Karnataka High Court

Sri Zamir Mirza vs M/S Siltech Hospitals Pvt Ltd on 19 December, 2023

Author: P.S. Dinesh Kumar

Bench: P.S. Dinesh Kumar

                                     R.F.A No.1623/2007

                            1


     IN THE HIGH COURT OF KARNATAKA AT BENGALURU
                                                          ®
       DATED THIS THE 19TH DAY OF DECEMBER 2023

                        PRESENT

       THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR

                          AND

 THE HON'BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA

             R.F.A NO.1623 OF 2007 (RES)

BETWEEN:

1.     SRI. ZAMIR MIRZA
       S/O SRI. SIRDAR MIRZA
       AGED ABOUT 43 YEARS
       R/AT FLAT NO.A-4
       MAYFAIR APARTMENTS, NO.31
       BERLIE STREET, LANGFORD TOWN
       BANGALORE-560 025

2.     SRI. NADER MIRZA
       S/O SRI. SIRDAR MIRZA
       AGED ABOUT 86 YEARS
       R/AT NO.13/1, ALBERT STREET
       RICHMOND ROAD
       BANGALORE-560 025
       REPTD. BY ITS GPA HOLDER
       SRI. SIRDAR MIRZA                   ...APPELLANTS

(BY SMT. MANEESHA KONGOVI, ADV.)

AND:

1.     M/S. SILTECH HOSPITALS PVT. LTD.,
       NO.98, RESIDENCY ROAD
       BANGALORE-560 025
       AND ALSO NO.5, CONVENT ROAD
       RICHMOND TOWN
       BANGALORE-560 025
                                   R.F.A No.1623/2007

                          2


2.   M/S. UNITED HEALTH CARE LTD
     NO.C-3, 8TH FLOOR
     "BALARAM" E BLOCK
     BANDRA, BANDRA KURLA COMPLEX
     BANDRA EAST, MUMBAI-462 001

     ALSO AT M/S.UNITED HEALTH CARE LTD.,
     UNITED HOUSE NO.4 PRESS COMPLEX
     ZONE-1, MAHARANA PRATAP NAGAR
     BHOPAL-462 001 AND ALSO NO.5
     CONVENT ROAD, RICHMOND TOWN
     BANGALORE-25

3.   KARNATAKA STATE
     FINANCIAL CORPORATION
     NO.1/1, THIMMAIAH ROAD
     BANGALORE-560 052

4.   KARNATAKA STATE INDUSTRIAL
     AND INVESTMENT DEVELOPMENT
     CORPORATION LTD., NO.36
     MSIL HOUSE, CUNNINGHAM ROAD
     BANGALORE-560 052                ...RESPONDENTS

(BY SHRI. VINOD KUMAR, ADV. FOR
    SHRI. BIPIN HEGDE, ADV. FOR R3;
    SHRI. V.F. KUMBAR, ADVOCATE FOR R4;
    VIDE ORDER DTD. 22.02.2016
    NOTICE TO R1 & R2 ARE HELD SUFFICIENT)

      THIS RFA IS FILED UNDER ORDER 41 RULE 1 AND 2
READ WITH SECTION 96 AND SECTION 151 OF CPC
AGAINST THE JUDGMENT AND DECREE DATED 11.4.2007
PASSED IN O.S.NO.3071/1999 ON THE FILE OF THE XVI
ADDL. CITY CIVIL JUDGE, BANGALORE, DECREEING THE
SUIT FOR EJECTMENT AND DAMAGES.

     THIS RFA, HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT    ON    28.06.2023   COMING    ON   FOR
PRONOUNCEMENT      OF    JUDGMENT,    THIS   DAY,
T.G. SHIVASHANKARE GOWDA J., PRONOUNCED THE
FOLLOWING:-
                                           R.F.A No.1623/2007

                             3


                      JUDGMENT

In this appeal, the plaintiffs have challenged the

judgment and decree dated 11.04.2007 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 01.04.1990 and expires on

31.03.2000. As per the terms of the lease deed,

defendant Nos.1 and 2 are required to pay rent of

Rs.36,850/- for a period of 3 years from 01.04.1990

till the end of 01.04.1993; Rs.42,337.50 paise for a

period of next 3 years from 1.4.1993 till the end of

31.03.1996. Rs.48,734.12 paise for the period of

next 3 years from 1.4.1996 till the end of

31.03.1999. Rs.56,044.24 paise for the period from

01.04.1999 till 31.03.2000. Defendant Nos.1 and 2

have paid the security deposit of Rs.1,10,500/- 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. 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 30th November 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 Section 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. 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

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. 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

15.03.1995, 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 Section 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 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 sub-

lease, 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:

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 01.04.1990 to

31.03.2000. The rent was initially started from

Rs.36,850/- 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/- 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 31.01.1999. 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 Section 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 31.03.2020. 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. 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. The

material on record did point out that the premises

was delivered to the plaintiffs on 25.06.2002 whereas

the lease expires on 31.01.1999 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 Sections

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 Sections:

"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."

xxxxxxxxxx

"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 1 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 Section 76 of the Transfer of Property Act."

AIR 1964 SC 1707

23. Defendant Nos.3 and 4 are not exempted

from obligation under Sections 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 2, 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. On the basis of this doctrine and becuse of

ILR 1979 KAR 2023

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: