New Delhi Municipal Council vs Ram Kishan Kulwant Rai & Sons
2012 Latest Caselaw 4975 Del

*             THE HIGH COURT OF DELHI AT NEW DELHI

                                          Date of Reserve: 9th August, 2012
%                                 Date of Pronouncement: 24th August, 2012

+      LPA No. 6 OF 2004

       NEW DELHI MUNICIPAL COUNCIL           ... APPELLANT
                   Through : Ms. Madhu Tewatia, Advocate

                                 VERSUS

       RAM KISHAN KULWANT RAI & SONS       ... RESPONDENT

Through: Mr. R.P. Sharma, Adv.

+      LPA No. 29 OF 2004

       NEW DELHI MUNICIPAL COUNCIL           ... APPELLANT
                   Through : Ms. Madhu Tewatia, Advocate

                                 VERSUS

       M/S ALLIED FINANCE (P) LTD.         ... RESPONDENT
                     Through: Mr. Sandeep Mittal, Adv.

+      LPA No. 32 OF 2004

       NEW DELHI MUNICIPAL COUNCIL           ... APPELLANT
                   Through : Ms. Madhu Tewatia, Advocate

                                 VERSUS

       RAM KISHAN KULWANT RAI              ... RESPONDENT
                    Through: Mr. R.P. Sharma, Adv.

+      LPA No. 1016 OF 2004

       NEW DELHI MUNICIPAL COUNCIL           ... APPELLANT
                   Through : Ms. Madhu Tewatia, Advocate

                                  VERSUS

       M/S ALLIED FINANCE PVT. LTD.       ... RESPONDENT
                     Through: Mr. Sandeep Mittal, Adv.

+      LPA No. 1081 OF 2004

       NEW DELHI MUNICIPAL COUNCIL           ... APPELLANT
                   Through : Ms. Madhu Tewatia, Advocate

                                 VERSUS

       M/S ALLIED FINANCE (P) LTD.         ... RESPONDENT
                     Through: Mr. Sandeep Mittal, Adv.


       CORAM :-
       HON'BLE THE ACTING CHIEF JUSTICE
       HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW


A.K. SIKRI, ACTING CHIEF JUSTICE:

1. These appeals are preferred by the NDMC against common judgment delivered by the learned Single Judge. Issue is identical in all these appeals which arises in different assessment years. The appellant NDMC had passed assessment orders dated 11.3.1999 for different years enhancing the rateable value which orders were questioned by filing writ petitions by the respondents herein. The learned Single Judge has allowed those writ petitions partly and this is how the NDMC is in appeal.

2. To state briefly, the matter pertains to the property tax in respect of property No. 112, Aurangzeb Lane, New Delhi of which the respondents

companies, namely, M/s Allied Finance Pvt. Ltd., M/s R.K.K.R. Industries and M/s K.R. Sons Pvt. Ltd. are the co-owners. An arrangement was arrived at between these companies as per which the premises were purportedly let out to the directors and shareholders of these very companies at a monthly rent of Rs.2,250/-. The assessing officer while carrying out the assessment took a view that there was complete identity of these companies with the directors and shareholders and the transaction of letting out was sham. He thus held that it was a fit case where corporate veil had to be pierced to arrive at the true nature of transaction. He further held that the rent was suppressed and what shown was much below the market rent. Accordingly, on the basis of comparable rent in the market, rateable value was fixed taking into consideration the market rent of the property in question.

3. Challenging the assessment order, the writ petitions were filed by the respondents herein. Though orders were challenged on various grounds and even the vires of Section 65 and Section 67 of the Punjab Municipal Act, 1911 were questioned, at the time of hearing only one aspect of the matter was pressed. As per the respondents, even if the corporate veil had to be pierced, whether it could be treated as rented property and the rateable value could be fixed on the basis of comparable rent. The submission of the respondents before the Learned Single Judge was that once the transaction is treated as sham transaction and as per his own findings, the assessing officer had stated that there is complete identity of the companies with the directors and shareholders, then it was a case of self-occupation of the property by the directors and shareholders and could not be treated as a case of letting. On this premise, it was argued that the rateable value in terms of the parameters

under Section 6(i) of the Delhi Rent Control Act, 1958 could only be applied. This contention is accepted by the Learned Single Judge in the following manner:

"However, having arrived at the aforesaid conclusion, in my considered view, the consequence would be that the property would be really a self-occupied property since the directors of the companies are the same as the shareholders and in total control of the companies occupying the property. Once respondent No.1 Council comes to a conclusion that there is identity between the directors and the shareholders of the companies who are occupying the same, the natural conclusion would be that there is no tenancy and it is self-occupied. Thus there is force in the contention of learned counsel for the petitioner to that extent that the consequence of the finding would be that the property would be treated as self-occupied and assessed to rateable value on the basis of cost of land and cost of construction in terms of Section 6(1) and 7 of Delhi Rent Control Act, 1958.

