Companies Act Case Law Carona Ltd Vs M/S Parvathy Swaminathan & Sons

CASE NO.:
Appeal (civil) 2805 of 2005

PETITIONER:
CARONA LTD

RESPONDENT:
M/S PARVATHY SWAMINATHAN & SONS

DATE OF JUDGMENT: 05/10/2007

BENCH:
C.K. THAKKER & P. SATHASIVAM

JUDGMENT:
J U D G M E N T

CIVIL APPEAL No. 2805 OF 2005

C.K. THAKKER, J.

1. This appeal by special leave is filed by the
appellant-Carona Ltd. (hereinafter referred to as ‘the
tenant’) against the judgment and order passed by the
High Court of Judicature at Bombay on November 1,
2004 in Writ Petition No. 8781 of 2004. By the said
order, the learned Single Judge of the High Court
dismissed the writ petition filed by the tenant and
confirmed the order passed by a Bench of Small Causes
Court at Bombay on August 3, 2004 in Appeal No. 277 of
2003 which in turn confirmed the judgment and decree
of eviction dated February 11, 2003, passed by a Judge
of Small Causes Court at Bombay in T.E. & R. Suit No.
226/240 of 2001 in favour of the respondent-partnership
firm (hereinafter referred to as ‘the landlord’).

FACTS
2. To appreciate the controversy raised in the
present appeal, few relevant facts may be stated.
3. The appellant-tenant was the original
defendant whereas the respondent-landlord was the
original plaintiff in the suit instituted in the Court of
Small Causes at Bombay. The landlord is a partnership
firm registered under the Partnership Act, 1932. It
owned a premises, bearing Shop No. 2, situated at
ground floor of Plot No. 3, A.M. Ward, Chembur, Govind
Road, Mumbai (hereinafter referred to as ‘the suit
premises’). According to the landlord, the suit premises
was let out to the tenant. It was alleged that tenant was
not paying rent regularly. It also initiated certain
proceedings against the landlord. The landlord did not
want the tenant to continue to occupy the suit premises.
Accordingly, by a notice dated February 23, 2001, the
landlord determined the tenancy with effect from March
31, 2001. In spite of determination of tenancy, the
tenant did not hand over vacant and peaceful possession
of the suit premises to the landlord. The landlord,
therefore, filed a suit in the Small Causes Court, Bombay
on April 2, 2001. In a written statement, dated August 1,
2001, the tenant disputed the averments made and
allegations levelled by the landlord and contended that it
was not liable to be evicted. The Small Causes Court,
Bombay, however, passed a decree of eviction against the
tenant on December 16, 2002 which was confirmed by a
Bench of that Court as also by the High Court. The said
order is challenged in the present appeal.
INTERIM ORDER BY THIS COURT
4. On February 21, 2005, notice was issued by
this Court. Status quo as regards possession was
ordered to be maintained. On April 18, 2005, leave was
granted. Pending appeal, stay of dispossession was
continued subject to the tenant depositing a sum of Rs.
twenty four lakhs with the Registry of the Court within
eight weeks which was allowed to be withdrawn by the
landlord without furnishing security. The matter was
ordered to be placed for final hearing and that is how the
matter is before us.

