Tenant's right to remain in occupation of the non-residential premises governed by the Maharashtra Rent Control Act, 1999 is a property; such property is saleable and the tenant has disposing power over the interest of tenancy for his benefit and in view thereof, we hold that the interest of the tenant of non-residential premises to which the Maharashtra Rent Control Act, 1999 applies is attachable and saleable in execution of the decree against the tenant.
Section 26 forbids the voluntary transfer of interest in the premises by the tenant but does not prevent the transfer by the court. Where the transfer is by an operation of law and not by act of the parities, Section 26 shall have no application. The argument that what the defendant could not have done otherwise legally could not be done through court is misplaced and devoid of merit. For one, it is consistently held for more than a century that restriction on assignment to transfer by the tenant under the lease or otherwise does not apply to an assignment by operation of law taking the effect in invitum as a sale under an execution. The other, neither Section 26 nor any other provision in the Act of 1999 restricts a sale in execution of the decree.
Section 26 forbids the voluntary transfer of interest in the premises by the tenant but does not prevent the transfer by the court. Where the transfer is by an operation of law and not by act of the parities, Section 26 shall have no application. The argument that what the defendant could not have done otherwise legally could not be done through court is misplaced and devoid of merit. For one, it is consistently held for more than a century that restriction on assignment to transfer by the tenant under the lease or otherwise does not apply to an assignment by operation of law taking the effect in invitum as a sale under an execution. The other, neither Section 26 nor any other provision in the Act of 1999 restricts a sale in execution of the decree.
Mr. Ramchandani has invited our attention to a passage in Sir D. F. Mulla's Law of Insolvency in India, second edition, 1958, and argued that whatever may be the position in regard to the alienability of the property' or otherwise, even such a tenancy is property and must vest in the Official Assignee. In particular, he relies upon para 501 at page 471, which reads as follows:
" 'Property' includes any property over which, or over the profits of which, any person has a disposing power which he may exercise for his own benefit. In view of that definition, all property in the hands of the insolvent, though inalienable, would vest in the Officer Receiver, unless exempted by the Code of Civil Procedure, 1908, or by any other enactment for the time being in force from liability to attachment and sale in execution of a decree."
Bombay High Court
Tangerine Electronics Systems ... vs Indian Chemicals And Ors. And ... on 4 March, 2004
Equivalent citations: AIR 2004 Bom 198, 2004 (5) BomCR 673, 2004 (2) MhLj 305
Bench: R Lodha, S Vazifdar, A V Mohta
1. The learned Single Judge of this court doubted the correctness of the view of another learned Single Judge in the case of Veetrag Investments and Finance Co. v. Premier Brass and Metal Works Pvt. Ltd., Mumbai, 2002(3) Mh.L.J. 455 (Veetrag Investments I) and passed the following order:--
"The principal question raised in this Chamber Summons is that the disputed property (non-residential) is tenanted property and if it is so, the same cannot be subject matter of attachment and sale in the course of execution of the decree. Reliance is placed on the decision of the Single Judge of this Court reported in 2002(3) Mh.L.J. 455 in Veetrag Investments and Finance Co. v. Premier Brass and Metal Works Pvt. Ltd., Mumbai. In this decision, the Court has mainly adverted to the provisions of Section 26 of the Maharashtra Rent Control Act, 1999, to conclude that the tenant has no right to sublet or transfer the premises held by him, whether they are for residential or non-residential purposes (see para 19); and on that basis, found that the leasehold rights cannot be put to sale.
In my opinion, prima facie, by virtue of Section 56 of the Act, which is a non-obstante provision, the limitation or restriction imposed in Section 26 of the Act is lifted and would enable the decreeholder to enforce the decree qua such premises, for it recognises that the tenant or any person acting or purporting to act on behalf of the tenant can claim or receive any sum or any consideration as a condition of the relinquishment, transfer or assignment of his tenancy of any premises. The judgment of this Court pressed into service has obviously not considered the efficacy of Section 56 of the Act, which has a non-obstante clause.
In the circumstances, the appropriate course is to refer the matter to a larger Bench for an authoritative pronouncement of the question that arises for consideration in this case.
Accordingly, the papers be placed before the learned Chief Justice for assigning it to a larger Bench."
2. This is how the present Full Bench has been constituted by Hon'ble the Chief Justice.
3. In the order of reference, the learned Single Judge has not narrated the necessary facts. The learned counsel for the parties were not ad-idem on facts before us. Bereft of facts, in the circumstances, the neat question of law for our consideration is; whether the interest of the tenant of non-residential premises to which the Maharashtra Rent Control Act, 1999 applies, is attachable and saleable in execution of the decree against the tenant?
4. The answer to the aforesaid question would depend on the consideration of the aspects; is the tenant's right to remain in occupation of the non-residential premises a property; is such property saleable and has the tenant disposing power over the interest of the tenancy for his benefit.
5. The word "property" has nowhere been defined under the Transfer of Property Act. The Civil Procedure Code also does not define the term "property". The term 'property' possesses a variety of different applications having different degrees and includes, in its widest sense, all a person's legal rights, of whatever description. In its ordinary and general meaning, the property is not only the thing which is subject matter of ownership but also includes dominium or the right of ownership or partial ownership and it indicates and describes every possible interest which a party can have, and will include any benefit that a person is entitled to take out of the property of another.
6. A lease, in the generic sense, is the form of encumbrance which consists in a right to the possession and use of the property owned by some other person.
7. Section 105 of the Transfer of Property Act, 1882 (For short 'TP Act') provides thus :
105. Lease defined.-- A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions, to the transferor by the transferee, who accepts the transfer on such terms.
