Dunlop India Limited
Vs. A.A. Rahna and another
Dunlop India Limited
Vs. A.A. Sulaiman and others
J U D G M E N T
G.S. Singhvi, J.
1.
Leave
granted.
2.
These
appeals are directed against judgment dated 27.7.2009 of the Division Bench of
the Kerala High Court whereby the revisions filed by the appellant against the order
passed by District Judge, Ernakulam (hereinafter referred to as, "the
Appellate Authority") under Section 18 of the Kerala Buildings (Lease and
Rent Control) Act, 1965 (for short, "the 1965 Act") were dismissed and
the direction given by IIIrd Additional Munsiff and Rent Control Court,
Ernakulam (for short, "the Rent Control Court") for vacating the suit
premises was confirmed.
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 3son 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 Part.WITNESSES 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 mentioned.
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 Lessee's 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 6appellant 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." 7 The Appellate Authority also referred to the Commissioner's
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
cause.
6.
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 evidence.
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 9and 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.
8.
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. 11
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 12 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." (emphasis
supplied)
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 13are 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 months.According 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 14 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 AAIFR. Hence these
points are found in favour of the Petitioners." (emphasis supplied)
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.
12.
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 15September, 2001 and that the
pendency of the proceedings under the 1985 Act cannot be construed as a
reasonable cause for non occupation of the premises.
13.
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 16 when it is proved
that there is cessation of physical occupation. The 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."
14.
Shri
R.F. Nariman, learned senior counsel for the appellant argued that the impugned
judgment and the orders passed by the Rent Control Court and the Appellate
Authority are liable to be set aside because the Rent Control Petition Nos. 109
of 2002 and 38 of 2003 were barred by res judicata. Learned senior counsel
submitted that the issue whether the appellant had ceased to occupy the
building continuously for six months without reasonable cause had already been decided
against the respondents in the proceedings arising out of Rent Control Petition
Nos.45 and 146 of 1999 and, as such, the second set of petitions filed on the same
cause were not maintainable.
He further submitted that
even though two sets of rent control petitions related to different periods,
the evidence produced by the respondents to prove their case with reference 17to
Section 11(4)(v) was substantially the same and the Rent Control Court
committed serious error by passing an order of eviction ignoring the contrary finding
recorded by the Appellate Authority and the High Court in the earlier round of
litigation and this error was repeated by the Appellate Authority and the High
Court while dismissing the appeals and revisions filed by the appellant. Shri Nariman
argued that the finding recorded by the Rent Control Court and the Appellate
Authority that the appellant had ceased to occupy the suit premises continuously
for six months without reasonable cause was based on misreading of evidence and
the High Court committed serious error by approving the same ignoring the
finding recorded in the earlier round of litigation, which had become final.
Learned senior
counsel emphasized that due to pendency of proceedings under the 1985 Act, the appellant
could not effectively use the suit premises, but that did not justify a conclusion
that it had ceased to occupy the premises. He then submitted that the pendency
of case under the 1985 Act was, by itself, sufficient for recording a finding
that there was reasonable cause for the appellant to have ceased to occupy the suit
premises. Shri Nariman invited our attention to order dated 3.3.2008 passed by
AAIFR vide which the appeals filed against the order of the BIFR were dismissed
and argued that the impugned order may be set aside because the appellant's financial
condition has considerably improved.
15.
S/Shri
S. Gopakumaran Nair and C.A. Sundaram, learned senior counsels for the
respondents argued that the concurrent findings recorded by the Rent Control
Court and the Appellate Authority on issue Nos.5, 6 and 7, which have been
approved by the High Court, do not suffer from any legal infirmity warranting
interference by this Court. Learned senior counsel candidly admitted that the
order of eviction passed in the earlier round of litigation was reversed by the
Appellate Authority and the revisions filed by the respondents were dismissed
by the High Court, but argued that the findings recorded in those proceedings could
not be treated as res judicata qua the petitions filed in 2002/2003 because the
same were based on a different cause. Learned counsel pointed out that in the first
round, the respondents had sought eviction under Section 11(4)(v) by alleging that
the appellant had ceased to occupy the suit premises from June, 1998 and in the
second set of petitions, eviction was sought on the ground that the appellant had
ceased to occupy the premises from September, 2001.
