Vishwanath v. Chaman Lal Khanna Etc

AVADH BEHARI, J.

( 1 ) THIS is a tenants appeal from the order of the rent control tribunal dated April

30. 1974.

( 2 ) THE facts are these. The appellant No. 1 Vishwa Nath carried on the business of

advertising under the name and style of interads International Advertising Agency.

He was the sole proprietor of this business. On November 1,1962, he took one.

room 9 X 20 feet on the back side in a building bearing No. 6/4 Asaf Ali Road, Delhi,

on a monthly rent of Rs. 100. 00. This room is being used as an office, Chaman Lal

Khanna. Advocate, and his three sons are the landlords of that building. They are

respondents 1 to 4.

( 3 ) VISHWA Nath thought of expanding his business, in 1964 he formed a limited

company. He called it Interads Advertising (P) Limited ("the company" ). Pron 1962

till the beginning of i964 he paid rent in the name of interads International

Advertising Agency. After the formation of the company in 1964 the company

started paying rent- Rent was being paid by pre-receipted cheques At the reverse,

of the cheque a receipt was printed. The receipt is in these terms: "received from

M/s. INTERADS ADVERTISING Ltd. the sum stated on the other side of this cheque.

Signature of payee-- -.- -. . .------ -. -.----- -. -. . . . . . . . . . . . . . . . . . Date---- -. . .

-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note The above

Signatures arc intended to be a receipt only. "

( 4 ) IN the beginning Vishwa Nath, appellant No. 1, and later on the company,

appellant No. 2. used to send the pre-recopied cheques lo the landlords. Mr.

Charnan Lal Khanna, respondent No. 1, would sign the cheques on the reverse and

obtain payment thereof. The cheques used to be returned to the company so that

these may serve as receipts.

( 5 ) ON January 25, 1969. the landlords brought a petition for ejectment of Vishva

Nath, appellant No. 1, and Interads Advertising (P) Limited, respondent No- 2,

mainly on the ground that Vishwa Nath had sublet, assigned and parted with the

possession of premises in fovour of the company. In the ejectment petition other

grounds were also taken. The landlords also alleged that Vishwa Nath had sublet the

premises to Stereo craft and Adman Studio (respondent No. 5 ). It was further

alleged that Vishwa Nath had caused substantial damage i nthe premises.

( 6 ) BEFORE the rent controller k was conceded by the counsel for the landlords

that except for unauthorised subletting by Vishwa Nath to inc company no. her

ground of eviction was proved in the case. The landlords, therefore, claimed

ejectment of tire tenant Vishwa Nath and the company he had formed on the

ground that he had sublet the premises to the company.

( 7 ) GROUND (b) to proviso to S. 14 (1) of the Delhi Rent Control Act, 1958 ("the

Act") is in these terms: "that the tenant has, on or after the 9th day of June, 1952.

sublet, assigned or otherwise parted with the possession of the whole or any part of

the premises without obtaining the consent in writing of the landlord. "

( 8 ) THE case was fought on this ground and no other. Vishwa Nath and the

company filed a joint written statement. Their defence was that ii was the company

which was the tenant and not Vishwa Nath. The company was in exclusive,

possession, they said. Vishwa Nath said that he was the chief executive of the

company, in a word they denied that there was subletting.

( 9 ) ON August 11, 1969, the company moved a petition under S. 45 of the Act.

The company alleged that in addition to the room they were entitled to the use of a

bathroom situated in the premises. The landlords had closed the bathroom. The

company complained of deprivation of an essential amenity and sought an order

against the I landlords directing them to restore the amenity. To tins application the

defence of the landlords was that the company was not their tenant. They said only

Vishwa Nath was their tenant. On merits was said that they had never allowed the

use of the bathroom to the tenant.

( 10 ) THE rent controller tried the ejectment petition arid the application under S.

45 together. By judgment dated May 17, 1971, he ordered the ejectment of Vishwa

Nath and the company. The application of the company under S. 45 of the Act was

dismissed.

