12 December 1996
Supreme Court
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M/S. COX & KINGS LTD. & ANR Vs SMT.CHANDER MALHOTRA

Bench: K. RAMASWAMY,S.B. MAJMUDAR,G.T. NANAVATI
Case number: Appeal (civil) 2702 of 1989


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PETITIONER: M/S. COX & KINGS LTD. & ANR

       Vs.

RESPONDENT: SMT.CHANDER MALHOTRA

DATE OF JUDGMENT:       12/12/1996

BENCH: K. RAMASWAMY, S.B. MAJMUDAR, G.T. NANAVATI

ACT:

HEADNOTE:

JUDGMENT:                THE 12TH DAY OF DECEMBER, 1996 present:                Hon’ble Mr.Justice K.Ramaswamy                Hon’ble Mr.Justice S.B.Majmudar                Hon’ble Mr.Justice G.T.Nanavati      R.F.Nariman, Sr.Adr.,  Kiran  Bhardwaj,  Vineet  Kumar, Advs. with him for the appellants.      P.P.Rao, Sr.  Adv., R.P.Sharma,  Adv. with  him for the Respondent                          O R D E R      The following order of the Court was delivered:      This appeal  by special  leave arises from the judgment of the  Delhi High  Court dated July 27, 1983 dismissing the Second Appeal  No.630/85 confirming  the decree  of eviction passed against  the appellants under Section 14(1)(b) of the Delhi Rent Control Act.      The admitted  facts are  that the  premises in question was demised  to Cox  & Kings  (AGENTS)  Limited,  a  company incorporated under  the United  Kingdom Companies  Act  [for short, "Foreign Company"], tenant of Smt. Jagdish Rani Sethi who subsequently  sold the property to Smt. Chander Malhotra by a  registered  conveyance.  Mrs.  Rani  Sethi  had  filed eviction petition on diverse grounds. Smt. Chander Malhotra, the  respondent,   after  getting   impleaded,  amended  the patition and  also pleaded  sub-letting to the appellant, an Indian Company.  The Rent Controller found that premises had been sub-let  by the Foreing Company and, therefore, ordered eviction. That  was confirmed  in appeal. As stated earlier, the second appeal was also dismissed. The principle question that arises  for consideration,  on reference to this Bench, is: whether  involuntary transfer  of the leasehold interest from Foreign  Company to  the Indian  Company  is  not  sub- letting within  the meaning  of Section 14(1)(b) of the Act? The said section reads under:      "... that  the tenant  has,  on  or      after the  9th day  of June,  1952,      sub-let,  assigned   or   otherwise      parted with  the possession  of the      whole or  any part  of the premises      without obtaining  the  consent  in

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    writing of the landlord".      The Contention  of Shri  R.F. Nariman,  learned  senior counsel for  the  appellants,  is  that  after  the  Foreign Exchange Regulation  Act, 1973  [for short,  the "FERA"] had come into  force, by operation of Section 29 of the Act, the Foreign Company  was required  to obtain,  to carry  on  the business, written  permission of  the Reserve Bank of India. Accordingly, it  had applied  for permission but the Reserve Bank had  refused permission  to continue the same business. As a  consequence, the  India company  was floated  in which Foreign Company,  though sought  to  have  100%  shares,  on refusal of  the  permission,  had  only  40%  share  in  the business to  which approval was given by the Reserve Bank of India. Consequently, the Indian company has been carrying on the business in the same premises. since the transfer of the leasehold interest  from the  Foreing Company  to the Indian Company is  by compulsion, it is an involuntary one and thus is not a case of "sub-letting" within the meaning if Section 14(1)(b) of  the Act. Therefore, the view taken by the court below is  not correct  in law.  We find it difficult to give acceptance to  the contention. It is true that under Section 29 of  the FERA,  without prejudice  to  the  provisions  of Section 28  and  Section  47  and  notwithstanding  anything contained  in   any  other  provision  of  the  Act  or  the provisions of  the Companies  Act, 1956,  a person  residing outside India  (whether a  citizen of  India or  not)  or  a person   who is  not a citizen of India but a is resident in India, or  a Company (other than a Banking Company) which is not incorporated under any law in force in force in India or in which  the non-resident  interest is more than 40% or any branch of  such Company   shall not, except with the general or special  permission of  the Reserve  Bank of  India,  (a) carry on  in India, or establish in India a branch office or other place  of business  for carrying  on any activity of a trading ,  commercial or  industrial nature,  other than  an activity for  the carrying  on of  which permission  of  the Reserve Bank  has   been obtained  under section 28...": (b) every application   made  under clause  (a) shall be in such form and contain such particulars as may be specified by the Reserve Bank;  and (c)  where an  application  has been made under clause  (a), the  Reserve Bank  may, after making such inquiry as  it may  think fit.  either allow the application subject to such conditions, if any, as the Reserve Bank  may think fit to impose or reject the application.      It is  not in  dispute that such an application came to be made  and the  Reserve Bank had passed an order directing the Foreign  Company to wind up its business.  Subsequently, an application was made for permission to incorporate Indian Company with  100% share  held by  the Foreign Company which was  refused.   Thereafter,  Indian   Company  came   to  be incorporated in  which the  Foreign Company  claimed to have to 40$% share in the  business. Thus, The Indian Company was incorporated under  the Indian  Companies  Act, 1956 and was doing business  under FERA  with the  permission of  Reserve Bank. The  question then   is:  whether the  Foreign Company sub-let the  demised premises within the meaning  of Section 14(1) (b)  of the  Act? It is seen that under FERA, there is no compulsion  that the  premises  demised  to  the  Coreign Company should  be continued  or given to Indian Company. On the other  hand, the conveyance executed between the Foreign Company and the Indian Company reads as under.      " An  agreement  was  executed  was      executed on  July 4,  1980  between      the English  Company.  The  English      Company is  termed as  Assignor and