SUBMISSIONS
5. We have heard the learned counsel for the
parties.
6. Mr. Gupta, learned counsel for the appellant-
tenant contended that all the courts committed an error
of law and of jurisdiction in passing the decree of eviction
against the tenant. He submitted that the suit filed by
the landlord was not maintainable and it ought to have
been dismissed by the courts below. He also submitted
that the question as to constitutional validity of clause (b)
of sub-section (1) of Section 3 of the Maharashtra Rent
Control Act, 1999 (hereinafter referred to as ‘the Rent
Act’) is pending before this Court and in view of the said
fact, the courts below ought not to have proceeded to
decide the matter. Alternatively, it was argued that even
if it is assumed that the provision is legal, valid and intra
vires, it would not apply to the case on hand inasmuch
as tenant’s net worth/paid up share capital has been
substantially eroded and it was not rupees one crore or
more when the proceedings were initiated by the
landlord. The provisions of the Rent Act, therefore,
applied to the suit premises and unless and until one of
the grounds of eviction specified in the Rent Act had been
made out, the landlord was not entitled to a decree for
possession. The learned counsel urged that the fact as to
‘paid up capital’ of the Company was a ‘jurisdictional fact’
and in absence of such fact, the Court had no power,
authority or jurisdiction to consider, deal with and decide
the matter.
7. It was further contended that the proceedings
could not have been continued in view of the fact that the
tenant was a ‘sick company’ within the meaning of the
Sick Industrial Companies Act, 1985 (hereinafter referred
to as ‘SICA’). In accordance with Section 22 of that Act,
hence, all proceedings against a sick company stood
suspended. No order of eviction, therefore, could have
been passed by the courts below. On all these grounds, it
was submitted that all the courts were wrong in passing
a decree of eviction against the tenant and the said order
deserves to be set aside by this Court.
8. Mr. Parekh, learned counsel for the
respondent-landlord, on the other hand, supported the
decree passed by the Small Causes Court, confirmed by a
Bench of that Court as also by the High Court. He
submitted that as far as constitutional validity of Section
3(1)(b) of the Rent Act is concerned, the point is covered
by a decision of the Division Bench of the High Court of
Bombay in M/s Crompton Greaves Ltd. v. State of
Maharashtra, AIR 2002 Bom 65. The Small Causes
Court as well as the High Court were, therefore, wholly
justified in proceeding with the matter and in deciding it
on merits. He submitted that tenancy was terminated in
accordance with law. It was, therefore, obligatory on the
tenant to hand over vacant and peaceful possession of
the property to the landlord, but it failed to do so. The
landlord was, therefore, constrained to approach a Court
of law which passed a decree for possession in favour of
the landlord holding that since the paid-up share capital
of the Company was more than rupees one crore, the
provisions of the Act were not applicable to it. The
counsel urged that there was no illegality in the said
finding and obviously, therefore, the landlord was
entitled to possession of suit-premises and the tenant
could not resist eviction. An appellate Court confirmed
the said decree. Before the High Court it was contended
by the tenant that a unanimous resolution was passed by
the Company to decrease the share capital to less than
rupees one crore (Rs.41 lakhs from Rs.8.20 crores).
Such unilateral action at a subsequent stage, submitted
the counsel, would not deprive the owner of the property
to the ‘right accrued’ in favour of the landlord. The
‘jurisdictional fact’ (paid up share capital of more than
rupees one crore) was very much in existence at the time
when the proceedings were initiated against the
Company. But even otherwise, considering the factual
situation, the tenant was not entitled to any relief. It was
stated that though the so-called resolution was said to
have been passed, it had not been approved by the Board
for Industrial and Financial Reconstruction (BIFR). In the
eye of law, therefore, there was no decrease of share
capital. The High Court was, hence, wholly right in
observing that even on that ground, the tenant was not
entitled to any relief. The counsel also submitted that
this Court is exercising discretionary and equitable
jurisdiction under Article 136 of the Constitution. The
tenant is not entitled to such equitable relief. It was
submitted that the tenant has not paid rent since several
years i.e. from January 1, 1995. According to the
counsel, the amount due and payable by the tenant as
on August 31, 2007 comes to Rs. 56,22,000/- pursuant
to interim order passed by this Court on April 18, 2005,
an amount of Rs. 24 lakhs was deposited by the
appellant in this Court which was withdrawn by the
landlord, but even excluding that amount, the tenant
is liable to pay to the landlord an amount of
Rs.32,22,000/-. It was further stated that after order
dated April 18, 2005 i.e. for more than two years, the
tenant has not paid even a pie to the landlord. Such
tenant, urged the counsel, does not deserve sympathy
and cannot claim equitable relief. On all these grounds,
the counsel prayed for dismissal of the appeal.

CONSIDERATION OF CONTENTIONS
9. We have given anxious and thoughtful
consideration to the rival contentions of the parties. And
in our opinion, no case has been made out by the
appellant-tenant for grant of discretionary and equitable
relief from this Court.

CONSTITUTINAL VALIDITY OF SECTION 3(1)(b)
10. As far as constitutional validity of Section 3(1)
(b) of the Rent Act is concerned, in our opinion, the
courts below were right in rejecting the contention raised
by the tenant and in proceeding to decide the matter on
merits in view of the decision in M/s. Crompton Greaves
Ltd.
11. Our attention has been invited by the learned
counsel for the parties to the relevant provisions of the
Act. The Act came into force with effect from March 31,
2000. It repealed the Bombay Rents, Hotel and Lodging
House Rates Control Act, 1947. The Preamble of the Act
recites;
An Act to unify, consolidate and amend
the law relating to the control of rent and
repairs of certain premises and of eviction and
for encouraging the construction of new
houses by assuring a fair return on the
investment by landlords and to provide for the
matters connected with the purpose aforesaid.

Whereas it is expedient to unify,
consolidate and amend the laws prevailing in
the different parts of the State relating to the
control of rents and repairs of certain premises
and of eviction and for encouraging the
construction of new houses by assuring a fair
return and to provide for the matters
connected with the purposes aforesaid.

