Delhi High Court
M/S New India Motors (New Delhi) ... vs M/S Northern India Iron And Steel ... on 14 September, 2021
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Pronounced on: 14th September, 2021
+ CM (M) 447/2021, CM APPLs.20990/2021 (by the petitioners
u/S 151 CPC for ad-interim stay) & 20991/2021 (by the
petitioners u/S 151 CPC for directions for calling the entire
Trial Court Record)
M/S NEW INDIA MOTORS (NEW DELHI) PVT LTD. & ORS.
.....Petitioners
Through: Mr. Ajay Kohli and Ms. Saloni
Jain, Advocates
Versus
M/S NORTHERN INDIA IRON AND STEEL CO. LTD. & ANR.
.....Respondents
Through: Mr. Manish Vashisht, Senior
Advocate with Mr. Rikky Gupta,
Mr. Manashwy Jha, Ms. Urvi
Kapoor, Ms. Sanjana Nangia,
Advocates for R-1
CORAM:
HON'BLE MS. JUSTICE ASHA MENON
JUDGMENT
1. This petition has been filed under Article 227 of the Constitution of
India seeking quashing/setting aside of the judgment of the learned Rent
Control Tribunal ("RCT", for short) dated 12th February, 2021, passed in
RCT No.24/2018 and the judgment of the learned Additional Rent
Controller ("ARC", for short) dated 8th June, 2018, passed in E-
No.24/2008.
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Signed By:MANJEET KAUR
Signing Date:14.09.2021
23:14:39
2. It may be noticed that cross-objections had been filed by the
present respondent No.1 (M/s.Northern India Iron And Steel Co. Ltd.)
when the appeal was filed by the present petitioners before the learned
RCT, and the cross-objections have also been disposed of vide the
impugned order dated 12th February, 2021. However, no petition has been
filed by the respondent No.1 against that part of the impugned order.
3. The facts, as are relevant for the disposal of the present petition, are
that the respondent No.1 herein is the owner and landlord of the premises
bearing No.10-B, Scindia House (bearing Municipal No.13), Connaught
Place, New Delhi, having purchased the same vide Sale Deed 31st May,
1986 from its erstwhile owners, namely, M/s.Atma Ram Properties Pvt.
Ltd.. M/s. New India Motors (New Delhi) Private Limited i.e., the
petitioner No.1 herein, was already a tenant in the premises at that time,
having been inducted by the previous landlords, namely, Sardar
Kushwant Singh and Brig. Gurbux Singh, vide Lease Deed dated 24th
February, 1971.
4. The respondent No.1 had filed an eviction petition under Section
14(1)(b) of the Delhi Rent Control Act, 1958 ("DRC Act", for short)
against the petitioners on grounds of the petitioner No.1 having sublet the
premises to the co-petitioners. It was alleged that the premises had also
been sublet to the respondent No.2. The learned ARC came to the finding
that the premises had been sublet by the petitioner No.1 herein to the
petitioners No.2 & 3 herein, and ordered eviction. Qua the respondent
No.2 herein i.e., M/s. East West Agencies, the learned ARC held that the
decision in a previous eviction petition filed by the petitioner No.1
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against the respondent No.2, which had been dismissed by the then RCT,
operated as res-judicata qua the ground of subletting.
5. The learned RCT vide its judgment dated 12th February, 2021
upheld the decision of the learned ARC that the petitioner No.1 had
sublet the premises to the petitioners No.2 & 3. Since there was a finding
by the competent Civil Court that the premises in dispute had been sublet
by the petitioner No.1 to the respondent No.2, against which RFA
No.319/2008 was pending before the High Court, it set aside that part of
the finding of the learned ARC dismissing the petition on principles of
res-judicata. However, it chose to adjourn the cross-objections bearing
RCT No.37/2018 sine die to await the decision of the High Court in RFA
No.319/2008.
6. Mr. Ajay Kohli, learned counsel for the petitioners, submitted that
the conclusions of the learned ARC as well as the learned RCT were
erroneous inasmuch as the original landlord had, while executing the
Lease-Deed dated 24th February, 1971, permitted K.C. Jain and Sons to
carry on their business from the demised premises. It was submitted that
Sh.Pawan Sagar Jain is the MD of the three petitioners/Companies and
was a member of the family of Sh.K.C. Jain and thus, had been permitted
to run any business from the premises. It was submitted that subletting
entails the effacement of the tenant from the control over and possession
of the tenanted premises. However, in the present case, when Sh.Pawan
Sagar Jain, being a member of the K.C. Jain Family, was in full control of
all the three petitioners/Companies, and the petitioner No.1 had not been
effaced, and through its MD Sh.Pawan Sagar Jain and its employees, was
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still in full control of the premises, it could not be said that there has been
subletting.
7. It was argued that there was no necessity for the learned RCT to
have gone into the question of whether the petitioner No.1 was a defunct
company. In any case, that conclusion was also incorrect on the evidence
brought on record. The Auditor's report had been produced by the
petitioners, which showed that the petitioner No.1 was not a loss making
company. Only because the petitioner No.1 was not making huge profits,
but was only a low profit making venture, was no reason to conclude that
the petitioner No.1/Company had been effaced from the premises. The
health of the business of the tenant is not a factor relevant to establish
continuance of possession. Attention of this Court was drawn to
Annexure P-21, the Auditor's Report, which reflected that salaries and
rent were being paid and profits were also slowly increasing. Thus, the
petitioner No.1 was in full possession of the demised premises.
8. According to learned counsel for the petitioners, Singer India Ltd.
v. Chander Mohan Chadha (2004) 7 SCC 1 was wrongly applied to the
facts of the present case. Here, tenancy rights had not been transferred to
anyone, unlike in Singer India (supra). The petitioner No.1 had not lost
its identity nor had ceased to have any business in its name. Moreover,
the employees of the petitioner No.1 were found at the spot even as per
the Local Commissioner's Report, which had been submitted in the
previous litigation between the erstwhile Landlord and the present
petitioner No.1, in which matter the petitioner No.1 was sought to be
evicted on grounds of subletting of the premises to the present respondent
No.2, and which fact has been recorded by the then learned RCT in its
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judgment dated 4th August, 1979 in R.C.A.No.220/1976 (Annexure P-12
at page No.338 of the E-file). Hence, it was submitted that the present
petition be allowed and the impugned judgments set aside.
9. Learned counsel for the petitioners has relied on State of
Maharashtra v. Milind & Ors. 2001(1) SCC 4, Rajinder Parsad Singhal
v. Sharda Devi in CM(M) 216/2019 [Order dated 5th May, 2020], Nawal
Kishore v. Mohd. Yakub in CM(M) 1256/2012 [Order dated 24th August,
2017] and Jasbir Singh v. Manjit Kaur & Ors. CM(M) 1041/2011
[Order dated 20th November, 2013], Madras Bangalore Transport Co.
(West) v. Inder Singh and Ors., (1986) 3 SCC 62, Reliable Finance
Corpn. (P) Ltd. v. Clearing House and Agencies (P) Ltd., 1984 SCC
OnLine Del 146, Dipak Banerjee v. Lilabati Chakraborty, (1987) 4 SCC
161, Vishwanath v. Chaman Lal Khanna, 1975 SCC OnLine Del 51,
Niranjan Lal Kanodia v. Harbans Lal, 1995 SCC OnLine Del 273 and
Jagan Nath v. Chander Bhan and Ors., (1988) 3 SCC 57.
10. Mr. Manish Vashisht, learned senior counsel appearing on behalf
of the respondent No.1, on the other hand, submitted that against
concurrent findings of facts, the present petition was not maintainable. It
was submitted that even if subletting had been permitted to K.C. Jain and
Sons, it could not be extended to other entities created by them.
Moreover, the petitioners No.2 & 3 were not created and established by
K.C. Jain and Sons, but were the companies in which Pawan Sagar Jain
was the Director/majority shareholder. They were inducted in the
premises without any intimation to the landlord. It was submitted that
merely because the Managing Director, Pawan Sagar Jain, was common
to all the concerns, would not make them the same legal entity. Reliance
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has been placed by the learned senior counsel for the respondent No.1 on
V. Kandasamy v. C. Kandasamy, 2005 SCC OnLine Mad 460.
11. Learned senior counsel further contended that the profit, which the
petitioner No.1 was claiming, was actually, the rent paid by the
petitioners No.2 & 3 to petitioner No.1. This also clearly established that
the demised premises had been sublet. It was submitted by the learned
senior counsel for the respondent No.1 that in the absence of any error or
perversity in the judgments or the exercise of powers without jurisdiction,
or the over-looking of evidence or admission of evidence erroneously, the
present petition was liable to be dismissed. Reliance has also been placed
on Chandavrkar Sita Ratna Rao v. Ashalata S. Guran 1986 (4) SCC
447, Puran Chand v. Raj Kumar, 2015 SCC OnLine Del 13743,
Indowind Energy Ltd. v. Wescare (India) Ltd. & Anr. 2010 (5) SCC
306, V. Subramaniam v. Rajesh Raghuvandra Rao 2009 (5) SCC 608,
Balwant Rai Saluja & Anr. v. AIR India Ltd. & Ors. 2014 (9) SCC 407,
Prem Prakash v. Santosh Kumar Jain & Sons 2018 (12) SCC 637 and
Surender Singh Chadha v. Subhash Chand Saini 2020 (266) DLT 316.
12. It is trite that the court does not sit as a court of appeal while
exercising its powers under Article 227 of the Constitution of India. The
court is not required to go into the questions which depend on
appreciation of evidence, even when two conclusions were possible. It
has been opined by the Supreme Court in Chandavrkar Sita Ratna
(supra) that even in preferring one view to another on factual
appreciation of evidence, the limit of the jurisdiction under Article 227 of
the Constitution of India would be transgressed. Only if there is
misdirection in law, or a view or fact taken is in the teeth of
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preponderance of evidence and the finding was so perverse and not based
on any material evidence or has resulted in manifest injustice, would the
court, while exercising its jurisdiction under Article 227 of the
Constitution of India, go into the questions of facts or re-appreciate
evidence. If there is evidence on record on the basis of which the findings
could be arrived at, then the findings cannot be interfered with. Findings
of facts ought not to be interfered with in proceedings, such as these, as
that would result in the conversion of the petition into an appeal. In case
the courts below had exceeded their jurisdiction and authority, the court
in the exercise of its supervisory power under Article 227 of the
Constitution of India would no doubt interfere. The court would also
interfere when a finding of the courts below was based upon exclusion of
some admissible evidence or consideration of some inadmissible
evidence.
13. Now, it is to be noticed that the question of subletting is to be
answered on facts. Both the courts below have returned a finding of fact
based on material placed before them that the premises have been sublet
by the petitioner No.1 to petitioners No. 2 & 3.
14. Learned counsel for the petitioners relying on Rajinder Parsad
Singhal (supra), State of Maharashtra (supra) and Nawal Kishore
(supra) submitted that in the present case, since the learned RCT and the
learned ARC had wrongly appreciated the evidence, which has resulted in
manifest injustice being done to the petitioners, this court was required to
look into the fact situation. Thus, the learned counsel for the petitioners
has urged this court to re-look into the evidence, particularly, the
Accounts and the Annual Returns of the petitioner No.1, and to reverse
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the findings that the petitioner No.1 was a defunct company and had not
effaced its existence.
15. In Madras Bangalore Transport Co. (supra), the limited company
and the partnership firm were different only in name, but for all practical
purposes, there was substantial identity between the two and it was in that
light that the Supreme Court concluded that there was no sub-letting or
assignment. In the present case, admittedly, the petitioner No.1 is
different from the petitioners No.2 & 3. What is claimed here is that there
was commonality of the Director/Managing Director/shareholder,
namely, Pawan Sagar Jain in respect of all three petitioners. Since the
time of Solomon v. Solomon, (1897) A.C. 22, [1896] UKHL 1, the
position in law has not changed, namely, that the company is a legal and
separate entity from the shareholders. So, even if Pawan Sagar Jain was a
shareholder in all three companies and was their Director/Managing
Director, he cannot be equated to the petitioners.
16. This was reiterated by the Supreme Court in Indowind Energy
(supra), where it was observed that two companies are separate and
distinct legal entities and the mere fact that they have common
shareholders or common Board of Directors, will not make them a single
entity. Moreover, the shareholders of the company cannot become co-
owners of the property of the company. Therefore, a tenancy right, being
the property of the petitioner No.1, cannot become the property of Pawan
Sagar Jain. The petitioners cannot, therefore, claim that the tenancy rights
have not been transferred.
17. The submission of the learned senior counsel for the respondent
No.1 has some force that the 'piercing of the corporate veil' is intended
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to avoid impropriety and wrongdoing or misuse. Here the tenant is
requiring the court to pierce the veil in order that it becomes evident that
there is commonality of shareholders amongst the petitioners and thus
draw a conclusion that there is no subletting. In the present case, even if it
is accepted that Sh.Pawan Sagar Jain is a common shareholder and
Director/Managing Director of the three petitioners/Companies, as
noticed hereinabove, his presence does not unify the separate legal
identity and existence of the three petitioners/Companies.
18. It is in this context that the contention of the petitioners that the
petitioner No.1 was still a working company, was raised, and the learned
RCT considered the material placed on the record to conclude that
petitioner No.1 was a defunct company. The learned counsel for the
petitioners may be right in saying that financial health or the business
acumen of the tenant is not relevant in a landlord-tenant relationship. But,
it had become relevant only because petitioner No.1 claimed it was
working from the tenanted premises. The learned RCT went into the
Accounts and other documents placed on the record in order to consider
the contention of both sides, one claiming to be in full control of the
petitioner No.1 and so of the tenanted premises, and the other refuting it.
The learned ARC looked into the documents and evidence placed before
it to understand whether the petitioners have been able to establish their
stand that the petitioner No.1 was the agent of the petitioners No.2 & 3.
While observing that the petitioners have failed to prove their defence,
neither the learned ARC nor the learned RCT has wrongly placed the
onus on the petitioners. It has not been pointed out to this court as to
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which document has been overlooked by the learned courts below or
which one wrongly relied upon.
19. In order to ascertain whether the legal possession remained with
the tenant, i.e. the petitioner No.1, and in order to evaluate the plea taken
by the petitioners that petitioner No.1 was the agent of the petitioners
No.2 & 3, the learned ARC and the learned RCT both considered the
evidence and documents produced by the parties, particularly, the
petitioners. The learned ARC noted that there was no documentary
evidence to show the relationship of a "principal" and "agent" between
the petitioners. It was the appellant No.1, who asserted that it was a
functional company. To determine this question, the learned RCT looked
into the turnover and rightly observed that only paltry sums were
indicated as profits of the company in the Auditor's report for the year
2000-01. The fixed assets from 2000 to 2011 were also considered. They
showed depreciated value of furniture from Rs.1,406/- to Rs.156/-. It is in
this background that it was concluded that the original tenant M/s. New
India Motors (New Delhi) Private Limited seems to be totally
dysfunctional and therefore, seems to have effaced itself from the
premises in dispute.
20. This Court does not find that this conclusion is tainted with error.
The learned RCT has neither overlooked material evidence nor
considered extraneous material to come to the conclusion. The question
before the courts below was not on the profitability of the tenants'
business and no comment has been made thereon. But a thriving concern
would have better business to show and not a depreciating value of fixed
assets over a period of a decade and that too, while being located in prime
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commercial area. The inferences that if the tenant is not effectively
working from the premises, but the other two companies are, it means
that the tenant has stopped its business and has allowed other legal
entities to function therefrom. Therefore, this Court does not find
anything amiss in the observations of the learned RCT that the petitioner
No.1 is in fact a defunct company and that the premises are in actual use
and control of the petitioners No.2 & 3.
21. This Court finds no force in the contention of the learned counsel
for the petitioners that the learned ARC had wrongly shifted the burden of
proof on the petitioners. There is no dispute at all that the premises were
let out to the petitioner No.1 and not to Mr. K.C. Jain. Liberty was given
to K.C. Jain and Sons to carry on their business. However, M/s. Bel Air
Travel & Cargo Pvt. Ltd. (petitioner No.2) and M/s. Trans Tour &
Travels International Pvt. Ltd (petitioner No.3), have not been shown to
be businesses of K.C. Jain and Sons, though Sh. Pawan Sagar Jain is the
son of Sh. K.C.Jain. The presence of petitioners No. 2 & 3 in the demised
premises is not in dispute. The petitioners set up their defence that the
petitioner No. 1 was its agent and secondly, that the petitioner No.1 was
carrying on its business from the premises and was thus in control of the
premises. The burden lay squarely on the petitioners to prove their
defence. Both the courts below have found that the petitioners have failed
to prove their case.
22. The petitioners No.2 & 3, being distinct legal entities, even if the
same person, namely, Pawan Sagar Jain, conducts their businesses, as he
is doing so, on behalf of three separate legal entities, his commonality in
the three petitioners/Companies will not be sufficient to disprove that the
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premises from where admittedly the petitioners No.2 & 3 are functioning,
have been sublet to them. Direct evidence to prove subletting will be
well-nigh impossible for any landlord to obtain. Subletting, which
furnishes a ground for eviction, has to be without the permission of the
landlord and therefore, the terms of such subletting and the nature and
mode of payment of rent, are facts that may not be within the knowledge
of a landlord to enable him to prove them, but such inability cannot defeat
the right of the landlord to seek eviction of the tenant, where subletting is
established on the basis of surrounding circumstances.
23. In the light of the foregoing discussion, no merit is found in the
present petition. The same is accordingly dismissed along with the
pending applications. The eviction is upheld. The petitioners are directed
to hand over the vacant peaceful possession of the subject premises viz.
No. 10-B, Scindia House (bearing Municipal No. 13) Connaught Place,
New Delhi, to the respondent No.1 within three months of the date of this
judgment.
24. The judgment be uploaded on the website forthwith.
(ASHA MENON)
JUDGE
SEPTEMBER 14, 2021
s
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Signed By:MANJEET KAUR
Signing Date:14.09.2021
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