USHA HARSHAD KUMAR DALAL v. M/S. ORG SYSTEMS AND ORS.

JANUARY 6, 2000

B

Rent Control & Eviction :

Code of Civil Procedure, 1908: Order XL Rules 1 and J-Appointment of Court Receiver--<:ourt Receiver acts on behalf on the Court-Duty of the Court Receiver to maintain status quo and to protect property-Receiver not to deal with the property without leave of the Court-{)b/igation of the Court as well as the Receiver to preserve and maintain the property as far as practicable in the ;·ame f onn when it was taken into possession.

The appellant is one of the co-owners of the property in dispute. In 1970, the co-owners of the suit property entered into a Leave and Licence G Agreement with R-2 company, permitting R-2 to occupy the premises on certain terms and conditions. The said licence W'dS renewable for a further term of five years un a three months' notice and the Licensees were alsu entitled to give the licensed premises or any portion thereof to their own subsidiary or affiliate companies/concerns etc. Before the expiry of the H 57

58 SUPREME COURT REPORTS (2UC0] 1 S.C.R.

A licence period of five years, an amendment in the Bombay Rents, Hotel alid Lodging Houses Rates Control Act, 1947 was introduced in 1973 whereby subsisting licensees became protected tenants and were governed by the said Act. Section 15(1) of the Act provided that subject to any contract to the contrary, it was unlawful for any tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any manner. The Act also made the landlord entitled to recover possession of the premises on that ground. After the expiry of the Leave and Licence Agreement in 1975, occupation of the suit premises by R-2 was governed by provisions of the Act. In 1978, the appellant filed a suit in the High Court for partition and possession of her share in the suit property against M who was another co-owner of the said suit property. The High Court, by an interim order, appointed a Receiver to the suit property directing him to take possession and manage the suit property and do all other incidental things in relation thereto.

D When the Court Receiver came to be appointed, the suit premises was found tu be in possession of R-2 company, therefore, the Receiver took symbolic possession. The said interim order was confirmed later. In 1996, some of the co-owners took Chamber Summons bringing to the notice of the High Court the fact that when the Court Receiver took symbolic possession, R-2 was in occupation but thereafter the said premises was being occupied E by R-1 company. On the High Court's direction, the Receiver filed a report stating that the sign board was in the name of R-1; premises was in posses- sion of R-1 and that S.G. Pharmaceuticals and R-1 were two companies of the same group. In its affidavit before the High Court against the Chamber Summons, R-1 stated that tbe name of R-2 i.e. Suhrid Geigy Trading Ltd. F was changed to S.G. Pharmaceuticals Ltd. and in 1981, by an order of the Gujarat Higlt Court, tbe said S.G. Pharmaceuticals was amalg-dmated into Ambalal Sarabhai Enterprises Ltd. and thereafter the said ORG Systems i.e. R-1 was given possession uf the premises as it was the electronics division of Ambalal Sarabhai Enterprises Ltd. R-1 also stated that amal- gamation scheme was sanctioned by the Gujarat High Court in December, G 1987 and therefore, their possession cannot be said to be unauthorised. The High Court rejected the Chamber Summons on maintainability itself directing respondents not to create any further sub- letting at all. The High Court was of the opinion that the dispute of the present nature could not be resolved by summary proceedings, instead the court Receiver had to adopt H the proper procedure under the Act. Hence the present appeal.

l.'SHA HARSHADKL MAR DAI .AL v. ORG SYSTEMS 59

Disposing the appeal and remitting the matter to the High Court, A this court

1.3. If a person who is put in possession as an agent of the Receiver G inducts a stranger and if such a third person claims a tenancy and then if the Receiver is directed to adopt the proceedings under the said Act for appropriate declaration and reliefs then the very object of Order XL, Rules 1 and 3 of the Code of Civil Procedure would be defeated. However, it is not in every case that the Receiver can resort to the summary procedure. H

60 SUPRhME COURT REPORTS [2GOOJ 1 S.C.R.

A The question would have to be decided by the Court with reference to the pleadings of the parties and the proof thereof. [67-B-C]

Anthony C. Leo v. Nandlal Bal f(Jishnan and Ors., [1996] 11 SCC 376, referred to.

B CIVIL APPELLATE JURISDICTION : Civil Appe::al No. 39 OF 2000.

From !ht: Judgmi.:nt and Ordt:r dated 8/9.12.97 of the Bombay High Court in C.S. No. 436/96 in Suit No. 120 of 1978.

C Rafiq A. Dada, Atul S. Dayal, R. Sasiprabhu and Chirag Balsara for the Appellant.

C. Mukund and T.V. Ratnam for the Respondent No. l.

Miland Sathe::, B.V. Deepak and M.P. Vinod for the Respond1.mt. D The Judgment of the Court wa~ delivered by

S.P. KURDUKAR, J. Leave granted.

This civil appeal arises out of an order dated December 819, 1997, E passed by the !t:arned single Judge of the Bombay High Court on Chamber Summons {for short Ch/S) taken out by the:: appellants defendant Nos. 2, 7, 8, 11 and 13 to 26. By this Ch/S the appellants sought a direction to the respondent No. 1 i.e. M/s. ORG Systems to handover quiet, vacant and peaceful possession of the premise~ i11 their occupation forthwith. The dispute in this Ch/S is restricted to the fourth floor premises in F 'Shreenikatan'. It is alleged by the appellants that M/s. ORG Systems have been in illegal and unauthorise occupation of the:: premises in question as they have bet:n inducted in the premises when the property was in posses- sion of the Court Receiver without leave of the:: court.

G It would be necessary to summarise briefly a few facts to indicate as to how the present Ch/S was required to be take::n out by the appellants.

Usha Harshadkumar Dalal fikd Suit No. 120 of 1978 on the:: Original 5ide of the Bombay High Court for partition of the said property against Manibhai Jhaverbhai Patel & Ors. seeking partition and possession of her ·H share in the said property. Obviously ;ince it was a 5Uit for partition

CSHAHARSHADKUMAR DALAL v. ORG SYSTEMS :s.P. KURDCKAR J .J 61

amongst the co-owners the first respondent, namely, M/s. ORG Systems as A well as second respondent Suhrid Geigy Trading Limited were not arrayed as defendants since they were not concerned with the partition of the joint family property. The appellant took out a Notice of Motion No. 115178 in the said suit for various interim reliefs including the appointment of the Court Receiver. The learned single Judge vide its order dated 13th B February, 1978, passed an ad interim order whereby Court Receivt:r, the Bombay High Court, was appointed as a Receiver of the suit property with a direction to take possession of the suit property and manage the same and do all other incidental things in relation thereto. Admittedly when the Court Receivt:r came to be appointed the premises in question was found to be in actual possession of Suhrid Geigy Trading Limited and, therefore, c thi: Receiver took symbolic possession without disturbing the possession of ; / Suhrid Geigy Trading Limited. The ad interim ordi:r was confirmed by the learned single Judge on July 24, 1978.

On September 7, 1970 (prior to suit) a Leave and Licence Agreement D between the co-owners of a building called Shreeniketan Building was entered inrn with Suhrid Geigy Trading Limited whereby the said Suhrid Geigy Trading Limited was permitted to occupy the premises in qm:stion admeasuring 4850 square feet on terms and conditions set out therein. The rdevant clause of the said agreement is as under: E

"7. If the Licencees shall be desirous of having this licence renewed for further term of five yi:ars and >hall at least three months before the expiration of the period of the Licence have givt:n to the Licensors in writing a notice of their intention to take such renewed licence, the Licensors shall upon receiving such notice and if there shall not be at the time of such request by the Licensees any existing breach, non- performance or non-obst:r- vance of any of the covenants and conditions on the part of the 1 Licensees herein contained grant to the Lia:nsees a fresh Licence of the Licensed Premises for a further period of 5 y.:ars at the same Licence fee or compensation (at the rate of Rs. 1.50 paise per sq. ft. for part of fourth floor) hereby dt:mised and up'Jn the same terms and conditions as are herein contained provided how- ever that such fresh licence shall not contain a covenant for renewal." H

62 SUPREME COURT REPORTS [2000) 1 S.C.R.

A There does not seem to be any dispute that the said agreement was not renewed for any further period. Other relevant clause in the said agreement is as under :

"11. The Licensees shall be entitled to give the licensed Premises or any part thereof terms and conditions not inconsistent B with the provisions hereof to their subsidiary associate concerns or affiliate Companies and establishments in Sarabhai Group of Companies including Suhrid Geigy Limited, Karamchand Prem- chand Private Limited, Ahmedabad Mfg. & Calico Printing Co. Ltd. Sarabhai Sons Private Limited, Sarabhai Management Cor- c poration Ltd., Sarabhai Technological Development Syndicate Pvt. Ltd., Bakubhai Ambalal Private Limited, Shilpi Advt:rtising Ltd., St:rcon Pvt. Ltd., Sarabhai M. Chemicals Ltd., Standard Phar- maceuticals Ltd., Systrocix Ltd., Synbiotics Ltd., Te!erad Private Limited, Travelers Ltd., for use by way of sub- licence without being required to obtain the liccn&ors consent to such sub-licence and the Licensees shall continue to be responsible to the Licensors for the performance and discharge of their obligations hen:under".