Learned counsel
pointed out that while the respondents had succeeded in proving that the suit premises
were vacant since September, 2001, the appellant could not produce any tangible
evidence to prove occupation of the premises or that there was reasonable cause
for its having ceased to occupy the suit premises. They emphasized that the
Rent Control Court and the Appellate Authority had 19rightly discarded the evidence
of RW1 on the issue of continued occupation of the suit premises because she failed
to produce the staff attendance register, muster rolls, wage registers, electricity
bills and payment thereof as also documents showing purchase and sale of the
goods from the suit premises.
16.
We
have considered the respective submissions. Section 11(1) contains a non
obstante clause and declares that notwithstanding anything to the contrary
contained in any other law or contract a tenant shall not be evicted whether in
execution of a decree or otherwise except in accordance with the provisions of the
Act. The first proviso to Section 11(1) carves out an exception and lays down that
nothing contained in this section shall apply to a tenant whose landlord is the
State Government or the Central Government or other public authority notified
under this
Act. Second proviso to
Section 11(1) carves out another exception and lays down where the tenant
denies the title of the landlord or claims right of permanent tenancy, the Rent
Control Court shall decide whether the denial or claim is bonafide and if it
records a finding to that effect, the landlord shall be entitled to sue for
eviction of the tenant in a Civil Court and such court can pass a decree for
eviction on any of the grounds enumerated in Section 11 even though the Court
may find that such denial does not involve forfeiture of the lease or that the
claim is 20unfounded. Section 11(4)(v) of the Act which has bearing on this
case reads as under: "(1) to (3) xxx xxx xxx (4) A landlord may apply to
the Rent Control Court for an order directing the tenant to put the landlord in
possession of the building,- (i) to (iv) xxx xxx xxx (v) if the tenant ceases to
occupy the building continuously for six months without reasonable cause."
The definition of the
term "building" contained in Section 2(1) is as under: "(1). "building"
means any building or hut or part of a building or hut, let or to be let separately
for residential or non residential purpose and includes- (a) the garden grounds
well's tanks and structures if any, appurtenant to such building, hut, or part of
such building or hut, and let or to be let along with such building or hut; (b)
any furniture supplied by the landlord for use in such building or hut or part
of a building or hut (c) any fittings or machinery belonging to the landlord,
affixed to or installed in such building or part of such building, and intended
to be used by the tenant for or in connection with the purpose for which such
building or part of such building let or to be let, but does not include a room
in a hotel or boarding house...."
17.
The
word "occupy" used in Section 11(4)(v) is not synonymous with legal
possession in technical sense. It means actual possession of the tenanted
building or use thereof for the purpose for which it is let out. If the
building is let out for residential purpose and the tenant is shown to be
continuously absent from the building for six months, the Court may presume
that he has ceased to occupy the building or abandoned it. If the building is let
out for business or commercial purpose, complete cessation of the business/commercial
activity may give rise to a presumption that the tenant has ceased to occupy
the premises. In either case, legal possession of the building by the tenant
will, by itself, be not sufficient for refusing an order of eviction unless the
tenant proves that there was reasonable cause for his having ceased to occupy
the building.
18.
The
initial burden to show that the tenant has ceased to occupy the building
continuously for 6 months is always on the landlord. He has to adduce tangible
evidence to prove the fact that as on the date of filing the petition, the tenant
was not occupying the building continuously for 6 months. Once such evidence is
adduced, the burden shifts on the tenant to prove that there was reasonable
cause for his having ceased to occupy the tenanted premises for a continuous period
of 6 months. No strait-jacket formula can be evolved for determining as to what
is the reasonable cause and each case is required to be decided keeping in view
the nature of the lease, the purpose for which the premises are let out and the
evidence of the parties.
If the building, as
defined in Section 2(1), is let out for industrial or commercial/business
purpose and the same is not used for the said purpose continuously for a period
of six months, the tenant cannot plead financial crunch as a ground to justify non
occupation of the building unless cogent evidence is produced by him to prove that
he could not carry on the industrial or commercial/business activity due to
fiscal reasons which were beyond his control. If the tenant does not use the
building for the purpose for which it is let out, he cannot be said to be occupying
the building merely because he has put some furniture or articles or machinery
under his lock and key.
19.
