SUPREME COURT HOLDS TENANT LIABLE FOR UNAUTHORISED ASSIGNMENT OF RIGHT TO USE THE LEASED PREMISES IN FAVOR OF A THIRD PARTY

In a recent case of Yuvraj vs Janardan Subajirao Wide and other connected matters, Civil Appeal Nos. 2855­-2856 of 2011, a two Judge Bench of the Supreme Court comprising of Justice Sudhanshu Dhulia and Justice Sanjay Kumar passed a Judgment dated 21-03-2023 and held the Respondent-Tenant liable for unlawful and unauthorised assignment of right to carry on a hotel business on the leasehold property in favor of a third party, in contravention of the terms of the Lease Deed dated 22-01-1975 executed between the original Landlord and Landlady and the Tenant.

Facts

i) In the present case, the original Landlord and Landlady of the Leased Premises consisting of two blocks on the ground floor of the building bearing C.T.S. No. 1873 at Bhamburda, Pune (Premises) leased out the said Premises to one, Janardan Subajirao Wide, the Tenant for the purpose of running a hotel business by the name of Hotel Ambika, vide Lease Deed dated 22-01-1975.

ii) The original Landlord and Landlady filed a Civil Suit No. 386 of 1985before the Ld. II Additional S.C. Judge, Pune seeking eviction of the Tenant from the Premises on the following grounds:

a) That the Tenant had carried out unauthorised construction of toilet on the said Premises in January 1985,

b) That the Tenant had entered into a Partnership Agreement dated 01-01-1985 with one, Krishna B Shetty and further, assigned the right to carry on the Hotel business on the said Premises in his favor, without obtaining consent of the Landlord, for Rs. 2,00,000.00 under an Assignment Agreement dated 15-01-1985.

c) Hence, the Tenant, thereby, violated the terms of the Lease Deed dated 22-01-1975 and the provisions of Section 13 (1) (b) and (e) of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 (Act) (When landlord may recover possession).

iii) However, the Advocate-Commissioner, upon conducting an inspection, did not find any toilet structure constructed on the said Premises.

iv) Further, the Ld. II Additional S.C. Judge, Pune took note of the Partnership Agreement dated 01-01-1985 and the Assignment Agreement dated 15-01-1985 and held that the Tenant had accepted Krishna B Shetty as his partner and unlawfully assigned the Premises to him for running the Hotel business on the Premises, without prior consent of the Landlord.

v) Thus, Ld. II Additional S.C. Judge, Pune passed a Judgment dated 30-09-1987 and decreed the Suit for Eviction against the Tenant (Decree of Eviction).

vi) Aggrieved, the Tenant filed Civil Appeal No. 1030 of 1987 before the Ld. 13^th Additional District Judge, Pune, which passed a Judgment dated 21-12-1991 and upheld the Judgment dated 30-09-1987 passed by Ld. II Additional S.C. Judge, Pune.

vii) Aggrieved, the Tenant filed Writ Petition No. 1067 of 1992 before the Hon’ble Bombay High Court, which set aside the Decree of Eviction and dismissed the Suit, vide Judgment dated 03-12-2008 on the ground that so long as the legal possession remained with the tenant, mere creation of a partnership agreement by the tenant for the purpose of jointly carrying on business in the leased premises would not amount to sub-letting.

viii) The High Court subsequently dismissed the Review Petition No. 75 of 2009 filed by the Appellants- Successors of the original Landlord and Landlady, vide Judgment dated 09-09-2009.

Supreme Court

Aggrieved by the High Court Judgments dated 03-12-2008 and 09-09-2009, the Appellants filed Appeals before the Hon’ble Supreme Court. The Apex Court, vide Judgment dated 21-03-2023, made the following observations:

1) That the Parties had explicitly agreed in the Lease Deed dated 22-01-1975 that the Tenant would not assign / transfer the business in favor of third parties or allow third parties to carry on the business on the Leased Premises.

2) However, the Tenant admittedly not only executed a Partnership Agreement dated 01-01-1985 with a third party, namely, Krishna B Shetty but also went ahead and assigned his Hotel business to him and received money for the same, under an Assignment Agreement dated 15-01-1985.

3) Thus, the Supreme Court held that the Tenant could not have assigned the leasehold interest in favor of a third party under the Assignment Agreement dated 15-01-1985 and thereby override the condition prescribed in the Lease Deed dated 22-01-1975.

Therefore, based on the aforesaid observations, the Apex Court held the Tenant liable for commission of breach of condition stipulated in the Lease Deed dated 22-01-1975 and violation of Section 13 (1) (e) of the Act and Section 15 (1) of the Act (In absence of contract to the contrary tenant not to sub-let or transfer). The Bench further directed the Respondent – Legal Representatives of the Deceased Tenant to vacate the Premises and handover peaceful possession thereof to the Appellants. As a result, the High Court Judgments dated 03-12-2008 and 09-09-2009 were set aside and the Appeal was allowed.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer