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2003 DIGILAW 716 (KER)

Pankajam v. Radha Nedumgadi

2003-11-20

K.S.RADHAKRISHNAN, PIUS C.KURIAKOSE

body2003
Judgment :- Pius C.Kuriakose, J. The present landlady who purchased the original landlady’s rights during the pendency of the proceedings before the rent control appellate authority and got herself impleaded as the second respondent before that authority is the revision petitioner. We will refer to the parties as the present landlady, the previous landlady and the tenant respectively. The previous landlady applied to the rent control court invoking the grounds under Sections 11(3) and 11(4)(i). That court disallowed the claim for eviction under section 11(3), but ordered eviction under Section 11(4)(i) the ground of subletting. The previous landlady did not prefer any appeal against the dismissal of her application under Section 11(3). In fact she conveyed her title to the present landlady – the revision petitioner. It is conceded before us that the claim under Section 11(3) does not survive for consideration. 2. The allegations in the rent control petition in the context of ground under Section 11(4)(i) were that the tenant is the respondent therein – M/s. Allied Sales Corporation, that the premises are presently in the possession of M/s. Sastha Enterprises, a proprietary concern belonging to one Velayudhan Nair. Since the transfer of the premises by the tenant to Sri. Velayudhan Nair amounts to subletting and since the same has not been terminated in spite of statutory notice issued in that regard, eviction was sought for on the ground under Section 11(4)(i), The tenant denied the allegations and contended that itself is in possession of the premises, that Sri. Velayudhan Nair is only a nominated dealer of the company, that the company, the lessee continues to be in possession of the building, the christening of the shop room as Sastha Enterprises was done by Velayudhan Nair with the approval of the tenant company and that the same will not in any manner amount to a sublease in favour of Sri. Velayudhan Nair and that Sri. Velayudhan Nair’s status in the building is only that of a licensee. 3. The rent control court formulated necessary points in the case and the evidence consisted of Exts. A1 to A78 on the side of the petitioner-landlady, Exts.B1 to B4, Ext.C1 commissioner’s report and oral testimony of P.W.1 and R.W1 respectively on the side of the original previous landlady and the tenant. The rent control court on an landlady and the tenant. The rent control court formulated necessary points in the case and the evidence consisted of Exts. A1 to A78 on the side of the petitioner-landlady, Exts.B1 to B4, Ext.C1 commissioner’s report and oral testimony of P.W.1 and R.W1 respectively on the side of the original previous landlady and the tenant. The rent control court on an landlady and the tenant. The rent control court on an evaluation of the evidence found that the tenant was the respondent in the rent control petition – M/s. Allied Sales Corporation, successor company of the original tenant M/s. Usha Sales Private Limited and that the person presently in possession of the schedule building was one Velayudhan Nair, who is the owner of M/s. Sastha Enterprises – the business presently carried on in the schedule building. That court found that the respondent-company and M/s. Sastha Enterprises are independent entitities and that the contention that Velayudhan Nair is not a transferee of the building, but is only a licensee under the tenant is not sustainable. Noticing that the document of lease under which the tenant was entrusted with the building does not authorize subleases, that court found that the arrangement between the tenant and Sri. Velayudhan Nair is clearly one of sublease and since the same is without the landlady’s consent is objectionable and granted eviction. 4. In appeal filed by the tenant, the appellate authority relied mainly on Ext.B2 dealership agreement executed between M/s. Allied Sales Corporation, the tenant and Sri. Velayudhan Nair, proprietor of M/s. Sastha Enterprises and held that the said agreement “makes it crystal clear that the tenant is having possession over the schedule building and that the alleged sublease is only in permissive occupation”. Taking the view that mere occupation of the leased premises by another person will not constitute sublease and what was required was transfer of legal possession, the appellate authority relied again on Ext.B2 to hold that there has been no transfer of legal possession in this case. The appellate authority also relied on the circumstance that there has been long silence over a period of 13 years on the part of the landlady in initiating proceedings on the ground of subletting as a circumstance supporting the tenant’s version. Accordingly, the appellate authority set aside the order of eviction passed under Section 11(4)(i) and dismissed the rent control petition. 5. Heard Sri. Accordingly, the appellate authority set aside the order of eviction passed under Section 11(4)(i) and dismissed the rent control petition. 5. Heard Sri. V. Chidambaresh, learned counsel for the revision petitioner, present landlady and Sri. A.V. Thomas, learned counsel for the second respondent-tenant. 