Jasoda Nandan Dutt vs Bidhan Nirman Pvt. Ltd.

Siddhartha Chattopadhyay, J.—This appeal is directed against the judgement and decree dated 19.01.2015 passed by the learned Trial Judge in C.S. 99 of 1997. The grievances as stated in the memo of appeal are as follows:

(a) That the learned Trial Judge has relied on the report of the special referee dated 18.11.2014 which ought not to be taken into account in view of the Division Bench''s order dated 02.12.2014.

(b) That the special referee has not considered the question of liability of the appellant in respect of mesne profit in accordance with law.

(c) That since the sub-tenant ultimately transposed themselves as plaintiff, so the plaintiff cannot recover any money from them.

(d) That the appellant was never in wrongful possession and so the Trial Court ought to have considered the theory of "lifting/piercing the corporate veil."

(e) That no legal evidence was adduced by the respondent/plaintiff in regard to quantum of mesne profit.

(f) That the Trial Court has ignored the factual aspect that the appellant has made some improvement in the property, which has been lost sight of by the special referee as well as by the Trial Court.

(g) That the special referee has made the calculation of mesne profit on the basis of the rent receipt issued in the year 2007, which ought not to be a basis of calculation of mesne profit. Disclosing the above mentioned grievances, the appellant has prayed for setting aside the judgment decree passed by the learned Single Judge.

In the interest of effective adjudication, the factual scenario is required to be revisited. The plaintiffs''/respondents'' case - in an encapsulated form - is such that one Ajoyendra Krishna Deb was the absolute owner of the building, being premises no. 76 of 2010 Bidhan Sarani, Calcutta and as such, he had executed a registered deed of lease dated 6th August 1962 in favour of M/s. Dutta and Company Private Limited. The defendant No. 1, Amal Kumar Dutt, since deceased, being the predecessor-in-interest of defendant No. 3 to 9 and one Ajit Kumar Dutt, since deceased, being the predecessor-in-interest of the defendant No. 3, executed a deed of lease for a period of 30 years from the first day of August 1962. The said lease was granted at a consideration of Rs.1800, being the monthly rent payable by the lessees to the plaintiff month by month according to the English calendar. The defendant No. 1 and the predecessors-in-interest of other defendants jointly took possession of the said premises on certain terms and conditions. It was specifically stipulated in the said lease deed that the lessees will not assign or part with possession of the demised premises, or any part thereof, without previous consent in writing of the lessor, provided nevertheless that even if the lessor shall give consent to such assignment, transfer or parting with possession of the demised premises or any part thereof, the lessees will not thereby be relieved of their liability to the lessor for the payment of rent and for the performance and observance by them of the terms and conditions mentioned therein. It was also stipulated that the lessees will be on the expiration or sooner determination of the lease allow the lessor within six months thereafter to dismantle and remove all buildings and structures erected by them on the demised premises. It was also specifically mentioned in the terms of the lease that the lessees shall have an option to renew the lease for a further period of 20 years commencing from 1st August, 1992 on the same terms, conditions and stipulations as mentioned in the original lease deed.

Plaintiff has also averred in its plaint that during the subsistence of the said lease deed, the said Amal Kumar Dutta and Ajit Kumar Dutta died intestate leaving their respective heirs and legal representatives, who are styled as defendant No. 2 to 9. The plaintiff is very categorical in saying that the said defendants have violated the terms and conditions of the said lease deed in the following manner:- (a) That they have failed and neglected to pay the rent from the month of May 1991 in spite of repeated demand and requests being made: (b) That the defendants and their predecessors-in-interest neglected to pay the municipal rates and taxes of the occupiers share from the 4th quarter of 1990-1991 till determination of the lease: (c) That the defendants and predecessors-in-interest in gross violation of the terms and conditions of the said lease have sub-let/assigned/parted with the possession of the demised premises to various third parties without the previous consent of the plaintiff in writing or otherwise. For that reason, the plaintiff did not renew the lease for another 20 years. An option was exercised by the defendant by a letter dated 30.06.1992 addressed to the plaintiff but the latter did not consider the same to be a proper exercise of the lessee''s options because they had already violated the terms of the lease deed. This apart, the defendants did not take any step for enforcement or specific performance of the said agreement for renewal of lease within the prescribed period of limitation.