At
this stage, we may notice some precedents which throw some light on the true interpretation
of the expressions "occupy" and "reasonable cause" used in
Section 11(4)(v) of the 1965 Act.
20.
In
Ram Dass v. Davinder (2004) 3 SCC 684, this Court interpreted Section 13(2)(v)
of the Haryana Urban (Control of Rent and Eviction) Act, 1973 in terms of which
an order of eviction could be passed against the tenant if he is shown to have ceased
to occupy the premises continuously for a period of 4 months without reasonable
cause. Respondent Davinder was tenant in the shop belonging to appellant-Ram
Dass. The appellant filed a petition for eviction of the respondent on the 23ground
that he had ceased to occupy the shop for a continuous period of 4 months
without any reasonable cause. The Rent Controller analysed the pleadings of the
parties and evidence produced by them and held that the appellant has been able
to prove that the respondent had ceased to occupy the premises for a continuous
period of more than 4 months and there was no reasonable cause for doing so.
The plea of the
respondent that he had kept the shop closed intermittently due to sickness was
not accepted by the Rent Controller. The Appellate Authority, on an independent
evaluation of the evidence, confirmed the finding of the Rent Controller. The
High Court allowed the revision filed by the respondent and set aside the
orders of the Rent Controller and the Appellate Authority. This Court reversed
the order of the High Court and restored the one passed by the Rent Controller.
The Court highlighted the distinction between the terms "possession"
and "occupy" in the context of Rent Control Legislation in the
following words: "The terms "possession" and "occupy" are
in common parlance used interchangeably. However, in law, possession over a
property may amount to holding it as an owner but to occupy is to keep possession
of by being present in it. The rent control legislations are the outcome of paucity
of accommodations. Most of the rent control legislations, in force in different
States, expect the tenant to occupy the tenancy premises.
If he himself ceases to
occupy and parts with possession in favour of someone else, it provides a ground
for eviction. Similarly, some legislations provide it as a ground of eviction
if the tenant has just ceased to occupy the tenancy premises though he may have
continued to retain possession thereof. The scheme of the Haryana Act is also
to insist on the tenant 24 remaining in occupation of the premises.
Consistently with what has been mutually agreed upon, the tenant is expected to
make useful use of the property and subject the tenancy premises to any
permissible and useful activity by actually being there. To the landlord's plea
of the tenant having ceased to occupy the premises it is no answer that the
tenant has a right to possess the tenancy premises and he has continued in
juridical possession thereof.
The Act protects the tenants
from eviction and enacts specifically the grounds on the availability whereof
the tenant may be directed to be evicted. It is for the landlord to make out a ground
for eviction. The burden of proof lies on him. However, the onus keeps shifting.
Once the landlord has been able to show that the tenancy premises were not being
used for the purpose for which they were let out and the tenant has discontinued
such activities in the tenancy premises as would have required the tenant's actually
being in the premises, the ground for eviction is made out. The availability of
a reasonable cause for ceasing to occupy the premises would obviously be within
the knowledge and, at times, within the exclusive knowledge of the tenant. Once
the premises have been shown by evidence to be not in occupation of the tenant,
the pleading of the landlord that such non-user is without reasonable cause has
the effect of putting the tenant on notice to plead and prove the availability
of reasonable cause for ceasing to occupy the tenancy premises." (emphasis
supplied)
21.
In
Brown v. Brash (1948) 1 All. E.R. 922, the Court of appeal was called upon to examine
correctness of an order passed by the County Court Judge, who upheld the
tenant's claim to possession of the premises and awarded damages against the
appellant for trespass. The facts of that case were that the premises were let out
to the tenant in 1941 on a quarterly rent of 26 pounds. In 1945, the tenant was
convicted and sentenced to serve 2 years' imprisonment for stealing 6 tones of tea.
25While going to jail, the tenant left physical occupation of the premises to
his mistress and two illegitimate children. In March 1946, the tenant's
mistress left the premises and dropped the two children with his mother. In the
meanwhile, the landlord sold the premises. The purchaser filed an action in
July 1946 for eviction of the tenant on the ground that he had abandoned
possession.