( 11 ) THE findings of the controller may be summarized as follows : 1. that the

premises were let to Vishwa Nath and not the company. 2. that Vishwa Nath and

not the company is the tenant. 3. that the tenancy of Vishwa Nath was validly

terminated. 4. that Vishwa Nath had parted with the possession of the room ill

favour of the Company 5. that. the bathroom was not included in the tenancy. 6.

that only one room was let. No essential supply was withheld.

( 12 ) ON these findings he ordered ejectment under clause (b) as I have said. The

petition under S. 4-5 was dismissed with an additional finding that the company was

not competent to make the petition as it was Vishwa Nath who was the tenant and

only a tenant could move an application for restoration of amenity.

( 13 ) BOTH Vishwa Nath and the company went in appeal to the rent control

tribunal. While the appeal was pending an application under 0. 6 or 17 of the Code

of Civil Procedure was made on January 14, 1974, by the appellants. In this

application written statement was sought to be amended. In their original written

statement Vishwa Nath and the company had taken the stand that the company was

the tenant. Since in evidence before the controller it had been proved that the

premises were in fact taken by Vishwa Nath in his own name in 1962 it seemed

necessary to the appellants to amend their written statement. Now they wanted to

plead that the premises were taken on rent by intrados of which Vishwa Nath was

the sole proprietor and that the possession of the premises was exclusively with

Vishwa Nath except that Interads was converted into Interads Private Limited who

are now carrying on business of advertisement in the room. It was said that the

amendment sought is in respect of a matter which is admitted by the parties and

the original written statement had been filed under a bona fide mistake.

( 14 ) THE tribunal dismissed the application for two reasons. Firstly, it said that the

amendment introduced a new case. Secondly,

( 15 ) AGREEING with the findings of the controller the tribunal dismissed the appeal

on April 30, 1974- The tribunal came to the conclusion that the tenant was Vishwa

Nath and not the company. Since Vishwa Naths own case in the written statement

was that the company was in exclusive possession of the premises the tribunal held

that it was a case of subletting as the possession had passed to the company from

Vishwa Nath. The tribunal was of the view that the company was a juristic

personality and was distinct from the share-holders and directions. It was a body

corporate and was different from Vishwa Nath. Since admittedly the company was in

possession of the room there was parting with possession, the tribunal said. Vishwa

Nath and the company appeal to this Court.

( 16 ) IT has been proved in evidence that Vishwa Nath on November 1. 1962, took

the room in his own name as the chief executive of Interads. On November 10,

1962, he wrote a letter to the landlords (A-3) saying "i have taken on rent from you

the Garage premises in your building, 6/4 B-Asaf Ali Road, New Delhi, at a rent of

Rs. 100. 00 (Rupees One hundred only per month) from 1st November, 1962. . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE said premises will be

used by me for office or godown of my firm known as INTERADS, of which I am the

Chief Executive. "

( 17 ) THIS letter was signed by Vishwa Nath, Chief Executive, INTERADS, New

Delhi and was written on a letterhead of interads, The draft rent note (A-4) was

also proved which is signed by Vishwa Nath as the sole proprietor and chief

executive of the concern known as INTERADS. This is a concurrent finding of fact by

both the authorities under the Act.

( 18 ) AFTER the premises were taken on rent what happened was this. Interads

Advertising Agency continued business till 1963. In 1964 the company was formed.

Then the company started paying rent, as I have said. Pre-receipted cheques were

issued and on the reverse the landlord, respondent No. 1, signed the cheques

acknowledging that he received the amount from Interads advertising (P) Limited.

This state of affairs continued right from 1964 till 1968 Towards The end of 1968

the landlords stopped accepting rent though the company tendered it time and

again. The landlords brought a petition for ejectment in January, !969. They alleged

subletting. The case of the tenant was that there is no subletting. The company is

the tenant and the company is in the possession of the premises, they said. The

controller and the tribunal both found that the tenant was Vishwa Nath and he was

the sole proprietor of Interads in 1962 when he took the premises on rent. They

found that the company was never the tenant Since in the written, statement it was

admitted that the company was the tenant and was in possession of the premises

both the controller and the tribunal held. as a matter of syllogistic reasoning, that