6. Sri. Chidambaresh submitted that M/s. Sastha Enterprises and M/s. Allied Sales Corporation are entirely different legal entitities. M/s. Allied Sales Corporation the tenant being a company and M/s. Sastha Enterprises being a proprietary concern belonging to Sri. Velayudhan Nair. Mr. Chidambaresh invited our attention to the statements of R.W.1, the tenant’s witness in his testimony that the entire stock in trade presently available in Sastha Enterprises belong to Mr. Velayudhan Nair only. Mr. Chidambaresh submitted that Mr. Velayudhan Nair is presently having absolute physical control over the schedule building and that under the Rent Control Act, what has been made a ground for eviction under Section 11(4)(i) is not subletting alone, but also transfer of possession without the landlord’s consent. According to the learned counsel, the tenant’s claim that he sells only products of the tenant-company has not been established by proper evidence. Counsel also submitted that since it had become clear that somebody other than the tenant is in possession, it was the tenant’s obligation to establish as to what was the exact jural relationship between the tenant and such person in possession. According to the counsel, Ext.B2 dealership agreement was the only item on the basis of which the appellate authority interfered with the findings of the rent control in the context of Section 11(4)(i) and the interference was not justified. Inviting our attention to the decision of the Supreme Court in M/s. Bajaj Auto Ltd. V. Behari Lal Kohli (AIR 1989 SC 1806) the counsel submitted that the observations of the Supreme Court in paragraph 6 of that judgment are very much relevant in the present case also. Counsel also referred to decisions such as M/s. General Radio & Appliances Co. Ltd v. M.A.Khader (AIR 1986 SC 1218), Bhagwan Dass v. Rajdev Singh (AIR 1970 SC 986) and Malabar Regional Co-operative M.P.U. Ltd. v. Abdullakoya Haji (1997(1) KLT 331) in order to fortify his submissions. Above all, counsel reminded us of our own decision in Vialaparambil Gopi v. Chundamveetil Pazhaya Ottayil Mohammed Basheer (2003(3) KHCACJ 670 (Ker)). 7. Replying to the submissions of Mr. Above all, counsel reminded us of our own decision in Vialaparambil Gopi v. Chundamveetil Pazhaya Ottayil Mohammed Basheer (2003(3) KHCACJ 670 (Ker)). 7. Replying to the submissions of Mr. Chidambaresh, Sri.A.V. Thomas, Advocate, submitted that it has always been the practice among big companies to have their sales promoted in places where they do not have branches by giving dealership to local merchants. Whenever, dealers are nominated in local areas, the same is done through agreements in the nature of Ext.B2 in this case and to construe such agreement as creating subleases will result in virtual deprivation of the company’s rights guaranteed under Article 19(1)(g) of the Constitution of India. Counsel submitted that our decision reported in 2003 (3) KHCACJ 670 (supra) which virtually takes the view that mere transfer of possession of the tenanted building by the tenant will constitute a ground for eviction under Section 11(4)(i) requires reconsideration since according to the learned counsel, ours may be the only decision which takes such a view and almost every other decision pertaining to the ground of subletting, insists on the establishment of landlord-tenant relationship between the landlord and the subtenant. In the opinion of the learned counsel, our decision in 2003 (3) KHCACJ 670 (supra) will put an end to the time honoured lawful practice of the tenants getting business conducted through licensees. Counsel also submitted that Ext.B2 agreement was executed some 13 years prior to the rent control proceedings and the fact that the landlady who lives not far away from the schedule building has not taken exception so far to the conduct of business by Sri. Velayudhan Nair from the Schedule premises would strongly indicate that the landlady also knew that the arrangement] between Mr. Velayudhan Nair and the company was an innocuous one and not an objectionable sublease or transfer. 8. In view of the rival submissions made at the Bar as well as the divergence between the findings entered by the rent control court and the appellate authority, we have made a thorough scanning of the pleadings and the evidence in this case. We find that the following facts irrefutably emerge in this case: (1) The tenant of the schedule building is M/s. Allied Sales Corporation, the respondent in the R.C.P. as well as in this revision. It is a company. We find that the following facts irrefutably emerge in this case: (1) The tenant of the schedule building is M/s. Allied Sales Corporation, the respondent in the R.C.P. as well as in this revision. It is a company. (2) On the terms of the rental arrangement between the landlady and tenant, the tenant is not entitled to sublet the premises or to part with possession of the premises without the landlady’s consent. A person by name Velayudhan Nair is currently having physical control over the schedule building. Velayudhan Nair is the proprietor of M/s. Sastha Enterprises. M/s. Sastha Enterprises deal mainly with the products of M/s. Allied Sales Corporation. (3) The