P. KODANDARAMAYYA, J.

( 1 ) AMONG numerous questions of law two interesting Company Law problems are raised in this Civil Appeal by Sri T. Veerabhadraiah, the learned counsel for the appellants. (1) Whether a conveyance in necessary to vest the property of the firm when the same was converted into a company? (2) Similarly whether such conveyance is necessary to claim title by the company in respect of the property acquired by the promoter before its incorporation? A considerable time and lengthy debate had taken place and hence we are impelled to state this in the forefront. Now we shall state the facts.

( 2 ) THE plaintiffs in O. S. No. 36 of 1969 on the file of the Subordinate Judge s Court, Vijayawada are the appellants in this appeal. The suit is laid for eviction of the defendants from the plaint schedule site after declaring the suit lease as duly terminated, removing the structures and deliver vacant possession of the same. The plaintiffs are grandsons of one Vali Subbarayudu and it is averred that the said Subbarayudu granted a lease to one Nidumukkala Subbarayulu the suit land for the purpose of constructing and running a Ginning and Rice and Oil Factory under a lease deed dated 10-7-1903 and the said lease though called a permanent lease was a tenancy at will and the said lease will enure to the life of the original lessee only and the original lessee constituted the 1st defendant firm with himself and other sharers and erected the factory of the 1st defendant and the 1st defendant paid the rents due till 1-1-1969 and committed default in payment of half yearly rents and the 1st defendant also committed breach of covenants of the aforesaid lease described kin paragraph 7 in detail and the lease aforesaid offends the rule of propertuities and consequently void. It was further alleged that handing over of the leased premises by the original lessee to the 1st defendant is unauthorised and hence the 1st defendant cannot claim to continue to be in possession and hence the plaintiffs terminated the tenancy in respect of the plaint schedule properties and hence the defendants should deliver possession of the property and that the 2nd defendant inaliciously set up the claim to a portion of the plaint schedule site and the 1st defendant failed to set off the rents due against the decretal dues in O. S. No. 1 of 1966 and hence the suit.

( 3 ) THE 1st defendant, a private limited company registered under the India Companies Act, 1913 filed a written statement contending that the lease dated 10-7-1903 was a permanent lease in favour of Nidumukkala Subbarayudu and the said property is continuously under the possession and enjoyment of the lessee and his successor-in-interest and is being used for the purposes contemplated in the original lease and there is no default in payment of rent and the allegation of breach of covenants of the lease deed is incorrect. The original lessor, his son and the present plaintiffs know that the 1st defendant is running the factory and acquiesced in the manner of enjoyment by the 1st defendant and hence they are estopped from questioning the rights by the 1st defendant and the plaintiffs have taken considerable amounts by way of advance from the 1st defendant and having committed default in payment of those amounts the 1st defendant obtained a decree in O. S. 1/1966 on the file of Principal Subordinate Judge s Court, Vijayawada against the plaintiffs and the same is being executed and the plaintiffs suit for the adjacent land on the basis of trespass passed in O. S. No. 79/69 is frivolous and vexatious and the 2nd defendant has no rights in the property and is not a necessary party and the same is liable to be dismissed.

( 4 ) THE 2nd defendant is the former managing Director of the 1st defendant firm and after his death defendants 3 to 12 were added as his legal representatives. 13th defendant was added by the plaintiffs themselves as adopted son of the original lessor. The 14th defendant was also a supplemental defendant. The 2nd defendant set up a claim for a portion of the land and filed a separate written statement. But his claim for that land was dismissed in O. S. No. 139/73 which was tried along with this suit and the same has become final and hence it is unnecessary to examine his defence in this appeal. The present suit was also tried along with the other suit O. S. No. 79/67 filed by the very same plaintiffs claiming that the 1st defendant trespassed into the adjacent land belonging to them not covered by the original lease deed. The Court below dismissed the said suit holding that the 1st defendant is in possession of less than the original extent mentioned in the lease deed and hence no question of trespass would arise and that judgment and decree have become final and hence we are concerned only with the controversy in O. S. No. 36/69.

( 5 ) ON the material issues framed by the trial Court it found that the lease deed dated 10-7-1903 is a permanent lease and it can enure beyond the lifetime of the original lessee and the 1st defendant did not commit any breach of covenants of the lease, the plaintiffs and their predecessors-in-interest have acquiesced in the mode of enjoyment of the plaint schedule property by the 1st defendant and hence they are estopped from filing the present suit and there is no default in payment of the rent by the 1st defendant, and the 2nd defendant and their legal representatives have no rights in the suit property and the plaintiffs have no right to terminate the lease and obtain possession of the property and consequently dismissed the suit. Issue Nos. 4 and 6 were deleted and issue No. 11 was found to be unnecessary which relates to the validity of lease deed as being opposed to public policy and the rule of perpetuity, and the termination of the lease, and validity of the quit notice, issued by the plaintiff respectively.

( 6 ) SRI. T. Veerabhadraiah, the learned counsel for the appellants raised questions 1 to 8, some of them not raised in the Court below. Sri P. Ramachandra Reddy appearing for the respondents besides refuting those questions raises questions 9 and 10 and they are: (1) Ex. A-1 is not a permanent lease. (2) The rights under Ex. A-1 are only heritable but not transferable but not transferable and hence S. 108 (j) Proviso of Transfer of Property Act is attracted. (3) No transfer of original lessee s interest in fact took place under the terms of Ex. B-53 to the firm formed by the said lessee, and if so the said transfers is void as Section 14 of the present Partnership Act 9 of 1932 has no application. (4) The partnership entered into by the original lessee consisting of more than 20 persons is illegal under the Indian Companies Act, 1913, and any transfer of his interest to the said firm is illegal and inoperative. (5) When the previous firm was converted into 1st defendant company a conveyance is necessary to vest the property of the firm in the company. (6) Similarly a conveyance is necessary for the 1st defendant company to claim title in the leasehold interest acquired by the original lessee under Ex. A-1. (7) The possession of the 1st defendant is only that of a tenant holding over after the death of the original lessee and the tenancy is terminable on quit notice. (8) The 1st defendant is liable to be evicted as there is a breach of covenant for non-payment of rent and for committing waste. (9) The plaintiffs and their predecessors-in-interest had acquiesced in the enjoyment by 1st defendant company of the suit property and hence they are estopped from seeking eviction. (10) The 1st defendant has perfected title by adverse possession for permanent lessee s interest.

( 7 ) BEFORE examining these questions let us notice the facts that are not in controversy. Under Ex. A-1 dated 10-7-1903 which is a registered deed a permanent lease was granted by the grandfather of the plaintiffs one Vali Subbarayudu of an extent of 16423 sq. yards situate in Vijayawada town to one Nidumukkala Subbarayudu for a sum of Rs. 180. 00 to be paid in two half yearly instalments of Rs. 90. 00 each. The lessee under the said document entered into a partnership Ex. B-53 dated 12-11-1906 with 47 other persons for constructing the factory. The said deed recites that the partners obtained the leas under Ex. A-1 for the purpose of constructing a joint factory and they constructed the buildings and installed machinery and were carrying on the business since 4-5-1904. Subsequently those partners and the lessee under Ex. B-54 constituted the said firm into a private limited company named as Sri Ramanuja Ginning and Rice Factory (Private) Limited, Vijayawada, the 1st defendant herein in the year 1920. The original lessor Vali Subbarayudu died in the year 1951. It appears that the lessee Nidumukkala Subbarayudu has no children. The 13th defendant was added as a party defendant by the plaintiffs but subsequently they disputed his right in the suit property and the Court below also held that he is not entitled to any rights in the suit property on additional issue No. 1 framed on 28-1-1974. During the lifetime of Vali Subbarayudu he collected the rent from the 1st defendant and subsequently his son Raghavaiah collected the rent from the 1st defendant till 1956. It is admitted that the rent was paid till 1-1-1960 and subsequently the 1st defendant filed the suit O. S. No. 1/66 on the file of Principal Subordinate Judge s Court, obtained a decree against the plaintiffs and brought their interest (lessor s interest) in the suit property for sale. The present suit was filed to indict the sale of further proceedings in execution. It is also not disputed that the subsequent rents are deposited in the Court by the 1st defendant. The plaintiffs having failed to satisfy the money decree obtained against them instituted the present suit in order to avert the sale of their interest in the suit property and issued quit notice dated 24-2-1967 terminating the tenancy and filed the present suit. This narrative clearly discloses that since 1903 the plaintiffs and also from the 1st defendant company which came into force in 1920 till the present suit is filed terminating the tenancy. The 1st defendant categorically stated in the written statement that he plaintiffs took advances and loans from the 1st defendant which are far higher than the aggregate of total amount of rents payable to the plaintiffs and having failed to pay those loans the plaintiffs did not care to take any interest either in discharging the aforesaid debts payable by them or with regard to the collection of the rents from the 1st defendant and they are willing to pay the rents and the plaintiffs are at liberty to collect the actual rents due to them. Hence we have to examine under the facts and circumstances whether the plaintiffs are entitled to evict the defendants from the suit land on the contentions now raised before us. NATURE OF LEASE:

