CL : Where order of amalgamation wasn't served on landlord by the transferee company and landlord continued to issue rent receipts in the name of (dissolved) transferor company though he accepted rent from transferee company, no right of tenancy was created/transferred in favour of transferee company. Tenancy is a non-transferable object that could extend to others either by an explicit contract or by statute. In the instant case, there us neither any statute law to support transfer of tenancy on amalgamation nor any agreement executed between tenant (transferor company) and landlord to deal with such an eventuality
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[2013] 40 taxmann.com 99 (Calcutta)
HIGH COURT OF CALCUTTA
Ambalal Sarabhai Enterprises Ltd.
v.
Rajeev Daga
ASHIM KUMAR BANERJEE, ACTG. CJ.
AND DEBANGSU BASAK, J.
AND DEBANGSU BASAK, J.
A.P.D. NO. 271 OF 2013
C.S. NO. 297 OF 1989
C.S. NO. 297 OF 1989
DECEMBER 5, 2013
Shyama Prasad Sarkar, Swarnendu Ghosh, Pushan Kar, Deep Nath Roy Chowdhury and Ms. Tapati Chatterjee for the Appellant. Jishnu Saha, Ms. Sulagna Mukherjee, Ashish Mukherjee and S.S. Kundu for the Respondent.
ORDER
BACKDROP:
Ashim Kumar Banerjee, Actg. CJ. - Short question involved herein as to whether the original tenant being a body corporate, incorporated under the Companies Act, 1956 could still be considered as "tenant" despite having merged with the transferee company by virtue of an Order of Amalgamation.
2. The facts brought in a narrow campus would find Standard Pharmaceuticals Limited, a company incorporated under the provisions of the Companies Act, 1956 becoming a tenant under the erstwhile landlord. In 1983, the Standard Pharmaceuticals Limited stood merged and/or amalgamated with Ambalal Sarabhai Enterprises Limited, the defendant No.1 above named. By virtue of the Order of Amalgamation, Standard Pharmaceuticals Limited stood dissolved and after dissolution, the company lost its existence. The transferee company did not inform the landlord contemporaneously. Since November 1988, the present landlords being the respondents for the first time came to know, the company started describing themselves as a division of Ambalal Sarabhai. Ambalal contended, they paid rents to the landlords whereas landlords would contend, although rent was paid by Ambalal, they did not recognize them as tenant. The landlords continued to issue rent receipts in the name of Standard Pharmaceuticals Limited, the original tenant.
3. In this backdrop, the present landlords being the respondent nos. 1 and 2 issued a notice to quit on Ambalal as well as its sister concern occupying the premises. The tenants being the appellant disputed the allegation of subletting and declined to vacate, that gave rise to the litigation. The learned Judge by the judgment and Order dated July 15, 2013 appearing at page 245-289 of the paper book decreed the suit and asked the defendants to vacate hence, this appeal at the instance of the tenant.
CONTENTIONS:-
4. Mr. Shyama prasad Sarkar learned Senior Counsel appearing for the appellant contended as follows:
| (i) | Learned Judge failed to construe the agreement for tenancy that would include successor and assigns moreover, the sister concerns were also allowed to enjoy the tenancy along with the original tenant. | |
| (ii) | The proposition of law laid down by the Apex Court in the case of M/s. General Radio and Appliances Company Limited and others v.M.A. Khader reported in 1986 Volume-II Supreme Court Cases Page-656 would not be applicable as it was not a case of voluntary transfer. | |
| (ii) | Assuming the original tenant was dissolved by virtue of the Order of Amalgamation, the landlord would not be entitled to get a decree for possession as by conduct of parties creation of fresh tenancy in favour of Ambalal was established. |
CASES CITED:-
5. To support his contention, Mr. Sarkar cited the following decisions:
| (a) | APPLICABILITY OF RATIO: |
| 1. | Delhi Administration v. Manohar Lal reported in 2002 Volume-VII Supreme Court Cases Page-222. | |
| 2. | Sanjay Singh and Another v. U.P. Public Service Commission Allahabad and Another reported in 2007 Volume-III Supreme Court Cases Page-720. | |
| 3. | Dharappa v. Bijapur Coop Milk Producers Societies Union Limited reported in 2007 Volume-IX Supreme Court Cases Page-109. | |
| 4. | Sumtibai and Others v. Para Finance Company & Others reported in 2007 Volume-X Supreme Court Cases Page-82. |
| (b) | INTERPRETATION OF PARTICULAR CLAUSE/DOCUMENT: |
| 1. | M/s. Girdhari Lal & Sons v. Balbir Nath Mathur and others reported in All India Reporter 1986 Supreme Court Page-1499. | |
| 2. | G. Sridharamurthi v. Hindustan Petroleum Corporation Limited and another reported in All India Reporter 1991 Karnataka Page-249. |
| (c) | DEFINITION OF "SUCCESSOR": |
| 1. | Sathyaprema Manjunatha Gowda (Smt) v. Controller of Estate Duty, Karnataka reported in 1997 Volume-X Supreme Court Cases Page-684. |
| (d) | CREATION OF TENANCY BY CONDUCT: |
| 1. | Ram Kumar Das v. Jagdish Chandra Deo reported in All India Reporter 1952 Supreme Court Page-23. | |
| 2. | Sm. Durgesh Nandini Devi v. Aolad Shaikh reported in All India Reporter 1955 Calcutta Page-502. |
Per contra, Mr. Jishnu Saha learned Counsel appearing for the present landlord being the respondent nos. 1 and 2 would strenuously contend, the principle decided by the Apex Court in General Radio (Supra) would be squarely applicable as there could be no distinction on factual scenario. He contended, although the appellant took a defence of common management to get the protection of Clause 11 of the agreement, the same could not be proved as would be apparent from the evidence. Mr. Saha would support the decision of the learned Single Judge. According to him, the consent to sublet must be explicit, mere payment of rent would not create any tenancy.
