Premier National Bank Ltd. v. Bhairodan Sethia And Ors.

The Judgment of the Court was delivered by

Mukharji, J.:— This is a suit by the Plaintiff Bank for a declaration that the decree in Suit No. 284 of 1946 of this Court is not binding on and enforceable against the Plaintiff and for a declaration that the Plaintiff Bank's tenancy in respect of a portion at 115, Canning Street, Calcutta, is subsisting and for an injunction restraining the first five Defendants from executing the decree in Suit No. 284 of 1946 against the Plaintiff Bank.

2. The Plaintiff Bank's case is that since the 1st January, 1946, it was a monthly tenant under the Defendant, Union Mercantile Bank, Ltd. (hereinafter referred to as “the Defendant Bank”) at a rent of Rs. 100 per month in respect of the first floor of premises No. 115, Canning Street consisting of one large Hall with a Counter, a covered space consisting of three chambers and another room to the east of the said covered space. This monthly tenancy of the Plaintiff Bank was supposed to be the result of an agreement with the Defendant Bank on the 1st December, 1945. The Defendant Bank was the lessee under the first five Defendants (hereinafter referred to as “the landlord Defendants”) under a lease dated the 9th February, 1944. On the 21st February, 1946, the landlord Defendants filed a suit against the Defendant Bank being Suit No. 284 of 1946. A written statement was filed in that suit on the 3rd April, 1946. Thereafter on the 12th April, 1946 the landlord Defendants as Plaintiffs in that suit took out summons for final judgment under Chapter 13A of the Original Side Rules of this Court against the Defendant Bank. The Defendant Bank filed its affidavit in opposition to that summons. Finally on the 14th May, 1946, the landlord Defendants obtained a decree for possession against the Defendant Bank in that suit.

3. The Plaintiff Bank in this suit made a case that the said decree was obtained fraudulently and collusively between the landlord Defendants and the Defendant Bank. Learned Counsel appearing on behalf of the Plaintiff Bank abandoned the case of fraud and collusion before me. He has limited his case for the Plaintiff Bank only on the basis that the decree made in Suit No. 284 of 1946 was not a proper and lawful decree on the ground that the determination of the lease by that decree was not properly done. He contends that the Plaintiff Bank continues as a sub-tenant for reasons stated in paragraph 4A of the amended plaint and the last line in red ink added in paragraph 7 of the amended plaint. Learned Counsel for the Plaintiff Bank has also argued that in any event the Plaintiff Bank is entitled to protection under sec. 11, sub-sec. (3) of the West Bengal Premises (Temporary Provisions) Rent Control Act.

4. The plaint as originally filed did not make the Defendant bank a party to the suit but later by an amendment made under order of this Court dated the 17th July, 1946, the Defendant bank was added as the 6th Defendant to the suit and a new paragraph 4A was added and a line in red ink in paragraph 7 in the original plaint. In fact the Plaintiff bank has confined now its case on the allegations made in paragraph 4A of the plaint and on the added allegation in paragraph 7 of the plaint.

5. As a result of these amendments there are two written statements filed by the landlord Defendants—one filed before the amendment of the plaint and the other filed after the amendment of the plaint. The case made in the written statements is a complete denial of the Plaintiff's claim.

6. The following issues were raised:—

(1) Is the decree in Suit No. 284 of 1946 binding on the Plaintiff?

(2) Is the suit maintainable by reason of the decree in Suit No. 284 of 1946 obtained by the landlord Defendants against the Defendant bank?

(3) Did the landlord Defendants waive forfeiture on account of subletting as alleged in the plaint in this suit?

(4) Was the alleged determination of the Defendant bank's tenancy valid?

(5) Is the Plaintiff entitled to protection under sec. 11 (3) of the West Bengal Premises Rent Control (Temporary Provisions) Act?

7. On behalf of the Plaintiff five witnesses have been examined and on behalf of the landord Defendants one witness has been examined being one of such Defendants themselves.

8. The Defendant bank did not file any written statement and did not enter appearance and no one has appeared on behalf of the Defendant bank in this suit. Indeed it appears from the evidence that the Defendant bank cannot be traced and that its Managing Director M.K Nandy is non est.

Issues Nos. 1, 3 and 4.

