1. This is an application on behalf of one of the lessors for an order that the liquidator do give possession to the lessors of the demised land. The application is made by one of the lessors and is supported by two others. It is opposed by Srimati Usha Bala Dassi, the fourth lessor. The question is whether the lease has come to an end. The lease was granted on 17th July, 1928, to the company which is in liquidation, and contains, among others, the following clause:
“In case the company goes to liquidation voluntarily or otherwise, this lease shall cease to be operative and the company shall forthwith make over possession of the abad to the proprietors.”
‘Abad’ is the property in question.
2. The company went into voluntary liquidation on 2nd May, 1950. Srimati Usha Bala made an application for the compulsory winding up of the company. The application was admitted by this Court. In due course the winding up order was made. The date of the order is 11th December, 1950. The liquidator is an advocate of this Court and is in possession of the property.
3. It is contended on behalf of the lessors-other than Usha Bala that the lease has determined. The contention of Usha Bala and the liquidator is that the lease has not determined.
4. The decision of the question turns on Section 111 of the Transfer of Property Act. The material portion of that section is as follows:
“A lease of immoveable property determines;
(a) by efflux of the time limited thereby;
(b) where such time is limited conditionally on the happening of some event—by the happening of such event.
(g) by forfeiture; that is to say; (1) in case the lessee breaks an express condition 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 transferee gives notice in writing to the lessee of his intention to determine the lease.”
5. Sub-clause (g) before it was amended by the amending Act XX of 1929 was as follows:
“(g) by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that on breach thereof the lessor may re-enter or the lease shall become void; 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; and in either case the lessor or his transferee does some act showing his intention to determine the lease.”
6. Before the amending Act of 1929, it was only necessary for the lessor to do ‘some act showing his intention to determine the lease’. There was a conflict of decisions in the several High Courts of India as to the point of time when the intention was to be shown. By the amendments made in 1929, the conflict has been set at rest.
7. The question is, which of the two subclauses applies to the case under consideration—sub-clause (b), or sub-clause (g). According to the petitioner sub-clause (b) applies. On the other hand on behalf of Usha Bala and the liquidator it is contended that sub-cl. (g) applies.
8. In Woodfall on ‘Landlord and Tenant’, we find this statement of law:
“A lease may be determined by entry or ejectment for a forfeiture incurred either by (1) breach of a condition therein in the lease, or (2) for a breach of any covenant, in case (and in case only) the lease contain a condition or proviso for re-entry for a breach of such covenant.”
9. Somervell L.J, in ‘Maley v. Fearn’, (1946) 2 All E.R 583 at p. 584, said that this was an accurate statement of the law.
10. That then is the law in England. But is that the law in India?
11. Reading S. 111 it seems that no distinction has been made in India between a condition and what is called a covenant in English Law. The section provides that a lease determines by forfeiture, if the lessee breaks an express condition, which provides that on breach thereof the lessor may re-enter provided the lessor gives a notice in writing to the lessee of his intention to determine the lease.
12. In Redman's ‘Law of Landlord and Tenant’ at p. 573 under the heading “Forfeiture” we find this:
“Subject to the statutory provisions for relief against forfeiture, which will be hereafter considered, a landlord may determine the lease or tenancy and re-enter for forfeiture when the tenant has broken a condition subject to the observance of which the lease was granted, either (a) expressly by the terms of the lease, or (b) impliedly from the very nature of the contract………….
Conditions either create, or enlarge, or defeat an estate, and are distinguished as conditions precedent and conditions subsequent. As we are dealing with forfeitures, we need only consider conditions subsequent, which defeat the estate. In fact, this is the only kind of condition which is accurately described by the word. This kind of condition is merely a proviso that on the doing of a particular act or the happening of a particular event, the term created by the instrument shall be defeated. Conditions annexed to terms of years are divisible into (1) conditions, the breach of which works a cessor of the term, and (2) conditions which give a right of re-entry. The older authorities considered that the former put an end to the estate as soon as the condition was broken, while the latter left the estate to continue until the landlord, by reentry or other act, elected to determine it. But the distinction no longer exists. Whatever the form of the condition, its breach does not, ‘ipso facto’, avoid the lease, but makes it voidable only.”
13. In forfeiture “the term created by the instrument” is defeated on the happening of a particular event or the doing of a particular act—that is our sub-clause (g). In sub-cl. (b) on the other hand, the term does not come to an end on the doing of an act or the happening of an event. It applies where the time is limited conditionally on the happening of some event and that event happens.
14. Sub-clause (a) Efflux of time—Leases for a definite period, such as a lease for a year or for a term of years, expire on the last day of the term, and the lessor or person entitled to the reversion may enter without notice or other formality.
