Delhi High Court
Capital Boot House And Ors. vs Intercraft Limited on 6 September, 1999
Equivalent citations: 1999(51)DRJ245
Author: S.N. Variava
Bench: S.N. Variava, S.K. Mahajan
JUDGMENT S.N. Variava, C.J.
1. Courts must take note of what is happening today. Parties take forcible possession. They then seek an ex-parte injunction restraining the other side i.e. the party from whom forcible possession has been taken, from dispossessing them. Having taken possession very often they also ask the Court to appoint a Commissioner to ascertain who is in possession. Thus process of law is misused. In this Appeal Court is considering Orders passed at an interim stage. Thus all observations of this Court would be prima-facie. However facts set out hereafter disclose, even at this prima-facie stage, that the Respondent have taken forcible possession and then come to Court. Unfortunately, the Respondents have succeeded in obtaining an Order dated 24th August 1995 in its favour. They have thus managed to enjoy, for the last four years, the fruits of their illegal act. The Appeal is against the Order dated 24th August, 1995.
2. Briefly stated the facts are as follows:
The Appellants and Respondent entered into an Agreement dated 15th September 1980. According to the Appellants a Franchise was being granted to them. According to the Appellants a Franchise being unknown to India the Agreement was in the nature of an Agency Agreement. The Agreement was renewed on 16th September 1983, 16th September 1986, 16th September 1989 and 19th September, 1991.
3. The Respondents filed the Suit seeking a permanent injunction restraining the Appellants from interfering with their possession of Shop bearing No. B-24 Connaught Place, New Delhi and to restrain the Appellants from carrying on business in the said shop. The Respondents also sought a declaration that they were lawful tenant of the Appellants. The Respondents claimed that they are functioning under the name and style of INTERSHOPPE. They claimed that they are exporters of garments and also manufacturers and retailers of garments in India. The Respondents claimed that they dealt in retail outlet not only in India but throughout the world. They claimed that they were interested in opening a retail outlet in Connaught Place in the year 1980 and that the Appellants were also interested in giving this above mentioned shop on rent. The Respondents claimed that the Appellants were in possession of this shop as a tenant. They claimed that in view of the provisions of Delhi Rent Control Act, it was not possible to enter into a contract of sub-lease. The Respondents claimed that in order to avoid the clutches of the Delhi Rent Control Act a document showing the transaction between the parties to be that of a Principal and Agent was prepared. They claimed that all records and documents were maintained as if the transaction was in the nature of an Agency. They claimed that they were put in possession of the shop. The Respondents claimed that the Agreements were, therefore, sham and bogus. The Respondents claimed that the real agreement between the parties was that a tenancy had been created. The Respondents claimed that as the period under the last Agreement had got over negotiations had taken place between the parties for executing a fresh document. The Respondents claimed that those negotiations failed. They claimed that on 27th September 1994 one of the partners of the Appellants', one Sukhinder Pal Singh, visited the shop and created a scene by using unparliamentary language to the staff and that he also threatened to put his lock on the premises and not to allow the Respondent to make use of the premises. The Respondent claimed that it is under these circumstances that they had filed this Suit.
4. Along with the Suit the Respondents took out IA No. 8829/94 seeking an interim injunction. On 3rd October 1994 status quo was directed to be maintained. On the Application of the Respondents a Local Commissioner was also appointed to visit the suit premises and to submit his Report.
5. On 7th October 1994 Respondents moved another Application being IA No. 8976/94 alleging that the Appellants were threatening to dispossess them and to disturb the smooth running of their business. On this Application by an Order dated 7th October 1994 the Appellants were directed not to interfere or cause hindrance in the running of the business.
6. Thereafter, the Appellants took out IA No. 11883/94 under Order 39 Rule 4 of the Code of Civil Procedure. In this Application the Appellants claimed that they were in possession and occupation of the said shop at all time. The Appellants claimed that the Respondents were not in possession prior to 3rd October 1994. The Appellants claimed that the Respondents had taken forcible possession on 3rd October, 1994 by breaking open the locks. They claimed that the Respondents had never been in possession prior to 3rd October 1994. The Appellants asked for vacation of the Orders dated 3rd October 1994 and 7th October 1994.
7. The learned Single Judge was thus considering all the Applications. The questions before the learned Single Judge were whether (a) on proper construction the Agreements were tenancy Agreements or Agency Agreements and (b) whether the Respondents had been in possession of the premises prior to 3rd October 1994.
