Ragubhir Saran Charitable Trust vs Standard Chartered Grindlays ...
2013 Latest Caselaw 1909 Del

-*      THE HIGH COURT OF DELHI AT NEW DELHI
+                         CS(OS) No. 37/2003
                                               Date of Decision: 29.04.2013
RAGUBHIR SARAN CHARITABLE TRUST .                           .......Plaintiff

                                Through:   Mr. T. K. Ganju, Sr. Adv., Mr.
                                           Ranvir Singh, Ms. Shruti Singh,
                                           Mr. Tileshwar Prasad, Advs.

                                     Versus

STANDARD CHARTERED GRINDLAYS BANK & ANR.
                            ......Defendant
               Through: Mr.Sumit Bansal, Mr.A.Mathur,
                        Advs.

CORAM:
HON'BLE MR. JUSTICE M.L. MEHTA

M.L. MEHTA, J.

1. This is a suit for recovery of possession and mesne profits. The plaintiff in the instant case is a charitable trust duly constituted under the Indian Trusts Act, 1882 and is the landlord of the premises measuring 3900 sq. ft. on the ground floor and 1352 sq. ft. on the mezzanine floor, bearing Municipal No. 6143 situated on Block E, Circus D, Connaught Place, New Delhi (hereinafter suit premises). The possession of the suit premises having been taken over by the plaintiff, the suit only survives for the recovery of mesne profits/damages.

2. The plaintiff‟s case is as follows. The plaintiff submits that it had leased the suit premises to ANZ Grindlays Bank Ltd. for a period of 10 years, commencing from October 1, 1996. And that the terms

and conditions of the said lease were duly recorded vide a lease deed dated January 31, 1998. It submits that it received a letter dated October 18, 2000, from Standard Chartered Grindlays Bank Ltd. (SCGB), defendant no. 1 herein, stating that Standard Chartered Bank, defendant no. 2 herein, had purchased the entire issued share capital of the erstwhile tenant i.e. ANZ Grindlays Bank Ltd. from the Australia and New Zealand Banking Group Ltd. and consequent thereto the name of the tenant had been changed to SCGB.

3. It submits that it was informed by defendant no. 1 vide its letter dated October 23, 2000, that with effect from November 1, 2000 they were changing the signage from the present „ANZ Grindlays‟ to „Standard Chartered Grindlays Bank‟. Thereafter the defendant no. 1 continued to pay the lease charges in relation to the suit premises to the plaintiff. The plaintiff submits that, all throughout, it was given representations and assurances that it was merely the name of ANZ Grindlays Bank Ltd. that had changed to SCGB and otherwise, defendant no. 1 continued to be the same entity with whom the plaintiff had entered into the said lease deed. And that believing these representations and assurances, the plaintiff had accepted the lease charges from SCGB with effect from the month of November 2000.

4. Subsequently, vide a letter dated November 19, 2001, the plaintiff was informed by defendant no. 1 that it was in the process of restructuring it business and as a part of the restructuring, the Indian assets and liabilities of SCGB would be merged with defendant no.

2. By the said letter, it is contended that defendant no. 1 sought the

consent of the plaintiff to substitute defendant no. 2 in the place of defendant no. 1 in respect of the suit premises and thereby assign and/or sublet and/or part with the possession of the suit premises in favour of defendant no. 2. The plaintiff vide its letter dated April 2, 2002 informed the defendant that this arrangement was in violation of clause 10.5 of the lease deed, and amounted to subletting of the premises and/or in any event parting with the possession of the suit premises in favour of a third party. The plaintiff further called upon the defendant no.1, to immediately and forthwith stop the misuse of the suit premises by defendant no. 2 as the suit premises had not been let out to the latter.

5. The plaintiff further submits that vide its letter dated May 7, 2002, the defendant no. 1 replied to the plaintiff‟s letter dated April 2, 2002, informing the plaintiff that the proposed restructuring had not been effected and in fact defendant no. 1 was yet to approach the Reserve Bank of India with their proposal. It was further stated that at the most, there would only be a change of name. The said letter dated May 7, 2002 purported to be in respect of the premises at E- 36, Connaught Place, New Delhi. However, the plaintiff contends that during the course of discussion it was informed that the same position applied in respect of the suit premises as well.

