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CASE NO.: Appeal (civil)  387 of 2004

PETITIONER: SINGER INDIA LIMITED                             

RESPONDENT: CHANDER MOHAN CHADHA & ORS               

DATE OF JUDGMENT: 13/08/2004

BENCH: CJI,G. P. MATHUR & C. K. THAKKER

JUDGMENT: J U D G M E N T (With Civil Appeal No. 388 of 2004)

G.P. MATHUR, J.

1.      This appeal, by Special Leave, has been preferred against the  judgment and order dated 25.5.2001 of Delhi High Court  whereby the  Second Appeal preferred by the appellant was dismissed and the judgment  and order dated 8.4.1996 of the Rent Control Tribunal directing eviction of  the appellant from the premises in dispute was affirmed.

2.      Shri Atma Ram Chadha, predecessor-in-interest of respondent Nos. 1  to 13 (hereinafter referred to as the ’landlord’) let out Shop No. 13/14  (Private No. 15) Block’C’, Cannaught Place, New Delhi to M/s. Singer  Sewing Machine Company, incorporated under the laws of the State of New  Jersey, USA, (hereinafter referred to as ’American Company’), at a rental of  Rs. 1200/- per month vide a registered lease deed dated 11.7.1966.   In the  year 1982, the landlord filed an eviction petition on the ground, inter alia,  that the American Company, without obtaining any written consent from the  landlord, had parted with the possession of the premises in dispute in favour  of Indian Sewing Machine Company Limited,  incorporated under the  Indian Companies Act (hereinafter referred to as ’Indian Company’), and it  was the said company which was in exclusive possession of the premises  and thereby it was liable for eviction in view of Section 14(1)(b) of the  Delhi Rent Control Act (hereinafter referred to as the ’Act’).  The eviction  petition was contested by the appellant on the ground, inter alia, that a  direction was issued to the American Company to reduce its share capital to  40 per cent in order to carry on business in India in view of Section 29 of  Foreign Exchange Regulation Act, 1973 (hereinafter referred to as ’FERA’).   Accordingly, Company Petition bearing No. 66 of 1981 was filed by the  Indian Company before the Bombay High Court under Sections 391 and  394 of the Companies Act which was allowed on 31.12.1981, and a scheme  of amalgamation was sanctioned whereby the undertaking in India of the  American Company was amalgamated with the Indian Company.  Under the  scheme of amalgamation the whole of the business, property, undertaking,  assets, including leases, rights of tenancy, occupancy etc stood transferred to  and vested in the Indian Sewing Machine Company, namely, the Indian  Company.  It was submitted that the Indian Company is no other entity  except the legal substitute of the American Company and in substance there  is no case of sub-tenancy.  The Additional Rent Controller, Delhi dismissed  the eviction petition by the judgment and order dated 6.2.1995, but this was  reversed by the Rent Control Tribunal in the appeal preferred by the  landlord and eviction petition was allowed.  The Second Appeal preferred  by the appellant was dismissed by the High Court on 25.5.2001.  During the  pendency of the appeal before the Rent Control Tribunal, the name of M/s.  Indian Sewing Machine Company was changed as Singer India Limited

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which is the appellant herein.