12. Section 3 grants exemption and enacts that
the Act would not apply to certain premises. Clause (b)
of sub-section (1) of the said section declares that the Act
would not apply “to any premises let or sub-let to Banks,
or any Public Sector Undertakings or any Corporation
established by or under any Central or State Act, or
Foreign Missions, International Agencies, Multinational
Companies, and Private Limited Companies and Public
Limited Companies having a paid up share capital
of rupees one crore or more”. (emphasis supplied)
13. It is an admitted fact that the appellant-tenant
is a Public Limited Company having a paid up share
capital of rupees more than one crore (Rs.8.20 crores).
The Courts below considered the contention as to
constitutional validity of clause (b) of Section 3(1) of the
Rent Act and observed that the vires of the provision was
upheld by the High Court in M/s. Crompton Greaves Ltd.
In that case, constitutional validity of Section 3(1)(b) was
challenged on the ground that it was arbitrary,
discriminatory and unjust. It was contended that the so-
called distinction between the Companies having a paid
up share capital of less than rupees one crore and the
Companies having a paid up capital of more than rupees
one crore was arbitrary, discriminatory and unreasonable
neither founded on any intelligible differentia nor the so-
called classification has rational or reasonable nexus to
the object sought to be achieved by the Legislation. It
was urged that denial of protection of the Act to the
Companies solely on the basis of ‘paid up share capital’
was based on irrational criterion and was hit by Article
14 of the Constitution.
14. The Court, however, negatived the contention
and upheld the validity of the provision. The Court
stated;
“10. We do not see any force in any of
these contentions. The Bombay Rent Act was
enacted originally as a temporary measure in
order to protect the tenants from eviction from
their premises and also from arbitrary
enhancement of rent. The necessity for the
control of rents by special legislation for
properties located within the urban areas was
felt during World War II. At that time not much
by way of new construction for civil population
was possible. A good proportion of private
accommodation was requisitioned by the
authorities for the war effort. In consequence,
rents were beginning to shoot up. Landlords
were trying to get rid of their existing tenants
to get better rents. The legislation was
undertaken primarily to save the tenants from
harassment of unscrupulous landlords. To
quote the words of Sarkaria J, Nagindas
Ramdas v. Dalpatram Ichharam, (1974) 1 SCC
242 at page 248 : (AIR 1974 SC 471) (at page
474). “The strain of the last World War,
industrial Revolution, the large scale exodus of
the working people to the urban areas and the
social and political changes brought in their
wake social problems of considerable
magnitude and complexity and their
concomitant evils. The country was faced with
spiralling inflation, soaring cost of living,
increasing urban population and scarcity of
accommodation. Rack renting and large scale
eviction of tenants under the guise of the
ordinary law, exacerbated those conditions
making the economic life of the community
unstable and insecure. To tackle these
problems and curb these evils the Legislatures
of the States in India enacted “Rent Control
Legislations”.
11. The rent control laws are in force in
the State for more than 60 years. As a result of
these legislations a host of problems have
cropped up. These problems have been
discussed by various committees appointed by
the Central Government and State
Governments. The reports of such committees
indicate that freezing of rentals at old historic
levels, the excessive protection of tenancy
rights and the extreme difficulties of recovering
possession even for the owner’s own use hit
hard the house owners of modest means;
rendered investment in housing for rental
unattractive; inhibited the letting out of
available accommodation and thus had
aggravated the acute scarcity of
accommodation for hire. It was felt that the
laws were being often abused by the rich
tenants against the poor or middle class
landlords.
12 The State of Maharashtra appointed a
Committee known as Rent Acts Enquiry
Committee (for short Tembe Committee) which
observed as under :
“……..The result of all this has been
that the supply of rental housing in the
market is gradually shrinking. Except in
the public sector, the growing tendency is
to dispose off houses on ownership or
hire purchase basis. Rental housing has,
therefore, almost come to a halt in cities
like Bombay. This has adversely affected
the economically weaker sections of the
society”;

“….The rent law that was enacted for the
benefit of the tenants is thus operating to
the detriment of their interest in that the
flow of rental housing is gradually
shrinking”.
Tembe Committee had recommended
exemption of premises of floor area more than
65 sq. meters for business, trade or storage
and 125 sq meters for residential purpose”.

The Court, therefore, concluded;
“It is already seen from the Statement of
Objects and Reasons that the object of the Act
is not merely, to protect tenants but also to
provide fair returns to the landlords and to
encourage housing activity so as to augment
rental housing in the form of construction of
buildings and letting them out. It is also meant
to legitimise the pagadi or premium system
which was prohibited earlier. Thus the Act has
been enacted in order to strike a balance
between the interests of landlords and tenants
and for giving a boost to house building
activity and in doing so the legislature in its
wisdom has decided and thought it fit not to
extend the protection of the Rent Act to certain
class of tenants like multinationals scheduled
banks, public sector undertakings and private
and public limited companies having share
capital of more than Rs. 1 crore. This is
essentially a matter of legislative policy. The
legislature would have repealed the Rent Act
altogether. It could also withdraw the
protection under the Rent Act on rental basis
[see D.C. Bhatiya v. Union of India, (1995) 1
SCC 104] or on income basis [see Delhi Cloth
and General Mills Ltd. v. S. Paramjit Singh,
(1990) 4 SCC 923] or any other
understandable basis. In our view it is for the
legislature to decide” what should be the
appropriate basis for the purpose of
classification and the legislature as of
necessity must have a lot of latitude in this
regard. Whether any particular category of
tenants needs to be protected under the Rent
Act is a matter of legislative determination.
There is nothing arbitrary if such protection is
taken away in case of certain categories of
tenants having regard to their position
determined on objective and reasonable
criterion. These are essentially matters of
policy. Unless the provision is shown to be
arbitrary, capricious or to bring about grossly
unfair results, judicial policy should be one of
judicial restraint. The prescriptions may be
somewhat cumbersome or produce some
hardship in their application in some
individual cases; but they cannot be struck
down as unreasonable, capricious or
arbitrary”.
15. It also appears that as the point was
concluded by a decision in M/s. Crompton Greaves Ltd.,
the issue as to vires was not pressed by the tenant before
the Trial Court. This is clear from the following
observations made by the Court;
“However, the advocate for Defendant not
argued on this issue, may be in view of
judgment dated 20.7.2001 of the Hon’ble High
Court of Judicature at Bombay. The said
judgment is reported in AIR 2002 Bombay 65
(M/s Crompton Greaves Ltd., v. State of
Maharashtra) (not cited at Bar). In the said
ruling, Hon’ble High Court upheld the
constitutional validity of the provisions of
Section 3(1)(b) of the Maharashtra Rent
Control Act. Therefore, this issue does not
survive. Accordingly issue No.2 is answered”.

