Supreme Court Remands Landlord-Tenant Dispute: Vinay Eknath Lad vs. Chiu Mao Chen (2019)

Date of the Judgment: 18 December 2019

Citation: [Not Available in Source]

Judges: Deepak Gupta, J., Aniruddha Bose, J.

Can a group of individuals, operating under the same trade name as a dissolved partnership firm, claim to be the landlords of a tenant without proper attornment or public notice of the change in ownership? The Supreme Court of India addressed this question in a recent case involving a dispute over a commercial property in Bengaluru. The core issue was whether the original plaintiffs, claiming to be co-owners of the property, had the legal standing to initiate an eviction suit against the tenant, given the lack of formal attornment or public notice regarding the dissolution of the original partnership firm and the subsequent formation of the co-ownership concern. The bench consisted of Justice Deepak Gupta and Justice Aniruddha Bose, with the judgment authored by Justice Aniruddha Bose.

Case Background

The case revolves around a commercial property in Bengaluru, originally leased to the respondent’s mother on May 10, 1978, by a partnership firm named “Sri Sabari Corporation.” After the mother’s death in 1996, the respondent became the tenant. In 2006, the original plaintiffs, claiming to be the co-owners of the property after the dissolution of the partnership firm, issued a notice to terminate the lease, seeking vacant possession and mesne profits. The plaintiffs asserted that they had inherited the property from the dissolved partnership firm as residue property, with some being former partners and others being their relatives. The defendant contested the suit, arguing that the plaintiffs lacked the legal standing to terminate the tenancy due to the absence of a jural relationship and proper attornment.

Timeline:

Course of Proceedings

The Trial Court decreed the suit in favor of the plaintiffs, ordering the defendant to vacate the premises and pay mesne profits. The Trial Court relied on a Deed of Co-ownership (exhibit “P-5”) and concluded that the formation of the co-ownership was a family arrangement and that the defendant was aware of the co-ownership. However, the High Court reversed the Trial Court’s decision, holding that the plaintiffs could not establish their locus standi to institute the suit. The High Court found that the property of the partnership firm was partitioned among seventeen persons, including non-partners, and that the co-ownership deed was improperly stamped, thus questioning the validity of the transfer. The High Court also noted the lack of public notice regarding the dissolution of the firm.

Legal Framework

Several legal provisions are central to this case:

• Section 106 of the Transfer of Property Act: This section deals with the termination of leases through notice. The original plaintiffs issued a notice under this section to terminate the lease.
• Section 109 of the Transfer of Property Act: This provision addresses the rights of a lessor’s transferee, stating that the transferee possesses all the rights of the lessor if the lessor transfers the leased property. It also states that the lessee can elect to treat the transferee as the person liable to him. The provision states that attornment is not necessary if the lessor transfers the property. The section also states that if the lessee pays the rent to the lessor without the knowledge of the transfer, the lessee shall not be liable to pay such rent again to the transferee.
• Section 116 of the Evidence Act: This section embodies the principle of estoppel, preventing a tenant from challenging the landlord’s title during the tenancy. However, this principle is not applicable if the tenant challenges the derivative title of an assignee/vendee of the original landlord.
• Section 48 of the Indian Partnership Act, 1932: This section deals with the mode of settlement of accounts between the partners after the dissolution of the firm. The plaintiffs claimed that they had derived their right, title, and interest to the property from the partnership firm after its dissolution under this section.
• Section 45(1) of the Indian Partnership Act, 1932: This section requires a public notice for the dissolution of a partnership firm. The defendant contended that no public notice was issued on the dissolution of the firm.