According to the plaintiff, since the said renewal of lease has not been accepted by the plaintiff, the defendants/appellants have become trespassers in the said property and they are in wrongful possession and occupation of the said premises. Accordingly, the plaintiff had given a notice to quit, which has not been acceded to by the defendant and in such circumstances they had to file the suit for recovery of possession as well as mesne-profit.

The defendants/appellants filed a written statement. According to them, they are the lessees in respect of the suit premises by virtue of a lease deed dated 6th August, 1962 made between the original plaintiff Ajoyendra Krishna Deb and M/s. Dutta and Company Limited and except the defendant No. 1, all are legal representatives of the said Ajit Kumar Dutta and Amal Kumar Dutta. For the purpose of renewal of lease they have sent a letter dated 30.06.1992 but the plaintiff has not responded to their request. It is also specifically pleaded that they were always ready and willing to pay rent to the original plaintiff but the original plaintiff did not collect or accept the rent from them. Therefore, terms of the lease have been violated by the plaintiff himself. They have also taken the plea that in furtherance of the lease agreement dated 06.08.1962 and the contract for renewal of the lease contained therein, the defendants have paid the electricity charges of the suit premises and the lessees have also borne all the charges and expenses to keep and maintain the building and structure including electrical installations, accessories and all sanitary fixtures, etc. They have also constructed a building on the demised portion and had to spend a substantial amount to the tune of more than 1,22,000,00/- for construction of the said building. In terms of the lease deed, the defendant No.1 had sub-let some portions of the tenanted premises to various sub-tenants/sub-lessees and the list of such tenants have been mentioned in the said written statement. The defendants had also contended that the original plaintiff had filed the suit claiming reliefs of eviction and vacant possession of the premises and such an eviction order was finally passed. In terms of the application, the rents for the period from May 1991 to December 1999, being a sum of Rs.1,85,400/-, was paid to the original plaintiff. The defendants had offered to pay to the plaintiff a sum of Rs.58,090/- being the amount of municipal taxes for the period prior to the renewal of the lease. The directions given in the order of December 23, 1999 was fully complied with by the defendants. During the pendency of the suit, sometime prior to June 10, 2006, the sub-tenants had approached the defendants with a proposal that they would form a company in the name of ''Bidhan Nirman Private Limited''. For the purpose of purchasing the tenanted premises from the original landlord, the defendant No. 3 had accepted the proposal of the said sub-tenants to subscribe to the share of ''Bidhan Nirman Private Limited''. The said Bidhan Nirman Company was formed in September 2006. Defendant No. 3 and his son entered into an agreement to subscribe to 4,500 equity shares each, accordingly a sum of Rs.4,50,000/- were paid by the defendant No. 3 and his son to one Abhijit Dutt of the said Bidhan Nirman. Such sum were paid by cheques which were duly encashed by the said Bidhan Nirman. At the time of formation of the company, at the request of the sub-tenants, the defendant No. 3 had paid a further sum of Rs.2,00,000/-, in cash, to Bidhan Nirman in connection with expenses for purchase of the tenanted premises. The widow and daughter of the original plaintiff (Ajoyendra Krishna Deb) had been substituted as plaintiff (1) (a) and (1) (b) in the suit by order dated 21st March, 2000. After the death of Ajoyendra Krishna Deb, ''Bidhan Nirman Ltd'' has purchased the entire premises from the said widow and daughter under a registered deed of conveyance dated 23.09.2006. After such purchase, ''Bidhan Nirman Ltd.'' had made an application for amending the plaint to substitute the name of ''Bidhan Nirman Ltd.'' as plaintiff in C.S. 99 of 1997 on the basis of the agreement between the defendant No. 3 and the said ''Bidhan Nirman Ltd.'' The said ''Bidhan Nirman Ltd.'' acted in breach of the terms and conditions of the agreement held between the defendant No. 3 and ''Bidhan Nirman Ltd.'' for issue of equity shares of ''Bidhan Nirman Ltd.'' The subtenants, who have formed a company ''Bidhan Nirman Ltd.'' acted in breach of their agreement. According to the defendant, the claim of the plaintiff/owner is baseless because ''Bidhan Nirman Ltd.'' has been formed by the sub-tenants who have assumed a corporate entity. Behind the corporate veil, ''Bidhan Nirman Ltd.'' there exist the sub-tenants of defendant No. 1, who are all share-holders of ''Bidhan Nirman Ltd.'' It is specifically pleaded that no rent had been paid by the subtenants from September 2006. By reason of their occupation of a substantial portion of the tenanted premises, the sub-tenant and ''Bidhan Nirman Ltd.'' are not entitled to any claim as against the defendants. After stating their grievances they have prayed for dismissal of the suit.

