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

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:"THIS DEED OF LEASE made on the Third day of February One Thousand Nine Hundred and Sixty Nine corresponding to the Fourteenth day of Magha One thousand Eight Hundred and Ninety One of the Sakha Era BETWEEN A.B. ABDUL KHADER son of Alumkaparambli Bava, Indian National, Businessman, aged Forty five years, residing at Alumkaparampil, Chittor Road, Ernakulam in the City of Cochin in Ernakulam District in Kerala State (hereinafter called "the Lessor" which expression shall unless excluded by or repugnant to the context include his heirs, executors, administrators and assigns) of the One Part AND DUNLOP INDIA LIMITED, formerly THE DUNLOP RUBBER COMPANY (INDIA) LIMITED, a Company duly incorporated in India having its Registered office at Dunlop House, 57-B Free School Street, Calcutta, herein represented by its duly constituted attorney G.S. Krishna son of Govindarajapuram Subramaniam, Indian National, Business, Executive, aged Forty four years, residing at 26, Dr. Hedge Road, Nangumbakkam in the City of Madras (hereinafter called "the Lessee" which expression shall unless excluded by or repugnant to the context include its successors and assigns) of the Other PartWITNESSES as follows:-1. In consideration of the rent hereinafter reserved and of the covenants on the part of the Lessee hereinafter stipulated, the Lessor hereby demises unto the Lessee all those pieces of parcels of land situate in Ernakulam Town comprised in Survey Number 341 Sub Division 1 (part) admeasuring 83 cents equivalent to 33 acres 58.844 sq. meteres together with the buildings and structures erected thereon more particularly described in the Schedule hereunder written together with all the fixtures, fittings, pathways, passages, rights and privileges appurtenant thereto TO HOLD the same unto the Lessee for a term of ten years from 1st December 1966 paying therefore during the continuance of the lease a monthly rent of Rs.4,000/- (Rupees Four Thousand) only on the days and in the manner and subject as hereunder provided(a) xxx xxx xxx(b) xxx xxx xxx(c) The Lessee shall permit the Lessor or his authorised agents with or without workmen during business hours to enter upon the demised premises for the purpose of viewing the condition thereof and from time to time for the purpose of effecting the necessary repairs and maintenance as hereunder provided(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 mentioned2. The Lessor hereby covenants with the Lessee as follows:-(a) Subject to the due observance and performance of the terms, covenants and conditions by the Lessee herein on their part to be observed and performed the lessee shall have the right during the continuance of the lease to use the premises without interruption by the Lessor or any person claiming under or in trust for him(b) xxx xxx xxx(c) xxx xxx xxx3. Provided always and it is mutually agreed by and between the parties hereto as follows:(a) Notwithstanding the period of lease herein before provided the Lessee shall have the option to terminate the lease by giving three months notice in writing to the Lessor at any time during the continuance of this Lease(b) The lessees shall have the option to renew the lease for a further period of ten years at the same rent and other terms, covenants and conditions as existed during the initial period of ten years save and except the Clause for renewal provided the Lessee gives notice in writing to the Lessor three months before the expiry of the initial period of ten years of the Lessees intention to exercise the option(c) xxx xxx xxx(d) xxx xxx xxx(e) xxx xxx xxx(f) xxx xxx xxx(g) The Lessee shall be at liberty at its own costs to construct at any time and at any place of the demised premises counters, strong rooms and safe deposit vaults and to fix, erect, bring in or upon or fasten to the demised premises and to alter and rearrange from time to time, furniture fixtures and fittings which the Lessee may require for its business such as partition screens, counters, platforms, shelves, cases, cupboards, heavy safes, cabinets, lockers, strong room doors, vault doors, cabinets of any size and weight, steel collapsible gates, ventilators, grills, shutters, sunblinds, gas and electric fittings, stoves, light, fans, air conditioners, sinks and other equipment, fittings, articles and things all of which the Lessee shall be at liberty to remove at any time at its pleasure, before the expiration or sooner determination of the tenancy without objection on the part of the Lessor and the Lessee shall make good the damage, if any, which may be thereby caused to the demised premises."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 appellant had ceased to occupy the suit premises continuously for six months without reasonable cause, the Appellate Authority observed as under:"I find merit in the submission of the learned counsel for the appellant that suspension of business activity on account of extreme financial crunch, at the same time keeping the unit open and alive for operation cannot amount to cessation of occupation without valid reasons. Ext. C1(a) notice conveys eloquently that there was no intention to abandon possession and the tenant did continue occupation. Business activity was not being run on account of peculiar circumstances. Till 2.8.1999 the premises were kept open and alive for operation. It is important to note that the employees of the tenant were not directed not to come to the establishment on any day prior to 2.8.1999. I am of the opinion that Ext.C1(a) read as a whole can never convey to a prudent mind that there was cessation of occupation. Physical inability to carry on business activity on account of financial difficulties and the closing down of the production