Arguments

Arguments of the Appellant (Original Plaintiffs):

• The original plaintiffs argued that they had derived their title to the property from the dissolved partnership firm, Sri Sabari Corporation, through a family arrangement. They contended that the property was distributed among the erstwhile partners and their relatives as residue assets under Section 48 of the Indian Partnership Act, 1932.
• The plaintiffs submitted that the defendant was aware of the change in ownership from a notice issued in 2004, even though that notice was not ultimately acted upon. They argued that this notice should have alerted the defendant to the fact that the partnership firm had been converted into a co-ownership concern.
• The plaintiffs argued that in an eviction suit, they are not required to prove their title as strictly as in a title suit. They cited the ruling in Apollo Zipper India Limited Vs. W. Newman and Company Limited [(2018) 6 SCC 744], which states that a landlord is not expected to prove his title like in a title suit.
• The plaintiffs contended that the principle of estoppel under Section 116 of the Evidence Act should apply, barring the tenant from questioning their title.
• The plaintiffs relied on the judgment of S.V. Chandra Pandian Vs. S. V. Sivalinga Nadar (1993) 1 SCC 589, arguing that in cases of sharing of residual assets of a partnership firm, payment of stamp duty equivalent to that of transfer or conveyance of property is not necessary.

Arguments of the Respondent (Defendant):

• The defendant argued that the original plaintiffs lacked the legal standing to terminate the tenancy because there was no jural relationship between them. The defendant contended that the tenancy was originally with the partnership firm, and the plaintiffs had not established a valid transfer of ownership to themselves.
• The defendant argued that there was no attornment of tenancy, meaning he had not formally recognized the plaintiffs as his new landlords. He also argued that no public notice of the dissolution of the firm was given as required under Section 45(1) of the Indian Partnership Act, 1932.
• The defendant argued that the devolution of the property was through a conveyance of immovable property, which required registration and proper stamp duty payment. The defendant contended that the co-ownership deed was not properly stamped, making it inadmissible in court.
• The defendant argued that the notice of 2004 was not sufficient to establish the change in ownership. He contended that he continued to pay rent to Sri Sabari Corporation under the same name, and therefore, he was not aware of the change in ownership.
• The defendant argued that the plaintiffs have not established their locus standi to institute the suit for recovery of possession.

Submissions Table

Issues Framed by the Supreme Court

The main issue framed by the Supreme Court was:

1. Whether the original plaintiffs had the locus to institute the suit or not.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Cases:

• Bismillah Be(Dead) by Legal Representatives Vs. Majeed Shah [2017 2 SCC 274]: This case was cited to emphasize that while a tenant is estopped from challenging the landlord’s title under Section 116 of the Evidence Act, they can challenge the derivative title of an assignee of the original landlord if there is no attornment. The Supreme Court of India followed this case.
• Appollo Zipper India Limited Vs. W. Newman and Company Limited [(2018) 6 SCC 744]: This case was cited to reiterate the principle that a tenant can challenge the derivative title of an assignee of the original landlord if there is no attornment. The Supreme Court of India followed this case.
• Sheela vs. firm Prahlad rai Premm Prakash [(2002) 3 SCC 375]: This case was cited to support the argument that in an eviction suit, a landlord is not expected to prove their title as strictly as in a title suit. The Supreme Court of India followed this case.
• Boorugu Mahadev & sons vs. Srigiri [(2016) 3 SCC 343]: This case was cited to support the argument that in an eviction suit, a landlord is not expected to prove their title as strictly as in a title suit. The Supreme Court of India followed this case.
• S.V. Chandra Pandian Vs. S. V. Sivalinga Nadar (1993) 1 SCC 589: This case was cited by the plaintiffs to argue that in cases of sharing of residual assets of a partnership firm, payment of stamp duty equivalent to that of transfer or conveyance of property is not necessary. The Supreme Court of India did not apply this case as there was no material before it to conclude that the original plaintiffs’ title to the subject-premises came from residue assets of the dissolved firm.
• Dr. Chiranji Lal (D) (supra) Vs. Haridas 2005 SCC 746: This case was cited on behalf of the defendant to argue that once a document has been admitted without objection, such objection could not be taken at the appellate stage. The Supreme Court of India did not enter into this controversy.

