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Case Number

1197 of 1973

Attorney(S)

S.N.Shelat
R.N.Shah
N.R.Oza

Judges

Mr. Justice A.D. Desai
Mr. Justice N.H. Bhatt

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Smart Summary

Concise Analytical Summary of the Opinion (N.H. Bhatt)

Factual and Procedural Background

The dispute arises out of an arrangement between members of an erstwhile partnership who, following a deed of dissolution (ex. 62), divided the rented factory premises into two separately used portions and ran separate businesses. The deed contains clauses (quoted in the opinion) describing the allocation of physical portions of the premises, allocation of debts and liabilities, and the continued joint obligation to pay rent and municipal taxes. The landlords contended that this division and separate enjoyment constituted unlawful sub-letting, assignment, transfer or licensing out of the rented property under clauses (e) and (ee) of section 13(1) of the Bombay Rent Act. The court considered whether the arrangement amounted to sub-letting, assignment/transfer of tenancy interest, or unlawful licensing. The opinion concludes with the court dismissing the plaintiffs' applications.

Legal Issues Presented

Whether the arrangement between the two groups of former partners — dividing the rented premises for separate use and enjoyment — constitutes unlawful sub-letting of the whole or part of the premises under section 13(1)(e) of the Bombay Rent Act.
Whether the same arrangement constitutes assignment or transfer of the tenants' interest in the rented property (including transfer in any other manner) under section 13(1)(e).
Whether the arrangement amounts to giving the premises on licence for monetary consideration without the landlord's prior permission under section 13(1)(ee) (i.e., unlawful licensing).

Arguments of the Parties

Landlords' Arguments

The landlords' counsel argued that the unequivocal division of the rented property, the taking over by the first group of the business name, telephone and debts and liabilities, and the exclusive possession of well-demarcated portions — together with the dissolution of every asset except tenancy rights — established that there had been sub-letting (or, alternatively, assignment or unlawful licensing).

Tenants' / Defendants' Position (as described in the opinion)

The arrangement was an internal division of enjoyment among the joint tenants (co-tenants or partners) for convenience; no third party was inducted as a head-tenant or sub-tenant.
The deed of dissolution preserved joint contractual relations with the landlords: the groups remained jointly liable to pay rent and municipal taxes and undertook to treat the tenancy as one and indivisible vis-à-vis the landlords.
Separate exclusive enjoyment of demarcated portions and internal allocation of assets or contributions to rent were internal arrangements among the co-tenants and did not affect the landlords' position or create an assignment/sub-letting/licence affecting the landlords' rights.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Badri Narain Jha and others v. Rameshwar Dial Singh and others, A.I.R. 1951 S.C. 186	Inter se partition among co-sharers (mokarraridars) of leasehold interest does not affect their liability to the lessor; several tenants constitute a single tenant vis-à-vis the landlord and partitions among them do not affect the integrity of the tenancy.	The court relied on this authority to hold that the internal division of enjoyment among the partners did not affect the integrity of the tenancy or the landlords' rights; hence it did not constitute sub-letting or assignment vis-à-vis the landlords.
Jekishondas Maganlal v. Abdul Rehman Haji Ahmedbhai and others, A.I.R. 1975 Guj. 205	Sub-letting requires two distinct persons — a head-tenant and a sub-tenant — and involves transfer of exclusive possession (whole or part) from a head-tenant to a third person; mere separate enjoyment without induction of a third person is not sub-letting.	The court adopted the single judge's exposition as the correct statement of law and applied it to find no sub-letting where partners merely separate enjoyment among themselves while retaining joint liability to the landlord.
Kanahiya Lal Balkishan Dass v. Labhu Ram, A.I.R. 1971 Delhi 219	Sub-letting entails induction of a third person into the leased premises; when premises are allotted to one partner on dissolution of a firm, there is no sub-letting (illustrating that internal allotment among partners does not create sub-tenancy).	The court cited this division-bench authority for the proposition that sub-letting essentially involves a third-party induction, and used it to support the conclusion that the internal allotment/separate enjoyment here did not amount to sub-letting.

