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CASE NO.:

Appeal (civil) 387 of 2004

PETITIONER:

SINGER INDIA LIMITED

RESPONDENT:

CHANDER MOHAN CHADHA & ORS

DATE OF JUDGMENT: 13/08/2004

BENCH:

CJI,G. P. MATHUR & C. K. THAKKER

JUDGMENT:

J U D G M E N T

(With Civil Appeal No. 388 of 2004)

G.P. MATHUR, J.

1. This appeal, by Special Leave, has been preferred against the

judgment and order dated 25.5.2001 of Delhi High Court whereby the

Second Appeal preferred by the appellant was dismissed and the judgment

and order dated 8.4.1996 of the Rent Control Tribunal directing eviction of

the appellant from the premises in dispute was affirmed.

2. Shri Atma Ram Chadha, predecessor-in-interest of respondent Nos. 1

to 13 (hereinafter referred to as the 'landlord') let out Shop No. 13/14

(Private No. 15) Block'C', Cannaught Place, New Delhi to M/s. Singer

Sewing Machine Company, incorporated under the laws of the State of New

Jersey, USA, (hereinafter referred to as 'American Company'), at a rental of

Rs. 1200/- per month vide a registered lease deed dated 11.7.1966. In the

year 1982, the landlord filed an eviction petition on the ground, inter alia,

that the American Company, without obtaining any written consent from the

landlord, had parted with the possession of the premises in dispute in favour

of Indian Sewing Machine Company Limited, incorporated under the

Indian Companies Act (hereinafter referred to as 'Indian Company'), and it

was the said company which was in exclusive possession of the premises

and thereby it was liable for eviction in view of Section 14(1)(b) of the

Delhi Rent Control Act (hereinafter referred to as the 'Act'). The eviction

petition was contested by the appellant on the ground, inter alia, that a

direction was issued to the American Company to reduce its share capital to

40 per cent in order to carry on business in India in view of Section 29 of

Foreign Exchange Regulation Act, 1973 (hereinafter referred to as 'FERA').

Accordingly, Company Petition bearing No. 66 of 1981 was filed by the

Indian Company before the Bombay High Court under Sections 391 and

394 of the Companies Act which was allowed on 31.12.1981, and a scheme

of amalgamation was sanctioned whereby the undertaking in India of the

American Company was amalgamated with the Indian Company. Under the

scheme of amalgamation the whole of the business, property, undertaking,

assets, including leases, rights of tenancy, occupancy etc stood transferred to

and vested in the Indian Sewing Machine Company, namely, the Indian

Company. It was submitted that the Indian Company is no other entity

except the legal substitute of the American Company and in substance there

is no case of sub-tenancy. The Additional Rent Controller, Delhi dismissed

the eviction petition by the judgment and order dated 6.2.1995, but this was

reversed by the Rent Control Tribunal in the appeal preferred by the

landlord and eviction petition was allowed. The Second Appeal preferred

by the appellant was dismissed by the High Court on 25.5.2001. During the

pendency of the appeal before the Rent Control Tribunal, the name of M/s.

Indian Sewing Machine Company was changed as Singer India Limited

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which is the appellant herein.

3. Shri Anil Divan, learned senior counsel for the appellant, has

submitted that at the relevant time Section 29 of FERA provided that a

company (other than a banking company) which is not incorporated under

any law in force in India or any branch of such company, shall not, except

with a general or special permission of the Reserve Bank, carry on in India

or establish in India a branch, office or other place of business for carrying

on any activity of a trading, commercial or industrial nature, other than an

activity for the carrying on of which permission of the Reserve Bank had

been obtained under Section 28. Accordingly, a direction was issued by the

Reserve Bank to the American Company to reduce its equity capital to 40

per cent. In view of this direction, a Company Petition was filed under

Sections 391 and 394 of the Companies Act in the Bombay High Court for

sanctioning a scheme of amalgamation which was allowed and the

American Company got amalgamated with the Indian Company. Learned

counsel has submitted that it was not a voluntary transfer of undertaking, but

the amalgamation of the original lessee, namely, the American Company

with the Indian Company had to be resorted to under compulsion of law

with a view to secure compliance of the provisions of FERA and the

directions issued by the Reserve Bank of India and, therefore, Section 14(1)

