AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition
Advocates
Judges
Acts
  • Article 12 of the Constitution
  • Section 182 of the Contract Act
  • Section 12 of the statute
  • Section 3(1)(b), The 1999 Act
  • The Textile Undertakings (Taking Over of Management) Act, 1983
  • Section 3(1)(a) of the 1999 Act
  • Section 3, Subsection 2 of the 1995 Act
  • Section 3(1)(a) & (b) of the 1999 Act
  • Section 230 of the Contract Act, 1872
  • Section 4, Sub-section (6) of the 1995 Act
  • Sections 3(1) and (2) of the 1995 Act
  • Sections 619 and 620 of the Companies Act
  • Article 285 of the Constitution
  • Rent Act
  • Article 136 of the Constitution
  • Section 3, Subsection 1 of the 1995 Act
  • Section 2 of the 1995 Act, clause (g)
  • Section 5, Subsection 2 of the 1983 Income Tax Act
  • Food Corporation Act, 1964
  • Section 2(m) of the 1995 Act
  • The Textile Undertakings (Nationalisation) Act, 1995
  • Section 3(1)(a) or 3(1)(b) of the 1999 Act
  • Section 5, Subsection 2 of the 1947 Act
  • The 1983 Act
  • The Income Tax Act, 1961
  • Section 3(1)(a) & (b) of the 1995 Act
  • Punjab Municipalities Act, 1911
  • The Maharashtra Rent Control Act, 1999
  • Section 115 of the Code of Civil Procedure, 1908
  • The 1995 Act
  • The Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition
Advocates
Judges
Acts
  • Article 12 of the Constitution
  • Section 182 of the Contract Act
  • Section 12 of the statute
  • Section 3(1)(b), The 1999 Act
  • The Textile Undertakings (Taking Over of Management) Act, 1983
  • Section 3(1)(a) of the 1999 Act
  • Section 3, Subsection 2 of the 1995 Act
  • Section 3(1)(a) & (b) of the 1999 Act
  • Section 230 of the Contract Act, 1872
  • Section 4, Sub-section (6) of the 1995 Act
  • Sections 3(1) and (2) of the 1995 Act
  • Sections 619 and 620 of the Companies Act
  • Article 285 of the Constitution
  • Rent Act
  • Article 136 of the Constitution
  • Section 3, Subsection 1 of the 1995 Act
  • Section 2 of the 1995 Act, clause (g)
  • Section 5, Subsection 2 of the 1983 Income Tax Act
  • Food Corporation Act, 1964
  • Section 2(m) of the 1995 Act
  • The Textile Undertakings (Nationalisation) Act, 1995
  • Section 3(1)(a) or 3(1)(b) of the 1999 Act
  • Section 5, Subsection 2 of the 1947 Act
  • The 1983 Act
  • The Income Tax Act, 1961
  • Section 3(1)(a) & (b) of the 1995 Act
  • Punjab Municipalities Act, 1911
  • The Maharashtra Rent Control Act, 1999
  • Section 115 of the Code of Civil Procedure, 1908
  • The 1995 Act
  • The Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
Smart Summary

Factual and Procedural Background

The dispute concerns premises measuring 12,118 sq. yards at Plot 9, Survey No. 73, Lower Parel Division, Mumbai. A 99-year lease executed in 1893 in favour of Hope Mills Ltd. ultimately devolved upon Toyo Poddar Cotton Mills Ltd. (“Poddar Mills”). On 22-10-1990 the lease expired. In 1983 the Central Government, under the Textile Undertakings (Taking Over of Management) Act, 1983, assumed management of Poddar Mills, and by the Textile Undertakings (Nationalisation) Act, 1995 (“1995 Act”) the undertaking vested first in the Union of India and immediately thereafter in the appellant, National Textile Corporation Ltd. (“NTC”).

The respondent-trust (“Harichand Roopchand Charity Trust”) served notices terminating the tenancy (1994 and 26-9-2000) and filed an eviction suit under the repealed Bombay Rent Act, later refiling on 20-4-2001 under the Maharashtra Rent Control Act, 1999 (“1999 Act”). The Small Causes Court decreed eviction on 5-8-2006, granting four months to deliver possession. Successive appeals—before the Division Bench of the Small Causes Court (14-8-2008) and the Bombay High Court in revision (3-8-2009)—were dismissed. NTC approached the Supreme Court by special leave.

Legal Issues Presented

  1. Whether, by virtue of the 1995 Act, the Central Government remained the statutory tenant and NTC only its “agent”, thereby attracting the exemption in s.3(1)(a) of the 1999 Act for premises let to Government.
  2. Whether NTC, as a government company/public sector undertaking with paid-up capital exceeding ₹1 crore, is excluded from the protective cover of the 1999 Act under s.3(1)(b).
  3. Whether a pure question of law regarding the 1995 Act and tenancy status could be raised for the first time before the Supreme Court absent any pleading, issue or evidence in the courts below.

Arguments of the Parties

Appellant (National Textile Corporation Ltd.)

