Law Web: Whether court should grant eviction decree on the ground of subletting if the tenant is not in control of business of the company working in rented premises?

In Sait Nagjee Purushotham (supra), the question was whether the partnership firm which was converted into a company had all the partners of the firm as the Directors. No evidence was led to show that the Directors were the same, accordingly, the Court held that there were subletting and observed as under:

"20. In view of the ratio laid down by this Court in the aforesaid decisions, various tests were laid down obtaining in the facts of each case. But the common ratio which runs in all these cases is that if there is voluntary transfer by the company to a newly incorporated company then in that case one has to plead and prove that all the members of the old firm continued in the new firm and it is essentially the same. The only exception which has been made is that the transfer of the old company to a new one is under the statute or law. Therefore, in the present case after verifying the records of the case, we have found that all the three courts have consistently observed that the benefit of Section 11(17) of the Act cannot be extended to the appellant in this case and we are of opinion that the view taken by the courts below is correct and there is no ground to interfere in this appeal."

25. Subsequent to the judgment in Sait Nagjee Purushotham (supra), the Supreme Court considered this very issue in Santosh Ajit Sachdeva and Ors. v. Anoopi Shahani, MANU/SC/7841/2007 : (2007) 7 SCC 675 wherein, on the question of subletting the Supreme Court observed as under:

"8. All other cases referred by learned Counsel were also examined and we do not feel any need to refer any more of them. The theory of lifting the corporate veil has been accepted in certain circumstances which have already been referred by this Court in a series of decisions. However, so far as this case is concerned, as per the finding of fact recorded by the appellate court as well as by the High Court that the appellant-defendant has not been able to successfully prove that she is controlling the company, it was held by the appellate court that merely by holding a large number of shares is not sufficient but something more is required to prove that she is actually controlling and managing the business herself. That finding of the Appellate Court has been upheld by the High Court. Hence, in view of the concurrent finding of both the courts below, there is no reason for us to take a different view of the matter. Hence, we do not find any merit in this appeal and accordingly the appeal stands dismissed. No order as to costs."

Thus, as per the judgment in Santosh Ajit Sachdeva and Ors. (supra), it is merely not enough for a tenant to hold a large number of shares in a company, something more would be required.

Conclusion

26. Applying the tests laid down in the above three decisions of the Supreme Court to the facts of the present case, the admitted facts show that there are three companies functioning from the tenanted premises. Two of the companies were incorporated by third persons. The tenants became Directors in the company a few years after incorporation. The companies had their registered office in the tenanted premises since inception. The exact shareholding of these Directors and their control is not clear to the Court. No evidence has been led to show as to who is in charge of the day to day handing of the business of these companies. In any event, the fact that there are other Directors in the companies and other shareholders itself shows that the corporate reflection and image of the said companies cannot be only Mr. Arun Kumar Jain and Ms. Archana Jain. Even going by the tests laid down in Madras Bangalore Transport Co. (supra), this is a clear case of subletting in view of the third-party Directors and shareholders in the said two companies. Under these circumstances, though not on the question of res judicata, even on merits, the finding of the ARC that there is subletting does not deserve to be interfered with.

IN THE HIGH COURT OF DELHI

CM (M) 600/2019, CM Appls. 17972, 20292 and 20409/2019

Decided On: 19.02.2020

Arun Kumar Jain Vs. Bhagwant Singh Pabla

Hon'ble Judges/Coram:

Prathiba M. Singh, J.

1. The present petition has been filed challenging the order of the Rent Control Tribunal (hereinafter, 'RCT') dated 11th March, 2019 as also the order of the Assistant Rent Controller (hereinafter, 'ARC') dated 21st April, 2018. A petition was filed under Section 14(1)(b) of the DRC Act by the Respondent-Mr. Bhagwant Singh Pabla (hereinafter 'landlord') against the Petitioners-Sh. Arun Kumar Jain, Smt. Archana Jain (hereinafter 'tenants') and M/s. Ritika Advertising Pvt. Ltd. The ARC, by the impugned order allowed the eviction petition primarily on two grounds i.e.

(i) that the findings in a judgment rendered by a Civil Court dated 29th March, 2004 in a suit for injunction filed by the Respondent-landlord would be binding between the parties; and

(ii) that the running of a company by the name Ms. Ritika Advertising Pvt. Ltd. and a third party company in the tenanted premises would constitute sub-letting.

2. The said decree was challenged before the RCT by the tenants. The ld. RCT vide the impugned judgment dated 11th March, 2019 has held that the non-challenge to the findings rendered by the Civil Court on the earlier occasion in the suit for injunction, would constitute res-judicata inasmuch as the finding having not been challenged, has attained finality and thus there is no illegality or infirmity in the order of the ARC.

