Shailendra Mohan vs Ajay Agarwal And Another"
2023 Latest Caselaw 719 UK

       IN THE HIGH COURT OF UTTARAKHAND
                  AT NAINITAL

                       SRI JUSTICE VIPIN SANGHI, C.J.

                              21ST MARCH, 2023
       WRIT PETITION (M/S) NO. 801 OF 2023
Between:
Ajay Agarwal                        ........Petitioner

and

Dr. Shailendra Mohan Singhal and another.
                                                              ....Respondents


Counsel for the petitioner           :   Mr. Siddharth Singh and Mr. Kshitij
                                         Sah, learned counsel.

Counsel for the respondents          :   None.



Upon hearing the learned Counsel, the Court made the
following

JUDGMENT :

The present petition, under Article 227 of the

Constitution of India, has been preferred by the petitioner to

assail the judgment dated 19.09.2022 passed by PA/Civil

Judge, Jaspur in Rent Control Case No. 1 of 2021 titled "Dr.

Shailendra Mohan vs. Ajay Agarwal and another", and to

dismiss PA Case No. 1 of 2021 aforesaid.

2. The petitioner, admittedly, is a tenant of

respondent No. 1 in respect of a non-residential property.

In fact, the tenancy has continued over generations. The

respondent instituted the aforesaid eviction case for release of the shop-in- question under Section 21(1)(a) of the U.P.

Act No.13 of 1972.

3. The bonafide need disclosed by the

respondent/landlord was for the expansion of the business

of his son Siddharth Mohan Singhal-who is running his

business of production of edibles under the name and style

of 'M/s Zippy Edible Products Private Limited'. The said

eviction proceedings were contested by the

petitioner/tenant. One of the objections / defences raised

by the petitioner to the maintainability of the petition itself

was that the bonafide need expressed by the landlord was

not in respect of his personal need, not even that of his son,

but the need was that of the Company, namely, M/s Zippy

Edible Products Private Limited, which is a separate juristic

entity. Therefore, according to the petitioner, the said need

of M/s Zippy Edible Products Private Limited could not be

considered as a bonafide need of the landlord either for

himself, or of his son.

4. The Courts below have returned concurrent

findings of facts, including on the aforesaid submission of

the petitioner.

5. The submission of learned counsel for the

petitioner is that the Allahabad High Court has, in a similar

case, held that the need of a Company in the name of which

the business may be carried-on could not be considered as

the need of the landlord. In this regard, he has placed

reliance on Bilal and another vs. 2nd Additional District

and Sessions Judge, Bulandshahar [2003(52) ALR

410] (Civil Misc. Writ Petition No. 38093 of 2000,

decided on 1st July, 2003).

6. Learned counsel submits that in the said case, the

said legal plea was not even raised before the Trial Court in

the pleadings. However, in the present case, the aforesaid

plea was squarely raised by the petitioner in his written

statement. The Allahabad High Court held in favour of the

tenant by observing as follows:-

"11. A company is an artificial person. It has separate legal identity than its share holders. More than a century ago, House of the Lords in Salomon v. Salomon 1897 AC 22 at Page 51 and 53, observed that:

'The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act. That is, I think, the declared intention of the enactment.

It has become the fashion to call companies of this class "one man companies". That is taking a nickname, but it

does not help one much in the way or argument. If it is intended to convey the meaning that a company which is under the absolute control of one person is not a company legally incorporated, although the requirements of the Act of 1862 may have been complied with, it is inaccurate and misleading.'

12. This is also the law in our country and the Saloman case still holds the field. The Supreme Court in Shubhra Mukharjee v. Bharat Cocking Coal Ltd. AIR 2000 SC 1203, (the Shubhra case) observed as follows:

'The principle laid down in Saloman case more than a century ago in 1897 by the House of Lords that the company is at law a different person altogether from the subscribers who have limited liability, is the foundation of joint stock company and basic incidence of incorporation both under English law and Indian Law.'

13. In England there is an Act similar to the Act.

It is known as 'the Landlord and Tenant Act, 1954' (the UK Act). Tenancy of a tenant of a shop was terminated and the tenant applied for grant of new tenancy under the UK Act. This was opposed by the landlady on the ground that the shop was required for carrying on business of a company of which she had complete control. This application of the tenancy was allowed by the country judge. However, appeal against the same was allowed in Tunstall v. Steigmann 1962 (2) All ER 24, (the Tunstall case). The Court held that.

'the fact that she holds virtually the whole of the shares in the limited company and has complete control of its affairs makes no difference to this proposition. The object of a limited liability company is that the share- holders shall have some protection and some limit to the liability which they may incur in the event of the company being unsuccessful. It is to be assumed that the landlord in this case assigned her business to the limited company for some good reason which she considered to be of an advantage

to her. She cannot say that in a case of this kind she is entitled to take the benefit of any advantages that the formation of a company gave to her, without at the same time accepting the liabilities arising therefrom. She cannot say that she is carrying on the business or intends to carry on the business in the sense intended by paragraph (g) of the sub-section and at the same time say that her liability is limited as provided by the Companies Act'.