  • Upon expiry of the 99-year lease (1990), Poddar Mills became a statutory tenant under the then Bombay Rent Act; those tenancy rights vested in the Union on enactment of the 1995 Act and were only managed by NTC as its agent.
  • Because the Central Government is the true tenant, the premises are “let to Government” and protected by s.3(1)(a) of the 1999 Act; the suit was therefore not maintainable.
  • The courts below failed to consider the 1995 Act, rendering their decrees unsustainable.

Respondents (Trust/Landlords)

  • The agency/1995-Act plea was never pleaded or argued in any lower court; new factual issues cannot be raised for the first time in the Supreme Court.
  • Even if considered, tenancy rights vested absolutely in NTC, a public sector company with paid-up share capital exceeding ₹1 crore; under s.3(1)(b) the 1999 Act expressly denies protection to such entities.
  • The Supreme Court, acting as a fourth forum, should not re-appraise concurrent findings of fact in an eviction matter.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Messrs. Trojan & Co. v. Nagappa Chettiar, AIR 1953 SC 235No relief without pleading.Reiterated to bar NTC’s new plea.
State of Maharashtra v. Hindustan Construction Co. (2010) 4 SCC 518Pleadings confine issues.Used to reject late reliance on 1995 Act.
Kalyan Singh Chouhan v. C.P. Joshi (2011) 11 SCC 786Evidence must match pleadings.Supports refusal to entertain new facts.
Ram Sarup Gupta v. Bishun Narain Inter College (1987) 2 SCC 555Evidence irrelevant without pleadings.Cited in same context.
Bachhaj Nahar v. Nilima Mandal (2008) 17 SCC 491Court cannot grant relief beyond pleadings.Relied upon.
Kashi Nath v. Jaganath (2003) 8 SCC 740Evidence contrary to pleadings inadmissible.Relied upon.
Biswanath Agarwalla v. Sabitri Bera (2009) 15 SCC 693Issues frame scope of trial.Same principle.
Syed & Co. v. State of J&K 1995 Supp (4) SCC 422No evidence sans pleading.Reinforced.
Chinta Lingam v. Govt. of India (1970) 3 SCC 768Factual foundation required.Cited.
J. Jermons v. Aliammal (1999) 7 SCC 382Difference between additional ground and new plea.Supports rejection of new factual plea.
Sanghvi Reconditioners v. Union of India (2010) 2 SCC 733Pure legal issue may be raised anytime.Distinguished—issue here involved facts.
Greater Mohali Area Dev. Authority v. Manju Jain (2010) 9 SCC 157Same as above.Distinguished.
State of Rajasthan v. Sripal Jain AIR 1963 SC 1323Meaning of “Government”.Used to contrast Govt. vs Govt. company.
Pashupati Nath Sukul v. Nem Chandra Jain (1984) 2 SCC 404“Government” denotes executive.Same.
R.S Nayak v. A.R Antulay (1984) 2 SCC 183Interpretation of “Government”.Cited.
V.S Mallimath v. Union of India (2001) 4 SCC 31Concept of Government.Cited.
Sukhdev Singh v. Bhagatram (1975) 1 SCC 421Corporations as State instrumentalities.NTC may be art. 12 “State” but not Govt.
Ramana Dayaram Shetty v. International Airport Authority (1979) 3 SCC 489Corporations as agencies of Government.Distinguished.
State of Punjab v. Raja Ram (1981) 2 SCC 66FCI not govt. dept.Analogy for NTC.
State of Bihar v. Union of India (1970) 1 SCC 67Company distinct from Govt.Applied.
S.S Dhanoa v. MCD (1981) 3 SCC 431Corporation distinct.Applied.
K. Jayamohan v. State of Kerala (1997) 5 SCC 170Corporation not Govt.Cited.
Hindustan Steel Works Constn. v. State of Kerala (1997) 5 SCC 171Similar.Cited.
Mohd. Hadi Raja v. State of Bihar (1998) 5 SCC 91Corporation distinct.Cited.
State (NCB) v. Kulwant Singh (2003) 9 SCC 193Company ≠ Govt.Cited.
FCI v. Municipal Committee, Jalalabad (1999) 6 SCC 74Govt. company liable to tax.Analogy for exemption issue.
Electronics Corp. of India Ltd. v. Govt. of A.P. (1999) 4 SCC 458Govt. company distinct.Relied upon.
A.K Bindal v. Union of India (2003) 5 SCC 163Identity of Govt. company separate.Applied to NTC.
Southern Roadways v. S.M. Krishnan (1989) 4 SCC 603Possession of agent = possession of principal.Cited to explain agency concept.
Chandrakantaben v. Vadilal Bapalal Modi (1989) 2 SCC 630Agent’s fiduciary role.Cited.
Prem Nath Motors v. Anurag Mittal (2009) 16 SCC 274Agent not liable when principal disclosed.Cited, then distinguished.
Vivek Automobiles v. Indian Inc. (2009) 17 SCC 657Same principle.Cited.
Pradeep Kumar Biswas v. IICB (2002) 5 SCC 111Instrumentality test under Art. 12.NTC can be State but not Govt.
Saraswat Co-op. Bank v. State of Maharashtra (2006) 8 SCC 520Validity of s.3(1)(b) exclusion.Guides exemption analysis.
Leelabai Gajanan Pansare v. Oriental Insurance Co. (2008) 9 SCC 720s.3(1)(b) applies to PSUs, etc.Held case fully covered.
D.C. Bhatia v. Union of India (1995) 1 SCC 104Rent-control exclusions.Referenced.
Fruit & Vegetable Merchants Union v. Delhi Improvement Trust AIR 1957 SC 344Meaning of “vesting”.Used in statutory interpretation.
Maharaj Singh v. State of U.P. (1977) 1 SCC 155Vesting may be limited.Cited.
Municipal Corpn. Hyderabad v. P.N. Murthy (1987) 1 SCC 568Ambiguity of “vest”.Cited.
Vatticherukuru Village Panchayat v. Nori Venkatarama 1991 Supp (2) SCC 228Same.Cited.
M. Ismail Faruqui v. Union of India (1994) 6 SCC 360Interpretation of vesting.Cited.
Govt. of A.P. v. The Nizam (1996) 3 SCC 282Vesting concept.Cited.
K.V. Shivakumar v. Appropriate Authority (2000) 3 SCC 485Vesting clarity.Cited.
Municipal Corpn. Greater Bombay v. HPCL (2001) 8 SCC 143Meaning of vesting.Cited.
Sulochana Chandrakant Galande v. Pune Municipal Transport (2010) 8 SCC 467Ambit of vesting.Cited.

