M/S Bharat Insulation Company vs Dr.Suraj Parkash & Ors
2015 Latest Caselaw 4269 Del

*                   HIGH COURT OF DELHI AT NEW DELHI
+                        RC.S.A. 12/2002 & C.M. No.16924/2011

                                                  Decided on :          May 27, 2015

M/S BHARAT INSULATION COMPANY             ..... Appellant
              Through: Mr. H.L. Tiku, Senior Advocate with
                       Ms. Yashmeet Kaur, Advocate.

                                 versus

DR.SURAJ PARKASH & ORS.1                                          ..... Respondents

                         Through:         Mr. Gaurav Sarin, Ms.Charul Sarin,
                                          Ms. Veera Angrish & Mr. Ajitesh K. Kir,
                                          Advocates.
CORAM:
HON'BLE MR. JUSTICE V.K. SHALI

V.K. SHALI, J.

1. This is a regular second appeal (rent) filed by the appellant against

the judgment dated 06.02.2002 passed by the Additional Rent Control

Tribunal in RCA No.883/1996 titled M/s Bharat Insulation Company

Thane (State of Maharashtra) & Ors. vs. Dr.Suraj Prakash and Ors by

virtue of which the learned Addl. Rent Control Tribunal ('ARCT' for

short) has upheld the judgment of eviction dated 01.10.1996, passed

Vide Order dated 30.04.2009 Ms. Shahnaz Parveen has been substituted as Respondent No.1, but no amended memo of parties is on record.

against the appellant by the Addl. Rent Controller on the ground of

subletting under Section 14 (1) (b) of the Delhi Rent Control Act.

2. Before dealing with the submissions made by the learned senior

counsel for the appellant, it may be pertinent here to give brief admitted

facts.

3. Appellant No.1- M/s.Bharat Insulation Company Thane is a firm of

which Sh.Dulerai Ratilal Mehta, Sh.Vinod Dulerai Mehta, Sh.Mahendra

Ratilal Mehta and Sh.Hasmukh Ratilal Mehta were the partners. Though

they become partners of the firm on different dates but it was before

taking the premises on rent. The tenanted premises consisted of a hall, a

side room, rear terrace and front open space with separate toilet and WC

on the ground floor of the property No.4653/201, Darya Ganj, Ansari

Road, Delhi. The site plan of the tenanted premises was filed along with

the eviction petition and the same was exhibited as AW1/36. The purpose

of letting was non residential and the rent was Rs.925 per month.

4. The case set up by the respondent in the eviction petition was that

the premises in question was let out to M/s.Bharat Insulation Company

Thane (State of Maharashtra), a partnership firm, which consisted of four

partners. It was alleged that the partnership firm, after having inducted

the appellant No.6, M/s. Covered Wires (P) Limited, a company

incorporated under Companies Act and having its registered office at

Bombay as a partner had sublet or parted possession of the tenant

premises in favour of the said appellant No.6. Thus the appellants were

liable to eviction. It was pleaded that this fact was learnt by the

respondent/landlord in October, 1983 when the rent was remitted by

cheque for and on behalf of M/s. Bharat Insulation Company by M/s.

Covered Wires (P) Ltd. (the company). On account of dissolution of the

appellant no.1 on 31.5.1983, without the prior consent of the landlord

later on the appellant No.6 was given the exclusive right to occupy the

premises which tantamounted to sub-letting under section 14 (1) (b).

5. It was admitted in the written statement that the appellant Nos.2 to

6 were the partners of the appellant No.1 and the appellant No.1 was

dissolved on 31.5.1983 whereupon its assets and liabilities were taken

over by the appellant No.6. It was stated that appellant Nos.2 to 5 were

the partners of appellant No.1 and they were also the Directors of the

appellant No.6 and thus having controlling interest in the affairs of the

appellant No.6/Company and, therefore, there was no question of

subletting, assigning or parting with possession and consequently no

order for ejectment could be passed against the appellant.

6. The respondent herein filed its replication and contested the

aforesaid stand.

7. The learned Additional Rent Controller recorded the evidence of

the parties. The appellant examined three witnesses namely RW-1/Hari

Sachdev, an official from the Sales Tax department, RW-2/Narinder Pal,

resident/representative of appellant No.1 and RW-3/D.R. Mehta who is

one of the partners of the dissolved firm. So far as the respondent is

concerned, he himself appeared as the sole witness on his behalf being

AW-1.

