Har Kishan Gupta vs Panna Lal Girdhari Lal
2010 Latest Caselaw 3242 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                                                                           Reserved on: 30.10.2009
                                                                          Pronounced on: 14.07.2010

+                                      CS(OS) 1/1984

       HAR KISHAN GUPTA                                                       ..... Plaintiff

                       Through : Mr. Arun Mohan, Sr. Advocate with
                                 Mr. Arvind Bhatt, Advocate.

                                       versus


       PANNA LAL GIRDHARI LAL                                                 ..... Defendant

                       Through : Ms. Sangeeta Jain, Advocate.

CORAM:
MR. JUSTICE S. RAVINDRA BHAT

1.

     Whether the Reporters of local papers           YES
       may be allowed to see the judgment?

2.     To be referred to Reporter or not?              YES

3.     Whether the judgment should be                  YES
       reported in the Digest?


MR. JUSTICE S.RAVINDRA BHAT
%

1. In the suit, a decree for declaration that property No.2152-2157, Kucha Mir Bikhari, Turkman Gate, Delhi (to the extent of 1608 sq. mtrs. and hereafter called "the suit property") of which the plaintiff claims undivided interest is not a subject matter of any tenancy rights of the first defendant (hereafter called "the company") and that the suit property is liable to be partitioned in accordance with the decree in a previous proceedings, i.e. Suit No.235/1976. A declaration that the suit property is a vacant property is also sought.

2. The suit alleges about the existence of a Hindu Undivided Family (HUF) of Panna Lal whose heir and successor was Girdhar Lal (the latter having died in 1935). The plaintiff contends that Girdhar Lal had five sons, i.e. Babu Ram, Bal Krishan Das, Banwari Lal, Murari Lal and

CS(OS) No. 1/1984 Page 1 Devi Charan. The plaintiff and defendant Nos.2, 5, 6 & 10 are the sons of Bal Krishan Das; defendant Nos. 7 & 8 are the children of a pre-deceased son of Banwari Lal, i.e. G.K. Gupta. It is a matter of record that the plaintiff died in the year 2000 and his legal representatives have been brought on record; likewise the tenth defendant died in 2003 and his legal representatives have been brought on record; the second Defendant, Brij Kishan Gupta died in 1998 and his legal representatives are also on the record. The defendant No. 9 is the widow of Late Bal Krishan Das and defendant nos.11 & 12 are allegedly executors of the Will of Bal Krishan Das.

3. The plaintiff contends that Girdhar Lal, his grandfather died in 1935 and was survived by his five sons including Bal Krishan Das. The family was joint, and carried on business and held property under the style "M/s Panna Lal Girdhar Lal". On 20.05.1940, one of the sons of Girdhar Lal, i.e. Murari Lal sought partition of the joint family properties, which led to division of the joint family business on 11.7.1941. It is alleged that after such partial partition, the five brothers and sons of Girdhar Lal, entered into partnership through a deed registered on 11.07.1941, i.e. M/s Panna Lal Girdhar Lal (hereafter called "PLGL"). The plaintiff also says that each of the five brothers acting as partners in PLGL represented their respective HUFs. It is further contended that on 31.12.1956, the said five brothers, i.e. sons of Girdhar Lal disrupted the joint family in its entirety and partitioned its assets amongst them. This led to disputes and a reference to arbitration by Shri Sheo Prasad Bansal who rendered his Award on 23.05.1957, which was made rule of the Court. Thus, the larger HUF of Girdhar Lal did not survive. The plaintiff submits that not only was judicial sanction to partition granted, but that it was also recognized by Income Tax and Wealth Tax authorities who passed assessment orders. One of the assets of the larger HUF was the land and factory building, i.e. 2152/57, Kucha Mir Bhikhari, Turkman Gate, Delhi measuring approximately 3800 sq. mtrs., which fell to the share of the father of the parties to the dispute, i.e. Bal Krishan Das and his brother Banwari Lal in equal undivided shares as the Karta of their respective HUFs. The suit also alleges that similarly, 20% interest in PLGL held by Bal Krishan Das became the property of Bal Krishan Das HUF.

4. The plaintiff contends that on 09.07.1960 Bal Krishan Das, acting as a Karta carried out partial partition of the assets of his HUF (Bal Krishan Das HUF) in respect of the 1/5th share in the firm PLGL. This was followed by Bal Krishan Das and defendant Nos. 2, 5 & 6 and the deceased Gopal Krishan Gupta entering into another partnership in the name of "M/s Bal

CS(OS) No. 1/1984 Page 2 Krishan Das". The asset for this partnership was the 1/5th share of B.K. Das HUF in PLGL. The plaintiff says that PLGL also owned and managed another business under the style "Krishna Gold and Silver Thread Mills" at Turkman Gate, Delhi.

5. It is submitted that in 1971 Babu Ram, one of the partners of PLGL died and other partners, i.e. Murari Lal, Devi Charan and Ram Saroop Das retired from the firm. Despite this event, M/s Bal Krishan Das continued to carry out the business in PLGL and also M/s Krishna Gold and Silver Thread Mills in partnership with the other partner of the HUF Shri Banwari Lal. The suit mentions about a partition and family settlement on 23.03.1973 as between Bal Krishan Das and Banwari Lal by virtue of which the firm PLGL fell to the share of Bal Krishan Dass as also a shop at Sadar Bazar. It is submitted that during this partition, the suit property was divided by metes and bounds and as a result the 1608 sq. mtrs. of the front portion of the property, was taken by Bal Krishan Das, as the head of his HUF and the rest of the property at back fell to the share of Banwari Lal, as the head of his HUF.

