Delhi High Court

Shakuntala Gupta vs The Bank Of Rajasthan Limited And ... on 26 February, 2015

Author: Indermeet Kaur

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                  Judgment reserved on : 20.02.2015
                                  Judgment delivered on : 26.02.2015

+     CS(OS) 874/2011

      SHAKUNTALA GUPTA                                     ..... Plaintiff

                         Through       Mr.Sanjiv Bahl, Mr.Udit Gupta,
                                       Mr.Kara Bharihoke and Mr.
                                       Eklavya Bahl, Adv.

                         versus

      THE BANK OF RAJASTHAN LIMITED AND ANR.

                                                           ..... Defendants

                         Through       Mr.R.P.Agrawal, Ms.Piyadarshini
                                       Verma     and       Mrs.Manisha
                                       Agrawal, Advocates.

CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR

INDERMEET KAUR, J.

1 Present suit has been filed by the plaintiff seeking possession of

the suit property i.e. a total area admeasuring 2955 sq. feet comprising

of showroom on ground floor measuring 2005 sq. feet mezzanine floor

measuring 750 sq feet and open space measuring 200 sq. feet on the

ground floor on the rear side of the showroom and forming part of

property No.82, Janpath, New Delhi.

2 It is an admitted position that the suit property had been leased

out to the defendant (Bank of Rajasthan Ltd.) vide registered lease deed

dated 01.10.2008 at a rental of Rs.7,61,500/- excluding all other charges.

In terms of this lease deed the defendant agreed not to sublet, assign,

transfer or part with either in part or whole of the demised premises

without prior consent in writing of the plaintiff. The plaintiff learnt that

the defendant no.1 had parted with possession and almost whole of the

premises in favour of defendant no.2 (ICICI Bank Ltd.) without prior

permission from the plaintiff. Rent has also not been paid to the

plaintiff without any justifiable reasons w.e.f. January, 2011. Legal

notice dated 13.01.2011 had been issued to the defendants seeking

eviction as also non-payment of rent. A reply dated 20.01.2011 was

sent by defendant no.2 (ICICI Bank Ltd.) but in spite of that neither the

property has been evicted nor the rent had been paid. A second legal

notice dated 1.02.2011 was sent by the plaintiff to the defendants

terminating the lease of the defendant no.1 w.e.f. 28.02.2011.

Defendants were called upon to vacate the premises and to pay arrears

of rent w.e.f. January, 2011 to February, 2011 along with interest @

18% per annum failing which the defendants would be liable to pay

damages of Rs.15,43,000/- per month which would be exclusive of

electricity and water charges. A frivolous reply dated 02.3.2011 had

been sent by defendant no.2. Suit for possession and recovery of arrears

and mesne profits and damages was accordingly filed.

3 In the written statement filed by defendant no.2 the primary

submission was that the Bank of Rajasthan Ltd. had been amalgamated

with ICICI Bank Ltd. pursuant to a scheme of amalgamation sanctioned

by the Reserve Bank of India vide its order dated 12.8.2010 which order

had been passed under Section 44A of the Banking Regulation Act,

1949 (hereinafter referred to as the said Act) and pursuant to clause 6(c)

of the Scheme of Amalgamation all properties, estates, assets, rights,

title, interest and authorities accrued to and/or acquired by the Bank of

Rajasthan Ltd. prior to the effective dated (i.e. 12.8.20100 shall be

deemed to have been accrued/acquired for and on behalf of ICIC Bank

Ltd. Submission being that the tenancy rights of defendant no.1 now

vest with defendant no.2. Attention has been drawn to the lease deed

and the word "lessee" as appearing therein which includes "successors

and permitted assigns". Submission being that defendant no.2 (ICICI

Bank Ltd.) clearly falls within the said definition. Additional

submission being that since the amalgamation had taken place under a

statute and has been approved by the Reserve Bank of India the question

of subletting does not arise.

4 On 19.01.2012 the parties agreed that since defendant no.1 had

amalgamated with defendant no.2 after the execution of lease deed, the

only two issues which had arisen for decision were legal in nature and as

such no evidence was required to be led by the parties. Accordingly on

that date the following two issues were framed:

1. Whether as per the Lease Deed dated 01.01.2008, the word

"lessee" includes its successors and permitted assigns? If so, its

effect? (OPD)

ii. Whether the amalgamation of the defendant no.1 with the

defendant no.2/Bank would amount to sub-letting of the suit

premises so as to entitled the plaintiff to a decree of possession

prayer for by the plaintiff? (OPP).