Learned Trial Court thereafter has passed an order dated 11th July, 2014, holding that the lease having expired on the last day of July 1992, the defendants are liable to be evicted therefrom. According to the learned Trial Court, the plaintiff is therefore, entitled to a decree of eviction in terms of the prayer of the plaint. For the purpose of arrears of rent, arrears of municipal rates and taxes and mesne profit, the trial Court has appointed Mr. Kaushik Chowdhury, Advocate, Bar Library Club to assess the mesne-profit which the plaintiff is entitled to receive from the defendant from the date of expiry of the lease deed.

The special referee, in terms of the order of the Trial Court, had issued notice upon the respective parties to appear with their statement of claim. But the defendants did not participate in that hearing and no accommodation was sought for. The plaintiff as well as the present defendant No.2, 3, 5 to 9 had filed their respective statement of claim and statement of defence. On the basis of that and after hearing the plaintiff/respondent, the said special referee had submitted his report on 3rd December, 2014 and had calculated the mesne-profit. None appeared on behalf of other defendants either personally or through their advocates. After hearing the learned senior counsel appearing on behalf of the plaintiffs/respondents and Mr. Ratnanko Banerjee, Senior Advocate, appearing on behalf of the defendant, the special referee has submitted the report holding that the present appellants were liable to pay Rs.47,64,251.

Be it mentioned at this stage that before submission of the report of special referee, the defendant/appellant preferred an appeal before the Hon''ble Division Bench being A.P.O.T. No. 619 of 2014. The said Division Bench passed a final order dated 2nd December, 2014 with certain guidelines and directions.

Learned counsel appearing on behalf of the present appellant had contended that the learned Trial Court ought to have lifted/pierced the corporate veil on the ground that the sub-tenants, who had been in possession of the suit property for a considerable period, on paying rent to the defendant/appellant and by virtue of forming a corporate entity, have now become the owner of the suit property and are claiming the mesne-profit for the wrongful possession of the defendant, which is anything but fair. He has cited the decisions ''State of Uttar Pradesh v. Renu Sagar Power Company reported in (1988) 4 SCC Page 94, New Horizons Limited and Anr. v. Union of India and Ors. reported in (1995) 1 SCC 478, Suvra Mukherjee and Anr. v. Bharat Cooking Coal Limited and Ors, reported in (2000) 3 SCC Page 312. They have also relied on the decision reported in (1996) 4 SCC 622 in connection with Delhi Development Authority v. Skipper Construction Company Limited. On perusal of the aforesaid judgments, it appears to us that the concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or defrauding others, the Court should ignore the corporate character and look at the reality behind the corporate veil so as to enable it to pass an appropriate order to do justice to the parties concerned. If the device of incorporation was really a ploy adopted for committing illegalities and/or to defraud people, the Court must pierce the corporate veil to do complete justice. It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. However it depends primarily on the realities of the situation. The principles of the company being a separate legal entity as a whole has been applied by the courts since the ''Aron Solomon v. A. Solomon and Co. Ltd. (1897) AC 22 (HL) Corporate veil has been lifted where the principal question before the Court was one of company law and in same situation where the corporate personality of the company involved was of secondary importance. The application of this old principle has worked to remove hardship and injustice. It is now well-settled that the corporate veil can be pierced or lifted in certain situations. The ratio of the aforesaid decisions clearly suggest that whenever a corporate entity is abused for an unjust and inequitable purpose, the Court will not hesitate to lift the veil and look into the realities so as to identify the persons, who are guilty and liable therefor. Court should see the realities of the situation and to know the real state of affairs behind the facade of the principle of corporate personality, the Courts should pierce the veil of incorporation. By applying this maxim in the present case, we are unable to find that there is any intention to defraud the creditors and to gain something illegally. There is nothing in this case to show that the principle of corporate personality has been used flagrantly and opposed to justice, convenience or the interest of the revenue being generated. When the notion of legal entity is used to defeat public convenience, justify wrong and fraud, or defend crimes, Court must rise to the occasion to lift the corporate veil. The instant case is devoid of such necessities and so we do not espouse the argument of the learned Counsel appearing on behalf of the appellant.