( 8 ) THE 1st appellant s contention is that Ex. A-1 is not a permanent lease and the learned counsel stated that the burden is on the defendant to show that the lease is a permanent one (Hamidullah v. Abdullah, AIR 1972 SC 410 ). He urges that the terms of Ex. A-1 disclose that it is not a permanent lease though the document was styled as a permanent lease. He relies upon two clauses which are extracted hereunder: (Matter in vernacular omitted.-Ed.) According to the learned counsel the lessee or his successors are bound to deliver property as there is no clause enabling them to transfer and the lease must be construed as limited to the family of the original lessee and it is only heritable but not transferable. He laid emphasis on the words (Matter in vernacular omitted-Ed.) and according to him the family of the original lessee alone must enjoy failing which the estate should revert to the lessor. He relies upon Bejoy Gopal v. Pratul Chandra, AIR 1953 SC 153 and urges that a permanent lease cannot be inferred by mere possession for generations at uniform rent or by raising the constructions of permanent structures and urges that the inference of permanent tenancy is a question of fact depending upon the facts of each particular case and the Court below erred in holding that Ex. A-1 is a permanent lease.

( 9 ) IT is seen that Ex. A-1 was granted for constructing a factory. Secondly we must see the correct meaning to be ascribed to the clause enabling the original lessee to surrender the lease. Such clause was construed by the Supreme Court in Sivayogeswara Cotton Press v. Panchakasharappa, (AIR 1962 SC 413) where the lease deed recites that "you (lessee) shall be at liberty to continue the lease of the said land and the said road and keep the said land and the said road in your possession as long as you may desire to do. " It was held that "it could not therefore have been in the contemplation of the parties that the lease should be only for the life of the grantee or for an indefinite period which could be terminated at the will of the lessor. In order to ensure that the lessor should not eject the lessee at his sweet will, the term was specifically included in the lease that it will not be op0en to the lessor to do so. It must, therefore, be held that a stipulation entitling the lessee to surrender possession of the premises at his will is not wholly inconsistent with the tenancy being permanent. " This view was affirmed in Chapsibhai v. Purushottam, AIR 1971 SC 1878 where the lease is for building purposes and for a definite period in the first instance and also with a clause that the lessee can continue possession on payment of agreed rent with a right to remove construction at his will. Their Lordships held:"a lease may provide a fixed period and then include a provision that in the event of the lessee dying before the expiry of such period, his heirs would be entitled to have the benefit of the lease for the remainder of the period. In such a case, although the lease may provide for the heirs to succeed to the interests in the leased land, it would only mean that such heirs succeed to the rights up to the expiry of the lease period. If the lease, on the other hand, were for an indefinite period, and contains a provision for the rights thereunder being heritable, then, such a lease, though ordinarily for the lifetime of the lessee, would be construed as permanent. "these are all cases where there is no express grant of permanent lease. When the grant expressed to be a permanent lease the burden is upon the lessor to show that it is not so. Fortunately we are concerned with the express of grant of permanent lease. The cases relied upon by both the counsel are cases where there is no express grant of permanent tenancy. Once the deed specifically purports to grant a permanent lease. The cases relied upon by both the counsel are cases where there is no express grant of permanent tenancy. Once the deed specifically purports to grant a permanent tenancy the tests laid down by the decided cases when a permanent tenancy can be inferred need not be invoked, unless the description of the document is shown to be mistake or the terms of the document are contrary to the express grant of permanent tenancy. Far from such indication of terms clearly show that the lease is permanent one. The lease was for building purposes, there is no cause for enhancement of rent, no period of tenancy was fixed, no provision for eviction even in case of default in payment of rent was stipulated, the right to enjoy from generation to generation was given and consequently the express grant of permanent tenancy is consistent with terms and must be taken to be correct. Hence we are clearly of the opinion that Ex. A-1 is a permanent lease.

( 10 ) IT may not be strictly permissible to construe a document with reference to subsequent conduct but in the present case the conduct of the parties is consistent with the term of the grant and the construction now placed by us. The original lessor described this Ex. A-1 in two of his wills executed by him. Exs. A-23 and B-34 dated 6-9-1917 and 22-4-1920 respectively as a permanent lease granted by him. A similar recital is found in Ex. B-50 dated 26-3-1906, a mortgage deed executed by him while referring to the boundary of this land as being one under permanent lease granted by him. Exs. B-53 and B-54 the partnership deed and also Memorandum of Articles of Association of the 1st defendant to which the original lessee Nidumukkala Subbarayudu is a party also describe Ex. A-1 as a permanent lease. It is unnecessary to refer to other subsequent documents. We have referred this circumstance to show how the parties have understood the transaction but not as an aid for construction. Now we must proceed to adjudicate the rights of the parties that Exhibit A-1 is a permanent lease. LEASE HERITABLE BUT NOT TRANSFERABLE :

( 11 ) THE finding on the above question covers this question also to a large extent. The learned counsel for appellants urges that permanent lease is also governed by the provisions of the Transfer of Property Act and the lessee has no transferable interest and hence Section 108 (j) of T. P. Act is not attracted but the proviso to the said clause applies. He relies upon Mohd. Safi v. Union of India, AIR 1953 Cal 729 which held that if it is established that one of the conditions of tenancy is that the tenant must carry on business himself, S. 108 (j) of T. P. Act is excluded. Let us look at Section 108 (j) Proviso of the Transfer of Property Act. "section 108 (j) : In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property lease. (j) the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease; nothing in this clause shall be deemed to authorize a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee. "we have already held that the terms in Exhibit A-1 do not restrict the right of the lessee and the clause permitting the lessee to surrender is only an enabling one and the same is not destructive of his rights as a permanent tenant. Further the words in Ex. A-1 (Matter in vernacular omitted-Ed.) would clearly show that there is no embargo on the power to transfer. Courts have construed that the words (Matter in vernacular omitted-Ed.) are words conferring absolute title without any restriction and those words far from restricting the estate from transferring the same to the third parties positively confer an absolute power of enjoyment. Further the document also recites that the lessee can raise constructions, dig wells and get all things done as he desires and enjoy the property. The absence of a clause permitting to transfer or sub-lease is not fatal in view of these clauses. On the other hand in the absence of a contract no consent of the landlord is necessary for the assignment, and Section 108 (j) comes into play. Unless there is a covenant restricting the right of lessee to assign his interest the proviso to Sec. 108 (j) will not be attracted. Hence we hold that rights under Ext. A-1 are heritable and transferable. Questions 3 and 4 :

( 12 ) WE must say that these two questions are not raised in the trial Court. In fact the plaint states that the original lessee constituted the 1st defendant firm with himself and other sharers and created the first defendant factory in the plaint schedule property and since then carried on business therein under the name and style "sri Ramanuja Ginning and Rice Factory (Private) Limited, Vijayawada". This statement clearly discloses that the plaintiffs are aware of the fact that the original lessee joined the third parties as parties and a firm was created and subsequently it was converted into a private limited company the 1st defendant. The terms of Ext. B-53 dated 12-11-1906 a registered partnership deed state that the suit site was taken in the name of Nidumukkala Subbarayudu for the purposes of erecting a joint factory. It also recited that the lease amount payable under the said permanent lease shall be payable out of the income of the firm and it shall be the responsibility of the person who will be the managing partner from time to time. It is not permissible to dispute the recital of this document which is an ancient one of more than thirty years old and no material is placed to displace the correctness of those recitals and hence we are proceeding on the basis that the original lessee brought into the stock of the firm his leasehold interest and has become the part of the firm s property.