The County Court
Judge held that the tenant had not abandoned possession and that even though he
failed in some of his obligations under the tenancy, it was not reasonable to
make an order for possession against him. In December 1946, the purchaser of
the original landlord transferred the premises to the appellant. After release from
prison, the tenant brought an action for possession and damages for trespass. His
claim was allowed by the County Court Judge, who directed the appellant to
return the premises to the respondent-tenant and also pay damages.
The Court of appeal
reversed the order of the County Court Judge and held: "We are of opinion that
a "non-occupying" tenant prima facie forfeits his status as a statutory
tenant. But what is meant by "non-occupying"? The term clearly cannot
cover every tenant who for however short a time, or however necessary a purpose,
or with whatever intention as regards returning, absents himself from the demised
premises. To retain possession or occupation for the purpose of retaining protection
the tenant cannot be compelled to spend 24 hours in all weathers under his own
roof for 365 days in the year. Clearly, for instance, the tenant of a London house,
who spends his week-ends in the country, or his long vacation in Scotland, does
not necessarily cease to be in occupation. Nevertheless, absence may be sufficiently
prolonged or un intermittent to compel the inference, prima facie, of a 26cesser
of possession or occupation.
The question is one
of fact and of degree. Assume an absence sufficiently prolonged to have this
effect. The legal result seems to us to be as follows:-(1) The onus is then on
the tenant to repel the presumption that his possession has ceased. (2) To
repel it he must, at all events, establish a de facto intention on his part to
return after his absence. (3) But we are of opinion that neither in principle nor
on the authorities can this be enough. To suppose that he can absent himself
for 5 or 10 years or more and retain possession and his protected status simply
by proving an inward intention to return after so protracted an absence would be
to frustrate the spirit and policy of the Acts as affirmed in Keeves v. Dean (1)
and Skinner v. Geary (3), (4) Notwithstanding an absence so protracted the authorities
suggest that its effect may be averted if he couples and clothes his inward intention
with some formal, outward, and visible sign of it, i.e., installs in the
premises some caretaker or representative, be it a relative or not, with the
status of a licensee and with the function of preserving the premises for his
own ultimate home-coming.
There will then, at all
events, be someone to profit by the housing accommodation involved which will not
stand empty. It may be that the same result can be secured by leaving on the
premises, as deliberate symbols of continued occupation, furniture, though we
are not clear that this was necessary to the decision in Brown v. Draper (4). Apart
from authority, in principle possession in fact (for it is with possession in
fact and not with possession in law that we are here concerned) requires not
merely an "animus possidendi" but a "corpus possessionis,"
viz., some visible state of affairs in which the animus possidendi finds
expression. (5)
If the caretaker (to use
that term for short) or the furniture be removed from the premises otherwise
than quite temporarily, we are of opinion that the protection, artificially prolonged
by their presence, ceases, whether the tenant wills or desires such removal or not.
A man's possession of a wild bird, which he keeps in a cage, ceases if it escapes
notwithstanding that his desire to retain possession of it continues and that
its escape is contrary thereto. We do not think in this connection that it is
open to the tenant to rely on the fact of his imprisonment as preventing him
from taking steps to assert possession by visible action. The tenant, it is
true, had not intended to go to prison. He committed intentionally the felonious
act which in the events which 27 have happened landed him there, and thereby
put it out of his power to assert possession by visible acts after Mar. 9,1946.
He cannot, in these circumstances, we feel, be in a better position than if his
absence and inaction had been voluntary." (emphasis supplied)
22.
In
Achut Pandurang Kulkarni v. Sadashiv Ganesh Phulambrikarm, AIR 1973 Bom. 210,
the learned Single Judge of the Bombay High Court interpreted Section 13(1)(k)
of the Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947 the language
of which is somewhat similar to Section 11(4)(v) of the 1965 Act. The learned Single
Judge referred to order passed by Chagla, C.J. in Civil Revision Application No.1527/1953
decided on July 30, 1954 and observed: "As observed by Chagla, C. J., in
the above case, physical possession by a tenant himself was not necessary.
Physical possession by other members of the family also is not necessary if
there was reasonable cause for their remaining absent from the premises.
23.
The
question is one of fact and degree. If there is evidence on record to show that
the tenant had something more than a vague wish to return and that he had a
real hope coupled with the practicable possibility of its fulfilment within a
reasonable time, it cannot be said that he had no reasonable cause for not
using the premises. In every case it is the duty of the Court to satisfy itself
that the tenant had no reasonable cause. Absence may be sufficiently prolonged or
unintermittent to compel the inference prima facie of a cesser of occupation.