In view of the aforesaid the impugned orders are quashed to the aforesaid extent and it is directed that as a consequence of the transaction of tenancy being held as a sham transaction the property be assessed on the basis of a self-occupied property. The necessary action be taken by the respondent Council within a maximum period of two months from today and the petitioners would be liable to pay the property tax dues in terms thereof. On the petitioners paying the amount and clearing the dues the bank guarantee can be discharged."

4. The neat submission made by Ms. Madhu Tewatia, learned counsel appearing for the appellant NDMC, is that once the agreement was considered as sham, the only effect thereof was not to accept the rent as

disclosed in the agreement, namely, Rs.2,250/- per month. However, that would not mean that the very transaction of letting out of the premises by the company to the directors and shareholders is to be ignored and it could be treated as a case of „self-occupation‟. To buttress this submission, learned counsel referred to various facts noted by the assessing officer on the basis of which he made some observations touching this aspect which, according to the learned counsel, were not taken into consideration by the learned Single Judge.

5. Mr. R.P. Sharma, learned counsel appearing for the respondents, on the other hand, argued on the same lines on which the judgment is rendered by the learned Single Judge and submitted that the NDMC could not blow hot and cold. Once the transaction of letting out itself is treated as sham by the NDMC, the consequence was that there was no letting of the premises at all and the learned Single Judge rightly proceeded on the basis that the premises were self-occupied and, therefore, the premises were assessed to property tax accordingly.

6. We have considered the respective submissions of both the parties. In the first place, we would like to take note of some of the discussions contained in the order of the assessing officer.

7. The property in question was purchased by the respondent company on 18.11.1971. It was assessed to house tax at an annual value of Rs.42,261/- less than 10% for the year 1973-74 after the property was mutated in the name of these respondents companies. Thereafter, notice dated 14.1.1993 was issued stating that while determining the aforesaid

annual value for the year 1973-74, certain vital facts were not taken into consideration and notice under Section 69 of the Punjab Municipal Act, 1911 for the year 1973-74 to 1992-93 and under Section 65 of the said Act for the year 1993-94 onwards was given proposing to enhance the rateable value. Objections were invited to the same and date of hearing posted. In this detailed show cause notice, it was inter alia pointed out that the property is located on a plot measuring 8500 sq. yards. Thereafter, some renovations were carried out by the directors who incurred the expenses on these renovations out of their own resources. It was residential property. Directors of the three respondent companies were Shri Kulwant Rai, Shri Jaswant Rai and Shri Vinay Rai, who was son of Shri Kulwant Rai. The list of shareholders and the shareholding of these persons show that there was complete identity between the three companies and the shareholders. Lease deed dated 1.3.1974 was executed between the companies with their respective directors and it was "for grant of permanent lease and tenancy rights" in respect of that property. According to the assessing officer, all the three companies who had transferred all the rights and interest in the property on "permanent lease" basis had contrived with the lessees to transfer the property for "exclusive" residential purpose without completing the requisite legal formalities and payments required to be made to the Land and Development Officer on such transfer of property, if legally allowed by that authority. Further, it seldom happens that landlord would permit such extensive renovations, modifications and alterations of the structure at the beginning of the tenancy itself. In addition, following pertinent fact was also noted:

"Another significant fact worth noting is the total absence of identification of ownership of the three Companies whereby it would be stated with precision as to which part of the building is owned by which company. The facts regarding tenancy are equally mysterious. No portion of the building has been demarcated for each tenant. The payment of the collusive rent, howsoever petty it is, has not been correlated to the user of any specific portion. It has been reported that the property is being occupied and used jointly by the Rai family having common living area, common kitchen and common residence for the last so many years."

8. The assessing officer also commented upon various clauses of the lease deed and remarked that these facts lead to inevitable conclusion that the disclosed rent in the lease deed is unreasonable and collusive. He pointed out that in the year 1973-74, owners of 2, Aurangzeb Lane were receiving a rent of Rs.10,000/- per month for an area of 10,685 sq.ft. Similarly, the house at 3, South End Road was fetching an actual rent of Rs.6,000/- per month. The assessing officer also recorded that in this case, standard rent in respect of property could not be adopted and the monthly rent of Rs.2,250/- was a totally suppressed figure. It was so stated in the following manner:

"10. The plea of adoption of standard rent in respect of this property would not be plausible as the fixation of monthly rent of Rs.2250/- is based on collusive rent amongst the Companies and individuals belonging to the same family and has no evidentiary value according to the several judgments of the Supreme Court of India.

11. The Committee had grossly erred in treating the aggregate rental value of Rs.2250/- as the not maintainable rent without examining the title deed of the property, the circumstantial evidence leading to the execution of the perpetual sub-lease, non-subscription of share capital absence of enforcement of even this nominal rent, reconstruction by the alleged tenants and several other relevant factors as discussed above. The veil have to be lifted from the collusive nature of rental transactions and determination of the correct Annual Value of the said properties. The portions occupied by each of the tenants have not been specified. The basis of the monthly rent of Rs.2250/- and the correlation of payments by each three tenants to each of the Companies have not been specified as the areas of ownership as well as the occupancy have neither been ascertained, no rate ascertainable. Keeping in view all these facts, the provisions of the Delhi Rent Control Act cannot be applied to the property both for fixation of the standard rent and for eviction proceedings in respect of the unspecified portions of the property. The property is incapable of alienation until all the three Companies mutually proceed with the consent of the hypothetical tenants of perpetual lease deed and the tenants are duly identified for each portion."

9. After giving hearing to the respondents, the NDMC passed the orders dated 20.9.1993 rejecting the objections of the respondents under Section 67 of the Punjab Municipal Act, 1911. We would like to reproduce following portion of the said order which touches upon the issue before us:

"xi) The above said position would show that the three companies in collusion with the shareholders perpetuated and fraud on the Committee since 1973-74 and the Committee also by mistake assessed the property in question at an erroneously low figure certain vital facts were withhold from the Committee at the relevant time.

xii) The inapplicability of the Delhi Rent Control Act to the facts and circumstances of the case has already been discussed in paras 11 and 12 of the notice dated 15.1.1993 and the assessee has not brought in other material fact to controvert the observations made in the aforesaid paras of the show cause notice. No other evidence has been filed in this regard to enable the taking of any other conclusion of these facts...."

10. We have to proceed on the basis that the lease deed dated 1.3.1974 is a sham transaction. Having regard to the aforesaid facts and particularly the fact that the lessees/tenants are the directors and shareholders of the companies and in fact between them, they own entire property. There is thus complete identity between the respondents companies and the lessees. The assessing officer returned these findings and even learned Single Judge proceeded on that basis. There was no dispute raised by the learned counsel for the respondents before us even in these appeals, in so far as this aspect is concerned. The only question is: what is the effect of this finding, namely, when the lease deed executed is to be treated as sham?

11. We are of the opinion that the finding that the lease deed was sham was only to the extent that the rent disclosed therein cannot be treated as the acceptable rent. Otherwise, there is no dispute about letting of the premises. Since the premises were let out by the company to its own directors and shareholders who were in full control of these companies itself, the rent disclosed was much less than the market rent. That means, had these respondent companies let out these premises to a third party, the premises would have fetched much higher rent. Once the lease deed is treated as

sham, for this limited purpose, it would not follow therefrom that the premises are self-occupied. There is no basis for such a conclusion. In so far as letting of the premises is concerned, the same remains undisputed. It is a different matter that premises are let out by the respondent companies to the persons who control these companies. However, that would not mean that if directors and shareholders of the company occupy the premises, it would amount to „self-occupation‟. The corporate veil is lifted to a limited extent, namely, to find out as to whether the rent disclosed in the lease deed was genuine and prevailing market rent or it was suppressed. The premises are not used by the directors and shareholders for the benefit of the company. These are not used to carry out any activities of the company. On the contrary, these premises are used by the directors and shareholders for their residences. In that sense, the companies are different from the directors and shareholders and once these are allowed to be used by the directors and shareholders by virtue of lease deed, the transaction amounts to letting out of the premises and is not self-occupied.

