Asa Ram And Another vs Mst. Ram Kali And Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 56 of 1956

Decision Date: 21 November 1957

Coram: S.K. Das, P.B. Gajendragadkar, Venkatarama Aiyar

In the matter titled Asa Ram and Another versus Mst. Ram Kali and Another, the Supreme Court of India delivered its judgment on the twenty‑first day of November, 1957. The petitioners were identified as Asa Ram and another individual, while the respondents were Mst. Ram Kali and another individual. The bench that heard the appeal comprised Justices S. K. Das, P. B. Gajendragadkar, and Justice T. L. Venkatarama Aiyyar. The decision has been reported in the All India Reporter at volume 1958, page 183, and in the Supreme Court Reports at volume 1958, page 988. The case concerned several statutory provisions: Section 76(a) of the Transfer of Property Act, 1882, which deals with the effect of a lease entered into by a mortgagee; Section 29(a) of the Uttar Pradesh Tenancy Act, 1939, which confers hereditary tenant rights on persons who were tenants at the commencement of that Act; and Section 180 of the same Uttar Pradesh Tenancy Act, which provides the procedure for suits for possession. The principal legal issues involved the circumstances under which a lease created by a mortgagee could bind the mortgagor after redemption, and the conditions that must be satisfied for a person to claim hereditary tenant status under the Uttar Pradesh legislation.

The factual background revealed that the lands in dispute were originally held as Sir lands, a category of land from which certain tenants are excluded from the benefits of Section 29(a). By virtue of a deed of usufructuary mortgage dated 8 July 1930, the owners at that time, Ram Prashad and Udairaj, transferred the lands into the names of the mortgagees, thereby converting them into Khudkasht holdings. Subsequent to this conversion, the respondents obtained possession of the lands from the mortgagees under a Kabuliat dated 26 May 1936. After the mortgage was fully redeemed, the appellants—acting as representatives of the original mortgagors—initiated a suit for possession under Section 180 of the Uttar Pradesh Tenancy Act, alleging that the respondents were occupying the land as trespassers. The respondents countered by asserting two main points: first, that the lease on which the Kabuliat of May 1936 was based was binding on the appellants; and second, that they were already tenants at the commencement of the Uttar Pradesh Tenancy Act and therefore entitled to the full suite of hereditary tenant rights prescribed by Section 29(a). The Court examined the nature of the lease and held that, according to Section 76(a) of the Transfer of Property Act, an agricultural lease created by a mortgagee will continue to bind the mortgagor after the mortgage has been redeemed only if the lease is of a type that a prudent owner would ordinarily enter into as part of ordinary management of the property. Moreover, the Court stated that a claimant seeking to rely on the hereditary tenant provisions of Section 29(a) must demonstrate that, on the exact date when the Act came into force, he was lawfully a tenant. Applying these principles, the Court concluded that the lease in the present case could not be sustained under Section 76(a); consequently, there was no valid admission of tenancy by any person possessing the requisite authority, and the transaction could not serve as the basis for invoking any rights under Section 29(a) of the Uttar Pradesh Tenancy Act.

In this case the Court observed that any claim to rights under section 29(a) of the Uttar Pradesh Tenancy Act, 1939, must be founded on a valid basis, and it referred to the precedent set in Mahabir Gope and others v. Harbans Narain Singh and others, reported in the 1952 Supreme Court Reporter at page 775. The judgment concerned a civil appeal numbered 56 of 1956, which was taken by special leave from the judgment and order dated 4 February 1954 issued by the Uttar Pradesh Board of Revenue in Appeal No. 96 of 1948‑49. The appellants were represented by counsel Dewan Charanjit Lal, while the respondents were defended by counsel S. P. Sinha, J. B. Dadachanji, S. N. Andley and Rameshwar Nath. The judgment was delivered on 21 November 1957 by Justice Venkatarama Aiyar, who recounted that the material facts relevant to the appeal had already been set out in an earlier order dated 6 February 1957 and could be briefly summarized for the present discussion.

The property at the centre of the dispute comprised agricultural land measuring ten Bighas and thirteen Biswas. On 8 July 1930 the then owners of the land, Ram Prashad and Udairaj, executed a usufructuary mortgage over this parcel and over certain other properties that are not the subject of the present litigation, granting the mortgage to Dwaraka Prashad, Naubat Singh and Munshilal. Initially the mortgagors held the land in the form of a “Sir,” but as part of their arrangement with the mortgagees they applied for and obtained an order dated 18 June 1930 removing their names from the Sir; consequently the land was thereafter entered as “Khudkasht” in the names of the mortgagees. In 1941 the surviving mortgagor, Ram Prashad, instituted Suit No. 132 of 1941 seeking redemption of the mortgage. Although the suit was contested, it was ultimately decreed, and the amount due to the mortgagees was fixed at Rs 1,860. After the decree was pronounced, Ram Prashad died, leaving his legal representatives – the present appellants – as his heirs. On 6 September 1945 the appellants paid the stipulated sum, and the mortgage was thereby redeemed. When the appellants thereafter attempted to take possession of the suit property, they were opposed by Govind Sahai and Bhagwan Sahai, who asserted that they had been admitted as tenants by the mortgagees. Consequently, the appellants instituted a suit under section 180 of the Uttar Pradesh Tenancy Act, No. XVII of 1939 (hereinafter referred to as “the Act”) seeking the ejection of the two defendants, treating them as trespassers. The defendants raised several defenses, but only one remained material for consideration: they contended that they were not trespassers but hereditary tenants entitled to protection under the Act and therefore could not be evicted. This contention gave rise to “Issue 2” in the proceedings. The Revenue Officer of Meerut, who tried the suit, held that because the lands had been held by the mortgagors in a Sir and because the mortgagees themselves had cultivated the land as Khudkasht, the defendants could not be classified as hereditary tenants. Accordingly, the Revenue Officer passed a decree of ejectment in favour of the appellants, a decree that was subsequently confirmed on appeal by the Commissioner of the Meerut Division. The defendants then pursued the matter further by filing an appeal.

The defendants appealed to the Board of Revenue in Second Appeal No 96 of 1948. By a judgment and decree dated 4 February 1954, the Board held that the defendants had been placed in possession by the mortgagees under a Kabuliat dated 26 May 1936. The Board observed that the rent fixed under that Kabuliat, rupees 112 per annum, was reasonable because the prevailing circle rate was rupees 76‑6‑0, and consequently the settlement was binding on the mortgagors as it represented “prudent and economic rent”. On the basis of this finding the Board allowed the appeal and dismissed the suit. The plaintiffs then sought special leave to appeal against that judgment. At the original hearing before this Court, the appellants primarily contended that the Kabuliat of 26 May 1936 had neither been mentioned in the written statement nor produced at trial, and therefore no relief could be granted on the basis of a document that had not been formally introduced. This Court, however, concluded that although the point was not expressly raised in the written statement, it required examination on its merits. Accordingly, the matter was remanded to the Board of Revenue for determination of two specific issues: (1) whether the lease deed dated 26 May 1936, purportedly executed by the mortgagees in favour of the respondents, was genuine and legally valid; and (2) whether that lease, if valid, was binding upon the appellants. After the remand, the parties presented fresh evidence concerning both issues, and the Board of Revenue submitted its findings.

On the first issue, the Board found that no lease deed had been executed by the mortgagees in favour of the lessees; instead, the lessees had executed a Kabuliat in favour of the mortgagees on 26 May 1936, and the authenticity of that Kabuliat had not been challenged. Regarding the second issue, the Board held that the binding nature of the Kabuliat depended on whether the mortgagees possessed a right to settle the land and whether such settlement bound the mortgagors. The Board observed that nothing in the mortgage deed prohibited the mortgagees from settling the land, even though the land was cultivated as khud‑kasht or even if the period of settlement extended beyond the mortgage term. The mortgagees, acting in prudent management of the property, settled the land at an economic rent; therefore, their action was binding on the mortgagors and the Kabuliat was consequently binding on the appellants. The appellants challenged both findings as erroneous. Concerning the first issue, they argued that because the mortgagees had not executed any lease deed, Govind Sahai and Bhagwan Sahai could not claim tenancy solely on the Kabuliat executed by them on 26 May 1936, asserting that the Kabuliat represented only a unilateral undertaking to cultivate. Nonetheless, the mortgagees produced evidence that…

The Court observed that the mortgagees had taken the Kabuliat, had accepted its terms and had collected the rent stipulated in that document; consequently, the objection raised by the appellants on this point lacked any substance and was dismissed. The principal dispute in the appeal, however, concerned the finding on the second issue. The appellants alleged that the Board had merely reiterated its earlier conclusion without referring either to the requirements of section 76(a) of the Transfer of Property Act or to the evidence presented by the parties during the remand proceedings. The Court concurred that this grievance was well founded. It reiterated the established principle that no individual may transfer property in a manner that grants the transferee a stronger title than the transferor himself possesses; therefore, any conveyance of mortgaged property made by a mortgagee must terminate upon redemption of the mortgage. Section 76(a) of the Act states that a mortgagee in possession “must manage the property as a person of ordinary prudence would manage it if it were his own.” Although the statutory wording imposes an obligation on the mortgagee, judicial authorities have held that an agricultural lease entered into by the mortgagee can bind the mortgagor even after redemption, provided that such a lease is of a nature that a prudent owner would ordinarily create in the ordinary course of managing his estate. This exception is strictly evidential, and the party seeking to invoke the benefit must prove its existence. Accordingly, the Court examined whether the respondents had demonstrated that the lease corresponding to the Kabuliat dated 26 May 1936 was the sort of lease a prudent owner would have fashioned. The Board had answered affirmatively on two grounds. First, the mortgage deed dated 8 July 1930 contained no clause prohibiting the mortgagees from leasing the land; in the absence of such a prohibition, the case of Mahabir Gope v. Harbans Narain Singh established that the lease would not be invalid, and the parties would be governed solely by the provisions of the Transfer of Property Act, requiring the lessees to show that the lease complied with section 76(a). Second, the Board noted that the rent fixed in the Kabuliat, Rs 112, exceeded the prevailing circle rate of Rs 76‑6‑0. However, the Court held that this comparison with the circle rate was not decisive; the substantive issue was whether the rent was reasonable and fair in view of the income a prudent owner could have earned from the land, a determination that required proof of the net yield from the property.

The Court noted that the parties had not produced any evidence regarding the land’s productivity or the market price of its produce at the relevant time. One mortgagee asserted that he and his brothers had cultivated the lands themselves until 1936, after which they leased them because the arrangement allegedly resulted in an annual loss of between fifty and one hundred rupees. However, the mortgagee failed to provide any details concerning the gross agricultural yield, the costs incurred in cultivation, or the prevailing price of the produce. The Court found it difficult to accept that tenants would have consented to the terms set out in the Kabuliat if the lease truly represented a losing venture. It was also admitted that the lessees had not complained about operating at a loss. Consequently, the Court regarded the mortgagee’s testimony on this matter as vague, unconvincing, and not persuasive.

Conversely, the Court observed that substantial evidence supported the position of the appellants. The Revenue Officer of Meerut had previously issued a decree granting the appellants an order of ejectment, and the appellants had subsequently taken possession of the suit property in execution of that decree. On 4 February 1954, the Board set aside the lower courts’ decrees and dismissed the appellants’ suit, after which the respondents regained possession of the properties in execution of the Board’s order. The respondents then invoked section 144 of the Code of Civil Procedure to seek mesne profits by way of restitution and obtained a decree awarding seven thousand five hundred rupees, calculated at a rate of one thousand rupees per annum. The Court held that, if this figure is taken as an indicator of the income a prudent owner could expect from the properties, the rent of one hundred twelve rupees fixed in the Kabuliat is manifestly inadequate and therefore cannot bind the mortgagors.