Legal Provisions:

• Section 106 of the Transfer of Property Act: Deals with the termination of leases through notice.
• Section 109 of the Transfer of Property Act: Deals with the rights of a lessor’s transferee.
• Section 116 of the Evidence Act: Embodies the principle of estoppel, preventing a tenant from challenging the landlord’s title during the tenancy.
• Section 48 of the Indian Partnership Act, 1932: Deals with the mode of settlement of accounts between the partners after the dissolution of the firm.
• Section 45(1) of the Indian Partnership Act, 1932: Requires a public notice for the dissolution of a partnership firm.

Authority Consideration Table

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The authorities of Bismillah Be(Dead) by Legal Representatives Vs. Majeed Shah [2017 2 SCC 274]* and Apollo Zippers (supra)* were cited to show that a tenant can challenge the derivative title of an assignee of the original landlord if there is no attornment.
• The authorities of Sheela vs. firm Prahlad rai Premm Prakash [(2002) 3 SCC 375]* and Boorugu Mahadev & sons vs. Srigiri [(2016) 3 SCC 343]* were cited to show that in an eviction suit, a landlord is not expected to prove their title as strictly as in a title suit.
• The authority of S.V. Chandra Pandian Vs. S. V. Sivalinga Nadar (1993) 1 SCC 589* was not applied as there was no material before the Court to conclude that the original plaintiffs’ title to the subject-premises came from residue assets of the dissolved firm.

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the lack of sufficient evidence establishing the original plaintiffs’ ownership of the subject premises. The Court emphasized the following points:

• The plaintiffs failed to adequately explain how the property transitioned from the partnership firm to the co-ownership concern.
• The absence of formal attornment or public notice of the change in ownership was a significant factor.
• The Court noted that the High Court had not dealt with the issue of the notice of 2004, which could establish the plaintiffs’ ownership.
• The Court also considered the defendant’s argument that the co-ownership deed was improperly stamped, although it did not make a final determination on that point.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio:

The court’s decision was primarily driven by factual gaps in the plaintiffs’ case, particularly their failure to establish a clear chain of title. The court also considered the legal principles surrounding attornment and the derivative title of a landlord, but the factual deficiencies weighed more heavily in its decision.

Logical Reasoning

Issue: Whether the original plaintiffs had the locus to institute the suit or not.

Key Takeaways

• Attornment is Crucial: Landlords need to ensure proper attornment or public notice when there is a change in ownership, especially when the identity of the landlord changes.
• Derivative Title Must Be Established: Landlords must be able to establish their derivative title when it is challenged by the tenant.
• Importance of Factual Evidence: Factual evidence is critical in establishing ownership in landlord-tenant disputes, and the onus is on the landlord to provide such evidence.
• Impact on Future Cases: This judgment underscores the importance of proper legal procedures in transferring property and the need for clear documentation to avoid disputes.
• Remand for Further Inquiry: The Supreme Court’s decision to remand the case highlights the importance of a thorough factual inquiry in such disputes.

Directions

The Supreme Court set aside the judgment of the High Court and remanded the matter back to the High Court for re-adjudication. The appellant was given the liberty to file an application for producing additional evidence, which the High Court was directed to consider on its own merits. The High Court was also requested to decide the appeal on remand as expeditiously as possible.

Specific Amendments Analysis

There is no specific amendment discussed in the judgment.

Development of Law

The ratio decidendi of this case is that while a landlord is not required to prove their title as strictly as in a title suit, they must still be able to establish their derivative title when it is challenged by the tenant. The case also highlights the importance of attornment or public notice when there is a change in ownership. The judgment reinforces the existing legal position regarding the rights of tenants to challenge the derivative title of a new landlord in the absence of attornment. It does not introduce any new legal principles but clarifies the application of existing laws in the context of landlord-tenant disputes.

Conclusion

The Supreme Court’s decision in Vinay Eknath Lad vs. Chiu Mao Chen emphasizes the importance of establishing a clear chain of title and the necessity of attornment or public notice when a landlord’s ownership changes. The Court remanded the case to the High Court, directing it to reconsider the matter with additional evidence if necessary. This judgment serves as a reminder of the legal requirements in landlord-tenant disputes and the need for proper documentation and procedures in property transfers.