8. An identical matter on identical facts came up for consideration before a Division Bench of this Court. In a Judgment , Liberty Sales Services v. Jakkimull & Sons and Anr., the Court held that if the documents between the parties were intended to be a sham documents then it would never have been intended to be operative at all and it could not have been implemented even between the parties. The Court held, on the facts of that case, that the Agreement has been implemented between the parties. The Court held that thus it was not possible to accept the submission that the documents were sham documents. The Court held that in cases where the Court has to consider who is in possession, the fact that an ex parte appointment of a Local Commissioner had been made would not help that party. The Court held that in such cases the question of possession had to be determined on the basis of the Agreement between the parties and not on the basis of the local Commissioner's Report. The Court also considered various clauses of that Agreement, which were more or less similar to the clauses of the Agreements in this Suit, and held that the agreement was one of Agency. The Court held on facts that the party claiming to be in possession had not been in physical possession. The Court held that even though the Suit had been filed for an injunction, once the Court came to the conclusion that the party was not in possession, the Court could direct that party to remove stock, furniture and other items. The Court held that the Court could direct that party to remove its stock, furniture and other items, as such an order would be part and parcel of the application for injunction. It must be mentioned that the impugned Judgment was cited before the Division Bench but they refused to follow it.
9. An Appeal to the Supreme Court against this Judgment was rejected by the Supreme Court on 21st March, 1997. These principles apply fully to the facts of this case also. This Judgment would be binding on this Court. On these principles this Appeal has to be allowed.
10. Even otherwise on Acts of this case it does appear, even at this prima-facie stage, that the Respondents were not in possession prior to 3rd October 1994. The terms of the Agreements show that the Appellants were in possession. The relevant terms are as follows:
"2. That the agency business shall be carried out in the name and style of Capital Boot House at premises No. 24-B, Connaught Place. The business will be carried on only on the ground floor and the agent will also have its office on the said floor to conduct the day-to-day affairs of the agency and show-room effectively.
3. That the Agent will be entitled to get commission on the sales calculated at the rate of 7.5% on sales conducted in the above said premises on the following rates:-
(a) 21.75% commission shall be allowed to the Agent on the sale of goods from zero to Rs. 1 (one) lac per month. In case of sale of Rs. 2 (Two) lacs per month the commission shall be 10.75%.
(b) 7.5% commission shall be payable to the Agent if the sale is Rs. 3 (three) lacs per month more.
The commission shall be calculated on any fraction of lakhs above Rs. one lakh till it exceeds Rs. 3,00,000 (three lakhs).
4. If the sale is less than four lacs per months, the agents will have the sole right to cancel the agency with a notice of one month to the Principals without assigning any reasons.
6. That the entire goods supplied by the Principals will be insured in the name of Capital Boot House by the Agent and insurance premium and any other expenses incurred by the agent in getting the goods insured will be reimbursed by the Principals. The responsibility for all merchandise before or after leaving the premises will be with the Principals.
7. That the premises mentioned above in which the showroom and office of the Agent will function shall be under the exclusive control and possession of the Agent and the staff working in the showroom shall be employed and be terminated by the Agent and they shall be on the pay roll and under the management of the Agent.
10. That the premises of the showroom and the office of the Agent on the ground floor in the above mentioned premises shall always be in exclusive possession of the Capital Boot House and the keys shall be with the Agent who will have the right of opening the showroom and closing the same on any day and at any time by himself or through his management.
16. That the premises in which the showroom shall function shall remain in sole custody, actual possession and legal possession of the Agent at all times and the Principals shall not take any claim right, title or interest in any manner by any method with respect to the premises in question."
11. Clauses 7, 10 and 16 show that it was the Appellants who were in possession. The learned Single Judge holds that there Clauses have been put in as the documents were meant to be sham documents and in order to avoid the clutches of the Rent Act. This finding is against the principles laid down in Liberty Sales case (supra). The learned Single Judge failed to appreciate that it was not even Respondent's case that the Agreements were not operative between the parties. The learned Single Judge failed to appreciate that the Agreements had been implemented between the parties and thereafter could not be said to be, sham documents. The learned Single Judge also held that a reading of the various terms of the Agreements showed that a tenancy had been created. We are unable to accept this finding. In our view the Clauses reproduced above show that the relationship was one of principal and agent. In our view the Agreement clearly shows that it was the Appellants who were in possession.
