1986 (4) TMI 272 - SC - Companies Law

Whether the voluntary amalgamation of the first and second appellants companies amounts to a transfer of the first appellant s right under the lease within the meaning of section 10(ii)( a) of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960? Held that - Appeal dismissed. There has-been a transfer of the tenancy interest of appellant No. 1 in respect of the premises in question to appellant No. 2, subsequently renamed appellant No. 3, M/s National Radio Electronics Co. Ltd., in utter contravention of the provisions of section 10(ii)(a ) of the said Act as well as of the terms and conditions of clause 4 of the rent agreement dated January 12, 1959, executed by the first appellant, i.e., M/s General Radio and Appliances (P.) Ltd., in favour of the respondent landlord.

Issues Involved:
1. Whether the voluntary amalgamation of two companies amounts to a transfer of tenancy rights under Section 10(ii)(a) of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960.
2. Whether the amalgamation constituted unauthorized sub-letting or assignment of tenancy rights.
3. Whether there was willful default in the payment of rent.

Detailed Analysis:

Issue 1: Voluntary Amalgamation and Transfer of Tenancy Rights
The primary legal question was whether the voluntary amalgamation of the first and second appellant companies amounted to a transfer of the first appellant's lease rights under Section 10(ii)(a) of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960. The court examined the nature of the amalgamation, noting that it was sanctioned by the High Court of Bombay under sections 391 and 394 of the Companies Act, 1956. The court held that the transfer of assets and liabilities, including leasehold interests, occurred by virtue of the court's order, making it a voluntary transfer initiated by the first appellant company. This transfer was not considered involuntary as it was based on the company's application for amalgamation.

Issue 2: Unauthorized Sub-letting or Assignment of Tenancy Rights
The court analyzed whether the amalgamation amounted to unauthorized sub-letting or assignment of tenancy rights. Clause 4 of the rental agreement explicitly prohibited sub-letting without the landlord's written consent. The court found that the first appellant company had transferred all its interests, including tenancy rights, to the second appellant company without the landlord's consent. This transfer was deemed a violation of Section 10(ii)(a) of the Act, which prohibits transferring lease rights or sub-letting without the landlord's consent. The court emphasized that the amalgamation resulted in the first appellant company ceasing to exist, effectively transferring possession to the second appellant company.

Issue 3: Willful Default in Payment of Rent
The court also addressed the issue of willful default in the payment of rent. The Rent Controller had initially found that there was willful default in rent payment from October 7, 1968, to April 7, 1969. However, the appellate court reversed this finding, stating that the landlord had refused to accept rent from the second appellant company. The Supreme Court did not delve deeply into this issue, focusing primarily on the legality of the amalgamation and transfer of tenancy rights.

Conclusion:
The Supreme Court affirmed the judgment of the High Court of Andhra Pradesh, holding that the amalgamation constituted a transfer of tenancy rights without the landlord's consent, in violation of Section 10(ii)(a) of the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960. The appeal was dismissed, and the order for eviction was upheld, with no order as to costs.

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