the ease of parting with possession was proved on the tenants own premises. In

other words the authorities under the Act proceeded thus : Vishwa Nath took the

premises on rent. Now admittedly, the company claims to be the tenant. Admittedly

the company is ini the possession of the room. They treated the company as in

exclusive occupation and therefore in possession and concluded that Vishwa Nath

must have parted with the possession of the room in favour of the company. The

flaw in this reasoning is that the occupation is merely that of a licensee. Such an

occupation is not necessary exclusive. The tenant has not completely effaced

himself, lie is in legal possession. He has a controlling interest in the company. [see

the observations of Scrutton 1.. in Chaplin v. Smith, (1926) I K. B. 198].

( 19 ) IN my opinion the deductive reasoning adopted by the controller and the

tribunal was faulty. Both of them were of the view that the tenants own admission

in the written statement that (1) the company was the tenant and that (2) the

company was in possession of the premises, was proof enough of parting with

possession. They proceeded on the tenants written statement. They did not pay

regard to what was proved on the record. On the record it was proved that the

tenant was not the company. Vishwa Nath was the tenant. At the time of letting he

carried on business under the name and style of rnterads as its sole proprietor. In

1964 he formed a private limited company. In his statement before the controller

Vishwa Nath said:

( 20 ) IF an individual takes the premises on rent and then converts his sole

proprietorship concern into a private limited company in which he has the controlling

interest he cannot be evicted from the premises. On the proved facts this is the

inevitable conclusion. The person who took the premises on rent remains in

possession though he forms a company and ceases to be the sole proprietor. He

does not cease to be in possession. He has not parted with the possession with any

one. He has changed the form of his business. In Interads Vishwa Nath was the sole

proprietor. In Interads Private Limited he has the controlling interest and his wife

and his two sons are the other shareholders along with two other strangers. He was

all in all in his proprietorship concern. Now also he is the chief executive chairman

and the managing director of the company. It is true that the company is a juristic

person but in each case what we have to sec is whether possession has been parted

with and whether there is an ouster of the tenant. If the company is a facade

concealing the true facts it may be necessary for the Court to pierce the corporate

veil.

( 21 ) IN Chaplin v. Smith (supra) a lessee had covenanted with his lessor that he

will not assign or underlet or part with possession of the demised premises or any

part thereof. The lessee then assigned his business to a company of which he was a

managing director and in which he held a controlling interest. Subsequently a

second company was formed of which the lessee was a managing director and it

was stipulated that he should remain in possession as actual tenant of the demised

premises. The Court of Appeal held that no interest in the demised premises passed

to the companies or either of them and that there had been no breach of the

lessees covenant not to part with possession of the premises or any part thereof.

( 22 ) SCRUTTON L.. referred the following passage in Foa on Landlord and Tenant

as a correct statement of law :"the mere act of letting other persons into possession

by the tenant, and permitting them to use the premises for their own purposes, is

not, so long as he retains the legal possession himself, a breach of the covenant. "

( 23 ) THE Court of Appeal referred to Jackson v. Simons (1923) I Ch. 373 and

Peebles v. Crosthwaite (1897) 13 Times L. R. 198 (C. A. ). These authorities hold

that if the lessee retained the legal possession of the premises he did not commit a

breach of the covenant against parting with possession by allowing other people to

use the premises or by sharing the possession with another. Peebles" case (supra)

was followed by the Court of Appeal. . Jacksons case (supra) was approved by

them. In this court we followed these cases recently.

( 24 ) CHAPLINs case (supra) was decided 50 years ago. Its correctness has never

been questioned or doubted so far as I know. It applies fully to the present case. In

this Court it has been followed in a recent decision : Gurdial Singh v. Brij Kishore.

1970 D. L. T. 592.

( 25 ) VISHWA Nath is in possession as managing director having a controlling

interest in the company. No doubt he has let the company into possession but he

has not parted with the possession himself and so long as it is true in fact Vishwa

Nath has not contravened the law. He has not gone out of possession. Possession

has been retained by him. If he has allowed the Company to use the premises G. D.