12. Even apart from the Agreement there is voluminous documentary evidence on record, which have been produced by the Appellants, which indicates that it was the Appellants who were in possession. The Appellants have produced on record the following documents:
1. Returns showing that Income Tax has been paid by them on profit from sales in the shop.
2. Income tax assessments of the Respondents showing that they have paid 'Commission' to the Appellants and not 'Rent'.
3. Affidavits of almost all the employees. These affidavits state that the employees were of the Appellants; that it was the Appellants who were running the shop; that on 3rd October 1994 forcible possession was taken and a new manager and all new employees brought in. The Affidavits also disclose how attempts were made to bribe the old employees.
4. Affidavits of taxi drivers detailing the actual incident of breaking open of the shop on 3rd October 1994.
5. Affidavit of one Smt. Shobha, who sells posters in front of the shop narrating the incident of 3rd October 1994.
6. Affidavits of 2 shop keepers, in Connaught Place, giving details of who ran the shop prior to 3rd October 1994 and what happened on that day.
7. Four Affidavits of other persons about who was running the shop prior to 3rd October 1994.
8. Photographs of the shop before and after 3rd October 1994.
9. Telephone Bills and Electricity Bills standing in name of Appellants.
10. Cash Memos, before and after 3rd October 1994. These show "Franchisee Capital Boot House" prior to 3rd October 1994. After that date this ceases. Also the Sales Tax Number changes.
11. Respondent's letter dated 30th September 1992 regarding payment of Sales Tax.
12. Documents showing that employees were employed and paid by Appellants and not Respondents.
13. Documents showing that Provident Fund was paid by Appellants and not the Respondents.
14. Documents showing that ESIC was paid by Appellants and not Respondents.
15. Documents showing that Gratuity was paid by Appellants and hot Respondents.
16. Documents showing that TDS was deducted by Appellants and not Respondents.
17. It was also shown that the Appellants were registered under Delhi Shops and Establishments Act. The Respondents have no such registration in respect of suit shop prior to 3rd October 1994.
18. Documents to show that the Appellants were members of New Delhi Traders Association and not the Respondents.
19. Numerous Invoice for the goods sold by the Appellants at the suit shop.
20. Documents to show that Central Sales Tax collected was paid by Appellants as assessee and not by the Respondents.
21. Bills/Cash Memos drawn by Appellants and not the Respondents. To be noted that Respondents could not produce a single Bill/Cash Memo to show that they were issuing Bills/Cash Memos prior to 3.10.1994.
22. The Appellants also showed that they were operating the Bank Accounts in respect of the business run in the suit shop.
23. Documents showing that credit card payments were made to Merchant account of Appellants. Respondents do not produce a single document to show that credit card payments were made to the their Merchant account prior to 3rd October 1994."
13. As against this the Respondent has not been able to produce any document to show that they were in possession prior to 3rd October 1994. On a question from Court Mr. Lekhi fairly admitted that the Respondents did not have any documents. He however submitted that this is because all documents were prepared in this fashion to camouflage the real relationship. For reasons set out hereafter this is difficult to accept.
14. The learned Single Judge has not dealt with or considered most of these documents. The learned Single Judge notes that payments of Salary, Sales Tax, ESI, Provident Fund and Gratuity to Employees were made by Appellants. However the learned Single Judge holds that the Appellants were getting reimbursed, for all the payments, by the Respondents. The learned Single Judge holds that as the Respondents were reimbursing the Appellants it showed that the business was that of the Respondents. With greatest of respect to the learned Single Judge it must be stated that he has missed the point. In case of an Agent and Principal the business would be that of the Principal. The Agent would be acting for the Principal. However the fact that the Agent was acting on behalf of the Principal shows that the Agent was in possession. In that case there would be no tenancy. The fact that the Appellants were paying these amounts and had so many documents in their possession showed that the Appellants were in possession and running the business as Agents. The learned Single Judge failed to appreciate that if the relationship was that of tenant and landlord, no question would arise of Appellants paying all these amounts and the Respondents then reimbursing them. All these documents and facts indicate that the Appellants were Agents of the Respondents and were carrying on the business in the premises as Agents of the Respondents. The learned Single Judge failed to appreciate that the fact that the Respondents reimbursed all the amounts, showed that they were not in possession of the premises. The learned Single Judge failed to realise that this mitigated against the claim of possession by the Respondents. The claim that all documents were prepared to camouflage the real relationship is difficult to believe. Many of these documents would not be known or shown to the landlord. They are not documents which would be prepared as and by way of camouflage.