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    Indian Company  has been  termed as      Assignee.  The  last  part  of  the      preamble indicates that whereas the      assignor has  agreed to  assign and      the assignee  has  agreed  to  take      over   for consideration  and  upon      the terms  and conditions  here  in      after set  out the business carried      on  by   the  assignor   in   India      hereinabove  recited   as  a  going      concern  together   with  all   the      assets and  liabilities of the said      business  as     appearing  in  the      Audited  Balance   Sheet   of   the      assignor relating  there to  as  on      the 30th  day of  September,  1976.      Clause (1)  specifically  mentioned      that on and from the date including      the     transfer    date  the  said      business shall become and be deemed      to have  been owned by and assigned      to  the   Assignee,   i.e.   Indian      Company. Clause  (2) envisages that      assignment   was    received    for      consideration    Clause     7(1)(b)      indicates as regards the leaseholds      , subject  to payment  of the  rent      reserved and  the observance of all      the   covenants    and   conditions      contained   in    the   Leases   or      Agreements for  Leases under  which      the same  are  hold.  Clause  7(ii)      indicates that  incidental  to  the      assignment of  the said business as      a  going   concern;  the   Assignor      shall, in  so for  as it  is within      its power to do so, assign or cause      to  be  assigned  the  monthly  and      other  tenancies   of  all   rented      premises of the Assignor in India".      Thus, It  could be  seen that  under the consequence of agreement the  Foreign Company   and the Indian Company, the Indian Company  became the  assignee  with  all  rights  and liabilities and  subject to  observance  of  the  terms  and conditions of all the tenancy rights contained in the leases or agreements  for lease under which the same are being held by the  Foreign Company. It would, thus, be clear that it is a case  of assignment  of the  leasehold right, had from the respondent in  favour  of  India  Company,  subject  to  the observance of the leasehold covenants contained in the lease held by  the Foreing  Company. The  question, therefore, is: whether it  is a  sub-letting or assignment? It is seen that sub-section (b) of Section 14, in clear terms envisages that the tenant  shall not,  after June 9, 1952, sub-let, assign, or otherwise  part with  the possession  of the whole or any part of  the premises, without obtaining the written consent of the landlord. It is seen that though by operation of FERA the Foreign  company had wound up its business, it assigned, under the  agreement, the  leasehold interest in the demised premises to the Indian Company which is carrying on the same business in  the tenanted  premises  without  obtaining  the written consent of the landlord.      The  respondent-landlord   is   not   bound   by   such assignment, induction  of the  appellant-Company against her wishes. Her written consent is a pre-condition, as envisaged