8. The issue before the trial court was very short one, that is, whether

the transfer of tenancy in favour of appellant No.6 by appellant No.1 on

its dissolution constituted sub-letting under the provisions of Section 14

(1) (b) of the DRC Act. The learned ARC after referring to various case

laws decided the question of subletting in favour of the respondent

holding that so far as appellant No.6 is concerned, it was a distinct legal

entity and, therefore, it was deemed that respondent Nos.2 to 5, who were

the original partners of appellant No.1 have sublet, assigned and parted

with possession of the tenanted premises to a different legal entity. So far

as the plea of the appellant No.6 being a partner in the appellant No.1 was

concerned, it was observed that the appellant No.6 was not a partner of

appellant No.1 at the time of creation of tenancy on 20.2.1971 and,

therefore, it could not have taken the tenancy rights on account of

appellant No.1 having been dissolved.

9. As regards some of the individual partners having controlling

interest in the appellant No.6 is concerned, it was held by the learned

ARC that there was no evidence produced by the appellant except one

document in support of the aforesaid contention and, therefore, it could

not be said that appellant Nos.2 to 5 were either having controlling

interest in appellant No.6 at the time of its incorporation..

10. Feeling aggrieved, the appellant preferred an appeal before the

learned ARCT, which was dismissed. The ARCT concurred with the

reasoning given by the ARC with respect to the appellant's contention of

having controlling interest in appellant No.6. The appellant had filed an

application under Order 41 Rule 27 CPC before ARCT for producing by

way of additional evidence a photocopy of an alleged statement of M/s

Covered Wires (P) Ltd. submitted to the Registrar of Companies,

Maharashtra, Bombay dated 17.2.1984 but the same was rejected by

ARCT while observing that the document did not suggest of the vesting

of control in either of erstwhile partners and therefore, cannot be allowed

to be brought on record under Order 41 Rule 27 CPC.

11. The aforesaid order dated 6.2.2002 of the ARCT is being assailed

in the present appeal. Vide order dated 4.4.2002 of this court, the

operation of the eviction order has been stayed.

12. The learned senior counsel for the appellant has vehemently

contested that the present appeal raises substantial questions of law which

are as under:

(a) Whether induction of a company incorporated under the companies act as a partner to the partnership firm by the existing partners can be said to tantamount to subletting, assigning or parting with possession when the company is owned, controlled and managed by some partners and

(b) Whether the continuation of business by one of the partners of the partnership firm, upon its dissolution will tantamount to subletting, assigning or parting with possession of the suit property.

13. The learned senior counsel for the appellant has alleged that the

learned ARC has grossly erred by holding that as there was no evidence

on record to show that the appellant Nos.2 to 5 had a major control over

the company, appellant No.6 during 1.6.1983 to 27.12.1984, the

possibility does exist that they may lose control over the company in

future as well. It is further alleged that it is well settled that a partnership

firm is only a compendius way of describing the partners of the firm and

so far as the partnership firm is concerned, it has no legal sanctity and it

acts for and on behalf of the partners and, therefore, the partners in their

individual capacity become tenants of the rented premises. In view of the

aforesaid, it is stated that the ARC erred in appreciation of facts.

14. The learned senior counsel for the appellant in support of his

contention has relied upon the following judgments:

i) Murli Dhar v. Chuni Lal & Ors; 1970 RCJ 922;

ii) Nand Kishore Mangilal Gajabi and Ors.v. Keshav Dadaji Jadhav & Ors.; 1980 (1) RCJ 90.

iii) Kanahiya Lal Balkishan Dass v. Labhu Ram; AIR 1971 Delhi 219.

15. The second submission of the learned counsel for the appellant is

that the dissolution of a partnership does not by itself bring to an end to

the tenancy of partners. The fact that the appellant No.1 was dissolved in

1983, did not dissolve the tenancy and it continued to exist in the shape of

assignment in favour of appellant No.6.