Court's Reasoning and Analysis

1. Pleadings Barrier: The Court emphasised that relief cannot be founded on facts not pleaded (Order 8 Rule 2 CPC). NTC never pleaded that the Central Government was the tenant or that NTC was merely its agent. All cited authorities establish that a new factual plea cannot be raised for the first time on appeal.

2. NTC not “Government” or its Department: Examining a catena of decisions distinguishing government departments from government companies, the Court concluded that NTC is a separate juristic entity— a government company—not the Central Government nor its department. Therefore, the exemption in s.3(1)(a) of the 1999 Act (premises let to Government) is inapplicable.

3. Effect of the 1995 Act: Sections 3(1) & (2) of the 1995 Act effect a two-stage vesting: first in the Union, then immediately in NTC. “Vesting” connotes an absolute transfer of rights; NTC therefore holds the tenancy in its own right and cannot portray itself as a mere conduit.

4. s.3(1)(b) Exclusion Applies: Following Saraswat Coop. Bank and Leelabai Pansare, the Court held that premises let to public sector undertakings or companies with paid-up share capital ≥ ₹1 crore are excluded from rent-control protection. NTC undeniably falls within this class.

5. Agency Argument Rejected: Under contract law an agent cannot be sued where the principal is disclosed; conversely, one claiming to be an agent must plead and prove it. NTC’s belated assertion lacked any factual foundation and was dismissed as “preposterous”.

6. No Ground for Appellate Interference: The eviction decree was concurrently affirmed by three courts. No pure question of law, independent of fact, warranted interference under Article 136.

7. Equitable Relief: Considering NTC’s business, the Court nevertheless granted time till 31-12-2013 to vacate, subject to an undertaking.

Holding and Implications

APPEAL DISMISSED. The eviction decree stands; NTC must hand over vacant possession by 31-12-2013 after filing an undertaking within four weeks.

Implications: The judgment reinforces that (a) government companies are distinct from the Government for purposes of rent-control exemptions; (b) tenants such as PSUs and large companies enjoy no protection under s.3(1)(b) of the 1999 Act; and (c) factual defences not pleaded at the outset cannot be introduced at the apex stage. No new precedent was created, but existing principles on pleadings and government-company distinction were emphatically applied.

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    National Textile Corporation Limited v. Nareshkumar Badrikumar Jagad And Others

    Dr. B.S Chauhan, J.— This appeal has been preferred against the judgment and order dated 3-8-2009 in National Textile Corpn. Ltd. v. Nareshkumar Badrikumar Jagad passed by the High Court of Judicature of Bombay affirming the judgment and order of the Small Causes Appellate Court dated 14-8-2008 in Appeal No. 627 of 2006 by which the appellate court has affirmed the judgment and decree dated 5-8-2006 in TE & R Suit No. 311/326 of 2001 passed by the Court of Small Causes at Bombay.

