GENERAL RADIO & APPLIANCES 00. LTD. & ORS. v. K.A. KHAilKR (DEAD) BY I.RS.

The Judgment of the Court was delivered by

p. 610 Copy page pinpoint

A • B.C. RAY, J. This appeal by way of certificate granted by the High Court of Andhra Pradesh at Hyderabad under Article • 133 of the Constitution of India is against the judgment and decree in Civil Revision Petition No. 684 of 1974 made on 23rd of April, 1976 and it raises an important question of law, i.e. whether the voluntary amalgamation of the first and B second appellants companies amounts to a transfer of the first appellant's right under the lease withic the meaning of s. 10 (ii)(a) of Andhra Pradesh Buildings (Lease, Rent & Eviction) t- Control Act, 1960.

c The front corner portion of the premises bearing No. 8092/1/2 (new No. 5-1-1-) situated at Rashtrapati Road at Secundrabad was let out on January 12, 1959 to M/s General Raio & Appliances Co. (P) Ltd., the first appellant, on a r- - monthly rent of Rs. 200 on the basis of the rental agreement ~ dated January 12, 1959 (Exhibit P-f>) executed by the first appellant. Clause 4 of the said agreement provides that the D tenant shall not sub-let the premises or any portion thereof to anyone without the written consent of the landlord. The respondent-landlord M.A. Khader issued a notice dated ~cember 26, 1968 to the tenant-appellant No. 1, M/s. General Radio and Appliances (P) Ltd. terminating the tenancy on the ground of subletting and/or transfer and assignment of the interest of ;.,, ' E the Appellant No. 1 to the Appellant No. 2. Thereafter on April 7, 1969 the Rent Control Case No. 96 of 1969 was filed by the respondent-landlord for eviction of the Appellant- tenant on two grounds, i.e. (i) unauthorised subletting of the premises by the first appellant and (ii) wilful default in payment of rent from October 7, 1968 to April 7, 1969. The l F appellants Nos. 1 and 2 filed a joint counter contending that there was neither subletting, nor assignment of the tenancy --1 rights by the first appellant to the second appellant, i.e. the first appellant company was amalgamated with the second appellant company by operation of law under the scheme of amalgamation and order of the High Court of Bombay under ss. G 391 and 394 of the Companies Act, 1956 and that the judgment of the Bombay High Court was judgment 'in Rem' and i t was binding on the petitioner even though he was not a party to the proceedings. It was further contended therein that by ~ reason of order of the Bombay High Court all the property rights and powers of every description including tenancy right H held by the M/ s. General Radio Appliance (P) Ltd., the

p. 611 Copy page pinpoint

A appellant No. 1, have been blended with the second appellant .--coq>any, M/s. National Ekco Radio and Engineering Co. Ltd., and that there was no wilful default in payment of rent. The application for eviction should, therefore be dismissed.

Two witnesses were examined on behalf of the landlord B and three witnesses were examined on behalf of the tenant. The Rent Controller, Secunderabad, on consideration of evidences on record held that the appellant No. 1 coq>any has sublet the ~premises to the appellant No. 2 coq>any without written consent of the landlord, as the amalgamation of the first appellant-coq>any with the second appellant-company amounted to subletting or assigruoont. It was further held that there was wilful default in payment of rent for the period in c -~question. The Rent Controller, therefore, allowed the applica- ..& tion and directed the appellants to vacate and deliver vacant ~ possession of the suit premises under their occupation to the landlord-petitioner within a period of three months from the date of the order. D Against this judgment and decree an appeal being Appeal No. 406 of 1972 was preferred before the Chief Judge, city Small Causes Court, Hyderabad. On 29.10.75 the Chief Judge,

• ~ ~~~~ st~ltl ~:~ ~h:rt~P~~~~::~dN:.ftet ~~:!: ~~~u~~:~~~; E sponsored the scheme of amalgamation, the ultimate power to sanction or not to sanction it rested with the High Court. The scheme of amalgamation though proposed by appellant No. 1 company voluntarily yet it became binding and enforceable on • all the parties only when it was made a rule of the court. It was, therefore, held that the transfer of assets and F ~ liabilities including the leasehold interest of appellant No. 1 company to appellant No. 2 coq>any took place by virtue of the order of the court. It was held that such a transfer of assets being art involuntary one did not amount to assigruoont of lease by appellant No. 1 company to appellant No. 2 company and as such it did not violate the terms of the lease. By G amalgamation of appellant 1 company with appellant 2 company, the appellant 1 company is not wound up but it is merely .. blended with the other coq>any. It was also held that there was no wilful default on the part of the tenant to pay the rent for the period mentioned in the petition inasl1llch as in spite of the tender of the rent the respondent-landlord H

612 SUPRDIE COURT REPORTS (1986] 2 s.c.R.

refused to accept the same and to grant receipt in the name of A appellant No. 2 company. The appeal was, therefore, allowed• and the order of the Rent Controller was set aside dismissing the eviction petition with costs.