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under  sub-section  (i)(b)  of  Section  14  which  was  not obtained. Therefore, it is a clear case of sub-letting. Even otherwise, it  would be  an assignment, as admittedly agreed in the  agreement referred  to  herein  before  between  the Foreing Company  and the  Indian Company.  In  P.H.  Rao  v. S.P.N.K. Jain  & Anr.  [(1980) 3  SCR 444], the landlord had executed a  lease in  respect of  the  demised  premises  in favour of  the Laxmi  Bank on  1.4.1942; the  Bank went into liquidation. the  liquidator sold  leasehold  right  to  the respondent and  the Court confirmed the same. An application for eviction  come to  be filed and it was contended that it being an  involuntary transfer  it was  not a  case of  sub- letting under  Section 14(1)(b)  of the  Act. This Court had negatived the contention holding thus:      " As  regards point  No.3, the High      Court  relying  on  a  decision  of      Calcutta High  Court in Krishna Das      Nandy vs.  Bidhan Chandra  Roy [AIR      1959 Cal.  1811] has  found that as      the   transfer    in   favour    of      respondent No.  1 by  the  official      liquidator  was  confirmed  by  the      Court, the  status of the tenant by      respondent  No.1  was  acquired  by      operation of  law  and,  therefore,      the  transfer  was  an  involuntary      transfer and the provisions of Rent      Control Act would not be attracted.      After careful  perusal of  Calcutta      case, in the first place it appears      that the  section concerned has not      been extracted  and we are not in a      position to  know what  the  actual      language  of  the  Section  of  the      Bengali  Act.   Secondly,  in   our      opinion,  the  official  liquidator      had merely  stepped into  the shoes      of  Laxmi   Bank  which   was   the      original tenant  and  even  if  the      official liquidator had transferred      the tenancy  interest to respondent      No.2 under the orders of the Court,      it was  on behalf  of the  original      tenant.  It   was   undoubtedly   a      voluntary sale  which clearly  fell      within  the   mischief  of  Section      14(1)(b) of  the Delhi Rent control      Act. Assuming  that the sale by the      official    Liquidator    was    an      involuntary    sale,     then    it      undoubtedly become an assignment as      provided for  by s.14(b)  of  Delhi      Rent  Control   Act.  S.14(b)  runs      thus:-      "14(b)--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."      The language  of  s.14(b)  is  wide      enough not only to include any sub-      lease but even an assignment or any      other mode  by which  possession of

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    the tenanted premises is parted. In      view  of   the  wide  amplitude  of      s.14(b)  we   are  clearly  of  the      opinion that  it does  not  exclude      even  an   involuntary  sale.  Fore      These reasons,  therefore,  we  are      unable to agree with the view taken      by the  High Court.  The appeal  is      accordingly allowed,  the  judgment      and decree  of the  High Court  are      set  aside   and  the   plaintiff’s      application under s.25 of the Delhi      Rent  Control   Act  is  dismissed.      "premises  without   obtaining  the      cons.      The above  ratio is  clearly  on  the  point  in  issue involved in the present case, In Venkatarama Iyer v. Renters Ltd. [(1951  II MLJ  57], K.  Subba Rao, J., as he then was, has  to   consider  a  similar  question  under  the  Madras Buildings  (Lease  and  Rent)  Control  Act.  There  was  an assignment between  the two  companies and  considering  the effect thereof  it was held that if a company doing business in a  particular premises  taken  on  lease,  transfers  its business as  a going concern to another company and also the net assets  for consideration  and thereafter the transferer company takes  over the  business and carries on business in the premises  let out  to the  former company,  it cannot be said that  there was  no transfer of the right of the former company under  the lease  to the  latter  company.  On  such transfer, the  tenant is  liable to  be evicted  as  a  sub- tenant. The  above judgment is clearly on the point in issue before us.  In General  Radio & Appliances Co. Ltd. v. M.A.. Khader (dead)  by Lrs.  [(1986) 2  SCR 607  at 620] a three- Judge Bench  had approved  the above  ratio.  Two  companies having been  amalgamated, eviction  against the  amalgamated company came  to be  filed.  On  consideration  of  all  the decisions referred  to above  hereinbefore, the irresistible conclusion followed  that there  had been  a transfer of the tenancy  interest  of  appellant  No.1  in  respect  of  the premises in  question to  the appellant  No.2, subsequently, renamed appellant  No.3, M/s. National Radio Electronics Co. Ltd. Accordingly,  their eviction  was upheld  under Section 10(ii)(a) of  the Andhra  Predesh Buildings (Lease, Rent and Eviction Control  Act, 1960.  The facts  in Madras Bangalore Transport Co. (West) v. Inder Singh & Ors. [(1986) 3 SCC 62] relied   upon    by   Shri   R.F.   Nariman,   are   clearly distinguishable.  In  that  case,  a  partnership  firm  was divided between  the partners and two separate firms came to be formed  with a  distinct area of operation and one of the companies was to retain possession of the tenanted premises. After 10 years, application for eviction came to be filed on the ground  of subletting  of the  premises. Considering the constitution of  the companies, its operation and the nature of the  incidence that flowed therefrom, this Court had held that the  limited company  and the partnership firm were two only on  paper but were one for practical purposes There was substantial identity  between the  limited company  and  the partnership firm.  On the  basis of  those findings,  it was held that  there  was  no  sub-letting.  The  ratio  has  no application to the facts in this case.      In view of the findings recorded above, viz., there was a clear  assignment between  the  Foreign  Company  and  the Indian Company  of the  demised premises without any written consent of  the respondent-landlord,  it is  a case of "sub- letting" within  the meaning of Section 14(1)(b) of the Act.

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The  courts   below,  therefore,   have  not  committed  any illegality   in    reaching   those    findings   warranting interference.      The appeal is accordingly dismissed. No costs.