( 13 ) THE second limb of the argument of the learned counsel is in the absence of a registered deed conveying interest of the original lessee to the firm, the title will not pass to the firm and inasmuch as the firm was formed prior to the Indian Partnership Act 9 of 1932 and Sec. 14 of the said Act has no application and the decisions rendered by Courts on the construction of Section 14 have no application as the transaction in question is governed by Sec. 293 of the Indian Contract Act of 1872. It is true that the partnership in question is governed by the provisions of the Contract Act of 1872 that embodied the Rules of partnership in Ss. 239 to 266. The corresponding section to S. 14 of the Partnership Act is S. 253 (1) of the Contract Act. It is necessary to notice the said provision :"s. 253. In the absence of any contract to the contrary the relations of partners to each other are determined by the following rules:- (1) all partners are joint owners of all property originally brought into the partnership stock, or bought with money belonging to the partnership, or acquired for purposes of the partnership business. All such property is called partnership property. The share of each partner in the partnership property is the value of his original contribution, increased or diminished by his share of profits or loss. "we do not find any material difference for the purpose of this question between S. 14 and S. 253 (1 ). In fact the statement and objects of the Indian Partnership Act recites thus: "sections 14 and 15 contain the substance of sub-section (1) of S. 20 and of Sec. 21 of the English Act, and of S. 253 (1) of the Indian Act, but the matter has been rearranged. An important difference is the introduction of the goodwill of the business, which is now specifically included among the property of the firm. It will, subject to contract between the partners, be included automatically in all accounts for the determination of shares. "- S. O. R. "in the second paragraph we have substituted the word acquired for the word purchased in order to cover the acquisition of leases, mortgages, etc. We have also assimilated the wording in this paragraph to that in the first. "- S. C. R. "

( 14 ) IT is clear that the main principle is that the property brought into the stock of the firm by the partner becomes the property of the firm. On the other hand the previous S. 253 (1) is more specific in stating that all partners are joint owners of all properties originally brought into the partnership stock and thus we have no doubt in our mind that the construction placed by the Supreme Court on S. 14 of the present Partnership Act in Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300, holding that: "whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm, and since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership and during the subsistence of the partnership, however, no partner can deal with any portion of the property as his own. " Would equally apply to the firm formed prior to the coming into force of the present Partnership Act and governed by the provisions of Contract Act. In fact no words of dispositive character are necessary to bring the property to the common stock (vide State Chief Controlling Revenue Authority v. Chidambaram, AIR 1970 Mad 5 (FB) ). The declaration of the rights of partners in Ext. B-53 is enough to make the property as the property of the firm. This answers the third question. Question No. 4:

( 15 ) REALISING this the learned counsel raised yet another limb of this argument the 4th question stating the partnership formed under Ext. B-53 is illegal as it contravened Section 4 of Companies Act, 1913 as it admittedly consists of the original lessee and 47 other partners and as such Section 14 of the Partnership Act or the corresponding earlier provision of S. 253 (1) of the Contract Act cannot be invoked as in law there is no firm as such. It must be remembered that the partnership was formed on 4-5-1904 as recited in the registered partnership deed/dated Ext. B-53 dated 12-11-1906.

( 16 ) IT is necessary to trace the history of the Company Law in our country. In this country following the English Companies Act of 1844 an Act for the registration of joint stock companies was first time enacted as Act 43 of 1850. The Indian Companies Act 7 of 1913 was passed which is said to be almost a verbatim reproduction of English Companies (Consolidation) Act, 1908. Though a provision similar to Sec. 4 (2) of the Indian Companies Act 7 of 1913 prescribing the upper limit for any trading associations to carry on the business was found in existence in previous Indian Act since 1866, sub-section 3, 4 and 5 were added to S. 4 of Act 7 of 1913 by the Amending Act 22 of 1936. It is sub-section 4 that declared that a company, association or partnership carrying on business shall be personally liable for all liabilities incurred in such business and it is sub-section (5) that declared that any person who is a member of the company, association or partnership firm in contravention of the said section shall be punishable with fine not exceeding Rs. 1,000. 00. Thus it is clear the contravention is made illegal and punishable as an offence by virtue of the Amending Act 22 of 1936. In the present case as per Ext. B-54 the 1st defendant-company was formed on 6th Dec. , 1920 as per the certificate of incorporation and hence it is not permissible for the appellants to contend that the partnership was illegal either on the date of its formation or 1904 as per the certificate of incorporation and hence it is not permissible for the appellants to contend that the partnership was illegal either on the date of its formation or 1904 or subsequently by the provisions of 1913 Act as the offending clauses (3) to (5) of the said section came into force on 15th Jan. , 1936 as per the Notification dated 28-11-1936 in Gazette of India dated 28-11-1936, Part I, page 1492. Hence we overrule this objection.

( 17 ) WE may also add in this connection that even assuming that the property in question was in the hands of the firm which was illegal for some time before it is converted into a limited company the rights cannot be adjudged on the basis of the past event which is no longer in existence for deciding the rights of the parties at present. It is enough if we note that Courts have ruled that the members of partnership or a company hit by this section can however have beneficial interest in the property. (Vide Queen v. Tankard, (1894) 1 QB 548 and Nibaran Chandra v. Lalit Mohan, AIR 1939 Cal 187), If the partnership agreement is illegal the Court cannot adjudicate in respect of such contract which the law declares to be illegal. (Vide Badri Prasad v. Nagarmal, AIR 1959 SC 559 ). This legal position would not in any way advance the case of the plaintiffs. Questions 5 and 6 : We must again say that these questions were not raised in the Court below.

( 18 ) WE have already held that the partnership firm in which the original lessee is a partner was legally constituted, and the firm continue to be lawful and the properties belonging to all the partners have become the properties of the firm. The question is whether the property of the said firm had vested in the first defendant company when the firm was registered under the provisions of Indian Companies Act 1913. For that it is necessary to notice the terms of Sec. 263 of the Indian Companies Act 1913 that corresponds to Section 575 of the present Companies Act 1956. Section 263 runs as follows-"s. 263. All property, movable and immovable, including all interests and rights in, to and out of property, movable and immovable, and including obligations and actionable claims as may belong to or be vested in a company at the date of its registration in pursuance of this Part, shall, on registration, pass to and vest in the company as incorporated under this Act for all the estate and interest of the company therein. "the word company occurring in Sec. 263 is not a company registered under the Act. It is used in the sense of group, assembly or association of persons. In fact throughout the Act the word company was used in several sections in the general sense of association of persons. In fact Section 11 of present Companies Act (Section 4 of previous Act) itself which enacted the prohibition of association exceeding certain members for carrying on trade starts with saying that no company or association or partnership consisting of more than ten members shall be formed. Section 253 of the previous Act corresponds to Section 565 of the present Act. Section 565 (1) (b) of present Act corresponds to Section 253 (1) (ii) of 1913 Act, which permits any company otherwise duly constituted according to law consisting of 7 or more members to be registered as a company. A partnership must be one such. This is made clear by the provisions of Section 255 of 1913 Act (present Act Section 567) and Section 256 of 1913 Act (present Act Section 568) where under a deed of partnership has to be filed before the Registrar before seeking the registration. Hence a partnership which was treated as a company for the purpose of the Companies Act can be registered under Part 8 of the previous Act (Part 9 of present Act) and the vesting is provided by Section 263 (Section 575 of present Act ). The provision is mandatory and there will be statutory vesting in the corporation so incorporated under the provisions of Companies Act. The Registrar is bound to give a certificate of registration under Section 262 (present S. 574) which is a conclusive proof of incorporation (Vide Section 35 of the present Act that corresponds to Section 24 of the previous Act ). Hence it is clear that no conveyance is necessary when the partnership is converted and registered as a company. However it is not possible to acquire such title statutorily under this section if the previous firm purports to convey title to the company in which event a separate deed of conveyance is necessary. Thus we hold that if the constitution of the partnership firm is changed into that of a company by registering it under this Part 9 of present Act (Part 8 of previous Act) there shall be statutory vesting of title of all the property of the previous firm in the newly incorporated company without any need of a separate conveyance. A similar view was taken in Ramasundari Ray v. Syamendra Lal Ray, ILR (1947) 2 Cal 1. D. W. 2 deposed that in 1920 the partnership was converted into a private limited company and filed the Articles of Association Ex. B-54. This evidence stood uncontradicted. In fact the plaintiffs and their predecessors-in-title treated the 1st defendant as successor-in-interest of the previous firm and hence we are of the opinion that the leasehold interest that has become firm s property by virtue of the original lessee bringing into the firm has vested in the 1st defendant company after its registration. Question No. 6:

( 19 ) SRI Veerabhadrayya, the learned counsel for the appellants, argued that the terms of Ex. B-54 do not show that the partnership was converted into a company but it reads as if for the first time the company was formed and in which event it cannot be treated that the partnership as such was converted into a company and hence a conveyance is required to confer title on the 1st defendant. For this he relied upon Alapati Venkataramaiah v. Commr. of Income-tax, Hyderabad. (1965) 57 ITR 185 : (AIR 1966 SC 115 ). But that was a case where a third party purported to sell his property to the company and it is clear in such event a conveyance is necessary. But if a promoter acquires property before the incorporation of the company the legal position is different.

( 20 ) THE original lessee undoubtedly played the part of a promoter of the company. We have already noticed that lease deed Ex. A-1 recited that the land was taken for purpose of constructing the factory and the necessary buildings for running the same. Ex. B-53 the deed of partnership recited that the original lessee took the permanent lease of the land in his name for the benefit of erecting the joint factory and the firm was carrying on business for the benefit of the members of the firm since 1904. Ex. B-65 is the first list of shareholders of the 1st defendant company signed by all the shareholders and the original lessee is one of the signatories and four shares were given to him. Ex. B-54, the Articles of Association recites that the permanent lease was taken by the original lessee on behalf of all the shareholders and hence the permanent lease hold rights in the said lease and also the buildings constructed in the land, machinery and other equipment shall be treated as property of the factory. The capital of the factory was declared at Rs. 41,600. 00 divided into 104 shares each share valued at RS. 400. 00 and this arrangement was adopted by a special resolution of the Directors. It was also recited that this capital can be enhanced further by a special resolution by the Directors. Ex. B-54 is the latest copy of the Articles of Association adopted in the general body meeting of the company dated 30-12-1955 and the company itself is called Sri Ramauja Ginning and Rice Factory (Private) Limited. The question is whether this lease hold interest in the factory has become the property of the 1st defendant private limited company. In view of the part played by the original lessee in securing the lease for the purpose of the 1st defendant as promoter we have to see legal consequences. For this purpose we have to examine (1) The nature of jural relationship between the promoter and the company. (2) The rights of the company in respect of contracts before its incorporations. (3) Whether this transaction comes under the purview of Section 5 of the Transfer of Property Act.

( 21 ) THE word promoter is not defined by the Companies Act I of 1956 or by its predecessor Act VII of 1913. It is said that it is not a term of law but of business. The earliest definition given in Phosphate Sewage Co. v. Hartmount, (1877) 5 Ch D 394 as a person who as principal procures or aids in procuring the incorporation of a company, was generally accepted as the correct definition which was subsequently approved by House of Lords in Official Receiver and Liquidator of Jubilee Cotton Mills Ltd. v. Lewis, (1924) AC 958. A person although is not a Director may be a promoter of a company. The promoter stands in a fiduciary position towards the company and his position was defined so in Erlanger v. New Sombrero Phosphate Co. , (1878) 3 AC 1218 by the House of Lords. Halsbury s Laws of England, Fourth Edition, paragraph 38 states, "a promoter stands in a fiduciary position with respect to the company which he promotes from the time when he first becomes until he ceases to be a promoter thereof; but his relation to the company is not that of trustee and beneficiary, or agent and principal. " Lord Cairns, L. C. observes in the above case :"they (promoters) stand, in my opinion, undoubtedly in a fiduciary position. They have in their hands the creation and moulding of the company; they have the power of defining how, and when, and in what shape, and under what supervision, it shall start into existence and begin to act as a trading corporation. If they are doing all this in order that the company may, as soon as it starts into life, become, thorough its managing directors, the purchaser of the property of themselves, the promoters, it is, in my opinion, incumbent upon the promoters they provide it with an executive, that is to say, within a board of directors, who shall both be aware that the property which they are asked to buy is the property of the promoters, and who shall be competent and impartial judges as to whether the purchase ought or ought not to be made. I do not say that the owner of property may not promote and form a joint stock company, and then sell his property to it, but I do say that if he does he is bound to take care that he sells it to the company through the medium of a board of directors who can and do exercise an independent and intelligent judgment on the transaction, and who are not left under the belief that the property belongs, not to the promoter, but to some other person. "again Lord Blackburn at page 1269 observes: "they must make a reasonable use of the powers which they accept from the Legislature with regard to the formation of the corporation, and that requires them to pay some regard to its interests. And consequently they do stand with regard to that corporation when formed, in what is commonly called a fiduciary relation to some extent. " He further observes : "where, as in the present case, the company is formed for the purpose of becoming purchasers from the promoters as vendors, the interests of the promoters and of the company clash. It is the vendor s interest to get as high a price as possible, and they have a strong bias to overvalue the property which they are selling; it is the purchasers interest to give as low a price as possible, and to secure that the price actually given is not more than the property is really worth to them. "

( 22 ) THUS, it is seen that they have got both fiduciary relationship and at the same time they have individual interest to be served in the process of floating the company and hence it is ruled that a promoter cannot therefore retain any profit made out of a transaction to which the company is a party without full disclosure. It is necessary in this connection to see the binding nature of the contracts entered into by them before the incorporation. The law in our country varies from that obtained in England. Again Halsbury states in Fourth Edition at page 435 paragraph 727 :"a company is not bound by contracts purporting to be entered into on its behalf by its promoters or other persons before its incorporation. After incorporation it cannot ratify or adopt any such contract because in such cases there is no agency and the contract is that of the parties making it. The adoption and confirmation by a directors resolution of a contract made before the incorporation of the company by persons purporting to act on its behalf does not create any contractual relation between it and the other party to the contract or impose any obligation on it towards him. "hence the commentator states in paragraph 728 "that in order that the company may be bound by agreements entered into before its incorporation, there must be a new contract to the effect of the previous agreement. " The Editors of Palmer s Company Law, in their 22nd Edition at page 271 state regarding Pre-incorporation contracts : "in Common Law. Before its incorporation a company has no capacity to contract. Consequently, in common law nobody can contract for it as agent because an act which cannot be done by the principal himself cannot be done by the principal himself cannot be done by him through an agent, nor can a pre-incorporation contract be ratified by the company after its incorporation. There is, however, nothing to prevent the company, when incorporated, from entering into a new contract to put into effect the terms of the pre-incorporation contract. But the mere acting after incorporation on the preliminary contract does not in itself constitute sufficient evidence of the creation of a new contract. " Thus, virtually a new contract has to be entered into in order to bind the company in respect of contracts entered before the incorporation. But in India both the Specific Relief Acts I of 1877 and 47 of 1963 made provisions making the pre-incorporation contracts binding on the company. Sec. 21 (f) of 1877 Act which corresponds to Section 14 of 1963 Act did not retain n the said provision as the said clause is covered by Sec. 9 The present Section 15 (h) of the previous Act and Section 19 (e) of the present Act corresponds to Section 27 (e) of the previous Act. Section 15 (h) provides that the company can enforce pre-incorporation contracts. If such contract is warranted by the terms of the incorporation and the company has accepted the contract and has communicated such acceptance to the other party. The converse position is covered by Section 19 (e) where the third party can enforce the contract against the company if such contract is warranted by the terms of the incorporation of the company and the company has accepted the contract and communicates such acceptance to the other party to the contract, and hence the dicta in Natal Land, and C. , Company v. Pauline Colliery Syndicate, (1904) AC 120 of Lord Davey speaking for the Judicial Committee "that a company count not by adoption or ratification obtain the benefit of a contract purporting to have been made on its behalf before the company came into existence", cannot be invoked in our country. No doubt it is true that the sections in the Specific Relief Act are concerned with the executory contracts and cannot be applied to conveyance of immovable property and hence we have to see whether the title has passed to the company and whether the provisions of the Transfer of Property Act stand in the way.

