Dunlop India Ltd vs A.A.Rahna & Anr

(Arising out of Special Leave Petition (C) No.24296 of 2009)

Dunlop India Limited ......Appellant

Versus

A.A. Rahna and another ......Respondents

With

CIVIL APPEAL NO.3912 OF 2011

(Arising out of Special Leave Petition (C) No.24558 of 2009)

Dunlop India Limited ......Appellant

Versus

A.A. Sulaiman and others ......Respondents

J U D G M E N T

G.S. Singhvi, J.

1. Leave granted.

2. These appeals are directed against judgment dated 27.7.2009 of the

Division Bench of the Kerala High Court whereby the revisions filed by

the appellant against the order passed by District Judge, Ernakulam

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(hereinafter referred to as, "the Appellate Authority") under Section 18 of

the Kerala Buildings (Lease and Rent Control) Act, 1965 (for short, "the

1965 Act") were dismissed and the direction given by IIIrd Additional

Munsiff and Rent Control Court, Ernakulam (for short, "the Rent Control

Court") for vacating the suit premises was confirmed.

3. A.B. Abdul Khader (predecessor of the respondents) leased out the

suit premises comprised in Survey Nos.341/1 and 2 situated at Ernakulam

village to the appellant for its godown and office for a period of 10 years

with effect from 1.12.1966. After 2 years and about 2 months, the parties

executed two lease deeds dated 3.2.1969, which were duly registered.

For the sake of reference, the relevant portions of the lease deed executed

in respect of Survey No.341/1 measuring 83 cents are extracted below:

"THIS DEED OF LEASE made on the Third day of

February One Thousand Nine Hundred and Sixty Nine

corresponding to the Fourteenth day of Magha One

thousand Eight Hundred and Ninety One of the Sakha

Era BETWEEN A.B. ABDUL KHADER son of

Alumkaparambli Bava, Indian National, Businessman,

aged Forty five years, residing at Alumkaparampil,

Chittor Road, Ernakulam in the City of Cochin in

Ernakulam District in Kerala State (hereinafter called

"the Lessor" which expression shall unless excluded by

or repugnant to the context include his heirs, executors,

administrators and assigns) of the One Part AND

DUNLOP INDIA LIMITED, formerly THE DUNLOP

RUBBER COMPANY (INDIA) LIMITED, a Company

duly incorporated in India having its Registered office at

Dunlop House, 57-B Free School Street, Calcutta, herein

represented by its duly constituted attorney G.S. Krishna

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son of Govindarajapuram Subramaniam, Indian National,

Business, Executive, aged Forty four years, residing at

26, Dr. Hedge Road, Nangumbakkam in the City of

Madras (hereinafter called "the Lessee" which expression

shall unless excluded by or repugnant to the context

include its successors and assigns) of the Other Part.

WITNESSES as follows:-

1. In consideration of the rent hereinafter reserved

and of the covenants on the part of the Lessee hereinafter

stipulated, the Lessor hereby demises unto the Lessee all

those pieces of parcels of land situate in Ernakulam

Town comprised in Survey Number 341 Sub Division 1

(part) admeasuring 83 cents equivalent to 33 acres

58.844 sq. meteres together with the buildings and

structures erected thereon more particularly described in

the Schedule hereunder written together with all the

fixtures, fittings, pathways, passages, rights and

privileges appurtenant thereto TO HOLD the same unto

the Lessee for a term of ten years from 1st December

1966 paying therefore during the continuance of the lease

a monthly rent of Rs.4,000/- (Rupees Four Thousand)

only on the days and in the manner and subject as

hereunder provided.

(a) xxx xxx xxx

(b) xxx xxx xxx

(c) The Lessee shall permit the Lessor or his

authorised agents with or without workmen during

business hours to enter upon the demised premises for

the purpose of viewing the condition thereof and from

time to time for the purpose of effecting the necessary

repairs and maintenance as hereunder provided.

(d) The Lessee shall deliver up the said demised

premises on termination of the lease in as good order and

condition as they were in at the time when the lease

hereby created commenced subject to determination due

to normal wear and tear and defects, if any, for want of

proper repair and maintenance which is the liability of

the lessor as hereinafter mentioned.

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2. The Lessor hereby covenants with the Lessee as

follows:-

(a) Subject to the due observance and

performance of the terms, covenants and

conditions by the Lessee herein on their part to be

observed and performed the lessee shall have the

right during the continuance of the lease to use the

premises without interruption by the Lessor or any

person claiming under or in trust for him.

(b) xxx xxx xxx

(c) xxx xxx xxx

3. Provided always and it is mutually agreed by and

between the parties hereto as follows:

(a) Notwithstanding the period of lease herein

before provided the Lessee shall have the option to

terminate the lease by giving three months notice

in writing to the Lessor at any time during the

continuance of this Lease.

(b) The lessees shall have the option to renew

the lease for a further period of ten years at the

same rent and other terms, covenants and

conditions as existed during the initial period of

ten years save and except the Clause for renewal

provided the Lessee gives notice in writing to the

Lessor three months before the expiry of the initial

period of ten years of the Lessee's intention to

exercise the option.

(c) xxx xxx xxx

(d) xxx xxx xxx

(e) xxx xxx xxx

(f) xxx xxx xxx

(g) The Lessee shall be at liberty at its own

costs to construct at any time and at any place of

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the demised premises counters, strong rooms and

safe deposit vaults and to fix, erect, bring in or

upon or fasten to the demised premises and to alter

and rearrange from time to time, furniture fixtures

and fittings which the Lessee may require for its

business such as partition screens, counters,

platforms, shelves, cases, cupboards, heavy safes,

cabinets, lockers, strong room doors, vault doors,

cabinets of any size and weight, steel collapsible

gates, ventilators, grills, shutters, sunblinds, gas

and electric fittings, stoves, light, fans, air

conditioners, sinks and other equipment, fittings,

articles and things all of which the Lessee shall be

at liberty to remove at any time at its pleasure,

before the expiration or sooner determination of

the tenancy without objection on the part of the

Lessor and the Lessee shall make good the

damage, if any, which may be thereby caused to

the demised premises."

4. The appellant exercised the option for extension of the term of

lease but did not vacate the premises at the end of extended period. After

the death of A.B. Abdul Khader, respondent No. 1 became owner of the

property comprised in Survey No. 341/1 while respondent No. 2 became

owner of the property comprised in Survey No.341/2. They filed Rent

Control Petition Nos.45 and 146 of 1999 for eviction of the appellant on

the grounds specified in Section 11(2)(b), 11(3), 11(4)(i) and 11(4)(v) of

the 1965 Act. By an order dated 11.4.2001, the Rent Control Court

allowed both the petitions and directed the appellant to vacate the

premises. The appeals preferred against that order were allowed by the

Appellate Authority and the order of eviction was set aside. While

reversing the finding recorded by the Rent Control Court that the

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appellant had ceased to occupy the suit premises continuously for six

months without reasonable cause, the Appellate Authority observed as

under:

"I find merit in the submission of the learned counsel for the

appellant that suspension of business activity on account of

extreme financial crunch, at the same time keeping the unit

open and alive for operation cannot amount to cessation of

occupation without valid reasons. Ext. C1(a) notice conveys

eloquently that there was no intention to abandon possession

and the tenant did continue occupation. Business activity

was not being run on account of peculiar circumstances. Till

2.8.1999 the premises were kept open and alive for

operation. It is important to note that the employees of the

tenant were not directed not to come to the establishment on

any day prior to 2.8.1999. I am of the opinion that Ext.C1(a)

read as a whole can never convey to a prudent mind that

there was cessation of occupation. Physical inability to carry

on business activity on account of financial difficulties and

the closing down of the production in the factories cannot

ipso fact, in the facts and circumstances of the case, lead to

the conclusion that the management of the tenant (which had

kept the unit open and alive for operation till 2.8.1999) had

ceased to occupy the building till 2.8.1999. Cessation to

occupy had a physical ingredient as also a mental ingredient.

