P L D 1962 (W (PLP)

This provision becomes directly useful to counsel when it is read with section 46 of the Partnership Act, which is as follows: "On the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representa?tives according to their rights." It is unnecessary, for the purposes of counsel's argument, to refer, to section 48 of the Partnership Act.

6. Mr. Dingomal has, on the other hand, argued that the lease of the K. P. T. godown is not transferable in terms of its lease deed, This is not disputed by Mr. Nasim A. Faruqui.

7. As to the other alleged leases Mr. Dingomal argued that mere mention of `rent' in clause 9 of the partnership deed was not sufficient to create tenancy. He referred to Miles v. Clarke ((1953) 1 All E R 779) to establish the proposition that even if they were leases the property of a partner does not become the property of the firm if it is allowed by the partner to be used by the firm, in the absence of an express or implied agreement to this effect, by drawing such inferences as need something more to be read in the partnership deed than what is embodied fn it. The facts of that case were that a certain photographer was doing his business on the premises which he held on lease. He had no skill in photography and invited a successful freelance photographer to join him as a partner. The latter brought with him considerable business connections, but the agreement was only that they would divide the profits equally. They quarrelled after some time, and it became necessary to wind up the partnership. The Court held: "It is absolutely necessary to assume that things quae ipso usu consumuntur the stock‑in‑trade, must be treated as having been brought Into the partnership and their value must be ascertained by inquiry. They were all brought in by the defendant. I do not see the necessity of assuming that anything else went into the partnership. It seems to me that, as the parties failed to agree, it is not for me to say that the defen?dant must be assumed to have thrown the lease and the plant into the pool. The partnership could get on quite well if he gave his partner a licence to go on the lease‑hold property for the purposes of the business and to use the cameras to make the joint profits. Therefore, in my judgment nothing changed bands except those things which were actually used and used up in the course of the carrying on of the business." This argument was supplemented by a reference to the third proposition, out of five which have been formulated by S. T. Desai in his book, Law of Partnership (2nd Ed.) under section 14, at page 83 as follows: "The mere fact that certain property is used or employed for the purposes of the firm does not necessarily raise a presump?tion that it is property of the firm. Persons may be partners in a business and yet the property by means of which the business is carried on may not be property of the firm but may be the separate property of one or more of the partners or of a total stranger. Cases also arise where co‑owners of property may be partners as to profits made by the use of it though as regards the property it would be held by them not as partners but as co‑owners with the result that the property would not be regarded as property of the firm."

8. In the alternative, counsel argued that if for any reason the conclusion of the Court is that in this case the property of the senior partners was thrown Into the pool of the partnership property, then in the absence of any clear provision to the contrary, the use of the property should be considered to have been limited for the duration of the partnership only. In support of this proposition he relied on Pocock v. Carter ((1912) 1 Ch. 663) from which I may reproduce the following portion:‑ "I think the case is really governed by Burdon v. Barkus (1861) 3 Giff. 412 and Benham v. Gray (1847) 5 C B

138. In those cases the tenancy inferred was a tenancy during the partnership. I thought at first that it was a choice between inferring a tenancy from year to year, or a tenancy at will, but I now think that true inference is that there was intended to be a tenancy during the continuance of the partnership. This inference is equivalent to the express terms of the tenancy which was dealt with In Doe v. Miles (1816) I Stark 181, and It appears to be the only inference which will enable the matter to be fairly dealt with. Nothing is said fn the partnership deed about the terms on which the property was to be held by the partnership though it Is plainly intended that the business should be carried on there. It is provided in general terms that all rent, rates and taxes shall be paid out of profits before division, but there is no specific reference to the rent or tenancy under this particular lease. The rent, however, was paid by the partnership. If I were to hold that there was implied either a tenancy at will or a tenancy from year to year, the partner owning the premises could by giving notice have terminated the agreement before the end of the partnership and turned the other partner out of the premises. That would be a most unsatisfactory position and cannot, I think, have been contemplated by the parties. I must therefore infer that there was a tenancy during the partnership only, which terminated at the dissolution of the partnership on October 20, 1910."

9. Lastly, counsel argued that the tenancy rights, which are alleged to have been created, amounted to statutory tenancy, which, is a personal right ; as such they are not transferable therefore it will be wrong to treat them as a part of the assets of the firm and dispose of them along with the good‑will of the firm.