6. It is submitted that on 01.04.1976, a suit for partition of the joint family property was filed by the plaintiff Hari Kishan Gupta and summons in the suit were served upon all the defendants. With this event, it is submitted, the joint tenancy in respect of the specified properties of the six brothers and their father, i.e. Bal Krishan Das as the Karta ceased and they became tenants in common. The suit was eventually decreed on 17.05.1979 by this Court. On 01.03.1978, an advocate, Mr. K.B. Soni was appointed Receiver of the properties. The plaintiff alleges that the suit property, which was being used by PLGL, had fallen to the share of Bal Krishan Das HUF was in its possession. Though, the property belonged to Bal Krishan Das, of which Hari Krishan Gupta, the plaintiff was the member, he was excluded from the firm M/s Bal Krishan Das and in order to perpetuate a fraud on him. To usurp his lawful share, the other members of Bal Krishan Das HUF formed a private limited company, i.e. Panna Lal Girdhar Lal Pvt. Ltd., which is the first defendant in the suit. It is contended that the assets of the firm PLGL (which include Krishna Gold and Silver Mills), the building, machinery and stocks at Turkman Gate as are claimed by the other defendants could not have been transferred to the first defendant, which was incorporated on 12.08.1973.

CS(OS) No. 1/1984 Page 3

7. The plaintiff submits that Defendant Nos. 1- 8 starting holding out that the suit property was occupied by the first defendant as a tenant of the family and such assertion is false. The plaintiff further submits that the property was never leased to the first defendant and that if any documentation or entries in the books of the PLGL or M/s Bal Krishan Das exists to such effect, they are collusive and would not bind him, since he had claimed partition by filing Suit No. 235/1976. The plaintiff also says that Bal Krishan Das had no authority to consent for transfer of the property in favour of the other members of the family to his detriment and that he could not have allegedly leased out the suit property to the first defendant, which is a device created to deprive him (the plaintiff) of his lawful right. The suit property is worth several lakhs of rupees and could not legitimately have been leased out for Rs. 500 per month. According to the suit averments, the cause of action arose on 06.12.1983 when the plaintiff requested the defendants to acknowledge that the suit property was not a subject matter of any tenancy rights and the latter refused to do so. In these circumstances, a decree for declaration is sought.

8. The suit is contested by the defendant nos.1-4. The averments and allegations of the first defendant company and the other contesting defendants are more or less similar. It is firstly argued that the subject matter of the suit is also subject matter of CS (OS) 235/1976. Consequently, the present suit is not maintainable. The relationship of the parties, i.e. the plaintiff and the defendant nos. 2-8 as children of Bal Krishan Dass is not denied. The allegations pertaining to the larger HUF of Girdhar Lal, of which Bal Krishan Das and his brothers were members, the partition of which took place in 1941 and subsequently, the division of the joint family in 1957 etc. are denied generally for want of knowledge. Similarly, the suit property falling to the share of Bal Krishan Das and Banwari Lal in equal shares, the entry of Bal Krishan Das to the firm PLGL as 1/8th partner on 09.07.1960, its other business - Krishna Gold and Silver Thread Mills, partition and family settlement as between Bal Krishan Das and Banwari Lal on 23.03.1973 etc. are denied for want of knowledge. The defendants, however, contradicted themselves by even denying the fact of filing of suit no. 235/1976, which had by then decreed. The defendants' position is that the suit property from the very inception was rented out by Bal Krishan Das HUF to the firm PLGL to run a factory and that the same was sold by Bal Krishan Das to the first defendant company, as a result of which the tenancy of the suit property was also transferred sometime in 1973 for a monthly rental of Rs. 400.

CS(OS) No. 1/1984 Page 4

9. The defendants assert that the rents were continuously received by Bal Krishan Das HUF and later by the receiver appointed by the Court. The defendants contest the plaintiff's assertion that PLGL's tenancy was ever surrendered to Bal Krishan Das HUF. They also deny that M/s Bal Krishan firm was ever a tenant of the premises. It is clarified that Late Bal Krishan Das as a sole proprietor of PLGL had sold the factory and machinery to the company, i.e. the first defendant for a consideration and as a part of the transaction, the tenancy in the suit premises was given in its favour, i.e. the company. The defendants deny any collusion as between themselves or an attempt made by them to usurp the plaintiff's legitimate right. They, on the other hand, say that Bal Krishan Das, as proprietor of PLGL had authority to transfer ownership of the factory to the first defendant company and that the latter could also enter into tenancy in respect of the suit premises. It is submitted that Late Bal Krishan Das was Karta of his HUF and, therefore, had every right to lease out any part of the joint family property. In such capacity, he had leased out the suit premises to the firm M/s PLGL which had tenancy rights that were later transferred to the first defendant company. The defendants disclose that at the plaintiff's instigation, defendant no. 5 had filed proceedings under Section 397/398 of the Companies Act before this Court and that in the said proceedings, the Court had by its order held that defendant nos. 2-4 were its shareholders. The defendants do not deny the plaintiff's title in respect of 1/8th share of the suit property but they submit that the tenancy in favour of the first defendant does not, in any manner, cast a cloud upon that right.

10. The parties to the suit had filed documents, which were later marked as exhibits. On the basis of the pleadings and the documentary materials, this Court on 14.11.1996 framed the following issues for trial: -

1) Whether the defendant No.1 is the lawful tenant of the property in dispute? OPD

2) If answer to the first issue is in the affirmative whether Shri Bal Krishan Das was authorized to create the tenancy, if not, its effect?

3) Relief.

11. When the case was eventually taken up for arguments, the defendants submitted that even though the question of limitation was not raised and an issue struck in that regard, the same goes

CS(OS) No. 1/1984 Page 5 to the root of the dispute and the maintainability of the present proceeding by virtue of Section 3 of the Limitation Act, 1963. They argued that having regard to the materials on record and an overall effect of the pleadings, the plaintiff was aware of the tenancy created in the first defendants' favour, as far back in 1978 and he had chosen to seek declaration by filing a suit in late 1983 beyond the prescribed period of three years. Thus, the suit is not maintainable. The plaintiff and defendants were heard on this aspect. The Court proposes to deal with the question of limitation after discussing the first two issues and rendering findings thereon.