8. From this definition of word "lease". It is clear that lease creates an interest in the property and unless there is a transfer of such interest, there can be no lease. The creation of an interest in the immovable property is a test to determine whether the transaction is lease. Thus, it is a transfer of right to enjoy the property leased and by way of lease, the lessee gets the right to remain in occupation of the premises on payment of rent.
9. In Ramesh Himmatlal Shah v. Harsukh Jadhavji Joshi, , the Supreme Court was seized with the question of law : Is a flat in a tenant co-partnership housing society under the Maharashtra Co-operative Societies Act, 1960 liable to attachment and sale in execution of a decree against a member in whose favour or for whose benefit the same has been allotted by the society. The Supreme Court considered the said question in the light of the provisions of Section 60 of the Civil Procedure Code (CPC), the provisions of the Maharashtra Co-operative Societies Act, 1960 and also the bye-laws of the society and held in para 19 of the report thus --
"19. This right or interest to occupy is a species of property. We have to consider whether this right to the particular property is attachable and saleable in execution of the decree against the judgment-debtor. It is contended by Mr. Chatterjee, amicus curiae, that Section 31 of the Act completely bars attachment and sale of the said property in execution of the decree. We have already pointed out the difference in language between Section 29 and Section 31 and also made reference to Section 47(1)(b) in that connection. There is nothing in the language of Section 31 to indicate that the right to occupation which is the right to be sold in auction is not attachable in execution of the decree. There is nothing in Section 31 to even remotely include a prohibition against attachment or sale of the aforesaid right to occupation of the flat. Once Section 31 is out of the way, we are left with Section 29 wherein we do not find even a provision of prior consent for transfer of share on interest in such property. The only restrictions under Section 29(2) are that the member may not transfer his interest in the property prior to one year and the transfer is made to an existing member of the Society or to a person whose application for membership has been accepted by the Society. It is true that Bye-law 71D says that a member to whom a tenement is allotted shall not assign or underlet, vacate or part with the possession of the tenement or any part thereof without the previous consent in writing of the Managing Committee, but there is nothing to show that contravention of this bye-law makes the assignment void under the Act unlike in the case of a transfer being void under Section 47(3). There is no impediment to ratification of the assignment by the Committee particularly in view of the legal position arising out of the conjoint effect of Section 29, Rule 24 and Bye-law 9. Section 29 read with Rule 24 shows that there is no prohibition as such against transfer of a share to a member or even to a non-member if he consents to be a member and makes an application for membership by purchasing five shares as provided under Bye-law 9. Reading the aforesaid provisions there is no reason to think that there is any question of refusal of membership of the Society to a non-member if he is qualified otherwise and makes an appropriate application in which case the transfer of shares will be operative and thus the assignment of the right to occupation will hold good. Further it is significant that under Section 146(a) of the Act, contravention of Sub-section (2) of Section 47 is punishable under Section 47 of the Act. Contravention of any bye-law is, however, no offence. We, therefore, unhesitatingly come to the conclusion that this species of property, namely the right to occupy a flat of this type, assumes significant importance and acquires under the law a stamp of transferability in furtherance of the interest of commerce. We have seen no fetter under any of the legal provisions against such a conclusion. The attachment and the sale of the property in this case in execution of the decree are valid under the law."
10. In what we have discussed above, it cannot be seriously disputed that tenant's right to remain in occupation of the non-residential tenanted premises is a property. If it were not so, the interest of a lessee of the residential building to which the Rent Control Act was applicable would not have been excluded by introducing Clause (kc) in proviso to Sub-section (1) of Section 60 Civil Procedure Code.
11. Section 6 of the TP Act provides that property of any kind may be transferred, except as otherwise provided therein or by any other law for the time being in force. Clause (d) of Section 6 reads thus --
"6. What may be transferred.-- Property of any kind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force.
(d) An interest in property restricted in its enjoyment to the owner personally cannot be transferred by him."
12. By virtue of Section 108(j) of the T.P. Act the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. Section 108(j) further provides that the lessee shall not by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease. The question, therefore, to be considered is, how far Section 26 of the Maharashtra Rent Control Act, 1999 (For short, Act of 1999) restricts the tenants right of the transfer of whole or any part of interest in the property.
13. Before we advert to Section 26, it may be proper to refer to Section 7(15) and Section 25 of the Act of 1999 to ascertain who the tenant is. "Section 7
(15) "tenant" means any person by whom or on whose account rent is payable for any premises and includes, --
(a) such person.--
(i) who is a tenant, or
(ii) who is a deemed tenant, or
(iii) who is a sub-tenant as permitted under a contract or by the permission or consent of the landlord, or (iv) who has derived title under a tenant, or (v) to whom interest in premises has been assigned or transferred as permitted, by virtue of, or under the provisions of, any of the repealed Acts;
(b) a person who is deemed to be a tenant under Section 25;
(c) a person to whom interest in premises has been assigned or transferred as permitted under Section 26;
(d) in relation to any premises, when the tenant dies, whether the death occurred before or after the commencement of this Act, any member of the tenant's family, who,--
(i) where they are let for residence, is residing, or
(ii) where they are let for education, business, trade or storage, is using the premises for any such purpose.
with the tenant at the time of his death, or, in the absence of such member, any heir of the deceased tenant, as may be decided, in the absence of agreement, by the court.
Explanation.-- The provisions of this clause for transmission of tenancy shall not be restricted to the death of the original tenant, but shall apply even on the death of any subsequent tenant, who becomes tenant under these provisions on the death of the last preceding tenant. "Section 25. Certain sub-tenants to become tenants on determination of tenancy. -- When the interest of a tenant of any premises is determined for any reason, any sub-tenant to whom the premises or any part thereof have been lawfully sub-let and such sub-tenancy is subsisting on the date of commencement of this Act or where sub-tenancy is permitted by a contract between the landlord and the tenant, such sub-tenant shall, subject to the provisions of this Act, be deemed to become the tenant of his landlord on the same terms and conditions as he would have held from the tenant if the tenancy had continued."
14. In the background of Section 7(15) and Section 25 of the Act of 1999, we turn to Section 26 which reads thus --
"26. In absence of contract tenant not to sub-let or transfer or to give on licence. -- Notwithstanding anything contained in any law for the time being in force, but subject to any contract to the contrary, it shall not be lawful for any tenant to sub-let or give on licence the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein :
Provided that, the State Government may by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases any premises or class of premises other than those let for business, trade or storage to such extent as may be specified in the notification."
15. The said Section 26 does not absolutely prohibit or totally forbid the tenant - the tenant as meant by section 7(15) - to sublet or give on licence or assign or transfer in any other manner whole or any part of the premises let to him since it is subject to the contract to the contrary with the landlord. In other words, the landlord is always at liberty to permit the tenant to sublet or give on licence or assign or transfer in any other manner whole or any part of the premises let to him. The contract contrary to the prohibition provided in Section 26 can be at any time - at the time the premises are let out to the tenant or any time thereafter, even after the tenant has sublet or given on licence or assigned or transferred his interest in the premises let out to him. The landlord can always ratify the action of the tenant in subletting or giving on licence or assigning or transferring in any other manner his interest in the premises let to him. Thus, Section 26 of the Act of 1999 cannot be held to contain the absolute bar against the tenant of the non-residential premises nor the transfer in contravention of Section 26 is absolutely void that is void against the whole world but may be void against the landlord furnishing him the ground to get a decree for ejectment.
16. Reverting back to the case of Ramesh Himmatlal Shah, though Section 31 of the Maharashtra Co-operative Societies Act, 1960 provides that the share or interest of the member in the capital of society shall not be liable to attachment or sale under any decree or order of a court or in respect of any debt or liability incurred by the member and Section 47 of the said Act makes provision to the effect that no property or interest in property covered under Sub-section (1) thereof shall be transferred in any manner without previous permission of the society and any transfer made in contravention of Sub-section (2) shall be void, the Supreme Court held that right to occupy the flat in a tenant co-partnership housing society by its member was a species of the property and was liable to attachment and sell in execution of a decree against the member in whose favour or for whose benefit it has been allotted by the society. The Supreme Court also held that the right to occupy such a flat assumed significant importance and acquired under the law a stamp of transferability in furtherance of the interest of commerce to impose a ban on saleability. It was held that though the flat was owned by the society, the member allottee had a right or interest to occupy the same and that there was nothing in Section 31 to indicate that the right to occupation which was a right to be sold in auction was not attachable in execution proceedings. Mr. Mahendra Ghelani, the learned counsel appearing for the applicants in support of the chamber summons sought to distinguish this judgment by contending that the observations made by the Supreme Court, "this right or interest to occupy is a species of property" and, "that this species of property namely the right to occupy a flat of this type" are made in the light of the interest of the member allottee in co-partnership housing society in share of interest in the capital and interest in the property of the society. We are unable to accept the distinction so suggested by Mr. Mahendra Ghelani. The facts in the case of Ramesh Himmatlal Shah are thus : Ramesh Himmatlal Shah claimed money decree against Harsukh Jadhavji Joshi and took a warrant of attachment of flat No. 9 of Paresh Co-operative Housing Society Ltd. at Santacruz, Mumbai, That flat described as ownership flat in common parlance was attached on August, 8, 1970 and the warrant of attachment was served on the judgment-debtor while he was in jail in Rajkot. In due course, a sale proclamation was also issued in respect of the flat while the judgment-debtor was yet in jail. At this stage of the proceedings, the brother of the judgment debtor (Hasmukh Jadhavji Joshi) took out a chamber summons challenging the execution on the ground that the flat did not belong to the judgment-debtor but belonged to him and to the judgment-debtor's wife and that the attachment should be raised. His chamber summons was made absolute but in appeal, the order was set aside and the matter was remanded. The said chamber summons was, however, finally dismissed on September 30, 1971. Hasmukh Jadhavji Joshi did not take any further action against the rejection of his claim against the property. After coming out of the jail, the judgment-debtor filed the suit in the year 1972 to set aside the decree. He could not secure an order of injunction to prevent the execution of the decree. The flat was offered for sale and was purchased in auction by one Bhupendra N. Shah for a sum of Rs. 24,000/-. The sale, however, was not yet confirmed and the judgment-debtor took out another chamber summons setting up a new plea for setting aside the warrant of attachment and proclamation of sale on the ground that the flat in a co-operative housing society was not liable to attachment and sale. He stated that he had no saleable interest in the said property under Section 60 of Civil Procedure Code and, therefore, was not liable to attachment. The chamber summons was dismissed by the City Civil Court but the learned Single Judge of this court allowed the appeal and set aside the attachment and sale of the flat. The Division Bench of this court maintained the order of the learned Single Judge and the matter was carried to the Supreme Court and as noticed by us above, the Supreme Court held that right of interest to occupy the flat by the judgment-debtor Hasmukh Joshi was a species of the property and that it was both attachable and saleable. In the light of the principles laid down by the Supreme Court in Ramesh Himmatlal Shah, when we view the provisions of Section 26 of the Act of 1999, we find the support for what we have held above that Section 26 does not contain an absolute bar against the tenant in subletting or giving on licence or transfer or assign the premises let out to him as the said provision is subject to the contract to the contrary.
