Judgement

Appeal (No. 107 of 1928) from a decree of the High Court in its appellate jurisdiction (November 25, 1927) reversing a decree of the Court in its original civil jurisdiction (April 14, 1927).

On August 23, 1910, the predecessor in interest to respondents Nos. 1-5 executed in favour of a lessee represented by respondents Nos. 6 and 7 a building lease of immovable property in Calcutta for a term of sixty-one years. The lease contained covenants, fully set out in the judgment of the Judicial Committee, by which the lessee had liberty, without obtaining the lessors consent, to underlet the premises and the buildings to be erected ; and the lessee had no power (subject to an immaterial exception) to assign, transfer, or alienate his right, title, and interest in the demised premises. The lease further provided by clause 10 that if any breach should be made by the lessee in any of the covenants and agreements on his part to be observed, it should be lawful for the lessor to re-enter upon the demised premises as if the lease had never been executed.

On May 7, 1923, the respondents Nos. 6 and 7 executed in favour of the appellants predecessor in title a mortgage of property including the mortgagors leasehold interest under the lease of August 23, 1910. By the mortgage the mortgagors demised and sub-let the premises to the mortgagee for the unexpired residue of the term of sixty-one years, subject to the proviso that the sub-lease should terminate if the sum advanced with interest and costs was repaid by the mortgagors or was realized out of the rents and profits, in which event the premises sub-let were to be reconveyed or surrendered.

On January 25, 1924, the lessors instituted a suit in the High Court against the lessees and the mortgagees claiming a forfeiture of the lease on the ground that the mortgage was a breach of the covenant by the lessee and mesne profits.

The trial judge (Page J.) dismissed the suit. The learned judge said that it was conceded before him that for certain purposes an underlease for the whole unexpired term of the lease amounted to an assignment. But in his view the mortgage was not such an absolute transfer of the lessees rights as to be within covenant 6 of the lease. He so held, having regard to Doe v. Hogg ((1824) 4D & R. 226.), applied in Russell v. Beecham ([ 1924] 1 K. B. 525.), and the right of redemption which remained in the lessee.

Upon appeal the decision was reversed by C. C. Ghose and Buckland JJ., and a decree made as prayed. The learned judges were of opinion that, as in Bengal National Bank v. Janaki Nath Roy (( 1927) I. L. R. 54 C. 813.), the mortgage was an assignment of the lessees interest contrary to the covenant, even though there was a proviso for reassignment in a certain event.

1929. Nov. 1, 4. Upjohn K.C. and Parikh for the appellants. By the lease the lessee had express power to underlet; the mortgage was a valid exercise of that power. No doubt in English law an underlease for the whole residue of the term demised ordinarily amounts to an assignment. But that is because in English law a reversion in the grantor is essential to the relation of landlord and tenant Parmenter v. Webber. ((1818) 8 Taunt. 593.) That is not so under the Transfer of Property Act, 1882, as by s. 105 a lease may be made in perpetuity, and by s. 108 (j) a lessee can transfer the whole of his interest in the property, in the absence of a contract to the contrary. As the covenant permitted the lessee to underlet, an underlease valid by the law applicable cannot be an assignment for the purposes of covenant 6. Further, the mortgage was not a complete transfer of the lessees rights. Not only had he a right to a surrender upon redemption, but the rents were collected by the mortgagees on his behalf, and he was entitled to the benefit of any surplus. Bengal National Bank v. Janaki Nath Roy (( 1927) I. L. R. 54 C. 813.) is distinguishable, as in that case there was in terms an assignment to the mortgage