Court's Reasoning and Analysis

The court began by identifying the statutory provisions invoked: section 13(1)(e) (sub-letting, assignment or transfer) and section 13(1)(ee) (granting premises on licence for monetary consideration without the landlord's permission) of the Bombay Rent Act (as extended/modified). It noted that the factual matrix was not in dispute: two groups of former partners divided the rented factory premises and ran their separate businesses with demarcated areas of exclusive enjoyment.

The court closely examined the deed of dissolution (ex. 62), quoting relevant clauses (clauses 2, 5 and 13). Clause 2 described the physical allotment of galas and other facilities and the allocation of the business name and telephone to the first group (with a monetary payment to the retiring partners). Clause 5 allocated debts and liabilities to the first group. Clause 13 stipulated that the factory premises belong to a named person (plaintiff No. 1) and that rent and municipal taxes were to be paid jointly in equal shares or on separate rent notes, and that certain facilities (bathroom and latrine) remain for joint use.

From those clauses the court inferred that while enjoyment of the premises had been divided for practical convenience, the contractual relations vis-à-vis the landlords remained intact: the groups had undertaken to remain jointly liable for rent and municipal taxes and to treat the tenancy as one and indivisible toward the landlords. The court pointed out that the landlords' complaint focused on the outward division and the allocation of business assets and exclusive use, but the court queried the landlords' submission by asking "who sub-let whom?" and observed the lack of a persuasive answer.

The court analyzed the legal concept of sub-letting, emphasizing that it presupposes two distinct parties — a head-tenant and a sub-tenant — and that sub-letting entails the transfer of exclusive possession (whole or part) to a third person. It concluded that the present case involved no induction of any third party: the arrangement was an internal division among joint tenants (partners) and thus did not satisfy the essential attributes of sub-letting.

The court also addressed the possibility of assignment or transfer of tenancy interest, observing that assignment would require a change in the tenants' liabilities as between them and the landlord. Here, legal liabilities remained undivided and intact vis-à-vis the landlords; mere separate enjoyment did not amount to assignment or transfer of the tenants' interest. The fact that each group contributed 50% of the rent did not materially alter the landlords' position because the landlords continued to receive rent from and on behalf of all partners.

To reinforce these conclusions the court relied on precedent (Badri Narain Jha - supreme court authority on integrity of tenancy despite inter se partitions) and adopted the exposition of law in Jekishondas Maganlal (single judge of this court) that sub-letting requires a distinct head-tenant and sub-tenant. The court also referred to the Delhi High Court decision in Kanahiya Lal Balkishan Dass for the proposition that sub-letting entails induction of a third person.

In short: the court applied the principle that internal arrangements among co-tenants for separate enjoyment do not affect the integrity of the tenancy vis-à-vis the landlord and therefore do not constitute sub-letting, assignment/transfer of interest, or unlawful licensing under the quoted statutory provisions.

Holding and Implications

HOLDING: The court held that there was neither sub-letting nor assignment or transfer of tenancy interest nor unlawful licensing by the respective groups of partners. The court DISMISSED the plaintiffs' applications.

Implications and direct effects:

The internal division of enjoyment among the former partners did not alter the landlords' legal position; the tenants remained jointly liable for rent and municipal taxes and the integrity of the tenancy remained intact.
No finding of sub-letting, assignment/transfer, or unlawful licensing was made against defendants nos. 2–5 based on the arrangement described in the deed of dissolution.
The court adopted and applied existing authorities rather than announcing a novel principle; the decision applies established principles (as cited) to the facts at hand and does not purport to lay down a new precedent beyond the application of those authorities.

Disposition recorded in the opinion: "Applications dismissed."