15. If the term depends upon the happening of a future event, the lease determines when that event happens. Thus a lease for life determines on the death of the lessee. That is what is contemplated in sub-clause (b). The term is not “defeated” as in sub-clause (g), (b) has got to be read along with (a).
16. In (b) the term is fixed conditionally and depends upon the happening of a future event. In (g) the term is brought to an end by a defeasance clause. This is the difference between (b) and (g).
17. In support of the contention that this lease comes within sub-clause (b), two cases have been relied upon: “(i) Great Northern Ry. Co. v. Arnold’. (1916) 33 TLR 114; and (ii) ‘Lace v. Chandler’, (1944) 1 All. ER 305. In the latter case at p. 307, MacKinnon, L.J said:
“A hard case and a good case may equally lead to bad law. The county Court judge granted the order because of his disapproval of the tenant's conduct. I think that is bad law. Whether the same tendency led Row-latt, J., to a similar result in ‘Great Northern Ry. Co. v. Arnold’, it is not necessary to determine: but it may be noted that he expressly said that his conclusion in favour of the plaintiff was arrived at ‘by hook or by crook’ rather than upon legal principles.”
18. I have carefully read that ‘Great Northern Fly case’. (1916-33 T.L.R 114. In that case the question that I have to decide did not specifically arise. The question that arose in that case was whether a term for the duration of the war was valid. It was argued that it was not, as the duration of the term was not sufficiently certain. Rowlatt, J., however, held that there was a good lease. And by way of illustration at page 115, said: “If a lease for 999 years had been made terminable with the conclusion of the war, it would have been perfectly good as a tenancy”. Relying on this observation of Rowlatt, J., counsel for the lessor before me contended that in this lease the term had been fixed conditionally and it came within sub-clause (b).
19. I find from the editorial note in ‘Lace v. Chandler’, (1944-1 All E.R 305) that the decision in ‘Great Northern Rly. Co. v. Arnold’, (1916-33 T.L.R 114) has often been questioned. For in his famous book referring to this case says that it did not seem to him to be any longer valid.
20. In my view counsel's contention that sub-clause (b) applies to the case under consideration is not correct. I do not think the term in this case was fixed conditionally on the happening of some event within the meaning of sub-clause (b). In this case the term was for 99 years. There is a condition in the lease that on the happening of particular event the term created by the instrument would be defeated. That is forfeiture.
21. Mr. Asoke Sen, counsel for Usha Bala, on the strength of ‘Fryer v. Ewart’, (1902), A.C, 187, argued that even if the matter did not come within the first portion of sub-cl. (g), it came within its last portion;
“the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event.”
22. He said that the ‘liquidation’ of the company amounted to its being adjudicated an insolvent.
23. On behalf of the lessors my attention was drawn to the following observation of Lord Halsbury in this case at p. 190:
“The other point to my mind is equally plain. It is, speaking broadly, whether the code concerning forfeiture contained in S. 14 of 44 & 45 Vict c. 41 has any application at all to the forfeiture which, as I have said, was very plainly incurred by the liquidation. That depends on what interpretation is to be given to the words of sub-S. 6 of the code in question. By that sub-section, it is expressly enacted that the section, which, as I have said, embraces a code for relief against forfeiture, is not to extend to a condition of forfeiture, upon the “bankruptcy” of the lessee. Of course, but for the artificial and extended meaning given to the word ‘bankruptcy’, this would not be such a condition; but it seems to me, when one reads that extended meaning given to the word ‘bankruptcy’, I cannot doubt that liquidation by a company comes within it.”
24. It is clear from his Lordship's observation that the ‘liquidation’ of a company was held to come within the meaning of the word ‘bankruptcy’, because of the extended meaning given to it in England.
25. I am not inclined to decide — it is not necessary to do so — this case on the strength of ‘Fryer v. Ewart’, (1902-A.C. 187), because I am not aware whether ‘liquidation’ has been given that extended meaning, in Section 111 of the Transfer of Property Act. I am not called upon in this case to decide as to whether ‘insolvency’ in sub-Cl. (g) includes ‘liquidation’ of a company.
26. The case before me is covered by ‘General Share and Trust Co. v. Wetley Brick and Pottery Co.’, (1882) 20 Ch D 260. In this case mines were demised to a company by a lease which contained a power of re-entry if the rents or royalties, or any part thereof, should be in arrear for thirty days, or if the company “should be wound up voluntarily or by compulsion or otherwise under the provisions of any Act or Acts of Parliament.” An action was brought against the company by debenture holders, and a receiver was appointed. Rent being in arrear, the landlord took out a summons for leave to distrain or re-enter. After the summons had been returnable, but before it was heard, an order was made for winding up the company. The summons was then amended by intituling it in the winding-up as well as in the action.