16. The courts below were, therefore, in our
opinion, fully justified in proceeding to decide the matter
on merits.

MERITS OF THE MATTER
17. The Trial Court framed necessary issues and
held that the defendant-Company was the tenant; the
Rent Act was not applicable; the tenancy was legally and
validly terminated; and defendant was liable to be
evicted. A prayer was also made by the plaintiff for
payment of mesne profits. The Court held that the
landlord was entitled to a decree for possession. But
since the proceedings were pending before BIFR, Section
22 of SICA was applicable and the landlord could recover
amount of mesne profits only after taking requisite
permission from BIFR. The Court, in the light of the
above findings, issued the following directions;
“The Defendants shall deliver vacant
repossession of the suit premises to the
Plaintiffs within 4 months.

The Defendants shall pay mesne profits
to the plaintiffs in respect of suit premises for
the period from the date Operating Agency suit
till the Plaintiffs recover possession of the suit
premises.

For determination of quantum of mesne
profits, enquiry under O. 20 R. 12(c) of the
Code of Civil Procedure is directed.

However, the order to pay mesne profits
shall be subject to the Plaintiffs obtain
permission of the BIFR to recover mesne
profits against the Defendants.

Preliminary decree be drawn
accordingly”.
18. A Bench of Small Causes Court, Bombay
confirmed the above order and dismissed the appeal.
Before the High Court, again all the contentions were
reiterated by the tenant, but the High Court negatived
them and dismissed the writ petition. The High Court
noted that it was not in dispute between the parties that
notice terminating the tenancy was issued by the
landlord on February 23, 2001 and tenancy was
determined with effect from March 31, 2001. On that
day, i.e. March 31, 2001, paid up share capital of the
Company (tenant) was more than rupees one crore. If it
were so, observed the High Court, Small Causes Court
was right in proceeding with the matter and in passing
the decree of eviction against the tenant.
19. The Courts were also right in relying upon
Shree Chamundi Mopeds Ltd. v. Church of South India
Trust Association, (1992) 3 SCC 1 and in holding that
eviction proceedings initiated by the landlord against the
tenant were maintainable even if the Company was ‘sick’
under SICA and Section 22 of that Act would not operate
as bar to such proceedings.

JURISDICTIONAL FACT
20. The learned counsel for the appellant-
Company submitted that the fact as to ‘paid up share
capital’ of Rs. one crore or more of a Company is a
‘jurisdictional fact’ and in absence of such fact, the Court
has no jurisdiction to proceed on the basis that the Rent
Act is not applicable. The learned counsel is right. The
fact as to ‘paid up share capital’ of a Company can be
said to be a ‘preliminary’ or ‘jurisdictional fact’ and said
fact would confer jurisdiction on the Court to consider
the question whether the provisions of the Rent Act were
applicable. The question, however, is whether in the
present case, the learned counsel for the appellant tenant
is right in submitting that the ‘jurisdictional fact’ did not
exist and the Rent Act was, therefore, applicable.
21. Stated simply, the fact or facts upon which the
jurisdiction of a Court, a Tribunal or an Authority
depends can be said to be a ‘jurisdictional fact’. If the
jurisdictional fact exists, a Court, Tribunal or Authority
has jurisdiction to decide other issues. If such fact does
not exist, a Court, Tribunal or Authority cannot act. It is
also well settled that a Court or a Tribunal cannot
wrongly assume existence of jurisdictional fact and
proceed to decide a matter. The underlying principle is
that by erroneously assuming existence of a
jurisdictional fact, a subordinate Court or an inferior
Tribunal cannot confer upon itself jurisdiction which it
otherwise does not posses.
22. In Halsbury’s Laws of England, (4th Edn.),
Vol.1, para 55, p.61; Reissue, Vol.1(1), para 68, pp.114-
15, it has been stated:
“Where the jurisdiction of a tribunal is
dependent on the existence of a particular
state of affairs, that state of affairs may be
described as preliminary to, or collateral to the
merits of the issue. If, at the inception of an
inquiry by an inferior tribunal, a challenge is
made to its jurisdiction, the tribunal has to
make up its mind whether to act or not and
can give a ruling on the preliminary or
collateral issue; but that ruling is not
conclusive”.

23. The existence of a jurisdictional fact is thus a
sine qua non or condition precedent to the assumption of
jurisdiction by a Court or Tribunal.

