Tuesday, 31 March 2020

What material facts are to be pleaded by a party claiming property to be joint family property?

I may note that the requirement of pleading in a clear cut manner as to how the HUF and its properties exist i.e. whether because of pre 1956 position or because of the post 1956 position on account of throwing of properties into a common hotchpotch, needs to be now mentioned especially after passing of the Benami Transaction (Prohibition) Act, 1988 (hereinafter referred to as "the Benami Act") and which Act states that property in the name of an individual has to be taken as owned by that individual and no claim to such property is maintainable as per Section 4(1) of the Benami Act on the ground that monies have come from the person who claims right in the property though title deeds of the property are not in the name of such person. An exception is created with respect to provision of Section 4 of the Benami Act by its sub-section (3) which allows existence of the concept of HUF. Once existence of the concept of HUF is an exception to the main provision contained in sub-sections (1) and (2) of Section 4 of the Benami Act, then, to take the case outside sub-sections (1) and (2) of Section 4 of the Benami Act it has to be specifically pleaded as to how and in what manner an HUF and each specific property claimed as being an HUF property has come into existence as an HUF property. If such specific facts are not pleaded, this Court in fact would be negating the mandate of the language contained in sub-sections (1) and (2) of Section 4 of the Benami Act."

 The clear legal position is that a party which claims that a particular property is joint family property must specifically plead the origin of the HUF, whether pre 1956 or post 1956, and give sufficient particulars as to the creation of the HUF as well as the ownership of the property by the HUF.

IN THE HIGH COURT OF DELHI

CS (OS) 1214/2014

Decided On: 11.02.2020

 Rajeev Chawla  Vs. Deepak Chawla

Hon'ble Judges/Coram:
Prateek Jalan, J.


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Whether daughters can claim right in property of their father as per his will if they have given no objection for mutation of property in the name of their brothers?

Merely because the daughters of the deceased had execute
d a no-objection certificate for mutation of the property in favour of their brothers would not defeat the right of the daughters to a share in the property when the will of the deceased categorically vested them with rights in the said property. The Court further observed that any averment in the no-objection certificate as regards the purport of the will, if found contrary to the contents of the will, could not be read against the daughters.

IN THE HIGH COURT OF DELHI

CS (OS) 263/2018 and IA No. 7445/2018 (u/O XXXIX R-1&2 CPC)

Decided On: 19.02.2020

 Chitta Ranjan Das Vs. Jyotsna Das

Hon'ble Judges/Coram:
Rajiv Sahai Endlaw, J.

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Whether court should grant eviction decree on the ground of subletting if the tenant is not in control of business of the company working in rented premises?

In Sait Nagjee Purushotham (supra), the question was whether the partnership firm which was converted into a company had all the partners of the firm as the Directors. No evidence was led to show that the Directors were the same, accordingly, the Court held that there were subletting and observed as under:

"20. In view of the ratio laid down by this Court in the aforesaid decisions, various tests were laid down obtaining in the facts of each case. But the common ratio which runs in all these cases is that if there is voluntary transfer by the company to a newly incorporated company then in that case one has to plead and prove that all the members of the old firm continued in the new firm and it is essentially the same. The only exception which has been made is that the transfer of the old company to a new one is under the statute or law. Therefore, in the present case after verifying the records of the case, we have found that all the three courts have consistently observed that the benefit of Section 11(17) of the Act cannot be extended to the appellant in this case and we are of opinion that the view taken by the courts below is correct and there is no ground to interfere in this appeal."

25. Subsequent to the judgment in Sait Nagjee Purushotham (supra), the Supreme Court considered this very issue in Santosh Ajit Sachdeva and Ors. v. Anoopi Shahani, MANU/SC/7841/2007 : (2007) 7 SCC 675 wherein, on the question of subletting the Supreme Court observed as under:

"8. All other cases referred by learned Counsel were also examined and we do not feel any need to refer any more of them. The theory of lifting the corporate veil has been accepted in certain circumstances which have already been referred by this Court in a series of decisions. However, so far as this case is concerned, as per the finding of fact recorded by the appellate court as well as by the High Court that the appellant-defendant has not been able to successfully prove that she is controlling the company, it was held by the appellate court that merely by holding a large number of shares is not sufficient but something more is required to prove that she is actually controlling and managing the business herself. That finding of the Appellate Court has been upheld by the High Court. Hence, in view of the concurrent finding of both the courts below, there is no reason for us to take a different view of the matter. Hence, we do not find any merit in this appeal and accordingly the appeal stands dismissed. No order as to costs."