The onus is on the
tenant in such a case to repel the presumption and to establish that his possession
had not ceased or that he had ceased to occupy on account of reasonable cause. In
my judgment, this can be established if the tenant proves notwithstanding the
intention 28 on his part to return after his absence, his helplessness in remaining
absent from the premises. It is true that the tenant should have made proper
attempts to discharge the onus in the present case by producing the orders, if not
before the trial Court, at least before the Appellate Court. That, however, as stated
above, does not permit the Courts to brush aside the requirements of Section 13(1)(k).
It is a matter for not awarding the costs. The Court cannot ignore the nature of
the tenant's services and his liability to be transferred when deciding the
question under Section 13(1)(k).
I do not propose to
lay down that in every case where a Government servant is transferred and he
goes on paying rent in respect of the premises, he had reasonable cause for not
using the premises for the purpose for which they were let. The question will depend
on the facts and circumstances of each case. The tenant must couple and clothe his
inward intention to return, with some formal, outward and visible sign of it,
as for instance by installing some caretaker or representative, be it a
relative or not with the status of a licensee and with the function of
preserving the premises for his own ultimate home-coming. It may also be that the
same result can be secured by leaving on the premises, as a deliberate symbol of
continued occupation, furniture. As stated by Asquith L. J., in Brown v. Brash
and Ambrose, (1948) 2 KB 247, the tenant must prove not only animus possidendi
but a corpus possessionis." (emphasis supplied)
24.
In
Ananthasubramania Iyer v. Sarada Amma 1978 KLT 338, the learned Single Judge of
the Kerala High Court held: "The physical absence of the tenant from the building
for more than six months would raise a presumption that he had ceased to occupy
the building and that he had abandoned it and that it was for the tenant to dislodge
the presumption and establish that he had the intention to continue to occupy
the tenanted premises."
25.
The
word "occupy" appearing in Section 11(4)(v) of the 1965 Act has been
interpreted by the Kerala High Court in large number of cases. In Mathai Antony
v. Abraham (2004) 3 KLT 169, the Division Bench of the High Court referred to
several judgments including the one of this Court in Ram Dass v. Davinder
(supra) and observed: "The word "occupy" occurring in S. 11(4)(v)
has got different meaning in different context. The meaning of the word "occupy"
in the context of S. 11 (4)(v) has to be understood in the light of the object
and purpose of the Rent Control Act in mind. The rent control legislation is
intended to give protection to the tenant, so that there will not be interference
with the user of the tenanted premises during the currency of the tenancy. Landlord
cannot disturb the possession and enjoyment of the tenanted premises.
Legislature has guardedly
used the expression "occupy" in S.1l (4)(v) instead of
"possession". Occupy in certain context indicates mere physical
presence, but in other context actual enjoyment. Occupation includes possession
as its primary element, and also includes "enjoyment". The word
"occupy" sometimes indicates legal possession in the technical sense;
at other times mere physical presence. We have to examine the question whether mere
"physical possession" would satisfy the word "occupy"
within the meaning of S.11 (4)(v) of the Act. In our view mere physical
possession of premises would not satisfy the meaning of "occupation" under
S. 1l (4)(v). The word "possession" means holding of such possession,
animus possidendi, means, the intention to exclude other persons.
The word
"occupy" has to be given a meaning so as to hold that the tenant is actually
using the premises and not mere physical presence or possession. A learned single
Judge of this Court in Abbas v. Sankaran Namboodiri (1993(1) KLT 76) took the
view that the word occupation is used to denote the tenant's actual physical
use of the building either by himself or through his agents or employees. The
Division Bench of this Court of which one of us is a party (Radhakrishnan, J.),
in Rajagopalan v. 30 Gopalan (2004 (1) KLT SNP.54) interpreting S. 11 (4)(v) took
the view that occupation in the context of S.l 1(4) means only physical occupation,
which requires further explanation. Occupation in the context of S. 11(4)(v)
means actual user. If the landlord could establish that in a given case even if
the tenant is in physical possession of the premises, the premises is not being
used, that is a good ground for eviction under S.11(4)(v) of the Act. S.11(4) uses
the words "put the landlord in possession" and not "occupation",
but 11 (4)(v) uses the words "the tenant ceases to occupy". In S. 11 (4)(v)
in the case of landlord the emphasis is on "possession" but in the case
of tenant the emphasis is on "occupation". The word "occupy"
has a distinct meaning so far as the Rent Act is concerned when pertains to
tenant, that is, possession with user."