    2. The suit premises belongs to the trust run by the respondents, Nareshkumar Badrikumar Jagad and others. Shri Damodar Dass Tapi Dass and Shri Daya Bhai Tapidas executed a lease deed dated 11-3-1893 in respect of the suit premises admeasuring 12118 sq yd bearing Plot No. 9 in Survey No. 73 of Lower Parel Division, N.M Joshi Marg, Chinchpokli, Mumbai 400 011, in favour of a company named Hope Mills Ltd. for a period of 99 years commencing from 22-10-1891. The lease so executed was to expire on 21-10-1990. The original owners transferred and conveyed the suit property in favour of one Harichand Roopchand and Ratan Bai on 22-2-1907. Thereafter, the suit property came to be vested in and owned by a public charitable trust, namely, Harichand Roopchand Charity Trust (hereinafter called as “the Trust”). The leasehold rights in respect of the suit property stood transferred to Prospect Mills Ltd. and, thereafter to Diamond Spinning & Weaving Co. Pvt. Ltd. and, ultimately, vide a lease indenture dated 25-10-1926 to Toyo Poddar Cotton Mills Ltd. (hereinafter called “the Poddar Mills”).

    3. The Textile Undertakings (Taking Over of Management) Act, 1983 (hereinafter called “the 1983 Act”) was enacted by Parliament in order to take over the management of 13 textile undertakings including the Poddar Mills pending their nationalisation. The lease granted in favour of the Poddar Mills expired by efflux of time on 22-10-1990. Thus, the said Poddar Mills continued as a tenant by holding over the suit premises. The Trust issued a legal notice dated 2-12-1994 to the National Textile Corporation (hereinafter called as “the appellant”), terminating its tenancy qua the suit premises. Parliament enacted the Textile Undertakings (Nationalisation) Act, 1995 (hereinafter called “the 1995 Act”).

    4. The Trust filed an eviction suit against the appellant under the provisions of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (hereinafter called “the 1947 Act”). The 1947 Act stood repealed by the Maharashtra Rent Control Act, 1999 (hereinafter called “the 1999 Act”). The respondent Trust issued a notice for terminating the tenancy of the appellant vide notice dated 26-9-2000. The respondent-plaintiffs after the withdrawal of the suit filed under the 1947 Act, filed a fresh suit in the Small Cause Court at Bombay seeking eviction of the appellant and for a decree of mesne profits on 20-4-2001.

    5. The appellant filed the written statement denying the pleas taken by the respondent-plaintiffs. The suit was decreed in favour of the respondent-plaintiffs vide judgment and decree dated 5-8-2006 by which the appellant was directed to hand over vacant and peaceful possession of the suit premises to the respondents within four months.

    6. Being aggrieved, the appellant preferred Appeal No. 627 of 2006 to the Division Bench of the Small Cause Court at Bombay on 13-11-2006 which was dismissed by the appellate court by affirming the judgment and decree of the trial court vide judgment and decree dated 14-8-2008. The appellant preferred civil revision before the High Court of Bombay, which has been dismissed vide the impugned judgment and order dated 3-8-2009. Hence, this appeal.

    7. Shri Parag P. Tripathi, learned Additional Solicitor General, appearing for the appellant has submitted that the judgments and decrees of the courts below have to be set aside as none of the courts below has taken into consideration the effect of the provisions of the 1995 Act by virtue of which the textile undertaking stood absolutely vested in the Central Government and further vested in the appellant. As on the expiry of the lease of 99 years on 22-10-1990, the 1947 Act was in force, the then tenant, Poddar Mills became the statutory tenant. Such tenancy rights stood vested absolutely in the Central Government on the commencement of the 1995 Act by operation of law. The appellant stepped in the shoes of the Central Government merely as an agent, thus, the Central Government remained the tenant. The Central Government continued to be a tenant in the suit premises and thus, would be protected in terms of Section 3(1)(a) of the 1999 Act being premises let out to the Government. The courts below failed to consider this vital legal issue. The suit filed by the respondents was not maintainable. The judgments and decrees of the courts below are liable to be set aside.

    8. Per contra, Shri Mukul Rohatgi, learned Senior Counsel appearing for the respondents, submitted that it is not permissible for the court to travel beyond the pleadings. No evidence can be led on an issue in respect of which proper pleadings have not been taken. Findings of fact cannot be recorded on a issue on facts in respect of which no factual foundation has been laid. The appellant had never raised the issue before the courts below that the Central Government was the tenant and it was holding the premises merely as an agent. In the written statement filed by the appellants, no reference was made to the provisions of the 1995 Act. Even otherwise, the tenancy rights which had vested in the Central Government, stood vested immediately, by operation of law, in the appellant, a public sector undertaking as well as the public limited company having a paid-up share capital of more than rupees one crore, thus the appellant has no protection of the 1999 Act.

    9. As the said provisions of the 1999 Act are not attracted in the instant case, the suit for eviction was filed before the Small Cause Court at Bombay. All the issues raised in the plaint have been adjudicated by the three courts. The power of the Revisional Court, in view of the provisions of Section 115 of the Code of Civil Procedure, 1908 (hereinafter called as “CPC”), remains very limited after the Amendment Act, 2002, w.e.f 1-7-2002. Being the fourth court, in exercise of its power under Article 136 of the Constitution, this Court should not entertain the appeal. The appeal lacks merit and is liable to be dismissed.

    10. We have considered the rival submissions made by the learned counsel for the parties and perused the record.

    11. In the instant case, no reference had ever been made by the appellant to the effect of the provisions of the 1995 Act before the trial court while filing the written submissions; neither any issue has been framed; nor arguments had been advanced in regard to the same; this issue has not been agitated either before the appellate court or the Revisional Court. Before us, an application has been filed to urge the additional grounds regarding the application of the 1995 Act without seeking amendment to the pleadings (WS).

    12. Pleadings and particulars are necessary to enable the court to decide the rights of the parties in the trial. Therefore, the pleadings are more of help to the court in narrowing the controversy involved and to inform the parties concerned to the question in issue, so that the parties may adduce appropriate evidence on the said issue. It is a settled legal proposition that “as a rule relief not founded on the pleadings should not be granted”. A decision of a case cannot be based on grounds outside the pleadings of the parties. The pleadings and issues are to ascertain the real dispute between the parties to narrow the area of conflict and to see just where the two sides differ. (Vide Trojan & Co. v. Nagappa Chettiar AIR 1953 SC 235, State of Maharashtra v. Hindustan Construction Co. Ltd. (2010) 4 SCC 518, AIR 2010 SC 1299 and Kalyan Singh Chouhan v. C.P Joshi (2011) 11 SCC 786, AIR 2011 SC 1127.)

    13. In Ram Sarup Gupta v. Bishun Narain Inter College (1987) 2 SCC 555, AIR 1987 SC 1242 this Court held as under:

    “6. … in the absence of pleading, evidence, if any, produced by the parties cannot be considered. … no party should be permitted to travel beyond its pleading and that all necessary and material facts should be pleaded by the party in support of the case set up by it.”

    Similar view has been reiterated in Bachhaj Nahar v. Nilima Mandal (2008) 17 SCC 491, AIR 2009 SC 1103.

    14. In Kashi Nath v. Jaganath (2003) 8 SCC 740 this Court held that where the evidence is not in line with the pleadings and is at variance with it, the said evidence cannot be looked into or relied upon. Same remains the object for framing the issues under Order 14 CPC and the court should not decide a suit on a matter/point on which no issue has been framed. (Vide Biswanath Agarwalla v. Sabitri Bera (2009) 15 SCC 693 and Kalyan Singh Chouhan (2011) 11 SCC 786, AIR 2011 SC 1127.)

    15. In Syed and Co. v. State of J&K 1995 Supp (4) SCC 422 this Court held as under:

    “7. … Without specific pleadings in that regard, evidence could not be led in since it is a settled principle of law that no amount of evidence can be looked unless there is a pleading.
    8. Therefore, without amendment of the pleadings merely trying to lead evidence is not permissible.”

    16. In Chinta Lingam v. Govt. of India (1970) 3 SCC 768, AIR 1971 SC 474 this Court held that unless factual foundation has been laid in the pleadings no argument is permissible to be raised on that particular point.

    17. In J. Jermons v. Aliammal (1999) 7 SCC 382 while dealing with a similar issue, this Court held as under:

    “31. … there is a fundamental difference between a case of raising additional ground based on the pleadings and the material available on record and a case of taking a new plea not borne out by the pleadings. In the former case no amendment of pleadings is required whereas in the latter it is necessary to amend the pleadings. …
    32. … The respondents cannot be permitted to make out a new case by seeking permission to raise additional grounds in revision.”

    18. In view of the above, the law on the issue stands crystallised to the effect that a party has to take proper pleadings and prove the same by adducing sufficient evidence. No evidence can be permitted to be adduced on a issue unless factual foundation has been laid down in respect of the same.

    19. There is no quarrel to the settled legal proposition that a new plea cannot be taken in respect of any factual controversy whatsoever, however, a new ground raising a pure legal issue for which no inquiry/proof is required can be permitted to be raised by the court at any stage of the proceedings. [See Sanghvi Reconditioners (P) Ltd. v. Union of India (2010) 2 SCC 733, AIR 2010 SC 1089 and Greater Mohali Area Development Authority v. Manju Jain (2010) 9 SCC 157, AIR 2010 SC 3817.]

    20. The questions do arise as to whether in the facts and circumstances of this case the Government is a tenant or the appellant can be termed as the “Government” or “government department” or “agent” of the Central Government in the context of the 1999 Act.

    21. The Government loosely means the body of persons authorised to administer the affairs of, or to govern, a State. It commands and its decision becomes binding upon the members of the society. The Government includes, both the Central Government as well as the State Government. The Government is impersonal in character having three independent functionaries as its branches. It performs regal and sovereign functions, which are not alienable to any other person e.g defence, security, currency, etc. The Government means a group of people responsible for governing the country. It consists of the activities, methods and principles involved in governing a country or other political unit.

    22. The Government is a body that governs and exercises control by issuing directions and is not governed by any other agency. It is a body politic that formulates policies and the laws by which a civil society is controlled. It is a political concept formulated to rule the nation. It is not a profit and loss establishment.

    “12. … From the legal point of view, the Government may be described as the exercise of certain powers and the performance of certain duties by public authorities or officers, together with certain private persons or corporations exercising public functions.”

