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Pascal Lazarous Lobo Vs. K. Sundara Shetty - Court Judgment

LegalCrystal Citation
SubjectTenancy
CourtKarnataka High Court
Decided On
Case NumberCivil Revision Petition No. 1279 of 82
Judge
Reported inILR1984KAR250; 1984(2)KarLJ99
ActsKarnataka Rent Control Act, 1961 - Sections 21
AppellantPascal Lazarous Lobo
RespondentK. Sundara Shetty
Appellant AdvocateP. Ganapathy Bhat, Adv.
Respondent AdvocateB.P. Holla, Adv.
DispositionPetition dismissed
Excerpt:
.....purchased property to construct and run business of boarding and lodging house therein, promoted a private limited company with landlord as its managing director for life. land-lord sought eviction of tenant for such construction by company he being its managing director. the trial court allowed the petition as confirmed by the district judge. in revision, contended that requirement of company was not requirement of landlord, the company being a legal person its requirement could never be requirement of the members and vice versa, they being different legal entities. per contra, it was contended that business of company is business by the landlord, no distinction could be made in reality between requirement of company and that of landlord;a firm is not a legal entity but is only a..........produced to show that it had not excluded him expressly or impliedly from the management of the firm's business and had not made him a sleeping partner and, hence, it could not be said that the accommodation was needed directly and substantially for his occupation by way of business.thus, the supreme court pointed out that if the partner is a sleeping partner, it could not be said that the require-ment of the firm was the requirement of the partner.11. the question came up for consideration, not directly but incidentally, before the supreme court, in the case, the corporation of the city of bangalore v. b.t. kampanna, .the supreme court, in that case, left open the question whether the requirement by the partnership, of which the landlord was a partner, amounts to the requirement of.....
Judgment:
1. This Revision Petition by the tenant under Section 115 of the Code of Civil Procedure is directed against the order dated 1-2-1982 made by the District Judge, D.K., Mangalore, in Civil Revision Petition No. 133 of 1980, on his file, dismissing the revision petition of the tenant, on confirming the order dated 15-91980 made by the First Additional Munsiff, Mangalore, in HRC No. 62 of 1976, on his file, allowing the petition of the landlord under Clause (j) of the proviso to Section 21(1) of the Karnataka Rent Control Act, 1961, (hereinafter referred to as 'the Act').

2. The landlord sought for eviction of the tenant from the petition schedule premises under Clauses (j) and (1) of the proviso to Section 21 (1) of the Act, though during hearing he gave up the claim under Clause (1) of the proviso to Section 21(1) of the Act. The landlord averred that himself and his wife purchased the petition schedule premises, among others, by a registered sale deed dated 19-7-1973 (Exhibit P-9) with the idea of putting up a Boarding & Lodging House therein. Since, however, the project involved considerable expenditure, they found a Private Limited Company along with others styled as 'Hotel Sukanya Private Limited'. The Company was promoted by the present landlord and his wife. The Memorandum of Articles of Association is at Exhibit P-l. The landlord is the Managing Director of the Company for life. He has sought for eviction of the tenant for the construction of a Boarding & Lodging House by the Company of which he is the Managing Director, bona fide and reasonably.

3. The tenant resisted the claim. Inter alia, he contended that the requirement of the Company was not the requirement of the landlord and, as such, the present landlord could not institute a petition for eviction of the tenant either under Clause (j) or Clause (1) of the proviso to Section 21 (1) of the Act. He also contended that the requirement of the landlord was not bona fide and reasonable.

4. The Courts below, however, found concurrently that since the present landlord was the Managing Director of Hotel Sukanya Private Limited, for whose benefit the petition schedule premises were required, the requirement was that of the landlord and, in that view, they proceeded to award eviction in favour of the landlord under Clause (j) of the proviso to Section 21 (1) of the Act. Aggrieved by the said orders, the tenant has come up with the above Revision Petition before this Court.

5. The learned Counsel appearing for the revision-petitioner strenuously urged before me that the case made out by the landlord was clear that the premises were required for construction of a Boarding & Lodging House by the Private Limited Company and, as such, the requirement of the Company could not be described as the requirement of the landlord.

6. As against that, the learned Counsel appearing for the respondent/landlord argued supporting the reasoning of the Courts below and submitted that since the present landlord was the Managing Director of the Company for life, no distinction could be made in reality from the requirement of the Company and that of the landlord. This was argued at length as a preliminary point.

7. So, the sole question that arises for my consideration in this Revision Petition is : 'Whether the Courts below were justified in holding that the requirement by the Company, namely, Hotel Sukanya Private Limited, could be described as the requirement of the landlord ?'

8. It is not in dispute that the property was purchased under Exhibit P-9 by K. Sundara Shetty, the present landlord, and his wife. They started a Private Limited Company under the name and style 'Hotel Sukanya Private Limited' with a view to put up a Boarding & Lodging House on the premises. It is further in evidence, as seen from the Articles of Association and the Memorandum, that the present landlord is made the Managing Director of the Company for life and, thus, he holds the key-position in the Company.