Reading of Ext. C1(a) as a whole, I am unable to agree that

there was such objectionable cessation of occupation.

Though it indicates that there was no business activity and

the establishment remained defunct and idle, there was still

the intention to occupy and the hope that it will be possible

to resume even business activity. The inevitable conclusion

flowing from Ext.C1(a) is that the employees were

continuing to attend the offices in the petition schedule

building till 2.8.1999. At any rate, it would be impossible to

come to a conclusion that there was cessation of occupation

prior to 2.8.1999 though I would readily agree that there was

no business activity in the petition schedule building for

some period of time even prior to 2.8.1999. I am in these

circumstances of the opinion that Ext. C1(a), the trump card

on which the landlords place reliance cannot deliver any

crucial advantage or assistance to the landlords in their

attempt to establish cessation of occupation."

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The Appellate Authority also referred to the Commissioner's report

but refused to rely upon the same by recording the following reasons:

"The inspection by the commissioner was on 10th September

and monsoon season had preceded such inspection. Some

wild growth as indicated in Ext. C1 (assuming that Ext. C1

can be legally taken cognizance of), is not, according to me,

sufficient to establish cessation of occupation. In the light of

the very specific statement in Ext. C1(a) that inspite of the

extreme financial crunch, the management had till 2.8.1999

kept the unit open and alive for operation and that Ext.C1(a)

notice was being issued on 2.8.1999 as management was

convinced that there is no prospect of running the company

immediately must definitely convey to the court that there

was no cessation of occupation prior to 2.8.1999 at any rate.

The wild growth perceived by the commissioner and

reported in Ext. C1 cannot in these circumstances tilt the

scales in favour of the landlords. I am in these circumstances

of the opinion that the learned Rent Control Court erred in

coming to the conclusion that the landlords have succeeded

in proving cessation of occupation for a period of 6 months

immediately prior to the filing of the petitions without

reasonable cause. I am unable to concur with the conclusion

of the learned Rent Control Court on this aspect. I am in

these circumstances satisfied that the challenge raised on this

ground also deserves to be upheld."

5. Civil Revision Petition Nos.579 and 580 of 2002 filed by the

respondents were dismissed by the Division Bench of the High Court

vide judgement dated 18.12.2006. The High Court agreed with the

Appellate Authority that the evidence produced by the landlord was not

sufficient for recording a finding that the tenant had ceased to occupy the

premises for a continuous period of six months without reasonable cause.

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6. During the pendency of the revisions before the High Court, the

respondents filed fresh rent control petitions which came to be registered

as RCP Nos.109 of 2002 and 38 of 2003 for eviction of the appellant

under Section 11(2)(b), 11(3), 11(4)(i) and 11(4)(v). This time, the

respondents pleaded that the appellant herein has ceased to occupy the

premises since September, 2001 without any reasonable cause. Both the

petitions were allowed by the Rent Control Court vide order dated

11.2.2004, which was confirmed by the Appellate Authority by

dismissing the appeals preferred by the appellant. However, Civil

Revision Petition No.368 of 2005 filed by the appellant was allowed by

the High Court vide order dated 18.12.2006 and the matter was remitted

to the Rent Control Court for fresh adjudication of the rent control

petitions after giving opportunity to the appellant to file counter statement

and adduce evidence.

7. After remand, the appellant filed written statement and claimed

that the petitions filed by the respondents were liable to be dismissed as

barred by res judicata because Rent Control Petition Nos. 45 and 146 of

1999 filed by them on similar grounds were dismissed by the Appellate

Authority and the High Court. On merits, it was pleaded that due to

financial constraints, the appellant could not run its business effectively

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and profitably and it was declared sick under the Sick Industrial

Companies (Special Provisions) Act, 1985 (for short, "the 1985 Act") by

the Board for Industrial and Financial Reconstruction (BIFR) in Case

No.14 of 1998 and the appeal filed against the order of BIFR was

pending before Appellate Authority for Industrial and Financial

Reconstruction (AAIFR). It was also averred that due to financial crisis,

the staff strength was reduced to bare minimum but there was no

cessation of occupation of the suit premises.

8. On the pleadings of the parties, the Rent Control Court framed the

following issues:

"(1) Whether the petition is barred by resjudicata and also

u/s.15 of the Act?

(2) Whether RW1 is having any authority to represent the

respondent?

(3) Whether there is a commercial lease between the

parties as alleged?

(4) Whether the Petitioners are entitled for an order of

eviction u/s.11(2)(b) of the Act?

(5) Whether the Respondent ceased to occupy the petition

schedule buildings continuously for six months?

(6) Whether there is any reasonable cause for the

cessation of occupation if any?

(7) Whether the Petitioners are entitled for an order of

eviction u/s 11(4)(v) of the Act?

(8) Relief and costs?"

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9. After considering the pleadings and evidence of the parties, the

Rent Control Court held that the petitions filed by the respondents were

not barred by res judicata and Section 15 of the 1965 Act cannot be

invoked for denying relief to them because two sets of rent control

petitions were based on different causes. However, the respondents' plea

that the appellant was in arrears of rent was rejected on the ground that no

evidence had been produced by them to prove the same. The Rent

Control Court then considered the question whether the appellant had

ceased to occupy the suit premises since September, 2001 without

reasonable cause and answered the same in affirmative. The Rent Control

Court referred to the evidence produced by the parties including the

reports Exhibits C1 and C2 produced by Advocate Commissioners PW2

and PW3 and recorded the following observations:

"(i) From Ext.C1 report filed by PW2 it can be seen that

the two entrance gates on the northern side of the petition

schedule property in O.S. 109/02 is found rusted and closed.

The boundary fencing on the northern side is found

damaged.

(ii) The land surrounding the side petition schedule

building is fully covered with grass and shrubs and PW2 the

commission even found it difficult to walk through the

premises. The sheds in the said property were seen in

dilapidated condition and the commissioner could not go

near to the shed as it was covered with tall bushes and

shrubs.

(iii) The eastern wall of the petition scheduled building in

RCP 109/02 had to rusted shutters which was seen closed.

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(iv) It is also reported that the commissioner could not

enter into the buildings as it was closed. On looking through

the glass window PW2 could see some furniture inside the

building which are full of dust, damaged and unfit for use.

Though the service line of electric connection to the petition

schedule building was there commissioner verified and

found that the electric connection being disconnected.

(v) PW3 is the advocate commissioner who had inspected

the petition schedule building RCP No.38/03 and filed

Ext.C2 report it can be seen that the petition schedule

building in RCP 38/2003 was lying closed at the time of

both the inspections made by PW3. The commissioner has

also noted the notice fixed in the front shutter of the petition

schedule building by Sri A.K. Agarwal Company Secretary

on 1.10.2001 stating that the Respondent company is a sick

industrial company under the Sick Industrial Companies

(Special Provisions) Act and operations at Kochi has been

suspended w.e.f. 1.10.2001 onwards. It is also mentioned in

ex.C2 that the front shutters and the shutters provided at the

eastern side are full of dust and the same were rusted due to

non use, and the entire compound around the petition

schedule building are full of bush and the bushes are seen at

some places grown on to the petition schedule building and

some other places grown to the roof of petition schedule

building.

(vi) The commissioner has also noted five calendars for

year 2001 seen inside the rooms in the petition schedule

building. PW3 also has noted that the switchboard provided

at the eastern and western wall of the petition schedule

building were not having electricity supply. It is also noted

that the four iron gates provided for the compound were

covered with dust and rust due to non use.

(vii) Even though the condition of the petition schedule

buildings happened to be as noted by PW2 and PW3 to a

limited extent to non-maintenance and repairs it cannot be

found that it happened only due to non-maintenance and

repairs.

(viii) The calendars for the year 2001 noted by PW3 inside

the petition schedule building in RCP No.38/03 and the

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notice dated 01.10.2001 affixed at the front shutter of the

same building clearly shows that both the petition schedule

buildings were not been opening from 1.10.2001 towards till

the inspection date. Since the petition schedule buildings

were not opened since September, 2001 the inability of the

Petitioner to carry out the repairs and maintenance also is to

be looked into."

(emphasis supplied)

10. The Rent Control Court then considered the plea of the appellant

that on account of pendency of the proceedings under the 1985 Act, the

staff strength was reduced to bare minimum but discarded the same on

the ground that staff attendance register, muster roll, wages register

maintained in the office as also the document showing purchase and sale

of the goods, payment of electricity charges etc. had not been produced

showing payment of the dues since September, 2001 and observed:

"The specific case of RW1 is that due to the proceedings

under the provisions of Sick Industrial Companies (Special

Provisions) Act, the staff strength of the Respondent

company was reduced to bare minimum at the petition

schedule buildings. According to RW1 even though there

were such proceedings respondent was functioning in the

schedule buildings with minimum staff. During cross

examination RW1 admitted that the staff attendance register,

muster roll wages register etc are maintaining in the petition

schedule buildings. She also admitted that they are

maintaining stock register in the petition schedule buildings.

But none of there documents are produced before court.

According to RW1 she omitted to produce these documents.

Had these documents for the relevant period come in

illegible/- the details regarding the strength of the staff and

the business being carried on is the petition schedule

buildings would have been revealed. She also admitted that

documents are maintained regarding the purchase and sale

done in the petition schedule buildings but those documents

13

are also not produced before court. ............... The specific

case of PW1 is that the electric connection was disconnected

more than 1= years before. But according to RW1 the

electricity connection was disconnected only two months

prior to her examination before court. If there was actually

electric supply to the petition schedule buildings and the

Respondents had paid the electricity charge definitely RW1

could have produced the electricity bill pertaining to the

petition schedule buildings. Though RW1 stated that she

can produce the electricity bill from 2001 September

onwards pertaining to the petition schedule buildings neither

of them has been produced till now. From all these it can be

seen that the Respondents were not occupying the petition

schedule buildings from 2001 September onwards, and they

had ceased to occupy the petition schedule buildings

continuously for more than six months.

According to RW1 respondent could not conduct the

business in full swing in the petition schedule building due

to BIFR and AAIFR proceedings. Ext.B9 is the order of

AAIFR, New Delhi in appeal No.1/02 wherein the

Respondent is the appellant. On perusal of Ext.B9 it can be

seen that several reliefs and concessions were given to the

Respondent company by the AAIFR. But as per ext.B9 no

restriction is seen imposed on the work of respondent

company all together or particularly in the schedule

buildings at Cochin. ........................................ As already

observed respondents could not produce any of the

mandatory prescribed registers such as stock register, day

book, muster roll, attendance register wages register etc. to

show that any business were being carried out in the petition

schedule buildings even with minimum staff. Even it was

specifically put to RW1 that due to the proceedings before

BIFR and AAIFR, whether the board of directors was

resolved to reduce the staff strength she answered that the

staff were told not to come and they have agreed for the

same. It is something unbelievable. RW1 has produced

Ext.B13 series to B25 series invoices to show that they are

conducting business to the scheduled property. But on going

through ext.B13 series to ext.B25 series it cannot be found

that those transactions were made through Kaloor Office

where in the petition schedule building situates as these

invoices were given to the Chennai office of respondent.

The learned counsel for the Petitioner has pointed out that in

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ext.B11 series and B12 series after the Chennai address of

the Respondent company it is seen typed in another machine

in Ext.B11 series and written in another handwriting in

Ext.B12 series, "through Kaloor Office Cochin". The same

and address of the purchasing dealer in all these documents

are the Chennai address of the Respondent company.

Ext.B11 series to ext.B25 series cannot be relied on to show

that business was being conducted in scheduled buildings. It

is also to be noted that ExtB11 series to B25 series are of the

year 2006 and these do not in any help the Respondents to

show that any business was being conducted in the petition

schedule building in between September, 2001 and filing of

these RCPs. It is also admitted by RW1 that copy of invoice

are to be given at the check post. But ext.B11 to B25 series

produced are having 4 to 6 copies of each invoices. If while

passing the sales tax check post copy of invoices were given

as stated there would not have been such number of copies at

in ext. B11 to B25 series. Therefore the genuineness of

these documents are also doubtful. On a perusal of the entire

evidence it can be seen that the Respondent has failed to

prove that the cessation of occupation of petition schedule

buildings for the continuous period of more than six months

were due to the restrictions imposed by BIFR and AAIFR.

Hence these points are found in favour of the Petitioners."

(emphasis supplied)

11. On the basis of above analysis of the pleadings and evidence, the

Rent Control Court concluded that the appellant had ceased to occupy the

suit premises since September, 2001 without any reasonable cause and,

accordingly, directed it to vacate the premises.

12. The Appellate Authority independently examined the pleadings

and evidence of the parties and reiterated the finding recorded by the Rent

Control Court that the appellant had ceased to occupy the premises since

15

September, 2001 and that the pendency of the proceedings under the

1985 Act cannot be construed as a reasonable cause for non occupation of

the premises.

13. The Division Bench of the High Court, though not required in law

to do so, minutely scrutinized the evidence produced by the parties and

concurred with the Rent Control Court and the Appellate Authority that

the respondents had succeeded in making out a case for eviction of the

appellant under Section 11(4)(v). The High Court referred to the

expression "reasonable cause" used in Section 11(4)(v), the judgment in

Paulina Joseph v. Idukki District Wholesale Co-operative Consumer

Stores Ltd. (2006) 1 KLT 603 and observed:

"Interpreting the scope and meaning of "reasonable cause"

provided in section 11(4)(v) of the Act a Division Bench of

this Court in Paulina Joseph vs Idukki District Wholesale

Co-operative Consumer Stores Ltd., (2006 (1) KLT 603)

held that if there is a plausible explanation to the question

why the business was not run in the premises continuously,

it may be a relevant fact in considering whether there was

reasonable cause for cessation of occupation. But it is held

that existence of such reasonable cause depends on the facts

and circumstances of each cases. It is further held that the

occupation of the building depends on the purpose for which

it is let and the purpose for which it is used. The nature of

the business and the requirement of the physical presence or

otherwise of the tenant in the building for the conduct of the

business is a relevant fact. But in this case on considering

the facts the requirement of physical presence is highly

essential to observe that the tenant company is continuing in

occupation, because the tenanted premises is occupied as

their office and godown. The burden to prove that there is

reasonable cause for non occupation is solely on the tenant

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when it is proved that there is cessation of physical

occupation.