    23. Thus, government department means something purely fundamental i.e relating to a particular Government or to the practice of governing a country. It has different wings. However, the expression “Government” may be required to be interpreted in the context used in a particular statute. The expression denotes the executive and not the legislature. (Vide State of Rajasthan v. Sripal Jain AIR 1963 SC 1323, (1963) 2 Cri LJ 347, Pashupati Nath Sukul v. Nem Chandra Jain (1984) 2 SCC 404, AIR 1984 SC 399, R.S Nayak v. A.R Antulay (1984) 2 SCC 183, AIR 1984 SC 684 and V.S Mallimath v. Union of India (2001) 4 SCC 31, AIR 2001 SC 1455.)

    24. To perform the functions, the Government has its various departments and to facilitate its working, the Government itself may be divided into various sections. To carry out the commercial activities by the State, the corporations have been established by the enactment of statutes and the “power to charter corporations as incidental to or in aid of governmental functions”. Such corporations would ex-hypothesis be agencies of the Government. (Vide Sukhdev Singh v. Bhagatram Sardar Singh Raghuvanshi (1975) 1 SCC 421, AIR 1975 SC 1331 and Ramana Dayaram Shetty v. International Airport Authority of India (1979) 3 SCC 489, AIR 1979 SC 1628)

    25. Banks and financial institutions carrying out financial transactions, are independent to do business subject to the regulatory laws made by the legislature. They are not under the direct executive control of the Government. They are profit and loss earning organisations coupled with all connected financial and economic activities. They are a body corporate with a limited role to play and do not “govern” people as understood by governance. (See Federal Bank Ltd. v. Sagar Thomas (2003) 10 SCC 733, AIR 2003 SC 4325).

    26. In State of Punjab v. Raja Ram (1981) 2 SCC 66, AIR 1981 SC 1694, this Court considered the provisions of the Food Corporation Act, 1964 and held that Food Corporation of India was not a government department but a government company. The Court observed:

    “9. … A government department has to be an organisation which is not only completely controlled and financed by the Government but has also no identity of its own. The money earned by such a department goes to the exchequer of the Government and losses incurred by the department are losses of the Government. The Corporation, on the other hand, is an autonomous body capable of acquiring, holding and disposing of property and having the power to contract. It may also sue or be sued by its own name and the Government does not figure in any litigation to which it is a party.”

    (See also State of Bihar v. Union of India (1970) 1 SCC 67, AIR 1970 SC 1446; S.S Dhanoa v. MCD (1981) 3 SCC 431, AIR 1981 SC 1395; K. Jayamohan v. State of Kerala (1997) 5 SCC 170; Hindustan Steel Works Construction Ltd. v. State of Kerala (1997) 5 SCC 171, AIR 1997 SC 2275; Mohd. Hadi Raja v. State of Bihar (1998) 5 SCC 91, AIR 1998 SC 1945 and State v. Kulwant Singh (2003) 9 SCC 193, AIR 2003 SC 1599.)

    27. In Food Corpn. of India v. Municipal Committee, Jalalabad (1999) 6 SCC 74, AIR 1999 SC 2573 this Court considered the case of imposition of house tax under the provisions of the Punjab Municipalities Act, 1911 and held that Food Corporation of India was a government company and not a government department—a distinct entity from the Central Government. Thus, was not entitled to exemption from tax under Article 285 of the Constitution. While deciding the said case, reliance had been placed by the Court on its earlier judgment in Electronics Corpn. of India Ltd. v. Govt. of A.P (Deptt. of Revenue) (1999) 4 SCC 458, AIR 1999 SC 1734.

    28. In A.K Bindal v. Union of India (2003) 5 SCC 163 this Court clarified:

    “17. The legal position is that identity of the government company remains distinct from the Government. The government company is not identified with the Union but has been placed under a special system of control and conferred certain privileges by virtue of the provisions contained in Sections 619 and 620 of the Companies Act. Merely because the entire shareholding is owned by the Central Government will not make the incorporated company as Central Government.”
    (emphasis added)

    29. In Southern Roadways Ltd. v. S.M Krishnan (1989) 4 SCC 603, AIR 1990 SC 673 this Court examined an issue whether the possession of the agent can be termed to be the possession of the principal for all purposes including the acquisition of title and held that agent who receives property from or for his principal, obtains no interest for himself in the property for the reason that possession of the agent is the possession of the principal and in view of the fiduciary relationship the agent cannot claim his own possession. While deciding the said case reliance was placed on various earlier judgments including Chandrakantaben v. Vadilal Bapalal Modi (1989) 2 SCC 630, AIR 1989 SC 1269

    30. In Prem Nath Motors Ltd. v. Anurag Mittal (2009) 16 SCC 274, AIR 2009 SC 567, this Court dealt with the relationship of agent and principal and held that in view of the provisions of Section 230 of the Contract Act, 1872 (hereinafter called “the Contract Act”), an agent is not liable for the acts of a disclosed principal subject to a contract to the contrary. Where the relationship of principal and agent is established the agent cannot be sued when the principal has been disclosed. (See also Vivek Automobiles Ltd. v. Indian Inc. (2009) 17 SCC 657)

    31. Thus, it was made clear that suit does not lie against an agent where the principal is known or has been disclosed.

    32. The appellant may be called the “agency” or “instrumentality” of the Central Government for a limited purpose, namely, to label it to be the “State” within the ambit of Article 12 of the Constitution. (See Pradeep Kumar Biswas v. Indian Institute of Chemical Biology (2002) 5 SCC 111.) However, even by a stretch of imagination, the appellant cannot be held to be an “agent” of the Central Government as defined under Section 182 of the Contract Act.