(b) of the Act would not be attracted. Learned counsel has further submitted

that in the peculiar facts of the present case, Section 14(1)(b) of the Delhi

Rent Control Act should not be literally construed but a purposive

construction should be given. Reference in this connection has been made

to a decision of Delhi High Court in Telesound India Ltd. In re. 1983 (53)

Company Cases 926 wherein it has been held that the effect of an order of

amalgamation passed under Section 394 of the Companies Act is that the

rights, properties and the liabilities of the transferor company become the

rights, property and liabilities of the transferee-company and it is neither an

assignment of right or property nor an assignment of the property by the

company. On amalgamation, the transferor-company merges into the

transferee-company shedding its corporate shell, but for all practical

purposes remaining alive and thriving as part of the larger whole. The

transferor-company is dissolved not because it has died or ceased to exist,

but because for all practical purposes it has merged into another corporate

shell. Learned counsel has thus submitted that what should be looked into

is the substance of the matter and in view of the aforesaid legal position,

only the corporate shell of the American Company has been shed or

removed, but it is still alive and thriving as part of the Indian Company and

consequently there was no sub-letting or parting with possession so as to

attract the provision of Section 14(1)(b) of the Act. Shri Divan has also

referred to G.K. Bhatnagar vs. Abdul Alim 2002(9) SCC 516 and Parvinder

Singh vs. Renu Gautam and others 2004(4) SCC 794 wherein with reference

to creation of partnership by a tenant it was held that if the user and control

of the tenancy premises has been parted with and a deed of partnership has

been drawn up as an indirect method of collecting the consideration for

creation of sub-tenancy or for providing a cloak or cover to conceal a

transaction not permitted by law, the court is not estopped from tearing the

veil of partnership and finding out the real nature of transaction entered into

between the tenant and the alleged sub-tenant. Reference has also been

made to a decision of a Single Judge of Delhi High Court in Vishwa Nath

vs. Chaman Lal Khanna AIR 1975 Delhi 117 wherein it was held that if an

individual takes a premises on rent and then converts his sole proprietorship

concern into a private limited company in which he has the controlling

interest, it would not amount to parting with possession with any one as he

continues to be in possession of the premises and as such he does not

become liable for eviction under Section 14(1)(b) of the Act. Learned

counsel has further submitted that as the Company Petition for sanctioning

the scheme of amalgamation was filed in order to secure compliance with

law, namely, to reduce the equity capital of the American Company to 40

per cent and as the "lease, rights of tenancy or occupancy" of the said

company got vested with the Indian Company in view of the sanction

granted by the Bombay High Court i.e. under the orders of the Court, the

principle laid down by this Court in Hindustan Petroleum Corporation Ltd

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and another vs. Shyam Co-operative Housing Society and others 1988 (4)

SCC 747 will be applicable and no order of eviction can be passed against

the appellant.

4. Shri Dushyant Dave, learned senior counsel for the respondent, has

submitted that the argument that it was not the voluntary act of the

American Company whereunder its leasehold rights, rights of tenancy or

occupancy got transferred to or vested in the Indian Company is wholly

fallacious. The direction issued by the Reserve Bank of India for ensuring

compliance of Section 29 of FERA was merely to reduce the equity capital

of the American Company to 40 per cent and this could be achieved by

various modes permissible in law. No such direction had been issued by

the Reserve Bank to the American Company for getting itself amalgamated

with an Indian Company. The American Company voluntarily submitted to

a scheme of amalgamation with the Indian Company in the Company

Petition before the Bombay High Court whereunder its 'lease, right of

tenancy or occupancy' got vested with the Indian Company. After the

sanction of scheme of amalgamation, the American Company completely

lost its identity and it was the Indian Company which came into possession

of the premises in dispute and, therefore, the provisions of Section 14(1)(b)

