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If the real purpose of a partnership is subletting of the premises to such other person, it shall be

A.Mahalakshmi v. Bala Venkatraman (D) Through LR ,Civil Appeal No. 9443 of 2019 07th January, 2020

CORAM: A two judge bench of the Supreme Court comprising of Justice Ashok Bhushan and Justice M. R. Shah.

It was held that: Where a tenant becomes a partner of a partnership firm and allows the firm to carry on business in the premises while he himself retains the legal possession thereof, the act of the tenant does not amount to subletting. However, inducting the partner in his business or profession by the tenant is permitted so long as such partnership is genuine. If the purpose of such partnership is ostensible in carrying on business or profession in a partnership but the real purpose in subletting such premises to such other person who is inducted ostensibly as a partner then the same shall be deemed to be an act of subletting.

Facts:

The appellant filed an eviction suit on the ground of subletting as well as on the ground of arrears of rent against the respondents herein – original defendants – Bala Venkatram and another under Sections 10(2)(i), 10(2)(ii)(a)(b) and 10(2)(iii) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 (hereinafter referred to as the ‘Act’) in the Court of District Munsiff, Pollachi. Upon default in payment of rent and noticing a change in the name as well as ownership of the shop in the tenanted premises from ‘Best Mark Super Market’ to ‘Amutham Super Market’, she discovered there was a complete change of hand from original defendant – Bala Venkatram to respondent no.2 – Shahu Hameed which also on the face of it was a gross breach of the rent agreement. The landlady issued a legal notice to the respondent – calling upon him to collect balance amount from the advance payment deposited after adjusting the arrears of rent and handover possession of the tenanted premises within 15 days failing which the appropriate legal action would be taken. There was no reply to the legal notice from respondent. Therefore, the landlady, the appellant herein, filed decree of eviction on the ground of subletting and arrears of rent.

The learned Rent Controller dismissed the eviction petition. Aggrieved by the same, the landlady appealed. The learned Rent Control Appellate Authority allowed the appeal in part. The learned Rent Control Appellate Authority passed the eviction decree on the ground of subletting only and therefore allowed the petition filed. The original tenant – Bala Venkatram died. Therefore, the legal heirs of the original tenant and the second respondent preferred the revision application before the High Court. By the impugned judgment and order, the High Court has allowed the said revision application and has quashed and set aside the eviction order passed by the Rent Control Appellate Authority. Aggrieved by the order the landlady has preferred the present appeal.

Appellant Contentions:

Learned Advocate appearing on behalf of the appellant submitted that the High Court has committed a grave error in holding that the landlady has not established and proved the subletting by the original tenant in favour of Respondent No.2. It was submitted that when the first appellate authority on appreciation of evidence specifically found that there was a subletting of the premises by original Respondent no.1 in favour of original Respondent no.2, the same was not required to be interfered with by the High Court in exercise of its revisional jurisdiction. It is further submitted that there were ample material/evidence on record, which establish and prove the subletting on record and have not at all been considered by the High Court. It was further submitted that the High Court ought to have appreciated that the Respondent no.1 in his cross examination set up a case that he was a partner in the business; however, no document was placed on record to show the partnership.

Respondent Contentions:

It was the case on behalf of the respondent that they were running ‘Amutham Super Market’ in the suit property through a partnership between the two respondents and there were many branches, namely, ‘Amutham Jewellery, Amutham Foods, Amutham Electronics, Amutham Textiles etc. According to the respondents since they refused to give the business in the name of the landlady, she filed the appeal with an ulterior motive.

The Supreme Court referred to the case of Celina Coelho Pereira v. Ulhas Mahabaleshwar Kholkar, (2010) 1 SCC 217 where the Court summarized the legal position on sub-letting as:

(i) In order to prove mischief of subletting as a ground for eviction under rent control laws, two ingredients have to be established, (one) parting with possession of tenancy or part of it by tenant in favour of a third party with exclusive right of possession and (two) that such parting with possession has been done without the consent of the landlord and in lieu of compensation or rent. (ii) Inducting a partner or partners in the business or profession by a tenant by itself does not amount to subletting. However, if the purpose of such partnership is ostensible and a deed of partnership is drawn to conceal the real transaction of subletting, the court may tear the veil of partnership to find out the real nature of transaction entered into by the tenant. (iii) The existence of deed of partnership between tenant and alleged subtenant or ostensible transaction in any other form would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of cross examination, making out a case of subletting or parting with possession in tenancy premises by the tenant in favour of a third person. (iv) If tenant is actively associated with the partnership business and retains the control over the tenancy premises with him, may be along with partners, the tenant may not be said to have parted with possession. (v) Initial burden of proving subletting is on landlord but once he is able to establish that a third party is in exclusive possession of the premises and that tenant has no legal possession of the tenanted premises, the onus shifts to tenant to prove the nature of occupation of such third party and that he (tenant) continues to hold legal possession in tenancy premises. (vi) In other words, initial burden lying on landlord would stand discharged by adducing prima facie proof of the fact that a party other than tenant was in exclusive possession of the premises. A presumption of subletting may then be raised and would amount to proof unless rebutted.

Applying the above law and considering the evidences on record the Hon’ble Supreme Court allowed the present appeal and set aside High Court order. The judgment and decree passed by the Rent Control Appellate Authority was restored.

–  Vignesh Hariharan. R

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