Allahabad High Court
Harish Khurana Son Of Shri Tilak Raj ... vs Prem Kumar And Satish Kumar Sons Of Shri ... on 5 December, 2005
Equivalent citations: 2006(1)AWC642
JUDGMENT S.U. Khan, J.
1. Civil Revision has been filed by tenant Harish Khurana against landlords Prem Kumar and Satish Kumar and is directed against judgment and decree dated 15.5.1995 passed by J.S.C.C. / Second A.D.J. Allahabad in S.C.C. Suit No. 15 of 1988 Prem Kumar and Anr. v. Harish Khurana. Through the said judgment and decree suit of landlords-opposite parties was decreed on the ground of sub-letting of the tenanted accommodation which is commercial in nature. Tenancy started with effect from 1.4.1977 through agreement of lease dated 14.5.1977. It was further alleged in the plaint of the suit that the tenant had sublet the premises to a Company M/S Khurana Auto Mobile Private Limited. It is admitted that the aforesaid Company consists of only tenant Harish Khurana and his wife Shrimati Usha Khurana and is a private limited Company. Apart from Harish Khurana and his wife Smt. Usha Khurana there is no other shareholder in the Company.
2. The writ petition is directed against order dated 22.9.1997 passed by Rent Control and Eviction Officer (I), Allahabad in case No. 10 of 1996 under Section 12/16 of U.P. Act No. 13 of 1972 Bisheshwar Dayal Agarwal v. Harish Khurana, The said proceedings had been initiated by respondent No. 1 Bisheshwar Dayal Agarwal, who had prayed for allotment of the accommodation in dispute on the ground that it was deemed vacant as it had been sub-let by Harish Khurana to the aforesaid Company. Through order dated 2291997 Rent Control and Eviction Officer declared the accommodation in dispute as vacant on the ground of sub-letting. The Rent Control and Eviction Officer placed reliance upon the judgment of the II Additional District Judge, Allahabad passed in S.C.C. Suit No. 15 of 1988 (challenged in the aforesaid civil revision).
3. The only point to be decided in this writ petition is as to whether handing over of the possession of tenanted accommodation which is commercial in nature, by the tenant, who is a natural person, to a Company which consists of the tenant and his wife amounts to sub-letting or not.
4. Under Section 20(2)(e) of the Act, sub-letting is a ground of eviction. The aforesaid sub-section refers to Section 25 which in turn refers to Section 12 (1)(b) and 12 (2) of the Act. All these provisions are material for the purposes of deciding the present controversy and are extracted below:
20...
(2)...
(e) Tenant has sublet in contravention of the provisions of Section 25 or as the case may be, of the old Act, the whole or any part of the building.
Section 25:...
Explanation: For the purposes of this section (1 )Where the tenant ceases within the meaning of clause (b) of Sub-section (1) or Sub-section (2) of Section 12 to occupy the building or any part thereof, he shall be deemed to have sublet that building or part.
12.(1 (b) he (tenant) has allowed it to be occupied by any person who is not a member of his family.
12.(2): In the case of non-residential building where a tenant is carrying on business in the building admits a person who is not a member of his family as a partner or a new partner as the case may be, tenant shall be deemed to have ceased to occupy the building.
5. In case tenant had entered into partnership business with his wife there would not have been any sub-letting by virtue of Section 12 (2) of the Act as wife is included in the definition of the family' of tenant. However, in respect of Company no provision has been made under the Act. Certain authorities of the Supreme Court have been cited at the Bar in respect of partnership firms. However, these authorities aeration relevant for two reasons. Firstly, partnership firm Is not a legal entity and It is merely a name used to describe all the partners compendiously. Secondly for partnership, special provision has been made under U.P. Act No. 13 of 1972. Certain types of partnerships maybe sub-letting in other States but not under the U.P. Act No. 13 of 1972. Similarly certain types of partnerships may not be sub-letting in other States or under general law of landlord-tenant provided under Chapter V Transfer of Property Act, but in Uttar Pradesh those will amount to sub-letting.
6. In M.H. Ghulambhai v. B. Fatehali A.I.R. 1998 S.C. 3214 the facts were that the father was the tenant and he constituted a partnership along with his sons After some time, he completely retired from the business and only his sons remained partners of the Firm. It was held that it amounted to sub-letting It was a case under Bombay Rent Control Act. However, under UP Act No 13 of 1972 it would not have been sub-letting as tenant i.e. Father allowed his sons who are his family members to occupy the building. By virtue of Section 12(1)(b) it is not sub-letting.
