Holding

Mere majority shareholding in a company does not, by itself, establish that the tenant controls the business; additional evidence of actual control is required.

Summary

The plaintiff, Anoopi Shahani, leased premises to Ajit Sachdeva who died; his wife, Santosh Ajit Sachdeva, succeeded as tenant and allegedly sublet the premises to a company in which she held a majority of shares. The plaintiff filed an eviction suit under s.13(1)(e) of the Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947, claiming illegal subletting. The trial court dismissed the suit, holding that majority shareholding proved control of the company. On appeal, the appellate authority and the High Court reversed, holding that mere shareholding is insufficient to establish actual control and that the plaintiff had not proved illegal subletting. The Supreme Court affirmed this view, stating that additional evidence of day‑to‑day control is required, and dismissed the appeal.

Issues considered

Whether the plaintiff proved illegal subletting of the premises under s.13(1)(e) of the Bombay Rents Act.
Whether holding a majority of shares in a company is sufficient to establish control of the business for eviction purposes.
Whether the corporate veil can be lifted to attribute control of the company to the tenant.

Legislation cited

Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947s. 13(1)(e)

Subjects

evictionsublettingrent controlmajority shareholdingcorporate veilcontrol of companyBombay Rent Act

Judgment

A SANTOSH AJIT SACHDEVA AND ORS.
v.
ANOOPI SHAHANI

AUGUST 21, 2007

B [A.K. MATHURANDMARKANDEYKATJU,JJ.]

Rent Control and Eviction:

Eviction-On the ground of subletting of premises by tenant to a
C Company-Tenants' case that business of the Company was run by tenant as
its Managing Director-Dismissal of eviction suit since tenant holding
majority of shares of the Company and thus, found to be controlling the
whole business of the Company-Appellate Authority as well as High Court
holding that mere holding of majority of shares of Company not sujjicient to
D prove that tenant was actually controlling and managing the business-but
something more was required and tenant unable to prove the same-On
appeal, held: In view of concurrent finding of fact recorded by Appellate
Court and High Court, no reason to take a different view-Bombay Rents,
Hotel and Lodging Houses Rates Control Act, 1947_.:_s. 13 (l)(e).

E Respondent-plaintiff let out the suit premises to AS. AS died and his
wife, appellant- defendant no. 1 became tenant of plaintiff in respect of the
suit premises. Plaintiff contended that defendant No. 2 was proprietary concern
of defendant No. 1; and that defendant No. 1 unlawfully sublet the suit premises
to defendant No. 3-Impression Advertising Pvt Ltd., defendant no 4 and 5.
F Plaintiff filed eviction suit against defendant No. 1. Defendant no. I contended
that she and her husband registered Impression Advertising Pvt Ltd. and were
its Directors and during lifetime of AS, they carried out the business in the
name of Impression Advertising and Marketing; that after death of AS,
defendant nos. I, 2 and 3 were remitting rent to the plaintiff; that the business
of defendant No. 3 was run by the defendant no. I as the Managing Director;
G that defendant No. I carried on the business in the name of the defendant No.
2 and the premises continued to remain in her custody and control and
defendant No. 3 did not claim any right or claim in the suit premises. Trial
court dismissed the eviction suit since the defendant No. I was holding
majority of the shares of the said company and thus, was found to be

H 204
SANTOSH AJIT SACHDEVA v. ANOOPI SHAHANI [A.K. MATHUR, J.] 205

controlling the whole business. Respondent-plaintiff filed appeal. Appellate A
,-
.. Authority held that the appellant was merely having a majority share-holding
by which it could not be concluded that she was in actual control of the business
of the company in suit premises. Defendant no 1 filed writ petition. High Court
upheld the finding recorded by the first appellate court and dismissed the
writ petition. Hence the present appeal.
B
Dismissing the appeal, the Court

HELD: In the instant case, as per the finding of fact recorded by the
appellate court as well as by the High Court that the appellant-defendant has
not been able to successfully prove that she is controlling the company, C
appellate court held that merely by holding a large number of shares is not
sufficient but something more is required to prove that she is actually
controlling and managing the business herself. That finding of the appellate
court has been upheld by the High Court. Hence, in view of the concurrent
finding of both the courts below, there is no reason to take a different view of
the matter. [Para 8] [209-A, B] D
Madras Bangalore Transport Co. (West) v. Inder Singh, (1986] 3 SCC
62 and Sail Nagjee Purushotham and Co. Ltd v. Vimalabai Prabhulal, (20051
(8) sec 252, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1386 of2005. E
From the Final Judgment and Order dated 29. I I .2004 of the High Court
of Judicature at Bombay in W.P. No. 7701/2204.