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Chhotalal Maganlal Badraniwala v. Mayur Silk Mills

N.H.Bhatt:-

(1) The first question that falls for consideration is whether this sort of arrangement found to have been made and arrived at by the two groups of erstwhile partners can amount to an act of sub - letting or assignment or transfer or unlawful licensing out of the rented property. The clauses that are pressed into service are (e) and (ee) of sub - sec. (1) of sec. 13 of the bombay rent act which are quoted below for ready reference:

Sec. 13 (1) x x x x x x (e) that the tenant has since the coming into operation of this act unlawfully sub - let the whole or part of the premises or assigned or transferred in any other manner his interest therein; or (ee) that the tenant has after the commencement of the bombay rents hotel and lodging house rates control gujarat extension and amendment) act 1963 given the whole or part of the premises on licence for monetary consideration to any person without the previous permission of the landlord.

As said above the factual aspects are no longer in controversy. The fact remains that two groups of the erstwhile body of partners have been running their separate businesses. In other words they have divided the rented property for their separate use and enjoyment. The question is whether this act of theirs would amount to an unlawful sub - letting of the whole or part of the rented property or whether it would amount to assignment or transfer in any other manner of their interest in the rented property by them.

(2) We would like to translate some important clauses as faithfully as possible from the deed of dissolution ex. 62.

"cl. 2. The factory that is the business premises are situated in ward no. 7 and registered (with municipality) at sr. No. 678. They consist of four galas: out of that two galas on the southern side a godown an open space are allotted to the 6 of the parties of the first part they will be entitled to use the name m/s. Mayur silk mills alias amrutlal chhaganlal and co. For the purpose of running business of manufacturing art silk cloth. The telephone so. 2286 is also allotted to the share of the first group as the price of the name and telephone the parties of the first group will pay rs. 4501. 00 to the retiring partners of the second group. .

Cl. 5. The debts and liabilities of the firm are allotted to the share of the two partners of the first group.

Cl. 13. The place of business. That is of the factory of the partnership belong to m/e. Chhotalal maganbhai buckhaniwala (i. E. The plff. No. 1). Its rent and municipal taxes are to be paid by us jointly in equal shares or to pay the same on getting separate rent notes. The bath - room and latrine shall remain in joint use of both the parties and neither party should directly or indirectly cause any obstruc tion in the joint use of the same

The above quoted clauses from the deed of dissolution ex. 62 therefore very clearly show that though the enjoyment was made separate and to that extent there was division of the rented property they had kept intact their contractual relations with the plaintiffs - landlords subject of course to their hope of the landlords agreeing to the separation of the two shares. In other words there is no manner of doubt that so ever left at that time that both the groups shall jointly be liable to pay the rent and municipal taxes and implicit therein is their undertaking to treat the tenancy as one and indivisible vis - a - vis the landlords.

(3) The learned counsel appearing for the landlords however urged that this unequivocal division of the rented property the taking over of the business name the telephone the debts and liabilities by the partners of the first group the exclusive possession of the two differently well - demarcated portions and the dissolution of every assets except tenancy a rights event to establish that there was sub - letting. (we put a pertinent question to the learned counsel appearing for the plaintiffs as to who sub - let whom and there could not be any direct and pertinent reply to the query. The difficulties in the way of plaintiffs are very obvious because as far as the plaintiffs were concerned there was unity of interest amongst the four partners who for the sake of convenience arrived at some mutual arrangement for their individual benefits. In other words it was a convenient mode of enjoyment of the rented property by the joint tenants or coenants). This arrangement arrived at by the co - tenants by itself did not work any detriment to the interests of the landlords. For all practical purposes all the four tenants who were the tenants in. Their individual capacity continued to remain jointly liable. We have got before us the position of law laid in crystal clear language by the supreme court itself in the case of badri narain jha and others v. Rameshwar dial singh and others a. I. R. 1951 s. C. 186. In very clear terms the supreme court has there observed as follows:

"the inter se partition of the mekarrari interest amongst the mokarraridars cannot affect their liability qua the lessor for the payment of the whole rent. As several tenants of a tenancy in law constitute but a single tenant and qua the landlord they constitute one person each constituent part of which possesses certain common rights in the whole and is liable to discharge common obligations in its entirety. Such partitions amongst several lessees inner se are usually made for convenience of enjoyment of the lease - hold but they do not in any way affect the integrity of the tenancy or make each holder of an interest in it as separate holder of a different tenancy. (emphasis by us).