9. I will take these three issues together. In fact the learned Counsel for the Plaintiff bank has argued that the decree in Suit No. 284 of 1946 is not binding on the Plaintiff on the grounds (i) waiver of forfeiture and (ii) invalid determination both of which grounds are subject-matters of Issues Nos. 3 and 4. In other words really Issues Nos. 3 and 4 are the grounds on which Issue No. 1 is raised.

10. Where a landlord obtains a decree for ejectment on the ground of forfeiture or determination of a lease by notice against his tenants the latters' sub-tenants are persons bound by the decree within the meaning of Or. 21, r. 35 of the Civil Procedure Code. That was laid down in Yusuf v. Jyotish(1). Mr. Sen appearing on behalf of the Plaintiff bank has argued that in this case the Plaintiff bank is not bound by the decree in Suit No. 284 of 1946, because according to him, the decree should never have been made inasmuch as the landlord Defendants waived forfeiture due to breach of covenant against subletting and, therefore, the alleged determination by the decree of the Defendant bank's tenancy was invalid and has relied on the decision in Sailendra v. Bijan(2). Reliance was placed on the following passage which occurs in the judgment of that case at page 141 of that report in support of that argument:—

“In our opinion, therefore, a sub-lessee will be bound by a decree for possession obtained by the lessor against the lessee if the ejectment is based upon a ground which determines that under-lease also, unless he succeeds in showing that the judgment was vitiated by fraud or that the lessee collusively suffered the decree to be passed against him. If however the decree for possession proceeds on the ground which does not by itself annul the sublease the decree would not be binding on the sub-lessee nor could the sub-lessee be evicted in execution of the decree if he had acquired statutory tight or protection i.e under the Bengal Tenancy Act which he could assert against the lessor. Within these limits, we think a sub-lessee could be held to be bound by a decree obtained against his lessor.”

11. The case of fraud or collusion has been given up by the Plaintiff. But it is argued that the decree can still be challenged because it proceeds on a ground which does not by itself annul the sub-lease. I cannot accept this argument. The fallacy of that argument is that in this case the decree does proceed on a ground which definitely annuls the sub-lease. The ground on which the decree proceeded in Suit No. 284 of 1946 was forfeiture of the lease on the breach of the covenant against subletting. But Mr. Sen argues, and re-opens the merits of the decree and then will be found that the reasons of that decree are wrong. He submits that the decree, it is true, proceeds on the ground of forfeiture but I am asked to hold that such forfeiture in fact had been waived and, therefore, the decree is bad on the merits and wrong in law and has not annulled the sub-lease.

12. In my judgment, the Plaintiff has to overcome a preliminary hurdle before that stage is reached. In my judgment, the Plaintiff has to show, in the first instance, that the decree has proceeded on a ground which does not annul the sub-lease. Here I find that the decree has proceeded on the ground of forfeiture which must annul the sub-lease under sec. 115 of the Transfer of Property Act. In order to find whether the forfeiture was waived or not I have really to sit in judgment over the decree and as I do not conceive myself to be a Court of Appeal from that decree I cannot persuade myself to take that course. In my judgment, the decree in Suit No. 284 of 1946 cannot be re-opened on merits at the instance of the sub-lessee. The questions whether the forfeiture was waived and whether the determination of the Defendant bank's tenancy was valid are questions of merits which, in my opinion, are concluded by the decree. I have discussed under Issue No. 5 the question whether the Plaintiff can claim any statutory right or protection, one of the other limits within which such a decree can be challenged on the principles laid down in Sailendra v. Bijan and have found against the Plaintiff.

13. In other words, even on the principles laid down by the passage quoted above in the decision in Sailendra v. Bijan the Plaintiff, in my judgment, docs not bring itself within the limits of the principles laid down there.

14. In my judgment, the clear words of the last paragraph of sec. 115 of the Transfer of Property Act leaves no room for doubt that the forfeiture of a lease annuls all under-leases except in two classes (1) where the forfeiture is procured by the lessor in fraud of the under-lessee and (2) relief against the forfeiture is granted under sec. 114 of the Transfer of Property Act. Neither of these two grounds is available to the Plaintiff Bank. The case of fraud has been abandoned and the case of relief against forfeiture for non-payment of rent does not arise in this case. In that view of the matter, quite apart from any authorities, I hold that under sec. 115 of the Transfer of Property Act the Plaintiff bank cannot assail the decree in Suit No. 264 of 1946 on the grounds urged before me. I, therefore, answer issue No. 1 in the affirmative and that issues Nos. 3 and 4 cannot be determined in this suit on the grounds urged before me.