The Court acknowledged that the restitution decree concerned a period later than the date of the Kabuliat and that market prices had risen significantly in the intervening years. Nevertheless, even after adjusting for those price increases, the Court concluded that a prudent owner would not have entered into a transaction yielding such low returns. Respondents’ counsel argued that the restitution decree was under appeal before the Commissioner of Meerut and should therefore be excluded from consideration in assessing the fairness of the Kabuliat rent. The Court rejected this argument, observing that the decree—issued on the respondents’ own application for mesne profits at one thousand rupees per annum—serves not merely as a judicial determination but as an admission of the net profits realistically attainable from the lands. Consequently, the decree was deemed material to the matter at hand.

It was observed that the lands over which the lease was created were originally held in Sir by the mortgagors. After the mortgage was executed, those lands entered the records as Khudkasht in the names of the mortgagees. The lands were home‑farm lands that were cultivated directly by the proprietors, distinguishing them from lands cultivated by tenants. Because tenancy law throughout India recognised special rights for owners of such home‑farm lands, any act by a mortgagee that jeopardised those rights could not be regarded as the conduct of a prudent owner unless there were exceptional grounds justifying it. The Court noted that the earlier decision in Mahabir Gope and others v. Harbans Narain Singh and others held that such an act could not be deemed prudent, and it found no evidence of any exceptional justification in the present case. The uncontradicted evidence presented by the appellants showed that the lands possessed canal‑irrigation facilities, were highly fertile, and that leasing them to tenants would not be economical. It also appeared that, on the eve of redemption, the mortgagees had created another lease, which had been set aside on the ground that it was intended to defeat the mortgagors. The Court concluded that the mortgagees’ action of leasing the lands to tenants on the terms specified in the Kabuliat was neither prudent nor bona‑fide. After considering the entire evidence, the Court, differing from the Board, held that the lease evidenced by the Kabuliat was not binding on the mortgagors.

The respondents then argued, through counsel, that even if the Kabuliat was not binding, the respondents would still be hereditary tenants under the Uttar Pradesh Tenancy Act, 1939, and that the appellants would have no right to eject them. Section 29(a) of that Act provides that every person who was a tenant of land at the commencement of the Act is entitled to all the rights of hereditary tenants, but certain classes of tenants are excluded, including tenants of Sir lands. Section 30(6) adds that, notwithstanding section 29, hereditary rights shall not accrue in land transferred by a mortgage to which the provisions of the second paragraph of sub‑section (5) of section 15 of the Agra Tenancy Act, 1926 apply during the period specified in that paragraph. The relevant provision of the Agra Tenancy Act, 1926 states: “Notwithstanding anything in this section, where the property transferred by means of a mortgage of the kind specified in sub‑section (5) of section 14 consists wholly of a specified area or sir, the mortgagor may by simultaneous agreement in writing waive his ex‑proprietary rights, and in that case the mortgaged land shall, if the mortgagor regains within twelve years of the date of the transfer possession thereof on redemption of the mortgage, resume the character of sir. In such land, statutory rights shall not accrue for twelve years from the date of transfer.” The Court considered these statutory provisions in assessing whether the respondents could claim hereditary tenancy rights over the lands in question.

According to the provision, when the mortgage is redeemed, the mortgagor must regain possession of the land and the land must again resume its status as sir. In such circumstances, statutory rights are prohibited from accruing for a period of twelve years measured from the date of the transfer. The judgment also referred to the second proviso of section eleven of the Uttar Pradesh Tenancy Act, 1939, which states that if, on redemption of a mortgage, the mortgagor regains possession of land that, under the Agra Tenancy Act, 1926, had ceased to be sir and to which the second paragraph of sub‑section (5) of section fifteen of that Act applied, then that land shall once more become his sir.