15. Apart from the above documents, there is also on record letters exchanged between the Appellants and the Respondents. Al these letters show the address of the Appellants to be that of the Suit premises and the address of the Respondents to be that at some other place. These are inter-party correspondence. It could not be said that these documents were also sham documents which had been prepared only for the purposes of getting out of the rigors of the Rent Act.
16. One further fact which is ignored by the learned Single Judge is that on 13th March 1995 a statement was made by the Counsel for the Respondents to the following effect:-
"Mr. Lekhi further states that there was no question of indicating the rent because the Plaintiff never paid any rent. Plaintiff has always treated it to be an agency. Plaintiff used to pay commission and not rent. It this view of the matter, let Plaintiff file an affidavit indicating these facts and the average amount of commission paid by the Plaintiff to the Defendant."
17. In our view this statement shows that the Respondents themselves considered the relationship to be that of Agency. Counsel on behalf of the Respondents had stated to Court that the Respondents never paid rent. Counsel for Respondents had stated that Respondents always treated it to be an Agency. Once such a statement was made then the Court should not have allowed the Respondents to retract.
18. Even presuming that the Agreements were intended to create tenancies, none of the Agreements had been registered. Therefore, even presuming that there was a tenancy it was only a tenancy from month to month. The Appellants have by a notice dated 16th September 1995 terminated the alleged tenancy. Appellants have by this notice called upon the respondents to quit, vacate and deliver possession. Based on this notice the Appellants had taken out the Application IA 10097/98 for vacating the injunction granted in favour of the Respondents. The only submission that could be made against the Notice was that it did not meet the requirement of Section 106 of the Transfer of Property Act. It was submitted that the Notice did not specify the date on which the tenancy was to expire and possession to be delivered. We see no substance in this p2 submission. This Notice inter-alia states as follows:-
"4. You (Intercraft) contend that you are the lawful tenants of the property under my clients (M/s Capital Boot House). My clients deny that and re-assert that you have no such right.
5. In this Suit 2199/94, your case as one can cull from the plaint, in short, is:
i All those Agreements, and all those events and actions, over the last 14 years were a Camouflage.
ii. All this was done to prevent sub-letting and that such arrangements are Customary and have the rights and liabilities of a landlord-tenant.
iii Intercraft were in both legal & physical possession of the shop. All acts of Capital Boot House were as Beamish for us.
iv Intercraft were paying sums varying between Rs. 20,000 on the underside to Rs. 1,00,000 on the upper side per month.
v. We (Intercraft) were/are the tenants and Capital Boot House were/are the landlords. We are tenants protected by law, and therefore entitled to injunction. Written Statement and a Counter-Claim was also filed. Contents thereof may be referred to.
6. Judgment dated 24.8.1995 in the aforesaid litigation has been rendered. This proceeds on a basis/assumption that you are a tenant and that the various agreements were only a camouflage for a 'landlord-tenant relationship'. This judgment is being petitioned/appealed against. Apart from that, it becomes necessary to serve you with this notice as well.
7. The terms 'tenant & tenancy' in paras 8 & 9 infra are based only on your allegation and without admitting your status as a tenant in any way.
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8. Without prejudice to my clients's case, and without admitting so in any way, and assuming that you are a tenant as claimed by you (and also possibly upheld by the said judgment), my client does not wish to keep you as a 'tenant' any longer, and hereby terminates the alleged tenancy with effect from the expiration of the tenancy month expiring on October 18, 1995. In case you feel that the tenancy month expires on some other day/date, even then, my client not being desirous of keeping you as a tenant any longer, hereby terminates your tenancy at the expiration of the month of your tenancy which will expire next after the end of 16 days from the service of this notice.
9. You are notified to kindly quit and deliver vacant peaceful possession of the aforesaid premises (Shop premises bearing No. B-24 Connaught Place, New Delhi, comprising an area of 276 square metres (2740 sq ft) on the ground floor) to my client at the expiry of the tenancy month as aforesaid, failing which appropriate legal proceedings will be taken against you, and you will also be liable to pay mesne-profits which for the present are claimed @ Rs. 250/- per sq. ft. per month with interest.
