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2023 DIGILAW 1396 (KAR)

Zamir Mirza v. Siltech Hospitals Pvt Ltd

2023-12-19

P.S.DINESH KUMAR, T.G.SHIVASHANKARE GOWDA

body2023
JUDGMENT T.G.SHIVASHANKARE GOWDA, J. In this appeal, the plaintiffs have challenged the judgment and decree dtd. 11/4/2007 passed in O.S.No.3071/1999 by the Court of XVI Additional City Civil and Sessions Judge, Bangalore City (CCH No.12) ('the Trial Court' for brevity) in dismissing the suit against defendant Nos.3 and 4. 2. For the sake of convenience, parties shall be referred as per their status before the Trial Court. 3. The facts leading to this appeal are, property bearing No.5 (present No.2), Convent Road, Richmond Town, Bangalore-560 025, measuring 60 feet x 40 feet consisting of ground floor (900 sq.ft. of carpet area), mezzanine floor (1500 sq.ft. of carpet area), first floor (1650 sq.ft. of carpet area), second floor (1650 sq.ft of carpet area) and third floor (1650 sq.ft of carpet area), in all 7350 sq.ft. consists of 15 bathrooms, lift to all the floors, power, water and sanitary connections with a submersible pump, is the disputed property (for short 'the suit schedule property'). 4. Plaintiffs are the co-owners of the suit schedule property. Defendant Nos.1 and 2 took a portion of the suit schedule property described as 'B' schedule on a registered lease for a period of 10 years commencing from 1/4/1990 and expires on 31/3/2000. As per the terms of the lease deed, defendant Nos.1 and 2 are required to pay rent of Rs.36, 850.00 for a period of 3 years from 1/4/1990 till the end of 1/4/1993; Rs.42, 337.50 paise for a period of next 3 years from 1/4/1993 till the end of 31/3/1996. Rs.48, 734.12 paise for the period of next 3 years from 1/4/1996 till the end of 31/3/1999. Rs.56, 044.24 paise for the period from 1/4/1999 till 31/3/2000. Defendant Nos.1 and 2 have paid the security deposit of Rs.1, 10, 500.00 and they are in possession of the original lease deed. Defendant Nos.1 and 2 are liable to pay rent on or before 5th of every month. They were permitted to take financial assistance from the recognized financial institution by mortgaging their leasehold right without any right of alienation and any such lease should not affect the rights of plaintiffs. 4.1. Defendant Nos.3 and 4 are the recognized financial institutions. Defendant nos.1 and 2 have mortgaged their leasehold rights obtained from the plaintiffs in their favour and thereby they become the creditors and stepped into the shoes of defendant Nos.1 and 2. 4.1. Defendant Nos.3 and 4 are the recognized financial institutions. Defendant nos.1 and 2 have mortgaged their leasehold rights obtained from the plaintiffs in their favour and thereby they become the creditors and stepped into the shoes of defendant Nos.1 and 2. They are liable to pay rents fixed under the lease deed as and when rent accrued, thereby there is a privity of contract between the plaintiffs and defendant Nos.3 and 4. 4.2. Defendant No.4 though made payments towards the rent for certain period, later stopped the payment. Till the end of 30/11/1998, the defendants are in due of arrears of rent of Rs.28, 10, 637.75. The plaintiffs have initiated proceedings under the Karnataka Rent Control Act, 1961 and later withdrawn it. After causing notice to the defendants, since they did not reply, the instant suit is filed. 5. Defendant No.1 remained ex-parte. Defendant No.2 though appeared did not file the written statement. Defendant Nos.3 and 4 have contested the suit. 6. Defendant No.3 in his written statement inter alia contended that there is no cause of action; suit is bad for non-joinder of parties; the plaintiff is not entitled to claim damages from defendant No.3; defendant Nos.1 and 2 have been in possession of the distinct portions of the suit schedule property; they were paying rents in respect of their respective portions; joint suit filed against the defendants is not maintainable. Defendant No.3 is only a mortgagee of the leasehold rights, the contention of the plaintiffs that defendant No.3 has stepped into the shoes of defendant No.1 is false. This defendant is not liable to pay any arrears of rent, whatever rents paid were on behalf of the defendant No.1. There is no relationship of landlord and tenant between them; the HRC proceedings initiated by the plaintiff is not affecting this defendant. Under Sec. 29 of the State Financial Corporation Act, possession of the mortgaged premises is taken by the defendants; the suit is premature and is liable to be dismissed. 