3.      Shri Anil Divan, learned senior counsel for the appellant, has  submitted that at the relevant time Section 29 of FERA provided that a  company (other than a banking company) which is not incorporated under  any law in force in India or any branch of such company, shall not, except  with a general or special permission of the  Reserve Bank, 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 had  been obtained under Section 28.  Accordingly, a direction was issued by the  Reserve Bank to the American Company to reduce its equity capital to 40  per cent.  In view of this direction, a Company Petition was filed under  Sections 391 and 394 of the Companies Act in the Bombay High Court for  sanctioning a scheme of amalgamation which was allowed and the  American Company got amalgamated with the Indian Company.  Learned  counsel has submitted that it was not a voluntary transfer of undertaking, but  the amalgamation of the original lessee, namely, the American Company  with the Indian Company had to be resorted to under compulsion of law  with a view to secure compliance of the provisions of FERA and the  directions issued by the Reserve Bank of India and, therefore, Section 14(1)  (b) of the Act would not be attracted.  Learned counsel has further submitted  that in the peculiar facts of the present case, Section 14(1)(b) of the Delhi  Rent Control Act should not be literally construed but a purposive  construction should be given.  Reference in this connection has been made  to a decision of Delhi High Court in Telesound India Ltd.  In re.  1983 (53)  Company Cases 926 wherein it has been held that the effect of an order of  amalgamation passed under Section 394 of the Companies Act is that the  rights, properties and the liabilities of the transferor company become the  rights, property and liabilities of the transferee-company and it is neither an  assignment of right or property nor an assignment of the property by the  company.  On amalgamation, the transferor-company merges into the  transferee-company shedding its corporate shell, but for all practical  purposes remaining alive and thriving as part of the larger whole.  The  transferor-company is dissolved not because it has died or ceased to exist,  but because for all practical purposes it has merged into another corporate  shell.   Learned counsel has thus submitted that what should be looked into  is the substance of the matter and in view of the aforesaid legal position,  only the corporate shell of the American Company has been shed or  removed, but it is still alive and thriving as part of the Indian Company and  consequently there was no sub-letting or parting with possession so as to  attract the provision of Section 14(1)(b) of the Act.  Shri Divan has also  referred to  G.K. Bhatnagar vs. Abdul Alim 2002(9) SCC 516 and Parvinder  Singh vs. Renu Gautam and others 2004(4) SCC 794 wherein with reference  to creation of partnership by a tenant it was held that if the user and control  of the tenancy premises has been parted with and a 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 a  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.  Reference has also been  made to a decision of a Single Judge of Delhi High Court in Vishwa Nath  vs. Chaman Lal Khanna AIR 1975 Delhi 117 wherein it was held that if an  individual takes a premises on rent and then converts his sole proprietorship  concern into a private limited company in which he has the controlling  interest, it would not amount to parting with possession with any one as he  continues to be in possession of the premises and as such he does not  become liable for eviction under Section 14(1)(b) of the Act.    Learned  counsel has further submitted that as the Company Petition for sanctioning  the scheme of amalgamation was filed in order to secure compliance with  law, namely, to reduce the equity capital of the American Company to 40  per cent and as the "lease, rights of tenancy or occupancy"  of the said  company got vested with the Indian Company in view of the sanction  granted by the Bombay High Court i.e. under the orders of the Court, the  principle laid down by this Court in Hindustan Petroleum Corporation Ltd

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and another vs. Shyam Co-operative Housing Society and others 1988 (4)  SCC 747 will be applicable and no order of eviction can be passed against  the appellant.   4.      Shri Dushyant Dave, learned senior counsel for the respondent, has  submitted that the argument that it was not the voluntary act of the  American Company whereunder its leasehold rights, rights of tenancy or  occupancy got transferred to or vested in the Indian Company is wholly  fallacious.  The direction issued by the Reserve Bank of India for ensuring  compliance of Section 29 of FERA was merely to reduce the equity capital  of the American Company to 40 per cent and this could be achieved by  various modes permissible in law.   No such direction had been issued by  the Reserve Bank to the American Company for getting itself amalgamated  with an Indian Company.  The American Company voluntarily submitted to  a scheme of amalgamation with the Indian Company in the Company  Petition before the Bombay High Court whereunder its ’lease, right of  tenancy or occupancy’ got vested with the Indian Company.   After the  sanction of scheme of amalgamation, the American Company completely  lost its identity and it was the Indian Company which came into possession  of the premises in dispute and, therefore, the provisions of Section 14(1)(b)  of the Delhi Rent Control Act were clearly attracted and the order for  eviction had rightly been passed.  Learned counsel has also submitted that it  is a well-settled principle of interpretation that the words of a statute must  be interpreted in their ordinary grammatical sense unless there be something  in the context or in the object of the statute in which they occur or in the  circumstances in which they are used to show that they were used in a  special sense different from their ordinary grammatical sense, and the  golden rule is that the words of a stature must, prima facie be given their  ordinary meaning.  On a plain reading of the provision, it is urged, sub- letting, assigning or otherwise parting with possession of the whole or any  part of the premises without obtaining the consent in writing from the  landlord would render the tenant liable for eviction.  It has thus been urged  that in view of the fact that the American Company transferred the lease and  occupancy rights to the Indian Company, the order for eviction passed  against the appellant was perfectly justified.  Shri Dave has also submitted  that the controversy raised in the present appeal has already been considered  in several decisions by this Court and there is absolutely no reason to depart  from the view taken therein.   

5.      Before adverting to the contentions raised at the Bar, it will be  convenient to reproduce Section 14(1)(b) of the Act, which reads as under: " 14.   Protection of tenant against eviction.--  (1)   Notwithstanding anything to the contrary contained in  any other law or contract, no order or decree for the  recovery of possession of any premises shall be made by  any court or Controller in favour of the landlord against  a tenant:          Provided that the Controller may, on an  application made to him in the prescribed manner, make  an order for the recovery of possession of the premises  on one or more of the following grounds only, namely --

(a)   \005\005\005\005\005\005\005\005\005\005

(b)  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 writing of the  landlord\005\005.."          \005\005\005\005\005\005\005\005\005\005\005\005                                     

                         There is no ambiguity in the Section and it clearly says that if, without  obtaining the consent in writing of the landlord the tenant has, on or after

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9.6.1952, (i) sub-let, or (ii) assigned, or (iii) otherwise parted with the  possession of the whole or any part of the premises, he would be liable for  eviction.  The applicability of the Section depends upon occurrence of a  factual situation, namely, sub-letting or assignment or otherwise parting  with possession of the whole or any part of the premises by the tenant.   Whether it is a voluntary act of the tenant or otherwise and also the reasons  for doing so are wholly irrelevant and can have no bearing.  This view finds  support from an earlier decision rendered in M/s. Parasram Harnand Rao vs.  M/s. Shanti Prasad Narinder Kumar Jain and another AIR 1980 SC 1655  wherein Section 14(1)(b) of Delhi Rent Control Act came up for  consideration.  The tenant in the premises, was Laxmi Bank, which was  ordered to be wound up and in that winding up proceeding, the Court  appointed an Official Liquidator who sold the tenancy rights in favour of  S.N. Jain on 16.2.1961.  The sale was confirmed by the High Court and, as a  result thereof, S.N. Jain took possession of the premises.  Thereafter, the  landlord filed a petition for eviction of Laxmi Bank.  The High Court held  that as the transfer in favour of S.N. Jain by the Official Liquidator was  confirmed by the Court, he acquired the status of the tenant by operation of  law and, therefore, the transfer of the tenancy rights was an involuntary  transfer and the provision of Section 14(1)(b) of the Act would not be  attracted.  Reversing the judgment, this Court held that 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 S.N. Jain under the orders of the Court, it was on behalf  of the original tenant.  It was further held that the sale was a voluntary sale,  which clearly was within the mischief of the Section, and assuming that the  sale by the Official Liquidator was an involuntary sale, it undoubtedly  became an assignment as provided by Section 14(1)(b) of the Act.  The  Court further held that the language of Section 14(1)(b) is wide enough not  only to include any sub-lease but even an assignment or any other mode by  which possession of the tenanted premises is parted and the provision does  not exclude even an involuntary sale.   

6.      It is also necessary to take note of some clauses of the scheme of  amalgamation which was sanctioned by the Bombay High Court on  31.12.1981.  In the scheme "Transferor Company" means the undertaking in  India of Singer Sewing Machine Company, a company incorporated under  the laws of the State of New Jersey, USA, the "Transferee Company" means  Indian Sewing Machine Company Limited, a company incorporated under  the Companies Act, 1956 and having its registered office at 207, Dadabhoy  Naoroji Road, Bombay, and the "Appointed Day" means 1.1.1982.  The  relevant part of clause (2) of the scheme, which has a bearing on the  controversy, is being reproduced below:

2.      " With effect from the Appointed Day, except as  hereinafter stated, the whole of the business, property,  undertaking, assets, including leases, rights of tenancy or  occupancy, instalment receivables under hire purchase  contracts, benefits of licences and quota rights of  whatsoever description and wheresoever of the  Transferor Company shall without further act or deed, be  transferred to and vested in the Transferee Company so  as to become from the appointed day, the business,  property, undertaking assets, including leases, rights of  tenancy or occupancy, instalment receivable under hire  purchase contracts, benefits of licences and quota rights  of the Transferee Company" for all the estate and interest  of the transferor company therein, provided that 13,445  equity shares of\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005."                          

The effect of this clause is that with effect from 1.1.1982 "leases, rights of  tenancy or occupancy" of the Singer Sewing Machine Company (American  Company) got vested with M/s. Indian Sewing Machine Company (Indian  Company).

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7.      The provision for facilitating reconstruction and amalgamation of  companies is made under Section 394 of the Companies Act.  In an  amalgamation, two or more companies are fused into one by merger or by  one taking over the other.  Reconstruction or amalgamation has no precise  legal meaning. In Halsbury’s Laws of England (4th Edn.) para 1539, the  attributes of amalgamation of companies have been stated as under:

" Amalgamation is a blending of two or more existing  undertakings into one undertaking, the shareholders of  each blending company becoming substantially the  shareholders in the company which is to carry on the  blended undertakings.  There may be amalgamation  either by the transfer of two or more undertakings to a  new company, or by the transfer of one or more  undertakings to an existing company.  Strictly  "amalgamation" does not, it seems, cover the mere  acquisition by a company of the share capital of other  companies which remain in existence and continue their  undertakings, but the context to which the term is used  may show that it is intended to include such an  acquisition.

