Calcutta High Court
Rajeev Daga & Anr vs Ambalal Sarabhai Enterprises Ltd. & Ors on 15 July, 2013
Author: Soumen Sen
Bench: Soumen Sen
CS No.297 of 1989
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
RAJEEV DAGA & ANR.
Versus
AMBALAL SARABHAI ENTERPRISES LTD. & ORS.
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
Date : 15th July, 2013.
Appearance:
Mr. Jishnu Saha, Adv.
Mr. Pramit Roy, Adv.
Mr. Ashis Mukherjee, Adv.
Mr. Shankha Shubhra Kundu, Adv.
Ms. Sulagna Mukherjee, Adv.
..for the plaintiffs.
Mr. Shyamaprosad Sarkar, Sr. Adv.
Mr. Swarnendu Ghosh, Adv.
Mr. D. N. Roy Chowdhury, Adv.
Ms. Tapati Chatterjee, Adv.
..for the defendants.
The Court : The plaintiffs are the owners of a part of the
mezzanine floor at premises no.24, Park Street, Kolkata,
measuring 2886 sq.ft. (hereinafter referred to as the suit
premises). The plaintiffs have instituted the suit against the
defendants for recovery of possession of the suit premises and for
mesne profits from May, 1986 till possession.
The plaintiffs purchased the suit premises from its erstwhile
owner, Calcutta Credit Corporation Limited, which had let out the
same to one Standard Pharmaceuticals Limited (hereinafter referred
to as the original tenant). There is an attornment of tenancy in
2
favour of the present plaintiffs on 11th May, 1977, prior to the
purchase of the suit premises by the plaintiffs and thereafter
from 1st May, 1977, the rents were being paid by the original
tenant to the present plaintiffs. According to the plaintiffs,
the plaintiffs for the first time noticed that the original tenant
has been describing itself as a division of the defendant no.1,
Ambalal Sarabhai Enterprises Limited. The plaintiffs upon enquiry
could discover that pursuant to a scheme of amalgamation the said
original tenant has merged with the defendant no.1 and have
thereafter being dissolved without winding up. Inasmuch as the
same amounted to an assignment of the tenancy of the original
tenant without consent of the landlord, the plaintiffs filed the
instant suit seeking, inter alia, eviction of the defendants from
the suit premises as a consequence of amalgamation of the original
defendant with the defendant no.1. The defendants had come to
occupy the said premises on the basis of such order sanctioning
the scheme of amalgamation. The plaintiffs could also ascertain
that the original defendant had merged with the defendant no.1 in
or about 1983. The plaintiff had never consented to transfer of
such tenancy in favour of the defendants. The plaintiffs were
advised to file the instant suit for eviction of the defendant
no.1 on the ground of illegal transfer/assignment of the said
premises by the original tenant, the defendant no.1. The
plaintiffs prior to obtaining such legal advice were not aware of
3
their right to initiate the present action against the defendant
no.1. The plaintiffs contended that in the events that have
happened the defendant no.1 is under an obligation to make over
the suit premises as the defendant no.1 is in occupation of the
property as a trespasser without having any semblance of right to
occupy the suit premises. The said transfer/assignment is
illegal, as the plaintiffs never had given any consent to the
original tenant within the meaning of Section 14 of the West
Bengal Premises Tenancy Act, 1956. The plaintiffs could further
ascertain that the defendant nos.2, 3 and 4 are also having their
offices and are carrying on their business on the said premises.
The plaintiffs, at no point of time, had ever given any permission
or consent to the continuous occupation of the said defendants or
use of the said premises or any portion thereof. The plaintiffs
had duly served on the said defendants to hand over possession of
the suit premises to the plaintiffs. The defendants and each of
them however has refused to make over a vacant possession of the
suit premises. The occupation of the defendant in the suit
premises from May, 1986 is illegal and the plaintiffs are entitled
to mesne profits. On these facts, the suit was filed by the
plaintiffs.
The defendants contested the proceeding and have filed the
written statement. The defendants contended that the defendants
are protected by Clause 5 and Clause 11 of the tenancy agreement
4
entered into on 22nd January, 1973. Pursuant to a scheme of
amalgamation made by and between Standard Pharmaceuticals Limited
and the defendant no.1 sanctioned by this Hon'ble Court and the
Gujarat High Court by orders dated 22nd January, 1983 and 7th May,
1983 respectively, all assets, liabilities, rights and obligations
including the aforesaid tenancy vested in defendant no.1, the said
Standard Pharmaceuticals Limited stood dissolved without winding
up by an order dated 22nd January, 1983 passed by this Court in the
amalgamation proceeding. The said order ultimately attained
finality in September, 1983 after a special leave petition
challenging the order of the Division Bench of Gujarat High Court
approving the amalgamation was dismissed as withdrawn. Pursuant
to the aforesaid, all the rights and obligations contained in and
arising out of the said agreement of tenancy dated 22nd January,
1973, in so far as it related to Standard Pharmaceuticals Limited,
vested in the defendant no.1. Standard Pharmaceuticals Limited
duly communicated confirmation and/or sanction of the said scheme
of amalgamation to the plaintiffs whereupon the plaintiffs by
actual acceptance and/or acquiescence recognised the defendant
no.1 as a tenant in respect of the suit premises. Moreover, the
plaintiffs had actual notice of the petition for confirmation of
the said scheme of amalgamation through advertisements published
in newspapers. The plaintiffs actually and by their conduct
became bound by the tenancy agreement and, in fact, had started
5
accepting rents and issued rent receipts in favour of the
defendant no.1.
In view of the aforesaid a fresh tenancy is created in favour
of the defendant no.1 adapting all the terms and conditions of the
said tenancy agreement dated 22nd January, 1973. In view of such
recognition of the defendant no.1 as a tenant under the plaintiff,
the defendant no.1 should necessarily be substituted in place of
Standard Pharmaceuticals Limited so far as the application and
interpretation of the said agreement dated 22nd January, 1973 is
concerned. In view thereof and particularly Clause 11 of the said
tenancy agreement dated 22nd January, 1973, the defendant no.1
would be entitled to use the said premises for any company which
will be managed or associated with the defendant no.1 in which its
directors have substantial interest. The parties have also
disclosed their documents. Before commencement of the trial the
following issues were settled:
"1. Is the suit maintainable?
