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Atlas Trading Co. Vs. Official Assignee of Bombay and ors. - Court Judgment

LegalCrystal Citation
SubjectTenancy;Civil
CourtMumbai High Court
Decided On
Case NumberAppeal No. 177 of 1979 in Insolvency Nos. 36, 86, 114, 122 and 123 of 1974
Judge
Reported inAIR1983Bom122; 1983MhLJ740
ActsPresidency Towns Insolvency Act, 1909 - Sections 2, 17, 52 and 62; Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 - Sections 15(1)
AppellantAtlas Trading Co.
RespondentOfficial Assignee of Bombay and ors.
Appellant AdvocateN.R.D. Romer and;A.V. Dalvi, Advs.
Respondent AdvocateJ. Makhija, Adv.
Excerpt:
.....against 'x' who were tenant of said property - appellant contended that property belonged to it as tenancy rights of same was transferred to it by landlord - evidence indicate to appellant does not have any locus standi in these proceedings - rights of appellant not adversely affected - proceedings initiated by official assignee upheld. - indian penal code, 1860 [c.a. no. 45/1860].sections 124-a, 153-a, 153-b, 292, 293 & 295a; [f.i. rebello, smt v.k. tahilramani & a.s. oka, jj] declaration as to forfeiture of book held, the power can be exercised only if the government forms opinion that said publication contains matter which is an offence under either of sections 124-a, 153-a, 153-b, 292, 293, 295a of i.p.c., - , together with goodwill and tenancy rights of the business..........shah as official assignee going concern with furniture, fixtures, etc., together with goodwill and tenancy rights of the business premises, which are the said premises, as well as another room no. 24 with which we are not concerned in this appeal. an order of attachment was also levied by the sheriff of bombay in respect of the suit premises pursuant to the order of the bombay city civil court in suit no. 9512 of 1973, which was filed by the two attaching creditors. mr. dhotiwala and mrs. dhotiwala. the official assignee had also sought an order directing the withdrawal of the said attachment. the claim of ashok vadilal shah was that the tenancy or the suit premises was transferred in his favour by the landlord with the consent of vadilal on 31st march, 1973 and the official assignee had.....
Judgment:

Chandurkar, J.

1. The appellant company is a sole proprietary concern of one Ashok Vadilal Shah who clams to be a tenant to room No. 23B, Lalsing Mansing Building at Lohar Chawl, Bombay (hereinafter referred to as the 'suit premises'). Vadilal Shah and his another son Ajitlal Shah were adjudicated insolvents by an order dated 21st January, 1975. An appeal was filed against the order of adjudication by both the insolvents. During the pendency of the appeal, Vadilal Shah died on 8th July, 1975. On 9th March 1978, Ajitlal Vadilal Shah withdrew the appeal and the appeal was dismissed for want for prosecution. The present proceeding arose Assignee for direction seeking an order for sale of the insolvent business known as Messrs. Vadilal R. Shah as Official Assignee going concern with furniture, fixtures, etc., together with goodwill and tenancy rights of the business premises, which are the said premises, as well as another room No. 24 with which we are not concerned in this appeal. An order of attachment was also levied by the Sheriff of Bombay in respect of the suit premises pursuant to the order of the Bombay City Civil Court in Suit No. 9512 of 1973, which was filed by the two attaching creditors. Mr. Dhotiwala and Mrs. Dhotiwala. The Official Assignee had also sought an order directing the withdrawal of the said attachment. The claim of Ashok Vadilal Shah was that the tenancy or the suit premises was transferred in his favour by the landlord with the consent of Vadilal on 31st march, 1973 and the Official Assignee had sought an order for setting aside the alleged transfer.