Before the expiry of the licence period of hve years on !st February, 1973, an amendment in the Bombay Rents, Hotd and Lodging House Rates Control Act, L947 (Bombay Rent Act) was introduced whereby all subsisting licensees became protected tenants and were governtd by tht provisions of the Bombay Rent Act. Section 15(1) of the Bombay Rent Act provides that subject to any contract to the contrary it shall not be lawful for any tenant to sub-let the whok or any part of the premises lt:t to him or to assign or transfer in any other manner. The Bombay Rent Act F provides that a landlord shall be entitled to recover possession of any premises if the Court is satisfied that the tenant has unlawfully sub-let the whole or part of the premises or assigned or transforred in any other manner his interest therein. The Leave and Licence Agreement came to be terminated on September 7, 1975 and the occupation of the said premises by Suhrid Geigy Tracling Limited was governed by the provisions of the Bombay Rent Act.

Some of the co-owners took out Ch/S !'lo. 436 of 1996 on 17th April, 1996, bringing to the notice of the High Court that when the Court Receiver took symbolic possession the Suhrid Geigy Trading Ltd. was in occupation but now the said premises are being occupied by the first

USHA HARSHADKUMAR DAlAL v. ORG SYSTEMS [S.P. KCRDLKAR. J.) 63

respondent ORG Systems. The applicants in the said Ch/S sought ap- A propriatc orders from the court directing tht: Court Rect:iver to submit a report to the High Court and recowr possession of the said premises from the first respondent ORG Systems. The High Court while passing the order directed the Court Receiver to submit a n:port relating to the use, occupa- tion and possession of the premises in question. On April 22, 1996, the Court Receiver submitted the report stating therein : B

(a) The sign board on the said premises was in the name of ORG Systems.

(b) The Section Officer met one Mr. Patwardhan, the accounts officer of the said ORG Systems and one Mr. R. Veershlin- gam an employee of ORG Systems, both of whom expressed their inability to state the manner in which the said ORG Systems came to occupy the said premises.

(c) Both the officers, however, informed the Section Officer that the entire premises were in the possession of ORG Systems under their lock and keys and they would furnish relevant documents on April 18, 1996. The Section Officer submitted his report to the court Receiver on 20th April, 1996.

(d) The Court Rcceivt:r thereafter submitted his report to the court annexing a letter dated March 16, 1994, addressed by one S.G. Pharmaceuticals stating that the said S.G. Phar- maceuticals and the said ORG Systems were companies within the Sarabhai Group. F While opposing the Ch/S the first respondent ORG Systems filed four affidavits stating therein :

That Suhrid Geigy Trading Limittd gave exclusive possession of the said premises to ORG Systems. In November L979, the name of Suhrid Geigy Trading Limited changed to S.G. Chemicals and Pharmaceuticals G Ltd. By an order dated 27th March, 1981 passed by the Gujarat High Court, a scheme of amalgamation was approved whereby the said S.G Chemicals and Pharmaceuticals Ltd. (Transferor) was amalgamated into Ambalal Sarabhai Enterprises Ltd. (Transfon:e). Pursuant to the said amalgamation of S.G. Chemicals and Pharmaceuticals Ltd. with Ambalal H

64 SUPREME COURT REPORTS (20001 l S.C.K A Sarabhai Enterprises Ltd. in March 1981, ORG Systems which w.as the electronics division of Ambalal Sarabhai Enterprises Ltd. was given pos- session of the said premises. The amalgamation scheme was sanctioned by thc Gujarat High Court by an order dated 24th Decemba, 1987 and because of this amalgamation scheme their possession cannot be said to bc unauthorised. The first respondent ORG Systems also raised a contcntion that the present Ch/S was taken out afkr a lapse of 16 years which would indicate that the applicants in the Ch/S or any other co-owm.:r had no objection to the possession of ORG Systems of the premises in question. It was also contended that as the Court Receiver alone could take ap- propriate action in accordance with law, the applicants had no right to take out such Ch/S.

