INDER MOHAN KHANNA Vs. JAI PARKASH

JUDGEMENT

(1.) This Second Appeal under Section 39 of the Delhi Rent Control Act, for short "the Act", by the landlords against the appellate order of the Rent Control Tribunal reversing the order of the 1st Additional Rent Controller and dismissing the petition for eviction, comes up before us on a reference by a learned Single Judge of this Court and involves consideration of an important question of law as to whether the incorporation by a tenant of his business amounted to parting with the possession of the demised premises to another person w'thin the meaning of clause (b) of proviso to Sub-Section (1) of Section 14 of the Act so as to entitle the landlords to an order of eviction. The Second Appeal was filed in the following circumstances.

(2.) It is a common case of the parties that the property in which the demised premises are situated was at one time an evacuee property, Shop No. 2681, Sadar Thana Road, being part of the demised premises was allotted by the evacuee property administration to Jai Parkash, the tenant, respondent No. 1 in the Appeal. Jai Parkash had been carrying on business in the shop along with his brothers, which was claimed to be the business of a Hindu undivided .family, and according to the material on record, this is how the business was being assessed to Income-tax. The tenancy, as indeed rent receipts, were throughout in the name of Jai Parkash. Meanwhile the property having been sold to the landlords, the tenant attorned to them and continued to carry on the business. In 1960 the brothers were carrying on the business of a chit fund. In the same year all the brothers constituted a Joint Stock Company known as Swastik Benefit Private Limited, the respondent No. 2 in the Appeal, and the business was continued in the name of the Company. All the shares in the Company were held by the brothers and other members of the family. All the brothers became the Directors of the Company. In the year 1962, the landlords extended the tenancy to a godown at the back of the shop and the rent for the composite premises was raised from Rs. 25 to Rs. 65 per month, apparently because the needs of the business of the Company necessitated the extension of the premises. The demised premises has since consisted of the enlarged shop with the addition of the godown at the back. One of the landlords happened to have subscribed to the fund and the landlords were, therefore, aware of the fact that the original business, whether the exclusive business of Jai Parkash or of the Joint Hindu Family, had since 1960 been carried on in corporate form. The petition for eviction out of which the present Appeal has arisen was filed by the landlords in 1968. Jai Parkash, the tenant, and the Company were impleaded as respondents No. 1 and 2 respectively and eviction was sought on the ground that "The respondent No. 1 has sub-let, assigned or otherwise parted with possession of the premises in favour of respondent No. 2 in the year 1962-63 without obtaining consent in writing of the petitioners to respondent No. 2". The petition was resisted and the allegation of assignment, sub-letting or parting with possession of the premises in favour of the Company was denied. In the course of written-statement it was brought out that initially the tenancy premises consisted of a shop in the front and the demised premises was extended in the year 1962 to the godown at the back and the rent was increased to Rs. 65 per month. It was further alleged that the shop had been initially taken by Jai Parkash for himself and for the members of his family for "joint business" and thereafter was a "joint Hindu family business" and that in the year 1962 after the addition the joint family business continued. It was further alleged that since 1960, when the Company was formed, the joint Hindu family business has been going on in the name of the Company which was Said to be neither a separate entity nor a separate person in the eye of law. It was alleged that the Company was only the name and style of the business of Jai Parkash and the family. A contention was also raised that the entire premises has throughout been under the possession and control of Jai Parkash. The liability to ejectment was, therefore, denied. In the replication the landlords reiterated the allegations made in the petition and it was alleged that the premises had been let out to Jai Parkash alone in 1962; that the other members of his family had no right, title or interest in the tenancy; that the Company was not owned by Jai Parkash; that the Company was an independent legal person and a separate entity; and that the tenant had, therefore, sub-let or parted with possession of the demised premises to the Company without the consent in writing of the landlords in "1962-63". At the trial, evidence was led on behalf of the landlords to show that the tenancy, as indeed the receipts, were throughout in the individual name of Jai Prakash and the name of the Joint Hindu Family or the Company never figured at any stage. On behalf of the tenant evidence was led to show that prior to the incorporation of the Company the business was being carried on in the demised premises by Jai Parkash and his brothers as a Hindu undivided family and this 'is how the business was assessed to Income-tax. Evidence was also led to show that the membership of the Company was confined to Jai Parkash and his brothers and the other members of the family. It was also brought out that the brothers were the only Directors of the Company. In his statement as R.W. 8 Jai Parkash specifically stated that the premises in question was locked by him and if he wanted to put any lock on the premises no one could' stop him. It was also brought out that one of the landlords had subscribed to a chit in the business run by the Company. In cross-examination Jai Parakash, however, admitted that "The entries about the payment of rent to the petitioners in respect of the premises in question are duly made in the account books of respondent No. 2".

(3.) On the material on record and Additional Rent Controller passed an order of eviction on the ground that, even though the tenant had been carrying on the business in this shop with his brothers, the tenant had parted with the possession of the demised premises in that the business was being carried on by the Company, which was also paying rent and the payment was "included in the account books of the limited Company" and that the tenant ceased to be in possession of the shop and had parted with possession in fabour of the Company even though the tenant and his brothers were conducting the business of the Company, as its Directors. On appeal, the order of eviction was reversed by the Rent Control Tribunal on the ground that the tenant throughout retained legal possession of the demised premises and the mere conversion of business into a Joint Stock Company did not constitute either sub-letting or parting with possession of any part of the demised premises. It was further observed that there was no material on record to show that the tenant had transferred the legal possession of the premises in favour of the Company or had totally effected himself. That is how the landlords came to this Court in Second Appeal and the question that was posed before the learned Single Judge was whether the conversion of the business by the tenant into a Joint Stock Company amounted to parting with possession of the premises by the tenant in favour of the Company and, in particular, whether the corporate veil of the Company could be torn to identify the real persons who constituted it and also if by the formation of the Company or otherwise, legal possession of the premises could be said to have been transferred by the tenant in favour of the Company so as to satisfy the requirements of clause (b) of the proviso to Sub-section (1) of Section 14 of the Act.