12. The plaintiff argues that the first defendant company is not a public limited company and is closely held and controlled by defendant nos.2 - 4. It is submitted that in fact the said first defendant company is defunct and has not carried out any trade or business activity for over 20 years. It does not even have electricity connection. Here it is argued by learned counsel that on 24.07.1998 in suit No.754 of 1979 Uma Devi v. Vimla Devi, this Court had rejected the claim of the first defendant (which was defendant no. 7 in that suit) that it was tenant in respect of some other property owned by Bal Krishan Das HUF. Reliance is placed on the following findings: -

"On a consideration of the evidence, I am very clear in my mind that the 7th defendant has not produced any evidence to prove the tenancy. Accordingly, the claim of tenancy by the 7th defendant is rejected.

Under these circumstances, the issue is answered against the 7th defendant and the plaintiff shall be at liberty to apply for passing of a final decree. The plaintiff shall be entitled to pendent-lite mesne profits and interest against the 7th defendant. The plaintiff shall be entitled to make appropriate application in this behalf."

It is submitted that the appeal against that judgment was dismissed by the Division Bench on 10.01.2003 and further special leave to appeal, SLP 12199/2004 was rejected by the Supreme Court on 03.09.2004. There is no dispute that the suit property is a joint HUF property and not a co-ownership asset. Reliance is placed upon an the proposition that no co-owner can choose a specific portion of the common property and transfer it to a third person as if it belonged to him exclusively. It is submitted that co-owner has a right to occupy a portion of the common property for the purpose of enjoyment of all co-owners but he had no right to put a stranger in a exclusive portion of the property. Reliance is placed on the judgments reported as Niranjan Mukherjee v.

CS(OS) No. 1/1984 Page 6 Soudamini Dasi, AIR 1926 Cal 714, Ram Sarup Sant Ram Aggarwal v. Chanan Singh, AIR 1964 Punj 525 and Ram Gopal Sawhney v. Suraj Balram Sawhney, 23 (1983) DLT 92.

13. The plaintiff argues that the claim put forward by the defendants about the first defendant's tenancy is sham and bogus and made with the sole object to defeat his rights as well as abusing rent control legislation. It is submitted that the suit property belonged to the larger HUF of Girdhar Lal and was partitioned in 1957. This partition was declaratory as it defined the shares but did not divide the property physically. Thus, the five members of the larger Girdhar Lal HUF continued to be co-owners of the property, but in their capacity as heads of their respective HUFs. The co-ownership of the five HUFs was partitioned in 1973, as a result of which the suit property to the extent of 1627 sq. yds. fell to the share of the parties (to the present suit) through Bal Krishan Das HUF. It is submitted that this defined share in turn became the common property of all members of Bal Krishan Das HUF. Here the plaintiff relies upon the Mulla's Principle of Hindu Law (13th Edition) page 248. The plaintiff also relies upon the Supreme Court decision reported as Valliammai Achi v. Nagappa Chettiar, AIR 1967 SC 1153 where it was held that:

"it is well settled that the share which a co-sharer obtains on partition of ancestral property is ancestral property as regards his male issues".

To the same effect, observations in C. Krishna Prasad v. C.I.T., Bangalore, 1975 (1) SCC 160, are relied upon. It is submitted that there can be no dispute that the property thus belongs to all brothers and members of Bal Krishan Das HUF including the plaintiff. The plaintiff goes on to submit that by reason of business exigencies, PLGL was a tenant to the suit property for a long period. This firm had five partners each of whom represented their HUFs. Partition of this property resulted in the tenancy being surrendered on 23.03.1973, though the possession was delivered some time later. Here the plaintiff relies upon the depositions of the fourth defendant Shivraj who has examined as DW-1 to the following effect:

"Qn. Firm Panna Lal Girdhar Lal surrendered the tenancy of Turk Man Gate property on what date and to whom?

Ans. The firm Panna Lal Girdhar Lal Sold its manufacturing division at Turk Man Gate agreement dated 27.12.73 to Panna Lal Girdhar Lal Pvt. Ltd. commenced its operations w.e.f 1.1.1974.

CS(OS) No. 1/1984 Page 7 Qn. Do I take it that at least till 26.12.1973 firm Panna Lal Girdhar Lal was a tenant in the Turk Man Gate property?

Ans. Yes, I think it can be construed that Firm Panna Lal Girdhar Lal were tenants till 31.12.1973.

Qn. According to you 20 per cent share in the partnership was that of your grandfather as Karta of the joint family. When by whom and to whom, were the tenancy rights surrendered before they were taken over by the sole proprietary concern as stated by you?

Ans. The tenancy rights were never surrendered till December, 1973. I am not aware if there exists any documents vide which the partnership firm had surrendered the tenancy rights to the owner of the property.

I cannot admit or deny the positive suggestion that no document existed in that regard. It is correct to suggest that premises continued to be under the tenancy till 30th December, 1973. I cannot say if the surrender of tenancy thereafter would enure to the benefit of the joint family members. The property was owned by the joint family but was not possessed by them."

14. The plaintiff also relies upon Ex. DW-1/X1, an Application under Order-23, Rule-3, to which the defendant Nos.2, 5 & 6 Gopal Krishan Gupta were the parties. The suit was between Bal Krishan Das and his brother Banwari Lal and the compromise indicated division of various assets including the suit property. Reliance is also placed upon Ex. DW-1/Y, an Agreement entered into between Bal Krishan Das and the first defendant company whereby the ownership of the factory and all rights in respect of the business were transferred to the said company. Particular emphasis is placed upon the following contents of the said document Ex.DW-1/Y:

"Whereas the party of the First part owns plant, machinery, Tins and Sheds, stock raw materials, finished goods, goods in process, stores and spare parts quota rights, import rights of raw material, trade rights, concessions, assets, fixtures, guarantees, debts as shown in the books of accounts, benefits of contracts, tools, dies, licenses, factory licenses, trademarks, securities, telephone connection, electricity, water and power connections and all other rights, facts and privileges of any kind and description whatsoever and wheresoever belonging to or reputed to belong to Shri Bal Kishan Das as sole proprietor of Firm Panna Lal Girdhar La and he has absolute right to transfer, sell and assign the same;

XXX XXX XXX

5. That the Vendee shall, after the purchase of the business together with all the assets and their rights and privileges, shall be entitled to get transferred in its name all rights,

CS(OS) No. 1/1984 Page 8 quota rights, raw material, import entitlements, privileges and benefits and the Vendor shall sign all such documents, letters and also assist the Vendee which may be necessary in this behalf.

