The following order of the Court was delivered:
This appeal by special leave arises from the judgment of the Delhi High Court dated July 27, 1983 dismissing the Second Appeal No.630/85 confirming the decree of eviction passed against the appellants under Section 14(1)(b) of the Delhi Rent Control Act.
The admitted facts are that the premises in question was demised to Cox & Kings (AGENTS) Limited, a company incorporated under the United Kingdom Companies Act [for short, "Foreign Company"], tenant of Smt. Jagdish Rani Sethi who subsequently sold the property to Smt. Chander Malhotra by a registered conveyance. Mrs. Rani Sethi had filed eviction petition on diverse grounds. Smt. Chander Malhotra, the respondent, after getting impleaded, amended the patition and also pleaded sub-letting to the appellant, an Indian Company. The Rent Controller found that premises had been sub-let by the Foreing Company and, therefore, ordered eviction. That was confirmed in appeal. As stated earlier, the second appeal was also dismissed. The principle question that arises for consideration, on reference to this Bench, is: whether involuntary transfer of the leasehold interest from Foreign Company to the Indian Company is not subletting within the meaning of Section 14(1)(b) of the Act? The said section reads under:
"... that the tenant has, on or
after the 9th day of June, 1952,
sub-let, assigned or otherwise
parted with the possession of the
whole or any part of the premises
without obtaining the consent in
writing of the landlord".
The Contention of Shri R.F. Nariman, learned senior counsel for the appellants, is that after the Foreign Exchange Regulation Act, 1973 [for short, the "FERA"] had come into force, by operation of Section 29 of the Act, the Foreign Company was required to obtain, to carry on the business, written permission of the Reserve Bank of India. Accordingly, it had applied for permission but the Reserve Bank had refused permission to continue the same business. As a consequence, the India company was floated in which Foreign Company, though sought to have 100% shares, on refusal of the permission, had only 40% share in the business to which approval was given by the Reserve Bank of India. Consequently, the Indian company has been carrying on the business in the same premises. since the transfer of the leasehold interest from the Foreing Company to the Indian Company is by compulsion, it is an involuntary one and thus is not a case of "sub-letting" within the meaning if Section 14(1)(b) of the Act. Therefore, the view taken by the court below is not correct in law. We find it difficult to give acceptance to the contention. It is true that under Section 29 of the FERA, without prejudice to the provisions of Section 28 and Section 47 and notwithstanding anything contained in any other provision of the Act or the provisions of the Companies Act, 1956, a person residing outside India (whether a citizen of India or not) or a person who is not a citizen of India but a is resident in India, or a Company (other than a Banking Company) which is not incorporated under any law in force in force in India or in which the non-resident interest is more than 40% or any branch of such Company shall not, except with the general or special permission of the Reserve Bank of India, (a) carry on in India, or establish in India a branch office or other place of business for carrying on any activity of a trading , commercial or industrial nature, other than an activity for the carrying on of which permission of the Reserve Bank has been obtained under section 28...": (b) every application made under clause (a) shall be in such form and contain such particulars as may be specified by the Reserve Bank; and (c) where an application has been made under clause (a), the Reserve Bank may, after making such inquiry as it may think fit. either allow the application subject to such conditions, if any, as the Reserve Bank may think fit to impose or reject the application.
It is not in dispute that such an application came to be made and the Reserve Bank had passed an order directing the Foreign Company to wind up its business. Subsequently, an application was made for permission to incorporate Indian Company with 100% share held by the Foreign Company which was refused. Thereafter, Indian Company came to be incorporated in which the Foreign Company claimed to have to 40$% share in the business. Thus, The Indian Company was incorporated under the Indian Companies Act, 1956 and was doing business under FERA with the permission of Reserve Bank. The question then is: whether the Foreign Company sub-let the demised premises within the meaning of Section 14(1) (b) of the Act? It is seen that under FERA, there is no compulsion that the premises demised to the Coreign Company should be continued or given to Indian Company. On the other hand, the conveyance executed between the Foreign Company and the Indian Company reads as under.
" An agreement was executed was
executed on July 4, 1980 between
the English Company. The English
Company is termed as Assignor and
Indian Company has been termed as
Assignee. The last part of the
preamble indicates that whereas the
assignor has agreed to assign and
the assignee has agreed to take
over for consideration and upon
the terms and conditions here in
after set out the business carried
on by the assignor in India
hereinabove recited as a going
concern together with all the
assets and liabilities of the said
business as appearing in the
Audited Balance Sheet of the
assignor relating there to as on
the 30th day of September, 1976.
Clause (1) specifically mentioned
that on and from the date including
the transfer date the said
business shall become and be deemed
to have been owned by and assigned
to the Assignee, i.e. Indian
Company. Clause (2) envisages that
assignment was received for
consideration Clause 7(1)(b)
indicates as regards the leaseholds
, subject to payment of the rent
reserved and the observance of all
the covenants and conditions
contained in the Leases or
Agreements for Leases under which
the same are hold. Clause 7(ii)
indicates that incidental to the
assignment of the said business as
a going concern; the Assignor
shall, in so for as it is within
its power to do so, assign or cause
to be assigned the monthly and
other tenancies of all rented
premises of the Assignor in India".
Thus, It could be seen that under the consequence of agreement the Foreign Company and the Indian Company, the Indian Company became the assignee with all rights and liabilities and subject to observance of the terms and conditions of all the tenancy rights contained in the leases or agreements for lease under which the same are being held by the Foreign Company. It would, thus, be clear that it is a case of assignment of the leasehold right, had from the respondent in favour of India Company, subject to the observance of the leasehold covenants contained in the lease held by the Foreing Company. The question, therefore, is: whether it is a sub-letting or assignment? It is seen that sub-section (b) of Section 14, in clear terms envisages that the tenant shall not, after June 9, 1952, sub-let, assign, or otherwise part with the possession of the whole or any part of the premises, without obtaining the written consent of the landlord. It is seen that though by operation of FERA the Foreign company had wound up its business, it assigned, under the agreement, the leasehold interest in the demised premises to the Indian Company which is carrying on the same business in the tenanted premises without obtaining the written consent of the landlord.