2. The proceeding before the landed Single Judge were contested only by Ashok Vadilal, though the report of the Official Assignee was served on the owner as well as on the petitioner creditors and Ajit Vadilal Shah. It is not in dispute that by Official Assignee notice dated 16th December, 1970. the tenancy in respect of the suit premises was terminated with effect from the end of the tenancy month of January. 1971. It was, however Official Assignee matter of dispute as to whether the tenancy was individually held by Vadilal personally or by the partnership firm of Messrs. Vadilal Rs. Shah. The landlord had also filed Official Assignee suit for ejectment, being suit No. 1014/5750 of 1971 in the Court of Small Causes at Bombay. According to the appellant, during the pendency of this suit, deceased Vadilal had given his consent to the landlord to make the appellant company as his tenant and the landlord had conferred Official Assignee direct tenancy upon the appellant company with effect from 1st April, 1975. It may be pointed out at this stage that while before the Official Assignee the surviving partner of Messrs. Vadilal R. Shah, namely, the insolvent Ajitlal Vadilal Shah had made as statement that on 31st March 1973. the partnership business of Messrs. Vadilal R. Shah had transferred the partnership business in favour of the appeal company along with the tenancy rights, goodwill, fixtures, furniture, etc. for consideration of Rs. 5,000/- in the proceeding before the learned single Judge, Official Assignee writing alleged to have been given by deceased Vadilal the ejectment suit was produced, by which Vadilal purported to given his consent to the landlord to transfer the tenancy in favour of the appellant company, who, it is alleged, was already in occupation of the suit premises on leave and licence basis since 1972. On the basis of this document, the main point which was argued before the learned single Judge was that Vadilal Shah was Official Assignee statutory tenant on the date of the passing of the order of adjudication and hence, no tenancy right could passed to the Official Assignee and reliance was passed on as decision of this courting In respondent Pergrino Rodrigues : AIR1945Bom173 . In this decision, it was laid down that the statutory tenancy to which an insolvent becomes entitled under the Bombay Rent Restriction Act, 1939, is not his property within the meaning of Section 62 of the Presidency-towns Insolvency Act, 1909. and does not vest in the Official Assignee by the adjudication order.

3. The learned single Judge at the outset directed his attention to the question as to whether there was in fact any surrender of the suit premises by the deceased insolvent Vadilal Shah and whether there was a creation of direct tenancy in favour of the appellant company from 1st April, 1975. While dealing with this question, the learned Judge referred to the fact that on the very day on which a direct tenancy is alleged to have been created in favour of the appellant company, a partnership deed had come to be executed on a stamped paper of Rs. 100/- by which a new partnership was constituted considering of Vadilal and his sons Ajitlal Vadilal to continue the business of the partnership firm which had already four partners out of High whom two had retried. The learned Judge held that it was impossible that on the day on which the new partnership business in the same name and style and in the same premises, namely, High suit premises, there would be surrender of valuable tenancy rights in favour of the landlord. The learned Judge also considered the fact Ajitlal had initially put up a story that the entire going concern of Messrs. Vadilal Shah together with the tenancy right had been transferred in favour of Ashok Vadilal Shah with effect form 31st March, 1973 and that it was only on the next date of his examination that it was stated that there was no documents evidencing the alleged transfer and subsequently the story of a tenancy being created with effect from 1st April 1975 was put up. The learned Judge took the view that the declaration said to have been made by the deceased in the Small Causes Court was brought about in collusion with the landlord and he took the view that the story of creation of tenancy was sham and bogus, Having regard to this finding, the learned Judge took the view that on the date on the commencement of the insolvency proceeding or on the date of the order of adjudication. Vadilal and Ajitlal were contesting the ejectment suit and the Official Assignee and a right of defend the ejectment suit which related to the business premises of the insolvent and further if the right to defend the ejectment was crippled and destroyed by the insolvent surrendering the possession of his premises. the creditors would be deprived of the valuable property which would otherwise be available for their benefit. The learned Judge further took the view that it could not be said that the tenancy right as they existed on the day to the order of ejectment were not property within the meaning of Section 17 of the Presidency Towns Insolvency Act, 1909. The learned Judge further took the view that the landlord who has notice of the order of adjudication, could not be permitted to divest the Official Assignee in whom the property had vested by operation of law. the learned Judge referred to the decision of the Supreme Court in Damadilal v. Prashram, : AIR1976SC2229 , in which the Supreme Court has observed that it cannot be assumed that with the determination of the tenancy the estate of the tenant must necessarily disappear and the statute can only preserve his status up irremovability and not the estate he had in the premises in his occupation. Having regard to those observations, the learned Judge came to to the conclusion that the attachment order by the City Civil Court after the order of adjudication was illegal and further that was no transfer in favour of the appellant on 31st March, 1973, as alleged. He further held that the alleged declaration dated 26th March, 1975, was sham and bogus and consequently directed the Official Assignee to take possession of the business premises and thereafter to proceed with the sale of the insolvent business known as Messrs. Vadilal R. Shah as a going concern together with the furniture and fixtures, etc. along with the goodwill and tenancy rights of the suit premises as incidental thereto either by public auction or private treaty as the Official Assignee may deem fit and proper. This order is now challenged by the appellant company in this appeal.

