Companies Act Case Law M/S Cox & Kings Ltd & Anr Vs Smt Chander Malhotra




DATE OF JUDGMENT: 12/12/1996






Hon’ble Mr.Justice K.Ramaswamy
Hon’ble Mr.Justice S.B.Majmudar
Hon’ble Mr.Justice G.T.Nanavati
R.F.Nariman, Sr.Adr., Kiran Bhardwaj, Vineet Kumar,
Advs. with him for the appellants.
P.P.Rao, Sr. Adv., R.P.Sharma, Adv. with him for the
The following order of the Court was delivered:
This appeal by special leave arises from the judgment
of the Delhi High Court dated July 27, 1983 dismissing the
Second Appeal No.630/85 confirming the decree of eviction
passed against the appellants under Section 14(1)(b) of the
Delhi Rent Control Act.
The admitted facts are that the premises in question
was demised to Cox & Kings (AGENTS) Limited, a company
incorporated under the United Kingdom Companies Act [for
short, “Foreign Company”], tenant of Smt. Jagdish Rani Sethi
who subsequently sold the property to Smt. Chander Malhotra
by a registered conveyance. Mrs. Rani Sethi had filed
eviction petition on diverse grounds. Smt. Chander Malhotra,
the respondent, after getting impleaded, amended the
patition and also pleaded sub-letting to the appellant, an
Indian Company. The Rent Controller found that premises had
been sub-let by the Foreing Company and, therefore, ordered
eviction. That was confirmed in appeal. As stated earlier,
the second appeal was also dismissed. The principle question
that arises for consideration, on reference to this Bench,
is: whether involuntary transfer of the leasehold interest
from Foreign Company to the Indian Company is not sub-
letting within the meaning of Section 14(1)(b) of the Act?
The said section reads under:
“… that the tenant has, on or
after the 9th day of June, 1952,
sub-let, assigned or otherwise
parted with the possession of the
whole or any part of the premises
without obtaining the consent in
writing of the landlord”.
The Contention of Shri R.F. Nariman, learned senior
counsel for the appellants, is that after the Foreign
Exchange Regulation Act, 1973 [for short, the “FERA”] had
come into force, by operation of Section 29 of the Act, the
Foreign Company was required to obtain, to carry on the
business, written permission of the Reserve Bank of India.
Accordingly, it had applied for permission but the Reserve
Bank had refused permission to continue the same business.
As a consequence, the India company was floated in which
Foreign Company, though sought to have 100% shares, on
refusal of the permission, had only 40% share in the
business to which approval was given by the Reserve Bank of
India. Consequently, the Indian company has been carrying on
the business in the same premises. since the transfer of the
leasehold interest from the Foreing Company to the Indian
Company is by compulsion, it is an involuntary one and thus
is not a case of “sub-letting” within the meaning if Section
14(1)(b) of the Act. Therefore, the view taken by the court
below is not correct in law. We find it difficult to give
acceptance to the contention. It is true that under Section
29 of the FERA, without prejudice to the provisions of
Section 28 and Section 47 and notwithstanding anything
contained in any other provision of the Act or the
provisions of the Companies Act, 1956, a person residing
outside India (whether a citizen of India or not) or a
person who is not a citizen of India but a is resident in
India, or a Company (other than a Banking Company) which is
not incorporated under any law in force in force in India or
in which the non-resident interest is more than 40% or any
branch of such Company shall not, except with the general
or special permission of the Reserve Bank of India, (a)
carry on in India, or establish in India a branch office or
other place of business for carrying on any activity of a
trading , commercial or industrial nature, other than an
activity for the carrying on of which permission of the
Reserve Bank has been obtained under section 28…”: (b)
every application made under clause (a) shall be in such
form and contain such particulars as may be specified by the
Reserve Bank; and (c) where an application has been made
under clause (a), the Reserve Bank may, after making such
inquiry as it may think fit. either allow the application
subject to such conditions, if any, as the Reserve Bank may
think fit to impose or reject the application.