The respondent-landlord is not bound by such assignment, induction of the appellant-Company against her wishes. Her written consent is a pre-condition, as envisaged under sub-section (i)(b) of Section 14 which was not obtained. Therefore, it is a clear case of sub-letting. Even otherwise, it would be an assignment, as admittedly agreed in the agreement referred to herein before between the Foreing Company and the Indian Company. In P.H. Rao v. S.P.N.K. Jain & Anr. [(1980) 3 SCR 444], the landlord had executed a lease in respect of the demised premises in favour of the Laxmi Bank on 1.4.1942; the Bank went into liquidation. the liquidator sold leasehold right to the respondent and the Court confirmed the same. An application for eviction come to be filed and it was contended that it being an involuntary transfer it was not a case of subletting under Section 14(1)(b) of the Act. This Court had negatived the contention holding thus:
" As regards point No.3, the High
Court relying on a decision of
Calcutta High Court in Krishna Das
Nandy vs. Bidhan Chandra Roy [AIR
1959 Cal. 1811] has found that as
the transfer in favour of
respondent No. 1 by the official
liquidator was confirmed by the
Court, the status of the tenant by
respondent No.1 was acquired by
operation of law and, therefore,
the transfer was an involuntary
transfer and the provisions of Rent
Control Act would not be attracted.
After careful perusal of Calcutta
case, in the first place it appears
that the section concerned has not
been extracted and we are not in a
position to know what the actual
language of the Section of the
Bengali Act. Secondly, in our
opinion, the official liquidator
had merely stepped into the shoes
of Laxmi Bank which was the
original tenant and even if the
official liquidator had transferred
the tenancy interest to respondent
No.2 under the orders of the Court,
it was on behalf of the original
tenant. It was undoubtedly a
voluntary sale which clearly fell
within the mischief of Section
14(1)(b) of the Delhi Rent control
Act. Assuming that the sale by the
official Liquidator was an
involuntary sale, then it
undoubtedly become an assignment as
provided for by s.14(b) of Delhi
Rent Control Act. S.14(b) runs
thus:-
"14(b)--that the tenant has, on or
after the 9th day of June, 1952,
sublet, assigned or otherwise
parted with the possession of the
whole or any part of the premises
without obtaining the consent in
writing of the landlord."
The language of s.14(b) is wide
enough not only to include any sub-
lease but even an assignment or any
other mode by which possession of
the tenanted premises is parted. In
view of the wide amplitude of
s.14(b) we are clearly of the
opinion that it does not exclude
even an involuntary sale. Fore
These reasons, therefore, we are
unable to agree with the view taken
by the High Court. The appeal is
accordingly allowed, the judgment
and decree of the High Court are
set aside and the plaintiff’s
application under s.25 of the Delhi
Rent Control Act is dismissed.
"premises without obtaining the
cons.
The above ratio is clearly on the point in issue involved in the present case, In Venkatarama Iyer v. Renters Ltd. [(1951 II MLJ 57], K. Subba Rao, J., as he then was, has to consider a similar question under the Madras Buildings (Lease and Rent) Control Act. There was an assignment between the two companies and considering the effect thereof it was held that if a company doing business in a particular premises taken on lease, transfers its business as a going concern to another company and also the net assets for consideration and thereafter the transferer company takes over the business and carries on business in the premises let out to the former company, it cannot be said that there was no transfer of the right of the former company under the lease to the latter company. On such transfer, the tenant is liable to be evicted as a subtenant. The above judgment is clearly on the point in issue before us. In General Radio & Appliances Co. Ltd. v. M.A.. Khader (dead) by Lrs. [(1986) 2 SCR 607 at 620] a threeJudge Bench had approved the above ratio. Two companies having been amalgamated, eviction against the amalgamated company came to be filed. On consideration of all the decisions referred to above hereinbefore, the irresistible conclusion followed that there had been a transfer of the tenancy interest of appellant No.1 in respect of the premises in question to the appellant No.2, subsequently, renamed appellant No.3, M/s. National Radio Electronics Co. Ltd. Accordingly, their eviction was upheld under Section 10(ii)(a) of the Andhra Predesh Buildings (Lease, Rent and Eviction Control Act, 1960. The facts in Madras Bangalore Transport Co. (West) v. Inder Singh & Ors. [(1986) 3 SCC 62] relied upon by Shri R.F. Nariman, are clearly distinguishable. In that case, a partnership firm was divided between the partners and two separate firms came to be formed with a distinct area of operation and one of the companies was to retain possession of the tenanted premises. After 10 years, application for eviction came to be filed on the ground of subletting of the premises. Considering the constitution of the companies, its operation and the nature of the incidence that flowed therefrom, this Court had held that the limited company and the partnership firm were two only on paper but were one for practical purposes There was substantial identity between the limited company and the partnership firm. On the basis of those findings, it was held that there was no sub-letting. The ratio has no application to the facts in this case.
In view of the findings recorded above, viz., there was a clear assignment between the Foreign Company and the Indian Company of the demised premises without any written consent of the respondent-landlord, it is a case of "subletting" within the meaning of Section 14(1)(b) of the Act. The courts below, therefore, have not committed any illegality in reaching those findings warranting interference.
The appeal is accordingly dismissed. No costs.