17. The Division Bench of this court in Union of India v. Mittersain Rupchand and Ors., 1995(2) Mh.L.J. 481 was concerned with the question as to whether the tenancy rights and the goodwill of the running concern can be attached in execution under Order 20, Rule 54 of Civil Procedure Code. That was the case where in the execution application filed by the decree holder seeking execution of the money decree, the executing court levied attachment of goodwill and tenancy rights of non-residential premises that were in possession of the judgment-debtor on lease. The judgment-debtor took out chamber summons for raising the attachment on the ground that Section 15 of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 (For short "Bombay Rent Act") prevented creation of any sub-tenancy or assignment or transfer in any manner of the interest of a tenant. The trial Judge of this court by his judgment, raised the attachment holding that as the transfer of tenancy rights was prohibited by law, the same could not be attached. Reversing the view of the learned trial Judge of this court, the Division Bench held that there was no bar whatsoever under Sub-section (1) of Section 15 to attach and sell the leasehold interest of a lessee in the premises leased out for non-residential purpose. The Division Bench referred to the judgment of the Supreme Court in the case of Ramesh Himmatlal Shah and also the Division Bench of this court in Zarina Umer Chamdewala v. Sati Lalchand Verumal Lalwani, BLR Vol. LXXI 1969 page 801 and held thus :--
"6. Sub-section (1) of Section 15 of the Bombay Rent Act, which is set out hereinabove, inter alia provides that it shall not be lawful for any tenant to sub-let the whole or any part of the premises or to assign or transfer in any other manner his interest therein. The plain reading of sub-section makes it clear that the prohibition is not absolute because it is always open to the parties to contract to the contrary as provided by the section. It is always open for the lessor and the lessee to contract that the lessee can sub-let the premises or assign or transfer in any other manner his interest therein. In other words the prohibition contained in Sub-section (1) is not absolute. The section nowhere provides that the transfer shall be void. The proviso of the sub-section confers power on the State Government to issue notification permitting the transfer of interest and such notification has been issued permitting transfer of interest of the lessee in the business premises, provided what is transferred is the running business with tenancy rights. It is, therefore, clear that even the legislature never contemplated that the lessee of non-residential premises cannot transfer or assign the interest in the leasehold rights. The learned Judge was, therefore, not right in observing that the transfer of leasehold interest in non-residential premises is totally prohibited and therefore not liable for attachment. It was also overlooked that the grievance on account of breach of Sub-section (1) of Section 15 of the Bombay Rent, Act can only be at the behest of the lessor and the lessee whose interest in the leasehold rights is attached cannot complain about the same. Indeed, in the present case, the respondents have admitted on affidavit that out of about 2,000 sq.ft of the leased area, 1850 sq. ft have already been parted with either under the cover of sub-leases or licenses. The conduct of the respondents speak for itself and requires no further comment. The lessee has not created the alleged sub-leases and licenses for no consideration. In the absence of total prohibition of transfer of leasehold interest in respect of non-residential premises it is not correct to suggest that the lessee of such premises do not hold saleable property or do not hold disposing power in respect of such interest."
18. Section 15(1) of the Bombay Rent Act since repealed by the Act of 1999 was as follows :
"15(1) Not withstanding anything contained in any law but subject to any contract to the contrary, it shall not be lawful after the coming into operation of this Act for any tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein and after the date of commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Act, 1973, for any tenant to give on licence the whole or part of such premises : Provided that the State Government may by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases or the giving on licence any premises or class of premises and to such extent as may be specified in the notification."
19. On the comparison of Section 15(1) of the Bombay Rent Act and Section 26 of the Act of 1999, it would be seen that both sections are almost identical save little difference in the proviso appended to both sections which empower the State Government to permit the transfer of interest in premises by publication of notification in the official Gazette. Proviso appended to Section 15(1) of the Bombay Rent Act provided that the State Government may by notification in the Official Gazette permit in any area the transfer of interest in premises held under such leases or class of leases or the giving on licence any premises or class of premises and to such extent as may be specified in the notification while the proviso appended to Section 26 such notification can be issued by the State Government only for the premises other than those let for the business trade or storage. In our considered view, this difference in proviso by taking out non-residential premises out of the purview of State Government's power to permit the transfer of interest by issuance of notification in official gazette does not make the ratio of the Division Bench in Mittersain Rupchand inapplicable under Section 26 of the Act of 1999. Even if we assume that under the proviso to Section 26 of the Act of 1999, the State Government cannot permit the transfer of interest in the premises let out for business, trade or storage, the prohibition contained in Section 26 being subject to the contract to the contrary does not alter the legal position that the restriction under Section 26 is neither absolute nor total. We find ourselves unable to agree with the submission of Mr. Mahendra Ghelani that Section 26 of the Act of 1999 provides total prohibition for transfer to the tenant and the only exception being the contract to the contrary and, therefore, the tenancy right is not saleable.
20. Incidentally, we may notice that one of us (S.J. Vazifdar, J.) in Veetrag Investments and Finance Company v. Premier Brass and Metal Works Private Ltd., 2003(1) Mh.L.J. 458 = 2003(1) All MR 493 (Veetrag Investments II) considered the question whether Section 26 of the Act of 1999 contain an exact bar against the judgment-debtor assigning or transferring its interest in the tenanted premises. S.J. Vazifdar, J. considered the Division Bench judgment in the case of Mittersain Rupchand and the judgment of the learned Single Judge in Veetrag Investments I and after taking into consideration the relevant provisions of the Act of 1999 and Section 60 of the Civil Procedure Code held that Section 26 does not contain absolute bar against the judgment-debtor assigning or transferring its interest as a sub-tenant in the said premises.
