JUDGMENT
P.K. Bahri, J.
(1) This second appeal under Section 39 of the Delhi Rent Control Act (hereinafter referred to as ‘the Act’) has been brought against the judgment dated 5th August, 1985 of Shri M.A. Khan, Rent Control Tribunal, Delhi, by which be dismissed the appeal brought by the appellants against an eviction order dated 21st February, 1985 of Shri A.K. Garg, Additional Rent Controller, Delhi, made on the ground of eviction covered by clause (b) of Section 14(1) of the Act.
(2) Smt. Jagdish Rani, previous owner/landlady, of the demised premises, which is a godown in property No. 3507, Rashid Manzil, Mori Gate, Delhi, had filed an eviction petition on the ground of eviction covered by clauses (c), (f) and (j) of Section 14(1) of the Act but later on during the pendency of the eviction case, the respondent had purchased this property and was substituted in place of Smt. Jagdish Rani, as petitioner and by amendment of the eviction petition the ground of eviction covered by clause (b) was set up and during the pendency of the eviction case other grounds of the eviction were given up.
(3) Facts relevant to the ground of eviction covered by clause (b) in brief are-that admittedly the premises in question stood let out to M/s. Cox and Kings (Agent) Limited, appellant No. I, and case of the respondent/ landlady is that the premises had been sub-let, assigned and parted with possession without the written consent of the landlady in favor of the appellant No. 2, namely-M/s. Cox and Kings (India) Limited.
(4) Appellant No. 1 is a company incorporated in U.K. and it was carrying on its business in India and in connection of that business the premises in question had been taken on rent. It was pleaded by the appellants that due to the coming into force of the Foreign Exchange Regulation Act, 1973, appellant No. 1 company could not possibly carry on any business in India except with the permission to be obtained from the Reserve Bank of India thus appellant No. 1 after taking necessary permission from the Reserve Bank of India had transferred its business to appellant No. 2 with effect from 1st October, 1978. It was pleaded that the share-holders of appellant No. 2 were earlier the employees of appellant No. 1 and by virtue of the agreement entered into between appellant No. \ and appellant No. 2, the appellant No. 1 acquired equity capital to the extent of 40% in appellant No. 2 and for a consideration of Rs. 3,98,500.00 the said business was transferred by appellant No. 1 to appellant No. 2 and the said consideration was paid by the issuance of 38,500 shares of the value of Rs. 10.00 each by appellant No. 2 in favor of appellant No. 1 and the balance amount of the consideration i.e. Rs. 3,500.00 was paid in cash. Reference is made to the letter of permission granted by Reserve Bank of India in this respect. It was also pleaded that one of the Directors in the two companies is common and this assignment of the business by appellant No. 1 to appellant .No. 2 and appellant No’s. I holding 40% equity capital in appellant No. 2 under the arrangement arrived at after taking permission from the Reserve Bank of India amounted to involuntary transfer and thus the ground of eviction covered by clause (b) is not available to the respondent/landlady. It was pleaded that clearly the business of appellant No. 1 and appellant No. 2 has become one and thus appellant No. 2 has become successor-in-interest of appellant No. 1 and thus there is no question of any sub-letting, parting with possession or assigning of the premises taking place by appellant No. 1 in favor of appellant No. 2. Both the courts below after going through the terms of the contract entered into between the appellant No. 1 and appellant No. 2 and also the terms of the permission granted by the Reserve Bank of India have given the findings that appellant No.1 and appellant No. 2 .are two separate legal entities and they have not amalgamated and become one legal entity and that the transferring of possession of the premises in question to appellant No. 2 by appellant No. 1 is not involuntary necessitated by any law and thus it amounted to ground of eviction covered by clause (b). I may mention that a plea was also taken by the appellants in the written statement that the respondent/landlady had acquiesced in the said arrangement made between appellant No. 1 and appellant No. 2 regarding the premises in question and thus was estopped from setting up this particular ground. Both the courts below negatived this plea and this particular pleas has not been pressed before me by the learned counsel for the appellants.