( 23 ) FOR this purpose we have to examine Sections 5 and 9 of the Transfer of Property Act. Sections 5 and 9 are in the following terms :- "s. 5. In the following sections "transfer of property" means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons ; and to transfer property" is to perform such act. In this section "living person" includes a company or association or body of individuals, whether incorporated or not, but nothing, herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals. " "s. 9. A transfer of property may be made without writing in every case in which a writing is not expressly required by law. " We shall divide the Section 5 into component parts and examine. It lays down that if a living person conveys property in present or future, to- (1) one or more other living persons; or (2) to himself; or (3) to himself and one or more other living persons. The words "living person" are said to include- (i) a company, or (ii) association or body of individuals, whether incorporated or not. So it is clear that the transfer must be by one living person to another living person. It must be inter vivos (During life : between living persons ). Though a company is a living person for the purpose of this se4ction before its incorporation it is not a company. The words whether incorporated or not in the second paragraph applies to other associations or body of individuals that are unincorporated. The second conspicuous element of this definition is that a transfer to oneself is contemplated. Thus a person may create a Trust and constitute himself the first trustee so that the legal estate in the property continues to vest in him though in his capacity as a trustee. (Vide Tulsidas v. Income-tax Commissioner, AIR 1961 SC 1023 ). It is necessary in this connection to state that the Transfer of Property Act is not exhaustive of the law relating to a transfer of Property by act of parties. The preamble itself indicates two things. (1) it purports to define and amend certain parts of law relating to transfer or property. (2) It relates to the transfer of property by act of parties. Thus, it excludes from its purview sales in execution of decree. Insolvency proceedings, Testamentary and Intestate Succession. The word convey occurring in first paragraph of the section is of wider import. The sweep of this expression can usefully be gathered from the definition given in Section 205 (1) (ii) of the Law of Property Act of England. "conveyance includes a mortgage, charge, lease, assent, vesting declaration, vesting instrument, disclaimer, release and every other assurance of property or of any interest therein by any instrument except a will. "

( 24 ) LET us turn to Section 9 which states that a transfer of property may be made without writing in every case in which a writing is not expressly required by law. The said provision is enacted as ex abundanti cautela though it is really unnecessary. The Act did not deal with all types of transfers. It deals only with enumerated and specified transactions of sale, mortgage, lease, exchange and gift. That is why the inclusion of Chapter 8 relating to transfer of actionable claims in this Act was criticised by jurists as being not consistent with the Scheme of the Act. It is true that other than the provisions of this Act also require certain documents to be in writing such as Indian Trusts Act and the Indian Succession Act. But Section 9 lays down that if a transaction is transfer of property and there is no express provision of law requiring to be in writing Section 9 will enable it to be made without writing. But if on the other hand the transaction is not a transfer of property and there is no express provision of law requiring to be in writing then it can also be done without waiting. thus there are innumerable instances where Courts recognised oral transfers such as release, relinquishment, surrender, compromise, partition, transfer of elementary rights, settling maintenance claims, creating charge, dedication to an idol and family settlements to name a few. Further in view of Section 5 a transfer to an unborn person can be made only by a machinery of trust and hence Section 13 of the Act used the expression transfer for the benefit of unborn person.

( 25 ) THUS we see a promoter of a company though fulfils some fiduciary duties, he cannot be described as a trustee as there is no beneficiary as defined under Section 3 of the Trust Act. He cannot also be an agent as there is no principal born by that time. Hence the promoter occupies a peculiar position of a quasi-trustee. Hence the question is whether the declaration made by him constitutes transfer of property and whether the company can claim any interest in the property so declared belonging to it by the promoter. The declaration of the promoter that the property is held by him for the company to be formed does not constitute either a sale, mortgage, lease, exchange or gift and the company before its incorporation is not a living person and hence Section 5 is not attracted. Such declaration also does not constitute a transfer to himself and the company has not come into force as a beneficiary and hence it will not become a trust. Hence the transaction is out side the purview of Section 5 of the Transfer of Property Act and also Trust Act and it does constitute a conveyance as a vesting instrument or other assurance of property and can be made orally under Section 9 of the Transfer of Property Act.

( 26 ) IF he purchases property from third party he will be acquiring the title though apparently in his name for the benefit of the company yet to be formed. The property vests in him for the benefit of the company though his assurance is sufficient to clothe the company after its birth to claim full title. Hence we hold that the property acquired by a promoter can become the property of the company by its acceptance and adoption after its birth. A Division Bench of the Madras High Court had an occasion to consider in an unreported judgment in Writ Appeals Nos. 85 and 86 of 1963 dated 5th August, 1964 whetheher a promoter of a private limited company prior to its incorporation can make a valid application on its behalf for the grant of a stage carriage permit and it was held that if the company came into existence before the actual determination by the authorities it can be justified either on principle of adoption or novation by a subsequent application. But if the company is incorporated subsequent to the last date of consideration it cannot ratify the application of the promoter. In that case Section 57 (2) of the Motor Vehicles Act requires an application to be made on behalf of the legal person. So their Lordships had some difficulty in sustaining the claim on behalf of the company before its incorporation as the application itself must be made on behalf of a legal person. In Weavers Mills v. Balkis Ammal, AIR 1969 Mad 462, Justice Veeraswami as he then was held that the benefit of the purchase made by the promoter passed to the company on its incorporation without any registered deed. But in that case the claim of the company was negatived on the ground, that the previous proceedings operate as res judicata and hence the company lost its claim for the said property. We find from the reasoning of the learned Judge a clear supportable legal principle to sustain the claim of a company in respect of the property acquired by a promoter on its behalf.

( 27 ) HENCE we hold that the property acquired by the promoter can be claimed by the Company after its incorporation without any need for conveyance.

( 28 ) HOWEVER we may add even assuming that this legal position is otherwise as the promoter is a quasi-trustee he can be compelled to convey the property to the company and if necessary on payment of consideration in view of the part played by him for obtaining the benefit before its incorporation.