The question whether a winding up is for the  purposes of reconstruction or amalgamation depends  upon the whole of the circumstances of the winding up."

8.      In Saraswati Industrial Undertaking vs. CIT Haryana AIR 1991 SC  70 (para 6), it has been held that there can be no doubt that when two  companies amalgamate and merge into one, the Transferor Company loses  its identity  as it ceases to have its business.  However, their respective  rights or liabilities are determined under the scheme of amalgamation, but  the corporate identity of the Transferor Company ceases to exist with effect  from the date the amalgamation is made effective.  Therefore, in view of the  settled legal position, the original lessee, namely, the American Company  ceased to exist with effect from the Appointed Day i.e. 1.1.1982 and  thereafter the Indian Company came in possession and is in occupation of  the premises in dispute.  

9.      The effect of parting of possession of the tenanted premises as a result  of sanction of scheme of amalgamation of companies under Section 394 of  the Companies Act by the High Court has also been considered in two  decisions of this Court.        In M/s. General Radio and Appliances Co. Ltd and  others vs. M.A. Khader 1986 (2) SCC 656, which is a decision by a bench  of three learned Judges, the premises had been let out to M/s. General Radio  and Appliances Co. Ltd.  On account of a scheme of amalgamation  sanctioned by the High Court under Sections 391 and 394 of the Companies  Act, all property, rights and powers of every description including tenancy  right, held by M/s. General Radio and Appliances Co. Ltd. had been  blended with M/s. National Ekco Radio & Engineering Co. Ltd.       Thereafter  the landlord instituted proceedings for eviction on the ground of  unauthorized sub-letting.  It was urged on behalf of the original tenant that  the amalgamation of M/s. General Radio and Appliances Co. Ltd (appellant  No. 1) with M/s. National Ekco Radio & Engineering Co. Ltd. (appellant  No. 2)  was  an involuntary one which had been brought into being on the  basis of the order passed  by the High Court under Sections 391 and 394 of  the Companies Act and that the appellant No. 1 Company had not been  wound up and /or liquidated, but had been merely blended with appellant  No. 2 on the basis of the order of the Court and consequently there was no  sub-letting by appellant No. 1 Company to appellant No. 2 Company.     It  was also urged that appellant No. 1 Company had not become extinct but  had been merged and/or blended with appellant No. 2 Company.  It was  held that the order of amalgamation was made by the High Court on the  basis of the petition filed by the Transferor Company in the Company  Petition and, therefore, it cannot be said that this is an involuntary transfer

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effected by the order of the Court.   It was further held that appellant No. 1  Company was no longer in existence in the eyes of law and it had effaced  itself for all practical purposes.  The appellant No. 2 Company i.e., the  Transferee Company, was not a tenant in respect of the suit premises and it  was appellant No. 1 Company which had transferred possession of the suit  premises in favour of the appellant No. 2 Company.  The Court further took  the view that under the relevant Act, there was no express provision that in  case of any involuntary transfer or transfer of the tenancy right by virtue of  a scheme of amalgamation sanctioned by the High Court by its order under  Sections 391 and 394 of the Companies Act, such a transfer will not come  within the purview of Section 10(ii)(a) of Andhra Pradesh Building (Lease,  Rent and Eviction) Control Act.   On this finding, it was held that the  appellant was liable for eviction.