(5) The only contention raised by the learned counsel for the appellants is that in view of the provisions of the Foreign Exchange Regulation Act, 1973 coming into force, the appellant No. 1 could not possibly carry on any business in India without taking necessary permission from the Reserve Bank of India and thus appellant No. 1 was forced by statutory provisions to transfer its business to appellant No. 2 after taking necessary permission from the Reserve Bank of India and so it cannot amount to voluntary subletting or transferring of possession of the premises by appellant No. 1 to appellant No. 2. It has been further argued by learned counsel for the appellants that in fact appellant No. 1 and appellant No. 2 should be treated as one legal entity inasmuch as the whole of the business of appellant No. 1 and its liabilities have been taken over by appellant No. 2 and appellant No. 1 has taken up 40% equity shares in the capital of appellant No. 2 and one of its Directors has also been taken as Director of appellant No. 2 hence the control and possession of the premises in question continued to be with appellant 1.
(6) The first point to be considered in this case is whether there has taken place any involuntary assignment of the demised premises by appellant No. I to appellant No. 2. I have gone through the provisions of the Foreign Exchange Regulation Act, 1973 and find that there is no statutory provision requiring that the foreign company should transfer its business to any resident company or a foreign company should assign all its assets to any Indian company. Section 29 of the Foreign Exchange Regulation Act, 1973 is the only provision to which reference has been made by both the learned counsel in support of their respective contentions. Section 29 reads as follows :-
“29.Restrictions on establishment of place of business in India- (1) Without prejudice to the provisions of Section 28 and Section 47 and notwithstanding anything contained in any other provisions of this Act or the provisions of the Companies Act, 1956, a person resident outside India (whether citizens of India or not) or a person who is not a citizen of India but is resident in India, or a company (other than a banking company) which is not incorporated under any law in force in India or in which the non-resident interest is more than forty per cent or any branch of such company shall not, except with the general or special permission of the Reserve Bank,-
(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 ha s been obtained under Section 28 ; or
(B)acquire the whole or any part of any undertaking in India or any person or company carrying on any trade, commerce or industry or purchase the shares in India of any such company.
(2)(a) where any person or company (including its Branch) referred to in Sub-section (1) carries on any activity referred to in clause (a) of that sub-section at the commencement of this Act, or has established a branch, office or other place of business for the carrying on of such activity at such commencement, then such person or company (including its branch) may make an application to the Reserve Bank within a period of six months from such commencement or such further period as the Reserve Bank may allow in this behalf for permission to continue to carry on such activity or to continue the establishment of the branch, office or other place of business for carrying on of such activity as the case may be.
(B)Every application made under clause (a) shall be in such form and contain such particulars as may be specified by the Reserve Bank.
(C)Where an application has been made under clause (a), the Reserve Bank may, after making such inquiry as it may deem fit, either allow the application subject to such conditions, if any, as the Reserve Bank may think fit to impose or reject the application:
Provided that no application shall be rejected under this clause unless the parties who may be affected by such rejection have been given a reasonable opportunity for making a s in the matter.
(D)Where an application is rejected by the Reserve Bank under clause (c), the person or company (including its branch) concerned shall discontinue such activity or close down the branch, office or other place of business established for the carrying on of such activity, as the case may be, on the expiry of a period of ninety days or such other later date as may be specified by the Reserve Bank from the date of receipt by such person or company (including its branch) of the communication conveying such rejection.
(E)where no application has been made under clause (a) by any person or company (including its branch), the Reserve Bank may, by order, direct such person or company (including its branch) to discontinue such activity or to close down the branch, office or other place of business established for the carrying on of such activity as the case may be, on the expiry of such period as may be specified in the direction :
Provided that no direction shall be made under this class unless the parties who may be affected by such direction have been given a reasonable opportunity for making a representation in the matter.