The question to be examined is whether on the facts of this

case the tenant was successful in proving any such

reasonable cause. The rent control petitions were filed

during the years 2002 and 2003. It has come out in evidence

that the tenant ceased to occupy the premises since last so

many years from the date of filing of the rent control petition

itself. Further it has come out in evidence that since the

lapse of more than six years from filing of rent control

petitions, still as on today, it is conceded that the company

could not resume business of physical occupation at the

tenanted premises. Therefore we have no hesitation to hold

that the tenant was not successful in establishing any

genuine intention or hope of reviving the physical

occupation not it was successful it establishing any

reasonable cause for the cessation of occupation."

14. Shri R.F. Nariman, learned senior counsel for the appellant argued

that the impugned judgment and the orders passed by the Rent Control

Court and the Appellate Authority are liable to be set aside because the

Rent Control Petition Nos. 109 of 2002 and 38 of 2003 were barred by

res judicata. Learned senior counsel submitted that the issue whether the

appellant had ceased to occupy the building continuously for six months

without reasonable cause had already been decided against the

respondents in the proceedings arising out of Rent Control Petition

Nos.45 and 146 of 1999 and, as such, the second set of petitions filed on

the same cause were not maintainable. He further submitted that even

though two sets of rent control petitions related to different periods, the

evidence produced by the respondents to prove their case with reference

17

to Section 11(4)(v) was substantially the same and the Rent Control

Court committed serious error by passing an order of eviction ignoring

the contrary finding recorded by the Appellate Authority and the High

Court in the earlier round of litigation and this error was repeated by the

Appellate Authority and the High Court while dismissing the appeals and

revisions filed by the appellant. Shri Nariman argued that the finding

recorded by the Rent Control Court and the Appellate Authority that the

appellant had ceased to occupy the suit premises continuously for six

months without reasonable cause was based on misreading of evidence

and the High Court committed serious error by approving the same

ignoring the finding recorded in the earlier round of litigation, which had

become final. Learned senior counsel emphasized that due to pendency

of proceedings under the 1985 Act, the appellant could not effectively

use the suit premises, but that did not justify a conclusion that it had

ceased to occupy the premises. He then submitted that the pendency of

case under the 1985 Act was, by itself, sufficient for recording a finding

that there was reasonable cause for the appellant to have ceased to

occupy the suit premises. Shri Nariman invited our attention to order

dated 3.3.2008 passed by AAIFR vide which the appeals filed against the

order of the BIFR were dismissed and argued that the impugned order

may be set aside because the appellant's financial condition has

considerably improved.

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15. S/Shri S. Gopakumaran Nair and C.A. Sundaram, learned senior

counsels for the respondents argued that the concurrent findings recorded

by the Rent Control Court and the Appellate Authority on issue Nos.5, 6

and 7, which have been approved by the High Court, do not suffer from

any legal infirmity warranting interference by this Court. Learned senior

counsel candidly admitted that the order of eviction passed in the earlier

round of litigation was reversed by the Appellate Authority and the

revisions filed by the respondents were dismissed by the High Court, but

argued that the findings recorded in those proceedings could not be

treated as res judicata qua the petitions filed in 2002/2003 because the

same were based on a different cause. Learned counsel pointed out that

in the first round, the respondents had sought eviction under Section

11(4)(v) by alleging that the appellant had ceased to occupy the suit

premises from June, 1998 and in the second set of petitions, eviction was

sought on the ground that the appellant had ceased to occupy the

premises from September, 2001. Learned counsel pointed out that while

the respondents had succeeded in proving that the suit premises were

vacant since September, 2001, the appellant could not produce any

tangible evidence to prove occupation of the premises or that there was

reasonable cause for its having ceased to occupy the suit premises. They

emphasized that the Rent Control Court and the Appellate Authority had

19

rightly discarded the evidence of RW1 on the issue of continued

occupation of the suit premises because she failed to produce the staff

attendance register, muster rolls, wage registers, electricity bills and

payment thereof as also documents showing purchase and sale of the

goods from the suit premises.

16. We have considered the respective submissions. Section 11(1)

contains a non obstante clause and declares that notwithstanding anything

to the contrary contained in any other law or contract a tenant shall not be

evicted whether in execution of a decree or otherwise except in

accordance with the provisions of the Act. The first proviso to Section

11(1) carves out an exception and lays down that nothing contained in

this section shall apply to a tenant whose landlord is the State

Government or the Central Government or other public authority notified

under this Act. Second proviso to Section 11(1) carves out another

exception and lays down where the tenant denies the title of the landlord

or claims right of permanent tenancy, the Rent Control Court shall decide

whether the denial or claim is bonafide and if it records a finding to that

effect, the landlord shall be entitled to sue for eviction of the tenant in a

Civil Court and such court can pass a decree for eviction on any of the

grounds enumerated in Section 11 even though the Court may find that

such denial does not involve forfeiture of the lease or that the claim is

20

unfounded. Section 11(4)(v) of the Act which has bearing on this case

reads as under:

"(1) to (3) xxx xxx xxx

(4) A landlord may apply to the Rent Control Court for an

order directing the tenant to put the landlord in possession of

the building,-

(i) to (iv) xxx xxx xxx

(v) if the tenant ceases to occupy the building

continuously for six months without reasonable

cause."

The definition of the term "building" contained in Section 2(1) is

as under:

"(1). "building" means any building or hut or part of a

building or hut, let or to be let separately for

residential or non residential purpose and includes-

(a) the garden grounds well's tanks and structures

if any, appurtenant to such building, hut, or part

of such building or hut, and let or to be let

along with such building or hut;

(b) any furniture supplied by the landlord for use in

such building or hut or part of a building or hut

(c) any fittings or machinery belonging to the

landlord, affixed to or installed in such building

or part of such building, and intended to be

used by the tenant for or in connection with the

purpose for which such building or part of such

building let or to be let,

but does not include a room in a hotel or boarding house...."

21

17. The word "occupy" used in Section 11(4)(v) is not synonymous

with legal possession in technical sense. It means actual possession of

the tenanted building or use thereof for the purpose for which it is let out.

If the building is let out for residential purpose and the tenant is shown to

be continuously absent from the building for six months, the Court may

presume that he has ceased to occupy the building or abandoned it. If the

building is let out for business or commercial purpose, complete

cessation of the business/commercial activity may give rise to a

presumption that the tenant has ceased to occupy the premises. In either

case, legal possession of the building by the tenant will, by itself, be not

sufficient for refusing an order of eviction unless the tenant proves that

there was reasonable cause for his having ceased to occupy the building.

