2004) 1 SCC 1; Food Corporation of India v Babulal
Agrawal, (2004) 2 SCC 712.
S. 106] LEASES 321
court said that the lease was liable to be cancelled irrespective of the fact
that the lessee had been paying rent for nine years.37
In a dispute about a lease, the lessor obtained a decree of eviction
which had attained finality. The court said that the obstructionists in
possession of the premises had no right to be there. The court directed
their removal from the premises.38
As regards the duration of a lease, in the absence of a contract to the
contrary, the law is set out in Sections 106 and in. Section 106 provides:
DURATION OF LEASE [S. 106]

106. Duration of certain leases in absence of written contract or local
usage.—In the absence of a contract or local law or usage to the contrary, a
lease of immovable property for agricultural or manufacturing purposes’9 shall
be deemed to be a lease from year to year, terminable, on the part of either lessor
or lessee, by six months’ notice; and a lease of immovable property for any other
purpose shall be deemed to be a lease from month to month, terminable, on the
part of either lessor or lessee by fifteen days’ notice.
Notwithstanding anything contained in any other law for the time being in
force, the period mentioned in sub-section (i) shall commence from the date of
receipt of notice.
A notice under sub-section (i) shall not be deemed to be invalid merely
because the period mentioned therein falls short of the period specified under
that sub-section, where a suit or proceeding is filed after the expiry of the period
mentioned in that sub-section.
Requirement as to notice to quit.—Every notice under sub-section (i) must
be in writing, signed by or on behalf of the person giving it, and either be sent by
post to the party who is intended to be bound by it or be tendered or delivered
personally to such party, or to one of his family or servants at his residence, or
(if such tender or delivery is not practicable) affixed to a conspicuous part of the
property.
In Ram Kumar Das v Jagdish Chandra Das40, on 8 December 192.4, the
defendant executed a registered kabuliyat in favour of the Receiver of
37. Bachan Lal Ghalwan v State of Uttarakhand, AIR 2015 NOC 700 (Utt).
38. Port of Mumbai v Nikhil N. Gupta, (2015) 10 SCC 139.
39. B.G. Devakate v V.M. Gangawal, (1975) 2 SCC 246; Pooran Chand v Motilal, AIR 1964
SC 461 (Notice not necessary); Chandika v Sukhnandan, 1980 SCC OnLine All 383: AIR
1981 All 312; Ram Gopal v Man Chand, 1980 SCC OnLine All 729: AIR 1981 All 352;
Rawat Hardeo Singh v State of Rajasthan, 1981 SCC OnLine Raj 5: AIR 1981 Raj 280;
Gordhan v AH Bux, 1981 SCC OnLine Raj n: AIR 1981 Raj 206; Kochunniv Kuriakose,
1981 SCC OnLine Ker 16: AIR 1982 Ker 87; Krishnan Servai v Arulmighu Kaliamman
Temple, 1982 SCC OnLine Mad 143, AIR 1983 Mad 142; Chhedi Lal v Munnu Sardar,
1982 SCC OnLine All 270: AIR 1983 All 274; Bengal Electric Lamp Works Ltd v Sukdev
Chandra Sinha, 1983 SCC OnLine Cal 20: AIR 1983 Cal 389; S.K. Gupta v R.C. Jain,
1983 SCC OnLine Del 33: AIR 1984 Del 187; Karayadathil Kunhimoosa Manjerintha v
Valiaparambath M.T. Kalliani, 1995 Supp (3) SCC 403; Jiwan Das v LIC, 1994 Supp (3)
SCC 694; Raptakos Brett & Co Ltd v Ganesh Property, (1998) 7 SCC 184.
40. AIR 1952 SC 23; Jagdish Lal Chawala v Ratan Chand, 1979 SCC OnLine MP 147: AIR
1979 MP 186; Bhagabandas Agarwalla v Bhagwandas Kami, (1977) 2 SCC 646;Jamir
the property for a period of io years at a certain rent per annum. It was
for building structures on the land. The lessee paid the annual rent in
1925 and 1926 and thereafter no payment of rent was made. After the
Receiver was discharged, the plaintiff took possession of the estate and
sued for the eviction of the lessees. The court found that the kabuliyat
was ineffective as a lease, that the lessee was a tenant from month to
month, but as the notice to quit was defective it dismissed the suit. The
plaintiff, after giving a proper notice, filed another suit for eviction. On
the question of the nature of tenancy, it was held:
A corporation was the owner of a piece of land. It entered into an agreement
with a develop for construction of a commercial complex on the land. The
right to allot shops and offices was transferred to the developer for a spec
ified period and amount. The court said that the intention of the parties
seemed to be that the corporation was divesting itself of the specified right
for the limited period of one year. The decision of the Collector that the
instrument was a lease and as such and therefore chargeable to stamp duty
as such.41
A lease deed has to be read as a whole. The presence of an absolute discre
tion to resume the land without assigning any reason, absence of any grant
is perpetuity and of consideration showed that the lease was not intended to
be one in perpetuity. The right of termination at any time and to resume pos
session without assigning any reason in a lease without consideration further
showed that it was not intended to be one on perpetuity.42
In a case before the Supreme Court the agreement of lease provided that
the lease could be terminated before the expiry of its terms, and also for the
right of subsequent renewal. The court regarded it to be an implied renewal
by “holding over” merely because the rent offered by the lessee had been
accepted. The lessee had also not exercised his option for renewal before
expiry of the lease. Acceptance of rent after expiry did not amount to assent
for continuation of the lease.43
Section 106 lays down a rule of construction which is to be applied when
there is no period agreed between the parties. In such cases the duration
has to be determined by reference to the object or purpose for which the
Ahmad v Madhawanand, 1978 SCC OnLine All 860: AIR 1979 All 104; Madhusudan
Prasad Agarwal v Shusama Bala Dasi, 1978 SCC OnLine Pat 66: AIR 1979 Pat 6
(Several lessors); Hashmatrai v Tarachand, 1978 SCC OnLine Bom 138: AIR 1979 Bom
95; Baidyanath Dutta v Radheshyam Dutta, 978 SCC OnLine Cal 126: AIR 1979 Cal
975 Jagat Taran Berry v Sardar Sant Singh, 1979 SCC OnLine Del 125: AIR 1980 Del
7; Bistvabani (P) Ltd v Santosh Kumar Dutta, (1980) 1 SCC 185; Samir Mukherjee v
Dauinder K. Bajaj, (2,001) 5 SCC 259; Ram Kumar Das v Jagdish Chandra Das, AIR 1951
SC 23; Shri Janki Deui Bhagat Trust v Ram Swarup Jain, (1995) 5 SCC 314; Mansoor
Khan v Motiram Harebhan Kharat, (2002) 5 SCC 462; Naveen Chand v Nagarjuna
Travels & Hotels (P) Ltd, (2002) 6 SCC 331; Calcutta Credit Corpn v Happy Homes (P)
Ltd, AIR 1968 SC 471: (1968) 2 SCR 20.
41. Bilaspur Infrastructures (P) Ltd v State of Chhattisgarh, 2009 SCC OnLine Chh 151:
AIR 2010 Chh 19.
42. B. Arvind Kumar v Govt of India, (2007) 5 SCC 745.
43. Shanti Prasad Devi v Shankar Mahto, (2005) 5 SCC 543.
S. 106] LEASES 323
tenancy is created. The rule of construction embodied in this section applies

not only to express leases of uncertain duration but also to leases implied by
law which may be inferred from possession and acceptance of rent and other
circumstances.
(It is conceded in the case before us that] the tenancy was not for manufac
turing or agricultural purposes. The object was to enable the lessee to build
structures upon the land. In these circumstances, it could be regarded as a
tenancy from month to month, unless there was a contract to the contrary.
[It is not disputed that the] contract to the contrary, as contemplated by
S. 106, T.P. Act, need not be an express contract; it may be implied, but it
certainly should be a valid contract.... But the difficulty in applying this
rule to the present case arises from the fact that a tenancy from year to year
or reserving a yearly rent can be made only by registered instrument as laid
down in S. 107, T.P. Act.
[A lease for one year certain cannot be inferred from the payment of
annual rent.] ...It is one thing to say that in the absence of a valid agreement,
the rights of the parties would be regulated by law in the same manner as
if no agreement existed at all; it is quite another thing to substitute a new
agreement for the parties which is palpably contradicted by the admitted
facts of the case.44
In a lease of industrial plot, the lease deed prohibited transfer of the plot,
change in the memorandum and articles of association of the company,
or change in its capital structure. Any such thing was not to be done
without assent of the lessor. The very survival of the company became
threatened and to save it from this catastrophe the company had to trans
fer its entire shareholding to new promoters. The demand of transfer fee
made by lessor corporation as per the terms of the lease was held to be
proper.45
MORTGAGE DISTINGUISHED FROM LEASE

The Andhra Pradesh High Court stated the points of distinction:46 Both
are species of the same genus, i.e. transfer of property, but the nature
of disposition is different. Mortgage is created to provide a security for
recovery of a debt. Usually, possession is not delivered except when it is a
usufructuary mortgage or one with conditional sale. In a lease, the lessee
gets possession of the property for its use and enjoyment in return for
payment of rents. The rights and liabilities of the parties are different.
There can be a perpetual lease subject only to the landlord’s right to put
an end to the lease. There cannot be a perpetual mortgage.
44. Swami Beli Ram Udasin Ashram Kankhal v District Judge, 2015 SCC OnLine Utt 286:
AIR 2015 Utt 102, the tenancy was at will, the landlord was a registered society not cov
ered by UP Rent Act, termination of tenancy by issuing notice was held to be proper.
45. U.P. SIDC v Monsanto Manufacturers (P) Ltd, (2015) 12 SCC 501.
46. Gita Cotton Trading Co v Chief Controlling Revenue Authority, 2012 SCC OnLine AP
490: AIR 2013 AP 129.
MANUFACTURING PURPOSE
This means production of articles of commercial use by means of
machinery.47
Renewal
Every renewal operates as a fresh grant of lease even if the original lease
contains a clause for renewal. The original lease granted by the State in
this case carried a renewal clause which also entitled the lessor for inclu
sion of additional terms and conditions which may be considered neces
sary. The new clause added was for payment of Salami which became
necessary because of amended rules introduced by the State Government
under an Act. The same were held to be binding on the prospective lessee
whether by renewal or new lease.48
NOTICE
A notice to terminate, which is otherwise valid, does not become invalid
merely because something else is added to it.4950But it should not be con
ditional. If in a notice terminating tenancy there is a clause threatening
enhanced rent, there is a difference of opinion whether or not it amounts
to a conditional notice.
In Putuada Venkateswara n C.V. Ramanas% the defendant-appellant
had taken a house on rent for a period of five years for running a lodging
house. After the lease had expired, according to the landlord respondent,
the appellant had continued to hold-over as a tenant on the same terms
by which presumably it was meant that it was a month-to-month ten
ancy. The respondent filed a petition under Section io, Andhra Pradesh
47. See, Allenbury Engineers (P) Ltd v Ramkrishna Dalmia, (1973) 1 SCC 7.
48. State ofW.B. v Calcutta Mineral Supply Co (P) Ltd, (2.015) 8 SCC 655.
49. Mangilal v Sugan Chand Rathi, AIR 1965 SC 101: (1964) 5 SCR 239; Bttdh Sen v
Rahinian, 1978 SCC OnLine All 607: AIR 1978 All 549; Promode Das v Dharmadutta
Sarma,'i9y8 SCC OnLine Gau 4: AIR 1978 Gau 95; Ram Chandra v Ram Saran, 1977
SCC OnLine All 398: AIR 1978 All 173 (case of co-owner saving for rent for a por
tion after partition); J. Me Gaffin v LIC, 1977 SCC OnLine Cal 56: AIR 1978 Cal 123;
Prauash Chandra Chatterjee v Chand Mohan Basak, 1977 SCC OnLine Cal 101: AIR
1978 Cal 224; Brij Bihari Prasad v Deoki Dev, 1977 SCC OnLine Pat 80: AIR 1978 Pat
117; Gosto Behari Roy v Ramesh Chandra Das, 1978 SCC OnLine Cal 25: AIR 1978 Cal
235 (surrender by tenant); Dineshtuar Prasad Singh v Manorma Devi, 1978 SCC OnLine
Pat 44: AIR 1978 Pat 256; Shew Karan Agarivalla v Satyanarain Mansinka, 1978 SCC
OnLine Cal 167: AIR 1978 Cal 495; Sushil Krishna Roy v Narayan Ch Mukherji, 1977
SCC OnLine Cal 249: AIR 1978 Cal 174; Hisi Manjhi v Rajkishore Pradhan, 1981 SCC
OnLine Pat 42: AIR 1981 Pat 215; Manohar Singh v Ram Nath Chitkara, 1981 SCC
OnLine Del 28: AIR 1981 Del 129; Budha v Bedariya, 1980 SCC OnLine MP 18: AIR
1981 MP 76; Shiv Narain Chaudhary v Naug & Co, AIR 1982 All 44 (notice to company
or firm).
50. (1976) 2 SCC 409.
S. 106] LEASES 325
Building (Lease, Rent and Eviction) Control Act, i960 before the Rent
Controller and he ordered eviction of the appellant after holding all the
defences of the appellant to be flimsy and unsubstantiated. The appel
lant’s revision to the High Court was also rejected. In appeal to the
Supreme Court, the appellant contended that the petition could not suc
ceed because notice under Section 106, Transfer of Property Act had not
been served upon the appellant. Dismissing the appeal, following the
decision of the Supreme Court in Raval & Co v K.G. Ramachandran51,
it was held: CASE PILOT
The Act provides for eviction of tenants and is self-contained so that no

recourse to the provisions of Section 106 of the Transfer of Property Act was
necessary. The Supreme Court explained the decision in Mangilal v Sugan
Chand Rathi52, as follows:
CASE PILOT
‘In that case, however, Section 4 of the M.P. Act merely operated as a
bar to an ordinary civil suit so that service of a notice under Section 106,
Transfer of Property Act, became relevant in considering whether an ordi
nary civil suit filed on a ground which constituted an exception to the bar
contained in Section 4 had to be preceded by a notice under Section 106
of the Transfer of Property Act. In the context of the remedy of ejectment
by an ordinary civil suit it was held that the usual notice of termination
of tenancy under Section 106, Transfer of Property Act was necessary to
terminate a tenancy as a condition precedent to the maintainability of
such a suit.’
51. (1974) 1 SCC 42.49; V. Dhanapal Cbettiar v Yesodai Ammal, (1979) 4 SCC 2.14; Prem
Lal v Jadav Chand, 1977 SCC OnLine Raj 46: AIR 1979 Raj 44; Pradesh Kumar Bajpai
v Binod Behari Sarkar, (1980) 3 SCC 348; Peter Paul Coelho v Constance D'Souza, 1979
SCC OnLine Kar 22: AIR 1980 Kar 28; Bipat v Addl District Judge, Gonda, 1980 SCC
OnLine All 858: AIR 1980 All 142 (“Now” in notice means “hereby”); Maharajsingh
v Prem Narain, 1979 SCC OnLine MP 148: AIR 1980 MP 117; Ram Setvak Jaisiual v
Abdul Majeed, 1980 SCC OnLine All 871: AIR 1980 All 262; Radhey Lal Mannia Lal v
Bimal Kumar Jain, 1979 SCC OnLine All 184: AIR 1980 All 84 (notice to joint tenants);
Shiv Dutt Singh v Ram Dass, 1980 SCC OnLine All 155: AIR 1980 All 280; Jagatjit
Industries Ltd v Rajiv Gupta, 1980 SCC OnLine Del 253: AIR 1981 Del 359; Jatuarlal
v Labhsankar, AIR 1982 Guj 152; Rahimtulla Abdul Rahirnan Nakib v Chandrakant
CASE PILOT
Anant Moog, 1981 SCC OnLine Bom 49: AIR 1982 Bom 282; Dutta & Associates v
State ofW.B., 1981 SCC OnLine Cal 176: AIR 1982 Cal 225; Francis Jerone Fernandis
v Anthony Pedad Cardoza, 1983 SCC OnLine Kar 228: AIR 1984 Kar 226; Sallomal v
Naina Baj, 1978 SCC OnLine All 489: AIR 1979 All 32; P.C. Cheriyan v Barfi Devi,
(1980) 2 SCC 461 (Retreading tyres not a manufacturing process); Devichand Balkrishna
Sonavane v Kisan Shripati Dhumal, 1981 SCC OnLine Bom 71: AIR 1981 Bom 226;
Idandas v Anant Ramchandra Phadke, (1982) 1 SCC 27 (Each product having a differ
ent name); Veena Rani v Ishrati Amanullah, 1984 SCC OnLine Pat 176: AIR 1985 Pat
207; H.C. Gupta v K.V. Ramana Rao, 1983 SCC OnLine AP 194: AIR 1985 AP 193;
CASE PILOT
Bal Kissen Shaw v Kanupada Bhowmick, 1984 SCC OnLine Cal 138: AIR 1985 Cal
129; Bhola Nath Das v Bholanath Boral, 1985 SCC OnLine Cal 16: AIR 1985 Cal 387;
Sibendra Nath Kanjilal v Ganes Chandra Basu, 1985 SCC OnLine Cal 12: AIR 1985 Cal
2.6% Jiwan Ram v Tobgyal Wangchuk Tenzing, 1983 SCC OnLine Sikk 5: AIR 1985 Sikk
10.
CASE PILOT
52. AIR 1965 SC 101: (1964) 5 SCR 239.
In Rattan Lal v Vardesh Chander53, the appellant was a tenant of a building

in Delhi having been inducted into possession by the respondent-landlord
in 1954. At the time of the lease, the Transfer of Property Act had not been
extended to Delhi although, later, on December 1, 1962. the Act was made
applicable. The term of the lease was said to be less than a year. But the
landlord had been receiving the rent from the tenant until the time he filed a
petition for eviction in 1967. In a petition by the respondent under the Delhi
Rent Control Act for eviction of the appellant, the appellant relied on certain
defences grounded on Sections 106 and m of the Transfer of Property Act
on the score that no notice to quit had been given, nor notice of forfeiture,
as prescribed by those sections. The petition was allowed and the appellant’s
appeal was dismissed right up to the High Court. Dismissing the appeal to it,
the Supreme Court held that the respondent was not correct in his contention
that no notice was required as the lease was for a specified period and expired
by efflux of time. ‘A lease merely stating that it is for a period less than one
year is ex facie for an indefinite period and as such cannot expire by efflux of
time....’ A notice in writing formally determining the tenancy is not a rule of
justice or canon of common sense. Realism married to equity being the true
test we are persuaded the pre-amending Act provision of Section 111(g) is in
consonance with justice. If so, the mere institution of the legal proceeding for
eviction fulfils the requirements of law for determination of the lease. The
conscience of the court needs nothing more and nothing else.
In Bhagabandas Agarwalla v Bhagwandas Kann54, the Supreme Court
of India held that under Section 106, Transfer of Property Act the notice
to quit must expire with the end of the month of the tenancy, or in other
words, it must terminate the tenancy with effect from the expiration of
the month of the tenancy. If it terminates the tenancy with effect from an
earlier date, it would be clearly invalid. In the present case the notice to
quit required the respondents to vacate the premises “within the month
of October 1962” and intimated to them that otherwise they would be
treated as “trespassers from November 1, 1962” in respect of the prem
ises. The Supreme Court observed:
CASE PILOT It is settled law [Sidebotham v Holland55, and Harihar Banerji v Ramshashi
Roy56] that a notice to quit must be construed not with a desire to find faults
in it, which would render it defective, but it must be construed ut res magis
valeat quam pereat. The validity of a notice to quit, ought not to turn on
CASE PILOT the splitting of a straw. It must not be read in a hyper-critical manner, nor
must its interpretation be affected by pedagogic pedantism or over-refined
subtlety, but it must be construed in a common sense way.
53. (1976) 2 SCC 103; Manujendra Dutt v Purendu Prosad Roy Chowdhury, AIR 1967 SC
1419: (1967) 1 SCR 475.
54. (1977) 2 SCC 646; Rani Kali v Sita Rain, 1978 SCC OnLine All 448: AIR 1978 All 546.
55. (1895) 1 QB 378.
56. 1918 SCC OnLine PC 58: (1917-18) 45 IA 222; Shantnugam v Henia, 2011 SCC OnLine
Mad 96: AIR 2011 Mad 177, the notice specified the door number of the suit premises,
held not bad for want of proper description of the property. The court said that something
which could be made certain is considered to be certain.
S. 106] LEASES 327
So judged the tenancy was sought to be determined on the expiration of