in the factories cannot ipso fact, in the facts and circumstances of the case, lead to the conclusion that the management of the tenant (which had kept the unit open and alive for operation till 2.8.1999) had ceased to occupy the building till 2.8.1999. Cessation to occupy had a physical ingredient as also a mental ingredient. Reading of Ext. C1(a) as a whole, I am unable to agree that there was such objectionable cessation of occupation. Though it indicates that there was no business activity and the establishment remained defunct and idle, there was still the intention to occupy and the hope that it will be possible to resume even business activity. The inevitable conclusion flowing from Ext.C1(a) is that the employees were continuing to attend the offices in the petition schedule building till 2.8.1999. At any rate, it would be impossible to come to a conclusion that there was cessation of occupation prior to 2.8.1999 though I would readily agree that there was no business activity in the petition schedule building for some period of time even prior to 2.8.1999. I am in these circumstances of the opinion that Ext. C1(a), the trump card on which the landlords place reliance cannot deliver any crucial advantage or assistance to the landlords in their attempt to establish cessation of occupation."The Appellate Authority also referred to the Commissioners report but refused to rely upon the same by recording the following reasons:"The inspection by the commissioner was on 10th September and monsoon season had preceded such inspection. Some wild growth as indicated in Ext. C1 (assuming that Ext. C1 can be legally taken cognizance of), is not, according to me, sufficient to establish cessation of occupation. In the light of the very specific statement in Ext. C1(a) that inspite of the extreme financial crunch, the management had till 2.8.1999 kept the unit open and alive for operation and that Ext.C1(a) notice was being issued on 2.8.1999 as management was convinced that there is no prospect of running the company immediately must definitely convey to the court that there was no cessation of occupation prior to 2.8.1999 at any rate. The wild growth perceived by the commissioner and reported in Ext. C1 cannot in these circumstances tilt the scales in favour of the landlords. I am in these circumstances of the opinion that the learned Rent Control Court erred in coming to the conclusion that the landlords have succeeded in proving cessation of occupation for a period of 6 months immediately prior to the filing of the petitions without reasonable cause. I am unable to concur with the conclusion of the learned Rent Control Court on this aspect. I am in these circumstances satisfied that the challenge raised on this ground also deserves to be upheld."5. Civil Revision Petition Nos.579 and 580 of 2002 filed by the respondents were dismissed by the Division Bench of the High Court vide judgement dated 18.12.2006. The High Court agreed with the Appellate Authority that the evidence produced by the landlord was not sufficient for recording a finding that the tenant had ceased to occupy the premises for a continuous period of six months without reasonable cause6. During the pendency of the revisions before the High Court, the respondents filed fresh rent control petitions which came to be registered as RCP Nos.109 of 2002 and 38 of 2003 for eviction of the appellant under Section 11(2)(b), 11(3), 11(4)(i) and 11(4)(v). This time, the respondents pleaded that the appellant herein has ceased to occupy the premises since September, 2001 without any reasonable cause. Both the petitions were allowed by the Rent Control Court vide order dated 11.2.2004, which was confirmed by the Appellate Authority by dismissing the appeals preferred by the appellant. However, Civil Revision Petition No.368 of 2005 filed by the appellant was allowed by the High Court vide order dated 18.12.2006 and the matter was remitted to the Rent Control Court for fresh adjudication of the rent control petitions after giving opportunity to the appellant to file counter statement and adduce evidence7. 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 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 premises8. On the pleadings of the parties, the Rent Control Court framed the following issues:"(1) Whether the petition is barred by resjudicata and also u/s.15 of the Act?(2) Whether RW1 is having any authority to represent the respondent?(3) Whether there is a commercial lease between the parties as alleged?(4) Whether the Petitioners are entitled for an order of eviction u/s.11(2)(b) of the Act?(5) Whether the Respondent ceased to occupy the petition schedule buildings continuously for six months?(6) Whether there is any reasonable cause for the cessation of occupation if any?(7) Whether the Petitioners are entitled for an order of eviction u/s 11(4)(v) of the Act?(8) Relief and costs?"9. After considering the pleadings and evidence of the parties, the Rent Control Court held that the petitions filed by the respondents were not barred by res judicata and Section 15 of the 1965 Act cannot be invoked for denying relief to them because two sets of rent control petitions were based on different causes. However, the respondents plea that the appellant was in arrears of rent was rejected on the ground that no evidence had been produced by them to prove the same. The Rent Control Court then considered the question whether the appellant had ceased to occupy the suit premises since September, 2001 without reasonable cause and answered the same in affirmative. The Rent Control Court referred to the evidence produced by the parties including the reports Exhibits C1 and C2 produced by Advocate Commissioners PW2 and PW3 and recorded the following observations:"(i) From Ext.C1 report filed by PW2 it can be seen