5 Parties had also explored possibility of settlement and matter had

also been referred to the Delhi High Court Mediation and Conciliation

Centre but the matter could not be amicably resolved. The plaintiff has

expired and vide order dated 05.12.2014 his legal heirs have been

brought on record.

6 Both these issues shall be decided by a common discussion. They

revolve around a legal proposition. The legal proposition argued by the

learned counsel for the plaintiff is that since the defendant no.1 (Bank of

Rajasthan Limited) has amalgamated with defendant no.2 (ICICI Bank

Ltd.) voluntarily and by consent of its share holders, it amounts to a

subletting and the lease categorically prohibited such a subletting to the

tenant without permission of the plaintiff which admittedly has not been

obtained; the defendant is thus liable to be evicted from the suit

property. Learned counsel for the plaintiff has placed reliance upon a

proposition laid down by the Apex Court in (2004) 7 SCC Singer India

Ltd.Vs. Chander Mohan Chadha and Ors.. To support this proposition

reliance has also been placed upon a decision of the Single Judge which

has been reversed by the Division Bench in RFA 319/2005 titled

Standard Chartered Grindlays Bank Vs. Raghubir Saran Charitable

Trust. delivered on 14.3.2014. Submission being reiterated that in this

case there was an amalgamation between ANZ Grindlays Bank and the

Standard Chartered Bank; order of eviction had been passed by the

District Judge holding it to be a case of subletting and this decision has

been upheld by the Division Bench. Learned counsel for the plaintiff

submits that the proposition of law which has been laid down by the

Division Bench of this Court in 2007 VIII AD (Delhi) 158 Allahabad

Bank and Ors. Vs. M/s K.Kishore (HUF) would not be applicable to the

facts of this case because in that case the amalgamation had taken place

under Section 45 of the Banking Regulation Act, 1949 wherein the

Division Bench had held that the amalgamation of the United Industrial

Bank Limited with the Allahabad Bank was not a voluntarily act either

on the part of United Industrial Bank or the Allahabad Bank as it was a

decision taken by the Government of India. Submission being that

present case is covered by Section 44A the Banking Regulation Act,

1949 which is distinct from Section 45 of the Said Act. Defendant no.1

having sublet its interest in favour of defendant no.2 which is prohibited

by the lease deed, the plaintiff is entitled to an order of eviction.

7 In counter, learned counsel for the defendant submits that the

proposition of law laid down by the Division Bench in Allahabad Bank

(supra) is fully applicable in the present case. That was also a case

where the sanction of the scheme had been done by the Reserve Bank of

India and in the absence of such a sanction the amalgamation could not

have been effected. There is no voluntariness involved in the present

case. The scheme having been sanctioned under a statute the ratio of

Allahabad Bank (supra) is fully applicable. The amalgamation between

defendant no.1 (Bank of Rajasthan Ltd.) and defendant no.2(ICICI Bank

Ltd.) was involuntarily. It does not amount to a subletting. Learned

counsel for the defendant has also placed reliance upon AIR 1969

Bombay 84 The Presidency Industrial Bank Ltd. Vs. The Hindustan

Leather Industries Ltd. wherein the provisions of Section 44A of the

Banking Companies Act had been discussed. Submission being that

this judgment applies on all fours to the present case as in that case a

Bench of the Bombay High Court had held that the amalgamation

having been taken place under Section 44A (6) of the Banking

Regulation Act, 1949, it would not amount to a subletting. Learned

counsel for the defendant further submits that the judgment reported as

119(2005) DLT 538 Asha Rohtagi & Ors. Vs. Erstwhile New Bank of

India Through General Manager, PNB is also applicable wherein also

the merger of New Bank India with PNB was held not to be a case of

subletting. Learned counsel for the defendant has also placed reliance

upon 2002(3) Arb.LR 316 (Delhi) Larsen and Toubro Ltd. Vs.