10. The last argument raises the question of the transfer?ability of the tenancy rights themselves ; therefore, I would like to examine its validity first. It presumes that the rights of a lessee created by an agreement between him and the lessor should be treated as those of a statutory tenant, because rent restriction statutes have come into force and extended protection and control of a certain kind to them. This presumption is not correct, because even if such protection and control were extended to the leases which are the subject of the present dispute, the rent restriction statutes which were in force in Karachi did not, and the Karachi Rent Restriction Act, 1953, which is now in force, does not abolish the chances of the creation or subsistence of contractual tenancies, but aim merely at imposing certain cont?rols and protections. Apart from what the statutes provide, the relationship of the parties is governed by their agreements. For instance, under subsection (1) of section 10 of the Karachi Rent Restriction Act, 1953 one of the grounds for depriving a lessee of the protection against ejectment is his failure to perform the conditions of his tenancy. Contractual tenants, excepting a few like those to which reference is made hereafter, as well as statutory tenants are protected by the Karachi Act, 1953 in virtue of the definition of "tenant" given in clause (7) of section 2, as follows.‑ "`tenant' means any person by whom or on whose account rent is payable for any premises and includes every person from time to time deriving title under a tenant and also every person remaining in possession of the premises leased to him after the determination of the lease with or without the consent of the landlord." The first part of this definition includes those lessees by whom or on whose account rent is payable and Includes those persons who derive title from such tenants. This part includes contractual tenancies. The second part refers to those tenants who remain in possession of the leased premises after the determination of the lease. I may in this connection reproduce the following remarks of R. B. Andhyarujina from page 17 of his book, Principles of Rent Control (1952 Ed.):‑ "The statute (i.e. the Bombay Rents, Hotel, and Lodging House Rates Control Act, 1947) protects not only statutory tenants, but contractual tenants also . . . . . . . The contractual tenant is in a more advantageous position than the statutory tenant in that the contractual tenant is transferable inter vivos as well as by operation of law, whereas the statutory tenancy, as stated above, does not possess this characteristic. Of course, a member of the statutory tenant's family can inherit the tenancy, but the important difference is that what the heirs and legal representatives of the contractual tenant inherit is an interest in immovable property that is, a right to property, whereas whatla member of statutory tenant's family inherits is only a statutory tenancy, a mere personal right of possession. Since a contractual tenant is equally protected by virtue of the first paragraph of section 5 (11) of the Act, it would be errone?ous to contend that where a contractual tenant avails himself of some of the provisions of the Rent Act, such as those for fixation of standard rent, he becomes a statutory tenant." (See Fumasoli v. Comyn and Fish (1924) 132 L T 490). For elucidation I should reproduce here the first paragraph of section 5(11) of the Bombay Rents, Hotel, and Lodging House Rates Control Act, 1947, to which reference has been made in the above quotation. It is as follows:‑ "'Tenant' means any person by whom or on whose account rent is payable for any premises, and includes . . . . . " The observation in the above quotation from R. B. Andhyarujina that contractual tenancy may be protected as well as transfer?able should be noted.

11. I shall state this view more elaborately, but here I should notice the word "payable" which occurs in the definitions of "tenant" in the Bombay Act, 1947 as well as in the Karachi Rent Restriction Act, 1953. It is significant, because the rent which is not `payable' and takes the form of rendition of service, is excluded from the definition, the conclusion from rendition of service as rent cannot be that these facts do not create any relationship between the parties, or that they do not establish tenancy ; on the contrary, the conclusion should be that such a relationship is not governed by the definitions of tenant given in the Acts, therefore It does not create.‑statutory tenancy. This view is supported by subsection (1) of section 10 of the Karachi Rent Restriction Act, 1953, which provides protection against ejectment only In respect of "rent payable under the Act". R. B. Andhyarujina has stated at page 32 of his above‑mentioned book that the word "payable" widens the scope of the definition of `tenant', because rent payable under any law falls within it and that therefore contractual tenancies are covered by it. He is right because these words bring within the purview of the definition a large majority of con?tractual tenancies, but this view should be taken subject to the restriction created by the words of section 10 (1) of the Karachi Rent Restriction Act, 1953 that protection against ejectment is extended to those tenants who pay "rent payable under the Act only. Those contractual tenancies in which rent is not payable in terms of the definition of 'tenant' are therefore not protected by the Act.

