Swastik Rubber Products Ltd. And ... vs Vasantrao Mahadeo Dhatingan
2004 Latest Caselaw 770 Bom

JUDGMENT

Shah A.P., C.J.

1. The respondent is the landlord and he filed an eviction suit against the petitioner Nos. 1 and 2 who were defendant Nos. 1 and 2 before the trial Court. The premises owned by the plaintiffs were given by him to defendant No. 1 company under a leave and licence agreement dated 3rd September, 1970 and by operation of the statute i e. section 15A of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, herein after referred to as the "Bombay Rent Act" for the purposes of brevity, defendant No. 1 acquired the status of a tenant.

2. It is alleged by the plaintiff that the defendant No. 1 sub-let the premises to defendant No. 2 on 23rd February, 1977 which subletting was in express violation of the provisions of law as also in violation of the agreement between the parties dated 3rd September, 1970. The suit was opposed by both the defendants and it was pleaded that under section 15(1) of the Bombay Rent Act, the tenant is entitled to transfer the tenancy rights in the demised premises along with the running business, goodwill and stock in trade and since the defendant No. 1 has by an agreement dated 23rd February, 1977 transferred his tenancy rights together with his business, goodwill and stock in trade, the assignment or transfer cannot be said to be unlawful.

3. The learned trial Judge considered the rival contentions and came to the conclusion that the act of inducting defendant No. 2 amounted to subletting by defendant No. 1 and he, therefore, decreed the suit directing delivery of possession to the plaintiff.

4. Both the defendants filed independent appeals before the District and Sessions Judge, Nasik challenging the judgment and decree passed in Reg. Civil Suit No. 315/1977 on 16th September, 1987. Both the appeals were taken up by the learned District Judge together and were decided by the judgment and decree dated 16th July, 1990. The learned District Judge dismissed both the appeals as a consequence of which these two writ petitions have been filed in this Court by the unsuccessful defendants. The petitions came up for hearing before D.K. Deshmukh, J., and after hearing the parties the petitions were referred to the larger Bench by a reasoned order of 6th January, 1998. The learned Judge has referred for adjudication the following questions by the larger Bench.

"(1) Whether a tenant who is protected by the Bombay Rent Act, can enter into a contract with the landlord which has the result of tenant giving up his right to transfer his interest in the demised premises after complying with the requirements of the notification issued by the State Government under proviso of sub-section (1) of section 15 of the Act?

(2) Whether such a contract would amount to a tenant being contracted out of benefits conferred on him by the Bombay Rent Act?

(3) Whether the term used in section 15(1) "subject to any contract to the contrary, saves a contract entered into between the tenant and the landlord which prohibits the tenant from assigning, subletting or transferring his interest in the demised premises or it contemplates only a contract between the landlord and the tenant whereby a landlord permits the tenant to transfer, sublet or assign the demised premises?"

5. Mr. Agarwal, learned Counsel appearing for the defendants urged before us that in the suit the plaintiff was seeking a decree of eviction against the defendants under section 13(1)(e) of the Bombay Rent Act. In the submission of Mr. Agarwal, a decree of eviction can be passed by the Court against a tenant under section 13(1)(e) of the Act, if the premises are unlawfully sublet or assigned by the tenant. Mr. Agarwal submitted that as a result of a notification issued by State Government under section 15(1) of the Bombay Rent Act, a tenant is entitled to transfer his right in the demised premises alongwith his business, goodwill and stock-in-trade and such transaction is expressly permissible by proviso to section 15(1) and, therefore, the agreement dated 23rd February, 1977 cannot be said to be illegal or unlawful. Mr. Agarwal further submitted that even after the determination of the tenancy, a statutory tenant continues to have transferable right in the demised premises and it is not correct to say that the contractual tenant alone can transfer tenancy rights under the proviso to section 15(1) and that a statutory tenant is entitled to transfer the tenancy right as a going concern notwithstanding the fact that the contract between the parties prevented the tenant from assigning the premises. In support of his submission Mr. Agarwal relied upon the decisions of the Supreme Court in Gian Devi Anand v. Jeevan Kumar, ; Chandavarkar v. Ashalata, 1986 Mh. L.J. 955 and Kalyanji Gangadhar Bhavat v. Virji Bharmal, 1995 Bom. R.C. 219. In any event, according to Mr. Agarwal, Clause 9(a) of the agreement dated 3rd September, 1970 between the plaintiff and defendant No. 1 cannot be said to be operative and effective as it amounts to contracting out a tenant of the benefits conferred on him by the Bombay Rent Act which is a beneficial legislation.

