Rup Chand Gupta vs Raghuvanshi Private Limited and Anr

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

Court: supreme-court

Case Number: Civil Appeal No. 172 of 1964

Decision Date: 15 April 1964

Coram: K.C. Das Gupta, P.B. Gajendragadkar

In this case the Supreme Court recorded that the petition was filed by Rup Chand Gupta against Raghuvanshi Private Limited and another respondent, with the judgment delivered on 15 April 1964. The bench was composed of Justice K.C. Das Gupta and Justice P.B. Gajendragadkar. The citation of the decision was 1964 AIR 1889 and 1964 SCR (7) 760. The factual background involved two corporate respondents: Respondent No 2 was the lessee of Respondent No 1, and the petitioner was the sub‑lessee of Respondent No 2. Both corporate respondents were managed by the same directors. Respondent No 1 instituted an eviction suit against Respondent No 2, but the petitioner was not named as a party to that suit. By a private agreement between the two respondents, Respondent No 2 chose not to defend the eviction proceedings, resulting in an ex‑parte decree in favour of Respondent No 1. The decree, by operation of law, rendered the petitioner, as a sub‑lessee, a trespasser who had no right to remain on the premises. To avoid this consequence the petitioner filed a separate suit seeking to set aside the decree on the ground that it had been obtained by collusion. The trial judge accepted the petitioner's contention, held that the petitioner continued to be a tenant, and directed that the respondents could not take steps to enforce the ex‑parte decree. On appeal, the appellate court set aside the trial judge’s decree, finding that the petitioner had not proved that the ex‑parte decree was procured by collusion. The matter then came before the Supreme Court, where the same issues were raised. The Court held that the mere fact that a defendant agrees with a plaintiff that the suit will not be defended does not automatically establish collusion; such an agreement indicates collusion only when it is entered into with a dishonest purpose, as discussed in the authorities Scott v Scott and Nagubai Ammal & Ors v B Shamma Rao. Further, the Court explained that the law permits a landlord to sue a lessee for possession on the basis of a valid notice without joining the sub‑lessee, and a decree in such a suit binds the sub‑lessee; consequently, the suit by Respondent No 1 could not be described as an improper act. The Court also observed that the failure of Respondent No 2 to defend the earlier suit was not an improper act, because even a party with a good defence is not compelled to defend. The Court noted that even if the petitioner were a tenant under the Calcutta Thika Tenants Act 1949, the Act would protect him only against eviction by the landlord, that is Respondent No 1, and would not shield him from eviction by the lessee, Respondent No 2. Moreover, the Court stressed that the two respondents were separate legal entities and the fact that they shared directors did not demonstrate a dishonest or sinister purpose behind the suit. Finally, the Supreme Court agreed with the appellate bench of the High Court that the petitioner had failed to establish that the decree was obtained through collusion, and consequently dismissed the petition.

The Court noted that the provisions of the Calcutta Thika Tenants Act, 1949, would have shielded the appellant from eviction initiated by respondent No. 2, but such protection would not extend to an eviction sought by respondent No. 1. The statute was fashioned solely to safeguard a Thika tenant against removal by the landlord, and it did not intend to protect the tenant from dispossession by any other party. The Court cited the precedent set in Shamsuddin Ahmad v. Dinanath Mullick, Appeal from original decree No. 123 of 1957, decided on 13 August 1959, to support this interpretation. The Court further observed that respondents No. 1 and No. 2 constitute two separate legal entities, and the mere fact that they shared the same directors does not suffice to infer a dishonest or malicious motive behind the suit. Accordingly, the Court held that the purpose of the suit could not be said to be sinister merely on that basis. Moreover, the Court affirmed the decision of the appellate Bench of the High Court, finding that the appellant had not succeeded in demonstrating that the decree under challenge had been obtained through collusion. The judgment was issued in a civil appellate jurisdiction as Civil Appeal No. 172 of 1964, which arose from the judgment and decree dated 6 July 1962 of the Calcutta High Court, itself an appeal from Original Decree No. 213 of 1959. The advocates for the appellant were S. T. Desai, B. Sen and B. P. Maheshwari, while the respondents were represented by H. N. Sanyal, the Solicitor‑General, together with Ajit Kumar‑Sen and S. N. Mukherjee. The judgment was delivered on 15 April 1964 by Justice D. A. S. Gupta.