6. The plaintiff contends that defendant no. 1 is a separate and distinct legal entity than defendant no. 2 and that the business activity being carried on by the latter from the suit premises is independent and unconnected with that of defendant no.1. The plaintiff alleges that the use of the suit premises by defendant no. 2 is without its consent and approval of the plaintiff and constitutes gross violation and/or

breach of conditions of the lease deed dated January 31, 1998. Hence, the it submits that it served a notice upon defendant no.1 stating that the use of the suit premises by defendant no. 2 amounted to parting with possession by subletting and/or assignment and or parting with possession of the suit premises without the prior permission of the plaintiff, thereby, constituting a breach of the said lease deed.

7. The plaintiff also submits that on various dates, representatives of the defendant no. 1 as well as defendant no. 2 held meetings with the representatives of the plaintiff for obtaining its consent to the use of the suit premises by defendant no. 2. And that, the plaintiff through their advocate sent a letter dated July 12, 2002, without prejudice to their rights and contentions, informing defendant no. 2 that the plaintiff was willing to consider entering into a fresh lease deed with defendant no. 2, but could not allow the use and possession of the leased premises by the defendant no. 2 as the existing lease deed did not permit the same. In its reply dated July 22, 2002 the defendant no .1, through its advocate wrote to the plaintiff stating that it was not willing to consider the proposal made by the plaintiff, during the currency of the lease deed and can consider it only after its expiry.

8. In another letter dated October 1, 2002, the plaintiff called upon the defendant no. 1 to deposit the security deposit equivalent to six months rent, with periodical increase in rent in terms of the said lease deed. And that vide another letter dated October 5, 2002, the plaintiff through their advocate informed defendant no. 1 that it had observed that defendant no. 2 had started functioning from the suit

premises without any authority or prior consent and that it amounted to a material breach of the terms and conditions of the registered lease deed. Further, the plaintiff called upon defendant no. 1 to intimate the correct status of defendant no. 2 vis-à-vis the suit premises by October 21, 2002. The plaintiff received a response from defendant no. 2 stating that it had taken note of the content of the letter and necessary steps were being taken for compliance.

9. The plaintiff avers that prior to October 2002, the cheques and/or pay orders in respect of the suit premises were being issued by defendant no. 1 and they were accordingly encashed and appropriated by the plaintiff. Thereafter, the plaintiff submits that it had received cheques purporting to be towards increased rental and/or enhanced security deposit in respect of the suit premises from defendant no. 2 under cover of its letter dated October 30, 2002, but it has not encashed the said cheques which it has received from defendant no.2.

10.The plaintiff submits that the lease in favour of defendant no. 1 had been duly terminated by the notice dated November 15, 2002, but the defendants failed and neglected to hand over the peaceful and vacant physical possession of the suit premises till October 14, 2006. Thus, the plaintiff submits that the defendants are liable to pay mesne profits for their unlawful and illegal use and occupation of the suit premises. The plaintiff claims from the defendants jointly and severally, mesne profits at the rate of Rs. 170 per sq. ft. per month for the use and occupation of the suit premises, with effect from December 1, 2002 uptil October 14, 2006. Therefore, the

plaintiff claims mesne profits of Rs. 8, 92, 840/- per month along with interest at the rate of 18% per annum.

11.The plaintiff also submits that in terms of the said lease deed, the defendant no. 1 had deposited a sum of Rs. 11,52,000/- towards security. The said amount is lying with the plaintiff and the plaintiff undertook to repay the same when the mesne profits along with the arrears of rent and interest thereon as determined by this Court were duly paid and received by the plaintiff.