4. Mr. Romer, the learned Counsel appearing for the appellant, who had appeared before the learned single Judge, said that the only question which was argued before the learned single Judge was that there are no right of a statutory tenant which could be said to vest in the Official Assignee and the learned Counsel made a grievance before us that the other question decided by the learned single Judge regarding the alleged transfer before 31st March, 1973 or the transfer of tenancy dated 1st April, 1975, were never argued before the learned single Judge and he was really not heard on those points at all. Assuming for a moment that the learned Counsel appearing for the appellant is right that he was not heard on these question, it is difficult for us to say that the question decided by the learned single Judge were wholly irrelevant for the purpose of decision of the matter before him. The claim of the appeal company was based on an alleged transfer of tenancy directly in favour of the Ashok Vadilal with effect from 1st April 75 by the landlord. The validity of this claim had to be adjudicated upon because it is only if this claim could be substantiated by the appellant that the further question as to whether he had any right of which he was being deprived by the Official Assignee or the question with regard to the effect of such a transfer as alleged would arise. We have, therefore, heard Mr. Romer at considerable length on the findings which, according to the learned counsel, were recorded by the learned single Judge without hearing him.

5. The first hurdle in the way of the appellant is the finding recorded by the leaned single Judge that the story of any transfer in his favour of the tenancy directly by the landlord is a sham and a bogus one. It may be mentioned that the story of the alleged transfer of the entire running business of the company with effect from 31st March 1973, which was given out before the Official Assignee by Ajitlal, has not been supported before us by the learned counsel for the appellant. Once again, the learned counsel has placed reliance on the writing which purports to be on a stamped paper of Rs. 3.50 (Ex. B) dated 26th March 1975. It is recited in this documents , which is signed by deceased Vadilal, that a suit has been filed against Vadilal for recovery of possession of room No. B 23 and B 24 on the first floor of Lalsing Mansing Building and that Vadilal had given room No. B 23 to Messrs Atlas Trading C. and room No. B 24 to Shri Dayal Gianchand under normal on leave and licence as the respective licenses were in occupation of the respective rooms since 1972. It is recited that their licence were subsisted on 1st November 1973 and they were entitled to occupation and protection and Vadilal, therefore, did not desire to contest the suit 'as it is of no benefit'. The material sentence which is important is follows:--

'I therefore hereby given may consent to the respective occupant being accepted by the plaintiff as their direct tenant and I be relieved of liability of future rents'.

This declaration has been rejected by the learned single Judge as being as documents which has been brought about in collusion with the landlord.

6. Now, there are circumstance on record which throw a serious doubt on the genuineness of this documents. It is no doubt true that on the basis of this statement made by Vadilal, the appellant was entitled to contend that the appellant was a direct tender of the premises in question, but the validity of this contention would depend on whether this documents can be accepted as genuine. Admittedly there is no other evidence with regard to the grant of leave and licence in 1972. There is ample material on record to show that there averment could not be accepted as true. The partnership firm of Messrs. Vadilal R. Shah originally consisted of four partners, two of them being father and son, namely Vadilal and Ajitlal and the two others were Punamchand Shah and Mahendrakumar Shah. These two partners retired with effect from 1st April 1975 and a separated retirement deed was executed. The two remaining partners continued the business of the firm under a new documents of partnership (Ex. A) with specifically provides that the original partnership business was to be continued with effect from 1st April 1975 by the new partnership firm and that the partnership business was and would be carried on at 6, Lalji Mansing Buildings, 1st floor, Lohar Street. The books of account of the partnership firm were also to be kept in the same premises. This documents, therefore, shows that there was a continuing business of the partnership firm at the suit premises not only after 1st April 1975 but even prior to that. Now. if this was so, it is difficult to accept the story of a part of the premises having been granted on leave and licence basis to the appellant company and the remaining premises to Dayal Gianchand. Similarly the bringing about of a new partnership deed to evidence a partnership, which was to continue the business even after 1st April 1975 in the same premises, would be wholly inconsistent with the story that the two licensees should be granted direct tenancies by the landlord. If this was accepted, it would mean that the business of the firm Messrs Vadilal R. Shah had cased with effect from 1st April 1975 which could be inconsistent with the conduct of the two partners in bringing about a new partnership deed in order to continue the business of the old partnership.