    33. Thus, if the aforesaid settled legal principles are applied to the appellant, it becomes evident that the appellant is neither the Government nor the department of the Government, but a government company. The appellant cannot identify itself with the Central Government. The submission made by Mr Tripathi that the appellant is merely an agent of the Central Government is not worth consideration at all for the simple reason that rights vested in the appellant stood crystallised after being transferred by the Central Government. The appellant is being controlled by the provisions of the 1995 Act and not by the Central Government. Whereas an agent is merely an extended hand of the principal and cannot claim independent rights.

    34. Sections 3(1)(a) & (b) provide for exemption from the application of the 1999 Act. This Court examined the validity of provisions of Section 3(1)(a) and (b) of the 1999 Act in Saraswat Coop. Bank Ltd. v. State of Maharashtra (2006) 8 SCC 520 and came to the conclusion that it was within the exclusive domain of the legislature to decide which section of tenants should be afforded protection on the basis of economic criteria. If a particular section of tenants is not protected considering their economic conditions it can be held to be a reasonable classification and making such distinction is valid. The exclusion of premises let or sub-let to banks or any public sector undertaking or any corporation established by or under any Central or State Act or foreign missions, international agencies, multinational companies and private and public limited companies having paid-up share capital of rupees one crore or more could not be held to be arbitrary. The Court further held that the provisions of Section 3(1)(b) are applicable to all the premises whether let out before or after the commencement of the 1999 Act.

    35. In Leelabai Gajanan Pansare v. Oriental Insurance Co. Ltd. (2008) 9 SCC 720 this Court dealt with the same issue as to which of the categories of tenants have been excluded from the operation of the 1999 Act and held as under:

    “73. … Therefore, we are of the view that on a plain meaning of the word ‘PSUs’ as understood by the legislature, it is clear that, India's PSUs are in the form of statutory corporations, public sector companies, government companies and companies in which the public are substantially interested (see the Income Tax Act, 1961). When the word PSU is mentioned in Section 3(1)(b), the State Legislature is presumed to know the recommendations of the various Parliamentary Committees on PSUs. These entities are basically cash-rich entities. They have positive net asset value. They have positive net worths. They can afford to pay rents at the market rate.
    74. … we hold that Section 3(1)(b) clearly applies to different categories of tenants, all of whom are capable of paying rent at market rates. Multinational companies, international agencies, statutory corporations, government companies, public sector companies can certainly afford to pay rent at the market rates. This thought is further highlighted by the last category in Section 3(1)(b). Private limited companies and public limited companies having a paid-up share capital of more than Rs 1,00,00,000 are excluded from the protection of the Rent Act. This further supports the view which we have taken that each and every entity mentioned in Section 3(1)(b) can afford to pay rent at the market rates.”
    (emphasis added)

    (See also D.C Bhatia v. Union of India (1995) 1 SCC 104.)

    36. The case stands squarely covered by the judgment of this Court in Leelabai Gajanan Pansare (2008) 9 SCC 720 so far as the issue of exemption to the 1999 Act is concerned.

    37. Sections 3(1) and (2) of the 1995 Act read as under:

    “3. Acquisition of rights of owners and vesting of the textile undertakings.—(1) On the appointed day, the right, title and interest of the owner in relation to every textile undertaking shall stand transferred to, and shall vest absolutely in, the Central Government.
    (2) Every textile undertaking which stands vested in the Central Government by virtue of sub-section (1) shall, immediately after it has so vested, stand transferred to, and vested in, the National Textile Corporation.”
    (emphasis added)

    The aforesaid provisions require construction giving proper meaning to the expression “vesting”.

