Judgement Appeal (No. 72 of 1939) from a judgment and decree of the High Court (February 18, 1938), which reversed a judgment and decree of the Subordinate Judge of Dhanbad (December 6, 1934) and passed a decree under Order xxxiv., r. 6, of the Code of Civil Procedure against the present appellants, the Jagadamba Loan Company, Ld. The main question in this appeal was whether there was privity of estate or of contract between the appellants, as mortgagees in possession of a leasehold, and the landlord, respondent No. 1, Raja Shiba Prasad Singh, so as to make the appellants liable for the payment of royalties due on coal mined from Law. Rep. 68 Ind. App. 67 ( 1940- 1941) Jagadamba Loan C ompany, Limited V. Raja Shiba Prasad Singh 238 lands which were leased by respondent No. 1 to the predecessor in interest (one Charles Smith) of respondents Nos. 2 and 3 (Tom Smith and D. M. Smith (since deceased, represented by Tom Smith)), and mortgaged by Charles Smith to the appellants. The proceedings in the case were originally instituted by the Receiver of the Jharia Raj Estate. In a mortgage suit filed on April, 20, 1928, the Receiver sought to recover from Charles Smith, his sub-lessees, the New Jeenagora Coal Co., Ld. (respondents No. 4), and his mortgagees (the appellants), royalties under the lease. Smith died during the pendency of the proceedings, and his heirs and legal representatives were substituted in his place. A preliminary decree against all the defendants was passed on December 9, 1929, and the final decree, for about Rs. 2,90,000, on August 30, 1930. On June 25, 1931, the property charged was sold in execution for Rs. 1,00,000, which was insufficient to discharge the sum due to the estate. The Receiver having been discharged, respondent No. 1, who had succeeded to the Jharia Raj Estate, instituted the present suit on June 23, 1934, petitioning under Order xxxiv., r. 6, of Code of Civil Procedure, and praying for a declaration for a personal decree against the appellants and the other defendants in the previous mortgage proceedings for the amount still owing to him. Of the objections filed by all the defendants, only those of the appellants were relevant to this appeal. They said, in effect, that there was neither privity of contract nor of estate between the plaintiff and themselves. Of the objections filed by all the defendants, only those of the appellants were relevant to this appeal. They said, in effect, that there was neither privity of contract nor of estate between the plaintiff and themselves. The facts appear from the judgment of the Judicial Committee. The Subordinate Judge found that respondent No. I was entitled to a personal decree against respondents Nos. 2 and 3, but not against the appellants. He found that the mortgage was not an English mortgage within s. 58 (e) of the Transfer of Property Act, IV. of 1882, and that there was neither privity of estate nor of contract between the appellants and respondent No. 1. On appeal, the High Court (Terrell CJ. and Fazl Ali J.) were of opinion that the lessee had covenanted on behalf of himself and his assigns to pay the rent to the landlord, and that the appellants took possession of the land under the mortgage with express notice of the mortgagors covenant, and that that established privity of contract between the appellants and respondent No. 1. They allowed the appeal, and held that the appellants were liable to a personal decree when the exercise of the charge by hypothecation had failed to satisfy the amount of the mortgage decree. The appeal is reported at ( 1938) I. L. R. 17 P. 499. 1940. Nov. 6. J. M. Pringle for the appellants. The first question is whether the lessor can recover from the mortgagee of a leasehold personally for arrears of rent. The matter has been dealt with to some extent by the Board in Ram Kinkar Banerjee v. Satya Char an Srimani (( 1938) L. R. 66 I. A. 50.), but that decision left open the question of a case where the mortgagee takes possession of the mortgaged property, which is the position in the present appeal. In Banerjees case (( 1938) L. R. 66 I. A. 50.) [the whole of the judgment was read] none of the mortgagees entered into possession—that is the point of distinction—but it is submitted that the reasoning in that case covers the case of a mortgagee in possession. A mortgage in Indian law is the transfer by the mortgagor to the mortgagee of an interest in specific immovable property, and not the transfer of such property itself s. 58 (a) of the Transfer of Property Act, 1882. A mortgage in Indian law is the transfer by the mortgagor to the mortgagee of an interest in specific immovable property, and not the transfer of such property itself s. 58 (a) of the Transfer of Property Act, 1882. The whole of the mortgagors interest does not by reason of the mortgage become assigned to and vest in the mortgagee, and it follows that the mortgage of leasehold property in India does not create privity of estate between the mortgagee and the mortgagors landlord. Further, there was no privity of contract between the lessor and the appellants, and in the absence of privity both of estate and of contract the appellants are under no personal liability to pay the decretal moneys or any part thereof to the lessor, respondent No. 1. The doctrine of privity of estate has been Law. Rep. 68 Ind. App. 67 ( 1940- 1941) Jagadamba Loan C ompany, Limited V. Raja Shiba Prasad Singh 239 grafted on to the Indian law from the law of England, and it is conceded that if under a mortgage of a leasehold the mortgagee takes a transfer of the whole of the lessees (mortgagors) interest, then by privity of estate he becomes liable to the lessees landlord for such covenants as are in the lease. In the present case, under the Indian law, however, the whole of the lessees interest did not vest in the mortgagee. The second point is that as a condition of r. 6 of Order xxxiv. of the