7. Another important circumstance which adversely affects the story that the declaration of 26th March 1975 is a genuine declaration is that an attachment was levied on 27th March 1975 in the suit filed by Mr. Dhotiwala and Mrs. Dhotiwala against the partnership firm in the City Civil Court. If the appellant was really in possession of the suit premises as a direct tenant. then the appeal would have taken immediate steps to have this attachment lifted. However, no such step were taken by the appellant and the attachment continued till it was lifted consequent upon the order of the learned single Judge which is impugned in this appeal. It is clear that the dated 26th March 1975, which is chosen as the date on which the tenancy was made, is the day prior to the day on which the attachment was levied. The only irresistible inference that can be drawn from the facts as they appear on record is that the alleged declaration on 25th March 1975 is a bogus documents and with it the appellant was a direct tenant of the landlord with effect from 1st April 1975.

8. Once the story of the appellant that it was a tenant of the premises is rejected, appellant does not have any locus standi in these proceedings. There was no question of any right of the appellant being adversely affected by any steps taken by the Official Assignee.

9. Strictly speaking, this is sufficient to dispose of the appeal. However, since the question as to the nature of the rights of a statutory tenant has been argued before us by Mr. Romer, we shall briefly deal with that question.

10. We have already referred to the decision of this Court in Rodrigues' case AIR 1945 Bom 173. Thereafter in the light of the provisions in the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, (hereafter referred to as the 'Bombay Rent Act)' the nature of the rights of a statutory tenant, that is, a contractual tenant whose lease has been terminated but whose possession is protected by the provision of the Bombay Rent Act has been the subject-matter of some decision of the Supreme Court. In the well-known decision in Anand Nivas (P) Ltd. v. Anandji, : [1964]4SCR892 , the majority view in the judgment of Shah, J. puts the position thus (at p. 422):

'A person remaining in occupation of the premises let to hi after the determination of or expiry of the period of the tenancy is commonly though not accurately, called 'a statutory tenant'. Such a person is not a tenant at all: he has no estate or interest in the premises occupied by him. He has merely the protection of the statute in that he cannot be returned out so long as he pays the standard rent and permitted increased, if any, and performs the other conditions of the tenancy. His right to remain in possession after the determination of the contractual tenancy is persons; it is not capable of being transferred or assigned, and devolves on his death only in the manner provided by the statute. The right of a lease from a landlord on the other hand is an estate or interest in the premises and in the absence of a contract to the contrary is transferable and the premises may be sublet by him. But with the determination of the lease, unless the tenant acquires the right of a tenant holding over by acceptance of rent of by assent to his continuing in possession by the landlord, the terms and conditions of the lease are extinguished, and the right of such a person remaining in possession are governed by the statute alone, Section 12(1) of the Act merely recognises his right to remain in possession so long as he pays or is ready and willing to pay the standard rent and permitted increases and performs the other conditions of tenancy, but not the right to enforce the terms and conditions of the original tenancy after it is determined'. Thus in the case of Anand Nivas (P) Ltd. : [1964]4SCR892 , it was held a statutory tenant has no estate or interest in the premises occupied by him. It is relaying on this decision that Mr. Romer has contended that if Vadilal has no interest or estate in the premises, there was nothing which would vest in the Official Assignee.

