Case: Dunlop India Ltd Vs. A.A.Rahna

Board or the Appellate Authority or a sanctioned scheme is under implementation without the consent of the Board or the Appellate Authority. It could not be the intention of Parliament in enacting the said provision to aggravate the financial difficulties of a sick industrial company while the said matters were pending before the Board or the Appellate Authority by enabling a sick industrial company to continue to incur further liabilities during this period. This would be the consequence if sub-section (1) of Section 22 is construed to bring about suspension of proceedings for eviction instituted by landlord against a sick industrial company which has ceased to enjoy the protection of the relevant rent law on account of default in payment of rent. It would also mean that the landlord of such a company must continue to suffer a loss by permitting the tenant (sick industrial company) to occupy the premises even though it is not in a position to pay the rent. Such an intention cannot be imputed to Parliament. We are, therefore, of the view that Section 22(1) does not cover a proceeding instituted by a landlord of a sick industrial company for the eviction of the company premises let out to it." (emphasis supplied) 31. In Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah (1999) 8 SCC 11 , it was argued on behalf of the appellant that suit for recovery of rent etc. is not maintainable in view of the prohibition contained in Section 22(1). While affirming the judgment of the High Court, the Court referred to the earlier judgment in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association (supra) and held: "Section 22 no doubt, inter alia, states that notwithstanding any other law no suit for recovery of money shall lie or be proceeded with except with the consent of the Board, but as we look at it the filing of an eviction petition on the ground of non-payment of rent cannot be regarded as filing of a suit for recovery of money. If a tenant does not pay the rent, then the protection which is given by the Rent Control Act against his eviction is taken away and with the non-payment of rent order of eviction may be passed. It may be possible that in view of the provisions of Section 22, the trial court may not be in a position to pass a decree for the payment of rent but when an application under Section 11(4) is filed, the trial court in effect gives an opportunity to the tenant to pay the rent failing which the consequences provided for in the sub-section would follow. An application under Section 11(4), or under any other similar provision, cannot, in our opinion, be regarded as being akin to a suit for recovery of money." (emphasis supplied) The same view was reiterated in Carona Ltd. v. Parvathy Swaminathan and Sons (2007) 8 SCC 559. 32. We shall now examine whether pendency of the proceedings under the 1985 Act, which implies that the appellant was facing financial difficulty in conducting its business constituted reasonable cause for cessation of occupation of the premises. The appellant was declared a sick industrial company on 22.6.1998 and IDBI was appointed as the Operating Agency under Section 17(3) of the 1985 Act to examine the viability of the company. Subsequently, State Bank of India was appointed as the Operating Agency. After several hearings, the BIFR passed order dated 19.10.2001 and directed the appellant to sort out all pending issues with secured creditors, Central/State Governments, TIIC, KSIIDC and TNSEP and submit a revised comprehensive and fully tied up rehabilitation scheme to the Operating Agency. For the next about five years, no tangible step is shown to have taken by the appellant for revival of its business activities. In August and November, 2006, the appellant filed applications before the BIFR seeking its permission for issue of two crore equity shares of Rs. 10/- each fully paid up at par to the companys promoters and/or its associates on private placement basis against full consideration to be utilized for rehabilitation. Thereupon, the BIFR passed order dated 16.3.2007. Three appeals were filed against that order. The AAIFR dismissed the appeals after taking note of order passed by the Madras High Court in Writ Petition (C) No. 24422 of 2006, order dated 25.4.2007 passed by the Orissa High Court in W.P (C) No. 344 of 2008, order dated 5.2.2008 passed by this Court in SLP(C) CC Nos. 1943-1944 of 2008 and held that in view of the various orders, the net worth of the appellant having turned positive and it can no longer be treated as sick industrial company. Before the Rent Control Court, the appellant had neither pleaded nor any evidence was produced to show that due to financial stringency was due to the reasons beyond its control and on that account, the suit premises could not be used from September, 2001 onwards for the purpose specified in the lease deeds. Therefore, the so called financial stringency cannot be construed as reasonable cause within the meaning of Section 11(4)(v). 33. We are also of the view that order dated 3.3.2008 passed by the AAIFR has no bearing on the decision of the issues raised by the respondents in the context of Section 11(4)(v) of the 1965 Act because what was required to be considered by the Rent Control Court was whether as on the date of filing the petition the appellant had ceased to occupy the premises continuously for a period of six months without reasonable cause. The improvement in the financial health of the appellant after many years cannot impinge upon the concurrent finding recorded by the Rent Control Court and the Appellate Authority that the respondents had succeeded in making out a case for eviction under Section 11(4)(v) and that there was no reasonable cause for the appellant to have ceased to occupy the suit premises continuously for a period of six months.

