w w w . L a w y e r S e r v i c e s . i n



M/s.Veetrag Investments And Finance Company v/s M/s.Premier Brass And Metal Works Private Limited

    CHAMBER SUMMONS NO.903 OF 2001 IN EXECUTION APPLICATION NO. 445 OF 2000 IN SUMMARY SUIT NO. 4150 OF 1997

    Decided On, 09 October 2002

    At, High Court of Judicature at Bombay

    By, THE HONOURABLE MR. JUSTICE S.J. VAZIFDAR

    M.C. Palan with Mr.M.K. Khatri, V.B. Naik i/b Y.P. Yagnik, Advocates.



Judgment Text

The Chamber Summons is to set aside the attachment levied pursuant to a warrant of attachment dated 17th November, 2000 in so far as it relates to the goodwill and suit premises and incidental reliefs.


On 16th February, 2002 the suit was decreed in the sum of Rs.24,00,000/- with interest at 36% per annum from the date of the promissory note on which the suit was filed i.e. 3.11.1994 till the date of filing of the suit and further interest at 18% per annum from the date of the suit till realisation on the sum of Rs.24,00,000/- along with costs.


On 17.11.2000 a warrant of attachment was issued by this Court. The Plaintiff had applied for execution of the decree by attachment of the moveable property belonging to and in the possession of the Defendant including the Defendants right, title and interest in the goodwill of the business together with tenancy rights of the said business as a going concern. The attachment in respect thereof was levied on 12th December, 2000. The Plaintiff, by its advocates letter dated 13th December, 2000 informed the Applicant of the said decree and the warrant of attachment dated 17th November, 2000 and the fact that the tenantable premises of the Defendant along with their right, title and interest to use, occupy and possess the same were attached by this Court. The Defendant, by her advocates letter dated 21st December, 2000 replied to the aforesaid letter. As the contents of the letter form the basis of her case in the present Chamber Summons, it is not necessary to narrate the same at this stage.


The Applicant took out the present Chamber Summons on 24th July, 2001. The Applicants case is that she is a tenant of the said premises. By an agreement dated 1st June, 1970 the Applicant entered into an agreement of leave and licence for 11 months with the Defendant. Thereafter, the Applicant and the Defendant entered into a further leave and licence agreement dated 1st March, 1973. On 1st June, 1978 the Applicant filed R.A.E. Suit No.308/5183 in the Small Causes Court at Bombay. On 25th/26th July, 1996 the learned Single Judge of the Small Causes Court passed a decree for ejectment against the Defendant. In 1996 the Defendant filed an appeal being Appeal No.486 of 1996 challenging the decree dated 25th/26th July, 1996. The Appeal is pending. By an order dated 17th April, 1998 the Division Bench of the Small Causes Court stayed the execution of the decree till further orders. The stay is presently in operation.


On 8th January, 2001 the Plaintiffs herein made an application to be joined as a party in Appeal No.486 of 1996. The application was allowed by an order dated 20th April, 2001 passed by the Small Causes Court. Being aggrieved by the said order, the Applicant filed Civil Revision Application No.988 of 2001 before this Court which was permitted to be withdrawn with liberty to the Applicant to agitate their contentions in appropriate proceedings after the present Chamber Summons is finally decided. It is in these circumstances that the Applicant filed the present Chamber Summons. Mr.Palan, the learned counsel appearing on behalf of the Applicant submitted that as the Defendant was the Applicants sub-tenant it has no disposing power over the said premises. Accordingly, he submitted, the same cannot be attached and sold in execution of the said decree. The attachment according to him is therefore liable to be set aside under Order XXI rule 15 of the Code of Civil Procedure. He further submitted that the proviso to section 60 of the C.P.C. was not exhaustive and, if the execution and sale of any property is barred under statute, the same also could not be attached and sold in execution despite the fact that it is not one of the properties mentioned in the proviso to section 60. Lastly, Mr.Palan submitted that the Defendant did not have any saleable goodwill or tenancy rights in respect of the said premises.


Mr.Palans submission that the tenancy rights of the Defendant in the property are not saleable and that the Judgment-debtor/sub-tenant has no disposing power over the same, is not well-founded. Section 60 of the Code of Civil Procedure reads as under:-


"60 (S.266) (1) The following property is liable to attachment and sale in execution of a decree, namely, lands, houses or other buildings, goods, money, bank notes, cheques, bills of exchange, hundies, promissory notes, Government securities, bonds or other securities for money, debts, shares in a corporation and, save as hereinafter mentioned, all other saleable property, moveable or immoveable, belonging to the judgment-debtor, or over which, or the profits of which, he has a disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment-debtor or by another person in trust for him or on his behalf:


Provided that the following particulars shall not be liable to such attachment or sale, namely:


.............


(kc) the interest of a lessee of a residential building to which the provisions of law for the time being in force relating to control of rents and accommodation apply;"


Thus Section 60 of the CPC itself indicates that the interest of a lessee is saleable property in respect of which the lessee has a disposing power. If it were not so, it would not have been necessary in the proviso, which excludes certain properties from sale and attachment in execution of a decree, to include the interest of a lessee holding a particular type of leasehold interest viz. in respect of a residential building to which the provisions of law for the time being in force relating to the control of rents and accommodation apply. If a lessees right did not constitute property within the meaning of that expression in Section 60 of the C.P.C., there would have been no necessity to enact clause (kc) to the proviso thereof.


It is thus clear that the tenancy rights of the judgment-debtor constitutes a saleable property within the meaning of that expression in Section 60 of the Code of Civil Procedure and in respect thereof the judgment-debtor has a disposing power, which he may exercise for his own benefit.


I am in agreement with Mr.Palans submission that the proviso to Section 60 of the Code of Civil Procedure is not exhaustive. In other words, if there is a statutory bar prohibiting attachment and sale of property of a particular nature under an enactment, then merely because it is not included in the proviso to Section 60, it cannot be said that the bar would not operate.


Founding himself in this proposition, Mr.Palan submitted that Section 26 of the Maharashtra Rent Control Act, 1999 (hereinafter referred to "1999 Act".) contains an absolute bar against the tenant to sublet or give on licence the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein. Section 26 of the 1999 Act reads thus :-


"26. In absence of contract tenant not to sublet or transfer or to give on licence - Notwithstanding anything contained in any law for the time being in force, but subject to any contract to the contrary, it shall not be lawful for any tenant to sublet or give on licence the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein".


In view of the provisions of Section 7(15) and 25 of the 1999 Act a sub-tenant falls within the meaning of the term "tenant". Thus the judgment-debtor, who is a sub-tenant of the Applicant is clearly a tenant within the meaning of that expression in Section 26 of 1999 Act. Consequently the restrictions on the tenant imposed by Section 26 of 1999 Act will also apply to the judgment-debtor.


Sections 7 (15) and 25 of the 1999 Act, are as follows :-


"7 (15) "tenant means any person by whom or on whose account rent is payable for any premises and includes :-


(a) such person, -


(i) who is a tenant, or


(ii) who is a deemed tenant, or


(iii) who is a sub-tenant as permitted under a contract or by the permission or consent of the landlord, or


(iv) who has derived title under a tenant, or


(v) to whom interest in premises has been assigned or transferred as permitted, by virtue of, or under the provisions of, any of the repealed Acts ;


(b) a person who is deemed to be a tenant


under Section 25 ;


25. Certain sub-tenants to become tenants on determination of tenancy ; When the interest of a tenant of any premises is determined for any reason, any sub-tenant to whom the premises or any part thereof have been lawfully sublet and such sub-tenancy is subsisting on the date of commencement of this Act or where sub-tenancy is permitted by a contract between the landlord and the tenant, such sub-tenant shall, subject to the provisions of this Act, be deemed to become the tenant of his landlord on the same terms and conditions as he would have held from the tenant if the tenancy had continued. "