business of M/s. Sastha Enterprises belong absolutely to Velayudhan Nair and M/s. Allied Sales Corporation does not have ownership over the stock in trade of M/s. Sastha Enterprises. (4) Velayudhan Nair is entitled to take all the profits that are derived from M/s. Sastha Enterprises and he is also bound to suffer all the loss incurred by M/s. Sastha Enterprises. (5) The contention of the tenant is that the status of Velayudhan Nair over the building is that of a licensee and that he will vacate the building on a word to that effect by the tenant. There is no evidence other than Ext.B2 agreement and the oral evidence of R.W.1 to substantiate this contention. The tenant has not been ready to examine Velayudhan Nair. The rent control appellate authority has relied almost solely on Ext.B2 agreement to set aside the findings of the rent control court. There is absolutely no documentary basis for the apparent view of the rent control appellate authority that the landlady has tacitly and impliedly accepted Ext.B2. (6) Even though the prominent allegation of the landlady in the rent control petition is that the tenant had sublet the premises unauthorisedly to Velayudhan Nair, what the landlady has been able to substantiate is that the tenant has transferred possession of the leasehold premises without the landlady’s consent to Velayudhan Nair. 9. The question which arise before us is whether the interference by the appellate court with the eviction order passed by the rent control court relying almost solely on Ext.B2 is justified in the light of the aspects which emerge as above. Facts of M/s. Bajaj Auto Limited (supra) have certain similarities with those obtaining in this case. 9. The question which arise before us is whether the interference by the appellate court with the eviction order passed by the rent control court relying almost solely on Ext.B2 is justified in the light of the aspects which emerge as above. Facts of M/s. Bajaj Auto Limited (supra) have certain similarities with those obtaining in this case. That was a case where eviction of an alleged sublease/transferee was sought under Section 14(1) Proviso (b) of the Delhi Rent Control Act which we extract hereunder: “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”. We had occasion to decide in Vialaparambil Gopi (supra) that unauthorised transfer of the leasehold premises by the lessee even if such transfer does not amount to sublet proper will constitute a ground for eviction under Section 11(4)(i) of the Kerala Rent Control Act. In M/s. Bajaj Auto Ltd. (supra) also the tenant-company had given dealership/distributorship to another establishment by name M/s. United Automobiles Ltd. to deal with the products of M/s. Bajaj Auto Ltd. Physical possession was found to be with M/s. United Automobiles Ltd. The Supreme Court confirmed the order of eviction noticing that M/s. Bajaj Auto Ltd. and M/s. United Automobiles Ltd. are two distinct legal entities. More importantly, the Supreme Court found that the relationship between a principal and the dealer or distributor who get only commission for the principal’s good sold cannot be equated to that of licensor and licensee or principal and agent enabling the parties to escape from liability to eviction on the ground of subletting or transfer of possession. The facts of the present case seem to be stronger from the landlady’s point of view since the evidence is that the entire stock in trade available in the premises belong to Velayudhan Nair. Physical control of the premises in this case is obviously with Velayudhan Nair. When the ratio of the decision in M/s. Bajaj Auto Ltd. is applied, it will be difficult to accept the tenant’s defence that the status of Velayudhan Nair who is “only the nominated dealer” of the tenant is that of a licensee. Delaership by itself does not confer status of licensee upon Velayudhan Nair. When the ratio of the decision in M/s. Bajaj Auto Ltd. is applied, it will be difficult to accept the tenant’s defence that the status of Velayudhan Nair who is “only the nominated dealer” of the tenant is that of a licensee. Delaership by itself does not confer status of licensee upon Velayudhan Nair. The burden to establish that the status of Velayudhan Nair is that of a licensee was certainly on the tenant. The self serving provisions contained in Ext.B2 agreement alone in our view will not suffice to prove that the status of Velayudhan Nair is that of a licensee only. One of the classic tests to determine as to what is the status of a person in physical control – whether licensee or lessee – is the test of exclusive possession. We are of the view that it has been established in this case that Velayudhan Nair is in absolute possession though Sri.A.V. Thomas did raise an argument before us that one key of the building is retained by the tenant in its office here at Ernakulam about 150 kilometres away from the schedule building. R.W.1 conceded that the entire machinery, equipments and other articles found in the building belong to Velayudhan Nair and the tenant-company has absolutely no share in the profits which Velayudhan Nair may be deriving out of the business. A separate name board of Sastha Enterprises is hanging in front of the schedule building. 