9. It is for that reason that the learned District Judge, relying on the decision of the Supreme Court of India, in the case, D.N. Sanghavi and Sons v. Ambalal Tribhuvan Das, , and on a Division Bench decision of this Court, in the case, Shivayogappa Tambake v. Seethabai, 1979 (1) Kar. L.J. 129 has reached the conclusion that the requirement of the landlord includes the requirement of the Company.

10. It may be stated that in the above decisions the question at issue was whether the need of the landlord included the need of the partnership of which he was a partner. The Supreme Court, in Sanghavi's case, referred to above, ruled that merely because the landlord required the accommodation for his partnership business did not fulfil the conditions of Section 12 (1) (f). The deed of partnership was not produced to show that it had not excluded him expressly or impliedly from the management of the firm's business and had not made him a sleeping partner and, hence, it could not be said that the accommodation was needed directly and substantially for his occupation by way of business.

Thus, the Supreme Court pointed out that if the partner is a sleeping partner, it could not be said that the require-ment of the firm was the requirement of the partner.

11. The question came up for consideration, not directly but incidentally, before the Supreme Court, in the case, The Corporation of the City of Bangalore v. B.T. Kampanna, .

The Supreme Court, in that case, left open the question whether the requirement by the partnership, of which the landlord was a partner, amounts to the requirement of the landlord

12. Thereafter, the question came up for direct consideration by a Division Bench of this Court, on reference by a Single Judge, in the case, Shivayogappa Tambake v. Seethabai (2). Their Lordships, after reviewing the earlier decisions, have held that if the landlord is merely a sleeping partner of the firm, then he cannot seek eviction of the tenant for the requirement of the firm.

In this decision, however, it is broadly enunciated that occupation by the firm is occupation by the partners. It is on that reason that this Court has ruled that a partner, who is actively associated with the management of the firm, requires his premises for the use and occupation of the firm, that amounts to the requirement of the partner himself.

13. The learned Counsel appearing for the revision petitioner/tenant urged before me that we are not concerned, on the facts of the present case, with the ease of a firm and its partners but with the case of a Private Limited Company. He urged on me that a firm is not a legal person but a Private Limited Company is an incorporated body and it is a legal person. As such, he submitted that the requirement of the Company could never be the requirement of its members and the requirement of the members could never be the requirement of the Company since they are different legal entities.

14. The learned Counsel invited my attention to a decision of the Supreme Court in Muralidhar v. Chunilal, 1970 R.CJ. 922 wherein the Supreme Court has laid down that a firm is not a legal entity but is only a compendious way of describing the partners thereof and that therefore, the occupation by a firm is only occupation by its partners.

The learned Counsel, on that basis, submitted before me that the learned District Judge was not justified in relying on the rulings rendered in the case of partnership.

15. As against that, the learned Counsel appearing for the respondent/landlord submitted before me that the strict concepts in Transfer of Property Act and in Company Law should not be applied in the case of Rent Control Legislation and the reality of the situation should be taken into consideration. He submitted that since the present landlord and his wife were the promoters of Hotel Sukanya Private Limited and the present landlord was the Managing Director for life, the business by the Company practically amounts to business by the present landlord and, as such, the requirement of the Company was the requirement of the landlord.

16. The interesting question, therefore, that arises for my consideration is : 'Whether the learned District Judge was justified in not making a distinction between a partnership firm and a Company.

17. The Supreme Court in Muralidhar's case, referred to above, viz., 1970 Rent Control Journal 922 (4), has made it clear that a firm is not a legal entity but is only a compendious way of describing the partners thereof and that therefore, the occupation by a firm is only occupation by its partners.

18. That is not the legal concept in the case of a Private Limited Company. It is an incorporated body. It is a legal person. It can sue and be sued in its own name as a legal person. The liability of the members is limited. Therefore, occupation by the Company could never be considered as occupation by its members or the requirement of the members can never be considered as the requirement of the Company and vice versa.

19. In fact, this question came up for consideration by the Courts of Appeal in England in Tunstall v. Steigmann, (1962) 2 All E.R. 417 The relevant facts in that case are :