the month of October 1962 and not earlier and the notice to quit expired with
the end of the month of tenancy as required by Section 106 of the Transfer
of Property Act. It was in the circumstances a valid notice which effectively
determined the tenancy of the respondents with effect from the midnight of
October 31, 1962.
There is no difference between a notice asking a tenant to vacate ‘within
the month of October 1962’ and a notice requiring a tenant to vacate latest
by the midnight of October 31,1962, because in both cases, the tenant would
be entitled to occupy the premises up to the expiration of October 31, 1962,
but not beyond it.
A tenancy from month to month or from year to year does not come to
an end with efflux of time even if its duration is fixed. Hence, issuance of
quit notice becomes mandatory. Without such notice, a suit for eviction
cannot be decreed.57
Where notice came back with the postal remark of “refusal”, the court
said that the tenant could not say that no notice was issued. Presumption
of service arose.58
A notice is not to be regarded invalid merely because the period men
tioned in it falls short of the period specified in the section, provided that
the suit or proceeding is commenced after expiry of the period specified
in the section. The period mentioned in the section commences from the
date of receipt of notice.59
A notice which does not mention any time or exact date for determin
ing the lease is a valid notice provided that the suit is filed only after the
prescribed period has expired after receipt of the notice.60
After expiry of the five-year term, the tenant did not make any regis
tered instrument for renewal. He also did not seek specific enforcement
of the agreement of renewal. He only continued with payment of rents.
The court said that he became a tenant by holding over. English Calendar
prevails unless there is proof of some special agreement. The tenancy was
nothing more than a month-to-month arrangement determinable under
57. Ajay Purwar v Suntan Yadav, AIR 2015 NOC 580 (All).
58. Manju Bai v Dhanna Lal, 2014 SCC OnLine Raj 4082: AIR 2015 Raj 74.
59. Pannalal Sagarntal v Central Bank of India, 2008 SCC OnLine Cal 477: AIR 2008 Cal
285; Virender Kuntar Sharma v Cogent EMR Solutions, AIR 2009 NOC 3017 (Del)
according to a provision in the lease deed the notice required the lessee to quit on mere
notice and forthwith, the court said that it has to be taken to mean by end of the month
of tenancy, hence the provision and notice were valid. Mritunjoy Sett v Jadunath Basak,
(2011) 11 SCC 402.
60. Renu Gupta v Kanti Devi, 2012 SCC OnLine All 2982: AIR 2013 All 26; Ajay Kumar
Singh v Dasa, 2013 SCC OnLine Cal 5935: AIR 2013 Cal 125. Thirty days notice was
required under agreement of the parties, only 15 days notice given, but suit filed after 30
days, competent. Shree Ram Urban Infrastructure Ltd n High Court of Bombay, (2015) 5
SCC 539, quit notice was short of the specified period, suit filed six months after notice,
held valid.
Section 106.61 In a case of more than one lessor, notice has to be given on
behalf of all of them. Common notice to co-sharers was held to be valid
within the meaning of Section 106.62 It is not necessary that the tenant
should have defaulted in payment of rent, nor it is necessary to mention
any ground for eviction.63 The notice contained statement of a wider
case than what was actually pursued by the plaintiff. The court did not
consider this as rendering the notice as vague or uncertain.64
No notice is required where the tenant denies the title of the landlord.65
In the case of joint Hindu family, notice has to be given by the Karta
(Manager) of the family and this is generally the seniormost male mem
ber. Where such member remained out of the country for a long time and
he had authorised by power of attorney the junior most male member
who was also collecting rents all the time, it was held that notice by such
member was valid.66
Mode of service.—The notice has to be duly sent to the party intended
to be bound by it. Any of the modes indicated in the section can be used.
The section provides that it may be sent by post or served personally. It
may be delivered to family members or even servants in the office or fam
ily. It may even be affixed on a conspicuous part of the leased building.67
In the case of a company, notice in its name may be sent by registered
post.68 Where the landlord died and the property was inherited by his
wife and son and the lessee accepted both of them as his landlords, it
was held that the notice sent by the son alone was sufficient.69 Where
61. 5. Rajdev Singh v Punchip Associates (P) Ltd, 2007 SCC OnLine Del 1291: AIR 2008
Del 56. The court added that notice of termination has not to be given to sub-tenants.
They are at best parties to suit for eviction.
62. A.S. Krishna Murthy v C.N. Revanna, AIR 2009 NOC 2692 (Kar).
63. Syed Mustajab Husain v Addl District Judge, AIR 2012 NOC 344 (All).
64. EIC Holdings Ltd v Calcutta Dock Labour Board, AIR 2008 NOC 1413 (Cal). Pannalal
Sagarmal v Central Bank of India, 2008 SCC OnLine Cal 477: AIR 2008 Cal 285, the
notice did not indicate any intention to terminate the tenancy, not good in itself, the lessor
could give a fresh notice. Dharam Pal v Harbans Singh, (2006) 9 SCC 216, objections as
to validity of notice should be specifically raised in the written statement, otherwise they
would be deemed to have been waived. Bandhu Machinery (P) Ltd v Ont Prakash Sikka,
2008 SCC OnLine Del 704: AIR 2009 Del 33, objections not averred in the written state
ment, notice had not become bad because the case was filed long time after notice. No
notice was required where tenancy expired by efflux of time.
65. Velu Thevar v Subbiah Pandiayan, AIR 2009 NOC 590 (Mad); Debi Dayal Sharma v
Ramesh Kumar Agarwala, 2008 SCC OnLine Ori 31: AIR 2009 Ori x9> ownership of the
landlord denied, complaint about notice not allowed.
66. Nopany Investments (P) Ltd v Santokh Singh (HUF), (2008) 2 SCC 728.
67. Dasa v Ajay Kumar Singh, AIR 2014 NOC 151 (Cal).
68. Kulkarni Patterns (P) Ltd v Vasant Baburao Ashtekar, (1992) 2 SCC 46; V.G.K. Design
& Development Engg (P) Ltd v H.N. Narayana Reddy, AIR 2008 NOC 739 (Kar), the
company refused to accept notice, but accepted summons. Green View Radio Service v
Laxmibai Ramji, (1990) 4 SCC 497, A.D. received, good service.
69. Narayan Kedia v Prasanta Kumar Pattnaik, AIR 2014 NOC 203 (Ori). Notice to any one
of the tenants is sufficient. Abdul Sattar v Rameshwar, 1993 Supp (1) SCC 59.
S. 106] LEASES 329
the notice came back with the remark “not-claimed/not met”, this was
regarded as a deemed service. There was no evidence to the contrary.70
Where the notice came back with the remark of the postman “refused”,
the court said that evidence could be produced to rebut this fact. But
neither the postman was examined, nor any other evidence. The fact that
the tenant was not able to identify the postman was immaterial. Notice
was properly served.71
Acceptance of rent after notice.—Where the landlord filed suit for
eviction even after accepting rent after giving notice to quit, it was held
that even in such circumstances there was neither revival of the tenancy
nor waiver of the notice.72 An eviction suit was filed after service of notice
because of arrears of rent. The notice stated that payment of rent, if any,
after notice would be taken under protest. Here also, it was held that the
notice was not waived.73
After receipt of notice by the tenant and filing of eviction suit against
him, the tenant cannot deposit rent in the court in order to claim relief
against forfeiture under Section 114, Transfer of Property Act.74
It is only the lessor’s right to give notice of eviction. It cannot be given
by any one else. In this case the Customs Authorities had notified the ten
ant to leave the premises to enable them to seize it for recovery of dues.
It was held that they could not do so. They have to follow the prescribed
procedure for such seizure. Their notice was quashed.75
Permissive occupancy.—A permissive occupancy is not equal to a
tenancy. Therefore, notice to quit under Section 106 is not necessary.
The parties were close relatives. One of them was permitted to use the
premises freely which did not belong to him. The court said that notice
under Section 106 was not necessary. The letter cancelling the occupancy
was valid. The defendant was directed to vacate the premises.76
Effect of redemption on tenant mortgagee.—Where the mortgagee
was also a tenant, it was held that redemption of the mortgage was not to
put an automatic end to tenancy. Generally, mortgage and tenancy on the
70. Vandana Gulati v Gurmeet Singh, 2.013 SCC OnLine All 13688: AIR 2013 All 69.
Radha Kishan v Radha Devi, AIR 2014 NOC 587 (Raj). Kanak Pramanik v Indrajit
Bandopadhyay, 2012 SCC OnLine Cal 7376: AIR 2013 Cal 60, no good service where
postal service was refused.
71. Ugrasen v Parmeshiuari Devi, AIR 2015 NOC 426 (All).
72. Sanjiv v Mahabir Digambar Jain Mandir, 2012 SCC OnLine All 937: AIR 2012 All 157;
Uttam Chand Gupta v New India Assurance Co Ltd, AIR 2014 NOC 115 (All), which is
to the same effect.
73. Nazeer Khan v Vijayanagar Welfare Assn, AIR 2008 NOC 1646 (AP); Raj Kanial
Kalamandir (P) Ltd v Jugalkishore Bansilal Gindodia, AIR 2008 NOC 1687 (Bom),
acceptance of rent does not amount to waiver of intention to terminate the tenancy.
74. Gopinath Mukherjee v Uttani Bharati, 2008 SCC OnLine Cal 565: AIR 2009 Cal 58.
75. Aditya Birla Nuvo Ltd v Union of India, AIR 2013 NOC 359 (Bom).
76. A. Valliammal v Jayanthi, 2009 SCC OnLine Mad 820: AIR 2009 Mad 182.
same premises operate independently. Lease remains in force even after

redemption of the mortgage.77
Arbitration clause.—The existence of an arbitration clause in the
lease deed does not militate against existence of the right of eviction. On
completion of the lease period all the rights under the lease deed come to
an end including arbitration clause. The process of arbitration remains
available if the parties want adjudication of their rights.78
TENANCY BY HOLDING OVER [S. 116]

116. Effect of bolding over.—If a lessee or under-lessee of property remains in
possession thereof after the determination of the lease granted to the lessee, and
the lessor or his legal representative accepts rent from the lessee or under-lessee,
or otherwise assents to his continuing in possession the lease is, in the absence
of an agreement to the contrary, renewed from year to year, or from month to
month, according to the purpose for which the property is leased, as specified in
Section 106.
Illustrations
(a) A lets a house to B for five years. B underlets the house to C at a monthly
rent of Rs ioo. The five years expire, but C continues in possession of the house
and pays the rent to A. C’s lease is renewed from month to month.
(b) A lets a farm to B for the life of C. C dies, but B continues in possession
with A’s assent. B’s lease is renewed from year to year.
When a tenant continues in possession without assent or dissent from the
lessor, in English Law, he is known as a tenant at sufferance. If, however,
the landlord signifies his assent, a tenancy is created and the terms of the
new tenancy are to be ascertained by referring to the terms of the old.
Under Indian law, the terms of the new tenancy are determined by the
purpose of the lease. Further, under Indian law, if there is no consent of
the landlord, the possession of the tenant after the termination of the
tenancy is wrongful, but his possession, unlike that of a trespasser, is
protected by law. A tenant at will is in possession with the consent of the
lessor, whereas a tenant by sufferance is in possession after the tenancy
period has come to an end without the consent of the lessor. The latter is
not responsible for rent, but only for compensation for use and occupa
tion, but since he is not a trespasser he is not liable for damages.79
77. Hutchison Essar South Ltd v Union Bank of India, 2007 SCC OnLine Kar 414: AIR
2008 Kar 14, the tenant cannot be thrown out by the secured creditor even after the
mortgage has ended. The mortgagee bank could take only symbolic possession of the
premises.
78. Master Pieces Furniture (P) Ltd v K. Lakshma Reddy, 2013 SCC OnLine AP 286: AIR
2014 AP 56.
79. Bai Chanchai v Syed Jalaluddin, (1970) 3 SCC 124; Bhatvanji Lakhamshi v Hbnatlal
Jamnadas Dani, (1971) 1 SCC 388; Badrilal v Municipal Corpn of Indore, (1973) 2 SCC
CASE PILOT
388; Govt of A.P. v Gnaneshtvar Rao, 1981 SCC OnLine AP 119: AIR 1982 AP 252;
Ramakrishna v Asstt Director, 1982 SCC OnLine Mad 52: AIR 1982 Mad 431; Hukum
S. 116] LEASES 331
After determination of a tenancy the tenant does not become a tres

passer. He continues to be a tenant till the decree of eviction is passed
against him.80 There is no implied renewal, merely because the rent has
been accepted after expiry of the period of lease. There has to be a writ
ten request for renewal. Without such request he does not have the status
of “holding over”. He is liable to be evicted.81
In Ganga Dutt Murarka v Kartik Chandra Das82, the respond
ent—owner of certain premises—gave notice to the appellant—a CASE PILOT
contractual tenant of those premises—to vacate and deliver vacant pos
session on the ground that they bona fide wanted the premises for their
occupation. The tenant was protected by the local Rent Control Act, but
the notice was given after the period of tenancy fixed by the contract had
expired. It was held:
Section 116 of the Transfer of Property Act insofar as it is material provides
that if a lessee of property remains in possession thereof after the determina
tion of the lease granted to him and the lessor accepts rent from the lessee or
otherwise assents to his continuing in possession, the lessee is, in the absence
of an agreement to the contrary, renewed from year to year or from month to
month according to the purpose for which the property is leased as specified
in Section 106. It is, however, well settled that where a contractual tenancy to
which the rent control legislation applies has expired by efflux of time or by
Chand v Hazra Begum, 1981 SCC OnLine All 817: AIR 1982 All 215; Thakuruddin
Ramjash v Sourendra Nath Mukherjee, 1981 SCC OnLine Cal 200: AIR 1982 Cal 133;
Ram Singh v Natht Lal, 1982 SCC OnLine Del 214: AIR 1983 Del 114; Burma Shell Oil
Storage and Distributing Co of India Ltd v State of U.P., 1983 SCC OnLine All 769:
AIR 1984 All 89; Satish Chand Makhan v Gouardhan Das Byas, (1984) r SCC 369;
Sudarshan Trading Co Ltd v L. D’Souza, 1983 SCC OnLine Kar 213: AIR 1984 Kar 214;
Gaya Parshad Dikshit v Nirmal Chander, (1984) 2 SCC 286; Rajendra Prasad v Ram
Prasad Sao, 1984 SCC OnLine Pat 254: AIR 1985 Pat 104; Indian Oil Corpn Ltd v Epuri
Prithvisen Reddy, 2014 SCC OnLine Hyd 761 after expiry of lease, possession by the les
see without consent of the landlord, he is tenant at sufferance, possession with consent of
landlord, tenant by holding over. Tenant at sufferance not entitled to notice for ejectment.
Tenant by holding over is not a trespasser, is entitled to notice.
The parties intended that the lessee could unilaterally exercise the right of renewal, but
there was no settlement as to terms and conditions. Difficult to accept.
80. Karam Chand v Labh Chand, AIR 2009 NOC 868 (Raj).
81. Panch Raghou Taank Ramniuas Sarada dr Co v Hindustan Petoleum Corpn Ltd, AIR
2014 Chh 178.
82. AIR 1961 SC 1067: (1961) 3 SCR 813; Deuaki v Alavi, 1978 SCC OnLine Ker 224: AIR
1979 Ker 108; R.V. Bhupal Prasad v State of A.P., (1995) 5 SCC 698; B. Sharma Rao H.
Ganeshmal v Head Quarters Asstt, (1998) 9 SCC 577; Anthony v K.C. Ittoop & Sons,
(2000) 6 SCC 394; Hitkarini Sabha v Corpn of the City of Jabalpur, (1972) 2 SCC 325;
Kewal Chand Mimani v S.K. Sen, (2001) 6 SCC 512; State of W.B. v B.K. Mondal and
Sons, AIR 1962 SC 779; C. Albert Morris v K. Chandrasekaran, (2006) 1 SCC 228, the
landlord filed a suit for ejectment but could not pursue. He, subsequently, withdrew it
with the permission of the court to file a fresh suit on the same cause of action. This was
held to be not an assent on his part for continued possession of the tenant. Manathanath
Kunhahammed v Kizhakke Theruvathakath Cheranimal Thodiyil Unnimoideenkutty,
2009 SCC OnLine Ker 570: AIR 2009 Ker 143, lessee under unregistered deed, which
being void, he was in possession by holding over.
determination by notice to quit and the tenant continues in possession of the

premises, acceptance of rent from the tenant by the landlord after the expira
tion or determination of the contractual tenancy will not afford ground for
holding that the landlord has assented to a new contractual tenancy. It was
observed by B.K. Mukherjea, J (as he then was) in Kaikhushroo Bezonjec
CASE PILOT
Capadia v Bai Jerbai Hirjibhoy Wardan83:
‘On the determination of a lease, it is the duty of the lessee to deliver up
possession of the demised premises to the lessor. If the lessee or a sub-les
see under him continues in possession even after the determination of the
lease, the landlord undoubtedly has the right to eject him forthwith; but
if he does not, and there is neither assent nor dissent on his part to the
continuance of the occupation of such person, the latter becomes in the
language of English law a tenant on sufferance who has no lawful title to
the land but holds it merely through the laches of the landlord. If now the
landlord accepts rent from such person or otherwise expresses assent to
the continuance of his possession a new tenancy comes into existence as
is contemplated by Section 116, TP Act, and unless there is an agreement
to the contrary, such tenancy would be regarded as one from year to year
or from month to month in accordance with the provisions of Section 106
of the Act.’...
‘... [I]n cases of tenancies relating to dwelling houses to which the Rent
Restriction Acts apply, the tenant may enjoy a statutory immunity from
eviction even after the lease has expired. The landlord cannot eject him
except on specific grounds mentioned in the Acts themselves. In such cir
cumstances, acceptance of rent by the landlord from a statutory tenant
whose lease has already expired could not be regarded as evidence of a
new agreement of tenancy and it would not be open to such a tenant to
urge, by way of defence, in a suit for ejectment brought against him under
the provisions of the Rent Restriction Act that by acceptance of rent a
fresh tenancy was created which had to be determined by a fresh notice
to quit.’
In such cases, that is, in cases coming under Rent Control Acts, no ten
ancy by holding over can be postulated under this section. The tenant is
a statutory tenant who, however, is not entitled to any notice to quit.84
In Karnani Industrial Bank Ltd v Province of Bengal85, on 17
CASE PILOT February 1928, a lease deed of land was executed, the lease to commence
from 24 February 1928 for a period of 10 years. The lessee (appellant)
paid the rent reserved for one year and in February 1929 paid the rent up
to 31 March 1930 and continued to do so the last being in April 1937 for
the year ending 31 March 1938. The lease having expired on 23 February
1938 by efflux of time, the respondent sued for the eviction of the appel
lant and the appellant sought the protection of Section 116. It was
held:
83. 1949 SCC OnLine FC n: (i949“5°) u FCR 262.

84. Sardarilal Vishwanath v Pritatn Singh, (1978) 4 SCC 1.
85. AIR 1951 SC 285: 1951 SCR 560.
S. 116] LEASES 333
A reference to... [the section] will show that for the application of that sec
tion, two things are necessary: (i) the lessee should be in possession after
the termination of the lease; and (z) the lessor or his representative should
accept rent or otherwise assent to his continuing in possession. This section
was construed by the Federal Court in Kaikhushroo Bezonjee Capadia v Bai
Jerbai Hirjibhoy Wardan86 and it was held that where rent was accepted by
the landlord after the expiration of the tenancy by efflux of time, Section 116
applied even though the landlord accepted the amount remitted to him as
‘part deposit towards his claim for compensation for illegal use and occupa
tion, and without prejudice to his rights’. It is to be noted that in that case
rent had been accepted after the expiry of the tenancy... and the present case
cannot be governed by that decision, because of the fact...that here the pay
ment of rent up to 31st March, 1938 was made not after the date of expiry
of the... [tenancy,] but nearly a year before the expiry of the lease. The use
of the word ‘otherwise’ suggests that acceptance of rent by the landlord has
been treated as a form of his giving assent to the tenant’s continuance of pos
session. There can be no question of the lessee ‘continuing in possession’ until
the lease has expired, and the context in which the provision for acceptance
of rent finds a place clearly shows that what is contemplated is that the pay
ment of rent and its acceptance should be made at such a time and in such a
manner as to be equivalent to the landlord assenting to the lessee continuing
in possession.
In Kamakhya Narayan Singh v Ram Raksha Singh87, there was a mukar-
rari lease conveying a life-estate, and on the death of the original mukar- CASE PILOT
raridar his heirs remained in possession and paid rent to the lessor, who
gave receipts in the name of the original mukarraridar and mentioning
the names of those who paid the rent. On the question, whether the heirs
could be considered as tenants holding over, it was held:
It was argued that the principle contained in the provisions of Section 116,
Transfer of Property Act, 1882, should be applied, for although it could not
be said that this case came expressly within the provisions of the section, it
was argued that the provisions thereof should be used by way of analogy as
laying down a rule of equity and good conscience. In their Lordships’ opinion
this is not a case of the lessee or under-lessee holding over within the meaning
of the section but even if the case were to be considered on the assumption
that the provisions of the section were applicable the facts of this case would
go to show, as already stated, that the parties in paying and accepting rent
after the expiration of the lease for lives were acting without prejudice to
their respective contentions, and it would have to be held that there was an
‘agreement to the contrary’ which would prevent the application of the pro
visions of the section in the present case.
The payment of rent to and its acceptance must be by a competent
person.88
86. 1949 SCC OnLine FC 11: (1949-50) 11 FCR 262.
87. 1928 SCC OnLine PC 27: (1927-28) 55 IA 212.
88. H.S. Rikhy v New Delhi Municipal Committee, AIR 1962 SC 554: (1962) 3 SCR 604.
In Dattonpant Gopalvarao Devakate v Vithalrao Maruthirao