26.
In
Kurian Thomas v. Sreedharan Menon (2004) 3 KLT 326, the High Court held as
under: "Once landlord could establish the tenant has ceased to occupy the
premises continuously for six months prior to the filing of the petition he is entitled
to get order of eviction under that section. The word "occupation" must
be understood to be not mere physical possession. Tenant should use the building.
The word "occupy" means to cohabit with, to hold or have in possession.
Tenanted premises must be in the state of being enjoyed and occupied. The word "occupy"
used by the statute would show that tenanted premises be put to use. Tenant
cannot be heard to contend that he is having physical possession of the premises
though not in occupation. So far as this case is concerned, we are of the view landlord
has discharged the burden and then the onus has shifted to the tenant and the tenant
could not establish that he has not ceased to occupy the premises and even if there
is cessation that was with reasonable cause."
27.
In
Paulina Joseph v. Idukki District Wholesale Co-operative Consumer Stores Ltd. (supra),
the Division Bench of the High Court referred to the dictionary meaning of the word
"reasonable" and observed: "The question whether the tenant ceases
to occupy the building continuously for six months is primarily a question of
fact to be determined with reference to the facts available in each case. The scope
of "occupation of the building" depends on the purpose for which the
building 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. No straight
jacket formula can be evolved in the matter of proof of cessation of occupation
within the meaning of Section 11(4)(v) of the Act. This intention of the tenant,
though not conclusive as such has also relevance in determining whether there was
actual cessation of occupation within the meaning of Section 11(4)(v). When it is
proved by the landlord that the tenant ceased to occupy the building
continuously for six months, the burden of proving that there was reasonable
cause for such cessation is on the tenant. Reasonable cause is also a question of
fact to be decided in the light of the facts proved in the case. No rigid formula
can be evolved for proof of "reasonable cause". The facts and
circumstances of the case, the particular facts with reference to the business
activities of the tenant, the nature of the business, the magnitude of the business,
the circumstance which led to the cessation of occupation are all relevant in
considering whether there was reasonable cause.
If the cessation of occupation
was due to circumstances beyond the control of the tenant, certainly the Courts
would be inclined to accept the case of the tenant that cessation of occupation
was not without reasonable cause. Financial constraint of the tenant by itself may
not be a sufficient reason to hold that there was reasonable cause. But that is
not completely irrelevant in considering the question. Whether the tenant is an
individual or an organization controlled by the Government or a Co-operative
society may also be relevant in considering the question of reasonable cause.
If there is a plausible explanation to the question why 32 the business was not
run in the premises continuously, it may well be a relevant fact in considering
whether there was reasonable cause for cessation of occupation under Section 11(4)(v),
depending on the facts and circumstances of each case. In the given set of
facts and circumstances, if it can be concluded that an ordinary prudent man would
act in the manner in which the tenant did, it can be safely said that the cessation
of occupation was with reasonable cause." (emphasis supplied)
28.
In
Simon & Ors. v. Rappai (2008) 2 KLJ 488, the High Court interpreted Section
11(4)(v) and held: "As far as the ground available under Section 11(4)(v) is
concerned, it is well settled by various decisions of this Court that if the
landlord has discharged the initial burden it is upto the tenant to lead
evidence in the matter to show that he has been conducting business in the
premises. A learned Single Judge of this Court in the decision report in Abbas
v. Sankaran Namboodiri (1993 (1) KLT 76) while examining the question held that,
the word 'occupation' is used to denote the tenant's actual physical use of the
building either by himself or through his agents or employees and legal possession
is not sufficient.
