Case: Nandini J. Shah &amp; Another Vs. Life Insurance Corporation of India &amp; Others

of directors and the total shareholding to be of immediate family members of Vilasben. The annual returns of State Street Capital & Finance Pvt.Limited were also produced on record. The composition of directors was placed on record which demonstrates that Harshal Jyotindra Shah grand-son; Ms.Nandini Jyotindra Shah daughter; Jyotindra Ramanlal Shah son-in-law; and Smt.Vilasben Jayantilal Shah mother (recorded tenant) were the directors and shareholders. In view of these documents produced on record, we do not find that the observation of the learned City Civil Court while dismissing the appeal that no documents were produced on record to show the composition of the directors and shareholders of the Companies, was justified.19. The question then arises is when a Private Limited Company is found to be operating from the tenanted premises, whether the decree of eviction on the ground of subletting should automatically follow. It is no doubt true that the company incorporated under the Companies Act, 1956 is an independent and distinct legal entity. The Company can sue and can be sued in its independent capacity. However when an allegation of subletting is made in respect of a Company, it is permissible to look at the composition of the directors and shareholding of a company to find out what is the exact relation of the Company with the tenant. It is permissible for a tenant to place on record material to demonstrate that the Company is nothing but an alter-ego of the tenant and is incorporated only for the purpose of carrying out business more efficiently. It is permissible for the tenant to demonstrate that even though a company is incorporated and operates from the tenanted premises, the tenant has controlling interest in the Company and tenant has remained in possession, though it is the company which is carrying on the business. It is not the position of law that moment a Company is found to be operating from tenanted premises, no other inquiry is necessary.20. For this purpose the well established principle of lifting the corporate veil can be employed. The Courts have used this principle to find out the composition of shareholding and directorship so as to ascertain the true controlling interest behind the company. In cases of subletting it is also open for a tenant to request the Court to lift the corporate veil. A tenant can demonstrate from the composition of the company that the tenant has the controlling interest. In the course of running a business, trade or profession, a person may feel a need to incorporate a private limited company to carry on the activity more successfully. There are several reasons why business persons and professionals form a company to facilitate effective business transactions.21. A tenant while retaining the control of the business may include close relatives as son, daughter, husband to form private limited company. Such company do have an independent juristic entity. For the purpose of ascertaining the charge of subletting in the context of landlord-tenant relationship, however the parameters are different. It is settled law that if the tenant remains in possession and retains control over the premises then the tenant cannot be evicted on the ground of subletting. If the tenant incorporates private limited company with his close family members and is able to demonstrate that he has controlling interest in the said company and he has not parted with possession, then he cannot be evicted from the premises only on the factum of registration of the company.22. In the present case the tenant Vilasben was director in the company along with her daughter, son-in-law and grand-son. Looking at the composition of the company it cannot be said that she relinquished control of the premises or parted with possession to a stranger. The directors of the companies were her immediate family members. The premises were in occupation of the family since the time of their great grand-father and continued to be within the family even after formation of these three companies. The family business/profession was relating to tax and financial services and continued to be so. In a changing commercial scenario she found formation of partnership firm and private limited companies was more effective way of conducting the tax and financial services. This was nothing but extension of existing business activity to remain in tune with the changing financial environment. Thus by employing the principle of lifting corporate veil and looking at the true nature of the Companies we find that Vilasben had not relinquished the control of premises by creating these three companies and there was no subletting.23. The Division Bench of Delhi High Court in the case of PremlataBhatia (128 (2006) DLT 24 )(supra) in similar facts situation undertook the exercise of lifting the corporate veil to examine the charge of subletting. In this case the Petitioner Premlata was allotted a shop by the Union of India. Clause 8 of the licence deed therein prohibited the licensee from transferring or alienating her interest in the premises without permission of the Union of India. Premlata incorporated a company along with her husband holding 97.93% shares. The Union of India instituted the proceedings under the Public Premises Act on the ground of subletting. The Estate Officer ordered eviction of Premlata and her challenge was negatived by the Single Judge. Smt.Premlata thereafter filed appeal before the Division Bench of Delhi High Court. The Division Bench allowed the appeal by holding that the corporate veil ought to have been lifted to ascertain the true nature of the company and found that there was no subletting.24. In the present case, the tenanted premises are in occupation of the appellants for several decades. All that Vilasben had done was to create three Companies with her son, daughter-in-law and grand-son. Eviction of the appellants from the premises in the circumstances will be unjust. Once we have come to the conclusion that there was no subletting in the first place, there is no question of appellants paying any amount of compensation as ordered by the impugned orders.