M/S ARRENA OVERSEAS PRIVATE LIMITED v. M/S BATRA ART PRESS

(iv) The Lease Agreement is a sham document and was never acted upon.

At no point of time was any rent was paid by the defendant firm to the plaintiff company under the said lease. Reliance in this regard has been placed on the profit and loss account of the plaintiff company for the Financial Years 2007-08 to 2013-14.

(v) A Memorandum of Understanding dated 20th December, 2007 (MoU) was executed between late Sh. Sanmukh Singh Batra and his two sons Jaspal Singh Batra and Ravinder Pal Singh Batra, whereby the Lease Agreement was cancelled.

(vi) Originally, Batra Art Press, a firm of which late Sh. Sanmukh Singh

(vii) On 9th April, 1975, business of the aforesaid firm was converted into a partnership firm with Jaspal Singh Batra, the elder son of late Sh. Sanmukh Singh Batra, as its partner. Subsequently, Jaspal Singh Batra retired in 1976 and Ravinder Pal Singh Batra, the younger son of late Sh. Sanmukh Singh Batra was inducted as a partner.

(viii) Thereafter, late Sh. Sanmukh Singh Batra gifted undivided half share in the suit property in favour of Prabhdit Singh Batra, son of Ravinder Pal Singh Batra, vide gift deed dated 14th May, 1999. On the same day, the remaining half of the undivided share in the suit property was gifted to Jaspreet Pal Singh Batra, son of Jaspal Singh Batra.

(ix) On 27th September, 2002, the plaintiff company was incorporated with both Prabhdit Singh Batra and Jaspreet Pal Singh Batra as its promoters, directors and shareholders. The plaintiff company has, BANSAL throughout been a family owned company and therefore, is in the nature of a quasi-partnership.

(x) On 28th October, 2002, upon persuasion of late Sh. Sanmukh Singh

Batra, a conveyance deed was executed by Prabhdit Singh Batra and Jaspreet Pal Singh Batra in favour of the plaintiff company towards their respective half share in the suit property, without receipt of any sale consideration.

(xi) Vide letter dated 20th November, 2002, the DDA converted the lease hold rights in the suit property in favour of the plaintiff company with 50% share each in favour of Jaspreet Pal Singh Batra and Prabhdit Singh Batra.

(xii) When the plaintiff company was incorporated, Prabhdit Singh Batra held 50% of the shares in the plaintiff company. Subsequently, disputes arose between the parties and the share of Prabhdit Singh Batra was diluted in the plaintiff company.

7. Counsel for the plaintiff has made the following submissions:

(i) There is no dispute with regard to the plaintiff company being the owner of the suit property. Reliance is placed on the pleadings in the suit filed on behalf of Hardit Singh Batra and Prabhdit Singh Batra, being CS(OS) No.1794/2015, wherein an admission has been made to the effect that plaintiff company is the owner of the suit property.

(ii) The plaintiff company is a distinct corporate entity and therefore, who owns/control the plaintiff company is not relevant.

(iii) Rent was duly paid by the defendant firm to the plaintiff company.

Reliance is placed on the income tax returns of the plaintiff company for the Assessment Year 2003-04 signed by Prabhdit Singh Batra BANSAL which reflects that lease rent has been received. Reliance is also placed on the profit and loss account of the defendant firm for the year ending 31st March, 2000 to show the payment of rent.

(iv) The lease was duly signed by Ravinder Pal Singh Batra, being the father of the Managing Partner of the defendant firm. Ravinder Pal Singh Batra was duly authorized to take all decisions with regard to the defendant firm and to sign documents. Reliance is placed on the General Power of Attorney dated 7th August, 2004 executed by the defendant firm in favour of Ravinder Pal Singh Batra and W.P.(C)1504/2008 filed on behalf of the defendant firm, supported by an affidavit of Ravinder Pal Singh Batra.

8. In view of the above, it is submitted that the defendant firm has no legal right to be in possession of the suit property. The tenancy has been duly terminated and no reply was given by the defendant firm to the said notice. After expiry of the lease deed, the tenancy of the defendant firm continued on a month-to-month basis. Reliance is placed on judgment in Payal Vision Ltd. v. Radhika Choudhary, (2012) 11 SCC 405 to submit that once the existence of landlord and tenant relationship is admitted and the tenancy is terminated, the plaintiff is entitled to a decree of possession under Order XII Rule 6 of the CPC. To similar effect are the judgments in Asha Narang v. HAFCO Brass USA, 2013 (137) DRJ 590, Sky Land International Pvt. Ltd. v. Kavita P Lalwani, (2012) DLT 594 and Maria Margarida Sequeria Fernandes v. Erasmo Jack de Sequeria (Dead) through L.R.’s, (2012) 5 SCC 370.