7. In the case of Parvinder Singh v. R. Gautam (a case from H.P.), Supreme Court held that mere entering into a partnership with stranger does not amount to subletting ipso facto unless it was shown that it was a device to overcome the prohibition contained in Rent Control Act against sub-letting and, in fact, entire possession and control of the business had been handed over to the other partners. Same view was taken by the Supreme Court in Mahendra Saree Emporium v. G.V.S. Murthy . Latter half portion of para 16 of the said authority is quoted below:
In the context of the premises having been, sub let or parted with possession by the tenant by adopting the device of entering into partnership, it would suffice for us to notice three decisions of this Court Murlidhar v. Chuni Lal and Ors. (1970) Rent C J 922 is a case where a shop was let out to a firm of the name of Chun Lal Gherulal. The firm consisted of 3 partners, namely, Chunilal, Gherulal and Meghraj. This partnership closed a new firm by the name of Meghraj Banshiclhar commenced its business with partners Meghraj and Banshidhar. The tenant-firm was sought to be evicted on the ground that-the old firm and the new firm "being two different legal entity, the occupation of the shop by the new firm amounted to sub-letting This Court discarded the contention as 'entirely without substance' and held that a partnership firm is not a legal entity; the firm name is only a compendious way of describing the partners of the firm Therefore occupation by a firm is only occupation by its partners. The two firms, old and new, have a common partner, namely Meghraj, who continued to be in possession and it was fallacious to contend that earlier he was in possession in the capacity of partner of the old firm and later as a partner of the new firm. The landlord, in order to succeed, has to prove it as a fact that there was a sub letting by his tenant to another firm. As the premises continued to be in possession of one of the original tenants, Meghraj, then by a mere change in the constitution of the firm of which Meghraj continue to be a partner, and inference as to sub letting could not be drawn in the absence of further evidence having been adduced to establish sub letting. In Helper Girdharbhai v. Saiyed Mohmad Mirasahed Kadri and Ors. (1087) 3 S.C.R. 289, the tenant had entered into a partnership and the firm was carrying on business in the tenancy premises. This Court held that if there was a partnership firm of which the appellant was a partner as a tenant, the same would not amount to subletting leading to forfeiture of the tenancy; for there can not be a subletting unless the lessee parted with the legal possession The mere fact that another person is allowed to use the premises while the lessee retains the legal possession is not enough to create a sub lease. Thus, the thrust is, as laid down by this Court, on finding out who is in legal possession of the premises So long as the legal possession remains with the tenant, the mere factum of the tenant having entered into partnership for the purpose of carrying on the business in the subtenancy premises would not amount to subletting. In Parvinder Singh v. Renu Gautam and Ors. a three Judges Bench of this Court devised the test in these terms - 'if the tenant is actively associated with the partnership business and retains the use and control over the tenancy premise with him may be along with the partners, the tenant may not be said to have parted with possession However, if the user and control of the tenancy premises has been parted with and deed of partnership has been drawn up as an indirect method of collecting the consideration for , creation of sub-tenancy or for providing a cloak or cover to conceal a transaction not permitted by law, the Court is not e stopped from tearing the veil of partnership and finding out the real nature of transaction entered into between the tenant and the alleged sub tenant.
8. In Uttar Pradesh mere creation of partnership with stranger who is not a family member as defined under U.P. Act No. 13 of 1972 amounts to subletting and no further inquiry is required. The the Supreme Court in the aforesaid authority of Mahendra has held that-if the tenant has entered into partnership with his nephews and cousins but he has not parted with possession and control of the premises and business, then it is not subletting. The said case was from Karnataka. However, in Uttar Pradesh even a partnership with son-in-law amounts to sub-letting as son-in-law is not included in the definition of family under U.P. Act No. 13 of 1972 (Vide Harish Tandon v. A.D.M. ).
9. In respect of Company there are two authorities of the Supreme Court reported in Madras Bangalore Transport Company v. I. Singh and Singer India Limited v. C.M. Chaddha and Ors. . Both the authorities are by three Hon'ble Judges. In the latter authority, the earlier authority has been described as "This case has been decided purely on facts peculiar to it and no principle of law has been laid down" (para 12).