2. Is the suit barred by limitation?
3. Was the transfer/assignment of the tenancy
right by virtue of the amalgamation order to the
defendant no.1 illegal within the meaning of West Bengal
Premises Tenancy Act, 1956 as alleged in paragraph 7 of
the plaint?
4. Are the defendants trespassers in respect of
the suit premises?
6
5.(a) Was any rent paid to the plaintiffs by or on
behalf of defendant no.1 after its amalgamation with the
Standard Pharmaceuticals Limited in 1982?
(b) If so, has the defendant no.1 become a direct
tenant under the plaintiffs?
6. Are the plaintiffs entitled to get decree for
possession of the suit premises as prayed for?"
Mr. Shyamaprosad Sarkar, learned Senior Counsel, appearing on
behalf of the defendants submitted that the cause of action in the
suit is based on the ratio of M/s. General Radio and Appliances
Company Limited and Ors versus M. A. Khader (dead by Lrs) reported
in 1986(2) Supreme Court Cases 656, to the effect that since an
order of amalgamation was passed by the Court on the basis of a
scheme submitted by the parties, the transfer of assets and
liabilities of the transferor company to the transferee company
happens or occurs at the instance of transferor company; hence, if
its assets including a tenancy right, it must be regarded to have
been transferred to the transferee company by the transferor
company and again if such transfer was without prior consent in
writing of the landlord, such tenancy, being in violation of
Section 14 of the West Bengal Premises Tenancy Act, 1956, such
transfer provides the landlord a good ground for eviction of the
tenant under Section 13(1)(a) of the said Act.
It was argued that it is a matter of significance that in the
instant case, the plaintiffs do not seek eviction of the
7
transferor company as tenant and with it, its transferee company
Ambalal Sarabhai Enterprises Limited, the alleged illegal sub-
tenant. As a matter of fact, Standard Pharmaceuticals Limited is
not even a party. They seek to evict Ambalal Sarabhai Enterprises
Limited and its other associates as illegal trespassers.
Mr. Sarkar has questioned the legal basis of the claim of the
plaintiffs on various separate and independent grounds.
First since transferor company is not a party in the suit as
noted in the preceding paragraph that the ratio of General Radio
cannot have any manner of application.
Second, the tenancy right in respect of the suit premises
stands transferred to Ambalal Sarabhai Limited by operation of
law, regardless of the fact it was brought about at the instance
of Standard Pharmaceuticals Limited, the transferor company the
tenant. The fact that such transfer was effected allegedly
without previous consent of the landlords, the plaintiffs, the
transfer per se is not illegal and hence it does not provide an
independent ground beyond provision of West Bengal Premises
Tenancy Act to treat Ambalal Sarabhai, the defendant no.1 the
transferee company as an illegal occupier or a trespasser.
That this is so clear from the following circumstances:
(a) The Hon'ble Supreme Court in their judgment in
Radio Engineer clearly described the transferee there
as a tenant: The transferee become a tenant, by
8
operation of special law, i.e. Companies Act
overriding the general law which contemplates that a
tenancy can be created only by an agreement between
parties express or implied.
(b) Even in general law, a transfer of tenancy without
previous consent of landlord, though exposes a tenant
to the risk of eviction such transfer itself is
neither illegal nor void.
Thirdly, on factual score, the defendants would contend that
by virtue of Clause 11 of the Tenancy agreement dated 22nd January,
1973 the Hon'ble Court should be pleased to hold that consent of
landlord permitting the tenant to sublet the tenanted premises to
its associate companies was implicit in the said clause and did
not require any fresh or further consent in writing in terms of
Section 14 of the West Bengal Premises Tenancy Act.
In the alternate, it was argued that by reason of Clause 11
of the tenancy agreement, the parties have contracted out of the
West Bengal Premises Tenancy Act, 1956 which is permissible. Mr.
Sarkar referred to the evidence of Tapan Nandan Bhattacharya to
establish that Ambalal Sarabhai Limited was an associate of
Standard Pharmaceuticals Limited and the plaintiffs have knowingly
received rents from the transferee company. It was further argued
on the basis of Clause 11 and by way of an alternative argument
9
that the defendants following such amalgamation have become direct
tenant under the plaintiffs by contract.
Mr. Sarkar has relied upon the following decisions to show
that a tenancy can be created by conduct, what is important, is
that a relationship of landlord and tenant is established:
AIR 1952 SC 23; AIR 1955 Cal.502
It is argued that the plaintiffs have consciously accepted
the rent from Ambala arabhai with actual or constructive notice of
such amalgamation. It was argued that the order of amalgamation
operated in rent because of wide publicity. The plaintiffs ought
to have known or could have ascertained with reasonable diligence
that the original tenant company has been amalgamated with the
defendant no.1. The acceptance of such rent and retention of the
money even after discovery of the fact that the original tenant
stood dissolved are the most telling aspect of the matter which
requires a serious consideration and clearly disproves the claim
of the plaintiffs that the defendant is a trespasser.
Mr. Sarkar has relied on 2012(8) SCC 441 (Paragraph 13) and
the following unreported decisions for the proposition that order
of amalgamation is operative in Rem because of wide publicity:
(1) Sanjib Banerjee J. in CP No.629 of 2011
(TLP Electricals Pvt. Ltd. & Ors. Dated August 6,
2012)
(2) Subhro Kamal Mukherjee J. in
CA No.209 of 2006
CA No.667 of 2006
CA No.96 of 2007
10
CA No.689 of 2009
CP No.594 of 2002
Castron Technologies Ltd. & Anr. Vs. Castron Mining
Ltd. dated December 2, 2011
Mr. Sarkar has relied upon question Nos. 1, 5, 25, 27, 28,
29, 30, 31, 32, 33, 34, 35, 45, 48, 49, 71, 72, 74, 75, 78, 81, 93
and 94, put to Tapan Nandan Bhattacharyya in examination in chief,
to show that Standard Pharmaceuticals is a subsidiary of Ambalal
Sarabhi Enterprises and the plaintiff had the knowledge of merger.
In order to establish that rent used to be collected from Standard
Pharmaceuticals, a Division of Ambalal Sarabhi Enterprises
Limited, with knowledge of amalgamation, he has referred to
question Nos. 11, 12, 13, 18, 19, 20, 22, 23, 24, 53, 54, 55, 56,
57, 59, 61, 62, 63, 64, 65, 66, 73, 76, 77, 79, 80, 84 and 85 put
to Tapan Nandan Bhattacharyya. Mr. Sarkar submitted that it would
appear from the evidence of Tapan Nandan Bhattacharyya that after
the amalgamation, it was Ambalal Sarabhai Enterprises Ltd. who
used to issue cheques in the same manner as Standard
Pharmaceuticals Limited used to issue and the cheques were drawn
in the name of Standard Pharmaceuticals, a division of Ambalal
Sarabhai, by their constituted attorneys, but two attorneys had to
sign such cheques. The cheques were issued with a rubber stamp
which used to bear the impression "For Standard Pharmaceuticals, A
Division of Ambalal Sarabhai Enterprises Ltd., by their
constituted attorneys" and Mr. Bhattacharyya used to sign the
11
cheques as one of the constituted attorneys. Much emphasis was
laid to the answer given to question No.83 with regard to display
of the signboard of the companies carrying on business from the
suit premises. Mr. Bhattacharyya deposed that what he could
recollect before he left the company in 1991 is that a signboard
displaying the name of four companies in which the first name was
Standard Pharmaceuticals, a Division of Ambalal Sarabhai
Enterprises Ltd., the second was OPEC Innovation Limited, the
third was Symbiotics and the forth was Sarabhai International and
in the bottom it was written "24, Park Street, Calcutta - 700 016"
was visible. It was his evidence that the signboard was put up
soon after the merger which was done to comply with the provisions
of Shops and Establishments Act.
Mr. Sarkar has referred to the evidence of Basant Kumar Daga
and Rajeev Daga to show that the landlord used to collect the rent
from Standard Pharmaceuticals, a division of Ambalal Sarabhi
Enterprises Limited with knowledge of amalgamation. He criticized
the evidence of Basant Kumar Daga when the witness says that till
September 1988, when he was looking after the affairs, he did not
have any knowledge of the aforesaid fact but thereafter when his
son Rajeev Daga started looking after the affairs, he conveyed to
him the change of identity of the original tenant. According to
Mr. Sarkar, the evidence of Basant Kumar Daga and Rajeev Daga with
regard to the discovery of the defendants in the suit premises and
12
feigning ignorance of their existence earlier to the filing of the
suit should be disbelieved. It was argued that the evidence would
show that at the top of the receipt, the name of "Standard
Pharmaceuticals" is prominently mentioned and accordingly there
could not be any doubt in the mind of either of the Dagas as to
the real identity and existence of the original tenant.
Mr. Jisnu Saha, learned counsel appearing on behalf of the
plaintiffs submitted that the order sanctioning the scheme of
amalgamation has resulted in merger of Standard Pharmaceuticals
with the defendant and subsequently the said company was dissolved
without winding up, which goes to show that the entry of the
defendant No.1 in the suit premises is illegal. Inasmuch as the
said order sanctioning the scheme of amalgamation amounted to
assignment of tenancy of Standard Pharmaceuticals Ltd. without the
consent of the landlord, the plaintiffs filed the instant suit
seeking inter alia eviction of the defendants from the suit
premises as, consequent on amalgamation of the said Standard
Pharmaceuticals Ltd. with the defendant No.1, the defendants have
come to occupy the suit premises. No notice terminating the
tenancy of Standard Pharmaceuticals Ltd. could be served and no
suit for eviction of Standard Pharmaceuticals Ltd. could be filed
as, upon being amalgamated with the defendant No.1, Standard
Pharmaceuticals Ltd. had dissolved without winding up and thus
ceased to exist. This fact is not denied by the defendants in
13
their written statement. In fact, in paragraph 4(e) of the
written statement, the defendants have admitted the said position.
In the circumstances, as the defendant No.1 or the other
defendants could not have and did not acquire any right to occupy
the suit premises, the plaintiffs have filed the suit for eviction
of the defendants as trespassers occupying the same without having
the authority to do so. Mr. Saha has referred to PD-18 and PD-19
being the notices to quit dated 20th February 1989 issued on behalf
of the plaintiffs to the defendants calling upon the said
defendants to hand over possession of the suit premises to the
plaintiffs. Mr. Saha, relying upon General Radio (supra),
submitted that in the said decision the Hon'ble Supreme Court held
that a transfer of tenancy consequent on amalgamation of a company
with another amounted to a transfer without the written permission
or consent of the landlord and as such the transferee in
possession of the tenanted premises cannot be deemed or considered
to be a tenant in respect of the same. It is submitted that
following the case of General Radio (supra), in the case of Cox &
Kings Ltd. -vs.- Chander Malhotra reported in (1997) 2 SCC 687,
the Hon'ble Supreme Court held that where by reason of operation
of FERA a foreign company had wound up its business and had
assigned its leasehold interest to an Indian Company to carry on
the same business in the tenanted premises, the same amounted to
subletting without the written consent of the landlord.
14
Thereafter in the case of Singer India Ltd. -Vs.- Chander Mohan
Chadda reported in (2004) 7 SCC 2 the Hon'ble Supreme Court held
that in an amalgamation even if there is an order of a court
sanctioning the scheme of amalgamation under Sections 391 and 394
of the Companies Act, whereunder lease, rights of tenancy or
occupancy of the transferor company got vested and become the
property of the transferee company, the same amount to subletting
or assignment or otherwise parting with possession of the premises
by the tenant (Paras 6, 7, 8 & 11).
Mr. Saha argued that in the written statement the defendants
have essentially contended that Standard Pharmaceuticals Limited
came to occupy the suit premises under and in terms of an
agreement dated 21st January 1973, clauses 5 and 11 whereof provide
as follows:
"5. The tenant shall not sublet any portion of the premises
to anyone without the prior consent in writing of the
landlord except as specified in Clause 11 of this letter,
but the tenant shall continue to be liable to the landlord
for the rent for the portion so sublet.
11. The tenant will however have the right to use the said
premises for any company which may be managed or associated
with Standard Pharmaceuticals Ltd. in which its Directors
have substantial interest."
15
He has referred to paragraphs 4(l), 4(m), 4(f), 4(g), 4(h)
and 4(k) of the written statement and submitted that each of the
grounds taken in defence of continued occupation of the suit
premises is untenable in law and in fact.