18. The initial burden to show that the tenant has ceased to occupy the

building continuously for 6 months is always on the landlord. He has to

adduce tangible evidence to prove the fact that as on the date of filing the

petition, the tenant was not occupying the building continuously for 6

months. Once such evidence is adduced, the burden shifts on the tenant

to prove that there was reasonable cause for his having ceased to occupy

the tenanted premises for a continuous period of 6 months. No strait-

jacket formula can be evolved for determining as to what is the

reasonable cause and each case is required to be decided keeping in view

22

the nature of the lease, the purpose for which the premises are let out and

the evidence of the parties. If the building, as defined in Section 2(1), is

let out for industrial or commercial/business purpose and the same is not

used for the said purpose continuously for a period of six months, the

tenant cannot plead financial crunch as a ground to justify non

occupation of the building unless cogent evidence is produced by him to

prove that he could not carry on the industrial or commercial/business

activity due to fiscal reasons which were beyond his control. If the tenant

does not use the building for the purpose for which it is let out, he cannot

be said to be occupying the building merely because he has put some

furniture or articles or machinery under his lock and key.

19. At this stage, we may notice some precedents which throw some

light on the true interpretation of the expressions "occupy" and

"reasonable cause" used in Section 11(4)(v) of the 1965 Act.

20. In Ram Dass v. Davinder (2004) 3 SCC 684, this Court

interpreted Section 13(2)(v) of the Haryana Urban (Control of Rent and

Eviction) Act, 1973 in terms of which an order of eviction could be

passed against the tenant if he is shown to have ceased to occupy the

premises continuously for a period of 4 months without reasonable cause.

Respondent Davinder was tenant in the shop belonging to appellant-Ram

Dass. The appellant filed a petition for eviction of the respondent on the

23

ground that he had ceased to occupy the shop for a continuous period of 4

months without any reasonable cause. The Rent Controller analysed the

pleadings of the parties and evidence produced by them and held that the

appellant has been able to prove that the respondent had ceased to occupy

the premises for a continuous period of more than 4 months and there was

no reasonable cause for doing so. The plea of the respondent that he had

kept the shop closed intermittently due to sickness was not accepted by

the Rent Controller. The Appellate Authority, on an independent

evaluation of the evidence, confirmed the finding of the Rent Controller.

The High Court allowed the revision filed by the respondent and set aside

the orders of the Rent Controller and the Appellate Authority. This Court

reversed the order of the High Court and restored the one passed by the

Rent Controller. The Court highlighted the distinction between the terms

"possession" and "occupy" in the context of Rent Control Legislation in

the following words:

"The terms "possession" and "occupy" are in common

parlance used interchangeably. However, in law,

possession over a property may amount to holding it as an

owner but to occupy is to keep possession of by being

present in it. The rent control legislations are the outcome

of paucity of accommodations. Most of the rent control

legislations, in force in different States, expect the tenant

to occupy the tenancy premises. If he himself ceases to

occupy and parts with possession in favour of someone

else, it provides a ground for eviction. Similarly, some

legislations provide it as a ground of eviction if the tenant

has just ceased to occupy the tenancy premises though he

may have continued to retain possession thereof. The

scheme of the Haryana Act is also to insist on the tenant

24

remaining in occupation of the premises. Consistently with

what has been mutually agreed upon, the tenant is

expected to make useful use of the property and subject the

tenancy premises to any permissible and useful activity by

actually being there. To the landlord's plea of the tenant

having ceased to occupy the premises it is no answer that

the tenant has a right to possess the tenancy premises and

he has continued in juridical possession thereof. The Act

protects the tenants from eviction and enacts specifically

the grounds on the availability whereof the tenant may be

directed to be evicted. It is for the landlord to make out a

ground for eviction. The burden of proof lies on him.

However, the onus keeps shifting. Once the landlord has

been able to show that the tenancy premises were not

being used for the purpose for which they were let out and

the tenant has discontinued such activities in the tenancy

premises as would have required the tenant's actually

being in the premises, the ground for eviction is made out.

The availability of a reasonable cause for ceasing to

occupy the premises would obviously be within the

knowledge and, at times, within the exclusive knowledge

of the tenant. Once the premises have been shown by

evidence to be not in occupation of the tenant, the pleading

of the landlord that such non-user is without reasonable

cause has the effect of putting the tenant on notice to plead

and prove the availability of reasonable cause for ceasing

to occupy the tenancy premises."

(emphasis supplied)

21. In Brown v. Brash (1948) 1 All. E.R. 922, the Court of appeal was

called upon to examine correctness of an order passed by the County

Court Judge, who upheld the tenant's claim to possession of the premises

and awarded damages against the appellant for trespass. The facts of that

case were that the premises were let out to the tenant in 1941 on a

quarterly rent of 26 pounds. In 1945, the tenant was convicted and

sentenced to serve 2 years' imprisonment for stealing 6 tones of tea.

25

While going to jail, the tenant left physical occupation of the premises to

his mistress and two illegitimate children. In March 1946, the tenant's

mistress left the premises and dropped the two children with his mother.

In the meanwhile, the landlord sold the premises. The purchaser filed an

action in July 1946 for eviction of the tenant on the ground that he had

abandoned possession. The County Court Judge held that the tenant had

not abandoned possession and that even though he failed in some of his

obligations under the tenancy, it was not reasonable to make an order for

possession against him. In December 1946, the purchaser of the original

landlord transferred the premises to the appellant. After release from

prison, the tenant brought an action for possession and damages for

trespass. His claim was allowed by the County Court Judge, who

directed the appellant to return the premises to the respondent-tenant and

also pay damages. The Court of appeal reversed the order of the County

Court Judge and held:

"We are of opinion that a "non-occupying" tenant prima

facie forfeits his status as a statutory tenant. But what is

meant by "non-occupying"? The term clearly cannot cover

every tenant who for however short a time, or however

necessary a purpose, or with whatever intention as regards

returning, absents himself from the demised premises. To

retain possession or occupation for the purpose of retaining

protection the tenant cannot be compelled to spend 24 hours

in all weathers under his own roof for 365 days in the year.

Clearly, for instance, the tenant of a London house, who

spends his week-ends in the country, or his long vacation in

Scotland, does not necessarily cease to be in occupation.

Nevertheless, absence may be sufficiently prolonged or

unintermittent to compel the inference, prima facie, of a

26

cesser of possession or occupation. The question is one of

fact and of degree. Assume an absence sufficiently

prolonged to have this effect. The legal result seems to us to

be as follows:-(1) The onus is then on the tenant to repel the

presumption that his possession has ceased. (2) To repel it

he must, at all events, establish a de facto intention on his

part to return after his absence. (3) But we are of opinion

that neither in principle nor on the authorities can this be

enough. To suppose that he can absent himself for 5 or 10

years or more and retain possession and his protected status

simply by proving an inward intention to return after so

protracted an absence would be to frustrate the spirit and

policy of the Acts as affirmed in Keeves v. Dean (1) and

Skinner v. Geary (3), (4) Notwithstanding an absence so

protracted the authorities suggest that its effect may be

averted if he couples and clothes his inward intention with

some formal, outward, and visible sign of it, i.e., instals in

the premises some caretaker or representative, be it a relative

or not, with the status of a licensee and with the function of

preserving the premises for his own ultimate home-coming.