7. Defendant No.4 in his written statement inter alia contended that it has advanced the financial assistance to defendant Nos.1 and 2, and they were carrying on their business and they made necessary arrangements for this defendant to enter and inspect the plant and machinery hypothecated it. It has every right to enter the premises for inspection. 7. Defendant No.4 in his written statement inter alia contended that it has advanced the financial assistance to defendant Nos.1 and 2, and they were carrying on their business and they made necessary arrangements for this defendant to enter and inspect the plant and machinery hypothecated it. It has every right to enter the premises for inspection. Since defendant Nos.1 and 2 defaulted in loan re-payment, it has not violated any terms of the contract, there is no cause of action and sought for dismissal of the suit. 8. On the basis of the pleadings, the Trial Court has framed the following issues: 1. Whether the plaintiff proves that though the lease period is over pertaining to the suit schedule BCD the defendant No.1 and 2 unauthorisedly continue to occupy the same thus causing loss and damages to the plaintiff? 2. Whether the plaintiff proves, that the defendants are in due of Rs.30, 00, 637.75 as on the date of the filing of the suit? 3. Whether the plaintiff further proves, that they are entitled to have damages @ 60, 000/- per month till they get back the vacant possession of the schedule property from the defendants 1 and 2? 4. Whether the plaintiff proves that they are entitled to have the delivery of the suit schedule property 'B', 'C', 'D', and the possession of the same? 5. To what order and decree? 9. Before the Trial Court, plaintiff examined one witness as PW-1 and marked Exs.P1 and 2. No evidence was let in on behalf of the defendant Nos.1 and 2. On behalf of defendant Nos.3 and 4, two witnesses are examined as DWs-1 and 2 and marked Exs.D1 and D2. 10. After considering the pleadings, evidence and the arguments on both sides, the Trial Court has recorded issue No.1 in the affirmative; issue Nos.2 and 3 against defendant Nos.1 and 2; issue No.4 does not survive for consideration and while answering issue No.5 decreed the suit against defendant Nos.1 and 2 and dismissed the suit against defendant Nos.3 and 4. Aggrieved by the same, the plaintiffs have filed this appeal on various grounds. 11. We have heard the arguments of Smt. Maneesha Kongovi, learned Counsel for the plaintiffs, Sri. Vinod Kumar on behalf of Sri.Bipin Hegde, learned counsel for defendant No.3 and Sri.V.F.Kumbar, learned counsel for defendant No.4. 12. Aggrieved by the same, the plaintiffs have filed this appeal on various grounds. 11. We have heard the arguments of Smt. Maneesha Kongovi, learned Counsel for the plaintiffs, Sri. Vinod Kumar on behalf of Sri.Bipin Hegde, learned counsel for defendant No.3 and Sri.V.F.Kumbar, learned counsel for defendant No.4. 12. It is the contention of the learned counsel for the plaintiffs that they are the absolute owners of the suit schedule property, which was leased for a period of ten years in favour of defendant Nos.1 and 2 with permission to them to mortgage the leasehold right for securing the financial assistance to run the business in the suit schedule property. By virtue of it, defendant Nos.1 and 2 have mortgaged their leasehold right in favour of defendant Nos.3 and 4 by raising the loan. Defendant Nos.1 and 2 since committed default of repayment of loan, defendant No.3 took possession of the suit schedule property on 15/3/1995, the premises was leased to Dr.Amarnath to run the hospital, during the said period, both the defendant Nos.3 and 4 have paid rent to the plaintiffs for a few months only. Since Dr.Amarnath could not run the hospital, defendant Nos.3 and 4 have sold away the mortgaged properties and locked the premises kept in their possession. Plaintiffs were prevented from holding the possession till it was delivered on 29/5/1999. Since the defendants have taken possession of the property by executing their mortgage right, they stepped into the shoes of defendant Nos.1 and 2 and liable to pay the arrears of rent. The Trial Court without considering these aspects decreed the suit only against defendant Nos.1 and 2 and she sought for interference. 