It was submitted that the transfer of the suit premises to
the defendant No.1 by virtue of the scheme of amalgamation
amalgamating Standard Pharmaceuticals Ltd. with the said defendant
amounted to assignment or subletting of the suit premises without
the consent of the landlord in writing and as such could not and
did not create any interest in the suit premises in favour of the
defendant No.1 is now settled law in view of the decision of the
Hon'ble Supreme Court in the matter of General Radio (supra) and
other decisions following the same namely Cox & Kings Limited And
Another vs. Chandar Malhotra 1997 (2) SCC 687 and Singer India
Limited vs. Chander Mohan Chadha & Anr 2004 (7) SCC 1.
It was submitted that the claim made in paragraph 4(m) of the
written statement that the defendants are group companies is
completely false. The falsity of such allegation would be evident
from the admissions made by the defendants in paragraph 4(e) of
the written statement that by an order dated 22nd January 1983
passed in the amalgamation proceedings, Standard Pharmaceuticals
Ltd. was dissolved without winding up. Although in answer to
question No.5 put to Tapan Nandan Bhattacharyya the said witness
stated that Standard Pharmaceuticals Ltd. was a subsidiary of the
16
defendant No.1, the court should not take note of the same as the
said contention is de hors the pleadings in the written statement.
In any event, on harmonious reading of Clause 5 and Clause 11 of
the agreement dated 22nd January 1973, it is evident that the said
clauses only permitted subletting by Standard Pharmaceuticals Ltd.
to a company managed by or associated with Standard
Pharmaceuticals Ltd. or to a company in which the directors of
Standard Pharmaceuticals Ltd. were substantially interested. In
this context, it is relevant to note that Clause 5 expressly
provided that notwithstanding such subletting, Standard
Pharmaceuticals Ltd. would continue to be liable to the landlord
for rent of the portion sublet. This clearly contemplates that
the right of Standard Pharmaceuticals to sublet the suit premises
would survive only so long as Standard Pharmaceuticals itself
remained in existence. In the instant case, the admitted position
is that Standard Pharmaceuticals Ltd. has ceased to exist.
Furthermore, the transfer of the suit premises by virtue of scheme
of amalgamation did not amount to subletting but a virtual
assignment which attempted to establish a new privity between the
defendant no.1 and the plaintiffs. Such an assignment in any
event is bad inasmuch as it is now settled law that even when the
rights under an agreement may be assigned, the obligations under
the same may not be assigned, except with the consent of the
person with which the assignor has privity. In this context, Mr.
17
Saha relied on Section 108(j) of the Transfer of Property Act,
1882 and the following decisions:-
a) Khardah Company Ltd. -Vs.- Raymon & Co., reported in AIR
1962 SC 1810 (Para 19);
b) ICICI Bank Limited -Vs.- APS Star Industries Limited,
reported in 1020 (10) SCC 1 (Para 47, 49 and 51).
Mr. Saha submitted that the true effect and character of
amalgamation has been considered in Saraswati Industrial Syndicate
Ltd. -Vs.- Commissioner of Income Tax reported in 1990 (Supp.) SCC
675 in which in paragraph 6, the Hon'ble Supreme Court has stated
that:- "The true effect and character of the amalgamation largely
depends on the terms of the scheme of merger. But undoubtedly
when two companies amalgamate and merge into one the corporate
entity of the transferor company loses its entity from the date of
amalgamation as it ceases to have its business. However, their
respective rights or liabilities are determined under the scheme
of amalgamation."
Mr. Saha submitted that the defendants, by reason of the
aforesaid, became trespassers and in this regard he has referred
to the decision reported in (2011) 1 SCC 356 [Laxmi Ram Pawar Vs.
Sitabai Balu Dhotre & Anr.] (Paras 12 to 16).
Mr. Saha has also relied upon the decision reported in (2010)
3 SCC 385 (Paras 18, 19, 20, 21 and 22) to show that the suit in
absence of Standard Pharmaceuticals Ltd. could be maintainable
18
since the plaintiffs always retain possession in law over the suit
property and the defendants even if unable to protect their
interest in the suit property and is dispossessed by a third
party, the plaintiff always have a right to file a suit for
eviction of the party who has entered the suit premises illegally.
Mr. Saha accordingly submitted that the defendants should be
directed to be evicted from the suit premises and should be made
liable to pay mesne profits to the plaintiffs from the date of
amalgamation of Standard Pharmaceuticals Ltd. with the defendant
No.1 at such rates as may be decided by this Court.
Mr. Sarkar, in reply to the argument advanced by Mr. Saha,
submitted that the decision of General Radio (supra) is grossly
misunderstood and according to him that case established two
distinct and clear principles as follows:
(I) First, since amalgamation of two companies is brought
about at the instance of the transferor company (the
appellant no.1 in that case) by which all properties
including tenancy right of the transferor company are
transferred to the transferee company and such transfer
of tenancy right is made without the consent of the
landlord and the transferor (tenant) is liable to be
evicted being in violation of the relevant provisions of
the Premises Tenancy Act (in the instant case sections
14 and 13(1) of the West Bengal Premises Tenancy Act).
19
(II) Second, the transferee company (the appellant no.2 in
the case) is "now the tenant".
According to Mr. Sarkar, the first principle is clearly
applicable to the instant case. In that case, the tenant
(appellant no.1) was made a party and it was liable to be evicted
and as a consequence the sub-tenant (appellant no.2) was liable to
be automatically evicted. Incidentally, it was not even necessary
to make the sub-tenant a party. In the instant case, the tenant
(transferor company) Standard Pharmaceuticals Ltd. has not been
made party and hence the question of evicting the defendant no.1
cannot arise.
Mr. Sarkar also finds fallacy in the argument made by Mr.
Saha with regard to the effect of the order of dissolution of the
Standard Pharmaceutical's case on amalgamation. It was argued
that the argument that the transferor company, Standard
Pharmaceuticals, was dissolved on amalgamation and as such it
could not be made a party, is neither correct nor relevant.
As a matter of law, the transferor company does not
automatically dissolve on passing of amalgamation order for
following such order; the official liquidator has to file a report
on the transferor company and forward the same to the Registrar of
Companies. Only then the name of the company can be struck off
the Register. Until then a transferor company is available to be
made a party. That there is invariably a time gap between the
20
order of dissolution and the fact of dissolution is apparent from
General Radio's case itself where the amalgamation order was
passed on 27th March, 1978 and the company stood dissolved from 16th
April 1968. Here there is no evidence that the Standard
Pharmaceuticals Ltd. stood finally dissolved when the suit was
filed. The onus was clearly on the plaintiff to establish such
fact but it failed to do so. In any event, if the tenant cannot
be made a party for having been dissolved, such special statutory
remedy simply cannot be availed of. The sins of the tenant cannot
be vested on the sub-tenant. In such a situation the only option
open to a plaintiff is to establish that such transferee is a
trespasser.