6. In reply, Mr. Bandiwadekar, learned Counsel appearing for the plaintiff relying upon the judgments of this Court in (1) Philatelie Orient v. Kodak Limited, reported in 1954(7) Bom. L.R. 175 and (2) Kusum Bhimrao v. Javahar Lalchand, urged that Clause 9(a) in the agreement dated 3rd September, 1970 prohibiting the tenant from transferring his tenancy rights was valid and therefore, as defendant No. 1 had transferred his tenancy rights in favour of the defendant Nos. 2 in breach of Clause 9(a) of the agreement dated 3rd September, 1970 the transaction is not protected under section 15(1) of the Bombay Rent Act. Mr. Bandivadekar also urged that the original tenant i.e. defendant No. 1 who after termination of tenancy became a statutory tenant could not have effected a transfer of tenancy rights as it is well settled that a statutory tenant has no right or estate in the tenanted premises. Reliance was placed on the judgment-of the Supreme Court in the case of S.J. Pande v. B.K. Balkrishnan, 1993 Mh.L.J. 1071.

7. After noting several authorities and the provisions of the Act, we are of the opinion that the questions as referred to by the learned Single Judge are required to be reformulated and accordingly we reformulate the questions as follows :

(a) Whether a statutory tenant can assign or transfer his interest in the demised premises under the proviso of section 15(1) although the contract between the tenant and the landlord prevented the tenant from assigning the premises without the previous consent of the landlord?

(b) Whether a tenant who is protected by the Bombay Rent Act, can enter into a contract with the landlord which has the result of tenant giving up his right to transfer his interest in the demised premises after complying with the requirements of the notification issued by the State Government under proviso of sub-section (1) of section 15 of the Act?

(c) Whether such a contract would amount to a tenant being contracted out of benefits conferred on him by the Bombay Rent Act?

8. Before adverting to the submissions made by the learned Counsel on the above issues, we may briefly refer to the relevant provisions of the Bombay Rent Act. Section 13(1)(e) entitles the landlord to ask for the eviction of the tenant if the tenant has, since coming into operation of the Act, unlawfully sublet or after the date of commencement of the Amendment Act, 1973, unlawfully given on licence the whole or part of the premises or assigned or transferred in any manner his interest therein. It is important to bear in mind that the provisions of section 13(1) of the Act are subject to the provisions of section 15 of the Act. In other words the provisions of section 15 have overriding effect over the provisions of section 13(1)(e) of the Act. Section 15(1) of the Act reads as under :

"15(1) Notwithstanding anything contained in any law, but subject to any contract to the contrary, it shall not be lawful after the coming into operation of this Act for any tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein and after the date of commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Act, 1973 for any tenant to give on licence the whole or part of such premises. Provided that State Government may by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such lease of class of leases or the giving on licence any premises or class of premises and to such extent as may be specified in the notification."

9. Section 15(1) prohibits subletting of the demised premises as also assignment or transfer subject to any contract to the contrary. In other words, a tenant will not be entitled to sublet, assign or transfer unless it is permitted by the contract between the parties. However, by proviso to sub-section (1) of section 10 of the Act a power is given to the State Government to exclude from the rigour of sub-section (1) of section 15 of the Act such leases or class of leases as may be specified by the State Government. In exercise of this power given to the State Government in proviso to section 15(1), the State Government has issued the notification dated 21st September, 1948. The effect of that notification is that if a tenant transfers or assigns his entire business carried on in the demised premises as a going concern, together with stock in trade and goodwill then such assignment or transfer is not hit by the provisions of sub-section (1) of section 15 of the Act. Thus, it is clear that if a tenant transfers his interest in the demised premises together with his entire business as a going concern as contemplated by the notification then the transaction would not be contrary to the section 15 of the Act and in such a case, the landlord will not be entitled to a decree of eviction against such tenant under section 13(1)(e) of the Act.

10. In Philatelie Orient v. Kodak Limited (supra) this Court construed the provisions of unamended section 15(1) which contained an absolute prohibition against subletting of premises or assignment or transfer of premises and under the said section the tenant could not sublet the premises even with the consent of the landlord. Chagla, C.J., held that section 15 contains an absolute prohibition against the tenant subletting demised premises or assigning or transferring his interest therein. The proviso to the section serves the limited purpose of withdrawing the absolute prohibition contained in the said section to this extent that if the contract between the landlord and the tenant permits of transfer of interest, the tenant may do so. The proviso does not enable the tenant to assign the tenancy in a case where there is a prohibition against the assignment in the contract of tenancy.