of the Delhi Rent Control Act were clearly attracted and the order for

eviction had rightly been passed. Learned counsel has also submitted that it

is a well-settled principle of interpretation that the words of a statute must

be interpreted in their ordinary grammatical sense unless there be something

in the context or in the object of the statute in which they occur or in the

circumstances in which they are used to show that they were used in a

special sense different from their ordinary grammatical sense, and the

golden rule is that the words of a stature must, prima facie be given their

ordinary meaning. On a plain reading of the provision, it is urged, sub-

letting, assigning or otherwise parting with possession of the whole or any

part of the premises without obtaining the consent in writing from the

landlord would render the tenant liable for eviction. It has thus been urged

that in view of the fact that the American Company transferred the lease and

occupancy rights to the Indian Company, the order for eviction passed

against the appellant was perfectly justified. Shri Dave has also submitted

that the controversy raised in the present appeal has already been considered

in several decisions by this Court and there is absolutely no reason to depart

from the view taken therein.

5. Before adverting to the contentions raised at the Bar, it will be

convenient to reproduce Section 14(1)(b) of the Act, which reads as under:

" 14. Protection of tenant against eviction.-- (1)

Notwithstanding anything to the contrary contained in

any other law or contract, no order or decree for the

recovery of possession of any premises shall be made by

any court or Controller in favour of the landlord against

a tenant:

Provided that the Controller may, on an

application made to him in the prescribed manner, make

an order for the recovery of possession of the premises

on one or more of the following grounds only, namely --

(a) \005\005\005\005\005\005\005\005\005\005

(b) that the tenant has, on or after the 9th day of June,

1952 sub-let, assigned or otherwise parted with the

possession of the whole or any part of the premises

without obtaining the consent in writing of the

landlord\005\005.."

\005\005\005\005\005\005\005\005\005\005\005\005

There is no ambiguity in the Section and it clearly says that if, without

obtaining the consent in writing of the landlord the tenant has, on or after

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9.6.1952, (i) sub-let, or (ii) assigned, or (iii) otherwise parted with the

possession of the whole or any part of the premises, he would be liable for

eviction. The applicability of the Section depends upon occurrence of a

factual situation, namely, sub-letting or assignment or otherwise parting

with possession of the whole or any part of the premises by the tenant.

Whether it is a voluntary act of the tenant or otherwise and also the reasons

for doing so are wholly irrelevant and can have no bearing. This view finds

support from an earlier decision rendered in M/s. Parasram Harnand Rao vs.

M/s. Shanti Prasad Narinder Kumar Jain and another AIR 1980 SC 1655

wherein Section 14(1)(b) of Delhi Rent Control Act came up for

consideration. The tenant in the premises, was Laxmi Bank, which was

ordered to be wound up and in that winding up proceeding, the Court

appointed an Official Liquidator who sold the tenancy rights in favour of

S.N. Jain on 16.2.1961. The sale was confirmed by the High Court and, as a

result thereof, S.N. Jain took possession of the premises. Thereafter, the

landlord filed a petition for eviction of Laxmi Bank. The High Court held

that as the transfer in favour of S.N. Jain by the Official Liquidator was

confirmed by the Court, he acquired the status of the tenant by operation of

law and, therefore, the transfer of the tenancy rights was an involuntary

transfer and the provision of Section 14(1)(b) of the Act would not be

attracted. Reversing the judgment, this Court held that the Official

Liquidator had merely stepped into the shoes of Laxmi Bank which was the

original tenant and even if the Official Liquidator had transferred the

tenancy interest to S.N. Jain under the orders of the Court, it was on behalf

of the original tenant. It was further held that the sale was a voluntary sale,

which clearly was within the mischief of the Section, and assuming that the

sale by the Official Liquidator was an involuntary sale, it undoubtedly

became an assignment as provided by Section 14(1)(b) of the Act. The

Court further held that the language of Section 14(1)(b) is wide enough not

only to include any sub-lease but even an assignment or any other mode by

which possession of the tenanted premises is parted and the provision does

not exclude even an involuntary sale.