There will then, at all events, be someone to profit by the

housing accommodation involved which will not stand

empty. It may be that the same result can be secured by

leaving on the premises, as deliberate symbols of continued

occupation, furniture, though we are not clear that this was

necessary to the decision in Brown v. Draper (4). Apart

from authority, in principle possession in fact (for it is with

possession in fact and not with possession in law that we are

here concerned) requires not merely an "animus possidendi"

but a "corpus possessionis," viz., some visible state of affairs

in which the animus possidendi finds expression. (5) If the

caretaker (to use that term for short) or the furniture be

removed from the premises otherwise than quite temporarily,

we are of opinion that the protection, artificially prolonged

by their presence, ceases, whether the tenant wills or desires

such removal or not. A man's possession of a wild bird,

which he keeps in a cage, ceases if it escapes

notwithstanding that his desire to retain possession of it

continues and that its escape is contrary thereto. We do not

think in this connection that it is open to the tenant to rely on

the fact of his imprisonment as preventing him from taking

steps to assert possession by visible action. The tenant, it is

true, had not intended to go to prison. He committed

intentionally the felonious act which in the events which

27

have happened landed him there, and thereby put it out of his

power to assert possession by visible acts after Mar. 9,1946.

He cannot, in these circumstances, we feel, be in a better

position than if his absence and inaction had been

voluntary."

(emphasis supplied)

22. In Achut Pandurang Kulkarni v. Sadashiv Ganesh

Phulambrikarm, AIR 1973 Bom. 210, the learned Single Judge of the

Bombay High Court interpreted Section 13(1)(k) of the Bombay Rents,

Hotel and Lodging Houses Rates Control Act, 1947 the language of

which is somewhat similar to Section 11(4)(v) of the 1965 Act. The

learned Single Judge referred to order passed by Chagla, C.J. in Civil

Revision Application No.1527/1953 decided on July 30, 1954 and

observed:

"As observed by Chagla, C. J., in the above case, physical

possession by a tenant himself was not necessary. Physical

possession by other members of the family also is not

necessary if there was reasonable cause for their remaining

absent from the premises. The question is one of fact and

degree. If there is evidence on record to show that the tenant

had something more than a vague wish to return and that he

had a real hope coupled with the practicable possibility of its

fulfilment within a reasonable time, it cannot be said that he

had no reasonable cause for not using the premises. In every

case it is the duty of the Court to satisfy itself that the tenant

had no reasonable cause. Absence may be sufficiently

prolonged or unintermittent to compel the inference prima

facie of a cesser of occupation. The onus is on the tenant in

such a case to repel the presumption and to establish that his

possession had not ceased or that he had ceased to occupy on

account of reasonable cause. In my judgment, this can be

established if the tenant proves notwithstanding the intention

28

on his part to return after his absence, his helplessness in

remaining absent from the premises.

It is true that the tenant should have made proper attempts to

discharge the onus in the present case by producing the

orders, if not before the trial Court, at least before the

Appellate Court. That, however, as stated above, does not

permit the Courts to brush aside the requirements of Section

13(1)(k). It is a matter for not awarding the costs. The Court

cannot ignore the nature of the tenant's services and his

liability to be transferred when deciding the question under

Section 13(1)(k). I do not propose to lay down that in every

case where a Government servant is transferred and he goes

on paying rent in respect of the premises, he had reasonable

cause for not using the premises for the purpose for which

they were let. The question will depend on the facts and

circumstances of each case. The tenant must couple and

clothe his inward intention to return, with some formal,

outward and visible sign of it, as for instance by installing

some caretaker or representative, be it a relative or not with

the status of a licensee and with the function of preserving

the premises for his own ultimate home-coming. It may also

be that the same result can be secured by leaving on the

premises, as a deliberate symbol of continued occupation,

furniture. As stated by Asquith L. J., in Brown v. Brash and

Ambrose, (1948) 2 KB 247, the tenant must prove not only

animus possidendi but a corpus possessionis."

(emphasis supplied)

23. In Ananthasubramania Iyer v. Sarada Amma 1978 KLT 338,

the learned Single Judge of the Kerala High Court held:

"The physical absence of the tenant from the building for

more than six months would raise a presumption that he had

ceased to occupy the building and that he had abandoned it

and that it was for the tenant to dislodge the presumption and

establish that he had the intention to continue to occupy the

tenanted premises."

29

24. The word "occupy" appearing in Section 11(4)(v) of the 1965 Act

has been interpreted by the Kerala High Court in large number of cases.

In Mathai Antony v. Abraham (2004) 3 KLT 169, the Division Bench

of the High Court referred to several judgments including the one of this

Court in Ram Dass v. Davinder (supra) and observed:

"The word "occupy" occurring in S. 11(4)(v) has got

different meaning in different context. The meaning of the

word "occupy" in the context of S. 11 (4)(v) has to be

understood in the light of the object and purpose of the Rent

Control Act in mind. The rent control legislation is intended

to give protection to the tenant, so that there will not be

interference with the user of the tenanted premises during

the currency of the tenancy. Landlord cannot disturb the

possession and enjoyment of the tenanted premises.

Legislature has guardedly used the expression "occupy" in

S.1l (4)(v) instead of "possession". Occupy in certain context

indicates mere physical presence, but in other context actual

enjoyment. Occupation includes possession as its primary

element, and also includes "enjoyment". The word "occupy"

sometimes indicates legal possession in the technical sense;

at other times mere physical presence. We have to examine

the question whether mere "physical possession" would

satisfy the word "occupy" within the meaning of S.11 (4)(v)

of the Act. In our view mere physical possession of premises

would not satisfy the meaning of "occupation" under S. 1l

(4)(v). The word "possession" means holding of such

possession, animus possidendi, means, the intention to

exclude other persons. The word "occupy" has to be given a

meaning so as to hold that the tenant is actually using the

premises and not mere physical presence or possession. A

learned single Judge of this Court in Abbas v. Sankaran

Namboodiri (1993(1) KLT 76) took the view that the word

occupation is used to denote the tenant's actual physical use

of the building either by himself or through his agents or

employees. The Division Bench of this Court of which one

of us is a party (Radhakrishnan, J.), in Rajagopalan v.

30

Gopalan (2004 (1) KLT SNP.54) interpreting S. 11 (4)(v)

took the view that occupation in the context of S.l 1(4)

means only physical occupation, which requires further

explanation. Occupation in the context of S. 11(4)(v) means

actual user. If the landlord could establish that in a given

case even if the tenant is in physical possession of the

premises, the premises is not being used, that is a good

ground for eviction under S.11(4)(v) of the Act. S.11(4)

uses the words "put the landlord in possession" and not

"occupation", but 11 (4)(v) uses the words "the tenant ceases

to occupy". In S. 11 (4)(v) in the case of landlord the

emphasis is on "possession" but in the case of tenant the

emphasis is on "occupation". The word "occupy" has a

distinct meaning so far as the Rent Act is concerned when

pertains to tenant, that is, possession with user."

25. In Kurian Thomas v. Sreedharan Menon (2004) 3 KLT 326, the

High Court held as under:

"Once landlord could establish the tenant has ceased to

occupy the premises continuously for six months prior to the

filing of the petition he is entitled to get order of eviction

under that section. The word "occupation" must be

understood to be not mere physical possession. Tenant

should use the building. The word "occupy" means to

cohabit with, to hold or have in possession. Tenanted

premises must be in the state of being enjoyed and occupied.

The word "occupy" used by the statute would show that

tenanted premises be put to use. Tenant cannot be heard to

contend that he is having physical possession of the

premises though not in occupation. So far as this case is

concerned, we are of the view landlord has discharged the

burden and then the onus has shifted to the tenant and the

tenant could not establish that he has not ceased to occupy

the premises and even if there is cessation that was with

reasonable cause."

