Supreme Court Upholds Eviction on Subletting: A. Mahalakshmi vs. Bala Venkatram (2020)

Introduction

Date of the Judgment: 07 January 2020

Citation: (2020) INSC 12

Judges: Ashok Bhushan, J., M.R. Shah, J.

Can a landlord evict a tenant if the tenant allows a third party to run a business on the rented premises? The Supreme Court of India addressed this question in a recent case concerning a dispute over subletting. This case clarifies the circumstances under which a tenant can be evicted for subletting the rented property. The Supreme Court bench consisted of Justices Ashok Bhushan and M.R. Shah, with the majority opinion authored by Justice M.R. Shah.

Case Background

The case revolves around a property initially owned by Dr. Sanjeevi and his wife, Mrs. Porkodi, who had granted a power of attorney to A. Mahalakshmi (the appellant). On 23 May 2007, A. Mahalakshmi rented the property to Bala Venkatram (the first respondent) for running a business called ‘Best Mark Super Market’. The monthly rent was Rs. 11,000, with a security deposit of Rs. 1,00,000. The rent was to be paid by the 7th of each month.

A. Mahalakshmi claimed that Bala Venkatram initially paid rent until October 2007. Subsequently, she noticed that the business name had changed to ‘Amutham Super Market’ and that the shop was now being run by Shahu Hameed (the second respondent). A. Mahalakshmi argued that this constituted a breach of the rental agreement and subletting. She issued a legal notice to Bala Venkatram, demanding possession of the property. When no response was received, she filed an eviction suit in 2008.

Bala Venkatram, in his defense, claimed that he had paid rent until December 2007. He also stated that he did not require the landlord’s permission to change the business name. He further argued that ‘Amutham Super Market’ was part of a larger group of businesses under the same name. He alleged that the eviction suit was filed due to his refusal to allow the landlord to run the business under her name.

Timeline

Course of Proceedings

The Rent Controller initially dismissed the eviction petition filed by A. Mahalakshmi. Aggrieved by this decision, A. Mahalakshmi appealed to the Rent Control Appellate Authority. The Appellate Authority partly allowed the appeal, granting an eviction decree based on the grounds of subletting under Sections 10(2)(i) and 10(2)(ii)(a)(b) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, but dismissed the petition under Section 10(2)(iii) of the Act.

Bala Venkatram passed away and was represented by his legal heirs. The legal heirs of Bala Venkatram and the second respondent, Shahu Hameed, then filed a revision application before the High Court of Judicature at Madras. The High Court allowed the revision application, setting aside the eviction order passed by the Rent Control Appellate Authority. A. Mahalakshmi then appealed to the Supreme Court of India.

Legal Framework

The case primarily involves the interpretation of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. The relevant sections of the Act are:

• Section 10(2)(i) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960: This section allows a landlord to seek eviction if the tenant has transferred their rights under the lease or sublet the property.
• Section 10(2)(ii)(a)(b) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960: This section deals with the grounds for eviction related to the tenant’s actions that are detrimental to the property.
• Section 10(2)(iii) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960: This section pertains to eviction on the grounds of wastage and material alteration of the premises.
• Section 2(6) of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960: This section defines who a landlord is for the purpose of the Act.

The Act aims to regulate the relationship between landlords and tenants, protecting both parties’ rights and ensuring fair practices. The core issue in this case is whether the tenant’s actions constituted subletting, which is a violation of the Act and grounds for eviction.

Arguments

Arguments by the Appellant (A. Mahalakshmi – Landlady):

• The High Court erred in overturning the eviction decree based on subletting.
• The High Court failed to consider the evidence on record, which clearly showed that the tenant sublet the premises to the second respondent.
• The change in business name from ‘Best Mark Super Market’ to ‘Amutham Super Market’ and the fact that the second respondent was running the business were evidence of subletting.
• The sales tax certificate and shop license were in the name of the second respondent, further proving subletting.
• Although the original tenant claimed a partnership with the second respondent, no partnership document was produced.
• The tenant had parted with possession of the property in favor of the second respondent without her consent.

Arguments by the Respondents (Bala Venkatram and Shahu Hameed – Tenant and Sub-tenant):

• A. Mahalakshmi, being a power of attorney holder and not the owner, cannot maintain an eviction petition.
• The High Court correctly set aside the eviction order because A. Mahalakshmi failed to prove that the tenant sublet the premises.
• The tenant and second respondent were running the shop as partners, not as a sub-tenant.
• The landlady was aware that the original tenant and the second respondent were running the shop as partners.

The primary contention of the landlady was that the tenant had sublet the property to the second respondent without her consent. The tenant, on the other hand, argued that he was running the business in partnership with the second respondent and that the landlady was aware of this arrangement.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issues for consideration:

1. Whether the High Court was justified in setting aside the eviction decree on the ground of subletting and arrears of rent.
2. Whether the appellant can be considered a landlady for the purpose of maintaining the eviction petition.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was heavily influenced by the evidence indicating that the original tenant had parted with possession of the property and that the second respondent was running the business as the owner. The Court found that the tenant’s claim of partnership was a mere facade to conceal subletting. The Court also emphasized that the High Court had failed to appreciate the evidence on record, including the original tenant’s deposition, which supported the claim of subletting.

The court’s reasoning was primarily based on the factual evidence presented, which strongly indicated that the tenant had sublet the property. The legal principles were applied to these facts to conclude that the tenant had violated the terms of the lease agreement and the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.

Key Takeaways

• A tenant cannot sublet a property without the landlord’s consent.
• If a tenant allows a third party to run a business on the rented premises and the evidence suggests that the third party has exclusive possession, it will be considered subletting.
• A mere claim of partnership will not suffice if the evidence indicates that the partnership is not genuine.
• Landlords need to be vigilant about changes in the operations of rented properties and should take action if they suspect subletting.
• Tenants need to be aware of the implications of subletting and should not attempt to circumvent the law by claiming false partnerships.

Directions

The Supreme Court directed the respondents to hand over peaceful possession of the suit premises to the appellant within three months from the date of the judgment. The respondents were also required to pay all arrears of rent within four weeks from the date of the judgment.

Development of Law

The ratio decidendi of this case is that a tenant cannot sublet a property without the landlord’s consent, and if the tenant allows a third party to run a business on the rented premises with exclusive rights, it will be considered subletting. The court clarified that a mere claim of partnership will not suffice to avoid the consequences of subletting if the evidence indicates otherwise. This case reinforces the existing legal position on subletting and clarifies the evidentiary standards required to prove it. There is no change in the previous position of law.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s judgment and restoring the eviction decree passed by the Rent Control Appellate Authority. The Court held that the tenant had sublet the property to the second respondent and that the claim of partnership was not genuine. The Court emphasized the importance of upholding the terms of lease agreements and the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.