The question then really is whether Section 26 of the 1999 Act contains an absolute bar against the judgment-debtor assigning or transferring its interest as a sub-tenant in the said premises. It is true that Section 26 is a non-obstante provision. It bars the tenant from sub-letting or giving on license, premises let to him or to assign or transfer in any other manner his interest therein. However, this bar is subject to any contract to the contrary. A plain reading of Section 26, indicates that the bar is not absolute but subject to any contract to the contrary. Whether in the facts of the present case, the judgment-debtor being a sub-tenant a contract to the contrary by it requires the landlord or the Applicant i.e. the head tenant to be a party to the contract is a matter which does not fall for consideration presently. A sub-tenant can, with the consent of the landlord and/or the head tenant enter into a contract to sublet or give on licence the whole or any part of the said premises let out to him or to assign or transfer in any other manner his interest therein.


This view is supported by the judgment of a Division Bench of this Court in the case of Union Bank of India .Versus. M/s. Mittersain Rupchand & Ors. reported in (1996) 3 C.C.C. 52. The question that fell for consideration of the Division Bench was whether the tenancy rights and goodwill of a running concern can be attached in execution under Order 21 Rule 54 of the C.P.C. The decree-holder sought and obtained attachment of the goodwill and the tenancy rights in the property in respect of which the Respondent was a tenant. The judgment-debtor was a tenant in respect of the premises which were attached. It was contended on behalf of the judgment-debtor that the goodwill and tenancy rights are not saleable property and over which the judgment-debtor had no disposing power. Consequently it was contended, the execution levied was invalid.


Rejecting the contention, the Division Bench held in paragraph 7 that there was no bar whatsoever under sub-section (1) of Section 15 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (hereinafter referred to "1947 Act"), to attach and sell the leasehold interest of a lessee in a premises leased out for a non-residential purpose. Section 15 (1) of 1947 Act, reads as under :-


"15 (1) Notwithstanding anything contained in any law but subject to any contract to the contrary, it shall not be lawful after the coming into operation of this Act for any tenant to sublet the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein and after the date of commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Act, 1973, for any tenant to give on licence the whole or part of such premises.


Provided that the State Government may by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases or the giving on licence any premises or class of premises and to such extent as may be specified in the notification."


For the purposes of the present submission, the provisions of Section 15 (1) of 1947 Act are similar to the provisions of Section 26 of 1999 Act. The Division Bench construed Section 15 (1) thus:-


"6. Sub-section (1) of Section 15 of the Bombay Rent Act, which is set out hereinabove, inter alia provides that it shall not be lawful for any tenant to sublet the whole or any part of premises or to assign or transfer in any other manner his interest therein. The plain reading of sub-section makes it clear that the prohibition is not absolute because it is always open to the parties to contract to the contrary as provided by the Section. It is always open for the lessor and the lessee to contract that the lessee can sub let the premises or assign or transfer in any other manner his interest therein. In other words the prohibition contained in sub-section (1) is not absolute. The Section nowhere provides that the transfer shall be void. The proviso of the sub-section confers power on the State Government to issue notification permitting the transfer of interest and such notification has been issued permitting transfer of interest of the lessee in the business premises, provided what is transferred is the running business with tenancy rights. It is, therefore, clear that even the legislature never contemplated that the lessee of non-residential premises cannot transfer or assign the interest in the leasehold rights. The learned Judge, was, therefore, not right in observing that the transfer of leasehold interest in non-residential premises is totally prohibited and therefore not liable for attachment."


The ratio of the judgment of the Division Bench squarely applies to the provisions of Section 26. As I have observed earlier Section 26 also does not contain an absolute bar. The observations of the Division Bench in respect of Section 15 (1) extracted above, would therefore, clearly apply to the provisions of Section 26.