XXX XXX XXX

8. That the Vendor has sold his entire plant, machinery etc. and has reserved no right in himself to claim any quota rights and raw material import entitlements and shall not carry on the business of manufacturing of Zari goods and Non-ferrous semies and all the quota rights and import of raw material rights shall vest with the Vendee.

9. The Vendee shall have no right in the tenancy of premises shop No.5718, situated at Sadar Bazar, Delhi and those tenancy premises are in tenancy, occupation and use of the Vendor."

15. The plaintiff further relies upon the affidavit of Late Bal Krishan Das dated 07.10.1980 which was marked as DW-1/X3. The same is to the following effect:

"I, Bal Krishan Das, son of Late Lala Girdhar Lal, aged 81 years, do hereby solemnly affirm and declare on oath as under: -

That the property at Joshi Road belongs to Smt. Uma Devi, Smt. Vimla Devi, Shri Balraj Krishan Gupta, Smt. Sheela Gupta and Smt. Swarna Gupta in equal shares. This property was never taken on rent by Panna Lal Girdhar Lal Pvt. Ltd.

That the property at Turkman Gate belongs to the Joint Hindu Family of which I was the Karta. Now it belongs to mylself, my wife, my five surviving sons and the children of my deceased son Shri Gopal Krishan Gupta in equal share i.e. 1/8th each. This property also was never taken on rent by Panna Lal Girdhar Lal Pvt. Ltd.

I may state here that on account of the close relationship between the parties and the co-owners of the property and the Directors of the Company being the same, there was some user of the property but no tenancy was created at any time, nor was any intended to be created.

Sd/-

              Deponent

               Seal of the Oath Commissioner

              High Court of Delhi

            New Delhi, dated 7.10.1980


CS(OS) No. 1/1984                                                                        Page 9
        Verification

Statements made above in the affidavit are true to my knowledge.

Verified at New Delhi on this the 7th day of October, 1980.

Sd/-

Deponent"

16. It is argued that any transfer, sale, encumbrances or alienation of the HUF property must be preceded by legal necessity and cannot be made by the senior member merely because he had the power to do so. It is submitted, therefore, that the defendants' arguments that Bal Krishan Das as Karta of the HUF had every right to create or transfer the tenancy in favour of the first defendant, cannot be accepted without any proof. The further submission is that the onus of proving the legal necessity or need lies upon the transferee and those asserting it. The plaintiff argues that the defendants had not discharged this onus at all either by proving existence of tenancy or even as to how such alleged tenancy made by the HUF or the plaintiff whose right to the suit property for full enjoyment was adversely affected by such continuation.

17. The plaintiff argues that first defendant company is nothing but a sham and bogus entity of the contesting defendants created only for the purpose of ousting him and his right to the suit property, relies upon the evidence of DW-1 to the following effect:

"Q) During the same period i.e. 26.12.1973 to 1.1.1974 of the then eight members of the HUF, five were share holders of equal extent in the deft. No.1 company?

A) It is correct

..... My grandfather, my father and three uncles were the promoters/directors of the company. The plaintiff was also not the shareholder of the company. I do not know why Mr. Jai Kishan Dass was also excluded. ...

... The beneficiaries of the grant of tenancy were not all six brothers. IN fact, they were directors of the company - four brothers and grandfather. Sh. Jai Kishan Dass and Sh. Hari Kishan Dass were excluded. ...

... There were no other shareholders except the members of the HUF. The two brothers were not represented while the other four were represented. The name of the company was same as that of the joint family.

CS(OS) No. 1/1984 Page 10 ... The total shareholding of the company as of today vests in me and other shareholders. This is under the orders of the Company Court 60 per cent shareholding of the company owned by me and my family and 40 per cent in other shareholders. They are corporate bodies whose names I do not remember. I have interest in those corporate bodies as well. It is correct that as of today, nobody except myself, my family members and other corporate bodies own his company. ...

It is correct that the shareholding of the Company was in equal shares between my father, three uncles and my grandfather on 1st January, 1974. ..."

18. The plaintiff also says that the depositions and the materials on record substantiated his contention that the first defendant company did not in fact carry on any trade or business and that it is in fact a defunct entity. The following extracts of DW-1 depositions are relied upon for this purpose:

"Q) In 1968, do you deny that there was a heavy load electric connection in the suit premises in the name of firm Panna Lal Girdhar Lal?

A) I do not know as to whether it was heavy or light but there were an electric connection.

Q) I put it to you that this electric connection in the name of firm Panna Lal Girdhar Lal which was operating from prior to 1958 continued without any `break' or `transfer' or `assignment' till long past 1970. What do you say?

A) I am not aware. But in 1974-75 DESU authorities disconnected the electric supply and an application was made to transfer in the name of Panna Lal Girdhar Lal Pvt. Ltd. From Panna Lal Girdhar Lal.

Q) Please clarify your answer to the last question so as to say that at the time of the alleged disconnection it was in the name of which entity i.e. firm Panna Lal Girdhar Lal or Panna Lal Girdhar Lal Pvt. Ltd?

A) Panna Lal Girdhar Lal sold some of its assets to Panna Lal Girdhar Lal Pvt. Ltd. for consideration. This also included the transfer of electric connection. When Panna Lal Girdhar Lal Pvt. Ltd. purchased the assets on application was made for effecting change of name of the firm to DESU Authorities.

Q) Can you give the date of this application DESU?

