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1931 Supreme(SC) 1
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD MACMILLAN, SIR JOHN WALLIS, AND SIR GEORGE LOWNDES.
FAQIR BAKHSH - Appellant
Versus
MURLI DHAR (DEFENDANTS) - Respondents
On Appeal from the Chief Court of Oudh.
Decided On : Jan. 13. 1931.
Solicitors for appellant: T. L. Wilson & Co.
A lease is not extinguished by merger if the lessee acquires only a partial proprietary interest in the property; merger under Section 111(d) of the Transfer of Property Act requires the interests in the whole property to vest in one person in the same right.
Headnote:(A) Transfer of Property Act, 1882 - Section 111(d) - Determination of lease by merger - Acquisition of a partial proprietary interest in the property by a lessee does not result in the merger of the leasehold interest if the proprietary interest acquired is only a fraction of the whole property - For a lease to be extinguished by merger under Section 111(d), the interests of the lessee and the lessor in the whole of the property must become vested at the same time in one person in the same right.
(B) Accounting between co-sharers - Where a valid and subsisting lease exists for a portion of the property, the rent stipulated under the lease is the measure of the contribution that the let subjects must make to the divisible revenue of the entire property.
Facts of the case:
A party who was already a tenant of three shops in a property under a lease subsequently purchased a one-eighth share of the entire property as a co-proprietor. A suit for accounting of rents and profits was filed. The dispute was whether the income from the three shops should be accounted for based on the stipulated lease rent or the estimated market rental value, given the party's dual status as a tenant and a co-sharer.
Findings of Court:
The acquisition of a one-eighth proprietary interest did not operate a merger of the tenant's right in the property right because the tenant's right extended to the shops in their entirety, while the proprietary interest was only a partial share. Consequently, the lease remained valid and subsisting.
Issues: Whether the acquisition of a pro indiviso share of the entire property by a tenant of a portion of that property results in the merger of the leasehold interest into the proprietary interest, thereby extinguishing the lease.
Ratio Decidendi: Under Section 111(d) of the Transfer of Property Act, a lease is determined by merger only when the interests of the lessee and lessor in the whole of the property vest in one person in the same right. Since the party acquired only a partial share, there was no fusion of interests in the whole of the property, and the lease remained valid. The rent under the lease is therefore the correct measure for accounting purposes.
Result: Judgment of the appellate court reversed and the decree of the trial court restored.
Appeal (No. 12 of 1930) from a decree of the Chief Court of Oudh (December 15, 1927) reversing a decree of the Subordinate Judge of Mohanlalganj, Lucknow, which affirmed a decree of the Second Munsif, Lucknow.
The suit was instituted by the appellant for an account of his share of the rents and profits of certain property in Lucknow, of which he had acquired a 2 anna, 1 pie, 11 kirant share by purchase in 1921, the defendants being owners of the remaining share under an earlier purchase. The question arising was whether in taking the accounts the appellant was chargeable in respect of three shops in his occupation, and forming part of the property, with the rent reserved by a lease granted to him before his purchase, or the estimated rental value apart from the lease. The Chief Court (reversing the lower Courts) had taken the latter view.
The facts appear from the judgment of the Judicial Committee.
Law Rep. 58 Ind. App. 75 ( 1930- 1931)
Faqir Bakhsh V. Murli Dhar 7
1930. Nov. 27. Wallach for the appellant. The respondents did not appear.
Jan. 13. The judgment of their Lordships was delivered by
LORD MACMILLAN. The plaintiff in this suit, Shaikh Faqir Bakhsh, and the defendant Murli Dhar, are joint proprietors pro indiviso of a property in the city of Lucknow known as Rahimganj, on which a large block of shops has been erected. The entire property was formerly owned by one Khuda Bakhsh, but it is now held in the proportions roughly of one-eighth and seven-eighths by the parties mentioned, who acquired their respective shares in it by purchase. When the plaintiff bought his one-eighth share on April 1, 1921, the defendant Murli Dhar had already acquired his seven-eighths share. At the time when the latter purchased his share of the entire property, a portion of it, consisting of three shops, was in the occupation of the plaintiff as tenant under a lease at a monthly rent of Rs.14.8, and this lease was current when the plaintiff himself purchased the remaining one-eighth share of the entire property.
In the present proceedings the plaintiff, now the appellant, asks that an account be taken of the income of the entire property for the period from October 1, 1922, to the end of February, 1925 (or 1926—the date is variously stated), in order that his share thereof may be ascertained and paid to him. He claims that in the account the revenue from the portion of the property in his own occupation, being the subjects comprised in his lease, should be entered at the monthly rent of Rs.14.8 payable under the lease. The defendant Murli Dhar contends that the plaintiff, having become a pro indiviso proprietor of one-eighth of the entire property and suing as a co-sharer for an account of the revenue of the entire property, is not entitled to found upon the lease in question and must bring into the account as the return on the subjects comprised in the lease and occupied by him, not the stipulated rent of Rs.14.8, but the reasonable profits of these subjects, which he estimates at not less than Rs.35O per month. The real issue in the case is raised by these rival contentions.
The Second Munsif, Lucknow, before whom the matter came in the first instance, found in favour of the plaintiff by a judgment dated November 29, 1926, which on appeal was affirmed by the Subordinate Judge, Mohanlalganj, on March 29, 1927. In both Courts the view was taken that the acquisition by the plaintiff of a one-eighth share of the entire property did not operate an extinction of his rights as a tenant of a portion of the property, and that the plaintiff was accordingly entitled to continue to claim the benefit of the lease and to bring into the account as the income of that portion the rent payable under the lease.
On an appeal being taken to the Chief Court of Oudh the decision of the Courts below was reversed and the case was remitted to the Court of first instance " for a determination of the true profits of the whole property, including the three sh
