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2021 DIGILAW 608 (KAR)

Indian Oil Corporation Limited v. John Lobo

2021-05-25

NATARAJ RANGASWAMY

body2021
JUDGMENT : Nataraj Rangaswamy, J. 1. This appeal is filed by the defendant No. 2 challenging the concurrent finding of the Trial Court in O.S. No. 783/2011 which was confirmed by the First Appellate Court in R.A. No. 105/2017. 2. The parties shall henceforth be referred to as they were arrayed before the Trial Court. 3. The plaintiffs are the owners of the suit property which was leased out to defendant No. 1 in terms of a lease deed dated 18.10.2004 which was duly registered. In terms of the said lease, the defendant No. 1 was liable to pay a monthly rent of Rs. 10,000/-. The defendant No. 1 had entered into a sub-lease with M/s. IBP Company Limited (for short, 'IBP Company') in terms of a sub-lease dated 12.11.2004 from whom the defendant No. 1 was collecting huge rental and was also earning sufficient income by way of commission as a dealer. The said IBP company was later merged with the defendant No. 2 and the defendant No. 2 took over the assets of the IBP Company including the leasehold rights in respect of the suit property. The plaintiffs claimed that they were businessmen who were mostly out of India on business tour. Therefore, they could not follow up the recovery of arrears of rent from defendant No. 1. They claimed that they returned to India in 2010 and found that defendant No. 1 had defaulted in depositing rent as per the lease agreement dated 18.10.2004. At the request of the plaintiffs, the defendant No. 1 paid a sum of Rs. 1,50,000/- towards part of the arrears which was adjusted towards rent from October 2004 to December 2005. However, the defendant No. 1 fell in arrears from January 2006. Therefore, the plaintiffs issued a notice of termination of tenancy on 26.07.2011 which was received by the defendant No. 1. The defendant No. 2 addressed a notice dated 26.10.2011 to the plaintiffs calling upon them to recognize the defendant No. 2 as their tenant. Therefore, the plaintiffs sought for ejectment of the defendants and to recover mesne profits at the rate of Rs. 5,000/- per day. The suit property is described as 33.75 cents of commercial converted land in Sy. No. 64/3B1(P) situate at Marakada village, Mangaluru Taluk. 4. The defendant No. 1 did not contest the suit. However, the defendant No. 2 contested the suit. 5,000/- per day. The suit property is described as 33.75 cents of commercial converted land in Sy. No. 64/3B1(P) situate at Marakada village, Mangaluru Taluk. 4. The defendant No. 1 did not contest the suit. However, the defendant No. 2 contested the suit. The defendant No. 2 admitted that the plaintiffs were the owners of the suit property. It alleged that the plaintiffs were hand in glove with the defendant No. 1 who was none other than their nephew and had colluded in filing the present suit. It alleged that the plaintiff No. 1 with an inclination to obtain a dealership of the defendant No. 2 contacted it. Since the plaintiff No. 1 lacked the prescribed educational qualification, he put forth the application of the defendant No. 1. It also alleged that a nominal lease deed dated 18.10.2004 was executed by the plaintiffs in favour of defendant No. 1. It alleged that neither the plaintiffs nor the defendant No. 1 had any real intention to lease out the suit property and get the rent as they were only interested in running a petrol outlet in the suit premises. It alleged that the defendant No. 1 could not muster good business though the suit property was situate on the highway leading to the international and domestic airport. It also alleged that the plaintiffs not persuading the defendant No. 1 to pay the arrears of rent was clearly designed to put the defendant No. 2 at inconvenience. It further alleged that the allegation that defendant No. 1 had defaulted in payment of the arrears of rent was a falsehood. It contended that it had taken over the leasehold rights from IBP Company and that it was paying monthly rent of Rs. 5,000/- from the date of inception of tenancy. It contended that it was regular in the matter of payment of rent to defendant No. 1 and that there was no violation of the terms of the sub-lease. It alleged that the plaintiffs being privy to a specific clause in the lease deed dated 18.10.2004 enabling the defendant No. 1 to sub-lease the suit property in favour of IBP Company, were bound by the said sub-lease. The defendant No. 2 being the successor of the IBP Company had stepped into the shoes of IBP Company. It alleged that the plaintiffs being privy to a specific clause in the lease deed dated 18.10.2004 enabling the defendant No. 1 to sub-lease the suit property in favour of IBP Company, were bound by the said sub-lease. The defendant No. 2 being the successor of the IBP Company had stepped into the shoes of IBP Company. Therefore, it contended that when there was no violation of the lease deed, the period of lease which was in force for 25 years from 12.10.2004 could not be terminated. In so far as the quantum of mesne profits is concerned, it denied the contention of the plaintiffs that the commercial rate of rent was Rs. 5,000/- per day. The defendant No. 2 specifically alleged that the plaintiffs and defendant No. 1 had colluded to cheat the defendant No. 2. 5. Based on these rival contentions, the Trial Court framed the following issues: 1) Whether the plaintiffs are entitled for the possession of the suit 'A' schedule property from the defendants? 