13. Per contra, learned counsel for defendant No.3/KSFC has contended that the possession of the suit property was taken under Sec. 29 of the KSFC Act, it has every right to be in possession till the expiry of lease period i.e., 15/4/1999. Since defendant Nos.1 and 2 have committed default, after taking possession, the premises was given to Dr.Amarnath to run the hospital. The rents being collected from him and for 2-3 months was paid to the plaintiffs. Only the leasehold right is mortgaged by deposit of title deeds, the suit property was not mortgaged to defendant No.3. Since defendant Nos.1 and 2 have committed default, after taking possession, the premises was given to Dr.Amarnath to run the hospital. The rents being collected from him and for 2-3 months was paid to the plaintiffs. Only the leasehold right is mortgaged by deposit of title deeds, the suit property was not mortgaged to defendant No.3. Since defendant No.3 taken possession under statutory right, such taking possession cannot be equated with that of a tenant to fasten the liability to pay the rent. In the alternative, it is also contended that defendant No.3 has taken possession of a portion of the plaint schedule 'D' property and it cannot be compelled to pay rent for the entire premises and the Trial Court after considering the statutory right of the defendant No.3 rightly absolved its liability and he supported the impugned judgment. 14. Learned counsel for defendant No.4 has adopted the argument canvassed on behalf of defendant No.3 and contended that defendant No.4 has no liability to pay any rents as taking possession of the property does not mean that there was a sublease, this defendant has not derived any income from the property after taking possession, the property mortgaged is only a leasehold right, not the possession and he supported the impugned judgment. 15. We have given our anxious consideration to the arguments addressed on behalf of both parties and perused the material on record. 16. The points that arise for our consideration is: (i) Whether the defendant Nos.3 and 4 are liable to pay rents due on account of the default committed by defendant Nos.1 and 2? (ii) Whether the impugned judgment is erroneous and calls for our interference? Reg. Point No.(i): 17. The material on record did point out and the Trial Court also recorded that there was a registered lease came into existence between the plaintiffs and defendant Nos.1 and 2 in respect of 'B' schedule property for a period of 10 years from 1/4/1990 to 31/3/2000. The rent was initially started from Rs.36, 850.00 with a provision to enhance for every three years and by the time the lease ends, the rate of rent will be Rs.56, 044.24 paise per month. The defendant Nos.1 and 2 have paid security deposit of Rs.1, 10, 500.00 in favour of the plaintiffs. The rent was initially started from Rs.36, 850.00 with a provision to enhance for every three years and by the time the lease ends, the rate of rent will be Rs.56, 044.24 paise per month. The defendant Nos.1 and 2 have paid security deposit of Rs.1, 10, 500.00 in favour of the plaintiffs. Defendant Nos.1 and 2 are put in possessin of the premises on the basis of the original lease deed. Defendant Nos.1 and 2 are liable to pay rents on or before 5th of every month. Defendant Nos.1 and 2 were permitted to take financial assistance from the recognized institution by mortgaging their leasehold rights but they cannot alienate the leasehold rights affecting the right of the plaintiffs in collecting the rents payable to the leased premises. The plaintiffs have terminated lease in favour of defendant Nos.1 and 2 by the end of 31/1/1999. Thereafter they alleged that the possession of the defendant Nos.1 and 2 in the leasehold premises is unauthorized, they are liable to pay damages for continuing to be in possession after expiry of the lease period. 18. It is pertinent to note that both defendant nos.1 and 2 have committed default in repaying the loan and for this reason, defendant No.3 exercising power under Sec. 29 of the KSFC Act took over the possession of the leasehold rights of the premises including the plant and machinery. Since defendant Nos.1 and 2 did not come forward to discharge the debt, the third defendant leased the premises to one Dr.Amarnath to run the hospital and collected the rents from him and paid the rents to the plaintiffs for 2-3 months. Thereafter, defendant Nos.3 and 4 did not pay the rents on the ground that they have only taken the mortgage of leasehold rights and not the entire building on lease. It is the contention of defendant Nos.3 and 4 that they are entitled to be in possession of the suit premises till the expiry of the lease till 31/3/2020. Accordingly, they are in possession legally; they have no liability to discharge the accrued rents to the plaintiffs; whatever rents accrued was to be recovered from defendant Nos.1 and 2. It is also their contention that whatever amount advanced to defendant Nos.1 and 2 was not fully realized even after auction sale of mortgaged plant and machineries in the leasehold premises. It is also their contention that whatever amount advanced to defendant Nos.1 and 2 was not fully realized even after auction sale of mortgaged plant and machineries in the leasehold premises. In view of this, the dispute has been narrowed down between the plaintiffs and defendant Nos.3 and 4 to determine their liability. 