The second principle of General Radio that a transferee
company on amalgamation becomes a tenant, makes it quite clear
that defendants here cannot be regarded as trespassers. Mr. Saha
contends that without landlord's consent a tenant cannot be thrust
on him willy nilly. A tenancy agreement, Mr. Saha says, can arise
in either of two ways. Either two parties must themselves agree
or a party to an existing agreement assigns such agreement in
favour of a third party. Again, in case of assignment, Mr. Saha
rightly says, that as a rule of ordinary law the benefits of a
contract can be assigned but not its liabilities. But there are
exceptions to this general rule. The most prominent of those is
an order passed under the sections 391 and 394 application. The
21
effect of such order override such ordinary law. That rights and
obligations of a contract can dissolve on a transferee company or
on a new company emerging by virtue of an amalgamation order, is
also recognised in sections 15(g) and 19(d) of the Specific Relief
Act, 1963.
In referring to clause 11 of the tenancy agreement, it was
argued that the first thing to be noticed in the tenancy agreement
is that the expression 'tenant', meaning thereby Standard
Pharmaceuticals Ltd., includes the successor and assigns. There
cannot be any question that after amalgamation, Ambalal Sarabhai
Enterprises has become a successor or assign of the transferor
tenant. On that footing and by express term in the said tenancy
agreement, the defendant no.1 as a lawful successor or assign of
Standard Pharmaceuticals Ltd. has become a tenant without
requiring any further approval of or a fresh agreement with the
landlord-plaintiff.
Secondly, on a true construction of the provisions of clause
11 of the agreement, it is clear that the said provision embodies
a built in consent to sub-let. The contention that the tenant
shall continue to be liable to the landlord for the rent for the
portion so sub-let as mentioned in clause 5, is misplaced. Such
obligation is clearly meant to operate either as an indemnity
clause or a guarantee clause and not as a provision for splitting
of obligations of the tenancy agreement. The question whether the
22
transferee company is managed by or associated with the transferor
company is of course a question of fact. Such question would have
to be examined at the point of transfer, i.e. the date of
amalgamation and not at any later stage. Mr. T.N. Bhattacharjee's
evidence dwell on situation obtaining at a later stage and
therefore not particularly pertinent. The order of amalgamation
in its narrative part however makes the inter relationship of the
transferor, the transferee and the other associated companies
within the group quite clear.
It was further argued that the details of correspondence
exchanged between the parties have been mutually misdescribed.
The fact that the rent receipts and payments of cheques drawn and
received apparently with equal indifference could not be
disregarded. These events clearly justify the acceptance of the
defendants by the plaintiffs as tenants.
Those apart, there has been meeting between the plaintiffs
and the defendants in 1984, i.e. after passing of the amalgamation
order on 7th May 1983 for enhancement of rent. The plaintiffs'
father, Basant Daga, the principal witness, admittedly visited the
suit premises after amalgamation more than once; yet, to say he
did not notice the sign board displaying the names of all the
defendants is incredible. It is difficult to believe that in none
of the circumstances and situations, the presence of a new entity,
Ambalal Sarabhai Enterprises has dawned on him.
23
Rajiv Daga, the plaintiff no.1, a chartered accountant, in
his evidence has admitted to have gone through his income tax
returns over a period but nonchalantly says that he has also
failed to notice that payment has come through a new entity.
Bearing in mind that the said state of affairs in their
various facets continued for a period of six years (1983 to 2009),
the question is whether, even allowing for some benefit of doubt,
this Hon'ble Court would believe the plaintiffs' assertion that
they were not aware of the amalgamation order and its consequence.
Significantly, no offer has been made by them to return the rents
received by them since 1983.
Taking all the circumstances into consideration and on an
objective view of the matter, it was submitted that this Hon'ble
Court would be pleased to accept the defendants' case that a new
tenancy agreement has come into existence by conduct.
Duality of existence and/or identify of the defendant no.1 is
the decisive factor in this proceeding. Although elaborate
arguments have been advanced by the parties but the moot point
appears to be the entry of the defendant no.1 in the suit
premises. The written statement filed on behalf of the defendants
clearly shows that the entry of the defendant no.1 in the suit
premises is by virtue of the order sanctioning the scheme of
amalgamation. By virtue of the said order of amalgamation, the
original tenant company stood dissolved as it merged with the
24
defendant no.1. This Hon'ble Court, by sanctioning of the scheme,
only considered the agreement entered into between the parties and
the rights and liabilities inter se that may form part of the
scheme sanctioned by the court cannot bind the third party, namely
the landlord.
In General Radio (supra), the Hon'ble Supreme Court has dealt
with this aspect and held that this act of amalgamation by reason
whereof the interest, rights of the transferor company in all its
properties including leasehold interest, tenancy rights and
possession were transferred and vested in the transferee company
voluntarily and the transferor company was dissolved and it ceased
to exist for all practical purposes in the eye of law would amount
to sub-letting. Even in case of an involuntary transfer or
transfer for tenancy right by virtue of a scheme of amalgamation
sanctioned by the court by its order under sections 391 and 394 of
the Companies Act, 1956, such transferor would come within the
mischief of parting with possession without consent of the
landlord. The order of amalgamation shows that Standard
Pharmaceuticals Ltd. has transferred all its assets and
liabilities including the tenancy right in favour of the
trasnferee company, namely the defendant no.1. The landlord is
not a party to the said proceeding. No right of tenancy could be
created in favour of any third party dehors the agreement of
tenancy subsisting between the plaintiffs and the original tenant.
25
The defendant no.1 is attempting to justify its continuation in
the suit premises on the basis that in the absence of the original
tenant, the defence on sub-tenancy based on section 14 of the West
Bengal Premises tenancy Act cannot survive. The original tenant
is lost in the horizon and completely invisible and untraceable.
It had ceased to exist.
It would appear from the written statement that Standard Pharmaceuticals Ltd., after
its merger with the defendant no.1, was thereafter dissolved without winding up. This
dissolution is a civil death to the said original tenant company. The consequence of such
dissolution and civil death is surrender of tenancy in favour of the plaintiffs and repossession
by the plaintiffs. The tenancy comes to an end. The plaintiffs cannot be asked to sue a non-
existent company. The plaintiffs can only sue the person who claims a right under the original
tenant. The entry of such person or entity, if not lawful, is that of a trespasser since
inception. The concept of 'trespass' has been elaborately discussed in Laxmi Ram Pawar
(supra) in paragraphs 12 to 16, which are reproduced hereinbelow:-
12. A 'trespass' is an unlawful interference with one's
person, property or rights. With reference to property, it
is a wrongful invasion of another's possession. In Words
and Phrases, Permanent Edn. (West Publishing Company), pp.
108, 109 and 115, in general, a 'trespasser' is described,
inter alia, as follows:
"A 'trespasser' is a person who enters or remains upon
land in the possession of another without a privilege to
do so created by the possessor's consent or otherwise.
(Wimmer's Estate, In re, P2d at 121.}"
A 'trespasser' is one entering or remaining on land in
another's possession without a privilege to do so created by
26
the possessor's consent, express or implied, or by law.
(Keesecker v. G.M. Mckelvey Co. NE at 226, 227)
* * *
A 'trespass' is a transgression or wrongful act, and in its
most extensive signification includes every description of
wrong, and a 'trespasser' is one who does an unlawful act,
or a lawful act in an unlawful manner, to the injury of the
person or property of another. (Carter v. Haynes, Tex., SW
at 220.)"
13. In Black's Law Dictionary (6th Edn.), 1990, p. 1504, the
term "trespasser" is explained as follows:
"Trespasser. - One who has committed trespass. One who
intentionally and without consent or privilege enters
another's property. One who enters upon property of
another without any right, lawful authority, or express
or implied invitation, permission, or licence, not in
performance of any duties to owner, but merely for his
purpose, pleasure or convenience."
14. In Halsbury's Laws of England, Vol. 45 (4th Edn.), pp.
631-32, the following statement is made under the title
"What Constitutes Trespass to Land":
"1384. Unlawful entry.- Every unlawful entry by one
person on land in the possession of another is a
trespass for which an action lies, even though no actual
damage is done. A person trespasses upon land if he
wrongfully sets foot on it, rides or drives over it or
takes possession of it, or expels the person in
possession, pulls down or destroys anything permanently
fixed to it, or wrongfully takes minerals from it, or
places or fixes anything on it or in it, or if he erects
or suffers to continue on his own land anything which
invades the airspace of another, or if he discharges
27
water upon another's land, or sends filth or any
injurious substance which has been collected by him on
his own land onto another's land."
In the same volume at p. 634, under the title "Trespass
ab initio", the legal position is stated thus :
"1389. Trespass ab initio.- If a person enters on the
land of another under an authority given him by law,
and, while there, abuses the authority by an act which
amounts to a trespass, he becomes a trespasser ab
initio, and may be sued as if his original entry were
unlawful.Instances of an entry under the authority of
the law are the entry of a customer into a common inn,
of a reversioner to see if waste has been done, or of a
commoner to see his cattle.
To make a person a trespasser ab initio there must
be a wrongful act committed; a mere nonfeasance is not
enough."
The aforesaid statement takes into consideration Six
Carpenters' case wherein the general rule given is this,
"when an entry, authority, or licence, is given to any
one by the law, and he doth abuse it, he shall be a
trespasser ab initio"
15. In Law Lexicon, the encyclopaedic law dictionary by P.
Ramanatha Aiyar, 2nd Edn., Reprint 2000 p. 1917, the word
"trespass" is explained by relying upon Tomlin's
Dictionary of Law Terms as follows :
"Trespass,. In its largest and most extensive sense,
signifies any transgression or offence against the law
of nature, of society, or the country in which we live;
whether it relates to a man's person or his property.
Therefore beating another is a trespass; for which an
action of trespass in assault and battery will lie.
28
Taking or detaining a man's goods are respectively
trespasses, for which action of trespass on the case in
trover and conversion, is given by the law; so, also
non-performance of promises or undertakings is a
trespass, upon which an action of trespass on the case
in assumesit is grounded: and, in general, any
misfeasance, or act of one man, whereby another is
injuriously affected or demnified, is a transgression,
or trespass, in its largest sense; for which an action
will lie."
16. In Salmond on the Law of Torts, 17th Edn. by R.F.V.
Heuston, 1977, p. 41, the expression, "trespass by
remaining on land' is explained in the following manner:
"Even a person who has lawfully entered on land in the
possession of another commits a trespass if he remains
there after his right of entry has ceased. To refuse
or omit to leave the plaintiff's land or vehicle is as
much a trespass as to enter originally without right.
Thus, any person who is present by the leave and
licence of the occupier may, as a general rule, when
the licence has been properly terminated, be sued or
ejected as a trespasser, if after request and after
the lapse of a reasonable time he fails to leave the
premises."
Under the title "Continuing trespasses"' at p. 42, it is
stated :
"That trespass by way of personal entry is a continuing injury,
lasting as long as the personal presence of the wrongdoer, and
giving rise to actions de die in diem so long as it lasts, is
sufficiently obvious. It is well settled, however, that the same
29
characteristic belongs in law even to those trespasses which
consist in placing things upon the plaintiff's land. Such a
trespass continues until it has been abated by the removal of
the thing which is thus trespassing; successive actions will lie
from day to day unit it is so removed; and in each action
damages (unless awarded in lieu of an injunction) are assessed
only up to the date of the action. whether this doctrine is either
logical or convenient may be a question, but it has been
repeatedly decided to be the law."
Although there may be various situations on the basis of
which a person and/or entity could be regarded and held as a
trespasser, but it is not necessary to go into the details of all
such situations but confine only to the enquiry as to the status
of the defendants.
Clauses 5 and 11 of the said agreement, on true, proper and
meaningful interpretation, would only mean that the original
tenant, without prior consent in writing by the landlord except as
specified in clause 11, shall not sub-let any portion of the
premises without prior consent in writing of the landlord and
irrespective of such sub-letting, the original tenant would be
liable to the landlord for the rent for the portion so sub-let.
Clause 11 is a permissive clause by reason whereof the tenant
could permit the use of the said premises for any company which
30
may be associated with Standard Pharmaceuticals or its directors
having substantial interest.
The witness on behalf of the defendants in his evidence made
an attempt to justify that the original tenant was an associate
company of the defendant no.1 or they are group companies.
However, there is no evidence on record to show that the
defendants and the original tenant are group companies. Even if
the argument based on clause 11 is accepted but that by itself
would not justify the claim of the defendants to continue its
occupation after the original tenant ceased to exist. They have
no right to be in possession. These clauses 5 and 11 would
continue so long the tenancy subsists. A person entering the
premises on the basis of such a permissive clause cannot elevate
his status to a contractual or statutory tenant. The agreement
itself comes to an end with the dissolution of the original
tenant. Moreover it is clear from clause 5 of the tenancy
agreement that Standard Pharmaceuticals Ltd. should not sub-let
any portion of the premises without prior consent in writing or
the landlord. The entry of the defendant no.1 is attempted to be
justified on the basis of the order of amalgamation which amounts
to sub-letting and contraventions of section 14 of the West Bengal
Premises Tenancy Act as well as the terms and conditions of the
tenancy agreement.
31
Mr. Sarkar argued that in the absence of Standard
Pharmaceuticals Ltd., the plea based on sub-letting cannot
subsist. He further argued that even if the original tenant
ceased to exist but the defendant no.1 cannot be recorded as a
trespasser because his entry to the suit premises is on the basis
of the order of amalgamation and by operation of law it has become
the tenant. Mr. Sarkar had strongly relied on paragraph 10 of the
General Radio (supra) vis a vis the observation made in the said
judgment that the appellant no.2 company is now the tenant in
respect of the suit premises.
The Hon'ble Supreme Court in General Radio (supra) ultimately
held that there has been a transfer of the tenancy in respect of
the premises in question to the appellant no.2 in utter
contravention of the provisions of the Andhra Pradesh Building
(Lease rent and Eviction) Control Act, 1960 and the terms and
conditions of clause 4 of the agreement dated January 12, 1959
executed by the appellant no.1 in favour of the respondent
landlord and upheld the judgment of the Andhra Pradesh High Court whereby the Andhra Pradesh High Court upheld the eviction of the appellant no.2 from the suit premises.
In General Radio (supra), the question that arose before the Hon'ble Supreme Court for consideration was whether voluntary amalgamation of the first and the second appellant companies amounts to a transfer of the first appellant's right under the 32 lease within the meaning of section 10(ii)(a) of the Andhra Pradesh Act of 1960.
Similar arguments were made with regard to the operation of the said order of amalgamation as a judgment in rem and binding on all parties including the landlord even though the landlord was not a party to the said proceeding. Such arguments were negatived by the Hon'ble Supreme Court.
The order sanctioning the scheme of amalgamation, whereby transferring the leasehold interest to the transferee was held to be sub-letting in General Radio (supra) and the appellant no.2 became the tenant of the respondent landlord by reason of sanctioning of the scheme of amalgamation. The only distinction that is sought to be made by Mr. Sarkar is the absence of Standard Pharmaceuticals Ltd. in the instant case. If a company brought about its own death and ceased to exist, any person claiming through him has to establish that the said company is entitled in law to continue in occupation although the landlord may not recognise him as its tenant. A tenancy is created by agreement or conduct. However, such relationship has to be established.
There is no dispute that Standard Pharmaceuticals Ltd. was a tenant in respect of the suit premises. On the death of Standard Pharmaceuticals Ltd., could the defendant no.1 enter the premises and claim tenancy right on the basis of the order sanctioning the scheme of amalgamation. In my considered opinion, it cannot, 33 irrespective of the fact whether Standard Pharmaceuticals Ltd. is on record or not. Standard Pharmaceuticals could not have been on record by reason of the fact the said company had died its natural death. The pleadings of the defendant no.1 clearly show that it is claiming through Standard and it has been categorically stated in the written statement that Standard should be substituted by the defendants. It is the positive case of the defendants that they are to be substituted in place and stead of the original tenant by virtue of the order of amalgamation. The said defendants are harbouring, no doubt, as to their status in the suit premises and they want to justify their continuation in the suit premises on the basis of the order sanctioning the scheme of amalgamation in which the tenancy rights have been assigned to the defendant no.1. Unfortunately this creation of rights by a party is dehors the provisions of the tenancy laws and in breach of the tenancy agreements and cannot bind the plaintiffs/landlords.
If the entry of the defendants is not lawful, the only inevitable conclusion is that they are rank trespassers. An argument is made on behalf of defendants that a legal relationship of landlord and tenant would be discernible from the conduct of the parties. This is just to remind that if a party is under a duty to disclose facts material to the issue, non-disclosure would visit such party with same consequences. In such situation, the inevitable inference would be that the said party is trying to 34 conceal and hide something from the other party. The exchange of letters and documents would clearly show that the said plaintiffs have all throughout regarded Standard Pharmaceuticals Ltd. to be the actual tenant. In fact late Mathuranath Bhattacharyya, a member of the Bar, who was the special officer in respect of the suit premises also used to address letters in connection with the suit premises to Standard Pharmaceuticals Ltd. and such letters were received and relied on by the defendants without any protest.
In order to establish that a tenancy is created by conduct, mere acceptance of rent is not enough, more particularly in a situation where such rent is accepted on a mistaken identity. A conscious mind accompanied by conduct - a total synchronization of the mind and the action - in accepting the rent may give rise to a strong presumption of a landlord-tenant relationship. The evidence of Basant Daga and Rajeev Daga on behalf of the plaintiffs would establish that such acceptance of rent was on a mistaken identity of the present defendants. The evidence of the said witnesses are that till about the middle of 1988 Mr. Basant Daga, the father of the plaintiffs was looking after the affairs of the suit premises. It is only towards the middle of 1998 that the plaintiff No.1 started taking an interest in its affairs. Upon noticing that there were no copies of the rent receipts issued to Standard Pharmaceuticals Ltd. in the plaintiffs' files, in or around 13th September, 1988 the plaintiff No.1 visited 35 Standard Pharmaceuticals Ltd. at the suit premises with three separate consolidated statements of cheques received from Standard Pharmaceuticals Ltd. with the object of obtaining certification of such payments from Standard Pharmaceuticals Ltd. The said consolidated statements for the periods September 1986 to March, 1987, April, 1987 to March 1988 and April, 1988 to August, 1988, all of which are dated 13.9.1988 were all addressed to Standard Pharmaceuticals Ltd. (Exhibits R, R1 and R2). One Shyamal Das certified the said statements and returned the same to the plaintiff No.1 three or four days thereafter. It is from the endorsements made on the said consolidated statements by way of certification of the payments mentioned therein that the plaintiff No.1 first saw that there was some other name mentioned in the same other than the name of Standard Pharmaceuticals Ltd. On enquiry the said Shyamal Das informed the plaintiff No.1 that the other company was a group company which had merged with Standard Pharmaceuticals Ltd. Unable to understand the implication of the same, the plaintiff No.1 thereafter made enquiries with the Registrar of Companies in Kolkata and in Gujrat, obtaned certified copies documents from the Registrar of Companies at Gujarat and thereafter took legal opinion in the matter. It is only in the course of making such enquiries and obtaining such legal opinion that the plaintiff No.1 realized what had happened and the implication thereof (Rajeev Daga Qs. 3, 7, 17 to 30, 131, 132, 36
133) and (Basant Daga Qs.216, 240, 241, 246 to 248, 270 - 272, 275, 324).