16. It is contended by the learned senior counsel for the appellant that

in case of subletting, there must be existence of animus domini and

corpus possessionis meaning thereby that the person who has dominion

over the property must have the intention coupled with the possession of

the premises in question. Since, in the instant case, the limited company

is only an alter ego of the partners, it could not be said that there was any

subletting. In support of the aforesaid contention, the learned senior

counsel relied upon Madras Bangalore Transport Co.v.Inder Singh; 1986

(3) SCC 62; Vishwa Nath v.Chaman Lal; AIR 1975 Delhi 117.

17. Before dealing with the submission made by the learned senior

counsel for the appellant and analyzing its application to the facts of the

case, it may be pertinent here to analyze the judgments which have been

relied upon by the learned senior counsel for the appellant.

18. In Murli Dhar v. Chuni Lal & Ors; 1970 RCJ 922, the partnership

firm was the tenant which consisted of three partners. On closure of the

business of the firm the premises were used by a new firm of which

admittedly the partners were the partner of the earlier firm. It was held in

the aforesaid case that firm name was only a compendious name for

describing the partners. Therefore, no case of sub-letting was made out. It

was further observed that the firm is not a legal entity. But this judgment

would not be applicable to the facts of the present case because in the

instant case, the new entity is not a partnership firm but a private limited

company which is a legal entity in the eyes of law therefore this judgment

is not applicable.

19. In Nand Kishore Mangilal Gajabi and Ors.v. Keshav Dadaji Jadhav

& Ors.; 1980(1) RCJ 90, it has been held where a partnership consisted of

three partners and the firm is dissolved, but one of the partners continued

to be in possession of the shop in question and he got the right to use the

suit premises on account of such a dissolution or severance of status, this

would not tantamount to subletting and accordingly the judgment of the

High Court was set aside.

20. The aforementioned judgment is also not applicable to the facts of

the present case because the new person in occupation of the premises

was a partner of firm which was the tenant. Therefore, this judgment is

also not applicable.

21. In Vishwa Nath v. Chaman Lal; AIR 1975 Delhi 117, a single

Judge of this court negatived the allegation of subletting, assignment or

parting with possession on the ground that the Chief Executive and the

Managing Director of the newly incorporated was controlled by the

proprietor who was let out the premises in question, meaning thereby that

in a case where an individual is a tenant running a proprietary business

converts his proprietary business into a private limited company and does

not divest himself of the possession, but on the contrary, has the complete

control over the company so incorporated, then it will not tantamount to

subletting.

22. This judgment is also not applicable to the facts of the case because

in the instant case the firm was a tenant which consisted of four partners

at the time of inception. The company which was found to be in

possession was incorporated after the creation of the tenancy. Moreover,

none of the partners of the tenanted firm were the promoter of the newly

inducted company. Further, the partners became stakeholders in the

company much later. Also, no evidence was produced before the trial

court to show that controlling partners of the new firm were holding the

majority interest of the company.

23. In Lalita Gupta v. Modern Trading Company; 133 (2006) DLT 55,

the learned single Judge of the High Court has held that in order to prove

the allegations of Section 14(1) (b) i.e. subletting, existence of animus

domini and corpus possessionis must be proved, In the said case, the

tenancy was originally created in favour of respondent No.1 a partnership

firm of which respondent Nos.2 to 5 were the partners. Respondent No.6

was the family concerned of respondent Nos.2 to 5 which was permitted

to run the business from the said premises. It was not disputed that the

limited company is an alter ego of the partners. Therefore, the court held

that there was no case for subletting made out against the respondent. On

the basis of the aforesaid legal position, it is urged by the learned senior

counsel for the appellant that since in the instant case the partnership

firm/appellant No.1 was the tenant and the appellant Nos. 2 to 5 were the

partners, they were also to be considered as tenants but the appellant No.6

was inducted in due course of time as a partner and in 1983 when the

dissolution had taken place, the assets in the form of tenancy premises

had gone to appellant No.6.

24. It is contended that this would not be meeting the test laid down by

the Supreme Court in Madras Bangalore Transport Company (West) vs.

Inder Singh & Ors.; (1986) 3 SCC 62 inasmuch as appellant No.6 cannot

be termed to be a stranger and moreover appellant No.6 has paid rent to

the respondent which has been accepted by them. Therefore, a tenancy

is created.

25. Mr.Gaurav Sarin, the learned counsel for the respondent, has

contested the submissions made by Mr.H.L.Tiku, Senior Advocate. It has

been contended by him that though the appeal has remained pending for

almost a decade before this court, however, no substantial question of law

is involved in the matter which is the prerequisite for admission of the

matter under Section 39 of the (since repealed) Delhi Rent Control Act.