11. Section 15(1) was amended by Amendment Act of 1959 by inserting the words 'subject to contract to the contrary'. Therefore, the decision in Philatelie Orient v. Kodak Limited is not of much assistance in interpreting the amended provisions of section 15(1) of the Act. In Kusum Bhimrao v. Javahar Lalchand (supra) Sharad Manohar, J., has held as follows :

"Juxtaposing this provision against the notification issued by the Government under the proviso to section 15(1). It will be found that the assignment which is permitted by the notification is not subject to any such non obstante clause. It is not provided therein that notwithstanding anything provided in any contract, the assignment effected as per the notification would be valid and lawful. On the plain reading of the notification, therefore, it cannot be said that there is any overriding effect given to the notification over the contractual prohibition against subletting or assigning.

Moreover, even the abovementioned Division Bench ruling of this Court in Spl. C.A. No. 2447/74 clearly brings out the position that if the tenancy per se is not transferable then the notification authorising the assignment would be of no avail to the assignee. It was held in that case that the statutory tenancy was not per se non-assignable having regard to the provisions of section 12(1) of the Rent Act and, hence, it was held that the notification would not given any added right to the transferee, fit he tenancy was per se non-transferable."

12. It becomes clear from the observation of Sharad Manohar, J., that he has inter alia based his judgment on a decision of the Division Bench in Vasant Tatoba Hargude and Ors. v. Dikkaya Muttaya Pujari, , In that case, the Division Bench held that the statutory tenant has no interest or estate in the demised premises and as such he has no right to transfer his leasehold rights. This was the view of the Supreme Court in Anand Nivas (P.) Ltd. v. Anandji Kalyanji's Pedhi, where it was held that the right to remain in possession after the determination of the contractual tenancy is personal and, therefore, it is not capable of being transferred or assigned. Again in Jaisingh Morarji v. Sovani (P) Ltd., , this proposition was reiterated. The Supreme Court in Jagdish Chander Chatterjee v. Sri Kishan, , while dealing with the Rajasthan Act took the view that such an interest is not heritable. Then came Damadilal v. Parashram, , in which the Supreme Court took the view that the right is heritable. This view was followed in Ganpati Sitaram Balvalkar v. Waman Shripad Mage, and Sardar Tota Singh v. Gold Field Leather Works .

13. In Gian Devi Anand v. Jeevan Kumar, (supra), it was held that if the Rent Act in question defined a tenant in substance to mean a tenant who continued to remain in possession even after the termination of the contractual tenancy till a decree for eviction was passed against him, the tenant even after the determination of the tenancy continued to have an estate or interest in the premises. Discussing the interests of a statutory tenant and the contractual tenant, Bhagwati, J., (as the learned Chief Justice then was), at page 687 of the report observed: "In one case, the estate or interest is the result of a contract while in the other, it is the result of a statute. But the quality of the estate or interest is the same in both cases." A.N. Sen, J., speaking for Court observes at 696 of the report, "we find it difficult to appreciate how in this country we can proceed on the basis that a tenant whose contractual tenancy has been determined but who is protected against eviction by the statute, has no right of property but only a personal right to remain in occupation, without ascertaining what his rights are under the statute." In para 35 the learned Judge concluded as follows:

"In our opinion, the view expressed by this Court in Ganapat Ladha v. Shashikant Vishnu Shinde, and the observations made therein which we have earlier quoted, do not lay down the correct law. The said decision does not properly construe the definition of the 'tenant' as given in section 5(11)(b) of the Act and does not consider the status of the tenant, as defined in the Act, even after termination of the commercial tenancy. In our judgment in Damadilal's case, this Court has correctly appreciated the status and the legal position of a tenant who continues to remain in possession after termination of the contractual tenancy. We have quoted at length the view of this Court and the reasons in support thereof. The view expressed by a seven Judge Bench of this Court in V. Dhanapal Chettiar v. Yesodev Awnal, and the observations made therein which we have earlier quote, lend support to the decision of this Court in Damadilal's case. These decisions correctly lay down that the termination of the contractual tenancy by the landlord does not bring about a change in the status of the tenant who continues to remain in possession after the termination of the tenancy by virtue of the provisions of the Rent Act. A proper interpretation of the definition of tenant in the light of the provisions made in the Rent Acts makes it clear that the tenant continues to enjoy an estate or interest in the tenanted premises despite the termination of the contractual tenancy."