Submissions of the Petitioners

3. On behalf of the Petitioners-tenants, ld. Senior Counsel submits that the finding of the RCT that the order of the Civil Court in which the finding was arrived at in respect of sub-letting, was one which resulted in a dismissal of the suit filed by the Respondent and thus, the same could not constitute res-judicata. The submission is that though there was a finding which was rendered in the said judgment dated 29th March, 2004, the suit filed by the Respondent-landlord was finally dismissed. The tenants were not expected to challenge the said judgment inasmuch as since the decree was in their favour, a mere finding need not be challenged. Reliance is placed on the following three judgments:

• State of Andhra Pradesh and Ors. v. B. Ranga Reddy (D) by L.Rs. and Ors., MANU/SC/1074/2019 : 2019 (10) SCALE 671

• Thamilarasi v. Selvam, MANU/TN/2902/2011 : 2011 (5) CTC 430

• S. Waryam Singh Duggal v. Savitri Devi, MANU/DE/0330/1983 : (1984) ILR 1 Delhi 214

4. It is further submitted that the second ground on which the impugned orders are liable to be set aside is that both the forums failed to appreciate that the company-M/s. Ritika Advertising Pvt. Ltd. was in fact under the control and management of Sh. Arun Kumar Jain and Smt. Archana Jain. Thus, the fact that the company may be using the premises as a registered office does not by itself mean that the Petitioner Nos. 1 and 2 had lost control of the possession of the property. Heavy reliance is placed on a Local Commissioner's report wherein the Local Commissioner had come to the conclusion that the Petitioner Nos. 1 and 2 were in possession of the property.

5. Ld. senior counsels further argue that even if the company is in control of a particular property, though the company might by itself be a separate legal entity, in effect, it is the individuals who control the company, who are the image of the company and instead of lifting the corporate veil, the judgment of Madras Bangalore Transport Company v. Inder Singh and Ors., MANU/SC/0539/1986 : AIR 1986 SC 1564 which uses the concept of 'corporate reflection' must be considered as applicable in the present case. On this proposition, ld. Sr. counsel relies upon the following judgments:

• Santosh Ajit Sachdeva and Ors. v. Anoopi Sahani, MANU/SC/7841/2007 : AIR 2007 SC 3231

• Madras Bangalore Transport Co. v. Inder Singh and Ors., MANU/SC/0539/1986 : AIR 1986 SC 1564

• Vishwa Nath and Anr. v. Chaman Lal Khanna and Anr. MANU/DE/0043/1975 : AIR 1975 Delhi 117.

6. Further reliance is also placed upon the findings of the Local Commissioner where the Commissioner concluded that the premises was in the possession of Sh. Arun Kumar Jain. It is submitted that this commission was executed in the presence of all the parties and the Respondent-landlord had also participated in the commission proceedings. The LC's report was also not objected to before the said Court.

Submissions of the Landlord

7. On the other hand, ld. counsel for the Respondent-landlord, places heavy reliance on the documents relating to the incorporation of the two entities which were functioning from the tenanted premises. The first submission made is that the records of the Registrar of Companies in respect of an entity-En-Arcade Private Limited shows that the Petitioner Nos. 1 and 2 were inducted as directors only on 1st June, 1991, but, the certificate of incorporation shows that the company was incorporated with the tenanted premises as the registered office since 9th October, 1987. This itself proves that the company which was operating from the tenanted premises was a company which was a third party not under the control of Petitioner Nos. 1 and 2. It is further submitted that even insofar as M/s. Ritika Advertising Pvt. Ltd. is concerned, the Petitioner Nos. 1 and 2 were inducted only on 15th September, 1998, in the said company. On the basis of these two records, it is argued that the usage of the tenanted premises as the registered office of these two companies would constitute sub-letting. It is further submitted that irrespective of whether these two companies are under the control of Petitioner Nos. 1 and 2, or not, the use of the premises which is rented out to individuals, if used for corporate entities, would by itself constitute sub-letting, especially if the said corporate entities use the said premises as their registered office. It is further submitted that while the RCT has dismissed the appeal on the ground of res-judicata, ld. counsel submits that the ARC has given detailed findings after recording evidence that the use by the said two companies of the demised premises would constitute sub-letting. Paragraph 7 of the impugned order is heavily relied upon by ld. counsel for the Respondent. Ld. counsel for the Respondent also relies upon the judgment of the Supreme Court in Roop Chand v. Gopi Chand Thelia, MANU/SC/0470/1989 : AIR 1989 SC 1416

Rejoinder on behalf of the Petitioners

8. In rejoinder, ld. counsel for the Petitioners rely upon the following judgments entitled Resham Singh v. Raghbir Singh and Ors., MANU/SC/0503/1999 : AIR 1999 SC 3087 and Sukhpal Singh and Ors. v. Satbir Singh and Ors., [CM(M) 952/2011, decided on 17th September, 2012] to submit that even if part possession is handed over to a third party, it would not constitute sub-letting and until and unless the owner proves that the lessees i.e. the tenants have lost control over the property, there would be no sub-letting. It is also submitted that the records of the Registrar of Companies would establish that M/s. Ritika Advertising Pvt. Ltd. was incorporated prior to the filing of the suit and the facts relating to En-Arcade were never argued before the lower Courts.

Analysis

9. The two questions that arise in this petition are:

• Whether the finding in the judgment of the Civil Court in the suit for injunction filed by the landlord against the tenant that there is subletting by the tenant, constitutes res judicata? and;

• Whether the tenants are guilty of subletting and the decree for eviction is liable to be upheld?