A) I do not remember as I was not a director of Panna Lal Girdhar Lal Pvt. Ltd. then.

... I cannot say even approximately as to what is the turnover of the lessee company.

The company has not been paying the electricity bills as the electricity supplies to the

CS(OS) No. 1/1984 Page 11 premises were got disconnected in 1989 or 1990 at our request. It is incorrect to suggest that since 1974, the company has not a single paise on account of excise duty. Excise duty was paid may be in the year 1976-1977. It is incorrect to suggest that for last 20 years, no sales tax was paid by the company from the premises in question. Before 1989, the manufacturing activity was being carried on and sales tax was paid. Over 30 or 40 people were working in the premises as employees of the company from 1985 to 1989. It is incorrect to suggest that there was no provident fund register maintained in relation to the premises and the employees working during that period. ...."

19. It is argued that the materials on record reveal that the first defendant company was incorporated on 03.08.1973 and its original shareholders were Bal Krishan Das, defendant no.2 Late Gopal Krishan Gupta and defendant nos. 5 & 6. Each of them held 250 shares. These coupled with the complete lack of any material disclosing existence of any lease deed or the surrender or transfer of tenancy by PLGL to the first defendant company, clearly reveal that the first defendant company was not inducted as is alleged, but existed only on paper, registered solely with the intention of defeating his (the plaintiff's) rights. It is submitted that this is an appropriate case for lifting the corporate veil and declaring that the plaintiff is entitled to claim division of this asset by disregarding the said first defendant company. The plaintiff relies upon the decision reported as Jai Narain Paras Rampuria v. Pushpa Devi Saraf, 2006 (7) SCC 756.

20. The defendants in their oral submissions admit to the existence of the PLGL since 1947 and that it was carrying on renowned business of copper wire manufacturing in the suit premises. The partners of such business were Sh. Babu Ram, Bal Krishan Das, Banwari Lal, Murari Lal and Devi Charan in their HUF capacity. They also admit that from 1960 onwards such partners continued but in their individual capacity. The defendants further submit that after 1971, all other partners except Bal Krishan Das and Banwari Lal retired. In 1973, Banwari Lal retired, leaving Bal Krishan Das as sole proprietor of the firm PLGL. The defendants rely upon the Ex. DW-1/5 whereby the business rights in respect of the factory in the suit premises were transferred to the first defendant company. It is submitted that the two tenants were also part of the assets of the said sole proprietorship concern. It is submitted that the first defendant company has been tenant since 01.01.1974 when the property was given on rent by Lala Bal Krishan Das. Reliance is placed upon Ex. DW-1/Y by which transfer of the business and commercial assets of PLGL took place in favour of the first defendant company. The defendants point out to

CS(OS) No. 1/1984 Page 12 the specific clause in the document, stating that the company would have no right over tenancy of shop No. 5798, Sadar Bazar and that the same would continue to be those of M/s PLGL firm. The argument made here is that had Bal Krishan Das wanted the tenancy or benefits in relation to the suit property to be with the HUF, a similar condition would have been incorporated. The absence of such a condition, say the defendants, clearly points to the intention of transferring the existing tenancy in favour of PLGL to the first defendant company.

21. The defendants rely upon rent receipts issued by Late Bal Krishan Das Ex. DW-4/1 and DW-4/2 along with the counter foils of rent books of Bal Krishan Das HUF - DW-4/3 and DW- 4/4. Similarly, a statement of account of ledger of the first defendant company evidencing payment of amounts towards the tenancy regularly, is produced as Ex. DW-4/5, are relied upon. The defendants further rely upon documents such as the Urban Land Ceiling Act returns filed by the sixth defendant- Ex. DW-3/1 and similar returns filed by the fifth defendant and Gopal Krishan Gupta, father of Defendant nos. 7 & 8 - Ex. DW-3/2 & DW-3/3. These, submit the defendants, show that the first defendant was disclosed and always treated as tenant of the suit property.

22. The defendants strongly relied upon the Plaintiff's affidavit dated 16.02.1978 in suit No. 235/1976 where he had deposed about the tenancy of the first defendant and receipt of rent by Bal Krishan Das HUF. The said document is produced as Ex. D-4/6, as the material place, reads as follows:

"3. That I say that the rental income of that factory, land and building ought to be over Rs.7,500/- per month.

4. That the defendants 2 to 6 with the malafide intent of harming me and usurping my interest, have tried to create a fictitious and illegal tenancy in respect of the said factory, land and building in favour of 'M/s. Panna Lal Girdhar Lal Private Limited'.

5. That this 'M/s Panna Lal Girdhar Lal Pvt. Ltd.' is nothing but a name in disguise for defendants 2 to 6.

6. That 'M/s Panna Lal Girdhar Lal Pvt. Ltd.' purports to be a private limited company and its shareholders are the defendants 2 to 6 and some of the sons of defendants 2 to 5. There is no outsider."

CS(OS) No. 1/1984 Page 13 It is stated that the plaintiff was clearly aware of the arrangement and even had knowledge about the tenancy but took no steps to assert his allegations in the form of any legal proceedings and, therefore, had consented to the arrangement. The defendants further placed reliance upon Ex.

DW-4/9 which are Income Tax and Wealth Tax assessment orders filed by his wife.

23. The defendants further rely upon testimony of DW-1 who specifically mentions in the cross examination that the plaintiff had requested/represented to be a Director of the defendant company and was, therefore, aware of its existence but chose to keep away from its affairs. Reliance is also placed upon the affidavit of Bal Krishan Das filed in reply to Ex. D-4/6. The evidence affidavit of Shri K.B. Soni, Advocate appointed as Receiver in Suit No. 235/1976 and the documents marked as Ex. RW/D-1 written by Late Bal Krishan Das regarding the rent received from the first defendant company.