10. In the first authority, of the Supreme Court, viz. M/S Madras Bangalore Transport Co. (supra) partners of a firm had formed a Company and Company was appointed as agent of the firm and the firm was appointed as agent of the Company and both firm as well as Company were carrying on business from the tenanted accommodation. The company was formed to avoid the effect of an Agreement which had been entered into in between the said firm and another firm regarding respective areas of business operation of both the firms. In the second authority, viz. Singer India Ltd. (supra), the Company which was the tenant had amalgamated with another Company and the new Company so formed was in occupation of the premises which were in occupation of the previous Company which had amalgamated with another Company. In the first Authority the Supreme Court held that there was no sub-letting and in the second authority it was held that there was sub- " letting. In the second authority it was also held that Company itself could not request for lifting of veil to determine the identity of real persons behind the Company. Both the authorities considered the relevant provisions of Delhi Rent Control Act i.e. Section 14(1)(b), which is quoted below:
14(1)...
(b)that the tenant has, on or after the 9th day of June, 1952, sub-let, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord.
11. Both the authorities of the Supreme Court have noticed an authority of the Delhi High Court reported in Vishwa Nath v. Chaman Lal Khanna . In the concluding portion of para 3 of Singer India Limited (supra) it is mentioned that "reference has also been made to a decision of a single Judge of the Delhi High Court in Vishwa Nath v. Chaman Lal Khanna wherein it was held that if an individual takes a premises on rent and then converts his sole proprietorship concern into a private limited Company in which he has the controlling interest it would not amount to parting with possession with any one as he continues to be in possession of the premises and, as such, he does not become liable for eviction under Section 14(1)(b) of the Act." In Singer India Limited neither the said authority of the Delhi High Court has been over ruled nor disapproved.
12. The facts of the instant case are almost similar to the facts of Vishwa Nath (supra). Here also tenant has converted his sole proprietorship into a Company in which his wife is the only other shareholder. Naturally the Original tenant (husband) must be. having controlling authority in the business, There is no contrary allegation by the plaintiff landlord any where. Accordingly I hold that conversion of sole proprietorship by a tenant into a Company of which he and his wife are the only partners does not amount to subletting. The revision as well as, writ petition therefore, deserve to be allowed.
13. I realise that for this view / judgment I can not escape the criticism of following the procedure (on the principle !) of ribbon matching.
14. In the result, revision as well as the Writ Petition are allowed. Judgment and decree passed by the J.S.C.C. as well as judgment and order passed by Rent Control and Eviction Officer are quashed.
15. In the revision while confirming the stay order on 12.12.1995 (on the order sheet) a condition was imposed that since the said date i.e.12.12.1995 tenant should deposit an amount of Rs. 8000/- per month in the Executing 'Court, Which shall be invested by the Executing Court and not paid to the landlord. The deposit was made subject to the final order passed in the revision. The said deposit is regularly being made as informed by the learned counsel for the parties.
16. During hearing of this case I had suggested to the parties to end the litigation through compromise. By virtue of Section 89 C.P.C. I had specifically formulated the proposed compromise to the effect that landlord should forego his right to evict the tenant under the impugned judgment and decree and tenant should pay rent of Rs. 10,000/- per month subject to the condition that Rent Control Act would be deemed to be applicable to the building in dispute. On the next date learned counsel for the tenant expressed his willingness to accept the proposed compromise. However, learned counsel for the landlord stated that his clients expressed their regret for not accepting the proposed terms. Thereafter the matter was heard on merits.
17. I have held in Khursheed v. A.D.J. 2004 (2) A.R.C. 64 that while granting relief against eviction to the tenant in respect of buildings covered by Rent Control Act writ court is empowered to enhance the rent to a reasonable extent. While confirming the stay order and imposing the condition of deposit of Rs. 8000/- per month through order dated 12.12.1995 this Court had given valid reasons for imposing the condition of deposit of Rs. 8000/- per month. Nothing has been brought on record that the reasons given in the said order were not correct. It is clear that even in the year 1995 rental value of the accommodation in dispute was not less than Rs. 8000/- per month. Accordingly it is directed that with effect from January, 2006 onward tenant or the Company, Khurana Auto Mobiles Private Limited snail pay rent to the landlord @ Rs. 8000/- per month. However it is directed that despite this rent, which is more than Rs. 2000/- per month, the provisions of U.P. Act No. 13 of 1972 will continue to apply on the building in dispute.
18. The entire amount deposited under interim order passed in the revision along with accrued interest shall at once be paid to the landlords.