Against this judgment and order, an application in revision being Civil Revision Petition No. 684 of 1974 was filed in the High Court of Judicature of And hr a Pradesh, B Hyderabad. On April 23, 1976 the said Revision Application was ~~ allowed and the judgment and decree of the Appellate Court was set aside on restoring the decision of the Rent Controller. It

c was held that the amalgamation of appellant No. l company with appellant No. 2 company on the basis of application made by the appellant No. l company by suhnitting a scheme which was _.,, duly approved and sanctioned by the High Court of Bombay was 'f - not an involuntary one and this order of amalgamation ,,. indicated transfer of tenancy right without any notice or opportunity to the landlord. It is thus hit by the provision of s. lO(ii)(a) of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960. D Against this judgment and order the instant appeal by way of certificate granted by the High Court of Andhra Pradesh has been preferred. The only question which falls for consideration in this appeal is whether in view of the order ,.. . '

made by the High Court of Bombay on 27.3.1968 sanctioning the scheme of amalgamation proposed by the appellant No. l company under ss. 391 and 394 of the Companies Act in Company Petition No. 4 of 1968 and the subsequent transfer of tenancy right in the suit premises and vesting of the same in the 2nd appellant can be deemed to be subletting of the tenancy right of the appellant No. l or transfer or assignment of interest in the tenanted premises of the appellant No. l to the appellant No. 2 within the meaning of s. lO(ii) (a) of the said Act. The appellant No. l General Radio and Appliances (P) Ltd. admittedly took the premises in question on the basis of an agreement dated 12th of January, 1959 duly executed by him in favour of the landlord-respondent at a monthly rent of Rs. 200 G for a period of eleven months commencing from 7th January

1959. Clause 4 of the said agreement is in the following terms :

"That they shall not sublet the said premises or H

p. 613 Copy page pinpoint

any portion thereof to anyone without the written A consent of the landlord."

On January 9, 1968 the appellant No· 1 M/s General Radio and Appliances (PJ Ltd., filed the Company Petition No. 4 of 1968 in the High Court of Bombay under S• 394 of the Companies Act for sanction of a scheme of amalgamation with M/s National B Ekco Radio & Engineering Co. Ltd., M/s. General Radio & -i Appliances (P) Ltd. was shown as transferor Company and the National Ekco Radio and Engineering Co. Ltd· was shown as a transferee company in the said petition. The High Court of Bombay by order dated 28th March, 1968 sanctioned the scheme of amalgamation. It is pertinent to refer here to the relevant -"' portions of the scheme which are as follows : C

"With effect from 1st day of January 1967 the undertaking and all the property, rights, powers of every description including all leases and tenancy rights, industrial, import and all other licences, quota rights of General Radio &Appliances (P) Ltd. D (hereinafter called the transferor company) without further act or deed be transferred and vested or deemed to be transferred and vested in the National Ekco Radio & Engineering Co. Ltd. (hereinafter called the transferee company) etc." E It has been urged on behalf of the appellant that the amalgamation of M/s General Radio & Appliances (P) Ltd., 1st appellant with the 2nd appellant company is involuntary one, '"-'t which has been brought into being on the basis of the order of the High Court of Bombay made under as. 391 and 394 of the Y Companies Act. The first appellant company has not been F wounded up and or liquidated, but it has been merely blended with the 2nd appellant on the basis of the order of the court. As such there has been no subletting by the 1st appellant company to the 2nd appellant company of the tenancy right of the 1st appellant in respect of the suit premises, nor there has been any transfer or assignment of interest of the 1st G appellant in respect of its tenancy right in the premises in ·~question in favour of the 2nd appellant within the meaning of S. 10(ii)(a) of the said Act. It has been further urged in this connection that the 1st appellant company by virtue of the scheme of amalgamation which was sanctioned by the Bombay H

614 SUPRDIE COURT REPORTS [1986 J 2 S, C, R,

High Court merely becomes a devision of the 2nd appellant A company i.e. M/s. National Ekco Radio and Engineering Company "a Ltd. In other words, it was tried to be coritended that the 1st appellant company has not become extinct, but it has been merged and or blended in the 2nd appellant company. In order to determine this issue it is relevant to set out herein the provisions of S. lO(ii)(a) of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960 (A.P. Act No. 15 B of 1960), Section lO(ii) runs as follows :

"A landlord who seeks to evict his tenant shall apply to the Controller for a direction in that behalf. .If the Controller, after giving the tenant reasonable opportunity of showing cause against the .,,- c applicant is satisfied :

(ii) that the tenant has, in Andhra area after the t- commencement of the Hyderabad House Rent Control Order of 1953 Fasli without the written consent of the landlord ; D (a) transferred his right under the lease or sublet the entire building or any portion thereof, if the lease does not confer on him any right to do so." ..J.. ,

Section 2(ix) defines tenant E "'tenant' means any person by whom or on whose account rent is payable for a building and includes the surviving spouse, or any son or daughter, of a -r' deceased tenant who had been living with the tenant in the building as a member of the tenant's family -j' F up to the death of the tenant and a person ' continuing in possession after the termination of the tenancy in his favour, but does not include a person placed in occupation of a building by its tenant, etc." G In the instant case the appellant No. 1 i.e. M/s General Radio and Appliances Co. (P) Ltd. is undoubtedly the tenant ~ having taken lease of the premises in question from the respondent landlord by executing a rent agreement dated 12th January, 1959 at a rental of Rs. 200.per month, the tenancy H

p. 615 Copy page pinpoint

A colllllE!Ilcing from 7th day of January 1959. On the basis of the 'A sanction accorded by order of the High Court of Bombay made on 27th March 1968 sanctioning the scheme of amalgamation in Company Petition No. 4 of 1968 filed by the 1st appellant, all the property, rights and powers of every description including all leases and tenancy rights etc. of the 1st appellant were B transferred to and vested or deemed to be transferred and vested in the 2nd appellant M/s National Ekco Radio and --iEngineering Co. Ltd. It also appears that the appellant No. 1 company stood dissolved from 16th of April, 1968. This clearly goes to show that the General Radio and Appliances (P) Ltd., the tenant company has transferred all its interest in the tenanted premises in favour of the appellant No. 2 i .e c - National Ekco Radio and Engineering Co. Ltd. (the transferee ~company). The order of amalgamation has been made on the basis -1 of the petition made by the transferor company in Company Petition No. 4 of 1968 by the High Court of Bombay. As such it cannot be said that this is an involuntary transfer effected by order of the court. Moreover the 1st appellant company is no longer in existence in the eye of law and it has effected itself for all practical purposes. The 2nd appellant company i.e. transferee company is now the tenant in respect of the suit premises and the 1st appellant company has transferred " ~possession of the suit premises in favour of the 2nd appellant company. There is undoubtedly no written permission or consent of the respondent landlord to this transfer of tenancy right

- of the 1st appellant company as required under S. 10(ii)(a) of the said Act. Moreover even it is assumed to be a subletting to the 2nd appellant by the 1st appellant, such subletting has - ~been made contrary to the provisions of the said Act and in , violation of the terms of clause 4 of the tenancy agreement t- (Exhibit P-6) which clearly prohibits such subletting of the tenanted premises wi.thout the written permission of the land- lord. The Andhra Pradesh Building (Lease, Rent and Eviction) Control Act, 1960 is a special Act which provides for eviction of tenants on certain specific grounds mentioned in s. 10 of the said Act. There is no express provision in the said Act that in case of any involuntary transfer or transfer of the tenancy right by virtue of a scheme of amalgamation sanctioned ·~by the court by its order under ss. 391 and 394 of the Companies i\ct as in the present case, such transfer will not come within the purview of S. 10(ii) (a) of the said Act. In other words such a transfer of tenancy right on the basis of H