9. Reliance is also placed on the judgment dated 31st July, 2020 passed by the Supreme Court in Civil Appeal No.7764/2014 titled Ravinder Kaur BANSAL Grewal v. Manjit Kaur in support of the family settlement arrived at between the parties.

10. Reliance is placed on Karan Madan and Others v. Nageshwar Pandey, 209 (2014) DLT 241 in support of the submission that the oral pleas which are contrary to the written document cannot be considered by the Court.

11. Per contra, counsel for the defendant has made the following submissions:

(i) The Lease Deed was never intended to be acted upon and therefore, the same was superseded by a subsequent MoU entered into between the parties.

(ii) No rent was ever paid by the defendant firm ever since the aforesaid

2007. If it were a genuine lease transaction and no rent was paid by the tenant, the plaintiff would not have waited till the year 2015 to file the present suit. There are no averments in the plaint as to the period for which the rent was not paid. From the legal notice sent on behalf of the plaintiff company, it is clear that the rent was not paid for at least three years prior to the filing of the suit and that is why a demand of Rs.90,00,000/- has been made.

(iii) In the MoU dated 20th December, 2007, it has been recorded that the only purpose of entering into a lease agreement between the plaintiff company and defendant was for getting loans from banks. If the plaintiff company disputes the genuineness of the aforesaid document, it has to be a matter of trial.

BANSAL

(iv) In the family settlement dated 14th April, 2003 between late Sh.

Sanmukh Singh Batra, his wife and his two sons Jaspal Singh Batra and Ravinder Pal Singh Batra and their respective wives, it is noted that late Sh. Sanmukh Singh Batra shall, at all times, be the absolute owner of the various properties including the suit property.

(v) The suit property was transferred in favour of the plaintiff company by the two grandsons of late Sh. Sanmukh Singh Batra, namely, Prabhdit Singh Batra and Jaspreet Pal Singh Batra. However, the family settlement, being a subsequent document of 14th April, 2003, states that the suit property belonged to late Sh. Sanmukh Singh Batra.

(vi) While according permission for conversion of leasehold rights in the suit property in favour of the plaintiff company, the DDA vide letter dated 20th November, 2002 noted that Jaspal Singh Batra and Prabhdit Singh Batra are the two shareholders of the plaintiff company, holding 50% share each. The conveyance deed dated 30th October, 2002 also notes that the parties shall not part with the shares in the plaintiff company without permission of the DDA.

(vii) The real owner of the suit property was Sanmukh Singh Batra, who died intestate and therefore, both of his sons would have shares in the suit property.

(viii) The plaintiff company was, at all points of time, a closely held family company and in the nature of a quasi-partnership. The real owner of the suit property was late Sh. Sanmukh Singh Batra, who died intestate during the pendency of the present suit.

BANSAL

(ix) The shares of Smt. Balwant Kaur Batra, wife of late Sh. Sanmukh

Singh Batra wrongfully transferred in favour of late Sh. Sanmukh Singh Batra and this is subject matter of proceedings before the National Company Law Tribunal (NCLT).

(x) Against his removal as a director, Prabhdit Singh Batra has filed a petition before the NCLT, which is pending adjudication.

12. I have considered the rival submissions.

13. While examining an application under Order XII Rule 6 of the CPC, the court has to see whether clear and categorical admissions has been made on behalf of the defendant on the basis of which a decree can be passed in favour of the plaintiff. Reference in this regard may be made to paragraph 11 of the judgment of the Supreme Court in Himani Alloys Limited v. Tata Steel Limited, (2011) 15 SCC 273, which is as under: “11. It is true that a judgment can be given on an “admission” contained in the minutes of a meeting. But the admission should be categorical. It should be a conscious and deliberate act of the party making it, showing an intention to be bound by it. Order 12 Rule 6 being an enabling provision, it is neither mandatory nor peremptory but discretionary. The court, on examination of the facts and circumstances, has to exercise its judicial discretion, keeping in mind that a judgment on admission is a judgment without trial which permanently denies any remedy to the defendant, by way of an appeal on merits. Therefore unless the admission is clear, unambiguous and unconditional, the discretion of the Court should not be exercised to deny the valuable right of a defendant to contest the claim. In short the discretion should be used only when there is a clear “admission” which can be acted upon. (See also Uttam Singh Duggal & Co. Ltd. v. United Bank of India [(2000) 7 SCC 120], Karam Kapahi v. Lal Chand Public Charitable Trust [(2010) 4 SCC 753: (2010) 2 SCC (Civ) 262] and Jeevan Diesels and Electricals BANSAL Ltd. v. Jasbir Singh Chadha [(2010) 6 SCC 601: (2010) 2 SCC (Civ) 745].) There is no such admission in this case.”

