DELHI MOTOR CO Vs. U A BASRURKAR DEAD

JUDGEMENT

(1.) The first appellant, M/s. Delhi Motor Company, is a partners ship firm (hereinafter referred to as "the firm") , of which the other four appellants Nos. 2 to 5 are partners. Respondent No 6, New Garage Ltd. is a private limited company (hereinafter referred to as "the Company") , of which respondent No. 1 was the Managing Director, and respondents Nos. 2 to 5 were members of the Board of Directors. The firm brought a suit against the Company far possession of part of the building known as "Scindia House" situated in Connaught Circus, New Delhi, on the basis of an agreement of sub-lease. Possession was claimed of a portion of the Show-Room on the ground floor, of 1/2 portion of the Balcony, and another portion of the premises which were, in the year 1950, in the possession of M/s. Kanwar Brothers Ltd. The case put forward by the firm was that the Company was the tenant of Scindia House and was in occupation of the Show-Room and other parts of the building, while a part of it was occupied by M/s. Kanwar Brothers Ltd. as sub-lessee of the Company. According to the firm, the agreement to sub-lease, or the sub-lease on the basis of which possession was claimed by the firm from the Company, is evidenced by three documents, the first one of which is letter, Ext. P. 1, dated 20th February. 1950, written by K. S. Bhatnagar, appellant No. 2, on behalf of the firm, to U. A. Bagrurkar, respondent No l, who was the Managing Director of the Company. The second document is letter, Ext. P. 2, dated 22nd February, 1960, written by respondent No. l Basrurkar to appellant No. 2 Bhatnagar; and the third document is Ext. P. 3, which purports to be notes on agreement arrived at between Basrurkar and Bhatnagar on 22nd February, 1950. The case of the firm was that, though these documents did not purport in so many words to be an agreement of sub-lease to be granted by the Company to the firm, in substance and in fact, the agreement arrived at was of a sub-lease in respect of the premises mentioned above. Since, under the Delhi and Ajmer Merwara Rent Control Act 19 of 1947, if a sub-lease had been granted by the Company to the firm without the consent of the landlord, the Company would have been liable to ejectment from the premises, the agreement was not made as directly evidencing a sub-lease, so that the landlord should not have an opportunity of suing the Company for ejectment. In February, 1950, when the agreement evidenced by these three documents was arrived at, respondent No 1, U. A. Basrurkar as Managing Director did not have the authority to enter into this transaction on behalf of the Company with the firm and, consequently, on 22nd March 1950, the Board of Directors of the Company, by a resolution Ext. P 9, authorised the Managing Director to enter into this transaction. Thereafter, the firm came into possession of two portions of the leased property and started its business in them with effect from 1st April, 1950. The two portions of the leased property which came into the possession of the firm were a portion of the Show-room on the ground floor and a half portion of the balcony on the first floor. The agreement contained in these letters and documents also required parties to carry out some other obligations and, according to the firm, it complied with them. In order to avoid the liability of the Company for ejectment under the Delhi and Ajmer Merwara Rent Control Act, 1947, the agreement wag sought to be given the form of a partnership; and in order to enable the Company to enter into such a transaction, a special resolution Ext. P. 4 was passed on 24th November, 1950 at an Extraordinary General Meeting of the Shareholders of the Company amending the Memorandum of Association of the Company. This amendment was subsequently approved by the District Judge and was registered with the Registrar of Companies. So far as the landlord is concerned, he was not a party to these transactions, though, on 5th April, 1951, the landlord gave a letter Ext. P. 22 recognising the possession of the firm, but he specifically stated in that letter that the firm would be a licensee and not a sub-lessee. One other term in the agreement arrived at was that appellant No. 2, K. S. Bhatnagar, was to be taken as a Director of the Company and he was in fact included in the Directors of the Company thereafter. The further case of the firm was that when M/s. Kanwar Brothers Ltd. vacated the portion of the premises which was included in the sub-lease, the Company did not give possession of that portion of the leased property to the firm and also started obstructing the use of those portions of the property by the firm of which the firm had secured possession by 1st April, 1950. A stage came when the firm was completely dispossessed from the property leased and, ultimately, after giving notices the firm instituted a suit on 18th June. 1952. The principal prayer in the suit was for delivery of possession in respect of all the three portions of the leased property. Then, there was a claim for damages to the extent of Rs. l0,000 in respect of loss incurred on account of dispossession and obstruction in use of the leased property at the instance of the Company Injunctions were also sought restraining the Company from interfering with the rights of the firm and with their uninterrupted use of the leased property. There were further prayers for other consequential injunctions which need not be described in detail.

(2.) On behalf of the Company and the Directors, the plea put forward was that there was no agreement of sub-lease or a completed sub-lease between the Company and the firm and that, in fact, all that took place were negotiations for entering into a partnership. Even the agreement for partnership was never completed, so that the firm was not entitled to any relief at all.

(3.) The trial Court held that the contract evidenced by these documents was an agreement for a sub-lease and, since this agreement did not require registration, the firm was entitled to the reliefs claimed on the basis of this agreement. The Company and its Directors appealed to the High Court of Punjab and that Court held that these documents constituted a completed lease or at least an agreement to lease falling within S. 2 (7) of the Indian Registration Act and, since the lease or the agreement to base was evidenced by documents in writing and they were unregistered, the lease or the agreement to lease could not be enforced. On this sole ground, the High Court allowed the appeal and dismissed the suit of the firm. The firm has now come up in appeal to this Court by special leave.