10. For decision on the first question, the admitted facts are that a lease agreement was entered into in respect of the 4th floor of property bearing No. 4E/7 Jhandewalan Extn., New Delhi (hereinafter 'tenanted premises'), on 8th January 1984 on a monthly rent of Rs. 600/-. The landlord had filed an eviction petition in 1992 under Section 14(1)(a) which was dismissed on 24th July, 2004. Simultaneously a suit for injunction was also filed by the landlord against the tenants in 1999. In the said suit, a Local Commissioner was appointed. The findings of the Local Commissioner are as follows:

"Shri Arun Kumar Jain present and I serve him the notice of my appointment and for joining the commission proceedings and he agreed to join the proceedings. Thereafter, I proceeded to the suit premises no. 4E/7, Jhandewalan Extn. New Delhi. Thare I found the plaintiff Shri Bhagwant Singh Pabla present alongwith his counsel Shri G.S. Kamal, Advocate. The defendant no. 1 also reached at the suit premises. I also served the plaintiff with the Notice, which he duly received. The plaintiff supplied to me a copy of the site plan and also arranged a Camera.

And whereas I started the commission proceedings in presence of plaintiff, his counsel and the defendant no. 1. I found that the suit premises no. 4E/7, was having two cabins with partition between them. I also found that the Defendant No. 1 was in possession, use, occupation and control of the suit premises as shown in the copy of the site plan supplied to me. I also found that the Plaintiff was not in possession, use, occupation and control of the suit premises.

And whereas I also found that no construction work was going on at the time of my inspection of suit premises. However, only renovation work was going on in the suit premises. I enquired from the labourers/carpenters working there. Shri Narain Singh s/o Shri Mohan Singh, the Carpenter/Contractor and Shri Chhotey Lal s/o Shri Kajod Ram Carpenter informed me that they are working for the defendant. no. 1 Shri Arun Kumar Jain in his said suit premises.

And whereas I did not find any sign-board etc. affixed on the outer front gate of the suit premises at the time of my visit. However, only one sticker/pamphlet was pasted on the wall of the gallery outside the suit premises, on which the name of the defendant no. 1 was written and the, same has also been shown in the photographs annexed herewith.

And whereas during the proceedings the photographs were taken from the Camera brought by the plaintiff and the same are annexed herewith.

And whereas the photographs bearing no. 1 to 3 reflect the inside view of the suit premises and also showing the books, furniture and fixtures lying, therein and the defendant no. 1 claimed that the same, belonged to him, which the plaintiff did not deny. The photograph bearing no. 4 reflect the door between the two cabins in the suit itemises.

The photographs bearing no. 5 to 7 reflect the outer view of the suit premises, the gallery/entrance to the suit premises and the sticker/pamphlet pasted on the wall of the gallery.

And whereas in this way I conducted the commission proceedings on 17.2.1999 and completed the same at about 5.00 PM and left the suit premises. Both the parties Co-operated in the commission proceedings.

Report is submitted accordingly."

Thus, the Local Commissioner had found that the premises was under the control of Mr. Arun Kumar Jain.

11. The Civil Court, which however decided the suit for injunction, came to the conclusion that the injunction was not liable to be granted in view of the fact that there were two companies namely M/s. En-Arcade Pvt. Ltd. and M/s. Ritika Advertising Pvt. Ltd. which had their registered offices in the tenanted premises. The Court thereafter concluded that since the premises had already been sublet, the injunction sought for, cannot be granted. The findings of the Court are relevant and are set out below:

"43. Vide order dated 16.2.99, a local Commissioner was appointed to report about:

1. Person or persons in possession, use, occupation and control of the suit premises consisting of one room measuring 32'X 8'.7.1/2" forming part of property bearing No. 4E/7, Jhandewalan Extn. New Delhi as shown in colour red in the site plan.

2. Portions, if any in the possession, use, occupation and control of the defendants with respect to the suit premises as described in (i) above.

3. Constructions/renovation work, if any going on at the site.

4. Person or persons on whose behalf the workers/masons/labourers/carpenters are doing the work if at all at the site.

5. Any sign board etc. affixed on the outer front gate of the suit premises with details.

6. Any other relevant observation at the site.

Though the ld. Local Commissioner has not been produced as a witness by either party and the report was not exhibited, yet no objections have been filed to the report of the ld. LC dated 24.2.99. The ld. LC reported that the suit premises had two cabins with partition between them and found that the defendant No. 1 was in possession, use, occupation and control of the suit premises as shown in the site plan. He found that the Plaintiff was not in possession, use, occupation and control of the suit premises. He also found that no construction work was going on at the time of the inspection of suit premises and only renovation work was going on. The labourers/carpenters working there informed the Ld. LC that they were working for the defendant No. 1 in the suit premises. The Ld. LC also did not find any sign-board affixed on the outer front gate of the suit premises at the time of his visit. Only one sticker/pamphlet was pasted on the wall of the gallery outside the suit premises on which the name of the defendant No. 1 was written. The defendant No. 1 claimed the books, furniture and fixtures lying in the suit premises as belonging to him which the plaintiff did not deny. During cross-examination PW1 admitted that when the local commissioner had visited the premises on 17.2.99, he was in possession of the premises for himself and on behalf of his wife as per photographs EX. PW1/A, B, C, D, E, F, G. PW1 admitted that the renovation such as partition and wood work was carried out at the time of the inspection of the premises on 17.2.99.