14. The case set up by the plaintiff is that the plaintiff company is the owner of the suit property and the same was leased out to the defendant. The Lease Agreement was terminated by the plaintiff and upon the failure of the defendant to handover possession, the present suit was filed. On the other hand, the defendant firm disputed the validity of the Lease Deed and submitted that the same was a sham document created between family members and was never acted upon.

15. As per the Lease Agreement, a sum of Rs.2,50,000/- per month was payable as rent. As per the defendant firm, from the time of execution of the aforesaid lease on 1st April, 2007, no rent was ever paid by the defendant firm to the plaintiff company. A perusal of the relevant extracts of the profit and loss account and balance sheets of the plaintiff company from the year 2007 to the year 2014 would only show that some amount of rental income was received/receivable by the plaintiff company. The only entries in respect of yearly “Lease Rent” in the various balance sheets of the plaintiff company reflect a maximum amount of Rs.3,84,000/- for the year ending on 31st March, 2009 and which amount also progressively declined in the following years. Further, the accounts of the defendant firm that have been placed on record pertain to the years prior to execution of the Lease Agreement. Therefore, none of these documents show that any rent was being paid or was payable by the defendant firm to the plaintiff company under the Lease Agreement.

BANSAL

16. The defendant has also placed on record the MoU dated 20th December, 2007 signed by late Sanmukh Singh Batra and his two sons. The relevant recitals of the said MoU are set out below: “This Memorandum of Understanding is with reference to the lease agreement between Arrena Overseas Pvt. Ltd., Batra Art Press and Welco Overseas Pvt. Ltd. For the monthly rent of Rs.250,000/each, with effect from 01st April 2007. The only purpose of both the lease agreements were for getting Financial Loans from Banks and/or any other Financial Institutions. There will be no other financial aspects and liabilities in regards to the Lease Agreement/Rent, on Batra Art Press and Welco Overseas Pvt. Ltd. The Financial Loan from Banks and/or any other Financial Institutions were primarily for the payment for Plot No.188, Sector- 58 in Faridabad, Haryana and construction of the building on it, which is owned by Mr. Sanmukh Singh Batra. In addition to the above stated mutual agreement between the Batra Family, the expenses of maintenance and the house ta of A-

41 Naraina Industrial Area, Phase-2, New Delhi-110028, which is owned by Arrena Overseas Pvt. Ltd., will be continuously borne by Batra Art Press, Welco Overseas Pvt. Ltd., and their respective sister concerns as usually paid in the past.”

17. The intent of the parties to enter into a Lease Agreement is evident from a reading of the aforesaid MoU. The only purpose for entering into a Lease Agreement was to show income of the plaintiff company so as to obtain loans from banks and other financial institutions and no rent was actually payable under the said Lease Agreement. The aforesaid MoU was executed soon after the execution of the Lease Agreement and therefore, a cloud is created over the genuineness of the lease.

18. There is merit in the submission by the counsel for the defendant firm that if no rent was being paid by a tenant to a landlord from 2007, the BANSAL landlord would not wait for eight years before filing a suit for possession. Further, no demand was ever raised for payment of rent during this period. Nor have any averments been made in the plaint in respect of the time period for which the defendant firm defaulted in payment of rent. Therefore, at this stage, it appears that the lease was nothing but an arrangement between the family members and was not a genuine lease deed. The validity and genuineness of the same can only be established in a trial. In fact, a specific issue has been framed by the Court with regard to the existence of a landlord and tenant relationship between the plaintiff company and the defendant firm.