Prior to September, 1988 the plaintiffs' peon used to visit the office of Standard Pharmaceuticals Ltd. at the suit premises with the original rent receipts prepared in the name of Standard Pharmaceuticals Ltd. and used to collect rent cheques against the same (Rajeev Daga Qs. 4, 6 and 7) and (Basant Daga Qs.137, 142, 143, 155, 156, 164, 167, 182, 208 and 312). As no copy of such rent receipts used to be retained, the plaintiff No.1 prepared the consolidated statements exhibited as Exhibits R, R1 and R2 with the object of reconciling accounts. After the plaintiff No.1 took charge of the affairs of the suit premises and till he realized the implication of the name appearing with the name of Standard Pharmaceuticals in the endorsements made in the consolidated statements, he received rent in respect of the suit premises only for the months of September and October, 1988 against receipts drawn in favour of Standard Pharmaceuticals Ltd. (Exhibits W and W1.) At all material times Mr. Mathura Nath Banerjee, who was appointed to maintain the building addressed all correspondence to Standard Pharmaceuticals Limited (Exhibit E, F). This clearly reflects that no intimation of the 37 amalgamation was given by Standard Pharmaceuticals Limited or the Defendant No.1 to them.
That no communication of the amalgamation was ever made by Standard Pharmaceuticals Limited or by the Defendant No.1 to the Plaintiffs is evident from the deposition in the suit (Qs. 49, 94, 219, 336 of Basant Daga; Qs. 13-16, 162- 167 of Rajeev Daga; Qs. 58, 60, 68 of Tapan Nandan Bhattacharya). Although it has been contended by the Defendants that the name plates of the Defendant companies wee displayed at the entrance of the suit premises and as such the Plaintiffs were aware that the suit premises was being occupied by the Defendants, it is clear from the cross examination of the Defendants' witness Mr. Tapan Nandan Bhattacharjee that no name plate of any of the Defendant companies were in fact displayed at the entrance of the suit premises (Qs. 73-79 of Tapan Nandan Bhattacharjee).
It is pertinent to mention here that in addition to the fact that no objection was ever raised by the defendant No.1 to the letters which were addressed, bills which were raised and rent receipts which were issued by the plaintiffs only in the name of Standard Pharmaceuticals Ltd., the defendant No.1 had also acted upon such letters and also made payments to such bills and rent receipts. Had the intention on the part of the defendant No.1 38 been to represent itself as a direct tenant of the plaintiffs, there would have been no need whatsoever on its part to use the name standard Pharmaceuticals either in the letters addressed to the plaintiffs or in the cheques issued to the plaintiffs. The very fact that the defendant No.1 has written letters on behalf of Standard Pharmaceuticals through their constituted attorneys and have issued cheques for Standard Pharmaceuticals, a Division of Ambalal Sarabhai Enterprises Ltd. in itself clearly manifests an intention on the part of the defendant No.1 to clandestinely pass itself off as Standard Pharmaceuticals Ltd. or an associated company of Standard Pharmaceuticals Ltd. The said defendants have never informed the plaintiffs that Standard Pharmaceuticals Ltd. has seized to exist and no explanation has come forth from the said defendants for not intimating the plaintiffs and the Special Officer about the order sanctioning the scheme of amalgamation. The dissolution of Standard Pharmaceuticals Ltd. is within the special knowledge of the defendants. Wittingly or unwittingly, whatever might have been the reason, this communication was not made and, on the contrary, the plaintiffs and the Special Officer considered the defendant no.1 as Standard Pharmaceuticals Ltd. That the order sanctioning the scheme would operate as a judgment in rem is of no consequence. The fact remains that by such voluntary agreement, such tenancy right is sought to be assigned to the defendant no.1 and the law on this aspect has already been 39 settled in General Radio (supra). Moreover, tenancy is not an asset of the company and is not transferable [(1983) 1 CHN 153 (paras 4 and 5)]. These are the matters which raise serious credibility about the defence raised by the defendants with regard to its status as a tenant or that fresh tenancy is created by reason of acceptance of the rent by the landlords-plaintiffs as made out in the written statement.
In such circumstances, in my view, it cannot be contended that the plaintiffs either accepted the defendant No.1 as direct tenant or assented to the continuance of the defendant No.1 as a direct tenant in the suit premises or otherwise waived their right to object to the continuance of the said defendant as a tenant in the suit premises and if any reference is required, the following decisions are referred to:-
(2006) 4 CHN 7; (1978) 4 SCC 1; (1976) ILR 2 Cal 247.
In view thereof, the plaintiffs are entitled to a decree for eviction from the suit premises. There shall accordingly be a decree for recovery of khas possession of the suit premises as more fully described in Schedule A to the plaint.
Since the defendants are in wrongful occupation of the suit premises since 1986, the plaintiffs shall be entitled to mesne profits from May 1986 till recovery of possession and Mr. Samrat Sen, a member of the bar, is appointed as special officer to compute the mesne profits and submit the report before this Court 40 within a period of eight weeks from date of communication of this order.
Mr. Sarkar, learned counsel for plaintiffs, prayed for stay of operation of the judgment and decree. The same is considered and rejected.
(SOUMEN SEN, J.) bp./ S. Kumar / TK A.R.(C.R.)