19. We have carefully perused the impugned judgment. The Trial Court recorded that the lease between the plaintiff and defendant Nos.1 and 2 to pay rents on 5th of every month and there is no privity of contract between the plaintiffs and defendant Nos.3 and 4 to pay the accrued rents and defendant Nos.3 and 4 acted statutorily to effect recovery of the loan advanced and they are not in possession as tenants nor they stepped into the shoes of defendant No.1 and 2 and they cannot be insisted to pay the arrears of rent. 20. According to the plaintiffs, defendant Nos.3 and 4 are not required to take possession of the suit schedule properties as it was not mortgaged to them. What has been leased to them was the leasehold rights. If defendant Nos.1 and 2 have committed default in repaying the loan by virtue of the mortgaged leasehold rights, defendant Nos.3 and 4 are entitled to take possession of the mortgaged plant and machinery only. But contrarily, defendant Nos.3 and 4 took possession of the entire suit schedule property which was in custody of the defendant Nos.1 and 2. It is interesting to note that defendant No.3 in order to generate the income to realize the loan leased the hospital to Dr.Amarnath and collects the income from him to appropriate towards the loan and also to pay rent to the plaintiffs. Defendant No.4 alleges that it has only seized the leasehold plant and machinery and kept it in the premises with seal. The plaintiffs not allowed the access to defendant No.4 and they are not entitled to claim any rent from him. This argument cannot be sustained as both defendant Nos.3 and 4 are in legal possession of the property and they have not allowed either defendant No.1 and 2 or the plaintiff to use the building; thereby the defendant Nos.1 and 2 are prevented from using the premises to generate the income to pay the rent. This argument cannot be sustained as both defendant Nos.3 and 4 are in legal possession of the property and they have not allowed either defendant No.1 and 2 or the plaintiff to use the building; thereby the defendant Nos.1 and 2 are prevented from using the premises to generate the income to pay the rent. The material on record did point out that the premises was delivered to the plaintiffs on 25/6/2002 whereas the lease expires on 31/1/1999 by virtue of termination of lease by notice. The defendant Nos.3 and 4 have right to be in possession of the plant and machinery only and not the premises. Then in what capacity they took physical possession of entire building has to be considered now. 21. The plaintiffs are banking upon Ss. 65(d) and 76(c) of the Transfer of Property Act, to demonstrate that if the mortgagee is in possession of the premises, he is responsible for payment of rents. In this regard, it is relevant to extract said Ss. : "65. Implied contracts by mortgagor.- In the absence of a contract to the contrary, the mortgagor shall be deemed to contract with the mortgagee, - (a) x x x x x x x (b) x x x x x x x (c) x x x x x x x (d) and, where the mortgaged property is a lease, that the rent payable under the lease, the conditions contained therein, and the contracts binding on the lessee have been paid, performed and observed down to the commencement of the mortgage; and that the mortgagor will, so long as the security exists and the mortgagee is not in possession of the mortgaged property, pay the rent reserved by the lease, or, if the lease be renewed, the renewed lease, perform the conditions contained therein and observe the contracts binding on the lessee, and indemnify the mortgagee against all the claims sustained by reason of the non-payment of the said rent or the non-performance or non-observance of the said conditions and contracts." x x x x x x x x x x "76. Liabilities of mortgagee in possession.