Leasehold mortgagee cannot outscore lessee's title where valid forfeiture is final and lessor seeks possession.

A mortgagee of leasehold rights cannot assert a title superior to the lessee where the lessor has validly determined the lease for breach of lease conditions and that forfeiture has attained finality. The lease in question had been terminated for cessation of the stipulated industrial activity, and neither the lessee nor the official liquidator challenged that determination. In liquidation, the mortgagee therefore took only the lessee's interest and could not prevent the lessor from recovering possession. The principle applied is that a mortgagee cannot defeat a lessor's contractual right to terminate the lease in accordance with its terms and seek possession, even where the leasehold asset is claimed to be part of the winding-up estate.

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Issues: Whether the mortgagee of leasehold rights could resist the lessor's right to determine the lease and recover possession after the lessee's breach of the lease conditions and the unchallenged forfeiture of the lease in liquidation proceedings.

Analysis: The lease had been validly determined by the lessor for cessation of the stipulated industrial activity, and that determination had attained finality because it was never challenged by the lessee or the official liquidator. In such a situation, the mortgagee stepped only into the shoes of the lessee and could not claim any right superior to that of the lessee. The exclusion of the leasehold property from the winding up estate followed from the settled principle that a mortgagee cannot assert a better title than the mortgagor, and the earlier decision relied upon affirmed that a lessor may terminate the lease in accordance with the lease terms and seek possession before or in the context of company liquidation.

Conclusion: The mortgagee could not defeat the lessor's right to recover possession, and the challenge to the High Court's order failed.

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