24. It is next submitted that the affidavit of the plaintiff's wife Smt. Uma Devi filed in the present proceedings during discovery and production of documents clearly mentions about assessment orders 1975-76 and thereafter describing the suit property as tenanted by the first defendant company. All these, it is stated, clearly point to the plaintiff's knowledge, from inception, of the tenancy sometime in 1973-74; his acceptance to that fact, his allegations having been made in that respect as far back as in 16.02.1978 despite which he chose not to take any action, all of which should result in dismissal of the suit.

25. It is argued that the materials on record unequivocally point to the tenancy having been created in favour of the first defendant as alleged in the present suit by the contesting defendants, payment of rents regularly, evidenced by receipts, entries made in that regard in the books of accounts maintained by the first defendant, the periodical contemporary annual returns before the statutory authorities by all the defendants etc. In these circumstances, the plaintiff's argument that the first defendant company is a device or is a bogus or sham entity meant or put up to defeat his rights, is baseless.

26. It is argued that so far as the question as to whether the tenancy was created lawfully is concerned, the pleadings and materials clearly point to disruption in the original larger family in 1957-58, continuation of the business of PLGL till 1971, the change in its constitution thereafter

CS(OS) No. 1/1984 Page 14 resulting in two brothers, i.e. Bal Krishan Das and Banwari Lal continuing as partners, the devolution of interest in that partnership firm to Bal Krishan Das pursuant to a family arrangement/settlement resulting in its becoming a sole proprietorship in 1973 and the transfer of the business assets and the running business by Bal Krishan Das in favour of the first defendant company through a document or deed. The document specifically excluded certain assets from the transfer while at the same time mentioning that all other assets of the partnership concern stood transferred to the first defendant. Having regard to all these facts which are duly established on the record, the tenancy in favour of the first defendant was lawfully created.

27. The defendants argue that earlier the HUF used to receive Rs. 350/- from PLGL for the entire area of 3500 sq. yds. After the division in 1973 and the creation of tenancy in favour of the first defendant about half of that area which is the suit property, the family started getting Rs. 4000/- per month. This demonstrates that the HUF of Bal Krishan Das stood to benefit and profit by creation of tenancy or its devolution in favour of the first defendant company. It is argued that these aspects, coupled with the other circumstances show that Bal Krishan Das as Karta of his HUF had every authority to create the tenancy, which he did in favour of his family. It is submitted that having regard to these circumstances, the plaintiff's claim for declaration and further relief of partition is not sustainable.

28. The above discussion would reveal that the parties have no dispute about the following facts:

(1) Girdharlal's sons partitioned their affairs, but entered into a partnership in 1941; later complete division of their assets took place. However, the firm Pannalal Girdharlal continued, with his sons as partners. These brothers were co-owners of the firm's assets, but as head of their respective HUFs. One of the assets was the suit property, as well as the rest of the portion.

(2) The firm Pannalal Girdharlal, underwent change in 1971; only two partners, i.e. Banwarilal and Balkrishan Das (the latter being the father of the plaintiff and the contesting defendants) survived.

(3) A division took place between Banwarilal and Balkrishan Dass; it was recorded in a compromise application, (Ex. DW-1/X1) filed and accepted by court, in 1973. As a result of the

CS(OS) No. 1/1984 Page 15 division, the suit property fell to the share of Balkrishan Das. Similarly, the firm PLGL fell to the share of Balkrishan Das.

(4) The first defendant company was incorporated in August, 1973. Balkrishan Das, and all his sons, except the plaintiff, were shareholders in the company.

(5) The plaintiff filed a suit for partition, Suit No. 235/1976. It was later decreed, declaring that he was entitled to one eighth share in the joint family properties.

29. The contesting defendants urge that no doubt the plaintiff has a share in the suit property, but that a lease was created in favour of the first defendant, validly, by late Balkrishan Dass, as karta of his HUF. It is said that this was beneficial to the family, and cannot be questioned. They also submit that the first defendant is a company having its juristic entity, and enjoys a genuine, valid tenancy, which cannot be impeached by the plaintiff. Now, the materials on record nowhere disclose that a lease, of the kind put forward by the defendant was created. The defendant's witness, DW-1, admitted as such in his evidence, in the following terms:

"Qn. According to you 20 per cent share in the partnership was that of your grandfather as Karta of the joint family. When by whom and to whom, were the tenancy rights surrendered before they were taken over by the sole proprietary concern as stated by you?

Ans. The tenancy rights were never surrendered till December, 1973. I am not aware if there exists any documents vide which the partnership firm had surrendered the tenancy rights to the owner of the property.

I cannot admit or deny the positive suggestion that no document existed in that regard. It is correct to suggest that premises continued to be under the tenancy till 30th December, 1973. I cannot say if the surrender of tenancy thereafter would enure to the benefit of the joint family members. The property was owned by the joint family but was not possessed by them."

The defendants' contention is that the first defendant used to regularly pay rents, and that rent receipts were issued in that regard, all of which are binding on them, as well as the plaintiff. The Court does not discern much substance in such a contention. The issuance of rent receipts or existence of ledgers, and other such documents, or even filing of statutory returns, do not ipso facto amount to creation of a valid tenancy. Not only is such a transaction not documented in a

CS(OS) No. 1/1984 Page 16 formal lease or rent agreement, the futility of such argument is exposed when one sees it from the standpoint that the company, a juristic entity, is supposed to have documented its affairs. No minutes of meeting, disclosing a resolution, authorizing the creation of such tenancy, or even the date of such lease, are part of the record. Furthermore, even though rent receipts and other documents of the company are part of the record, the defendants have not brought any other material by way of company returns, or any other authorization, license, or sales or statutory tax payment evidence, on the record. Indeed, DW-1 in his evidence admitted that the company did not pay any excise or such duties.

