Appeals Nos
2416 and 2417 of 1966
Appeals from the judgment and order dated March 19 1963 of the Punjab High Court in Regular First Appeal No 281 of 1960
Rameshwar Nath and Mahinder Narain for the appellants in CA No 24161966 and Respondents Nos 1 2 and 4 in CA No 2417 of 1966
NC Chatterjee and HP Wanchoo for the respondent No 1 in CA No 2416 of 1966 and the appellant in CA No 2417 of 1966
The Judgment of the Court was delivered by Hidayatullah CJ
These are appeals by certificate granted by the Punjab High Court against the judgment and decree dated March 19 1963
The property in dispute is a building in Jullundur City in which there is located a cinema
It was formerly  called Chitra Talkies  and now is known as Odeon Cinema 
The building was constructed in 1933 on land measuring 3 kanals and 17 marlas
The original owner one Azim Baksh migrated to 583 Pakistan in 1947 and this property was declared evacuee property
Before migration Azim Baksh had dealt with this property in several ways
On January 21 1946 he had mortgaged the building with possession for Rs 70000 with Malawa Ram and Gamda Mal
On January 22 1946 Azim Baksh took the building on leaseon a rent of Rs 1628 annas for 11 months from the mortgagees
He executed a rent note
On February 8 1946 this rent note was cancelled
An endorsement was made on the rent note to the following effect With the consent of Lal Gainda Ram and Malawa Ram the said rent deed has been cancelled
Rent for one month may be included in the mortgage amount
The mortgagees are entitled to carry on the aforesaid cinema in any way they like or may give the same on lease to any body else
I shall have no objection
Previously Azim Baksh had rented this building to Sant Ram and Sita Ram on Rs 150 per month
After the release of the property the mortgagees leased it to Sita Ram and Sohan Lal on Rs 200 per month
This lease was terminated on July 26 1950
On August 1951 the mortgagees leased it to the All India Film Corporation Ltd appellant No 1 defendant No 2 on Rs 250 per month vide exhibit D2 W21
The lease was for 5 years in the first instance from September 15 1951 to September 14 1956
It was however renewable for 10 years by yearly renewals
There was a condition that renewal on the same terms was not to be refused
By this lease the lessee was given full right to use the property whether by itself or through agents or in partnership or by sub leasing
Malawa Ram and Gainda Mal partitioned their property and this house fell to the share of Gainda Mal
The lessee company in its turn sub let the premises to defendants 3 to 9 on a monthly rent of Rs 1250 
This was on May 16 1952
Before subleasing the premises the head lessee company had equipped the house with cinema machinery etc
and the sub lease included the use of machinery etc
Gainda Mal applied under Evacuee Interest Separation Act 1951 for separation of his interest
The Competent Officer by his order August 25 1955 determined the mortgage charge as Rs 908074 annas and ordered sale of the building and land together with another plot
The respondent in this appeal Raja Gyan Nath purchased the cinema with the land 3 kanals 17 marlas for Rs 65000 on December 3 1955
The sale certificate was issued on March 3 1956
The mortgage charge was paid off on April 19 1958
584 The purchaser Raja Gyan Nath then filed a suit for possession of this property from the head lessee and the sub lessees on August 5 1959 and for mesne profits at the rate of Rs 1250 per month
The sub lessees claimed the benefit of the East Punjab Urban Rent Restriction Act 3 of 1949
Later the plaintiff gave up his claim to the cinema machinery furniture and fittings
The trial Judge decreed the claim in full except that mesne profits were reduced to Rs 500 per month and half of the costs were disallowed
Defendants 2 4 10 and 11 appealed against the decree to the High Court
The plaintiff cross objected asking for mesne profits at Rs 1250 with interest at 6 per year and the remaining costs
The High Court affirmed the decree but reduced mesne profits further from Rs 500 to Rs 250 per month
The mesne profits were to run from the date of suit till possession with interest at 6 per annum
The High Court granted a certificate to both sides and they have filed their respective appeals
In the High Court only three points were urged 1 Whether the defendants were protected by the East Punjab Urban Rent Restriction Act 3 of 1949  2 What were the mesne profits  and 3 Whether plaintiff was entitled to possession before the expiry of the full term of the lease with right to renewals  These are the only points which have been urged before us in these appeals
The first question to consider is this Did the tenancy created by the mortgagee in possession survive the termination of the mortgagee interest so as to be binding on the purchaser  A general proposition of law is that no person can confer on another a better title than he himself has
A mortgage is a transfer of an interest in specific immovable property for the purpose of securing repayment of a loan
A mortgagee s interest lasts only as long as the mortgage has not been paid off
Therefore on redemption of the mortgage the title of the mortgagee comes to an end
A derivative title from him must ordinarily come to an end with the termination of the mortgagee s title
The mortgagee by creating a tenancy becomes the lessor of the property but his interest as lessor is coterminous with his mortgagee interest
Section 111 c of the Transfer of Property Act provides that a lease of immovable property determines where the interest of the lessor in the property terminates on or his power to dispose of the same extends only to the happening of any event by the happening of such 585 event