D.L.F.Industries Ltd. to support his submission that even presuming

that there was a subletting by defendant no.1 in favour of defendant

no.2, the lease deed categorically specified that the "lessee" would

include its "successors and assigns" and defendant no.2 (ICICI Bank

Ltd. ) is a successor/assign of the Bank of Rajasthan, on that count also

he stands protected.

8 The scheme of amalgamation between defendant no.1 and

defendant no.2 was sanctioned on 12.8.2010; this was by the Reserve

Bank of India. This sanction was under Section 44A of the said Act.

The order dated 12.8.2010 passed by the Executive Director Anand

Sinha clearly states that in the exercise of its power under Section 44A

of the said Act, the RBI has sanctioned the appended scheme of

amalgamation between Bank of Rajasthan (Transferor Bank) and the

ICICI Bank Ltd. (Transferee Bank); this amalgamation shall come into

effect from the close of business on 12.8.2010. Clause 1 of the said

Scheme states that this scheme is pursuant to Section 44A of the said

Actand the other provisions of the said Act and RBI guidelines for

merger and amalgamation. Clause 2 defines the assets of the

undertaking which includes tenancy rights which had been vehemently

harped on by learned counsel for the defendant to substantiate that the

tenancy rights of defendant no.1 stood transferred to defendant no.2.

Part III deals with Transfer and Vesting; it states that all the licenses,

..........leases, tenancy, rights on transfer will stand transferred from the

transferor bank to the transferee bank and all its properties shall also be

deemed to be transferred to the transferee. Clause 20 stipulates that an

application under Section 44A will be made by transferor and the

transferee bank to the RBI within five days after obtaining approval

from its shareholders. Clause 21 specifies that the scheme is conditional

and subject to the consent by the majority representing 2/3rd members of

the transferor bank and the transferee bank in their respective meetings.

The approval had to be obtained on or before 30.11.2010 and only after

the satisfaction of the aforenoted conditions will the merger be effected

between the transferor and the transferee bank.

9 Section 44A of the said Act reads herein as under:

"44A. Procedure for amalgamation of banking companies

(1) Notwithstanding anything contained in any law for the time being in force, no banking company shall be amalgamated with another banking company, unless a scheme containing the terms of such amalgamation has been placed in draft before the shareholders of each of the banking companies concerned separately, and approved by the resolution passed by a majority in number representing two-thirds in value of the shareholders of each of the said companies, present either in person or by proxy at a meeting called for the purpose.

(2) Notice of every such meeting as is referred to in sub-section (1) shall be given to every shareholder of each of the banking companies concerned in accordance with the relevant articles of association, indicating the time, place and object of the meeting, and shall also be published at least once a week for three consecutive weeks in not less than two newspapers which circulate in the locality or localities where the registered offices of the banking companies concerned are situated, one of such newspapers being in a language commonly understood in the locality or localities.

(3) Any shareholder, who has voted against the scheme of amalgamation at the meeting or has given notice in writing at or prior to the meeting to the company concerned or to the presiding officer of the meeting that he dissents from the scheme of amalgamation, shall be entitled, in the event of the scheme being sanctioned by the Reserve Bank, to claim from the banking company concerned, in respect of the shares held by him in that company, their value as determined by the

Reserve Bank when sanctioning the scheme and such determination by the Reserve Bank as to the value of the shares to be paid to the dissenting shareholders shall be final for all purposes.

(4) If the scheme of amalgamation is approved by the requisite majority of shareholders in accordance with the provisions of this section, it shall be submitted to the Reserve Bank for sanction and shall, if sanctioned by the Reserve Bank by an order in writing passed in this behalf, be binding on the banking companies concerned and also on all the shareholders thereof.

[* * *1

(6) On the sanctioning of a scheme of amalgamation by the Reserve Bank, the property of the amalgamated banking company shall, by virtue of the order of sanction, be transferred to and vest in, and the liabilities of the said company shall, by virtue of the said order be transferred to, and become the liabilities of the banking company, subject in all cases to 215[the provisions of the scheme as sanctioned]

............"