The Court described the subject matter of the dispute as a parcel of land situated in the commercial core of Calcutta. This parcel formed part of a larger block comprising fifty‑two cottahs that had been leased on 21 January 1950 by the Official Trustee of West Bengal to Raghuvanshi Private Limited, a private limited company, under a building lease for a term of seventy‑five years commencing on that date. The lease imposed an obligation on the lessee to erect a three‑ or four‑storeyed building on the land within ten years. In September 1960, Raghuvanshi Private Limited sub‑leased ten and one‑half cottahs of the original block to Land and Bricks Ltd., a public limited company, thereby creating a monthly tenancy effective from 1 October 1950. Land and Bricks Ltd. subsequently sub‑let the entire ten and one‑half cottahs to the appellant, Rup Chand Gupta, who operated under the business name Hind Airways. The sub‑lease was documented by two letters dated 19 August 1950 and 5 September 1950, setting out specific conditions: the sub‑lessee was prohibited from further sub‑letting the land, required to vacate the premises whenever Land and Bricks required it, and barred from erecting any permanent structures, being allowed only to use the open land for a garage for motor vehicles. Contrary to this undertaking, the appellant proceeded to construct a permanent building on the land. Land and Bricks objected to the unauthorized construction, but their protest failed to prevent the building’s completion. Consequently, Land and Bricks initiated demolition proceedings under the Calcutta Municipality Act, which likewise proved unsuccessful. The Court therefore recorded these factual circumstances as the background to the litigation concerning possession and the validity of the decree.

Land and Bricks had earlier taken steps to remove the structures that had been built on the leased land, but those demolition proceedings also failed. In February 1953 the lessor, Land and Bricks, served a notice to quit on the appellant, Rupchand Gupta, yet no suit was filed to enforce that notice. Subsequently Land and Bricks filed a suit for arrears of rent against the appellant in September 1955 and another suit in 1957; consent decrees were entered in both cases. Around May or June 1954 Raghuvanshi expressed a desire to regain possession of the land it had originally leased to Land and Bricks. The difficulty for Raghuvanshi was that Land and Bricks, having sub‑let the entire parcel to the appellant, could not surrender possession to its own lessor unless it first obtained possession from the appellant. In that context Raghuvanshi terminated its lease with Land and Bricks by issuing a notice to quit dated 11 April 1955. Thereafter Raghuvanshi instituted suit number 3283 of 1955 in the High Court of Calcutta against Land and Bricks, seeking possession of the land. The appellant was not made a party to that suit, and Land and Bricks did not oppose the proceedings. On 11 May 1956 the Court delivered an ex‑parte decree in favour of Raghuvanshi. By operation of that decree the plaintiff, as the sub‑lessee of Land and Bricks, lost any right to remain on the land and became, in the eyes of the law, a trespasser. To avoid the effect of that decree, Rupchand Gupta filed the present suit, alleging that the decree had been obtained “by fraud and collusion between the defendants in order to injure the plaintiff and to evict the plaintiff from the said premises without any decree being passed against the plaintiffs.” Both Land and Bricks and Raghuvanshi were joined as defendants, Land and Bricks as the first defendant and Raghuvanshi as the second, and each denied the allegations of fraud and collusion.

During the hearing the allegation of fraud was abandoned, and the plaintiff pressed only the claim that the decree had been obtained collusively. The Trial Judge concluded that there was indeed collusion between defendant No 1 (Land and Bricks) and defendant No 2 (Raghuvanshi) in securing the ex‑parte decree in suit 3283 of 1955, and therefore held that the plaintiff was not bound by that decree. The Judge declared that the plaintiff remained a tenant under defendant No 1 and could not be evicted on the basis of the ex‑parte decree, and further ordered an injunction restraining the defendants from taking any steps to execute the decree. Raghuvanshi appealed the trial judgment. On that appeal the appellate judges set aside the trial decree, finding that the plaintiff had failed to establish that the decree in suit 3283 of 1955 had been procured through collusion. Consequently, the appellate court held that the plaintiff was bound by the original ex‑parte decree. The present appeal therefore concerns whether the plaintiff succeeded in proving the alleged collusion that led to the decree.