The duration of the mortgagee s interest determines his position as the lessor
The relationship of lessor and lessee cannot subsist beyond the mortgagee s interest unless the relationship is agreed to by the mortgagor or a fresh relationship is recreated
This the mortgagor or the person succeeding to the mortgagor s interest may elect to do
But if he does not the lessee cannot claim any rights beyond the term of his original lessor s interest
These propositions are well understood and find support in two rulings of this Court in Mahabir Gope and others vs Hatbans Narain Singh1 and Asaram and others vs Mst
Ram Kali2
To the above propositions there is however one exception
That flows from section 76a which lays down liabilities of a mortgagee in possession
It is provided there that when during the continuance of the mortgage the mortgagee takes possession of the mortgaged property he must manage the property as a person of ordinary prudence would manage it if it were his own
From this it is inferred that acts done bona fide and prudently in the ordinary course of management may bind even after the termination of the title of the mortgagee in possession
This principle applies ordinarily to the management of agricultural lands and has seldom been extended to urban property so as to tie it up in the hands of lessees or to confer on them rights under special statutes
To this again there is an exception
The lease will continue to bind the mortgagor or persons deriving interest from him if the mortgagor had concurred to grant it
Applying these principles to the facts of this case we find that the property the subject of the lease was a house in the city of Jullundur suitable for a cinema theatre
This was leased for five years on a rent of Rs 250 pm
This sum included the use of a passage for which the rent was Rs 100 pm
In effect the rent of the building was Rs 150 
This was lower rent than the rent it had fetched before
The mortgagee further agreed to renewal of the lease on the same terms for a further period of 10 years
It is in evidence that a plot only 8 marlas formed the passage and the rent was Rs 100 and on that basis land of 3 kanals and 17 marlas with a building fit for cinema ought to have fetched much more
Such a building in a growing city ought not to have been tied down for a period of fifteen years to a rent of Rs 150 or even Rs 250 pm
The learned subordinate Judge pointed out that the annual rent of the building was assessed at Rs 10800 for the years 1950 55
This shows how low was the actual rent
The history of the building in the hands of the head lessee shows that after an investment of Rs 60000 the rent went upto Rs 1250 pm with additional rights 1  2 586 to the head lessee
The building without the fittings and the land of the passage fetched Rs 65000 
Therefore a tenant willing to pay a better rent could easily have been found
The case is thus not covered by the exception because we cannot hold that such a long lease on such a small rent was an act of prudence whether it was a bona fide act or not and whether the exception can apply to urban property
This brings us to the next question
It is whether the tenants could take advantage of the provisions of the East Punjab Urban Rent Restriction Act 1949  The answer to this question deFends on whether we can say that there was a tenancy to protect
We have shown above that the lease came to an end with the mortgagee s interest in the property
Although this was not a case of a redemption plain and simple because a straight redemption was refused the property was put to sale and the purchaser paid off the mortgage in full
The interests of the mortgagor and mortgagee united in the person of the purchaser anti the mortgage ceased to subsist
In this view of the matter the purchaser speaking in his character as a mortgagor could claim that the mortgagee s action came to an end and there did not subsist any relationship between him and the tenants
The respondents attempted to argue that the Rent Restriction Act defines landlord and tenant with reference to the payment of rent
A landlord means a person entitled to receive rent and a tenant means any person by whom or on whose account rent is payable
These definitions apply if the tenancy either real or statutory could be said to survive after the termination of the mortgage
The scheme of section 10 of the is that in the case of a mortgagor or a mortgagee a the Competent Officer may pay to the Custodian or the claimant the amount payable under the mortgage debt and redeem the property or b the Competent Officer may sell the mortgaged property for satisfaction of the mortgage debt and distribute the sale proceeds thereof or c the Competent Officer may partition the property between the mortgagor and the mortgagee proportionate to their shares or d adopt a combination of any of these measures
It is obvious that method Co was followed
The property was sold and the mortgage was satisfied
This led to the extinction of the mortgagees  interest and the purchaser acquired full title to the property
The termination of the mortgagee interest terminated the relationship of landlord and tenant and it could not in the circumstances be said to run with the land
There being no landlord and no tenant the provisions of the Rent Restriction Act could not apply any further
Nor could it be said that when the mortgagor cancelled the rent note and autho 587 rised the mortgagee to find any other tenant the intention was to allow expressly a tenancy beyond the term of the mortgage