30. The Supreme Court, in Valliammai Achi (supra) held that:

"...The property being joint family property Pallaniappa's father was not entitled to will it away and his making a will would make no difference to the nature of the property when it came into the hands of Pallaniappa. A father cannot turn joint family property into absolute property of his son by merely making a will, thus depriving sons of the son who might be born thereafter of their right in the joint family property. It is well settled that the share which a co-sharer obtains on partition of ancestral property is ancestral property as regards his male issues. They take an interest in it by birth whether they are in existence at the time of partition or are born subsequently : [see Hindu Law by Mulla, Thirteenth Edition p. 249, para 223 (2)(4)]. If that is so and the character of the ancestral property does not change so far as sons are concerned even after partition..."

The defendants do not correctly dispute the above proposition. However, they counter by saying that the possession, which enured with PLGL transformed into exclusive rights in favour of late Balkrishan Das, after the division between him and Banwarilal in 1973, and he became the sole proprietor of the business; the business included a tenancy, which was later transferred to the first defendant. The Court here sees an inconsistency. It is because, the firm was joint family, and upon division, in 1957, each partner or brother of Balkrishan Das, continued in the firm not only for himself, but also representing his branch, and his joint family (HUF). There is no evidence indicating the contrary. Consequently, when the successive changes in the firm took place in 1971 (which resulted only in two partners) and in 1973, when the entire business fell to the share of Balkrishan Das, the character of the business, and the assets held by it, as joint family assets of Balkrishan Das, did not undergo a change. If it did, the defendants do not suggest or point how that happened. In the circumstances, it is held that the business of the firm, which fell to the

CS(OS) No. 1/1984 Page 17 share of Balkrishan Das, in 1973, were also part of his HUF assets, and not his own or sole property.

31. That Balkrishan Das was Karta of his HUF, is not in dispute. However, the further assertion of the defendants is that in such capacity, he could create the tenancy, of the kind this Court has to consider, regardless or in the absence of consent of all coparceners. The law on this aspect was declared by the Supreme Court, in the following terms, in Ammathayee v. Kumaresan, AIR 1967 SC 569:

"Hindu law on the question of gifts of ancestral property is well settled. So far as movable ancestral property is concerned, a gift out of affection may be made to a wife, to a daughter and even to a son, provided the gift is within reasonable limits. A gift for example of the whole or almost the whole of the ancestral moveable property cannot be upheld as a gift through affection : But so far as immovable ancestral property is concerned, the power of gift is much more circumscribed than in the case of moveable ancestral property. A Hindu father or any other managing member has power to make a gift of ancestral immovable property within reasonable limits for 'pious purposes'; (see Mulla's Hindu Law, 13th Edn., para 226, p. 252). Now what is generally understood by 'pious purposes' is gift for charitable and/or religious purposes. But this Court has extended the meaning of 'pious purposes' to cases where a Hindu father makes a gift within reasonable limits of immovable ancestral property to his daughter in fulfillment of an ante nuptial promise made on the occasion of the settlement of the terms of her marriage, and the same can also be done by the mother in case the father is dead : (see Kamla Devi v. Bachulal Gupta (AIR 1957 SC 434 : 1957 SCR 452))."

The karta is competent or has the power to dispose of coparcenary property only if (a) the disposition is of a reasonable portion of the coparcenary property, and (b) the disposition is for a recognised "pious purpose".

The law had been previously stated, by the Supreme Court, in Prasad & Ors v V. Govindaswami Mudaliar & Ors 1982- (1)-SCC -185, in the following words:

"61. In Raja Brij Narain v. Mangla Prasad LR 51 IA 129 : AIR 1924 PC 50 : 77, the Judicial Committee, upon consideration of the authorities, laid down the following propositions :

(1) The managing member of a joint undivided estate cannot alienate or burden the estate qua manager except for purposes of necessity; upon (2) if he is the father and the other members are the sons he the estate open to be taken in execution proceedings upon a decree for payment of that debt. (3) If he purports to burden the estate by mortgage, then unless that mortgage is to discharge an antecedent debt, it would not bind the estate. (4) Antecedent debt means antecedent in fact as well as in time, that is to say, that the debt

CS(OS) No. 1/1984 Page 18 must be truly independent and not part of the transaction impeached. (5) There is no rule that this result is affected by the question whether the father, who contracted the debt or burdens the estate, is alive or dead."

In the present case, there is no evidence why tenancy had to be created, in respect of the suit property. Such encumbrance does not fit the description of any of the five conditions summarized by the Privy Council, and affirmed by the Supreme Court. Therefore, the tenancy was not binding upon the plaintiff; it was not validly created.

32. As far as the status of the first defendant company is concerned, the defendants have no doubt showed that it was incorporated, and took over assets of the erstwhile PLGL. A document to that effect also has been brought on record. Yet, there is no gainsaying the fact that the said company is a private one, of which there were no shareholders, other than the contesting defendants and late Balkrishan Das. There is no material on record that the company had any meaningful commercial activity, or was filing Income tax returns, or paying commercial levies, such as sales tax, or excise, etc. The concept of lifting of the corporate veil, pressed by the plaintiff, enables the Court to look beyond the company's corporate or juristic personality to discover whether the company is a guise used by someone or individual to further an unlawful or impermissible purpose. It was held in Kapila Hingorani v. State of Bihar, (2003) 6 SCC 1 that:

"It is now well-settled that the corporate veil can in certain situations be pierced or lifted. The principles behind the doctrine is a changing concept and it is expanding its horizon as was held in State of U.P. v. Renusagar Power Co. ([1991] 70 Comp Cas 127 (SC)) The ratio of the said decision clearly suggests that whenever a corporate entity is abused for an unjust and inequitable purpose, the court would not hesitate to life the veil and look into the realities so as to identify the persons who are guilty and liable therefor."

[Union of India v. Playworld Electronics P. Ltd. [1989] 3 SCC 181; AIR 1990 SC 202, ([1990] 68 Comp Cas 582 (SC)) State of U.P. v. Renusagar Power Co. [1988] SCC 59; AIR 1988 SC 1737 ([1991] 70 Comp Cas 127 (SC)) and Yukong Line Ltd. of Korea v. Rendsbur Investments Corp. of Liberia (No. 2) [1998] 4 All ER 82 (QBD)].