It is not in dispute that such an application came to
be made and the Reserve Bank had passed an order directing
the Foreign Company to wind up its business. Subsequently,
an application was made for permission to incorporate Indian
Company with 100% share held by the Foreign Company which
was refused. Thereafter, Indian Company came to be
incorporated in which the Foreign Company claimed to have
to 40$% share in the business. Thus, The Indian Company was
incorporated under the Indian Companies Act, 1956 and was
doing business under FERA with the permission of Reserve
Bank. The question then is: whether the Foreign Company
sub-let the demised premises within the meaning of Section
14(1) (b) of the Act? It is seen that under FERA, there is
no compulsion that the premises demised to the Coreign
Company should be continued or given to Indian Company. On
the other hand, the conveyance executed between the Foreign
Company and the Indian Company reads as under.
” An agreement was executed was
executed on July 4, 1980 between
the English Company. The English
Company is termed as Assignor and
Indian Company has been termed as
Assignee. The last part of the
preamble indicates that whereas the
assignor has agreed to assign and
the assignee has agreed to take
over for consideration and upon
the terms and conditions here in
after set out the business carried
on by the assignor in India
hereinabove recited as a going
concern together with all the
assets and liabilities of the said
business as appearing in the
Audited Balance Sheet of the
assignor relating there to as on
the 30th day of September, 1976.
Clause (1) specifically mentioned
that on and from the date including
the transfer date the said
business shall become and be deemed
to have been owned by and assigned
to the Assignee, i.e. Indian
Company. Clause (2) envisages that
assignment was received for
consideration Clause 7(1)(b)
indicates as regards the leaseholds
, subject to payment of the rent
reserved and the observance of all
the covenants and conditions
contained in the Leases or
Agreements for Leases under which
the same are hold. Clause 7(ii)
indicates that incidental to the
assignment of the said business as
a going concern; the Assignor
shall, in so for as it is within
its power to do so, assign or cause
to be assigned the monthly and
other tenancies of all rented
premises of the Assignor in India”.
Thus, It could be seen that under the consequence of
agreement the Foreign Company and the Indian Company, the
Indian Company became the assignee with all rights and
liabilities and subject to observance of the terms and
conditions of all the tenancy rights contained in the leases
or agreements for lease under which the same are being held
by the Foreign Company. It would, thus, be clear that it is
a case of assignment of the leasehold right, had from the
respondent in favour of India Company, subject to the
observance of the leasehold covenants contained in the lease
held by the Foreing Company. The question, therefore, is:
whether it is a sub-letting or assignment? It is seen that
sub-section (b) of Section 14, in clear terms envisages that
the tenant shall not, after June 9, 1952, sub-let, assign,
or otherwise part with the possession of the whole or any
part of the premises, without obtaining the written consent
of the landlord. It is seen that though by operation of FERA
the Foreign company had wound up its business, it assigned,
under the agreement, the leasehold interest in the demised
premises to the Indian Company which is carrying on the same
business in the tenanted premises without obtaining the
written consent of the landlord.
The respondent-landlord is not bound by such
assignment, induction of the appellant-Company against her
wishes. Her written consent is a pre-condition, as envisaged
under sub-section (i)(b) of Section 14 which was not
obtained. Therefore, it is a clear case of sub-letting. Even
otherwise, it would be an assignment, as admittedly agreed
in the agreement referred to herein before between the
Foreing Company and the Indian Company. In P.H. Rao v.
S.P.N.K. Jain & Anr. [(1980) 3 SCR 444], the landlord had
executed a lease in respect of the demised premises in
favour of the Laxmi Bank on 1.4.1942; the Bank went into
liquidation. the liquidator sold leasehold right to the
respondent and the Court confirmed the same. An application
for eviction come to be filed and it was contended that it
being an involuntary transfer it was not a case of sub-
letting under Section 14(1)(b) of the Act. This Court had
negatived the contention holding thus:
” As regards point No.3, the High
Court relying on a decision of
Calcutta High Court in Krishna Das
Nandy vs. Bidhan Chandra Roy [AIR
1959 Cal. 1811] has found that as
the transfer in favour of
respondent No. 1 by the official
liquidator was confirmed by the
Court, the status of the tenant by
respondent No.1 was acquired by
operation of law and, therefore,
the transfer was an involuntary
transfer and the provisions of Rent
Control Act would not be attracted.