6. It is also necessary to take note of some clauses of the scheme of

amalgamation which was sanctioned by the Bombay High Court on

31.12.1981. In the scheme "Transferor Company" means the undertaking in

India of Singer Sewing Machine Company, a company incorporated under

the laws of the State of New Jersey, USA, the "Transferee Company" means

Indian Sewing Machine Company Limited, a company incorporated under

the Companies Act, 1956 and having its registered office at 207, Dadabhoy

Naoroji Road, Bombay, and the "Appointed Day" means 1.1.1982. The

relevant part of clause (2) of the scheme, which has a bearing on the

controversy, is being reproduced below:

2. " With effect from the Appointed Day, except as

hereinafter stated, the whole of the business, property,

undertaking, assets, including leases, rights of tenancy or

occupancy, instalment receivables under hire purchase

contracts, benefits of licences and quota rights of

whatsoever description and wheresoever of the

Transferor Company shall without further act or deed, be

transferred to and vested in the Transferee Company so

as to become from the appointed day, the business,

property, undertaking assets, including leases, rights of

tenancy or occupancy, instalment receivable under hire

purchase contracts, benefits of licences and quota rights

of the Transferee Company" for all the estate and interest

of the transferor company therein, provided that 13,445

equity shares of\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005."

The effect of this clause is that with effect from 1.1.1982 "leases, rights of

tenancy or occupancy" of the Singer Sewing Machine Company (American

Company) got vested with M/s. Indian Sewing Machine Company (Indian

Company).

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7. The provision for facilitating reconstruction and amalgamation of

companies is made under Section 394 of the Companies Act. In an

amalgamation, two or more companies are fused into one by merger or by

one taking over the other. Reconstruction or amalgamation has no precise

legal meaning. In Halsbury's Laws of England (4th Edn.) para 1539, the

attributes of amalgamation of companies have been stated as under:

" Amalgamation is a blending of two or more existing

undertakings into one undertaking, the shareholders of

each blending company becoming substantially the

shareholders in the company which is to carry on the

blended undertakings. There may be amalgamation

either by the transfer of two or more undertakings to a

new company, or by the transfer of one or more

undertakings to an existing company. Strictly

"amalgamation" does not, it seems, cover the mere

acquisition by a company of the share capital of other

companies which remain in existence and continue their

undertakings, but the context to which the term is used

may show that it is intended to include such an

acquisition.

The question whether a winding up is for the

purposes of reconstruction or amalgamation depends

upon the whole of the circumstances of the winding up."

8. In Saraswati Industrial Undertaking vs. CIT Haryana AIR 1991 SC

70 (para 6), it has been held that there can be no doubt that when two

companies amalgamate and merge into one, the Transferor Company loses

its identity as it ceases to have its business. However, their respective

rights or liabilities are determined under the scheme of amalgamation, but

the corporate identity of the Transferor Company ceases to exist with effect

from the date the amalgamation is made effective. Therefore, in view of the

settled legal position, the original lessee, namely, the American Company

ceased to exist with effect from the Appointed Day i.e. 1.1.1982 and

thereafter the Indian Company came in possession and is in occupation of

the premises in dispute.

