Supreme Court settles rights of Transferee Landlord to recover Arrears of Rent in Eviction Cases: Sheikh Noor & Anr. vs. Sheikh G.S. Ibrahim (Dead) By Lrs. (04 August 2003)

Introduction

Date of the Judgment: 04 August 2003

Citation: 2003 Supp(2) SCR 204

Judges: R.C. Lahoti & Ashok Bhan

Can a new landlord, who has purchased a property, evict a tenant for not paying rent that was due to the previous owner? The Supreme Court of India addressed this important question in a case concerning the rights of landlords and tenants. The core issue revolved around whether a landlord could recover rent arrears predating the property’s transfer and use that as grounds for eviction. This judgment, delivered by a bench of Justices R.C. Lahoti and Ashok Bhan, clarifies the circumstances under which such evictions are permissible under Indian law.

Case Background

The case involves a property located at House No. 2690, City Survey No. 1900 of Bhusawal. Initially owned by Mr. Mohammad Yahya, the property was leased to Sheikh Noor and another appellant in 1946. After the partition in 1947, Mohammad Yahya moved to Pakistan but returned in 1957 to collect rent arrears. He then instructed the tenants to pay rent to Fatimabi.

The tenants complied with this arrangement. However, they failed to pay municipal taxes, leading the Municipal Council of Bhusawal to issue a warrant of attachment and order a public auction of the property. Fatimabi purchased the house at this auction, and the sale was confirmed in her name. On April 15, 1976, Fatimabi transferred her ownership rights to Sheikh Ghasu Sheikh Ibrahim (now deceased and represented by his legal heirs, the respondents).

On April 16, 1976, Fatimabi informed the appellants of the transfer and directed them to pay all future rent and any arrears to Sheikh Ghasu Sheikh Ibrahim. The appellants, however, refused to recognize Sheikh Ghasu Sheikh Ibrahim as their landlord or pay him rent. Consequently, the respondent filed separate suits seeking eviction on the grounds of (i) rent default for more than six months and (ii) bona fide requirement of the house for personal occupation.

Timeline:

Arguments

Arguments by the Appellants (Tenants):

• ✓ Fatimabi was not the rightful owner of the property but merely a rent collector on behalf of the original owner, Mohammad Yahya.
• ✓ The transfer of property to Fatimabi by the Municipal Council was illegal because the council lacked the authority to attach or sell the property for municipal tax arrears.
• ✓ The sale to Fatimabi was collusive and fraudulent, with an undervalued sale consideration of only Rs. 1,000.
• ✓ Since Fatimabi did not acquire valid ownership, the subsequent sale to the respondent was invalid.
• ✓ The property should be considered evacuee property because Mohammad Yahya migrated to Pakistan, making it immune to attachment or sale by the Municipal Council.
• ✓ Arrears of rent prior to the sale in favor of the respondent should be treated as a ‘debt due,’ and therefore, cannot be the basis for eviction under the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (hereafter referred to as “the Act”).

Arguments by the Respondent (Landlord):

• ✓ The appellants are estopped from disputing the landlord-tenant relationship with Fatimabi, as they had attorned to her in 1957 and paid rent accordingly.
• ✓ The burden of proof lies on the appellants to demonstrate that the sale to Fatimabi was collusive, fraudulent, or lacked due formalities, which they failed to do.
• ✓ The Municipal Council had the right to attach and sell the property for unpaid municipal taxes, and the appellants did not provide evidence that the auction sale was improperly conducted or successfully challenged.
• ✓ Fatimabi validly transferred the property to the respondent, and this transfer was not challenged or proven to suffer from any legal infirmity.
• ✓ The arrears of rent were assigned to the respondent, entitling him to recover them as arrears of rent, which forms a valid basis for the eviction suit.

Submissions Table

Issues Framed by the Supreme Court

1. Whether the transferee/landlord is entitled to recover the rent due prior to the date of transfer of property in his favor as arrears of rent and seek eviction under the Act on that ground.

Treatment of the Issue by the Court: “The following table demonstrates as to how the Court decided the issues”

Authorities

The Supreme Court considered the following authorities:

Section 109 of the Transfer of Property Act:

• ✓ This section deals with the rights of a lessor’s transferee. The court analyzed the substantive part of the section along with its proviso, noting that it indicates arrears of rent due are one of the lessor’s rights that can be transferred.
• ✓ The proviso clarifies that if there is an assignment of rent due, the transferee/landlord is entitled to recover the same from the tenant as arrears of rent.

Case Laws:

• ✓ Ramchander Narsey & Co. v. Wamanrao Shenoy, UJ (SC) 70(69): The Supreme Court approved the Bombay High Court’s judgment in ordering the ejectment of a tenant for failing to pay arrears of rent to the transferee landlord, including arrears prior to the transfer.
• ✓ Smt. Daya Debi v. Chapla Debi, AIR (1960) Cal.,378: The Calcutta High Court held that the assignment of arrears of rent ceases to be rent, becoming a debt in law. The Supreme Court initially noted this view but did not explicitly disapprove it in Ramchander Narsey & Co. v. Wamanrao Shenoy.
• ✓ Satti Krishna Ready v. Nallamilli Venkata Reddy and Anr., [1982] 3 SCC 364: The Supreme Court held that the view in Smt. Daya Debi’s case was incorrect, clarifying that arrears of rent assigned to the transferee landlord do not lose their character and eviction proceedings can be maintained by the successor landlord on the ground of arrears of rent.
• ✓ Girdharilal (dead) by LRs. v. Hukam Singh and Ors., AIR (1977) SC 129: The Supreme Court approved the Rajasthan High Court’s interpretation of the proviso to Section 109 of the Transfer of Property Act, stating that a transferee is ordinarily not entitled to arrears unless there is a contract to the contrary.
• ✓ N.M Engineer and Ors. v. Narendera Singh Virdi and Anr., AIR (1995) SC 448: The Supreme Court held that in the absence of any assignment of the rent in favor of the transferee, the assignee is not entitled to the rent due before the assignment.
• ✓ Ram Prakash Ghai v. Karam Chand, AIR (1963) All. 47: A Division Bench of the Allahabad High Court held similarly.
• ✓ Champak Lal Dahyabhai Natali and Ors. v. Saraswatiben and Ors., AIR (1977) Guj. 48: A Full Bench of the Gujarat High Court held similarly.
• ✓ Pratap Muktassa Tak v. Vishnu Giopal Pathak, (1997) Bom. R.C. 416: A single Judge Bench of the Bombay High Court held similarly.

