2022 (10) TMI 1083 - HC - Companies Law

Possession of suit property - recovery of arrears of rent - family company - real beneficiary / lifting of corporate veil - relationship of lessor and lessee between the parties or not - Order XII R-6 read with Order XIIIA of the Code of Civil Procedure, 1908 - HELD THAT - While examining an application under Order XII Rule 6 of the CPC, the court has to see whether clear and categorical admissions has been made on behalf of the defendant on the basis of which a decree can be passed in favour of the plaintiff. As per the Lease Agreement, a sum of Rs.2,50,000/- per month was payable as rent. As per the defendant firm, from the time of execution of the aforesaid lease on 1st April, 2007, no rent was ever paid by the defendant firm to the plaintiff company. A perusal of the relevant extracts of the profit and loss account and balance sheets of the plaintiff company from the year 2007 to the year 2014 would only show that some amount of rental income was received/receivable by the plaintiff company - the accounts of the defendant firm that have been placed on record pertain to the years prior to execution of the Lease Agreement. Therefore, none of these documents show that any rent was being paid or was payable by the defendant firm to the plaintiff company under the Lease Agreement. The plaintiff company was incorporated as a family owned company with the two grandchildren of late Sh. Sanmukh Singh Batra being the only shareholders and directors. Subsequently, disputes arose between the parties and it appears that Sanmukh Singh Batra sided with one of the grandsons, resulting in the shares of the plaintiff company and the control of the plaintiff company being transferred in favour of Jaspreet Pal Singh Batra, to the exclusion of Prabhdit Singh Batra - From the accounts of the plaintiff company that have been placed on record, it is evident that the plaintiff company was not engaged in any business activity and was only an asset holding company owned by the family. The only income shown of the plaintiff company is from lease rental. Further, the directorship and majority shareholding of the plaintiff company has, at all times, been with the family members of late Sh. Sanmukh Singh Batra. In view of settled principles of law with regard to Order XII Rule 6 of the CPC, no case is made out for passing of a judgment on the basis of admission - application dismissed.

Issues Involved:
1. Existence of landlord and tenant relationship.
2. Validity and genuineness of the Lease Agreement.
3. Ownership and control of the plaintiff company.
4. Impact of family settlements and share transfers.
5. Applicability of Order XII Rule 6 of the CPC for judgment on admissions.

Detailed Analysis:

1. Existence of Landlord and Tenant Relationship:
The plaintiff claimed the defendant was a tenant under a Lease Agreement dated 1st April 2007, which was terminated, leading to the present suit for possession and arrears of rent. The defendant contested this, denying any landlord-tenant relationship and alleging the Lease Agreement was a sham document created for obtaining loans from banks.

2. Validity and Genuineness of the Lease Agreement:
The defendant argued the Lease Agreement was never acted upon and was superseded by a subsequent Memorandum of Understanding (MoU) dated 20th December 2007, which stated the lease was only for securing financial loans. The court noted that no rent was paid by the defendant firm since the execution of the Lease Agreement and that the plaintiff had not demanded rent for eight years, suggesting the lease was not genuine.

3. Ownership and Control of the Plaintiff Company:
The plaintiff company was initially owned by two grandsons of late Sh. Sanmukh Singh Batra. Disputes arose, leading to the dilution of one grandson's shares. The defendant argued that the plaintiff company was a family-owned quasi-partnership, and the real owner of the suit property was late Sh. Sanmukh Singh Batra. Proceedings before the National Company Law Tribunal (NCLT) regarding the transfer of shares and directorship were highlighted, indicating ongoing disputes about the company's control.

4. Impact of Family Settlements and Share Transfers:
The defendant highlighted family settlements and share transfers, including a family settlement dated 14th April 2003, which stated that late Sh. Sanmukh Singh Batra was the absolute owner of the suit property. The court noted that the outcome of NCLT proceedings concerning the transfer of shares would significantly impact the present case.

5. Applicability of Order XII Rule 6 of the CPC for Judgment on Admissions:
The court emphasized that for a judgment on admissions under Order XII Rule 6 of the CPC, admissions must be clear, unambiguous, and unconditional. Given the disputed facts and the need for a trial to determine the genuineness of the Lease Agreement and the relationship between the parties, the court found no clear admissions to justify a judgment on admissions.

Conclusion:
The court dismissed the plaintiff's application under Order XII Rule 6 of the CPC, stating that the issues raised required a trial for resolution. The court emphasized that the observations made were only for deciding the present application and would not affect the final adjudication of the suit. The case was listed for further consideration of pending applications on 16th February 2023.

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