Learned counsel appearing on behalf of the appellant has raised vehement objection against the finding of the Trial Court on the ground that the special referee was appointed before they preferred an appeal before the Division Bench. The said special referee has submitted the report just after the decision of the Hon''ble Division Bench. The Hon''ble Division Bench has directed the respective parties to appear before the learned Trial Judge on 09.12.2014 and had directed the respective parties to pursue the matter in accordance with law. The Hon''ble Division Bench has also directed that in what form and how the sub-lessees together as a company have acquired such right to be placed before the learned Judge so as to enable the learned Judge to dispose of the matter on merits. On 09.12.2014, pursuant to the direction of the Hon''ble Division Bench, the parties appeared before the learned Judge and had sought for adjournment and the prayer of both the parties was rejected by the learned Trial Judge showing the reason that the case is pending for a long time. Pendency of the case cannot be a ground for rejection of the adjournment prayer when the Division Bench has categorically given a guideline to dispose of the matter on merit. A short adjournment could be given so as to enable the parties to place their cases before the learned Trial Judge. But this opportunity could not be utilised by the respective parties. On the contrary, the learned Trial Judge has accepted the special referee''s report in to. In the interest of effective adjudication we cannot help quoting the relevant part of the order passed by the Hon''ble Division Bench "However, the fact remains that the erstwhile owner-cum-landlord is not the owner of the property, as on today. Who has to pay rents or damages in the form of mesne-profit seems to be the dispute between the parties. According to the lessee, except a small portion of the premises, major portion of the premises was in the hands of sub-lessees and the factual situation, as stated above, is creating problems to the lessee. The fact remains that the lessee was not able to bring on record their stand or defence before the Trial Court and meanwhile a Commissioner was appointed and proceeding before the Commission is almost complete and the Commissioner is about to file report. In the above circumstances, the precarious position, according to the appellant is that they have not been able to bring on record how and why they are not liable to pay the mesneprofits. If the facts in reference to the date of transfer of interest in the property in favour of successor in title could be brought on record, it would be clear to all the parties concerned to know where they stand and how much they are liable for or entitled to receive from whom. Without causing inquiry into such factual situation, if the matter is proceeded with, it is possible that one of the parties, probably the lessee would be put through immense loss and hardship. In order to do justice to the parties where no prejudice of any nature would be caused to the respondent-plaintiff, we are of the opinion, the matter deserves to be remitted back to the Trial Judge giving an opportunity to the appellants to bring on record their defence in support of their case so far as mesne-profits and the liability to pay damages, if any.

Both the parties are directed to be present before the Trial Court on 09.12.2014 and they are entitled to pursue the matter in accordance with law. According to the respondent-plaintiff, some of the sub-lessees together as a company have acquired the right, title and interest in the property. In what form and how they have acquired such right could be placed before the learned Judge so as to enable the learned Judge to dispose of the matter on merits."

(Emphasis supplied by us).

Therefore, to set the matter at rest and also keeping in view of the direction of the Hon''ble Division Bench, we are of the clear opinion that the direction of the Hon''ble Division Bench has not been properly applied by the learned Judge. He has disposed of the matter hastily ignoring that one of the parties, probably lessee, would be put to immense loss and hardship as observed by the Hon''ble Division Bench. Judicial discipline is not maintained by the learned Trial Court.