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

Explanation:
0[ds]28. In this case, the Rent Control Court, after detailed scrutiny of the pleadings and the evidence of the parties recorded a finding that while the landowners (respondents herein) succeeded in proving that the tenant (appellant herein) had ceased to occupy the suit premises for a period exceeding six months, the latter could not prove that it was occupying the premises or that non occupation thereof was for a reasonable cause. The Rent Control Court took cognizance of the appellants plea that it was carrying on business activities from the suit premises with reduced staff strength but discarded the same by observing that the relevant records like the attendance register, muster roll, wage register had not been produced and no evidence was adduced to prove payment of electricity bills and sale and purchase of goods. The High Court also analysed the pleadings and evidence of the parties and concurred with the findings recorded by the Rent Control Court. As against this, the appellant did not produce any evidence to prove physical occupation of the premises or any business transaction. It also failed to produce any evidence to show that there was reasonable cause for non occupation of the suit premises29. The arguments of Shri Nariman that the second set of rent control petitions should have been dismissed as barred by res judicata because the issue raised therein was directly and substantially similar to the one raised in the first set of rent control petitions does not merit acceptance for the simple reason that while in the first set of petitions, the respondents had sought eviction on the ground that the appellant had ceased to occupy the premises from June, 1998. In the second set of petitions, the period of non occupation commenced from September, 2001 and continued till the filing of the eviction petitions. That apart, the evidence produced in the first set of petitions was not found acceptable by the Appellate Authority because till 2.8.1999, the premises were found kept open and alive for operation. The Appellate Authority also found that in spite of extreme financial crisis, the management had kept the business premises open for operation till 1999. In the second round, the appellant did not adduce any evidence worth the name to show that the premises were kept open or used from September, 2001 onwards. The Rent Controller took cognizance of the notice fixed on the front shutter of the building by A.K. Agarwal on 1.10.2001 that the company is a sick industrial company under the 1985 Act and operation has been suspended with effect from 1.10.2001; that no activity had been done in the premises with effect from 1.10.2001 and no evidence was produced to show attendance of the staff, payment of salary to the employees, payment of electricity bills from September, 2001 or that any commercial transaction was done from the suit premises. It is, thus, evident that even though the ground of eviction in the two sets of petitions was similar, the same were based on different causes. Therefore, the evidence produced by the parties in the second round was rightly treated as sufficient by the Rent Control Court and the Appellate Authority for recording a finding that the appellant had ceased to occupy the suit premises continuously for six months without any reasonable cause33. We are also of the view that order dated 3.3.2008 passed by the AAIFR has no bearing on the decision of the issues raised by the respondents in the context of Section 11(4)(v) of the 1965 Act because what was required to be considered by the Rent Control Court was whether as on the date of filing the petition the appellant had ceased to occupy the premises continuously for a period of six months without reasonable cause. The improvement in the financial health of the appellant after many years cannot impinge upon the concurrent finding recorded by the Rent Control Court and the Appellate Authority that the respondents had succeeded in making out a case for eviction under Section 11(4)(v) and that there was no reasonable cause for the appellant to have ceased to occupy the suit premises continuously for a period of six months