Both the parties in support of tht:ir rival contentions filed the af- fidavits. The karned Single Judge of the High Court vide judgment and order dated 8/9th December, 1997, held as under :

D "Hence, so far as chamber summons is concerm:d, the same is not maintainable and, therefort:, stands rejected. Resuondents are directed not to crt:atc further subletting either in favour of their sister conccrns or third party."

E It is this order passed by the learned Single Judge on C'1/S which is the subject matter of challenge in this appeal.

The entire reasoning of the impugned judgment is based upon the judgment ofthis Court in Anthony C. Leo v. Nandla/ Bal Krishnan and Ors., [1996[ ll s.c.c. 376. F In the opinion of the !tamed single Judge the dispute: of the pn:sent nature could not be resolved by summary proceedings (ChJS) but the Court Receiver has to adopt the proper procedun: under the Bombay Rent Act.

Some of the J:.asic and admitted facts of the case before us are that under the Leave and Licence agreement dated September 7, 1970, the premises in question was given to Suhrid Geigy Trading Ltd. for ii" peri9d of five years. This licence was never renew.:d. During the subsistence of this Leave and licence Agreement, Bombay Rent Act came to be amended · and such of the liccncees who were in possession pursuant to a valid !icence on 1st of February, !973 shall be deemed to have become the tenant of the

USlL\HAR~HADKUMAR lJAlAL v. ORO SYSTEMS (S.P. KURDt.:KAR J.J 65

landlord in rnspect of the premises or any part thereof in its possession A. (Section 15A inserted by Maharashtra 17of1973). When the Receiver took - the symbolic possession, Suhrid Geigy Trading Limited was in occupation and by virtue of section 15A of the Bombay Rent Act such a Licensee shall be deemed to be a tenant. The first respondent came in possession in 1979 pursuant to the amalgamation scheme approved by the Gujarat High Court B on December 24, 1987. In view of these admitted facts the question is as to whether induction of tht: first respondent in the premises without leave of tht: court and/or without any intimation to the Court Receiver will be valid or otherwise. Lt is well settkd principle that when a Court Receiver is appointed in rcspcct of any property it is said to be in custodia legis and court holds the property for the benefit of the true owner. The Court C Rtcciv~r acts on behalf of the court. Even the court receiver will have no power to deal with such property without the leave of the court. It is the duty of the Court Receiver to maintain the status quo and also to protect the property from being put to waste or allow it to diminish its value. The Court Receiver cannot encumber the property in any manner without the D leave of the court. lt is the obligation of the Court as well as the Court Receiver to preserve and maintain the property as far as possible and practicable in the same form when it was taken in possession. If these pnnciples are borne in mind, in our view, it is quite dear that when the possession of the property was taken by the Court Receiver in 1978, Suhrid E Geigy Trading Limited was in occupation and the Court Receiver took symbolic possession thereof. It must be presumed that Suhrid Gcigy Trad- ing Limited was very much aware of the appointment of the Court Receiver. In Anthony C. Leo's case (Supra) admittedly the tenant was in occupation of the premises before the Court Receiver took symbolic possession. The tcn;mt had committed certain breaches and had resorted F to unauthorised and illegal activity prior to the filing of tht: civil suit. The landlord who had a cause of action under the Bombay Rent Act did not file any proceedings under the said Act for necessary reliefs before the appropriate forum. The landlord filed a suit on the original side of the Bombay High Court and got the Receiv..:r appointed for the suit property. G In that suit the landlord took out a C..1t/S to evict tht: tenant on the gr~ttnd that he has committed bn:ach of lease agreement inasmuch it carried out construction of lofts and put up two stand-type boxes on the outer wall for storage of gas cylinders and air~conditioning units. In the Ch!S it was pray,;d that the Court Rt:c..:iver be din:ch:d to remove the said lofts and H