(3)Notwithstanding anything contained in Sub-section (2), the Reserve Bank may, having regard to-
(I)the fact that any person or company (including its branch), referred to in sub-section (1), is carrying on any activity referred to in clause (a) of that sub-section at the commencement of this Act or has established a branch, office or other place of business for the carrying on of such activity at such commencement, in either case, in pursuance of any permission or license granted by the Central Government ; and
(II)the nature of the activity which is being, or intended to be carried on by such person or company (including its branch), by order, exempt-
(A)such person or company (including its branch) ; or
(B)any class of such persons or companies (including their branches), in relation to such activity as may be specified in the order, from the operation of the provisions of subsection (2) subject to such conditions as may be specified in the order.
Provided that the Reserve Bank shall not make any order under this sub-section in a case where the activity which is being, or intended to be, carried on is solely of a trading nature.
(4)(a) where at the commencement of this Act any person or company (including its branch) referred to in Sub-section (1) holds any share in India of any company referred to in clause (b) of that sub-section, then, such person or company (including its branch) shall not be entitled to continue to hold such shares unless before the expiry of a period of six months from such commencement or such further period as the Reserve Bank may allow in this behalf such person or company (including its branch) had made an application to the Reserve Bank in such form and containing such particulars as may be specified by the Reserve Bank for permission to continue to hold such shares.
(B)Where an application has been made under clause (a), the Reserve Bank may, after making such inquiry as it may deem fit, either allow the application subject to such conditions, if any, as the Reserve Bank may think fit to impose or reject the application:
Provided that no application shall be rejected under this clause unless the parties who may be affected by such rejection have been given a reasonable opportunity for making a representation in the matter.
(C)Where an application has been rejected under clause (b), or where no application has been made under clause (a), the Reserve Bank may, if it is of opinion that it is expedient so to do for the purpose of conserving the foreign exchange, direct such person or company (including its branch) to sell or procure the sale of such shares :
Provided that no direction shall be made under this clause unless notice of such direction for a period of not less than ninety days has been given to the person or company (including its branch) to be affected by such direction.
EXPLANATION.-FORthe purpose of this section, “company” has the same meaning as in clause (b) of the Explanation to Section 28.”
(7) The only effect of this particular provision is that a foreign company cannot carry on any business in India without obtaining permission of the Reserve Bank of India if that company has more than 40% interest of the non-residents. So what was required by this statutory provision was that the foreign company should dilute its shares so that the foreign interest should be reduced to about 40% or less. This provision did not require that a foreign company should transfer its business to any other company or should assign the assets and the liabilities to another company. The foreign company only sought permission of the Reserve Bank of India for assigning its Indian business to appellant No. 2 and the said permission was granted by Reserve Bank of India vide letter copy, Ext. CW/R2 which reads as follows :