44. There is no mention in the report of the Ld. Local Commissioner about M/s. Ritika Advertising Pvt. Ltd. being run from, the tenanted premises and the ld. Local Commissioner found the possession to be with the defendant No. 1. However this does not detract from the fact of the said company being also run from the tenanted premises as per the case of the defendants themselves especially as defendant No. 1 is one of the directors of the said company. A perusal, of photographs filed by the ld. Local Commissioner shows that there are two photographs which bear the name of the defendant No. 1 and under it Ritika Advertising. Thus even at the time of inspection of the Ld. Local Commissioner Ritika Advertising was being run from the suit premises.

45. The question which arises is whether the act of the defendants in running M/s. Ritika Advertising Pvt. Ltd. from the suit premises amounts to subletting/parting with possession or not when even as per the deposition of DW2 the registered office of the said company has been shown at the suit premises and whether the plaintiff would be entitled to the relief of permanent injunction. The defendants have placed reliance on clause (1) of the lease deed which permitted the defendants to enter into partnership with a third person but the said person or the partnership firm will not be entitled to any right or title or interest in the tenancy rights and which shall always remain with the lessees alone and have contended that they continue to retain possession of the suit premises. However the status of a company is different from that of a partnership. There is no dispute about the status of M/s. Ritika Advertising Pvt. Ltd. being a company and even witnesses from the Registrar of Companies were produced by the defendants. The specific mention of only a partnership in the terms of the lease deed makes it obvious that the decision to allow the defendants to enter into a partnership was one limited only to a partnership being run and it did not give liberty to the defendants to run any kind of concern from the said premises. Quite clearly the plaintiff had not given rights to the defendants to enter into any agreement with any kind of company (Private Limited) because the status of the private limited company in the eyes of law is that of a juristic person and the same is run and controlled by the members of Board of Directors. It is not like a partnership firm. A company is a legal entity by itself and once the registered office of the company is shown at the address of the tenanted premises or even that it is being run from the suit premises the same would amount to sub-letting/parting with possession though the defendants may still be using the premises. In M.B. Ruhari v. Commissioner, Corporation of Madras 1995 AIHC 284 (Mad) it was held that where the tenant was doing proprietary business in the leased property and the business was converted into a private company, it amounted to subletting irrespective of the fact that the shareholders of the company happened to be the children and sons-in-law of the tenant. In the instant case, admittedly there are other directors of M/s. Ritika Advertising Pvt. Ltd. and also that it is a private company and thus irrespective of the fact that the defendants are also directors of the said company, it amounts to subletting and parting with possession and even clause 1 in the lease deed would be of no avail the defendants.

46. It is pertinent that once the suit premises have already been subletted by the defendants, there is no restraint order which can be passed and a decree for permanent injunction would also be futile once the act of subletting and parting with possession is complete. In these circumstances nothing survives in the present suit."

12. The findings of the court are clear i.e., that there is sub-letting to the company. The question is whether the above findings which were rendered in a proceeding between the same parties constituted res judicata. The submission of ld. Senior counsel-Mr. Keshav Dayal on behalf of the Petitioners-tenants is that since the suit itself was dismissed, the finding could not have been challenged by the tenants. Thus, the findings by itself would not constitute res judicata unless and until a decree was drawn against the tenants. This submission has some merit as, the settled position in respect of res judicata as held recently by the Supreme Court in State of Andhra Pradesh v. B. Ranga Reddy, MANU/SC/1074/2019 : 2019 (10) SCALE 671 is that a mere finding cannot be challenged and unless and until the decree has been passed, an appeal is not maintainable. Thus, a mere finding, not capable of being challenged, cannot operate as res judicata. The observations of the Supreme Court are as under:

"36. We find that the High Court has failed to draw the distinction between the decree and a finding on an issue. It is the decree against which an appeal lies in terms of Section 96 of the Code. Decree in terms of Section 2(2) of the Code means formal expression of an adjudication conclusively determining the rights of the parties. The defendants-State could not file an appeal against a decree which was of a dismissal of a suit simpliciter. The findings on Issue No. 1 against the State could be challenged by way of cross-objections in terms of amended provisions of Order XLI Rule 22 of the Code but such filing of cross-objections is not necessary to dispute the findings recorded on Issue No. 1 as the defendants have a right to support the ultimate decree passed by the trial court of dismissal of suit on grounds other than which weighed with the learned trial court. Even in terms of Order XLI Rule 33 of the Code, the Appellate Court has the jurisdiction to pass any order which ought to have been passed or made in proceedings before it.

38. The decree is of dismissal of the suit, whereas, the reasons for passing such decree is judgment as defined in Section 2(9) of the Code. In terms of Section 11 read with Explanation I, the issue in a former suit will operate as res judicata only if such issue is raised in a subsequent suit. Since, the issue of title has not attained finality, therefore, it is not a former suit to which there can be any application of Section 11.