Code of Civil Procedure becoming applicable there must be a sale held under the last preceding rule, and a sale held under that rule is one of the mortgaged property or a sufficient part thereof. The condition precedent to the operation of r. 6 of Order xxxiv. has not in fact been complied with, because a part of the property charged has been left out of the sale where there has been no sale under Order xxxiv., r. 5, there can be no application under r. 6. C. S. Rewcastle K.C. and R. K. Handoo for respondent No. 1. has not in fact been complied with, because a part of the property charged has been left out of the sale where there has been no sale under Order xxxiv., r. 5, there can be no application under r. 6. C. S. Rewcastle K.C. and R. K. Handoo for respondent No. 1. The decision in Ram Kinkar Banerjee v. Satya Char an Srimani (L. R. 66 I. A. 50.) was not available at the time of the judgments of the Courts below, but it is conceded that no useful distinction can be drawn from the fact that in the present case the mortgagees have entered into possession of the mortgaged property. There is, therefore, only one point of argument left, namely, reliance on the terms of the leases. These are not leases which cannot be assigned without leave of the landlord; they quite frankly contemplated assignment. In those circumstances the proposition is that if the mortgagees choose to become the successors in interest of the lessee, having notice of the form of the lease, they adopt that lease. On a true interpretation of the lease and mortgage bond, the appellants must be regarded as transferees of the lessee upon whom the liability to pay royalties devolved. Dec. 2. The judgment of their Lordships was delivered by Sir George Rankin. The controversy in this case has reference to 650 bighas of coal land in Mouza Jinagara, in the district of Manbhum, in Bihar. In these, the appellants, the Jagadamba Loan Company, Ld., are mortgagees of certain leasehold interests which were granted by the Jharia Raj, as zemindar, to one Charles Smith upon the terms of two kabulyats, dated April 24, 1907. By one of these instruments Charles Smith took settlement of the surface rights for 999 years at an annual rent of Rs. 650 ; by the other the sub-soil rights were settled with him for the same period upon certain terms as to payment of royalty which need not here be set out. The rent for the surface rights was secured by a provision that "the leasehold "land remains wholly hypothecated for the amount of rent and "the amount of rent will be treated as the first charge." As regards the sub-soil rights, the provision was that "for the "amount of royalty the leasehold land and the machineries "remain wholly hypothecated. The rent for the surface rights was secured by a provision that "the leasehold "land remains wholly hypothecated for the amount of rent and "the amount of rent will be treated as the first charge." As regards the sub-soil rights, the provision was that "for the "amount of royalty the leasehold land and the machineries "remain wholly hypothecated. If I make default in payment "of the amount of royalty you will be competent to realise "the same by selling the leasehold land." The appellants mortgage is dated February 4, 1920. It was executed by the lessee Charles Smith. It recited that several sub-leases had in the meantime been granted by him, one being in favour of the Jinagara Coal Company, Ld. It provided that the appellants should from time to time make advances upon a cash credit loan account, and that Charles Smith, the mortgagor, should repay the same with certain interest on February 4, 1923. Subject to a proviso for redemption, it conveyed to the appellants all the estate and interest of the mortgagor, including his right to rent and royalties under sub-leases. The mortgagor covenanted that during the subsistence of the security he would pay all rents, royalties, taxes, etc., and observe the covenants of the head leases. In case of the mortgagors default in payment of the principal and interest when due the appellants were to be entitled to enter into possession of the mortgaged premises and receive the rents, issues and profits thereof, and in case of the mortgagors default in payment of the rents, royalties or taxes due in respect of the lands, the Law. Rep. 68 Ind. App. 67 ( 1940- 1941) Jagadamba Loan C ompany, Limited V. Raja Shiba Prasad Singh 240 appellants were to be at liberty to enter into possession without being accountable as a mortgagee in possession. It is agreed that the appellants eventually collected certain rents and profits from sub-lessees of Charles Smith, and in this sense entered into possession; but the dates and other particulars of the appellants action do not appear from the record submitted to the Board. It is not suggested that the appellants at any time paid rent to the Jharia Raj in respect of the leasehold interests in mortgage to them. The suit out of which this appeal arises was brought in the Court of the Subordinate Judge at Dhanbad on April 20, 1928. It is not suggested that the appellants at any time paid rent to the Jharia Raj in respect of the leasehold interests in mortgage to them. The suit out of which this appeal arises was brought in the Court of the Subordinate Judge at Dhanbad on April 20, 1928. It was brought on behalf of the Raj, as lessor, against Charles Smith (the first defendant), as lessee, and certain other parties as sub-lessees. The appellants were not originally impleaded ; they were added as parties on January 4, 1929, but took no steps to contest the suit until after it had resulted in a sale as hereafter mentioned. The plaint claimed large sums as due to the Raj for rent and royalty in arrear in respect of the 650 bighas, prayed that an account of the raisings of coal should be had to ascertain the sums due for royalty, claimed that the arrears were a first charge on the leasehold properties, and