After careful perusal of Calcutta
case, in the first place it appears
that the section concerned has not
been extracted and we are not in a
position to know what the actual
language of the Section of the
Bengali Act. Secondly, in our
opinion, the official liquidator
had merely stepped into the shoes
of Laxmi Bank which was the
original tenant and even if the
official liquidator had transferred
the tenancy interest to respondent
No.2 under the orders of the Court,
it was on behalf of the original
tenant. It was undoubtedly a
voluntary sale which clearly fell
within the mischief of Section
14(1)(b) of the Delhi Rent control
Act. Assuming that the sale by the
official Liquidator was an
involuntary sale, then it
undoubtedly become an assignment as
provided for by s.14(b) of Delhi
Rent Control Act. S.14(b) runs
“14(b)–that the tenant has, on or
after the 9th day of June, 1952,
sublet, assigned or otherwise
parted with the possession of the
whole or any part of the premises
without obtaining the consent in
writing of the landlord.”
The language of s.14(b) is wide
enough not only to include any sub-
lease but even an assignment or any
other mode by which possession of
the tenanted premises is parted. In
view of the wide amplitude of
s.14(b) we are clearly of the
opinion that it does not exclude
even an involuntary sale. Fore
These reasons, therefore, we are
unable to agree with the view taken
by the High Court. The appeal is
accordingly allowed, the judgment
and decree of the High Court are
set aside and the plaintiff’s
application under s.25 of the Delhi
Rent Control Act is dismissed.
“premises without obtaining the
The above ratio is clearly on the point in issue
involved in the present case, In Venkatarama Iyer v. Renters
Ltd. [(1951 II MLJ 57], K. Subba Rao, J., as he then was,
has to consider a similar question under the Madras
Buildings (Lease and Rent) Control Act. There was an
assignment between the two companies and considering the
effect thereof it was held that if a company doing business
in a particular premises taken on lease, transfers its
business as a going concern to another company and also the
net assets for consideration and thereafter the transferer
company takes over the business and carries on business in
the premises let out to the former company, it cannot be
said that there was no transfer of the right of the former
company under the lease to the latter company. On such
transfer, the tenant is liable to be evicted as a sub-
tenant. The above judgment is clearly on the point in issue
before us. In General Radio & Appliances Co. Ltd. v. M.A..
Khader (dead) by Lrs. [(1986) 2 SCR 607 at 620] a three-
Judge Bench had approved the above ratio. Two companies
having been amalgamated, eviction against the amalgamated
company came to be filed. On consideration of all the
decisions referred to above hereinbefore, the irresistible
conclusion followed that there had been a transfer of the
tenancy interest of appellant No.1 in respect of the
premises in question to the appellant No.2, subsequently,
renamed appellant No.3, M/s. National Radio Electronics Co.
Ltd. Accordingly, their eviction was upheld under Section
10(ii)(a) of the Andhra Predesh Buildings (Lease, Rent and
Eviction Control Act, 1960. The facts in Madras Bangalore
Transport Co. (West) v. Inder Singh & Ors. [(1986) 3 SCC 62]
relied upon by Shri R.F. Nariman, are clearly
distinguishable. In that case, a partnership firm was
divided between the partners and two separate firms came to
be formed with a distinct area of operation and one of the
companies was to retain possession of the tenanted premises.
After 10 years, application for eviction came to be filed on
the ground of subletting of the premises. Considering the
constitution of the companies, its operation and the nature
of the incidence that flowed therefrom, this Court had held
that the limited company and the partnership firm were two
only on paper but were one for practical purposes There was
substantial identity between the limited company and the
partnership firm. On the basis of those findings, it was
held that there was no sub-letting. The ratio has no
application to the facts in this case.
In view of the findings recorded above, viz., there was
a clear assignment between the Foreign Company and the
Indian Company of the demised premises without any written
consent of the respondent-landlord, it is a case of “sub-
letting” within the meaning of Section 14(1)(b) of the Act.
The courts below, therefore, have not committed any
illegality in reaching those findings warranting
The appeal is accordingly dismissed. No costs.



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