-When, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property, - (a) x x x x x x x x. (b) x x x x x x x x (c) he must, in the absence of a contract to the contrary, out of the income of the property, pay the Government revenue, all other charges of a public nature 1[and all rent] accruing due in respect thereof during such possession, and any arrears of rent in default of payment of which the property may be summarily sold; 22. The Hon'ble Apex Court in Smt.Basmati Devi (since deceased) and after death her LRs and Another -vs- Chamru Sao and Others, AIR 1964 SC 1707 has held at paras-11 and 13 as under: "11. With this view we are unable to agree. In our opinion, the fact that the mortgagor had made a default, does not alter the position that the mortgagee had also defaulted in paying the rent he was liable to pay. By his default he has contributed to the position that a suit had to be brought for arrears of rent and ultimately to the position that the property was put to sale in execution of the decree obtained in the suit. This contribution to the bringing about of the sale was a direct result of his position as a mortgagee. When therefore he purchased the property himself at the sale in execution of the rent decree he clearly gained an advantage by availing himself of his position as a mortgagee. 12. x x x x x x x 13. In the present case, the finding is that the liability of the defendants 1 and 2 was to pay a substantial portion of the rent. To say in such circumstances that they did not take advantage of their position as mortgagees is entirely unrealistic Such a construction would put a premium on dishonesty on the part of mortgagees whenever the entire burden of payment of rent was not left squarely on the mortgagee as under the provision of Sec. 76 of the Transfer of Property Act." 23. Defendant Nos.3 and 4 are not exempted from obligation under Ss. 65 and 76 of the T.P.Act. Defendant Nos.3 and 4 are not exempted from obligation under Ss. 65 and 76 of the T.P.Act. They drawn the obligation on themselves by letting out the premises during the seizure to raise the income, to appropriate towards arrears of loan and even paid rent to the plaintiffs. From the date of seizure till the property was delivered back to the plaintiffs, defendant Nos.1 and 2 were not in possession and enjoyment of the leasehold premises. It is the defendant Nos.3 and 4 were in physical possession and therefore they are stepped into the shoes of defendant Nos.1 and 2. At one breath, defendant Nos.3 and 4 leases the premises, receives income and pays rent to the plaintiffs and at another breath, they say that they have no liability to pay the arrears. Defendant Nos.3 and 4 cannot be permitted to approbate and reprobate their stand as they being the public institution and therefore, the finding recorded by the Trial Court in exonerating defendant Nos.3 and 4 from their liability to pay the arrears is erroneous. 24. When defendant Nos.3 and 4 seized the property, took possession, be in possession and delivered after expiry of the lease period for the reason of express covenant in the lease deed for 10 years was still persisting. This has created the relationship between plaintiffs and defendant Nos.3 and 4 on the doctrine of 'privity of estate'. This has been explained by this court in Maji Venkateshwara Bhat -vs- Ramakrishna Mayya and Another, ILR 1979 KAR 2023. at para 15 it is held as follows: "15. Rent reserved by a lease and the benefit of every cove-nant or provisions therein contained having reference to the subject matter thereof and on the lessee's part to be observed or performed, and every condition of re-entry and the other conditions contained therein shall be annexed and incident to and shall go with the land. Such rent, covenant or provision can be recovered, enforced or taken advantage of by the persons from time to time entitled, subject to the term of the lease. It is because of this implied covenant running with the land that the relationship of landlord and tenant is created between the original lessor and the assignee of the lease on the doctrine of privity of estate. It is because of this implied covenant running with the land that the relationship of landlord and tenant is created between the original lessor and the assignee of the lease on the doctrine of privity of estate. On the basis of this doctrine and becuse of implied covenants, the assignee is personally bound by the implied covenants and one of them is to pay the rental to the original lessor. Hence, it is obvious that the assignee is personally bound to pay the rental to the original lessor." 25. In view of the doctrine of privity of estate between plaintiffs and defendant No.4 and 5, they are bound to pay rents and if they are not able to realize their loan, they have to proceed against defendant Nos.1 and 2 to realize the remaining loan as well as the arrears of rent due to the plaintiffs. Hence, the appeal filed by the plaintiffs merits consideration. In the result, the following: ORDER (i) Appeal is allowed. (ii) The order of dismissal of the suit against defendant Nos.3 and 4 is set aside; (iii) All the defendants are jointly and severally liable to pay decretal amount as ordered by the Trial Court; (iv) Rest of the impugned judgment is kept intact. Parties to bear their own costs.