This authority. Therefore very clearly lays down that the inter se partition amongst several co - sharers of leasehold rights cannot in any way affect the integrity of the lease. The case on hand clearly falls in this category.

(4) The sub - letting presupposes from its very nature the two distinct parties one that can be said to be the head - tenant and another a sub - tenant. The defendants nos. 2 and 3 cannot be said to have sub - let any portion to the defendants no. 4 and 5 nor can defendants nos. 4 and 5 be said to have sub - let the southern portions to the defendants nv. 2 and 3 all is an arrangement for separate enjoyment. The fact that they have been separately and exclusively enjoying their separate portions does not go to the detriment of the plaintiffs - landlords whose position remains absolutely unaltered in respect of the rented property. Whether the portions earmarked by the two sets of partners are equal or unequal is also not a matter of consequence to the landlords so is the case about division of all assets between the two groups of partners we would repeat that as far as the landlords are concerned. Their position remains intact and no right of theirs is in any way violated. They have therefore no cause of grievance.

(5) There cannot he any assignment or transfer also because as far as the legal liabilities are concerned they continue to remain undivided and intact is - a - vis the landlords. In the words of the supreme court by separate enjoyment integrity of tenancy is not affected. Mere separate enjoyment would not give rise to any assignment of interest on the part of all or any of the partners. As this question is disposed of on this count it is not necessary to deal with this aspect from other angles. The fact that each of the groups of the partners contribute 50% of the amount of rent also does not in any way materially alter the position of the landlords. They are being paid rent by and on behalf of all the partners. How they collect the amount is a matter of their internal arrangement with which the landlords have nothing to bother about

(6) A similar question bad arisen before the learned single judge of this court and it has been dealt with by him in the case of jekishondas maganlal v. Abdul rehman haji ahmedbhai and others a. I. R. 1975 guj. 205 in that case the learned single judge has examined the import of the term sub - letting and assignment of interest and has rightly held that sub - letting means that the premises which are in the possession of a person as a lessee are sub - let wholly or partly to a third person. Unless there are two distinct persons or personalities that can be described as a head - tenant and a sub - tenant there cannot be sub - letting. Sub - letting or sub - tenancy must mean transfer of exclusive possession from a head - tenant to a sub - tenant either of the whole premises in the occupation of the tenant or a part thereof. Despite this separate enjoyment of the two parcels of the partners of the two groups their legal right to every inch of the property remains intact.

(7) To the same effect are the observations of the division bench of the delhi high court in the case of kanahiya lal balkishan dass v. Labhu ram a. I. R. 1971 delhi 219. As observed therein sub - letting essentially entails induction of a third person into the leased premises. Elaborating in the case of a firm; that court has observed that when a firm becomes a tenant its partners also become tenants since a firm is only a compendious name of the partners. The division bench also has observed very clearly that when the premises are allotted to one of the partners on the dissolution of the firm there would be no sub - letting. No doubt it was a case of allotment of the entire premises to one of the partners on dissolution but the underlying principles remain the same.

(8) We are therefore of the clear view that the exposition of law by the learned single judge of this court in the case of jakisondas maganalal (supra) is the correct exposition of law and we respectfully adopt it fully. We therefore find that there is neither sub - letting nor assignment of transfer of interest by the defendants nos. 2 and 3 on one hand or the defendants nos. 4 and 5 on the other in favour of the defendants nos. 4 and 5 and the defendants nos. 2 and 3 respectively. What we have observed would equally apply to the case of licensing alternatively pleaded under this broad head of arguments by the learned counsel for the plaintiffs. Applications dismissed.

Chhotalal Maganlal Badraniwala v. Mayur Silk Mills

Concise Analytical Summary of the Opinion (N.H. Bhatt)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Landlords' Arguments

Tenants' / Defendants' Position (as described in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Chhotalal Maganlal Badraniwala v. Mayur Silk Mills

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