2) Whether the plaintiffs are entitled for mesne profits at the rate of Rs. 5,000/- per day from the defendants? 3) Whether the plaintiffs are entitled for the relief as prayed in the plaint? 4) What order or decree? 6. The plaintiff No. 1 was examined as PW. 1 and he marked documents as Exs. P1 to P10 while an official from defendant No. 2 was examined as DW. 1 and he marked documents as Exs. D1 to D5. 7. Based on the oral and documentary evidence, the Trial Court held that there was no dispute regarding the ownership of the suit property by the plaintiffs. There was also no dispute regarding the execution of the lease deed by the plaintiffs in favour of defendant No. 1. There was also no dispute that the defendant No. 1 was authorized to sub-lease the suit premises to any third party. It was also not in dispute that the defendant No. 1 as a lessee had sub-let the suit premises to IBP Company for the purpose of establishing a petrol and diesel out let. There is also no dispute that IBP Company was taken over by the defendant No. 2. Ex. P10 disclosed that the defendant No. 2 was aware that the defendant No. 1 did not pay the rent to the landlord as agreed upon from 01.04.2009. In terms of Ex. There is also no dispute that IBP Company was taken over by the defendant No. 2. Ex. P10 disclosed that the defendant No. 2 was aware that the defendant No. 1 did not pay the rent to the landlord as agreed upon from 01.04.2009. In terms of Ex. P5, the defendant No. 2 had stated that it was ready to pay the arrears of rent. The Trial Court noticed clause No. 7 in the lease deed dated 18.10.2004 which provided that in the event of default of payment of rent, the plaintiffs would be entitled to terminate the agreement with a prior notice of 30 days. The Trial Court held that defendant No. 1 had admitted that he fell in arrears of rent which compelled the plaintiffs to terminate the tenancy. The Trial Court rejected the contention of defendant No. 2 that being a sub-lessee, it was entitled to a notice of termination of sub-lease by placing reliance on the judgment in the case of Burmah Shell Oil Distributing vs. Khaja Midhat Noor [ AIR 1988 SC 1470 ], the Trial court held that defendant No. 2 being the sub-lessee cannot feign ignorance of the clause which enabled the plaintiff to terminate the lease for nonpayment of rent. Therefore, it held that defendant No. 2 cannot claim that it had no notice of termination of the lease. The Trial Court held that defendant No. 2 having addressed the notice dated 26.10.2011 (Ex. P5), had acknowledged that it had notice of the fact that defendant No. 1 had failed to pay the rent. In view of the same, the Trial Court decreed the suit and directed the defendants to vacate and hand over the vacant possession of the suit premises to the plaintiffs and also pay mesne profits at the rate of Rs. 10,000/- per month from November 2011 till vacating the suit premises. 8. Being aggrieved by the aforesaid Judgment and Decree of the Trial Court, the defendant No. 2 filed R.A. No. 105/2017. The First Appellate court secured the records of the trial court, heard the learned counsel for the parties and framed the following points for consideration: 1) Whether the Respondents No. 1 and 2 (Plaintiffs No. 1 and 2) prove the relationship of Landlord and Tenant as contended in the plaint? The First Appellate court secured the records of the trial court, heard the learned counsel for the parties and framed the following points for consideration: 1) Whether the Respondents No. 1 and 2 (Plaintiffs No. 1 and 2) prove the relationship of Landlord and Tenant as contended in the plaint? 2) Whether the Respondents No. 1 and 2 (Plaintiffs No. 1 and 2) prove that they terminated the tenancy in accordance with law? 3) Whether the levy of mesne profits by the Learned Trial Court would be justified in the facts and circumstances of the case? 4) Whether the Appellant (Defendant No. 2) is able to establish collusion between Respondents No. 1 and 2 and the Respondent No. 3 to its detriment? 5) Whether the Appellant (Defendant No. 2) is justified in setting up the plea of defence under Section 115 of Transfer of Property Act and if justified whether the Appellant (Defendant No. 2) is entitle to succeed in such defence? 6) Whether the Appellant (Defendant No. 2) proves that, the finding recorded by the learned Trial Court is contrary to law and facts and it needs interference? 7) What order or Decree? 9. The First Appellate Court held that the defendant No. 2 being a sub-lessee had notice of the defendant No. 1 falling in arrears of rent and therefore the defendant No. 2 could not claim that it was entitled to a notice of termination of the tenancy. The First Appellate Court after considering the oral and documentary evidence, held that the defendant No. 1 had failed to pay the monthly rent due as per the lease agreement dated 18.10.2004 and that the notice of termination of tenancy to defendant No. 1 resulted in termination of not only the lease but also sub-lease in favour of defendant No. 2 and hence, dismissed the appeal. 10. Being aggrieved by the aforesaid Judgments and Decrees of both the Courts, the defendants have filed this Regular Second Appeal. 11. In this appeal, plaintiff Nos. 1 and 2/respondent Nos. 1 and 2 have entered caveat through counsel. Defendant No. 1/respondent No. 3 though served with notice, has remained unrepresented. Records of the Trial Court and the First Appellate Court were secured. 