9. The effect of parting of possession of the tenanted premises as a result

of sanction of scheme of amalgamation of companies under Section 394 of

the Companies Act by the High Court has also been considered in two

decisions of this Court. In M/s. General Radio and Appliances Co. Ltd and

others vs. M.A. Khader 1986 (2) SCC 656, which is a decision by a bench

of three learned Judges, the premises had been let out to M/s. General Radio

and Appliances Co. Ltd. On account of a scheme of amalgamation

sanctioned by the High Court under Sections 391 and 394 of the Companies

Act, all property, rights and powers of every description including tenancy

right, held by M/s. General Radio and Appliances Co. Ltd. had been

blended with M/s. National Ekco Radio & Engineering Co. Ltd. Thereafter

the landlord instituted proceedings for eviction on the ground of

unauthorized sub-letting. It was urged on behalf of the original tenant that

the amalgamation of M/s. General Radio and Appliances Co. Ltd (appellant

No. 1) with M/s. National Ekco Radio & Engineering Co. Ltd. (appellant

No. 2) was an involuntary one which had been brought into being on the

basis of the order passed by the High Court under Sections 391 and 394 of

the Companies Act and that the appellant No. 1 Company had not been

wound up and /or liquidated, but had been merely blended with appellant

No. 2 on the basis of the order of the Court and consequently there was no

sub-letting by appellant No. 1 Company to appellant No. 2 Company. It

was also urged that appellant No. 1 Company had not become extinct but

had been merged and/or blended with appellant No. 2 Company. It was

held that the order of amalgamation was made by the High Court on the

basis of the petition filed by the Transferor Company in the Company

Petition and, therefore, it cannot be said that this is an involuntary transfer

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effected by the order of the Court. It was further held that appellant No. 1

Company was no longer in existence in the eyes of law and it had effaced

itself for all practical purposes. The appellant No. 2 Company i.e., the

Transferee Company, was not a tenant in respect of the suit premises and it

was appellant No. 1 Company which had transferred possession of the suit

premises in favour of the appellant No. 2 Company. The Court further took

the view that under the relevant Act, there was no express provision that in

case of any involuntary transfer or transfer of the tenancy right by virtue of

a scheme of amalgamation sanctioned by the High Court by its order under

Sections 391 and 394 of the Companies Act, such a transfer will not come

within the purview of Section 10(ii)(a) of Andhra Pradesh Building (Lease,

Rent and Eviction) Control Act. On this finding, it was held that the

appellant was liable for eviction.

10. Cox & Kings Ltd. and another vs. Chander Malhotra 1997 (2) SCC

687 is also a decision by a bench of three learned Judges and arose out of

proceedings for eviction under Section 14(1)(b) of Delhi Rent Control Act.

Here, the premises were given on lease to Cox & Kings (AGENTS)

Limited, a company incorporated under the United Kingdom Companies

Act (for short, "Foreign Company"). A petition for eviction was filed on

several grounds and one of the grounds was of sub-letting to Cox & Kings

Limited, a company registered under the Indian Companies Act (for short an

"Indian Company"). It was contended on behalf of the appellant that in

view of Section 29 of FERA, the Foreign Company was required to obtain

written permission from the Reserve Bank of India to carry on business.

The said permission was sought for but was refused. As a consequence, the

Indian Company, namely, Cox & Kings Limited was floated in which the

Foreign Company sought to have 100 per cent shares, but on refusal of

permission had only 40 per cent of shares in the business to which approval

was given by the Reserve Bank of India. Thereafter, the Indian Company

carried on business in the same premises. It was urged that as the transfer of

leasehold interest from the Foreign Company to the Indian Company was by

compulsion, it was an involuntary one and, therefore, it was not a case of

sub-letting within the meaning of Section 14(1)(b) of the Act. It was held

that under FERA, there was no compulsion that the premises demised to the

Foreign Company should be continued or given to the Indian Company. On

the other hand, under the agreement executed between the Foreign

Company and the Indian Company, incidental to the assignment of the

business as a growing concern, the Foreign Company also assigned the

monthly and other tenancies and all rented premises of the assignor in India

to the Indian Company. The Court, accordingly, concluded that though by

operation of FERA the Foreign Company had wound up its business, but

under the agreement it had assigned the leasehold interest in the demised

premises to the Indian Company which was carrying on the same business

in the tenanted premises without obtaining the written consent of the

landlord and, therefore, it was a clear case of sub-letting. After referring to

the earlier decisions in M/s. Parasram Harnand Rao vs. M/s. Shanti Prasad

Narinder Kumar Jain (supra) and M/s. General Radio and Appliances Co.