39. In view of the above, we allow the present appeals, set aside the order passed by the High Court in the first appeal filed by the State, as the findings on Issue Nos. 1 and 2 in the first and second suit do not operate as res judicata. The pending applications, if any, shall stand disposed of."

13. The Supreme Court quoted with approval in this case, the decision in Banarsi and Ors. v. Ram Phal, MANU/SC/0147/2003 : 2003 (9) SCC 606 where the Court held as under:

"8. Sections 96 and 100 Code of Civil Procedure make provision for an appeal being preferred from every original decree or from every decree passed in appeal respectively; none of the provisions enumerates the person who can file an appeal. However, it is settled by a long catena of decisions that to be entitled to file an appeal the person must be one aggrieved by the decree. Unless a person is prejudicially or adversely affected by the decree he is not entitled to file an appeal. (See Phoolchand v. Gopal Lal [MANU/SC/0284/1967 : AIR 1967 SC 1470 : (1967) 3 SCR 153], Jatan Kumar Golcha v. Golcha Properties (P) Ltd. [MANU/SC/0041/1970 : (1970) 3 SCC 573] and Ganga Bai v. Vijay Kumar[MANU/SC/0020/1974 : (1974) 2 SCC 393].) No appeal lies against a mere finding. It is significant to note that both Sections 96 and 100 Code of Civil Procedure provide for an appeal against decree and not against judgment.

9. Any respondent though he may not have filed an appeal from any part of the decree may still support the decree to the extent to which it is already in his favour by laying challenge to a finding recorded in the impugned judgment against himA party who has fully succeeded in the suit can and needs to neither prefer an appeal nor take any cross-objection though certain finding may be against him. Appeal and cross-objection--both are filed against decree and not against judgment and certainly not against any finding recorded in a judgment. This was the well-settled position of law under the unamended Code of Civil Procedure."

14. The ARC and the RCT have however, held that the finding would constitute res judicata. While there is no doubt that the finding was rendered in a suit for injunction between the same parties after proper contest and evidence having been led, since neither party challenged the judgment, the same cannot be held to have attained finality for operation of res judicata. The landlord did not challenge the judgment and neither did the tenants. However, having said so, the findings led in the said case as also the Commissioner's report and the judgment itself can be exhibited in subsequent proceedings and can be relied upon by the parties. The Court would have to, however, adjudicate all the issues that arise, once again without simply dismissing or allowing the subsequent petition based only on the findings in the earlier injunction suit.

15. The ARC in the present case, has, after framing issues thus, gone ahead and conducted the trial in the suit. In the trial, the said documents forming part of the earlier proceedings have been exhibited and thus the ARC has followed the right approach. The tenants cannot seek benefit on both occasions. They have first avoided an injunction by sub-letting the premises and now they intend to avoid eviction by arguing that the finding of sub-letting is not binding. Such a course of action, if permitted, would result in a mockery.

16. In view of what has transpired before the ARC and before the RCT and in view of the fact that detailed evidence has been recorded in the present eviction petition, this Court deems it appropriate to peruse the evidence on record. The tenanted premises was given out on lease in 1984 and the first proceeding filed by the landlord itself dates back to 1992. The parties have thus, been litigating for more than 28 years. The present eviction petition has itself been filed in the year 2000 i.e. 19 years ago.

17. The ARC, has, in its final order arrived at following findings:

"13. In the considered opinion of this court, a company is a legal entity by itself and once the registered office of the company is shown at the address of the tenanted premises or even that it is being run from the suit premises the same would amount to sub-letting/parting with possession though the defendants may still be using the premises. In M.B. Ruhari Vs. Commissioner, Corporation of Madras 1995 AIHC 284 (Mad) it was held that where the tenant was doing proprietary business in the leased property and the business was converted into a private company, it amounted to subletting irrespective of the fact that the shareholders of the company happened to be the children and sons in law of the tenant. In the instant case, admittedly there are other directors of M/s. Ritika Advertising Pvt. Ltd. and also that it is a private company and thus irrespective of the fact that the defendants are also directors of the said company, it amounts to sub-letting and parting with possession and even clause L in the lease deed would be of no avail to the defendants.

14. Thus, on the basis of the pleadings and the evidence led by the parties, it has been proved that there exists relationship of landlord and tenant between the petitioners and the respondents no. 1 and 2 and further that the respondent no. 1 and 2 had sublet, assigned or parted with the possession of the premises in favour of respondent no. 3 without the written consent of the petitioners."

These findings have been upheld by the RCT.

18. The question thus, arises as to whether if two separate companies are operating from the same premises and the tenants are the Directors of the said companies, whether there would be subletting or not.

19. It is, first of all, relevant to note that there are two companies which have their registered offices in the tenanted premises. The first company-M/s. En-Arcade P. Ltd. was admittedly incorporated on 9th October, 1987. As per the evidence which was led in the injunction suit, it is clear that since incorporation, Mr. Nand Kumar and Mr. Rajinder Parsad Agarwal of Kanpur were Directors of the said company. Returns were filed by the said Directors. The present tenants were inducted as Directors in the company only on 1st June, 1991. Thus, clearly, the company had functioned with its registered office from the tenanted premises even prior to the tenants becoming Directors in the said company.

20. Insofar as M/s. Ritika Advertising Pvt. Ltd. is concerned, the stand of the tenants in the earlier suit for injunction was that they were not even the Directors of M/s. Ritika Advertising Pvt. Ltd. In the cross-examination in the said suit, the tenants had completely admitted that they are no longer in possession of the suit premises. These findings of the Civil Court are important as the submission of the tenants now is that they are in control of the premises. The relevant portions of the findings of the Civil Court are set out below:

"36. It is the case of the plaintiff that the defendants are in the process of sub-letting the premises to M/s. Ritika Advertising Pvt. Ltd. of which the defendants are not the directors and he further stated that during the pendency of the suit the defendants sub-letted the premises to the said company and are no longer in possession of the suit premises. He was also extensively cross-examined on this aspect. During cross-examination P.W. 1 denied the suggestion that the possession of the premises is with the respondents or that they are the directors of M/s. Ritika Advertising Pvt. Ltd. PW1 deposed that as per his inspection, Ms. Alka Gupta and Damodar Pd. Gupta are the directors of the M/s. Ritika Advertising Pvt. Ltd. and he had inspected the records on 10/11 February, 1999. He denied the suggestion that he had not inspected the record. PW1 deposed that on subsequent inspection on 25.5.99, same position was continuing. He denied the suggestion that respondents are in the physical control of the premises. PW1 denied the suggestion that the respondents are directors of M/s. Ritika Advertising Pvt. Ltd. w.e.f. 15.9.98 and the requisite form was submitted to the registrar of company on 8.2.99 prior to filing of the present suit. PW1 stated that he had not make any complaint to the Registrar of companies that the record of M/s. Ritika Advertising Pvt. Ltd. is not complete. He denied the suggestion that the defendant No. 1 along with his wife are the directors of M/s. Ritika Advertising Pvt. Ltd. and M/s. Super Chit Pvt. And M/s. En Arcade Pvt. Ltd. He did not know whether the said information is recorded in the registrar of the companies regarding the directorship of the respondents. He denied the suggestion that the respondents are not in position of the premises or that the respondent opens and closes the office sometimes by themselves and sometimes by their employees. He stated that he was not aware of the correct address of the respondent. PW1 deposed that he had visited the office of the respondent on 13.2.99 but he was not in possession of any document to show that he had visited the office of the respondent. PW1 admitted that he had made the averments with regard to M/s. Ritika Advertising Pvt. Ltd. and they are fully aware of the fact that the respondents are the directors of the said company. He could not give the date of the notice which had been issued to the respondent. He also denied the suggestion that initially there were two directors namely Alka Gupta and Sh. Damodar Parsad Gupta and the respondent was inducted as an additional director of M/s. Ritika Advertising Pvt. Ltd. w.e.f. 15.9.98 or that the respondents were inducted as additional directors in the company w.e.f. 15.9.98 and the intimation of the same was given to the registrar of company on 8.2.99 prior to the institution of the suit. He deposed that he stated so after the inspection of the record of the registrar company. He denied the suggestion that he had not inspected the complete record of the registrar of company. He stated that he has the proof regarding his visit to the registrar of company. He admitted that he is not in possession of any document to show that he had lodged a complaint with registrar of company the record is not complete. He denied the suggestion that the premises have been subletted or that he had spoken to the respondent on 13.2.99. He admitted that Shri Anup Kumar Jain had stated, that the work was being carried on behalf of the respondent tenant and that the money was spent by the respondent only for renovation.

37. Though some contradictions appears in the deposition of PW1 during cross-examination, he has maintained the stand that the defendants are not the directors of the company and have sub-letted the suit premises to the said company. It is pertinent that the plaintiff did not produce any document to support his contention that he had inspected the record of the Registrar of Companies, nor has he produced any certified copies which he may have obtained to show that the defendants are not directors of the companies. He also admitted that he could not produce any document to show that he had made a complaint with the Registrar of Company that the record is not complete in respect of M/s. Ritika Advertising Pvt. Ltd. In the plaint the plaintiff had referred to legal notice dated 29.1.99 got sent by him to the defendants and having received back the envelope with the remarks of the postal authorities "Addressee Left" and also that he had received an envelope through post on 10.2.99 addressed in the name of M/s. Ritika Advertising Pvt. Ltd. but none of these have been produced in evidence by the plaintiff. Moreover no independent witness has been produced to corroborate what he had stated or to depose about incident of 12.2.99 or 13.2.99. Certain photographs were filed by the plaintiff but even the same were not exhibited.

38. The defendants on their part have stated that they were inducted as additional directors of M/s. Ritika Advertising Pvt. Ltd. even prior to the filing of the suit and continue to be in possession and control of the suit premises so the question of sub-letting does not arise and further that they are also directors in other concerns which are being run from the said premises. In support of their contentions they produced two witnesses.