21. Mr. Mahendra Ghelani, the learned counsel relied upon the Division Bench judgment of this court in Zarina Umer Chamdewala (supra). The Division Bench in Zarina Umer Chamdewala held that the tenancy of the monthly tenant who has been adjudicated an insolvent and which is not alienable under Section 15(1) of the Bombay Rent Act cannot be regarded as property of insolvent which much vest in the official assignee under Section 17 of the Presidency Towns Insolvency Act, 1909. The Division Bench observed thus --
"The Act of 1947 made a departure from those provisions. Section 5(11) of the Bombay Rent Control Act, 1947, defines the word "tenant" in such a way as not only to include a tenant for the time being under an agreement with the landlord, but, also sub-tenants and other persons as have derived title under a tenant before the commencement the Act of 1947 and thereafter before the commencement of the amendment of 1959 even if they remained in possession of the premises after the termination of the lease with or without the assent of the landlord. Even the successors of a tenant who have derived title prior to the amendment of 1959 and any member of the tenant's family residing with him at the time of his death as may be decided in default of the agreement by the Court are included in the definition. By Section 15, as it originally stood, it made it unlawful for any tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein, with a proviso that the State may by notification in the Official Gazette permit in any area the transfer of interest in premises held under such leases and to such extent as may be specified in the notification. This section was amended in 1959 and was made subject to any contract to the contrary. The clear effect of this section is that until the Act was amended no tenant was entitled in any manner to transfer or sub-let his interest in the tenancy, and after the amendment unless permitted by the contract. Under the proviso the State Government had issued notifications from time to time which permitted the transfer of tenancy interest along with business as a going concern, and the sad experience of the litigating public is that it is extremely misused. However, with the policy of the legislation we are not concerned."
22. In Zarina Umer Chamdewala, the Division Bench went on to hold thus --
"In the present case, the flat is a residential flat and the agreement gives no power to the defendant to transfer her interest in the property. On the contrary, it specifically prohibits her from transferring the same to anyone under Clause 11 thereof. It is obvious, therefore, that under Section 15 of the Bombay Rent Act the transfer is unlawful. In the circumstances, assuming that it is property the question is, is it such property that it can be divisible amongst the creditors either as it is or by cash realisation of the same, and the answer must be in the negative.
As we have stated earlier, Sections 17 and 52 of the Presidency towns Insolvency Act read together can only mean that the property which vests in the official assignee must be such property that it is capable of being disposed of so that the amount realised can be divided amongst the creditors. We find support for this conclusion in the decision of this Court in Chandrakant Devji v. Narottamdas Amarchand where Sir John Beaumount C.J. dealing with the question in a slightly different context says (p. 646):
"...... A suit relating to the property of the insolvent, in my opinion, means a suit which, if successful, will increase the assets distributable amongst the creditors, or the defence of which may prevent the assets being diminished."
It was on this ground that the learned Chief Justice held under Section 68(1)(d) of the said Act that (p. 646):
"......... a right to institute an appeal, which merely relates to a money claim against an insolvent, is not, in my view, a legal proceeding relating to the property of the insolvent and does not fall within the powers given by Section 68 to the Official Assignee."
Mr. Ramchandani has invited our attention to a passage in Sir D. F. Mulla's Law of Insolvency in India, second edition, 1958, and argued that whatever may be the position in regard to the alienability of the property' or otherwise, even such a tenancy is property and must vest in the Official Assignee. In particular, he relies upon para 501 at page 471, which reads as follows:
" 'Property' includes any property over which, or over the profits of which, any person has a disposing power which he may exercise for his own benefit. In view of that definition, all property in the hands of the insolvent, though inalienable, would vest in the Officer Receiver, unless exempted by the Code of Civil Procedure, 1908, or by any other enactment for the time being in force from liability to attachment and sale in execution of a decree." Even though the statement has been worded very widely, the footnote contains cases, which clearly indicate that the proposition as widely stated cannot be supported. In Bhola Nath v. Chunni Lal; in Sohan Singh v. Official Receiver occupancy rights under the Punjab Tenancy Act; in Vithoba Chinnaji v. Mahadeo Kesheorao occupancy land in Nagpur and in Masumayya v. Official Receiver, Kurnool Masjir service lands, were held not to vest in the receiver in insolvency. In the first case under the Agra Tenancy Act the ex-proprietary tenancy could not be transferred in execution or alienated except in accordance with law. In the second case, the lands involved were governed by the Punjab Tenancy Act which could not be attached or sold in execution of a decree or transferred by private contract without the consent of the landlord. In the fourth case, which is more apposite, the lands were service Inam lands. Such lands it was held in Anjaneyalu v. Sri Venugopala Rice Mill Ltd. to be inalienable by reason of Section 6(d) of the Transfer of Property Act as it "was opposed to the nature of the interest affected thereby". In our view, the ratio of these cases must apply to the case where a tenant is a monthly tenant governed by the Rent Act unless his tenancy is made alienable under the proviso to Section 15(1) of the Bombay Rent Act,"
23. Zarina Umer Chamdewala was considered by the Division Bench in Mittersain Rupchand and was distinguished thus --
"7. Mr. Bansal relied heavily on the decision of the Division Bench of this Court in Zarina Chamdewala's case (supra). In the case before the Division Bench the property in dispute was a residential flat and agreement of lease did not confer power on the lessee to transfer the leasehold interest. The Division Bench of this Court found that under Section 15 of the Bombay Rent Act transfer of interest in residential premises was unlawful. In that case the lessee was adjudicated as insolvent and the issue arose as to whether the Official Assignee can recover possession in accordance with the provisions of sections 17 and 52 of the Presidency Towns Insolvency Act which inter alia provide that the property of insolvent vests in the Official Assignee. The Division Bench held that the tenancy of monthly tenant of a residential premises, who has been adjudicated insolvent is not attachable under Section 15 of the Bombay Rent Act and therefore it cannot be regarded as property of the insolvent and which must vest in the Official Assignee. The decision of the Division Bench clearly deals with the residential premises and the interests in such premises are not attachable under Section 