Pandit Kishan Lal vs Ganpat Ram Khosla And Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 356 of 1959

Decision Date: 17 April, 1961

Coram: J.C. Shah, S.K. Das, J.L. Kapur, M. Hidayatullah

In this case, the Court recorded that the dispute was between Pandit Kishan Lal as petitioner and Ganpat Ram Khosla together with another respondent, and that the judgment was delivered on 17 April 1961 by the Supreme Court of India. The judgment was authored by Justice J.C. Shah, with Justices S.K. Das, J.L. Kapur and M. Hidayatullah forming the bench. The citation of the decision is reported in 1961 AIR 1554 and 1962 SCR (2) 17. The matters relied upon involved the East Punjab Urban Rent Restriction Act, 1949 (East Punjab III of 1949), in particular section 13, and the Transfer of Property Act, 1882, specifically section 108(q). The appellant, Pandit Kishan Lal, owned a shop situated at Gurgaon in the State of Punjab and leased it to the Singer Sewing Machine Company, which was the second respondent. The company informed the landlord that it had ceased its own operations, that Ganpat Ram Khosla, the first respondent, would conduct business in the shop and would be personally liable for the rent, and, despite the landlord’s protests and without his consent, the company surrendered possession of the shop to the first respondent.

Following that surrender, the appellant applied to the Controller under section 13 of the East Punjab Urban Rent Restriction Act seeking eviction of both respondents. The Controller ordered the company to restore possession to the appellant. The District Court affirmed that order, but the Punjab High Court, hearing a petition under Article 227 of the Constitution, set aside the Controller’s order on the ground that the company no longer possessed any interest in the tenancy after 31 August 1954 and that nothing had been transferred to the first respondent. The Supreme Court held that the High Court was wrong on both grounds and that its order must be reversed. The Court explained that, under section 108(q) of the Transfer of Property Act, a tenant who is determined to be out of possession must return possession to the landlord, and if the tenant fails to do so before the notice period expires, the tenancy continues and cannot be terminated merely by an assignment to another person. The Court referred to the decision in W. H. King v. Republic of India, [1952] SCR 419, for this principle. In the present facts, the Company had not proven that it had served the statutory notice required to terminate the tenancy, and therefore it remained the tenant. Because the first respondent took possession as an assignee and not as a trespasser, the proceeding before the Controller was proper against both the Company and the first respondent.

The matter before the Supreme Court was a civil appeal numbered 356 of 1959, taken on special leave from the Punjab High Court’s judgment dated 18 November 1957 in Civil Miscellaneous Application No. 712 of 1956. Counsel for the appellant was B.D. Sharma; counsel for the first respondent were Hardev Singh and A.G. Ratnaparkhi; and counsel for the second respondent was Y. Kumar. The Court’s judgment was delivered by Justice Shah, and it began by noting that the Singer Sewing Machine Company, referred to as “the company,” had been the tenant of the shop since 1934.

In 1934 the person who occupied a shop in Gurgaon, Punjab for business purposes was Pandit Kishan Lal, who is referred to in the judgment as the appellant. The sales manager of the Singer Sewing Machine Company was one Ganpat Ram Khosla, hereinafter called Khosla. The Legislature of the State of East Punjab enacted Act III of 1949, known as the East Punjab Urban Rent Restriction Act, 1949, to limit rent increases for certain premises located within urban areas and to regulate the eviction of tenants. The Act provided protection to tenants of both residential and non‑residential premises. Section 2, element (1) defined the term “tenant”, insofar as the definition was material, as any person by whom or on whose account rent was payable for a building or rented land and it also included a tenant who remained in possession after the tenancy had terminated in his favour; however, the definition expressly excluded a person who was placed in occupation of a building or rented land by its tenant unless the landlord gave his consent. Section 13 restricted the landlord’s right to evict a tenant even when executing a decree and required the landlord to obtain an order from the Controller in certain circumstances specified in that section. On August 30, 1954 the company sent a letter to the appellant indicating that it intended to close its office in Gurgaon with effect from September 1, 1954. The relevant portion of the letter stated: “Now the Company has closed its agency business at Gurgaon and Mr. Khosla will be carrying on Sewing Machine business in Gurgaon in your shop in his personal capacity and not as a Manager of Singer Company. In order that there may not be any misunderstanding about the payment of rent in future, you are informed that from September, 1954 onwards Mr. Khosla will be personally responsible for the payment of rent of your shop.” The appellant replied that unless vacant possession was delivered to him, the tenancy could not be validly terminated, and that the company would remain liable for the rent until such delivery, adding that legal action would be taken against the company if possession were transferred to another person. Nevertheless, the company handed over possession of the shop to Khosla and allowed him to occupy it in his personal capacity from September 1, 1954. Subsequently, on October 31, 1954 the appellant filed an application under section 13 of the Act before the Controller, seeking an order against Khosla and the company on three grounds: (1) that the company no longer required the premises while the appellant needed them for his own use; (2) that the company had failed to pay rent since September 1, 1954; and (3) that the company had assigned or sublet the shop to Khosla without obtaining the appellant’s written consent.