12.In response to these contentions, the defendant has primarily contended that the plaintiff was aware of the acquisition of ANZ Grindlays Bank by defendant no. 2 right from the very beginning. And that by accepting defendant no. 1 as the substituted tenant after being informed of its acquisition vide the letter dated October 18, 2000, the plaintiff had acquiesced to the assignment of the suit premises to the defendant no. 2, which was the same corporate entity as defendant no. 1, albeit, only with a different name. The defendant places reliance on the communication and correspondences exchanged between the parties regarding the change of name of the defendant no. 1 and submits that the plaintiff did not raise any objection or dispute to the said amalgamation a the first instance, and continued to accept the defendant as its tenant, and consequently accepted the rent. However, the defendants submit that the plaintiff, as an after-thought raised frivolous issues of subletting on refusal of the defendant to increase the rent contrary to the lease deed.

13.The defendants also contend the plaintiff is trying to draw a distinction between SCGB and Standard Chartered Back i.e.

defendant no. 1 and 2, even though the plaintiff was aware of the acquisition of the entire share capital of the erstwhile tenant by defendant no. 2, and never raised any objection for more than 2 years. Further, the defendants have also contended that the intention of the plaintiff became all the more clear when in October 2002, when the security amount tendered by the defendant was accepted by the plaintiff and the decision of the plaintiff to not deposit of the said cheques on the ground that defendant no. 2 was not its tenant was merely an after-thought. Furthermore, the defendant no.2 also alleges that the plaintiff blatantly disregarded the lease before its expiry and terminated the tenancy of the defendant. It is submits that clause 9 of the lease deed clearly stipulates, that during the currency of the lease deed, the exclusive right to terminate the tenancy vested with the defendant alone. It is also provided in the lease deed that the defendant shall have exclusive right to terminate the lease deed by service a three month advance notice upon the plaintiff.

14.The defendants also contend that the suit is not maintainable as no cause of action has arisen in favour of the plaintiff. The defendants also deny that the defendant no. 2 is engaged in its own independent business activities from the suit premises without the consent of the plaintiff.

15.Vide Order dated November 14, 2006, this Court framed the following issues for consideration.

(i) Whether the suit filed by the plaintiff is premature?

OPD

(ii) Whether the suit of the plaintiff has been instituted, signed or verified by a duly authorized person. OPD

(iii) Whether the acquisition/merger of Grindlays Bank Ltd.

or defendant no. 1with defendant no. 2 amounts to subletting/assigning/parting with possession of the suit premises or violates any of the terms of the lease deed dated 31 January 1998. OPP

(iv) Whether the plaintiff is aware of the amalgamation and has recognized the Standard Chartered Bank as its tenant. OPD

(v) To what amount, if any as damages/mesne profits, is the plaintiff entitled against the defendants? OPP

(vi) Relief I have heard the arguments of the counsels for both parties at length and also perused through the documents placed on record.

16.With respect to the first two issues, I find that the defendants have not adduced any evidence to suggest that the suit has been filed prematurely. With regards to the valid authorization, the Board Resolution of the plaintiff has been placed on record as PW1/1 and the defendants have not assailed it in the cross examination. Therefore, I find that the suit is not premature and has been validly instituted.

17.With regards the third issue and fourth issue, it must be noted that the position of law on the aspect of sub-tenancy or parting with possession as a result of an amalgamation or merger is well settled. A catena of precedents lay out the proposition on this aspect very clearly. The plaintiff has placed reliance on the decisions of the

Apex Court in Singer India Ltd. v. Chander Mohan Chadha & Ors. AIR 2004 SC 4368 (Singer Case) and M/s. General Radio & Appliances Co. Ltd. & Ors. v. M. A. Khader (Dead) by L.R.s AIR 1986 SC 1218 (General Radio Case). In the Singer Case, the landlord filed an eviction petition on the ground that the tenant, an American company, without obtaining any written consent from the landlord, had parted with the possession of the premises in dispute. The American company contended that it was required to reduce its share capital to 40% in order to carry on business in India, in view of S. 29 of Foreign Exchange Regulation Act, 1973. And that a scheme of amalgamation was sanctioned, whereby the undertaking in India of the American company was amalgamated with the Indian company. Referring to its earlier decision in the General Radio Case, the Apex Court held that though by operation of FERA the Foreign Company had wound up its business, but under the agreement it had assigned the leasehold interest in the demised premises to the Indian Company which was carrying on the same business in the tenanted premises without obtaining the written consent of the landlord and, therefore, it was a clear case of sub- letting.

18.Similarly, in the General Radio Case, the Court held that when the clause of the rent agreement executed by the transferor company expressly prohibited subletting of the tenant premises without the express consent of the landlord, the transfer of the interest of the transferor company including the possession in respect of the tenanted premises under the Order of the High Court, without obtaining a written permission or consent of the landlord could be

said to have been transferred in contravention with the provisions of the act, as well as the conditions laid down in the rent agreement, and the transferee company is liable to be evicted from the tenanted premises.

19.This Court has also previously decided similar matters and has observed the distinction drawn by courts between amalgamations which have taken place by voluntary actions of private parties and acquisitions effected by the operation of law. In the case of Hindustan Commercial Bank Ltd. & Anr. v. British Motor Car Company(1934) Ltd. CM(M) No. 485/2012, it was observed: "It will thus be seen that consistent view of the Supreme Court has been that takeover of a company by the Central Government under a statute stands on a different footing then merger of two companies under the provisions of companies Act. Vesting of tenancy rights in the Central Government or a Government company by virtue of the provisions of the statute was upheld by the apex court in the case of G. Sridharamurti v. Hindustan Petroleum Corporation Ltd. and Anr. AIR 1996 SC 264 and this decision was cited with approval in the case of Singer India Ltd. (Supra). Whereas in cases of later category i.e. transfer of tenancy rights under a scheme of amalgamation under provisions of company Act has been consistently held to be subletting, assignment or parting with possession, in cases falling in the former category viz. where tenancy rights of one company are taken over by the Government and are conferred on some other government company under a statute have never been held to tantamount to subletting, assignment or parting with possession."

20. Thus, the position of law is amply clear. The only two exceptions which can validate a subletting by the transferor company are, if the amalgamation/takeover has been effected by the Central Government under a specific statute; or of the sub-tenancy or assignment created by an amalgamation has been consented

to/acquiesced by the landlord. In the instant case, the amalgamation between ANZ Grindlays Bank and defendant no. 2 certainly did not take place under the aegis of any specific statute. The amalgamation in question took place when the defendant no. 2 acquired the entire shares of the erstwhile tenant ANZ Grindlays Bank, voluntarily. Therefore, unless there is a case of consent/acquiescence from the landlord, the defendants cannot claim that the subletting/assigning of the suit premises is lawful.

21.In order to determine if the plaintiff recognized the defendant no. 2 as its tenant, the communications between the parties as well as the relevant clauses of the contract must be looked into. The contention of the plaintiff is that it became aware of the change in the corporate identity of the tenant, only upon the receipt of the letter dated November 19, 2000. The contents of the letter are reproduced hereunder.

"

Sub: Lease Agreement dated 1 March 1999 in respect of premises at E-36 First Floor, Connaught Place, New Delhi As discussed with you personally, Standard Chartered Grindlays Bank (SCGB) is in the process of restructuring its business. The restructuring in compliance with Indian Laws will result in SCGB Indian assets and liabilities being merged with Standard Chartered Bank ("SCB"). On completion of the above merger, SCB will become the premier foreign bank operating in India. While it may not strictly be necessary to ask for your consent for SCB to stand substituted for SCGB in respect of the above premises, SCB wishes to maintain the cordial relations that SCGB has with you. To this extent, your formal permission to enable to use the above premises is required. SCB is writing to you separately that SCB will duly abide by the contractual terms agreed between the SCB and yourself 9ves). WE seek your formal consent as per draft enclosed.

The actual date and effectiveness of the merger will be intimated to you separately."

