Dunlop India Ltd vs A.A.Rahna & Anr

3. A.B. Abdul Khader (predecessor of the respondents) leased out the suit premises comprised in Survey Nos.341/1 and 2 situated at Ernakulam village to the appellant for its godown and office for a period of 10 years with effect from 1.12.1966. After 2 years and about 2 months, the parties executed two lease deeds dated 3.2.1969, which were duly registered. For the sake of reference, the relevant portions of the lease deed executed in respect of Survey No.341/1 measuring 83 cents are extracted below:

(d) The Lessee shall deliver up the said demised premises on termination of the lease in as good order and condition as they were in at the time when the lease hereby created commenced subject to determination due to normal wear and tear and defects, if any, for want of proper repair and maintenance which is the liability of the lessor as hereinafter mentioned.

2. The Lessor hereby covenants with the Lessee as follows:-

4. The appellant exercised the option for extension of the term of lease but did not vacate the premises at the end of extended period. After the death of A.B. Abdul Khader, respondent No. 1 became owner of the property comprised in Survey No. 341/1 while respondent No. 2 became owner of the property comprised in Survey No.341/2. They filed Rent Control Petition Nos.45 and 146 of 1999 for eviction of the appellant on the grounds specified in Section 11(2)(b), 11(3), 11(4)(i) and 11(4)(v) of the 1965 Act. By an order dated 11.4.2001, the Rent Control Court allowed both the petitions and directed the appellant to vacate the premises. The appeals preferred against that order were allowed by the Appellate Authority and the order of eviction was set aside. While reversing the finding recorded by the Rent Control Court that the 6 appellant had ceased to occupy the suit premises continuously for six months without reasonable cause, the Appellate Authority observed as under:

7. After remand, the appellant filed written statement and claimed that the petitions filed by the respondents were liable to be dismissed as barred by res judicata because Rent Control Petition Nos. 45 and 146 of 1999 filed by them on similar grounds were dismissed by the Appellate Authority and the High Court. On merits, it was pleaded that due to financial constraints, the appellant could not run its business effectively 9 and profitably and it was declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, "the 1985 Act") by the Board for Industrial and Financial Reconstruction (BIFR) in Case No.14 of 1998 and the appeal filed against the order of BIFR was pending before Appellate Authority for Industrial and Financial Reconstruction (AAIFR). It was also averred that due to financial crisis, the staff strength was reduced to bare minimum but there was no cessation of occupation of the suit premises.

11. On the basis of above analysis of the pleadings and evidence, the Rent Control Court concluded that the appellant had ceased to occupy the suit premises since September, 2001 without any reasonable cause and, accordingly, directed it to vacate the premises.

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 39 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 company's 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.

(emphasis supplied)

(emphasis supplied)

(emphasis supplied)

34. In the result, the appeals are dismissed. The parties are, however, left to bear their own costs. The appellant is allowed three months time to deliver vacant possession of the suit premises to the respondents subject to its filing usual undertaking before this Court within four weeks. It is also made clear that during this period of three months, the appellant 41 shall not induct any other person in the premises or transfer its possession to any other person in any capacity whatsoever.