14. The case here is similar. The contesting respondent has set up and proved the case that the company intends to carry on business in the shop. He cannot say that the need of the company is his personal need. The case Sevenarb Ltd. v. Busvine 1969 (1) All ER 392, under the UK Act is distinguishable. In this case the Court had held that the landlady held the premises in trust for the company. It is in this light that the Court held that:

'A landlady of business premises who holds the premises on trust is entitled to oppose tenant's application for a new tenancy if either the landlord himself or his cestui que trust intends to occupy the premises for the purpose of a business to be carried on there either by the landlord or by his cestui que trust.

15. Here the Company was incorporated on 8.11.1995. The shop in question was let out many years before that by the father of the contesting respondent. It was inherited by the contesting respondent and his brothers on their father's death. It came to the share of the contesting respondent on partition. He is not holding it in trust for the company.

16. The counsel for the contesting respondent submitted that:

• Principles laid down in the Salomon case are neither absolute nor written on stone.

• The Courts have been lifting corporate veil to see the correct facts.

• In case corporate veil is lifted then it would be clear that the need of the company is nothing but the need of the contesting respondent and he cannot be non-suited on this ground.

17. It is correct that the Courts have been lifting corporate veil to see the facade behind it. The Supreme Court in the Shubhra case further held that,-

'Lifting the veil of incorporation under statutes and decisions of the Courts is an equally settled position of law. This is more readily done under American law, to look at the realities of the situation and to know the real state of affairs behind the facade of the principle of the corporate personality, the Courts have pierced the veil of incorporation'.

18. The Court have lifted corporate veil to see if it is used for tax evasions or to circumvent tax obligations. CIT v. Sri Meenakshi Mills Ltd. AIR 1967 SC 819, or if the purpose is to commit illegality and defraud others DDA v. Skipper Constructions 1996 (4) SCC 622, but not in a case of this kind where a company requires a shop for its need.

19. The Court in the Tunstall case observed:

'While it may be argued that the Courts have departed from a strict observance of the principle laid down in Salomon v. Salomon Ltd. It is true to say that any departure, if indeed any of the instances given can be treated as a departure, has been made to deal with special circumstances when a limited company might well be a facade concealing the real facts. Counsel was unable to point to any special circumstances in this case other than that the landlord has complete control of the company. In my judgment that is not enough. I see no reason to depart from well established principles and I would allow the appeal.

20. So is the case here. There are no special circumstances and the contesting respondent does not even have complete control over the

company. The majority shares are held by his brother. The need of the company cannot be treated as, the need of the contesting respondent and the application is not maintainable."

7. Merely because the son of respondent No. 1 is

carrying-on his business under the façade of a Private

Limited Company-of which he is a Director / shareholder, it

does not take away the fact that the business is that of the

son of respondent No. 1. A person may carry-on his

business either as a proprietor, or in partnership, or by

forming an association of persons, or a private limited

company. A private limited company is only a façade

created for the purpose of carrying-on a business, by the

promoters of the Company.

8. Pertinently, the submission of the learned counsel

for the petitioner is that if the son were to carry-on his

business as a proprietor, the objection sought to be raised

will not be available. That itself demonstrates the frailty of

the submission, which is hyper technical.

9. Since the business is that of the son of respondent

No. 1, it does not matter whether the same is carried-on by

him as a proprietor, or as a partner, or by incorporating a

private limited company. It is not the case of the petitioner

that the said Company is owned and controlled by the

Directors other than the son of respondent No. 1 and others,

who are strangers / outside the family of respondent No. 1.

It has come on evidence that the son of respondent No. 1

and his mother, uncle and aunt are the Directors in the said

Company. With due respect, I am not in a position to

subscribe the view of the learned Single Judge of the

Allahabad High Court in Bilal Ahmed (supra). No doubt, a

Company is a juristic entity. However, for the purpose of

examining the issue whether business is of the son of

respondent No. 1, in the context of the Rent Control

legislation, and for examining whether need of the landlord

is bonafide for himself, or for any of his family members, it

does not matter, to my mind, that the business is carried-on

in the name of a private limited company, and not in the

name of the son as a proprietor, or a partner.

10. Further submission of the learned counsel for the

petitioner is that the bonafide need of the landlord is the

first aspect, which has to be examined and established,

before proceeding to examine the issue of comparative

hardship. In this regard, he has placed reliance on Ashok

Kumar and others vs. Sita Ram (2001) 4 SCC 478.

11. In my view, that judgment is not attracted in the

facts of the present case for the reason that the Courts

below have examined the aspect of bonafide need.

12. For the aforesaid reasons, I am not inclined to

interfere with the impugned judgments, as they have been

rendered by the Courts below in the exercise of jurisdiction

vested in them, and within the bounds of their jurisdiction.

It is not for me, in these proceedings, to correct the errors

of facts and law, or re-appreciate the concurrent findings of

fact.

13. The petition is, accordingly, dismissed.

________________ VIPIN SANGHI, C.J.

Dt: 21st March, 2023 Rathour