Authorities Considered by the Court

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• ✓ Section 109 of the Transfer of Property Act: The Court interpreted this section to mean that the right to recover arrears can be transferred, and if so, eviction proceedings can be maintained for those arrears.
• ✓ Ramchander Narsey & Co. v. Wamanrao Shenoy, UJ (SC) 70(69): The Court approved this judgment, reinforcing the right of a transferee landlord to seek eviction for arrears, including those predating the transfer.
• ✓ Smt. Daya Debi v. Chapla Debi, AIR (1960) Cal.,378: While the Court initially noted this view, it ultimately sided with the perspective that arrears of rent do not lose their character when assigned to a transferee landlord, citing Satti Krishna Ready v. Nallamilli Venkata Reddy and Anr., [1982] 3 SCC 364.
• ✓ Girdharilal (dead) by LRs. v. Hukam Singh and Ors., AIR (1977) SC 129: The Court approved the interpretation that a transferee is ordinarily not entitled to arrears unless there is a contract to the contrary.
• ✓ N.M Engineer and Ors. v. Narendera Singh Virdi and Anr., AIR (1995) SC 448: The Court followed this precedent, which held that in the absence of any assignment of the rent in favor of the transferee, the assignee is not entitled to the rent due before the assignment.

What weighed in the mind of the Court?

The Supreme Court’s decision in Sheikh Noor & Anr. vs. Sheikh G.S. Ibrahim (Dead) By Lrs. was primarily influenced by the legal principle of the transferability of rights, specifically the right to recover arrears of rent. The Court emphasized that when a property is transferred, the rights of the previous owner, including the right to collect outstanding rent, can also be transferred to the new owner. This transfer must be explicitly stated or assigned. The Court also considered the conduct of the tenants, who had previously acknowledged Fatimabi as their landlord and paid rent to her.

The Court placed significant weight on the following factors:

• ✓ Assignment of Arrears: The explicit assignment of the right to recover arrears from Fatimabi to Sheikh G.S. Ibrahim was a crucial factor. The Court noted that the communication from Fatimabi to the tenants clearly stated that the right to recover arrears was transferred.
• ✓ Estoppel: The Court invoked the principle of estoppel, stating that the tenants could not deny the landlord-tenant relationship with Fatimabi, as they had previously acknowledged her as their landlord.
• ✓ Legal Precedents: The Court relied on several previous judgments to support its decision, including Ramchander Narsey & Co. v. Wamanrao Shenoy and Satti Krishna Ready v. Nallamilli Venkata Reddy, which clarified the rights of transferee landlords.
• ✓ Lack of Challenge to Sale: The Court noted that the tenants had not successfully challenged the sale of the property to Fatimabi, indicating that they had accepted the validity of the transfer.

Fact:Law Ratio

Logical Reasoning

Issue: Whether the transferee/landlord is entitled to recover the rent due prior to the date of transfer of property in his favor as arrears of rent and seek eviction under the Act on that ground.

Logical Reasoning Flowchart:

Start

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Was there an assignment of the right to recover arrears of rent to the transferee/landlord?

↓

Yes

↓

The transferee/landlord is entitled to recover the rent due prior to the transfer as arrears of rent.

↓

Can eviction be sought under the Act on the ground of these arrears?

↓

Yes

↓

Eviction proceedings can be maintained by the successor landlord on the ground of arrears of rent.

↓

End

Key Takeaways

• ✓ Assignment of Arrears is Crucial: A transferee landlord can recover rent arrears predating the transfer only if the right to recover those arrears was explicitly assigned to them.
• ✓ Importance of Clear Communication: Landlords must clearly communicate the transfer of property and the assignment of rent arrears to tenants.
• ✓ Tenant Estoppel: Tenants who have previously acknowledged a landlord-tenant relationship cannot later deny it.
• ✓ Legal Recourse: Tenants must formally challenge property sales and transfers if they believe them to be invalid.

Development of Law

The ratio decidendi of this case is that a transferee landlord is entitled to recover rent arrears predating the transfer of property if the right to recover those arrears was explicitly assigned to them. This clarifies and reinforces the rights of transferee landlords, ensuring that they can maintain eviction proceedings based on these arrears.

Conclusion

In summary, the Supreme Court dismissed the appeals, affirming that Sheikh G.S. Ibrahim, as the transferee landlord, had the right to recover rent arrears predating the property transfer because the right to recover those arrears was explicitly assigned to him. This decision reinforces the importance of clear communication and legal assignment in property transfers and clarifies the rights and responsibilities of both landlords and tenants in such situations.