26. It has been contended by him that on perusal of the impugned

order, it is prima facie evident that there is no jurisdictional error,

impropriety or illegality or perversity in the concurrent findings returned

by the two courts below holding that the appellant is guilty of subletting

the premises under Section 14 (1) (b) of the Delhi Rent Control Act.

27. In order to support his submission, the learned counsel Mr.Sarin

has referred to these broad submissions.

28. Firstly, it has been contended by the learned counsel for the

respondent that the original tenant of the respondent was Bharat

Insulation which was a partnership firm consisting of five people.

However, the original tenant ceased to exist on dissolution of the said

partnership firm on 31.5.1983. It is stated that admittedly the original

partners have parted with the possession of the property and created

tenancy in favour of a stranger i.e. M/s Covered Wires (P) Limited which

was inducted as a partner and is in occupation of the premises. Thus, it

tantamounted to subletting of the premises in favour of M/s Covered

Wires (P) Limited.

29. It has been averred by the learned counsel for the respondent that

the contention of the appellant that the erstwhile partners of M/s Bharat

Insulation Company are the Directors in M/s Covered Wires (P) Limited

and their shareholding in the company is approximately 53%, therefore,

they have sufficient controlling interest in the transferee company and

thus continue to be in possession of the tenanted premises does not hold

good for two reasons

i) No evidence has been produced by the erstwhile partners before the trial court with regard to their percentage of holding in the transferee company namely M/s Covered Wires (P) Limited.

ii) Further so far as the transferee company M/s Covered Wires (P) Limited is concerned, it is a company and thus a juristic person in its own

independent right and could not be considered to be a partner.

30. It is contended that as on 01.06.1983 when appellant No.6 took

possession of the suit premises, no evidence was in existence with regard

to the shareholding of the formers partners of the dissolved firm in

appellant No.6.

31. The second submission made by Mr.Sarin is that so far as M/s

Covered Wires (P) Limited is concerned, it is a distinct legal entity and

has been doing business in the suit premises in its individual capacity

with effect from 01.06.1983 when it was given the possession of the suit

premises. It is stated that the factum of the aforesaid would not legalize

the possession with regard to the suit premises. It has been further stated

that this tantamounted to subletting of the premises in contravention of

Section 14(1)(b) of the Delhi Rent Control Act.

32. It has also been contended that merely because this transferee

company continued to deposit rent in terms of the orders of the High

Court or paid for that matter to the respondent herein, does not make it a

tenant because this rent was paid by them unilaterally without there being

any acceptance of the same by the respondent with a view to accept him

as a tenant.

33. The third submission made by Mr.Sarin is that although there are

judicial precedents which lay down that if the tenancy is in the name of the

partnership and subsequent thereto, the partnership firm is dissolved then the

tenanted premises if they are allotted to any of the partners as his share in the

assets of the partnership firm, such a partner who has joined the

partnership firm initially at the time of inception of the tenancy would

become the tenant. But in case such a partnership to whose share the

assets fall on account of the dissolution has joined that partnership firm

subsequent to the inception of the tenancy then it is only a camouflage to

overcome the question of subletting and in such a contingency it will

tantamount to violating Section 14(1)(b). It has been contended that

precisely this is what has happened in the instant case where a party namely

M/s Covered Wires (P) Limited came into existence of 01.10.1972 i.e. after

the inception of tenancy which took place on 20.02.1971 and was

inducted as a tenant after the inception of tenancy by the appellant No.1.

34. It is contended that as a matter of fact the respondent learnt about

M/s Covered Wires (P) Limited being inducted as a partner only in

October, 1983 after the dissolution of the original firm M/s Bharat

Insulation Company. On the basis of the aforesaid, it has been

contended that an iron cast case for subletting is made out against the

appellant and there are concurrent findings returned by the two courts

below in this regard.

35. The learned counsel for the respondent in support of his

submissions has relied upon the following judgments:

36. In Ram Saran v. Pyare Lal and Anr; (1996) 11 SCC 728, the

Hon'ble Apex Court has held as under:

24. ... ... ...

