1998 PLP 2656 (SCMR)

WAJIHUDDIN AHMED, J.

The appellant is the landlord, whereas the respondents Nos. 3 to 11 are the legal representatives of deceased tenant Muhammad Amin, in respect of the tenent-hold shop, situated in a commercial locality of Peshawar city. An eviction application was brought by the landlord on 27-7-1989 on the grounds of default and subletting, the last having allegedly 'occurred because of a partnership concluded between Iqbal Din son of Muhammad Amin and Muhammad Muallam, respondent No.12, on 27-2-1989. The learned Controller allowed eviction on both counts, but the order was reversed on appeal in totality. The landlord preferred Constitutional petition on 21-6-1993 against the appellate order dated 24-5-1993 and such, coming up before a Division Bench of the Peshawar High Court, presided over by Abdur Rehman Khan, J., as he then was, stood dismissed, the High Court affirming the findings of the appellate forum on both grounds. Leave was granted on 1-11-1995 to examine whether the High Court had correctly extended the benefit of the second proviso to clause (vi) of subsection (2) of section 13 of the Urban Rent Restriction Ordinance, 1959, and whether the tenant by entering into the partnership arrangement dated 27-2-1989 was not guilty of subletting the disputed premises within the meaning of section 13(2)(ii)(a) of the same Ordinance. As regards the second proviso to clause (vi) of subsection (2) of ` section 13 of the Ordinance, which is confined to the N.-W.F.P. alone, the preponderance of judicial opinion is that a reprieve under such proviso can follow only, if there is an unconditional admission of liability to pay the rent due on the part of tenant qua the alleged default in an eviction application, if the admission is made on the first date of hearing and finally, if the Controller is satisfied that the tenant had not made such a default on any previous occasion. These conditions not being satisfied in Habibullah v. Fazl-ur-Rehman, (1989 CLC 1567), the benefit was not extended because the tenant there, on the one hand, pleaded that he had been paying rents but no receipts were issued and, on the other expressed a conditional willingness to pay only if "the landlord made statement on oath that he has not been paying the rent" Similar result followed in Hazrat Umar v. Zafar Majeed (PLD 1991 SC 138), where the tenant "did not offer to pay the rent straightaway without raising any contest as is the intention underlying the proviso". The relevant passage culled from the case of Hazrat Umer is as appears below:-- "An amendment made in the Urban Rent Restriction Ordinance, 1959 by N.-W.F.P. Ordinance No. XII of 1972 added a proviso after clause (vi) of subsection (2) of section 13 of the parent Ordinance. It reads as follows:- 'Provided further that where the application made by the landlord is on the ground mentioned in clause (1) and the tenant on the first date of hearing admits his liability to pay the rent due from him, the Controller shall, if he is satisfied that the tenant has not made such default on any previous occasion, direct the tenant to deposit all the rents due from him on or before a date to be fixed for the purpose, and upon such deposit being made he shall make an order rejecting the application.' Taking advantage of this amendment an argument has been advanced in this appeal that the liability to pay the rent for the default , not denied by the appellant. - His only plea was that the respondent/landlord having declined to receive the rent in an ordinary mode, the appellant/tenant was compelled to remit the amount through a money order but the landlord had refused again to receive the amount. Therefore, as argued by the learned counsel, the condition laid in the aforequoted proviso to avoid eviction on the ground of default had been satisfied. We do not agree with him. It was a disputed question whether or not the landlord had - refused to receive the rent in the first instance, accordingly, the appellant had disputed his liability to be evicted on the ground of default. In case like the present the condition in the proviso would have been satisfied if the tenant would have, at proper time, accepted, amongst other conditions his liability to pay the rent. There was also liability to be evicted if the rent is not offered and paid as laid down in proviso. In this case none of the conditions is satisfied. For example the appellant did not accept his liability to pay the rent. As to the facts, when he had filed the written statement, the rent, according to his own admission in para. 5 of his written statement was still due. Notwithstanding the aforementioend averment in the written statement about rent he did not offer to pay the rent straightaway without raising any contest as is the intention underlying the proviso. Accordingly, he cannot get any advantage on account of the newly-added proviso." As against this. the High Court in the impugned order addressed the applicability of the second proviso, aforesaid. in these words:- "The contention of the petitioner's counsel that the admission of tile liability in the written statement to pay the rent was conditional is not borne out by the written statement filed by respondent No.

