Companies Act Case Law Singer India Limited Vs Chander Mohan Chadha & Ors

CASE NO.:
Appeal (civil) 387 of 2004

PETITIONER:
SINGER INDIA LIMITED

RESPONDENT:
CHANDER MOHAN CHADHA & ORS

DATE OF JUDGMENT: 13/08/2004

BENCH:
CJI,G. P. MATHUR & C. K. THAKKER

JUDGMENT:
J U D G M E N T
(With Civil Appeal No. 388 of 2004)
G.P. MATHUR, J.

 

1. This appeal, by Special Leave, has been preferred against the
judgment and order dated 25.5.2001 of Delhi High Court whereby the
Second Appeal preferred by the appellant was dismissed and the judgment
and order dated 8.4.1996 of the Rent Control Tribunal directing eviction of
the appellant from the premises in dispute was affirmed.

2. Shri Atma Ram Chadha, predecessor-in-interest of respondent Nos. 1
to 13 (hereinafter referred to as the ‘landlord’) let out Shop No. 13/14
(Private No. 15) Block’C’, Cannaught Place, New Delhi to M/s. Singer
Sewing Machine Company, incorporated under the laws of the State of New
Jersey, USA, (hereinafter referred to as ‘American Company’), at a rental of
Rs. 1200/- per month vide a registered lease deed dated 11.7.1966. In the
year 1982, the landlord filed an eviction petition on the ground, inter alia,
that the American Company, without obtaining any written consent from the
landlord, had parted with the possession of the premises in dispute in favour
of Indian Sewing Machine Company Limited, incorporated under the
Indian Companies Act (hereinafter referred to as ‘Indian Company’), and it
was the said company which was in exclusive possession of the premises
and thereby it was liable for eviction in view of Section 14(1)(b) of the
Delhi Rent Control Act (hereinafter referred to as the ‘Act’). The eviction
petition was contested by the appellant on the ground, inter alia, that a
direction was issued to the American Company to reduce its share capital to
40 per cent in order to carry on business in India in view of Section 29 of
Foreign Exchange Regulation Act, 1973 (hereinafter referred to as ‘FERA’).
Accordingly, Company Petition bearing No. 66 of 1981 was filed by the
Indian Company before the Bombay High Court under Sections 391 and
394 of the Companies Act which was allowed on 31.12.1981, and a scheme
of amalgamation was sanctioned whereby the undertaking in India of the
American Company was amalgamated with the Indian Company. Under the
scheme of amalgamation the whole of the business, property, undertaking,
assets, including leases, rights of tenancy, occupancy etc stood transferred to
and vested in the Indian Sewing Machine Company, namely, the Indian
Company. It was submitted that the Indian Company is no other entity
except the legal substitute of the American Company and in substance there
is no case of sub-tenancy. The Additional Rent Controller, Delhi dismissed
the eviction petition by the judgment and order dated 6.2.1995, but this was
reversed by the Rent Control Tribunal in the appeal preferred by the
landlord and eviction petition was allowed. The Second Appeal preferred
by the appellant was dismissed by the High Court on 25.5.2001. During the
pendency of the appeal before the Rent Control Tribunal, the name of M/s.
Indian Sewing Machine Company was changed as Singer India Limited
which is the appellant herein.