60(kc) of Code of Civil Procedure. The proviso to Sub-section (1) of Section 15 of the Bombay Rent Act confers power on the State Government to issue notification and such notification has been issued only in respect of non-residential premises and obviously with a view not to put fetters on the commerce which is practised on a large scale in this metropolis. The restrictions or limitations imposed upon the lessee while conferring the protection under the provisions of the Rent Act were not required to be strictly applied in respect of the premises leased out for business and the wisdom of the legislature is reflected by conferring power on executive to issue notification. In our judgment, the decision of the Division Bench has no application to premises let out for non-residential purposes. Mr. Bansal then submitted that the decision of the Division Bench in respect of residential flat was followed with approval by another Division Bench in the judgment in the case of M/s D. Vasantrai and Co. (supra) where the premises leased out were for the purpose of carrying on business. The submission is not accurate because the decision proceeds on the basis that the agreement between the parties while effecting transfer was only for the purpose of creation of sub-tenancy of the premises and nothing more. As mentioned hereinabove it is not permissible to merely transfer or assign interest in the leasehold property but it must be accompanied by transfer of running business and stock-in-trade. The decision therefore proceeds on the peculiar facts and that case nowhere holds that the leasehold interests of a lessee of non-residential premises are not liable to attachment and sale. Reliance on the decision of the single Judge of Delhi High Court in the case of Belrux India Ltd. (supra) is also not accurate. Section 14 of Delhi Rent Control Act, inter alia provided that no order or decree for recovery of possession of any premises shall be made by any Court in favour of landlord against the tenant unless the tenant has on and after June 9, 1952 sub-let, assigned or otherwise parted with possession of the premises without obtaining the consent of the landlord in writing. As the tenant in the case before the Delhi High Court had transferred the interest without obtaining consent of the landlord in writing, it was held that the tenant had no disposing power over the premises under tenancy and consequently no saleable power over the premises under tenancy and consequently no saleable interest. The decision has no application to the facts of the case or the provisions of Section 15 of the Bombay Rent Act. In our judgment, there is no bar whatsoever under Sub-section (1) of Section 15 to attach and sale (sic) the leasehold interest of a lessee in a premises leased out for non-residential purpose."
24. Be it noted that in Zarina Umer Chamdewala, the Division Bench also held that the word "property" was of wide import and may include every right which a person has over property and in this sense, a monthly tenancy that a person may hold may amount to property. In the context of the provisions of Presidency Towns Insolvency Act. Section 15(1) of Bombay Rent Act and the facts obtaining therein, the Division Bench observed that tenancy interest of the insolvent was not property and even if it was held to be property, it could not be divided amongst the creditors either as it is or by cash realisation of the same.
The observations of the Division Bench in Zarina Umer Chamdewala cannot be extended to the case like this where the question is whether the interest of the tenancy of non-residential premises to which the Act of 1999 applies is attachable and saleable in execution of the decree against the tenant, and particularly after the judgment of the Supreme Court in Ramesh Himmatlal Shah.
25. Section 26 forbids the voluntary transfer of interest in the premises by the tenant but does not prevent the transfer by the court. Where the transfer is by an operation of law and not by act of the parities, Section 26 shall have no application. The argument that what the defendant could not have done otherwise legally could not be done through court is misplaced and devoid of merit. For one, it is consistently held for more than a century that restriction on assignment to transfer by the tenant under the lease or otherwise does not apply to an assignment by operation of law taking the effect in invitum as a sale under an execution. The other, neither Section 26 nor any other provision in the Act of 1999 restricts a sale in execution of the decree.
26. In the case of Golak Nath Roy Chowdhary v. Mathura Nath Roy Chowdhary, decided on September 1, 1891 and reported in (1893) Vol. XX Calcutta, 273, the Division Bench of Calcutta High Court held, "we take it to be clear law in India, as in England, that a general restriction of assignment does not apply to an assignment by operation of law taking effect in invitum, as a sale under an execution. The Bombay cases cited are authorities for this proposition as regards India". Golak Nath Roy Chowdhary was a case where certain land was leased -- the lease expressly prohibiting the lessee and his heir from making any assignment of the property either by sale or gift, though there was no provision for forfeiture or for re-entry by reason of assignment in violation of its terms. The leased property was sold in execution of the decree against the lessee. In the suit to recover possession, the plaintiff contended that by virtue of the provisions in the lease nothing passed to the purchaser under the sale nor was there any saleable interest within the provisions of Section 266 (now Section 60) of the Civil Procedure Code in the lessee. The defence of the auction purchaser, inter alia, was that the lease did not prevent a sale in execution. The Division Bench of Calcutta High Court referred to the judgment of this Court in Tamaya v. Timapa Ganpaya, ILR., 7 Bombay 262 and held that a restriction on assignment does not apply to an assignment by operation of law. In Tamaya, this court held that a clause against voluntary alienation afforded no ground for impeaching the title of an auction purchaser, to whom the alienation was by act of law and not by the lessee.
27. Golak Nath Roy Chowdhary was followed by the Division Bench of Calcutta in Keshab Chandra Pramanik v. Ajhar Ali Biswas, (1914) CWN 1182. In that case the appellant Keshab Chandra held the permanent lease of some lands on which he had his huts; there was a condition, however, in the lease that if he made any transfer of the lands, the landlord would re-enter. The decree holder Ajhar Ali having attached the land and the huts, the lessee Keshab Chandra objected that the land was not saleable under Section 60 Civil Procedure Code since under Section 60 Civil Procedure Code such lands only can be sold as are saleable and belong to the judgment debtor and judgment debtor could not sale the lands, the court cannot sale the same. Repelling the objection of the judgment debtor, the Division Bench of Calcutta High Court held, "This argument is based on a misapprehension of the word saleable used in the section, The word evidently means saleable by auction at a compulsory sale under the orders of the court and not transferable act of parties. The lease in this case forbade by the tenant, but did not prevent a sale by the court. This view is in accord with the opinion expressed in the case of Golak Nath v. Mathuranath and we have no reason to differ from the same".