( 29 ) HENCE we hold that the leasehold interest obtained by the original lessee would enure for the benefit of the 1st defendant company without any separate conveyance. Further we are of the opinion that if the original lessee or his successor-in-interest disputes the assignment of lease hold interest so made by him, he can be compelled to convey the said interest specifically to the company in view of the benefit obtained by him. Question No. 7: Tenancy Holding over and termination of tenancy :

( 30 ) THE plaint as originally filed stated that the lease deed dated 10-7-1903 purported to be a permanent lease and the said Subbarayudu constituted the 1st defendant firm with himself and other sharers and erected the 1st defendant factory in the plaint schedule property and since then carried on business therein under the name and style of Sri Ramanuja Ginning and Rice Factory (Private) Limited. As per the orders in I. A. No. 3370/73 dated 31-12-1973 the plaint was amended and the word purporting was struck off and the word calling was used and a new paragraph was added stating that the said lease though called a permanent lease was really a tenancy at will of either party under law, as the lessee was given the right to give up the leasehold right if he did not require the lease hold property and as such the lessor was also entitled to the same right to cancel the lease and take back the lease hold property at his will and even if otherwise the lease can enure only for the lifetime of the lessee can enure only for the lifetime of the lessee and not beyond his lifetime and the use of the word putra, poutra in the lease deed are superfluous and would have no legal effect. In the Court below it was contended by the defendants that the plaintiffs filed this application purporting to be consequential amendment petition arising out of the order of the Court permitting the 13th defendant to be added as a party and they were not aware of these insertions and consequently they filed an application to receive the additional written statement in I. A. 1090/74. Two more applications are filed to strike off the amendment portion in the plaint (I. A. No. 842/75) and for striking of the pleading relating to the version that the lease would enure only for the lifetime (I. A. 1973/74 ). Though the defendants were permitted to file additional written statement the later two applications were dismissed permitting them to raise the contentions at the time of the arguments. So it is seen that in the original plaint the plaintiffs stated that the lease deed Ex. A-1 is a permanent lease but urged forfeiture of the lease as there is violation of the covenants of the lease as stated in para 7. In fact even in the registered notice issued by the plaintiffs in Exhibit A-2 to the 1st defendant it was categorically admitted that the lessee and his representatives were carrying on the business on the said premises for manufacturing purposes under the name of Sri Ramanuja Ginning and Rice Factory (Private) Limited, Vijayawada (1st defendant) and the lessee and his representatives paid the rent till 1-1-1959 but subsequently committed default in payment of rent and also committed breach of covenants of the lease and hence liable to be evicted. The theory that the tenancy under Ex. A-1 is a tenancy at will is built upon those line of cases where lessees were to hold for such time as they require or wish, the tenancy was construed as tenancy at will of the lessee and by implication of law such tenancy is tenancy at will of the lessor also. The earliest authority is K. R. Manicka Mudaliar v. T. Chinnappa Mudaliar,

(1913) ILR 36 Mad 557. In an ordinary lease such term stood by itself was construed to be tenancy at will but when the document was construed as a permanent lease considering the other terms of the lease, the term in the lease that a lessee can surrender if he does not want to continue cannot be construed as tenancy at will. In fact we have already held on question 1 on the authority of the judgment of Sivayogeswara Cotton Press v. Panchaksharappa (AIR 1962 SC 413) (supra) that this term is not destructive of the lease being a permanent lease. Once we hold the lease is a permanent one, it is not possible to contend that Ex. A-1 creates only a tenancy at will. Realising this the learned counsel argued that the 1st defendant has become a tenant holding over as after the death of the original lessee, the lessor and his successors have accepted the rents and hence the 1st defendant has become a tenant holding over and his tenancy was terminated under Exhibit A-2. This is again a new question raised.

( 31 ) HENCE we have to examine whether the 1st defendant can be described as a tenant holding over. We must look to Section 116 of Transfer of Property Act which defines the effect of holding over which is in the following terms:- "if a lessee or under-lessee of property remain in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representatives accepts rent from the lessee or under-lessee, or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month, according to the purpose for which the property is leased, as specified in Section 106. " For the application of Section 116 as held by the Supreme Court in Karnani Industrial Bank v. Prov. Of Bengal, AIR 1951 SC 285 two things are necessary. (1) The lessee should be in possession after the termination of a lease. (2) The lessor or his representative should accept the rent or otherwise assent to his continuing in possession. The contention of the learned counsel is that the tenancy is for life of the original lessee or heritable but not transferable and once the original lessee has no progeny the tenancy came to an end and the acceptance of the rent from the 1st defendant would only mean that the 1st defendant is a tenant holding over. We have already held that Ex. A-1 is heritable and transferable, an dalso held that the 1st defendant is the assignee from the original lessee and the rent is being received by the plaintiffs and their predecessors-in-title and consequently there is no determination of lease in any of the modes contemplated under Section 111 of the Transfer of Property Act. But if the lease is determined on the death of the original lessee and the assignment of termination of tenancy. But the plaintiffs did not plead any fresh lease after the death of the original lessee. Hence it is not possible to hold that there is a termination of lease and the continuance of the tenancy thereafter with the 1st defendant. Issue No. 6 which was framed on this question is in the following terms. "whether the plaintiff is entitled for the declaration that the suit lease dated 10-7-1903 was duly terminated and not binding on the plaintiffs?" That issue was deleted by the Court as per the order dated 9-1-1974 in I. A. No. 8901/73 and hence it is not a case of termination of tenancy and a subsequent creation of jural relationship by acceptance of rent. In view of the foregoing we hold that the 1st defendant is not a tenant holding over and such tenancy is not terminated. Question No. 8.

( 32 ) THE forfeiture of lease due to non-payment of rent and waste.

( 33 ) IN the plaint in paragraph 7, seven grounds were urged to show that the defendants committed breach of covenants of the aforesaid lease and hence liable to be evicted. This pre-supposes the 1st defendant is a tenant. This contention is on the basis even assuming that the 1st defendant is successor-in-interest he forfeited the tenancy rights. The learned counsel urged before us only two grounds. Forfeiture due to non-payment of rent and waste. It is admitted in the plaint that the rent was paid up to 1-1-1959. The Court below found that the subsequent rent due has been deposited into Court during the pendency of the suit and hence this ground is factually baseless. Further Ex. A-1 provides 12% interest for non-payment of rent till the date of payment and there is no clause entitling the lessor to evict the defendants for non-payment of rent and hence this ground is factually incorrect.

( 34 ) THE ground of waste pleaded in the trial Court is causing material damage to the leased premises by wasteful and destructive acts due to gross negligence. The Court below found in paragraph 43 of its judgment that there is no proof that any material damage to the leased premises was done by wasteful acts or destructive acts. Under this ground, the learned counsel argues that there is deficiency in the extent of land leased out as found by the Court below in the connected suit in O. S. No. 79/67 and hence a portion of the land is lost to the estate and hence it constitutes a waste and there shall be forfeiture of the lease. We must say that this is not the ground urged in the Court below. However we see under Ex. A-1 property was described with specific boundaries. A commissioner was appointed in O. S. No. 79/67 when these very plaintiffs filed the said suit on the ground that the 1st defendant trespassed on the adjacent land belonging to them. The commissioner submitted a report along with a plan which were marked as Exs. A-28 and A-29. The Court below found that there is no trespass on the part of the 1st defendant was in possession of 15092 sq. yards instead of 16423 square yards as originally said to have been granted under Ex. A-1. The plaintiffs having failed in O. S. No. 79/67 to establish trespass on the adjacent land raise the present contention that in view of the diminution of the extent of land in the possession of the 1st defendant it should constitute a waste and that shall be a ground for forfeiture of the lease. The Court below found that the lease was given by the boundaries and three plots of land were given. It found that when the lease deed Ex. A-1 was executed some extent of land after measuring the three plots shown in the lease deed has not been measured and the 1st defendant was in possession of the original extent of land as given by the boundaries and hence the diminution of any extent cannot be ascribed as any loss to the estate. It is true as held by the Supreme Court permanent tenancies are within the rule of Sec. 111 (g) of the Transfer of Property Act and are liable for forfeiture if there is a disclaimer of tenancy or denial of the landlord's title. (Vide Mohd. Amir v. Municipal Board of Sitapur, AIR 1965 SC 1923 ). But these two grounds now do not constitute forfeiture of permanent lease and we hold accordingly. Question No. 9 : Estoppel. By acquiescence:

( 35 ) THE term 'acquiescence' is used when a person refrains from seeking redress when there is a violation of his rights to his knowledge. There is an element of laches in it. It is defined as 'quiescence' to infer assent on the part of the owner. This doctrine of acquiescence operating as an estoppel was founded on fraud. Acquiescence differs from estoppel in that for acquiescence it is not necessary that a person should have made any representation by words or conduct that he did not intend to enforce his rights. (See Proctor v. Bennis, Bown LJ (1887) 36 Ch D 740 ). This doctrine is intended to relieve persons against fraud when a person refrains from interfering when his legal rights are being violated. Let us see the facts to apply this principle.