39. DW1-Junior Technical Assistant, Registrar of Companies, New Delhi produced the record pertaining to the company registered under the Companies Act SUPR and deposed that as per the record brought by her the returns were being filed by the said company in the registrar of company as per the provision of law and the address given is 4E/7, Jhandewalan Extn. And the directors of the company are Sh. Arun Kumar Jain and Mrs. Archana Jain who are resident of 52/58 Ramjas Road, Karol Bagh, New Delhi. In the earlier returns of the year 1996 the address of the company was 4E/7, Jhandewalan Extn. And as per the record there is no other director except as mentioned. During cross-examination she deposed that she had no personal knowledge about the running of M/s. SUPR Chits Pvt. Ltd. in the premises 4E/7, Jhandewalan Extn., New Delhi. She did not know whether M/s. Ritika Advertising Company has been running the business in the premises 4E/7, Jhandewalan Extn., Delhi (vol. as per the record brought by her the company by name of SUPR was being run and returns for 1997, 98 and 99 were filed) and she had brought the returns of 1999.

40. DW2-UDC office of the registrar of company NCT of Delhi produced the record of M/s. Ritika Advertising Pvt. Ltd. and En Arcade Pvt. Ltd. He deposed that the directors of the Co. earlier were Smt. Alka Gupta and Damodar Parsad Gupta per form 32 of the registrar of company and the same was filed on 6.1.95 when the company was incorporated. He stated that form 32 was filed with registrar of company by Sh. Arun Kumar Jain and Smt. Archana Jain on 8.2.99. He further stated that the effective date is 15 Sept. 1998 and computer receipt number 40915 is dated 8.2.99. He deposed that as per the record both the directors of said company are resident of 52/58 Ramjas Road, Karol Bagh Delhi and they are still the directors of the company as per the record brought by him and the said company had filed the return only for 1997. He also deposed that as per the record brought by him in respect of company named as En Arcade Pvt. Ltd. the names of the directors are since incorporation Nand Kumar and Sh. Rajinder Parsad Aggarwal r/o 15/88 Civil Lines Kanpur (UP). The returns for the year 1999 had been filed by the said company showing address 4E/7 Jhandewalan Extn., New Delhi and the return was filed on 20.12.99. He stated that the directors of the company are Sh. Arun Kumar Jain and Smt. Archana Jain both resident of 52/58 Ramjas Road, Karol Bagh, New Delhi and returns had been filed by them on behalf of the company as directors of the company.

41. During cross-examination DW2 deposed that he had no person knowledge of the case and had deposed on the basis of the record maintained by the company. He stated that earlier address of the company since incorporation was UP-8, IInd Floor Pitampura, Delhi-110034 of which Alka Gupta and Damodar Prasad were the directors. The registered office of the company remained at Pitampura till 14.2.99 and thereafter shifted to 4E/7 Jhandewalan Extn., New Delhi-110055 and the intimation was given to the registrar of company on 18.11.99. He stated that the names of Miss Alka Gupta and Damodar Prasad are not there. He could not comment on the suggestion whether till dated Alka Gupta and Damodar Pd. Gupta still continue as directors of company or not and no resignation of the two directors had been filed with them. He stated that the annual return of 1999 had not been filed and in the form 32 filed on 8.2.99 the name of Alka Gupta and Damodar Pd. Gupta does not appear. He stated that his office received information for the first time about the change of registered office at 4E/Jhandewalan Extn. New Delhi on 18.11.99. DW2 deposed that the defendants No. 1 and 2 had not sent any articles/memorandum or any minutes book of M/s. Ritika Advertising Pvt. Ltd. alongwith their Form No. 18 dated 18.11.99 about the change of the office. He stated that no annual return has been filed on behalf of M/s. Ritika Advertising Pvt. Ltd. Co. and last return of M/s. Ritika Advertising had been filed in 1996. But the annual return for the year 1996 is not available in their record. He had no personal knowledge about the filing of the annual return for the year 1996 on behalf of M/s. Ritika Advertising Pvt. Ltd. Further no record about the original director Sh. Nand Kumar Aggarwal, Rajinder Prasad Aggarwal was available on their record and no return (annual return) of En Arcade Pvt. Ltd. filed by the previous directors Sh. Nand Kumar Aggarwal and Rajinder Kumar Aggarwal was available. He deposed that the present directors Sh. Arun Kumar Jain and Smt. Archana Jain had filed the annual return for the year 1999 in the office on 20.12.99. He had no personal knowledge as to who is running the business at 4E/7, Jhandewalan Extension, New Delhi.

42. From the deposition of DW2 it is clear that the defendants had been inducted as directors of M/s. Ritika Advertising Pvt. Ltd. prior to the filing of the suit though the intimation about change of address was given later. It is pertinent that the defendants have admitted that they are doing the business in their respective names and also in the name of their concern M/s. Ritika Advertising Pvt. Ltd. in which the defendants are having interest and that the staff of the defendants are working in the said premises and sometimes the defendants are there to look after the day-to-day affairs of the business and their respective concerns. It is stated that the defendants are the directors of M/s. Ritika Advertising Pvt. Ltd. and they are the tenants qua the property and have all the right to use the property in their own name as well as in the name of their concern and that the tenanted premises are in the physical possession of the defendants and they have not sub-let, assigned or parted with the possession of the suit premises. Thus even as per the case of the defendants the said M/s. Ritika Advertising Pvt. Ltd. is being run from the said premises though it is the case of the defendants that they continue to retain possession of the suit premises'"

Thus, the finding of the Civil Court was that there was clear subletting by the tenants.

