SINGER INDIA LIMITED Vs. CHANDER MOHAN CHADHA

JUDGEMENT

(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 Tribual the name of M/s.Indian Sewing Machine Company was changed as Singer India Limited 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 permision 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 Gautum 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 all 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. 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.