Ltd. vs. M.A. Khader (supra), the Court ruled that it was a case of

assignment by the Foreign Company to the Indian Company which

amounted to sub-letting within the meaning of Section 14(1)(b) of the Act

and the decree for eviction was affirmed.

11. These cases clearly hold that even if there is an order of a Court

sanctioning the scheme of amalgamation under Sections 391 and 394 of the

Companies Act whereunder the leases, rights of tenancy or occupancy of the

Transferor Company get vested in and become the property of the

Transferee Company, it would make no difference in so far as the

applicability of Section 14(1)(b) is concerned, as the Act does not make any

exception in favour of a lessee who may have adopted such a course of

action in order to secure compliance of law.

12. Madras Bangalore Transport Co. (West) vs. Inder Singh and others

1986(3) SCC 62 cited by Shri Divan, does not advance the case of the

appellant either as, here, the Court on the basis of material on record found

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as a fact that the Limited Company was formed with the partners of the

existing tenant firm as Directors and both the firm and the company were

operating from the same place, each acting as agent of the other. It was also

found as a fact that the company was only an 'alter ego' or a 'corporate

reflection' of the tenant firm and the two were for all practical purposes

having substantial identity and, consequently, there was no sub-letting,

assignment or parting with possession of the premises by the firm to the

company so as to attract Section 14(1)(b) of the Act. This case has been

decided purely on facts peculiar to it and no principle of law has been laid

down. The position in Hindustan Petroleum Corporation Ltd and another vs.

Shyam Co-operative Housing Society and others 1988(4) SCC 747 cited by

learned counsel for the appellant has hardly any application here. It is not a

case of amalgamation of two companies but acquisition of undertaking of a

Foreign Company by the Central Government. Section 5 of Esso

(Acquisition of Undertakings in India) Act, 1974 provided that where any

property is held in India by Esso under any lease or under any right of

tenancy, the Central Government shall, on from the appointed day be

deemed to have become the lessee or tenant, as the case may be, in respect

of such property as if the lease or tenancy in relation to such property had

been granted to the Central Government, and thereupon all the rights under

such lease or tenancy shall be deemed to have been transferred to and vested

in the Central Government. In view of this statutory provision, the Central

government, by operation of law, became the tenant of all such properties

which were being held by Esso under any lease or any right of tenancy.

There is no statutory enactment here which may give any kind of protection

to the appellant.

13. Shri Divan has next contended that on amalgamation Singer Sewing

Machine Company (American Company) merged into Indian Sewing

Machine Company (Indian Company) shedding its corporate shell, but for

all practical purposes remained alive and thriving as part of the larger

whole. He has submitted that this Court should lift the corporate veil and

see who are the directors and shareholders of the Transferee Company and

who are in real control of the affairs of the said company and if it is done it

will be evident there has been no sub-letting or parting with possession by

the American Company.

14. In Palmer's Company Law (24th Edn), in chapter 18, para 2 onwards

some instances have been given in which the modern company law

disregards the principle that the company is an independent legal entity and

also when the Courts would be inclined to lift the corporate veil and the

important ones being in relation to the law relating to trading with enemy

where the test of control is adopted and also where the device of

incorporation is used for some illegal or improper purpose. In Gower's

Principle of Modern Company Law (4th Edn), in chapter 6, the topic of

lifting the veil has been discussed. The learned author has said that there is

no consistent principle beyond a refusal by the legislature and the judiciary

to apply the logic of the principle laid down in Solomon's case where it is

too flagrantly opposed to justice, convenience or the interest of the

Revenue. In the cases where veil is lifted, the law either goes behind the

corporate personality to the individual members, or ignores the separate

personality of each company in favour of the economic entity or ignores the

separate personality in favour of the economic entity constituted by a group

of associated companies. The principal grounds where such a course of

action can be adopted are to protect the interest of the Revenue and also

where the corporate personality is being blatantly used as a cloak for fraud

or improper conduct.

