Case: M/S. Sait Nagjee Purushotham &amp; Co. Ltd Vs. Vimalabai Prabhulal

an association which was an unregistered body known as Indian Cable Makers Association was inducted in the year 1969 as a tenant in the premises Room No.503, 5th Floor, Arun Chambers, Tardeo, Bombay by respondent No.2 under an agreement termed as leave and licence dated 23.9.1969 at a rental of Rs.1500/- per month out of which Rs.1000/- was towards the premises and rent of Rs.500/- per month was payable towards furniture and fixtures. The name of the appellant was changed from Indian Cable Makers Association into M/s. Electrical Cable Development Association. It was registered in the year 1972. In that context, the question arose whether M/s. Electrical Cable Development Association is the successor of the Indian Cable Makers Association and their Lordships after examining the memorandum of association and articles of the appellant- Company and after reviewing the matter found that it was not the same. It was observed that articles and the memorandum of association only provided that a member of Electrical Cable Development Association as of right be admitted subject to certain conditions. It does not say that all those members in the unregistered association become members of the association much less any resolution was produced before the Court of the Electrical Cable Development Association to show that they were converting themselves into an incorporated body. Therefore, in that context, their Lordships held that the Electrical Cable Development Association is not the real successor of M/s. Indian Cable Makers Association and they are not the same. Therefore, on this question of fact their Lordships found that it was distinctly separate legal entity and not the successor of the unregistered firm and the decree of eviction was affirmed. 16. In the case of G. Sridharamurti vs. Hindustan petroleum Corporation Ltd. & Anr. reported in (1995) 6 SCC 605 , the provisions of the Karnataka Rent Control Act, 1961 came into consideration and in this case a distinction was made between voluntary formation of company and in-voluntary formation of the company. In-voluntary formation of company means if by virtue of a statute law, a company is taken over then in that case the successor company will not become a sub-tenant and in case, it is a voluntary formation of company then in that case necessary evidence will have to be led to show that for all purposes it is same. In this case, ESSO a private oil company was merged by virtue of Section 7 of the Esso (Acquisition of Undertakings in India) Act, 1974. On coming into force of this Act, the pre-existing tenancy rights held by Esso Company with the appellant initially stood transferred and vested in the Central Government and thereafter it became a Government company known as Hindustan Petroleum Corporation Limited. In that context, their Lordships held that the premises were occupied by Esso which has been acquired by the Central Government under the enactment of the Parliament and therefore it will not become a sub-tenant. 17. In the case of Janki Devi (Smt.) & Anr. vs. G.C.Jain reported in (1994) 5 SCC 337(II), the premises were let out for being used as a school under the name and style of Tagore School by a society registered under the Registration of Societies Act. The respondent - landlord sought to evict lessee on the ground of subletting in favour of the society. The appellant was the secretary of the society. But the school was run by different management. Their Lordships observed that the test to determine a sublease is whether original lessee has the right to include and exclude others. Once she is merely a secretary, this test is not answered. Therefore, their Lordships found that the premises were subleased. 18. In the case of Cox & Kings Ltd. & Anr. vs. Chander Malhotra (Smt.) reported in (1997) 2 SCC 687 , the premises in question was demised to Cox & Kings (Agents) Limited, a company incorporated under the United Kingdom Companies Act. On account of certain problems the company wound up and had assigned under agreement the leasehold interest in the demised premises to the Indian company which carried on the business in the tenanted premises without obtaining written consent of the landlord. This was challenged by the respondent on the ground that this amounted to subletting under the Delhi Rent Control Act. Their Lordships after examining the matter answered the question that since the foreign company was leased out to an Indian company that amounts to voluntary transfer and the Indian company became a sub-tenant without the consent of the landlord. Their Lordships answered the question against the tenant and held that this amounts to sub-leasing within the meaning of Section 14(1)(b) of the Delhi Rent Control Act. 19. On review of all these cases it clearly transpires that the appellant- tenant has failed to substantiate that the private limited company which was formed in the year 1948 carried the same partners on the Board of Directors as were there prior to 1948. 20. In view of the ratio laid down by this Court in the aforesaid decisions, various tests were laid down obtaining in the facts of each case. But the common ratio which runs in all these cases is that if there is voluntary transfer by the company to a newly incorporated company then in that case one has to plead and prove that all the members of the old firm continued in the new firm and it is essentially the same. The only exception which has been made is that the transfer of the old company to a new one is under the statute or law. Therefore, in the present case after verifying the records of the case, we have found that all the three courts have consistently observed that the benefit of Section 11(17) of the Act cannot be extended to the appellant in this case and we are of opinion that the view taken by the courts below is correct and there is no ground to interfere in this appeal.