CASES CITED:-
6. Mr. Saha would rely upon two Apex Court decisions on the subject issue:
| 1. | South Asia Industries Private Limited v. S. Sarup Singh and others reported in All India Reporter 1966 Supreme Court Page-346. | |
| 2. | M/s. Shalimar Tar Products Limited v. H.C. Sharma and Others reported in 1988 Volume-I Supreme Court Cases Page-70. |
7. On the issue of "assignment" Mr. Saha cited the following decisions:
| 1. | Cox & Kings Limited and Another v. Chander Malhotra (Smt) reported in 1997 Volume-II Supreme Court Cases Page-687. | |
| 2. | Singer India Limited v. Chander Mohan Chadha and Others reported in 2004 Volume-VII Supreme Court Cases Page-1. | |
| 3. | Bhagwati Prasad Khaitan & Ors. v. Truner Morrison & Company Limited reported in 2006 Volume-IV Calcutta High Court Notes Page-1. |
CASES DISCUSSED:
8. Let me deal with the cases cited at the bar on topic wise.
APPLICABILITY OF A RATIO:-
9. Mr. Sarkar relied on four Apex Court decisions on the issue, three reported in 2007 Supreme Court Cases and the other one in 2002. In the case ofDelhi Administration v. Monohar Lal (Supra) the Apex Court in paragraph 5 observed, the High Court and all other Courts would be obliged to follow the law declared by the Apex Court, however, it would be the responsibility of the subordinate Court to apply the ratio considering the facts and circumstances involved in them. The Apex Court also observed, the Court must consider the special circumstances noticed, before applying a ratio decided by the Apex Court. In the case of Sanjay Singh (Supra) the Apex Court observed, every judgment of the superior Court would have three segments:
| (i) | Facts and point at issue | |
| (ii) | Reasons | |
| (iii) | Final order |
The reason for the decision or the ratio decendi is not the final order that could be applied. Considering the facts involved in a given case, similar view was expressed in Dharappa (Supra) and Sumtibai (Supra). The Apex Court considered one of its earlier decisions and observed, the ratio of any decision must be understood in the background of the facts of that case.
On a combined reading of the aforesaid decisions the view of the Apex Court so consistently held, would suggest, the precedent could only be applied when facts would tally, any significant difference would make a ratio not applicable.
INTERPRETATION OF DOCUMENT:
10. Mr. Sarkar relied on two decisions, one of the Apex Court and the other of the Karnataka High Court on the issue. In the case of Girdhari Lal(Supra) the Apex Court considered a Clause in the tenancy agreement. The Apex Court observed, "There is no magical form in which the consent is to be given nor any charmed form in which the notice is to be sent. As we said, the essence of the matter is that the consent to the sub-tenancy and the notice of sub-tenancy in respect of the premises must be evidenced by writing signed by the landlord and the tenant or the sub-tenant ." In the case of G. Sridharamurthi (supra) the Division Bench of the Karnataka High Court while dealing with the point in issue observed, "Clause 4(a) of the lease deed only enables the tenant to license or sub-let the demised premises or any part thereof to any local dealer or agent for use for all or any of the purposes mentioned in the lease deed without any consent of the landlord; but not in favour of a Company which is neither a local dealer nor an agent of the original tenant." Considering such Clause the Division Bench held in the scenario, the tenant did not sub-let. In the present case, Clause 11 would permit the appellant to permit its sister concerns also to occupy that would not include a new transferee company, that did not have any relation with the original tenant before the merger.
EFFECT OF THE ORDER OF AMALGAMATION:
11. The decision in the case of General Radio (Supra) would hold the field. In addition Mr. Saha relied on three more decisions, two of the Apex Court and one of this Court. In General Radio, the Apex Court considered Section 14 of the Andhra Pradesh tenancy law that would clearly debar a sub-letting. Similar provision prohibiting sub-letting is also available in most of the State laws including Bombay and Delhi as considered by the Apex Court. The Apex Court held, order of amalgamation was nothing but a voluntary transfer of assets and liabilities by one juristic entity to the other.