12. 11. In this appeal, plaintiff Nos. 1 and 2/respondent Nos. 1 and 2 have entered caveat through counsel. Defendant No. 1/respondent No. 3 though served with notice, has remained unrepresented. Records of the Trial Court and the First Appellate Court were secured. 12. Learned counsel for the defendant No. 2/appellant submitted that this Court had earlier in RSA No. 301/2019, remanded the case to the First Appellate Court to ascertain the question of collusion between the plaintiffs and defendant No. 1 and if established whether the plaintiffs could annul the sub-lease in favour of the defendant No. 2. The learned counsel for defendant No. 2 contended that though this Court had directed the First Appellate Court to rehear the appeal, yet the First Appellate Court had not given any finding on the question of collusion between the plaintiffs and defendant No. 1 resulting in termination of the lease agreement and consequently the sub-lease between the defendant No. 1 and defendant No. 2. 13. Per contra, the learned counsel for plaintiffs/respondent Nos. 1 and 2 contended that the First Appellate Court after remand had framed a point for consideration, namely, "Whether the appellant (defendant No. 2) is able to establish collusion between respondent Nos. 1 and 2 and respondent No. 3 to its detriment?" He brought to the notice of this Court the findings recorded on the said point for consideration wherein the First Appellate Court held that DW. 1 specifically deposed that there were no documents to prove that the defendant No. 1 was the nephew of the plaintiffs. It also noticed the evidence of PW. 1 that defendant No. 1 was not related to him. It also noticed that a question posed to PW. 1 about the collusion between plaintiffs and defendant No. 1 was denied. The First Appellate Court after considering the law laid down by the Apex Court in Rup Chand Gupta vs. Raghuvanshi Private Limited and Another, AIR 1964 SC 1889 ] held that a mere fact that the defendants did not defend the suit would not necessarily prove collusion. Therefore, the First Appellate Court held that there was nothing to establish that the defendant No. 1 colluded with the plaintiffs to eject defendant No. 2 from the suit property. Therefore, the First Appellate Court held that there was nothing to establish that the defendant No. 1 colluded with the plaintiffs to eject defendant No. 2 from the suit property. The First Appellate Court considered point No. 5 and held that the defendant No. 2 is not justified in setting up the defence under Section 115 of the Transfer of Property Act, 1882 and thus, dismissed the appeal and confirmed the Judgment and Decree of the Trial Court. 14. Learned counsel for the plaintiffs therefore contended that the First Appellate Court had considered the direction issued by this Court in R.S.A. No. 301/2019. 15. I have given my anxious consideration to the arguments canvassed by the learned counsel for the defendant No. 1/appellant and the plaintiffs/respondent Nos. 1 and 2. As rightly contended by the learned counsel for the plaintiffs, the First Appellate Court after remand of the case in R.S.A. No. 301/2019 had considered the question of collusion between the plaintiffs and defendant No. 1. Though, PW. 1 in his deposition claimed that the defendant No. 1 was not related to him, the defendant No. 2 did not establish that the defendant No. 1 was the nephew of the plaintiff No. 1. Except claiming that the defendant No. 1 had not contested the suit and that the plaintiffs had deliberately allowed the defendant No. 1 to fall in arrears of rent, the defendant No. 2 did not demonstrate any credible ground to establish the collusion between the plaintiffs and the defendant No. 1. In view of the fact that a lease deed was executed between the plaintiffs and the defendant No. 1 which enabled the plaintiffs to terminate the lease for non-payment of rent and since the defendant No. 1 had fallen in arrears of rent, the lease stood terminated on the issuance of a notice dated 26.07.2011. Since the sub-lease is always coterminous with a lease, termination of the lease deed dated 18.10.2004 automatically resulted in termination of the sub-lease agreement in favour of the defendant No. 2/appellant. The defendant No. 2 has not made any attempt to pay the arrears of rent to the plaintiffs but had merely issued a notice calling upon the plaintiffs to treat it as a tenant and that it would henceforth pay the rent to the plaintiffs. The defendant No. 2 has not made any attempt to pay the arrears of rent to the plaintiffs but had merely issued a notice calling upon the plaintiffs to treat it as a tenant and that it would henceforth pay the rent to the plaintiffs. Consequently, the defendant No. 2 is not entitled to any relief against forfeiture of the tenancy for non-payment of arrears of rent. Since the plaintiffs have passed a notice of termination upon the defendant No. 1 and as the same was within the knowledge of the defendant No. 2, both of them are liable in law to quit and deliver vacant possession of the suit property to the plaintiffs. This is precisely what the Trial Court and the First Appellate Court have done. Consequently, no interference is warranted with the well reasoned Judgments of both the Courts. 16. As no substantial question of law arises for consideration in this appeal, the same is dismissed. Consequently, the pending application would stand rejected.