12. Though in different context, following observations from the Supreme Court decision in Western Coalfields Ltd. v. Special Area Development Authority, Korba & Anr, (1982) 1 SCC 125 would clarify the legal position:

"21. The third contention of the Attorney General flows from the provisions of Article 285(1) of the Constitution which says that the property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. Section 127A(2) of the Madhya Pradesh Municipalities Act and Section 136 of the Madhya Pradesh Municipal Corporation Act also

provided that the property tax shall not be leviable, inter alia, on "buildings and lands owned by or vesting in the Union Government". Relying on these provisions, it is contended by the Attorney General that since the appellant companies are wholly owned by the Government of India, the lands and buildings owned by the companies cannot be subjected to property tax. The short answer to this contention is that even though the entire share capital of the appellant companies has been subscribed by the Government of India, it cannot be predicated that the companies themselves are owned by the Government of India. The companies, which are incorporated under the Companies Act, have a corporate personality of their own, distinct from that of the Government of India. The lands and buildings are vested in and owned by the companies: the Government of India only owns the share capital. In Rustom Cavasjee Cooper v. Union of India, (1970) 3 SCR 530 (the Banks Nationalisation case) it was held:

A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the profit.

22. In Heavy Engineering Mazdoor Union v. The State of Bihar and Ors., (1969) 3 SCR 995, the Heavy Engineering Corporation Limited was incorporated under the Companies Act and its entire share capital was contributed by the Central Government. It was therefore a Government Company Under Section 617 of the Companies Act. On the question as to whether the Corporation carried on an industry under the authority of the Central Government within the meaning of Section 2(a) of the Industrial Disputes Act, 1947, it was held by this Court that an incorporated company has a separate

existence and the law recognises it as a juristic person, separate and distinct from its members. The mere fact that the entire share capital of the respondent company was contributed by the Central Government and the fact that all its shares were held by the President and certain officers of the Central Government did not make any difference to that position.

23. The decision of this Court in the A.P.S.R.T.C. v. I.T.O., (1964) 7 SCR 17 puts the matter beyond all doubt. In that case, the Andhra Pradesh Road Transport Corporation claimed exemption from taxation under Article 289 of the Constitution by which, the property and income of a State is exempt from union taxation. This Court, while rejecting the Corporation's claim, held that though it was wholly controlled by the State Government it had a separate entity and its income was not the income of the State Government. Gajendragadkar, C.J., while speaking for the Court, referred to the judgment of Lord Denning in Tamlin v.

Hansaford [1950] KB 18 in which the learned Judge observed:

In the eye of the law, the corporation is its own master and is answerable as fully as any other person or corporation. It is not the Crown and has none of the immunities or privileges of the Crown. Its servants are not civil servants, and its property is not Crown property. It is as much bound by Acts of Parliament as any other subject of the King. It is, of course, a public authority and its purposes, no doubt, are public purposes, but it is not a government department nor do its powers fall within the province of government."

Similar principle was reiterated by a constitution bench judgment of the Supreme Court in Electronics Corporation of India Ltd. v. Secretary,

Revenue Department, Government of Andhra Pradesh & Ors., (1999) 4 SCC 458 in the following words:

"15. A clear distinction must be drawn between a company and its shareholder, even though that shareholder may be only one and that the Central or a State Government. In the eye of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares.

16. In Western Coalfields Ltd. v. Special Area Development Authority, Korba (1982) 1 SCC 125, this Court reviewed earlier judgments on the point. It held that even though the entire share capital of the appellant before it had been subscribed by the Government of India, it could not be predicated that the appellant itself was owned by the Government of India. Companies, it was said, which are incorporated under the Companies Act, have a corporate personality of their own, distinct from that of the Government of India. The lands and the buildings in question in that matter were vested in and owned by the appellant. The Government of India only owned the share capital.

17. In Rustom Cavasjee Cooper v. Union of India, (1970) 1 SCC 248, it was held: (SCC p.273, para 11)

"A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the company is not the property of the shareholders. A share-holder has merely an interest in the company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the distributed profit."

18. In Heavy Engineering Mazdoor Union v. Stale of Bihar, (1969) 1 SCC 765, this Court held that an

incorporated company has a separate existence and the law recognises it as a juristic person, separate and distinct from its members."

13. Though in both the aforesaid cases the Court was concerned with exemption that was claimed by the companies from payment of property tax invoking the provisions of Article 285 of the Constitution of India on the ground that these were wholly Government owned companies, the principle that a clear distinction has to be drawn between a company and its shareholder and the company is a distinct legal entity is the one which is clearly discernible. It is stated at the cost of repetition that in the present case corporate veil was lifted only for limited purpose, namely, to observe whether rent disclosed in the lease deed is genuine and represents the market rent or it is a case where directors and shareholders, taking advantage of their dominant position, have let out to themselves the premises at suppressed rent. This was the only purpose and no more. The learned Single Judge, therefore, committed an error in going further in ignoring the very letting out of the property and treating it as „self-occupied‟, though it was actually a letting transaction, albeit by the respondents companies to their directors and shareholders and not to the outsiders.