Rakesh Dwivedi, Vilas Naik, Amit K. Singh, Shantanu Krishna, Mukti
· Chowdhary Rahul Joshi and Shivaji M Jadhav for the Appellant. F
P.P. Rao, Ravindra Srivastava, Kunal Verma, R. Srivasatava, M. Manan
and C.G. Solshe for the Respondent.

The Judgment of the Court was delivered by
G
A.K. MATHUR, J. I. This Appeal is directed against the order passed
by the High Court of Judicature at Bombay in Writ Petition No. 770 I of 2004
on 29th November, 2004 whereby the learned Single Judge has upheld the
order of the appellate court under the provisions of Section I 3(1 )(e) of the
Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947.
H
206 SUPREME COURT REPORTS [2007] 9 S.C.R.

A 2. Brief facts which are necessary for the disposal of this appeal are as
under:

The suit was filed by the plaintiff Smt. Anoop Shahani (respondent
herein) against the defendant No. I Mrs. Santosh Ajit Sachdeva (appellant
herein) wife of Mr. Ajit Sachdeva since died who was the original tenant of
B the suit premises for eviction on the ground of subletting of the premises. The
suit preinises, i.e., 61, Anjali, 6th floor, Behind Radio Club, Colaba Bombay 5
was let out by the plaintiff on the monthly rent of Rs. 13001-. It was contended
that the defendant No. 2 was a proprietory concern of the defendant No. 1
known as Mis Pearl Advertisings. During the pendency of the suit the plaint
C was amended and the defendants Nos 4& 5 joined as defendants. The joining
of defendants Nos. 4 & 5 were unlawful in respect of the suit premises. It is
the case of defendant No. I who unlawfully sublet the suit premises to
defendants Nos. 3, 4 & 5. The defendant Nos. 3, 4 & 5 claimed rights through
defendant no. I. According to plaintiff, defendant No. I has unlawfully sublet
the suit premises to defendant No. 3 in the month of September, 1998 and
D therefore, the defendant No. 1 has lost protection of the Bombay Rent Act
and therefore, the defendant No. 1 is liable to be evicted from the suit
premises. The plaintiff by giving a notice dated 19 .8.1989 through her advocate
terminated the tenancy of the defendant no. 1 in respect of suit premises and
called upon the defendant No. 1 to quit, vacate and deliver the quiet and
E peaceful possession of the suit premises. But no reply was given. Hence, the
suit was filed against the defendants for eviction. On the basis ·of pleadings
of the parties, the learned trial judge framed three issues in the suit on
7.11.1997:

I. Does plaintiff prove that defendant nos. 1 & 2 illegally sublet the
F suit premises or unlawfully given on licence to the Defendant No.
3?
2 Is plaintiff entitled to decree of possession of the suit premises?

3. What order and decree?

G 3. Both the parties examined themselves with necessary witness and
produced the documents. The trial court after considering the matter held that
the plaintiff was not entitled to the decree for eviction. It is relevant to
mention that Mr. Sachdeva expired and defendant No. 1 Smt. Santosh Ajit
Sachdeva wife of Mr. Sachdeva became the tenant of plaintiff in respect of
suit premises. As already mentioned above that Mis Pearl Advertisings is a
H proprietory concern of Shri Ajit Sachdeva. The defendant No. 3 Mis Impression
SANTOSH AJIT SACHDEVA v. ANOOPI SHAHANI [A.K. MATHUR, J.) 207

Advertising Pvt. Ltd is the unlawful occupant in respect of suit premises. The A
r case of the defendant was that her husband Ajit Sachdeva and she herself
registered the Private Limited Company and were the Directors of the said
company. During the life time of late Shri Sachdeva he also carried out the
business in the name of Mis Impression Advertising and Marketing. Mr.
Sachdeva died on 26th September, 1984 and thereafter defendant No. ' was B
accepted as tenant by the plaintiff and the rent was being paid by the
defendant No. 2 to the extent of Rs. 300/- and by M/s Impression Advertising
and Marketing at Rs. I 000/- per month.

4. It was also contended that defendant No. 3 Mis Impression
Advertising Co. did not commence the business owing to the illness of the C
Director late Shri Sachdeva. However in July, 1988 defendant No. 1 decided
that the said company should conduct the business which was being carried
out in the name of Mis Impression Advertising and Marketing. After the
commencement of the business the defendant was remitting the rent to the
plaintiff on behalf of the defendant no. I. Therefore, the defendant no. I
denied that the defendant no. 3 was the unlawful occupant as alleged. It was D
also contended that the business of the defendant No. 3 was run by the
defendant no. I as the Managing Director. Therefore, the allegation that
defendant had unlawfully sub-let or given on leave and on licence basis to
the defendant No. 3 was not proved. it was urged that defendant No. 1 carried
on the business in the name of the defendant No. 2 and the premises E
continued to remain in her custody and control and defendant No. 3 did not
claim any right or claim in the suit premises.

5. However, the trial court after examining the necessary evidence
dismissed the suit. Hence, the respondent approached the appellate authority
against the judgment and order passed by the trial court on 22.12.1998. The F
appellate authority examined the factual controversy and after reviewing all
the oral & documentary evidence of the defendant No. I did not feel persuaded
that she was controlling the whole business as Director of the compan·y in
the suit premises. The trial court after referring to the Annual Returns from
1988 to 1994 found that defendant No. I the appe Hant owns 1400 shares out
of 2000 shares of the said company and one Shri Shivdutt Sharma owns 240 G
shares and Shri Gautam Sachdeva owns 250 shares of the said company. It
was further held that Ms. Shibani Sachdeva and M/s Nikki Sachdeva own 60
& 50 shares respectively whereas S/Shri Charles D Souza & Bhooshan Prabhu
were holding 90 shares & 50 shares respectively and on that basis the trial
court found that the defendant (appellant herein) was found to be controlling H
208 SUPREME COURT REPORTS [2007) 9 S.C.R.

A the whole business. However, this finding was reversed by the appellate
court. The appellate court found that simple shareholding of the appellant in
the company is not enough & there is no factual foundation in respect of
actual control over the business of the company in suit premises. Mere
statement that the appellant holds 1400 shares or production of balance sheet
B is not sufficient to prove her actual control. The appellate court found that
except this documentary evidence there is no evidence to show that the day
to day activity is being controlled by the defendant No.I. On this evidence,
the appellate court reversed the finding and held that merely she was having
a majority share-holding by that it cannot be concluded that she was in actual
control of the business of the company in suit premises. Aggrieved against
C the order of the appellate court, the writ was filed before the High Court and
the High Court after reviewing the evidence affirmed the finding recorded by
the first appellate court that there is no sufficient material from which it can
be concluded that actually the defendant - appellant is looking after the
business of the company in the suit premises. Accordingly, the High Court
dismissed the writ petition and affirmed the order of the appellate court.
D Aggrieved against this order, the present appeal was filed.

6. We have heard learned counsel for the parties & perused the record.

7. Mr. Dwivedi, teamed senior counsel strenuously urged before us that
the principal of lifting the corporate veil has been accepted and, therefore, if
E the corporate veil is lifted then it appears that the appellant who holds the
major share is looking after the day to day functioning of the company and
learned counsel accordingly placed reliance on the decision of this Court in
the case of Madras Bangalore Transport Co. (West) v. lnder Singh, reported
in [ 1986] 3 sec 62 and also placed reliance in a number ofother judgments.
p The decision of Madras Bangalore Transport Co. (West)(Supra) came up for
consideration before this Court in a subsequent judgment in the case of Sait
Nagjee Purushotham & Co. Ltd v. Vimalabai Prabhula/, reported in [2005]
8 SCC 25:! wherein the case of Madras Bangalore Transport Co. (West)
(Supra) was considered alongwith all other cases cited by learned counsel
and it was specifically recorded with regard to Madras Bangalore Transport
G Co. (West) (Supra) .

"This case has been decided purely on facts peculiar to it and no
principle of law has been laid down."

8. All other cases referred by teamed counsel were also examined and
H we do not feel any need to refer any more of them. The theory of lifting the
SANTOSH AJIT SACHDEVA v. ANOOPI SHAHANI [A.K. MATHUR, J.) 209

corporate veil has been accepted in certain circumstances which have already A
been ~ferred by this Court in a series of decisions. However, so far as this
case is concerned, as per the finding of fact recorded by the appellate court
as well as by the High Court that the appellant-defendant has not been able
to successfully prove that she is controlling the company, it was held by the
appellate court that merely by holding a large number of shares is not sufficient
but something more is required to prove that she is actually controlling and B
managing the business herself. That,finding of the Appellate Court has been
upheld by the High Court. Hence, in view of the concurrent finding of both
the courts below, there is no reason for us to take a different view of the
matter. Hence we do not find any merit in this appeal and accordingly the
appeal stands dismissed. No order as to costs. C
NJ. Appeal dismissed.

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