12. Tenancies can be divided into contractual and statutory. There is no definition of `statutory tenancy' in the Karachi Rent Restriction Act, 1953, nor was the expression defined in the earlier English Rent Acts, but it has been defined in the Housing Repairs and Rent Act, 1954, and the nature of that definition is explained in Megarry's Rent Acts (1961 Ed.) edited by Ashley Bramall, as follows:‑ "The Acts prior to the Act of 1954 contain no mention of the term `statutory tenancy', which has been said to come from the marginal note to section 15 of the Act of 1920, although in fact it has an earlier judicial origin. The Acts give little clear indication of what Parliament intended, so that it has been left to the Court, which have `had to proceed slowly and with extreme caution', to work out the nature of a statutory tenancy. The provision in the Act of 1920, set out below which prescribes the terms upon which a tenant `who by virtue of the provisions of this Act retains possession' of a house within the Acts is treated as referring to the provisions in the Acts restricting the landlord's right to possession, and the conception of a statutory tenancy is derived from this. Accord?ingly `the Courts have very slowly . . . . . been trying to frame a consistent theory' in their task of `making bricks with very insufficient statutory straw'. The Act of 1954 embodies the results of judicial labour in a definition of `statutory tenant' (and, by reference, `statutory tenancy') as a tenant (as defined in section 12(1)(g) of the Act of 1920) who retains possession by virtue of the Rent Acts and not as being entitled to a tenancy', and this definition Is repeated in the Act of 1957." (page 181‑182). A tenancy which is not statutory in terms of the rent restriction statutes must be contractual. The lessors and lessees of the latter are bound to be the parties to that contract, or those who derive title from such parties excepting such of them as derive title by the operation of rent restriction statutes.

13. When a tenancy is contractual it is transferable subject to the terms of the contract or local usage to the contrary. The present three tenancies, if they are tenancies, which aspect will be discussed below, cannot be statutory because the rent is in the form of service. It is, therefore, not correct to argue that they confer on the tenants non‑transferable personal right only.

14. Turning now to the first argument of Mr. Dingomal that the language of Clause 9 of the partnership deed is inadequate to create tenancy because apart from the word `rent' there are no other expressions in the deed which are usually associated with the creation of a lease, I think that the argument is not sound because under this clause the parties agreed to pay and receive rent for the premises and later the firm which was liable to pay the rent rendered service which was accepted by the owners of the property who were to receive the rent. The initial agreement and subsequent conduct of the parties leave no doubt to my mind that tenancies were created.

15. The supplementary argument of counsel based on the third proposition formulated by Desai is irrelevant because all the owners of the property are neither partners in the firm now nor parties to the suit. Ownership of the premises has in course of time partly passed on from the senior partners to those who are not partners in the firm. Such owners are Din Bat and Mathi Bai to whom also service has been rendered by the firm. For this reason the arguments founded on Miles case and Pocok's case are also irrelevant.

16. Taking up now the argument of Mr. Nasim A. Faruqui that the firm's business, which is the business of stevedores, was in such manner connected with the premises as to form a part of the firm's good‑will, I consider it uncalled for and unnecessary to decide whether of not it was so connected. It is uncalled for because the nature of the relationship was not discussed by counsel and the law is not that the place of business of a firm isle invariably a part of its good‑will. It is unnecessary because, for reasons given above, I have held that the tenancy rights which were created between the owners of the three premises to which the main contest relates are transferable as rights of contractual tenancies.

17. I can now revert to their transferability in order to explain it in some detail. In my view, every contractual tenancy does not enjoy the protection conferred by the Karachi Rent Restriction Act, 1953, but it is transferable. It is obvious that a lease of immovable property created in terms of section 105 of the Transfer of Property Act is the transfer of a right to the lessee to enjoy such property. It creates interest in the property and this interest is the property of the lessee. So long as such a tenancy is not transformed into statutory tenancy, it is transferable under section 6 read with section 108 (1) of the Transfer of Property Act, 1882. There is no covenant or local usage to the contrary. A contractual tenancy becomes statutory tenancy when, for instance, in terms of section 2 (7) of the Karachi Rent Restriction Act, 1953 it Is determined and the tenant remains in possession. Before its character is so transformed its transferability is not affected by rent restriction statutes because unlike statutory tenancy it is not a mere personal right.