3. Shri Anil Divan, learned senior counsel for the appellant, has
submitted that at the relevant time Section 29 of FERA provided that a
company (other than a banking company) which is not incorporated under
any law in force in India or any branch of such company, shall not, except
with a general or special permission of the Reserve Bank, 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 had
been obtained under Section 28. Accordingly, a direction was issued by the
Reserve Bank to the American Company to reduce its equity capital to 40
per cent. In view of this direction, a Company Petition was filed under
Sections 391 and 394 of the Companies Act in the Bombay High Court for
sanctioning a scheme of amalgamation which was allowed and the
American Company got amalgamated with the Indian Company. Learned
counsel has submitted that it was not a voluntary transfer of undertaking, but
the amalgamation of the original lessee, namely, the American Company
with the Indian Company had to be resorted to under compulsion of law
with a view to secure compliance of the provisions of FERA and the
directions issued by the Reserve Bank of India and, therefore, Section 14(1)
(b) of the Act would not be attracted. Learned counsel has further submitted
that in the peculiar facts of the present case, Section 14(1)(b) of the Delhi
Rent Control Act should not be literally construed but a purposive
construction should be given. Reference in this connection has been made
to a decision of Delhi High Court in Telesound India Ltd. In re. 1983 (53)
Company Cases 926 wherein it has been held that the effect of an order of
amalgamation passed under Section 394 of the Companies Act is that the
rights, properties and the liabilities of the transferor company become the
rights, property and liabilities of the transferee-company and it is neither an
assignment of right or property nor an assignment of the property by the
company. On amalgamation, the transferor-company merges into the
transferee-company shedding its corporate shell, but for all practical
purposes remaining alive and thriving as part of the larger whole. The
transferor-company is dissolved not because it has died or ceased to exist,
but because for all practical purposes it has merged into another corporate
shell. Learned counsel has thus submitted that what should be looked into
is the substance of the matter and in view of the aforesaid legal position,
only the corporate shell of the American Company has been shed or
removed, but it is still alive and thriving as part of the Indian Company and
consequently there was no sub-letting or parting with possession so as to
attract the provision of Section 14(1)(b) of the Act. Shri Divan has also
referred to G.K. Bhatnagar vs. Abdul Alim 2002(9) SCC 516 and Parvinder
Singh vs. Renu Gautam and others 2004(4) SCC 794 wherein with reference
to creation of partnership by a tenant it was held that if the user and control
of the tenancy premises has been parted with and a deed of partnership has
been drawn up as an indirect method of collecting the consideration for
creation of sub-tenancy or for providing a cloak or cover to conceal a
transaction not permitted by law, the court is not estopped from tearing the
veil of partnership and finding out the real nature of transaction entered into
between the tenant and the alleged sub-tenant. Reference has also been
made to a decision of a Single Judge of Delhi High Court in Vishwa Nath
vs. Chaman Lal Khanna AIR 1975 Delhi 117 wherein it was held that if an
individual takes a premises on rent and then converts his sole proprietorship
concern into a private limited company in which he has the controlling
interest, it would not amount to parting with possession with any one as he
continues to be in possession of the premises and as such he does not
become liable for eviction under Section 14(1)(b) of the Act. Learned
counsel has further submitted that as the Company Petition for sanctioning
the scheme of amalgamation was filed in order to secure compliance with
law, namely, to reduce the equity capital of the American Company to 40
per cent and as the “lease, rights of tenancy or occupancy” of the said
company got vested with the Indian Company in view of the sanction
granted by the Bombay High Court i.e. under the orders of the Court, the
principle laid down by this Court in Hindustan Petroleum Corporation Ltd
and another vs. Shyam Co-operative Housing Society and others 1988 (4)
SCC 747 will be applicable and no order of eviction can be passed against
the appellant.
4. Shri Dushyant Dave, learned senior counsel for the respondent, has
submitted that the argument that it was not the voluntary act of the
American Company whereunder its leasehold rights, rights of tenancy or
occupancy got transferred to or vested in the Indian Company is wholly
fallacious. The direction issued by the Reserve Bank of India for ensuring
compliance of Section 29 of FERA was merely to reduce the equity capital
of the American Company to 40 per cent and this could be achieved by
various modes permissible in law. No such direction had been issued by
the Reserve Bank to the American Company for getting itself amalgamated
with an Indian Company. The American Company voluntarily submitted to
a scheme of amalgamation with the Indian Company in the Company
Petition before the Bombay High Court whereunder its ‘lease, right of
tenancy or occupancy’ got vested with the Indian Company. After the
sanction of scheme of amalgamation, the American Company completely
lost its identity and it was the Indian Company which came into possession
of the premises in dispute and, therefore, the provisions of Section 14(1)(b)
of the Delhi Rent Control Act were clearly attracted and the order for
eviction had rightly been passed. Learned counsel has also submitted that it
is a well-settled principle of interpretation that the words of a statute must
be interpreted in their ordinary grammatical sense unless there be something
in the context or in the object of the statute in which they occur or in the
circumstances in which they are used to show that they were used in a
special sense different from their ordinary grammatical sense, and the
golden rule is that the words of a stature must, prima facie be given their
ordinary meaning. On a plain reading of the provision, it is urged, sub-
letting, assigning or otherwise parting with possession of the whole or any
part of the premises without obtaining the consent in writing from the
landlord would render the tenant liable for eviction. It has thus been urged
that in view of the fact that the American Company transferred the lease and
occupancy rights to the Indian Company, the order for eviction passed
against the appellant was perfectly justified. Shri Dave has also submitted
that the controversy raised in the present appeal has already been considered
in several decisions by this Court and there is absolutely no reason to depart
from the view taken therein.

5. Before adverting to the contentions raised at the Bar, it will be
convenient to reproduce Section 14(1)(b) of the Act, which reads as under:
” 14. Protection of tenant against eviction.– (1)
Notwithstanding anything to the contrary contained in
any other law or contract, no order or decree for the
recovery of possession of any premises shall be made by
any court or Controller in favour of the landlord against
a tenant:

Provided that the Controller may, on an
application made to him in the prescribed manner, make
an order for the recovery of possession of the premises
on one or more of the following grounds only, namely —

(a) 

(b) 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..”


There is no ambiguity in the Section and it clearly says that if, without
obtaining the consent in writing of the landlord the tenant has, on or after
9.6.1952, (i) sub-let, or (ii) assigned, or (iii) otherwise parted with the
possession of the whole or any part of the premises, he would be liable for
eviction. The applicability of the Section depends upon occurrence of a
factual situation, namely, sub-letting or assignment or otherwise parting
with possession of the whole or any part of the premises by the tenant.
Whether it is a voluntary act of the tenant or otherwise and also the reasons
for doing so are wholly irrelevant and can have no bearing. This view finds
support from an earlier decision rendered in M/s. Parasram Harnand Rao vs.
M/s. Shanti Prasad Narinder Kumar Jain and another AIR 1980 SC 1655
wherein Section 14(1)(b) of Delhi Rent Control Act came up for
consideration. The tenant in the premises, was Laxmi Bank, which was
ordered to be wound up and in that winding up proceeding, the Court
appointed an Official Liquidator who sold the tenancy rights in favour of
S.N. Jain on 16.2.1961. The sale was confirmed by the High Court and, as a
result thereof, S.N. Jain took possession of the premises. Thereafter, the
landlord filed a petition for eviction of Laxmi Bank. The High Court held
that as the transfer in favour of S.N. Jain by the Official Liquidator was
confirmed by the Court, he acquired the status of the tenant by operation of
law and, therefore, the transfer of the tenancy rights was an involuntary
transfer and the provision of Section 14(1)(b) of the Act would not be
attracted. Reversing the judgment, this Court held that 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 S.N. Jain under the orders of the Court, it was on behalf
of the original tenant. It was further held that the sale was a voluntary sale,
which clearly was within the mischief of the Section, and assuming that the
sale by the Official Liquidator was an involuntary sale, it undoubtedly
became an assignment as provided by Section 14(1)(b) of the Act. The
Court further held that the language of Section 14(1)(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 and the provision does
not exclude even an involuntary sale.

6. It is also necessary to take note of some clauses of the scheme of
amalgamation which was sanctioned by the Bombay High Court on
31.12.1981. In the scheme “Transferor Company” means the undertaking in
India of Singer Sewing Machine Company, a company incorporated under
the laws of the State of New Jersey, USA, the “Transferee Company” means
Indian Sewing Machine Company Limited, a company incorporated under
the Companies Act, 1956 and having its registered office at 207, Dadabhoy
Naoroji Road, Bombay, and the “Appointed Day” means 1.1.1982. The
relevant part of clause (2) of the scheme, which has a bearing on the
controversy, is being reproduced below:

2. ” With effect from the Appointed Day, except as
hereinafter stated, the whole of the business, property,
undertaking, assets, including leases, rights of tenancy or
occupancy, instalment receivables under hire purchase
contracts, benefits of licences and quota rights of
whatsoever description and wheresoever of the
Transferor Company shall without further act or deed, be
transferred to and vested in the Transferee Company so
as to become from the appointed day, the business,
property, undertaking assets, including leases, rights of
tenancy or occupancy, instalment receivable under hire
purchase contracts, benefits of licences and quota rights
of the Transferee Company” for all the estate and interest
of the transferor company therein, provided that 13,445
equity shares of.”

The effect of this clause is that with effect from 1.1.1982 “leases, rights of
tenancy or occupancy” of the Singer Sewing Machine Company (American
Company) got vested with M/s. Indian Sewing Machine Company (Indian
Company).

7. The provision for facilitating reconstruction and amalgamation of
companies is made under Section 394 of the Companies Act. In an
amalgamation, two or more companies are fused into one by merger or by
one taking over the other. Reconstruction or amalgamation has no precise
legal meaning. In Halsbury’s Laws of England (4th Edn.) para 1539, the
attributes of amalgamation of companies have been stated as under:

” Amalgamation is a blending of two or more existing
undertakings into one undertaking, the shareholders of
each blending company becoming substantially the
shareholders in the company which is to carry on the
blended undertakings. There may be amalgamation
either by the transfer of two or more undertakings to a
new company, or by the transfer of one or more
undertakings to an existing company. Strictly
“amalgamation” does not, it seems, cover the mere
acquisition by a company of the share capital of other
companies which remain in existence and continue their
undertakings, but the context to which the term is used
may show that it is intended to include such an
acquisition.

The question whether a winding up is for the
purposes of reconstruction or amalgamation depends
upon the whole of the circumstances of the winding up.”

8. In Saraswati Industrial Undertaking vs. CIT Haryana AIR 1991 SC
70 (para 6), it has been held that there can be no doubt that when two
companies amalgamate and merge into one, the Transferor Company loses
its identity as it ceases to have its business. However, their respective
rights or liabilities are determined under the scheme of amalgamation, but
the corporate identity of the Transferor Company ceases to exist with effect
from the date the amalgamation is made effective. Therefore, in view of the
settled legal position, the original lessee, namely, the American Company
ceased to exist with effect from the Appointed Day i.e. 1.1.1982 and
thereafter the Indian Company came in possession and is in occupation of
the premises in dispute.

9. The effect of parting of possession of the tenanted premises as a result
of sanction of scheme of amalgamation of companies under Section 394 of
the Companies Act by the High Court has also been considered in two
decisions of this Court. In M/s. General Radio and Appliances Co. Ltd and
others vs. M.A. Khader 1986 (2) SCC 656, which is a decision by a bench
of three learned Judges, the premises had been let out to M/s. General Radio
and Appliances Co. Ltd. On account of a scheme of amalgamation
sanctioned by the High Court under Sections 391 and 394 of the Companies
Act, all property, rights and powers of every description including tenancy
right, held by M/s. General Radio and Appliances Co. Ltd. had been
blended with M/s. National Ekco Radio & Engineering Co. Ltd. Thereafter
the landlord instituted proceedings for eviction on the ground of
unauthorized sub-letting. It was urged on behalf of the original tenant that
the amalgamation of M/s. General Radio and Appliances Co. Ltd (appellant
No. 1) with M/s. National Ekco Radio & Engineering Co. Ltd. (appellant
No. 2) was an involuntary one which had been brought into being on the
basis of the order passed by the High Court under Sections 391 and 394 of
the Companies Act and that the appellant No. 1 Company had not been
wound up and /or liquidated, but had been merely blended with appellant
No. 2 on the basis of the order of the Court and consequently there was no
sub-letting by appellant No. 1 Company to appellant No. 2 Company. It
was also urged that appellant No. 1 Company had not become extinct but
had been merged and/or blended with appellant No. 2 Company. It was
held that the order of amalgamation was made by the High Court on the
basis of the petition filed by the Transferor Company in the Company
Petition and, therefore, it cannot be said that this is an involuntary transfer
effected by the order of the Court. It was further held that appellant No. 1
Company was no longer in existence in the eyes of law and it had effaced
itself for all practical purposes. The appellant No. 2 Company i.e., the
Transferee Company, was not a tenant in respect of the suit premises and it
was appellant No. 1 Company which had transferred possession of the suit
premises in favour of the appellant No. 2 Company. The Court further took
the view that under the relevant Act, there was no express provision that in
case of any involuntary transfer or transfer of the tenancy right by virtue of
a scheme of amalgamation sanctioned by the High Court by its order under
Sections 391 and 394 of the Companies Act, such a transfer will not come
within the purview of Section 10(ii)(a) of Andhra Pradesh Building (Lease,
Rent and Eviction) Control Act. On this finding, it was held that the
appellant was liable for eviction.

10. Cox & Kings Ltd. and another vs. Chander Malhotra 1997 (2) SCC
687 is also a decision by a bench of three learned Judges and arose out of
proceedings for eviction under Section 14(1)(b) of Delhi Rent Control Act.
Here, the premises were given on lease to Cox & Kings (AGENTS)
Limited, a company incorporated under the United Kingdom Companies
Act (for short, “Foreign Company”). A petition for eviction was filed on
several grounds and one of the grounds was of sub-letting to Cox & Kings
Limited, a company registered under the Indian Companies Act (for short an
“Indian Company”). It was contended on behalf of the appellant that in
view of Section 29 of FERA, the Foreign Company was required to obtain
written permission from the Reserve Bank of India to carry on business.
The said permission was sought for but was refused. As a consequence, the
Indian Company, namely, Cox & Kings Limited was floated in which the
Foreign Company sought to have 100 per cent shares, but on refusal of
permission had only 40 per cent of shares in the business to which approval
was given by the Reserve Bank of India. Thereafter, the Indian Company
carried on business in the same premises. It was urged that as the transfer of
leasehold interest from the Foreign Company to the Indian Company was by
compulsion, it was an involuntary one and, therefore, it was not a case of
sub-letting within the meaning of Section 14(1)(b) of the Act. It was held
that under FERA, there was no compulsion that the premises demised to the
Foreign Company should be continued or given to the Indian Company. On
the other hand, under the agreement executed between the Foreign
Company and the Indian Company, incidental to the assignment of the
business as a growing concern, the Foreign Company also assigned the
monthly and other tenancies and all rented premises of the assignor in India
to the Indian Company. The Court, accordingly, concluded that though by
operation of FERA the Foreign Company had wound up its business, but
under the agreement it had assigned the leasehold interest in the demised
premises to the Indian Company which was carrying on the same business
in the tenanted premises without obtaining the written consent of the
landlord and, therefore, it was a clear case of sub-letting. After referring to
the earlier decisions in M/s. Parasram Harnand Rao vs. M/s. Shanti Prasad
Narinder Kumar Jain (supra) and M/s. General Radio and Appliances Co.
Ltd. vs. M.A. Khader (supra), the Court ruled that it was a case of
assignment by the Foreign Company to the Indian Company which
amounted to sub-letting within the meaning of Section 14(1)(b) of the Act
and the decree for eviction was affirmed.

11. These cases clearly hold that even if there is an order of a Court
sanctioning the scheme of amalgamation under Sections 391 and 394 of the
Companies Act whereunder the leases, rights of tenancy or occupancy of the
Transferor Company get vested in and become the property of the
Transferee Company, it would make no difference in so far as the
applicability of Section 14(1)(b) is concerned, as the Act does not make any
exception in favour of a lessee who may have adopted such a course of
action in order to secure compliance of law.

12. Madras Bangalore Transport Co. (West) vs. Inder Singh and others
1986(3) SCC 62 cited by Shri Divan, does not advance the case of the
appellant either as, here, the Court on the basis of material on record found
as a fact that the Limited Company was formed with the partners of the
existing tenant firm as Directors and both the firm and the company were
operating from the same place, each acting as agent of the other. It was also
found as a fact that the company was only an ‘alter ego’ or a ‘corporate
reflection’ of the tenant firm and the two were for all practical purposes
having substantial identity and, consequently, there was no sub-letting,
assignment or parting with possession of the premises by the firm to the
company so as to attract Section 14(1)(b) of the Act. This case has been
decided purely on facts peculiar to it and no principle of law has been laid
down. The position in Hindustan Petroleum Corporation Ltd and another vs.
Shyam Co-operative Housing Society and others 1988(4) SCC 747 cited by
learned counsel for the appellant has hardly any application here. It is not a
case of amalgamation of two companies but acquisition of undertaking of a
Foreign Company by the Central Government. Section 5 of Esso
(Acquisition of Undertakings in India) Act, 1974 provided that where any
property is held in India by Esso under any lease or under any right of
tenancy, the Central Government shall, on from the appointed day be
deemed to have become the lessee or tenant, as the case may be, in respect
of such property as if the lease or tenancy in relation to such property had
been granted to the Central Government, and thereupon all the rights under
such lease or tenancy shall be deemed to have been transferred to and vested
in the Central Government. In view of this statutory provision, the Central
government, by operation of law, became the tenant of all such properties
which were being held by Esso under any lease or any right of tenancy.
There is no statutory enactment here which may give any kind of protection
to the appellant.

13. Shri Divan has next contended that on amalgamation Singer Sewing
Machine Company (American Company) merged into Indian Sewing
Machine Company (Indian Company) shedding its corporate shell, but for
all practical purposes remained alive and thriving as part of the larger
whole. He has submitted that this Court should lift the corporate veil and
see who are the directors and shareholders of the Transferee Company and
who are in real control of the affairs of the said company and if it is done it
will be evident there has been no sub-letting or parting with possession by
the American Company.