11. Now, in Damadilal v. Parashram : AIR1976SC2229 , which was a case arising under the provisions of the Madhya Pradesh Accommodation Control Act, 1961 the nature of the rights of a statutory tenant in the light of the right of tenant governed by the Rent Restriction Act in England was considerated. In paragraph 11 of the judgment, it was observed as followed (Para 11):--

'We find it difficult to appreciate how in this country we can proceed on the basis that a tenant whose contractual tenancy has determined but who is protected against eviction by the statute, has no right of property but only a personal right to remain in occupation, without ascertaining what his right are under the statute. The concept of a statutory tenant having no estate or property in the premises which he occupies is derived form the provisions of the English Rent Acts. But it is not clear how it can be assumed that the position is the same in this country without any reference to the provisions of the relevant statue. Tenancy has its origin in contract. There is no dispute that a contractual tenant has an estate or property in the subject-matter of the tenancy. and heritability is an incident of the tenancy. It cannot be assumed, however, that with the determination of the tenancy the estate must necessarily disappear and the statute can only preserve his statute of irremovability and not the estate he had in the premises in his occupation. It is not possible to claim that the 'sanctity' of contract cannot be touched by legislation. It is therefore necessary to examine the provisions of the Madhya Pradesh Accommodation Control Act, 1961 to find out whether the respondent predecessors-in-interest retained a heritable interest in the disputed premised even after the termination of their tenancy'.

However, before making the above observations. the Supreme Court referred to the decision in the case of Anand Nivas (P) Ltd. : [1964]4SCR892 and in the case of Jagdish Chandra Chatterjee v.Sri Kishna : [1973]1SCR850 , and observed that these decision proceeded on the basis that the tenant whose tenancy has been terminated, described as a statutory tenant, has no estate or interest in the premise but only a personal right to remain in occupation. It was then observed as follows:--

'It would seem as if there is a distinct category of tenant called statutory tenant having separate and fixed incident of tenancy. The terms 'statute tenancy' is borrowed from the English Rent Act. This may be a convenient expression for referring to a tenant whose tenancy has been terminated and who would be liable to be evicted but for the protecting statute, but courts in this country have sometime borrowed along with the expression certain notices regarding such tenancy from the decision of the English courts. In out opinions it has to be ascertained how for these notice are reconcilable with the provisions of the statute under consideration in any particular case'.

The Supreme Court thus took the view that the right of the statutory tenant have to be determined in the light of the relevant statutory provisions and with regard to the Madhya Pradesh Accommodation Control Act, it was pointed out that the incident of tenancy of the tenant defined in Section 2 (1) of the Madhya Pradesh Accommodation Control Act, 1961, and a contractual tenancy must be the same unless any provisions of the Act conveyed a contrary intention and it was expressly held that under the Madhya Pradesh Accommodation Control Act, the tenant retain an interest in the premises and not merely a personal right of occupation.

12. Prior to the decision in Damadilal's case : AIR1976SC2229 , in another decision in Jai Singh Murarji v. Sovani (P) Ltd, : [1973]2SCR603 , the Supreme Court was concerned with construction of Section 15(2) of the Bombay Rent Act and it was held in that case that the word 'tenant' in Section 15 of the Bombay Rent Act meant a contractual tenant and not a statutory tenant and Section 15(2) protects only sub-leases or assignment or transfer by the tenant but does not effect subsequent assignment, or transfers by assignees of transferees,. Thus there was some conflicts to whether the right of a tenant was only a personal right to possession protected by statute or whether that right also include an interest or estate in the tenancy of the premises. This apparent conflict was considered by a Division Bench of this Court in Vasant v. Dikkaya : AIR1980Bom341 , to which one of us (Lentin J) was a party. I paragraph 12 of the judgment referring to the apparently divergent views, it was observed as followed (at p. 344):--

'It is difficult to escape the conclusion that the view expressed in Anand Nivas case : [1964]4SCR892 as to the statutory tenant basically not having any interest, estate or property in the demised premises is irreconcilable with the view in Damadiala's case : AIR1976SC2229 that heritability is the incidence of the tenancy and that a statutory tenant does not asses to hold such an estate, interest and property therein as such ordinary incidence of tenancy unless the statute protecting his such possession provides to the contrary'.

While proceeding to consider whether there is any infirmity in the decision in the case of Anand Nivas the Division Bench in paragraph 14 observed as follows:--

'On this point in initial presumption as to the subsisting incidence of the tenancy, we shall have to follow the ratio of Damadilal's case : AIR1976SC2229 in preference to the decision in Anand Nivas case and shall have to proceed on the assumption that statutory tenant does ordinarily possess transferable interest in his tenancy. We shall have to find out from the provisions of the Bombay Rent Act, if anything, therefore in has the effect of destroying it'.