616 SUPROO COURT RERJRTS [19861 z s.c.R.

A the order of the ccrurt will be illlllune from the operation of the said Act and the transferee tenant will not be evicted on;. the ground that the original tenant transferred its right under the lease or sublet the tenanted premises or a portion thereof. It is important to note in this connection the de- finition of tenant as given in S. 2(ix) of the said Act which provides specifically that a tenant does not include a person B placed in occupation of a bnfldfng by its tenant. On a plain reading of this provision it is crystal clear that any persont' placed in occupation of a building by the tenant cannot be deemed or considered to be a tenant in respect of the preniises in which the said person is to be in possession within the meaning of the said Act. Therefore, the 2nd appellant i.e. c National Ekco Radio and Engineering Co. Ltd. the· transferee r' company who has been put in possession of the tenanted premises by the transferor tenant General Radio and Appliance f-. Co. (P) Ltd. cannot be deemed to be tenant under this Act on the mere plea that the tenancy right including the leasehold interest in the tenanted premises have come to be transferred D and vested in the transferee company on the basis of the order made under ss. 391 and 394 of the Companies Act.

The effect of an order under S. 153(A) of the Companies Act 1913 which corresponds to ss. 391 and 394 of the Companies .J. • Act, 1956 has been very succinctly stated in the case of E Sahayanidhi Virudhungar Ltd. v. A.S.R. Subrahmanya Nadar & Ors., 1951 A.I.R. Madras p. 209. Section 153(A) of the Companies Act has been enacted with a view to facilitate arrangements and compromise between a Company and its creditors or shareholders which involve a transfer of its ..Y- · - assets and liabilities to other companies as part of such agreement. If any such scheme or arrangement is sanctioned by--j court, the court is empowered by the section to make provisions by its order sanctioning the arrangement or any subsequent order, for the transfer of the assets and liabilities of a company in liquidation to another company styled in the section as transferee company. Where an order of court made under the section provides for the transfer of the assets and liabilities of a company in liquidation to another company, the assets are, by virtue of that order, without ~ more, transferred to and vest in the transferee company and · the liabilities of the former company are also cast upon the transferee company. Under the ordinary law of contract while H

p. 617 Copy page pinpoint

A ~assets are assignable, liabilities under contracts or duties arising thereunder are not assignable, but the effect of S. 153(A) is to some extent to override the ordinary law. Thus by an order sanctioning amalgamation of the rights, interest and liabilities of the transferor company are transferred and vested in the transferee company. It appears that by the order B of amalgamation, the interest, rights. of the transferor company in all its properties including leasehold interest and -4tenancy rights are transferred and vested in the transferee co~any.

It has been urged that the effect -of amalgamation is analogous to that of a man who enters with partership with c "\ another. The two companies do not become jointly liable to .their respective separate creditors and neither becomes liable -1.for the debts of the other. The general effect of amalgamation as provided in Halsbury's Laws of England (3rd Edition) Vol. 22, P. 432 has been referred to in this connection and it has been submitted that by the amalgamation there has been no subletting as the 1st appellant company has co-interest in transferee company, the 2nd appellant co~any herein. lne case of Devarajulu Naidu v. Ktbirajavalli Thyar811111a, [ 1949] 2 ,M.L.R. p. 423 has been referred to in this connection. In that ~ >case the original tenancy was in favour of three persons who were partners in the firm and after dissolution of the partnership firm one of the partner was allowed to wind up the affairs of the partnership and there.after he was allowed to use the demised premises for his sole business. The , question arose whether in such case the landlord was entitled ·t to eviction of that partner from the tenanted premises on the ~ground that there was subletting. It was held in the facts of that case that the original tenancy being in favour of three persons who were partners in the firm and act on the part of the two partners after dissolution of the firm to allow one of the parterns to use the premises for his sole business could not amount to a transfer or subletting of the premises to the petitioner. It has been observed as follows : G

"This act on the part of the two partners other than the petitioner cannot amount to a transfer or sub-letting of the premises to the petitioner. It is true that the Courts in England have taken up an extreme view that even when one of two partners H

618 SUPRE11E COURT REPORTS [1986) 2 s.c.R. A after the dissolution of the partnership assigns to>-, the other partner the interest of the partnership in premises which had been taken on lease by the partnership, it would amount to a breach of the covenant prohibiting an assignment of the lease without the consent of the lessor. But this Court B was not inclined to apply this doctrine to Indian conditions. In Ioragalva v • .lakri Beary, (1926, 52 M.L,J, 8) Devadoss, J, held that the transfer by ~ co-lessee in favour of another lessee of his right in the lease would not be a breach of a covenant against the assignment without the consent of the c landlord." y lhis decision has got no application to the instant case 1 inasmuch as in that case the only question involved was~­ whether the transfer by co-lessee in favour of another lessee of his rights would be a breach of covenant against assignment D without the consent of the landlord.