Since transfer of tenancy is a voluntary act that would be clearly hit by the prohibitory provision of the tenancy law. In the case of Cox and Kings(Supra) the Apex Court in paragraph 7 considered the ratio decided in General Radio and ultimately came to a finding, the facts involved therein would suggest a voluntary transfer. The Apex Court observed, "There was a clear assignment between the Foreign Company and the Indian Company of the demised premises without any written consent of the respondent as landlord, it is a case of sub-letting within a meaning of section 14(1) (b) of the Act." Similar view was taken in the case of Singer India (Supra) and Sikha Roy Chowdhury (Supra).
CREATION OF FRESH TENANCY-CONSENT MUST BE EXPLICIT:
12. Mr. Sarkar would rely upon two decisions to suggest, the parties by their conduct proved a fresh tenancy whereas Mr. Saha would rely upon two Apex Court decisions to support his contention, the consent must be explicit. We want to deal with these two issues at a time. In the case of Ramkumar Das (Supra) the Apex Court observed, the contract to the contrary, as contemplated under Section 106 of the Transfer of Property Act need not be an express contract, it may be implied. In the case of Durgesh Nandini Devi (supra) the parties intended to create a permanent lease, however, the lease was not executed. The tenant came in possession, started paying rent, hence the tenancy was proved. In the case of Shalimar Tar Products (Supra) the Apex Court observed, to constitute sub-letting there must be parting of the legal possession i.e. possession with the right to include and also right to exclude others. Here also section 14 of the Delhi Tenancy Act was considered.
OUR VIEW:
13. On a combined reading of the principle of law so decided in the precedents referred to above and the statute law relevant for the purpose, our understanding of the law is as follows:
| (i) | Interpretation of a document would depend upon the purpose for which it was executed and how the parties understood the same and acted upon it. | |
| (ii) | When a tenant would claim protection under the tenancy law prevalent at the relevant period, it would have the restrictions imposed in the said law including Section 14 of the West Bengal Tenancy Act, 1956 that would make a tenancy vulnerable in case of transfer of tenancy without the knowledge and consent of the landlord. | |
| (iii) | A body corporate being a tenant would not be entitled to claim immunity in case of amalgamation without the knowledge and consent of the landlord. | |
| (iv) | Mere payment of rent by itself would not create any tenancy in favour of the payee. |
14. In the present scenario we do not find any distinction of the facts involved herein with General Radio (supra).
15. Mr. Sarkar made a frantic effort that, however, could not impress us. Mr. Sarkar tried to interpret the agreement by contending, the landlord by the said agreement permitted Standard Pharmaceuticals to allow its sister concerns to occupy the premises. Moreover, the recital part of it would also include successor and assigns.
16. Clause 5 would impose a restriction on the tenant from subletting any portion without prior consent. However, exception was provided in Clause 11 where the companies under the same management were permitted to occupy. It is an admitted position, Standard Pharmaceuticals Limited stood dissolved long ago that was not in the knowledge of the landlord hence, they continued to issue rent receipts in the name of the original tenant. Ambalal, although paid rent, did not inform about the change. They also did not protest and accepted rent receipts issued in favour of Standard Pharmaceuticals Limited a non-existent Company. In an Order of Amalgamation, the shareholders at large as well as the transferee company in their wisdom would decide to merge one with the other, as a consequence of merger the assets and liabilities of the transferor would automatically vest unto the transferee and the transferor would become a non-existent entity and in course of time would get dissolved. Same is the situation here; once the company stood dissolved the tenancy would automatically perish. The order of amalgamation, although an order in rem, is rendered at the instance of the shareholders of both the companies including the transferor tenant hence, the Order of Amalgamation would not protect the tenancy.
17. It is true, the recital part of the agreement did provide, tenant would include its successors and assigns however, on a close reading of the said agreement, the recital part being contrary to the specific Clause being Clause 5 and 11 would be nugatory when it would come in conflict with Clause 5 and 11.
18. When the law would prevent sub-letting and the parties decided to contract otherwise such contract must be explicit. In the present case, the shareholders of the transferor Company decided to merge with Ambalal. It was their wisdom that would have no bearing on the landlord who was not taken in confidence. Be it assignment, be it transfer, be it sub-letting, the tenancy is a non-transferable object that could only extend to others either by an explicit contract or by a clear statute. In the present case, neither there is any statute law to support transfer of tenancy on amalgamation nor any agreement executed between the landlord and the tenant to deal with such eventuality. Voluntary act of the tenant making its own position vulnerable would have no bearing on the landlord.
19. Mr. Sarkar lastly contended, the parties created a new tenancy by conduct. We fail to reason. Mere payment of rent would not create any tenancy. Apart from payment of rent by Ambalal, we do not get any other evidence in support of the appellant. On the contrary we would find, the Order of Amalgamation was never served upon the landlord. The landlord was not taken in confidence at any point of time hence, such contention would not be tenable in law.
RESULT:-
20. The appeal thus fails and is hereby dismissed. There would be no order as to costs.
Debangsu Basak, J:
I agree.
Regards
Prarthana Jalan
__._,_.___
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