66 SUPREME COURT Rl'.PORTS (2000] 1 S.C.R. A the said box-type stands. The High Court granted the relief to tht: landlord in the said Ch/S and it was against this order the tenant had filed the appeal in Court. Therefore, the admitted position that flows fromAnthony C. Leo's case is that the landlord had a cause of action before the filing of the civil suit in the High Court to initiate proceedings for appropriate reliefs under B the Bombay Rent Act in the competent court but he did nut do so. When the Receiver came tu be appointed in the suit fiied by the landlord on the original side obviously he could nut have b.:tter rights to enforce the cause of action accrm:d under the Bombay Rent Act. It is in these circumstances this Court in paragraph 34 has observed as under :

c "34. lt appears to us that since the court must be presumed tu be fully unbiased in deciding the allegation of unauthorised and illegal activities of a tenant causing prt:judice against the lawful owner in the matter of preservation and maintenance of the property pendente lite, the necessity of ad.indication of such dispute by another court by bringing a legal action before it, as a matter of course, is neither necessary nor expedient. It, however, should be made clt:ar that if for the purpose of deciding the dispute of unauthorised and illt:gal activity afkcting maintenance and preser- vation of the property in custodia lt:gis it bi:comes necessary tu determine i:lllY right claimed under a statute or flowing from some action inter partes as may be pleaded and required to be decided, it is only d1::sirable that the court would refrain from such deter- mination in the summary proceeding initiated before it on the complaint of the receiver or a party to the suit and the court will direct the receiver tu seek adjudication of the dispute bdon: a competent court by bringing appropriate legal action. Save as aforesaid, it will not be correct to contend that in no case the court exercising control and supervision of the property in suit by ap- pointing a receiver will be incompetent even to pass direction against a third party for the purpose of preservation of th~ proper- ty, once such third p<>rty pleads defonce in justification of his action. The question of summary adjudication by the court ap- G pointing the receiver or relegating the receiver tu a regular suit for adjudication of the dispute concerning third party will depend on the nature of dispute and the defence claimed by the third party." r- I \ The above observations in our opinion is the ratio of the judgment H in Anthony C. Lev case (Supra) and it would not be correct to read the

l:SHA HARSHADKUMAR DALAL v. ORU SY~TEMS [S.P. KURDLKAR. J.J 67

" said judgment to mean that if the trespasser or any person who obtains the A: possession after the Receiver took over symbolic possession or actual possession of the property and if such person pleads that he is a tenant the only remedy fur the Court Receiver is to approach the Rent court under the Bombay Rent Act. For instance, a person who is put in possession as an agent of the Receiver inducts a strangt:r and if such a third person B claims a tenancy the question is whether Receiver should be directed to adopt the proceedings under the Bombay Rent Act for appropriate decla- ration and reliefs. If such a course is n:quired to follow, in our opinion, the very object of Order XL Rule 1 & 3 of the Code of Civil Procedure would be defeated. The High Court in our opinion has totally misread and misinterpreted tht ratio of Anthony C. Leo's case (supra). We must, c however, make it clear that we are not laying down a broad proposition that in every case the Receiver can resort to the summary proceeding of ilii~ nature. The question would have to be decided by the Court with reference to the pleadings of the parties and the proof thereof. On perusal of the judgment of the High Court we find that the High Court has not D considered variow, rival contentions raised by the parties in their pleadings. The High Court has also nut considered the effect of non-renewal of the Leaw and Licence Agreement after the expiry of its period nor it had considered the effoct of Sections 15 and 15A of the Bombay Rent Act. The High Court has also not considered what would be the effect of changes · E in the composition of Subrid Geigy Trading Limited after the Receiver took the symbolic possession. All these various factual and legal conten- tions will have to be considered bearing in mind the provisions of tht: Bombay Rent Act as well as Companies Act.

Mr. C. Mukund, learned Advocate appearing for the first respon- F dent, however, urged that the judgment in Anthony C. Leo's case (supra) squarely applies to the facts of the present case and the rights of the first respondent cannot be adjudicated by taking recourse to the summary proceedings. The Court Receiver if so advised may adopt the proper proceedings undt:r the Bombay Rent Act before the competent court. He G urged that the judgment of the High Court does not call for interference. -.._ We see no substance in any of these contentions. ' ' In the result the impugned judgment and order dated 8/9.12.1997 passt:d by the learned singlt: Judge of the High Court on Ch/S No. 436 of H

68 SVPREME COURT REPORTS [2000) l S.C.R. A 1996 is quashed and set aside and the matter iF remitted back to the High Court for disposal in accordance with law.

In the circumstance then: will be no order as to costs.

R.C.K. Appeal dbposed of.