( 36 ) WE have already referred to the allegations in the original plaint and also the quit notice Ex. A2 wherein the 1st defendant was described as a successor-in-interest of the original lessee. In fact in the connected suit filed in O. S. No. 79/67 the plaintiffs themselves have admitted that the 1st defendant is a representative-in-interest of the original lessee. That suit relates not to the leased property but an adjacent land and no doubt the 1st defendant denied the said allegation. Now in the present suit the 1st defendant pleaded that they are the successors-in-interest of the original lessee. Even the amended plaint in paragraph 4 as already extracted earlier portion of our judgment states that Nidumukkala Subbarayudu the original lessee took the plaint schedule property for constructing and running a Ginning, Rice and Oil Factory and it is he who constituted the 1st defendant firm with other sharers. So the plaintiffs and their predecessors-in-title are fully aware that the purpose of lease is for raising of the factory and that the lessee himself constituted the 1st defendant firm. Though the 1st defendant is now a private limited company, the plaintiffs and their predecessors-in-title were still treating it as a firm not knowing the legal significance of conversion of the firm into a company.

( 37 ) D. W. 1 one Malladi Satyanarayana was examined to bear out the circumstances under which the 1st defendant became the representative of the original lessee. This witness is aged about 76 years. He states that Nidumukula Subbarayudu executed the lease for the benefit of the partners and his father was the first Managing Director and the witness wrote accounts for the firm even since 1920. The Court below accepted his evidence which is not challenged before us that the firm itself paid the amount to Vali Subbarayudu and Nidumukkala Subbarayudu was not paying the rent in his personal capacity. After the death of Vali Subarayudu the plaintiffs' father accepted the rent. This witness filed a certified copy of the first list of the shareholders of the 1st defendant company Ex. B-165 in which his father was shown as a shareholder against Serial No. 32 and the original lessee Nidumukkala Subbarayudu was shown as serial No. 25. He also states that the original shareholders have sold away their respective shares and the present shareholders are the assignees of the original shareholders constituting the 1st defendant firm. Therefore the plea that the 1st defendant is not successor-in-interest of Nidumukkala Subbarayudu is opposed to the very plaint case. The original lessor is fully aware that lease was taken for the purpose of raising a factory. D. W. 2 deposed the value of building is Rs. 4,00,000. 00 and factory is Rupees 2,00,000/- and rent was received by lesson initially from the firm consisting of original lessee as per Ex. B-53 since 1906 and from the 1st defendant since 1920 till suit notes was issued on 24-2-1967 for over a period of six decades. The account books of the 1st defendant firm show, the rent was received by the plaintiffs and their predecessors from the 1st defendant company. They have also borrowed from the 1st defendant. D. W. 1 deposed that he is prepared to deposit arrears with interest or adjust the amount towards the decree debt due from the plaintiffs. The evidence is clear that the 1st defendant was treated as successor-in-interest of the original lessee. These facts clearly disclose that this is not a case of a mere acquiescence without any representation by words or conduct but the plaintiffs and their predecessors-in-title have accepted the assignment in whatever manner the original lessee did to the 1st defendant and received the rent from the first defendant and hence they are estopped from contending that the 1st defendant is not a successor-in-interest and no lease hold interest was passed to it and consequently we hold that all principles of equitable and legal estoppel are attracted to the facts of the present case, and we accordingly affirm the finding of the trial Court on issue No. 3 that the plaintiffs and their predecessors-in-interest have acquiesced in the mode of enjoyment of the plaint schedule property by the 1st defendant and they are now estopped from contending to the contrary. Question No. 10 Adverse Possession.

( 38 ) IN view of the fact that we have permitted the plaintiffs to raise new grounds challenging that the 1st defendant is not a successor-in-interest of the original lessee, we have to permit the defendant to urge the ground of adverse possession. It is true that there is no plea of adverse possession raised by the 1st defendant. Facts forming the basis of this ground are not in controversy or at least found by the Court below and further no evidence is necessary. While examining questions 7 and 9 relating to the tenancy holding over and also the estoppel we have already stated that the plaintiffs and their predecessors-in-title are fully aware of the fact that the lease hold interest is being enjoyed by the 1st defendant after it is formed and before that by the firm consisting of the original lessee. If the lease stood terminated on the death of original lessee and the assignment in favour of the 1st defendant is invalid and inoperative for any reason as there is no conveyance in its favour, and the principle of estoppel also is not attracted to the facts of this case, then we have to alternatively see whether the lessee's interest is acquired by the 1st defendant by prescription.

( 39 ) NOW it is well settled that a permanent tenancy may be acquired by prescription. Mulla on Transfer of Property Act, Sixth Edition states that "a permanent tenancy may be acquired by prescription, for it is a well established rule that there can be adverse possession of a limited interest in property as well as of the full title of the owner. " The Supreme Court ruled in Rameshwar Rao v. Govind Rao, AIR 1961 SC 1442 that there is no doubt that there can be adverse possession of a limited interest in property as well as of the full title as owner. The learned counsel for the appellants argued that the legal position is altered after the death of the original lessee and a new tenancy must be deemed to have been created after the death of the original lessee as the original lessor accepted the rent subsequent to the death of the of the original lessee. We have already held that no fresh tenancy was created and the jural relationship between the 1st defendant and the original lessor cannot be that of a tenant holding over. If we proceed on the basis that the tenancy was terminated on the death of the original lessee and no fresh tenancy was created the 1st defendant is in possession of the property paying the rent claiming under the original lessee, for over statutory period and hence the question is whether the 1st defendant had perfected title by adverse possession for a limited interest of permanent lessee.

( 40 ) IT is fairly settled that when a tenant dies and the rent is accepted by the landlord from a person claiming to be the heir of the original tenant for a period of twelve years the relationship of landlord and tenant is not effected and the heir acquires status of the tenant. (Sadanand v. Jyotish Kanta, AIR 1926 Cal 952 ). Recently in a case arising under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act of 1960 our learned brother Seetharam Reddy, J. , held that when a person continues in possession in a building after the death of his grand father who is the original tenant for over a statutory period he prescribes interest of tenancy. (Vide M. Vijaya Ram v. Kamaran, (1983) 1 APLJ (HC) 45) ). The rule that a landlord's cause of action to recover possession from a tenant or any one claiming under the tenant only accrues from the time when he determines the tenancy was first enunciated by Sri Barnes Peacock, C. J. , in Davis v. Kazee Abdool Hamed, (1867) 8 Suth WR 55 which is followed in several decisions and was finally accepted by their Lordships of the Privy Council in Katyayani Debi v. Udoy Kumar Das, AIR 1925 PC 97.) In (1867) 8 Suth WR 55 Sir Barnes Peacock, C. J. observed at page 58 "when the forfeiture is committed, and the landlord elects to put an end to the lease on the ground of forfeiture, the landlord's title to recover possession accrues. He could not, pending the lease, recover possession from the tenant or any one claiming under the tenant, nor even from a trespasser. " This view was reiterated by Vivian Bose, J. , delivering a judgment as a Member of Full Bench in Punjaram Jacoba v. Ramu, AIR 1940 Nag 49 stating that "in England the landlord cannot sue for possession during the continuance of a tenancy even if there is a trespasser on the land. His rights in that respect do not accrue until the tenancy is determined. Until then all he can do is to sue in respect of injuries to his reversionary interest; and this of course entails the right to institute a declaratory suit under Section 42 of the Specific Relief Act but not one for possession. The law in India is the same. " This dicta that the cause of action will not accrue even in a case of trespass during the continuance of tenancy is not accepted by Sundara Iyer, J. in Ambalavana Chetty, v. Singaravelu Udayr, (1912) Mad WN 669 contrary to views expressed in a number of cases. We are not concerned with the case of trespass. (See page 1704 U. N. Mitra Law of Limitation and Prescription 9th Edition.