21. One of the tenants in his cross-examination and evidence-in-chief in fact admitted that the registered offices of the companies M/s. Ritika Advertising Pvt. Ltd. and En-Arcade P. Ltd. are at the tenanted premises. The relevant portion of the cross examination is set out below:

Cross examination of RW4-Sh. Arun Kumar Jain

"The regd. Office of the companies namely M/s. Ritika Advertising P. Ltd. and En-Arcade P. Ltd. v/s. 4E/7, Jhandewalan Ext. New Delhi-55 Vol. I was one of the Directors in the said companies and also used to look after the business of the said companies. The said companies were incorporated after the inception of the present tenancy. No permission from the petitioner was ever taken, for using the said address, as the regd. Office of the companies. Vol. At that time the father of the petitioner was alive. No permission in writing was obtained from the father of the petitioner at that time. Vol. The same was told to him and he agreed to the same.

The said offices are still in operation from the tenanted premises. Besides the aforesaid companies there is one more company operating from there i.e., SUPR Chit P. Ltd. I do not remember the date of incorporation of the same but the same incorporated after the inception of tenancy. I cannot say if the said company was incorporated after the, death of the father of the petitioner."

22. Ld. counsel for the Petitioner-tenants have objected to the use of the material in respect of En-Arcade Pvt. Ltd. on the ground that the same had not been argued before the ld. Trial Court. This submission does not appear to be correct. In any event, from the tenants' own evidence it is clear that there are three companies which are operating from the tenanted premises. Mr. Jain who was RW-4, has himself admitted to these facts. The only issue is whether this constitutes subletting or not. The two judgments that have been cited by the parties which are to be considered are the judgment of the Supreme Court in Madras Bangalore Transport Co. v. Inder Singh & Ors., MANU/SC/0539/1986 : AIR 1986 SC 1564 and the later judgment in Santosh Ajit Sachdeva and Ors. v. Anopi Shahani, MANU/SC/7841/2007 : (2007) 7 SCC 675.

23. In Madras Bangalore Transport Co. (supra) the Supreme Court had held that the conversion of a partnership firm to a Private Limited company did not be itself constitute subletting, rather the actual corporate reflection of the firm and the image of the firm needs to be considered when the question of subletting under Section 14(1)(b) arises. The Supreme Court observed that since the Directors themselves were in control of the tenanted premises there was no subletting. This judgment in Madras Bangalore Transport Co.(supra) came to be considered in a subsequent judgment of the Supreme Court in Sait Nagjee Purushotham and Co. Ltd. v. Vimalabai Prabhulal and Ors., MANU/SC/2480/2005 : (2005) 8 SCC 252. The Supreme Court then held that the Madras Bangalore Transport Co. (supra) case was decided on the peculiar facts in that case. The observations of the Supreme Court in Sait Nagjee Purushotham (supra) are as under:

"11. Learned counsel has invited our attention to a decision of this Court in the case of Madras Bangalore Transport Co. (West) v. Inder Singh and Ors. reported in MANU/SC/0539/1986 : AIR 1986 SC 1564. In this case, on examination of the facts this Court found that the company was an alter ego or corporate reflection of the tenant-firm and the two were one for all practical purposes having substantial identity and therefore, in that context their Lordships held that there was no subletting, assignment or parting with possession of the premises by the firm to the company so as to attract Section 14(1)(b) of the Delhi Rent Control Act, 1958. Therefore, this case was decided on the peculiar facts and it was found that the tenant-company was having no new but the same partners. Therefore, their Lordships held that the new company cannot mean to be a sub-lessee. Therefore, in view of the peculiar facts, it was held that the new identity of the company was the same as was the old one. Therefore, this case is distinguishable on its facts.

13. As against this learned counsel for respondent has invited our attention to a recent decision of this Court in the case of Singer India Ltd. v. Chander Mohan Chadha and Ors. reported in MANU/SC/0626/2004 : AIR 2004 SC 4368 wherein the decision in Madras Bangalore Transport Co. (West) (supra) was also considered. This Court after considering the aforesaid decision observed as follows:

"This case has been decided purely on facts peculiar to it and no principle of law has been laid down.""

24. In Sait Nagjee Purushotham (supra), the question was whether the partnership firm which was converted into a company had all the partners of the firm as the Directors. No evidence was led to show that the Directors were the same, accordingly, the Court held that there were subletting and observed as under:

Thus, as per the judgment in Santosh Ajit Sachdeva and Ors. (supra), it is merely not enough for a tenant to hold a large number of shares in a company, something more would be required.

Conclusion

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Tuesday, 31 March 2020

Whether court should grant eviction decree on the ground of subletting if the tenant is not in control of business of the company working in rented premises?

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