28. The legal position reiterated in Golak Nath Roy Chowdhary and Keshab Chandra Pramanik with regard to a general restriction imposed in the lease deed on assignment of tenancy interest by the lessee that such general restriction on assignment does not apply to an assignment by operation of law taking effect in invitum, as a sale under an execution, is applicable equally to a general restriction in law on assignment of tenancy interest by the tenant and we hold so.
We clarify however that by what we have said about Court sales, we do not intend affecting the rights of the landlord under the 1999 Act. In Veetrag Investments II, 2003(1) Mh.L.J. 458 = 2003(1) All MR 493, it was held that though the rights of the tenant are liable to be attached and sold in execution of a decree, the same cannot affect the rights of the landlords/head tenants in any manner for the right of a tenant under Section 56 of 1999 Act can only be exercised with the consent of the landlord and that in execution of a decree against the tenant/sub-tenant, the Court cannot force in unwilling landlord/head tenant to enter into such a agreement. We however keep this question open to be decided by the executing Court at the appropriate stage.
29. Even otherwise, if the tenant acts in contravention of the prohibition contained in Section 26 by voluntary transferring or assigning the interest of tenancy, the tenant exposes himself to eviction as unlawfully subletting or transfer or assignment by the tenant is a ground for eviction.
30. Section 60 of the Civil Procedure Code is as follows :--"60. Property liable to attachment and sale in execution of decree,-- (1) The following property is liable to attachment and sale in execution of a decree, namely, lands, houses or other buildings, goods, money, banknotes, cheques, bills of exchange, hundis, promissory notes, Government securities, bonds or other securities for money, debts, shares in a corporation and, save as hereinafter mentioned, all other saleable property, movable or immovable, belonging to the judgment-debtor, or over which, or the profits of which, he has a disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment-debtor or by another person in trust for him or on his behalf:
Provided that the following particulars shall not be liable to such attachment or sale, namely :--
(kc) the interest of a lessee of a residential building to which the provisions of law for the time being in force relating to control of rents and accommodation apply :
31. It would be seen from Section 60 that all saleable property which belongs to the judgment-debtor may be attached and sold in execution of the decree against him subject to proviso to Sub-section (1). Similarly, the saleable property over which the judgment-debtor has a disposing power which he may exercise of his own benefits may also be attached and sold. A property may not belong to the judgment-debtor and yet he may have a disposing power over it exercisable for his own benefit. In such cases, the property is liable to attachment and sale subject to proviso to Sub-section (1). From what we have discussed above, it is clear that the tenancy right of the non-residential premises is a property and is saleable within the meaning of Section 60 Civil Procedure Code.
32. Section 56 of the Act of 1999 legitimatizes the acceptance of consideration for relinquishment, transfer or assignment of tenancy of any premises. It also legalises for the landlord to receive any premium or other like sum or deposit inter alia for giving his consent for transfer of the lease to any other person. Section 56 of the Act of 1999 reads thus --
"56. Right to Tenant and Landlord to receive lawful charges.--Notwithstanding anything contained in this Act, it shall be lawful for, --
(i) the tenant or any person acting or purporting to act on behalf of the tenant to claim or receive any sum or any consideration, as a condition of the relinquishment, transfer or assignment of his tenancy of any premises;
(ii) the landlord or any person acting or purporting to act on behalf of the landlord to receive any fine, premium or other like sum or deposit or any consideration in respect of the grant, or renewal of a lease of any premises, or for giving his consent to the transfer of a lease to any other person.
33. The aforesaid provision leaves no manner of doubt that it enables the tenant to claim or receive any sum or any consideration, as a condition of the relinquishment, transfer of assignment of his tenancy of any premises. It indicates that the tenant has a disposing power in respect of the interest in the tenancy in the non-residential premises for his own benefit either by surrendering it to the landlord for any sum or consideration or transfer or assign the tenancy for consideration. Clause (kc) appended to the proviso of Sub-section (1) of Section 60 prohibits the attachment and sale of interest of the lessee of a residential building to which the Rent Control Act applies but the said prohibition is not applicable to the interest of a tenant of a non-residential premises to which the Maharashtra Rent Control Act applies and therefore, it can safely be held that the interest of the tenant in the non-residential premises to which the Act of 1999 applies is attachable and saleable in execution of the decree against the tenant.
34. Section 26 as well as Section 56 of the Act of 1999 start with the non-obstante clause. While Section 26 starts with the expression, "Notwithstanding anything contained in any law for the time being in force ........", Section 56 starts with the expression, "Notwithstanding anything contained in this Act......." Non-obstante clause may give the enacting part of the section in case of an conflict an overriding effect over the provision or Act mentioned in the non-obstante clause. It may also be read as clarifying the whole position and may be understood to have been incorporated by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment. The expression notwithstanding anything contained in any law may not be construed to take away the effect of any provision of the Act in which that section appears. Though the learned Single Judge in the order of reference observed that by virtue of Section 56 of the Act that starts with non-obstante clause, the limitation or restriction imposed in Section 26 is lifted, in our judgment, this may not be correct approach to the construction of sections 26 and 56 of the Act of 1999 as the first thing to be ascertained would be whether both can be read harmoniously. There should be clear inconsistency between the two before giving an overriding effect to the non-obstante clause. Be that as it may, in the light of the issue posed before us it is not necessary to go into the question whether Section 56 overrides Section 26 because one thing is clear that Section 56 indicates in no manner of doubt that the interest of the tenant in the non-residential premises to which the Act of 1999 applies is saleable and the tenant has the disposing power of the said property for his benefit.