asked for enforcement of the charge by sale. Certain accounts having been taken as directed by the trial judge on June 14, 1929, a preliminary decree for sale was made on December 9, 1929, and a final decree on August 30, 1930. The sale took place on June 25, 1931. After setting off the sale proceeds against the amount due to the Raj, a large sum remained due and unpaid, and on June 23, 1934, application was made on behalf of the Raj under Order xxxiv., r. 6, of the Civil Procedure Code for a personal decree for the deficiency against the estate of Charles Smith, the lessee (who had died pending suit), against one of his sub-lessees, and against the appellants. The deficiency was said to amount to a lac of rupees. This claim was resisted by the appellants, who lodged an objection, dated July 28, 1934, maintaining that between themselves and the Raj as lessors there was neither privity of contract nor of estate. The learned Subordinate Judge, on December 6, 1934, upheld the objection, and refused to make a personal decree against the appellants, but, on appeal, the High Court at Patna (Terrell C. J and Fazl Ali J.) reversed his decision, and passed a decree on February 18, 1938, against the appellants for the sums due to the Raj for rent and royalties in respect of the six years before suit. From this decree an appeal has now been brought to His Majesty in Council. The appellants, as a new ground of objection in addition to those previously insisted on, have relied upon the fact that the plaintiffs agreed to exclude from the sale the interest of certain sub-lessees, and say that in any case the property which was included in the decree for sale was neither "the mortgaged property nor a sufficient part thereof " within the meaning of r. 5, sub-r. 3, of Order xxxiv. Whether upon this new ground the appellants could resist a personal decree for the deficiency under r. 6 of that Order, is, however, a question which their Lordships do not find it necessary to discuss or decide. Since the decision of the High Court in this case, the position of a mortgagee of leaseholds has been considered by the Board in Ram Kinkar Banerjee v. Satya Char an Srimani (L. R. 66 I. A. 50.). It was there held that in India even in the case of an English mortgage a legal interest remains in the mortgagor ; hence the interest taken by the mortgagee is not an absolute interest, and is not such as to render him liable for the burdens of the lease by reason of privity of estate. In that case however, the mortgagees had not entered into possession of the properties mortgaged. In the present case no question arises of novation by reason of the appellants having paid rent to the Raj or otherwise. Their Lordships have, however, to consider whether the appellants have become Law. Rep. 68 Ind. App. 67 ( 1940- 1941) Jagadamba Loan C ompany, Limited V. Raja Shiba Prasad Singh 241 liable for the rents and royalties by reason of their entry into possession of the mortgaged property. They are of opinion that privity of estate cannot result from entry into possession in the case of a person who has taken a transfer from the lessee of an interest which is not the whole interest in the term. The High Court were of opinion that the appellants were liable by reason of privity of contract, and in support of this view cited Dallas C.J. in Williams v. Bosanquet (( 1819) 1 Brod. The High Court were of opinion that the appellants were liable by reason of privity of contract, and in support of this view cited Dallas C.J. in Williams v. Bosanquet (( 1819) 1 Brod. & B. 238, 263.) "and, " even as to privity of contract, there is such privity also, for the " contract of the lessor is with the lessee and his assigns, and the "defendants here are the assigns of the lessee it is, therefore, "a contract between the lessor and the assignee, that is, in this case, between the plaintiff and the defendants." Before relying upon this dictum it would be necessary to inquire whether the principle which it expresses has been accepted in the law of England, and how it can be reconciled with the doctrine, generally accepted, that the assignees liability to the lessor can be brought to an end by his assigning the premises over to another. But, in their Lordships view, the principle of the decision in Ram Kinkar Banerjees case (L. R. 66 I. A. 50.) is inconsistent with there being privity of contract between the lessor and the mortgagee in respect of the rent and lessees covenants. If the lessee retains part of his original interest in the term the mortgagee cannot be liable to the lessor for the whole of the rent and covenants; and cannot without apportionment be liable for any part thereof, whether or not he enters into possession. The transferee of a partial interest in the term cannot be taken to have promised the lessor to discharge any part of the burdens of the lessee. It would be somewhat remarkable if the lease in Ram Kinkar Banerjees case (L. R. 66 I. A. 50.) was not thought to be one in which "the contract of "the lessor is with the lessee and his assigns " ; yet no suggestion is to be discovered to the effect that the mortgagees were liable by privity of contract. Their Lordships are of opinion that the principle of that decision is equally inconsistent with privity of contract as with privity of estate as a ground of claim against the mortgagee of leaseholds in such a case as the present. Their Lordships are of opinion that the principle of that decision is equally inconsistent with privity of contract as with privity of estate as a ground of claim against the mortgagee of leaseholds in such a case as the present. They will humbly advise His Majesty that this appeal be allowed, the decree of the High Court, dated February 18, 1938, set aside, and that of the Subordinate Judge, dated December 6, 1934, restored. The first respondent will pay the appellants costs in the High Court and of this appeal.