The application of the said doctrine becomes relevant in view of the fact that in the memorandum of association of the company the Sarafs alone were shown to be the subscriber members of the company. In the articles of association they were naturally inducted as the first directors. Subsequently they included their son as a director; and it was all the three directors who executed the agreement for sale. There had, thus, been no shareholder except the Sarafs. Since, they had been attempting to use the personality of the company for furthering their own personal object the doctrine of lifting the veil is

CS(OS) No. 1/1984 Page 19 applicable. They did so in furtherance of their dishonest and fraudulent design. They in fact were the alter ego of the company. It was, therefore, impossible for them to take a different stand vis-a-vis the interest of the company."

Here too, the documentary evidence reveals that the first defendant company was incorporated with all family members as shareholders, except the plaintiff. No reason is furnished for such exclusion. The company does not have the involvement of any stranger or outsider; the defendants have been unable to prove any commercial activity being carried out, by that company, in the suit property. Even the electricity connection to the premises was discontinued. No taxes seem to have been paid. The only activity of the company, revealed to the Court was the regular issuance of receipts and maintenance of such books, which reflected disbursement of those rents. In the circumstances, this is a fit case for lifting the corporate veil, and holding that the said company is a sham, an alter ego, not created for the purpose of trading or carrying on business. Its effect has been to deny the plaintiff his legitimate rights in respect of the suit property. The first issue is therefore, answered in the plaintiff's favour; the tenancy was not created validly. The second issue, about Balkrishan Das being authorized to create the tenancy, is also answered against the defendants, and in favour of the plaintiff.

Limitation

33. The findings on the two issues ought to have been dispositive of the suit. However, the question of limitation was pressed by the defendants, who urged that the plaintiff was aware of the existence of the first defendant company, in 1978, but took no steps to include any relief or seek a declaratory decree, before 1983. It is urged that for the relief of declaration, the period of limitation prescribed is three years. In these circumstances, say the defendants, the suit is time barred. The plaintiff however, counters that the defendants were asked to give his share in the suit property, in 1983, which was denied, and therefore, the suit was filed immediately thereafter.

34. Articles 56-58 of the Limitation Act deal with declarations, and prescribe the period of limitation within which suits are to be instituted. Articles 56 and 57 provide for specific kinds of declarations; Article 58 deals with all other classes of declarations. The period of limitation prescribed is three years, and the starting point of limitation is- "When the right to sue first accrues". As to the meaning of the expression "right to sue" the Supreme Court had ruled, in

CS(OS) No. 1/1984 Page 20 Savalaram v. Dhyaneshwar, AIR 1959 SC 798, that it accrues when the right in respect of which declaration is sought is denied or challenged.

35. The effect of not suing within the period of limitation, and the obligation placed on the Court to apply the enactment, is spelt out in Section 3 of the Act. It prescribes as follows:

"3 BAR OF LIMITATION.

(1) Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence.

(2) For the purposes of this Act--

(a) a suit is instituted--

(i) in an ordinary case, when the plaint is presented to the proper officer;

(ii) in the case of a pauper, when his application for leave to sue as a pauper is made; and

(iii) in the case of a claim against a company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator;

(b) any claim by way of a set off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted--

(i) in the case of a set off, on the same date as the suit in which the set off is pleaded;

(ii) in the case of a counter claim, on the date on which the counter claim is made in court;

(c) an application by notice of motion in a High Court is made when the application is presented to the proper officer of that court."

The mandatory nature of Section 3 was emphasized by the Supreme Court in Manindra Land & Building Corporation Ltd. v. Bhutnath Banerjee, AIR 1964 SC 1336, where it was held that:

"Section 3 of the Limitation Act enjoins a Court to dismiss any suit instituted, appeal preferred and application made, after the period of limitation prescribe therefor by the I Schedule irrespective of the fact whether the opponent had set up the plea of limitation or not. It is the duty of the Court not to proceed with the application if it is made beyond the period of limitation prescribed. The Court had no choice and if in construing the

CS(OS) No. 1/1984 Page 21 necessary provision of the Limitation Act or in determining which provision of the Limitation Act applies, the Sub-ordinate Court comes to an erroneous decision, it is open to the Court in revision to interfere with that conclusion as that conclusion led the Court to assume or not to assume the jurisdiction to proceed with the determination of that matter."

36. In the present case, the plaintiff was aware of the first defendant, and had even sworn an affidavit (Ex. D-4/6) which was filed in Court. The relevant part of that document reads as follows:

"4. That the defendants 2 to 6 with the malafide intent of harming me and usurping my interest, have tried to create a fictitious and illegal tenancy in respect of the said factory, land and building in favour of 'M/s. Panna Lal Girdhar Lal Private Limited'.

5. That this 'M/s Panna Lal Girdhar Lal Pvt. Ltd.' is nothing but a name in disguise for defendants 2 to 6.

6. That 'M/s Panna Lal Girdhar Lal Pvt. Ltd.' purports to be a private limited company and its shareholders are the defendants 2 to 6 and some of the sons of defendants 2 to 5. There is no outsider."

When he affirmed the affidavit, the suit for partition instituted by him (CS (OS) 235/1976) was pending. His knowledge about the intent of the defendants was apparent. His claim for partition however, did not include a declaratory relief sought in the present case. Though he asserts that the defendants denied his claim to share and possession in respect of the suit property for the first time, sometime in 1983, this is not substantiated by any evidence or materials. In the circumstances, it is held that the right to sue had accrued sometime in February, 1978, in the plaintiff's favour. He, however, chose not to file any suit, before late 1983. Therefore, the present suit is time barred.

37. In view of this Court's finding on limitation, the plaintiff is not entitled to any relief. The suit has to be, and is, accordingly dismissed. In the circumstances, the parties are left to bear their costs.

                                                                             S. RAVINDRA BHAT
                                                                                       (JUDGE)
JULY 14, 2010

CS(OS) No. 1/1984                                                                             Page 22