35. There may be a case where the tenant does not transfer or assign his tenancy rights but only surrenders his tenancy to the landlord. Section 26 does not come in the picture in that case. For the surrender of his tenancy, the tenant may receive money as there is no prohibition and Section 56 of the Act of 1999 legalises that. Yet another case where the tenant transfers or assigns his tenancy rights in non-residential premises to the third party on consideration for transfer or assignment. The landlord ratifies the act of transfer or assignment and also accepts money for grant of such permission to transfer. There may also be a case where the landlord purchases in public auction the interest of the tenant in execution with a view to get back his property without undertaking exercise of eviction. The cases may be many. Can it be said that interest of the tenant in the non-residential premises is not saleable or that the tenant has no disposing power in respect of such interest for his benefit. The answer obviously has to be in the negative.
36. The submission of Mr. Mahendra Ghelani that the saleable right has to be in praesenti and merely because the lessor may give his consent later on or he may ratify the act of transfer or assignment done by the tenant cannot be a reason to hold that the interest in tenancy can be transferred in the teeth of Section 26, is without merit and devoid of substance for the reasons we have already indicated above.
37. In Veetrag Investments I, the learned Single Judge in paras 8, 9 and 10 noted thus --
"8. The next submission made by Shri Samdani is that the demised premises are not liable to be attached. There is no dispute on the fact that the applicant is the owner and landlord of the entire building of which the demised premises are a part and that the defendant is only tenant in the demised premises. The question which arises is whether tenanted premises are liable to be attached and sold in execution of a decree passed against the tenant himself. In this respect Shri Mehta drew my attention to Section 60 of the Civil Procedure Code which contains a list of the properties which are liable to attachment and sale in execution of a decree. The list contains lands, houses or other buildings etc. The proviso to Section 60 specifies the properties which shall not be liable for attachment and sale. Shri Mehta referred to Clause k(c) of Section 60 which in substance states that the interest of a lessee of a residential building to which the provisions of law for the time being in force relating to control of rents and accommodation apply, is not liable to attachment or sale. Admittedly, the demised premises are commercial premises. Therefore, the submission of Shri Mehta is that the same is liable to be attached and sold in execution of a decree. In this respect Shri Mehta relied upon the decision of a Division Bench of this Court in Union Bank of India v. Mittersain Rupchand, , wherein it was held that the exclusion of properties mentioned in Section 60 of the Civil Procedure Code specifically refers to residential premises and not to premises used for non-residential purposes. It was further held that goodwill and tenancy rights in such premises would be saleable property and, therefore, they would be liable to attachment and sale. It was also held that Section 15(1) of the Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947 (For short, "the Rent Act, 1947") would be no bar. Section 15(1) in substance prohibits the tenant from subletting for transferring or giving on licence the premises in this occupation. This is however, subject to any contract to the contrary. In other words, if there is a contract between the landlord and tenant whereby the form of permits, letter then such a transfer of the premises would be valid.
9. Shri Samdani, however, pointed out that the Rent Act, 1947 has been repealed by the Maharashtra Rent Control Act, 1999 (hereinafter referred to as "the Rent Act, 1999", for short). Section 58 of the said Act provides for repeal of the Rent Act, 1947. It may be noted that the Rent Act, 1999 came into force with effect from 31-3-2000. The impugned order ordering sale of the demised premises in demised of the plaintiff was made on 30-3-2001 i.e. exactly one year after the coming into force of the Rent Act, 1999. It is therefore, obvious that the question as to whether tenancy and goodwill in respect of the premises which are non-residential can be transferred, is governed not by a Rent Act, 1947 but, the Rent Act, 1999. Shri Samdani referred to the provisions of Section 26 of the Rent Act, 1999 which provides that in the absence of contract tenant not to sub-let or transfer or give on licence.
10. The proviso enables the State Government to permit in any area the transfer of interest in the premises held on lease other than those let for business. It is not brought to my notice that the State Government has issued any notification under the proviso of Section 26 of the Rent Act, 1999. Even in that case, the notification cannot be in respect of the premises let for business. It is therefore, clear that in the absence of any contract, the tenant has no right to sublet or transfer the premises held by him whether they are for residential or non-residential purposes. The argument of Shri Samdani is to the effect that the sale of the demised premises as per the order dated 30-3-2001 is contrary to the provisions of Section 26 of the Rent Act, 1999. According to him, Court cannot permit anything to be done which violates the provisions of any Act. In other words, what the defendant could not have done otherwise legally done, cannot be got done through court. In view of that the submission of Shri Samdani in this behalf is sound and sustainable. Therefore, the same will have to be upheld."
38. To the extent the observations of the learned Single Judge in para 10 of the aforesaid judgment are inconsistent with what we have already discussed above and that we need not repeat, the view of the learned Single Judge in Veetrag Investments (I) cannot be said to be a good law.
39. The judgment of the Division Bench of this Court in the case of Saraswat Co-operative Bank Ltd. v. Chandrakant Magan Lal Shah, 2002(1) Mh.L.J. 581, should not detain us for a long. In that case the question was whether tenancy rights of a company in liquidation were capable of being transferred, assigned or attached. Surely a different question with which we are concerned. But in Saraswat Bank also the Division Bench held that the prohibition against transfer or assignment or transfer of tenant's right under Section 15 of the Bombay Rent Act was not absolute but was subject to certain well known exceptions.
40. We, therefore, conclude that the tenant's right to remain in occupation of the non-residential premises governed by the Maharashtra Rent Control Act, 1999 is a property; such property is saleable and the tenant has disposing power over the interest of tenancy for his benefit and in view thereof, we hold that the interest of the tenant of non-residential premises to which the Maharashtra Rent Control Act, 1999 applies is attachable and saleable in execution of the decree against the tenant.
41. Let the papers of chamber summons No. 593 of 2003 in Execution Application No. 636 of 2001 in Summary Suit No. 2255 of 1998 be placed before the learned Chamber Judge for proceeding accordingly.
No comments:
Post a Comment