14. Mr. Sharma, learned counsel appearing for the respondents companies, had relied upon the judgment of the Supreme Court in Madras Bangalore Transport Company (West) v. Inder Singh & Anr., (1986) 3 SCC 62. After going through the said judgment, we are of the view that the same is not relevant here. In that case, the limited company was formed with partners of existing tenant firm as directors. Both the firm and the

company were operating from the same place, each acting as agent of the other. The landlord filed eviction petition under Section 14(1)(b) of the Delhi Rent Control Act, 1958 on the ground that giving of the part of the premises by the tenant firm to the company amounted to sub-letting, assignment or parting with possession of the premises by the firm to the company as company was separate legal entity. This contention was negatived holding that though the company was a separate legal entity, actually it was only as an alter ego or corporate reflection of the tenant firm and the two were, for all practical purposes, having substantial identity. The following discussion, relied upon by learned counsel for the respondents, would demonstrate the difference between that case and the appeals at hand:

"7. In Vishwanath v. Chaman Lal (supra), a learned single judge of the Delhi High Court held that if an individual took the premises on rent and then converted his sole proprietary business into a private Limited company in which he had the controlling interest he could not be said to have sub-let, assigned or otherwise parted with possession of the premises so as to entitle the landlord to evict him from the premises. In Reliable Finance Corporation v. Clearing House (supra), another learned single judge of the High Court held that where a private limited company was functioning from a rented premises and the Managing Director of that company allowed a firm of which he was a partner to function from the same premises, there was no sub-letting, assignment or parting with possession within the meaning of Section 14(1)(b) of the Delhi Rent Control Act.

8. As mentioned by us earlier, the Madras-Bangalore Transport Company (West) continued to be in occupation of the premises even after the Caravan Goods Carrier

Private Limited came in. They never effaced themselves. The firm allowed Caravan Goods Carrier Private Limited Company, to function from the same premises but Caravan Goods Carrier Private Limited though a separate legal entity, was in fact a creature of the partners of Madras-Bangalore Transport Company (West) and was the very image of the firm. The Limited company and the partnership firm were two only in name but one for practical purposes. There was substantial identity between the limited company and the partnership firm. We do not think that there was any sub-letting, assignment or parting with possession of the premises by Madras-Bangalore Transport Company (West) to Caravan Goods Carrier Private Limited so as to attract Section 14(1)(b) of the Delhi Rent Control Act. In the result the appeal is allowed with costs."

Similar was the position in Inder Mohan etc. v. Jai Perkash, 1978 Rajdhani Law Reporter 367, another judgment cited by Mr.Sharma. In that case as well, tenant converted his individual business into company. He was having tenanted the premises which were being used by the company. In petition filed by the landlord under Section 14(1)(b) of the Delhi Rent Control Act, 1958, this Court held that it would not amount to sub-letting or parting with possession. The manner in which principle of lifting of corporate veil has been discussed in the said case rather advances the case of the appellant herein on the facts of the present case.

"6. In considering the question if the corporate veil is to be ignored in a particular case a distinction must however, be made between cases where the tearing of the corporate veil is being resisted by a Company and cases in which the privilege of the corporate veil is sought to be waived by the Company and those who costitute it. In the former class of cases the question has to be examined in the context of an attempt to deprive the corporation of its

statutory privilege while in the other the corporation in laying itself bare for others to see. The present is a case which falls in the latter category. It is the landlords who are anxious to preserve the corporate veil of the Company, which was constituted by the tenant along with his brothers to continue a joint business. It is the case of the landlord's that it was the Company that operates the business being an entity distinct from those who constitute it. Look at the Company, contend the landlords, but ignore those who are behind it and hold that there has been parting with possession in favor of a new legal entity. It is the promoters of the Company themselves, the tenant and his brothers, as indeed the Company, which offer to raise the corporate curtain to show the persons who are behind the corporate facede. They claim the protection of the Act on the ground that the formation of the Company merely changed the form of business which continued in substance to be the same. It is, Therefore, waiving of a privilege conferred by the statute and would stand on a different footing. If that be the true legal position, the doctrine of tearing of the corporate veil and the limitations in the application of the doctrine would not be involved in the present case, being the voluntary exposure by the Company or those that constitute it. In that situation the position that would emerge is that the tenant, who was carrying on the business along with his brothers as a Hindu undivided family or on his own but otherwise in association with his brothers, continued to carry on the business in association with the brothers and the other members of the family though in a corporate form and without introducing any new element in the business or in the demised premises. The question, Therefore, of the tenant having parted with possession, in fact or in law, did not and could not arise. Such a conclusion would accordingly be determinative of the question as to the tenant's liability to ejectment.