JURISDICTIONAL FACT AND ADJUDICATORY FACT
24. But there is distinction between ‘jurisdictional
fact’ and ‘adjudicatory fact’ which cannot be ignored. An
‘adjudicatory fact’ is a ‘fact in issue’ and can be
determined by a Court, Tribunal or Authority on ‘merits’,
on the basis of evidence adduced by the parties. It is no
doubt true that it is very difficult to distinguish
‘jurisdictional fact’ and ‘fact in issue’ or ‘adjudicatory
fact’. Nonetheless the difference between the two cannot
be overlooked.
25. In Halsbury’s Laws of England, (4th Edn.),
Vol.1, para 55, p.61; Reissue, Vol.1(1), para 68, pp.114-
15, it is stated:
“There is often great difficulty in
determining whether a matter is collateral to
the merits or goes to the merits. The
distinction may still be important; for an
erroneous decision on the merits of the case
will be unimpeachable unless an error of law is
apparent on the face of the record of the
determination or unless a right of appeal lies
to a court in respect of the matter alleged to
have been erroneously determined. An error of
law or fact on an issue collateral to the merits
may be impugned on an application for an
order of certiorari to quash the decision or in
any other appropriate form of proceedings,
including indirect or collateral proceedings.
Affidavit evidence is admissible on a disputed
issue of jurisdictional fact, although the
superior courts are reluctant to make an
independent determination of an issue of fact
on which there was a conflict of evidence
before the inferior tribunal or which has been
found by an inspector after a local inquiry”.

26. In R. v. Fulham Rent Tribunal, (1950) 2 All ER
211, it was held that the question whether premium for
renewal of tenancy was or was not paid was a
jurisdictional fact and, therefore, was held to be a
condition precedent for the lawful exercise of jurisdiction
by a Rent Tribunal. In Brittain v. Kinnaird, (1819) 1 B&B
432, however, the factum as to possession of a ‘boat’ with
gunpowder on board was held to be a part of the offence
charged and thus a finding of fact or adjudicatory fact. It
was stated: “The logical basis for discriminating
between these cases and other falling on opposite
sides of the line, is not easily discernible”.
(emphasis supplied)
27. Likewise, the fact whether the petitioner was
an ‘adult’ in adoption proceedings was not held to be a
‘jurisdictional’ fact (Eversole v. Smith, 159 SW 2nd 35).
28. In Jagdish Prasad v. Ganga Prasad, 1959
Supp (1) SCR 733, the questin was whether the landlord
was entitled to enhancement of rent. Under the Act, he
was not entitled to such rent unless a ‘new construction’
had been made after June 30, 1946. It was held by this
Court that the question whether construction was new or
not was a ‘jurisdictional fact’ and if the court wrongly
decided the said fact and thereby conferred jurisdiction
not vested in it, the High Court could interfere with the
order. The Court stated that “once it had the power it
could determine whether the question of the date of
construction was rightly or wrongly decided”. [See also
Arun Kumar v. Union of India, (2007) 1 SCC 732].
29. But, in Roshanlal v. Ishwardas, (1962) 2 SCR
947, this Court held that the Rent Controller had
jurisdiction to fix standard rent for new construction
made after March 24, 1947. The question was as to when
the construction was made. The Rent Controller recorded
a finding of fact that the construction was put up after
March 24, 1947. The finding was confirmed by the
District Judge. But the High Court interfered in revision.
30. Setting aside the decision of the High Court,
this Court stated:
“It is clear from the orders of the Rent
Controller and of the District Judge in appeal
that the question whether the second floor was
newly constructed or not was really a question
of fact, though undoubtedly a jurisdictional
fact on which depended the power of the Rent
Controller to take action under s. 7A. If the
Rent Controller had wrongly decided the fact
and assumed jurisdiction where he had none,
the matter would be open to reconsideration in
revision. The High Court did not, however, go
into the evidence, nor did it say that the
finding was not justified by the evidence on
record. The High Court referred merely to
certain submissions made on behalf of the
landlord and then expressed the opinion that
what was done to the second floor was mere
improvement and not a new construction. We
think that the High Court was in error in
interfering with the finding of fact by the
Rent Controller and the District Judge, in
support of which finding there was clear
and abundant evidence which had been
carefully considered and accepted by both
the Rent Controller and the District Judge”.
(emphasis supplied)
31. It is thus clear that for assumption of
jurisdiction by a Court or a Tribunal, existence of
jurisdictional fact is a condition precedent. But once
such jurisdictional fact is found to exist, the Court or
Tribunal has power to decide adjudicatory facts or facts
in issue.
32. As already seen earlier, in the case on hand,
the appellant Company was having ‘paid up share
capital’ of more than Rs. one crore, not only when the
notice was issued and tenancy was determined but also
when the suit for possession was instituted. What was
stated was that a resolution was passed by the Board of
Directors to reduce ‘paid up share capital’ from Rs.8.20
crores to Rs.41 lakhs (less than Rs.1 crore). But it was
not approved by BIFR. The Small Cause Court considered
this aspect and stated;
“The reasons are that the above suit is
filed on 4.4.2001. Whereas undisputed
document Ex.B. annual report of the
Defendant Company shows that on 30.9.1999
the paid up shares capital of the Defendant
Company was more than Rs.1 crore. If the
Defendants have moved BIFR by reference of
1997, by that time the Defendant ought to
have received favourable orders reducing the
paid-up capital of the Defendants to less than
Rs. one crore. But no such evidence is
produced by the Defendants to rebut the
annual report Ex.B of the Defendants showing
paid up capital of more than Rs.8 crores as on
30.9.1999. There is nothing before the court to
show that the paid up share capital of the
Defendants is brought down to Rs.41 lacs as
per para 1.3(1) of the revised rehabilitation
proposal in BIFR case No.74/1999 (Ex.4). The
advocate for Defendants has not pointed out
any order to show that the said proposal is
accepted.