If upon accepting the surrender of tenancy of the said tenant, occupation of a new tenant is acknowledged by the landlord by accepting payment of rent from the new tenant, then by such payment and acceptance of rent between the tenant and landlord, a new tenancy may be created. By a unilateral action of the tenant of surrendering his right of tenancy in favour of a third party by delivering possession of the tenanted premises to the said third party, no new tenancy is created which may legally bind the landlord. By mere acceptance of rent for the tenanted premises tendered by the tenant in the name of the registered society, neither a new tenancy or a valid sub-tenancy in favour of the said registered society has been created. .. ... ..."

25. .. ... ...

Consequently, landlord will not be estopped from claiming eviction of unauthorised sub-tenant along with

the tenant for indulging in inducting sub-tenant without lawful authority."

37. On the basis of the aforesaid judgment, it is contested that the

acceptance of rent by the respondent cannot be treated as creating a new

tenancy in favour of appellant No.6.

38. Relying on Gurubachan Singh v.Ram Niwas (2006) 5 SCC 296, it

is stated by the learned counsel for the respondent that the essential

ingredients of subletting are: i) there is a transfer of the legal

possession/exclusive right to enjoy the premises, and ii) some amount has

been collected by way of rent or compensation. It is further stated that

the instant case meets the aforesaid prerequisites.

39. In Parvinder Singh v. Renu Gautam and Ors; (2004) 4 SCC 794, it

has been held as under:

8. ... ... ... ...

To defeat the provisions of law, a device is at times adopted by unscrupulous tenants and sub-tenants of bringing into existence a deed of partnership which gives the relationship of tenant and sub-tenant an outward appearance of partnership while in effect what has come into existence is a sub-tenancy or parting with possession camouflaged under the cloak of partnership. Merely because a tenant has entered into a partnership he cannot necessarily be held to have sublet the premises or parted with possession thereof in favour of his partners. If the tenant is actively associated with the

partnership business and retains the use and control over the tenancy premises with him, may be along with the partners, the tenant may not be said to have parted with possession. However, if the user and control of the tenancy premises has been parted with and deed of partnership has been drawn up as an indirect method of collecting the consideration for creation of sub-tenancy or for providing a cloak or cover to conceal the transaction not permitted by law, the Court is not estopped from tearing the veil of partnership and finding out the real nature of transaction entered into between the tenant and the alleged sub-tenant."

40. In Celina Coelho Pereira v.Ulhas Mahabaleshwar Kholkar; (2010)

1 SCC 217, it has been held as under:

"28. The legal position that emerges from the aforesaid decisions can be summarised thus:

(i) In order to prove mischief of subletting as a ground for eviction under rent control laws, two ingredients have to be established, (one) parting with possession of tenancy or part of it by tenant in favour of a third party with exclusive right of possession and (two) that such parting with possession has been done without the consent of the landlord and in lieu of compensation or rent.

(ii) Inducting a partner or partners in the business or profession by a tenant by itself does not amount to subletting. However, if the purpose of such partnership is ostensible and a deed of partnership is drawn to conceal the real transaction of sub-letting, the court may tear the veil of partnership to find out the real nature of transaction entered into by the tenant.

(iii) The existence of deed of partnership between tenant and alleged sub-tenant or ostensible transaction in any other form would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of cross- examination, making out a case of sub-letting or parting with possession in tenancy premises by the tenant in favour of a third person.

(iv) If tenant is actively associated with the partnership business and retains the control over the tenancy premises with him, may be along with partners, the tenant may not be said to have parted with possession.

(v) Initial burden of proving subletting is on landlord but once he is able to establish that a third party is in exclusive possession of the premises and that tenant has no legal possession of the tenanted premises, the onus shifts to tenant to prove the nature of occupation of such third party and that he (tenant) continues to hold legal possession in tenancy premises.

(vi) In other words, initial burden lying on landlord would stand discharged by adducing prima facie proof of the fact that a party other than tenant was in exclusive possession of the premises. A presumption of sub-letting may then be raised and would amount to proof unless rebutted."