19. Yet another aspect raised by the defendant firm in its written statement is with regard to the shareholding of the plaintiff company. It is an admitted position that Prabhdit Singh Batra, partner of the defendant firm, had 50% shareholding in the plaintiff company at the time of its incorporation. His grandfather, Sanmukh Singh Batra, by exercising undue influence got transferred 34,500 shares i.e. 69% shares of the plaintiff company in favour of his wife Smt. Balwant Kaur Batra and subsequently, got the said shares transferred in his favour on 20th June, 2013. It is the case of the defendant firm that Prabhdit Singh Batra did not sign any documents for the said transfers. It is also the case of the defendant firm that late Sh. Sanmukh Singh Batra fraudulently transferred the said shares in the name of Smt. Balwant Kaur Batra in his favour as Smt. Balwant Kaur Batra has been suffering from Alzheimer’s since 2011. Prabhdit Singh Batra and his father were also removed from the Board of Directors of the plaintiff company on 31st December, 2014.

BANSAL

20. Challenging the aforesaid removal, and the illegal transfer of shares of Prabhdit Singh Batra in favour of Smt. Balwant Kaur Batra, a petition has been filed by Prabhdit Singh Batra before the NCLT, being CP No.46(ND)/2016. The NCLT vide order dated 26th April, 2018 in CP No.1/59/2017 filed by Jaspreet Pal Singh Batra appointed a Local Commissioner and directed that thumb impressions of Smt. Balwant Kaur Batra be taken and the same be sent for forensic analysis. Subsequently, vide order dated 17th May, 2018, NCLT directed that the original transfer deed along with the sample of the thumb impression be sent to CFSL, Rohini for analysis. The aforesaid petitions are still pending adjudication before the NCLT.

21. Based on the aforesaid, it appears that the plaintiff company was incorporated as a family owned company with the two grandchildren of late Sh. Sanmukh Singh Batra being the only shareholders and directors. Subsequently, disputes arose between the parties and it appears that Sanmukh Singh Batra sided with one of the grandsons, resulting in the shares of the plaintiff company and the control of the plaintiff company being transferred in favour of Jaspreet Pal Singh Batra, to the exclusion of Prabhdit Singh Batra.

22. The outcome of the proceedings before the NCLT would have a crucial bearing on the outcome of the present case as the subject matter of the said petitions is whether the transfer of shares of the plaintiff company in favour of Smt. Balwant Kaur Batra and their subsequent transfer in favour of late Sh. Sanmukh Singh Batra were genuine. In the event the aforesaid transfers are held not to be valid, the shareholding and directorship of Prabhdit Singh Batra in the plaintiff company would be restored. Even as BANSAL on date, 15% shareholding in the plaintiff company is held by Prabhdit Singh Batra and his brother Hardit Singh Batra.

23. Counsel for the plaintiff company has relied upon the admission made by the defendants in CS(OS) No.1794/2015 filed by them. The relevant paragraphs of the said plaint are set out below: “2. That the plaintiffs are shareholders in the company namely M/s Arrena Overseas Pvt. Ltd. And having share of 7.75% each. The said company situated at A-41, Naraina Industrial Area, Phase-II, New Delhi in which the FULL ground floor and FULL basement are in possession of the plaintiffs. The Certificate of Incorporation of M/s Arrena Overseas Pvt. Ltd. Along with list of directors and annual return are annexed herewith as Annexure P-1 (Colly).

3. That the plaintiffs and their father having some financial dispute with the other directors of the company who are defendant herein, in relation they are grandfather and uncle and cousin brothers of the plaintiffs. The plaintiffs are the co-owners of property No. A-41, Naraina Industrial Area, Phase-II, New Delhi- 110028 as the property is in the name of the company of M/s Arrena Overseas Pvt. Ltd. The house tax receipt is annexed herewith as Annexure P-2.”

24. A perusal of the aforesaid paragraphs would show that the plaintiffs therein have claimed to be co-owners of the suit property even though the said property is in the name of the plaintiff company. From the said pleading, it appears that the plaintiffs therein, Prabhdit Singh Batra and Hardit Singh Batra have claimed to be the co-owners of the suit property as the plaintiff company is a family-owned company and the real owner of the suit property was late Sh. Sanmukh Singh Batra. This is also borne out from the fact that the suit property was initially owned by late Sh. Sanmukh Singh Batra, who executed a gift deed in respect of the suit property in favour of his two grandsons from two different branches of his family, namely BANSAL Jaspreet Pal Singh Batra and Prabhdit Singh Batra. Thereafter, a conveyance deed was also executed by Jaspreet Pal Singh Batra and Prabhdit Singh Batra in favour of the plaintiff company, transferring the suit property to the plaintiff company. The fact that late Sh. Sanmukh Singh Batra was the real owner of the suit property has also been recorded in the Family Settlement dated 14th April, 2003, which has been signed by Sh. Sanmukh Singh Batra, his wife and his two sons Jaspal Singh Batra and Ravinder Pal Singh Batra and their respective wives.