Chaudhary v. Shri Anand Sarup, 1966 D. L. T. 28. while he himself lias remained in

possession of them as managing director and chief executive of the company I

cannot accede to the argument that he has parted with possession. He has not

assigned nor has he sublet.

( 26 ) SO long as the lessee retains the legal possession of the whole of the

premises he does not commit a breach of law against parting with the possession by

allowing other people to use the same. A tenant cannot be said to part with the

possession of any part of the premises unless his agreement with the licensee

wholly outs him from the legal possession of that part. If there is anything in the

nature of a right to concurrent user there is no parting with possession: See Standing

v. Abrahams (1931) L. R. Ch. D. 470 (8) and G. D. Chaudhry v. Shri Anand Sarup.

1966 D. L. T. 28.

( 27 ) CLAUSE (b) of the proviso to S. 14 (1) uses three expressions, namely,

sublet, assign and "otherwise parted with the possession of the whole or any part

of the premises without obtaining the consent in writing of the landlord". These

three expressions deal with different concepts and apply to different circumstances.

In subletting there exists the relationship of landlord and tenant as between the

tenant and his sub tenant and all the incidents of letting or tenancy have to be

found, namely, the transfer of an interest in the estate, payment of rent, and the

right to possession as against the tenant in respect of the premises sublet. In

assignment the tenant has to divest himself of all the rights that he has as a tenant.

The expression "parted with possession" undoubtedly postulates parting with legal

possession. Parting with possession means giving possession to persons other than

those to whom possession has been given by lease and "parting with possession"

must have been by the tenant. The mere user by other persons is not parting with

possession so long as the tenant retains the legal possession himself or, in other

words, there must be vesting of possession by the tenant in another person by

divesting himself not only of physical possession but also of the right to possession.

The divestment or abandonment of the right to possession is necessary in order to

invoke the clause of parting with possession: Sec Hazari Lal v. Gian Ruin, 1972 RCR

74.

( 28 ) IN Woodfall on landlord and Tenant 27th Edition Volume I page 523 it is

said:

( 29 ) ON the defence raised in the written statement the authorities under the Act

thought that there was parting with possession. The tribunal rejected the application

for amendment. The tenants own written statement was held to be the basis of his

ejectment. It became a trip wire of procedure. This resulted in miscarriage of

justice.

( 30 ) UNDER a bonafide mistaken belief Vishwa Nath thought that the company

was the tenant. This idea which Vishwa Nath entertained cannot be said to be

entirely unfounded. He formed the company in 1964. He started paying rent from

1964 in the name of the company. Rw, R3. R4 and Rl are all cheques issued by the

company to which are appended receipts at the back signed by Chaman Lal Khanna

acknowledging the receipt of rent from the company. Vishwa Nath, therefore,

thought that his landlords have accepted and recognised the company as a tenant.

In his evidence, he said: "when my sole proprietorship was converted into pvt.

concern in 1964, it was within the knowledge of Chaman Lal petitioner. "i cannot

persuade myself to believe that the landlords never knew that Vishwa Nath had

formed a company. Rent was accepted from the company with full knowledge for

four years or so.

( 31 ) THE counsel for the landlords says that though the company had been formed

the landlords continued to recognize as before only Vishwa Nath as their tenant. A

rent receipt (AW 3/1) issued in the name of Vishwa Nath was proved. It was

submitted by Vishwa Nath to the electricity undertaking for getting an electric

connection in his own name on December 24, 1966. On this basis it is contended

that Vishwa Nath remained the tenant throughout as is shown by the receipt. This

receipt was issued at the request of Vishwa Nath because he wanted a connection in

his own name. Apart from this receipt no other receipt has been proved on the

record. The landlords stated that even after this receipt they have been issuing

receipts in the name of Vishwa Nath. They filed counter-foils (A20 to A49 ). Vishwa

Nath in his evidence has denied the issue of separate receipt in his own name after

the formation of the company except the one which he submitted to the electricity

undertaking. He said in his evidence: "it is incorrect that the petitioner used to send

regular separate rent receipts to me. "i should have imagined that there was no

need of issuing separate receipts. The pre-receipted cheque is a receipt in itself.