It was held that,
"however, if a landlord succeeds in proving that his tenant did not occupy
the building almost near the period fixed in Section 11(4)(v) of the Act it may
help the court to presume that there could have been cessation of occupation for
the statutory period. Such background presumption is not anathematic to the law
of evidence". In para.7 it was observed that, "be that as it may, burden
is on the landlord to prove that the tenant ceased to occupy the building for
six months. But it is hard to expect a landlord to prove the precise during which
his tenant ceased to occupy the building. However, if the court is satisfied on
the evidence and/or with the aid of presumptions that the tenant did not occupy
the building for such length of time as would cover the statutory period, then the
burden would shift to the tenant to show that he had reasonable cause for such non-occupation."
Finally it was also observed in para.9 that, 'but, possession must combine 33 with
something more to make it occupation. Legal possession does not by itself constitute
occupation'. These principles can be safely applied to the facts of this
case."
29.
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 appellant's 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
premises.
30.
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, 35payment 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 cause.
31.
The
question whether the prohibition contained in Section 22(1) of the 1985 Act
operates as a bar to the maintainability of a petition filed for eviction of
the tenant was considered and answered in negative in Shree Chamundi Mopeds
Ltd. v. Church of South India Trust Association (1992) 3 SCC 1. In that case,
this Court referred to the provisions of the Karnataka Rent Control Act,
Section 22(1) of the 1985 Act and observed: "11. Similarly in Civil Appeal
No. 2553 of 1991 this question has been raised by the appellant-company to challenge
the order of the learned Single Judge of the Karnataka High Court dated March
15, 1991 dismissing the revision petition under Section 50(1) of Karnataka Rent
Control Act. For the reasons aforementioned Section 22(1) of the Act cannot be
invoked to assail the said order of the High Court on the ground that on the
date of passing of the order of the High Court the matter was pending before
the Appellate Authority.
But in this appeal, the
order allowing the eviction petition was passed by the XII Additional Small Causes
Court on September 30, 1989 and at that time the matter under Sections 15 and 16
was pending before the 36Board. It is, therefore, necessary to consider the second
question about the applicability of Section 22(1) to eviction proceedings
instituted by the landlord against the tenant who happens to be a sick company.
In this regard, it may
be mentioned that the following proceedings only are automatically suspended
under Section 22(1) of the Act:(1) proceedings for winding up of the industrial
company;(2) proceedings for execution, distress or the like against the
properties of the sick industrial company; and(3) proceedings for the
appointment of receiver.12. Eviction proceedings initiated by a landlord against
a tenant company would not fall in categories (1) and (3) referred to above. The
question is whether they fall in category (2). It has been urged by the learned
counsel for the appellant-company that such proceedings fall in category (2)
since they are proceedings against the property of the sick industrial company.
The submission is that the leasehold right of the appellant-company in the
premises leased out to it is property and since the eviction proceedings would
result in the appellant-company being deprived of the said property, the said
proceedings would be covered by category (2).
We are unable to agree.
The second category contemplates proceedings for execution, distress or the
like against any other properties of the industrial company. The words `or the
like' have to be construed with reference to the preceding words, namely, `for execution,
distress' which means that the proceedings which are contemplated in this
category are proceedings whereby recovery of dues is sought to be made by way of
execution, distress or similar proceedings against the property of the company.
Proceedings for eviction instituted by a landlord against a tenant who happens
to be a sick industrial company, cannot, in our opinion, be regarded as falling
in this category. We may, in this context, point out that, as indicated in the
Preamble, the Act has been enacted to make special provisions with a view to securing
the timely detection of sick and potentially sick companies owning industrial
undertakings, the speedy determination by a Board of experts of the preventive,
ameliorative, remedial and other measures which need to be taken with respect to
such companies and the expeditious enforcement of the measures 37 so
determined.
The provision
regarding suspension of legal proceedings contained in Section 22(1) seeks to
advance the object of the Act by ensuring that a proceeding having an effect on
the working or the finances of a sick industrial company shall not be instituted
or continued during the period the matter is under consideration before the
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)
32.
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: 38 "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.
33.
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 39pending 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. Before the Rent Control Court, the appellant had neither
pleaded nor was any evidence 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 40stringency cannot be
construed as reasonable cause within the meaning of Section 11(4)(v).
34.
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.
35.
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 shall not induct any other person in the
premises or transfer its possession to any other person in any capacity
whatsoever.
..........................................J.
[G.S. Singhvi]
...........................................J.
[Asok Kumar Ganguly]
New
Delhi
May
4, 2011.
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