CASE PILOT Janagaval89, the appellant was a tenant of the suit-property when the
respondent purchased it in August 1968 and became his tenant from
that date. The latter gave notice of termination of tenancy and filed an
application under Section zi(i)(tf) and (/?), Mysore Rent Control Act,
1961 for eviction. The appellant resisted it and the trial court dismissed
the application but the appellate court allowed the appeal. The District
Judge in appeal reversed all the findings of the trial court and held that
the landlord acquired the premises reasonably and bona fide for occu
pation by himself and that no hardship would be caused to the tenant
by passing the decree for eviction and that the lease was not for a manu
facturing purpose nor a yearly one. The notice terminating the monthly
tenancy was held to be good and valid. The revision application to the
High Court was dismissed. The appellant in the Supreme Court chal
lenged the findings of the first appellate court (District Judge). Allowing
the appeal, it was held:
The lease in this case was for the year which expired on April 9, 1946 and a
tenant held over under Section 116 of the Transfer of Property Act. Although
in the lease deed, the purpose of the lease was not mentioned, the appellate
court held that the appellant started manufacturing soda in a small portion of
the demised premises. In any view of the matter the dominant purpose of the
lease was not a manufacturing one and the holding over under Section 116
...created a month-to-month tenancy terminable by 15 days’ notice ending
with the tenancy month given under Section 106....
The oral tenancy commenced on April 9, 1945 and that day had to be
excluded in computing the period of one year under Section no...and,
therefore, one year’s tenancy ended on April 9, 1946 and by holding over
the tenancy from month to month started from April 10, 1946 ending on the
9th day of the following month. The view taken by the appellate court and
the High Court that one year’s tenancy ended on April 8, 1946 and monthly
tenancy started from 9th of month ending on 8th of the following month
was erroneous in law. There was, therefore, no valid legal termination of the
contractual tenancy...
The appellant was a contractual tenant, who would have become a stat
utory tenant within the meaning of Section z(r) of the [Mysore] Act if he
would have continued in possession after the termination of the tenancy in
his favour, otherwise not. Without the termination of the contractual ten
ancy by a valid notice or other mode set out in Section in of the Transfer of
Property Act, it was not open to the landlord to treat the tenant as a statutory
tenant and seek his eviction without service of a notice to quit. [Where a lease
is determined by efflux of time under Section m-A, TP Act, a notice would
not be necessary.]
Waiver of notice.—Even after notice, the tenant remained in posses
sion of the premises and continued to remit rents by means of demand
89. (1975) 2 SCC 246; Lal Chand v District Judge, Agra, (1999) 8 SCC 351.
S. 110] LEASES 335
drafts. The same were received without any protest and uncondition
ally over years, also during pendency of the suit. The court said that it
amounted to waiver of the notice to quit even when it was proved that
the receipt of the amount was appropriated towards damages for use and
occupation.90
Agreement against presumption of holding over.—The presumption
of holding over can be excluded by agreement. It has to be an express
agreement and not just one to arise by implication. The agreement has to
specify the terms of holding over as well as those of the new lease.
Rights of tenant by holding over.—His rights remain the same as they
were before determination of the lease. He can sublet the holding. With
the assent of the lesser, he can create a mortgage. He can be evicted only
by following the due process of law. He was allowed an injunction to
restrain his eviction and restoration of power supply.91 A sub-lessee also
comes to termination with termination of the original lease. He cannot
deny title of the original lessor or lessee.92
Renewal.—A municipal corporation granted a lease with renewal
clause. The lessee created a sub-lease. The sub-lessee was not allowed to
exercise the right of renewal which was vested only in the original lessee.
That was also found to be wrong because of the lack of sanction of the
State Government.93 The term of a lease deed with renewal clause was
over. The lessee did not exercise the right of renewal. He went on paying
rent and the lessor accepted it in ignorance of the efflux of time. This was
held to be no renewal.94
Duration of lease. — Section no provides for computing the duration
of the period of a lease and of notices to quit. It provides:
110. Exclusion of day on which term commences.—Where the time limited
by a lease of immovable property is expressed as commencing from a particular
day, in computing that time such day shall be excluded. Where no day of com
mencement is named, the time so limited begins from the making of the lease.
Duration of lease for a year.—Where the time so limited is a year or a
number of years, in the absence of an express agreement to the contrary,
the lease shall last during the whole anniversary of the day from which
such time commences.
90. Auto World v K.V. Sathyavathi, 2015 SCC OnLine Kar 5645: AIR 2015 Kar 128.
91. Bibek Motors v Pyarimohan & Pramila Trust, AIR 2012 Ori 87.
92. Kamini Kapoor v Punjab National Bank, 2013 SCC OnLine Cal 7706: AIR 2013 Cal
206.
93. Saroj Screens (P) Ltd v Ghanshyam, (2012) n SCC 434.
94. R.S. Iron Industries (P) Ltd v Calcutta Pinkjarapole Society, 2012 SCC OnLine Cal
11672: AIR 2013 Cal 94.
Option to determine lease.—Where the time so limited is expressed

to be terminable before its expiration, and the lease omits to mention at
whose option it is so terminable, the lessee, and not the lessor, shall have
such option.
Scope.—If the time is not limited as is usual in monthly tenancies, the
section will not apply to such tenancies.
In Benoy Krishna Das v Salsiccioni95, a lease of residential property
CASE PILOT was expressed to be from i June 1921 for the next four years. The ten
ancy continued after four years and on i February 1928, the tenant gave
notice terminating it. The one month clear notice was stated to take
effect on that day and the possession was to be given on 1 March. On
the question whether it was a valid notice, it was held:
The question depends, first of all, on the date of the expiry of lease. That date
determines the beginning of the respondents’ tenancy, which was capable of
determination by monthly notice in accordance with Section 106.
Turning to the terms of the lease of 1921, and applying to it the language
of section no of the Transfer of Property Act, it would appear that the first
day of June, 1921, is excluded from the term....
It further appears that the 1st of June, 1925, is included... and the lease
ended at midnight on the 1st of June 1925 ....
That being so, it must be taken that the lease ended at midnight on the
1st of June, 1925, and that any notice to determine thereafter given must be
a notice to quit expiring with the month ending at midnight on the first day
of any month. The notice in fact given on the 1st of February, 1928, clearly
is a notice in regard to the 1st of March, 1928, and not in regard to the 29th
of February, 1928. It, therefore, is a notice which, in the language of section
106, expired with the end of a month of the tenancy, because the month of
the tenancy expired at midnight on the 1st of March, 1928. [The reason for
including the anniversary is that the first day is excluded.]
As regards the rights and liabilities of the lessor and the lessee they are
set out in Sections 108 and 109. These are subject to a contract to the
contrary.
Suppose a residential lease is for four years commencing from
1 June 1991 and the tenant holds over. A notice to quit given on 1
95. 1932 SCC OnLine PC 43: (1931-32) 59 IA 414; H.V. Rajan v C.N. Gopal, (1975) 4
SCC 302; Sotluri Subbareddi v Kalabai Rathi, 1981 SCC OnLine AP 149: AIR 1982 AP
186; Kishan Chand v Sayeeda Khatoon, 1982 SCC OnLine AP 153: AIR 1983 AP 253;
Khudiram Mukherjee v Samsul Bari, 1981 SCC OnLine Cal 189: AIR 1983 Cal 303;
Bhuneshtvar Prasad v United Commercial Bank, (2000) 7 SCC 232; Samir Mukherjee v
Davinder K. Bajaj, (2001) 5 SCC 259; Shri Janki Devi Bhagat Trust v Ram Stvarup Jain,
(1995) 5 SCC 314; Shakti Vats v Fatima Raja, AIR 2008 NOC 2442 (Del), acceptance
of rent beyond the period of lease does not confer upon the lessee the status of “holding
over”.
C. Albert Morris v K. Chandrasekaran, (2006) 1 SCC 228, the landlord told the asses-
see to vacate and that any amount paid by him by way of rent would be treated as payment
towards compensation, this did not have the effect of renewal.
S. 1081 LEASES 337
February 1996 for leaving the premises on 1 March 1996 will be valid
because it is equivalent to quit at midnight on 1 March 1996.
Suppose a monthly lease for four years provided that the lease com
mences on 1 May 1991, but that it would terminate on 30 April 1995,
and that the landlord should give two months notice if he desired that the
tenant should quit at the end of the lease period. A notice given by land
lord on 18 February 1995 asking the tenant to vacate on 30 April 1995
will be valid because there is a contract to the contrary. If the tenant
holds over, the notice should be only a 15 days’ notice under Sections 106
and 116.
Suppose there is an oral lease of a house, which was taken posses
sion of on 1 April 1994, for four years. The landlord gives notice on
11 October 1998 for vacant possession on 1 November 1998. Such a
notice would be invalid because the lease being for a period exceeding
one year, it should be in writing and registered. In its absence it should
be treated as a monthly tenancy. Since admittedly, it was to commence
on 1 April 1994 (the day of taking possession) it would expire on the
midnight of the last day of the month that is in the present case on 31
October 1998. Hence, the notice to quit on 1 November 1998 is invalid.
It is to avoid these technical anomalies that Section 106 has been
amended.
If a notice to quit says “within the month of...”, it is construed to
mean “Midnight of the last day of the month”96. But if a notice to quit
says “Before the beginning of next month”, it is construed as “before the
end of the previous month”97, and hence would be invalid. If a notice to
quit reaches the tenant on 15 February 1988, it would be invalid because
even though 1988 is a leap year, it has only 29 days. Since the receipt of
the notice is on the 15th, it is not a case of 15 clear days notice.
RIGHTS AND LIABILITIES OF LESSOR AND LESSEE [S. 108]

108. Rights and liabilities of lessor and lessee.—In the absence of a contract
or local usage to the contrary, the lessor and the lessee of immovable property,
as against one another, respectively, possess the rights and are subject to the lia
bilities mentioned in the rules next following, or such of them as are applicable
to the property leased:
(A) Rights and Liabilities of Lessor

(a) The lessor is bound to disclose to the lessee any material defect in the
property, with reference to its intended use, of which the former is and
the latter is not aware, and which the latter could not with ordinary care
discover;
96. Bhagabandas Agarivalla v Bhagtuandas Kann, (1977) 2 SCC 646.

97. Fakiragouda S. Patil v Paruatibai Mahadev Mahendrakar, 1976 SCC OnLine Kar 207:
AIR 1977 Kar 112.
(b) the lessor is bound on the lessee’s request to put him in possession of the
property;
(c) the lessor shall be deemed to contract with the lessee that, if the latter
pays the rent reserved by the lease and performs the contract binding on
the lessee, he may hold the property during the time limited by the lease
without interruption.
The benefit of such contract shall be annexed to and go with the lessee’s
interest as such, and may be enforced by every person in whom that inter
est is for the whole or any part thereof from time to time vested.
(B) Rights and Liabilities of Lessee

(d) If during the continuance of the lease any accession is made to the prop
erty such accession (subject to the law relating to alluvion for the time
being in force) shall be deemed to be comprised in the lease;
(e) if by fire, tempest or flood, or violence of any army or of a mob, or other
irresistible force, any material part of the property be wholly destroyed or
rendered substantially and permanently unfit for the purposes for which
it was let, the lease shall, at the option of the lessee, be void:
Provided that, if the injury be occasioned by the wrongful act or
default of the lessee, he shall not be entitled to avail himself of the benefit
of this provision;
(f) if the lessor neglects to make, within a reasonable time after notice, any
repairs which he is bound to make to the property, the lessee may make
the same himself; and deduct the expense of such repairs with interest
from the rent, or otherwise recover it from the lessor;
(g) if the lessor neglects to make any payment which he is bound to make,
and which, if not made by him, is recoverable from the lessee or against
the property, the lessee may make such payment himself, and deduct it
with interest from the rent, or otherwise recover it from the lessor;
(h) the lessee may even after the determination of the lease remove, at any
time whilst he is in possession of the property leased, but not afterwards,
all things which he has attached to the earth; provided he leaves the prop
erty in the state in which he received it;
(/) when a lease of uncertain duration determines by any means except the
fault of the lessee, he or his legal representative is entitled to all the crops
planted or sown by the lessee and growing upon the property when the
lease determines, and to free ingress and egress to gather and carry them;
(/) the lessee may transfer absolutely or by way of mortgage or sub-lease the
whole or any part of his interest in the property, and any transferee of
such interest or part may again transfer it. The lessee shall not, by reason
only of such transfer, cease to be subject to any of the liabilities attaching
to the lease;
Nothing in this clause shall be deemed to authorise a tenant having an
untransferable right of occupancy, the farmer of an estate in respect of
which default has been made in paying revenue, or the lessee of an estate
under the management of a Court of Wards, to assign his interest as such
tenant, farmer or lessee;
(k) the lessee is bound to disclose to the lessor any fact as to the nature or
extent of the interest which the lessee is about to take, of which the lessee
S. 108] LEASES 339
is, and the lessor is not, aware, and which materially increases the value
of such interest;
(/) the lessee is bound to pay or tender, at the proper time and place, the
premium or rent to the lessor or his agent in this behalf;
(m) the lessee is bound to keep, and on the termination of the lease to restore,
the property in as good condition as it was at the time when he was put
in possession, subject only to the changes caused by reasonable wear and
tear or irresistible force, and to allow the lessor and his agents, at all rea
sonable times during the term, to enter upon the property and inspect the
condition thereof and give or leave notice of any defect in such condition,
and, when such defect has been caused by any act or default on the part
of the lessee, his servants or agents, he is bound to make it good within
three months after such notice has been given or left;
(w) if the lessee becomes aware of any proceeding to recover the property or
any part thereof, or of any encroachment made upon, or any interference
with, the lessor’s rights concerning such property, he is bound to give,
with reasonable diligence, notice thereof to the lessor;
(o) the lessee may use the property and its products (if any) as a person of
ordinary prudence would use them if they were his own; but he must not
use, or permit another to use, the property for a purpose other than that
for which it was leased, or fell or sell timber, pull down or damage build
ings belonging to the lessor, or work mines or quarries not open when
the lease was granted, or commit any other act which is destructive or
permanently injurious thereto;
(p) he must not, without the lessor’s consent, erect on the property any per
manent structure, except for agricultural purposes;
(q) on the determination of the lease, the lessee is bound to put the lessor into
possession of the property.9899
CLAUSE (a): DISCLOSURE OF MATERIAL DEFECTS

The duty to disclose is with respect to defects which are latent, but of
which the lessor is aware. In H.V. Low & Co Ltd v Jyotiprasad Singh
Deo", the appellants entered into a contract of lease for working under CASE PILOT
ground coal rights, but refused to take the lease, because they discov
ered that an ancestor of the respondent had made Brahmottar grants of
the property and the respondent was unable to produce copies of those
grants to show that the Brahmottar grants did not include minerals. The
appellants sued the respondent for recovery of the premium forfeited. It
was held:
The real question at issue therefore is whether the appellant company has
shown that the respondent’s title to grant a lease of the mineral rights in the
two villages is not free from reasonable doubt, or may be fairly described as
imperfect. It is obvious that the question is one of degree. The doubt sug
gested must be a reasonable doubt; the imperfection must be material....
98. Madan Lal v Bhai Anand Singh, (1975) 1 SCC 84.

99. 1931 SCC OnLine PC 70: (1930-31) 58 IA 392.
The result is that the appellant company is unable to do more than con
jecture that the grants made by the respondent’s predecessors may have com
prised the underground rights. On the other hand, there is no evidence that
the grantees have ever asserted any right to the minerals under the villages
or that they have ever been worked by them or their predecessors.... ‘a long
series of recent decisions by the Board has established that if a claimant to
subsoil rights holds under the zamindar or by a grant emanating from him,
even though his powers may be permanent, heritable and transferable, he
must still prove the express inclusion of the subsoil rights’....
The rights and liabilities of lessor and lessee are defined in the Transfer of
Property Act, 1882...., Section 108. These contrast markedly with the rights
and liabilities of buyer and seller as defined in Sect. 55, particularly in the
matter of the requirements as to title which the seller must satisfy. The appel
lant company has not shown that the respondent has failed, or is not in a
position to perform any of the duties incumbent on a lessor under Sect. 108.
From the words “with reference to its intended use” it follows that there
is an implied covenant by the lessor that the property is suitable for the
particular purpose. The sub-section applies only to physical defects and
as quotation from the judgment above shows, not to defects in title. The
judgment in fact refers to Sections 18 and 25, Specific Relief Act, 1877,
corresponding to Sections 13 and 17 of the 1963 Act and the discussion
shows that in a lease it is merely the right to possess and enjoy the prop
erty that is given, and as that is provided for in sub-sections (b) and (c),
the lessee is not allowed to insist that the lessor has a valid title.
CLAUSE (&): HANDING OVER OF POSSESSION

The duty arises only when the lessee requests, and his remedy, when the
lessor fails to put him in possession, is to sue the lessor for damages.
In Ram Lal Dutt Sarkar v Dhirendra Nath Roy100, the lessor demised
CASE PILOT land at a lump sum rent, but failed to give possession to the lessee of a
part of the land leased. The lessee claimed that no part of the rent was
payable by him under the doctrine of suspension of rent. It was held:
So far the only rule laid down by the Board has been the negative proposition
that ‘the doctrine of suspension of payment of rent, where the tenant has not
been put in possession of part of the subject leased has been applied where
the rent was a lump rent for the whole land leased treated as an indivisible
subject. It has no application to a case where the stipulated rent is so much
per acre or bigha.’: Katyayani Debi v Udoy Kumar Das101 ...The observations
CASE PILOT
of the Board in Katyayani's case have only added to the perplexity, since they
have in some cases been wrongly taken to lay down that if the rent is a lump
sum rent then in all cases of failure to give possession of any part there must
100. 1942 SCC OnLine PC 33: (1942-43) 70 IA 18.
101. 1924 SCC OnLine PC 77: (1924-25) 52 IA 160; Naushe AH Khan v Mohd Siddiq, 1981
SCC OnLine All 323: AIR 1981 All 307; Bidhu Bhusan Bhinya v Ranajit Mondal, 1980
SCC OnLine Cal 73: AIR 1981 Cal 154.
S. 108] LEASES 341
be a suspension of the entire rent. They were intended only as showing that
on its facts that case raised no question of suspension....
The English context of English decisions must be borne in mind—the
social system, the character of the countryside, the well settled boundaries,
the limited term of leases.... The purely accidental or aleatory character of
the penalty with which the lessor is visited prevents it from being the medium
or the object of a judicial discretion in such cases.... [There is] no reason
why a scientific and careful attempt to adjust the rights of the parties should
discard the ordinary form of relief—damages, apportionment, specific per
formance, the right to avoid the lease as the case may require—for a method
which proceeds by giving one party to the transaction a windfall, or a right
to retain and use another party’s property without making payment therefor.
CLAUSE (c): NO INTERRUPTION IF LESSEE

COMPLIES WITH TERMS
This is known as the implied covenant for quiet enjoyment. It is intended
for the lessee’s benefit, runs with land and can be enforced by an assignee
or under-lessee. This covenant protects a lessee even with respect to a
title paramount. Suppose A leases property B and prohibits a sub-lease.
Suppose B sublets to C. If C is evicted, he has a right of action against B,
even though C was evicted by a title paramount. A’s title is paramount
to B’s.
The law in England is different. Under that system the covenant for
quiet enjoyment could be restricted or absolute. An implied covenant in
English Law is only a restricted covenant and does not cover acts under
title paramount. If it should be an absolute covenant extending to inter
ruptions even by title paramount, it has to be expressly entered into.
The implied covenant under this clause does not apply to tortuous acts,
because the lessee can have his own remedies against the tortfeasors. In
Katyayani Debi v Udoy Kumar DaslQ2, a perpetual tenancy was sold for
arrears of rent under the Bengal Tenancy Act. The purchaser claimed
abatement of rent in respect of a part of the land, on the ground that
at the date of his purchase, that part was in possession of a trespasser,
who by being allowed to remain in possession acquired title against the
purchaser. It was held:
[i] The duty of a tenant under a perpetual tenure such as the one in ques
tion is to protect himself against illegal encroachments by others on the
lands of which he has the exclusive possession. If he fails to do so he cannot
prejudice the landlord’s claim for rent. The considerations which appear to
their Lordships to be conclusive are those stated by Peacock C.J. in Womesh ^—3
Chunder Goopto v Raj Narain Roy102 103.... It has also been pointed out in CASEPIL
other judgments that the landlord cannot in the ordinary case know whether
102. 1924 SCC OnLine PC 77: (1924-25) 52 IA 160.

103. (1868) 10 WR 15.
the possession of a particular area of land is adverse to the tenant or has

taken place with his consent. He could not therefore sue an action at his own
hand for ejectment of a trespasser, as he might always be met with the objec
tion that the apparent trespass was acquiesced in by the tenant, who can deal
with the lands as he pleases.
[z] The further contention... [was] that as this plot of land was originally
embraced within the boundaries of the tenure and that the appellant... [was]
not... in possession..., [the appellant was] entitled to suspend payment of the
rent of the remaining area.... The doctrine of suspension of payment of rent,
where the tenant has been put in possession of part of the subject leased, has
been applied when rent was a lump rent for the whole land leased treated as
an indivisible subject. It has no application to a case where the stipulated rent
is so much per acre or bigha.
CLAUSE (d): ACCESSION DURING LEASE

To be an accretion it is not necessary that it should be an imperceptible
addition; but it must be gradual and not sudden.
When the lessee encroaches upon neighbouring land, it is deemed to
be an accretion, and if the lessee acquires a prescriptive title to the accre
tion, the lessor gets the benefit to the accretion at the end of the lease
period. If the lessee, however, encroaches upon the lessor’s land then the
land would be treated as if leased by the lessor to the lessee and the lessor
may recognise the lessee as the lessee of the portion encroached upon. If
he does not want to so recognise him, he may evict him.
CLAUSE (e): LEASE TO BE VOID AT LESSEE’S OPTION IF

PROPERTY DESTROYED
In English Law the destruction of the subject-matter of lease does not
affect the lease, because the doctrine of frustration as understood in that
system of law does not apply to leases. The Indian doctrine of frustration
also does not apply to leases in India, because the rights and liabilities of
the parties are governed by Section 108; and, under Section 108(e), in the
case of the destruction of the subject-matter of lease, the lessee, if he is
not to be blamed for such destruction, could avoid the lease at his option,
but there is no automatic termination of the lease.104 In cases where the
whole rent has been paid in advance, and the property is destroyed before
the period of lease expires the lessee has a right to recover the propor
tionate part of the rent already paid, provided, the lessee is not at fault. In
cases where the property is acquired by government also, the lessee can
104. Rahim Bux v Mohd Shafi, 1969 SCC OnLine All 154: AIR 1971 All 16; Rajendra Nath
v Ramdhin, AIR 1971 Ass 160; Thomas v Moram Mar Baselious Ougen, 1979 SCC
OnLine Ker 3: AIR 1979 Ker 156; S. Sidharthan v Pattiori Ramadasan, 1984 SCC
OnLine Ker 59: AIR 1984 Ker 181; Vannattankandy Ibrayi v Kunhabdulla Hajee,
(2001) 1 SCC 564.
S. 108] LEASES 343
claim the same right. Where the site was a part of the building leased out
and the building was totally destroyed, the court said that the relation
ship of landlord and tenant subsisted. The lease was not avoidable under
this clause.105 In such a situation the tenant is not entitled to rebuild the
structure without consent of the landlord. Destruction of the house or
building constructed on the leasehold property does not by itself put an
end to tenancy rights.106
A number of points on this aspect of lease were stated by the Supreme
Court in Shaha Ratansi Khimji & Sons v Kumbhar Sons Hotel (P) Ltd107.
It has to be ascertained whether the lease was created in the structure or CASE PILOT
both in the structure as well as the underlying land. If it was a lease of the
structure alone, the mere destruction of the structure would not avoid it,
unless it was due to some fault on the part of the lessee. Lease of build
ing or structure, namely, house, shop, godown, etc. normally cannot be
treated as mere lease of structure. It would also include lease of site, or
land on which such structure is built unless the underlying land was spe
cifically excluded. It was held in V. Kalpakam Amma v Muthurama Iyer
Muthurkrishna Iyer108 that the word “building” must take in the site also CASE PILOT
as a part of the building. This is so because without site there cannot be a
structure. The site becomes an integral part of the structure. Without site
the superstructure cannot exist. If the superstructure is destroyed, land
continues to exist and therefore the lease is not extinguished. It is a rare
happening that land also ceases to exist. Such devastation may be caused
by an earthquake. In this case, destruction of the godown did not bring
its lease to an end because there was no clause excluding the site from the
lease. Transfer of the lessor’s reversion or rent hold absolutely to a third
person does not terminate the lease. Where the lessee was wrongfully
dispossessed and he had to remain out of possession for a long period,
the court directed payment of compensation instead of restoration of
lease.
CLAUSE (/): LESSEE’S RIGHTS TO REPAIR IF LESSOR FAILS

The wording of the section shows that there are certain repairs which the
landlord is bound to make and others which he need not. Those which he
is bound to make are those which he had expressly covenanted to make,
and where the lessor had so agreed, he can enter the premises to carry
out the repairs, notwithstanding that under clause (c), the lessee has a
right to hold the property without interruption. See, clause (a). If the
105. V. Kalpakam Amma v Muthurama Iyer Muthurkrishna Iyer, 1994 SCC OnLine Ker
182: AIR 1995 Ker 99.
106. Shaha Ratansi Khimji & Sons v Kumbhar Sons Hotel (P) Ltd, (2014) 14 SCC 1.
107. (2014) 14 SCC 1.
108. 1994 SCC OnLine Ker 182: AIR 1995 Ker 99.
lessor does not make the repairs, the lessee himself can do so and deduct
the expenses after notice to the lessor.109
CLAUSE (g): LESSEE’S RIGHT TO MAKE COMPULSORY

PAYMENTS IF LESSOR FAILS
This is nothing more than the right to recover recognised by Section 69,
Contract Act. If the lessor fails to make such a compulsive payment,
which if not made, would be recoverable from the lessee or the property,
the lessee may make such payment. He can then deduct it from the rent
amount with interest or recover it from the lessor. The payment must not
be voluntary, it must not be compulsive like taxes. If the lessee wants to
recover the amount from the lessor, he must have paid it under protest,
otherwise deduction from rent.
CLAUSE (/;): RIGHT TO REMOVE ACCESSORIES

In K.A. Dhairyawan v J.R. Thakur110, the scope of Section io8(Z?),
CASE PILOT Transfer of Property Act was explained thus:
Normally, before the expiry of the lease, a lessee can remove all structures
and buildings erected by him on the demised land. All that was necessary for
him to do was to give back the land to the lessor, on the termination of the
lease, in the same condition as he found it. The ownership, therefore, of the
building in this case was not with the lessors but was with the lessees. Under
Section 108 of the Transfer of Property Act there was nothing to prevent
the lessees contracting to hand over any building or structure erected on the
land by them to the lessors without receiving any compensation. In other
words, although under Section 108 the lessees had the right to remove the
building, by the contract they had agreed to hand over the same to the lessors
without the right to receive compensation at the end of the lease, the matter
being entirely one of contract between the parties. Such a contract, however,
did not transfer the ownership in the building to the lessors while the lease
subsisted.
CLAUSE (:): RIGHT TO REMOVE CROPS, ETC.