The Division Bench then considered the provisions of Section 12(1) of the Bombay Rent Act, as construed in the Anand Nivas case : [1964]4SCR892 and then observed as follows in paragraph 17:--

'This decision as to the scope of Section 12(1) of the Bombay Rent Act based on its wording and the context, obviously runs counter to the assumed ordinary incidence of transferability of the statutory tenancy. This, in other words, is a clear provisions indication legislative intent to the contrary to rob the tenancy of this attribute or incidence in terms of the requirement of the ratio of Damadilal's case : AIR1976SC2229 . Looking at from this point of view there is no conflict in decision of these two cases on this point. Ratio of Anand Nivas case : [1964]4SCR892 still holds good and binding'.

Thus the Division Bench in Vasant v. Dikkaya : AIR1980Bom341 has on an analysis of the decision in Anand Nivas : [1964]4SCR892 and Damadilal's : AIR1976SC2229 cases come to the conclusion that there is no conflict between those decision and that the ratio of Anand Nivas case was still good and binding.

13. Mr. Romer has invited out attention to an order of the Supreme Court dismissing of a petition for special leave against a decision of this Court arising out of the Bombay Rent Act. That order of the Supreme Court is reported in Ganapati v. Waman : AIR1981SC1956 . We has sent for the original judgment to the learned single Judge against which the special leave petition was made before the Supreme Court. That decision is in Ganapati v. Waman, Special Civil application No. 2806 of 1976 dated 18th November 1980. by Kanade J. The question which fell for decision before the learned single Judge (Kanade J.) was whether after the termination of a contractual tenancy by a notice received from the landlord, it is permissible for the tenant to assign or transfer the tenancy rights. The learned Judge referred to the decision in Vasant v. Dikkaya : AIR1980Bom341 , and observed that it was held in that case that 'though ordinarily a statutory tenant is assumed to possess a transferable interest in the tenancy in terms of the ratio in Damadilal's case : AIR1976SC2229 , Section 12(1) 13, 14 and 15 of the Bombay Rent Act, as interpreted earlier in Anand Nivas case : [1964]4SCR892 , indicate legislative intent to the contrary and the statutory tenancy thereunder not to be so transferable. The Division Bench decision being binding on the learned Judge, he held that the point raised, therefore, did not survive, Now, when special leave petitioner was filed from this decision and it was rejected, it must necessarily mean that the Division Bench decision of this Court in Vasant v. Dikkaya, which had held that the ratio of the decision in Anand Nivas case was not affected by the decision in Damadiala's case, must be held to have been approved by the Supreme Court.

14. Now, it is difficult for us to appreciate how this position of law is of any assistance to the appellant. So far as the appellant is concerned, he is not claiming directly though Vadiala. His claim is that he was granted a tenancy directly form Vadialal, Vadilal was incompetent to pass on any rights to the appellant company because the right of Vadilal were only rights to occupation protected by the statute. Secondly, the observations of another Division Bench of this Court in Zarina Umer v. Sati Lalchand : (1969)71BOMLR809 , indicate that tenancy of a monthly tenant who has been adjudicated an insolvent and which is not alienable under Section 15(1) of the Bombay Rent Act cannot be regarded as property of the insolvent which must leave in the Official Assignee under Section 17 of the Presidency-towns Insolvency. Act, 1909. The Division Bench has further observed in that case '........ we find it impossible to hold that such a tenancy dissociated from a going business can be regarded as property which must vest in the Official Assignee. These are the observations relied upon by Mr. Makhija for contending that what is taken to have been vested in the Official Assignee is not merely a right of occupation but the entire business assets of the partnership firm consisting of the two partners and the right of occupation but the entire business assets of the partnership firm consisting of the two partnership firm consisting of the two partners and the right of occupation are intrinsically and closely connected with the business itself. Therefore, it is the whole bundle of rights in the running business including the right of occupation which must be taken to have vested in the Official Assignee.

15. In the view which we have taken, we find no infirmity in the order appealed against. The appeal must, therefore, fail and is dismissed. However, we make no order as to costs. The operation of the order is stayed for two weeks, Undertaking given on 24th April 1979 to continue until further orders.

16. Appeal dismissed.


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