10.     Cox & Kings Ltd. and another  vs. Chander Malhotra  1997 (2) SCC  687 is also a decision by a bench of three learned Judges and arose out of  proceedings for eviction under Section 14(1)(b) of Delhi Rent Control Act.   Here, the premises were given on lease to Cox & Kings (AGENTS)  Limited, a company incorporated under the United Kingdom Companies  Act (for short, "Foreign Company").  A petition for eviction was filed on  several grounds and one of the grounds was of sub-letting to Cox & Kings  Limited, a company registered under the Indian Companies Act (for short an  "Indian Company").  It was contended on behalf of the appellant that in  view of Section 29 of FERA, the Foreign Company was required to obtain  written permission from the Reserve Bank of India to carry on business.   The said permission was sought for but was refused.  As a consequence, the  Indian Company, namely, Cox & Kings Limited was floated in which the  Foreign Company sought to have 100 per cent shares, but on refusal of  permission had only 40 per cent of shares in the business to which approval  was given by the Reserve Bank of India.  Thereafter, the Indian Company  carried on business in the same premises.  It was urged that as the transfer of  leasehold interest from the Foreign Company to the Indian Company was by  compulsion, it was an involuntary one and, therefore, it was not a case of  sub-letting within the meaning of Section 14(1)(b) of the Act.  It was held  that under FERA, there was no compulsion that the premises demised to the  Foreign Company should be continued or given to the Indian Company.  On  the other hand, under the agreement executed between the Foreign  Company and the Indian Company, incidental to the assignment of the  business as a growing concern, the Foreign Company also assigned the  monthly and other tenancies and all rented premises of the assignor in India  to the Indian Company.   The Court, accordingly, concluded that though by  operation of FERA the Foreign Company had wound up its business, but  under the agreement it had assigned the leasehold interest in the demised  premises to the Indian Company which was carrying on the same business  in the tenanted premises without obtaining the written consent of the  landlord and, therefore, it was a clear case of sub-letting.  After referring to  the earlier decisions in M/s. Parasram Harnand Rao vs. M/s. Shanti Prasad  Narinder Kumar Jain (supra) and M/s. General Radio and Appliances Co.  Ltd. vs. M.A. Khader (supra), the Court ruled that it was a case of  assignment by the Foreign Company to the Indian Company which  amounted to sub-letting within the meaning of Section 14(1)(b) of the Act  and the decree for eviction was affirmed.

11.     These cases clearly hold that even if there is an order of a Court  sanctioning the scheme of amalgamation under Sections 391 and 394 of the  Companies Act whereunder the leases, rights of tenancy or occupancy of the  Transferor Company get vested in and become the property of the  Transferee Company, it would make no difference in so far as the  applicability of Section 14(1)(b) is concerned, as the Act does not make any  exception in favour of a lessee who may have adopted  such a course of  action in order to secure compliance of law.   

12.     Madras Bangalore Transport Co. (West) vs. Inder Singh and others  1986(3) SCC 62 cited by Shri Divan, does not advance the case of the  appellant either as, here, the Court on the basis of material on record found

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as a fact that the Limited Company was formed with the partners of the  existing tenant firm as Directors and both the firm and the company were  operating from the same place, each acting as agent of the other.  It was also  found as a fact that the company was only an ’alter ego’ or a ’corporate  reflection’ of the tenant firm and the two were for all practical purposes  having substantial identity and, consequently, there was no sub-letting,  assignment or parting with possession of the premises by the firm to the  company so as to attract Section 14(1)(b) of the Act.   This case has been  decided purely on facts peculiar to it and no principle of law has been laid  down. The position in Hindustan Petroleum Corporation Ltd and another vs.  Shyam Co-operative Housing Society and others 1988(4) SCC 747 cited by  learned counsel for the appellant has hardly any application here.  It is not a  case of amalgamation of two companies but acquisition of undertaking of a  Foreign Company by the Central Government.   Section 5 of Esso  (Acquisition of Undertakings in India) Act, 1974 provided that where any  property is held in India by Esso under any lease or under any right of  tenancy, the Central Government shall, on from the appointed day be  deemed to have become the lessee or tenant, as the case may be, in respect  of such property as if the lease or tenancy in relation to such property had  been granted to the Central Government, and thereupon all the rights under  such lease or tenancy shall be deemed to have been transferred to and vested  in the Central Government.  In view of this statutory provision, the Central  government, by operation of law, became the tenant of all such properties  which were being held by Esso under any lease or any right of tenancy.    There is no statutory enactment here which may give any kind of protection  to the appellant.  

13.     Shri Divan has next contended that on amalgamation Singer Sewing  Machine Company (American Company) merged into Indian Sewing  Machine Company (Indian Company) shedding its corporate shell, but for  all practical purposes remained alive and thriving as part of the larger  whole.  He has submitted that this Court should lift the corporate veil and  see who are the directors and shareholders of the Transferee Company and  who are in real control of the affairs of the said company and if it is done it  will be evident there has been no sub-letting or parting with possession by  the American Company.    

