IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.R. No. 4876 of 1998 Date of Decision: 28.10.2006 M/S Lotus Industries, New Delhi. .............. Petitioner. Versus M/S Lotus Enterprises (P) Ltd., New Delhi and another. ........... Respondents CORAM: Hon'ble Mr.Justice Mahesh Grover .... Present: Shri Arun Jain, Advocate with Shri Amit Jain, Advocate for the petitioner. Shri P.K.Mutneja, Advocate for the respondents. .... Mahesh Grover,J. The present revision petition by the landlord is directed against judgment dated 23.7.1998 of the Appellate Authority, Faridabad. Petitioner-M/S Lotus Industries, a partnership firm, preferred a petition under Section 13 of the Haryana Urban (Control of Rent and Eviction) Act,1973 (for short, `the Act') against the respondents seeking to evict them from the demised premises which is an industrial shed on the ground of sub-letting, non-payment of rent for the period from 1.2.1987 to C.R.No.4876 of 1998 -2- October,1987 and material impairment. It was pleaded that the petitioner is the owner/ landlord of the industrial shed out of which some portion was let out by it to respondent no.1- M/S Lotus Enterprises (P) Ltd. at a monthly rent of Rs.4300/- with effect from 1.7.1981. An agreement was executed for the said purpose on 13.8.1981. The tenant, i.e., M/S Lotus Enterprises (P) Ltd. subsequently let out the demised premises to respondent no.2- M/S Ruchika Engineering Pvt. Ltd. vide lease deed dated 19.6.1982. The Rent Controller, Faridabad dismissed the petition and held that the rent had been duly paid, there was no material impairment and there was no sub-letting. In appeal, the Appellate Authority, Faridabad affirmed the findings of the Rent Controller. Even though the eviction was sought on the aforesaid three grounds, yet, the controversy stood narrowed down to the issue of sub- letting. It has been contended by learned counsel for the petitioner that the issue of sub-letting had been erroneously answered by the Courts below. He urged that both the Rent Controller and the Appellate Authority had gone wrong in holding that the petitioner and respondent no.1 were one and the same entity having the same set of persons, who are managing their affairs and, therefore, it cannot be said that respondent no.2 had been sub- let the demised premises by respondent no.1. Learned counsel relied upon the judgments of the Supreme Court reported as 1995 H.R.R. 93- Rajinder Singh (Dead) and another Versus Dalip Chand and others and 2004(2) H.R.R. 481 – Singer India Limited Versus Chander Mohan Chadha and others to contend that the petitioner and respondent no.1 were completely C.R.No.4876 of 1998 -3- different entities, a proper agreement had been executed by the petitioner in favour of respondent no.1 vide deed dated 13.8.1981 and respondent no.1 had abused the tenancy by inducting a sub-tenant in the demised premises in the form of respondent no.2. The contentions of the learned counsel for the petitioner were controverted by the learned counsel for the respondents, who submitted that the authorities below had rightly come to the conclusion that the petitioner and respondent no.1 were one and the same and, therefore, respondent no.2 cannot be treated as a sub-tenant. Reliance was placed on the judgment of the Apex Court in Delhi Development Authority Versus Skipper Construction Co.(P.) Ltd. and another, (1996) 4 S.C.C. 622 to say that the Courts should lift the veil to establish the real character of the corporate entity. I have thoughtfully considered the contentions of the learned counsel for the parties and have perused the record. The evidence adduced on record overwhelmingly suggests that the petitioner and respondent no.1 are one and the same. The partnership deed of the petitioner- firm reveals that D.P.Gupta, who is also Director of respondent no.1 and is alleged to have created a sub-tenancy in favour of respondent no.2, is one of the prominent partners. Further, the constitution of the partnership firm of the petitioner reveals it to be more of a family concern. Besides, D.P.Gupta has been communicating with respondent no.2 as a partner of the petitioner-firm urging it either to vacate the demised premises or to remove certain encroachments. The letters are on record as Exhibits R10 to R12 and R14 to R17. That apart, respondent no.2 is already a tenant under the petitioner-firm in respect of Sheds `A' and `B' of the C.R.No.4876 of 1998 -4- composite property belonging to the landlord. Shed `C' which is now the demised premises was taken on rent from D.P.Gupta, who is again the partner of the petitioner-firm and Karta of H.U.F. constituted amongst the family members. Their Lordships of the Supreme Court in Skipper Construction Co.(P) Ltd.'s case (supra), have observed in paragraph 28 of the judgment as follows:- “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. The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this Court from treating all of them as one entity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are merely cloaks behind which lurks Tejwant Singh and/ or members of his family and that the device of incorporation was really a ploy adopted for committing illegalities and/ or defraud people.” The above quoted observations were made by the Apex Court after being inspired by the article “Piercing the veil of corporate entity” of Prof. L.Maurice Wormser, the relevant portion of which is reproduced below:- “The various classes of cases where the concept of corporate C.R.No.4876 of 1998 -5- entity should be ignored and the veil drawn aside have now been briefly reviewed. What general rule, if any, can be laid down? The nearest approximation to generalisation which the present state of the authorities would warrant is this: When the conception of corporate entity is employed to defraud creditors, to evade an existing obligation, to circumvent a statute, to achieve or perpetuate monopoly, or to protect knavery or crime, the courts will draw aside the web of entity, will regard the corporate company as an association of live, up- and-doing, men and women shareholders, and will do justice between real persons.” As noticed above, the actual entity of the petitioner and respondent no.1 is the same and, therefore, it cannot be said that respondent no.2 was inducted as a sub-tenant. The agreement executed between the petitioner and respondent no.1 is apparently a sham transaction to circumvent the provisions of law. The concept of sub-letting presupposes a well defined tenancy in favour of the tenant in the first instance, implying thereby that there has to be a valid and established tenancy which will result in sub-letting to a third person, but if the tenancy itself is a fictitious and based on a sham transaction, which, on the basis of the evidence, has been established to be between the one and the same entity, then in that eventuality, it cannot be said that the tenancy created in favour of the sub-tenant amounts to sub- letting vis-a-vis the original landlord, rather it shall be deemed to be a tenancy under him. The onus to prove the sub-tenancy rests heavily on the landlord. C.R.No.4876 of 1998 -6- The facts of the present case show that respondent no.2 was the direct tenant of the landlord. There is, thus, no infirmity in the findings recorded by the Courts below. The revision petition, being devoid of any merit, is dismissed as such. October 28,2006 (Mahesh Grover ) “SCM” Judge