    38. “Vesting” means having obtained an absolute and indefeasible right. It refers to and is used for transfer or conveyance. “Vesting” in the general sense, means vesting in possession. However, “vesting” does not necessarily and always means possession but includes vesting of interest as well. “Vesting” may mean vesting in title, vesting in possession or vesting in a limited sense, as indicated in the context in which it is used in a particular provision of the Act. The word “vest” has different shades, taking colour from the context in which it is used. It does not necessarily mean absolute vesting in every situation and is capable of bearing the meaning of a limited vesting, being limited, in title as well as duration. Thus, the word “vest” clothes varied colours from the context and situation in which the word came to be used in the statute. The expression “vest” is a word of ambiguous import since it has no fixed connotation and the same has to be understood in a different context under different set of circumstances. [Vide Fruit & Vegetable Merchants Union v. Delhi Improvement Trust AIR 1957 SC 344, Maharaj Singh v. State of U.P (1977) 1 SCC 155, AIR 1976 SC 2602, Municipal Corpn. of Hyderabad v. P.N Murthy (1987) 1 SCC 568, AIR 1987 SC 802, Vatticherukuru Village Panchayat v. Nori Venkatarama Deekshithulu 1991 Supp (2) SCC 228, M. Ismail Faruqui v. Union of India (1994) 6 SCC 360, AIR 1995 SC 605, Govt. of A.P v. Nizam, Hyderabad (1996) 3 SCC 282, K.V Shivakumar v. Appropriate Authority (2000) 3 SCC 485, Municipal Corpn. of Greater Bombay v. Hindustan Petroleum Corpn. (2001) 8 SCC 143, AIR 2001 SC 3630 and Sulochana Chandrakant Galande v. Pune Municipal Transport (2010) 8 SCC 467.]

    39. The 1995 Act has been brought for providing the acquisition and transfer of the rights, title and interest of the owners in respect of the textile undertakings. The respondents had not been the owner of the textile undertaking. They had rented out the premises to Poddar Mills and what had vested in the Central Government was only the right, title and interest of Poddar Mills and nothing else. Poddar Mills was having only right in tenancy in the suit premises. The owner had been defined in clause (g) of Section 2 of the 1995 Act, taking into consideration the expression in relation to a textile undertaking as a proprietor or lessee, or occupier of the textile company undertaking. It included even the Receiver and liquidator where the companies had gone under liquidation.

    40. “Textile undertaking” has been defined in Section 2(m) which means undertaking specified in Column (2) of the First Schedule to the 1995 Act i.e the textile undertakings, management of which had been taken over by the Central Government under the 1983 Act. The First Schedule included Poddar Mills at Sl. No. 9 and Poddar Mills had been paid compensation to the tune of Rs 7,46,30,000. Nothing has been paid so far as Respondent 1 is concerned.

    41. Sub-section (6) of Section 4 of the 1995 Act provides that any suit, appeal or other proceedings of whatever nature in relation to any property which had vested in the Central Government under Section 3 on the appointed day, instituted or preferred by or against the textile company is pending, the same shall not abate or adversely affect the rights of the parties by reason of the transfer of textile undertaking. Thus, the commencement of the 1995 Act does not really affect even the pending cases. In view thereof, it is beyond our imagination as to how the 1995 Act would prejudice the cause of the respondents in the proceedings which arose subsequent to the commencement of this Act.

    42. It is not permissible for the appellant to canvass that the Central Government has any concern so far as the tenancy rights are concerned. Right vested in the Central Government stood transferred and vested in the appellant. Both are separate legal entities and are not synonymous. The appellant being neither the Government nor the government department cannot agitate that as it has been substituted in place of the Central Government, and acts merely as an agent of the Central Government, thus protection of the 1999 Act is available to it. The appellant cannot be permitted to say that though all the rights vested in it but it merely remained the agent of the Central Government. Acceptance of such a submission would require interpreting the expression “vesting” as holding on behalf of some other person. Such a meaning cannot be given to the expression “vesting”.

    43. It is a settled legal proposition that an agent cannot be sued where the principal is known. In the instant case, the appellant has not taken the plea before either of the courts below. In view of the provisions of Order 8 Rule 2 CPC, the appellant was under an obligation to take a specific plea to show that the suit was not maintainable which it failed to do so. The vague plea to the extent that the suit was bad for non-joinder and, thus, was not maintainable, did not meet the requirement of law. The appellant ought to have taken a plea in the written statement that it was merely an “agent” of the Central Government, thus the suit against it was not maintainable. More so, whether A is an agent of B is a question of fact and has to be properly pleaded and proved by adducing evidence. The appellant miserably failed to take the required pleadings for the purpose.

    44. Thus, in view of the above, we reach the inescapable conclusion that the appellant is not entitled for exemption under Section 3(1)(a) or 3(1)(b) of the 1999 Act. Nor can it claim the status of an “agent” of the Central Government. Submissions advanced on behalf of the appellant are preposterous. Facts and circumstances of the case do not warrant review of the impugned judgment.

    45. However, considering the nature of business of the appellant, it is in the interest of justice that the appellant be given time up to 31-12-2013, to vacate the premises. The appellant shall file a usual undertaking within four weeks from today to hand over peaceful and vacant possession to Respondent 1.

    46. With the aforesaid observations, the appeal stands dismissed.

    CA No. 7449 of 2011 with CA No. 7450 of 2011

    47. In view of our judgment pronounced today in Civil Appeal No. 7448 of 2011 (National Textile Corpn. Ltd. v. Nareshkumar Badrikumar Jagad), these appeals also stand dismissed. However, the appellant is given time up to 31-12-2011 to vacate the premises. The appellant shall file a usual undertaking within four weeks from today to hand over peaceful and vacant possession to the respondent.

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    National Textile Corporation Limited v. Nareshkumar Badrikumar Jagad And Others
    (Sep 5, 2011)