10. There is controversy between the parties as to whether Velayudhan Nair is selling products of other companies also. The rent control court took the view that the non-production of the stock register by the tenant company will justify drawal of adverse inference against the tenant-company in this context. The appellate authority however held that the aspect is a negative one and the tenant is not obliged to prove a negative aspect. According to the appellate authority, if the version of the landlady’s husband that he purchased products of other companies from the schedule premises is true, the same will be borne out by bills and non-production of such bills should invite adverse inferences against the landlady. We are of the view that burden of proof is not of much importance regarding this aspect of the case since both sides have adduced evidence. We are of the view that burden of proof is not of much importance regarding this aspect of the case since both sides have adduced evidence. After all, it is especially within the knowledge of the trader as to which all items are sold in his shop. R.W.1 does not dispute that the shop maintains a stock register and that the said register will reveal the details of the stock which was and is actually available. Admittedly, nobody claims that M/s. Sastha Enterprises is an exclusive shop for Usha brand products – the products of M/s. Allied Sales Corporation and we feel that probabilities are more that Velayudhan Nair sells products of other companies also atleast in a small way. Velayudhan Nair is the most competent person to swear as to his readiness and willingness to vacate the moment a command in that regard is given to him by the tenant. Velayudhan Nair admittedly is not an employee of the tenant. There are two worken working in the shop and they are admittedly employees of Velayudhan Nair. The tenant-company through R.W.1 also admitted that the company has absolutely nothing to do with the tax liabilities pertaining to sales in this shop and also to the income from this shop’s business. The heavy reliance placed by the appellate authority on Ext.B2 was ignoring the crucial position that Ext.B2 agreement binds only the parties to it and not the landlady. 11. Though not very specifically the appellate authority finds that the arrangement between Velayudhan Nair and the tenant-company has been approved of by the landlady through her long silence over a period of 13 years. We find that acquiescence by silence is not a plea raised by the tenant through its statement of objections. In order that acquiescence shall operate as a bar to the landlord’s eligibility for an eviction order under Section 11(4)(i), the tenant should be able to show that there has been a conscious relinquishment by the landlord of his right to evict the tenant on the ground under Section 11(4)(i). The tenant’s plea in this case is clearly one that Velayudhan Nair is licensee. The tenant has not succeeded in substantiating the plea. 12. The tenant’s plea in this case is clearly one that Velayudhan Nair is licensee. The tenant has not succeeded in substantiating the plea. 12. Before we conclude, we have to consider submission of Sri.A.V. Thomas that our decision Vialaparambil Gopi’s case (2003(3) KHCACJ 670(Ker)(supra) requires reconsideration since that decision is likely to upon the practice amongst manufacturing companies to their sales promoted through nominated dealers. Counsel submitted that our decision in Vialaparambil Gopi (Supra) practically does away with the practice of licensing out of business premises, a practice which had been in vogue all along. What we decided in Vialaparambil Gopi’s case was only that a transfer of possession of the leasehold premises or any portion thereof by the tenant even if such transfer does not amount to subletting proper shall constitute a ground for eviction under Section 11(4)(i) of the Kerala Rent Control Act. The nature of the possession which a licensee can have will be purely permissive. Such possession will not be juridical possession. It is for the tenant to establish in cases where physical possession is seen transferred as to what is the nature of possession and jural status of the person in possession over the premises. The authorities under the rent control law shall enquire into the controversy regarding the jural status and nature of possession on the basis of the evidence on record taking into account all attendant circumstances as well as the broad probabilities of the matter. It is needless to mention that if the enquiry reveals that the arrangement between the tenant and the alleged subtenant or transferee is really a licence only, order of eviction will not be passed. But if the enquiry reveals that the arrangement though styled as licence is one intended as a camouflage for arrangement of sublease or transfer of possession, order of eviction will follow. The result of the above discussion is that the revision succeeds. We set aside the judgment of the rent control appellate authority and restore that of the rent control court. The respondents shall put the present landlady in possession of the petition schedule building on or before 31.3.2004. Revision allowed as above. Parties will suffer their costs.