This right is known as the right to emblements111 and the tenant’s right
by custom even extends to away-going crops. This applies only to cases
of lease of uncertain duration. This right arises when termination of the
109. Eashwar v B. Sudershan, 1983 SCC OnLine AP 161: AIR 1985 AP 4; Apparel Trends v
Krishna Dandona, 1984 SCC OnLine Del 223: AIR 1985 Del 106 (Doctrine of suspen
CASE PILOT
sion of rent).
110. AIR 1958 SC 789: 1959 SCR 799; Basant Lal v State of U.P., (1980) 4 SCC 430; Baljit
Singh v J.I. Cunnington, 1984 SCC OnLine All 106: AIR 1984 All 209; N.A. Munavar
Hussain Sahib v E.R. Narayanan, 1983 SCC OnLine Mad 89: AIR 1984 Mad 47.
111. Mariappa Thevar v Kaliammal, 1970 SCC OnLine Mad 68: AIR 1971 Mad 198. (No
right in case of forfeiture).
S. 108] LEASES 345
lease is due to any cause not attributable to the lessee. He becomes enti
tled to remove the crops, if any, sown by him during subsistence of the
lease. The right to enter upon the property for this purpose is there. If
the lease is not of uncertain nature, the parties can provide for this right
by their own agreement.
CLAUSE (;): RIGHT TO TRANSFER INTEREST IN LEASE

A lessee cannot, by his act of assignment, get rid of the obligations he
had agreed to.
In Kishan Lal v Ganpat Ram Khosla112, the tenant—a company—of
certain premises wrote to the appellant-landlord—that it was closing CASE PILOT
down its office and that the business would be carried on by the respond
ent. The appellant objected, but in spite of the objection, the company
delivered the premises to the respondent. In a petition by the appellant,
for eviction of the respondent, it was held:
A tenancy except where it is at will, may be terminated only on the expiry
of the period of notice of a specified duration under the contract, custom or
statute governing the premises in question. A tenant does not absolve himself
from the obligations of his tenancy by intimating that as from a particular
date he will cease to be in occupation under the landlord and that someone
else whom the landlord is not willing to accept will be the tenant. It is one of
the obligations of a contract of tenancy that the tenant will, on determination
of the tenancy, put the landlord in possession of the property demised (see,
Section 108(g) of the Transfer of Property Act). Unless possession is delivered
to the landlord before the expiry of the period of the requisite notice, the
tenant continues to hold the premises during the period as tenant. Therefore,
by merely assigning the rights, the tenancy of the company did not come to
an end. It was observed by this court in W.H. King v Republic of India113.
‘There is a clear distinction between an assignment of tenancy on the one CASE PILOT
hand and a relinquishment or surrender on the other. In the case of an
assignment, the assignor continues to be liable to the landlord for the per
formance of his obligations under the tenancy and this liability is contrac
tual, while the assignee becomes liable by reason of privity of estate. The
consent of the landlord to an assignment is not necessary, in the absence of
a contract or local usage to the contrary. But in the case of relinquishment,
it cannot be a unilateral transaction; it can only be in favour of the lessor
by mutual agreement between them. Relinquishment of possession must
be to the lessor or one who holds his interest; and surrender or relinquish
ment terminates the lessee’s rights and lets in the lessor.’ [The present case
is one of transfer to the respondent and not a surrender to the appellant
as it should be if the respondent wanted to be free of the obligations of
tenancy.]
112. AIR 1961 SC 1554; K.K. Krishnan v M.K. Vijaya Raghauan, (1980) 4 SCC 88; Surjit
Singh v Rattan Lal, 1979 SCC OnLine P&H 121: AIR 1980 HP 319; Tirath Ram Gupta
v Gurubachan Singh, (1987) 1 SCC 712.
113. AIR 1952 SC 156: 1952 SCR 418.
The basis of the decision is as follows: Between the lessor and the lessee
there is a privity of estate as well as a privity of contract. The first arises
because he occupies the lessor’s land or estate and the second because of
agreement between them. If the lessee assigns the whole of his tenancy,
the assignee, because of his occupation, becomes liable to the lessor on
account of privity of estate, but the original lessee continues to be liable
on account of the privity of contract. Privity of the estate can arise only
if the entire right of the lessee is transferred to the assignee. Where there
is a subletting of a part of the estate, or for a part of the period of lease
or where there is a mortgage by possession created by the lessee, there
cannot be a privity of estate because it can arise only if the entire right of
the tenant is transferred to transferee. In the absence of a privity of con
tract between the lessor and the transferee, therefore, the lessor cannot
sue the sublessee.
The assignee is of course subject to the covenants running with the
land, under Section 40.
The right to assign or alienate or transfer which a lessee ordinarily has
can be restricted by the lessor. [See, S. 10]
In Hansraj v Bejoy Lal Seal114, the lessees executed a sub-lease of the
CASE PILOT leasehold premises, subletting them for the unexpired residue of the term.
The lessor’s representatives instituted the suit to enforce a forfeiture. It
was held:
The question having arisen in India, it has, of course, to be decided in accord
ance with the law, not of England, but of India; it does not, however, seem
to have occurred to anyone in the Courts below to see, in the first place,
before resorting to English decisions, whether under the law of landlord and
tenant in India a sub-lease by a lessee for the unexpired residue of the term
operates as an assignment of the term. That law is to be found in the Transfer
of Property Act, 1882, which has now been in force for nearly half a century.
Though founded on English law, and drafted in the first instance by eminent
lawyers in England, it has only applied the English law in so far as it was
considered applicable to India. It is not surprising to find that the rule, arising
out of the special conditions of land tenure in England, that a conveyance to
operate as a lease must reserve a reversion to the lessor finds no place in the
Act. In India a lessor is expressly empowered to grant a lease in perpetuity,
and is not obliged for that purpose, as in England, to grant a lease for lives,
or for a term with a covenant for perpetual renewal; and, similarly, a lessee
as sub-lessor can create a sub-lease for the unexpired residue of the term with
the same incidents as in any other sub-lease.
Leases in perpetuity are expressly included in the definition of ‘lease’ in
Sect. 105....
The provision in Sect. io8(/) is that, in the absence of a contract to the
contrary, a lessee may grant a sub-lease for the unexpired residue of the term
in the same way as a sub-lease for any shorter term is equally clear....
114. 1929 SCC OnLine PC in: (192.9-30) 57 IA no.

S. 108] LEASES 347
There is therefore no ground for the contention that in India a sub-lease

for the unexpired residue of the term operates otherwise than as a sub-lease.
Where the lessee of a government property transferred by way of sale
his right which was in violation of the terms of lease deed, the purchaser
could not seek the remedy for specific performance of such transfer.115
Creation of usufructuary mortgage.—The right to assign includes the
right to create a usufructuary mortgage. If there is any tenant on the
premises such mortgagee becomes a landlord. He becomes entitled to
seek eviction of the tenant on the grounds provided in the Act for such
eviction. He is also entitled to receive rent and profits accruing from
the property in his own right and on his own account.116 Such transfer
ee-mortgagee of the lessee gets the same interest which were vested in the
original lessee. The liquidator of a company transferred the company’s
leasehold rights for value so as to enable him to pay off the company’s
debts. This was held to be proper.117
CLAUSE (k): DUTY TO DISCLOSE FACTS WHICH

MATERIALLY INCREASE VALUE OF PROPERTY
This clause may be compared with clause (a) and also Section 55(5)^).
Like Section 55(5)^) it deals more with title than physical advantages
and hence the lessee’s duty under this clause is more limited than that of
the lessor under clause (a). The lessor’s right on a breach of this duty by
the lessee is an action for damages; but since under Section 17, Contract
Act, silence, when there is a duty to speak, amounts to fraud, perhaps
the lessor would also have a right of re-entry. A better opinion is that
there would be only the right to recover damages for loss, if any, caused
by suppression of the fact. For example, if the lessee upon entry on the
land finds there is a valuable kind of mineral wealth beneath it, he has to
disclose this fact. Non-disclosure may amount to a fraud for which an
action for damages may lie.
CLAUSE (/): DUTY TO PAY RENT

The lessee’s obligation to pay rent arises as soon as the lessor discharges
his obligation of putting the lessee in possession. What are proper time
and place may be agreed upon or be regulated by custom. Otherwise, the
time is the end of the period and the place is the property leased. If the
lessee defaults in payment as stipulated in the deed, the lessor may resort
115. Jayalakshmi Patra v Shyam Kanta Mohanty, AIR 2014 Ori 162.
116. Narpatchand A. Bhandari v Shantilal Moolshankar Jani, (1993) 3 SCC 351.
117. Ashok Kumar Krishanlal Patel v Continental Textile Mills Ltd, 2013 $CC OnLine Del
1322: AIR 2013 Del 166.
to either proceedings for recovery of rents with interest or for ejectment

after giving due notice.
CLAUSE (m): DUTY TO MAINTAIN PROPERTY

While the tenant or lessee is not liable for reasonable wear and tear, he
would be liable for permissive waste, that is, for allowing the property
to fall into a state of disrepair. That is, he is not liable to repair any
reasonable wear and tear, but will be liable for the consequences which
flow from such wear and tear. The duty of care expected from the lessee
is to see whether he has maintained the property in the same condi
tion in which it was given to him. Only such repairs will be necessary
which become requisite under proper use and enjoyment of property.
Any change in the property which occurs otherwise is not the lessee’s
responsibility. He has no duty to repair the property if it is damaged
by cyclone or earthquake or any other irresistible forces of nature. The
lessee has to allow the lessor to enter upon the premises to enable him to
see whether the property has been kept in good condition.
CLAUSE (n): DUTY TO DISCLOSE ANY HAPPENING

ADVERSE TO PROPERTY
When the lessee comes to know that there has appeared an encroach
ment on the property under his lease or any interference, or any suit or
proceeding in respect of the leased property, the lessee has to inform the
lessor of any such fact so that he may take necessary steps for protection
of his interest.
CLAUSE (o): DUTY TO MAKE REASONABLE

USE OF PROPERTY
In U Po Naing v Burma Oil Co Ltd118, the appellant leased a site to the
respondent for winning oil. During the operations no oil was obtained
but gas came up from the wells which were dug. The gas was enclosed
in pipes and utilised by the respondents. The appellant filed a suit for
compensation for the use of their gas. It was held:
In Their Lordships’ opinion it is quite clear that oil does not include gas....
No authority could be produced for the view that gas under the soil before
it had been tapped or released was the property of the appellant, and it seems
to their Lordships difficult to reconcile any such view with the well-known
118. 1929 SCC OnLine PC 6: (1928-29) 56 IA 140; Kasturchand Panachand Doshi v

Yeshiuant Vinayak Sainkar, 1980 SCC OnLine Bom 85: AIR 1980 Bom 270; Leena Roy
Choudhary v Indumati Bose, 1979 SCC OnLine Pat 40: AIR 1980 Pat 120 [case under
cl. (/■)]; Paratneshwari Das Khanna v Bhola Nath Parihar, 1980 SCC OnLine Del 148:
AIR 1981 Del 77.
S. 108] LEASES 349
authorities as to underground water not flowing in any defined channel. No

doubt it is true that the gas could be reduced into possession, and when
reduced into possession it became the property of the person who had so
reduced it. But in their Lordships’ judgment the gas was not reduced into
possession by the appellant but by the respondents....
In their Lordships’ judgment it is not necessary exhaustively to discuss the
limits of that provision, [under Section 108(0), T.P. Act] but there seems to be
nothing inconsistent with its terms in the use of gas which is necessarily set
free by reason of the sinking of the oil well for the respondent’s own purposes
without doing any damage or any injury to the property leased.
The lessee has to use the property only for purposes for which it was
leased to him. Where the lessee tried to shift the use of the land from
commercial to information technology, the lessor did not permit it.
The High Court did not interfere under writ jurisdiction.119 The tenant
demolished construction without landlord’s permission. The court said
that his existence on the leased premises became reduced to that of a
rank trespasser. The legal relationship came to an end. The tenant was
liable either to make reconstruction or make compensation for it.120
Court may take notice of subsequent events.—An eviction suit was
decreed in favour of the landlord because he and his wife needed the
house. They were staying as licensee in his brother’s house. An appeal
was filed against the decree. During pendency of the appeal both the
landlord and his wife died. It was held that the court could take notice of
this fact. There was nobody there to claim on the basis of personal need.
Legal heirs could recover possession on any other available ground.121
CLAUSE (p): DUTY NOT TO ERECT

PERMANENT STRUCTURE
This clause requires that the lessee must not, without lessor’s consent,
erect on the property any permanent structure, except for agricultural
purposes. No permanent structure should be built without consent.
Whether the structure in question is permanent or otherwise depends
upon its nature and intention of the lessee. This is a question of fact. The
Supreme Court observed:
A permanent structure means something lasting up to the end of tenancy. It
need not be everlasting or a structure creating additional usable space. In this
case there was replacement of the tin roof by concrete slab and construction
of passage. Both attractions were intended to last till end of tenancy. They
119. Shakti Commercial Premises Society Ltd v State of Maharashtra, AIR 2.012 NOC 379
(Bom).
120. Ratval Singh v Kiuality Stores, 1985 SCC OnLine Del 274: AIR 1986 Del 236.
121. Raj Kumar Dutta v Bimal Kumar Dhar, 2008 SCC OnLine Cal 246: AIR 2008 Cal 190.
could not be removed without damage to the other structure. For this reason
the tenant became liable to be evicted.122
In agricultural leases, the lessee can erect structures for agricultural pur
poses without lessor’s consent.
This clause does not come into play when the lease itself is meant for
erection of a dwelling house or a commercial shop.
Any permanent structure, if not removed by the lessee, becomes les
sor’s property on expiry of the lease.123
The lessee constructed shops and let them out for commercial pur
poses. The District Magistrate had given permission only for letting out
land. It could not be treated as a permission for construction of shops.
The court said that it was an apparent breach of the terms and conditions
of the lease. Lessee forfeited all rights. Refusal for renewal was proper.124
LESSOR’S RIGHT TO TRANSFER AND

ITS CONSEQUENCES [S. 109]
Section 109 deals with lessor’s right to transfer and the consequences of
such transfer.
109. Rights of lessor’s transferee.—If the lessor transfers the property leased,
or any part thereof, or any part of his interest therein, the transferee, in the
absence of a contract to the contrary, shall possess all the rights, and, if the lessee
so elects, be subject to all the liabilities of the lessor as to the property or part
transferred so long as he is the owner of it; but the lessor shall not, by reason only
of such transfer, cease to be subject to any of the liabilities imposed upon him by
the lease, unless the lessee elects to treat the transferee as the person liable to him:
Provided that the transferee is not entitled to arrears of rent due before the
transfer, and that, if the lessee, not having reason to believe that such transfer has
been made, pays rent to the lessor, the lessee shall not be liable to pay such rent
over again to the transferee.
The lessor, the transferee and the lessee may determine what proportion of the
premium or rent reserved by the lease is payable in respect of the part so trans
ferred, and, in case they disagree, such determination may be made by any court
having jurisdiction to entertain a suit for the possession of the property leased.
The section however is silent on the question whether the assignee can
take advantage of any breach committed by the lessee before the assign
ment. The English Law on the point is in Section 141(3) of the 1925
Act.125
122. Purushottam Das Bangur v Dayanand Gupta, (2.012.) 10 SCC 409.
123. Pundarikaksha Basu v Chanda Singh, 1966 SCC OnLine Cal 104: AIR 1967 Cal 538.
124. Prantod Kumar Kankane v State of U.P., AIR 2015 NOC 887 (All).
125. Amar Prasad Goopta v Arun Kumar Shaw, 1979 SCC OnLine Cal 153: AIR 1979 Cal
367 (Partial eviction, not permissible); Sardarilal v Narayanlal, 1979 SCC OnLine MP
25: AIR 1980 MP 8; Ram Charan Mowar v Ved Prakash, 1979 SCC OnLine All 943:
AIR 1980 All 27; Nuratmal v Tarinibala Bora, 1979 SCC OnLine Gau 18: AIR 1980
Gau 30; Hajee K. Assainar & Co v Chacko Joseph, 1983 SCC OnLine Ker 231: AIR
1984 Ker 113. The transferee can take advantage of the notice to quit by the transferor.
S. Ill] LEASES 351
A lessor does not lose ownership of his property only by the fact of
granting a lease. No restriction can be imposed upon the right of the
owner to transfer his property. The owner can terminate the lease and
resume possession.*126 The transferee of a leased property is not entitled
to recover the arrears of rent due up to the date of transfer. He is entitled
to future rents. Lessee who starts paying rents to his new landlord can
not afterwards challenge the title of the new landlord.127
When a landlord transfers his rights, it has been held by the Supreme
Court that attornment by the tenant is not necessary to confer validity
on the transfer.128
A family arrangement under which a member receives his share in
the property does not amount to conveyance of the property. The suit
house was allotted to a member (petitioner) under a family arrangement
and his name was mutated in revenue records. A suit was filed by the
new owner for eviction for arrears of rent up to the date of transfer. The
order that the new owner was not entitled to rents due up to the date of
allotment of the house to his share, was held to be not proper. The court
said that the tenant was admittedly in arrears of rent for more than six
months. The new owner was entitled to the decree of eviction.129
DETERMINATION OF LEASE [S. Ill]

111. Determination of lease.—A lease of immovable property, determines—
(a) by efflux of the time limited thereby;130
(b) where such time is limited conditionally on the happening of some
event—by the happening of such event;131
(c) where the interest of the lessor in the property terminates on, or his power
to dispose of the same extends only to, the happening of any event—by
the happening of such event;
Vasantkumar Radhakisan Vora v Port of Bombay, (1991) 1 SCC 761; Sk Sattar Sk

Mohd Choudhari v Gundappa Amabadas Bukate, {1996) 6 SCC 373.
126. Tata Steel Ltd v State ofJharkhand, AIR 2013 Jhar 24.
127. Biswan Chandra Harrish v Pooran Chandra Joshi, AIR 2008 NOC 2447 (Utt).
128. Ambica Prasad v Mohd Alam, (2015) 13 SCC 13, attornment by the tenant is not neces
sary, he cannot challenge the title of his new landlord.
129. Subhash Narsopant Sandankar v Chandrakant Babanrao Salunke, AIR 2015 NOC 765
(Bom), attornment by the tenant is not necessary, he cannot challenge the title of his new
landlord. )
130. Rattan Lal v Vardesh Chander, (1976) 2 SCC 103; Samir Sobhan Sanyal v Tracks Trade
(P) Ltd, (1996) 4 SCC 144; Prashant Ramachandra Deshpande v Maruti Balaram CASEP|LqT
Haibatti, 1995 Supp (2) SCC 539, the tenant gave undertaking before the High Court
to vacate the premises within specified time. It was held that he was not precluded from
approaching the Supreme Court under Art. 136. The Supreme Court may not exercise
its discretion under the Article, but the principle of approbate or reprobate, election and
estoppel cannot deprive the tenant of his constitutional right to approach the Supreme
Court under Art. 136.
131. Sudarshan Trading Co Ltd v L. D'Souza, 1983 SCC OnLine Kar 213: AIR 1984 Kar
214.
(d) in case the interests of the lessee and the lessor in the whole of the prop
erty become vested at the same time in one person in the same right;132
(e) by express surrender; that is to say, in case the lessee yields up his interest
under the lease to the lessor, by mutual agreement between them;
(f) by implied surrender;
(g) by forfeiture, that is to say, (i) in case the lessee breaks an express condi
tion which provides that on breach thereof the lessor may re-enter; or (2)
in case the lessee renounces his character as such by setting up a title in a
third person or by claiming title in himself; or (3) the lessee is adjudicated
an insolvent and the lease provides that the lessor may re-enter on the
happening of such event; and in any of these cases the lessor or his trans
feree gives notice in writing to the lessee of his intention to determine the
lease;133
(/;) on the expiration of a notice to determine the lease, or to quit, or of inten
tion to quit, the property leased, duly given by one party to the other.134
Illustration to clause (f)

A lessee accepts from his lessor a new lease of the property leased, to take
effect during the continuance of the existing lease. This is an implied surrender
of the former lease and such lease determines thereupon.
CLAUSE (a): EFFLUX OF TIME

Generally, leases have a term permitting renewal and it requires the lessee
to give notice to the lessor of his intention to renew within a reasonable
time before the expiry of the lease. Consent of the lessor is not necessary
unless expressly provided for.135
On the expiry of the term of lease, the lessee remained in continued
possession taking benefit of the extension clause for a further period of
10 years, but did not get the new term registered by a deed on the basis
of the increased rent. The court refused to regard him as a tenant after
the expiry of the period by holding over, nor that it was a monthly ten
ancy. The lease expired by efflux of time. Eviction suit was allowed.136
In another case of the same kind, the agreement of renewal required
fulfilment of two conditions: exercise of option of renewal by the lessee
132. Shah Mathuradas Maganlal & Co v Nagappa Shankarappa Malage, (1976) 3 SCC 660.
133. Rattan Lal v Vardesh Chander, (1976) 2 SCC 103; Nalakath Sainuddin v Koorikadan
Sulaiman, (2002) 6 SCC 1.
134. Jagat Ram Sethi v R.B.D.D. Jain, (1972) 2 SCC 613; Hamidullah v Sk Abdullah, (1972)
4 SCC 800.
135. Shanti Devi v Amal Kumar Banerjee, (1981) 2 SCC 199; Thakuruddin Ramjash
v Sourendra Nath Mukherjee, 1981 SCC OnLine Cal 200: AIR 1982 Cal 133; R.V.
Bhupal Prasad v State of A.P., (1995) 5 SCC 698; Rajeshtuar Dayal v Avneesh Kumar
Avasthi, (2002) 4 SCC 311; S.P. Watel v State of U.P., (1973) 2 SCC 238; Tarak Nath
Sha v Bhutoria Bros (P) Ltd, (2002) 5 SCC 1; Shrikrishna Oil Mill v Radhakrishan
Ramchandra, (2002) 2 SCC 23; Ont Prakash Gupta v Ranbir B. Goyal, (2002) 2 SCC
256; Gurdial Singh v Raj Kumar Aneja, (2002) 2 SCC 445.
136. Renuka Seal v Sabitri Dey, 2007 SCC OnLine Cal 501: AIR 2008 Cal 75; EIC Holdings
Ltd v Calcutta Dock Labour Board, AIR 2008 NOC 1413 (Cal), the lessee had to vacate
on expiry of the period. Landlord’s assent to holding over irrelevant.
S. Ill] LEASES 353
before expiry of the original term and fixation of the terms of new lease
by mutual consent and in its absence through mediation. The lessee
remained in possession without complying with these requirements.
The court said that the lessee was not entitled to remain in perpetuity
either as a tenant or a lessee by holding over. He had to comply with the
requirements of renewal. Having not done so, he was neither a tenant
nor a lessee.137
CLAUSE (b): TIME LIMITED CONDITIONALLY