22.I see no merit in the plaintiff‟s argument that the above mentioned letter led to the contravention of the lease deed, based on two reasons. Firstly, I am of the opinion that the substitution of Standard Chartered Bank as the tenant is not in contravention of the lease deed. And secondly, in any event, the plaintiff has acquiesced to the said substitution. Regarding the first reasoning, it is pertinent to look at the relevant clauses of the lease deed at this juncture. The recital of the lease deed states as under:

"...LESSEE, which expression shall unless otherwise repugnant to the context or meaning thereof, includes its successors and assigns of the SECOND PART."(emphasis supplied) Clause 10.5 of the lease deed stipulates as follows:

"The Lessee shall not have any right to assign, sublet, or part with the possession of the said property or any part thereof. However, it is agreed and understood that the use of the demised premises by the subsidiary/associate(s) of the Lessee shall not amount to subletting or parting with the possession of the said property in any manner, subject to the following conditions:

(i) No independent tenancy right shall be created or deemed to be created in favour of any such subsidiary/associate of the lessee;

(ii) The lessee shall be responsible and liable for the performance of the obligation as laid down in the lease deed.

(iii) The subsidiary/associate if any, which may function from the said premises shall be set up only to handle the matters connected with the business of the Lessee and for no other activities."

23.It is settled proposition that the correspondence and clauses of an agreement are not to be interpreted like statutes. The Apex Court in the case of Capt. B. V. D'Souza v. Antonio Fausto Fernandes, AIR 1989 SC 1816 has held that in interpreting an agreement, the

intention of the parties are to be looked into. In the instant case, though not happily worded, a harmonious construction of the lease deed reveals that the intention of the parties was not to have an absolute prohibition on assigning or subletting. The lease deed clearly stipulates that parting with possession in favour of subsidiaries or associates shall not be regarded as subletting subject to three conditions. The three conditions are that no independent tenancy shall be created in favour of the assignee; the Lessee shall be held responsible/liable for the performance of the lease deed; and the assignee shall use the premises only to handle matters connected with the business of the Lessee. This stipulation is also in line with the larger premise of the lease deed, wherein the recital stipulates that the term lease deed shall have a wide import and include the successors and assigns of the Lessee.

24.In the instant case, defendant no. 1 has come into existence after it purchased the entire issued share capital of the erstwhile tenant ANZ Grindlays Bank. Where after, the erstwhile tenant ceases to exist as a corporate person, and is „succeeded‟ by the new SCGB, defendant no. 1 herein. The true corporate identity of the defendant no. 1 is the same as defendant no. 2, namely Standard Chartered Bank. This has also been communicated to the plaintiff, wherein it is clearly mentioned that Standard Chartered Bank has bought out the entire share capital of the erstwhile tenant and for the purpose of Government Regulations will be called by SCGB. Even, in the subsequent letter dated November 19, 2001, reference is made to the earlier correspondence dated October 11, 2000. In fact, the erstwhile tenant ANZ Grindlays Bank, has already been taken over

by defendant no. 2 in 2000 and its name changed to SCGB (defendant no.1). This was admittedly communicated by the defendant to the plaintiff, vide letter dated October 18, 2000. It was only restructuring of the businesses which was undertaken subsequently and conveyed vide letter dated November 21, 2001. Therefore, defendant no. 2 was well within its right to validly substitute itself in the place of defendant no. 1 as it was not in violation of the lease deed. Moreover, the plaintiff has not alleged the contravention of any of the three conditions laid down in Clause 10.5.

25.I also find that the cases relied upon by the plaintiff in the instant case are irrelevant and can be distinguished on the facts. In the Singer Case as well as the General Radio Case, the Apex Court held that the in the absent of written consent for subletting as required by the statute or the agreement, the assignee tenant was liable to be evicted. However, in the instant case, it is seen that the lease deed does not require for a consent to be given in writing for any such substitution by a successor/assign/subsidiary/associate bank. The defendant no. 2 was merely writing to the landlord in furtherance of the goodwill and relations that its predecessor maintained with the landlord plaintiff. In any case, it is seen that plaintiff had impliedly consented to the substitution by recognizing the tenancy of defendant no. 1 and thereby acquiescing to the change in the corporate identity of the tenant.