There is yet another reason for construing Section 26 in this manner. Mr.Naik, invited my attention to Section 56 of the 1999 Act. There was no similar provision in the 1947 Act. Section 56 of 1999 Act reads thus:-


"S.56. Right of Tenant and Landlord to receive lawful charges .- Notwithstanding anything contained in this Act, it shall be lawful for.-


(i) the tenant or any person acting or purporting to act on behalf of the tenant to claim or receive any sum or any consideration, as a condition of the relinquishment, transfer or assignment of his tenancy of any premises ;


(ii) the landlord or any person acting or purporting to act on behalf of the landlord to receive any fine, premium or other like sum or deposit or any consideration in respect of the grant, or renewal of a lease of any premises, or for giving his consent to the transfer of a lease to any other person."


Once again it must be noted that the expression tenant in Section 56 of 1999 Act would include a deemed tenant which the judgment-debtor is. Section 56 of the 1999 Act now permits a tenant to claim or receive any sum or any consideration as a condition for the relinquishment, transfer or assignment of his tenancy of any premises let to him. It also permits the landlord to receive any fine, premium or other like deposit or any consideration in respect of grant, or renewal of a lease of any premises, or for giving his consent to the transfer of a lease to any other person. Section 56 thus now gives a valuable right and creates a further interest in respect of premises let to a tenant. In view of Section 56 of the 1999 Act a fortiorari tenancy rights of a tenant constitute saleable property and give tenants a disposing power in respect thereof and the same are therefore, liable to be attached and sold in execution of a decree. In answer to Mr.Naiks submission in respect of Section 56 of the 1999 Act, Mr.Palan invited my attention to J.D. Dalals commentary on The Maharashtra Rent Control Act, 1999 at page 747 and adopted the same as his argument. The relevant part reads as follows:-


"Then the question arises how far are the provisions of sec. 56 of the Act which now allow the landlord and tenant to take consideration for relinquishment, transfer or assignment of tenancy of any premises consistent with this provision. Because while a consideration is legal for transfer or assignment of any premises the transfer of premises let for business or trade or storage is prohibited. This situation appears to be somewhat inconsistent. Therefore sec. 56 stands restricted to transfer of premises let for residence or education. That would mean that lease or tenancy of residential or educational premises to which the proviso may apply can be a matter of commercial bargain particularly because of sec.56 but the tenancy or lease of commercial premises cannot be so. The provision should have been vice versa. At the same time sec. 56 has a non obstante clause viz. notwithstanding anything contained in the Act. Does it mean that


Sec.56 overrides the provisions to sec.26. If that is so there was no point in excluding the premises let for business or trade or storage."


I fail to understand why according to the learned author the transfer of premises let for business or trade or storage is prohibited. Firstly,as I have observed earlier, there is no absolute bar on transfer or assignment of the tenancy rights in respect of commercial premises. The bar is subject to a contract to the contrary. Founding himself on this erroneous premise the author goes on erroneously to conclude that Section 56 is restricted in its application to premises let for education and residence. In the circumstances, there is no in-consistency between the provisions of Sections 26 and 56 of the 1999 Act. Sections 26 and 56 in fact complement each other. With respect I am not inclined to accept Mr.Palans submission based on the above commentary and reject the same as being contrary to the provisions of the 1999 Act.