Where time is limited conditionally to the happening of some event,
determination takes place on the happening of such event. So long as the
specified event does not happen, the lease continues.
CLAUSE (c): TERMINATION OF LESSOR’S INTEREST OR

HIS POWER OF DISPOSAL
Examples of such leases are: i) When a Hindu widow, having only a
widow’s estate, grants a lease without legal necessity. On her death the
lease is also determined, z) When a mortgagee in possession grants a
lease. It only extends up to the term of the mortgage, but it does not
automatically end. In such a case, the mortgagor has right to terminate
the lease.138
CLAUSE (d): MERGER

This is known as merger, that is when a greater and a lesser interest coin
cide. It is obvious that a man cannot be both a landlord and a tenant.
Therefore, if by purchase or inheritance, the two rights become vested
in one, the tenant’s interest, being the lesser merges in that of the lessor,
which is the larger and the lease comes to an end. One condition is how
ever essential, namely, the merger must be of the interests of the lessor
and lessee in the whole estate.139 Thus, in Faqir Bakhsh v Murli Dhar140,
CASE PILOT
137. Indian Oil Corpn Ltd v Indian Institute of Engg and Technology, 2012 SCC OnLine
Mad 1485: (2012) 3 LW 834.
138. Champa Lal v Gulabi, 1980 SCC OnLine Raj 46: AIR 1981 Raj 130.
139. Pramod Kumar Jaisival v Bibi Husn Bano, (2005) 5 SCC 492, taking assignment of part
CASE PILOT
only of the landlord’s interest is not enough to determine the lease. The tenant had taken
over the interest of some of the co-owner landlords.
140. 1931 SCC OnLine PC 1: (1930-31) 58 IA 75; Ganesh Prasad v Badri Prasad Bholanath,
1 1980 SCC OnLine All 887: AIR 1980 All 361; Nand Lal v Ramjilal, 1981 SCC OnLine
Raj 15: AIR 1981 Raj 243; Syed Ahmed v Salima Bi, 1980 SCC OnLine Mad 166:
AIR 1982 Mad 44; Santosh Kumar v Chameli Devi, 1982 SCC OnLine All 930: AIR
1983 All 195; Gambangi A. Naidu v Behara V. Patro, (1984) 4 SCC 382; ].]. Pancholi
v Sridharjee, 1984 SCC OnLine All 50: AIR 1984 All 130; D.S. Commercial (P) Ltd
v Shree Shewtambar Stbanakbasi Jain Sabha, 1983 SCC OnLine Cal 185: AIR 1984
Cal 194; Parmar Kanaksinh Bhagwansinh v Makivana Shanabhai Bhikhabhai, (1995)
2 SCC 501; Narayan Vishnu Hendre v Baburao Savalaram Kothaivale, (1995) 6 SCC
the lessee of certain shops acquired a share in the property. On the ques
tion whether there was a merger, it was held:
The matter, however, is put beyond dispute by the terms of S. in of the
Transfer of Property Act.... That section enumerates in eight paragraphs
the various modes in which ‘a lease of immovable property determines,’ and
the enumeration is exhaustive. The only paragraph relating to determination
by merger is...(d).... ‘The fusion of interests required by law is to be in
respect of the whole of the property.’ There was no such fusion in the present
instance.
Such fusion was found in the facts of a case before the Karnataka High
Court.141 The defendant had remained in occupation of the suit premises
for about 45 years before the case arose. The tenant suffered an eviction
order under the Rent Control Act. But before he was evicted, the lim
ited tenancy right of the defendant was amplified and enlarged into an
absolute right of ownership of the premises by virtue of an auction-sale
in his favour and affirmed by sale certificate. The tenant having become
an absolute owner, the decree of eviction against him became null and
inexecutable by application of the doctrine of merger.
Since, for a merger the entire interests of the lessor and lessee must
unite, if there is a sub-lease granted by the lessee, then there cannot be a
merger. Acquisition of the rights of a co-owner landlord by the lessee did
not amount to merger because there was extinguishment of the tenancy
as such.142 Where a tenancy was inherited by the legal representatives of
the original tenant and only one of them purchased one portion of the
property, the court said that there was no extinguishment of the tenancy
and hence, no merger.143 The Supreme Court observed on the facts of
a case that it would depend upon the facts and circumstances of each
case and terms of the document as to whether there had been merger
or not. No hard and fast rule could be laid down.144 Where one of the
joint tenants purchased the premises which was under their lease and the
other joint owner neither claimed any tenancy rights, nor paid rent to the
purchaser, the court said that the joint tenancy became merged into the
rights of ownership. Relatives or legal heirs of the joint tenant could not
claim any tenancy rights in the premises.145
608; Huchappa Yellappa Radderv Ningappa Bheemappa Talawar, 1993 Supp (3) SCC
651; Gopalan Krishnankutty v Kunjamma Pillai Sarojini Amma, (1996) 3 SCC 424;
Murlidhar Jalan v State of Meghalaya, (1997) 5 SCC 480; Puran Chand v Kirpal Singh,
(2001) 2 SCC 433; India Umbrella Mfg Co v Bhagabandei Agarivalla, (2004) 3 SCC 178.
141. K. Muthuraj v K.R. Srinivasa Iyengar, AIR 2015 NOC 460 (Kar).
142. Pramod Kumar Jaistval v Bibi Husn Bano, (2005) 5 SCC 492.
143. Hameeda Begum v Champa Bai Jain, AIR 2009 NOC 2623 (MP), the purchaser tenants
and other tenants continued to be there as tenants.
144. Chandrakant Shankarrao Machale v Parubai Bhairu Mohite, (2008) 6 SCC 745.
145. Thrity Sam Shroff v Mehroo Meherji Vakil, 2010 SCC OnLine Bom 564: AIR 2010 Bom
170.
S. Ill] LEASES 355
Another important condition recognised by the section is that the two

rights must be vested in one person in the same right.
CLAUSE (e): SURRENDER BY LESSEE UNDER

MUTUAL AGREEMENT
Express surrender can only be to the lessor or his representative and that
too with his consent.146
CLAUSE (/): IMPLIED SURRENDER

This clause deals with implied surrender. Suppose a lessee, before the
expiry of the term, enters into a new lease, then there is an implied sur
render of the old one.147148
CLAUSE (g): FORFEITURE

The law generally views with strictness conditions relating to forfeiture.
For example, a condition against assignment was held not to include
subletting or mortgage and a condition against alienation of the lessee’s
tenure was held not to include a sale of a portion of it; and alienation is
interpreted to mean voluntary alienation and not alienation as a result of
execution of a decree.
In this connection, see. Section 12.
The amendments made in this section are not retrospective.
In Namdeo Lokman Lodhi v Narmadabai[4\ in 1870, the purchaser
of the tenancy rights from a lessee agreed with the lessor that he would
146. Puttegowda v State of Karnataka, 1980 SCC OnLine Kar 13: AIR 1980 Kar 101; 5.R.
Radhakrtshnan v Neelamegam, (2.003) 10 SCC 705.
147. Madhubala v Budhiya, 1980 SCC OnLine All 872: AIR 1980 All 266; Nand Lal v
Ramjilal, 1981 SCC OnLine Raj 15: AIR 1981 Raj 243; P.M.C. Kunhiraman Nair v
CASE PILOT
C.R. Naganatha Iyer, (1992) 4 SCC 254; Narayan Vishnu Hendrev Baburao Savalaram
Kothaivale, (1995) 6 SCC 608; Munisami Naidu v C. Ranganathan, (1991) 2 SCC
139; Gopalan Krishnankutty v Kunjamma Pillai Sarojini Amnia, (1996) 3 SCC 424;
Kanilabai v Mangilal Dulichand Mantri, (1987) 4 SCC 585; P.M.C. Kunhiraman Nair
v C.R. Naganatha Iyer, (1992) 4 SCC 254; Manik Lal v Ravindra Kumar, AIR 2013
Pat 137, acceptance of a new tenancy does not necessarily result in implied surrender.
The court has to consider the proven facts to see the real effect. Tarachand v Sagarbai,
relinquishment of possession may result in implied surrender even if the tenant remains
in possession. B. Paramashivaiah v M.K. Shankar Prasad, 2008 SCC OnLine Kar 483:
AIR 2009 Kar 88, tenant agreed to buy the property, not to pay rent from the date of
agreement, amounted to implied surrender.
148. AIR 1953 SC 228: 1953 SCR 1009; Sri Ram v Pritam Singh, 1977 SCC OnLine HP 35:
AIR 1978 HP 30; Tarakpada Kirti v Ruplekha Chatterjee, 1977 SCC OnLine Cal 236:
AIR 1978 Cal 189; Lelitha v Ayissumma, 1977 SCC OnLine Ker 129: AIR 1978 Ker
167; Ratanlal v Chandbasappa, AIR 1978 Bom 216; Gyasi Ram v Ram Chandra Singh,
1977 SCC OnLine All 458: AIR 1978 All 376; Ved Prakash Gupta v Chotelal, 1978 SCC
OnLine MP 139: AIR 1978 MP 250; Shiv Balak v Ram Kishore, 1980 SCC OnLine All
863: AIR 1980 All 178; Chanda Devi v Tara Pad Sinha, 1979 SCC OnLine All 871: AIR
1980 All 270; A. Appa Rao v Maragathammal, 1980 SCC OnLine Mad 91: AIR 1981
pay the agreed annual rent and that in case of default the tenant or his
heirs would have no right over the land. The new lessee was a habitual
defaulter, and the last default was in 1941. In a suit for possession on the
ground of forfeiture and for arrears of rent, the lessee contended that
notice as contemplated by Section 111(g), Transfer of Property Act was
necessary. It was held:
As the law stands today under the Act, notice in writing by the landlord is
a condition precedent to a forfeiture and the right of re-entry. Section 63 of
Act 2.0 of 192.9, restricts the operation... to transfers of property made after
1-4-1930. The lease in this case was executed before the Transfer of Property
Act came into force in 1882. The amendment therefore made in this sub-sec
tion by Act 20 of 1929, not being retrospective, cannot touch the present
lease and it is also excluded from the reach of the Transfer of Property Act
by the provisions of Section 2.... It was however, strongly argued that the
amendment made in 1929 to Section 111(g) of the Act embodies a principle
of justice, equity and good conscience and notwithstanding Section 2 of the
Act, the principle was applicable in this case....
It is axiomatic that the courts must apply the principles of justice, equity
and good conscience to transactions which come up before them for determi
nation even though the statutory provisions of the Transfer of Property Act
are not made applicable to these transactions. It follows therefore that those
provisions of the Act which are but a statutory recognition of the rules of
justice, equity and good conscience also govern those transfers....
[But] it may be observed that it is erroneous to suppose that every provi
sion in the Transfer of Property Act and every amendment effected is neces
sarily based on principles of justice, equity and good conscience.... Now, so
far as Section 111(g) of the Act is concerned, the insistence therein that the
notice should be given in writing is intrinsic evidence of the fact that the for
mality is merely statutory and it cannot trace its origin to any rule of equity.
Equity does not concern itself with mere forms or modes of procedure. If the
purpose of the rule as to notice is to indicate the intention of the lessor to
determine the lease and to avail himself of the tenant’s breach of covenant
it could as effectively be achieved by an oral intimation as by a written one
without in any way disturbing the mind of a Chancery Judge. The require
ment as to written notice provided in the section therefore cannot be said to
be based on any general rule of equity. That it is not so is apparent from the
circumstance that the requirement of a notice in writing to complete a forfei
ture has been dispensed with by the legislature in respect to leases executed
before 1-4-1930. Those leases are still governed by the unamended sub-sec
tion (g) of Section m. All that was required by that sub-section was that
the lessor was to show his intention to determine the lease by some act indi
cating that intention. The principles of justice, equity and good conscience
are not such a variable commodity, that they change and stand altered on
a particular date on the mandate of the legislature and that to leases made
Mad 57; Tharumal v Masjid Hajurn Pharosan Va Madrassa Talimul Islam, (1994) 3
SCC 375; Guru Amarjit Singh v Rattan Chand, (1993) 4 SCC 349; Rattan Lal v Vardesh
Chander, (1976) 2 SCC 103.
S. Ill] LEASES 357
between 1882 and 1930 the principle of equity applicable is the one contained
in sub-section (g) as it stood before 1929, and to leases executed after 1-4-
1930, the principle of equity is the one stated in the sub-section as it now
stands....
The provision with regard to the giving of notice before a right of re-entry
accrues to the landlord [in England] is expressly excluded by [Section 146(11)
of the Law of Property Act, 1925].... In England it is not necessary in case of
non-payment of rent for a landlord to give notice before a forfeiture results.
It cannot, therefore, be said that what has been enacted in sub-section (g) of
Section m is a matter which even today in English law is considered as a
matter of justice, equity and good conscience. In English law the bringing of
an action which corresponds to the institution of a suit in India is itself an
act which is definitely regarded as evidencing an intention on the part of the
lessor to determine a lease with regard to which there has been a breach of
covenant entitling the lessor to re-enter....
In India there is a substantial body of judicial authority for the proposition
that in respect of leases made before the Transfer of Property Act forfeiture is
incurred when there is a disclaimer of title or there is non-payment of rent....
The lessor has to simply express an intention that he is going to avail of the
forfeiture and that can be done by filing of a suit, as in English law, in all
cases not governed by the Transfer of Property Act....
Considerable reliance was... [based] on the decision of Chandrasekhara
Aiyar, J. sitting singly in the case of T. Umar Pulavar v Dawood Rowther149
wherein the learned Judge said that Section m(g) as amended in 1929 CASE PILOT
embodied a principle of justice, equity and good conscience and must be
held to govern even agricultural leases and when there was a forfeiture by
denial of the landlord’s title, a notice in writing determining the lease was
necessary.... The learned Judge for this view placed reliance on the decision
in Krishna Shetti v Gilbert Pinto150; in which it was said that the Transfer of
Property Act was framed by eminent English lawyers to reproduce the rules
of English law, insofar as they are of general application and rest on principle
as well as authority and its provisions are binding on us as rules of justice,
equity and good conscience. With respect, we are constrained to observe
that this is too broad a statement to make. It seems that the attention of the
learned Judges was not drawn to the fact that the provision as to notice for
determining a lease for non-payment of rent was not a part of the English
law....
[In Brahmayya v Sundaramma151,]... it was said that although Section 106
of the Transfer of Property Act does not apply to leases for agricultural pur CASE PILOT
pose by virtue of Section 117 of the Act, nevertheless the rules in Section 106
and in the other sections (Ss. 105 to 116) in Chapter V of the Act are founded
upon reason and equity and they are the principles of English law and should
be adopted as the statement of the law in India applicable also to agricultural
leases. In our opinion, the above statement is again formulated in too wide
a language....
150. 1919 SCC OnLine Mad 1: ILR (1919) 42 Mad 654.
Reference was also made to the decision... in Tatya Savla Sundrik v

Yeshwanta Kondiba Mulay152 where it was said that the principle embodied
in Section in(g) of the Transfer of Property Act that in the case of forfeiture
CASE PILOT
by denial of landlord’s title a notice in writing determining the lease must be
given is a principle of justice, equity and good conscience which must be held
to govern even agricultural leases. In that case it was contended that follow
ing upon forfeiture which had been incurred a suit was filed by the plaintiffs
for eviction and nothing more needed to be done by the plaintiffs.... This
contention was negatived in view of the decision of Chandrasekhara Aiyar,
J above referred to.... With respect we think that that decision did not state
the law on the point correctly. Under English law the institution of a suit for
ejectment has always been considered an unequivocal act on the part of the
landlord for taking advantage of the default of the tenant and for enforcing
the forfeiture in case of non-payment of rent, and even in other cases except
where statutory provisions were made to the contrary.
Reference was also made to the observations of Their Lordships of the
Privy Council in Aditya Prasad v Ram Ratan Lal153. Their Lordships dealing
with the question whether a certain document created a charge upon a vil
lage observed that the appellant could not redeem it without paying both the
mortgage debt and the amount subsequently raised and it was said that the
provisions of the Transfer of Property Act on the point were identical with
the principles of justice, equity and good conscience. The observation made
in that case must be limited to that case and cannot be held as applicable to
all cases irrespective of the nature of the provisions involved. Similar obser
vations are contained in another decision of Their Lordships of the Privy
Council in Mohd Raza v Abbas Bandi Bibi154 which concerned the provisions
CASE PILOT
of Section io of the Transfer of Property Act which recognises the validity
of a partial restriction upon a power of disposition in the case of a transfer
inter vivos. It was held that there was no authority that a different principle
applied in India before the Act was passed and that under English law a
partial restriction was not repugnant even in the case of a testamentary gift.
On the happening of any of the three conditions of forfeiture mentioned
in the section, the lease does not automatically become void. It only gives
the lessor a right to avoid the lease and to re-enter. Some act on the
part of the lessor showing an intention to re-enter is necessary155 and the
section as it now stands provides for the giving of notice as the essential
requisite. [See also, S. 116, Evidence Act.]
In Mohd Amir Ahmad Khan v Municipal Board of Sitapur156, the
CASE PILOT appellant held land paying a nominal rent. There was no document and
the origin of the lease was unknown. In certain land acquisition pro
ceedings, he claimed compensation as owner. On the question whether it
amounts to a denial of the landlord’s title entailing forfeiture, it was held:
152. 1950 SCC OnLine Bom 60: ILR 1951 Bom 293.
153. 1930 SCC OnLine PC 19: (1929-30) 57 IA 173.
154. 1932 SCC OnLine PC 23: (1931-32) 59 IA 236.
155. See, Parkash Chand v Harnam Singh, (1973) 2 SCC 484.
156. AIR 1965 SC 192.3.
S. 114] LEASES 359
... [T]he principles embodied in Section in(g) are equally applicable to ten
ancies to which the Act does not apply on the ground of the same being cz=\
in consonance with justice, equity and good conscience (See Maharaja of
Jeypore v Rukmini Pattamahevi)157. It was also clear law that permanent CASEP|L0T
tenancies are within the rule and are liable to forfeiture if there is a disclaimer
of the tenancy or a denial of the landlord’s title. That the disclaimer or the
repudiation of the landlord’s title must be clear and unequivocal and made to
the knowledge of the landlord is also beyond dispute....
[When] the tenant [appellant] stated that the land ‘belonged to him’ he
was asserting merely the substantial character of his interest in the property
and not disclaiming the reversionary interests of the Government or its right
to demand and receive a fixed rent in respect of the property. We consider
that the words employed did not, in the circumstances, amount to a dis
claimer or a renunciation of the tenancy.
In suits for eviction, the title of the landlord is irrelevant and it is only the
relationship of landlord and tenant that is relevant.
The tenant denied title of the landlord. He did so during proceedings
before the Rent Controller. Consequently, the landlord issued notice of
forfeiture to the tenant. The act of denial of landlord’s title during pro
ceedings was deliberate and conscious act. Section 116, Evidence Act
prevents tenants by estoppel from denying landlord’s title. The court said
that the tenant incurred forfeiture of tenancy. The landlord became enti
tled to recover possession.158
FORFEITURE [SS. 114 AND 114-A]

(RELIEF AGAINST FORFEITURE)
In this connection we may note Sections 114 and 114-A and 112.
114. Relief against forfeiture for non-payment of rent.—Where a lease of
immovable property has been determined by forfeiture for non-payment of rent,
and the lessor sues to eject the lessee, if, at the hearing of the suit, the lessee
pays or tenders to the lessor the rent in arrear, together with interest thereon
and his full costs of the suit, or gives such security as the Court thinks sufficient
for making such payment within fifteen days, the Court may, in lieu of making
a decree for ejectment, pass an order relieving the lessee against the forfeiture;
and thereupon the lessee shall hold the property leased as if the forfeiture had
not occurred.
This section is based on the principle that relief against forfeiture should
be given whenever compensation is an adequate alternative relief. This
157. 1919 SCC OnLine PC 2: (1918-19) 46 IA 109.

158. Narendra Vyankatesh Tambat v Pravin Kumar Khushalchand, AIR 2015 NOC 1279
(Bom), acceptance of rent during pendency of proceedings is no waiver of the notice to
quit, it rather shows that the landlord is not interested in continuation of the tenancy.
Waiver had to be a deliberate act for continuation of tenancy on the part of the landlord.
reflects the same attitude expressed by Bowen LJ in Cropper v Smith139

in relation to amendments of pleadings:
...[TJhere is one panacea which heals every sore in litigation, and that is
costs. I have very seldom, if ever, been unfortunate enough to come across
an instance, where a person has made a mistake in his pleadings which has
put the other side to such a disadvantage as that it cannot be cured by the
application of that healing medicine.
160, (p. 353) it was observed:

In Namdeo Lokman Lodhi v Narmadabai159
CASE PILOT Reference was made to the decision... in Debendra Lal Khan v F.M.A.
Cohen161 wherein it was held that the court normally would grant relief
against forfeiture for non-payment of rent under Section 114 of the Transfer
of Property Act and that if the sum required under the section was paid
or tendered to the lessor at the hearing of the suit the court has no discre
tion in the matter and must grant relief to the tenant. We do not think that
the learned Judge intended to lay down any hard and fast rule. Indeed the
learned Judge proceeded to observe as follows:
Tn exercising the discretion with which it is invested under Section 114
a court in India is not bound by the practice of a Court of Chancery in
England, and I am not disposed to limit the discretion that it possesses.
Those who seek equity must do equity, and I do not think merely because
a tenant complies with the conditions laid down in Section 114 that he
becomes entitled as of right to relief.’
In our opinion, in exercising the discretion, each case must be judged by
itself, the delay, the conduct of the parties, and the difficulties to which the
landlord has been put should be weighed against the tenant. This was the
view taken...in Appayya Shetty v B.P.M. Mahammad Beari162 and the mat
CASE PILOT
ter was discussed at some length. We agree with the ratio of that decision.
It is a maxim of equity that a person who comes in equity must do equity
and must come with clean hands and if the conduct of the tenant is such
that it disentitles him to relief in equity, then the court’s hands are not tied
to exercise it in his favour. Reference in this connection may also be made
to Ramakrishna Malhya v Baburaya163 and Varanasi Ramabrahmam v Kota
CASE PILOT
Rami Reddi164.
159. (1884) LR 26 Ch D 700.