1. In the written statement while replying the relevant para. Jeem' of the preliminary objection it was averred that: It was also stated in reply to paras. 4 and 5 of the petition and again in the same para: The contention of the petitioner's counsel was that the offer of liability was conditional because he had also added these words while admitting his liability: , This contention is not sound because this line if read in context with, and in the light of the other sentences then it would convey the sense that the acceptance of the petitioner of the liability was not that conditional so as to take it for refusal to pay the rent. In our view the "'` para. in vernacular reproduced above is a clear admission of the liability to pay the rent and it covered by the proviso In the foregoing background of the case, as found by the High Court, the admission of liability to pay on the part of the tenant occurred at the stage of the written statement itself, for all practical purposes, ahead of the "first date of hearing", which usually, but subject to context, means and implies the date when a case is laid for framing of issues or recording of evidence. It was unconditional, because not only there was a manifest offer to pay but even an enhanced rate was declared to be acceptable. The High Court was also right in observing that merely because a reference to the law of limitation was made, the tenant could not be imputed with a disinclination to pay. Thus, the tenant could immediately be asked whether he was prepared to clear the supposedly time barred arrears, for limitation, while it extinguishes the remedy, does not erase the right. If he answered in the affirmative the required deposit may have been directed but if in the negative the matter could have proceeded on merit. Lastly, there was no previous default, antecedent to the claim in the eviction case, which could have been set up or otherwise come in the way of extending the benefit to the tenant. The conclusion of the High Court, therefore, on this question is not open to any exception. This brings up the second aspect of the controversy, namely, whether the entering into a partnership, by one of the successors and legal representatives of the deceased tenant could ipso facto have established a case of subletting. The law on the point is that mere conclusion of a partnership by a sitting tenant and induction of outsiders as partners in a business carried out from a tenant-hold does not in itself constitute subletting. In order that such emerging partnership be construed as an act of subletting, it is essential that there should be a surrender of the tenancy by the sitting tenant in favour of the partnership which, thereupon, would emerge as the sub-tenant, having, at some point of time, by acquiring rights in rem or a privity of estate, either wholly or partially, displaced the original tenancy. To put it differently, there should be a clear surrender or devolution of what technically is termed as legal possession of the estate by or from the erstwhile tenant in favour of the partnership which, then, should step into the shoes of the tenant. A considerable case-law on the point has emerged and relevantly may be noted: Motal Bai v. Abdul Aziz, (PLD 1968 Karachi 635) (Noorul Arfin, J.), Khuda Bux v Badrul Hasan, PLD 1968 Karachi 657) (Noorul Arfin, J.), Attaur Rahman v. Adam Ali, 1981 CLC 1747 (Abdul Hayee Qureshi, J.), where, inter alia, reliance was placed on some of the observations of Dorab Patel, J.. in Malik Muhammad Ishaq v. Messrs Erose Theatre, PLD 1973 Karachi 522; Najumddin v. Zamir Ahmad, PLD 1982 Karachi 188 (Naimuddin, J.), dissenting from Tansukhdas Chhaganlal v. Smt. Shambai and another, AIR 1954 Nagpur 160, distinguishing Manek J. Mobed v . Shah Behram, PLD 1974 SC 351 and relying upon. inter alia Motal Bai v, Abdul Aziz, PLD 1968 Karachi 635; Nasir Mahmood v. Mustaiabi Begum: 1983 CLC 2872 (Lahore); G.B. Ltd. v. Alliance Commercial Corporation 1984 CLC 2336 (Muhammad Zahoorul Haq, J.) and Mehro Mal v. Habibur Rahman Khan, PLD 1988 Karachi 240 (Tanzilur Rehman, J.). Here a specific reference may be made to Manek, J. Mobed v. Shah Behram, PLD 1974 SC