Reserve bank Of India Central Office Exchange Control Department BOMBAY-400 001. 14-5-1980 Ref. No. EC.CO.FCS. 2385/653/(Activity)80. Cox & Kings (Agents) Ltd., 270/272, Dr. D.N. Road, Bombay – 400 001. Dear Sirs, Indianisation of Cox and Kings (Agents) Ltd. Please refer to the correspondence resting with your letter dated 6th May 1980 on the captioned subject. We are agreeable to your transferring your Indian business to the Cox & Kings (India) Pvt. Ltd., with effect from the close of business on 30th September, 1978 for a total consideration of Rs. 3,98,500.00 . The said consideration of Rs. 3,98,500.00 will be discharged by issue of 38,500 shares of Rs. 10.00 each at par to Cox & Kings (Agents) Ltd., U.K. and the balance amount of Rs. 13.500.00 by payment in cash. Please note that the above permission has been granted subject to the following conditions:- (i) The non-resident interest in the equity capital of Cox & Kings (India) Pvt. Ltd., shall not at any stage exceed 40% of the paid- up capital of that company. (ii) The Indian business of your company will be taken over by Cox & Kings (India) Pvt. Ltd., with effect from 1st October, 1978 and there shall not be any depletion in the net assets as on the date of actual transfer from what was given in your balance sheet as at 30th September, 1978. (iii) The Income tax liabilities of the Indian branch up to 30th September, 1978 will be settled by Cox & Kings (Agents) Ltd., U.K. and shall not devolve on the Indian company. The U.K. company may note to forward to us an undertaking that any claims made by the tax authorities in excess of the tax paid will be met by remittances from abroad. (iv) The formalities regarding Indianisation should be completed by 31st August, 1980. 2. After your Indian business has been transferred to the Indian company, you should wind up your affairs in India and submit to us certified copy of the notice in form 54A under Indian Companies Act, 1956 submitted to the Registrar of Companies, Delhi and Haryana, in this regard. You should not also undertake any activity of a trading, commercial or industrial nature in India after your business has been transferred as approved herein- above. 3. For remittance of the amount of Rs. 13,500.00 you may please approach our Bombay Regional Office, Along with (a) a ‘no objection’/tax clearance certificate from the Income tax authorities (b) an auditor’s certificate regarding compliance with conditions (ii), (iii) and (iv) above (c) an auditor’s certificate relating to the transfer of your Indian business to the said Indian company with effect from 1st October, 1978. Please also submit to us a certified copy of the sale deed that may be executed by you for transfer of your Indian business to the Indian company. 4. Please acknowledge receipt. Yours faithfully, sd/- (Smt. S. Gopinath) for Controller.
(8) Reference is also made to Ext. QQ/R3 which reads as under :
“RESERVE BANK Of India Central Office Exchange Control Department Bombay – 400 001. 3rd June, 1980 No. CO.F.C.S. 2544/653/(Activity)/80 Cox & Kings (India) Pvt. Ltd., 270/272, Dr. D.N. Road, Bombay – 400 001. Dear Sirs, Section 19(10)(d) of the Foreign Exchange Regulation Act, 1973 – Permission for issue of shares to non-residents. Please refer to our endorsement No. EC.CO.FCS. 2386/653 (Activity)/79-80 dated 15th May, 1980 granting permission to Cox & Kings (Agents) Ltd., to transfer its Indian business to your Company for a total consideration of Rs. 3,98,500.00 (Rupees three lakhs ninety eight thousand five hundred only). We advise that you have our permission under Section 19(l)(d) of the Foreign Exchange Regulation Act, 1973 for issue of 38,500 shares ofRs. 10.00 each at par to Cox & Kings (Agents) Ltd, U.K., in part settlement of the said consideration of Rs. 3,98,500.00 subject to the condition that the non-resident interest in the equity capital of your company including 1,500 shares already held by the above U.K. company shall not at any stage exceed 40% of the total equity capital. 2. The permission for issue of 38,500 shares of Rs. 10.00 each may also be treated as our permission under Section 29(l)(b) of the Foreign Exchange Regulation Act, 1973 to the U.K. company to acquire the said shares in your company. 3. It is also noted that out of the remaining 60% of the equity capital, your company proposes to issue 57,000 shares (57%) to resident Indians as per the list attached to your letter dated 6th May 1980 and remaining 3,000 shares (3%) to the ‘Staff Gratuity Fund Trust’. As regards the latter issue please, however, note to comply with the following additional conditions: (i) The Deed of the Staff Gratuity Fund Trust shall contain a clause to the effect that the trustees and the beneficiaries alike should be Indian citizens resident in India. (ii) The holding of shares by the Trust/Trustees in your company will be in accordance with the Sections 153, 153A and 533 of the Companies Act, 1956. 4. Please acknowledge receipt. Yours faithfully, sd/- (Smt. S. Gopinath) for Controller.”