The appellate division of the High Court had affirmed that the plaintiff was bound by the decree in the earlier suit, and it was against that decree that Rupchand Gupta filed the present appeal. The sole issue for determination was whether the plaintiff had successfully demonstrated that the ex‑parte decree had been secured through collusion between Raghuvanshi and Land and Bricks. To establish the allegation of collusion, the plaintiff relied upon several material circumstances that the learned judge considered to substantiate his case. Firstly, although Raghuvanshi and Land and Bricks were separate corporate entities, they shared the same individuals as directors. Secondly, the construction of a building under the lease indenture with the Official Trustee was necessarily in the interest of the shareholders of Raghuvanshi; consequently, the same interest applied to Land and Bricks because the principal shareholders of both companies were identical. Thirdly, the Calcutta Thika Tenancy Act, 1949 posed a serious obstacle to the plaintiff’s eviction in any suit brought by Land and Bricks. In response, Land and Bricks attempted to obtain possession of the land by seeking an order for demolition of the structures through proceedings under the Calcutta Municipality Act. When those proceedings failed and it became apparent that a direct suit for ejectment by Land and Bricks might also be unsuccessful, the parties agreed that Raghuvanshi would file a suit against Land and Bricks. By mutual arrangement, Land and Bricks refrained from contesting that suit, and to eliminate any possibility of a defence being raised by the plaintiff, Raghuvanshi did not implead the plaintiff in the proceedings. The appellant argued that, taken together, these facts justified the conclusion that defendant No. 2 (Raghuvanshi) had colluded with defendant No. 1 (Land and Bricks) to procure the ex‑parte decree for the purpose of executing it against the plaintiff. The learned judge then referred to a simple definition of collusion offered by Mr. Justice Bucknill in Scott v. Scott, wherein collusion was described as “an improper act done or an improper refraining from doing an act, for a dishonest purpose.” A substantially similar definition appears in Whitworth’s Law Lexicon, 14th Edition, p. 212, which characterises collusion in judicial proceedings as “a secret arrangement between two persons that the one should institute a suit against the other in order to obtain the decision of a judicial tribunal for some sinister purpose.” This definition was endorsed by the Court in Nagubai Ammal & Ors. v. B. Shamma Rao & Ors. The judge emphasized that the mere fact that a defendant agrees not to defend a suit does not, by itself, establish collusion. Only where such an agreement is made improperly, with the intention of achieving a dishonest purpose, can the parties be said to have colluded. The Court observed that there was little doubt that…

In the case before the Court, the parties identified as Land and Bricks entered into an agreement with the party identified as Raghuvanshi that a suit for ejectment would not be contested. After the suit was instituted, Land and Bricks refrained from contesting it and an ex‑parte decree was consequently issued. The Court also noted that Raghuvanshi did not implead the appellant, who was the sub‑lessee, in that suit. The Court then examined whether any of these three acts – the agreement of Land and Bricks not to contest, the actual refraining by Land and Bricks from contesting, and the omission by Raghuvanshi to implead the appellant – could be characterised as an improper act or an improper refraining from an act. The Court expressed the view that none of these steps could be described as improper. First, with respect to Raghuvanshi’s omission to implead the appellant, the Court observed that the law does not impose a duty to make a sub‑lessee a party to an ejectment proceeding. The High Court had correctly pointed out that, in all cases where possession is sought on the basis of a valid notice to quit served on the lessee, the landlord’s legitimate object is to obtain a decree that will enable the landlord to evict the sub‑lessee in execution of that decree. The decree issued in such a suit binds the sub‑lessee, even though the effect may be harsh on the sub‑lessee, a consequence that the sub‑lessee is presumed to have understood when he entered into the sub‑lease. Because the law permits this course, the Court held that the omission to implead the appellant could not be characterised as an improper act. The Court further held that the decision of Land and Bricks not to contest the ejectment suit could likewise not be described as an improper act. No suggestion had been made that Land and Bricks possessed a viable defence to the ejectment claim and that it deliberately refrained from raising that defence solely to assist Raghuvanshi in obtaining possession. Even assuming that Land and Bricks might have had a defence, the Court noted that there was no obligation on its part to raise it. The Court added that, only if Land and Bricks possessed a defence which, if presented to the court, would have prevented any decree in favour of Raghuvanshi, could there be a basis to allege that the omission to implead the sub‑lessee was motivated by a dishonest purpose and therefore improper. The Court found that it was unnecessary to pursue this line of inquiry because neither the lower courts nor the present Court had received any allegation that the appellant‑sub‑lessee could have raised a plausible defence against Raghuvanshi’s ejectment claim. The Court also recalled that one of the circumstances alleged by the plaintiff to demonstrate collusion was the application of the Calcutta Thika Tenancy Act, which purportedly impeded the plaintiff’s eviction of Land and Bricks. The Court deemed it unnecessary to decide whether the appellant qualified as a “Thika” tenant within the meaning of that Act, as the question was not material to the present determination.