351. Such though not directly a case under the rent laws was one which did have some nexus with those laws. On facts, the lessee, in the year 1952, had converted his business into a private limited company in the name and style of Paradise Theatres Limited, the shareholders therein being the lessee, his son, Manek, J. Mobed, his daughter, Mrs. Parin R. Bomboart and daughter-in-law, Mrs. Khurshid wife of Manek, J. Mobed.. Article 12 of the Articles of Association of such Paradise Theatres Ltd. recited that the Company was being incorporated with the object of forthwith entering into an agreement with the proprietors of Paradise Theatres, Picture House Theatres. Capital Theatres and Mauripur Theatres and to acquire and take over the said joint concerns, including existing contracts and agreement with all or any of their assets and liabilities, right, title and interest. It was proved in evidence that subsequent cheques for the rent were sent by the erstwhile lessee, as Managing Director of the Company. The lessor was not informed of the Company having been formed. There was no suggestion that the premises had been taken over by the Company as a licensee under the tenant and on the contrary in para. 10 of the written statement the Company claimed to be tenant in its own right. Their Lordships, on the legal plane, considered a number of cases and in particular Peebles v. Crosthwaite, (1897) 13 TLR 198; Chaplin v. Smith. (1925) 1 KB 198; Giansingh & Company v. Deveraj Nahar & Company (1965) 1 All ER

768. These precedents, all of which support the proposition, above recapitulated `in the preceding para, were distinguished on the peculiar facts of that case. It was in such circumstances that their Lordships laid down the following rule: "If a person obtains lease-hold rights in his own name and subsequentl'assigns them to a firm or to a private limited company consisting of family members it cannot be said that no change has taken place in the status of the tenant or that it is not a case of subletting or assignment of lease-hold rights." Their Lordships' conclusion, incidentally, was perhaps adopted in Lam Kee Ying Sdn Bhd v. Lam Shes Tong (1975) A.C. 247, where a tenant was treated to have parted with possession of the demised premises when the business conducted from the premises was taken over by a company in which the tenant held a majority of shares: The Privy Council opined that whereas the facts of "the erection of the signboard and the transfer of the electricity, water supply and telephone and the issue of receipts, bill and invoices in the name of" the company were equivocal and quite consistent with a conclusion that although the company occupied the premises the tenant retained the possession, the remaining facts that the company issued its own cheque for the payment of rent and that there was no unqualified denial at any stage of the trial that the tenant had parted with possession to the company clinched the issue and breach of the covenant, not to assign, underlet or part with possession of -the demised premises or any part thereof, did occur. Now may be noted Ghulam Muhammad v. Zia Anwar, PLD 1978 Lah 1054 (Gul Muhammad Khan, J.). There it was found that Ghulam Muhammad was the original tenant of the premises since 1961. He took in one Sultan Muhammad and 2 others, as partners, in a firm, which came to be registered in 1967. Question arose whether such amounted to transfer of the tenant's rights under the lease or constituted subletting of any portion of the tenant-hold. The following passages from the judgment are relevant:-- "Section 13(2(ii)(a) which forms the basis of the application for ejectment reads:-- The tenant has, without the written consent of the landlord transferred his right under the lease or sublet the entire building or rented land or any portion thereof. The concept of the provision is analogous to the assignment or un letting the lease as known to English law. In the present case, the appellant No. l assigned 3/4th of his lease-rights to the other two appellants and Sultan vide the Exh. R/1. In that situation no one of the partners has an exclusive possessory or tenancy right in the premises though he could claim such a right jointly with others in every inch of the property. The question w could be, does it amount to subletting of the entire building or any portion thereof? Halsbury, para. 1374, Vol. 23, III Edition, page 656 dealing with a similar situation says that a covenant not to assign or otherwise part with the premises is not broken if the tenant who retains the legal possession of the whole of the premises at all material times though he allows other people to use the premises Chaplin v. Smith (1926) 1 K. B. 198 (C.A.); Feebles v. Crosswaite (1897) 13 TLR 198 (C.A.) were relied upon. Retention of premises by one partner alone on a dissolution of the partnership was not considered to be breach of covenant against assignment contained in a lease to both. It was held in Cook v. Shoesmith (1951) 1 K. B. 752 (C. A.) and Grove v. Portal (1902) 1 Ch. 727) that a covenant not to part with possession is not broken by tenant parting with part of the premises.