7. For our present purpose it is, however, unnecessary to carry the doctrine of tearing of the veil beyond the conventional way it is looked upon in England and in this country, under an obvious spectre of the decision in the case of Salomon v. Salomon (supra), and one may, Therefore, assume that the corporation, being a legal entity distinct from those who constitute it, there was good reason why a tenant-landlord dispute was not a proper occasion for the investigation as to who was running the business was not a good reason, to tear the corporate veil and to identify those who are behind the Company. The landlords would even then be in no better position. This is so because conversion of the business- by an individual or more than one individual into a corporate form could not in law by itself constitute a parting with possession of the premises in which the business was being carried on. The case of the landlords being primarily based on the contention that the very act of conversion of business into a corporation ipso-facto operated as parting with possession must, Therefore, fail on the short ground that that is not the necessary consequence of such a conversion. There may, however, be something in the arrangement between the tenant and those who along with him constitute the corporation or between the tenant and the corporation, that was brought into existence, which may provide a valid basis for the conclusion that on the constitution of the corporation, or after it came into existence, there has been a parting with possession of the promises in dispute in favor of a person different that the tenant. It has already been pointed out that mere introduction in the premises of another legal entity does not by itself constitute a parting with possession within the meaning of the Act because a parting with possession is not only a physical act but is a legal concept and it must, Therefore, be a parting with legal possession of the premises i.e. the right to occupy as distinct from the actual occupation. The material brought on the record by the parties does not justify the conclusion that there has been any transfer of legal

possession or Transfer of any right or interest in the tenancy in favor of the company. That the tenant and his brothers continued to be on the premises as part of the business of the Company was not disputed. That the rent was throughout being paid to the landlords by the tenant and the receipt was being executed by the landlords in favor of the tenant was also not in dispute. There is nothing either in the Memorandum of Association of the Company or in any instrument between the tenant and the Company, which may be construed as conferring any right or interest in the tenancy in favor of the Company or which may form a valid basis for a claim by the Company that it was entitled to occupy the premises independently of the tenant, there is nothing on the record which may indicate any act of the tenant by which he divested himself in relation to tenancy or that there has been any corresponding vesting in the Company of any rights or interest in the tenancy. The continuance of the business in the form of the Company did not have the effect of diminishing the legal possession of the premises by the tenant or the effacement of the tenant in relation to the premises. The only indicia, according to the landlords, of transfer of legal possession was an admission by the tenant in the course of his statement in cross-examination that the payment of rent to the landlords was duly reflected in the records of the Company. An inference was sought to be drawn on behalf of the landlord from this statement that the rent of the premises was being debited in the books of accounts of the Company to its expense account. There is, however, no warrant for such an inference. There is no indication as to how the payment of rent was being reflected in the books of account of the Company. Whether it was being debited to the tenant or the payment was being shown as made by the Company to the tenant. On this material it is not possible to hold that there has been any transfer of legal possession in favor of the Company so as to entitle the landlords to an order of eviction."

25. In both these cases, the premises were used for the business purposes only. In contrast, in the present case, company is the owner and the premises are not used by the company for its own purpose but for the residence of the directors and shareholders.

26. We are, therefore, of the opinion that the conclusion of the learned Single Judge in the impugned order that the transaction is not held to be a tenancy transaction and the property is to be assessed on the basis of a self- occupied property, is not correct in law or in fact and as a result, the respondents could not claim rateable value fixed in terms of Section 6(1) and Section 7 of the Delhi Rent Control Act, 1958. The transaction in question had to be treated as that of letting out of the premises. The only question to be determined was as to what should be the rent fixed once the rent is found to be as not reflecting the true rent because of the relationship between the parties which exercise was undertaken by the assessing officer.

27. These appeals are accordingly allowed and the impugned order of the learned Single Judge is set aside. As a consequence, the writ petitions of the respondents herein are dismissed.

ACTING CHIEF JUSTICE

RAJIV SAHAI ENDLAW (JUDGE) AUGUST 28, 2012 pk