In the absence of such order of the
appropriate court or authority accepting
the proposal Ex.1 to reduce share capital
to less than 1 crore rupees, I am unable to
accept the case of the Defendants that the
said share capital of the Defendant
Company is reduced to less than Rs.1
crore”. (emphasis supplied)

33. The High Court also dealt with this aspect and
concluded;
“It is not in dispute between the parties
that the tenancy of the petitioners was
terminated with effect from 31.3.2001 and on
that day the paid up share capital of the
petitioners/Company was more than Rupees
one crore, no fault can be found with trial
Court taking cognizance of the eviction
proceedings initiated against the petitioners,
as the trial Court definitely had jurisdiction to
entertain such proceedings, considering the
provisions of law comprised under Section
3(1)(b) of the said Act, as rightly submitted by
the learned advocate for the respondents. The
clause (b) of Section 3(1) of the said Act clearly
provides that “the said Act shall not apply to
any premises let or sub-let to banks, or any
Public Sector Undertaking or any Corporation
established by or under any Central or State
Act, or foreign missions, international
agencies, multinational companies, and private
limited companies and public limited
companies having a paid up share capital of
rupees one crore or more”. Undisputedly, the
petitioner/Company is a Public Limited
Company having share capital of more
than Rupees one crore”.
(emphasis supplied)

34. All the Courts were, therefore, in our
considered opinion, right in holding that the provisions of
the Rent Act were not applicable to the present case.

SUBSEQUENT EVENTS
35. The learned counsel for the tenant then
submitted that it was obligatory on the courts below
including the High Court to take into consideration
subsequent events. In support of the submission, our
attention has been invited by the counsel to a leading
decision of this Court in Pasupuleti Venkateswarlu v.
Motor & General Traders, (1975) 1 SCC 770. In that case,
the plaintiff filed a suit for possession on the ground of
personal requirement for starting business. A decree for
possession was passed in his favour which was
confirmed by the Appellate Court. At the stage of
Revision, however, due to subsequent event of acquisition
of non-residential building by the plaintiff-landlord, an
application for amendment was made by the defendant-
tenant. The High Court allowed the amendment. The
plaintiff challenged the said order by approaching this
Court. It was contended that the High Court committed
an error in taking cognizance of subsequent event which
was ‘disastrous’. This Court, however, held that the High
Court had not committed any illegality in doing so.
36. Referring to leading cases on the point,
Krishna Iyer, J. stated;
“We feel the submissions devoid of
substance. First about the jurisdiction and
propriety vis-`-vis circumstances which come
into being subsequent to the commencement
of the proceedings. It is basic to our
processual jurisprudence that the right to
relief must be judged to exist as on the date a
suit or institutes the legal proceeding. Equally
clear is the principle that procedure is the
handmaid and not the mistress of the judicial
process. If a fact, arising after the lis has come
to court and has a fundamental impact on the
right to relief or the manner of moulding it, is
brought diligently to the notice of the tribunal,
it cannot blink at it or be blind to events which
stultify or render inept the decretal remedy.
Equity justifies bending the rules of procedure,
where no specific provision or fairplay is not
violated, with a view to promote substantial
justicesubject, of course, to the absence of
other disentitling factors or just
circumstances. Nor can we contemplate any
limitation on this power to take note of
updated facts to confine it to the trial Court. If
the litigation pends, the power exits, absent
other special circumstances repelling resort to
that course in law or justice. Rulings on this
point are legion, even as situations for
applications of this equitable rule are myriad.
We affirm the proposition that for making the
right or remedy claimed by the party just and
meaningful as also legally and factually in
accord with the current realities, the Court
can, and in many cases must, take
cautious cognizance of events and
developments subsequent to the institution
of the proceeding provided the rules of
fairness to both sides are scrupulously
obeyed.” (emphasis supplied)
37. In our judgment, the law is fairly settled. The
basic rule is that the rights of the parties should be
determined on the basis of the date of institution of the
suit. Thus, if the plaintiff has no cause of action on the
date of the filing of the suit, ordinarily, he will not be
allowed to take advantage of the cause of action arising
subsequent to the filing of the suit. Conversely, no relief
will normally be denied to the plaintiff by reason of any
subsequent event if at the date of the institution of the
suit, he has a substantive right to claim such relief.
38. In the instant case, in our opinion, the courts
below were right in holding that the date on which
tenancy was determined, the right in favour of the
landlord got accrued. Such right could not have been set
at naught by the tenant by unilateral act by passing a
resolution to reduce ‘paid up share capital’ of the
Company.
39. In this regard, it may be profitable to refer to a
decision of this Court in Gajanan Dattatraya v. Sherbanu
Hosang Patel & Ors., (1975) 2 SCC 668. In Gajanan, the
Court was called upon to consider clause (e) of Section
13(1) of the Bombay Rents, Hotel and Lodging House
Rates Control Act, 1947 which read thus;
13(1)(e). That the tenant has, since the
coming into operation of this Act,
unlawfully sublet, or after the date of
commencement of the Bombay Rents, Hotel
and Lodging House Rates Control
(Amendment) Act, 1943, unlawfully given on
licence, the whole or part of the premises or
assigned or transferred in any other manner
his interest therein.
(emphasis supplied)