(9) If we peruse the terms mentioned above in the letters of Reserve Bank of India they do not go to show that appellant No. 1 was bound under any statute to go by the terms mentioned by the Reserve Bank of India. It was voluntary act of appellant No. 1 in seeking permission of Reserve Bank of India with regard to certain transactions being entered into by appellant No. 1 with appellant No. 2 and the Reserve Bank of India granted that permission. The statute did not require that appellant No. I should have obtained permission from the Reserve Bank of India of the type sought by appellant No. 1. The appellant No. 1 could have sought the permission of Reserve Bank of India for carrying on business itself in India and it was for the Reserve Bank of India to decide whether such permission should be granted or not. In order to meet the requirements of Section 29 of the Act. the appellant No. 1 could have issued shares to residents of India so as to dilute its capital value and the non-residents should not hold more than 40% shares in appellant No. 1 company. Appellant No. 1 of its own evolution did not choose to adopt this method. Therefore the option lay with appellant No. 1 to proceed one way or the other and the statute did not require that appellant No. 1 should have proceeded only in the manner it actually proceeded to get permission from the Reserve Bank of India regarding the arrangements made by appellant No, I with appellant No. 2. It is not out of place to mention that the income-tax liabilities have not been assigned to appellant No. 2. So in the present case it was evident that appellant No. 1 and appellant No. 2 are two separate legal entities and there had been no statutory compulsion in appellant No. 1 transferring or assigning the demised premises in favor of appellant No. 2. It is also not out of place to mention that the agreement which had been entered into between appellant No. 1 and appellant No. 2, which has been reproduced in the judgment of the Tribunal in extenso also contained Clause 7(ii) to the following effect :-
“s the assignment of the said business as a going concern the assigner shall in so far 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 Assigner in India.” This clause clearly visualise that appellant No. 1 could assign those premises which were in its tenancy to appellant No. 2 and which were within its power to do so. There is a statutory prohibition for assigning tenanted premises without the consent of the landlady by the tenant to anyone else. So before assigning the premises in question to appellant No. 2, the appellant No. 1 ought to have taken written permission of the landlady.
(10) A mere fact that appellant No. 1 is holding 40% share capital in appellant No. 2 and one of the Directors of appellants I and 2 is common does not mean that appellants I and 2 are not separate legal entities. It is also quite evident that actual control and possession of the demised premises has been given to appellant No. 2. With one common Director being there does not lead to any inference that the demised premises still continues to be under the control and in possession of appellant No. 1.
(11) Learned counsel for the appellants had made reference to : Madras Bangalore Transport Co. (West) v. Inder Singh and others. In the cited case a partnership firm was the tenant of a particular premises and the partners of the said firm constituted a limited company of which all of them became Directors. The landlord set up the ground of sub-letting which was negatived by the Supreme Court with the observations that the partners, who were the real tenants, continued to be in complete control and possession of the demised premises and thus there had not been any sub-letting, parting with possession or assigning of the demised premises in favor of any third party. Such is not the case here. Hence this judgment is of no help to the appellants in showing that the premises had not been assigned by appellant No.1 to appellant No. 2.
(12) Counsel for the appellants also cited : Anakapalle Cooperative Agricultural and Industrial Society v. Workmen and others. This was the judgment also cited before the courts below and both the courts below distinguished this judgment for good reasons. The question which came up for decision before the Supreme Court was whether a purchaser of a running business becomes a successor-in-interest and then certain criteria was laid down which has to be kept in view where a particular purchaser of a running business becomes a successor-in-interest I quote the relevant observations of the Supreme Court in that respect :
“The question as to whether a purchaser of an industrial concern can be held to be a successor-in-interest of the vendor will have to be decided on a consideration of several relevant facts. Did the purchaser purchase the whole of the business ? Was the business purchased a going concern at the time of the sale transaction ? If the business purchased carried on at the same place as before ? Is the business carried on without a substantial break in time ? Is the business carried out by the purchaser the same or similar to the business in the hands of the vendor ? If there has been a break in the continuity of the business, what is the nature of the break and what were the reasons responsible for it ? What is the length of the break ? Has goodwill been purchased ? Is the purchase only of some parts and the purchaser having purchased the said, parts purchased some other new parts and started a business of his own which is not the same as the old business but is similar to it ? These and all other relevant factors have to be borne in mind in deciding the question as to whether the purchaser can be said a successor-in-interest of the vendor for the purpose of industrial adjudication. It is hardly necessary to emphasise in this connection that though all the facts which have been referred above by way of illustration are relevant, it would be unreasonable to exaggerate the importance of any one of these facts or to adopt the inflexible rule that the presence or absence of any one of them is decisive of the matter one way or the other. The decision of the question must ultimately depend upon, the evaluation of all relevant factors and it cannot be reached by treating any one of them as of overriding or conclusive significance.”