In this case, the Court examined whether the respondent could be regarded as a tenant within the meaning of the Calcutta Thika Tenancy Act, 1949. The Court observed that, if the respondent were such a tenant, the Act would unquestionably have shielded him from eviction by Land and Bricks. However, the Court noted that the provisions of the Act could not be invoked in a suit filed by Raghuvanshi against Land and Bricks, because the Act was intended solely to protect a Thika tenant from eviction by his landlord and not from eviction by any other party. The Court relied on the decision of the High Court of Calcutta in Shamsuddin Ahmed v. Dinanath Mullick and ors., Appeal from Original Decree No. 123 of 1957, dated 13 August 1959, which held that the Thika Tenancy Act was designed for protection only against a landlord’s action. The Court further stated that this interpretation had not been contested before it and that the appellant had not alleged that Land and Bricks was a Thika tenant of Raghuvanshi. The Court explained that such an allegation could not be sustained, since Land and Bricks had never constructed any building, a condition required under section 2, clause 5 of the Calcutta Thika Tenancy Act, 1949, for a person to be classified as a Thika tenant. After reviewing the evidence, the Court concluded that Land and Bricks possessed no viable defence against Raghuvanshi’s claim for ejectment. The central issue, the Court said, was whether Raghuvanshi’s effort to obtain possession of the land was motivated by a dishonest or sinister purpose. Counsel for the appellant asked the Court to define dishonesty, arguing that the directors of Raghuvanshi and Land and Bricks were the same individuals, and that the persons interested in Land and Bricks also wished to prevent Raghuvanshi from suffering forfeiture of his lease for failing to fulfil the covenant to erect a building by 1960. While the Court acknowledged that these facts could be true, it could not see how they rendered Raghuvanshi’s attempt to acquire possession dishonest or sinister. The Court observed that Raghuvanshi indeed sought possession of the land, not merely to aid Land and Bricks in obtaining it. Moreover, the Court reminded that the shared identity of directors and principal shareholders did not alter the legal position that, both in law and in fact, Raghuvanshi and Land and Bricks were distinct and separate entities. The Court rejected any suggestion that the two entities were, in reality, the same person operating under two names. If that were the case, the Court explained, there would be a strong reason to suspect that the suit was filed as a device to overcome the obstacle created by the Calcutta Thika Tenancy Act, 1949. In such a scenario, a suit by Raghuvanshi to eject Land and Bricks would be nonsensical, because possession of Land and Bricks would be identical to possession of Raghuvanshi. However, the appellant had not put forward such a claim. The Court further noted that the High Court’s judgment made clear that the plaintiff’s counsel had expressly denied that the real lessor was Raghuvanshi Private Ltd. rather than Land and Bricks Ltd., and that the lease between the two companies remained in force at the time of Suit No. 3283 of 1955.

In this case, counsel for the plaintiff told the Court that it was not his client’s position that the plaintiff’s actual lessor was Raghuvanshi Private Ltd., and that the lessor was therefore not Land and Bricks Ltd. In the present appeal the appellant’s counsel, identified as Mr Desai, again urged that the two companies, Land and Bricks Ltd. and Raghuvanshi Private Ltd., were distinct legal entities and that the lease granted by Raghuvanshi to Land and Bricks remained a genuine, subsisting lease at the time the earlier Suit No 3283 of 1955 was filed. The Court observed that the appellate Bench of the High Court had carefully examined the material placed before it and had rightly concluded that the plaintiff had failed to prove that the decree rendered in Suit No 3283 of 1955 was obtained by any collusive arrangement. Because the plaintiff could not establish any such collusion, the High Court correctly dismissed the suit. Accordingly, the Court held that the appellant’s present appeal could not succeed, ordered the appeal to be dismissed, and directed that the costs of these proceedings be borne by the appellant. The appeal was therefore dismissed with costs.