The judgment recorded that Khosla and the company contested the application by asserting that Khosla stood as the appellant’s tenant and that, on August 28, 1954, the company, through its local supervisor, had delivered possession of the shop to the appellant, who had consequently agreed to regard Khosla as his tenant effective September 1, 1954. The Controller dismissed the contentions raised by Khosla and the company and directed that the company hand over possession of the premises to the appellant. On appeal before the District Court at Rohtak, the Controller’s order was affirmed. Subsequently, Khosla filed a petition under article 227 of the Constitution in the High Court of Judicature for Punjab at Chandigarh, seeking to set aside the District Court’s decision, and the High Court indeed quashed that order. The High Court reasoned that after August 31, 1954, the company retained no interest in the tenancy and, because the tenancy was a month‑to‑month arrangement terminable at the will of the appellant, it could not be the subject of a transfer or sub‑letting; consequently, the High Court held that the lower court’s order was rendered without jurisdiction. During its reasoning, the High Court observed that full rent had continued to be paid after September 1, 1954, and therefore concluded that the appellant could not rely on non‑payment of rent as a ground. It was later accepted at the bar that this observation stemmed from a misapprehension, for the rent accruing after that date had not been paid to the appellant but had been deposited with the court. The present appeal, filed with special leave, challenged the High Court’s order. Both the Controller and the District Court had found that the true tenant of the disputed shop was the company, not Khosla, and that the company had handed possession to Khosla without the appellant’s consent; these findings were binding on the High Court. The sole issue left for determination by the High Court was whether the company, by unilateral action, could compel the appellant to treat Khosla as his tenant. The judgment held that the High Court had misconstrued the nature of the tenancy, noting that, except where the tenancy is at will, termination may occur only after the expiry of the notice period prescribed by the contract, custom, or statute governing the premises. It further explained that a tenant cannot discharge his obligations merely by declaring that, from a specified date, he would cease to occupy the premises and that another party, unacceptable to the landlord, would become the tenant. Under section 108(q) of the Transfer of Property Act, a tenant is obligated, upon determination of the tenancy, to return possession of the demised property to the landlord, and until possession is lawfully delivered, the tenant remains in possession.

Before the expiry of the period of the requisite notice, the tenant continued to occupy the premises as a tenant. Consequently, merely assigning the tenancy rights did not terminate the company’s tenancy. The Court referred to the decision in W. H. King v. Republic of India (1) wherein it observed: “There is a clear distinction between an assignment of a tenancy on the one hand and a relinquishment or surrender on the other. In the case of an assignment, the assignor continues to be liable to the landlord for the performance of his obligations under the tenancy and this liability is contractual, while the assignee becomes liable by reason of privily of estate. The consent of the landlord to an assignment is not necessary, in the absence of a contract or local usage to the contrary. But in the case of relinquishment it cannot be a unilateral transaction; it can only be in favour of the lessor by mutual agreement between them. Relinquishment of possession must be to the lessor or one who holds his interest: and surrender or relinquishment terminates the lessee’s rights and lets in the lessor.” In the facts before the Court, the company did not surrender its rights to the appellant; instead it attempted to transfer those rights to Khosla. The company expressly admitted that it had not served the notice mandated by law, and the appellant had not consented to the company’s unilateral determination of the tenancy. Accordingly, the company did not cease to be a tenant at the moment the notice was served. Because Khosla was permitted to take possession, he became an assignee of the company’s tenancy rights and could not be treated as a trespasser. The High Court’s view that the proceedings were not maintainable before the Controller for possession was therefore erroneous. As an assignee of the tenancy, Khosla was equally liable to be sued before the Controller for an ejectment order, just as the company was. The Court therefore allowed the appeal, set aside the order of the High Court, and restored the order of the District Court, Rohtak. The appellant was awarded costs in both this Court and the High Court against Khosla. The appeal was allowed. (1) [1952] S.C.R. 419.