The Supreme Court was not seized with the matter whether a purchaser of a running business can be treated as a person in whose favor demised premises stands assigned. It is not a question in the Act to see whether the purchaser of a business of the tenant is a successor-in-interest of the tenant. The question which has to be decided is whether a purchaser of a business of the tenant, if he steps into the shoes of the tenant, may be as his successor, can be construed to be sub-tenant as contemplated by Clause (b) of Section 14(1) of the Act. Even if a tenant sells his business Along with the demised premises to a third person without the written consent of the landlord, the ground of eviction covered by Clause (b) would become available. The Supreme Court in the cited cases was considering the provisions of Section 25-FF of the Industrial Disputes Act, 1947 in order to decide whether the purchaser of the business could be treated as a successor-in-interest of the vendor for the purpose of the said Act. Even if such a purchaser could be treated as a successor-in-interest of the vendor for the purpose of Section 25-FF of the Industrial Disputes Act still such a transfer would be hit by provisions of Clause (b) because it would amount to sub-letting or parting with possession or assigning of the demised premises by a tenant to the third person without the written consent of the landlord. So this judgment also does not help the appellant in any manner.
(13) In 1979 (i) R.C.R. 548 : Mis. Bennett Coleman and Co. Lid. v. Shri Prem Chand Jain and others, it has been held that even if disputed premises are given possession of by the tenant to the employee of sister concern of the tenant still the same would be hit by Clause (b) of Section 14(1) of the Act. In 1981 (1) R.C.J. 235: Engineering Projects (India) Ltd. v. S.K. Malhotra and another, the facts in brief were that the demised premises had been given in possession of to B.H.E.L., by the tenant which was said to be the sister concern of the tenant. BH.E.L., had a shareholding of 20% in the tenant company. However, it was held that both the companies are separate legal entities and the ground of sub-letting was upheld.
(14) Learned counsel for the respondent has brought to my notice 1986(2) Rent Law Reporter 252 : M/s. General Radio and Appliances Co. Ltd and others v. M.A. Khader (dead) by L.Rs. In the cited case the order of amalgamation of the tenant company with another company was made by obtaining an order of the High Court. Still it was held by the Supreme Court that it amounted to sub-letting and parting with possession of the demised premises by the tenant company to the second company. It was held that such an amalgamation of the companies was not an involuntary transfer. It was also held that there is no provision in the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, that involuntary transfer of premises by the tenant would not be covered by the ground of eviction covered by Section 10 of the said Act. The ground of eviction in the said Act as far as sub-letting, assigning or parting with possession is concerned is similarly worded to the ground of Clause (b) of Section 14(1) of the Act. So the Supreme Court has upheld the ground of eviction in such a case which case was on better footing, as compared to the present case.
(15) In the present case the appellant No. 1 company is not holding majority of shares of appellant No. 2. So in no way appellant No. 1 has any controlling power over the appellant No. 2 by any stretch of reasoning. It is, indeed, not in dispute that appellant No. 1 and appellant No. 2 are two separate legal entities. Even if their veils are lifted to see the reality behind them even then there is nothing to show that appellant No. 1 is in control of appellant No. 2 so as to give a finding in favor of the appellants that appellant No. 1 continues to have possession and control of the demised premises. It is not possible to countenance the contention of the learned counsel for the appellants that appellant No. 1 and appellant No. 2 are one and the same thing and they should be treated as one legal person.
(16) I have no reason to differ with the reasonings given by the two courts below in coming to the finding that appellant No. 1 bad parted with possession and assigned the demised premises to appellant No. 2 without the written consent of the landlady and I affirm the judgments of the lower courts and dismiss this appeal with costs. Counsel fee Rs. 1000.00 .