40. The tenant took on lease the premises on
January 1, 1960. He, however, sublet a part of the
premises in August, 1965. The landlord issued a notice
on April 1, 1967 and terminated the tenancy. The tenant
denied that there was unlawful sub-letting of a part of
the premises. It was further submitted that in any case,
the so-called sub-tenant vacated the premises on April
14, 1967 i.e. before the suit was instituted by the
landlord and hence, cause of action did not survive. It
was contended on behalf of the tenant that Section
13(1)(e) used the expression “has sub-let”, i.e. the
present perfect tense which contemplated the event
connected in some way with the present time. Since the
sub-tenant had already vacated and left the premises, at
the most it could be said that the tenant ‘had sub-let’
the premises but it was not a ground for eviction under
the Act and hence no decree could have been passed.
Reliance was also placed on an earlier decision of this
Court in Goppulal v. Thakurji Shriji Shriji Dwarkadheshji,
(1969) 3 SCR 989 : (1969) 1 SCC 792.
41. Negativing the contention, upholding the
decree of eviction and distinguishing Goppulal, this Court
said;
“The provisions of the Bombay Rents,
Hotel and Lodging House Rates Control Act,
1947 indicate that a tenant is disentitled to
any protection under the Act if he is within the
mischief of the provisions of Section 13(1)(e),
namely, that he has sublet. The language is
that if the tenant has sublet, the protection
ceases. To accede to the contention of the
appellant would mean that a tenant would not
be within the mischief of unlawful subletting if
after the landlord gives a notice terminating
the tenancy on the ground of unlawful
subletting the sub-tenant vacates. The
landlord will not be able to get any relief
against the tenant in spite of unlawful
subletting. In that way the tenant can foil the
attempt of landlord to obtain possession of the
premises on the ground of subletting every
time by getting the sub-tenant to vacate the
premises. The tenant’s liability to eviction
arises once the fact of unlawful subletting
is proved. At the date of the notice, if it is
proved that there was unlawful subletting,
the tenant is liable to be evicted”.
(emphasis supplied)
42. The Court approved the view taken by the High
Court of Gujarat in Maganlal Narandas Thakkar v. Arjan
Bhanji Kanbi, (1969) 10 Guj LR 837. In Maganlal, the
High Court of Gujarat had an occasion to consider a pari
materia provision under the Saurashtra Rent Control
Act, 1951?.
43. A similar argument was advanced before the
Court. However, considering the scheme of the Act, the
Court refuted the contention. The Division Bench
observed;
“So far as the first point is concerned, Mr.
Desai laid great stress, and relied very heavily,
on the grammatical meaning of the words ‘has
sub-let’. His argument is that the meaning of
the words ‘has sub-let’ include the element
that the subletting must be continuing on the
date when the plaintiff filed his suit. He stated,
and there is no dispute on the point, that the
words ‘has sub-let’ do not use of the verb ‘sub-
let’ in the present perfect tense. He referred to
page 61 of the Handbook of English Grammar
by R.W. Zandvoort. In paragraph 140 of this
Book it is stated that when a verb is used in
present perfect tense, it denotes “a completed
past action connected, through its result, with
the present moment”. The argument of Mr.
Desai was that the subletting which started
sometime after 1951, that is after the Act came
into operation, must be connected with the
present moment through its result; and his
argument was that once the sub-tenancy was
created, it must be connected with the present
moment-the date of filing the suit-by its result
by the sub-tenant continuing in possession of
the premises upto that date. Mr. Desai thus
urged before us that unless a sub-tenant were
in possession of the property sublet on the
date of the suit it cannot be said that the
tenant ‘has sub-let’ the premises, even though
a sub-tenancy was in fact created by the
tenant. In our opinion if this interpretation
were to be accepted, the result would be that a
tenant can with impunity put some other
person in possession of the premises as a sub-
tenant and avoid an order for delivery of
possession against him by seeing to it that the
sub-tenant departs from the property before
the plaintiff files a suit. Having regard to the
scheme of the Rent Control Act, particularly
the scheme of Sections 12 and 13 of the Act
and the context in which the words ‘has sub-
let’ are used, it appears to us that that is not
the way in which the meaning of the words
‘has sub-let’ should be gathered. If the Rent
Control Act were not in force and the parties
were left to their ordinary rights under the
Transfer of Property Act, the landlord will have
a vested right to recover possession in him as
soon as he terminates the tenancy of the
tenant in the manner provided in the Transfer
of Property Act. After terminating the tenancy
he can immediately call upon the tenant to
hand over possession to him. By enacting
Section 12 of the Rent Control Act, the
landlord’s right to terminate the tenancy is not
affected, but the enforcement of his right to
recover possession immediately thereafter from
the tenant is affected. The provisions of
Section 12 prevent a landlord from recovering
possession of the property from a tenant even
after a lawful termination of his tenancy,
provided the tenant fulfils the conditions
mentioned in Section 12. Section 12 does not
take away the right of the landlord to recover
possession of the premises but merely
postpones the enforcement of this right of the
landlord so long as the tenant fulfils the
conditions laid down in that section. Having
put this impediment in the enforcement of the
right of possession of the landlord or in other
words, having clothed the tenant with an
immunity from dispossession, the Legislature
proceeds in Section 13 to lay down those
conditions on the fulfillment of which the
landlord is entitled to recover possession of the
premises from the tenant. Section 13,
therefore, provides for those contingencies on
proof of which the tenant loses the immunity
from dispossession under Section 12. Some
discussion took place on the question whether
the tenant has a right of possession or whether
he has merely an immunity from being
dispossessed. Whether it be called an
immunity from dispossession or whether it be
called a personal right of possession, the fact
remains that by Section 13, the Legislature
has provided for dispossession of tenant,
despite provisions of Section 12, if the Court is
satisfied that any one of the grounds
mentioned in Section 13 does exist. One of
such grounds is the subletting of the premises
or a part thereof by the tenant. In view of this
scheme of the provisions in Sections 12 and 13
of the Act, it is necessary for us to construe
the meaning of the words ‘has sub-let’ keeping
in mind that the verb ‘sub-let’ is used in the
present perfect tense. First, it must be a
completed past action, that is the subletting
must be completed. A subletting is complete as
soon as the sub-tenant is put in possession of
the premises given to him on sublease. Now,
this completed act of subletting must have a
result. What would be that result in the
context of Sections 12 and 13 of the Act? The
result of subletting would be removal of the
impediment in the way of the landlord to
recover possession of the premises. In other
words, the result of subletting would be to take
away that personal right of possession which
the tenant enjoyed under the provisions of the
Rent Act. Now, this result must be connected
with the present moment. The present moment
will be the moment when the suit is filed. How
is this result connected with the filing of the
suit? The answer is quite obvious. It is this
removal of the impediment in the way of the
landlord’s recovery of possession which
induces him to go forthwith to the Court and
file a suit for possession. Therefore, the words
‘has sub-let’ mean that a sub-letting has taken
place and as a result of that subletting the
impediment in the way of the landlord to
recover possession has been removed, thus,
inducing him to go to Court and ask for
recovery of possession. It is the result of the
completed act, i.e. the removal of the
impediment in his way, which permits the
landlord to go to the Court and ask for a
decree for possession. It is not necessary,
therefore, that subletting must continue
enough if the premises have been sub-let
sometime after the coming into operation of
the Act. The provisions of Section 15 of the
Saurashtra Rent Control Act make subletting
unlawful. Therefore, any subletting by the
tenant after the Act came into operation
immediately removes the impediment in the
way of the landlord to recover possession and
entitles him immediately to go to the Court
and ask for recovery of possession. In order to
convey the correct meaning of the words ‘has
sub-let’ it is not necessary to show that the
subletting was in existence on the date of suit.
It is enough that the subletting has taken
place sometime after the Act came into
operation; it does not matter that the
subletting came to an end before the
landlord gave notice or before the landlord
filed a suit”.
(emphasis supplied)

44. In our opinion, the ratio laid down in the above
cases applies to the present case as well. Admittedly, on
the date the tenancy was terminated, the tenant (Public
Limited Company) was having a paid up share capital of
rupees more than one crore. Under clause (b) of Section
3(1) of the Act, therefore, the provisions of the Act were
not applicable to the suit-premises. It is true that a
resolution was passed by the Company to reduce the
paid up share capital to less than rupees one crore, but
the said resolution was never approved by BIFR. But
even otherwise, once it is proved that the tenancy was
legally terminated and the Act would not apply to such
premises, a unilateral act of tenant would not take away
the accrued right in favour of the landlord. Unless
compelled, a Court of Law would not interpret a provision
which would frustrate the legislative intent and primary
object underlying such provision. We, therefore, see no
infirmity in the conclusions arrived at by the courts
below.

EQUITABLE CONSIDERATIONS
45. The learned counsel for the respondent-
landlord is also right in submitting that the appellant-
tenant does not deserve equitable relief under Article 136
of the Constitution. The tenant has not paid
‘rent’/’mesne profits’ since more than ten years. Even
after approaching this Court, it had made part payment
pursuant to interim order made in April, 2005. But
nothing was paid/deposited thereafter even though two
years have passed. These facts have not been disputed by
the appellant. We are, therefore, of the view that even on
that ground, the appellant-tenant cannot ask for
discretionary and equitable relief and we are not inclined
to grant such relief.

46. For the foregoing reasons, the appeal deserves
to be dismissed and is, accordingly, dismissed with costs.

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