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. It is true that the petitions arising out of the order passed under the Public Premises Act were being heard by the Division Bench. This was being done due to observation of the Division Bench of this Court in the case of NusliNeville Wadia V/s. New India Assurance Co.Ltd.Another (2010 (4) Bom.C.R.807). However by an order dated 15 November 2011, another Division Bench of this Court expressed doubt about the correctness of the observation made in the case of Nusli Neville Wadia (supra) and referred the issue as to whether the petitions arising out of the orders passed under the Public Premises Act should be heard by the division Bench or Single Judge, to the Full Bench for consideration. The Full Bench in the case of PrakashSecurities(2012 (4) Bom.C.R.1)(supra) found that clause 3 of Rule 18 of Chapter XVII of the Bombay High Court Appellate Side Rules 1960 was wide enough to include orders passed by anyauthority under any enactment, even if such explanation is not covered by clause 1, 2, 4 to 43 of Rule 18. The Full Bench found that the order passed byauthority under the Public Premises act is also covered by Rule 18 (3) so as to indicate that the petitions under Articles 226227 of the Constitution of India challenging such orders are to be heard and decided by the Single Judge. Reference was accordingly disposed of by the Full Bench by its judgment dated 26 April 2012. The Full Bench held that the Appellate Side Rules as they stand, provide that the petitions challenging the orders passed under the Public Premises Act are required to be heard by the learned Single Judge and therefore the observations made in the case of NusliNeville Wadia (supra), were not correct. The petitions relating to orders passed under Public Premises Act were being entertained by the Division Bench when the rules provided that they should be entertained by the Single Judge. Therefore there was no conscious decision to remove the petitions arising from orders passed under the Public Premises, from Division Bench and to place them before Single Judge. In fact Full Bench found that these petitions were being wrongly entertained by the Division Bench.15. In the judgment of the Full Bench there is no indication that Letters Patent Appeal arising out of the orders passed by the Single Judge in proceedings under the Public Premises Act will not be maintainable. If Letters Patent Appeals are otherwise maintainable, judgment of the Full Bench does not take away that right in respect of petitions challenging the orders passed under Public Premises Act. Therefore the argument advanced by the learned counsel on maintainability of the appeal on this ground cannot be accepted. Maintainability was not contested on any other ground. In the present case, the petitioner has invoked both Articles 226 and 227 of the Constitution of India. The learned Judge also has referred to the said Articles in the impugned order. Furthermore, theis itself amenable to writ jurisdiction of this Court, being a public corporation. There is therefore no substance in the preliminary objection raised by thelearned counsel for theRespondent that the appeal is not maintainable and that it should be dismissed at the threshold without looking at the merits of the matter.We have perused the documents which are produced on record. Before the Estate Officer, the appellants had produced several documents. Amongst these were copies of annual returns filed by Vilasben, including documents in respect of State Street CapitalFinance Limited which showed the names of directors and the total shareholding to be of immediate family members of Vilasben. The annual returns of State Street CapitalFinance Pvt.Limited were also produced on record. The composition of directors was placed on record which demonstrates that Harshal Jyotindra ShahMs.Nandini Jyotindra Shah daughter; Jyotindra Ramanlal Shah; and Smt.Vilasben Jayantilal Shahmother (recorded tenant) were the directors and shareholders. In view of these documents produced on record, we do not find that the observation of the learned City Civil Court while dismissing the appeal that no documents were produced on record to show the composition of the directors and shareholders of the Companies, was justified.In the present case the tenantVilasben was director in the company along with her daughter,n. Looking at the composition of the company it cannot be said that she relinquished control of the premises or parted with possession to a stranger. The directors of the companies were her immediate family members. The premises were in occupation of the family since the time of their greatand continued to be within the family even after formation of these three companies. The family business/profession was relating to tax and financial services and continued to be so. In a changing commercial scenario she found formation of partnership firm and private limited companies was more effective way of conducting the tax and financial services. This was nothing but extension of existing business activity to remain in tune with the changing financial environment. Thus by employing the principle of lifting corporate veil and looking at the true nature of the Companies we find that Vilasben had not relinquished the control of premises by creating these three companies and there was no subletting.23. The Division Bench of Delhi High Court in the case of PremlataBhatia (128 (2006) DLT 24 )(supra) in similar facts situation undertook the exercise of lifting the corporate veil to examine the charge of subletting. In this case the Petitioner Premlata was allotted a shop by the Union of India. Clause 8 of the licence deed therein prohibited the licensee from transferring or alienating her interest in the premises without permission of the Union of India. Premlata incorporated a company along with her husband holding 97.93% shares. The Union of India instituted the proceedings under the Public Premises Act on the ground of subletting. The Estate Officer ordered eviction of Premlata and her challenge was negatived by the Single Judge. Smt.Premlata thereafter filed appeal before the Division Bench of Delhi High Court. The Division Bench allowed the appeal by holding that the corporate veil ought to have been lifted to ascertain the true nature of the company and found that there was no subletting.In the present case, the tenanted premises are in occupation of the appellants for several decades. All that Vilasben had done was to create three Companies with her son,n. Eviction of the appellants from the premises in the circumstances will be unjust. Once we have come to the conclusion that there was no subletting in the first place, there is no question of appellants paying any amount of compensation as ordered by the impugned orders.