Mrs. Tunstall was tenant of a shop at 28, Fossgate York, where she carried on the business of a wardrobe dealer. Mrs. Steigmann, the landlord, is the owner of the premises and the shop held by the tenant on a lease for three years from April 19, 1958, at a weekly rent of 1-10s. The landlord also owns a shop next door and she has carried on there the business of a pork butcher. On April 12, 1961, the landlord by her solicitors served a notice to terminate the tenancy on Oct. 19,1961. The notice stated that the landlord would oppose an application for a new tenancy on the ground that she, the landlord, intended to occupy the holding for the purpose of a business to be carried on by her therein. The notice was in accordance with the provisions of the statute and no question arose thereof. On Oct. 11, 1961, the tenant applied to the Court for a grant of a new tenancy pursuant to the Act. The application was for a lease for a term of five years at a rent of 75 per annum. On Aug. 23, 1961, the landlord filed a notice of her intention to oppose the grant on the ground (inter alia) that she intended 'to occupy the said premises for the purposes of a business to be carried on by her thereat'. In due course the matter came on for hearing before the County Court Judge. In the meantime, on a future date, the landlord promoted a limited company for the purpose of carrying on her business. It was not challenged that the landlord held the whole of the shares in the limited company, with the exception of two which were in the possession of her nominees, and she had the sole control of the business of the company. This was not in dispute. The question that came up for consideration was whether, in the circumstances, the landlord intended to carry on her business on the premises, the business by that time being owned by the limited company. The point was considered as a preliminary issue.

Section 30(1) (g) of the Landlord and Tenant Act, England reads :

"Subject as hereinafter provided, that on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence."

The question at issue, therefore, was : "Whether the business of the Private Limited Company could be described as the business of the landlord since the Company was practically owned by the landlord "

The County Court answered in favour of the landlord. The Court of Appeal, however differed holding that the business to be carried on by the Company, though virtually owned by the landlord, was legally a separate entity.

Ormerod, L. J., speaking on the aspect, has observed :

"There is no question, of course, of the premises being required here as a residence for the landlord, and the only question to be considered is whether it was the intention of the landlord to occupy the holding for the purposes of a business to be carried on by her therein. I have formed the view that in these circumstances it cannot be said that it is the intention of the landlord to carry on the business. It was decided in Salomon v. Salomon & Co., Salomon & Co. v. Salomon, (1897) A.C. 22, that a company and the individual or individuals forming a company were separate legal entities, however complete the control might be by one or more of those individuals over the company. That is the whole principle of the formation of limited liability companies and it would be contrary to the scheme of the Companies Acts to depart from that principle.

It has been contended in this case that a realistic view should be taken of the circumstances. It is submitted that any person in the street would say that the business was the landlord's business, notwithstanding that it was being carried on by a limited company, and that in those circumstances it should be held that the provisions of para(g), to which I have referred, should be considered to be satisfied. That, I think, is a dangerous doctrine. It may be that in practice the landlord will continue to carry on the business as it has been carried on in the past when she was undoubtedly the proprietor of it. It may be that she will derive a profit or otherwise from the business as she has done in the past. But the fact remains that she has disposed of her business to a limited company. It is the limited company which will carry on the business in the future, and if she acts as the manager of the business, it is for and on behalf of the limited company.

In my judgment the fact that she holds virtually the whole of the shares in the limited company and has complete control of its affairs makes no difference to this proposition. The object of a limited liability company, as I understand it, is that the shareholders shall have some protection and some limit to the liability which they may incur in the event of the company being unsuccessful. It is to be assumed that the landlord in this case assigned her business to the limited company for some good reason which she considered to be of an advantage to her. She cannot say that in a case of this kind she is entitled to take the benefit of any advantages that the formation of a company gave to her, without at the same time accepting the liabilities arising therefrom. She cannot say that she is carrying on the business or intends to carry on the business in the sense intended by para(g) of thesub-section and at the same time say that her liability is limited as provided by the Companies Acts."

The same conclusion was arrived at by the other two Lords Justices constituting the Bench.

It was also argued in that case, as in the present case, that the entire business of the Company was controlled by the landlord. Even so, the Noble Lords made it clear that a Company is a separate legal entity and it cannot be confused with the landlord.

The same reasoning holds good on the facts of the present case also.

20. No other decision, holding a contrary view, was brought to my notice. I am satisfied on fundamental principles that since the Company is a legal entity and the liability and rights of its members are defined, the requirement of the members cannot be equated with the requirement of the Company nor the requirement of a Company, which is a legal person, could be equated with that of its members. It is entirely different in the case of a partnership firm.

21. For the foregoing reasons, I am of the considered view that the requirement of Hotel Sukanya Private Limited cannot be considered as the requirement of Shri K. Sundara Shetty, though he is made the Managing Director of the Company for life. That being so, the requirement under the petition for eviction, instituted by Shri K. Sundara Shetty, the landlord of the premises purchased by him and his wife for the purpose of putting up a Boarding & Lodging House by Hotel Sukanya Private Limited, cannot be the requirement of Shri K. Sundara Shetty.

22. The preliminary point, therefore, is sustained. Without more, the petition for eviction is liable to be dismissed and accordingly, I allow the revision petition and dismiss the petition of the landlord for eviction of the tenant on setting aside the orders of the Courts below.

In the view that I have taken, the other questions would not survive for consideration.

No order as to costs of this revision petition.


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