Thus, as per the judgment in Santosh Ajit Sachdeva and Ors. (supra), it is merely not enough for a tenant to hold a large number of shares in a company, something more would be required.

Conclusion

26. Applying the tests laid down in the above three decisions of the Supreme Court to the facts of the present case, the admitted facts show that there are three companies functioning from the tenanted premises. Two of the companies were incorporated by third persons. The tenants became Directors in the company a few years after incorporation. The companies had their registered office in the tenanted premises since inception. The exact shareholding of these Directors and their control is not clear to the Court. No evidence has been led to show as to who is in charge of the day to day handing of the business of these companies. In any event, the fact that there are other Directors in the companies and other shareholders itself shows that the corporate reflection and image of the said companies cannot be only Mr. Arun Kumar Jain and Ms. Archana Jain. Even going by the tests laid down in Madras Bangalore Transport Co. (supra), this is a clear case of subletting in view of the third-party Directors and shareholders in the said two companies. Under these circumstances, though not on the question of res judicata, even on merits, the finding of the ARC that there is subletting does not deserve to be interfered with.

 IN THE HIGH COURT OF DELHI

CM (M) 600/2019, CM Appls. 17972, 20292 and 20409/2019

Decided On: 19.02.2020

 Arun Kumar Jain  Vs.  Bhagwant Singh Pabla 

Hon'ble Judges/Coram:
Prathiba M. Singh, J.
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How to appreciate evidence in eviction suit if tenant takes the plea of partnership to conceal real transaction of subletting?

In order to prove mischief of subletting as a ground for eviction under the Rent Control laws, two ingredients have to be appreciated, (1) parting with possession of tenancy or part of it by the tenant in favour of a third party with exclusive right of possession, and (2) that such parting with possession has been done without the consent of the landlord and in lieu of compensation or rent. Inducting a partner or partners in the business by a tenant, by itself does not amount to subletting. However, if the purpose of such partnership is ostensible and a deed of partnership is drawn to conceal the real transaction of subletting, the Court may tear the veil of partnership to find out the real nature of the transaction entered into by the tenant. The existence of deed of partnership between the tenant and the alleged sub tenant or the ostensible transaction in any other form would not preclude the landlord from bringing on record material and circumstances, by adducing evidence or by means of cross-examination, making out a case of subletting or parting with possession in the tenancy premises with him, may be along with partners, the tenant may not be said to have parted with possession. The initial burden of proving sub-letting is on the landlord. But once he is able to establish that the third party is in exclusive possession of the premises and that the tenant has no legal possession of the tenanted premises, the onus shifts upon the tenant to prove the nature of occupation of such third party and that he still continues to hold legal possession of the tenanted premises. In other words, initial burden lying upon the landlord would stand discharged by adducing prima facie proof of the fact that the party other than the tenant was in exclusive possession of the premises. A presumption of subletting may then be raised and would amount to proof unless rebutted.1

15. As noticed earlier, there is discrepancy between the document at Exhibit 98 i.e. the deed of partnership dated 19 February 1981 and the entry dated 17 September 1981 in the extract of registration obtained from the Registrar of Firms. There is no clarity as to the precise deed or document produced by Thakkar at the stage of registration with the Registrar of Firms. However, even if the contention of Thakkar and others that deed of partnership dated 19 February 1981 was the document which was produced is to be accepted, the contents thereof establish that the real transaction between Thakkar and the so-called partners was of subletting. There is no dispute that no consent whether in writing or otherwise was obtained by Thakkar from the petitioners.

16. Clause 3 of the partnership deed states that no capital whatsoever shall be contributed by Thakkar, whether at the stage of entering into partnership or in future. However, it is stated that Thakkar 'shall give earlier mentioned premises admeasuring 10' x 40' along with all articles fixtures (list of all articles is enclosed)". Thakkar in his deposition (cross-examination) has admitted that when he entered into the partnership in 1981, his business was not that of tailoring. Further, that the list of articles mentioned in the agreement at Exhibit 98 was not attached to it. Thakkar has also admitted that he has no knowledge of tailoring work. Similarly Sailesh Shah (defendant No. 4) in his deposition has admitted that Thakkar had no knowledge of tailoring business or sale of clothes. It is also admitted by Sailesh Shah that Thakkar never took part in the management of the partnership business. The expression 'give earlier mentioned premises ... .......' In clause 3 of Exhibit 98, in said context means and implies that Thakkar parted with the possession of the suit premises in favour of Sailesh Shah and Arora in the guise of entering into partnership with them. This is clear from the rest of the clauses as well as oral evidence on record.