In this view of the matter the decision of the High Court and the court below cannot be said to be erroneous
There remains to consider the question of mesne profits
The High Court reduced the mesne profits to Rs 250 pm which was the actual rent paid for the building and the passage
There is some doubt as to whether this sum included Rs 100 for the use of the passage
However we think that the matter is between the purchaser and the head lessee
The rent of Rs 250  although on a low side was the actual rent on which the premises were held
The High Court was therefore not wrong in limiting mesne profits to that figure
The result is that both the appeals fail and will be dismissed with costs
There will be a right to set off the costs and the resulting difference alone will be payable
YP Appeals dismissed


Summary:
The mortgagee of a property in which a cinema was run
leased it to the first appellant on a monthly rental of Rs 250 for a period of 5 years renewable for 10 years by yearly renewals on the same terms
The lessee was given the full right to use the property whether by itself or through
agents or in partnership or by sub leasing
The lessee sublet the premises after equipping the house with cinema machinery on a monthly rental of Rs 1250 
The property had been declared evacuee property and the lessee applied under the for separation of his interest
The Competent Officer ordered sale of the property which was purchased for Rs 65000 by the respondent
Then before the expiry of the term of the lease the respondent filed a suit against the head lessee and the sub lessee for possession of the property
On the questions i whether the respondent was entitled to possession before the expiry of the full term of the lease and ii whether the subleases were protected under the East Punjab Urban Rent Restriction Act 1949
HELD i No person can confer on another a better title than he himself has
A mortgage is a transfer of an interest in specific immovable property for the purpose of securing repayment of a loan
A mortgagee s interest lasts only as long as the mortgage has not been paid off
Therefore on redemption of the mortgage the title of the mortgagee comes to an end
A derivative title from him must ordinarily come to an end with the termination of the mortgagee s title
The mortgagee by creating a tenancy becomes the lessor of the property but his interest as lessor is coterminous with his mortgage interest
The relationship of lessor and lessee cannot subsist beyond the mortgagee s interest unless the relationship is agreed to by the mortgagor or a fresh relationship is recreated
This the mortgagor or the person succeeding to the mortgagor s interest may elect to do
But if he does not the lessee cannot claim any rights beyond the term of his original lessor s interest
584 F The exception to the above propositions is the one that flows from section 76a which lays down liabilities of a mortgagee in possession
It is provided there that when during the continuance of the mortgage the mortgagee takes possession of the mortgaged property he must manage the property as a person of ordinary prudence would manage it if it were his own
From this it is inferred that acts done bona fide and prudently in the ordinary course of management may bind even after the termination of the title of the mortgagee in possession
This principle applies ordinarily to the management of agricultural lands and has seldom been extended to urban property so as to tie it up in the hands of lessees or to confer on them rights under special statutes
To this again there is an exception
The base will continue to bind the mortgagor or persons deriving interest from him if the mortgagor had concurred to grant it
585 C 582 The present case was not covered by the exception because such a long lease on a small rent could not be said to be an act of prudence whether it was a bona fide act or not and whether the exemption can apply to urban property
Mahabir Gope and Ors
vs Harbans Narain Singh 1952 SCF 775 and Asaram  Ors
vs Mst
Ram Kali 1958 SCR 986 followed
ii A landlord means a person entitled to receive rent and a tenant means any person by whom or on whose account rent is payable
These definitions apply if the tenancy either real or statutory could be said to survive after the termination of the mortgage
The scheme of section 10 of the is that in the case of a mortgagor or a mortgagee a the Competent Officer may pay to the Custodian or the claimant the amount payable under the mortgage debt and redeem the property or b the Competent Officer may sell the mortgaged property for satisfaction of the mortgage debt and distribute the sale proceeds thereof or c the Competent Officer may partition the property between the mortgagor and the mortgagee proportionate to their shares or d adopt a combination of any of these measures
It is obvious that method b was followed
The property was sold and the mortgage was satisfied
This led to the extinction of the mortgagee s interest and the purchaser acquired full title to the property
The termination of the mortgagee interest terminated the relationship of landlord and tenant and it could not in the circumstances be said to run with the land
There being no landlord and no tenant the provisions of the Rent Restriction Act could not apply any further
Nor could it be said that when the mortgagor cancelled the rent note and authorised the mortgagee to find any other tenant the intention was to allow expressly a tenancy beyond the term of the mortgage
586 E