The respondents argued that although the suit lands were originally held as sir, they lost that character when the mortgage was executed on 8 July 1930. They contended that, consequently, section twenty‑nine(a) of the Act became applicable and that sections thirty‑six, eleven of the same Act and section fifteen of the Agra Tenancy Act, 1926, should not apply because the mortgage also included lands that were not sir and because possession had not been regained within twelve years of the mortgage. Based on this reasoning, the respondents claimed that they, being in possession as tenants on 1 January 1940—the date when the Act came into force—had acquired the status of hereditary tenants under section twenty‑nine(a). They supported this claim by relying on the decision in Jai Singh v. Munshi Singh (1955) A.L.J. 834.

The Court identified a fundamental error in that argument. The error lay in assuming that Govind Sahai and Bhagwan Sahai, by virtue of the Kabuliat dated 26 May 1936, became tenants for the purposes of section twenty‑nine(a) of the Act. The Court explained that the true scope of sub‑section (a) of section twenty‑nine is that it presupposes the existence, on the commencement date of the Act, of a person who is lawfully a tenant and to whom certain rights are to be conferred. Accordingly, a condition precedent to the operation of that provision is that the person must have been admitted as a tenant by someone who possessed the authority to admit a tenant. If the individual who purported to grant the lease lacked such authority, then, regardless of any rights existing between the lessor and the lessee, the true owner is not bound to recognize the lessee as a tenant, and section twenty‑nine(a) does not apply to him. The Court illustrated this point by analogy: if A owns certain lands, B trespasses on them and grants a lease to C, sub‑section (a) of section twenty‑nine does not confer any rights on C against A. Therefore, the crucial question, as highlighted in the cited decision, is whether the person asserting hereditary tenancy rights under section twenty‑nine(a) was admitted as a tenant by a person who had the legal right to admit a tenant. The Court noted that an owner can of course admit a tenant, and a mortgagee in possession would also have such a right if authorized by the mortgage deed or if the transaction were protected by section seventy‑six(a) of the Transfer of Property Act; otherwise, no such admission can be said to have occurred.

It was held that a mortgagee possessed the authority to admit a tenant only when such authority was conferred by the mortgage deed or when the lease transaction fell within the protection afforded by section 76(a) of the Transfer of Property Act. When a lease did not satisfy the requirements of section 76(a), there was no valid admission of a tenant by any person who held the requisite authority. Consequently, even if the lease was enforceable between the mortgagee and the lessee, it could not serve as the basis for invoking the rights provided under section 29, sub‑section (a) of the Uttar Pradesh Tenancy Act. The Court referred to the earlier decision in Mahabir Gope and others v. Harbans Narain Singh and others, where it was observed that a usufructuary mortgagee who created a lease contrary to an express prohibition against letting in the mortgage deed could not confer occupancy rights under the Bihar Tenancy Act, despite the tenant’s possession lasting more than thirty years. The same result applied where the lease was not binding on the mortgagor under section 76(a) of the Transfer of Property Act or where the lease was not executed in good faith. Applying that principle, and having found that the Kabuliat dated 26 May 1936 did not bind the appellants, the Court concluded that Govind Sahai and Bhagwan Sahai did not acquire any hereditary tenancy rights under section 29(a) of the Uttar Pradesh Tenancy Act. The Court also considered the decision in Jai Singh v. Munshi Singh, which the respondents relied upon. That judgment stated that “the agricultural lease granted by the mortgagee in favour of Jai Singh was a lease granted in the ordinary course of management,” and therefore the tenant obtained hereditary tenant rights. The present Court held that this reasoning could not be applied because the lease in the present case was not a prudent transaction that bound the mortgagors. Accordingly, the questions raised by counsel regarding the construction of section 30(6) and section 11 of the Uttar Pradesh Tenancy Act, as well as section 15 of the Agra Tenancy Act, 1926, did not require a decision. In the final order, the appeal was allowed, the decree issued by the Board was set aside, and the earlier decree of the Revenue Officer, Meerut, which had been affirmed by the Commissioner, was restored. The respondents were ordered to bear the costs of the appellants in full, including the costs incurred during the remand. The appeal was thereby allowed.