41. In Vinaykishore Punamchand Mundhada v. Shri Bhumi Kalpatru;

(2010) 3 SCC (Civ) 625, it has been held as under:

15. We are not impressed by the submission made by the learned Counsel for the respondents that unless

payment of consideration was established as a fact between the tenant and sub-tenant, the application under the provisions of the Rent Control order filed by the landlord cannot be allowed. Is it possible for any landlord to establish the actual agreement or understanding between the tenant and the person to whom the possession of the premises is delivered? It is well settled that sub-tenancy or sub-letting comes into existence when the tenant voluntarily surrenders possession of the tenanted premises wholly or in part and puts another person in exclusive possession thereof without the knowledge of the landlord. In all such cases, invariably the landlord is kept out of scene rather, such arrangement whereby and whereunder the possession is parted away by the tenant is always clandestine and such arrangements take place behind the back of the landlord. It is the actual physical and exclusive possession of the newly inducted person, instead of the tenant, which is material and it is that factor which reveals to the landlord that the tenant has put some other person into possession of the tenanted property. It would be impossible for the landlord to prove, by direct evidence, the arrangement between the tenant and sub-tenant. It would not be possible to establish by direct evidence as to whether the person inducted into possession by the tenant had paid monetary consideration to the tenant. Such arrangement which may have been made secretly, cannot be proved by affirmative evidence and in such circumstances, the Court is required to draw its own inference upon the facts of the case proved at the enquiry. Delivery of exclusive possession by the tenant to a stranger to the landlord and without the prior permission of the landlord is one dominant factor based on which the

Court could infer as to whether the premises was sub- let.

42. I have heard the learned counsel for the parties and gone through

the judgments cited by the respective sides.

43. There is no dispute about the fact that law has been crystallized by

a catena of judgments that so far as the partnership firm is concerned,

even though it may be a tenant, but since partnership firm is not a legal

entity, all the partners are deemed to be the tenants. In the event of

dissolution of partnership firm, if all the tenancy rights fall into the hands

of one or some of the partners start a fresh business under a new

partnership firm which is not a legal entity or where a proprietary concern

is converted into a private limited company but the erstwhile sole

proprietor continues to retain the control of private company in the

capacity of managing director or chairman then notwithstanding that it is

a legal entity still in none of the situations it will tantamount to creating a

sub-tenancy and eviction cannot be ordered.

44. Now comes the question of a case like in the instant one where a

partnership firm is a tenant and originally, had only four partners at the

time of inception of tenancy. If it be so, there should be no difficulty if

tenancy rights are taken by one or more of the partners in the event of the

partnership firm being dissolved by operation of law or on will. But the

difficulty arises only when a person or a company which was not a

partner at the time of inception of tenancy is inducted as a partner in the

firm later on. In such an event in case the dissolution takes place and the

tenancy rights are given to such newly inducted partner then it is for the

courts to see whether the new entity which is made a partner and which

has come to acquire the tenancy on account of dissolution of the firm will

tantamount to subletting or not. The test for this which has been laid

down by the courts is as to check whether this new entity is a legal entity

or not and if so then whether original partners have controlling interest in

the said legal entity or not. Reliance in this regard is placed on the the

judgment of this court in Vishwa Nath and Anr. V. Chaman Lal Khanna

and Anr; AIR 1975 Delhi 117 which was later approved by the Apex

Court in Madras Bangalore Transport Co.(West) v. Inder Singh and Ors;

(1986) 3 SCC 62.

45. Coming back to the facts of the present case, there is no dispute

about the fact that so far as appellant No.6 is concerned, it was not a

partner of the appellant No.1 at the time of creation of tenancy, but was

inducted as a partner much later. Appellant No.1 is admittedly dissolved

in 1983 and at the time of dissolution, the respondent herein were not

aware that a company has been inducted as a partner. It is only when

appellant No.6 starts making the payment to the respondents that they

learn about its induction and the factum of dissolution of the original

tenanted firm. It is because of this alleged subletting, the respondents

initiated the eviction proceedings.

46. Now so far as appellant No.6 is concerned, it is an independent

distinct legal entity and, therefore, according to the judgment of the court

in Ram Saran v. Pyare Lal's case (supra) qualifies to meet the

requirement of Section 14(1) (b) of the Delhi Rent Control Act meaning

thereby that the induction of this partner in the partnership firm and the

subsequent subletting in its favour tantamounts to subletting.