Issue No. 2.

15. It follows, on the above reasoning that this issue must be answered in the negative.

Issue No. 5.

16. Before the question of any protection under sec. 11(3) of the Rent Control Act can be decided a preliminary question of fact has to be found and that is whether the said portion of the premises was “lawfully sublet” to the Plaintiff bank. I propose to discuss, in the first instance, therefore, whether the Plaintiff bank can be said to be the “lawful” sub-lessee, and thereafter whether the Plaintiff has proved itself to be a sub-lessee in fact.

17. The parent lease of the 9th February, 1944, provided by cl. (6) thereof that the lessee shall not sublet without the written consent of the lessor. There was no written consent of the lessor in this case. Assuming, therefore, that there was any sub-letting that could only have been in breach of the covenant and wrongful, it cannot in my judgment be said that where under a lease the lessee cannot sublet without the written consent of the lessor it can be said to have been “lawfully” sublet without such consent. It is in that case I consider “wrongfully” sublet and not “lawfully” sublet. The tenancy of the Plaintiff bank was supposed to commence from the 1st January, 1946. On that day (i.e, 1st January, 1946) the said Defendant in my judgment had a subsisting right of re-entry under cl. (6) and under the proviso for re-entry appearing at the end of cl. (10) of the said lease of the 9th February, 1944. There was no waiver of this breach. The breach of this covenant not to sublet in this case occurred on the 1st January, 1946, because it was from that date that the Plaintiff bank contends, it became a sub-lessee and I fail to see how this breach could be waived before it occurred by letter of the Solicitors dated the 22nd December, 1945, as urged by learned Counsel for the Plaintiff.

18. In fact this right of re-entry was not in my judgment lost by waiver on the part of the landlord Defendants. Besides, the landlord Defendants filed the suit for ejectment against the Defendant bank on the 21st February, 1946, being the said Suit No. 284 of 1946. The decree that followed in Suit No. 284 of 1946 concludes the question of waiver and on the basis of that decree which I hold to be binding there was no waiver.

19. The construction which in my judgment is a proper construction of the words “lawfully sublet” in sec. 11 (5) of the West Bengal Premises Rent Control (Temporary Provisions) Act is that they do not protect any subletting which is contrary to the terms of the tenancy. Lord Justice Morton in Norman v. Simpson(3) construing sec. 15(3) of the Increase of Rent and Mortgage Interest (Restriction) Act 1920 which uses similar language came to the interpretation that a sub-tenant was within the protection if at the time the landlord had no subsisting right of re-entry. In the present case before me I have held that the landlord had subsisting right of re-entry and therefore even on the basis of construction put by Lord Justice Morton the Plaintiff can have no protection as a sub-lessee.

20. With great respect to Lord Justice Morton, however, I cannot persuade myself to take the view that the words “lawfully sublet” have any reference to a subsisting right of re-entry. I should have thought that quite independently of any right of re-entry there is no lawful subletting if it was in breach of a covenant not to sublet and it is immaterial in my view whether it gives a right of re-entry or a right to damages. I find however that I have some support for the view that I take in the decision of Maley v. Fearn(4) given about a year after Norman v. Simpson. Lord Justice Somervell at p. 585 of that Report says:—

“It seems to me that it would be wrong to take what was said by Lord Justice Morton as deciding that a sub-tenancy is not unlawful within the meaning of Bent Restrictions Act when it comes into existence in consequence of breach of a covenant which does not give a right of re-entry.”

21. Indeed Lord Justice Morton himself after having delivered his judgment in Maley v. Fearn made the following observations at p. 585 of that report after the judgment of Lord Justice Somervell:—

“I think that in the passage he ‘Lord Justice Somervell) has quoted the definition of what is an unlawful subletting was given in too narrow terms. I am disposed to think that if a sub-letting is contrary to the terms of the tenancy it may well be that it is an unlawful subletting even although under the terms of the tenancy the subletting does not give Else to right of re-entry.”