31

26. In Paulina Joseph v. Idukki District Wholesale Co-operative

Consumer Stores Ltd. (supra), the Division Bench of the High Court

referred to the dictionary meaning of the word "reasonable" and

observed:

"The question whether the tenant ceases to occupy the

building continuously for six months is primarily a question

of fact to be determined with reference to the facts available

in each case. The scope of "occupation of the building"

depends on the purpose for which the building is let and the

purpose for which it is used. The nature of the business and

the requirement of the physical presence or otherwise of the

tenant in the building for the conduct of the business is a

relevant fact. No straight jacket formula can be evolved in

the matter of proof of cessation of occupation within the

meaning of Section 11(4)(v) of the Act. This intention of the

tenant, though not conclusive as such has also relevance in

determining whether there was actual cessation of

occupation within the meaning of Section 11(4)(v). When it

is proved by the landlord that the tenant ceased to occupy the

building continuously for six months, the burden of proving

that there was reasonable cause for such cessation is on the

tenant. Reasonable cause is also a question of fact to be

decided in the light of the facts proved in the case. No rigid

formula can be evolved for proof of "reasonable cause". The

facts and circumstances of the case, the particular facts with

reference to the business activities of the tenant, the nature

of the business, the magnitude of the business, the

circumstance which led to the cessation of occupation are all

relevant in considering whether there was reasonable cause.

If the cessation of occupation was due to circumstances

beyond the control of the tenant, certainly the Courts would

be inclined to accept the case of the tenant that cessation of

occupation was not without reasonable cause. Financial

constraint of the tenant by itself may not be a sufficient

reason to hold that there was reasonable cause. But that is

not completely irrelevant in considering the question.

Whether the tenant is an individual or an organization

controlled by the Government or a Co-operative society may

also be relevant in considering the question of reasonable

cause. If there is a plausible explanation to the question why

32

the business was not run in the premises continuously, it

may well be a relevant fact in considering whether there was

reasonable cause for cessation of occupation under Section

11(4)(v), depending on the facts and circumstances of each

case. In the given set of facts and circumstances, if it can be

concluded that an ordinary prudent man would act in the

manner in which the tenant did, it can be safely said that the

cessation of occupation was with reasonable cause."

(emphasis supplied)

27. In Simon & Ors. v. Rappai (2008) 2 KLJ 488, the High Court

interpreted Section 11(4)(v) and held:

"As far as the ground available under Section 11(4)(v) is

concerned, it is well settled by various decisions of this

Court that if the landlord has discharged the initial burden it

is upto the tenant to lead evidence in the matter to show that

he has been conducting business in the premises. A learned

Single Judge of this Court in the decision report in Abbas v.

Sankaran Namboodiri (1993 (1) KLT 76) while examining

the question held that, the word 'occupation' is used to

denote the tenant's actual physical use of the building either

by himself or through his agents or employees and legal

possession is not sufficient. It was held that, "however, if a

landlord succeeds in proving that his tenant did not occupy

the building almost near the period fixed in Section 11(4)(v)

of the Act it may help the court to presume that there could

have been cessation of occupation for the statutory period.

Such background presumption is not anathematic to the law

of evidence". In para.7 it was observed that, "be that as it

may, burden is on the landlord to prove that the tenant

ceased to occupy the building for six months. But it is hard

to expect a landlord to prove the precise during which his

tenant ceased to occupy the building. However, if the court

is satisfied on the evidence and/or with the aid of

presumptions that the tenant did not occupy the building for

such length of time as would cover the statutory period, then

the burden would shift to the tenant to show that he had

reasonable cause for such non-occupation." Finally it was

also observed in para.9 that, 'but, possession must combine

33

with something more to make it occupation. Legal

possession does not by itself constitute occupation'. These

principles can be safely applied to the facts of this case."

28. In this case, the Rent Control Court, after detailed scrutiny of the

pleadings and the evidence of the parties recorded a finding that while the

landowners (respondents herein) succeeded in proving that the tenant

(appellant herein) had ceased to occupy the suit premises for a period

exceeding six months, the latter could not prove that it was occupying the

premises or that non occupation thereof was for a reasonable cause. The

Rent Control Court took cognizance of the appellant's plea that it was

carrying on business activities from the suit premises with reduced staff

strength but discarded the same by observing that the relevant records

like the attendance register, muster roll, wage register had not been

produced and no evidence was adduced to prove payment of electricity

bills and sale and purchase of goods. The High Court also analysed the

pleadings and evidence of the parties and concurred with the findings

recorded by the Rent Control Court. As against this, the appellant did not

produce any evidence to prove physical occupation of the premises or

any business transaction. It also failed to produce any evidence to show

that there was reasonable cause for non occupation of the suit premises.

34

29. The arguments of Shri Nariman that the second set of rent control

petitions should have been dismissed as barred by res judicata because

the issue raised therein was directly and substantially similar to the one

raised in the first set of rent control petitions does not merit acceptance

for the simple reason that while in the first set of petitions, the

respondents had sought eviction on the ground that the appellant had

ceased to occupy the premises from June, 1998. In the second set of

petitions, the period of non occupation commenced from September,

2001 and continued till the filing of the eviction petitions. That apart, the

evidence produced in the first set of petitions was not found acceptable

by the Appellate Authority because till 2.8.1999, the premises were

found kept open and alive for operation. The Appellate Authority also

found that in spite of extreme financial crisis, the management had kept

the business premises open for operation till 1999. In the second round,

the appellant did not adduce any evidence worth the name to show that

the premises were kept open or used from September, 2001 onwards.

The Rent Controller took cognizance of the notice fixed on the front

shutter of the building by A.K. Agarwal on 1.10.2001 that the company is

a sick industrial company under the 1985 Act and operation has been

suspended with effect from 1.10.2001; that no activity had been done in

the premises with effect from 1.10.2001 and no evidence was produced

to show attendance of the staff, payment of salary to the employees,

35

payment of electricity bills from September, 2001 or that any commercial

transaction was done from the suit premises. It is, thus, evident that even

though the ground of eviction in the two sets of petitions was similar, the

same were based on different causes. Therefore, the evidence produced

by the parties in the second round was rightly treated as sufficient by the

Rent Control Court and the Appellate Authority for recording a finding

that the appellant had ceased to occupy the suit premises continuously for

six months without any reasonable cause.

30. The question whether the prohibition contained in Section 22(1) of

the 1985 Act operates as a bar to the maintainability of a petition filed for

eviction of the tenant was considered and answered in negative in Shree

Chamundi Mopeds Ltd. v. Church of South India Trust Association

(1992) 3 SCC 1. In that case, this Court referred to the provisions of the

Karnataka Rent Control Act, Section 22(1) of the 1985 Act and observed:

"11. Similarly in Civil Appeal No. 2553 of 1991 this

question has been raised by the appellant-company to

challenge the order of the learned Single Judge of the

Karnataka High Court dated March 15, 1991 dismissing the

revision petition under Section 50(1) of Karnataka Rent

Control Act. For the reasons aforementioned Section 22(1)

of the Act cannot be invoked to assail the said order of the

High Court on the ground that on the date of passing of the

order of the High Court the matter was pending before the

Appellate Authority. But in this appeal, the order allowing

the eviction petition was passed by the XII Additional Small

Causes Court on September 30, 1989 and at that time the

matter under Sections 15 and 16 was pending before the

36

Board. It is, therefore, necessary to consider the second

question about the applicability of Section 22(1) to eviction

proceedings instituted by the landlord against the tenant who

happens to be a sick company. In this regard, it may be

mentioned that the following proceedings only are

automatically suspended under Section 22(1) of the Act:

(1) proceedings for winding up of the industrial company;

(2) proceedings for execution, distress or the like against the properties of the sick industrial company; and

(3) proceedings for the appointment of receiver.