Why should separate receipts be issued If that was the landlords case they should

have declined to accept rent by pre-receipted cheques issued by the company

requiring them to acknowledge receipt of rent from the company.

( 32 ) AS the landlords were accepting rent from the company Vishwa Nath though

that the company had become the tenant. He did not. consider that the previous

legal relationship between him and the. landlords continued. He assumed not

entirely without justification that now the company was the tenant. He said so in his

written statement. The landlords proved, the tenants letter which he wrote at the

inception of the tenancy and the draft rent note which he had signed The rent

controller came to the conclusion that Vishwa Nath was the tenant and that he had

created an interest in favour of the company. In appeal the tenant wanted to

retrace his steps and say what had been judicially found to be the true state of

things. He wanted to plead by way of amendment that the tenant was Vishwa Nath

and not the company. This was in consonance with the findings of the controller. It

was not a new case. That was the landlords own case. It was the holding of the

controller as well as the tribunal. The Courts do not punish the litigants for the

mistakes make. Courts of law are not courts of penal jurisdiction. They exists for the

sake of doing justice. If truth was as I think it was that Vishwa Nath was the tenant

the tribunal should have allowed the amendment. Landlords own case was this. The

tenant accepted that case in his application for amendment so that ejectment order

is not passed against him on the ground of his own admission that the company is

the tenant.

( 33 ) THE counsel for the landlords cited an unreported decision in Shyam Sunder

v. Jaswant Rai Berry, Civil Revision No. 165 of 1967. decided on November 14,

1968, by Mehar Singh CJ of Punjab and Haryana High Court (^ ). In that case the

tenant had sublet the demised shop to a cooperative industrial society limited

without the consent of the landlord. The tenant became the salaried officer of the

society and the society was in occupation of the shop. The court came to the

conclusion that the tenant had sublet the shop to the society as the books of the

society showed that the society was paying rent. to the tenant. This was the

distinguishing feature of that case. The facts of that case were substantially different

from the present one.

( 34 ) THE counsel then referred to another case : Milkhi Ram v. Hans Raj 72 All

India Rent Control Journal (14) (Short notes of cases ). I refuse to notice this case

as it appears only in short notes. I do not know what were the facts of that case.

( 35 ) LASTLY it was said that the company filed the application under S. 45 which

also showed that the company claimed to be The tenant. This was what Vishwa

Nath thought to be the legal position and that is why the company filed the

application. This will not alter the legal position found as a fact by the authorities

under the Act.

( 36 ) A document of some importance is the notice dated December 6, 1968 (A-6)

which was issued by Chaman Lal Khanna himself (respondent No. 1) to Vishwa Nath

chief executive of M/s. Interads (P) Ltd. The only complaint in this notice was that

the premises had been sublet and possession thereof had been parted in favour of

Admanas Studios. No complaint was made that Vishwa Nath had sublet or parted

with the possession in favour of the company. This is how in fact the case began-

Before the controller the landlords took three grounds of subletting. They said that

the premises have been sublet to (1) Stereo-craft (2) Admanas Studios and (3)

Interads (P) Ltd. They abandoned their case of subletting to Stcrco-crafts and

Admanas Studios and confined themselves to Interads (P) Ltd. The authorities under

the Act ordered ejectment of the tenant on his own. written statement in disregard

of the true facts which they themselves had found on evidence.

( 37 ) TO sum up : on the facts proved Vishwa Nath was the tenant. He took the

premises on rent in November, 1962 in his own name. In 1964 he formed a

company in which he has a controlling interest and of which he is the chief

executive and the managing director. He is in possession of the premises. His sons

and wife are the other share-holders with him. In my opinion there is no subletting

or parting with possession.

( 38 ) AS regards the application under S- 45 the controller and the tribunal both

found that the tenant was not entitled to the use of the bathroom. They found no

deprivation. This is a finding on fact, which cannot be disturbed in second appeal. I

must, therefore, confirm the order of the controller and the tribunal dismissing the

application under S. 45 of the Act.

( 39 ) FOR these reasons I would allow the appeal and set aside the order of

ejectment. The parties will bear their own costs throughout.