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