10 This section applies when one Banking company is amalgamated

with another company. Clause (1) which starts with a non-obstante

clause specifically provides that no Banking company shall be

amalgamated with another Banking company unless a scheme of

amalgamation has been placed before the shareholders of each of the

Banking companies concerned separately and has been approved by a

resolution passed by the 2/3rd of its shareholders in each of the company

present either in person or by proxy. Sub-clause (2), sub-clause (3) and

sub-clause (4) provide notice of the meetings to be given to the

shareholders of both the companies with a wide circulation in two

newspapers and it is only after the requisite majority has voted for the

scheme, that an application for its sanction will be made by both the

transferor and the transferee company under Section 44 (4) of the said

Act to the RBI. Sanction of the Scheme is then accorded by the RBI

under sub-clause (6).

11 As rightly pointed out by learned counsel for the plaintiff it is

only when two Banking companies agree and decide to amalgamate will

the provisions of Section 44A of the Banking Companies Act come into

operation. It is not by a mandate in any statute that the Banking

companies are forced to amalgamate. It is their willing and voluntary

decision for the best interest of their shareholders; it is their desire that

the scheme of amalgamation would be a better alternate. This is clear

from all the foregoing provisions as enumerated in Section 44A.

12 Section 45 of the said Act reads as under:

Section 45. 1[Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamation.

(1) Notwithstanding anything contained in the foregoing provisions of this Part or in any other law or 2[any agreement or other instrument], for the time being in force, where it appears to the Reserve Bank that there is good reason so to do, the Reserve Bank may apply to the Central Government for an order of moratorium in respect of 3[a banking company].

(2) The Central Government, after considering the application made by the Reserve Bank under sub-section (1), may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it thinks fit and proper and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.

(3) Except as otherwise provided by any directions given by the Central Government in the order made by it under sub-section (2) or at any time thereafter the banking company shall not during the period of moratorium make any payment to any depositors or discharge any liabilities or obligations to any other creditors.

[(4) During the period of moratorium, if the Reserve Bank is satisfied that--

(a) in the public interest; or

(b) in the interests of the depositors; or

(d) in the interests of the banking system of the country as a whole,

it is necessary so to do, the Reserve Bank may prepare a scheme--

(i) for the reconstruction of the banking company, or

(ii) for the amalgamation of the banking company with any other banking institution (in this section referred to as "the transferee bank").

(5)xxxxxxxx

13 It is distinct. It gives power to the RBI to apply to the Central

Government, where it appear to the RBI that there is good reason to do

so for an order for suspension of business of a Banking company and to

prepare scheme of its reconstitution or amalgamation. This discretion to

take recourse to Section 45 of the Said Act is to be exercised by the

expert body i.e. the RBI and it is the decision of the RBI to hold that the

situation calls for an acquisition or amalgamation or reconstruction of a

Banking company. For the purpose of passing order of moratorium a

pre-decisional hearing is also not necessary. Post decisional opportunity

of hearing is sufficient. This has been held by Apex Court in (1997) 6

SCC 417 Bari Doab Bank Ltd. Vs. Union of India (UOI) and Ors. and

wherein the Court had held that a pre-decisional hearing for an action

under Section 45(1) and (2) would have the effect of frustrating the very

object of the action. Section 45(1) and (2) requires a secrecy to be

maintained which must necessarily exclude any pre-decisional hearing.

The moratorium as contemplated under Section 45(1) signifies a

suspension of activity a temporary ban on the performance of legal

obligations and the activity of the banking is suspended during this

period; all this is under the directions and decision of the RBI. There is

no choice given to the banking companies to decide as to whether their

banking business is to continue or remain suspended.

14 Distinction between Section 44A and Section 45 is thus clear,

evident and apparent. Under Section 45 of the said Act the scheme

which is sanctioned is by an act of the Government of India; by

operation of law; it is under a statute. No so under Section 44A where if

on the voluntary intention of the transferor and the transferee Banking

company and only after an approval of the requisite majority of the

shareholders of the two Banking companies the scheme

15 The judgment of the Division bench in Allahaband Bank was

under Section 45 of the said Act. The Court had noted that the

Allahabad Bank which was the transferee company had become the

successor-in-interest for the reason that the amalgamation between the

two banking companies i.e. United Industrial Bank Ltd and the

Allahabad Bank was not a voluntary act on the part of either United

Industrial Bank Ltd or Allahabad Bank; it had a statutory force; it was a

decision taken by the Government of India. In those circumstances, the

Court had noted that this was not a case of subletting.