15. The question of lifting the corporate veil was examined by a

Constitution Bench in Tata Engineering and Locomotive Co. Ltd etc. vs.

The State of Bihar and others AIR 1965 SC 40. The Court observed that

the doctrine of lifting of the veil postulates the existence of dualism between

the corporation or company on the one hand and its members or

shareholders on the other. After review of a number of authorities and

standard books, the parameters where the said doctrine could be applied

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were indicated in consonance with the principles indicated in the preceding

paragraph. In Delhi Development Authority vs. Skipper Construction

Company (P) Ltd. and another AIR 1996 SC 2005, Mr. Justice B. P. Jeevan

Reddy has examined the question in considerable detail and it will be useful

to reproduce the relevant paragraph of the judgment which is as under:

Para 24. " Lifting the corporate veil:

In Aron Salomon v. Salomon & Company Limited

(1897) Appeal Case 22), the House of Lords had

observed, "the company is at law a different person

altogether from the subscriber\005..; and though it may be

that after incorporation the business is precisely the same

as it was before and the same persons are managers and

the same hands received the profits, the company is not

in law agent of the subscribers or trustee for them. Nor

are the subscribers as members liable, in any shape or

form, except to the extent and in the manner provided by

that Act". Since then, however, the Courts have come to

recognize several exceptions to the said rule. While it is

not necessary to refer to all of them, the one relevant to

us is "when the corporate personality is being blatantly

used as a cloak for fraud or improper conduct" (Gower:

Modern Company Law \026 4th Edn. (1979) at P. 137)

Pennington (Company Law \026 5th Edn. 1985 at P.53) also

states that "where the protection of public interests is of

paramount importance or where the company has been

formed to evade obligations imposed by the law", the

Court will disregard the corporate veil \005\005\005\005"

It was held that, broadly, where a fraud is intended to be prevented, or

trading with enemy is sought to be defeated, the veil of corporation is lifted

by judicial decisions and the shareholders are held to be 'persons who

actually work for the corporation'. The main principle on which such a

course of action can be taken was stated in paragraph 28 of the report and

the relevant part thereof is being reproduced below:

"28. The concept of corporate entity was evolved to

encourage and promote trade and commerce but not to

commit illegalities or to defraud people. Where,

therefore, the corporate character is employed for the

purpose of committing illegality or for defrauding others,

the Court would ignore the corporate character and will

look at the reality behind the corporate veil so as to

enable it to pass appropriate orders to do justice between

the parties concerned\005\005.."

16. However, it has nowhere been held that such a course of action is

open to the company itself. It is not open to the Company to ask for

unveiling its own cloak and examine as to who are the directors and

shareholders and who are in reality controlling the affairs of the Company.

This is not the case of the appellant nor could it possibly be that the

corporate character is employed for the purpose of committing illegality or

defrauding others. It is not open to the appellant to contend that for the

purpose of FERA, the American Company has effaced itself and has ceased

to exist but for the purpose of Delhi Rent Control Act, it is still in existence.

Therefore, it is not possible to hold that it is the American Company which

is still in existence and is in possession of the premises in question. On the

contrary, the inescapable conclusion is that it is the Indian Company which

is in occupation and is carrying on business in the premises in question

rendering the appellant liable for eviction.

17. Civil Appeal No. 388 of 2004 has been filed by M/s. Singer Company

of USA (American Company). The American Company did not challenge

the order of the Rent Control Tribunal by filing a Second Appeal in the

High Court. Even otherwise, the grounds for challenge are the same, which

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we have already discussed above.

18. For the reasons mentioned above, Civil Appeal No. 387 of 2004 and

Civil Appeal No. 388 of 2004 are dismissed with costs.

19. The appellant in Civil Appeal No. 387 of 2004 is granted three

months' time to vacate the premises subject to its filing usual undertaking

before the Rent Controller.