18. This is often not appreciated. What escapes notice is that contractual tenancies exist and can exist along with statutory tenancies during the existence of rent restriction statutes which are in force, in this country, in India and in England.

19. The object of the Karachi Rent Restriction Act, 1953 is stated in its preamble to be only :‑‑ "to make certain provisions regarding accommodation, whether residential or non‑residential, furnished or unfurnished, In the Capital of the Federation, and in particular to provide for controlling the rents chargeable for such accom?modation and for preventing eviction in certain cases ;" and, as pointed out above, section 10(1) of the Act enforces the conditions of contractual tenancy except of course those that may be found to have been expressly or by necessary implication overrid?den by the provisions of the Act. As regards India the opinion of R. B. Andhyarujina in this respect has already been quoted above. In England the situation is not different in this regard. The editor of R. E. Megarry's the Rent Acts (1961 Ed.) has stated at page 155, as follows :‑ "The Acts do not interfere with leases and tenancy agree?ments more than is necessary to carry out their purposes ; they are `Acts for the protection of tenants, and not Acts for the penalising of landlords." It is an inclusive agreement, therefore, to point out merely that statutory tenancies are not transferable because they are personal rights, unless reasons are also disclosed for coming to the conclusion that these three tenancies are statutory tenancies. I find no reason for coining to this conclusion.

20. I, therefore, hold that the three tenancies form the assets of the firm and are saleable. As to the tenancy of the K. P. T. ground, there is no objection of the parties to selling it and distributing its proceeds except that the tenant cannot sell it. This means that the permission of the Karachi Port Trust is needed for transferring it. If the Karachi Port Trust declines to grant the permission, there will arise the need for changing the course of action in its regard. The situation in that event will be that the tenant, that is, the partners of the dissolved firm, will be entitled to take advantage of it under sections 46 and 47 of the Partnership Act as joint tenants. If as such their shares are suitably adjusted in the assets of the firm and then one or more of the partners are allowed by the Official Assignee, who as the receiver has the possession of the godown on behalf of the Court for the benefit of all the partners, to have the premises, it will be firstly, neither a transfer nor assignment of the tenancy rights; secondly, it will benefit all the partners; and thirdly, it will be the most fair arrangement under the circumstances.

21. I should explain how it will be all this. It is not a transfer or assignment because in law each partner has and is entitled to have full possession and enjoyment of the whole of the demised premises. If one of them withdraws or reliaquishes his Interest, no adverse change will be brought about in respect of the other partners nor will the legal rights of the lessor be adversely effected. Too squeamish a view of the situation may emphasise the distinction between joint possession of all and the joint possession of a few or the joint possession of all and the exclusive possession of one of them, but the distinction is too fastidious and archa?tically literal to be true to reality or the actual intention of the parties. Technically the distinction is unsound because none of the joint tenants, each one of whom is technically in full pos?session and enjoyment of the entire demised premises, has anything extra as a tenant to transfer or assign to another joint tenant. If an authority is needed in support of the view, I refer to Corporation of Bristol v. Westcott (12 Ch. 461). Further, see footnote (e) at page 423 of Undlay on 'Partnership (4th Ed.), and paragraph 20 at pages 421 to 423 of the Principles of Rent Control by R. B. Andhyarujina (1952 Ed.).

22. It is unnecessary to explain how the arrangement con?templated by me will benefit all the partners, because this is obvious; but I should explain how it is the most fair arrangement. It is fair to the lessor because the lessor's covenants and true intentions are preserved un-violated. It is fair to the partners because they cannot be conceived to desire surrendering the tenancy to the Karachi Port Trust ; therefore, the best and perhaps the only course open to them in order to protect them?selves from loss is to follow the arrangement.

23. I direct therefore that the three tenancies which are items Nos. 1, 2 and 3 in the 6th Paragraph of the Official Assignee's reference be sold along with the good‑will of the firm or separately as may appear to be more beneficial for the firm ; and that the Official Assignee should try to obtain the permission of the Karachi Port Trust to sell the tenancy of the K. P. T. godown which is the fourth item in the 6th paragraph of the reference ; failing to obtain the permission he should deal with this tenancy as explained above. The parties to this suit are at liberty to choose any other course on which they may happen to agree among themselves, and the Official Assignee should adopt it. K. B. A. ??????????????????????? Reference answered.