47. Now, the question which arises is that whether appellant Nos.2 to 5

have a controlling interest in appellant No.6 as is sought to be urged

before this court and as was contended by Mr.Tiku that the company or

the firm is an alter ego of the partners or the persons who are having

controlling interest and, therefore, if appellant Nos.2 to 5 have a majority

shareholding in appellant No.6, therefore, it could not be said that there is

a case for subletting made out against appellant Nos.1 to 6.

48. I fully agree with this submission of Mr.Tiku that in case appellant

Nos.2 to 5 have controlling interest in appellant No.6 then perhaps it

could be said that there was no case for subletting made out but this

question as to whether appellant Nos.2 to 5 have a controlling interest in

appellant No.6 or not, is a question of fact which has been decided

against the present appellants concurrently by the two courts below and

the reasons for this have been given by the ARC by observing that there

is no evidence produced before the learned ARC to the effect that

appellant Nos.2 to 5 had a controlling interest in appellant No.6.

49. I am tempted here to reproduce para Nos. 23 & 24 of the judgment

of the ARC in this regard.

"23. Though it has been brought out through RW3/3 that as on 27.12.84 the major share holding of the company is controlled by respondent Nos.2 to 5 either in the individual capacity or jointly with certain family members. But then there is no evidence led as to what was the nature of share holding in the company as on 01.06.83 when the respondent No.6 admittedly took control over the suit premises. At the same time the plea that respondent No.6 was floated in 1972 by respondent No.2 to 5 has also not been proved. Rather, the memorandum of Association brought on record

shows that the promoters of company were persons other then respondent No.2 to 5. It is evident that the share holding and control over the company has been undergoing change over the years. As there is no evidence on record to show that respondent No.2 or 5 had a major control over the company during 1.6.83 to 27.12.84, the possibility does exist that they may loose control over the company in future as well.

24. Therefore, applying the principle of Ram Saran v. Pyare Lal (supra), I hold that respondent No.6 is a distinct legal entity and its business in the suit premises is in the capacity of a stranger in occupation which must lead to the conclusion that there has been parting with legal possession by the tenant. This also for the added reason that respondent No.3 to 5 have not offered rent has been offered to be paid by respondent No.6 within their knowledge. Respondent No.6 thus assets its independent rights to the tenancy which were not available it."

50. The appellants had also filed an application under Order 41 Rule

27 CPC seeking permission to produce additional evidence at the

appellate stage to show that appellant Nos.2 to 5 had a controlling interest

in appellant No.6. This application also stood rejected by the ARCT for

two reasons. Firstly, this was a document which was in possession of the

appellants themselves at the time when the evidence was sought to be

produced before the ARC. Therefore, additional evidence cannot be

permitted to be adduced by a party to fill up the lacunae. Additional

evidence can be permitted to be produced by a party only if the piece of

evidence which it wants to produce was not in its knowledge earlier or it

was beyond its control. There is no such finding returned by the ARCT

that it was meeting such a requirement in the face of the evidence which

was to be produced by them. Even otherwise, after perusal of the

document which was sought to be placed by them on record, the learned

ARCT has observed that the aforesaid document does not establish any

controlling interest in appellant No.6 as is sought to be urged by them.

For these reasons also, their appeal was rejected.

51. For the reasons mentioned above, I feel that since there is

concurrent finding returned by the two courts below which is perfectly in

tune with the legal position that appellant No.6 was not a partner of

appellant No.1 at the time of inception of tenancy. Therefore, a stranger

could not be permitted to be thrust as a tenant on the respondent under the

garb of tenancy rights being devolved upon the appellant on dissolution

of appellant No.1. The holding of shares by the erstwhile partners in

appellant No.6, as stated in the eviction petition, is a matter of fact and

not a matter of law. Moreover, even if the partners have the shares in the

company, nothing prevents them from divesting the same later on.

52. So far as the question of payment of rent by appellant No.6 is

concerned, the learned counsel for the respondent has referred to a

judgment in Ram Saran's case (supra) wherein it has been clearly laid

down that since the amount is being deposited voluntarily by appellant

No.6, it could not be treated to be creating a tenancy in favour of the

appellants.

53. For the reasons mentioned above, I feel that the aforesaid

submissions urged by the learned counsel for the appellants do not raise

any substantial question of law and the appeal must necessarily fail.

54. Accordingly, the present regular second appeal is dismissed.

V.K. SHALI, J.

MAY 27, 2015 AD/dm