14. In Palmer’s Company Law (24th Edn), in chapter 18, para 2 onwards
some instances have been given in which the modern company law
disregards the principle that the company is an independent legal entity and
also when the Courts would be inclined to lift the corporate veil and the
important ones being in relation to the law relating to trading with enemy
where the test of control is adopted and also where the device of
incorporation is used for some illegal or improper purpose. In Gower’s
Principle of Modern Company Law (4th Edn), in chapter 6, the topic of
lifting the veil has been discussed. The learned author has said that there is
no consistent principle beyond a refusal by the legislature and the judiciary
to apply the logic of the principle laid down in Solomon’s case where it is
too flagrantly opposed to justice, convenience or the interest of the
Revenue. In the cases where veil is lifted, the law either goes behind the
corporate personality to the individual members, or ignores the separate
personality of each company in favour of the economic entity or ignores the
separate personality in favour of the economic entity constituted by a group
of associated companies. The principal grounds where such a course of
action can be adopted are to protect the interest of the Revenue and also
where the corporate personality is being blatantly used as a cloak for fraud
or improper conduct.

15. The question of lifting the corporate veil was examined by a
Constitution Bench in Tata Engineering and Locomotive Co. Ltd etc. vs.
The State of Bihar and others AIR 1965 SC 40. The Court observed that
the doctrine of lifting of the veil postulates the existence of dualism between
the corporation or company on the one hand and its members or
shareholders on the other. After review of a number of authorities and
standard books, the parameters where the said doctrine could be applied
were indicated in consonance with the principles indicated in the preceding
paragraph. In Delhi Development Authority vs. Skipper Construction
Company (P) Ltd. and another AIR 1996 SC 2005, Mr. Justice B. P. Jeevan
Reddy has examined the question in considerable detail and it will be useful
to reproduce the relevant paragraph of the judgment which is as under:
Para 24. ” Lifting the corporate veil:

In Aron Salomon v. Salomon & Company Limited
(1897) Appeal Case 22), the House of Lords had
observed, “the company is at law a different person
altogether from the subscriber..; and though it may be
that after incorporation the business is precisely the same
as it was before and the same persons are managers and
the same hands received the profits, the company is not
in law agent of the subscribers or trustee for them. Nor
are the subscribers as members liable, in any shape or
form, except to the extent and in the manner provided by
that Act”. Since then, however, the Courts have come to
recognize several exceptions to the said rule. While it is
not necessary to refer to all of them, the one relevant to
us is “when the corporate personality is being blatantly
used as a cloak for fraud or improper conduct” (Gower:
Modern Company Law  4th Edn. (1979) at P. 137)
Pennington (Company Law  5th Edn. 1985 at P.53) also
states that “where the protection of public interests is of
paramount importance or where the company has been
formed to evade obligations imposed by the law”, the
Court will disregard the corporate veil ”

It was held that, broadly, where a fraud is intended to be prevented, or
trading with enemy is sought to be defeated, the veil of corporation is lifted
by judicial decisions and the shareholders are held to be ‘persons who
actually work for the corporation’. The main principle on which such a
course of action can be taken was stated in paragraph 28 of the report and
the relevant part thereof is being reproduced below:

“28. The concept of corporate entity was evolved to
encourage and promote trade and commerce but not to
commit illegalities or to defraud people. Where,
therefore, the corporate character is employed for the
purpose of committing illegality or for defrauding others,
the Court would ignore the corporate character and will
look at the reality behind the corporate veil so as to
enable it to pass appropriate orders to do justice between
the parties concerned..”
16. However, it has nowhere been held that such a course of action is
open to the company itself. It is not open to the Company to ask for
unveiling its own cloak and examine as to who are the directors and
shareholders and who are in reality controlling the affairs of the Company.
This is not the case of the appellant nor could it possibly be that the
corporate character is employed for the purpose of committing illegality or
defrauding others. It is not open to the appellant to contend that for the
purpose of FERA, the American Company has effaced itself and has ceased
to exist but for the purpose of Delhi Rent Control Act, it is still in existence.
Therefore, it is not possible to hold that it is the American Company which
is still in existence and is in possession of the premises in question. On the
contrary, the inescapable conclusion is that it is the Indian Company which
is in occupation and is carrying on business in the premises in question
rendering the appellant liable for eviction.

17. Civil Appeal No. 388 of 2004 has been filed by M/s. Singer Company
of USA (American Company). The American Company did not challenge
the order of the Rent Control Tribunal by filing a Second Appeal in the
High Court. Even otherwise, the grounds for challenge are the same, which
we have already discussed above.

18. For the reasons mentioned above, Civil Appeal No. 387 of 2004 and
Civil Appeal No. 388 of 2004 are dismissed with costs.

19. The appellant in Civil Appeal No. 387 of 2004 is granted three
months’ time to vacate the premises subject to its filing usual undertaking
before the Rent Controller.

 

 

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