25. From the accounts of the plaintiff company that have been placed on record, it is evident that the plaintiff company was not engaged in any business activity and was only an asset holding company owned by the family. The only income shown of the plaintiff company is from lease rental. Further, the directorship and majority shareholding of the plaintiff company has, at all times, been with the family members of late Sh. Sanmukh Singh Batra.

26. At this stage, reference may be made to the observations made by the Supreme Court in Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, (2005) 11 SCC 314, which are set out below: “225. A company incorporated under the Companies Act is a body corporate. However, in certain situations, its corporate veil can be lifted. (See Kapila Hingorani v. State of Bihar [(2003) 6 SCC 1: 2004 SCC (L&S) 586].)

226. The Court, however, has made a clear distinction between a family company, a private company and a public limited company. The true character of the company, the business realities of the situation should not be confined to a narrow legalistic view. (See Needle Industries [(1981) 3 SCC 333].)

227. It is now well known that principles of quasi-partnership are not foreign to the concept of the Companies Act. For the BANSAL purpose of grant of relief the principles of partnership have been applied even in a public limited company. (See Loch v. John Blackwood Ltd. [1924 AC 783: 1924 All ER Rep 200] and Ebrahimi v. Westbourne Galleries Ltd. [(1972) 2 All ER 492: 1973 AC 360: (1972) 2 WLR 1289 (HL)] ) …

230. Kilpest (P) Ltd. v. Shekhar Mehra [(1996) 10 SCC 696] whereupon Mr Desai placed strong reliance, thus, cannot be said to be an authority for the proposition that for no purpose whatsoever can the principles of quasi-partnership be applied to an incorporated company. The real character of the company, as noticed hereinbefore, for the purpose of judging the dealings between the parties and the transactions which are impugned may assume significance and in such an event, the principles of quasi-partnership in a given case may be invoked.

231. The ratio of the said decision, with respect, cannot be held to be correct as a bare proposition of law, as was urged by Mr Desai, being contrary to larger Bench judgments of this Court and in particular Needle Industries [(1981) 3 SCC 333]. It is, however, one thing to say that for the purpose of dealing with an application under Section 397 of the Companies Act, the court would not easily accept the plea of quasi-partnership but as has been held in Needle Industries [(1981) 3 SCC 333] the true character of the company and other relevant factors shall be considered for the purpose of grant of relief having regard to the concept of quasi-partnership.

27. The aforesaid dicta of the Supreme Court has been relied on by me in NAS v. Delhi Guest House Services Private Limited and Others, 2022 SCC OnLine Del 3106, wherein I have observed that even though the suit property involved in the said case, on paper, was held in the name of the defendant no.1 company therein, the real owners of the said property were the family members and the defendant no.1 company was the alter ego of the defendant no.5 therein.

BANSAL

28. In the present case also, the aforesaid principles of family company/quasi-partnership can be applied to the facts of the present case and the Court can look into the true character of the plaintiff company. I am of the prima facie view that the plaintiff company is nothing but a family owned company and the real owner of the suit property was Sanmukh Singh Batra, who expired during the pendency of the present suit. If that be so, the property would devolve by laws of succession on both his sons Jaspal Singh Batra and Ravinderpal Singh Batra. All these issues would have to be determined in the trial and the defendant firm cannot be denied its right to contest the claim of the plaintiff company when no clear, unambiguous and unconditional admissions have been made.

29. In S. M. Asif v. Virender Kumar Bajaj, (2015) 9 SCC 287, the Supreme Court has observed that a mere admission of the relationship of landlord and tenant cannot be said to be an unequivocal admission for decreeing a suit and relevant factors of each case have to be considered while exercising the discretion afforded to the Court under Order XII Rule 6 of the CPC. The present suit is not a simpliciter case of admission of the relationship of landlord and tenant on the basis of which a judgment on admissions can be granted to the plaintiff company. Therefore, the judgments cited on behalf of the plaintiff in this regard are of no relevance.

30. In view of the above discussion and settled principles of law with regard to Order XII Rule 6 of the CPC, no case is made out for passing of a judgment on the basis of admission.

31. There is no merit in the application and the same is dismissed.

BANSAL

32. Needless to state, any observations made herein are only for the purposes of deciding the present application and would have no bearing on the final adjudication of the suit. CS(COMM) 806/2016

33. List for consideration of pending applications on 16th February, 2023. AMIT BANSAL, J. OCTOBER 28, 2022 BANSAL