2006 (3) TMI 771 - HC - Companies Law

Summary

Issues:
- Suit for eviction based on default in rent payment and subletting
- Interpretation of subletting under Section 13(1)(a) of the West Bengal Premises Tenancy Act
- Whether transfer of possession to subsidiary companies constitutes subletting
- Application of legal principles from Supreme Court decisions on subletting

Analysis:

1. The plaintiff, a landlord, filed a suit for eviction based on default in rent payment and subletting. The defendant contested the suit, denying subletting and stating that the occupation by subsidiary companies was permissive. The Trial Judge dismissed the suit, considering the relationship between the defendant and the subsidiary companies.

2. The main issue for determination was whether the transfer of possession to subsidiary companies by the defendant constituted subletting under Section 13(1)(a) of the West Bengal Premises Tenancy Act. The Court analyzed the control of the holding company over its subsidiaries and the legal implications of such transfers.

3. The Court referred to Section 4 of the Companies Act to establish the separate legal entities of holding and subsidiary companies. It held that accepting rent from subsidiary companies for their occupation amounted to subletting, even if the same individuals were involved in both companies.

4. The Court distinguished the present case from Supreme Court decisions on company amalgamations, emphasizing that allowing a separate legal entity like a subsidiary company to occupy the property on rent constituted subletting under the Act.

5. The Court concluded that the defendant had indeed sublet the premises to the subsidiary companies, Shalimar Works Limited and Lodna Colliery, without the landlord's consent. As a result, the Court allowed the appeal, setting aside the Trial Judge's decision and granting a decree for eviction based on the illegal sub-tenancy created by the defendant.

6. The judgment highlighted that the presence of subletting at the time of suit institution was sufficient grounds for eviction, even if the possession had been returned by the subsidiary companies to the defendant. The defendants were directed to vacate the property within two months, and no costs were awarded in the circumstances.

7. Justice Pravendu Narayan Sinha concurred with the decision, and the appeal was allowed, leading to the eviction of the defendants due to the established subletting without landlord consent.