160. AIR 1953 SC 228: 1953 SCR 1009; Pradesh Kumar Bajpai v Binod Behari Sarkar,
(1980) 3 SCC 348; Phukan Chandra Bayan v Madhav Chandra, 1980 SCC OnLine
Gau 31: AIR 1980 Gau 68; Ramchandra Bastiram Saraswat v Ramniwas Bansilal
Lakhotiya, 1982 SCC OnLine Bom 254: AIR 1983 Bom 417; Geetabai Namdeo Dap v
B.D. Manjrekar, 1984 SCC OnLine Bom 115: AIR 1984 Bom 400; Abhoy Singh Surana
v V7. Evans & Co Ltd, 1963 SCC OnLine Cal 17: AIR 1984 Cal 88; Sadhu Saran Prasad
v Rabindra Nath Saha, 1983 SCC OnLine Cal 29: AIR 1985 Cal 1.
161. 1927 SCC OnLine Cal 286: ILR (1927) 54 Cal 485.
162. 1915 SCC OnLine Mad 504: ILR {1916) 39 Mad 834; Hindustan Petroleum Corpn Ltd
v Chandra Prakash Bubna, 1995 Supp (3) SCC 167.
163. (1914) 24 IC 139.
164. 1927 SCC OnLine Mad 432: AIR 1928 Mad 250; Prithvichand Ramchand Sablok v S.Y.
Shinde, (1993) 3 SCC 271; National Textile Corpn Ltd v Ahmedabadani Samasta Modh
S. 114-A] LEASES 361
In order to secure relief against forfeiture for default in payment of

rent, the tenant deposited the requisite amount in the court without
its leave and also without filing any petition. The court said that the
risk involved in such a deposit belongs to the depositor. Such deposit
could not be legalised. The tenant was not entitled to relief against
forfeiture.165
A trust executed a sub-lease in favour of a club. The lease was ter
minated for non-payment of rent. A suit was filed for possession and
recovery of rent. The club admitted its default but disputed the title of
the trust to create sub-lease and for recovery of rent. The club also filed
a suit challenging the title of the trust and cancellation of the sub-lease.
The club relied upon the lease and its agreement to pay rent to the trust.
Thus, it resorted to inconsistent pleas. It had also adopted dilatory tac
tics. It became disentitled to claim any relief under writ jurisdiction of
Article 136 of the Constitution.166
Section 114-A provides:
114-A. Relief against forfeiture in certain other cases.—Where a lease of
immovable property has been determined by forfeiture for a breach of an express
condition which provides that on breach thereof the lessor may re-enter, no suit
for ejectment shall lie unless and until the lessor has served on the lessee a notice
in writing—
(a) specifying the particular breach complained of; and
(b) if the breach is capable of remedy, requiring the lessee to remedy the
breach;
and the lessee fails, within a reasonable time from the date of the service of the
notice, to remedy the breach, if it is capable of remedy.
Nothing in this section shall apply to an express condition against assigning,
under-letting, parting with the possession, or disposing, of the property leased,
or to an express condition relating to forfeiture in case of non-payment of rent.167
This section does not give relief against forfeiture which the lessee incurs
by denying his landlord’s title. The section only contemplates covenants
for repairs, maintenance or insurance of the property leased. It does not
apply to the breach of the covenant to pay rent.168 Where a breach result
ing in forfeiture is of such a nature that it can be set right or remedied, an
Champaneri Vanik Gnati, AIR 2008 NOC 841 (Guj), entire rent paid, relief against
forfeiture granted.
165. Chittaranjan Mondal v Tapan Kumar Adhikari, 2014 SCC OnLine Cal 20549: AIR
2015 Cal 1.
166. Karam Kapahi v Lal Chand Public Charitable Trust, (2010) 4 SCC 753; Anil Kumar
Keshav Dev v Kishan Lal Shyamlal, 2012 SCC OnLine All 845: AIR 2012 All 156, no
written lease agreement, no relief under the section.
167. Tarakpada Kirti v Ruplekha Chatterjee, 1977 SCC OnLine Cal 236: AIR 1978 Cal 189.
168. Chandrawati Devi v Surendra Pal Singh, 1979 SCC OnLine All 916: AIR 1979 All 406; \l——/
Bhagaban Biswas v Bijoy Singh Nahar, 1979 SCC OnLine Cal 172: AIR 1980 Cal 70;
Hira Lal v Shiv Shankar Lal, 1979 SCC OnLine All 569: AIR 1980 All 401; P.S. Nirash CASE PIL0T
v Mintok Dolma Kazini,1983 SCC OnLine Sikk 4: AIR 1984 Sikk 1; Nikhil Chandra
Sen v Ajit Chandra Mullick, 1983 SCC OnLine Cai 23: AIR 1984 Cal 31; Sugam Chand
opportunity has to be given to the lessee to enable him to make good the
breach. Only if he fails to do so, forfeiture may be ordered.169
IMPLIED WAIVER [S. 112]

Section nz deals with what is called implied waiver.
112. Waiver of forfeiture.—A forfeiture under Section m, clause (g), is
waived by acceptance of rent which has become due since the forfeiture, or by
distress for such rent, or by any other act on the part of the lessor showing an
intention to treat the lease as subsisting:
Provided that the lessor is aware that the forfeiture has been incurred:
Provided also that, where rent is accepted after the institution of a suit to eject
the lessee on the ground of forfeiture, such acceptance is not a waiver.
A waiver of forfeiture, however, cannot be implied by acceptance of rent
due for a period before the occurrence of forfeiture. This follows from
the words “which has become due since the forfeiture” in the section.170
Waiver may arise from waiver of notice or dismissal of ejectment suit for
default. A case of this kind was filed under Delhi Rent Control Act, 1957.
The ejectment suit was dismissed for default. The court said that its effect
was not that the tenant had become one in perpetuity, nor he became
owner of the premises. It could only be a waiver under Section 113 or
an assent within the meaning of Section 116. The lessee was also not a
tenant at sufferance but only a month-to-month tenant, or year to year
depending upon the original lease, terminable under Section 106. The
landlord could also file a fresh suit for ejectment.171
CLAUSE (A) OF SECTION 111: NOTICE TO QUIT

See, Section 106, which provides for the period of notice in the case of
various kinds of leases.
Though the section has enumerated eight methods of determining a
lease, in the case of houses used for residential as well as non-residential
purposes, these rules are superseded by local enactments in order to give
greater protection to tenants against eviction by greedy landlords; but
Agrawal v Jivt Shah, 1983 SCC OnLine Pat 93: AIR 1984 Pat 184; Raghuram Rao v
Eric P. Mathias, (2002) 2 SCC 624, there has to be an express condition in the leasehold
providing for the landlord’s right to re-enter on default in payment of rent and notice for
exercising this right has to be given. Bharathi Shetty v B. Hanumanthappa, AIR 2013
Kar 165, the provision was that non-payment of rent was breach of an express condition,
but there was no mention of the right of forfeiture, forfeiture not allowed, only recovery
of rent was possible. Lahu v Kailash Matasaran Gupta, 2014 SCC OnLine Bom 664:
AIR 2014 Bom 143, on denial of title, the new transferee filed a suit under Rent Control
Act, the tenant denied her title, incurred on ground for forfeiture, subsequently she filed
a civil suit, the tenant was estopped from saying that she should take permission of the
Rent Controller.
169. Ramesh Prasad v State of Bihar, AIR 2008 NOC 1415 (Pat).
170. Sen & Con Mani, 1980 SCC OnLine Cal 28: AIR 1980 Cal 155.
171. M.R. Sahni v Doris Randhawa, 2008 SCC OnLine Del 268: AIR 2008 Del no.
JS.H3] LEASES 363
like any other beneficial legislation, these enactments have been misused
by recalcitrant tenants.172 It is said that when one landlord gave notice to
his tenant, the latter replied: “Sir, I am in receipt of your notice. I beg to
remain. Yours sincerely.”
In Harihar Banerji v Ramshashi Roy173, it was observed by the Privy
Council: CASE PILOT
... [Tjhe test of sufficiency is not what they... [notice] mean to a stranger
ignorant of all the facts and circumstances touching the holding to which
they purport to refer, but what they would mean to tenants presumably con
versant with all those facts and circumstances... they are to be construed not
with a desire to find faults in them which would render them defective, but to
be construed ut res magis valeat pereat....
[I]f a letter properly directed, containing a notice to quit, is proved to have
been put into the post office, it is presumed that the letter reached its destina
tion at the proper time according to the regular course of business of the post
office, and was received by the person to whom it was addressed.
In the case of joint lessors, notice must be given by all of them or by one
of them on behalf of all, and when there are joint lessees notice should
be given to all of them.
A notice given may however be waived. This is provided for in
Section 113 as follows:
113. Waiver of notice to quit.—A notice given under Section in, clause (A),
is waived, with the express or implied consent of the person to whom it is given,
by any act on the part of the person giving it showing an intention to treat the
lease as subsisting.
Illustrations
(a) A, the lessor, gives B, the lessee, notice to quit the property leased. The
notice expires. B tenders and A accepts rent which has become due in respect of
the property since the expiration of the notice. The notice is waived.
172. Tralok Chand v Arjun Singh, 1977 SCC OnLine HP 30: AIR 1978 HP 2; Mohan Lal
Goela v Siri Kishan, 1977 SCC OnLine Del 80: AIR 1978 Del 92; Pallapothu Narasimha
Rao v Kidanbi Radhakrishnamacharytdu, 1977 SCC OnLine AP 171: AIR 1978 AP
319; Doddappa v Basavanneppa, 1978 SCC OnLine Kar 33: AIR 1978 Kar 143 (notice
to court); Metal Press Works Ltd v J.K. and Sons, 1978 SCC OnLine Cal 131: AIR 1978
Cal 472 (Waiver of forfeiture); Rajendra Mohan Ghosh v Kaushalla Deui, 1978 SCC
OnLine Pat 203: AIR 1978 Pat 292 (Withdrawal of deposits, effect of); Krishnadeo
Narayan Aggarival v Ram Krishan Rai, (1982) 3 SCC 230; Hans Raj v Hardev Singh,
1983 SCC OnLine P&H 464: AIR 1984 P&H 229; Dharma Chakra Centre v Denzong
Cinema Ltd, 1985 SCC OnLine Sikk 2: AIR 1985 Sikk 17; Vashu Deo v Balkishan,
(2002) 2 SCC 50; Deuasahayam v P. Savithramma, (2005) 7 SCC 653, notice to quit is
necessary even where the tenant is setting up adverse title or claims that he himself is
the owner.
173. 1918 SCC OnLine PC 58: (1917—18) 45 IA 222; Mani Kant Tituari v Babit Ram Dixit,
1978 SCC OnLine All 947: AIR 1978 All 144; Sharad v Vishnu, 1977 SCC OnLine Bom
35: AIR 1978 Bom 187; Mohd Indris Mian v Daman Sah, 1977 SCC OnLine Pat 79:
AIR 1978 Pat 82; Tara Chand v Ishivar Dass, 1981 SCC OnLine HP 11: AIR 1982 HP
29; Palani Ammal v Viswanatha Chettiar, (1998) 3 SCC 654.
(b) A, the lessor, gives B, the lessee, notice to quit the property leased. The
notice expires, and B remains in possession. A gives to B as lessee a second notice
to quit. The first notice is waived.
Scope.—Unlike the previous section the consent of the person to
whom notice is given is necessary to constitute waiver. The consent
could be express or implied.174 In the illustrations, notice is given by the
lessor and the consent of the lessee is implied in illustration (a), by his
tender of rent, and in illustration (ft), by his remaining in possession.
Illustration (a) shows that acceptance of rent for the period before the
notice expired does not operate as waiver. How far acceptance of rent
and issue of a second notice operate as waiver depends on the facts and
circumstances of each case. There has to be an express or implied agree
ment between the parties to the effect of waiver of notice. Where prem
ises are jointly held, any negotiation as to terms has to be joint. There
was no manifestation of intention in this case of co-sharers that they had
abandoned their right as to notice. Hence, the court found no waiver of
notice to quit or its nullification. The court directed vacation of premises
(—A subject to making payment of occupation charges and other charges.175
U=z/ In Tayabali Jaffarbhai Tankiwala v Asha & Co176, property of appel-
case pilot lant was let to tîe respondent as a monthly tenant. By means of a notice,
the tenant was informed by the landlord that he was in arrears and that
his tenancy was terminated. The tenant did not vacate and a second
notice was sent also claiming the premises for personal occupation, but
prior to the second notice the landlord received the amount referred to
as arrears in the first notice. In a suit for eviction of the tenants and for
recovery of rent, it was held:
[It seems to us that] on the facts which have been established the land
lord was bound to fail. It is abundantly clear that he had, in the second
notice...treated the tenancy as subsisting and not only the respondent was
described as a monthly tenant, but also in the plaint, even after the amend
ment had been allowed, rent was claimed up to... [the period covered by the
second notice]; thereafter the amount due was described as compensation
for use and occupation. The plaintiff was thus fully alive to the distinction
between rent and damages for use and occupation and it cannot be said that
174. Muni Lal v Nand Lal, 1971 SCC OnLine Del 22: AIR 1971 Del 300; Ram Bandhan v
Guddar Ram, 1971 SCC OnLine All 317: AIR 1971 All 485; Dahyabhai Limjibhai v
Amarchand Jagjivan, 1970 SCC OnLine Guj 34: AIR 1971 Guj 73. (This principle of
waiver is applicable even in cases of statutory tenancies under Rent Control Acts).
175. Fortune Investors & Traders Ltd v Punjab National Bank, AIR 2015 NOC 635 (Cal).
176. (1970) 1 SCC 46; Ramjilal v Gulabrai, AIR 1979 Bom 44; B.P. Shrivastava v Poon
Bai, 1981 SCC OnLine Del 107: AIR 1981 Del 344; Garware Paints Ltd v Prem Chand
Gupta, 1984 SCC OnLine All 590: AIR 1984 All 364. Vijay Kumar v Harbhajan Kaur,
AIR 2013 NOC 217 (J&K), shop given on rent, the landlady claimed eviction because
of personal need. The court said that it was not necessary for her to prove the personal
need. Acceptance of rent after notice did not alter the parties* rights.
S. 115] LEASES 365
he had abandoned the second notice and asked for the same to be treated as
non est or that he had relied solely on the first notice.... Under Section 113
of the Transfer of Property Act a notice given under Section in, clause (h) is
waived with the express or implied consent of the person to whom it is given
by any act on the part of the person giving it showing an intention to treat
the lease as subsisting....
If only the language of illustration [(b)] were to be considered, as soon as
the second notice was given the first notice would stand waived. Counsel
for the appellant has relied on the observation of Denning J, (as he then
was) in Lowenthal v Vanhowte177178 that where a tenancy is determined by
a notice to quit it is not revived by anything short of a new tenancy and in
order to create a new tenancy there must be an express or implied agreement
to that effect and further that a subsequent notice to quit is of no effect
unless, with other circumstances, it is the basis for inferring an intention to
create a new tenancy after the expiration of the first. The Privy Council in
Harihar Banerji v Ramsbashi Roy173 had said that the principles governing
a notice to quit under Section 106 of the Transfer of Property Act were the
same in England as well as in India. For the purpose of the present case it
is wholly unnecessary to decide whether for bringing about a waiver under
Section 113 of the Transfer of Property Act a new tenancy by an express or
implied agreement must come into existence. All that need be observed is that
Section 113 in terms does not appear to indicate any such requirement and all
that has to be seen is whether any act has been proved on the part of the pres
ent appellant which shows an intention to treat the lease as subsisting pro
vided there is an express or implied consent of the person to whom the notice
is given.
In the present case there can be no doubt that the serving of the second
notice and what was stated therein together with the claim as laid and ampli
fied in the plaint showed that the landlord waived the first notice by show
ing an intention to treat the tenancy as subsisting and that this was with
the express or implied consent of the tenant to whom the first notice had
been given because he had even made payment of the rent which had been
demanded though it was after the expiration of the period of one month
given in the notice.
It further appears that the rent was sent by the tenant treating the tenancy
as subsisting and not as having come to an end by virtue of the first notice.
EFFECT OF FORFEITURE AND SURRENDER ON

UNDER-LESSEE [S. 115]
The effect of surrender and forfeiture on under-lessees is provided in
Section 115.
115. Effect of surrender and forfeiture on under-leases.—The surrender,
express or implied, of a lease of immovable property does not prejudice an under
lease of the property or any part thereof previously granted by the lessee, on
177. (1947) 1 KB 342.

178. 1918 SCC OnLine PC 58: (1917-18) 45 IA 222.
3>66 LAW OF TRANSFER OF PROPERTY [Chap. 19]
terms and conditions substantially the same (except as regards the amount of
rent) as those of the original lease; but unless the surrender is made for the pur
pose of obtaining a new lease, the rent payable by, and the contracts binding on,
the under-lessee shall be respectively payable to and enforceable by the lessor.
The forfeiture of such a lease annuls all such under-leases except where such
forfeiture has been procured by the lessor in fraud of the under-lessees, or relief
against the forfeiture is granted under Section 114.
Whereas forfeiture destroys the right of an under-lessee, surrender does

not, because, the lessee, by surrendering his right, cannot derogate from
his grant by which he has created rights in an under-lessee. And if the
surrender is for obtaining a fresh lease, the under-lessee or sub-lessee will
continue to hold under his lessor, namely, the original lessee.179
EXERCISES
1. Distinguish between a lease and licence, (pp. 313-317)
2. What are the legal presumptions in relation to the duration of a
lease? (pp. 319-320)
3. What is the scope of the lessor’s obligation to put the lessee in pos
session? (pp. 345-346)
4. What is the implied covenant for quiet enjoyment? (pp. 339-340)
5. What is the law as to emblements? (pp. 342-343)
6. What is the effect of a lessee’s covenant not to alienate? (p. 344)
7. What is the scope of a lessee’s liability for waste? (p. 346)
8. What are the rights of a lessor’s transferee? (p. 348)
9. Explain “Law abhors forfeiture”, (p. 350)
10. What is the difference in effect on a sub-lessee of a “surrender” and
a “forfeiture”? (pp. 363-364)
11. What is the difference between “a tenant holding over”, “a tenant
by sufferance” and “a tenant at will”? (pp. 32.8-330)
179. See, Maneksha Ardeshir Irani v Manekji Edulji Mistry, (1974) 2. SCC 62.1.
LEASES 367

The following cases from this chapter are available 4 f—N

• Appayya Shetty v B.P.M. Mahammad Beari, 1915 SCC casepilc
OnLine Mad 504
• Associated Hotels of India Ltd v R.N. Kapoor, AIR 1959 SC 1262:
(i960) 1 SCR 368
• Baboo Lekhraj Roy v Kunhya Singh, 1877 SCC OnLine PC 13
• Bai Chanchai v Syed Jalaluddin, (1970) 3 SCC 124
• Benoy Krishna Das v Salsiccioni, 1932 SCC OnLine PC 43
• Board of Revenue v A. M. Ansari, (1976) 3 SCC 512
• Brahmayya v Sundaramma, 1947 SCC OnLine Mad 268
• Champa Lal v Gulabi, 1980 SCC OnLine Raj 46
• Chan drawati Devi v Surendra Pal Singh, 1979 SCC OnLine All 916
• Cropper v Smith, (1884) 26 Ch D 771
• Dattonpant Gopalvarao Devakate v Vithalrao Maruthirao Janagaval,
(1975) 2 SCC 246
• Durga Das Khanna v CIT, (1969) 1 SCC 429
• Errington v Errington, (1952) 1 KB 290: (1952) 1 All ER 149 (CA)
• Faqir Bakhsh v Murli Dhar, 1931 SCC OnLine PC 1
• Ganga Dutt Murarka v Kartik Chandra Das, AIR 1961 SC 1067:
(1961) 3 SCR 813
• Giridhari Singh v Megh Lal Pandey, 1917 SCC OnLine PC 49
• H.V. Low & Co Ltd v Jyotiprasad Singh Deo, 1931 SCC
OnLine PC 70
• Hansraj v Bejoy Lal Seal, 192.9 SCC OnLine PC in
• Harihar Banerji v Ramshashi Roy, 1918 SCC OnLine PC 58
• Hari Narayan Singh Deo v Sriram Chakravarti, 1910 SCC
OnLine PC 12
• Jaswantsingh Mathurasingh v Ahmedabad Municipal Corpn, 1992.
Supp (1) SCC 5
• Jawarlal v Labhsankar, AIR 1982 Guj 152
• Jiwan Ram v Tobgyal Wangchuk Tenzing, 1983 SCC OnLine Sikk 5
• K.A. Dhairyawan v J.R. Thakur, AIR 1958 SC 789: 1959 SCR 799
• Kaikhushroo Bezonjee Capadia v Bai Jerbai Hirjibhoy Wardan, 1949
SCC OnLine FC 11
368 LAW OF TRANSFER OF PROPERTY
(contd.)
• Kamakhya Narayan Singh v Ram Raksha Singh, 1928 SCC OnLine PC

27: (1927-28) 55 IA 212
• Karnani Industrial Bank Ltd v Province of Bengal, AIR 1951 SC 285:
1951 SCR 560
• Katyayani Debi v Udoy Kumar Das, 192.4 SCC OnLine PC 77
• Kauri Timber Co Ltd v Commr of Taxes, 1913 AC 771 (PC)
• Kishan Lal v Ganpat Ram Khosla, AIR 1961 SC 1554
• M.N. Clubtvala v Fida Hussain Saheb, AIR 1965 SC 610: (1964) 6
SCR 642
• Madhubala v Budhiya, 1980 SCC OnLine All 872
• Maharaja ofJeypore v Rukmini Pattamahevi, 1919 SCC OnLine
PC 2
• Mangilal v Sugan Chand Rathi, AIR 1965 SC 101: (1964) 5
SCR 239
• Mohd Amir Ahmad Khan v Municipal Board of Sitapur, AIR 1965
SC 1923
• Mohd Raza v Abbas Bandi Bibi, 1932 SCC OnLine PC 23
• Namdeo Lokman Lodhi v Narmadabai, AIR 1953 $C 228:
1953 SCR 1009
• Purban (P) Ltd v Deb Kumar Shaw, 1977 SCC OnLine Cal 112
• Raghunath Roy v Durga Prashad Singh, 1919 SCC OnLine PC 12
• Ramakrishna Malhya v Baburaya, (1914) 24 IC 139
• Ram Kumar Das v Jagdish Chandra Das, AIR 1952 SC 23
• Ram Lal Dutt Sarkar v Dhirendra Nath Roy, 1942 SCC OnLine
PC 33
• Rattan Lal v Vardesh Chander, (1976) 2 SCC 103
• Raval & Co v K.G. Ramachandran, (1974) 1 SCC 4249
• Shaha Ratansi Khimji & Sons v Kumbhar Sons Hotel (P) Ltd, (2014)
14 SCC i
• Sidebotham v Holland, (1895) 1 QB 378
• Sridhar Suar v Shri Jagannath Temple, (1976) 3 SCC 485
• Sunil Kumar Roy v Bhowra Kankanee Collieries Ltd, (1970) 3
SCC 565
• T. Umar Pulavar v Dawood Roivther, 1946 SCC OnLine Mad 112
• Tarkeshtvar Sio Thakur Jiu v Dar Dass Dey & Co, (1979) 3 SCC 106
• Tatya Savla Sundrik v Yeshwanta Kondiba Mulay, 1950 SCC OnLine
Bom 60
• Tayabali Jaffarbhai Tankiiuala v Asha & Co, (1970) 1 SCC 46
LEASES 369
(contd.)
• Undavilli Nagarathnam v Reddi Satyanarayana Murthi, (1976) 4

SCC 20
• V. Kalpakam Amina v Muthurama Iyer Muthurkrishna Iyer, 1994
SCC OnLine Ker 182
• Veena Rani v Ishrati Amanullah, 1984 SCC OnLine Pat 176
• W.H. King v Republic of India, AIR 1952 SC 156: 1952 SCR 418
• Womesh Ch under Goopto v Raj Narain Roy, (1868) 10 WR 15
Chapter 20
Exchanges
Sections 118 to 121 deal with the law relating to exchanges.