Having said this, it is necessary at this stage to clarify the position regarding the rights of landlords and head tenants. I have held that tenancy rights can be attached and sold in execution of a decree. The rights of the tenants if exercised under Section 56 of the 1999 Act would also be liable to be attached and sold in execution of a decree. However, this cannot affect the rights of the landlords/head tenants in any manner, for the right of a tenant under Section 56 of 1999 Act can only be exercised with the consent of the landlord. In execution of a decree against the tenant/sub-tenant, the Court cannot force an unwilling landlord/head tenant to enter into such a agreement. But if such an agreement is entered into by the landlord or head tenant with a tenant or sub-tenant as the case may be, the consideration received by the latter is liable to be attached and sold. Further, if the landlord and/or the head tenant is willing to enter into an agreement as contemplated in Sections 26 and 56, it would be possible for the executing Court to force the tenant or sub-tenant to enter into an agreement contemplated therein. Needless to say, the executing Court at that stage would not confirm the agreement, sale, assignment or transfer unless it is satisfied that the same was reasonable, fair and genuine. In this regard such a sale would be no different from a sale of any other property. Mr.Palan, relied upon a judgment of this Court in the case of - Veetrag Investments & Finance Co. Versus M/s.Premier Brass & Metal Works Pvt.Ltd. And M/s.Seksaria Sons Pvt. Ltd. Mumbai, reported in 2002 (3) Mh.L.J. page 455. It is necessary to set out the facts in that case before dealing with the ratio therein. Incidently, it is interesting to note that the application for raising attachment and setting aside in that case also was taken out in the present suit. The Applicant was the owner and landlord of the premises. The Defendant was a monthly tenant in respect thereof. According to the Applicant, the Defendant had committed a breach of tenancy and he intended therefore to file a suit for eviction against him and for recovery of possession.


The Plaintiff had obtained the decree mentioned earlier by me. The Plaintiff had taken out a Notice of Motion for attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure. The learned Counsel appearing for the Defendant made a statement that the Defendant would maintain status-quo in relation to the premises in his occupation. When the suit was finally disposed of, the Defendants counsel was not prepared to continue the statement. The learned Judge, who passed the decree, appointed a Court Receiver in respect of the premises therein but directed the Court Receiver to take only formal possession, which the Court Receiver did. Ultimately the Court Receiver was directed to hold a bid between the Plaintiff and the Defendant to find out whose bid was higher for utilising the premises as an agent of the Court Receiver. If the Plaintiffs bid was higher, the Court Receiver was directed to appoint him as his agent. The Plaintiff filed an execution application and obtained a Judges order whereby the Court Receiver was directed to sell the suit premises to the Plaintiff or his nominee for a sum of Rs.40,00,000/-. The Court Receiver was directed to hand over possession of the premises to the Plaintiff. The Plaintiff was thereafter put in possession of the premises. Thereafter the Applicant took out a Chamber Summons under Order 21 Rule 90 of the Code of Civil Procedure praying that the order sanctioning sale of the premises in favour of the Plaintiff be set-aside and for raising the attachment. The Applicant further made an application that he be permitted to re-enter the premises. It was contended on behalf of the Plaintiff that he had by operation of law become a tenant of the Applicant and therefore, this Court did not have jurisdiction to entertain the Chamber Summons. It is important to note that the learned Judge dealt with two separate applications in the Chamber Summons - one was for quashing the sale that was sanctioned by the Court and other was to raise the attachment. The Plaintiffs contention that the property had been validly sold in execution of a decree, was negatived by the learned Judge. It is however, important to note that the learned Judge did not quash the attachment, which had been levied by the Court. This is clear from paragraphs 8, 9 and 10 read with paragraph 18 of the judgment.


The learned Judge in paragraphs 8 and 9 dealt with the submission made on behalf of the Plaintiff to the effect that the goodwill and tenancy rights in such premises were saleable property and therefore would be liable to attachment and sale in view of Section 15 (1) of 1947 Act read with the notification issued thereunder permitting transfer and assignment of leasehold interest in the business in cases when the stock-in-trade of a running business is transferred or assigned. The Plaintiff sought to support the sale relying upon the judgment in Union Bank of India Versus. M/s. Mittersain Rupchand & Ors. (supra). It is in respect of this argument that the learned Judge observed as follows in paragraphs 9 and 10 :-