12. The Indian Courts' view in respect of user of a premises by a partnership is found in Gundalapalli RangamamZar Chetty v. Desu Rangiah and others (1952) 1 MU 652), the Court opined that taking other partners in business did not amount to subletting. The test laid down was that unless lessee parted with legal possession and gave to his sub-lessee exclusive possession and enjoyment of the premises, there was no sub-lease. The mere fact that another is allowed to use the premises while the lessee retains the legal possession is not enough to create a sub-lease. A different view was taken in Tansukhadas Chhaganlal v. Sint Shambai and another (AIR 1954 Nagpur 160), it was held that if a lessee allowed other persons to enter into partnership alongwith himself to carry on business ill those premises, he shall be deemed to have sublet the premises to an entity different from the original lessee. A mere licence does not amount to subletting as held in S. Gain Singh v. District Judge, Delhi (AIR 1959 Punjab 508). In that case the tenant had allowed a watch-repairer to keep a show case for safety during the night.

13. The discussion in the above two paras. concerns the covenant against subletting demised land or premises. However, in Bristol Corporation v. West Colt (1879) 12 Ch. D. 461 (C.A.) as given in para. 1336 (f) of Halsbury referred to above it was held that if the covenant prohibits subletting of the entire premises or,any part thereof to an undertenant, the underletting of lodgings or parting with exclusive possession will amount to breach of the covenant. "

14. The view expressed in Motal Bai's case referred to in para. 10 above is that where the shop was not brought into the firm as the part of partnership property, the other tenants became only licensees and no interest passed on to them so as to make them co-lessees. sub-lessees, or transferees. Therefore, the tenant was not liable to eviction.

15. The wording of relevant clause as reproduced above is very clear. I; prohibits subletting of any portion of the tenant without the written consent of the landlord. The portion of the tenant does not mean a clear cut portion of which an exclusive possession could be given to the sub tenant but would mean that the tenant deprives himself of the right of the exclusive possession so as to part with a portion of his right as a tenant. The evidence, as discussed above, makes it quite clear that originally the shop had been let out to Ghulam Muhammad or in the words of Ghulam Muhammad to him and Sultan. In any case, other partners were inducted later and, therefore, the tenant did part with a portion of the tenancy right. After the firm got into the premises every partner according to Exh. R/1 became entitled to a share in the tenancy and so the original tenant lost his exclusive possession. The action therefore, falls within the mischief of the above provisions and denudes the tenant of the legal protection against ejectment. " In the first place, there appear to be printing errors in the reproduced portion, more particularly in relation to Halsbury's Laws of England. But that need not detain us except to point out that in Corporation of Bristol v. West Colt (1879) 12 Ch. D.461, C.A., cited by the learned Judge, the position was different than that reflected in para. 13 of the reproduced portion. That was a case where, upon dissolution of a firm, consisting of two partners, one of whom was agreed to be assigned the lease-hold property with the consent of the lessor but without such consent having been obtained, such partner remaining in sole possession, it was found that there was no breach of the covenant to assign, underlet or part with the possession of the demised property and the proviso for re-entry had not come into operation. Further Tansukhdas Chhjaganlal v. Smt. Shambai, AIR 1954 Nag. 160, cited apparently with approval, has since been dissented from by Naimuddin, J., in Najmuddin v. Zamir Ahmed (supra). the remaining decisions referred to by the learned Judge from the Indian Jurisdiction also do not subscribe to such view. In point, as well, is Karsada Rajmi v. Karasanji Kalayanji, AIR 1953 Sau.

112. The conclusion of Gul Muhammad Khan, J., in the above-quoted paragrapgh 15, since the relevant extracts from Exh.R/I have not been reproduced, appears to be doubtful because a portion of the tenant-hold, while such may not signify a clear-cut portion, as found, divestation or relinquishment of exclusive possession thereof, which may occur by making the tenancy property of the firm, still remained necessary for a breach to have come about. A distinction, may it be added, exists between mere conferment of a licence to use or a simple permission of occupancy, on the one hand, and legal possession of the tenant, on the other. So long as the tenancy right, in whole or in part, does not stand assigned to a firm or, what means the same thing, brought in as property of the firm, as distinguished from remaining an independent asset of a partner thereof, it cannot be concluded that an assignment of the tenancy or underletting has taken place. It also needs to be clarified here that a covenant or stipulation not to part with the possession of the premises is not broken by the tenant parting with part of the tenant-hold. Hence the specific 4 clauses in leases such as "not to assign, sublet or part with possession of all or part of the demised premises": Church v. Brown (1808)

15. Ves. 258 at 265: Grove v. Portal (1902) 1 Ch. 727; Cook v. Shoesmith (1951) 1 KB 752, C.A. Herein, amongst other things, lies the distinction between the provisions of section 13(2)(ii)(a) of the Urban Rent Restriction Ordinance, 1959 and section 15(2)(iii)(a) in the Sindh Rented Premises Ordinance, 1979, the former penalising even subletting of a portion but the latter visualising parting with the whole of the possession. More of this would be adverted to below. In the leading case of Motal Bai, above, where a similar partnership, as in Re: Ghulam Muhammad, had come to be associated with the tenant-hold, Noorul Aarfin, J., besides noticing the precedents later referred to by their Lordships in the case of Manek, J. Mobed, also drew upon several other decided cases. Of these Miles v. Clarke, (1953) 1 All ER 779, pertained to a partnership between two photographers, one of whom held lease of the premises and invited the other to join him as a partner in the business, carried on in such premises The agreement provided for sharing of profits. In the circumstances, it was found that the agreement did not go further than a division of profits and nothing beyond could be implied than that the consumable stock used in the business was to be treated as a partnership asset and the other assets, including the lease of the premises, remained to be treated as the property of the partner who brought in the same. In addition, Noorul Arfin, J., adverted to the distinction between a lease and a licence, citing a large array of dicta, the principal of which was Abdullah Bhai v. Ahmed Din, PLD 1964 SC 106, from this jurisdiction. It was observed, and observed correctly, that a lease, or for that matter a sub-lease, contemplates a transfer of interest in an immovable property, conferring a right on the tranferee to enjoy the property exclusively during the term contemplated On the other hand, a licence consists of a right to do or continue to do in or upon the immovable property of the grantor something which would, but for such right, be unlawful, provided that such privilege, in turn, does not amount to an easement or an interest in property. Having examined the recapitulated provisions of section 13(2)(ii)(a) of the Urban Rent Restriction Ordinance, 1959, we may also address ourselves to a similar, though not identical provision, in section 15(2)(iii)(a) in, the Sindh Rented Premises Ordinance, 1979, which runs thus:--

15. Application to Controller.--(1) (2) The Controller shall, make an order directing the tenant to put the landlord in possession of the premises within such period as may be specified in the order, if he is satisfied that-- (i) .............. (ii) .............. (iii) the tenant has, without the written,consent of the landlord-- (a) handed over the possession of the premises to some other person;

The difference in these provisions lies in the circumstance that whereas it is handing over of the possession of the premises, which constitutes a ground for eviction under the 1979 enactment, something which implies divestation of legal possession by the tenant, as noticeably distinguished from mere permission, use or shared occupancy (e.g., a tenant who retains the legal possession of the whole of the premises at all material times does not commit a breach of the covenant by allowing other people to use the premises: Halsbury's Laws of England, para. 364, p. 283, Vol. 27, Fourth Edition), a similar or even smaller deviation namely, transfer of the tenant's right under the lease, such as an assignment or subletting of the entire building or rented land or any portion thereof is envisioned to furnish a ground for eviction under 1959 Statute. However, in either case, there should be a manifest transfer of the estate and divestation of legal possession of the tenant. Where, therefore, a tenant reserves unto himself and continues with possession and merely allows the tenancy rights to be used, without any' incidental transfer or assignment, by others in association with himself, ensuring all the time that there is no surrender of the estate, a case of subletting cannot be set up. It is on this plane of reasoning that the allegations of subletting have to be dealt with in the instant case. An essential element to be addressed in determining whether there has been a lease (a sub-"lease) or a licence is to find out whether exclusive possession of the immovable property is retained or parted and correspondingly whether it was a mere personal privilege of user, which has been conferred. If exclusive possession is made over and the grantor has, in essence and in substance, divested himself of possession being replaced by another, the case may be one of a lease (or sub-lease). On the other hand, if it is a mere personal privilege or nothing but simple use of an immovable property, which has been allowed to another, without creating any interest in the property itself, the transaction. if not amounting to an easement and not qualifying as a lease, is to be reckoned as a licence simpliciter As to making such an assessment, the phraseology in the deed, attending circumstances, including the conduct of the parties and the intention or object behind the arrangement is to come up for examination. Keeping all such circumstances- in view, we have to examine the implications of the instant partnership arrangement. The same was initially for one year only, "the shop (vacant) to remain in use of the first party" (tenant). Indeed, it was stated before us by the respondent No.3 that the transaction soon caved in after the institution of eviction proceedings, when the landlord was found to be averse to the development. In fact, the partnership document (unregistered) itself expressly postulated that the arrangement, inter alia, would be terminated if the landlord objected. Then, there are specific stipulations that the other partner, respondent No. 12 who has not defended, was to provide the stocks in trade and the parties were to share in the profits equally. There are other expressions, besides, which envisage sooner termination of the partnership than even the initial one year term, implicitly visulisiag that with the termination, the tenancy would remain, as it always was vesting in the tenant, the second party lifting the stock, inter alia, if, after the term, the business was not mutually extended. Here, it needs to be re-emphasised that there ' is a fine distinction between an asset of the firm and a property thereof. Thus, a partner may, expressly or impliedly, bring into the firm his personal assets, without the same, being made property of the firm, as observed by Lindley on Partnership and approved the their Lordships in the case of Manek, J. Mobed (supra). The test for reckoning, whether a thing of value has been brought into the firm as a separate asset of a partner thereof or as a property of the firm, lies in determining, whether by introduction of such an asset in the firm the other or others have acquired a proprietary right or interest in the thing so introduced. If h, the answer be in the affirmative, the asset would be part of the property of the firm and if in the negative such would remain exclusively vested in the partner, who introduced the same into the firm, reverting to him as an when the partnership gets dissolved or otherwise ceases. In the former state of things, an assignment, a transfer of tenancy or an Underletting may have occurred but, ordinarily, not so, if the latter be the case. On this criterion also, the tenancy rights do not appear to have become the property of the firm and remained an asset of the tenant. In the result, no sub-tenancy seems to have been created. The upshot of the discussion is that neither on the ground of default nor on that of subletting the tenant is liable to be evicted. The orders of the appellate forum and those of the High Court have, therefore, to be upheld. The appeal is dismissed but with no order as to costs. A./H-18/S Appeal dismissed.