( 41 ) IN Kumar Kamakhya v. Ram Raksha, AIR 1928 PC 146 it was ruled that where after the death of the original lessee to whom a life estate alone was given the heirs remained in possession and paid rent to the lessor but receipts are given in the name of the original lessee the case is not governed by Section 116 of the Transfer of Property Act and the suit for recovery of possession brought beyond 12 years is barred. Hence it is seen in this case if the assignment is void after the death of the original lessee the possession of the 1st defendant becomes adverse and subsequent payment of rent creates in them a limited title of permanent tenancy.

( 42 ) SRI Veerabhadraiah, the learned counsel very strongly relied upon Datto v. Babasaheb, AIR 1934 Bom 194 to show that when the tenant is shown to have paid rent, the presumption in the absence of evidence is he is yearly or monthly tenant. That was a case where the permanent lease deed granted was held to be inadmissible for want of registration and the terms also could not be looked into in view of Section 92, Evidence Act. Mulla's Sixth Edition on Transfer of Property Act at page 657 remarks about this case as a clear case of permanent tenancy acquired by prescription. The tenant came into possession in 1865 under permanent lease which was inadmissible as evidence of a lease for want of registration and hence that case is of no assistance to the appellants. In fact that was distinguished in In re v. Tharawattil Karnavan, AIR 1957 Mad 73 where a Division Bench held that the said case cannot be an authority that the right of permanent lessee cannot be acquired by prescription.

( 43 ) SRI Veerabhadraiah next contends on the strength of Nainapillai Marakayar v. Ramanathan Chettiar, (1924) ILR 47 Mad 337 : (AIR 1924 PC 65) that no tenant of land in India can obtain right of permanent tenancy by prescription against his landlord. But this case was already explained in number of decisions and the earliest judgment is Periyanan Chetty v. Govinda Rao, (1932) 62 Mad LJ 496 : (AIR 1932 Mad 328) holding that the dicta in (1924) ILR 47 Mad 337 : (AIR 1924 PC 65) that permanent right of occupancy can only be obtained by a tenant by custom or by grant from an owner of the land who happens to have power to grant such right or under an Act of Legislation, means that a tenant who has entered into possession under a valid lease which is not permanent, cannot by his own assertion or act during the tenancy enlarge his rights into a permanent tenancy. (also see page 757 of Rustomji on Law of Limitation and Adverse Possession, Sixth Edition ). In Atyam Veerraju v. Venkanna, AIR 1966 SC 629 the Supreme Court refrained from pronouncing upon the correctness of the observation of the Full Bench of the Patna High Court when a tenant can prescribe permanent rights of prescription. The Full Bench of Patna High Court in Bastacolla Colliery v. Bandhu Beldar, AIR 1960 Pat 344 observed regarding the acquisition of permanent tenancy by prescription :"there are, however, some cases in which a lessee can acquire the right of a permanent tenant by prescription in spite of payment and acceptance of rent. Those are cases where the lessee pays rent on the basis of a notorious claim of permanent tenancy to the knowledge of the owner. The acceptance of rent by an owner on the basis of the lessee's claim as a permanent tenant will not prevent the acquisition of such a right by the lessee. If the lessee tenders the rent on the basis of permanent tenancy and the owner refuses to accept it on that basis, the parties are at arm's length and no relationship of landlord and tenant can come into existence between them. Hence, the lessee's possession in adverse to the lessor and he may acquire to the lessor and he may acquire a limited right of permanent tenancy by being in adverse possession for the statutory period. "the Supreme Court observed adverting to this passage (at p. 634) : "as we did not hear any argument on that point we do not also decide whether this passage lays down the correct law. This passage must be read with the following observation of the Patna High Court in the same case. If once a tenancy of some kind comes into existence either under an express lease or under a lease implied by law, the tenant cannot convert his tenancy into a permanent one by doing any act adverse to the landlord. " The view expressed by the Supreme Court was again considered by the same High Court in Administrator of District Board, Gaya v. Shri Deonath Sahay, AIR 1970 Pat 256 holding that once a tenancy of some kind has come into existence, any subsequent assertion of permanent tenancy right by the tenant cannot create any such right in his favour by adverse possession. So it is clear that if an ordinary tenant got into possession by his mere assertion he cannot convert the tenancy into one of permanent tenancy into one of permanent tenancy. But Ex. A-1 created a permanent tenancy, and we hold so and hence we conclude that if the assignment of interest of the original lessee in whatever form to the 1st defendant is invalid and inoperative the possession of the 1st defendant becomes adverse to the original lessor and the acceptance of the rent for over the statutory period of 12 years makes the assignee to prescribe for the limited title of permanent interest. In fact the possession of the 1st defendant had all the qualities of adequacy, continuity, exclusiveness and publicity to constitute its possession as adverse. There is clear animus on the part of the 1st defendant under the colour of assignment of the interest under Ex. A-1 to it. It is true that there is no lease granted to the 1st defendant but the 1st defendant is claiming under the colour is title viz. , the lease granted to one of its shareholders. We have already held that the interest under Ex. A-1 has become part of the firm's property, and it was declared to be the property of the company under Ex. B-54. Assuming that the declaration does not convey any title to the 1st defendant, the first defendant continued in possession of suit property for over a statutory period to the knowledge of the plaintiffs and their predecessors-in-title and thus perfected title by adverse possession to the limited interest of the permanent lessee.

( 44 ) WE have completed the bundle of inconsistent and incongruous pleas and reject the claim, of the plaintiffs for possession as clearly unsustainable.

( 45 ) NOW we state the result of our discussion. It is clear that the lessee can transfer his interest by way of an assignment. We have already examined the scope of S. 108 (j) T. P. Act and held that the lessee can transfer absolutely his interest and there is no prohibition on such alienation. It is well settled that an absolute agreement of the whole interest of a lessee, creates privity of estate between the lessor and the assignee and the assignee becomes liable to the lessor of covenants running with the land including the covenants to pay the rent. In fact the present suit was filed treating the 1st defendant as u8sccessor-in-interest on the basis of such assignment paying court-fee on the basis of annual rent. If the plaintiffs consider that the 1st defendant is not the representative-in-interest of the original lessee the suit should not have been framed as one for eviction of tenant paying court-fee on yearly rent. They should treat him as trespasser and the suit must be based on title. The plaintiffs did not plead any fresh tenancy and once the assignment is found to be true and valid and there is no forfeiture of permanent lease an the 1st defendant continues to be successor-in-interest of the original lessee and so long he is willing to pay the rent stipulated in the lease deed, the present suit for eviction is not maintainable. We also hold that the plaintiffs are precluded from contending that the 1st defendant is not a successor-in-interest as the principle of estoppel stands in the way.

( 46 ) EVEN assuming the assignment in favour of the 1st defendant by the original lessee is not valid for want of conveyance or otherwise so long the permanent lease is not forfeited and validly terminated even the licensee or any one claiming form the permanent lessee can continue in possession. This is not a case of abandonment of estate by the lessee. Hence a permissive possession from the lessee cannot be removed so long the lease is not validly terminated. The suit is not maintainable without terminating the lease. The ground of forfeiture of lease are found to be factually incorrect and legally untenable. The plaintiffs have not sued any heir of the lessee and we cannot accept that he died heir less though he may not have any progeny and hence the suit against the 1st defendant must be treated as one based on privity of estate. We also alternatively hold that even assuming that the assignment is invalid and inoperative the 1st defendant perfected title by adverse possession for permanent lessee's interest as he continued in possession of the property since the death of the original lessee in 1951 till the date of suit. Hence we see no legal basis on which the plaintiffs' suit can be decreed and hence the appeal is dismissed but, in the circumstances without costs.

( 47 ) APPEAL dismissed.