10. It is reiterated that my client does not admit you to be a tenant and that the purpose of this notice is only so that an argument that there exists a tenancy which has never been terminated, is, after expiry of the period of this notice as aforesaid, no longer available to you. This is also without prejudice to the written statement and the counter-claim that has been filed in the aforesaid suit. It is because of the judgment rendered on 24.8.1995 that this notice has been necessitated."
19. In case of Addis v. Burrows reported in (1948) 1 KB pg. 444 the notice was in similar terms. The Court held that a notice in that form puts plainly on the tenant the obligation of ascertaining the date meant by the form of words used. Prima facie, the problem is not very difficult. It was observed that all the tenant required was a modern calendar and the tenancy agreement. It was held that armed with those two things the tenant could asks himself first: when was this served on him. It was held that after knowing the date when it was served on him the tenant was next required to find out when the period ends after the service of the notice. It was held that with the aid of his calendar the tenant will discover the answer to that question without any great difficulty. A submission that to impose on a tenant that obligation is to fail to clothe the notice to quit with the required degree of clarity and lack of ambiguity was not accepted. It was observed that whenever this form of words were used the tenant was required to find, by examining the terms of the document, what the answer to the question was and to find out when the period of tenancy ended. It was held that in many cases the document may well be so clear that no problem would arise. It was held that even though there may be a doubt or difficulty in the language of the instrument, however the concerned agreement was the tenants' instrument as well as the landlord's instrument.
20. In the case of Pahlad Das v. Ganga Saran the notice required the Defendant to vacate the shop on the 26th of the month or on any date on which the defendant considered that the month of his tenancy-expired.' It was the left entirely to the Defendant to decide on which date the month of his tenancy expired and he could leave the shop on any date on which according to his own case the month expired. It was held that the defendant could not in the circumstances say that he was prejudiced in any way by not getting sufficient notice to vacate the shop. It was held that the plea that the notice for ejectment was bad was, therefore, not tenable.
21. In Bhagwan Sri Krishanji Maharaj Virajman Mandir v. Chuttan Lal the words of the notice were"... or if you think that the tenancy commenced on some other date, you may vacate the land on the corresponding date". It was held that the Transfer of Property Act prescribes no form of notice nor any particular words. It was held that if the notice makes it clear to the tenant that his tenancy has been terminated and he is required to vacate the accommodation at the end of the month (or the year) of the tenancy, it is a valid notice. It was held that Courts have always taken the view that the object of the notice under Section 106 is to give the tenant sufficient time to vacate the premises and such a notice should be liberally construed. It was held that the real point in such cases was that the person on whom the notice is served should understand that his tenancy has been terminated and he is required to vacate at the end of the period of the tenancy. It was held that if the tenant attacks the notice on the round of vagueness he must show that its defective language caused him to misunderstand its nature.
22. In spite of the above position in law that Application was also dismissed by the learned Single Judge. FAO (OS) No. 17/95, which is next on the Board, has been filed against that judgment. It prima-facie appears that even on Respondents own case, now after the receipt of notice dated 16th September 1995, Respondents appear to have no right to remain in possession. Even if they were tenants from month to month that tenancy has come to an end.
23. In our view, the Appellants have made out a very good case. The Order of the learned Single Judge cannot be sustained. Even at this prima-facie stage it appears that neither on facts nor in law have the Respondents any right to the injunction as claimed by them. In the above circumstances, the Appeal is allowed. The Impugned Order is set aside. Respondent's Applications i.e. IAs Nos. 8829/94 an 8976/94 stand dismissed. The Applications of the Appellants i.e. IAs Nos. 11883/94 and 10097/98 stand absolute.
24. There is one further fact to be considered. As seen from facts set out above the Respondents appear to have misused process of law. They have used it to hold on to the possession taken forcibly. In such cases mere dismissal of their Applications is not sufficient. Respondents were never in possession. The law is clear. A rank trespasser or a person who has taken forcible possession has no right to remain in possession. A party who misuses process of Court and takes a Court for a ride must be made to hand back possession. We, therefore, direct the Respondents to remove all their stock, material, articles, things and themselves and their employees from the Suit premises within a month from today.
25. Appeal stands disposed of accordingly.