118. “Exchange” defined.—Where two persons mutually transfer the owner
ship of one thing for the ownership of another, neither thing or both things being
money only, the transaction is called an “exchange”.
A transfer of property in completion of an exchange can be made only in man
ner provided for the transfer of such property by sale.
A partition is not an exchange, because the parties are not in exclusive
possession of properties which they interchange.1
119. Right of party deprived of thing received in exchange.—If any party to
an exchange or any person claiming through or under such party is by reason of
any defect in title of the other party deprived of the thing or any part of the thing
received by him in exchange, then, unless a contrary intention appears from the
terms of the exchange, such other party is liable to him or any person claiming
through or under him for loss caused thereby, or at the option of the person
so deprived, for the return of the thing transferred, if still in the possession of
such other party or his legal representative or a transferee from him without
consideration.
This deals with warranty of title and remedies for its breach.2
120. Rights and liabilities of parties.—Save as otherwise provided in this
Chapter, each party has the rights and is subject to the liabilities of a seller as to
that which he gives, and has the rights and is subject to the liabilities of a buyer
as to that which he takes.
121. Exchange of money. — On an exchange of money, each party thereby
warrants the genuineness of the money given by him.
Money means both coins and currency notes.
1. See, S. 5. Than Singh v Nandu, 1977 SCC OnLine P&H 151: AIR 1978 P&H 94; ]attu
Ram v Hakam Singh, (1993) 4 SCC 403.
2. Chinnathambi Gounderv Royal Gounder, 1979 SCC OnLine Mad 47: AIR 1979 Mad
285; V. Narasimharaju v V. Gurumurthy Raju, AIR 1963 SC 107: (1963) 3 SCR 687;
CASE PILOT
Ouseph Poulo v Catholic Union Bank Ltd, AIR 1965 SC 166.
[S. 121] EXCHANGES 371
The following further points may be noticed with respect to exchanges:

i. If in addition to the property, some money is paid or agreed to be
paid to set off any inequality, the transaction does not cease to be
an exchange.
2. But, unlike a sale if such money is not paid, the other party can not
have any charge for the unpaid money, on the exchanged property.
3. If one of the parties is deprived of a part, the other can, (a) retain
the rest and ask for compensation, or (b) repudiate the whole
transaction.
4. An exchange is when either both objects being transferred are in
terms of money or neither is money. This means that where one of
the considerations is money (price), it is a sale and not an exchange.
5. The definition of exchange is not limited to immovable property.
A partition deed does not involve an exchange because the parties to a
partition are already joint owners of the property. When one movable
property is exchanged for another movable property, it is known as bar
ter. It is also an exchange within the meaning of Transfer of Property
Act. One kind of property may be exchanged with a property of another
kind, for example, an item of property may be given in lieu of shares.3
Where both properties are movable registration is not compulsory. But
if one of the properties is immovable and is of the value more than
^100, registration becomes necessary.4 An immovable property given in
exchange does not confer a legal title on the recipient. But by virtue of
remaining in possession for over 12 years without any protest confers
upon him title as against the other parties to the exchange.
EXERCISES
1. Is “partition” an “exchange”? (pp. 368-369)
3. CIT v Motors and General Stores (P) Ltd, AIR 1968 SC zoo.
4. Birbal v Barfu Devi, AIR zoo8 NOC 1874 (HP); Nivrutti v Sakhubai, 2009 SCC OnLine
Bom 19: AIR 2009 Bom 93; Kashi Nath Tetvari v Makchhed Teivari, 2003 SCC OnLine
AP 753: AIR 1939 All 504.; Srihari Jena v Khetramohan Jena, 2002 SCC OnLine Ori 50:
AIR 2002 Ori 195, exchange of property in return for compromising a criminal case held
void under S. 23, Contract Act, 1872.

and statutes referred to in the book ill [—]EBC
The following case from this chapter is available

• Chinnathantbi Gounder v Royal Gounder, 1979 SCC CASE PILOT
OnLine Mad 47
Chapter 21
Gifts
GIFTS
The law relating to “Gifts” is set out in Sections izz to 1Z9.
122. “Gift” defined. — “Gift” is the transfer of certain existing movable or
immovable property made voluntarily and without consideration, by one person,
called the donor, to another, called the donee, and accepted by or on behalf of
the donee.
Acceptance when to be made.—Such acceptance must be made during the
lifetime of the donor1 and while he is still capable of giving.
If the donee dies before acceptance, the gift is void.
Consideration means valuable consideration.2 While a minor can not be

a donor, he could be a donee unless onerous conditions are attached to
the gift.3 This follows from the words “on behalf of the donee” The
donee must be in existence at the date of gift. He could be en ventre de sa
1. Vasudev Ramchandra Shelat v Pranlal Jayanand Thakar, (1974) 2 SCC 323.

2. Shakuntala v State of Haryana, (1979) 2 SCC 226; Bhubaneswar Naik Santoshrai v
CASE PILOT
Tahsildar, 1979 SCC OnLine AP 191: AIR 1980 AP 139; Sonia Bhatia v State of U.P.,
(1981) 2 SCC 585; Duraisami Reddiar v Saroja Animal, 1981 SCC OnLine Mad 18: AIR
1981 Mad 351; Rajammal v Mookan, (1981) 3 SCC 518; Tirath v Manmohan Singh, 1980
SCC OnLine P&H 214: AIR 1981 P&H 174; Janardan Prasad v Girja Prasad Seth, 1980
SCC OnLine All 752: AIR 1981 All 86 (Gift to a minor); Ponnuchamiv Balasubramaniam,
1981 SCC OnLine Mad 57: AIR 1982 Mad 281; Munni Devi v Chhoti, 1982 SCC OnLine
All 803: AIR 1983 All 444; Brundaban Misra v Is war Swain, 1983 SCC OnLine Ori 14:
AIR 1983 Ori 172; Sunder Bai v Anandi Lal, 1982 SCC OnLine All 637: AIR 1983 All
23; Chanan Singh v Pritam Kaur, 1983 SCC OnLine P&H 694: AIR 1984 P&H 153;
Shri Ram Kishan Mission v Dogar Singh, 1983 SCC OnLine All 581: AIR 1984 All 72;
Subhash Chandra v Nagar Mahapalika, 1983 SCC OnLine All 728: AIR 1984 All 228;
Shakuntla Devi v Amar Devi, 1985 SCC OnLine HP 13: AIR 1985 HP 109; Sukhdeo Rai
v Champa Debi, 1984 SCC OnLine Pat 146: AIR 1985 Pat 89; Ajmer Singh v Atma Singh,
1984 SCC OnLine P&H 688: AIR 1985 P&H 315; C/Tv R.S. Gupta, (1987) 2 SCC 84;
CED v Vithal Das, (1987) 2 SCC 37; Chaudhary v Prabhawati, 2012 SCC OnLine All
949: AIR 2012 All 173, Bhumidari property donated to daughter, a sum of ^40,000 was
mentioned as value of the property. This being only for purposes of valuation of stamp
duty, etc. was held to be not consideration. The transaction was a gift not a sale.
3. See, S. 7.

The following case from this chapter is available

• Chinnathatnbi Gounder v Royal Gounder, 1979 SCC CASE PILOT
OnLine Mad 47
Chapter 21
Gifts
GIFTS
The law relating to “Gifts” is set out in Sections izz to 129.
122. “Gift” defined. — “Gift” is the transfer of certain existing movable or
immovable property made voluntarily and without consideration, by one person,
called the donor, to another, called the donee, and accepted by or on behalf of
the donee.
Acceptance when to be made.—Such acceptance must be made during the
lifetime of the donor1 and while he is still capable of giving.
If the donee dies before acceptance, the gift is void.
Consideration means valuable consideration.2 While a minor can not be
a donor, he could be a donee unless onerous conditions are attached to
the gift.3 This follows from the words “on behalf of the donee”. The
donee must be in existence at the date of gift. He could be en ventre de sa
1. Vasudev Ramchandra Shelat v Pranlal Jayanand Thakar, (1974) 2 SCC 323.

2. Shakuntala v State of Haryana, (1979) 2 SCC 226; Bhubaneswar Naik Santoshrai v
CASE PILOT
Tahsildar, 1979 SCC OnLine AP 191: AIR 1980 AP 139; Sonia Bhatia v State of U.P.,
(1981) 2 SCC 585; Duraisami Reddiar v Saroja Ammal, 1981 SCC OnLine Mad 18: AIR
1981 Mad 351; Rajammal v Mookan, (1981) 3 SCC 518; Tirath v Manmohan Singh, 1980
SCC OnLine P&H 214: AIR 1981 P&H 174; Janardan Prasad v Girja Prasad Seth, 1980
SCC OnLine All 752: AIR 1981 All 86 (Gift to a minor); Ponnuchami v Balasubramaniam,
1981 SCC OnLine Mad 57: AIR 1982 Mad 281; Munni Devi v Chhoti, 1982 SCC OnLine
All 803: AIR 1983 All 444; Brundaban Misra v Iswar Swain, 1983 SCC OnLine Ori 14:
AIR 1983 Ori 172; Sunder Bai v Anandi Lal, 1982 SCC OnLine All 637: AIR 1983 All
23; Chanan Singh v Pritam Kaur, 1983 SCC OnLine P&H 694: AIR 1984 P&H 153;
Shri Ram Kishan Mission v Dogar Singh, 1983 SCC OnLine All 581: AIR 1984 All 72;
Subhash Chandra v Hagar Mahapalika, 1983 SCC OnLine All 728: AIR 1984 All 228;
Shakuntla Devi v Amar Devi, 1985 SCC OnLine HP 13: AIR 1985 HP 109; Sukhdeo Rai
v Champa Debi, 1984 SCC OnLine Pat 146: AIR 1985 Pat 89; Ajmer Singh v Atma Singh,
1984 SCC OnLine P&H 688: AIR 1985 P&H 315; CIT v R.S. Gupta, (1987) 2 SCC 84;
CED v Vithal Das, (1987) 2 SCC 37; Chaudhary v Prabhawati, 2012 SCC OnLine All
949: AIR 2012 All 173, Bhumidari property donated to daughter, a sum of ^40,000 was
mentioned as value of the property. This being only for purposes of valuation of stamp
duty, etc. was held to be not consideration. The transaction was a gift not a sale.
3. See, S. 7.
mere so that a gift could even be made to a child in its mother’s womb,
provided it is properly accepted on its behalf.
The property gifted must be existing, and not a future property. It
must also be transferable under Section 6. The donor must have rights
over the property. A donor bequeathed his property to a trust and left
nothing for his wife and her foster son. The wife made a gift of the prop
erty so dealt with. There was nothing left to show that she had any rights
over the property in any manner.4
This chapter deals only with gifts inter vivos. Gifts mortis causa of
movable property and gifts by will are not covered by this Act.5
A gift can only be in favour of an ascertainable person. Therefore, it
cannot be in favour of the public, though it can be in favour of an idol.
Unlike English Law, under this Act, acceptance by the donee is essential,
though it need not be express and may be inferred from the circum
stances of the transaction.
Where the donee is a minor but has attained the age of discretion (e.g.
16-17 years) and the donor is a natural guardian, silent acceptance by
the donee may be deemed to be an implied acceptance of the gift. A nat
ural guardian, a mother, gifted certain property to her son aged 16 years.
The possession and right of enjoyment was retained by her. The Supreme
Court held that the gift was not revocable on account of non-acceptance
by the minor. The court said that ownership of the property of the minor
could be presumed by silent acceptance, particularly when the donee was
an educated person of 16 years and had knowledge that the gift had been
executed in his favour. The fact that possession was not delivered or the
right of ownership over the property was not exercised and the donee, on
attaining majority, did not have the property mutated in his favour were
circumstances which could not be used for negativing the presumption of
implied acceptance of the gift by the minor.6
A gift deed'was got executed by the lady donor when she was not in a
fit state of mind and was not able to look after herself. She was not able
to show any knowledge of the document. The attesting witnesses did
not seem to be reliable because they had not signed in the presence of
each other. The scribe was not able to ensure that a doctor came into the
house to see whether the donor was in a proper state of mind. The gift
was held to be the result of a fraud.7
4. Kesbava Pai v V. Jothoji Rao, AIR 2014 NOC 166 (Kar).

5. Chhotelal Dhandu Kewat v Rajmati Banduram Keivat, 2009 SCC OnLine Chh 25: AIR
2009 Chh 43, the document was described as gift, but its contents showed that the interest
in the property was not to be transferred till the executor’s death, the document was held
to be a will and not a gift. Premoda Devi v Sabitri Devi, AIR 2015 Gau 29, allegation
that the donor was a person of unsound mind at the time of execution of gift deed, but no
evidence was offered to that effect. No setting aside of gift.
6. K. Balakrishnan v K. Kantalam, (2004) 1 SCC 581.
7. Pulakesh Datta v Parintal Dey, AIR 2015 NOC 861 (Tri).
S. 123] GIFTS 375
In another case of the same kind, the gift deed was signed by only
one attesting witness whereas the mandatory requirement is that of two
attesting witnesses. The sole attesting witness was not called before the
court, nor the scribe. No evidence was produced of the fact that the sig
nature of the donor was identified. The gift was held to be not valid. The
donee was not allowed to derive any benefit from it.8
It is further necessary that the gift should be a voluntary act of the
donor. Free consent of the donor as defined in Section 14, Contract
Act, 1872. is necessary. In one of the cases an old, illiterate and ail
ing lady was taken by her collateral relative to his home, put before
dhooni to ward off any evil spirit and in that state made to sign two
papers telling her that they were her pension papers. In fact they were
two gift deeds. As soon as she came to know she challenged the gift
deeds. The court held that it could not be said that she had executed
the gift deeds voluntarily. She was positively acting under influence and
without any independent advice. The deeds were set aside.9 Similarly,
in another case of the same kind, advantage was taken of the old age
and ill-health of the donor lady in making her to sign the gift deed, the
same was declared to be void. The evidence, however, showed that she
always desired to help the donee and had allowed him to make a house
on a part of the land. The gift was not accordingly disturbed up to that
extent.10
TRANSFER HOW EFFECTED [S. 123]

123. Transfer how effected. — For the purpose of making a gift of immovable
property, the transfer must be effected by a registered instrument signed by or on
behalf of the donor, and attested by at least two witnesses.
For the purpose of making a gift of movable property, the transfer may be
effected either by a registered instrument signed as aforesaid or by delivery.
Such delivery may be made in the same way as goods sold may be delivered.
A registered instrument is necessary for the gift of immovable property

whatever its value. Unlike a sale, but like a mortgage, attestation by two
witnesses is also necessary.
When another signs “on behalf” of the donor he signs only the donor’s
name and not his own.
8. Golap Borah v Padmeshwar Borah, 2015 SCC OnLine Gau 165: AIR 2015 Gau 99.
9. Surjit Singh v Bimla Devi, AIR 2008 NOC 969 (HP).
10. Sulender Singh v Pritam, AIR 2014 NOC 236 (HP); Indrasan Singh v Yudhishtir Singh,
AIR 2008 NOC 1649 (Jhar), an old mother of four daughters, persuaded by the youngest
son-in-law to execute the gift deed in favour of her youngest daughter, his wife, to the
exclusion of other daughters. There were other irregularities, e.g. no attestation by any
of the relatives, or neighbours, only by strangers, she did not consult her husband on the
point and denied all knowledge about contents. Gift deed was set aside.
In Kalyanasundaram Pillai v Karuppa Mooppanar11, a gift deed was

duly executed and attested and handed over to the donee. It was not reg
CASE PILOT
istered, but the donee accepted the gift. The donor sought to revoke it as
he had taken a boy in adoption thereafter. It was held:
The circumstances in... [Atmaram Sakharam Kalkye v Vaman Janardhan
Kashelikar12] were very much the same as in the present, and the decision
CASE PILOT
is thus correctly expressed...: ‘Where the donor of immovable property has
handed over to the donee an instrument of gift duly executed and attested,
and the gift has been accepted by the donee, the donor has no power to
revoke the gift prior to the registration of the instrument.’...
When the instrument of gift has been handed by the donor to the donee
and accepted by him, the former has done everything in his power to com
plete the donation and to make it effective. Registration does not depend
upon his consent, but is the act of an officer appointed by law for the pur
pose, who, if the deed is executed by or on behalf of the donor and is attested
by at least two witnesses, must register it if it is presented by a person having
the necessary interest within the prescribed period. Neither death, nor the
express revocation by the donor, is a ground for refusing registration, if the
other conditions are complied with.
Acceptance of the gift by the donee is thus the most important part of the
transaction. Registration can be later. A gift, in fact, takes effect from
the date of execution of the deed and not from the date of the registra
tion. Also, if a person wants to make a gift inter vivos, but fails because
of some defect in the transaction, it cannot be construed as creating a
trust. A gift deed was not held to be forged or fabricated only for the rea
son that it mentioned wrong address of the donee. The court said that it
could be rectified by executing another document. The fact of possession
remaining with the donor was also held to be no indication of forgery.
The donee was a sister of the donor. It could be for the reason that he was
looking after the land by keeping it with him.13
The donor must have such rights over the property as would enable
him to make an effective transfer. Where a joint family property was
gifted by one of the family members before partition, the deed of dona
tion was held to be void.14
Where this condition was attached to the gift that the donee would
serve the donor till her lifetime and the donee complied with the condi
tion till the donor’s demise, it was held that the gift had become absolute.
11. 1926 SCC OnLine PC 64: (1926-27) 54 IA 89; State ofV.P. v Sayed Abdul Jalil, (1973) 2
SCC 26; Shakuntala v State of Haryana, (1979) 3 SCC 226; Surendra Kumar v Nathulal,
(2001) 5 SCC 46; M. Rangasamy v Rengammal, (2003) 7 SCC 683.
12. 1924 SCC OnLine Bom 45: AIR 1925 Bom 210; Khushalchand Swarup Chand Zabak
Jain v Sureshchandra Kanhaiyalal Kochar, 1995 Supp (2) SCC 36; Gomtibai v Mattulal,
(1996) 11 SCC 681; Naramadaben Maganlal Thakker v Pranjivandas Maganlal Thakker,
(1997) 2 SCC 255; Baby Amtnal v Rajan Asari, (1997) 2 SCC 636.
13. Vrmila Devi v State of Bihar, AIR 2015 NOC 859 (Pat).
14. Kirpal Kaur v Jitender Pal Singh, (2015) 9 SCC 356.
S. 123] GIFTS 377
The legal heirs could not claim the property on the ground that the donee
did not continue serving the legal heirs.15
Where this stipulation was attached to the document that the execu
tant was to keep possession of the property, utilise its income for repaying
loans and also for its maintenance. After his lifetime the property was to
go absolutely to his sons. The court said that no right or interest was cre
ated in favour of the sons during lifetime of the executant. The document
was not a gift. It was a will which could be revoked. Revocability is the
point of difference between a gift and will.16
Delivery of possession not necessary.—The Supreme Court has been

of the opinion that Section 123 supersedes the rule of Hindu Law insofar
as such rule required delivery of possession to the donee. Sections 122
and 123, Transfer of Property Act, do not seem to require that in the case
of gift of immovable property there should be delivery of possession. The
gift in this case was registered and accepted by the donee. Recitals in the
gift deed showed that there was absolute transfer of title to the donee.
The mere fact that the donor retained the right to use the property dur
ing her lifetime did not in any way affect the transfer of ownership from
donor to donee.17
Gift to Idol.—The Supreme Court18 has endorsed the view expressed

by the Madras High Court.19 Although an idol is recognised as a juristic
person but it is not strictly speaking a living person, a gift to an idol is
outside the purview of the Act. Registration is therefore not necessary.
The Supreme Court held that as the suit property was dedicated to a
deity, it did not require registration. This was also so because it consti
tuted a religious trust. Such gift may even be oral. It may at choice be
effected by a registered instrument.
Gift to minor.—A property can be gifted to a minor but a caretaker

has to be designated. A widow gifted her self-acquired property by
means of a gift deed in favour of a minor. Those who were not her legal
heirs, cognates or agnates, could not dispute the disposition. The prop
erty was put in possession of the minor donee’s father. He looked after
the property on behalf of the minor. The father executed a will giving
the property to the sons of his second wife. It was held that he had no
right to do so. The father led oral evidence to the effect that the donor’s
real intention was to gift the property to the father. Such evidence was
15. Chameli v Naresh Kumari, 2009 SCC OnLine P&H 7788: AIR 2010 P&H 55.
16. Mathai Samuel v Eapen Eapen, AIR 2013 SC 532.
17. Renikuntla Rajanima v K. Sarwanamma, (2014) 9 SCC 445.
18. Sainath Mandir Trust v Vijaya, (2011) 1 SCC 623.
19. Tangella Narasimhasivami v Mamidi Venkatalingam, 1927 SCC OnLine Mad 13: AIR
1927 Mad 636.
not allowed by virtue of the provisions of Sections 91 and 92, Evidence