17. Clause 4 of the partnership deed at Exhibit 98 provides that Sailesh Shah and Arora shall manage the entire business of the firm, bear all expenses towards articles, baggage, municipal permissions, employees, electricity charges and incidental expenses. Thakkar is exempted from taking part in the business activities of the firm and is also exempted from any liability or responsibility of any type concerning the business of the firm. Clearly therefore, this is not a case where Thakkar, as a partner, has agreed to carry on the business of the firm together with other partners.

18. Clause 5 of the partnership deed at Exhibit 98, in terms provides that since the entire business of the firm is to be carried on by Sailesh Shah and Arora, only they shall be entitled to all the profits arising from the said business and similarly only they shall be entirely responsible for the losses. One of the essential ingredients in the matter of constitution of a partnership is that the partners agree to carry on business in partnership with each other and to share the profits of such business. The element of sharing of profits is clearly absent in this projected partnership. It is possible that there is a dormant partner, who does not take part in the day to day activities or the business of the firm. It is also possible that a partner does not bear the share of losses. However, the share in profits, is one of the vital ingredients in the constitution of a partnership firm. Such vital ingredient is absent in the partnership or the projected partnership.

19. Section 4 of the Indian Partnership Act, 1932 (Partnership Act) defines 'partnership' as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. From the definition itself, it is clear that one of essential elements necessary for determining the existence of partnership is that there must be an agreement to share the profits of business. Section 6 of the Partnership Act provides for mode of determining existence of partnership. This section provides that in determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be have to the real relation between the parties, as shown by all relevant facts taken together. The first explanation to this section provides that sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property, does not of itself make such persons partners. The second explanation provides that the receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of the profits or varying with the profits earned by a business, does not itself make him a partner with a person carrying on the business. This means that regard has to be had to the real intention between the parties, as shown by all relevant facts taken together. The receipt by a person of the share of the profits of a business is an important element and strong evidence of the existence of partnership between him and the persons carrying on business. It is, however, not conclusive. The crucial test is whether such participation in profits constitutes the relationship between the principal and agent between the persons taking profits and those actually carrying on the business. In this case the element of sharing the profits is absent.

20. Clause 6, again, in terms, provides that Thakkar, 'in lieu of making available his above mentioned premises ... ..... shall take for himself a sum of Rs. 800/- (Rupees Eight Hundred only) per month from income of said partnership business.' This clause further goes on to state that even if the firm makes losses, Sailesh Shah and Arora shall pay every month Rs. 800/- to Thakkar. Clause 8 then provides that Thakkar 'shall have right to take back in his possession above described premises ... ..... if the business of partnership is dissolved.'

21. A conjoint reading of clauses 3, 6 and 8 leave no manner of doubt that Thakkar, in lieu of consideration of Rs. 800/- per month has parted with his possession of the suit premises in favour of Sailesh Shah and Arora. In clause 3 there is reference to the giving of the suit premises to Shah and Arora. In clause 6 there is reference to making available the suit premises to Arora and Shah. In clause 8, Thakkar has reserved unto himself the right to take back in his possession the suit premises. All this is sufficient to establish that Thakkar has parted with the exclusive possession of the suit premises in favour of Sailesh Shah and Arora in the year 1981 and thereafter, in place of Arora, to Dinesh Amrutlal Shah. The deed at Exhibit 98, without anything further, discharges the initial burden which the law casts upon the petitioners.

22. In the case of Celina Coelho Pereira (supra), the Apex Court has held that the initial burden of proving subletting is upon the landlord, but once he is able to establish that the third party has no exclusive possession of the premises, the onus shifts upon the tenant. It is further held that the initial burden lying on the landlord would stand discharged by adducing prima facie proof of the fact that the party other than the tenant was in exclusive possession of the suit premises. A presumption of subletting may then be raised and would amount to proof unless rebutted. If reference is made to the deposition of Sailesh Shah and Thakkar, it will be evident that Thakkar has failed to discharge the onus. Rather, the deposition of Sailesh Shah and Thakkar establish that the so-called partnership was merely a cloak to conceal the real transaction of sub-letting.