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

Explanation:
0[ds]4. First of all we shall take up the question of bona fide need of the landlords. So far as the partition of the property and the present premises coming to the share of the landlords are concerned, there is no dispute that the portion of the building has come to the share of the landlords and they are the owners as a result of the partition of the family properties. But the question is whether the landlords who are the owners of the portion of the building have substantiated the allegation with regard to the bona fide need or not. We have gone through the findings of the trial court as well as that of the appellate authority and the High Court and after closely scrutinizing the same, we do not think that the finding recorded by appellate court and the High Court can be interfered by this Court on the ground of being perverse or without any basisWe fail to appreciate that when two sons are there and if they want to expand their business at Calicut then it cannot be said that the need is a sham one. It is not possible for the landlords and their sons to wait till the disposal of the case. They have to do something in life and they cannot wait till the appellant is evicted from the premises in question. It is common experience that landlord tenant disputes in our country take long time and one cannot wait indefinitely for resolution of such litigation. If they want to expand their business, then it cannot be said that the need is not bona fide. It is alleged that one of the sons of the landlords has settled in the U.S.A.. That does not detract from the fact that the other sons of landlords want to expand their business at Calicut. Indian economy is going global and it is not unlikely that prodigal sons can return back to mother land. He can always come back and start his business at Calicut. On this ground we cannot deny the eviction to the landlords9. So far as the finding of the first appellate court and that of the High Court with regard to the eviction of the tenant on the ground of sub-letting & material change in premises under Section 11(4)(I ) & (ii) is concerned, that has been held against the landlords and there is no cross-appeal before us. Therefore, we need not go into merits of the findings of the courts belowThe appellant did not lead any categorical evidence to show that the same firm which was there in 1918 was later on converted into a private limited company with the same Directors. Therefore, the evidence in the present case is totally lacking. We insisted learned counsel for the appellant to satisfy us that the old firm which was there prior to 1948, converted into a private limited company with the same directors but learned counsel for the appellant failed to satisfy us. In fact, this question seems to have not been seriously raised either before the trial court, or the appellate court or before the High Court. It was observed by the trial court with regard to the protection under Section 11(17) of the Act that in order to prove that the firm is continuing in the tenanted building from 1940, it is admitted by the tenant that prior to the formation of the tenant- company the business was conducted by the partnership firm. It is apparent from Ext.B-6 that the tenant company came into existence in 1948 and memorandum and article of association clearly shows that the company was incorporated on 6.2.1948. Therefore, it was held that it is a separate legal entity from the date of incorporation. It was held by the trial court that the tenant company could not claim any tenancy right of partnership because the newly constituted separate legal entity had come into existence on 6.2.1948. Therefore, it was observed by the trial court that the very important ingredient of Section 11(17) is lacking in this case. Similarly, the appellate court in paragraph 25 of its order also held that the tenant company has not produced any document to show that it was in possession of the building as such before 1940. In fact, the private limited company came into existence in 1948. Therefore, the first appellate court also affirmed the finding of the trial court. Likewise, the High Court affirmed the findings of the courts below and observed that both the Rent Control Court and the Appellate Authority rightly held that tenancy commenced only in the year 1948 and hence the tenant cannot claim the protection of Section 11(17) of the Act. In view of this concurrent finding by all the Courts below there was hardly any scope to pierce the corporate veilWe cannot consider the facts pleaded in another case with regard to the firm but in order to substantiate that the same firm was occupying the premises on 1.4.1940, the tenant has to lead specific evidence so as to claim protection under Section 11(17) of the Act in this suit. We have ourselves gone through the evidence adduced in this case to find out whether any evidence has been led by the tenant to show that the same partnership firm continued when it was converted into the private limited company registered under the Companies Act with the same Board of Directors. But we regret to say that there is none in this case. This is a civil suit and party has to plead and prove in this case. We cannot look into the facts appearing in other case pertaining to this case19. On review of all these cases it clearly transpires that the appellant- tenant has failed to substantiate that the private limited company which was formed in the year 1948 carried the same partners on the Board of Directors as were there prior to 194820. In view of the ratio laid down by this Court in the aforesaid decisions, various tests were laid down obtaining in the facts of each case. But the common ratio which runs in all these cases is that if there is voluntary transfer by the company to a newly incorporated company then in that case one has to plead and prove that all the members of the old firm continued in the new firm and it is essentially the same. The only exception which has been made is that the transfer of the old company to a new one is under the statute or law. Therefore, in the present case after verifying the records of the case, we have found that all the three courts have consistently observed that the benefit of Section 11(17) of the Act cannot be extended to the appellant in this case and we are of opinion that the view taken by the courts below is correct and there is no ground to interfere in this appeal.