14. It is true that in the case of S.J. Pande v. P.K. Balakrishnan, (supra), a two Judge Bench of the Supreme Court has held that the statutory tenant has no right to assign or transfer the premises. However, in a subsequent judgment in Kalyanji Gangadhar Bhagat v. Virji Bharmal (supra) the Supreme Court has clarified that the S.J. Pande's case was not correctly decided as the attention of the Bench was not drawn to Gyan Devi's case.

15. Thus, as a result of the various decisions referred to hereinabove, it must be accepted that a statutory tenant is in the same position until the decree of eviction is passed against him and such a tenant has a transferable right in the demised premises. In fact, in Chandavarkarv. Ashalata (supra), a two Judge Bench of the Supreme Court following Gian Devi's case held that a licensee inducted by the statutory tenant before February 1, 1973 would be entitled to protection under section 15A of the Act.

16. The main question that falls for consideration in the present case is whether a statutory tenancy can transfer his tenancy rights as a going concern under the proviso to section 15(1), even though the agreement prevented such a transfer without previous consent of the landlord. In other words, whether provisions of section 15(1) would override the contract between the parties, which stood determined either by efflux of time or by termination of tenancy. In Kalyanji Gangadhar Bhagat v. Virji Bharmal (supra) the scope of proviso of section 15(1) directly fell for consideration of the Supreme Court. The question was whether a contractual tenant alone can assign or transfer his interest in the demised property and such a right of assignment or transfer is not available to the statutory tenant. The Court held that even a statutory tenant can assign the premises under the proviso and observed as follows :

"The submission of Mr. P. Chidambaram, Senior Counsel, is that the leases or class of leases in the proviso must relate to the contractual leases because there is no question of any statutory lease. We find great difficulty in accepting this submission because these words are prefaced by the transfer of interest in premises held under such leases or class of leases. Therefore, it must be held to be relatable to the premises held under such lease and not merely contractual leases. If that is the interpretation obviously the notification issued by the then Government of Bombay will have to be looked at. The said notification inter alia proceeds as follows :

"This Act shall apply to notices in respect of suits or proceedings which relate to immovable properties situate wholly or partly in the city of Bombay with effect from such date as may be directed by the Provincial Government in this behalf by notification in the Official Gazette.

Provided that the Provincial Government may by similar notification direct that the provisions of this Act shall apply to such notices relating to immovable properties situate wholly or partly in such other area as may be specified in the said notification."

Admittedly, it was a case of transfer of stock-in-trade and their goodwill thereof. In other words, the transfer or assignment in favour of the contesting respondent herein is in the entire interest of transfer of stock-in-trade and the goodwill of such leasehold premises together with the business and the goodwill thereof.

4. The leasehold premises in the notification extracted above means adjective (sic). It has nothing to do with the contractual tenancy. In other words, the premises ought to have been held under a valid lease initially."

17. In light of the above decision of the Supreme Court, it is clear that the leases or class of leases in the proviso need not relate to the contractual leases and the only condition is that the premises must have been held under a valid lease initially. If the premises were held under a valid lease initially then upon termination of such lease, the tenant would continue to hold transferable interest in the premises and he would be entitled to transfer the premises under the proviso alongwith the running business, goodwill and stock-in-trade. Consequently, a statutory tenant would be entitled to assign or transfer his interest in the demised premises under the proviso to section 15(1) irrespective whether the contract contained prohibition against assigning the premises without consent of the landlord. Therefore, the view taken by the two courts below that the assignment of the leasehold premises by the defendant No. 1 to defendant No. 2 would amount to illegal subletting is clearly erroneous. Question 'a' above is answered accordingly. In view of our finding on question 'a, question 'b' and 'c' do not survive.

18. It appears that it was argued before the lower courts that by the agreement dated 23rd February, 1977, entire stock-in-trade was not transferred and, therefore, even if it is assumed that the parties would be governed by the provisions of section 15, then also there is no transfer as contemplated by notification issued under the proviso to sub-section (1) of section 15 of the Act. In so far as this contention is concerned, perusal of the judgment of the Appellate Court shows that this aspect of the matter has been dealt with in detail by the Appellate Court and the Court has rejected this submission of the plaintiff. The learned Counsel appearing for the plaintiff could not show that there is any flaw in the reasoning adopted by the Appellate Court in this regard. The contention has no force.

19. Both the learned Counsel agree that the issue of subletting is the only issue involved in these petitions and therefore, the petitions may be disposed of in light of the finding recorded by us on the said issue.

20. In the result, the petitions succeed. The impugned judgments are therefore, set aside and the suit of the plaintiff is dismissed. There shall be no order as to costs.

Parties to act on a copy of this order duly authenticated by the Court Stenographer. Petition allowed.