16 The proposition laid down by the Apex Court in Singer

India(supra) is fully applicable to the present case. This was an

amalgamation which had taken place between two private companies;

under the provisions of Section 391 and 394 of the Companies Act; the

Court had noted that this being a voluntary act on the part of the two

companies which had by 2/3rd majority agreed to this scheme being

sanctioned, it was a clear case where the transferor company parting

with the possession of the tenanted premises in favour of transferee

company which was prohibited in terms of the lease deed, amounted to a

subletting.

17 The relevant extract of the said judgment reads as under:

"In an amalgamation, two or more companies are fused into one by merger or by one taking over the other. Reconstruction or amalgamation has no precise legal meaning. However, in Halsbury's Laws of England (4th Edn., Vol.7), para 1539, certain attributes of amalgamation of companies have been stated. In view of the settled legal position, the original lessee, namely, the American Company ceased to exist with effect from the appointed day i.e. 1-1-1982 and thereafter the Indian Company came in possession and remained in occupation of the premises in dispute."

.......

"Case-law shows that even if there is an order of a court sanctioning the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act whereunder the leases, rights of tenancy or occupancy of the transferor company get vested in and become the property of the transferee company, it would make no

difference insofar as the applicability of Section 14(1) proviso (b) is concerned, as the Act does not make any exception in favour of a lessee who may have adopted such a course of action in order to secure compliance with law."

18 Sections 391 and 394 of the Companies Act is almost parimateria

Section 44 A of the Banking Regulation Act. The judgment of The

Hindustan Leather Industries Ltd (supra) of the Bombay High Court is

distinct. This was an application for transmission of a decree from one

Court to another in proceedings under Order 21 Rule 6 of the Code. In

para 5 of the judgment, the Court had in fact while dealing with the

provisions of Section 44-A of the Banking Companies Act, 1949 vis-à-

vis Section 153-A of the Companies Act, 1913 observed that whether

such a transfer is by operation of law is not a point necessary for the

decision of that case. Nothing in this judgment supports the stand set up

by the defendant.

19 The Division Bench in Standard Charted Bank Vs. Raghubir

Saran Charitable Trust had also upheld the proposition that where the

two private banks i.e. ANZ Grindlays Bank Ltd. merged with the

Standard Charted Bank and an order of eviction had been passed by the

Addl. District Judge on the ground of subletting; such an order suffered

from no infirmity especially in view of the fact that the lease deed

prohibited a subletting and the necessary consequence was that eviction

had to follow. The Division Bench had relied upon the proposition laid

down in Singer India.

20 The clause in the lease deed in the case of Standard Chartered

Bank appears to be almost identical with the instant case. The argument

advanced before the Division Bench was also that a "lessee" includes its

"successors and assigns" and as such even if there was an amalgamation

of two banking companies the Standard Chartered Bank being the new

lessee would be covered under the definition of a "successors and

assigns" of the ANZ Grindlays. This argument was repelled. The

Division Bench had noted that there was an express clause in the lease

deed prohibiting subletting, the question of holding that the definition of

"lessee" which included "successors and assigns" would include a sub-

tenant is a wholly misunderstood proposition; the order of the single

Judge had been reversed.

21 In the instant case clause 10 of the lease deed reads as under;

"10. That Lessee shall not sub-let, assign, transfer or part with in favour of anyone either in part of whole, of the Demises Premises, without the prior consent of the Lessor in writing."

22 It specifically states that the lessee i.e. Rajasthan Bank Ltd would

not sublet, assign, transfer or part any part of the demised premises

without prior consent of the lessor. Admittedly no consent has been

taken by the Bank of Rajasthan to transfer the property; it admittedly

stands parted in favour of ICICI Bank. There being an express

stipulation in the lease deed to the effect, the definition of "lessee"

appearing on the first page of the lease deed which includes its

"successors and assigns" would in no manner help the defendant to

support his submission that the ICICI Bank Ltd. would eb protected as a

lessee. The reading of the document as a whole clearly ridicules such a

proposition.

23 In view of the aforenoted discussion, this Court is of the view that