14.     In Palmer’s Company Law (24th Edn), in chapter 18, para 2 onwards  some instances have been given in which the modern company law  disregards the principle that the company is an independent legal entity and  also when the Courts would be inclined to lift the corporate veil and the  important ones being in relation to the law relating to trading with enemy   where the test of control is adopted and also where the device of  incorporation is used for some illegal or improper purpose.  In Gower’s  Principle of Modern Company Law (4th Edn), in chapter 6, the topic of  lifting the veil has been discussed.  The learned author has said that there is  no consistent principle beyond a refusal by the legislature and the judiciary  to apply the logic of the principle laid down in Solomon’s case where it is  too flagrantly opposed to justice, convenience or the interest of the  Revenue.  In the cases where veil is lifted, the law either goes behind the  corporate personality to the individual members, or ignores the separate  personality of each company in favour of the economic entity or ignores the  separate personality in favour of the economic entity constituted by a group  of associated companies.  The principal grounds where such a course of  action can be adopted are to protect the interest of the Revenue and also  where the corporate personality is being blatantly used as a cloak for fraud  or improper conduct.   15.     The question of lifting the corporate veil was examined by a  Constitution Bench in Tata Engineering  and Locomotive Co. Ltd etc. vs.  The State of  Bihar and others AIR 1965 SC 40.  The Court observed that  the doctrine of lifting of the veil postulates the existence of dualism between  the corporation or company on the one hand and its members or  shareholders on the other.  After review of a number of authorities and  standard books, the parameters where the said doctrine could be applied

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were indicated in consonance with the principles indicated in the preceding  paragraph.      In Delhi Development Authority vs. Skipper Construction  Company (P) Ltd. and another AIR 1996 SC 2005, Mr. Justice B. P. Jeevan  Reddy has examined the question in considerable detail and it will be useful  to reproduce the relevant paragraph of the judgment which is as under: Para 24. " Lifting the corporate veil:   

       In Aron Salomon v. Salomon & Company Limited  (1897) Appeal Case 22), the House of Lords had  observed, "the company is at law a different person  altogether from the subscriber\005..; 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 received the profits, the company is not  in law 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  that Act".  Since then, however, the Courts have come to  recognize several exceptions to the said rule.  While it is  not necessary to refer to all of them, the one relevant to  us is "when the corporate personality is being blatantly  used as a cloak for fraud or improper conduct" (Gower:  Modern Company Law \026 4th Edn. (1979) at P. 137)  Pennington (Company Law \026 5th Edn. 1985 at P.53) also  states that "where the protection of public interests is of  paramount importance or where the company has been  formed to evade obligations imposed by the law", the  Court will disregard the corporate veil \005\005\005\005"                            

It was held that, broadly,  where a fraud is intended to be prevented, or  trading with enemy is sought to be defeated, the veil of corporation is lifted  by judicial decisions and the shareholders are held to be ’persons who  actually work for the corporation’.  The main principle on which such a  course of action can be taken was stated in paragraph 28 of the report and  the relevant part thereof is being reproduced below:  

"28.  The concept of corporate entity was evolved to  encourage and promote trade and commerce but not to  commit illegalities or to defraud people.  Where,  therefore, the corporate character is employed for the  purpose of committing illegality or for defrauding others,  the Court would ignore the corporate character and will  look at the reality behind the corporate veil so as to  enable it to pass appropriate orders to do justice between  the parties concerned\005\005.." 16.     However, it has nowhere been held that such a course of action is  open to the company itself.  It is not open to the Company to ask for  unveiling its own cloak and examine as to who are the directors and  shareholders and who are in reality controlling the affairs of the Company.   This is not the case of the appellant nor could it possibly be that the  corporate character is employed for the purpose of committing illegality or  defrauding others.   It is not open to the appellant to contend that for the  purpose of FERA, the American Company has effaced itself and has ceased  to exist but for the purpose of Delhi Rent Control Act, it is still in existence.  Therefore, it is not possible to hold that it is the American Company which  is still in existence and is in possession of the premises in question.  On the  contrary, the inescapable conclusion is that it is the Indian Company which  is in occupation and is carrying on business in the premises in question  rendering the appellant liable for eviction.   

17.     Civil Appeal No. 388 of 2004 has been filed by M/s. Singer Company  of USA (American Company).  The American Company did not challenge  the order of the Rent Control Tribunal by filing a Second Appeal in the  High Court.  Even otherwise, the grounds for challenge are the same, which

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we have already discussed above.

18.     For the reasons mentioned above, Civil Appeal No. 387 of 2004 and  Civil Appeal No. 388 of 2004 are dismissed with costs.  

19.     The appellant in Civil Appeal No. 387 of 2004 is granted three  months’ time to vacate the premises subject to its filing usual undertaking  before the Rent Controller.