We have already stated hereinbefore that the 1st appellant company, the tenant, has transferred their interest in the-tenanted premises to the appellant No. 2 company on the basis of the order made by the High Court of Bombay in Companf_ _' E Petition No. 4 of 1968 sanctioning the scheme submitted to it by the transferor company. We have also held that this is not an involuntary transfer by operation of law, but a transfer of the interest of the tenant company on the basis of their application made before the said High Court in the said~ Company Petition. Furthermore, we have also held that the· F Andhra Pradesh Buildings (lease, Rent and Eviction) Control I Act, 1960 which is a special Act provides specific grounds for'Y termination of a tenancy and eviction of the tenant in S. lO(ii)(a) i.e. on the ground of subletting and/or transferring the interest of the tenant either in whole or any part of the tenanted premises to another person. lhus the Act prohibits in specific terms both subletting as well as the transfer or assignment of the interest of the tenant. Moreover clause 4 of the rent agreement executed by the !St appellant expresslyl prohibits subletting of the tenanted premises without the, express consent of the landlord. lhe transferor company in this case has undoubtedly been dissolved and the company has ceased to exist for all practical purpose in the eye of law.

GENL. RADIO CO. V• M.A. KHADER [B.C. RAY, J.) 619

~ ~!n t~~ ::st::::tof ~i!~e:n~~e;~~=:a~vei~1:~:8.:r::::~ 0

to the transferee company in contravention of the provisions of the said Act as well as in contravention of the terms and conditions of the said rent agreement thereby making the transferee company liable to be evicted from the tenanted B premises.

-f It has been observed by Subba Rao, J, in the case of Yenkatarw Iyer V• llenten Ltd., [1951) II M. L. R. 57 as

- follows :

"The Madras Buildings (Lease and Rent) Control Act c applies not only to residential and non-residential buildings, but also to same buildings used for both purposes. 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 transferee 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."

- It is pertinent to mention in this connection the decision of this court in Parasarm Bamand Rao v. Shanti "'lPrasad Narinder Kollar Jain & .Anr., [1980] 3 s.c.R. P• 444. In , this case the appellant landlord executed a lease in respect F ~Of the disputed premises in favour of respondent No. 2 for three years on 1.4.1942. In 1948 the appellant landlord filed a suit for eviction of the tenant for non-payment of the rent and for conversion of user of the premises. The suit for possession was dismissed, but a decree for arrears of rent was passed and it was held that Laxmi Bank was the real tenant, G The Bomaby High Court subsequently made an order that the Bank be wound up and in the winding up proceedings, the High Court ~appointed an official liquidator who sold the tenancy right to the respondent No. 1 in 1961. The sale was subsequently confirmed by the High Court and the respondent No. 1 took possession of the premises on 24. 2.1961. The landlord H

p. 620 Copy page pinpoint

A appellant filed an application under the Delhi Rent Control)-, Act for eviction of the Laxmi Bank and a decree for eviction was passed in favour of the appellant. Thereafter respondent ;" No. l filed a suit for declaration that he was tenant of the landlord. The suit was dismissed and the appeal against that order also failed. The respondent No. l, however, filed an application for recalling the warrant of possession issued by B the court in pursuance of the decree in favour of the appellant. This ultimately came up in second appeal and th~ High Court allowed the Rent Controller's order allowing recalling of warrant of possession. On appeal by special leave this Court held that the amplitude of S. 14(b) of the Delhi Rent Control Act was wide enough not only to include any sub- c lease !mt even an assignent or any other mcle by which{. possession of the tenanted premises is parted. In view of the t wide amplitude of s. l4(b), it does not exclude even anl-· invohmtary sale.

On a conspectus of all these decisions ref erred to hereinbefore the irresistible conclusion follows that there has 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. in utter contravention of the provision~-' of S. lO(ii)(a) of the said Act as well as of the terns and conditions of clause 4 of the rent agreement dated 12.1.1959 executed by lst appellant i.e. M/s General Radio and Appliances (P) Ltd. in favour of respondent landlord.

We, therefore, affirm the judgment and order passed by f~ the High Court of Judicature Andhra Pradesh and dismiss thi~-J F appeal. There will, however, be no order as to costs. "

S.R. Appeal dismissed.