26.It is not disputed by the plaintiff that it received a letter dated October 18. 2000 from its erstwhile tenant ANZ Grindlays Bank

informing the plaintiff of the change of name. The letter clearly states:

"

Change of name of ANZ Grindlays Bank Ltd. to Standard Chartered Grindlays Bank Ltd.

Please be advised that following the acquisition by Standard Chartered Bank of the entire issued share capital of ANZ Grindlays Bank Ltd. from the Australia and New Zealand Banking Group Ltd., the name of ANZ Grindlays Bank Ltd. has been changed to Standard Chartered Grindlays Bank Ltd. We enclose a copy of an extract from Part III - Section 4 of the Gazette of India, October 7, 2000, in this regard being a direction of the Reserve Bank of India in respect of the change of name as above. The registered office of Standard Chartered Grindlays Bank Ltd. is now at the following address: „Level 11, 345 George Street, Sydney, NSW 2000, Australia‟ We enclose a copy of the Notification in Form 203 lodged with the Australian Securities and Investments Commission indicating the new registered office address and principal place of business.

Kindly take note of the above mentioned, and please continue to address all future correspondence to the bank and deal with the Bank at the address in India at H-2, Connaught Circus, New Delhi 110001. Please also note that there is no change in the terms and conditions contained in the agreements/documents/procedures executed/agreed in writing between us on account of the aforesaid changes.

If you have any queries, please do not hesitate to call the undersigned telephone number."

27.From a plain reading of the above mentioned letter, I am of the opinion that this letter is an unequivocal communication of the fact that the erstwhile tenant has been duly taken over by the defendant no. 2. Three essential developments are brought to the attention nof the landlord by the said letter. Firstly, the fact that the entire issued share capital of the tenant has been purchased by defendant no. 2.

Secondly, the fact that this change is notified in the Gazzette in accordance with the requirement under Indian Law. And Thirdly, the change of address of the registered office. Although, the subject of the letter states that the name of the Bank is being changed, the three notable developments, ex facie suggest that it is not only the name of the bank that has undergone the change, but the acquisition of ANZ Grindlays Bank by Standard Chartered Bank (defendant no.2).

28.When the tenant, ANZ Grindlays Bank wrote to the landlord about the acquisition of all its issued share capital by another bank, its intention is to bring to the landlord‟s attention of the change in its corporate identity. Moreover, by specifically making a reference to all the agreements/documents/arrangements between the parties, the tenant has sought to reassure the landlord that though there has been a change in its corporate identity, all the contractual arrangements between the parties will remain the same. If the landlord had a grievance with the change, he must have raised his concern immediately. By not responding to this letter, and allowing SCGB to be a tenant for over a year, the landlord has clearly acquiesced to the change in the tenancy.

29.Furthermore, I see no merit in the plaintiff‟s contention that it was unaware of the change in the corporate identity of the defendant no. 1 and continued to presume that it was merely a name change based on the assurances given by the defendant. Firstly, there are no assurances given either in the letter dated October 18, 2000 or October 23, 2000. While the letter dated October 18, 2000 informs the plaintiff about the background transactions leading to the name

change, the second letter informs the plaintiff that the signage has duly been changed after obtaining the necessary permits. In both the cases, it is seen that the plaintiff did not write to the defendant no. 1 raising any kind of objection. Rather, the plaintiff continued accepting rent from defendant no. 1, SCGB uptil September 2002.

30.On the basis of the correspondences between the parties, I find that the plaintiff was made aware of the amalgamation vide the letter dated October 11, 2000. And by not responding to the said letter, the plaintiff has thereby recognized defendant no. 2 as its tenant. Thus, both these issues are decided against the plaintiff and in favour of the defendants. In view of the findings against the plaintiff in issues 3 and 4 as above, the possession of the suit premises by defendant no. 2 after the notice of termination of tenancy, could not be said to be unlawful. Therefore, the plaintiff is not entitled to any relief of damages or mesne profits as claimed. The suit is hereby dismissed. Decree be drawn accordingly.

M. L. MEHTA, J.

APRIL 29, 2014 kk/rmm