12. Eviction proceedings initiated by a landlord against a

tenant company would not fall in categories (1) and (3)

referred to above. The question is whether they fall in

category (2). It has been urged by the learned counsel for the

appellant-company that such proceedings fall in category (2)

since they are proceedings against the property of the sick

industrial company. The submission is that the leasehold

right of the appellant-company in the premises leased out to

it is property and since the eviction proceedings would result

in the appellant-company being deprived of the said

property, the said proceedings would be covered by category

(2). We are unable to agree. The second category

contemplates proceedings for execution, distress or the like

against any other properties of the industrial company. The

words `or the like' have to be construed with reference to the

preceding words, namely, `for execution, distress' which

means that the proceedings which are contemplated in this

category are proceedings whereby recovery of dues is sought

to be made by way of execution, distress or similar

proceedings against the property of the company.

Proceedings for eviction instituted by a landlord against a

tenant who happens to be a sick industrial company, cannot,

in our opinion, be regarded as falling in this category. We

may, in this context, point out that, as indicated in the

Preamble, the Act has been enacted to make special

provisions with a view to securing the timely detection of

sick and potentially sick companies owning industrial

undertakings, the speedy determination by a Board of

experts of the preventive, ameliorative, remedial and other

measures which need to be taken with respect to such

companies and the expeditious enforcement of the measures

37

so determined. The provision regarding suspension of legal

proceedings contained in Section 22(1) seeks to advance the

object of the Act by ensuring that a proceeding having an

effect on the working or the finances of a sick industrial

company shall not be instituted or continued during the

period the matter is under consideration before the Board or

the Appellate Authority or a sanctioned scheme is under

implementation without the consent of the Board or the

Appellate Authority. It could not be the intention of

Parliament in enacting the said provision to aggravate the

financial difficulties of a sick industrial company while the

said matters were pending before the Board or the Appellate

Authority by enabling a sick industrial company to continue

to incur further liabilities during this period. This would be

the consequence if sub-section (1) of Section 22 is construed

to bring about suspension of proceedings for eviction

instituted by landlord against a sick industrial company

which has ceased to enjoy the protection of the relevant rent

law on account of default in payment of rent. It would also

mean that the landlord of such a company must continue to

suffer a loss by permitting the tenant (sick industrial

company) to occupy the premises even though it is not in a

position to pay the rent. Such an intention cannot be imputed

to Parliament. We are, therefore, of the view that Section

22(1) does not cover a proceeding instituted by a landlord of

a sick industrial company for the eviction of the company

premises let out to it."

(emphasis supplied)

31. In Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah (1999)

8 SCC 11, it was argued on behalf of the appellant that suit for recovery

of rent etc. is not maintainable in view of the prohibition contained in

Section 22(1). While affirming the judgment of the High Court, the

Court referred to the earlier judgment in Shree Chamundi Mopeds Ltd.

v. Church of South India Trust Association (supra) and held: 38

"Section 22 no doubt, inter alia, states that notwithstanding

any other law no suit for recovery of money shall lie or be

proceeded with except with the consent of the Board, but as

we look at it the filing of an eviction petition on the ground

of non-payment of rent cannot be regarded as filing of a suit

for recovery of money. If a tenant does not pay the rent, then

the protection which is given by the Rent Control Act

against his eviction is taken away and with the non-payment

of rent order of eviction may be passed. It may be possible

that in view of the provisions of Section 22, the trial court

may not be in a position to pass a decree for the payment of

rent but when an application under Section 11(4) is filed, the

trial court in effect gives an opportunity to the tenant to pay

the rent failing which the consequences provided for in the

sub-section would follow. An application under Section

11(4), or under any other similar provision, cannot, in our

opinion, be regarded as being akin to a suit for recovery of

money."

(emphasis supplied)

The same view was reiterated in Carona Ltd. v. Parvathy

Swaminathan and Sons (2007) 8 SCC 559.

32. We shall now examine whether pendency of the proceedings under

the 1985 Act, which implies that the appellant was facing financial

difficulty in conducting its business constituted reasonable cause for

cessation of occupation of the premises. The appellant was declared a

sick industrial company on 22.6.1998 and IDBI was appointed as the

Operating Agency under Section 17(3) of the 1985 Act to examine the

viability of the company. Subsequently, State Bank of India was

appointed as the Operating Agency. After several hearings, the BIFR

passed order dated 19.10.2001 and directed the appellant to sort out all

39

pending issues with secured creditors, Central/State Governments, TIIC,

KSIIDC and TNSEP and submit a revised comprehensive and fully tied

up rehabilitation scheme to the Operating Agency. For the next about five

years, no tangible step is shown to have taken by the appellant for revival

of its business activities. In August and November, 2006, the appellant

filed applications before the BIFR seeking its permission for issue of two

crore equity shares of Rs. 10/- each fully paid up at par to the company's

promoters and/or its associates on private placement basis against full

consideration to be utilized for rehabilitation. Thereupon, the BIFR

passed order dated 16.3.2007. Three appeals were filed against that

order. The AAIFR dismissed the appeals after taking note of order

passed by the Madras High Court in Writ Petition (C) No. 24422 of 2006,

order dated 25.4.2007 passed by the Orissa High Court in W.P (C) No.

344 of 2008, order dated 5.2.2008 passed by this Court in SLP(C) CC

Nos. 1943-1944 of 2008 and held that in view of the various orders, the

net worth of the appellant having turned positive and it can no longer be

treated as sick industrial company.

Before the Rent Control Court, the appellant had neither pleaded

nor any evidence was produced to show that due to financial stringency

was due to the reasons beyond its control and on that account, the suit

premises could not be used from September, 2001 onwards for the

purpose specified in the lease deeds. Therefore, the so called financial

40

stringency cannot be construed as reasonable cause within the meaning of

Section 11(4)(v).

33. We are also of the view that order dated 3.3.2008 passed by the

AAIFR has no bearing on the decision of the issues raised by the

respondents in the context of Section 11(4)(v) of the 1965 Act because

what was required to be considered by the Rent Control Court was

whether as on the date of filing the petition the appellant had ceased to

occupy the premises continuously for a period of six months without

reasonable cause. The improvement in the financial health of the

appellant after many years cannot impinge upon the concurrent finding

recorded by the Rent Control Court and the Appellate Authority that the

respondents had succeeded in making out a case for eviction under

Section 11(4)(v) and that there was no reasonable cause for the appellant

to have ceased to occupy the suit premises continuously for a period of

six months.

34. In the result, the appeals are dismissed. The parties are, however,

left to bear their own costs. The appellant is allowed three months time

to deliver vacant possession of the suit premises to the respondents

subject to its filing usual undertaking before this Court within four weeks.

It is also made clear that during this period of three months, the appellant

41

shall not induct any other person in the premises or transfer its possession

to any other person in any capacity whatsoever.

..........................................J.

[G.S. Singhvi]

...........................................J.

[Asok Kumar Ganguly]

New Delhi

May 4, 2011.