It was also argued by the learned counsel appearing on behalf of the appellant that the manner in which the special referee has assessed the mesneprofit is erroneous on the ground that it was not in terms of Order 20, Rule 12 of C.P.C. He further argued that in view of the decision reported in A.I.R. 86 Cal 393 wherein a Division Bench of this High Court held quoting Sir John Woodroffe in his Tagore Law Lecturers on Receiver (1964 Edition, Page 7) observed that "the possession of a Receiver appointed by the Court during the pendency of a suit should be regarded as possession for the party who might ultimately turn out to be the true owner and entitled to possession as such." In that view of the matter, the possession of the defendant, after he was appointed as the Receiver, is to be regarded as the possession of the plaintiff in whose favour the original suit has finally been decreed. The true position is that so long the lis continues, the possession of a receiver appointed by the Court is the possession of the Court, property in the possession of the receiver is in custodia legis, but at the determination of the lis his earlier possession even during the lis would, in law, amount to possession for the party entitled to own and possess the property under the decree in the lis. And his position in law remains the same even when a party to the lis is appointed as the Receiver. In this case, therefore, even though the possession of the defendant was proved to be wrongful during certain period, the quality and the colour of its possession immediately changed with its appointment as a Receiver and its possession, even though wrongful, ceased to be wrongful from the time of such appointment and its liability to pay mesne-profits for any period thereafter automatically ceased."

It appears from the paper book, vide page 156, that in connection with G.A. No. 1164 of 1997, that arose out of C.S. 99 of 1997, one Mr. Ranajoy Chatterjee, an advocate on this Court, was appointed receiver only for the purpose of inspecting the subject premises comprised in the tenancy of the defendant and to submit a report to this Court as to who are the present occupiers and the condition of the said premises and also as to what amount is being finalized by the defendant/tenants from such occupiers. Therefore, the period under which the receiver acted on behalf of the Court is to be deducted because possession of the receiver means possession of the Court and in view of the judgment cited above, we are of the view that the said observation of the Division Bench should be taken into consideration by the learned Trial Judge.

Learned counsel appearing on behalf of the appellant has also contended that when the suit was filed, the suit property was not registered in favour of the present respondents and that the respondents are not entitled to get any benefit from that unregistered deed. In this regard we may rely on the decision reported in (1998) Supp. (1) SCR 485 in Raptakos, Brett and Company Limited v. Ganesh Property. In the aforesaid judgment, the Hon''ble Apex Court held that subsequent registration will certainly cure the defect. Initially the agreement was between the original lessor and lessee. Thereafter, the sub-lessees have formed a company and came under the purview of a corporate entity. The suit was filed prior to purchase of the property. Therefore, it will be of no use because the sub-lessees were in possession all along under the lessee i.e. the appellant. In that case, the Hon''ble Supreme Court held "if that happens all that a subsequently registered plaintiff partnership firm could do is to immediately file a second suit on the ground that it is now already registered and that could only result in giving a fresh number to the suit which would further delay the proceedings before the Court. As it would be a freshly filed suit having a new number referable to the year of its filing. Thus the adjudicatory process would be further delayed. That such a situation in the present day when the Court dockets are heavily loaded and arrears are mounting should be avoided and such a technical contention which does not advance the case of justice should be rejected. That the Court always leans in favour of curing such technical obstacles which are of no bearing on the merits of the controversy between the parties." Therefore, there is no harm in it for subsequent registration of the property by the present respondents.

Now, in conclusion, the impugned judgment dated 19.01.2015 passed by learned Trial Court is hereby set aside. We have already decided that plea of lifting/piercing the corporate veil does not lie in this case. The period during which receiver acted should be excluded from the calculation of mesne-profit. The learned Trial Judge shall rehear the settlement of the claims of the respective parties on merit and for that purpose he shall fix a specific date for appearance of the respective parties and to redress their grievances regarding the quantum of mesneprofit. The learned Judge is at liberty to refer the matter to the same special referee appointed by him to consider the settlement of claim of the respective parties and to reassess the mesne-profit, damages etc. in accordance with law. The special referee''s fee may be assessed by the learned Trial Court and such fees will be added to the respondents'' claim automatically. With this direction, we remand the case to the learned Trial Judge for hearing afresh only on the point of mesne-profit and future damages and costs, if any.

Urgent photostat certified copy of this judgment and order, if applied for, be supplied to the parties on priority basis upon compliance with all requisite formalities.

Biswanath Somadder, J.—I agree with the conclusion.