Act, 1872.20
The next group of sections, Sections 124 to 129 provide as follows:
124. Gift of existing and future property.—A gift comprising both existing
and future property is void as to the latter.
125. Gift to several of whom one does not accept.—A gift of a thing to two
or more donees, of whom one does not accept it, is void as to the interest which
he would have taken had he accepted.
126. When gift may be suspended or revoked.—The donor and donee may
agree that on the happening of any specified event which does not depend on the
will of the donor a gift shall be suspended or revoked, but a gift which the parties
agree shall be revocable wholly or in part at the mere will of the donor is void
wholly or in part, as the case may be.
A gift may also be revoked in any of the cases (save want or failure of consid
eration) in which, if it were a contract21, it might be rescinded.
Save as aforesaid, a gift cannot be revoked.
Nothing contained in this section shall be deemed to affect the rights of trans
ferees for consideration without notice.
Illustrations
(a) A gives a field to B, reserving to himself, with B’s assent, the right to
take back the field in case B, and his descendants die before A. B dies without
descendants in A’s lifetime. A may take back the field.
(B) A gives a lakh of rupees to B, reserving to himself, with B’s assent, the right
to take back at pleasure Rs 10,000 out of the lakh. The gift holds good as to Rs
90,000 but is void as to Rs 10,000 which continues to belong to A.
[See, Ss. 21, 25 and 31, Section 19, Contract Act, they lay down the cases
in which a contract may be rescinded.]
The first part of the section relates to a condition subsequent agreed to,
between the donor and donee, on the happening of which the gift is put
an end to. It must be express and should not be violative of Sections 10
and 11.
If the revocation depends on the will of the donor then the gift is void.
A gift cannot be revoked on any other grounds than those mentioned
in the section. A gift deed was validly executed in favour of the donee.
The donor simultaneously claimed that he had unilaterally revoked the
gift and that he had lodged it for registration. It was held that neither such
unilateral revocation nor unilateral registration were valid. Participation
of the donee is necessary.22
20. Ramesh v Tarachand, AIR 2008 NOC 1170 (Bom); Chothu v Board of Revenue, AIR
2013 NOC 122 (Raj), the daughter of the donor, no locus standi to question a completed
gift.
21. Afsar Sheikh v Soleman Bibi, (1976) 2 SCC 142; Thakur Raghunath Ji Maharaj v Ramesh
Chandra, (2001) 5 SCC 18; K. Balakrishnan v K. Kamalam, (2004) 1 SCC 581.
22. Sheel Arora v Madan Mohan Bajaj, AIR 2009 NOC 333 (Bom); Fazalullah Khan v State
of A.P., AIR 2012 AP 163, another case of the same kind. The gift deed was completed in
S. 127] GIFTS 379
Bona fide transferee.—A gift deed which carries a condition as a

ground for revocation is revocable if that condition is not fulfilled. A
gift was made subject to the condition that the donee would pursue a
particular line of education. He did not pursue it but transferred the
property for value to a person who had no knowledge of the fact of gift
or of the condition attached to it. Thus, he was a bona fide buyer for val
uable consideration. The revocation of the gift did not deprive him of his
acquisition of the property. The subsequent conduct of the donee is not a
ground for rescission of a valid gift.23
127. Onerous gift.—Where a gift is in the form of a single transfer to the
same person of several things of which one is, and the others are not, burdened
by an obligation, the donee can take nothing by the gift unless he accepts it
fully.
Where a gift is in the form of two or more separate and independent trans
fers to the same person of several things, the donee is at liberty to accept one of
them and refuse the others, although the former may be beneficial and the latter
onerous.
Onerous gift to disqualified person.—A donee not competent to contract and
accepting property burdened by any obligation is not bound by his acceptance.
But if, after becoming competent to contract and being aware of the obligation,
he retains the property given, he becomes so bound.
Illustrations
(a) A has shares in X, a prosperous joint stock company, and also shares in Y,
a joint stock company, in difficulties. Heavy calls are expected in respect of the
shares in Y. A gives B all his shares in joint stock companies. B refuses to accept
the shares in Y. He cannot take the shares in X.
(b) A having a lease for a term of years of a house at a rent which he and his
representatives are bound to pay during the term, and which is more than the
house can be let for, gives to B the lease, and also, as a separate and independent
transaction, a sum of money. B refuses to accept the lease. He does not by this
refusal forfeit the money.
Onerous gift means a gift of property which is burdened with liabili
ties or, in other words, gift of a non-beneficial property. Why should
anybody accept it. The section therefore contemplates of a single gift of
several properties some of which onerous and others are beneficial. The
section therefore requires that the donee has to accept the whole gift and
not merely the beneficial part of it. The application of this rule requires
that there should be a single transfer of both types of property. If the two
types of property are gifted by separate and independent transactions,
the donee would have the choice to reject the onerous transaction.
all respects by registration and possession. Unilateral revocation deed and its registration
not valid.
23. Asokan v Lakshmikutty, (2007) 13 SCC 210; Kamalakanta Mohapatra v Pratap Chandra
Mohapatra, 2009 SCC OnLine Ori 39: AIR 2010 Ori 13, a completed gift cannot be
revoked without complying with the mandatory requirements of the section.
If gift of both types of property is made to a minor or any otherwise

disqualified person, he may accept it. But on attaining majority he may
either keep up his acceptance or reject the whole. If he keeps the prop
erties comprised in the gift, he is deemed to have accepted it. The donor
cannot take back the properties unless on attaining majority he rejects
the gift. If the donee dies during his minority, property passes to his heirs.
The donor cannot take back the gift on the ground of incompleteness.24
See, Section 35.
128. Universal donee.—Subject to the provisions of Section 127 where a gift
consists of the donor’s whole property, the donee is personally liable for all the
debts due by and liabilities of the donor at the time of the gift to the extent of the
property comprised therein.
If the universal donee is a person not competent to contract, he is not lia

ble under this section unless he retains the property after the incapacity
is removed.
Donor’s whole property means his entire property both movable and
immovable.25 If any item of property, movable or immovable is left with
the donor, the donee is not a universal donee. A universal donee succeeds
to the donor’s all assets and liabilities. The donee becomes personally
liable for all the debts and liabilities of the donor which were outstand
ing at the time of donation. His liability is only to the extent of donated
properties.
If the donor is earning some money by way of his salary, but has
made gift of all his other properties, the donee is nevertheless a universal
donee.26 Universal donee’s liability is restricted to the value of the items
of property received. He is not personally liable if the assets so received
are not sufficient to meet the outstandings.
129. Saving of donations mortis causa and Muhammadan law.—Nothing
in this chapter relates to gifts of movable property made in contemplation of
death, or shall be deemed to affect any rule of Muhammadan law.
The death-bed gifts are confined to movable property and take effect
only if the donor dies. See, Section 191, Succession Act.27
24. Subratnania Ayyar v Sitha Lakahmi, ILR (1897) 20 Mad 147.

25. Lingareddi Sreenivasulu Reddi v D. Muniratnam Reddi, 1977 SCC OnLine AP 113:
AIR 1978 AP 173; Sk Faathima Bi v Sri Venkata Chaiapathy Finance Corpn, 1977 SCC
OnLine AP 283: AIR 1978 AP 401; Shanmugam v Syndicate Bank, 1998 SCC OnLine
Mad 690: (1999) 3 CTC 186, (Current TN cases), all the lands and structures on it were
settled in favour of the donees, the property was brought up with the help of bank loan,
settlers died without paying back the bank, the bank levied execution and attached all the
properties under settlement. Settlees were universal donees. They being the legal repre
sentatives of the mortgagees, were bound to pay their debts.
26. Sk Fathima Bi v Sri Venkata Chaiapathy Finance Corpn, 1977 SCC OnLine AP 283: AIR
1978 AP 401.
27. Mohd Hesabuddin v Mohd Hesaruddin, 1983 SCC OnLine Gau 10: AIR 1984 Gau 41.
S. 129] GIFTS 381
The section confers exemption on two types of gift, namely, gifts made
in contemplation of death and secondly, where the donor is a Muslim
though the donee need not be so. In the case of Muslims, a gift, which is
known as “Hiba”, is governed by the Muslim personal law. The require
ments of a Hiba are declaration, acceptance and delivery of possession.
It is also exempted from registration, even if it is made in writing.28 Such
oral gift is valid whatever may be the value of property involved and
since the transfer is being effected in writing it would require registra
tion. Section 17, Registration Act becomes applicable.2’
Gift made by a person in contemplation of his death is known as
donatio mortis causa. Under the Muslim Law such gifts are taken to be
wills. Such gifts are confined only to movables.
EXERCISES
1. Resumable gifts are void, but conditional gifts are valid. Explain.
(p. 376)
2. When can a gift be revoked? (pp. 376-377)
3. Who is a universal donee? (p. 378)
4. What is a donatio mortis causa? (p. 379)
28. Hafeeza Bibi v Sk Farid, (2011) 5 SCC 654.

29. Govt of Hyderabad v Tayyaba Begum, 1961 SCC OnLine AP 156: AIR 1962 AP 199.

through EBC Explorer™ on SCC Online*;
The following cases from this chapter are available c=V

• Atmaram Sakharam Kalkye v Vatnan Janardhan case pilot
Kashelikar, 1924 SCC OnLine Bom 45
• Kalyanasundaram Pillai v Karuppa Mooppanar, 1926 SCC OnLine
PC 64
• Vasudev Ramchandra Shelat v Pranlal Jayanand Thakar, (1974) 2
SCC 32.3
Chapter 22
Actionable Claims
Section 3 defines an actionable claim. [See, p. 44] An actionable claim is

one which forms a basis for an action in law, an action must be one which
the courts of law recognise as grounds for relief. An actionable claim is
either an unsecured debt or a claim as to a beneficial interest in mova
ble property not in possession, either actual or constructive possession
whether in present or in the future, whether conditional or contingent.
Sections 130 and 131 provide for the mode of transfer of an actionable
claim and the right of the transferee.1
130. Transfer of actionable claim.—(1) The transfer of an actionable claim
whether with or without consideration shall be effected only by the execution of
an instrument in writing2 signed by the transferor or his duly authorised agent,
shall be complete and effectual upon the execution of such instrument, and there
upon all the rights and remedies of the transferor, whether by way of damages
or otherwise, shall vest in the transferee, whether such notice of the transfer as is
hereinafter provided be given or not:
Provided that every dealing with the debt or other actionable claim by the
debtor or other person from or against whom the transferor would, but for such
instrument of transfer as aforesaid, have been entitled to recover or enforce such
debt or other actionable claim, shall (save where the debtor or other person is
party to the transfer or has received express notice thereof as hereinafter pro
vided) be valid as against such transfer.
(2) The transferee of an actionable claim may, upon the execution of such
instrument of transfer as aforesaid, sue or institute proceedings for the same in
his own name without obtaining the transferor’s consent to such suit or proceed
ings and without making him a party thereto.
1. Union of India v Sri Sarada Mills Ltd, (1972) 2 SCC 877 (claim of damages held not to
be transferable).
CASE PILOT
2. Maddi Rama Kotaiah v Maddi Seshamma, 1970 SCC OnLine AP 164: AIR 1971 AP
315 (case of promissory note); Champalal Gajanand v Padam Chand Sheolal Jain, 1967
SCC OnLine MP 62: AIR 1971 MP 133; Sheth Dahyabhai Chimanlal v Sheth Ambalal
Himatlal, (1981) 3 SCC 644; K. Krishnamurthy Rao v Kamalakshi, 1982 SCC OnLine
Kar 253: AIR 1983 Kar 235.
[S. 132] ACTIONABLE CLAIMS 383
Exception.—Nothing in this section applies to the transfer of a marine or fire

policy of insurance or affects the provisions of Section 38 of the Insurance Act,
1938 (IV of 1938).
Illustrations
(i) A owes money to B, who transfers the debt to C. B then demands the
debt from A, who, not having received notice of the transfer as prescribed in
Section 131, pays B. The payment is valid, and C cannot sue A for the debt.
(ii) A effects a policy on his own life with an insurance company and assigns
it to a bank for securing the payment of an existing or future debt. If A dies
the bank is entitled to receive the amount of the policy and to sue on it with
out the concurrence of A’s executor, subject to the proviso in sub-section (1) of
Section 130 and to the provisions of Section 132.
See, Section 3 under “actionable claim” and Section 8 under “debts and
securities”.
The proviso is intended for the benefit of the debtor and he is pro
tected when he pays off the debt without notice of the transfer.
The section does not prevent the assignment of a part of the debt.
Curiously, though a gift of immovable property by a Muslim does not
require a document because of Section 129, since there is no such saving
provision in this Chapter, a gift of an actionable claim by Muslim must
comply with the requirements of this section.
A court “decree” does not fall within the ambit of actionable claims.
It is neither a share nor an interest. It does not fall within four corners
of Section 136?
Section 131 is as follows:
131. Notice to be in writing, signed.—Every notice of transfer of actionable
claim shall be in writing, signed by the transferor or his agent duly authorized
in this behalf, or, in case the transferor refuses to sign, by the transferee or his
agent, and shall state the name and address of the transferee.
As regards the rights of the transferee, they do not depend on the

notice, because under Section 130 he gets the right upon the execu
tion of the instrument of transfer. But in the absence of notice to the
debtor his dealings with the debt are protected under the proviso to that
section.
Section 132, which provides for the liability of a transferee of an
actionable claim, reads:
132. Liability of transferee of actionable claim.—The transferee of an
actionable claim shall take it subject to all the liabilities and equities to which the
transferor was subject to in respect thereof at the date of the transfer.34
3. Devkinandan v State of M.P., 2.011 SCC OnLine MP 650: (2011) 4 MPLJ 633.
4. Sunrise Associates v Govt (NCT of Delhi), (2.006) 5 SCC 603, actionable claims are
transferable. The decision to the contrary effect in Vikas Sales Corpn v CCT, (19.96) 4
SCC 433 was described as erroneous.
Illustrations
(/) A transfers to C, debt due to him by B, A being then indebted to B. C sues
B for the debt due by B to A. In such suit B is entitled to set off the debt due by A
to him; although C was unaware of it at the date of such transfer.
(n) A executed a bond in favour of B under circumstances entitling the former,
to have it delivered up and cancelled. B assigns the bond to C for value and with
out notice of such circumstances. B cannot enforce the bond against A.

133. Warranty of solvency of debtor.—Where the transferor of a debt war
rants the solvency of the debtor, the warranty, in the absence of a contract to the
contrary, applies only to his solvency at the time of the transfer, and is limited,
where the transfer is made for consideration, to the amount or value of such
consideration.
The rest of the sections deal with certain exceptions and how the money
received is to be applied:
134. Mortgaged debt.—Where a debt is transferred for the purpose of secur
ing an existing or future debt, the debt so transferred, if received by the trans
feror or recovered by the transferee, is applicable, first, in payment of the costs
of such recovery; secondly, in or towards satisfaction of the amount for the time
being secured by the transfer; and the residue, if any, belongs to the transferor or
other person entitled to receive the same.
Section 130 deals with the rights of the transferee as against the debtor,
while this section deals with the rights between the transferor and
transferee.
135. Assignment of rights under policy of insurance against fire. — Every
assignee by endorsement or other writing, of a policy of insurance against fire, in
whom the property in the subject insured shall be absolutely vested at the date of
the assignment, shall have transferred and vested in him all rights of suit as if the
contract contained in the policy had been made with himself.
The enforceability of the policy of insurance against fire depends not

merely on the assignment of the policy but also on the assignment of the
property insured.5
136. Incapacity of officers connected with Court of Justice.—No Judge,
legal practitioner, or officer connected with any Court of Justice shall buy or
traffic in, or stipulate for, or agree to receive any share of, or interest in, any
actionable claim, and no Court of Justice shall enforce, at his instance, or at the
5. Panrnal Ranka v Oriental Fire and General Insurance Co Ltd, 1979 SCC OnLinc Gau
10: AIR 1979 Gau 70; Oberai Forwarding Agency v New India Assurance Co Ltd, (2000)
CASE PILOT
2 SCC 407; Union of India v Sri Sarada Mills Ltd, (1972) 2 SCC 877 (From Mad HC),
a consignment of hundreds of bales of cotton was destroyed due to fire while in custody
of Railways. Insurer paid full claim amount to the claimant, who assigned all his rights
under the policy to insurer. It was held that subrogation does not authorise the subrogatee
to file a suit in his own name without showing who was the original claimant in whose
right the case is being filed. A mere right to sue cannot be assigned.
: S. 137] ACTIONABLE CLAIMS 385
instance of any person claiming by or through him, any actionable claims so

dealt with by him as aforesaid.
' The reason for this rule is that officers of a court of justice should like
■ Caesar’s wife be above suspicion.
137. Saving of negotiable instruments, etc.—Nothing in the foregoing sec
tions of this Chapter applies to stocks, shares or debentures, or to instruments
which are for the time being, by law or custom negotiable, or to any mercantile
document of title to goods.
Explanation.—The expression “mercantile document of title to goods”
includes a bill of lading, dock-warrant, warehouse keeper’s certificate, railway
receipt6, warrant or order of the delivery of goods, and any other document used
in the ordinary course of business as proof of the possession or control of goods,
or authorizing or purporting to authorise, either by endorsement or by delivery,
the possessor of the document to transfer or receive goods thereby represented.
EXERCISES
i. Compare “actionable claim” and “a chose in action”, (pp. 44-46)
2. What is the scope of the warranty of debtor’s solvency? (p. 382)
6. Shree Shyant Stores v Union of India, 1970 SCC OnLine Gau 32: AIR 1971 Assam &
Ngld 59; Mulji Deoji v Union of India, AIR 1957 Nag 31; Sheo Prasad v Dominion
CASE PILOT
of India, 1954 SCC OnLine All 136: AIR 1954 All 747; Shamp Bhanji & Co v North
Western Railway, 1945 SCC OnLine Bom 73: AIR 1947 Bom 169; Union of India v
Taherali Isaji, 1956 SCC OnLine Bom 139; Keshava Pai v V. Jothoji Rao, AIR 2014 NOC
166 (Kar); Ibrahim Isaphai v Union of India, 1964 SCC OnLine Guj 19: AIR 1966 Guj 6;
CED v Godavari Bai, (1986) 2 SCC 264.
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and statutes referred to in the book I] ÊBC
through EBC Explorer™ on SCC Online*; Exploiei™

• Panmal Ranka v Oriental Fire and General Insurance Co case pilot
Ltd, 1979 SCC OnLine Gau 10
• Shree Shyam Stores v Union of India, 197° $CC OnLine Gau 32
• Union of India v Sri Sarada Mills Ltd, (i97z) 2 $CC 877

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Chapter 13

MORTGAGEE’S RIGHT AGAINST THE MORTGAGOR

his dispossession.... ‘He brought no suit then, or at any time subsequently,

SCOPE OF THE PROVISO AS SHOWN BY

OTHER RIGHTS OF THE MORTGAGEE: RIGHTS OF

2. 1911 SCC OnLine PC 35: (1911-ii) 39 IA 7.

mortgagee as such or a mortgagee by conditional sale as such to institute

10. 1911 SCC OnLine PC 7: (1910-11) 15 CWN 441.

In Yeo Htean Sew v Abu Zaffer Koreeshee13, the mortgagor agreed to

13. 1900 SCC OnLine PC 7: (1899-1900) 27 IA 98.

mortgagor expressly consents to such severance.15 In such a case it is bet­

The remedy of taking possession is available to the usufructuary mort­

Section 67-A provides:

20. (1971) i SCC 18.

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The following cases from this chapter are available

1. 1904 AC 313, 315 (HL).

the mortgagee is in possession of the mortgaged property, to deliver possession

NATURE OF RIGHT TO REDEEM

Even a collateral advantage which subsists in favour of the mortga­

4. 1922 SCC OnLine PC 57: (1922-23) 50 IA 41.

I or my heirs will not be entitled to redeem the property for a period of 85

6. 1914 SCC OnLine PC 6: (1913-14) 41 IA 84.

9. (1989) 1 SCC 458.

always a mortgage and therefore always redeemable becomes applicable.

redeeming co-mortgagor was the ordinary period of limitation and not

28. (1899) 2 Ch 474 (CA).

A mortgagor transferred the property to a third person disregarding

amounted to clog on the equity of redemption could not be enforced on equi­

37. AIR 1953 SC zz8: 1953 SCR 1009.

In Gulab Chand Sharma v Saraswati Devi43, in a mortgage by condi­

PRINCIPAL AMOUNT HAS BECOME DUE FOR PAYMENT

INDIVISIBILITY OF MORTGAGE SECURITY

According to English law the respondents would have been entitled to

53. Bishwanath Prasad Singh v Rajendra Prasad, (2006) 4 SCC 432.

extinction of the right of redemption has to be subsequent to the deed

It is erroneous to suggest that the mortgagee is acting as the agent of

WHO CAN REDEEM [S. 91]

CLAUSE (a): PERSON HAVING INTEREST IN OR

66. 1921 SCC OnLine PC 57: (1922-23) 50 IA 41.

CLAUSE 3: TRANSFER OF MORTGAGE BY MORTGAGEE

Section 61 provides for another right of the mortgagor. It provides:

CONSOLIDATION OF SECURED AND UNSECURED DEBTS

70. (1912) 16 Cal LJ 394.

that mortgage, provided it expresses the maximum to be secured thereby

71. 1923 SCC OnLine PC 41: (1922-23) 50 IA 283.

[Considerations as to the exigencies of business,] while founded on views

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The following cases from this chapter are available

• G. & C. Kreglinger v New Patagonia Meat and Cold Storage Co Ltd,

1. 1911 SCC OnLine PC 22: (1910-11) 15 CWN 813.

The appellant’s bond is later than...[that of the respondent,] which being

mortgage security or in the right of redemption are required to be made

SUBROGATION [S. 92]

The principles underlying subrogation are fully explained in the follow­

5. 1875 SCC OnLine PC 7: (1874-75) z IA 131*

is no such obligation in the case of a voluntary payment by A of B's debt. Still

Two points follow from these observations:

10. 1901 SCC OnLine PC 29: (1901-02) 29 IA 9.

13. 1912 SCC OnLine PC 3: (1911-12.) 39 IA 68.

mortgagor expressly consents to such severance.15 In such a case it is bet

The remedy of taking possession is available to the usufructuary mort

Even a collateral advantage which subsists in favour of the mortga

amounted to clog on the equity of redemption could not be enforced on equi

In Gulab Chand Sharma v Saraswati Devi43, in a mortgage by condi

The principles underlying subrogation are fully explained in the follow

In Girishchunder Maiti v Anundmoyi Debi2, a testator gave certain prop

After determination of a tenancy the tenant does not become a tres