27. It was held by the Court below that as the landlord was a creditor of the company, leave could not be given him to distrain, and that the claim to re-enter ought to be left to be tried in an action.
28. But it was held by the Court of Appeal reversing the judgment of the trial Judge that according to the true construction of the proviso for re-entry, a right to re-enter accrued on the making of a winding-up order, and that, the title of the landlord to re-enter being clear, the Court ought to order possession to be given to him and ought not to put him to the useless expense of bringing an action to which there was no defence.
29. The leading judgment in that case was delivered by Jessel M.R, the material portion of which is as follows: (p. 266-7)
“The lease contained a proviso for re-entry if any rent should be in arrear for thirty days; or if the company should be wound up. At the time when the summons came on to be heard an order for winding up the company had been made, and the summons had been amended by intituling it in the winding up as well as in the action. It was objected that the applicant could not distrain, because of the winding up order, and it was urged, I do not know why, that he had no right to reenter. Under the terms of the proviso he was clearly entitled to re-enter, and could only be kept out of possession by the unlawful act of the tenant. The Vice-Chancellor thought that he ought not to be allowed to re-enter without establishing his right by an action. I see no reason for putting him to an action. I have often said both here and at the Rolls, that when in a winding-up a landlord comes to the Court asking for the possession of property which is under the control of the Court, and the claim is one against which the liquidator would have no defence, the right course is to order the liquidator to give up possession. It would be a cruel hardship to put the applicant to the expense of bringing an action when the Court can see that there is nothing to be tried. He might lose his costs as he might be proceeding against the liquidator of a company with no assets.”
30. I shall decide the case before me on the strength of the observation made by Sir George Jessel which I have quoted above. There is no material difference between the proviso in the lease in that case and the proviso in the lease in the case before me. The proviso there, ran as follows:
“If the company should be wound up voluntarily or by compulsion or otherwise under the provisions of any Act or Acts of Parliament.”
31. The proviso in the lease before me is: “In case the company goes ??? liquidation voluntarily or otherwise, this lease shall cease to be operative. ………” The word “bankruptcy” does not occur in either of the provisos. So I need not pause to consider in this case as to whether ‘liquidation’ includes ‘insolvency’.
32. The proviso is that if there is a liquidation of the company, the lease will cease to be operative. It is an express condition on the breach of which forfeiture is incurred.
33. The next question is: does the lease provide for re-entry? If there is no provision for re-entry, there is no forfeiture. “Re-entry” means the resuming or retaking that possession which any one has lately foregone. The words in the proviso are: ‘The company shall forthwith make over possession of the land to the proprietors.’ The lessee is bound to make over possession. There is a duty cast on the lessee to do so. Therefore there is a co-relative right of the lessor to take possession. There, is thus a provision for re-entry.
34. Have the lessors given notice in writing of their intention to determine the lease? It is admitted that the notice was signed by the three lessors and not by or on behalf of Usha Bala, the fourth lessor. It has been conceded by counsel for the parties that this notice is not a good notice. Therefore in my view there has been no determination of the lease.
35. Where will then the possession be? Section 178 of the Indian Companies Act provides:
1. “The official liquidator whether appointed provisionally or not shall take into his custody, or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled
2. All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.”
36. There being no termination of the tenancy, the company was entitled to the possession of the land. Therefore the liquidator is entitled to possession. The application therefore must fail on this point.
37. The lessors other than Usha Bala, in the alternative, have asked for leave to sue the liquidator. Mr. Asoke Sen on behalf of Usha Bala has submitted that no leave should be granted. I am not impressed with the opposition. Mr. Sen has recited his client's grievances. But they are all matters of prejudice. If the lessors other than Usha Bala think that they are entitled to possession, I see no reason why I should refuse the leave. I, therefore, grant the leave to sue the liquidator. This order will, of course, be without prejudice to the rights which any party may have in the matter on grounds to which my attention has not been called.
38. The only matter I have decided in this application is that for want of notice the lease has not come to an end by forfeiture. I have not decided any other point.
39. The Advocate-General on behalf of the State of West Bengal supported the contention that possession should not be given to the lessors. I have already held in favour of that contention. The petitioner will pay the costs of this application to Usha Bala and the liquidator—one set. Certified for counsel. In conclusion, I note that I am obliged to counsel for the parties for the very able arguments they advanced before me in this case.
V.B.B
40. Order accordingly.