"9. Shri Samdani, however, pointed out that the Rent Act, 1947 has been repealed by the Maharashtra Rent Control Act, 1999 (hereinafter referred to as "the Rent Act, 1999" for short).Section 58 of the said Act provides for repeal of the Rent Act, 1947. It may be noted that the Rent Act, 1999 came into force with effect from 31.3.2000. The impugned order ordering sale of the demised premises in demised of the plaintiff was made on 30.3.2001 i.e. exactly one year after the coming into force of the Rent Act, 1999. It is therefore, obvious that the question as to whether tenancy and goodwill in respect of the premises which are non-residential can be transferred, is governed not by a Rent Act, 1947, but, the Rent Act, 1999. Shri Samdani referred to the provisions of Section 26 of the Rent Act, 1999 which provides that in the absence of contract tenant not to sublet or transfer or give on licence. The Section reads:


S.26. Notwithstanding anything contained in any law, for the time being in force, but subject to any contract to the contrary, it shall not be lawful for any tenant to sublet or give on licence the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein:


Provided that, the State Government may be notification in the Official Gazette, permit in any area the transfer of interest in premises held under such lease or class of lease any premises or class of premises other than those let for business, trade or storage to such extent as may be specified in the notification.


10. The proviso enables the State Government to permit in any area the transfer of interest in the premises held on lease other than those let for business. It is not brought to my notice that the State Government has issued any notification under the proviso of section 26 of the Rent Act, 1999. Even in that case, the notification cannot be in respect of the premises let for business. It is therefore, clear that in the absence of any contract, the tenant has no right to sublet or transfer the prem

Please Login To View The Full Judgment!

ises held by him whether they are for residential or non-residential purposes. The argument of Shri Samdani is to the effect that the sale of the demised premises as per the order dated 30.3.2001 is contrary to the provisions of Section 26 of the Rent Act, 1999. According to him, Court cannot permit anything to be done which violates the provisions of any Act. In other words, what the defendant could not have done otherwise legally done, cannot be got done through Court. In view of that the submission of Shri Samdani in this behalf is sound and sustainable. Therefore, the same will have to be upheld." However, in paragraph 18 the learned Judge ordered as under:- "18. In the result, the Chamber Summons is made absolute in terms of prayer clause (b) subject to the deletion of the bracketed portion which reads "& quash attachment if any levied thereon on 23rd November, 2000 or any other date be raised". It is clarified that the attachment of the demised premises will continue and that the plaintiff/decree holder will be at liberty to follow the prescribed procedure for sale of the demised premises". Thus the learned Judge set-aside the sale but did not raise the attachment. The judgment is therefore of no assistance to Mr.Palan. In the present case, the Court has not ordered the premises to be sold. It has only attached the goodwill and tenancy rights of the judgment-debtor. Mr.Naik, however submitted that even the sale of goodwill and tenancy rights of the Judgment-debtor /Defendant is permissible. Replying upon Section 58 (c) of the 1999 Act he contended that the notification issued under Section 15 (1) of 1947 Act is saved. The judgment in Veetrag Investments case, the relevant part of which is reproduced above is binding on me and it answers the issue against Mr.Naiks submission. Mr.Palan relied upon paragraph 5 of the affidavit in support of this Chamber Summons to contend that the facts stated therein were not seriously disputed. These facts refer to the merits of the case between the judgment-debtor and the Applicant and are relevant only to the appeal pending before the Small Causes Court and not for the purpose of the present Chamber Summons. Mr.Naik submitted that there was considerable delay on the Applicants part and that therefore the Chamber Summons ought to be dismissed in view of proviso (b) of Order 21 Rule 58 (1) of the C.P.C. under which no claim or objection shall be entertained if it is designedly or unnecessarily delayed. Considering the view that I have taken, it is not necessary to go into this question. In the circumstances, the Chamber Summons is dismissed. The Applicant shall pay the Plaintiff the costs of this Chamber Summons fixed at Rs.5,000/-. Parties to act on an ordinary copy of this order, duly authenticated by the Chamber Registrar/C.S. of this Court.
O R