that the two entrance gates on the northern side of the petition schedule property in O.S. 109/02 is found rusted and closed. The boundary fencing on the northern side is found damaged(ii) The land surrounding the side petition schedule building is fully covered with grass and shrubs and PW2 the commission even found it difficult to walk through the premises. The sheds in the said property were seen in dilapidated condition and the commissioner could not go near to the shed as it was covered with tall bushes and shrubs(iii) The eastern wall of the petition scheduled building in RCP 109/02 had to rusted shutters which was seen closed(iv) It is also reported that the commissioner could not enter into the buildings as it was closed. On looking through the glass window PW2 could see some furniture inside the building which are full of dust, damaged and unfit for use. Though the service line of electric connection to the petition schedule building was there commissioner verified and found that the electric connection being disconnected(v) PW3 is the advocate commissioner who had inspected the petition schedule building RCP No.38/03 and filed Ext.C2 report it can be seen that the petition schedule building in RCP 38/2003 was lying closed at the time of both the inspections made by PW3. The commissioner has also noted the notice fixed in the front shutter of the petition schedule building by Sri A.K. Agarwal Company Secretary on 1.10.2001 stating that the Respondent company is a sick industrial company under the Sick Industrial Companies (Special Provisions) Act and operations at Kochi has been suspended w.e.f. 1.10.2001 onwards. It is also mentioned in ex.C2 that the front shutters and the shutters provided at the eastern side are full of dust and the same were rusted due to non use, and the entire compound around the petition schedule building are full of bush and the bushes are seen at some places grown on to the petition schedule building and some other places grown to the roof of petition schedule building(vi) The commissioner has also noted five calendars for year 2001 seen inside the rooms in the petition schedule building. PW3 also has noted that the switchboard provided at the eastern and western wall of the petition schedule building were not having electricity supply. It is also noted that the four iron gates provided for the compound were covered with dust and rust due to non use(vii) Even though the condition of the petition schedule buildings happened to be as noted by PW2 and PW3 to a limited extent to non-maintenance and repairs it cannot be found that it happened only due to non-maintenance and repairs(viii) The calendars for the year 2001 noted by PW3 inside the petition schedule building in RCP No.38/03 and the notice dated 01.10.2001 affixed at the front shutter of the same building clearly shows that both the petition schedule buildings were not been opening from 1.10.2001 towards till the inspection date. Since the petition schedule buildings were not opened since September, 2001 the inability of the Petitioner to carry out the repairs and maintenance also is to be looked into."10. The Rent Control Court then considered the plea of the appellant that on account of pendency of the proceedings under the 1985 Act, the staff strength was reduced to bare minimum but discarded the same on the ground that staff attendance register, muster roll, wages register maintained in the office as also the document showing purchase and sale of the goods, payment of electricity charges etc. had not been produced showing payment of the dues since September, 2001 and observed:"The specific case of RW1 is that due to the proceedings under the provisions of Sick Industrial Companies (Special Provisions) Act, the staff strength of the Respondent company was reduced to bare minimum at the petition schedule buildings. According to RW1 even though there were such proceedings respondent was functioning in the schedule buildings with minimum staff. During cross examination RW1 admitted that the staff attendance register, muster roll wages register etc are maintaining in the petition schedule buildings. She also admitted that they are maintaining stock register in the petition schedule buildings. But none of there documents are produced before court. According to RW1 she omitted to produce these documents. Had these documents for the relevant period come in illegible/- the details regarding the strength of the staff and the business being carried on is the petition schedule buildings would have been revealed. She also admitted that documents are maintained regarding the purchase and sale done in the petition schedule buildings but those documents are also not produced before court. ............... The specific case of PW1 is that the electric connection was disconnected more than 1= years before. But according to RW1 the electricity connection was disconnected only two months prior to her examination before court. If there was actually electric supply to the petition schedule buildings and the Respondents had paid the electricity charge definitely RW1 could have produced the electricity bill pertaining to the petition schedule buildings. Though RW1 stated that she can produce the electricity bill from 2001 September onwards pertaining to the petition schedule buildings neither of them has been produced till now. From all these it can be seen that the Respondents were not occupying the petition schedule buildings from 2001 September onwards, and they had ceased to occupy the petition schedule buildings continuously for more than six monthsAccording to RW1 respondent could not conduct the business in full swing in the petition schedule building due to BIFR and AAIFR proceedings. Ext.B9 is the order of AAIFR, New Delhi in appeal No.1/02 wherein the Respondent is the appellant. On perusal of Ext.B9 it can be seen that several reliefs and concessions were given to the Respondent company by the AAIFR. But as per ext.B9 no restriction is seen imposed on the work of respondent company all together or particularly in the schedule buildings at Cochin. ........................................ As already observed respondents could not produce any of the mandatory prescribed registers such as stock register, day book, muster roll, attendance register wages register etc. to show that any business were being carried out in the petition schedule buildings even with minimum staff. Even it was specifically put to RW1 that due to the proceedings before BIFR and AAIFR, whether the board of directors was resolved to reduce the staff strength she answered that the staff were told not to come and they have agreed for the same. It is something unbelievable. RW1 has produced Ext.B13 series to B25 series invoices to show that they are conducting business to the scheduled property. But on going through ext.B13 series to ext.B25 series it cannot be found that those transactions were made through Kaloor Office where in the petition schedule building situates as these invoices were given to the Chennai office of respondent. The learned counsel for the Petitioner has pointed out that in ext.B11 series and B12 series after the Chennai address of the Respondent company it is seen typed in another machine in Ext.B11 series and written in another handwriting in Ext.B12 series, "through Kaloor Office Cochin". The same and address of the purchasing dealer in all these documents are the Chennai address of the Respondent company. Ext.B11 series to ext.B25 series cannot be relied on to show that business was being conducted in scheduled buildings. It is also to be noted that ExtB11 series to B25 series are of the year 2006 and these do not in any help the Respondents to show that any business was being conducted in the petition schedule building in between September, 2001 and filing of these RCPs. It is also admitted by RW1 that copy of invoice are to be given at the check post. But ext.B11 to B25 series produced are having 4 to 6 copies of each invoices. If while passing the sales tax check post copy of invoices were given as stated there would not have been such number of copies at in ext. B11 to B25 series. Therefore the genuineness of these documents are also doubtful. On a perusal of the entire evidence it can be seen that the Respondent has failed to prove that the cessation of occupation of petition schedule buildings for the continuous period of more than six months were due to the restrictions imposed by BIFR and AAIFRHence these points are found in favour of the Petitioners."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 premises12. The Appellate Authority independently examined the pleadings and evidence of the parties and reiterated the finding recorded by the Rent Control Court that the appellant had ceased to occupy the premises since September, 2001 and that the pendency of the proceedings under the 1985 Act cannot be construed as a reasonable cause for non occupation of the premises13. The Division Bench of the High Court, though not required in law to do so, minutely scrutinized the evidence produced by the parties and concurred with the Rent Control Court and the Appellate Authority that the respondents had succeeded in making out a case for eviction of the appellant under Section 11(4)(v). The High Court referred to the expression "reasonable cause" used in Section 11(4)(v), the judgment in Paulina Joseph v. Idukki District Wholesale Co-operative Consumer Stores Ltd. (2006) 1 KLT 603  and observed:"Interpreting the scope and meaning of "reasonable cause" provided in section 11(4)(v) of the Act a Division Bench of this Court in Paulina Joseph vs Idukki District Wholesale Co-operative Consumer Stores Ltd., (2006 (1) KLT 603 ) held that if there is a plausible explanation to the question why the business was not run in the premises continuously, it may be a relevant fact in considering whether there was reasonable cause for cessation of occupation. But it is held that existence of such reasonable cause depends on the facts and circumstances of each cases. It is further held that the occupation of the building depends on the purpose for which it is let and the purpose for which it is used. The nature of the business and the requirement of the physical presence or otherwise of the tenant in the building for the conduct of the business is a relevant fact. But in this case on considering the facts the requirement of physical presence is highly essential to observe that the tenant company is continuing in occupation, because the tenanted premises is occupied as their office and godown. The burden to prove that there is reasonable cause for non occupation is solely on the tenant when it is proved that there is cessation of physical occupationThe question to be examined is whether on the facts of this case the tenant was successful in proving any such reasonable cause. The rent control petitions were filed during the years 2002 and 2003. It has come out in evidence that the tenant ceased to occupy the premises since last so many years from the date of filing of the rent control petition itself. Further it has come out in evidence that since the lapse of more than six years from filing of rent control petitions, still as on today, it is conceded that the company could not resume business of physical occupation at the tenanted premises. Therefore we have no hesitation to hold that the tenant was not successful in establishing any genuine intention or hope of reviving the physical occupation not it was successful it establishing any reasonable cause for the cessation of occupation."

Court's reasoning:
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