23. In the case of Helper Girdharbhai (supra), the Apex Court has held that the issue whether a genuine partnership existed of which the tenant claims to be a partner, is a mixed issue of law and fact. It has been further held that the mere fact that tenant partner was entitled to a fixed percentage of the profit of the firm only and not to share its losses, was not by itself a consideration to hold that such partnership was not a genuine one and the tenant had merely sublet the premises to the so-called partners. This position, is distinguishable and will not apply to the facts and circumstances of the present case. Even in the case of Helper Girdharbhai (supra) the element of sharing of profits was present, although, the tenant partner was entitled to a fixed percentage of the profit of the firm. In the present case, as noted earlier, clause 5 of the deed at Exhibit 98 in terms provides that only Sailesh Shah and Arora will be entitled to the profit arising from the business. Thus, in the present case there is no element of sharing of profit whatsoever, as between Thakkar and the remaining partners. Clause 6 of the document at Exhibit 98 merely provides that Thakkar shall, in lieu of making available the suit premises, take for himself a fixed sum of Rs. 800/- per month from the income of the partnership business. This clause further provides that Sailesh Shah and Arora shall pay this fixed amount of Rs. 800/- per month to Thakkar irrespective of whether or not the partnership business earns profits or makes losses. Clearly this was not the fact situation in the case of Helper Girdharbhai (supra). Again, in the said decision, there were several other factors, which were noticed by the Apex Court to uphold the conclusion that the partnership was genuine and not merely ostensible transaction to conceal the real transaction of subletting.

24. In this case, if the tests summarised by the Apex Court in the case of Celina Coelho Pereira (supra) are applied, it is evident that the real transaction between the parties is one of subletting. Thakkar, has clearly parted with the possession of the suit premises for consideration of Rs. 800/- per month. Thakkar is not at all actively associated with the partnership business, rather is exempted from association with the partnership business. In the evidence, it has come on record that the partnership business is dealing in tailoring, sale of clothes, etc. and Thakkar, has neither any knowledge nor experience of this kind of business. This is not a case where Thakkar can be said to have retained any control over the suit premises. Thakkar, has only retained unto himself the right to take back in his possession the suit premises if the partnership firm is dissolved. Sailesh Shah in his deposition has at one place admitted that it is true that Thakkar has given the suit premises to Sailesh Shah and Arora "as sub tenants". Mr. Datar, however submitted that this admission appears to be a typographical error and on the basis of a stray statement in the deposition, the effect of the rest of the deposition cannot be whittled down.

25. Even if, the aforesaid categorical admission is excluded from consideration, there is other material in the deposition of Sailesh Shah and Thakkar, which establishes the case of sub-letting. There are admissions that Thakkar had no knowledge of tailoring business of sale of clothes. There are admissions that Thakkar never took any part in the management of the partnership business. There are admissions that there was no list of articles like sewing machines, cupboard etc. attached to the deed of partnership at Exhibit 98. There is evidence that no such articles were supplied by Thakkar to the remaining partners. All this coupled with the categoric provisions in the deed of partnership, to the effect that Thakkar was not entitled to any share in the profits of the firm, make it very clear that the entire transaction, in reality, was one of sub-letting and not partnership, as it was projected to be. In such a situation, the two Courts have failed in their duty to pierce the veil of partnership and determine the real nature of transaction between Thakkar and others who claim to be the partners.

26. There is evidence on record that the firm commenced its business from the suit premises in the year 1981 and invitation cards were printed for the inaugural. Upon such invitation cards even the name of Thakkar did not appear. True, as contended by Mr. Datar, this by itself, is not a relevant circumstance. However, if such several circumstances are considered cumulatively, it is clear that the partnership in the present case was only ostensible and a cloak to disguise the real transaction of subletting.
IN THE HIGH COURT OF BOMBAY

Writ Petition No. 1940 of 1996

Decided On: 24.07.2015

Taralakshmi Maneklal Thanawalla  Vs. Shantilal Makanji Dave
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