22. Lord Justice Morton in the passage which is quoted above apparently revised his former view expressed in Norman v. Simpson and came to the same construction winch I have done in the present case.

23. On the facts whether there was at all a subletting to the Plaintiff bank the evidence in my view is quite inconclusive. The letter of the 1st December, 1945, which is Ex. 2 in this suit is a letter from the Defendant bank to the Plaintiff. On a reading of the whole letter it appears it was a license to use and not actually a case of subletting. Nandalal Chatterjee who is supposed to be the law officer of the Plaintiff bank was the mortgagee in possession of the furniture and fittings of the Defendant bank as will appear from the letters dated the 28th December, 1945 and the 1st January, 1946, being respectively Exs. “I” and “J” in this suit. The letter dated the 28th December, 1945, shows that Nandalal Chatterjee took possession of the entire furniture and fittings and kept them under lock and key. If that were so, then I do not see how the Plaintiff bank could use the counter and the chambers as permitted by letter dated the 1st December, 1945. On the 1st January, 1946, as Ex. “G “indicates, Chatterjee sold in satisfaction of his mortgage the furniture and fittings to the Plaintiff bank for a sum of Rs. 4,745 although the mortgage was for Rs. 5,000.

24. It is said in the plaint that the rent payable by the Plaintiff bank was Rs. 100 per month, but no rent receipt is produced. Instead a Current Deposit Ledger Account being Ex. “H” in this suit has been produced and at page 24 of that account one solitary entry under date the 30th March, 1946, is shown an amount of Rs. 300 as being the “amount of rent paid to you for the months of January, February and March, 1945, for our office at 115, Canning Street.” This is supposed to be an account of the Defendant with the Plaintiff—all written out on one page. Why there was one lump sum payment of Rs. 300 on the 30th March, 1946, remains unexplained. The Defendant bank disappeared and the Plaintiff bank has been enjoying the happy position of freely occupying the Defendant bank's premises without having to pay for it. The account is an overdraft account and the rent is thus alleged to have been paid on an adjustment of that overdraft account.

25. The account book is in my judgment open to very serious doubt. No evidence was laid in chief to show that the payment of rent was made by adjustment of overdraft account. In fact after learned Counsel had wanted to know in cross-examination of Mr. Bhatia as to how; payment of rent was made by Plaintiffs to Defendant bank then Mr. Sen appearing for the Plaintiff bank in re-examination (Questions 270-277) brought out this particular page 24 in the Ledger Account. I allowed Mr. Sarkar to cross-examine him on those questions.

26. In such cross-examination Mr. Bhatia, the Director, gave the most disconcerting evidence saying that this account was the second copy and was not shown to the Auditors and was not the Pucca Book (Questions 283-285). As a result of such evidence the Plaintiff bank called one Tarapada Mitra said to be an Accountant of the Plaintiff bank and he tried to recover the lost ground by saying that this Ex. “H” had been audited by the Auditors but then no Auditors' report was forthcoming. His evidence was at complete variance with the evidence of the Director and on such conflict of testimony between Plaintiffs' own witnesses I am not inclined to accept this story of payment of rent by adjustment against overdraft account. I cannot conceive of any kind of letting without rent. I hold, therefore, on fact that there was no subletting. The Plaintiff has exhibited the proceedings in Suit No. 668 of 1946 between the Plaintiffs and the Defendant bank and the decree made in that suit but in my judgment they do not bind the landlord Defendants who were not parties to that suit. It is a matter of some significance that in the plaint in Suit No. 668 of 1946 filed on the 15th April, 1946, the Defendant bank was described in the cause-title as lately carrying on business at 115, Canning Street but then no present address of the Defendant was given. But there is an affidavit in opposition by M.K Nandy but it does not appear even from there the whereabouts of the Defendant bank. In paragraph 8 of the plaint in that suit payment of rent by adjustment of account is alleged, and as I have said above this adjustment appears to have been done only about a fortnight before filing of that suit. It may be for the purposes of that suit.

27. I hold, therefore, both on a construction off sec. 11 (3) of the West Bengal Premises Rent Control (Temporary Provisions) Act as well as on the facts that the Plaintiff is not entitled to any protection under sec. 11 (3) of that Act. I answer Issue No. S in the negative.

28. In my judgment the suit fails and is dismissed with costs.